PDC Energy (PDCE) Q2 Results - August 8

[dan_s]

Second Quarter Highlights: My comments are in blue

> Lowered full-year capital investment guidance to a range of $810 to $840 million from $810 to $870 million, which includes reducing the Wattenberg rig count from three to two in September.
> Reduced corporate headcount in June by approximately 15 percent to more closely align with the updated operational plan, contributing to second half projected 2019 G&A expense between $2.60 and $2.80 per Boe.
> Increased full-year production to a range of 48 to 50 MMBoe, reflecting the benefit of increased operational efficiencies in both basins driving increased production in the first half of the year. < PDC has a good habit of "under-promising and then over-delivering" on production guidance. My forecast model will be based on 2019 production of 136,000 Boepd, which is 1,000 Boepd below the high end of their fresh guidance. My bet is that actual production will exceed the high end of guidance because that is what this company does. - Dan.
> Returned $125 million to shareholders through July with the repurchase of approximately 3.7 million shares via the previously announced $200 million stock repurchase program. < This is good news.
> Received approximately $264 million of cash in the second quarter from closing of all three Delaware midstream sales. An additional unconditional payment of $82 million is due June 2020. Received nearly $35 million through the sale of approximately 6,500 net Delaware acres that were scheduled to expire in 2019. < Asset sale and FCF from operations has PDC on-track for a very solid balance sheet by year-end.

Second Quarter Highlights:

> Oil production of 4.9 MMBbls, or approximately 53,800 Bbls per day, a 24 percent increase from the second quarter of 2018 and a seven percent increase from the first quarter of 2019.
> Total production of 12.4 MMBoe, or approximately 136,500 Boe per day, a 32 percent increase from the second quarter of 2018 and a ten percent increase from the first quarter of 2019. < Compares to my Q2 forecast of 130,300 Boe per day.
> LOE of $2.76 per Boe, a 20 percent improvement from the second quarter of 2018 and a 12 percent decrease from the first quarter of 2019.
> Further improved Delaware basin drill times, from spud to rig release, to an average of 23 days, a 33 percent, or 11 day improvement, from the second quarter of 2018.

CEO Commentary

President and Chief Executive Officer, Bart Brookman commented, “Throughout the second quarter, our operating teams continued to deliver improved drilling and completion efficiencies while building on the momentum created earlier in the year. The combination of lowering our full-year capital investment guidance while increasing our full-year production guidance enables PDC to generate in excess of $150 million of free cash flow in the second half of 2019. Additionally, the adjustments to our business plan clearly demonstrate our ability to execute on a strategy centered on delivering sustainable free cash flow in a volatile commodity price environment. Over the past several months, we have met extensively with our long-term shareholders and are confident our cost control measures, slowed Wattenberg development pace and return of capital all align with our long-term value proposition.”

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Stifel's take on Q2 results 8-8-2019

PDC Energy (PDCE, $27.21, Buy; Target $47.00) by Michael S. Sciala

PDEC - Reduced Budget Supports FCF and Share Buyback

We view yesterday's release as slightly positive. The positives include: i) 2Q total/oil production beat consensus by 5%/1%; ii) 2019 production guidance increased 2%, 2% above consensus although projected 2019 oil volumes are 1% below consensus; iii) 2019 capex guidance declined 2%, 4% below consensus; iv) $125MM of the $200MM share repurchase program was completed through July.
The negatives include: i) CFPS missed primarily on realized commodity prices; ii) 2Q19 capex was 2% above consensus; iii) prolonged high line pressures in
Wattenberg are anticipated due to delayed expansion of DCP's midstream system.