PDC Energy update

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SergioSays
Posts: 99
Joined: Mon Jul 12, 2021 8:59 am

PDC Energy update

Post by SergioSays »

PDCE up 6% this morning

via Seeking Alpha:

PDC Energy (PDCE) provided updated guidance ahead of the market open Friday, following the close of its Great Western acquisition earlier in the month. Management provided pro-forma forecasts at the time of the acquisition announcement in February, and assumed a Q2 close (actual close May 6). Friday's update looks broadly in-line with the pro-forma forecasts from February, though the free cash flow guidance appears light:

Production - 2022 production guidance was lifted 4.3% above the prior pro-forma forecast, to 242.5kboe/d (midpoint).
Capex - capital spending was lifted 2.6%, to $975m (midpoint).
Free cash flow - on the company's updated price deck, assuming $95 WTI and $6.00 Henry Hub, management expects to generate $1.7b in free cash flow (25% of current market cap); previously management guided to pro-forma free cash flow of $1.3b on $75 WTI and $4.00 Henry Hub.
Shareholder return - in conjunction with the higher free cash flow outlook (+$400m), the company lifted shareholder return guidance from $800m to $1,000 (15% of market cap) and the base dividend to $1.40 annually (~2% yield).
The production and capex increases appear in-line with the previously guided ranges. They are higher, but the transaction also closed early in the quarter.

However, the updated free cash flow guidance looks light. At 242.5kboe/d of production, management expects to produce ~88mboe this year. The increased free cash flow guide (+$400m) is only an incremental ~$4.50 per barrel. Despite lifting the oil price assumption $20 and Henry Hub assumption $2.00 ($11.6 per boe). The increased capex guidance explains some of the headwind (~28c per boe), but investors are likely to question why more of the increased commodity price assumption didn't drop to the bottom line.
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: PDC Energy update

Post by dan_s »

I will take a hard look at PDCE on Saturday. My current valuation is $121/share.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: PDC Energy update

Post by dan_s »

I have updated my valuation of PDCE to $140. The updated profile and forecast model have been posted to the EPG website.
Dan Steffens
Energy Prospectus Group
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