PDC Energy (PDCE) Valuation Update - Aug 19

[dan_s]

PDCE was trading at $64.04 at the time of this post.

I have completed the review of our updated profile on PDCE and made some adjustments to my forecast/valuation model.
I have lowered my current valuation by $12 to $130. I remain very bullish on this company and it remains one of the "Elite Eight" in our Sweet 16.

They did have some operational issues in Q2 that lowered production guidance a bit, but the Company is still on-track for ~20% year-over-year production growth in 2022 and a significant increase in free cash flow from operations. The Company pays a quarterly dividend of $0.35 and they have an aggressive stock repurchase program underway. I also expect them to pay a significant "Special Dividend" based on 2022 FCF in early 2023.

I have also decided to adjust my oil & gas price deck that I will use from this day forward for modeling purposes.
> I have lowered my WTI oil price forecast to $90/bbl for Q3 and $95/bbl for Q4, while holding my forecast to $100/bbl for 2023.
> I have increased my HH natural gas price forecast to $8.00/MMBtu for Q3 and $9.00/MMBtu for Q4, while holding my forecast to $5.00/MMBtu for 2023.
* I think commodity price risk is to the upside for Q4 2022 and Q1 2023 because of the shortages of all space heating fuels.

I did lower my valuation multiple from 5.5 to 5.0 X annualized operating cash flow for PDCE, just because I want to see a full quarter of results that include the impact of the Great Western Acquisition that closed on May 6, 2022. If PDC does hit the high end of their updated production guidance in Q4, it should set up a stronger year 2023 than my current forecast ($18.48 EPS and $32.75 operating CFPS).

TipRanks: " In the last 3 months, 8 ranked analysts set 12-month price targets for PDCE. The average price target among the analysts is $101.56. The 8 price targets range from $76 to $126."