PDC Energy Q2 Results

[dan_s]

PDC Energy Reports 2016 Second Quarter Financial and Operating Results Including 54% Production Increase; Raises Full-Year 2016 Production Guidance while Reducing Full-Year Capital

DENVER, Aug. 09, 2016 (GLOBE NEWSWIRE) -- PDC Energy, Inc. ("PDC", the "Company," "we" or "us") (NASDAQ:PDCE) today reported its 2016 second quarter financial and operating results and updated its full-year 2016 guidance.

2016 Second Quarter Highlights

•Production of more than 57,100 barrels of oil equivalent ("Boe") per day; 54% increase year-over-year and 14% increase over the first quarter of 2016. < Compares to my forecast of 53,500 boepd

•Reduced lease operating expense ("LOE") 29% year-over-year to $2.63 per Boe.

•Turned-in-line 37 gross operated wells including the 10,000 foot lateral Neff well in the Utica. Began completions on first extended-reach lateral wells in the Core Wattenberg.

•Announced agreement to consolidate Middle Core Wattenberg leasehold position through strategic acreage trade that is expected to provide the opportunity for longer laterals with significantly increased working interest and improved operational synergies.

•Settled $115 million 3.25% Convertible Senior Notes ("Convertible Notes") in May 2016 through a combination of cash and approximately 792,000 shares.

2016 Updated Guidance Highlights

•Increased mid-point of guidance to 21.5 million barrels of oil equivalent ("MMBoe"), a 40% increase from 2015 production volumes, with an expected December exit rate in excess of 64,000 Boe per day.

•Anticipated second half 2016 spuds and turn-in-lines of 52 and 61, respectively.

•Full-year capital expenditures reduced to $400 to $420 million from the previously guided $410 to $440 million.

•Net cash from operating activities of approximately $440 to $465 million and an adjusted cash flow from operations, a non-U.S.GAAP measure defined below, of $450 to $475 million.

Bart Brookman, Chief Executive Officer and President, commented, "Once again, we are extremely pleased with our operational results and, in particular, the 54% year-over-year production growth. Our improved guidance for 2016 is a direct reflection of our ongoing commitment to operational improvements along with an intense focus on cost structure and the balance sheet. As we wrap up the year, we anticipate operational cash flows will exceed capital expenditures and we eagerly anticipate the first turn-in-lines of our Wattenberg XRL drilling projects. With the success of these longer laterals coupled with enhanced completion designs, we expect to be able to deliver additional value in the Middle Core portion of the field where our acreage will be concentrated following the expected closing of our recently announced strategic acreage trade."

[dan_s]

I have updated my forecast model for PDCE. It will be posted to the EPG website this afternoon.

My valuation is $92.00/share, down $1.00 from the last newsletter just because I am using more conservative oil & gas prices in my forecast models. My valuation compares to First Call's price target of $71.81. I will be stunned if First Call's price target does not go up in the next two weeks because this is a rock solid company with very impressive growth. Production will be up 35% to 40% YOY and it has lots of running room.

For the 2nd half of 2016, PDCE has the following hedges in place:
> ~68% of natural gas is hedged at $3.45/mcf
> ~60% of crude oil is hedged at $73.92/bbl
For the first half of 2016, PDCE received cash settlements on their hedges of more than $120 million.

PDCE's capital program will be fully funded by operating cash flows for the remainder of 2016 and all of 2017.

Not given much value today is their stake in the Utica shale. If gas prices move up to where I am expecting, there is significant upside to my valuation. PDCE can probably double their Utica gas and NGL production with a one rig drilling program in 2017.

PDCE does have exposure to the Colorado petitions to ban fracking. As I posted earlier, the chances of the ban being voted into law are slim and none. The oil & gas business is vital to the Colorado economy and the majority of citizens and elected officials know it.

[dan_s]

Stifel has upgraded PDCE to a BUY with a $70 price target.

"On today's 2Q earnings call, PDCE management indicated that initiatives #75 and
#78, which have the potential to shut down new drilling in Colorado, are unlikely to
reach the November 8 ballot. Based on unofficial estimates, the company's
sources suggest 105M-110M signatures were gathered for each proposal while the
validation process usually nullifies 30%-40%. If these numbers are accurate, both
proposals could be thrown out within the next 30 days."