PDC Energy (PDCE)

[dan_s]

PDC Energy Announces 2018 Capital Investment Budget of $850 to $920 Million; 2018 Production Forecast of 38 to 42 Million Boe and an Estimated Year-End Leverage Ratio of 1.6 Times

DENVER, Dec. 11, 2017 (GLOBE NEWSWIRE) -- PDC Energy, Inc. (“PDC” or the “Company”) (PDCE) today announced its 2018 capital investment budget and production forecast.

2018 Budget Highlights:

Year-over-year production growth of approximately 25 percent to an estimated 38 to 42 million barrels of oil equivalent (“MMBoe”).
Oil production to account for approximately 42 percent of total production, representing a year-over-year oil volume increase of approximately 30 percent.
Year-over-year Delaware Basin production growth estimated to exceed 80 percent.
Anticipated capital investment between $850 and $920 million with an expected outspend of approximately $130 million utilizing a $50 oil and $3 gas price deck. < This lines up with my forecast of $795 million Cash Flow From Operations. - Dan
Anticipate operating in a cash flow neutral environment over the second half of 2018, including an anticipated cash flow positive fourth quarter assuming $50 oil and $3 gas.
Spud approximately 153 operated wells and turn-in-line (“TIL”) approximately 161 operated wells.

This update gives be a VERY HIGH level of confidence in my forecast model for PDCE. I've only had to make a few minor changes and an updated forecast/valuation model will be posted to the EPG website this evening. My valuation of $81.00/share is unchanged. - Dan

CEO Commentary

President and Chief Executive Officer, Bart Brookman commented, “As we head into 2018, our teams are point focused on delivering strong operational execution. In Wattenberg, our three rig pace targets some of the most capital efficient, high rate-of-return projects in the country. In the Delaware, we continue to gain momentum in unlocking our tremendous resource potential, which includes our first downspacing test in our Eastern area. Overall, our plan is focused on our most productive projects and the ongoing pursuit of technical innovations. We are excited that our 2018 operating plan projects to provide us with the opportunity to grow production volumes by 20 to 30 percent, while simultaneously strengthening the Company’s balance sheet.”

2018 Capital Budget, Financial Positioning and Production Guidance

PDC’s 2018 capital budget of $885 million at the mid-point is primarily focused on continued execution in the Wattenberg Field and Delaware Basin by operating at a three drilling rig pace while utilizing one completion crew in each asset throughout the year. This plan includes flexibility to add a completion crew, as necessary, based on the timing of well completions and midstream capacity. Additionally, 2018 forecasts and projections include the anticipated closing of the Company’s previously announced Wattenberg acquisition prior to year-end 2017.

PDC’s current borrowing base has been established at $1.1 billion, with an elected commitment amount of $700 million. Given the recent issuance of $600 million of 5.75% Senior Notes due in 2026, the anticipated redemption of the $500 million 7.75% Senior Notes, and considering the anticipated closing of its Wattenberg acquisition, the Company anticipates to be minimally drawn on its revolving credit facility at year-end 2017. Assuming $50 oil and $3 gas pricing, PDC anticipates its 2018 capital investment to modestly exceed its expected cash flows from operations by approximately $130 million. PDC plans to be cash flow positive in the fourth quarter of 2018. Additionally, the Company expects to further improve its year-end leverage ratio, as defined by its revolving credit facility, from an estimated 1.8 times at year-end 2017, to approximately 1.6 times at year-end 2018.

The Company continues to focus on delivering a strong balance sheet and improved operational execution, resulting in 2018 expected production of 38 to 42 MMBoe, or approximately 104,000 to 115,000 Boe per day, representing year-over-year growth of approximately 25 percent compared to anticipated 2017 volumes. In Wattenberg, the Company plans to manage its TIL cadence to coincide with the expected fourth quarter expansion of third party processing in the field; while Delaware Basin TILs are expected to deliver initial production late in the first quarter as completion activity is expected to resume early in 2018. 2018 corporate production growth is expected to be modest in the early part of the year, with more robust growth expected later in the year with the Delaware contributions and the anticipated relief of Wattenberg midstream constraints. The December 2018 exit rate is anticipated to be more than 120,000 Boe per day. The Company anticipates closing the sale of its Utica Shale assets in early 2018.

Operational Details

In 2018, the Company plans to invest approximately $480 million in the Wattenberg Field, of which approximately $425 million is expected to be invested in operated drilling and completion activity, with the majority of the remaining capital related to participation in non-operated projects. PDC plans to spud and TIL approximately 131 and 139 operated wells, respectively. Activity in 2018 is expected to be primarily focused in the Company’s Kersey area, with approximately 60 percent of 2018 TILs anticipated to be mid- or extended-reach lateral wells. Average operated working interests in Wattenberg in 2018 is expected to be approximately 85 percent with well costs projected to remain flat compared to 2017 levels.

In the Delaware Basin, the Company plans to invest approximately $395 million, of which approximately $275 million is expected to be dedicated to operated drilling and completions investments. PDC plans to spud 22 wells, 20 of which are expected to be located in the Company’s Eastern area. The Company plans to TIL 22 wells in 2018, approximately 50 percent of which are projected to be in the Company’s consolidated position within its Eastern area. Driven by early successful outperformance in its Eastern area wells, the Company has included an increase to its Eastern area type curves to a range of 1 million to 2.6 million Boe per well, depending on lateral length, targeted completion zone and drilling location. Estimated well costs for 2018 are projected to be between $9 million and $14 million per well, depending on lateral length. Estimated well costs include the Company’s enhanced completion design, which it believes is the primary contributor to early production outperformance of its acquisition type curves.

Included in the Company’s 2018 Delaware Basin capital program is approximately $60 million to expand its midstream asset infrastructure, of which approximately $20 million is allocated to constructing crude oil gathering systems in the Company’s Eastern area. The Company anticipates delivering crude oil volumes on this system to third party purchasers in the fourth quarter of 2018. Similar to 2017, the Company plans to invest in salt water disposal wells, compressor station upgrades and production gathering lines across its Eastern and Central areas. Lastly, the Company plans to allocate approximately $60 million in non-operated drilling and completion activities, leasing, seismic and other miscellaneous capital.

Upcoming Investor Conferences

PDC is scheduled to attend the Goldman Sachs Energy Conference in Miami, on Tuesday, January 9, 2018. There is no webcast scheduled for this event, however, the Company expects to post an updated presentation prior to attending the event.

About PDC Energy, Inc.

PDC Energy, Inc. is a domestic independent exploration and production company that produces, develops, and explores for crude oil, natural gas, and NGLs, with primary operations in the Wattenberg Field in Colorado and the Delaware Basin in Reeves and Culberson Counties, Texas. The Company also has operations in the Utica Shale in Southeastern Ohio, which it plans to divest. PDC’s operations are focused in the horizontal Niobrara and Codell plays in the Wattenberg Field and in the Wolfcamp zones in the Delaware Basin.

[dan_s]

On November 20, 2017: Michael Scialla at Stifel Nicolaus rated PDCE a BUY with an $83.00 price target. His report is the most current analyst's report submitted to Reuters/First Call.

Based on my forecast model, PDCE is going to CRUSH the current First Call EPS estimate for Q4.