PDC Energy (PDCE) Q2 Results - Aug 7

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2020 Second Quarter Highlights:

Net cash from operating activities of approximately $103 million and adjusted cash flows from operations, a non-U.S. GAAP metric defined below, of approximately $182 million. < Beat my forecast of $139.4 million cash flow from operations.

Oil and gas capital investments of approximately $120 million.
Approximately $62 million of free cash flow, a non-U.S. GAAP metric defined below as net cash flows from operating activities, before changes in working capital, less oil and gas capital investments.

In June 2020, the Company received $82 million in relation to its previously divested Delaware Basin midstream assets. These proceeds were used to pay down a portion of the Company’s revolver balance and are excluded from its second quarter free cash flow calculation.

Lease operating expense (“LOE”) of $36 million or $2.08 per barrel of oil equivalent (“Boe”). < Big improvement since Q1.

Total production of 17.2 million Boe or nearly 190,000 Boe per day and oil production of 6.2 million barrels (“Bbls”) or approximately 68,000 Bbls per day. < My forecast was 163,000 Boepd and 55,000 BOPD.

Full-Year 2020 Updated Guidance Highlights:

Anticipate generating more than $300 million of free cash flow assuming $35 per Bbl WTI, $2 per Mcf NYMEX natural gas and NGL realizations of approximately $9 per barrel for the remainder of the year.
Reduced anticipated oil and gas capital investments to a range of $500 to $550 million, from the prior range of $500 to $600 million.
Increased anticipated oil production by five percent to a range of 64,000 to 68,000 Bbls per day while increasing total production to a range of 175,000 to 185,000 Boe per day.

CEO Commentary

President and Chief Executive Officer Bart Brookman commented, “The second quarter presented multiple challenges, but I am extremely proud of our ability to quickly adapt our business plan while never losing sight of our corporate values and strategy. Our operational excellence and ability to execute are more apparent than ever, and were clearly reflected in our results and updated guidance. As PDC stands today with our substantial projected free cash flow, I am proud of our differentiating outlook.

“From a risk perspective, we are experiencing a much improved midstream, operating and regulatory backdrop in Colorado that enhances our confidence in achieving our business objectives. I echo Governor Polis’ recent remarks around the need for collaboration as we collectively strive to safely deliver clean, affordable energy in Colorado and I look forward to working with his administration on this mission.”

2020 Capital Investments and Financial Guidance

Planned 2020 capital investment of $500 million to $550 million represents a decrease of approximately 50 percent compared to the Company’s original guidance of $1.0 to $1.1 billion provided in February, and a decrease of approximately five percent from previous guidance provided in May. The Company’s second quarter capital investments were approximately $120 million and represent more than 70 percent of the revised full-year 2020 guidance when combined with first quarter investments of approximately $260 million. Investments for the third and fourth quarter are expected to be approximately $50 million and $100 million, respectively.

In Wattenberg, the Company plans to operate one drilling rig for the remainder of the year, while anticipating to resume completions late in the third quarter, assuming commodity pricing supports such a decision. The 2020 Delaware Basin capital program was largely completed for the year in the second quarter, with the expectation to spend less than $20 million on various leasing and other projects the remainder of the year.

In 2020, the Company projects to generate more than $300 million of free cash flow, assuming $35 per Bbl WTI, $2 per Mcf NYMEX natural gas and NGL realizations of approximately $9 per barrel for the remainder of the year. PDC anticipates generating material free cash flow in each the third and fourth quarters.

The Company increased its oil production range for 2020 by five percent to 64,000 to 68,000 barrels per day while increasing its total production to a range of 175,000 to 185,000 Boe per day. Each figure includes immaterial curtailments for the remainder of the year. PDC projects similar volumes in the third quarter as the second quarter before decreasing approximately ten percent on a sequential basis and averaging an estimated 170,000 Boe per day and 60,000 Bbls per day, respectively in the fourth quarter.

Finally, PDC decreased its expected 2020 LOE to a range of $170 million to $180 million, or approximately $2.65 per Boe while anticipated general and administrative expense (“G&A”) remains unchanged at $135 million to $140 million, or approximately $2.05 per Boe for the full-year, and does not include approximately $20 million of deal costs associated with the SRC merger incurred in the first quarter. The Company projects G&A of less than $2.00 per Boe in the second half of the year.