PDC Energy (PDCE) Update - August 6

[dan_s]

I have updated my forecast/valuation model for PDCE and posted it to the EPG website.
My valuation increases by $2 to $80, primarily because their detailed guidance for 2H 2021 confirms a lot of my model assumptions. PDC is going to report a nice increase in production from Q2 to Q3 as they take advantage of the good weather in Colorado to complete a lot of high rate horizontal wells. Plus, natural gas and NGL price differentials in the DJ Basin have improved. Natural gas prices in the region could spike this winter.

PDCE closed today at $38.62

TipRanks 8-6-2021: "In the last 3 months, 5 ranked analysts set 12-month price targets for PDCE. The average price target among the analysts is $61.00. The five price targets range from $55 to $67, with the $67 target is from Truist Financial on 8/5/2021."

PDC is now on track to generate close to $1 Billion of free cash flow from operations this year. They have started paying a dividend and they have an active share buyback underway. They do have some "Bad Hedges" to work off and if WTI averages $70/bbl in 2022 they could generate over $2 Billion of operating cash flow next year, approximately $20 per share. A 12-month price target of 6X operating cash flow is reasonable.
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I have finished updating all of the Sweet 16 forecast/valuation models. All 16 companies generated free cash flow in Q2 and they will generate a lot more FCF during 2H 2021. Several of them now pay nice dividends.