PDC Energy (PDCE) Update - Sept 22

[dan_s]

PDCE is trading at $44.98 as of the time of this post. It is up more than 115% YTD, but still trades at a deep discount to my current valuation.
I have update my forecast model, increasing the ngas and NGL prices. My valuation increases $2 to $82/share.

PDC's Q2 production was 191,458 Boepd, 30.9% crude oil, 41.5% natural gas and 27.6% NGLs. < I really like their production mix.

~40% of their 2H 2021 natural gas and 100% of their NGLs are unhedged. < Unhedged natural gas volumes increase to ~85% after December, 2021.

TipRanks: "In the last 3 months, 7 ranked analysts set 12-month price targets for PDCE. The average price target among the analysts is $62.00." < The seven price targets range from $55 to $70.

PCD is on pace to generate close to $1Billion free cash flow in 2021. This one is a "Cash Flow Machine" and all of the growth is funded by operating cash flow with lots of free cash flow to pay down debt, increase dividends and fund a stock buyback.
Operating Cash Flow per share
2019A = $13.40
2020A = $9.24
2021E = $15.75
2022E = $20.30

If PDC's guidance for 2022 matches up with my forecast assumptions, my valuation will jump to over $100/share six months from now because my model (based on what now looks quite conservative) shows them generating more than $20/share of operating cash flow next year. This company deserves to trade for at least 5X operating cash flow per share.

The only justification that I see for the current share price is the paradigm of "geopolitical risk" in Colorado.