My valuation of PDCE will be be going higher.
PDC Energy Announces $1.3 Billion Core Wattenberg Acquisition,
Establishes Enhanced Return of Capital Framework, Provides 2021 Results and 2022 Guidance
PDC Energy, Inc.
Mon, February 28, 2022, 5:00 AM
Acquisition Adds Significant Scale to Core Wattenberg Position, is Accretive to Key Financial and Operating Metrics, Maintains Strong Balance Sheet
Increases Quarterly Base Dividend More Than 100% to $0.25 per Share with Expectations to Further Increase to $0.35 per Share Upon Acquisition Closing
Commits to Returning a Minimum of 60% of Annual Post-Dividend FCF to Shareholders via Systematic Share Repurchases and Special Dividend, if needed
Increases Board-Authorized Share Repurchase Program to $1.25 Billion
PDC to Host Investor Call Today at 11:00 a.m. ET / 9:00 a.m. MT
PDC Energy (PDCE) Q4 Results -Feb 28
PDC Energy (PDCE) Q4 Results -Feb 28
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: PDC Energy (PDCE) Q4 Results -Feb 28
DENVER, Feb. 28, 2022 (GLOBE NEWSWIRE) -- PDC Energy, Inc. (“PDC” or the “Company”) (Nasdaq:PDCE) today announced it has entered into a definitive purchase agreement with Great Western Petroleum, LLC (“Great Western”) and certain sellers under which PDC will acquire Great Western in a transaction valued at approximately $1.3 billion, including net debt of approximately $500 million (the “Acquisition”).
Great Western is a Denver-based DJ Basin operator owned by affiliates of EIG, TPG Energy Solutions, L.P. and The Broe Group. Under the terms of the agreement, the Acquisition will be financed through the issuance of approximately 4.0 million shares of common stock to existing Great Western shareholders and approximately $543 million of cash, subject to customary post-closing adjustments. The transaction is expected to close in the second quarter of 2022 and is expected to be financed with cash on hand and borrowings under the Company’s credit facility. PDC does not expect its pro forma leverage ratio to exceed 1.0x upon closing.
The Company also provided its enhanced return of capital framework, 2021 fourth quarter and year-end operating and financial results, detailed 2022 PDC standalone guidance and a preliminary 2022 pro forma outlook.
Key Acquisition Highlights:
Materially increases PDC scale through the acquisition of approximately 55,000 barrels of oil equivalent (“Boe”) per day, composed of approximately 42 percent crude oil and 67 percent liquids and year-end 2021 SEC proved reserves of 185 MMBoe. PDC estimates its pro forma year-end 2021 SEC proved reserves were approximately 1 billion Boe.
Addition of 315 identified locations – approximately 125 of which are either drilled but uncompleted wells (“DUCs”) or approved permits. The Company’s pro forma combined DUC and approved permit count was approximately 500 locations at year-end 2021.
Accretive to key financial and operating metrics including adjusted free cash flow (“FCF”), a non-U.S. GAAP metric defined below, FCF per share, shareholder returns, oil mix, general & administrative expense (“G&A”) per Boe and lease operating expense (“LOE”) per Boe. The Company anticipates its pro forma leverage ratio to be less than 0.7x at year-end 2022.
Accretive to PDC’s current GHG and methane emission intensities while supporting the Company’s 2025 and 2030 emission intensity reduction goals and further enhancing its best-in-class community stewardship programs.
President and Chief Executive Officer Bart Brookman commented, “Coupled with our existing high-quality inventory, this Core Wattenberg acquisition adds meaningful scale to PDC while also demonstrating our commitment to – and confidence in – the future of safe and responsible energy development in the state of Colorado. This opportunity meets all the Company’s acquisition-related criteria we’ve previously communicated by strengthening our free cash flow, increasing our shareholder returns, honoring the balance sheet and adding competitive, high-quality inventory.”
Return of Capital Framework:
PDC’s board of directors has approved an increase to its 2022 first quarter base dividend to $0.25 per share from $0.12 per share in the fourth quarter of 2021. The Company anticipates further increasing the quarterly base dividend to $0.35 per share upon closing of the Acquisition in the second quarter.
In 2022 and beyond, PDC is committed to returning a minimum of 60 percent of post-dividend annual FCF to shareholders through the Company’s board-authorized $1.25 billion share repurchase program and year-end special dividend, if needed. The Company intends to utilize its entire $1.25 billion authorization by year-end 2023.
Cumulative 2022 and 2023 estimated pro forma FCF of approximately $2.7 billion and projected shareholder returns of more than $1.7 billion, equating to approximately 50 percent and 30 percent, respectively, of the Company’s current market cap.
“I’m extremely excited to execute our new return of capital framework.” commented Chief Financial Officer Scott Meyers. “Not only do we feel this will lead to industry-leading shareholder returns, but we maintain the ability to further strengthen the balance sheet and build a cash balance for future flexibility. While our primary goal is to honor and consistently grow the base dividend, we plan to aggressively buy back a significant portion of our stock while we trade at an unwarranted discount to our intrinsic value, our peers and the broad market in general. At our current share price, we not only plan to fully exhaust our new plan in under two years – but we also project to retire more shares by the end of the third quarter than we’re issuing in association with the Great Western acquisition.”
PDC Standalone and Pro Forma 2022 Highlights (1):
Assuming $75 per barrel WTI crude oil, $4.00 NYMEX natural gas and NGL realizations of approximately $27.50 per barrel, PDC anticipates generating approximately $1.1 billion of standalone FCF with anticipated pro forma FCF of approximately $1.3 billion.
PDC standalone oil and gas capital investments expected between $675 and $725 million with pro forma capital investments expected between $900 million and $1.0 billion.
Total standalone production and oil production expected between 195,000 and 205,000 Boe per day and 62,000 and 65,000 barrels (“Bbls”) of crude oil per day. Pro forma daily production and daily oil production in the second half of 2022 are expected between 250,000 and 260,000 and 82,000 and 87,000, respectively.
(1) Pro forma outlook assumes successful closing of Acquisition in the second quarter, are based on current estimates and subject to a higher degree of uncertainty.
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My valuation will be going over $100/share
Great Western is a Denver-based DJ Basin operator owned by affiliates of EIG, TPG Energy Solutions, L.P. and The Broe Group. Under the terms of the agreement, the Acquisition will be financed through the issuance of approximately 4.0 million shares of common stock to existing Great Western shareholders and approximately $543 million of cash, subject to customary post-closing adjustments. The transaction is expected to close in the second quarter of 2022 and is expected to be financed with cash on hand and borrowings under the Company’s credit facility. PDC does not expect its pro forma leverage ratio to exceed 1.0x upon closing.
The Company also provided its enhanced return of capital framework, 2021 fourth quarter and year-end operating and financial results, detailed 2022 PDC standalone guidance and a preliminary 2022 pro forma outlook.
Key Acquisition Highlights:
Materially increases PDC scale through the acquisition of approximately 55,000 barrels of oil equivalent (“Boe”) per day, composed of approximately 42 percent crude oil and 67 percent liquids and year-end 2021 SEC proved reserves of 185 MMBoe. PDC estimates its pro forma year-end 2021 SEC proved reserves were approximately 1 billion Boe.
Addition of 315 identified locations – approximately 125 of which are either drilled but uncompleted wells (“DUCs”) or approved permits. The Company’s pro forma combined DUC and approved permit count was approximately 500 locations at year-end 2021.
Accretive to key financial and operating metrics including adjusted free cash flow (“FCF”), a non-U.S. GAAP metric defined below, FCF per share, shareholder returns, oil mix, general & administrative expense (“G&A”) per Boe and lease operating expense (“LOE”) per Boe. The Company anticipates its pro forma leverage ratio to be less than 0.7x at year-end 2022.
Accretive to PDC’s current GHG and methane emission intensities while supporting the Company’s 2025 and 2030 emission intensity reduction goals and further enhancing its best-in-class community stewardship programs.
President and Chief Executive Officer Bart Brookman commented, “Coupled with our existing high-quality inventory, this Core Wattenberg acquisition adds meaningful scale to PDC while also demonstrating our commitment to – and confidence in – the future of safe and responsible energy development in the state of Colorado. This opportunity meets all the Company’s acquisition-related criteria we’ve previously communicated by strengthening our free cash flow, increasing our shareholder returns, honoring the balance sheet and adding competitive, high-quality inventory.”
Return of Capital Framework:
PDC’s board of directors has approved an increase to its 2022 first quarter base dividend to $0.25 per share from $0.12 per share in the fourth quarter of 2021. The Company anticipates further increasing the quarterly base dividend to $0.35 per share upon closing of the Acquisition in the second quarter.
In 2022 and beyond, PDC is committed to returning a minimum of 60 percent of post-dividend annual FCF to shareholders through the Company’s board-authorized $1.25 billion share repurchase program and year-end special dividend, if needed. The Company intends to utilize its entire $1.25 billion authorization by year-end 2023.
Cumulative 2022 and 2023 estimated pro forma FCF of approximately $2.7 billion and projected shareholder returns of more than $1.7 billion, equating to approximately 50 percent and 30 percent, respectively, of the Company’s current market cap.
“I’m extremely excited to execute our new return of capital framework.” commented Chief Financial Officer Scott Meyers. “Not only do we feel this will lead to industry-leading shareholder returns, but we maintain the ability to further strengthen the balance sheet and build a cash balance for future flexibility. While our primary goal is to honor and consistently grow the base dividend, we plan to aggressively buy back a significant portion of our stock while we trade at an unwarranted discount to our intrinsic value, our peers and the broad market in general. At our current share price, we not only plan to fully exhaust our new plan in under two years – but we also project to retire more shares by the end of the third quarter than we’re issuing in association with the Great Western acquisition.”
PDC Standalone and Pro Forma 2022 Highlights (1):
Assuming $75 per barrel WTI crude oil, $4.00 NYMEX natural gas and NGL realizations of approximately $27.50 per barrel, PDC anticipates generating approximately $1.1 billion of standalone FCF with anticipated pro forma FCF of approximately $1.3 billion.
PDC standalone oil and gas capital investments expected between $675 and $725 million with pro forma capital investments expected between $900 million and $1.0 billion.
Total standalone production and oil production expected between 195,000 and 205,000 Boe per day and 62,000 and 65,000 barrels (“Bbls”) of crude oil per day. Pro forma daily production and daily oil production in the second half of 2022 are expected between 250,000 and 260,000 and 82,000 and 87,000, respectively.
(1) Pro forma outlook assumes successful closing of Acquisition in the second quarter, are based on current estimates and subject to a higher degree of uncertainty.
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My valuation will be going over $100/share
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group