PDC Energy (PDCE) Update - May 2

[dan_s]

Michael S. Scialla at Stifel: PDC Energy (PDCE, $41.69, Buy; Target $59.00)
Midstream Sale Bolsters BalanceSheet, 1Q Short on Oil Production

"We view today's release as slightly negative. The positives include: i) a Delaware Basin midstream sale will raise $310MM and allow the company to pay off outstanding debt under its revolver; ii) 1Q19 Wattenberg and Delaware well costs were below budget; iii) the 2019 capital plan remained unchanged; iv) the Board authorized a $200MM share repurchase program.
The negatives include: i) 1Q19 oil production 5% below consensus; ii) 1Q19 capex was 5% above consensus."

[dan_s]

From TPH

PDCE Q1'19 Quick Look
Negative on Q1 print; midstream monetizations and buyback could offset
Sector: NAm E&P | Ticker: PDCE | Recommendation: HOLD | Target: $70 | Close: $41.69

Though total production was ~in-line (125mboepd vs. TPHe/Street 125/126), PDCE missed on oil (50mbpd vs. TPHe/Street 53), capex ($282MM vs. TPHe/Street $261MM/$253MM), and clean EPS (27c vs. TPHe/Street 59c). Overspend attributed to efficiencies-driven acceleration, though mgmt. re-iterated its commitment to the unchanged $810-870MM FY budget. Delaware midstream monetization and newly-initiated buyback ($200MM Q3'19 through YE'20, to be funded via FCF) could partially offset. Gas assets are to be sold to EagleClaw Midstream for $182MM ($82MM to be received 1-year out), and water assets are slated for WaterBridge Resources, LLC for $125MM (all at closing). Future LT gathering/processing and gathering/disposal, respectively, are also included and are based on AMI acreage dedication structures (no MVCs); looking for detail on pro-forma cost impact. $307MM total transaction value has upside via (i) up to $135MM of volume/activity-based incentives and (ii) oil assets (in final stages of negotiations, per release).