Energy Prospectus

After the markets closed on February 24 PDC Energy Announces 2020 Results, 2021 Guidance and Multi-Year Outlook Focused on Return of Capital Initiatives Including Board-Approved Dividend Program Expected to Commence Mid-2021. The stock was up BIG today on HIGH volume.

2020 Fourth Quarter and Full-Year Highlights:

Net cash from operating activities of approximately $220 million and $870 million in the fourth quarter and full-year 2020, respectively. Adjusted cash flows from operations, a non-U.S. GAAP metric defined below, of approximately $270 million, beating my Q4 forecast of $251 million.

Full year operating cash flow was $920, which compares to the company's 2020 capital expenditures of $520 million. FCF of $400 million during one of the most challenging years EVER tells you how profitable this company is going to be in the future.

PDC reduced total debt by approximately $300 million since closing the SRC Energy, Inc. ("SRC") acquisition, resulting in a year-end leverage ratio, as defined by the Company’s revolving credit facility, of approximately 1.7 times.

Implemented initiatives aimed at decreasing both total emissions and flaring intensity as the Company is aligned with the World Bank in achieving zero routine flaring by 2030, with aspirations to reach this goal sooner. In 2020, the Company flared approximately 0.2 percent of its total gross natural gas production, including approximately 1.6 percent of gross Delaware Basin natural gas production, an improvement of more than 50 percent compared to 2019.

I will finish updating my forecast/valuation model for PDCE this evening. The stock closed today at $35.81, which passed my pre-release valuation of $34.00.

2021 Capital Investment and Financial Guidance

PDC anticipates 2021 capital investments of $500 to $600 million to generate between 190,000 and 200,000 Boe per day and 64,000 to 68,000 Bbls per day, reflecting approximately five percent total production growth and flat oil production on a year-over-year basis. The Company’s revised production ranges reflect an increase in expected total production and no change in expected oil production compared to prior guided ranges due to sooner than previously planned completions of large, gassier Plains wells in Wattenberg and the delayed completions of oilier Delaware basin wells from January to March.

PDC expects its capital program to generate more than $400 million of FCF, assuming $45 per Bbl WTI, $2.50 per Mcf NYMEX natural gas and NGL realizations of $12 per Bbl. < Commodity prices are going to be much higher than this.

In late February 2021, PDC reduced its debt balance to below its near-term target of $1.5 billion and subsequently reinstated its stock repurchase program. Also, in February, the Company’s Board of Directors approved the implementation of a quarterly dividend program expected to commence in mid-2021 with an initial target of a one to two percent yield. As part of PDC’s long-term strategy, it is targeting 2021 debt reduction of more than $200 million and shareholder returns, consisting of stock repurchases and dividend payments, of at least $120 million. The remaining projected FCF is expected to flex between further debt reduction, additional shareholder returns, working capital needs and business development initiatives as dictated by macro-level conditions such as commodity prices and PDC share price.

Today: 3 highly respected analysts put out new price targets for PDCE

Stifel 2/25/2021 $37.00
JP Morgan 2/25/2021 $47.00
S Williams 2/25/2021 $40.00

I am increasing my valuation by $10 to $44/share. My updated forecast/valuation model will be posted to the EPG website this evening.