PDC Energy (PDCE) Valuation Update - Oct 18

[dan_s]

At the time of this post PDCE was trading at $66.67

TipRanks: "In the last 3 months, 7 ranked analysts set 12-month price targets for PDCE. The average price target among the analysts is $102.40. The 7 price targets range from $76 to $126."

My current valuation increases by $3 to $120.

Why:
> PDC closed the Great Western Acquisition on May 5, 2022, so the full impact of the deal will be included in Q3 results.
> PDC is going to report very strong Q3 results, including a production increase of ~5% quarter-over-quarter. Production increased from 199,151 Boepd in Q1 2022 to 235,273 Boepd in Q2 and my forecast is 247,000 Boepd in Q3.
> I believe the Company's guidance will show them on pace to a 2022 exit rate of more than 255,000 Boepd, which will cause me to increase my 2023 forecast.
> PDC pays a dividend of $0.35/quarter and it is funding an aggressive stock repurchase program. It is the stock buyback which should justify a much higher share price.
> As of today they have less than 94 million shares outstanding. That is quite low for a company of this size (~250,000 Boepd of production).
> My current 2023 forecast is that PDC will generate over $21 earnings per share and over $36 operating cash flow per share. A conservative 12-month price target would be 4X operating CFPS.

PDC is a DJ Basin company. There is a "False Paradigm" that Colorado is anti-oil companies. Like Texas, Colorado gets a lot of tax revenues from upstream companies and the politicians know they need those revenues.
> PDC is the 2nd largest oil producer in Colorado and they have a good working relationship with the state agencies.
> The DJ Basin is one of the top five oil producing regions in the US.

If you cashed out of CLR, this is a good place for you move the money.