At the time of this post PDCE was trading at $81.76.
TipRanks: "In the last 3 months, 5 ranked analysts set 12-month price targets for PDCE. The average price target among the analysts is $91.75. Three of the five analysts have updated their price targets since the Company announced Q3 results on Nov 2nd to $90, $100 and $103."
I have updated my forecast/valuation model for PDCE for their outstanding Q3 results and updated guidance for Q4.
My valuation increases by $4 to $124 per share, based on just 4X 2022+2023 annualized operating CFPS.
What I like:
> PDCE has an aggressive stock buyback underway. In Q3 they reduced the outstanding shares by almost 4%.
> The Company is on pace to generate close to $2.6 billion of operating cash flow this year ($28.02/share) and over $1.5 billion of free cash flow.
> My 2023 forecast based on realized prices of $85/bo, $5/mcf of ngas and $30/bbl for NGLs is $21.51 EPS and $36.95 operating CFPS. 4X Operating CFPS is a reasonable 12-month price target.
> PDCE is a DJ Basin (Colorado) company. The DJ Basin is one of the top five oil basins in the U.S. and HZ wells have incredible economics at today's oil price.
> PDCE's production growth will be close to 20% YOY in 2022 to an exit rate of ~255,000 Boepd, primarily due to the Great Western Acquisition that closed May 6, 2022 adding ~55,000 Boepd.
> The Company's year-end 2022 reserve report should show PV10 Net Asset Value for just their proved reserves (P1) over $100/share.
> Strong balance sheet, no debt problems, double digit annual production growth locked in and fully funded by 50% of their operating cash flow.
> I expect their aggressive stock repurchases to continue and look for more dividend increases in 2023.
I have followed PDCE for over a decade. This company has a first-class management team and lots of "running room".
PDC Energy (PDCE) Valuation Update - Nov 7
PDC Energy (PDCE) Valuation Update - Nov 7
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: PDC Energy (PDCE) Valuation Update - Nov 7
Note from Neal Dingmann at Truist Financial dated 11-4-2022. His price target for PDCE is $100.
PDC Energy, Inc. (PDCE)
No Slowdown in Solid Shareholder Return Story
PDCE delivererd solid repeatable well results that translated into continued strong FCF.
We continue to forecast the company will max out its buyback authorization by next year
leading the way to another increased amount. PDC has multiple years of permits and
virtually no debt clearing the runway for much more shareholder return upside and potentially
incremental and/or external growth. While we do not believe the company feels immediate
M&A pressure, we believe PDC would add assets if the details checked all the required
boxes.
Improved Operating Efficiencies Driving Upside
PDC is back on track reporting nothing but solid well results after a slight slip last quarter
that appears to be fully rectified. The company continues to bring on-line a number of large
pads with longer laterals and various improved completions that result in notable average
well upside. PDC most recently highlighted the Wayne and Gus pads with 10 wells on the
first pad and 36 wells on the second, respectively. In addition to the impressive pads, the
company continues to progress with its CAPs with the latest Guanella CAP having 450 wells
on 22 pads on a 50+ square mile development, with a hearing set for early December.
Updating Estimates, Price Target Increased to $100 from $96
PDC reported higher 3Q22 FCF than consensus estimates though less than expected
EBITDA, driven by lower than forecasted oil/natural gas production but better than
anticipated capex. 2022 guidance was largely unchanged though the capital spending was
taken to the previous high end of the range, in-line with the street. The company continues
to run an active shareholder return program focused primarily on stock buybacks, which
should max out the current authorization by next year. PDCE’s operations were back on
track last quarter after a couple hiccups in 2Q22. We have updated 4Q22/2023 estimates
for the latest macro energy and OFS inflation environment. Specifically, we have lowered
our pricing estimates in 2H22. Our $100 price target is derived from two equally weighted
methodologies, with the first being our ’23 EV/EBITDAX multiple of 3.0x (3.0x prior and 2.2x
peer group average) applied to our 2023E EBITDAX estimate of $3,214MM ($3,192MM prior
and $2,957MM consensus) and the second being a FCF/EV Yield.
PDC Energy, Inc. (PDCE)
No Slowdown in Solid Shareholder Return Story
PDCE delivererd solid repeatable well results that translated into continued strong FCF.
We continue to forecast the company will max out its buyback authorization by next year
leading the way to another increased amount. PDC has multiple years of permits and
virtually no debt clearing the runway for much more shareholder return upside and potentially
incremental and/or external growth. While we do not believe the company feels immediate
M&A pressure, we believe PDC would add assets if the details checked all the required
boxes.
Improved Operating Efficiencies Driving Upside
PDC is back on track reporting nothing but solid well results after a slight slip last quarter
that appears to be fully rectified. The company continues to bring on-line a number of large
pads with longer laterals and various improved completions that result in notable average
well upside. PDC most recently highlighted the Wayne and Gus pads with 10 wells on the
first pad and 36 wells on the second, respectively. In addition to the impressive pads, the
company continues to progress with its CAPs with the latest Guanella CAP having 450 wells
on 22 pads on a 50+ square mile development, with a hearing set for early December.
Updating Estimates, Price Target Increased to $100 from $96
PDC reported higher 3Q22 FCF than consensus estimates though less than expected
EBITDA, driven by lower than forecasted oil/natural gas production but better than
anticipated capex. 2022 guidance was largely unchanged though the capital spending was
taken to the previous high end of the range, in-line with the street. The company continues
to run an active shareholder return program focused primarily on stock buybacks, which
should max out the current authorization by next year. PDCE’s operations were back on
track last quarter after a couple hiccups in 2Q22. We have updated 4Q22/2023 estimates
for the latest macro energy and OFS inflation environment. Specifically, we have lowered
our pricing estimates in 2H22. Our $100 price target is derived from two equally weighted
methodologies, with the first being our ’23 EV/EBITDAX multiple of 3.0x (3.0x prior and 2.2x
peer group average) applied to our 2023E EBITDAX estimate of $3,214MM ($3,192MM prior
and $2,957MM consensus) and the second being a FCF/EV Yield.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group