PDC Energy Agrees to Sell Its 50% Interest in the PDCM Marcellus Joint Venture for Approximately $250 million; PDC Energy Increases Its Utica Shale Leasehold to Approximately 67,000 Net Acres
DENVER, July 30, 2014 (GLOBE NEWSWIRE) -- PDC Energy, Inc. ("PDC" or the "Company") (Nasdaq:PDCE) today announced that it agreed to sell its fifty percent interest in PDC Mountaineer LLC ("PDCM"), a Marcellus Joint Venture ("JV"), to Mountaineer Keystone Energy, LLC for approximately $250 million subject to certain purchase price adjustments. PDC's net pre-tax proceeds from the sale, after its share of JV debt repayment and other working capital adjustments, is expected to be approximately $190 million comprised of $150 million in cash and a $40 million note. The transaction includes the buyer's assumption of PDC's share of the firm transportation obligations related to the assets owned by PDCM as well as PDC's share of certain PDCM natural gas hedging positions for the years 2014 and 2015.
The effective date of the transaction is January 1, 2014 and it is expected to close on or about October 15, 2014, subject to customary closing conditions. The assets are approximately 99% natural gas and include an estimated 240 billion cubic feet (Bcf) of proved reserves net to PDC, as of December 31, 2013. The assets produced approximately 24 million cubic feet equivalent per day (MMcfe/d) net to PDC in the first quarter of 2014. Tudor Pickering Holt acted as advisor on the sale.
2013 Year End SEC Proved Reserves – Pro Forma
Total proved reserves for PDC as of December 31, 2013 pro forma for the sale are estimated to be 226 million barrels oil equivalent ("MMBoe") with the liquid mix of those reserves increasing from 54% to 63%. Pro forma for the sale, PDC's per unit SEC PV-10 proved reserve value increases from $10.16 to $11.50 per Boe.
Utica Shale Acreage and Inventory Update
Through a series of transactions, the Company recently added approximately 13,000 net acres, subject to confirmation of title, in the liquid-rich windows of the Utica Shale play in southeast Ohio. The newly acquired acreage closely offsets PDC's existing acreage in southern Utica including the Company's recently drilled Palmer unit acreage in eastern Morgan County as well as leasehold in northern Washington County. The cost for the additional acreage is approximately $35 million which the Company expects to be funded within its existing 2014 capital budget of approximately $647 million.
PDC's total acreage position in the Utica Shale with the additional acreage increases from approximately 54,000 to 67,000 net acres. Total gross horizontal well inventory is projected to increase from approximately 300 to 350 locations. The Company's acreage position in southern Utica is substantially contiguous in the wet-gas and condensate windows and provides for increased drilling, operational and midstream synergies. The Company continues to pursue additional acreage acquisitions that complement its existing Utica Shale position.
PDC recently added a second drilling rig in the play. The Company is progressing with completion operations on its two-well Palmer pad, and has re-initiated production from its three-well Garvin pad in Washington County that was temporarily shut in due to midstream issues.
2014 Guidance Update
The Company intends to provide updated production and financial guidance for 2014 along with an updated outlook for 2015 and 2016 on its second quarter conference call currently scheduled for August 8, 2014.
James Trimble, Chief Executive Officer, stated, "This divestiture represents a final step in our transition towards a high quality, liquid-rich asset base and positions us to fully focus our efforts on the horizontal development of our higher-return Wattenberg Field and Utica Shale assets. Our acquisition of additional acreage in the liquid-rich area of the Utica Shale demonstrates our strong commitment to the southern portion of the play. Proceeds from this sale along with internally generated cash flow and cash on the books at the beginning of the year are expected to fully fund our previously announced 2014 capital program. This transaction further strengthens our balance sheet and debt metrics, increases per-unit margins, and enhances our long-term growth profile."
About PDC Energy, Inc.
PDC Energy is a domestic independent energy company engaged in the exploration, development and production of crude oil, NGLs and natural gas. Its operations are focused primarily in the liquid-rich Wattenberg Field of Colorado, including the horizontal Niobrara and Codell plays, the Utica Shale in Ohio and the Marcellus Shale in West Virginia. PDC is included in the S&P SmallCap 600 Index and the Russell 2000 Index of Companies.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding PDC's business, financial condition, results of operations and prospects. All statements other than statements of historical facts included in and incorporated by reference into this release are forward-looking statements. Words such as expects, forecast, guidance, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements herein, which may include statements regarding the closing of the proposed transaction and the final purchase price, statements regarding future production, 2014 capital expenditures and projects (including rig deployments), future operational initiatives, and management's strategies, plans and objectives. However, these are not the exclusive means of identifying forward-looking statements herein. Although forward-looking statements contained in this press release reflect the Company's good faith judgment, such statements can only be based on facts and factors currently known to PDC. Consequently, forward-looking statements are inherently subject to risks and uncertainties, including risks and uncertainties incidental to the exploration for, and the acquisition, development, production and marketing of natural gas and oil, and actual outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to:
potential impediments to completing the proposed transaction on the expected timeframe or at all, or greater than expected purchase price adjustments;
changes in worldwide production volumes and demand, including economic conditions that might impact demand;
volatility of commodity prices for crude oil, natural gas and NGLs;
the impact of governmental policies and/or regulations, including changes in environmental and other laws, the interpretation and enforcement related to those laws and regulations, liabilities arising thereunder and the costs to comply with those laws and regulations;
potential declines in the value of our crude oil, natural gas and NGLs properties resulting in impairments;
changes in estimates of proved reserves;
inaccuracy of reserve estimates and expected production rates;
potential for production decline rates from our wells being greater than expected;
timing and extent of our success in discovering, acquiring, developing and producing reserves;
our ability to secure leases, drilling rigs, supplies and services at reasonable prices;
availability of sufficient pipeline, gathering and other transportation facilities and related infrastructure to process and transport our production, particularly in the Wattenberg Field and the Utica Shale, and the impact of these facilities and regional capacity on the prices we receive for our production;
timing and receipt of necessary regulatory permits;
risks incidental to the drilling and operation of crude oil and natural gas wells;
our future cash flows, liquidity and financial condition;
competition within the oil and gas industry;
availability and cost of capital;
reductions in the borrowing base under our revolving credit facility;
our success in marketing crude oil, natural gas and NGLs;
effect of crude oil and natural gas derivatives activities;
impact of environmental events, governmental and other third-party responses to such events, and our ability to insure adequately against such events;
cost of pending or future litigation;
effect that acquisitions we may pursue have on our capital expenditures;
our ability to retain or attract senior management and key technical employees; and
success of strategic plans, expectations and objectives for our future operations.
Further, PDC urges you to carefully review and consider the cautionary statements made in this press release and the Company's filings with the SEC for further information on risks and uncertainties that could affect the Company's business, financial condition and results of operations, which are incorporated by this reference as though fully set forth herein. The Company cautions you not to place undue reliance on forward-looking statements, which speak only as of the date hereof. PDC undertakes no obligation to update any forward-looking statements in order to reflect any event or circumstance occurring after the date of this release or currently unknown facts or conditions or the occurrence of unanticipated events. All forward looking statements are qualified in their entirety by this cautionary statement. Estimates of non-proved reserves, including 3P reserves, are based on more limited information, and are subject to significantly greater risk of not being produced, than proved reserves. Initial and test results from a well are not necessarily indicative of the well's long-term performance.
CONTACTS: Michael Edwards
Senior Director Investor Relations
(July 30, 2014 - 9:05 AM EDT)
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