PDC Energy Inc (ticker: PDCE) is engaged in the exploration, development and production of crude oil, NGLs and natural gas. The company’s operations are focused primarily in the Wattenberg Field of Colorado, including the horizontal Niobrara and Codell plays, the Utica Shale in Ohio, and the Marcellus Shale in West Virginia.
2012 was a transformative year for PDC Energy with a lot of moving parts. The company divested its Permian Basin assets for $189 million, acquired 30,000 net acres in the core Wattenberg Field, and purchased an additional 45,000 net acres in the Utica shale. The transformation spilled over into early 2013 with the company’s announcement to sell its non-core Colorado gas assets for $200 million to Caerus Oil & Gas.
Recent Financial Results
PDCE reported a net loss for Q4’12 of $126 million, or a loss of $4.17 per share. This compares to a Q4’11 net loss of $8 million, or loss of $0.35 per share. Commodity sales revenues from continuing operations during Q4’12 totaled $78 million, compared to $80 million during Q4’11. Production from continuing operations during Q4’12 increased 2% to 13.0 Bcfe compared to 12.8 Bcfe during Q4’11.
The company reported a full-year 2012 net loss of $131 million, or a loss of $4.72 per share, compared to net income of $13 million, or earnings of $0.56 per share in 2011. 2012 commodity sales revenues from continuing operations totaled $270 million compared to $277 million in 2011. Net production from continuing operations for 2012 increased 10% to 49.6 Bcfe compared to 45 Bcfe in 2011. Full-year production was approximately 35% crude oil and liquids and 65% natural gas. You can view the conference call transcript here and listen to the webcast here.
Proved Reserves
Total proved reserves at year-end 2012 increased 14% from year-end 2011 to approximately 1.2 Tcfe, a new company record. Oil and NGLs made up 48% of proved reserves at year-end 2012. Approximately 42% of year-end reserves are proved developed. The SEC-PV 10 value of the reserves was $1.7 billion. Average prices used in the year-end reserve calculation were $87.51 per barrel of crude oil, $28.02 per NGL barrel, and $2.35 per Mcf.
Utica Shale Well Headline of the Release
PDCE announced its second horizontal Utica well which performed better than the first. The Detweiler 42-3H well is located in Guernsey County, Ohio and tested at an average rate of 2,039 BOEPD for 24 consecutive hours. The company’s first well in the Utica tested at 1,500 BOEPD. The well’s production stream is 49% condensate, 26% NGLs and 25% residue gas. As infrastructure constraints are worked through in the Utica, we believe the company has positioned itself to build an asset that could potentially rival its current growth driver in the Wattenberg Field. Additional wells in Guernsey County and future tests in the Washington County are expected to de-risk PDC’s position in Ohio supporting this thesis.
[sam_ad id=”32″ codes=”true”]
Liquids Focus – Final Thoughts on PDCE
With the sale of non-core Colorado gas assets, and the marketing of its dry gas position in the Marcellus, PDC proved it’s serious about high grading its portfolio and we believe this could be the end of its divestiture process. Pro-forma for the planned sale of non-core Colorado gas assets, PDC’s year-end 2012 proved reserves are approximately 52% liquids. The company’s production in 2013 is also expected to be over 50% liquids. Continued growth in production and liquids weighted production will be largely driven by its three core areas in the Wattenberg, Utica and Marcellus Shale.
Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication.
