Denver-based PDC Energy (ticker: PDCE) is an independent oil and natural gas company that operates in Colorado within the liquid-rich Wattenberg Field and the Appalachian Basin including the emerging liquid-rich Utica Shale play in Ohio and the Marcellus Shale in West Virginia.
PDC announced its total proved reserves for year-end 2013 were 266 MMBOE, an increase of 38% compared to 2012’s year-end reserves of 193 MMBOE. Approximately 54% of the company’s production was from liquids. The commodity makeup achieves the company goal of reaching at least 50% liquid production in order to better balance its portfolio between liquid and gas, as stated in its Q4’12 news release.
In addition, the company sold approximately 16 MMBOE worth of proved developed reserves in June 2013. If the divesture is excluded from year-end numbers, PDC’s proved reserves actually grew organically by 50%. PV-10 value for the company climbed to $2.7 billion, an increase of 59% compared to 2012’s value of $1.7 billion. Its year-end 2013 3P reserves rose to 854 MMBOE (56% liquids), a 45% increase from 2012’s total of 589 MMBOE.
The estimates were conducted by Ryder Scott Company, L.P., using NYMEX prices of $96.94 per barrel and $3.67 per million British Thermal Units.
PDC Continues Investment in Wattenberg
PDC management said much of the reserve increases were a result of downspacing in the Wattenberg, and the play’s proved reserves increased by 42%. PDC holds 98,000 net acres with 95% held by production, and is the third largest leaseholder and producer in the region. The project has now identified 623 proved undeveloped horizontal locations in the play, with 543 in the Niobrara and 80 in the Codell formation. Other increases resulted from initial reserve bookings in the Utica Shale. Due to its attention on oil, PDC management said it will not be drilling on any of its Marcellus Shale acreage in 2014.
In terms of 3P reserves, the Wattenberg downspacing project has revealed roughly 22 wells per section, increasing the 3P well inventory to more than 2,800 gross locations. Overall, the company has now identified more than 3,600 gross 3P locations.
In 2014, PDC plans on running 16 wells per 640-acre section. The company will progress on its Wattenberg acreage by adding a fifth rig in Q2’14. The region’s fourth rig was placed online in December 2013. Management said it plans on conducting a 25 well per section downspacing test with an outside operator in the upcoming year. A 16 well test in November 2013 on its Waste Management section exceeded company expectations with total production of 7.6 MBOEPD (88% crude oil).
The Utica, meanwhile, will receive its second rig in 2H’14. PDC management said 11 wells were drilled in 2013 and the new rig will assist in the planned drilling of 18 wells in 2014.
PDC Energy’s Shift to Oil
The ongoing horizontal program is being utilized to meet PDC’s shift from gas to liquids production. The company had 113 producing horizontals according to its most recent presentation on January 24, 2014, and spud 119 (70 operated) in 2013. The company plans on spudding 133 total operated horizontals in 2014, with 115 in the Wattenberg. Its 2014 capital budget of $647 is still largely dedicated to the ongoing development of the play, and an estimated 89% will account for its expenditures.
As indicated by PDC’s chart on the right, liquids production in terms of commodity mix has grown by more than 70% since 2012. Production dropped to 7.3 MMBOE in 2013 from 8.9 MMBOE in 2012 as a result of the shift to a more oil-oriented approach. Despite the drop in daily production as a result of the change, PDC expects its downspacing and horizontal program to compensate for the drop. Initial guidance for the upcoming year expects production to reach 9.5 MMBOE to 10 MMBOE, with oil being the driver going forward.
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