Denver-based PDC Energy (ticker: PDCE) is an independent natural gas and oil 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 capital budget for 2014 will be approximately $647 million in a news release on December 10, 2013. The primary goal of the budget is to increase organic growth in PDC’s Wattenberg Field and Utica Shale positions. Development capital consists of $576 million and expenses for leasehold acquisitions and exploration will be $71 million.
PDC released a full presentation covering its budget and operations outlook on December 11, 2013, which can be found here.
Net production volumes for 2014 are estimated to average between 9.5 MMBOE to 10 MMBOE, an increase of 34% over its 2013 numbers. Its 2014 production exit rate is expected to be 33 MBOEPD. Liquids are estimated to account for 60% of production, as opposed to 54% in 2013. Dry gas volumes are expected to decrease due to the sale of its Upper Devonian asset in addition to suspending operations in its Marcellus legacy assets. In a conference on December 11, 2013, PDC management said the decision to halt production in the area is a result of widening differentials and the ongoing softness of the gas market in the Northeast. Most of its acreage is held by production and operations are expected to continue once the market improves.
Wattenberg Field Review
PDC’s 2014 operations in the Wattenberg include investing $469 million and running four horizontal rigs, with a fifth expected to join in Q2’14. An estimated 115 gross horizontal wells (59 Codell and 56 Niobrara) will be spud in 2014 with 19 
reaching extended length lateral completions of approximately 7,000 feet. Overall, the company holds 98,000 net acres in the Field and 95% are held by production. An estimated 2,000 gross horizontal locations have been identified.
A 26-well per section downspacing test in the Niobrara will be a key point of 2014 operations. The Niobrara B and Niobrara C benches will each receive 13 wells and the project is expected to cost $50 million. The company is expanding testing after results from a 16 well test were completed on November 12, 2013, in the Waste Management Section. The entire section produced a peak 24-hour rate of 7.6 MBOEPD, with 88% crude oil. Six Codell wells performed above the type curve with an average peak 24-hour rate of 500 BOEPD per well. Ten Niobrara wells between the B and C benches performed in line with the type curve at an average peak 24-hour rate of 560 BOEPD.
An additional 15 wells are expected to be brought online by the end of Q4’13 and will factor in to PDC’s exit rate. Non-operated projects will command $100 million of the budget.
Utica Shale Review
The Utica will receive $162 million of PDC’s budget with the intention of spudding 18 wells (eight northern, 10 southern) on the property. $30 million is allotted to acquire contiguous property. A second rig will be deployed in Q2’14.
PDC’s gross production rate from its 11 wells is expected to be 5.2 MBOEPD (70% liquids) by the end of December 2013, after three wells were recently turned to sells and another will join before year-end 2013. PDC is restricting flow rates to optimize recovery.
Two recent wells in Washington Country, Ohio, averaged approximately 1,857 BOEPD. The Garvin 1H well averaged roughly 1,530 BOEPD (100 BOPD with 4MMcf/d over a 30-day period) and two offset wells are being drilled with completion expected by early 2014. To the northwest, the Neill 1H well has been on flowback for more than 30 days and experienced a peak 24-hour rate of 327 BOEPD. PDC expects the frac load recovery will boost production rates.
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