Acreage purchase, trade
PDC Energy (ticker: PDCE) announced two acreage moves yesterday, expanding the company’s position in the Wattenberg.
The first deal PDC announced is a bolt-on acreage purchase from privately-held Bayswater Exploration & Production. PDC purchased about 8,300 acres for $210 million in cash. These properties are currently producing about 2,200 BOEPD, with 60% of production consisting of crude oil. Opportunities for increased development are present, as there are 30 operated DUCs on the property, and a further 240 gross drilling locations. The acquired acreage is directly contiguous with some of PDC’s current acreage, and will increase PDC’s working interest in about 60 existing locations. If each flowing BOE is valued at $35,000, this purchase equates to an acreage valuation of $16,025/acre.
This acquisition has allowed the company to form a focus area, called the “Prairie Area” in the middle and outer core of the Wattenberg, where the company has relatively consolidated acreage. The purchase is expected to close before the end of the year.
Moves make three areas to focus operations
The second deal made by PDC is an acreage trade with an undisclosed operator. PDC will receive about 11,700 net acres in exchange for 12,100 net acres. The trade exchanges acreage that is spread out in the middle core portion of the Wattenberg for acreage that is concentrated in the inner core. Notably, this trade does not include production, wellbores or existing facilities.
Like in the acreage purchase, the acreage trade allows PDC to form an additional concentration area, called the “Plains Area.” The company will focus on these areas in future drilling activities, along with its already-established Kersey Area.
Source: PDCE
PDC President and CEO Bart Brookman remarked, “These strategic business development initiatives offer PDC a great opportunity to not only drill more extended-reach lateral wells, but add to our existing inventory of highly economic projects in the Core Wattenberg Field. As we have experienced first-hand in our Kersey Area, there are significant capital and operational efficiencies, reduced surface impacts, and incremental value created through consolidated acreage positions.”
Analyst Commentary
From KLR Group:
PDCE – Creates Two Additional Wattenberg Core Development Areas Through Acquisition/Acreage Trade – (Negligible Value Impact) – PDCE announced the acquisition of ~8,300 net acres in Weld County, Colorado for ~$210 million in cash. Current production associated with the assets is ~2.2 Mboepd (~60% oil). Assuming a ~$40k production valuation multiple and ~$40 million of implied value attributable to the DUC inventory, this transaction equates to a fully valued ~$10,000 per acre net of production. The acquisition includes 30 operated DUCs and the company estimates the acreage should support 240 additional drilling locations. Combined with PDCE’s existing acreage, the consolidated position, referred to as the Prairie Area, encompasses ~30,000 net acres in the middle/outer core of the Wattenberg. In addition, the company announced an acreage trade and should receive ~11,700 net acres in exchange for ~12,100 net acres. This transaction includes only leasehold acreage and does not include production, wellbores or existing facilities. Combined with the company’s existing acreage, the consolidated positon, referred to as the Plains Area, approximates 17,500 net acres in the inner/middle core of the Wattenberg. Along with the Kersey Area, the Plains and Prairie areas will constitute the primary focus of the company’s Wattenberg development. These transactions should have a negligible intangible value impact though are a positive optic as PDCE deepens its Wattenberg drilling inventory.
