Current PDCE Stock Info

PDC Energy, Inc. (ticker: PDCE) announced today its 2018 capital investment budget and production forecast.

2018 budget highlights:

  • Year-over-year production growth of approximately 25 percent to an estimated 38 to 42 million barrels of oil equivalent (MMBoe)
  • Oil production to account for approximately 42 percent of total production, representing a year-over-year oil volume increase of approximately 30 percent
  • Year-over-year Delaware Basin production growth estimated to exceed 80 percent
  • Anticipated capital investment between $850 and $920 million with an expected outspend of approximately $130 million utilizing a $50 oil and $3 gas price deck
  • Plans to invest approximately $480 million in the Wattenberg Field
  • Plans to invest approximately $395 million in the Delaware Basin
  • Spud approximately 153 operated wells and turn-in-line (TIL) approximately 161 operated wells

PDC Energy President and CEO Bart Brookman commented, “In Wattenberg, our three rig pace targets some of the most capital efficient, high rate-of-return projects in the country.  In the Delaware, we continue to gain momentum in unlocking our tremendous resource potential, which includes our first downspacing test in our Eastern area.  Overall, our plan is focused on our most productive projects and the ongoing pursuit of technical innovations.”

Bookman’s statement said the 2018 operating plan targets the opportunity to grow production volumes by 20% to 30%.

2018 capital budget, financials, and production guidance

PDC’s 2018 capital budget of $885 million at the mid-point is primarily focused on continued execution in the Wattenberg Field and Delaware Basin by operating at a three drilling rig pace, while utilizing one completion crew in each asset throughout the year.

PDC said that this plan includes flexibility to add a completion crew, as necessary, based on the timing of well completions and midstream capacity.  Additionally, 2018 forecasts and projections include the anticipated closing of the company’s previously announced Wattenberg acquisition prior to year-end 2017.

PDC’s current borrowing base has been established at $1.1 billion, with an elected commitment amount of $700 million.  Given the recent issuance of $600 million of 5.75% Senior Notes due in 2026, the anticipated redemption of the $500 million 7.75% Senior Notes, and considering the anticipated closing of its Wattenberg acquisition, the company anticipates to be minimally drawn on its revolving credit facility at year-end 2017.  Assuming $50 oil and $3 gas pricing, PDC anticipates its 2018 capital investment to modestly exceed its expected cash flows from operations by approximately $130 million.

Targets cash flow positive in Q4 of 2018

PDC plans to be cash flow positive in the fourth quarter of 2018.  Additionally, the company expects to further improve its year-end leverage ratio, as defined by its revolving credit facility, from an estimated 1.8 times at year-end 2017, to approximately 1.6 times at year-end 2018.

2018 production is expected to be 38 to 42 MMBoe, or approximately 104,000 to 115,000 BOEPD, representing year-over-year growth of approximately 25 percent compared to anticipated 2017 volumes.

In Wattenberg, the company plans to manage its TIL cadence to coincide with the expected fourth quarter expansion of third party processing in the field; while Delaware Basin TILs are expected to deliver initial production late in the first quarter as completion activity is expected to resume early in 2018.

2018 production growth will kick in when Delaware basin kicks in, Wattenberg takeaway constraints are relieved: PDC looks for 120,000 BOEPD+ production exit for ‘18

2018 corporate production growth is expected to be modest in the early part of the year, with more robust growth expected later in the year with the Delaware contributions and the anticipated relief of Wattenberg midstream constraints.

The December 2018 exit rate is anticipated to be more than 120,000 BOEPD.  The company anticipates closing the sale of its Utica Shale assets in early 2018.

Operational details

In 2018, the company plans to invest approximately $480 million in the Wattenberg Field, of which approximately $425 million is expected to be invested in operated drilling and completion activity, with the majority of the remaining capital related to participation in non-operated projects.

PDC Energy Earmarks $920 Million CapEx Budget for 2018

PDC Wattenberg Map

In the Wattenberg, PDC plans to spud and TIL approximately 131 and 139 operated wells, respectively. Activity in 2018 is expected to be primarily focused in the company’s Kersey area, with approximately 60 percent of 2018 TILs anticipated to be mid or extended-reach lateral wells.  Average operated working interests in Wattenberg in 2018 is expected to be approximately 85 percent with well costs projected to remain flat compared to 2017 levels.

PDC Energy Earmarks $920 Million CapEx Budget for 2018

PDC Operational Overview Map

In the Delaware Basin, the company plans to invest approximately $395 million, of which approximately $275 million is expected to be dedicated to operated drilling and completions investments. PDC plans to spud 22 wells, 20 of which are expected to be located in the company’s Eastern area.  The company plans to TIL 22 wells in 2018, approximately 50 percent of which are projected to be in the company’s consolidated position within its Eastern area.

Driven by early successful outperformance in its Eastern area wells, the company has included an increase to its Eastern area type curves to a range of 1 million to 2.6 million Boe per well, depending on lateral length, targeted completion zone and drilling location.  Estimated well costs for 2018 are projected to be between $9 million and $14 million per well, depending on lateral length.  Estimated well costs include the company’s enhanced completion design, which it believes is the primary contributor to early production outperformance of its acquisition type curves.

PDC Energy Earmarks $920 Million CapEx Budget for 2018

PDC Delaware Basin Map

Included in the company’s 2018 Delaware Basin capital program is approximately $60 million to expand its midstream asset infrastructure, of which approximately $20 million is allocated to constructing crude oil gathering systems in the company’s Eastern area.  The company anticipates delivering crude oil volumes on this system to third party purchasers in the fourth quarter of 2018.

Similar to 2017, the company plans to invest in salt water disposal wells, compressor station upgrades, and production gathering lines across its Eastern and Central areas.  Lastly, the company plans to allocate approximately $60 million in non-operated drilling and completion activities, leasing, seismic and other miscellaneous capital.

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