PDC Energy (NASDAQ: PETD) announced Q4’11 and year-end 2011 operational and financial results.

The company reported a Q4’11 net loss of $8 million, or a loss of $0.35 per share, compared to a net loss of $18 million, or a loss of $0.86 per share in Q4’10. Revenues for Q4’11 totaled $80 million, an increase of 52% compared to $53 million for Q4’10. PDC’s average realized price including net realized gains on derivatives for Q4’11 was $6.79, up $0.23 from Q4’10. Production for the quarter increased 36% to 12.8 Bcfe compared to 9.4 Bcfe in Q4’10, and increased 13% compared to 11.3 Bcfe during Q3’11.

For the full-year 2011, PDC Energy reported net income of $13 million, or $0.56 per share, compared with full-year 2010 net income of $6 million, or $0.31 per share. Revenues for the year totaled $396 million, a 15% increase from $343 million for 2010. PDC’s average realized price, including net realized gains on derivatives, was $6.53 per Mcfe for 2011, compared to $6.89 per Mcfe for 2010. Production for the year, including discontinued operations, increased 23% to 47.5 Bcfe from 2010 production levels.

PDC’s total proved reserves for 2011 increased 18% to approximately 1 Tcfe compared to 861 Bcfe in 2010.

OAG360 Comments

2011 was a solid operational year for PDC by exceeding production guidance, entering into the Utica Shale in Ohio, selling its Permian Basin assets, focusing on its Horizontal Niobrara program, and increasing its liquids rich proved reserve mix to 34%.

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Exceeding Production Guidance and Entering the Utica Shale:

PDC’s production exceeded guidance by increasing 26% to 47.5 Bcfe. PDC forecast 2011 production volumes of 46.5 Bcfe for 2011. The 2011 daily exit rate net to PDC for 2011 was 146 MMcfe/d (62% natural gas). PDC’s liquids rich operating program in the Wattenberg Field continues to be successful and thus continues to have positive effects on reserves and production. We believe once PDC finds a suitable JV partner on its Utica Shale acreage that Ohio will provide an additional source of liquids production.

PDC’s Utica acquisition is located in Noble, Monroe, Washington, Morgan and Guernsey of Ohio. Hess Corporation (NYSE: HES) and CONSOL Energy (NYSE: CNX) announced an Ohio Utica shale joint venture across 200,000 acres located in two of the same counties PDC bought their acreage in the oil and liquids windows of Noble and Guernsey Counties.

Sale of the Permian Basin Assets:

PDC sold its Permian position to Concho Resources. (NYSE: CXO) for $184.4 million. Previously, PDC sold its non-core Permian assets during Q4’11for $13.3 million, resulting in total proceeds from the sale of the Permian Basin asset sales of approximately $198 million. The Permian Basin represented approximately 5%, or 2.5 Bcfe, of PDC’s total 2011 production and 6%, or 65 Bcfe, of year-end 2011 proved reserves.

Horizontal Drilling Results and De-Risking the Niobrara:

In the Wattenberg Field, PDC drilled 17 horizontal Niobrara wells, 80 vertical well, and completed 190 refrac/recompletion projects. With 14 horizontal Niobrara wells on production, PDC reported average peak 24-hour rates of 600 BOEPD. This could turn out to be a game changer for PDC if they continue drilling successful horizontal wells. PDC reported an increase in its internal type curve to range between 300 to 500 MBOE from its previous core Wattenberg type curve of 310 MBOE.

PDC Mountaineer, the company’s joint venture company in the Marcellus, will not drill the Marcellus during 2012 due to natural gas prices. The $12 million originally allocated to the Marcellus in PDC’s total 2012 CAPEX program of $284 million will be shifted to PDC’s Wattenberg development. The Wattenberg Field will now see a developmental capital budget of approximately $190 million.

Increased Oil/Liquids Mix to 34% during 2011:

Back in 2010, PDC made the push to drill its oil and liquids inventory. The company reported its natural gas proved reserves represented approximately 77% of its total proved reserves. A year later and PDC’s 2011 year-end proved reserves comprised of approximately 66% natural gas, 22% crude oil, and 12% natural gas liquids. Upside in 2012 remains across the company’s liquid rich horizontal Niobrara drilling program and Utica Shale prospects.

2012 Outlook:

Based on actual net production for 2011 of 47.5 Bcfe, or 45 Bcfe net of Permian Basin production for 2011, PDC estimates net production will increase approximately 18% in 2012 compared to 2011 production net of Permian.

PDC Energy at EnerCom’s The Oil & Services Conference™ 10:

Lance Lauck, Senior Vice President, Business Development of PDC Energy (NASDAQ: PETD) presented at EnerCom’s The Oil & Services Conference™ 10, February 21-12, 2012.

During the company’s breakout session, management was asked the following questions:

  • What were the key factors that led you to divest the Permian assets?
  • What is the percentage of oil and liquids that you get from a horizontal Niobrara well in the Wattenberg?
  • What are you seeing with regards to service costs and availability in the Niobrara?
  • What does your wish list look like for a JV partner in the Utica? What terms are you thinking of for a JV deal?
  • At what gas prices to you put rigs back to work in the Piceance?
  • Who are you preferred service providers in each of your plays? Do you have any long term service agreements in place?

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