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Anticipates 35% to 40% Annual Production Growth With Projected Year-End 2016 Debt to EBITDA of Approximately 1.4x
PDC Energy (NASDAQ:PDCE) today reported its 2016 capital budget and production forecast.
2016 Highlights
– Targeted cash flow neutrality with planned capital budget of $450 to $500 million.
– Anticipated annual production of 20.0 to 22.0 MMBoe, 35% to 40% year-over-year growth.
– Projected 2016 year-end debt to EBITDA of approximately 1.4x.
– Hedged approximately 50% of 2016 oil volumes and 62% of natural gas volumes at nearly $85 per barrel and $3.65 per Mcf, respectively.
– Continued improvements in capital efficiencies through anticipated reductions in drilling times and well costs, enhanced completion designs and extended reach lateral development.
CEO Commentary
Bart Brookman, President and Chief Executive Officer, commented, “Our ability to execute our 2015 plan has positioned us to carry a lot of momentum into 2016. Our drilling program remains extremely flexible and we are committed to continue delivering shareholder value in these challenging times through the development of our best-in-class assets and continued focus on our cost structure. The balance sheet and financial strength of the Company will remain our top priorities in 2016. We are extremely excited about the prospect of once again delivering peer leading production growth in a safe, responsible manner, while continuing to test new well designs and completion methods. With the continued hard work and dedication of our employees, we are positioned for another strong year at PDC.”
2016 Capital Plan and Production Guidance
PDC’s 2016 capital budget, of $475 million at the mid-point, is focused on continuing to provide value-driven production growth by exploiting the Company’s extensive inventory of high rate-of-return projects in the Wattenberg Field. Capital spending is expected to be weighted to the front half of 2016 as the Company completes in-process wells spud in 2015. The Company remains very flexible in terms of rig activity and capital deployment due to short-term rig contracts and held-by-production acreage.
PDC’s 2016 production guidance of 20.0 to 22.0 million barrels of oil equivalent (“MMBoe”), or 54,650 to 60,100 Boe per day, represents an increase of 35 to 40 percent over anticipated 2015 levels. The commodity mix is expected to be approximately 42 percent oil, 20 percent NGLs and 38 percent natural gas. The mix is slightly gassier than 2015 due to a number of higher GOR Inner Core Wattenberg wells being turned-in-line in the second half of 2015 and first half of 2016. The Company’s long-term commodity mix expectation remains approximately 45 percent oil and 65 percent liquids.
The majority of production growth in 2016 is expected to occur in the second and third quarters while the first and fourth quarters are expected to show relatively flat sequential quarter-over-quarter growth.
2016 Financial Positioning
PDC is projected to exit 2016 with a debt to EBITDA ratio of approximately 1.4 times and total liquidity of approximately $500 million, based upon its current $700 million borrowing base and the pricing assumptions described below. PDC’s $115 million of convertible notes mature in May 2016 and the Company has elected to redeem the face value of the notes in cash with excess value above the conversion price paid in PDC common stock.
Based on the mid-point of PDC’s production guidance, nearly 50 percent of 2016 expected crude oil volumes are hedged at approximately $85 per barrel and approximately 62 percent of anticipated gas volumes are hedged at nearly $3.65 per thousand cubic foot, including CIG basis swaps. The mark-to-market value of future hedges exceeds $250 million, as of November 30, 2015.
Using internal weighted-average NYMEX pricing of $53 per barrel of oil, $2.60 per Mcf of natural gas and NGL realizations of approximately 18% of NYMEX oil, the Company expects to outspend cash flow in the first half of the year and be cash flow positive in the second half. The Company anticipates the Wattenberg well-head oil differential to NYMEX to be under $8 per barrel in 2016. Using the mid-point of production guidance, a $10 per barrel change in oil price results in an approximate $40 million change to anticipated cash flow.
