PDC Energy (PDCE, Financial) is well positioned in a difficult oil environment. Its diversified strong position in oil, gas and NGLs, coupled with efficient costs reduction programs, drilling efficiencies and technical progress are allowing the company to remain profitable under this uncertain oil price environment. Moreover, the company has strong hedging position. The company had benefit of $50 million through its hedging position in the first-quarter 2015. In fact, the mark-to-market value for its hedges stands more than $300 million.Â
Strong assets to drive growth
The company has very economical assets at its disposal such as Niobrara Bs, Niobrara Cs, and Codells in the inner core portion of the Wattenberg resource. The company sees higher internal rate of returns from the wells under these shale plays that has rich reservoir.
Also, the scheduled 10 wells from Chesnut pad are soon expected to come online. It doesn’t see further delay in these wells. The company has enough wells at its disposal that will drive its production in the current quarter.
In addition, the company continues to see greater production from the Dynamite Pad in the Utica and better-than-expected non-operated production from recently turned on wells. These wells produced more than 680,000 barrel of oil equivalent type curve for the first 100 days of production. Also, the company is planning to bring its 4-well Cole pad into production in the on-going quarter. Remember these wells have similar completion design as in the Dynamite Pad that should have higher production rate going forward.
PDC reported 2.9 million barrels of oil equivalent or 32,200 Boe per day. This is approximately 41% increase over its production in the first-quarter 2014 and 15% jump over its fourth-quarter 2014 production. Wattenberg saw production growth of 42%, while its Utica shale witnessed significant 35% increase in production year-on-year basis.
Its new wells should enhance its production and add value to its topline growth this year. Moreover, PDC Energy is hostilely testing AccessFrac process that includes BioVert diversion material. The company is expected to share more news on this completion designs on the analysts day, which is around the corner.
Apart from these progresses, the company has strong balance sheet. The recent 4 million equity share offerings have allowed the company to build strong cash position of $700 million. Moreover, it has strong liquidity position that stands at $750 million. It has debt to EBITDA of 1.9X.Â
Conclusion
PDC Energy offers strong short as well as long-term investment avenues. The company is gifted with the assets that are capable enough to produce profits even the further decrease of $10 + in oil prices. The analysts expect its earnings to grow at CAGR of 12.00%, which is in-line with average industry CAGR of 12.09% for the next five years. This is remarkable growth in its earnings in the long-run as none of the above mention peers has such a healthy earnings growth in the long-run.
Moreover, PDC has good short term returns as its earnings are expected to grow 352.20% this year and 21.90% for the next year respectively. In fact, look at its profit and operating margins that stands tall and remains the best in the industry under not so friendly oil environment. It has profit and operating profit margin of 36.66% and 93.24% respectively for the past twelve months. It has operating cash flow of $238.07 million.
