Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - PDC ENERGY, INC. | pdc8k20091104.htm |
| EX-2.2 - EX-2.1 - PDC ENERGY, INC. | ex2_1.htm |
| EX-10.2 - EX-10.2 - PDC ENERGY, INC. | ex10_2.htm |
| EX-99.1 - EX-99.1 - PDC ENERGY, INC. | ex99_1.htm |
| EX-10.1 - EX-10.1 - PDC ENERGY, INC. | ex10_1.htm |
NASDAQ:
PETD
PETROLEUM
DEVELOPMENT
CORPORATION
CORPORATION
Appalachian Joint
Venture
with Lime Rock Partners to Develop
the Marcellus Shale Play
with Lime Rock Partners to Develop
the Marcellus Shale Play
2
The
following information contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act
of 1995. These forward-looking statements are based on Management’s current expectations and beliefs, as well as a number
of assumptions concerning future events.
of 1995. These forward-looking statements are based on Management’s current expectations and beliefs, as well as a number
of assumptions concerning future events.
These
statements are based on certain assumptions and analyses made by Management in
light of its experience and its
perception of historical trends, current conditions and expected future developments as well as other factors it believes are
appropriate in the circumstances. However, whether actual results and developments will conform with Management’s
expectations and predictions is subject to a number of risks and uncertainties, general economic, market or business
conditions; the opportunities (or lack thereof) that may be presented to and pursued by Petroleum Development Corporation;
actions by competitors; changes in laws or regulations; and other factors, many of which are beyond the control of Petroleum
Development Corporation.
perception of historical trends, current conditions and expected future developments as well as other factors it believes are
appropriate in the circumstances. However, whether actual results and developments will conform with Management’s
expectations and predictions is subject to a number of risks and uncertainties, general economic, market or business
conditions; the opportunities (or lack thereof) that may be presented to and pursued by Petroleum Development Corporation;
actions by competitors; changes in laws or regulations; and other factors, many of which are beyond the control of Petroleum
Development Corporation.
You are
cautioned not to put undue reliance on such forward-looking statements because
actual results may vary materially
from those expressed or implied, as more fully discussed in our safe harbor statements found in our SEC filings, including,
without limitation, the discussion under the heading “Risk Factors” in the company’s annual report on Form 10-K and in
subsequent Form 10-Qs. All forward-looking statements are based on information available to Management on this date
and Petroleum Development Corporation assumes no obligation to, and expressly disclaims any obligation to, update
or revise any forward looking statements, whether as a result of new information, future events or otherwise.
from those expressed or implied, as more fully discussed in our safe harbor statements found in our SEC filings, including,
without limitation, the discussion under the heading “Risk Factors” in the company’s annual report on Form 10-K and in
subsequent Form 10-Qs. All forward-looking statements are based on information available to Management on this date
and Petroleum Development Corporation assumes no obligation to, and expressly disclaims any obligation to, update
or revise any forward looking statements, whether as a result of new information, future events or otherwise.
The SEC
permits oil and gas companies to disclose in their filings with the SEC only
proved reserves, which are reserve
estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. The Company uses in this presentation the terms
“probable” and “possible” reserves, which SEC guidelines prohibit in filings of U.S. registrants. Probable reserves are unproved
reserves that are more likely than not to be recoverable. Possible reserves are unproved reserves that are less likely to be
recoverable than probable reserves. Estimates of probable and possible reserves which may potentially be recoverable through
additional drilling or recovery techniques are by nature more uncertain than estimates of proved reserves and accordingly are
subject to substantially greater risk of not actually being realized by the Company. In addition, the Company’s reserves and
production forecasts and expectations for future periods are dependent upon many assumptions, including estimates of
production decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected
by significant commodity price declines or drilling cost increases.
estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. The Company uses in this presentation the terms
“probable” and “possible” reserves, which SEC guidelines prohibit in filings of U.S. registrants. Probable reserves are unproved
reserves that are more likely than not to be recoverable. Possible reserves are unproved reserves that are less likely to be
recoverable than probable reserves. Estimates of probable and possible reserves which may potentially be recoverable through
additional drilling or recovery techniques are by nature more uncertain than estimates of proved reserves and accordingly are
subject to substantially greater risk of not actually being realized by the Company. In addition, the Company’s reserves and
production forecasts and expectations for future periods are dependent upon many assumptions, including estimates of
production decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected
by significant commodity price declines or drilling cost increases.
This
material also contains certain non-GAAP financial measures as defined under the
Securities and Exchange Commission
rules.
rules.
DISCLAIMER
PDC
/ Lime Rock Joint Venture Overview
3
|
Summary:
|
PDC and Lime
Rock Partners (LRP) announced the formation of PDC
Mountaineer, LLC, to develop PDC’s Appalachian Marcellus Shale and Shallow Devonian assets |
|
Consideration:
|
PDC Appalachia
assets valued at approximately $158.5 million
|
|
Terms:
|
LRP funded $45
million as return of capital at closing. PDC
has an option to
take a second cash contribution of $11.5 million by year-end 2010 |
|
|
Lime Rock
Partners to provide first capital funding of up to $68.5 million
by
December 31, 2011 to earn 50/50 parity with PDC in JV. (assuming PDC only takes $45 million return of capital) |
|
Operations:
|
Mr. Dewey
Gerdom has been appointed Chief Executive Officer of the JV. PDC
has designated approximately ninety of its employees to directly support the JV, which will be headquartered in Bridgeport, West Virginia |
|
AMI:
|
PDC and LRP to
form a limited Area of Mutual Interest to jointly develop
Marcellus acreage (existing and future) |
|
Governance:
|
JV Board will
have equal representation from PDC and
LRP
|
• Marcellus shale is a
leading shale gas play with strong economics and production
growth profile
growth profile
• Accelerates
development of existing PDC acreage
• Provides capital to
capture new leasehold in Marcellus fairway
• Lime Rock Partners
brings substantial oil and gas expertise and history of successful
energy investments
energy investments
• PDC initial $45
million return of capital provides cash to pay down debt to offset
reduction in borrowing base at PDC
reduction in borrowing base at PDC
• Bank approval with
reduced borrowing base to $305 million without Appalachia assets;
• $45 million
distribution to PDC at closing; no net change in PDC corporate
liquidity
• PDC does not expect
the borrowing base to be adjusted in November redetermination
• PDC Mountaineer, LLC
to operate assets via service agreements with PDC
Joint
Venture Rationale
4
PDC
Assets Contributed to Joint Venture
Marcellus
Position
• 55,000 net Marcellus
acres (approximately 89% held by production) - a
subset of the Shallow Devonian acreage
subset of the Shallow Devonian acreage
• 7 vertical wells
drilled to-date in WV
• Existing 2D and 3D
seismic data: Recently acquired 3D seismic in
Taylor County, WV. Processing complete, currently interpreting.
Taylor County, WV. Processing complete, currently interpreting.
• Option on Marcellus
mid stream build-out utilizing many of PDC’s
existing rights-of-way
existing rights-of-way
Legacy
Shallow Devonian Assets
• 115,000 net Devonian
acres (approximately 98% held by production)
• Approximately 12
MMcf/d of current production
• 1,900+ shallow
operated wells
• Existing
low-pressure gathering and compression facilities in WV and
PA
and associated rights-of-way
and associated rights-of-way
5
Pennsylvania
Acreage Map
West
Virginia Acreage Map
Appalachian
Basin - PDC Acreage
Marcellus
and Shallow Devonian
6
15,000
Net Marcellus Acres
40, 000
Net Marcellus Acres
• 40 year track record
of operating in the Appalachian Basin - over 1,900 operated wells
• Existing offices and
employees in PA and WV
• Presence in basin
affords PDC valuable relationships and knowledge of the region
– Understanding of
changing regulatory environment in Appalachian Basin
– Established
relationships and marketing presence in the basin
• Appalachian gas
marketing presence with established relationships
– Existing
low-pressure gathering and compression facilities in place
• Leverage
company-wide drilling and hydraulic fracture completion knowledge
– Extensive experience
with unconventional gas development
– Track record as a
low-cost leader among peers
• Key Operating
Managers with average 25+ years experience committed to the JV
• Technical team with
proven unconventional/tight rock completion/production expertise
– 2,100 hydraulic
fracturing treatments (2006-2008)
PDC
Appalachian Capabilities
7
• Continue development
and delineation of acreage thru drilling
– Drilled 7 pilot
wells in Taylor, Harrison, Barbour Counties, WV
• 5 wells online and
meeting expectations
• Cored 2 wells,
gathering excellent geotechnical and resource data
– Plan to drill 1
pilot well in Cambria County, PA in Q4 2009 and a second in first half
2010
• Utilize 3D to
optimize placement of wells
– Taylor County 3D
completed and processed, currently interpreting for first horizontal well
location
– Plan to complete 3D
acquisition in Harrison County, WV and Cambria County, PA
• Plan to spud first
horizontal well in Taylor County, WV in Q1 2010
• Refine technical
best practices; completions, frac designs, target areas for growth
• Increase acreage
position over time
– Perform key
technical analysis; highgrade buy-out areas
– Leasing, farm-in,
traditional asset purchases focus on large leases for horizontal development
efficiency
• Develop full
Marcellus midstream strategy
Marcellus
Growth Strategy:
PDC
and LRP Shared Vision
8
• Finalize JV’s 2010
operating budget by Q4 2009
• Drill first
horizontal well in Q1 2010
• Ramp up development
of 55,000 acres in Marcellus fairway - target
20-25 total Marcellus wells in 2010
20-25 total Marcellus wells in 2010
• Finalize Marcellus
midstream analysis
• Complete additional
3D seismic acquisitions
• Gather additional
seismic, geological, reservoir, and core data
• Confirm 500
potential horizontal and vertical drilling locations
• Refine potential
reserve upside in WV and PA acreage
• Analyze additional
acreage purchases in Marcellus fairway
Marcellus
Planned Development:
Q4
2009 and Full Year 2010
9
Taylor
County, WV 3-D
Seismic:
Acquired
& Processed, Interpretation Underway
• Interpretation
underway
underway
• 10.72 square
miles
• 6,680
acres
• Potential for
30
horizontal locations
horizontal locations
• Survey to
be
contributed to Joint
Venture
contributed to Joint
Venture
3D
Seismic
10
Note: Dashed
line represents median result for the group; 2010 estimates per Bloomberg
consensus; The Company has not completed its internal 2010 estimates at this
time.
EV
/ Production
EV
/ Proved Reserves
EV
/ 2010E EBITDA
P
/ 2010E CFPS
R/P
= 13.4x
18.8x
15.9x
7.5x
9.2x
21.7x
16.7x
16.9x
Peer
Group Analysis
• Marcellus shale
provides an opportunity for strong economic growth with scale
and repeatability
and repeatability
• PDC is extremely
pleased to partner with Lime Rock
• Validation of PDC
opportunity and technical team
• History of
value-adding investments
• Long term investor
of growth capital in exploration and production
• Joint Venture
accelerates growth and visibility of PDC’s Marcellus shale gas
position
• Joint Venture
enables PDC to increase production, develop low cost reserves and
grow acreage position in the Marcellus fairway
grow acreage position in the Marcellus fairway
• PDC’s experienced
Appalachia team brings 40 year track record in drilling and
completing unconventional gas - skill sets to develop the full potential of the Marcellus
shale gas
completing unconventional gas - skill sets to develop the full potential of the Marcellus
shale gas
• Initial return of
capital provides liquidity for debt reduction and liquidity for other
strategic initiatives
strategic initiatives
• JV establishes
value-add potential for our combined investors
In
Summary
12
NASDAQ:
PETD
PETROLEUM
DEVELOPMENT
CORPORATION
CORPORATION
Appalachian Joint
Venture
with Lime Rock Partners to Develop
the Marcellus Shale Play
with Lime Rock Partners to Develop
the Marcellus Shale Play