Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - PDC ENERGY, INC. | pdc8k_20100218.htm |
| EX-99.1 - EX-99.1 - PDC ENERGY, INC. | pdcrelease2010_0217.htm |
NASDAQ:PETD
PETROLEUM
DEVELOPMENT
CORPORATION
CORPORATION
EnerCom,
Inc.
The Oil
& Services Conference VIII
February 18,
2010
See
Slide 2 regarding Forward Looking Statements
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 2008 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 2008 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
See
Slide 2 regarding Forward Looking Statements
Richard
W. McCullough
Chairman and Chief
Executive Officer
3
See
Slide 2 regarding Forward Looking Statements
Reasons
to Invest in PDC
• Long term track
record of operational excellence
• Long life reserves
with reserve life index of appx 20 yrs
• Diversified
operating basins with low risk predictable growth (over 2,200
projects in inventory)
projects in inventory)
• Emerging opportunity
in the Marcellus Shale
• Strong balance sheet
with capital available for value added acquisitions,
joint ventures, exploration and partnership repurchases
joint ventures, exploration and partnership repurchases
• Trade at discount to
peers on operational & financial metrics
• Strong hedge
positions that protect cashflow
• Company
transitioning from a Partnership company to a more traditional
E&P company
E&P company
4
See
Slide 2 regarding Forward Looking Statements
(1) JV
with Lime Rock in the Marcellus
(2)
EBITDAX and Cash Flow estimates as per analyst consensus
• Petroleum
Development Corporation is an
independent oil and natural gas company
with operations primarily in the Rocky
Mountain region, Appalachian Basin and
Michigan Basin
independent oil and natural gas company
with operations primarily in the Rocky
Mountain region, Appalachian Basin and
Michigan Basin
• PDC was founded in
1969 in Bridgeport, WV
and is now headquartered in Denver, CO
and is now headquartered in Denver, CO
Corporate
Summary
Enterprise
Value
Capitalization
Corporate
Profile
|
Share
Price (2/12/10)
|
$ 21.20
|
|
Diluted
Share Outstanding (MM)
|
19.2
|
|
Market
Capitalization ($MM)
|
$ 408
|
|
Total Debt
@ 9/30/09
|
307
|
|
Minority
Interest (1)
@ 9/30/09
|
45
|
|
Less: Cash
@ 9/30/09
|
(22)
|
|
Enterprise
Value @ 9/30/09
|
$ 738
|
|
52-Week
High ($/share)
|
$ 23.06
|
|
52-Week
Low ($/share)
|
$ 9.39
|
|
|
Pro
Forma
|
|
|
9/30/2009
|
|
Capitalization:
($MM)
|
|
|
Cash
|
$ 22
|
|
Debt:
|
|
|
Credit
Facility: $305MM Borrowing Base
|
106
|
|
12% Senior
Notes due 2018
|
201
|
|
Total
Debt
|
307
|
|
Common
Equity
|
500
|
|
Minority
Interest (1)
|
45
|
|
Total
Capitalization
|
$ 852
|
|
Debt
Ratios:
|
|
|
Debt/EBITDAX
(LTM) (2)
|
2.0x
|
|
Senior
Debt/EBITDAX (LTM) (2)
|
1.3x
|
|
EBITDAX/
Interest Net (LTM) (2)
|
4.3x
|
|
Debt/Book
Cap
|
41%
|
5
See
Slide 2 regarding Forward Looking Statements
Core
Operating Regions
See
Slide 2 regarding Forward Looking Statements
2009
Proved Reserves:
641
Bcfe
641
Bcfe
2009
Production:
37.8
Bcfe
37.8
Bcfe
Rocky
Mountains
2009
Proved Reserves:
15 Bcfe
15 Bcfe
2009
Production:
1.4 Bcfe
1.4 Bcfe
Michigan
Basin
2009
Proved Reserves:
61
Bcfe
61
Bcfe
2009
Production:
4.1
Bcfe
4.1
Bcfe
Appalachian
Basin*
2009
Proved Reserves
717
Bcfe
Appalachian
Basin (9%)*
2009
Production
43.3
Bcfe
Michigan
Basin (3%)
Basin (3%)
Appalachian
Basin (9%)
Rocky
Mountains (87%)
Mountains (87%)
*Appalachian
Basin includes 100% of PDC Mountaineer, LLC Reserves
6
See
Slide 2 regarding Forward Looking Statements
2009
SEC Year-End reserve reporting changes:
- 5 year rule
related to PUD bookings
Year-End
2009 Reserve Summary
See
Slide 2 regarding Forward Looking Statements
|
PDC
Price
|
Snapshot
|
Snapshot
|
12
month Avg
|
|
|
12/31/08
|
12/31/09
|
12/31/09
|
|
|
|
|
|
|
Natural
Gas (per Mcf)
|
$4.98
|
$5.51
|
$3.17
|
|
|
|
|
|
|
Oil
(per Bbl)
|
$37.85
|
$72.91
|
$54.64
|
7
Using
flat 12/31/09 pricing, (2008 SEC pricing
methodology) PDC proved reserves would be 811 Bcfe
methodology) PDC proved reserves would be 811 Bcfe
Proved
Reserves (YE 2008)
753
Revisions and
Pricing Adjustment
(100)
PUD
reductions, tail loss
Adds /
Extensions
91
New
regulation - 1 offset rule
Drops /
Scheduling Adjustments
(46)
5
year PUD rule
Revisions, LOE
Improvements, Operations
62
LOE
cost improvements, operational improvements
Production
(43)
Proved
Reserves (YE 2009)
See
Slide 2 regarding Forward Looking Statements
8
2009
Summary
Production
(Bcfe)
($MM)
Capital
Spending
• Reduced capital
spending by 56% in response to poor natural gas price conditions ( 56%)
• Increase
production by 12% and reduced L.O.E $/Mcfe by just under 30%.
• Reduced L.O.E
$/Mcfe should be sustainable beyond 2009 and will improve incremental capital
investment
returns.
returns.
See
Slide 2 regarding Forward Looking Statements
2009
Summary - Credit Ratios
Total
Debt / EBITDAX(1)
(TTM)
Total
Debt / Capital Base
(%)
(1)
EBITDAX: Earnings before Interest, Taxes, Depreciation, Depletion and
Amortization and Exploration Expense.
EBITDAX
(1)/ Interest, net
(TTM)
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
• ~$50MM equity raise,
and ~$160MM PDC and Lime Rock Partners joint venture to develop
Marcellus Shale and Shallow Devonian assets, reflected the company’s ability to access
alternative capital markets, and improve liquidity, leverage and coverage measures
Marcellus Shale and Shallow Devonian assets, reflected the company’s ability to access
alternative capital markets, and improve liquidity, leverage and coverage measures
*
Liquidity excludes
impact of $18.7MM L.C.
9
(*)
$305
$203
See
Slide 2 regarding Forward Looking Statements
2009
Summary - Oil and Gas Hedges
(1) Based
on 12/31/09 PDP curve (i.e., may represent 50% or less of actual production for
the future year)
(2) Based
on forward pricing curves as of 12/31/2009
(3) Blended
price for forecasted production at hedged and at forward prices
|
|
|
2010
|
2011
|
2012
|
2013
|
|
Weighted
Average Hedge Price (Mcfe) (1)
|
|||||
|
With
Floors
|
$7.84
|
$6.87
|
$6.39
|
$6.39
|
|
|
With
Ceilings
|
$8.76
|
$7.76
|
$7.97
|
$8.21
|
|
|
% of
Forecasted Production(1)
|
73%
|
74%
|
66%
|
65%
|
|
|
Weighted
Avg Forward Price(2)
|
$6.70
|
$7.20
|
$7.36
|
$7.51
|
|
|
Weighted
Avg Price of Forecasted
Production(3) |
$7.54
|
$6.96
|
$6.72
|
$6.78
|
|
Continued focus on
hedging enabled the Company to protect its cash flow, capital
programs, and organic drilling economics from commodity price fluctuations
programs, and organic drilling economics from commodity price fluctuations
• Realized gains of
$108MM
• Substantial hedge
positions through 2013 via swaps (2010-2011) and collars (2012-2013) at solid
historical
commodity price levels should continue to provide on-going protection
commodity price levels should continue to provide on-going protection
• Price sensitivity of
2010’s budget has been significantly mitigated. Variation
of $1.00/Mcfe for natural gas
and $10.00/bbl for oil results in less than a 5% variation in cash flow for operations
and $10.00/bbl for oil results in less than a 5% variation in cash flow for operations
10
See
Slide 2 regarding Forward Looking Statements
2009
STRATEGIC POSITIONING
• Enhanced A&D
team through the hiring of new Senior Vice President
of Business Development and the hiring of senior engineering support
personnel.
of Business Development and the hiring of senior engineering support
personnel.
• Initiate three-year
plan to buyback Partnerships.
• Developed an
intrinsic valuation model which will be utilized to evaluate
capital deployment (organic drilling, acquisitions, etc.) decisions.
capital deployment (organic drilling, acquisitions, etc.) decisions.
• PDC 2009
achievements positively positions the Company to execute its
operating strategy and pursue strategic initiatives in 2010:
operating strategy and pursue strategic initiatives in 2010:
– A&D team
development
– Improvement in
liquidity, leverage ,and coverage measures
– Hedging price
protection
– Cost reductions
which improve capital drilling returns
– Development of an
intrinsic valuation model
11
See
Slide 2 regarding Forward Looking Statements
2010
CAPEX BUDGET
|
|
2009E
|
2010E
|
%
Change
|
|
Net
Development Capital (MM$)
|
79
|
127
|
61%
|
|
Exploration,
Land, G&G (MM$)
|
15
|
6
|
-60%
|
|
Leasehold
and Partnership Puts
|
9
|
9
|
3%
|
|
Miscellaneous
Capital (MM$)
|
8
|
8
|
-3%
|
|
Total
Net Capital (MM$)
|
$110
|
$150
|
36%
|
12
See
Slide 2 regarding Forward Looking Statements
13
Marcellus
•16
Verticals
•10
Horizontals
Shallow
Devonian
•50
Recompletes
•29
Workovers
NECO
•25
New Drills
•50
Workovers
Wattenberg
•180
New Drills
-138
Operated New Drills
-42
Non-Op New Drills
•12
Refracs/Recompletes
Piceance
•21
New Drills
-11
Mesa
-10Valley
See
Slide 2 regarding Forward Looking Statements
PDC
has over 2,200 identified
projects in Inventory
projects in Inventory
See
Slide 2 regarding Forward Looking Statements
Operations
Forecast
2009 vs. 2010
2009 vs. 2010
|
|
2009E
|
2010E
|
%
Change
|
|
Total
Net Production (Bcfe) (1)
|
43.3
|
35.7
|
-18%
|
|
Gross
Exit Rate (MMcfe/d)
|
187
|
185
|
-1%
|
|
Net
Exit Rate (MMcfe/d)
|
107
|
106
|
-1%
|
|
Net
Development Capital (MM$)
|
$79
|
$127
|
61%
|
|
Gross
Number of Drilling
Projects |
100
|
257
|
157%
|
|
Gross
Number of Other
Projects |
38
|
62
|
63%
|
14
(1) 12% production
decrease excluding impact of JV.
See
Slide 2 regarding Forward Looking Statements
15
Net
Production
35.7
43.3
• Production decline
vs. 2009 primarily due to:
– Decision to limit
drilling in late 2008/2009
(price / economy) and to preserve
liquidity
(price / economy) and to preserve
liquidity
– Formation of
Mountaineer JV Partnership
(2.3 Bcfe)
(2.3 Bcfe)
• PDC has over 2,200
Identified projects in
Inventory to organically grow production and
cash flow for foreseeable future.
Inventory to organically grow production and
cash flow for foreseeable future.
• 2010 Drilling and
workover program initially
set for 300+ organic projects
set for 300+ organic projects
• PDC has a project
Inventory of over 7 years
• PDC positioned for
additional growth thru
acquisitions, Joint ventures, Exploration and
Partnership Buy backs
acquisitions, Joint ventures, Exploration and
Partnership Buy backs
2010
Production Guidance
See
Slide 2 regarding Forward Looking Statements
IncreasingValue
in 2010 and Beyond
• Additional Organic
Drilling - Possibly beginning 2nd half
2010
- Ramp up
in Piceance and Wattenberg
- Focus
on enhancing Piceance economics
• Marcellus JV -
drilling 26 horizontal and vertical wells in 2010
- Large operator in
WVA achieved reserves of 3.6 Bcfe per
horizontal well near PDC acreage
horizontal well near PDC acreage
- Over 150 Marcellus
permits issued in WVA counties
surrounding PDC position
surrounding PDC position
• Partnership
Purchases - Three Year Plan
- Non-operated
interests in certain existing PDC operated
Wattenberg and Piceance Assets
Wattenberg and Piceance Assets
• Acquisitions - Asset
and Small Corporate
- Anticipate
substantial A&D deal flow in 2010
• Exploration -
Moderate Risk Resource Plays
- Niobrara
Wattenberg; Mancos Shale Piceance; Bakken; Others
16
See
Slide 2 regarding Forward Looking Statements
Partnership
Purchases:
Three year plan
Three year plan
• Limited Partners’
non-operated interest is typically at 60-80%
of certain PDC operated wells (Rockies principally)
of certain PDC operated wells (Rockies principally)
• 28 Limited
Partnerships have net reserves of approximately
125 Bcfe owned by the Limited Partners
125 Bcfe owned by the Limited Partners
• 28 Limited
Partnerships have net production of approximately
25 MMcfe/d owned by the Limited Partners
25 MMcfe/d owned by the Limited Partners
• PDC strategy to
purchase Limited Partners’ interest over next
three years
three years
– Production and
reserve adds in existing operated core acreage
– 9 SEC compliant
partnerships represent over 60% of net reserves and over
75% of total cash flows owned by the Limited Partners
75% of total cash flows owned by the Limited Partners
– Elimination of
Limited Partnerships through repurchases would finalize PDC’s
transition to a traditionally capitalized E&P company
transition to a traditionally capitalized E&P company
17
See
Slide 2 regarding Forward Looking Statements
• Strong Focus on
creating Shareholder value
• Great core assets
with improved drilling economics
• Marcellus Shale JV
with Lime Rock provides potential catalyst
for strong production and cash flow growth
for strong production and cash flow growth
• Evaluating potential
acquisition, joint venture, and exploration
opportunities that could provide value-added growth
opportunities that could provide value-added growth
• Strong balance sheet
with liquidity of $257 million
• Experienced and
highly effective management team
• PDC is undervalued
and poised for growth
PDC
in Summary
18
See
Slide 2 regarding Forward Looking Statements
Appendix
19
See
Slide 2 regarding Forward Looking Statements
Piceance
Basin
at December 31, 2009
at December 31, 2009
• Gross
operated wells 288
• Undeveloped
acreage 5,300
• Undeveloped,
gross, 10 acre locations 433
• 362
total net PDC
• Number
of net remaining locations
- PUD 251
- Probable 97
- Possible 14
20
See
Slide 2 regarding Forward Looking Statements
Wattenberg
Field
at December 31, 2009
at December 31, 2009
• Gross
Operated wells 1,410
• Undeveloped
acreage 19,400
• Undeveloped,
gross, locations 1,533
• 831
total net PDC
- PUD 373
- Probable 316
- Possible 142
21
See
Slide 2 regarding Forward Looking Statements
PDC
Undeveloped Northern
Wattenberg Acreage Area
Wattenberg Acreage Area
EOG
Niobrara Horizontal Well plus
39
Drilling Permits Approved & Pending
Drilling Permits Approved & Pending
PDC
Undeveloped Acreage in
Northern Wattenberg Area.
Approximately 24,000 Acres.
Northern Wattenberg Area.
Approximately 24,000 Acres.
PDC
NECO Area: Niobrara
Biogenic Gas Production
Biogenic Gas Production
Pawnee
National
Grasslands
National
Grasslands
Pawnee
National
Grasslands
Grasslands
Base
Map Source
USGS
USGS
22
See
Slide 2 regarding Forward Looking Statements
Marcellus
JV
• Formed JV with Lime
Rock in October 2009 valuing assets
at $158.5 million (Lime Rock will fund first $68.5 million).
at $158.5 million (Lime Rock will fund first $68.5 million).
• Organization in
place and fully operational for future
development of Devonian and Marcellus assets.
development of Devonian and Marcellus assets.
• Marcellus
assets:
– Focus has been on
solidifying current acreage position and
evaluating vertical well program results
evaluating vertical well program results
– Acreage position has
grown to over 55,000 net acres
– Seven vertical wells
were drilled in West Virginia; one
additional delineation well is being drilled in Pennsylvania
additional delineation well is being drilled in Pennsylvania
– First horizontal
test to be commenced in February 2010
– A total of three
horizontal tests are planned for the first half
of 2010
of 2010
– Midstream strategy
is being addressed and finalized
23
See
Slide 2 regarding Forward Looking Statements
Appalachian
Operating Presence
Ø 44
Employees - Indiana, PA
– Production
– Drilling/Completion
– Trucking/Pipeline/Construction
Ø 133
Employees - Bridgeport, WV
– Production
– Drilling/Completion
– Pipeline - DOT
Compliance
– Gas
Marketing
– Accounting
– Administration
Ø 13
Senior Technical Team Employees -
Bridgeport, WV
Bridgeport, WV
– Engineering
– Geology
– Completions
– Pipeline
– Production
PDC’s
Appalachian presence consists of shallow
Devonian sands and the deeper Marcellus shale.
Devonian sands and the deeper Marcellus shale.
Marcellus
Economic Fairway
24
39,900
ACRES WV
15,100
ACRES PA
See
Slide 2 regarding Forward Looking Statements
Acreage
Inventory
|
Area
|
Lease
Gross
Acres |
PDC
Net Acres
|
Net
Developed
Acres |
Net
Undeveloped
Acres |
State
|
|
Grand
Valley
|
8,000
|
8,000
|
2,700
|
5,300
|
Colorado
|
|
Wattenberg
|
72,200
|
64,900
|
45,500
|
19,400
|
Colorado
|
|
NECO
|
127,100
|
105,100
|
19,600
|
85,500
|
Colorado/Kansas
|
|
Michigan
|
26,800
|
23,300
|
14,800
|
8,500
|
Michigan
|
|
New
York
|
18,700
|
15,900
|
0
|
15,900
|
New
York
|
|
North
Dakota
|
66,800
|
30,200
|
4,600
|
25,600
|
North
Dakota
|
|
Appalachian
Basin
|
120,900
|
117,600
|
106,800
|
10,800
|
WV
/ PA
|
|
Wyoming
|
19,500
|
19,300
|
100
|
19,200
|
Wyoming
|
|
Texas
Barnett
|
8,900
|
6,000
|
400
|
5,600
|
Texas
|
|
Total
|
468,900
|
390,300
|
194,500
|
195,800
|
|
|
|
|
|
PDC
TOTAL NET
|
390,300
|
|
25
NASDAQ:PETD
PETROLEUM
DEVELOPMENT
CORPORATION
CORPORATION
EnerCom,
Inc.
The Oil
& Services Conference VIII
February 18,
2010