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8-K - FORM 8-K - PDC ENERGY, INC. | d82173e8vk.htm |
Exhibit 99.1
news FOR IMMEDIATE RELEASE |
May 10, 2011
PDC Energy Announces First Quarter 2011 Results; Quarterly Production
Exceeds Guidance; Company Announces Results of Niobrara Horizontal Wells in
Wattenberg
DENVER, CO, May 10, 2011: PDC Energy (PDC or the Company)
(NASDAQ:PETD) today reported its first quarter 2011 operating and financial
results.
First Quarter 2011 Highlights
| The Company reported a net loss from continuing operations for the quarter ended March 31, 2011 of $22.5 million, or $0.96 per diluted share. Adjusted net loss attributable to shareholders, a non-GAAP financial measure defined below, for the first quarter 2011 was $2.7 million, or $0.12 per diluted share. |
| The Companys second and third horizontal Niobrara wells in Wattenberg averaged a combined 1,004 Boe/d in early production tests. |
| First quarter 2011 production from continuing operations increased to 11.0 Bcfe, compared to first quarter guidance of 10.6 Bcfe. This production level is a 1.3 Bcfe improvement from fourth quarter 2010 production levels of 9.7 Bcfe, or a 13% quarterly increase. |
| The Company drilled a total of 40.9 net wells during the first quarter 2011, compared to 38.6 net wells drilled in the same 2010 period. |
| The Companys available liquidity at March 31, 2011 was $317.2 million. The Companys borrowing base was increased to $350 million from $321.2 million on May 6, 2011. |
Richard W. McCullough, Chairman and Chief Executive Officer, stated, We were
extremely pleased with our production for the quarter which exceeded our
previously released guidance. All of our drilling programs are on, or ahead of
pace for the year. We also completed approximately 60 refrac/recompletion
projects in our Wattenberg prospect during the quarter, well ahead of plan.
Were also particularly encouraged by our horizontal programs in the Marcellus
and Niobrara areas and initial production results from our recent horizontal
wells drilled in the northeast fringe of the core Wattenberg field. We expect
production and cash flows to continue their strong growth trend throughout the
year as we continue to execute our drilling plans.
Financial Results
Natural gas, natural gas liquids (NGLs) and crude oil sales revenues for the
first quarter 2011 increased 10.5% to $63.9 million, an increase of $6.1
million from $57.8 million for the same 2010 period. The average realized
price of natural gas, NGLs and crude oil, including realized gains and
losses
on derivatives, was $6.16 per Mcfe in the first quarter 2011 compared to $8.86
per Mcfe in the first quarter 2010, a decrease of 30.5%. The first quarter
2011 average realized price of natural gas, NGLs and crude oil, including
realized gains and losses on derivatives, decreased 7.2% compared to $6.64 per
Mcfe for the fourth quarter 2010.
The average sales price for natural gas, NGLs and crude oil, excluding realized
gains and losses on derivatives, for the first quarter 2011 was $5.82 per Mcfe,
a decrease of 8.2% from $6.34 per Mcfe for the same quarter 2010. The average
sales price for first quarter 2011 for natural gas, NGLs and crude oil,
excluding realized gains and losses on derivatives, increased 1.4% compared to
$5.74 per Mcfe for the fourth quarter 2010.
Adjusted cash flows from operations, a non-GAAP financial measure defined
below, for the first quarter 2011 was $26.1 million compared to $49.3 million
for the first quarter 2010 and $30.4 million in the fourth quarter 2010. Lower
commodity prices, including realized gains on derivatives, during the current
quarter contributed to the decrease compared to the first quarter 2010. Higher
operating costs and costs associated with the pending settlement of a lawsuit,
discussed below, also impacted adjusted cash flows during the quarter compared
to the fourth quarter 2010.
Commodity price risk management resulted in a loss of $23.9 million for the
first quarter 2011. The loss was comprised of a $3.8 million realized gain and
a $27.7 million unrealized loss. The net loss was primarily a result of an
increase in crude oil prices during the quarter. Commodity price risk
management resulted in a gain of $43.2 million for the first quarter 2010,
which was comprised of a $22.9 million realized gain and a $20.3 million
unrealized gain.
Production costs increased 40.6% to $21.0 million, or $1.92 per Mcfe for the
first quarter 2011, compared to $15.0 million, or $1.64 per Mcfe for the first
quarter 2010. The increase, on an absolute basis, was primarily attributable
to well workovers, which included an increase in tubing and casing repairs of
$2.0 million, and environmental remediation charges of $1.4 million.
Production taxes, which fluctuate with natural gas, NGL and crude oil revenues,
increased $2.3 million to $4.7 million in the first quarter 2011 versus the
same quarter 2010. The increase was primarily related to higher ad valorem
rates in new and existing areas of production, and the increase in natural gas,
NGL and crude oil sales during the quarter.
DD&A expense related to natural gas and crude oil properties for the first
quarter 2011 increased 19.9% to $30.7 million, from $25.6 million in the first
quarter 2010. The per Mcfe expense decreased to $2.79 per Mcfe from $2.96 per
Mcfe, in the respective quarter 2010. The per Mcfe decrease was driven
primarily by the positive reserve adjustments at year-end 2010, offset by an
increase in production in the first quarter 2011 versus the first quarter 2010.
Total DD&A expense for the first quarter 2011 was $32.4 million compared to
$27.5 million for the first quarter 2010.
The Companys exploration expense decreased from $6.4 million in the first
quarter 2010 to $2.2 million in the first quarter 2011. The decrease was
primarily due to $2.9 million of non-recurring costs recorded in the 2010 first
quarter related to the fracturing and testing of several exploratory zones on a
well drilled in the Piceance Basin, and $0.7 million of personnel charges as
certain personnel were refocused from exploration expense to operations and
administration expense.
General and administrative expenses increased to $13.9 million in the first
quarter 2011, from $10.7 million in the same 2010 period. The increase was
primarily due to an increase in payroll and payroll related expenses of $1.8
million, partially related to the personnel refocusing discussed above, as well
as a $1.6 million charge to legal fees for the oral settlement agreement of the
Companys West Virginia royalty lawsuit.
Page | 2
Interest expense increased $1.3 million to $9.1 million in the first quarter
2011, from $7.8 million in the same period of 2010, primarily related to an
increase in debt issuance amortization expense of $0.8 million, as well as a
higher average outstanding debt balance. The increase in the outstanding debt
balance was primarily related to the Companys November 2010 convertible debt
issuance. Debt to book capitalization was 32.2% at March 31, 2011.
Drilling Activity
As of March 31, 2011, a total of 50 wells are in process and waiting to be
completed and/or for pipeline connection.
Wells Drilled
Three Months Ended March 31, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
Gross | Net | Gross | Net | |||||||||||||
Rocky Mountain Region |
49 | 34.9 | 43 | 37.9 | ||||||||||||
Permian Basin |
6 | 6.0 | | | ||||||||||||
Appalachian Basin |
| | 1 | 0.7 | ||||||||||||
Total Wells Drilled |
55 | 40.9 | 44 | 38.6 | ||||||||||||
Average Costs Related to Oil and Gas Operations (per Mcfe)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Lease operating expenses |
$ | 1.17 | $ | 0.97 | ||||
Exploration expense (less impairment and amortization) |
$ | 0.15 | $ | 0.64 | ||||
DD&A (oil and gas properties only) |
$ | 2.79 | $ | 2.96 |
The Company recently completed its second and third horizontal Niobrara
wells. The second horizontal Niobrara well averaged 503 Boe/d for the first
thirteen days of production, and the third horizontal Niobrara well averaged
501 Boe/d for its first eight days of production. Both wells were drilled on
the northeast fringe of the core Wattenberg field, and both wells are very
early in the cleanup of their frac loads and are flowing naturally up seven
inch casing with no tubing or artificial lift. The second horizontal Niobrara
wells production has stabilized, and the third horizontal Niobrara wells
production continues to improve. Year to date, the Company has reached total
depth on four horizontal Niobrara wells and is on pace to drill and complete
eight to nine horizontal wells in the core Wattenberg, and four to five
horizontal wells in its Krieger area which is located eight miles northeast of
the core Wattenberg area.
PDC expects to provide additional details related to its drilling program at
its analyst day scheduled for July 14th in Denver, Colorado.
Gas and Oil Sales and Production
Production for the quarter increased 20.4% versus the same period in 2010. The
production increase was offset in part by a 30.5% decrease in average realized
prices, including realized gains on derivatives, and a 40.6% increase in
production costs in the first quarter 2011 versus the first quarter 2010.
First quarter 2011 production was 11.0 Bcfe compared to 9.1 Bcfe for the first
quarter 2010
Page | 3
and 9.7 Bcfe in the fourth quarter 2010. The increase in
production drove the 10.5% increase in natural gas, NGL and crude oil sales to
$63.9 million from $57.8 million for the first quarter 2010.
The following table provides production by area of operation, as well as the
weighted average sales price for the quarters ended March 31, 2011 and 2010,
excluding realized derivative gains or losses:
Three Months Ended March 31, | ||||||||||||
2011 | 2010 | Percent | ||||||||||
Natural gas (MMcf) |
||||||||||||
Rocky Mountain Region(1) |
6,787.5 | 5,873.2 | 15.6 | % | ||||||||
Permian Basin(2) |
81.1 | | * | |||||||||
Appalachian Basin |
866.9 | 630.5 | 37.5 | % | ||||||||
Other |
11.8 | 9.7 | 21.6 | % | ||||||||
Total |
7,747.3 | 6,513.4 | 18.9 | % | ||||||||
Weighted Average Sales Price |
$ | 3.08 | $ | 4.71 | (34.6 | %) | ||||||
Crude oil (MBbls) |
||||||||||||
Rocky Mountain Region |
320.0 | 284.1 | 12.6 | % | ||||||||
Permian Basin(2) |
50.1 | | * | |||||||||
Appalachian Basin |
1.1 | 0.7 | 57.1 | % | ||||||||
Other |
0.1 | | * | |||||||||
Total |
371.3 | 284.8 | 30.4 | % | ||||||||
Weighted Average Sales Price |
$ | 87.56 | $ | 73.57 | 19.0 | % | ||||||
NGLs (MBbls) |
||||||||||||
Rocky Mountain Region |
147.5 | 148.0 | (0.3 | %) | ||||||||
Permian Basin(2) |
18.1 | | * | |||||||||
Other |
1.3 | 1.1 | 18.2 | % | ||||||||
Total |
166.9 | 149.1 | 11.9 | % | ||||||||
Weighted Average Sales Price |
$ | 44.99 | $ | 41.80 | 7.6 | % | ||||||
Natural gas equivalent (MMcfe) |
||||||||||||
Rocky Mountain Region |
9,592.0 | 8,465.5 | 13.3 | % | ||||||||
Permian Basin(2) |
490.7 | | * | |||||||||
Appalachian Basin |
873.7 | 634.8 | 37.6 | % | ||||||||
Other |
20.2 | 16.1 | 25.5 | % | ||||||||
Total |
10,976.6 | 9,116.4 | 20.4 | % | ||||||||
Weighted Average Sales Price |
$ | 5.82 | $ | 6.34 | (8.2 | %) |
* | Percentage change is not meaningful or equal to or greater than 300%. | |
(1) | Approximately 27.7% of the 15.6%, or 253 MMcf, increase in the Companys natural gas production was the result of a settlement with a gas purchaser recorded during the three months ended 2011 related to prior years volume imbalances. | |
(2) | PDCs Permian Basin properties were acquired in July and November 2010. |
Gas and Oil Derivative Activities
The Company uses various derivative instruments to manage fluctuations in
natural gas and crude oil prices. PDC has in place a series of collars, fixed
price swaps and basis swaps on a portion of its natural gas and crude oil
production. If the applicable index rises above the ceiling price or swap, the
Company pays the counterparty; however, if the index drops below the floor or
swap, the counterparty pays the Company. The majority of PDCs hedging
counterparties are lenders to the Companys revolving credit facility. A
complete listing of the Companys derivative positions as of March 31, 2011 is
included in the Companys Form 10-Q, filed with the SEC on May 10, 2011.
Page | 4
Non-GAAP Financial Measures
This release refers to adjusted cash flows from operations and adjusted net
income (loss) attributable to shareholders both of which are non-GAAP
financial measures. Adjusted cash flows from operations is the cash flow
earned or incurred from operating activities without regard to the collection
or payment of associated receivables or payables. Adjusted net income (loss)
attributable to shareholders is net income (loss) attributable to shareholders
excluding the after tax impact of unrealized gains or losses from the change in
the mark-to-market value of the Companys derivatives during the period. The
Company believes it is important to consider adjusted cash flows from
operations and adjusted net income (loss) attributable to shareholders
separately, as the Company believes it can often be a better way to discuss
changes in operating trends in its business caused by changes in production,
prices, operating costs, and related operational factors, without regard to
fluctuations in future commodity prices and without regard to whether the
earned or incurred item was collected or paid during that year. The Company
also uses these measures because the collection of its receivables or payment
of its obligations and the change in fair market value of derivatives has not
been a significant issue for the Companys business, but merely a timing issue
from one period to the next, with fluctuations generally caused by considerable
changes in commodity prices. Adjusted cash flows from operations and adjusted
net income (loss) attributable to shareholders are not measures of financial
performance under GAAP and should be considered in addition to, not as a
substitute for, cash flows from operations, investing, or financing activities,
nor as a liquidity measure or indicator of cash flows reported in accordance
with GAAP.
The following tables provide the calculation of adjusted cash flows from
operations and adjusted net income (loss) attributable to shareholders,
non-GAAP measures, for the three months ended March 31, 2011 and 2010 (in
thousands, except per share data):
Adjusted Cash Flows from Operations
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Adjusted cash flows from operations: |
||||||||
Net cash provided by operating activities |
$ | 15,476 | $ | 51,345 | ||||
Changes in assets and liabilities |
10,623 | (2,016 | ) | |||||
Adjusted cash flows from operations |
$ | 26,099 | $ | 49,329 | ||||
Adjusted Net Income (Loss) Attributable to Shareholders
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Adjusted net income (loss) attributable to shareholders: |
||||||||
Net income (loss) attributable to shareholders |
$ | (19,924 | ) | $ | 23,724 | |||
Unrealized (gain) loss on derivatives, net |
27,745 | (20,490 | ) | |||||
Tax effect of above adjustments |
(10,540 | ) | 7,862 | |||||
Adjusted net income (loss) attributable to shareholders |
$ | (2,719 | ) | $ | 11,096 | |||
Weighted average diluted shares outstanding |
23,428 | 19,287 | ||||||
Adjusted diluted earnings (loss) per share |
$ | (0.12 | ) | $ | .58 | |||
Page | 5
PETROLEUM DEVELOPMENT CORPORATION
(dba PDC Energy)
Condensed Consolidated Statements of Operations
(unaudited; in thousands, except per share data)
(dba PDC Energy)
Condensed Consolidated Statements of Operations
(unaudited; in thousands, except per share data)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Revenues: |
||||||||
Natural gas, NGL and crude oil sales |
$ | 63,879 | $ | 57,827 | ||||
Sales from natural gas marketing |
15,202 | 22,687 | ||||||
Commodity price risk management gain (loss), net |
(23,882 | ) | 43,222 | |||||
Well operations, pipeline income and other |
1,876 | 2,589 | ||||||
Total revenues |
57,075 | 126,325 | ||||||
Costs, expenses and other: |
||||||||
Production costs |
21,039 | 14,961 | ||||||
Cost of natural gas marketing |
14,993 | 22,323 | ||||||
Exploration expense |
2,151 | 6,418 | ||||||
General and administrative expense |
13,873 | 10,694 | ||||||
Depreciation, depletion and amortization |
32,357 | 27,458 | ||||||
Total costs, expenses and other |
84,413 | 81,854 | ||||||
Income (loss) from operations |
(27,338 | ) | 44,471 | |||||
Interest income |
9 | 5 | ||||||
Interest expense |
(9,062 | ) | (7,800 | ) | ||||
Income (loss) from continuing operations before income
taxes |
(36,391 | ) | 36,676 | |||||
Provision (benefit) for income taxes |
(13,847 | ) | 13,804 | |||||
Income (loss) from continuing operations |
(22,544 | ) | 22,872 | |||||
Income from discontinued operations, net of tax |
2,620 | 797 | ||||||
Net income (loss) |
(19,924 | ) | 23,669 | |||||
Less: net loss attributable to noncontrolling interests |
| (55 | ) | |||||
Net income (loss) attributable to shareholders |
$ | (19,924 | ) | $ | 23,724 | |||
Amounts attributable to Petroleum Development
Corporation shareholders: |
||||||||
Income (loss) from continuing operations |
$ | (22,544 | ) | $ | 22,927 | |||
Income from discontinued operations, net of tax |
2,620 | 797 | ||||||
Net income (loss) attributable to shareholders |
$ | (19,924 | ) | $ | 23,724 | |||
Earnings (loss) per share attributable to shareholders: |
||||||||
Basic |
||||||||
Income (loss) from continuing operations |
$ | (0.96 | ) | $ | 1.19 | |||
Income from discontinued operations |
0.11 | 0.04 | ||||||
Net income (loss) attributable to shareholders |
$ | (0.85 | ) | $ | 1.23 | |||
Diluted |
||||||||
Income (loss) from continuing operations |
$ | (0.96 | ) | $ | 1.19 | |||
Income from discontinued operations |
0.11 | 0.04 | ||||||
Net income (loss) attributable to shareholders |
$ | (0.85 | ) | $ | 1.23 | |||
Weighted average common shares outstanding: |
||||||||
Basic |
23,428 | 19,191 | ||||||
Diluted |
23,428 | 19,287 | ||||||
Page | 6
First Quarter 2011 Teleconference and Webcast
The Company will host a conference call with investors to discuss first quarter
2011 results. The Company invites you to join Richard W. McCullough, Chairman
and Chief Executive Officer, Gysle R. Shellum, Chief Financial Officer, and
Barton R. Brookman, Senior Vice President Exploration and Production, for a
conference call on Wednesday, May 11, 2011, for a discussion of its results.
The related slide presentation will be available on PDCs website at
www.petd.com.
Event:
|
Wednesday, May 11, 2011, 1:00pm EDT | |||
Webcast:
|
www.petd.com | |||
Domestic:
|
877-312-5520 | |||
International:
|
253-237-1142 | |||
Conference ID:
|
62078847 | |||
Replay Numbers: |
||||
Domestic:
|
800-642-1687 | |||
International:
|
706-645-9291 | |||
Conference ID:
|
62078847 |
About PDC Energy
PDC Energy is an independent energy company engaged in the development,
production and marketing of natural gas and crude oil. Its operations are
focused in the Rocky Mountains with additional operations in the Appalachian
and Permian Basins. PDC is included in the S&P SmallCap 600 Index and the
Russell 3000 Index of Companies.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 regarding PDCs business, financial condition and results
of operations. These statements and all other statements other than statements
of historical facts included in and incorporated by reference into this press
release are forward-looking statements within the meaning of the safe harbor
provisions of the United States Private Securities Litigation Reform Act of
1995. Words such as expects, anticipates, intends, plans, believes, seeks,
estimates, projects and similar expressions or variations of such words are
intended to identify forward-looking statements herein, which include
statements regarding the Companys future financial and operating results,
estimated natural gas and oil production and reserves, expected production
growth trend throughout the year for the Companys horizontal programs in the
Marcellus and Niobrara areas, operating, development and exploration plans,
including the number of wells the Company plans to drill in 2011, the timing
and closing, if consummated, of the mergers of the three 2005 partnerships,
anticipated liquidity and capital expenditures, availability of capital and
managements strategies, plans and objectives. However,
these are not the exclusive means of identifying forward-looking statements
herein. Although forward-looking statements contained in this release reflect
the Companys good faith judgment, such statements can only be based on facts
and factors currently known to PDC. Consequently, forward-looking statements
are inherently subject to risks and uncertainties, including known and unknown
risks and uncertainties incidental to the exploration for, and the acquisition,
development, production and marketing of natural gas and oil, and actual
outcomes may differ materially from the results and outcomes discussed in the
forward-looking statements. Important risk factors that could cause actual
results to differ materially from the forward-looking statements include, but
are not limited to:
Page | 7
| changes in production volumes and worldwide demand; | |
| volatility of commodity prices for natural gas and oil; | |
| changes in estimates of proved reserves; | |
| inaccuracy in reserve estimates and expected production rates; | |
| declines in the values of PDCs natural gas and oil properties resulting in impairments; | |
| the future cash flow, liquidity and financial position of the Company; | |
| the timing and extent of the Companys success in discovering, acquiring, developing and producing natural gas and oil reserves; | |
| PDCs ability to acquire leases, drilling rigs, supplies, services and personnel at reasonable prices; | |
| reductions in the borrowing base under the Companys credit facility; | |
| risks incident to the drilling and operation of natural gas and oil wells; | |
| future production and development costs; | |
| the availability of sufficient pipeline and other transportation facilities to carry PDCs production and the impact of these facilities on price; | |
| the effect of existing and future laws, governmental regulations and the political and economic climate of the United States of America; | |
| changes in environmental laws and the regulations and enforcement related to those laws; | |
| the impact of weather and the occurrence of disasters such as fires, floods and other events and natural disasters and governmental responses to such events; | |
| competition in the oil and gas industry; | |
| the success of prospect development and property acquisition by the Company; | |
| the success of the Company in marketing oil and gas; | |
| the effect of natural gas and oil derivative activities and plans; | |
| conditions in the capital markets; | |
| losses possible from pending or future litigation; and | |
| the success of strategic plans, expectations and objectives for future operations of the Company. |
Further, PDC urges you to carefully review and consider the cautionary
statements made in this press release, the Item 1-A Risk Factors in the 2010
annual report on Form 10-K for the year ended December 31, 2010, filed with the
Securities and Exchange Commission (SEC) on February 24, 2011, as amended on
April 21, 2011, and other subsequent filings with the SEC for further
information on risks and uncertainties that could affect the Companys
business, financial condition and results of operations, which are incorporated
by this reference as though fully set forth herein. The Company cautions you
not to place undue reliance on forward-looking statements, which speak only as
of the date made. Other than as required under the securities laws, PDC
undertakes no obligation to update any forward-looking statements in order to
reflect any event or circumstance occurring after the date of this release or
currently unknown facts or conditions or the occurrence of unanticipated
events. All forward looking statements are qualified in their entirety by this
cautionary statement.
Contact:
|
Marti J. Dowling | |
Manager Investor Relations | ||
303-831-3926 | ||
ir@petd.com |
###
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