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PDC Energy Third Quarter 2022 Results

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   |    Wednesday,November 02,2022

PDC Energy, Inc. announced its 2022 third quarter financial and operating results.

2022 Third Quarter Highlights:

  • Net cash from operating activities of approximately $850 million, adjusted cash flows from operations, a non-U.S. GAAP metric defined below, of approximately $700 million and oil and gas capital investments of approximately $260 million.

  • Approximately $440 million of adjusted free cash flow ("FCF"), a non-U.S. GAAP metric defined below.

  • Returned approximately $295 million of capital to shareholders through the repurchase of approximately 4.2 million shares, or approximately 4.5 percent of common stock outstanding, and a $0.35 base dividend.

  • Reduced debt by approximately $300 million, exiting the quarter with approximately $1.4 billion in long-term debt and a leverage ratio of 0.5x.

  • Total production of 23.0 million barrels of oil equivalent ("MMBoe") or approximately 250,000 Boe per day and oil production of 7.4 million barrels ("MMBbls") or approximately 81,000 Bbls per day.

  • Published the Company's 2022 environmental, social and governance ("ESG") materials providing a roadmap on progress of our key metrics, material initiatives and successes in 2021. We remain committed and on track to achieve our long-term goals of reducing greenhouse gas and methane emission intensity by 60% and 50%, respectively, by 2025.

President and Chief Executive Officer, Bart Brookman, commented, "The third quarter generated solid results for PDC. This marks the first full quarter reflecting the benefits of the Great Western acquisition. I am proud of our team who worked diligently to fully integrate this transaction on schedule and under budget. Results for the quarter are highlighted by $440 million of free cash flow, shareholder returns of approximately $295 million through our accelerated share buyback program, and a $0.35 per share base dividend. Quarterly production averaged 250,000 Boe per day, the midpoint of our guidance, as we began to see the synergies of the consolidated asset base. Our low cost and efficient operations are reflected in our strong free cash flow, as lease operating, and G&A expenses came in at a combined $4.75 per Boe.

"Additionally, our regulatory team has worked tirelessly and thoughtfully to move our Guanella CAP permitting application forward. This CAP, along with our prior OGDPs, represent our planned Wattenberg Field turn-in-line activity through 2028. We are scheduled for the COGCC public hearing on December 7, 2022. The locations included under the CAP application represent approximately 450 wells in our Summit and Plains areas in the core Wattenberg Field."

Operations Update

In the third quarter of 2022, PDC invested approximately $260 million while delivering total production of 23.0 million Boe, or approximately 250,000 Boe per day, and oil production of 7.4 million barrels, or approximately 81,000 barrels per day. Total production and oil production represent a sequential increase of 7 percent and 8 percent, respectively, compared to the second quarter of 2022, primarily driven by the production volumes from the Great Western acquisition and turn-in-line activities in the third quarter of 2022.

In the Wattenberg Field, the Company invested approximately $230 million to operate an average of three drilling rigs and approximately one completion crew in the third quarter, resulting in 47 spuds and 41 TILs. As a result of the longer laterals and improved efficiencies, we completed approximately 15 percent more stages in the third quarter compared to the previous quarter. Total production was 20.2 million Boe, or approximately 219,000 Boe per day, while oil production was approximately 6.3 million Bbls, or approximately 69,000 Bbls per day. PDC exited the third quarter with approximately 200 drilled, uncompleted wells ("DUCs") and approximately 400 approved permits in-hand.

In the Delaware Basin, PDC invested approximately $30 million to operate one drilling rig, resulting in 3 spuds and 1 TIL. Total production was 2.8 million Boe, or approximately 31,000 Boe per day, while oil production was approximately 1.1 million Boe, or approximately 12,000 Boe per day.

Q3 2022 Shareholder Returns and Financial Position

The Company returned approximately $295 million of capital to shareholders in the third quarter through the repurchase of approximately 4.2 million shares of common stock and a $0.35 per share base quarterly dividend. The Company has a $1.25 billion share repurchase program authorized, which is expected to be utilized by year end 2023. PDC remains committed to returning a minimum of 60 percent of its annual post-dividend FCF to shareholders through the Company's share repurchase program and a year-end special dividend, if needed.

The Company reduced its debt by approximately $300 million during the quarter. At quarter end, the company had approximately $45 million cash on hand and approximately $450 million drawn on its credit facility. The leverage ratio was 0.5x at September 30, 2022.

In October 2022, as part of our credit facility semi-annual redetermination, our borrowing base increased to $3.5 billion from $3.0 billion as a result of the reserves acquired from the Great Western acquisition. The Company maintained the elected commitment amount of $1.5 billion.

Guanella Comprehensive Area Plan ("CAP")

On August 2, 2022, the Company passed a major milestone in the permitting process by receiving the Completeness Determination on its Guanella CAP from the Colorado Oil & Gas Conservation Commission ("COGCC"). The Guanella CAP covers approximately 35,000 consolidated net acres in rural Weld County with approximately 450 well locations accessed by only 22 surface locations.

On October 2, 2022, the Company completed the 60-day public comment period. We are scheduled for the COGCC public hearing on December 7, 2022 which could potentially continue on December 8, 2022 given the size and scale of the Guanella CAP. The CAP, along with our prior OGDPs, represent our planned Wattenberg Field turn-in-line activity through 2028.

Fourth Quarter and Full Year 2022 Outlook

For the fourth quarter, the Company expects total production to be in a range of 245,000-255,000 Boe per day and 80,000-84,000 Bbls per day of oil production.

For the full-year 2022, we reaffirm our production guidance range of 230,000 Boe to 240,000 Boe per day, of which approximately 73,000 Bbls to 77,000 Bbls is expected to be crude oil. Our planned 2022 capital investments in crude oil and natural gas properties are expected to be approximately $1.075 billion, which is at the high end of our previously reported full-year guidance range. This is a result of bringing on the second completion crew at the end of September, as planned, paired with continued operational efficiency that ultimately increases the number of stages completed and incremental spuds as well as continued cost pressures.

Environmental, Social and Governance ("ESG")

Through the first nine months of 2022, the Company is on schedule with its planned projects to meet its 15% and 30% GHG and methane reduction targets for the full year 2022, respectively.

During the third quarter, the Company published its 2022 ESG materials. The 2022 ESG reports are aligned with the Sustainability Accounting Standards Board ("SASB"), the Taskforce on Climate-related Financial Disclosures ("TCFD"), and the American Exploration and Production Council ("AXPC") ESG metrics frameworks.

For more information about PDC's sustainability efforts and to download the 2022 ESG reports, please visit www.pdce.com.

Third Quarter Oil and Gas Production, Sales and Operating Cost Data

Crude oil, natural gas and NGLs sales, excluding net settlements on derivatives, were $1,201 million, a 3 percent decrease compared to second quarter of 2022 of $1,238 million. The decrease in sales between periods was due to a 10 percent decrease in the weighted average realized sales price per Boe to $52.25 from $57.81 partially offset by a 7 percent increase in production from 21.4 MMBoe to 23.0 MMBoe. The decrease in sales price was primarily driven by a 15 percent decrease in weighted average realized crude oil and NGLs prices partially offset by an 8 percent increase in weighted average realized natural gas prices. The combined revenue from crude oil, natural gas and NGLs sales and net settlements on commodity derivative instruments was $948 million in the third quarter of 2022 compared to $939 million in the prior quarter.

Production costs for the third quarter of 2022, which include LOE, production taxes and TGP, were $200 million, or $8.69 per Boe, compared to $190 million, or $8.85 per Boe, in the second quarter of 2022. The decrease in production costs per Boe was primarily due to a 7 percent increase in production volumes partially offset by a 10 percent increase in production taxes as a result of increased ad valorem rates associated with the acquisition of Great Western.

Financial Results

Net income for the third quarter of 2022 was $798 million, or $8.30 per diluted share, compared to $662 million, or $6.74 per diluted share in the second quarter of 2022. The quarter-over-quarter change was primarily due to a $306.7 million commodity risk management gain in the third quarter of 2022 compared to a $102.0 million commodity risk management loss in the second quarter of 2022 partially offset by (i) a gain on bargain purchase from the Great Western acquisition of $100.3 million recognized in the second quarter, (ii) an increase in income tax expense of $101.3 million, and (iii) a decrease in crude oil, natural gas and NGLs sales of $37.1 million between periods. Adjusted net income, a non-U.S. GAAP financial measure defined below, was $363 million in the third quarter of 2022 compared to $502 million in the second quarter of 2022. The movement between periods is primarily attributable to the bargain purchase gain and, to a lesser extent, the change in sales and settled derivatives.

Net cash from operating activities for the third quarter of 2022 was approximately $848 million compared to $747 million in the second quarter of 2022. Adjusted cash flows from operations, a non-U.S. GAAP metric defined below, was approximately $701 million and $695 million in the third and second quarter of 2022, respectively. The quarter-over-quarter increase in adjusted cash flows from operations was primarily due to a $45.8 million decrease in derivative settlement losses and a $5.5 million decrease in general and administrative expense partially offset by a decrease in sales and an increase in production taxes and TGP between periods. Adjusted free cash flows, a non-U.S. GAAP metric defined below, increased to $440 million from $404 million in the second quarter of 2022.

G&A, which includes cash and non-cash expense and $4.9 million in Great Western transaction and transition related expense, was $40 million, or $1.75 per Boe in the third quarter of 2022 compared to $46 million, which includes $13.0 million in Great Western transaction and transition related expense, or $2.13 per Boe, in the second quarter of 2022. Excluding the transaction and transition costs associated with the Great Western acquisition, G&A was $1.53 and $1.52 per Boe in the third and second quarter, respectively.


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