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Analyst Day – PDC Energy, Inc.

PDC Energy, Inc. · Apr 7, 2016 · 74 slides

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Slides

  1. Analyst Day – PDC Energy, Inc. – slide 1
    ANALYST DAY: DENVER April 7, 2016
  2. Analyst Day – PDC Energy, Inc. – slide 2
    BART BROOKMAN President & Chief Executive Officer 4/7/2016 3
  3. Analyst Day – PDC Energy, Inc. – slide 3
    PDC Energy Analyst Day Agenda Gysle Shellum 2016 Financial Guidance Key Financial Metrics Overview Scott Reasoner Core Wattenberg Operational Update Technical Enhancement Performance Utica Asset Overview Lance Lauck…
  4. Analyst Day – PDC Energy, Inc. – slide 4
    PDC Energy Vision and Strategy Delivering Stakeholders Delivering value added growth Value Community involvement/education Dedicated, highly-valued employees Corporate Corporate Development Development Long-term/multi-year focus…
  5. Analyst Day – PDC Energy, Inc. – slide 5
    PDC Energy Top-Tier Assets Utica Shale 2.7B 65,000 net acres Market Cap(1) 3.1B Enterprise Value(1) 273 YE15 Proved Reserves (MMBoe) 2,150 2P Horizontal Locations 20 22 Core Wattenberg 2016 Production Guidance…
  6. Analyst Day – PDC Energy, Inc. – slide 6
    PDC Energy Financial Strength and Discipline Debt / EBITDAX(1) Debt / Flowing Boe 4.0x 40,000 3.1x 3.0x 30,000 2.7x 2.0x 1.8x 20,000 1.4x 1.15x 1.0x 10,000 0.0x 0 2012 2013 2014 2015 2016e 2012 2013 2014 2015…
  7. Analyst Day – PDC Energy, Inc. – slide 7
    PDC Energy Operational Execution 2P Watt. Locations/Section Middle Core SRL(1) EURs (MBoe) Avg. Feet Drilled/Day/Well 30 500 2,100 20 400 1,400 10 300 700 0 200 0 2012 2013 2014 2015 2016e 2012 2013 2014 2015 2016e 2012 2013…
  8. Analyst Day – PDC Energy, Inc. – slide 8
    PDC Energy Business Development Marketing & Midstream Focus - Reducing differentials a key value-driver - Minimal long-term, firm commitments - Ample takeaway capacity for several years Select, Accretive Acquisitions - Must…
  9. Analyst Day – PDC Energy, Inc. – slide 9
    PDC Energy Delivering Value Operating Costs/Boe 25.00 PDCE: +29% 20.00 15.00 10.00 5.00 0.00 (1) 2012 2013 2014 2015 2016e G&A / Boe GTP/Boe Production Taxes/Boe LOE/Boe Operating Margin (Inc. Hedges) 100 100%…
  10. Analyst Day – PDC Energy, Inc. – slide 10
    PDC Energy Key Analyst Day Takeaways Top-Tier Financial Positioning - Strong Balance Sheet - High-value hedge portfolio Robust Inventory of High-Economic Wells - Deep inventory of value-driven drilling - Best-in-class economics in…
  11. Analyst Day – PDC Energy, Inc. – slide 11
    GYSLE SHELLUM Chief Financial Officer 4/7/2016 12
  12. Analyst Day – PDC Energy, Inc. – slide 12
    Financial Overview 2016 Guidance Summary Debt and Liquidity Analysis Cost of Capital and Hedging Overview 4/7/2016 13
  13. Analyst Day – PDC Energy, Inc. – slide 13
    2016 Capital Budget Guidance Targeting cash flow neutrality 425mm 2016e Capex Midpoint 2016e cash flow: 405 - 430 million Capital budget of 410 440 million 10mm Outspend Core Wattenberg 390 million Flexibility to account for…
  14. Analyst Day – PDC Energy, Inc. – slide 14
    2016 Production Guidance Further reduction in completed well costs (CWC) 20-22 2016e Production (MMBoe) 2.5mm (SRL), 3.5mm (MRL), 4.5mm (XRL)(2) Initiating new technological advancements Monobore drilling on all SRL & MRL wells…
  15. Analyst Day – PDC Energy, Inc. – slide 15
    2016 Financial Guidance 2015 2016 Guidance(2) Actual Low High Production 15.4 20.0 22.0 Crude oil, natural gas and NGLs sales 379 366 402 Realized gain on derivatives 239 251 251 Other Income 2 1 1 Adjusted total revenue 620 618…
  16. Analyst Day – PDC Energy, Inc. – slide 16
    Low Costs Continue to Drive Margins Source: Wells Fargo Securities, LLC 2014-2016e All-In Cash Cost Decrease/Boe(1) PDCE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 0% -10% -20% -30% -40% -50% 2016e All-In Cash Costs/Boe(1)…
  17. Analyst Day – PDC Energy, Inc. – slide 17
    Financial Overview 2016 Guidance Summary Debt and Liquidity Analysis Cost of Capital and Hedging Overview 4/7/2016 18
  18. Analyst Day – PDC Energy, Inc. – slide 18
    Pro Forma Debt and Liquidity As of 12/31/15, Pro Forma for March 2016 Equity Offering Pro Forma Debt Maturity Schedule (millions) Pro Forma 1,000 Available liquidity of 949 million(1) YE15 Debt / EBITDAX of 1.3x Current Borrowing…
  19. Analyst Day – PDC Energy, Inc. – slide 19
    Debt and Liquidity Analysis 2015 Actual 2016 Estimated Beginning Debt (millions)(Credit Facility) 56 37 - Adjusted cash flow from ops (421) (405 430) +/- Payment for retirement of convertible debt - 115 +/- Proceeds from equity…
  20. Analyst Day – PDC Energy, Inc. – slide 20
    Financial Overview 2016 Guidance Summary Debt and Liquidity Analysis Cost of Capital and Hedging Overview 4/7/2016 21
  21. Analyst Day – PDC Energy, Inc. – slide 21
    Weighted Average Cost of Capital Analysis See Appendix for Detailed WACC Calculation As of December 31, 2014 2015 Cost of Equity 14.2% 11.4% Equity % 69.5% 84.0% After-tax cost of debt 5.2% 5.3% Debt % 30.5% 16.0% WACC…
  22. Analyst Day – PDC Energy, Inc. – slide 22
    Crude Oil and Natural Gas Hedges Summary Full-Year 2016 Hedge Volumes Including Hedges in Place as of March 7, 2016 60% of crude oil volumes at weighted average floor price of 76.29/Bbl 2016 67% of natural gas volumes at weight…
  23. Analyst Day – PDC Energy, Inc. – slide 23
    PDCs Vision and Strategy Financial Strength Peer-leading debt metrics Ample liquidity Active hedging program Financial discipline 4/7/2016 24
  24. Analyst Day – PDC Energy, Inc. – slide 24
    SCOTT REASONER SVP Operations 4/7/2016 25
  25. Analyst Day – PDC Energy, Inc. – slide 25
    Operational Overview Core Wattenberg Operational Update Downspacing Performance Middle Core Development Utica Shale Performance Update 2016 Initiatives 4/7/2016 26
  26. Analyst Day – PDC Energy, Inc. – slide 26
    Core Wattenberg Asset Summary Wattenberg 2P Inventory 96,000 Inner Middle Net Acres Outer 100% 2016e TIL Breakdown SRLs Acreage HBP MRLs XRLs 135/160 Spuds TILs 2,150 2P Hz Locations (4,700 avg. lateral length)…
  27. Analyst Day – PDC Energy, Inc. – slide 27
    Core Wattenberg Consistently Track Type Curves PDC Performance Against 2015 Analyst Day Type Curves per 1,000 of Lateral Inner 5,500 net acres 50 2P Hz Locations 3 spuds in 2016 Middle 60,000 net acres 1,600 2P Hz…
  28. Analyst Day – PDC Energy, Inc. – slide 28
    Core Wattenberg Sustained Plug-n-Perf Uplift Enhanced Well Performance Plug-n-perf consistently outperforms sliding sleeves by 10-20% More time needed to determine absolute correlation between production uplift and EUR…
  29. Analyst Day – PDC Energy, Inc. – slide 29
    Core Wattenberg Continued AccessFrac Evaluation Moderate performance uplift on sliding sleeve completions Sliding sleeve wells show uplift from AccessFrac ranging from 5% to 10% Very limited data on plug-n-perf completions with…
  30. Analyst Day – PDC Energy, Inc. – slide 30
    Core Wattenberg Significant Drilling Efficiencies 2015 drill times improved by 45% since 2014 and 65% since 2013 Exceeded 2015 forecast of spuds and TILs 2016 efficiency gains could further improve drill times 2016 budget assumes…
  31. Analyst Day – PDC Energy, Inc. – slide 31
    Core Wattenberg Monobore Drilling Gains To-Date Current Implementation Monobore drilling saves 1 day in spud-to-spud times 50-100k savings per well realized to-date All 2016 SRL and MRL wells expected to be drilled using monobore…
  32. Analyst Day – PDC Energy, Inc. – slide 32
    Core Wattenberg Reduced Completed Well Costs 2015 Wattenberg well costs decreased more than 40% compared to 2014 Completed well costs down nearly 15% from original guidance (December 2015) Wattenberg SRL Well Cost(1) vs. NYMEX Oil…
  33. Analyst Day – PDC Energy, Inc. – slide 33
    Operational Overview Core Wattenberg Operational Update Downspacing Performance Middle Core Development Utica Shale Performance Update 2016 Initiatives 4/7/2016 34
  34. Analyst Day – PDC Energy, Inc. – slide 34
    Downspacing Successful Tests of MRLs 20 Wells per Section Equivalent 480-acre unit 6,700 laterals 10 wells 5 NIO (64 acre spacing) 5 CDL (64 acre spacing) Key Findings Sustained well performance over ten months One…
  35. Analyst Day – PDC Energy, Inc. – slide 35
    Downspacing Strong Becker Ranch Test Results 22 Wells per Section Equivalent 320-acre unit 4,200 laterals 11 wells 8 NIO (40 acre spacing) 3 CDL (107 acre spacing) Key Findings Consistent performance from all wells after 90…
  36. Analyst Day – PDC Energy, Inc. – slide 36
    Downspacing Rieder Test In-Line with Expectations Planned at 26 Wells per Section Equivalent; Drilled at 32 Wells per Section Equivalent due to Legacy Vertical Wells 320-acre unit 4,200 laterals 13 wells 10 NIO (32 acre spacing) 3…
  37. Analyst Day – PDC Energy, Inc. – slide 37
    Downspacing Solidifying Development Outlook Successful downspacing tests enable focus on true potential of Core Wattenberg Vertical development, GOR data and leaseholds are key variables in spacing design Well spacing of 20-24 wells…
  38. Analyst Day – PDC Energy, Inc. – slide 38
    Operational Overview Core Wattenberg Operational Update Downspacing Performance Middle Core Development Utica Shale Performance Update 2016 Initiatives 4/7/2016 39
  39. Analyst Day – PDC Energy, Inc. – slide 39
    Middle Core Focus of Long-Term Development Inventory 2016 Spud Breakdown 1,600 YE15 2P locations (4,700 avg. lateral length) 1,770 YE14 2P locations (4,200 avg. lateral length) Consistent performance Economics Inner Core…
  40. Analyst Day – PDC Energy, Inc. – slide 40
    Middle Core Consolidating Type Curves 2013 Spuds All Middle Core Niobrara and Codell wells performed in-line with 440 MBoe type curve NIO CDL Shifting focus to Niobrara as primary target formation Single type curve simplifies…
  41. Analyst Day – PDC Energy, Inc. – slide 41
    Middle Core Increased SRL EUR to 490 MBoe Increased Type Curve from 440 MBoe Majority of PDCs Middle Core inventory Middle Core Net Acres: 60,000 Oil: 2P Locations: 1,350 36-40% Over 1,300 locations with IRRs 30%(1) Avg. Lateral…
  42. Analyst Day – PDC Energy, Inc. – slide 42
    Middle Core Increased MRL EUR to 685 MBoe Increased Type Curve from 600 MBoe Nearly 200 locations under current plans Middle Core Net Acres: 60,000 Oil: 2P Locations: 180 36-40% Average drill times of 10 to 12 days Avg. Lateral…
  43. Analyst Day – PDC Energy, Inc. – slide 43
    Middle Core Initial XRL EUR of 850 MBoe Based on Industry Data 70 locations with current lease Middle Core Net Acres: 60,000 Oil: 2P Locations: 70 configurations Avg. Lateral Length: 9,500 36-40% Expected drill times of 13 to 15…
  44. Analyst Day – PDC Energy, Inc. – slide 44
    Middle Core Inventory Provides Resilient Returns Type Well Profile Comparison Type Well IRR Comparison(1) 35 Flat 37 / 45 / 55 45 / 55 / 65 2.00 Flat 2.13 / 2.50 / 2.75 2.50 / 3.00 / 3.50 NYMEX Pricing NYMEX Pricing NYMEX…
  45. Analyst Day – PDC Energy, Inc. – slide 45
    Middle Core Supporting Increased Type Curves 2016 Analyst Day type curves Peterson 16 wells/section SRL Design TIL: 2Q15 320 acre unit 8 total wells 4 plug-n-perf 4 sliding sleeve R&R/Trimar 20 wells/section SRL Design…
  46. Analyst Day – PDC Energy, Inc. – slide 46
    Operational Overview Core Wattenberg Operational Update Downspacing Performance Increasing Type Curves Utica Shale Performance Update 2016 Initiatives 4/7/2016 47
  47. Analyst Day – PDC Energy, Inc. – slide 47
    Utica Asset Summary Producing Pads 65,000 2016 Pad Locations Net Acres 52% Acreage HBP 23 Hz Net Producing Wells 35mm 2016e Capex 5/5 Spuds TILs 4/7/2016 48
  48. Analyst Day – PDC Energy, Inc. – slide 48
    Utica Stable Performance, Improved Frac Design Dynamite Pad Performance Cole Pad Performance Improved completion designs showing sustained performance 4/7/2016 49
  49. Analyst Day – PDC Energy, Inc. – slide 49
    Utica Testing New Areas & Designs in 2016 Approximately 35 million capital plan for 2016 Mason 2-well pad Delineate condensate fairway in southern acreage Test new completion design from Cole & Dynamite wells Miley 2-well pad Well…
  50. Analyst Day – PDC Energy, Inc. – slide 50
    PDCs Vision and Strategy Operational Execution Strong asset base Solid economics at current prices Decade-plus of drilling inventory Technical innovation driving improvements in many areas 4/7/2016 51
  51. Analyst Day – PDC Energy, Inc. – slide 51
    LANCE LAUCK EVP Corporate Development and Strategy 4/7/2016 52
  52. Analyst Day – PDC Energy, Inc. – slide 52
    Corporate Development Corporate Development Update Marketing & Midstream Update Organic Reserve Growth Acquisition Strategy Strategic Outlook 3-Year Outlook Peer Comparisons 4/7/2016 53
  53. Analyst Day – PDC Energy, Inc. – slide 53
    2016e Corporate Marketing and Pricing Summary 2016 Strip Pricing as of 03/23/16 with 3 Months of Actuals; Percentages May Vary Due to Rounding CRUDE OIL NATURAL GAS NGLs Wattenberg Wattenberg Wattenberg NYMEX Oil Price: 41/Bbl NYMEX…
  54. Analyst Day – PDC Energy, Inc. – slide 54
    Moving Beyond Line Pressure Constraints 2013 Processing AKA/APC DCP 2014 Processing AKA/APC DCP 2015 Processing AKA/APC Lucerne 2 plant provided significant relief to line pressure DCP during 2H 2015 2016e Processing…
  55. Analyst Day – PDC Energy, Inc. – slide 55
    Significant Long-Term Crude Oil Takeaway in Wattenberg Multiple takeaway options (refinery, pipeline, trucking and rail) Expected takeaway capacity exceeds production forecasts for the basin well past 2020 PDC has firm capacity of…
  56. Analyst Day – PDC Energy, Inc. – slide 56
    Year-End 2015 Proved Reserves Summary YE2014 Proved Reserves 250 MMBoe 2015 15.4 Significant Wattenberg production Production MMBoe growth through technical improvements Dominated by moving Outer Core PUDs in Reserve…
  57. Analyst Day – PDC Energy, Inc. – slide 57
    Established Acquisition Strategy High Threshold for Potential Acquisitions Top-Tier Expanded Portfolio Corporate Assets Inventory Optionality Accretion Must compete with Wattenberg Existing base production Provides new core…
  58. Analyst Day – PDC Energy, Inc. – slide 58
    Corporate Development Corporate Development Update Marketing & Midstream Update Organic Reserve Growth Acquisition Strategy Strategic Outlook 3-Year Outlook Peer Comparisons 4/7/2016 59
  59. Analyst Day – PDC Energy, Inc. – slide 59
    PDC Energy Modest Price Recovery Case Stable Capital Development Plan Production (MMBoe) 35 23% 3-Year Production CAGR (mid-point) 30 Oil: 40% Gas: 40% NGLs:…
  60. Analyst Day – PDC Energy, Inc. – slide 60
    PDC Energy Price Rebound Case Increasing Capital Development Plan Production (MMBoe) 35 27% 3-Year Production CAGR (mid-point) 30 Oil: 40% Gas: 40% NGLs:…
  61. Analyst Day – PDC Energy, Inc. – slide 61
    PDC Energy Balance Sheet Preservation Case (35/2 FLAT) Decreasing Capital Development Plan Debt / EBITDAX 5.0x 31% Average Annual Debt-to-Cap 4.0x 3.0x 10mm Revolver balance YE18e 2.0x 1.0x 300 Spuds 0.0x 2016e 2017e…
  62. Analyst Day – PDC Energy, Inc. – slide 62
    PDC Energy 3-Year Outlook Recap Wide Range of Inputs High Oil Price Volatility 35 /Bbl 65 Gas Market Assumed 2.00 /Mcf 3.50 Spud Management 300 Total Spuds 515 Narrow Range of Outcomes Value-Driven Growth 10% 27% 3-year…
  63. Analyst Day – PDC Energy, Inc. – slide 63
    PDC Energy Peer Leading Two-Year Outlook Source: Seaport Global E&P Comp Sheets; Week Ending March 18, 2016 Net Debt/EBITDA 2016e Average: 4.7x 10.0x 2017e Average: 4.3x 2016 2017 8.0x 6.0x 4.0x 2.0x 0.0x 1 2 PDCE 3 4…
  64. Analyst Day – PDC Energy, Inc. – slide 64
    PDC Energy High-Growth, Strong Balance Sheet Source: Seaport Global E&P Comp Sheets; Week Ending March 18, 2016 2017e Net Debt to EBITDA vs 2 Year Est. Production CAGR 14.0x Median: -1% 12.0x 10.0x 2017e Net Debt to…
  65. Analyst Day – PDC Energy, Inc. – slide 65
    PDC Energy EBITDA Multiple vs Peers Source: Seaport Global E&P Comp Sheets; Week Ending March 18, 2016 2-Year Production CAGR vs 2017e EV/EBITDA 16.0x 14.0x 12.0x Maintenance Mode Avg.: Growth Group Avg.: 8.5x, -5% 11.5x,…
  66. Analyst Day – PDC Energy, Inc. – slide 66
    PDC Energy Vision to Become a Mid-Cap Company Delivering Value Stakeholders Corporate Development Corporate Development Operational Execution Operational Execution Financial Discipline Balance Sheet Strength Top-Tier…
  67. Analyst Day – PDC Energy, Inc. – slide 67
    Q&A 68
  68. Analyst Day – PDC Energy, Inc. – slide 68
    Investor Relations Mike Edwards, Senior Director Investor Relations michael.edwardspdce.com Kyle Sourk, Manager Investor Relations kyle.sourkpdce.com Corporate Headquarters PDC Energy, Inc. 1775 Sherman Street Suite 3000 Denver,…
  69. Analyst Day – PDC Energy, Inc. – slide 69
    APPENDIX 70
  70. Analyst Day – PDC Energy, Inc. – slide 70
    PDC Energy 2015 Cost of Capital As of 12/31/15 Cost of Equity Cost of Debt Capital asset pricing model (CAPM) 5.3% = 8.5% x (1 37%) 11.4% = 2.3% + (1.41 x 6.5%) Risk-Free Equity Risk After-Tax Cost Pre-Tax Cost Marginal Tax…
  71. Analyst Day – PDC Energy, Inc. – slide 71
    PDC Energy 2014 Cost of Capital As of 12/31/2014 Cost of Equity Cost of Debt Capital asset pricing model (CAPM) 5.2% = 8.6% x (1 40%) 14.2% = 2.2% + (1.60 x 7.5%) Risk-Free Equity Risk After-Tax Cost Pre-Tax Cost Marginal Tax…
  72. Analyst Day – PDC Energy, Inc. – slide 72
    Reconciliation of Non-GAAP Financial Measures In millions, except per share data Three Months Ended Year Ended Adjusted EBITDA from net income (loss): December 31, December 31, 2015 2014 2015 2014 Net income (loss) 3.0 131.8 (68.3)…
  73. Analyst Day – PDC Energy, Inc. – slide 73
    Reconciliation of Non-GAAP Financial Measures In millions, except per share data Three Months Ended Year Ended Adjusted net income (loss) from net income (loss): December 31, December 31, 2015 2014 2015 2014 Net income (loss) 3.0…
  74. Analyst Day – PDC Energy, Inc. – slide 74
    Production Costs Details In millions, except per share data Previous Method Current Method Three Months Ended Three Months Ended December 31, December 31, 2015 2014 2015 2014 Lease Operating Expense 13.2 10.8 14.2 11.1 Production…

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