PDC Energy: Quality Assets Trapped in a Failing Structure Kimmeridge believes PDC Energy owns and operates premier oil and gas assets. Despite the underlying asset quality, PDC has consistently failed to generate a return on average…
Consistently Poor ROACE vs Peers and vs the WACC PDCs ROACE over the past ten years has averaged 4% and has never been above 6%. This is materially lower than its WACC of 10.5%. Elementary finance theory explains that investments…
Shareholder Returns are Depressed Due to Excessive G&A The main driver of PDCs bloated cost structure is overhead / SG&A. The company is near the top of the peer group on a per unit of production basis. A telling metric is overhead…
Size and Scale Larger basin operators are able to achieve capital efficiency and cost savings through rig optimization, longer laterals, and lower service costs. PDC is not a major operator in either of its two basins, further…
A History of Failing to Execute At the start of 2018, PDCE forecasted an outspend of less than 90 million for 2018. The actual result was nearly twice as high, with an outspend of 176 million despite materially higher commodity…
PDC Energy: A Better Path Under Kimmeridges proposed plan, PDC would: Develop a plan to return ROACE above the WACC at 50/bbl and 3/mcf. Cut SG&A from 20% of cashflow to industry leading levels. Return cash to shareholders and…
The Kimmeridge Better Path PDC guidance for 2020 implies a ROACE below the cost of capital, further degrading equity value. A better path for PDC is to implement aggressive controls on costs and spending. The company can and should…
Delivering ROACE above the WACC PDC needs to build a path to meeting its WACC (10.5%) at 50/bbl oil and 3/mcf gas prices by lowering SG&A, improving operating performance, and delivering additional drilling efficiencies. Over time,…
A New Board for a New Business Model Kimmeridge is nominating three directors to stand for election at the Companys 2019 annual meeting of shareholders. Kimmeridges candidates have extensive experience as investors and asset owners.…
Kimmeridges Director Nominees Ben Dell is the founder of Kimmeridge where he leads the firms investment activities, including overseeing the screening and diligence of new geological opportunities as well as the negotiation and…
Disclosures Continued Custom peer group data presented in the chart on slide 3 was prepared by Kimmeridge using publicly available information for 75 publicly listed E&P companies chosen by Kimmeridge and is meant to be representative of…
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