Credit Suisse Energy Summit. February 6, 2013 NASDAQ: PDCE

Transcription

1 Credit Suisse Energy Summit February 6, 2013 NASDAQ: PDCE

2 Disclaimer The following information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 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 of PDC Energy, Inc. ( PDC or the Company ) 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 PDC; actions by competitors; changes in laws or regulations; and other factors, many of which are beyond the control of the Company. In particular, the transaction described herein may not close in the timeframe PDC expects or at all, and the anticipated benefits of the transaction for PDC may not materialize. 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 the safe harbor statements found in PDC s SEC filings, including, without limitation, the discussion under the heading Note Regarding Forward Looking Statements and Risk Factors and elsewhere in the Company s most recent 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 the Company 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 proved reserves, probable reserves and possible reserves. SEC regulations define proved reserves as those quantities of oil or gas which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible in future years from known reservoirs under existing economic conditions, operating methods and government regulations; probable reserves as unproved reserves which, together with proved reserves, are as likely as not to be recovered; and possible reserves as unproved reserves which are less certain to be recovered 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, the effects of midstream constraints, 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. 2/6/2013 2

3 Company Overview Market cap ~$1.1 Billion (1) Enterprise value ~$1.8 Billion (1) Proved reserves 1.2 Tcfe (193 MMBoe) (2) 48% liquids, 42% proved developed Does not include anticipated future contributions from Utica Shale position 3P reserves 3.6 Tcfe (600 MMBoe) (2) 51% liquids Significant inventory of low risk horizontal development projects in liquid-rich Wattenberg and Marcellus Considerable growth in resource potential still remains in Marcellus and Utica Growing liquids component of reserves and production ~37% of production comprised of liquids at year-end 2012 Strategic Core Areas Colorado and Appalachian Basin Liquid-Rich Basins (4) (1) Company estimate as of 1/31/2013. (2) Year-end /6/2013 3

4 PDC Signs Definitive Agreement to Sell Non-Core Colorado Assets Colorado Natural Gas Assets: Piceance, NECO, Krieger, SECO Offer Amount: ~$200 million cash Includes certain PDC Hedges for Buyer assumption of all PDC Firm Transportation Obligations Effective Date: January 1, 2013 Estimated Closing Date: Second Quarter, YE Proved Reserves: 85 Bcfe, 99% gas, 100% PDP 2013 Est. Net Production: 10 Bcfe (April December) Net Acres: 106,000 (primarily NECO) Use of Proceeds: Pay down revolver; place majority of proceeds into short-term cash awaiting reinvestment Along with internally generated cash flow, more than fully funds previously announced 2013 capital budget Positions the Company to accelerate the liquid-rich Wattenberg and Utica Shale horizontal programs 2/6/2013 4

5 PDC Positioned to Accelerate Liquid-Rich Horizontal Wattenberg & Utica Focuses PDC on three premier horizontal plays with decade-plus drilling inventory Liquid-rich: Core Wattenberg (Niobrara & Codell) and Utica Shale Prolific natural gas: West Virginia Marcellus Major step in corporate transition to high quality, liquid-rich asset base 3P reserves decrease from 3.6 Tcfe (600 MMBoe) to 3.5 Tcfe (583 MMBoe) pro forma for transaction Improves corporate metrics; increases per-unit margins; improves long-term growth profile Strengthens balance sheet and debt metrics Total Proved Reserves (1P) 2012 Year-End 2012 Proforma Total Reserves (Bcfe) 1,157 1,072 Total Reserves (MMBoe) NGL/Oil Mix 48% 52% Note: Beginning in 2013, PDC will report production and reserves in barrels equivalent. 2/6/2013 5

6 Key Investment Themes Stable base of production from long-lived assets in Colorado and Appalachia Substantial portfolio of high return, liquid-rich projects Core Wattenberg horizontal Niobrara play increasing from two to three horizontal rigs in 2013 One of top economic return horizontal plays in the U.S. at current costs and commodity prices (40% to 123% IRR) (1) ~1,400 horizontal locations (2P) identified with additional potential through further downspacing Liquid-rich position in emerging Utica Shale play with approximately 200 gross locations Sizable Marcellus Shale leasehold position in core area of northern West Virginia Solid balance sheet with ample liquidity Operational flexibility to allocate capital: largely HBP acreage and operated assets Significant gas & oil hedge positions through 2013 to protect cash flow Consistent History of Double-Digit Production and Reserve Growth (1) Flat Pricing: $90 NYMEX Oil, $3.50 NYMEX Gas. Excludes lease acquisition and corporate-level costs. 2/6/2013 6

7 YE2012 Reserve Summary Area PDCE Reserves Comparison YE2011 YE2012 Total Proved (Bcfe) 1,016 1,157 PDP (Bcfe) % Liquids 34% 48% PV-10 Value (MM$) $1,350 $1,709 SEC Product Pricing Gas ($/MMbtu) $4.12 $2.76 SEC Product Pricing Oil ($/Bbl) $96.19 $94.71 SEC Product Pricing NGLs ($/Bbl) $51.94 $37.29 PDP Reserves (Bcfe) PDNP Reserves (Bcfe) PUD Reserves (Bcfe) Total Proved Reserves (Bcfe) Wattenberg Appalachia Piceance NECO Total PDCE ,157 3P Reserves (internal estimates) increased over 70% from 2.1 Tcfe (YE 11) to 3.6 Tcfe (YE 12). 2/6/2013 7

8 Production Summary Continuing Operations Total Net Production (Bcfe) Exit Rate (Mmcfe/d) December 2012 Commodity Mix December 2012 Area Production by Commodity Oil NGLs Gas 100% Oil 27% 80% 60% 40% Rocky Mountains (90%) Gas 63% NGLs 10% 20% 0% Wattenberg Appalachia Piceance NECO/ Other 2/6/2013 8

9 Core Wattenberg Horizontal Niobrara Third largest leaseholder and producer in the core Wattenberg Field ~103,000 net acres in core area (~109,000 total) (1) 70%-80% liquids Typical EURs from 300 to 500 MBoe Excellent returns IRR of 40% - 123% (2) ~1,400 identified 2P horizontal Niobrara and Codell locations PDCE and peers are achieving strong economic results on a consistent basis across core Wattenberg (1) Subject to new Wattenberg acquisition post-closing adjustments. (2) Flat Pricing: $90 NYMEX Oil, $3.50 NYMEX Gas. Excludes lease acquisition and corporate-level costs. 2/6/2013 9

10 PDC Core Wattenberg Horizontal Program PDC Average Peak 24 Hr and 30 Day IP in Boepd North 2012 Spuds: 37 Producing Wells: 31 Avg Peak 24 Hr IP: 513 Avg 30 Day IP: 394 ~% Liquids: 65 85% PDC Core Wells Avg Peak 24 Hr IP: 517 Avg 30 Day IP: 403 Center 2012 Spuds: 0 Producing Wells: 2 Avg Peak 24 Hr IP: 573 Avg 30 Day IP: 521 ~% Liquids: 40 70% South 2012 Spuds: 0 Producing Wells: 0 Industry achieving Boepd 2/6/

11 DJ Basin Stratigraphic Column Multiple Target Zones Current PDC Horizontal Program Data Drilling 3 to 5 well pads ~4,000 average lateral length 16 frac stages per well Drill time of days spud to spud Sliding sleeves, swell/ HYD packers Niobrara Formation Productive Interval and Niobrara A, B, & C Chalk Benches Downspacing (2012) Test Codell for Horizontal Productivity Codell Sandstone (2012) Other DJ Basin Zones with HZ Potential Greenhorn Limestone and Graneros Shale 2/6/

12 Wattenberg Project Inventory Proved HZ Inventory 2P HZ Inventory* 3P HZ Inventory* 4 Gross wells per 640 Ac. Gross HZ Inventory: Gross wells per 640 Ac. (8 Niobrara, 2 Codell) Gross HZ Inventory: ~1, Gross wells per 640 Ac. (12 Niobrara, 4 Codell) Gross HZ Inventory: ~2,000 *Vertical wells may or may not be present. 2/6/

13 Horizontal Production: Niobrara and Codell (1) Flat Pricing: $90 NYMEX Oil, $3.50 NYMEX Gas. 3-stream production. 2/6/

14 Wattenberg Production 2/6/

15 Midstream Provider Throughput (Wattenberg) 2/6/

16 Midstream Activity Summary Wattenberg Third Party Providers Expansion Projects Current Capacity 445 MMcf/d LaSalle Plant - Wells Ranch Booster - Additional Compressor Stations MMcf/d Under Construction LaSalle Expansion 50 MMcf/d Permit Pending Lucerne Plant 2 - Additional Boosters MMcf/d Permits Submitted Plant 10 - Additional Boosters MMcf/d Permits Submitted 100% Capacity Increase Future Capacity 1,065 MMcf/d Front Range NGL pipeline expected to add MBpd/d Mont Belvieu access November /6/

17 Utica Leasehold and Asset Summary Southeast Ohio Activity update PDC and other operators recent reported drilling results have exceeded expectations Wells drilled by PDC and other operators in and around PDC s leasehold have helped to accelerate de-risking of the play Plan to spend $53 million in 2013 Drill, complete and connect 5 horizontal wells across acreage position $7 million for leasehold acquisitions The 2012 and 2013 drilling programs should test a substantial portion of PDC s leasehold Leasehold and asset summary ~45,000 contiguous net acres, primarily located in the gascondensate window Average 95% WI, 16% royalty, ~57% HBP Inventory of ~200 gross horizontal drilling locations Large resource potential with high liquids content Midstream Plan to finalize midstream strategy and marketing arrangements in Q First sales from PDC horizontal wells expected in Q PDCE Onega- Commissioners #14-25H IP: 1,796 boepd PDCE Stiers 3-Well Hz Pad (Planned 2013 Spud) Spencer A-1H & A-5H IP: 436 boepd Brookfield A-3H IP: 575 boepd PDCE Palmer #44-20 (Vertical Test Well) Oil Wet Gas Condensate Dry Gas Ryser 1-25H IP: 2,914 boepd PDCE Maxwell Hz Well (Planned 2013 Spud) Boy Scout 1-33H IP: 3,456 boepd Sanford 1H Strong results APC BK Stephens 1-16H IP: 3,007 boepd Groh 1-12H IP: 1,935 boepd PDCE Detweiler #42-3H Miley 5HA Strong results Rubel 1H Strong results PDCE Garvin 1H (Planned 2013 Spud) Wagner 1-28H IP: 4,650 boepd Shugert 1-12H IP: 7,482 boepd PDCE Hickenbottom (Vertical well) Whitacre 5H 2/6/

18 Appalachian Basin PDCM Project Overview Devonian Marcellus Productive Wells 3, Total Approx. Net Acreage 236, ,000* West Virginia 195, ,000 Pennslyvania 41,000 9,000 EURs - horizontal Marcellus wells (Bcf) 5-7 * Subject to certain post-closing adjustments from Seneca-Upshur acquisition. Marcellus Activity Update Completed 3-well pad, hooked up Nov. 2012; recommence drilling program in Q PDCM Acreage Existing Industry Wells PDCM is a 50 / 50 joint venture between PDC and Lime Rock Partners Majority of leasehold is held by production Note: Totals reflect gross ownership of PDC Mountaineer, LLC (PDCM) at year-end /6/

19 Marcellus Focus Area Hz Inventory Undeveloped Locations Core Focus Area 357 Outside Focus Area 243 Total 600 Marcellus Activity Horizontal Wells Harrison County Taylor County 8 7 Vertical Wells 15 Total 30 West Virginia PDCM Marcellus Acreage 2/6/

20 Marcellus Horizontal 2/6/

21 2013 Capital Budget 2013 Capex Budget by Region: $372 Million Wattenberg (1) Utica PDCM 50% Other Area Capital Budget ($MM) Operated Horizontal Rigs 68% 14% Wattenberg $ % 13% Utica $53 1 Other $17-95% of Capex allocated to liquids-rich projects 90% of Capex allocated to development projects PDCM s (50/50 Joint Venture) capital budget is expected to be funded by the JV s cash flow and borrowings under the JV s revolving credit facility Sub-Total $ Marcellus Shale (PDCM 50%) $48 1 Total $ Development Projects Focused on Low-Risk Liquid-Rich Areas (1) Includes horizontal Niobrara drilling program of 63 operated wells, ~50 refrac and recomplete stages, and $30 million for non-operated projects. 2/6/

22 Strong Balance Sheet PDC has Maintained Relatively Low Leverage and Strong Liquidity Conservative Leverage Strong Liquidity (1) ($MM) 44% 45% $ x 43% 43% 50% $393 34% 33% 2.8x 2.8x 2.8x 40% $400 $ x 1.7x 1.9x 30% 2.0x 1.6x $300 $231 $238 20% $180 $ x $200 10% 0.0x 0% $ LTM PF as of 9/30/12 9/30/2012 $- Debt/Adj. EBITDAX Debt to Capitalization As of PF as of 9/30/2012 9/30/ x 8.x 5.x 3.x 8.4x Adj. EBITDAX (2) / Interest, net 4.9x 4.9x 5.3x 5.4x 5.8x PF Debt Maturity Schedule ($MM) $450 $410 (1) Undrawn Revolver 3.25% Convertible Notes due % Notes due 2022 $115 $500 0.x LTM 9/30/12 PF as of 9/30/ $ (1) Pro-forma as of 9/30/2012; excludes PDCM. Pro forma for $500mm High Yield Notes offering and October 31, 2012 borrowing base redetermination. (2) Adjusted EBITDAX: Earnings before Interest, Taxes, Depreciation, Depletion & Amortization, Exploration Expense, Impairment of natural gas and crude oil properties, and excluding unrealized gain or loss on derivatives. Adjusted EBITDAX is a non-gaap measure.; see appendix for reconciliation to GAAP. 2/6/

23 Crude Oil and Natural Gas Hedges Hedges in Place as of December 31, 2012 Crude Oil (includes NGL) NYMEX Average (1) $92.75 $92.36 $90.26 Weighted-Average Hedge Price With Ceilings $99.74 $ $ Weighted-Average Hedge Price With Floors $88.75 $86.59 $90.00 Hedge Volumes (MBBL) 2,327 1, Natural Gas NYMEX Average (1) $3.54 $4.03 $4.23 Weighted-Average Hedge Price With Ceilings (2) - $4.02 $4.09 Weighted-Average Hedge Price With Floors (3) $4.26 $3.95 $3.97 Hedge Volumes (MMcf) 28,710 19,333 13,610 (1) As of 12/31/2012 Strip Price. (2) Hedge price is at PEPL, NYMEX, and CIG; Ceilings are immaterial in (3) Hedge price is at PEPL, NYMEX, and CIG; Includes Swaps and Floors. 2/6/

24 Investment Highlights Significant horizontal projects in inventory Core Wattenberg Niobrara and Codell Utica Shale in SE Ohio West Virginia / Marcellus Capital currently allocated to projects that increase liquids-mix in production and proved reserves Operational flexibility; largely HBP and operated Positioned to execute multi-year organic growth of production, cash flow and proved reserves Focused on improving cash margins through low-cost operations and midstream / marketing initiatives Significant operating expertise in focus areas Proactive hedging strategy helps protect cash flow 2/6/

25 Appendix 2/6/

26 Adjusted EBITDAX Reconciliation Full Year Full Year Full Year Full Year LTM /30/2012 Net income (loss) $113.3 ($79.3) $6.2 $13.4 ($12.9) Unrealized (gain) loss on derivatives, net 1 (117.5) (12.6) (28.6) 24.9 Interest expense, net Income taxes expense (benefit) 61.5 (45.6) (7.7) Impairment of natural gas & crude oil properties Depreciation, depletion & amortization Adjusted EBITDA $211.5 $167.9 $149.4 $188.3 $214.8 Exploration expense Adjusted EBITDAX $231.0 $181.9 $163.1 $194.5 $223.7 (1) Includes natural gas marketing activities. (2) Includes accretion of asset retirement obligations 2/6/

27 Contact Information Investor Relations Ron Wirth, Vice President Finance and Treasurer Marti Dowling, Investor Relations Manager Corporate Headquarters PDC Energy, Inc Sherman Street Suite 3000 Denver, CO Website 2/6/