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Ohio Utica Shale

PDC Energy says average daily Utica production up 30 percent

By Bob Downing Published: May 6, 2014

From PDC Energy today:

PDC Energy Announces 2014 First Quarter Results: Production Growth of 44%; Crude Oil and NGLs Production Increase of 57%; Per Boe Production Costs Decreased 7%

 

DENVER, May 6, 2014 (GLOBE NEWSWIRE) -- PDC Energy, Inc. ("PDC", the "Company," "we" or "us") (Nasdaq:PDCE) today reported its 2014 first quarter financial and operating results from continuing operations.

2014 First Quarter Highlights Compared to First Quarter 2013

  • Increased production 44% to 26,700 barrels of oil equivalent per day ("Boe/d").
  • Increased crude oil and NGLs production 57% to 15,800 Boe/d.
  • Increased crude oil, natural gas and NGLs sales revenues by 63% to $130 million.
  • Reduced total production costs by 7% per Boe.

James Trimble, Chief Executive Officer and President, commented, "First quarter production growth was strong despite some winter weather challenges in Wattenberg. We are pleased with our initial results from our two Garvin offset wells in the Utica Shale and with our ability to add 6,000 more net acres to our Utica leasehold. We expect strong production growth of 28% to 35% in 2014 compared to 2013 despite normal declines from our Marcellus joint venture assets where we are not currently drilling. We expect to add a fifth drilling rig in Wattenberg this month with a production contribution expected later in 2014. We also plan to add a second drilling rig in the Utica during the second half of the year, as we continue to accelerate the development of our high-return, liquid-rich assets."

Financial Results

Net loss for the first quarter of 2014 was $2.1 million, or $0.06 per diluted share, compared to a net loss of $39.4 million, or $1.30 per diluted share, for the first quarter of 2013. Adjusted net income, a non-U.S. GAAP financial measure defined below, was $9.6 million for the first quarter of 2014, compared to an adjusted net loss of $20.4 million for the comparable period of 2013. Net cash from operating activities was $80.5 million in the first quarter of 2014, compared to net cash from operating activities of $44.3 million in the first quarter of 2013. Adjusted cash flows from operations, a non-U.S. GAAP financial measure defined below, increased 33% to $69.7 million in the first quarter of 2014, compared to $52.4 million in the comparable period of 2013.

First quarter 2014 production increased 44% to 26,700 Boe/d compared to 18,500 Boe/d in the first quarter of 2013, and increased 2% compared to 26,100 Boe/d in the fourth quarter of 2013. The increase in production over first quarter 2013 was due to successful horizontal drilling in the Wattenberg Field, Utica Shale and Marcellus Shale.

Crude oil, natural gas and NGLs sales revenues increased 63% to $129.8 million in the first quarter of 2014, compared to $79.4 million in the first quarter of 2013. The average sales price, excluding net settlements on derivatives, increased 13% to $54.05 per Boe for the first quarter of 2014, compared to $47.71 per Boe for the same 2013 period.

Net commodity price risk management activities for the first quarter of 2014 resulted in a loss of $27.2 million, which was comprised of $8.2 million of negative net settlements on derivatives and a $19.0 million loss in net change in fair value of unsettled derivatives. Commodity price risk management activities for the first quarter of 2013 resulted in a net loss of $22.4 million, which was comprised of $8.5 million of positive net settlements on derivatives and a $30.9 million loss in net change in fair value of unsettled derivatives.

Production costs were $21.2 million, or $8.83 per Boe, for the first quarter of 2014, compared to $15.9 million, or $9.52 per Boe, for the first quarter of 2013, representing a 7% decrease on a per Boe basis. Lease operating expense for the first quarter of 2014 decreased 14% to $3.41 per Boe compared to $3.98 per Boe in the first quarter of 2013.

General and administrative ("G&A") expense was $23.6 million for the first quarter of 2014, up from $15.1 million for the first quarter of 2013. The increase in G&A was attributable to an increase in legal and other professional costs and expenses related to an ongoing lawsuit as well as an increase in payroll and benefits.

Depreciation, depletion and amortization ("DD&A") expense was $46.6 million, or $19.42 per Boe, in the first quarter of 2014, compared to $27.9 million, or $16.79 per Boe, in the first quarter of 2013. The DD&A expense increase in the first quarter of 2014 compared to the first quarter of 2013 was due to higher production volumes and a higher per Boe DD&A rate.

Interest expense for the first quarter of 2014 was $12.8 million, compared to $13.4 million for the first quarter of 2013. The decrease in interest expense was primarily related to having no outstanding balance on the Company's revolving credit facility during the first quarter of 2014.

Operations Update

The Company turned in line 13 gross operated wells in the Wattenberg Field during the first quarter of 2014 and average daily per Boe production increased approximately 2% compared to the fourth quarter of 2013. Additional natural gas processing capacity in the quarter allowed for a higher recovery of NGLs which decreased natural gas sales volumes compared to the fourth quarter of 2013. PDC's average wellhead oil differential in the Wattenberg Field was approximately $13 per barrel for the first quarter of 2014.

In the Utica Shale, the Company saw average daily per Boe production rise 30% in the first quarter of 2014 compared with the fourth quarter of 2013. Production from the Garvin 2H and 3H wells which were turned in line during the quarter, and the Garvin 1H well on the same pad, was restricted due to a mechanical issue on a third-party midstream pipeline. Average wellhead oil differentials were $13 per barrel in the Utica during the first quarter of 2014.

Average daily production from the Marcellus Shale joint venture increased 35% in the first quarter of 2014 compared to the first quarter of 2013, but decreased approximately 10% compared to the fourth quarter of 2013 due to normal declines from ten wells turned in line in 2013. The joint venture finalized drilling and completion operations on four horizontal wells which were in-process at December 31, 2013. Three of the wells were turned in line as of March 31, 2014 and the fourth was turned in line in April 2014.

Oil and Gas Operations Cost, Production and Sales Data

The following table provides the components of production costs for the three months ended March 31, 2014 and 2013:

 

  Three Months Ended
March 31,
  2014 2013
  (in millions, except per Boe data)
Lease operating expenses $ 8.2 $ 6.6
Production taxes 7.6 5.4
Transportation, gathering and processing expenses 2.2 1.6
Overhead and other production expenses 3.2 2.3
Total production costs $ 21.2 $ 15.9
Total production costs per Boe $ 8.83 $ 9.52

The following table provides production from continuing operations by area, as well as the weighted-average sales price, for the three months ended March 31, 2014 and 2013, excluding net settlements on derivatives:

 

  Three Months Ended
  March 31,
  2014 2013 Percent
       
Crude oil (MBbls)      
Wattenberg Field 952.6 650.7 46.4%
Utica Shale 90.3 16.7 *
Appalachia-Marcellus Shale 0.9 (100.0)%
Total 1,042.9 668.3 56.1%
       
Weighted-Average Sales Price $ 86.02 $ 86.96 (1.1)%
       
Natural gas (MMcf)      
Wattenberg Field 3,315.0 2,975.5 11.4%
Utica Shale 429.3 0.3 *
Appalachia-Marcellus Shale 2,134.0 1,574.0 35.6%
Total 5,878.30 4,549.8 29.2%
       
Weighted-Average Sales Price $ 4.56 $ 3.09 47.6%
       
NGLs (MBbls)      
Wattenberg Field 343.9 238.3 44.3%
Utica Shale 35.6 *
Total 379.5 238.3 59.3%
       
Weighted-Average Sales Price $ 35.18 $ 30.48 15.4%
       
Crude oil equivalent (MBoe)      
Wattenberg Field 1,848.9 1,385.0 33.5%
Utica Shale 197.5 16.8 *
Appalachia-Marcellus Shale 355.7 263.2 35.1%
Total 2,402.1 1,665.0 44.3%
       
Weighted-Average Sales Price $ 54.05 $ 47.71 13.3%
       
* Percentage change is not meaningful or equal to or greater than 300%.
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