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Ohio Utica Shale

PDC pleased with Utica results, ending Marcellus drilling in 2014

By Bob Downing Published: December 11, 2013

Colorado-based PDC Energy Inc. said in a document released on Wednesday that it is pleased with its Utica shalde results and intends to cease its marcellus shale operations in 2014.

Here is the company's statement:

Denver: PDC Energy Inc. today announced its capital budget and productione stimates for 2014.

 

2014 Capital Budget and Production Guidance

PDC's capital budget for 2014 is approximately $647 million, including $576 million of development capital and $71 million for leasehold acquisitions, exploration and other expenditures. The 2014 capital budget is targeting organic growth within PDC's inventory of high-return, liquid-rich projects in the core Wattenberg Field and Utica Shale.

PDC estimates net production volumes for 2014 will average between 9.5 million and 10 million barrels of oil equivalent ("Boe") and anticipates that its crude oil and natural gas liquids ("NGLs") will increase to approximately 60%. Production guidance includes a reduction in dry gas volumes in 2014 due to the anticipated closing of the sale of its shallow Upper Devonian assets and the suspension of drilling in its Marcellus Shale assets. The Company estimates its 2014 production exit rate to be approximately 33,000 Boe/d.

2014 Wattenberg Field Capital Overview

The Company plans to invest a total of $469 million in the Wattenberg Field in Colorado, beginning 2014 with four horizontal drilling rigs and plans to add a fifth operated horizontal drilling rig in the second quarter of 2014. The Wattenberg budget for 2014 includes spudding 115 gross operated horizontal wells, with 59 horizontal Codell wells and 56 horizontal Niobrara wells. These drilling plans include 19 wells with extended length lateral completions of approximately 7,000'. The Company also plans to reinitiate its vertical well refrac program.

Approximately $100 million of the total Wattenberg capital budget is allocated for non-operated projects including participation in a 26-well per section downspacing test in the Niobrara formation in the northeastern portion of the core Wattenberg Field. Results from the test will target the Niobrara B and Niobrara C benches and could further expand the Company's 3P resource potential in the Field.

2014 Utica Shale Capital Overview

Approximately $162 million is expected to be invested in the Utica Shale in southeast Ohio to spud 18 horizontal wells, including 8 wells in the Company's northern acreage and 10 wells in its southern acreage. A second drilling rig is expected to be deployed in the second half of 2014. The Utica capital budget includes approximately $30 million to acquire additional contiguous leasehold.

2014 PDC Mountaineer JV ("PDCM") Capital Overview

PDC has budgeted approximately $16 million for its 50 percent share of PDCM in the Marcellus Shale to finalize drilling and completion operations on the remaining four horizontal wells and for midstream infrastructure. PDCM recently elected to suspend 2014 drilling in the Marcellus Shale play due to the natural gas price environment.

Operations Update — Wattenberg Field

The remaining eight wells on the Waste Management Section were brought online by November 12, 2013. The Waste Management Section is the Company's 16 horizontal wells per section test. The six Codell wells are tracking above the Company's Codell type curve with an average peak 24-hour rate of 500 Boe/d per well and the ten Niobrara wells completed in the B and C Benches are performing solidly between the Company's Niobrara type curves for the outer and middle core areas, with an average peak 24-hour rate of 560 Boe/d per well. To date, the peak, one-day production rate for the entire 16-well section is approximately 7,600 Boe/d with 88% crude oil. In addition to the Waste Management wells, the Company expects to bring approximately 15 wells online by the end of fourth quarter of 2013 for a strong exit rate from the Field.

Operations Update — Utica Shale

The Company recently turned its eighth, ninth and tenth Utica Shale horizontal wells to sales. One additional well is expected to be turned to sales before year-end 2013. The Company expects gross production from its 11 wells by the end of December 2013 to be approximately 5,200 Boe/d which assumes full ethane recovery with approximately 70% liquids. To optimize ultimate recoveries (EURs) for wells located in the retrograde condensate window, the Company plans to continue maintaining high reservoir pressures by restricting flow rates. Well performance has been very strong on the relatively small chokes with significant casing pressures supporting greater long-term production rates and higher EURs.

The Garvin 1H, the Company's first Utica Shale well in Washington County, Ohio, continues to produce on a restricted choke. Gross production, after approximately thirty days of sales, averaged slightly over 100 barrels of condensate per day and nearly 4 million cubic feet per day of high-BTU gas. The Company is actively drilling two offset wells on the Garvin pad which are expected to be completed in early 2014.

The Neill 1H well, located in northwest Washington County, with a 6,000' lateral and 33 frac stages, has been on flowback for over 30 days and continues to recover condensate, high-BTU natural gas and frac load water. The well is exhibiting different frac load recovery characteristics than prior Utica wells. To date, during the cleanup, 24-hour peak hydrocarbon recovery was approximately 327 Boe/d assuming full ethane recovery. The Company expects production to improve as the frac load is recovered.

Operations Update — Marcellus Shale

At its O.E.S. pad in northeast Taylor County, West Virginia, PDCM recently turned all three wells to sales with a gross combined rate of approximately 18 million cubic feet per day of natural gas. The O.E.S. pad helps de-risk a good portion of PDCM's acreage block in this area. PDCM plans to finish drilling four wells at its Armstrong/Reynolds pad in southwestern Taylor County by early 2014 and expects to have the wells turned to sales early in the second quarter of 2014 following completion operations.

CEO Comments

James Trimble, President and CEO, stated, "We expect strong production growth in the fourth quarter 2013 from our Wattenberg, Utica and Marcellus operations. The fourth rig recently arrived in the Wattenberg Field and we anticipate meaningful production growth from both the Niobrara and Codell formations in 2014. We are excited about participating in the 26-well per section test in Wattenberg that could add significantly to our liquid-rich 3P inventory. Production from this test is expected to begin in the fourth quarter of 2014. In the Utica, we are extremely pleased with early results which support ongoing development in both our northern and southern Utica acreage positions. Our 60% liquids mix forecast for total company production in 2014 further demonstrates our transition from a natural gas focused company to a liquids focused one."

Upcoming Industry Conference Participation

PDC management is currently scheduled to present at the Wells Fargo Conference in New York, New York on Wednesday, December 11, 2013, at 1:45pm ET, and at the Capital One SouthCoast 8th Annual Energy Conference in New Orleans, Louisiana on Friday, December 13, 2013, at 9:00am CT. Please see PDC's website at www.pdce.com for full details. The related slide presentations are expected to be available on the Company's website immediately prior to the events.

About PDC Energy, Inc.

PDC Energy is a domestic independent energy company engaged in the exploration, development and production of crude oil, NGLs and natural gas. Its operations are focused primarily in the liquid-rich Wattenberg Field of Colorado, including the horizontal Niobrara and Codell plays, the Utica Shale in Ohio and the Marcellus Shale in West Virginia. PDC is included in the S&P SmallCap 600 Index and the Russell 2000 Index of Companies.

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Ohio Department of Natural Resources' Division of Oil and Gas Resources Management State agency Web site.

ODNR Division of Oil and Gas Resources Management. State drilling permits. List is updated weekly.

ODNR Division of Geological Survey.

Ohio Environmental Protection Agency.

Ohio State University Extension.

Ohio Farm Bureau.

Ohio Oil and Gas Association, a Granville-based group that represents 1,500 Ohio energy-related companies.

Ohio Oil & Gas Energy Education Program.

Energy In Depth, a trade group.

Marcellus and Utica Shale Resource Center by Ohio law firm Bricker & Eckler.

Utica Shale, a compilation of Utica shale activities.

Landman Report Card, a site that looks at companies involved in gas and oil leases.FracFocus, a compilation of chemicals used in fracking individual wells as reported voluntarily by some drillers.

Chesapeake Energy Corp,the Oklahoma-based firm is the No. 1 driller in Ohio.

Rig Count Interactive Map by Baker Hughes, an energy services company.

Shale Sheet Fracking, a Youngstown Vindicator blog.

National Geographic's The Great Shale Rush.

The Ohio Environmental Council, a statewide eco-group based in Columbus.

Buckeye Forest Council.

Earthjustice, a national eco-group.

Stop Fracking Ohio.

People's Oil and Gas Collaborative-Ohio, a grass-roots group in Northeast Ohio.

Concerned Citizens of Medina County, a grass-roots group.

No Frack Ohio, a Columbus-based grass-roots group.

Fracking: Gas Drilling's Environmental Threat by ProPublica, an online journalism site.

Penn State Marcellus Center.

Pipeline, blog from Pittsburgh Post-Gazette on Marcellus shale drilling.

Allegheny Front, environmental public radio for Western Pennsylvania.