PDC Energy Inc. was able to shake-off the effects of a severe wet season in Colorado during the second quarter, where its assets in the Denver-Julesburg Basin helped the company set a series of internal records that already have it looking ahead to next year.
Fewer drilling days, efficient completions and better-than-expected results from the company's extended-reach laterals in its Wattenberg Field of Colorado and its wells in Ohio's Utica Shale have it accelerating its drilling and completion schedule and increasing full-year guidance.
The company produced 37,001 boe/d during the second quarter, up 46% from the 25,366 boe/d it produced in the year-ago period and up 16% from the 32,162 boe/d it produced in 1Q2015. Most of the second quarter production came from the Wattenberg, where the company produced 33,716 boe/d, or 15% more than it produced from the field in the previous quarter.
Crude oil production, meanwhile, was up 47% year-over-year to 17,378 b/d, mainly on the increase in Wattenberg drilling.
"This dramatic increase in drilling efficiencies has enabled us to continue with our strong growth heading into 2016, while reducing our Wattenberg rig count to four rigs in the fourth quarter of 2015," said CEO Bart Brookman. "This will result in approximately 140 wells drilled in 2016, continued production growth over 35% next year and continued growth in the cash flow of the company."
In addition to the company's record quarterly production, it also reached a milestone by spudding 43 wells and turning in-line 44 wells during the period. PDC increased its full-year guidance from the previously announced 13.5-14.5 million boe to 14.7-15 million boe. Combined with its work in the first and second quarters, the company said it would drill 155 wells and turn 125 of them to sales by the end of the year.
Senior Vice President of Operations Scott Reasoner said the second quarter brought with it a severely wet spring, which "resulted in a lot of mud." That forced the company to deal with vertical well shut-ins, completion delays and logistical challenges. CFO Gysle Shellum added that without those impediments, quarterly production would have likely been more than 240,000 boe higher.
In Ohio's Utica Shale, where the company has been less focused in favor of wetter production from the Wattenberg, the company brought online the four-well Cole pad in Guernsey County (see Shale Daily, Feb. 20; Dec. 10, 2014). Along with the recently completed Dynamite pad there, Utica production increased 11% from the first quarter to 3,285 boe/d. Costs in the Wattenberg are also substantially lower, with PDC’s wells ranging from $3.1-4.1 million each, depending on lateral length.
"We are done for the year in the Utica, but the results of both the Cole and Dynamite pads have really increased our confidence in the play, and we are excited to get back to work when the time is right," Reasoner said.
PDC still felt the effects of low commodity prices, however. Year-over-year revenue fell to $60 million from $101.3 million. Excluding hedges, PDC's average sale price for the second quarter was $28.79/boe, up slightly from $25.60/boe in 1Q2015, but down significantly from $56.76/boe in the year-ago period. It did realize a hedge gain of $44.1 million during the quarter, though.
Senior Vice President of Corporate Development Lance Lauck said the company anticipates turning 160-165 wells to sales next year, counting backlogged wells it plans to carry into the year. Currently, PDC said it has 4.1 million bbl of oil hedged at an average floor price of $84.99 and 29.8 Bcf of natural gas hedged at $3.71/MMBtu for 2016.
The company reported a net loss of $46.9 million (minus $1.17/share), compared to a loss of $28.2 million (minus 79 cents/share) in the year-ago period and net income of $17.1 million (46 cents/share) in 1Q2015.