Shale Daily / NGI All News Access

'Depressed' Gas Prices Force PDC to Suspend Marcellus Drilling

PDC Mountaineer (PDCM), a joint venture (JV) of Petroleum Development Corp. (PDC) and Lime Rock Partners V LP, will temporarily suspend drilling in the Marcellus Shale "due to the current depressed natural gas price environment," according to Denver-based PDC.

The JV is drilling its third horizontal Marcellus well in West Virginia and plans to drill another well prior to suspending drilling operations. It also plans to proceed with the completion of seven wells over the next several months, including three wells that were drilled last year, PDC said.

Despite the temporary suspension of drilling, PDC remains "very pleased" with results of 5-7 Bcf/well in its West Virginia Marcellus program, according to CEO James Trimble.

"Substantially all of our Marcellus acreage position is held by production, which provides us the flexibility to wait for improved gas pricing before recommencing our drilling program," Trimble said.

The independent plans to reallocate the $12 million PDCM equity contribution portion of its capital budget to liquid-rich projects in the Wattenberg Field. PDC's previously announced $284 million 2012 capital budget remains unchanged, and PDC reconfirmed its 2012 production guidance of 53 Bcfe.

About $100 million of the capital budget will go toward miscellaneous projects, "and almost all of that is going to be spent in the Utica getting acreage firmed up and getting a couple more wells drilled and tested," said Barton Brookman, senior vice president for exploration and production.

PDC also said that it has closed on the sale of its remaining Permian Basin assets to Concho Resources Inc. for approximately $184.4 million (see Shale Daily, Dec. 27, 2011). The deal, which was announced in December, followed PDC's sale of primarily noncore Permian assets for $13.3 million and was to have helped clear the way for PDC to focus on the Wattenberg Field in Colorado, the Marcellus Shale in West Virginia and the Utica Shale in Ohio. Proceeds from the sale will be used to reduce outstanding borrowings on the company's revolving credit facility and provide liquidity to fund its 2012 capital budget, PDC said.

In September PDCM, a joint venture of PDC and Lime Rock Partners V LP, agreed to pay $152.5 million to National Grid plc for Seneca-Upshur LLC, including the rights to an estimated 90,000 net acres in the Marcellus Shale in north central West Virginia (see Shale Daily, Sept. 29). PDCM last year acquired an estimated 30,000 acres in the prospective Utica Shale, primarily in Noble, Monroe, Washington, Morgan and Guernsey counties in southeastern Ohio.

PDC on Thursday reported a net loss of $8 million (minus 35 cents/share) in 4Q2011, compared with a net loss of $18 million (86 cents) in 4Q2010. Losses in both 4Q2011 and in full year 2011 ($13 million, or minus 56 cents/share, compared with full year 2010 income of $6 million, or 31 cents/share) were impacted by an after-tax impairment charge of $14 million related to its Northeast Colorado proved natural gas properties.

4Q2011 production from continuing operations increased 36% to 12.8 Bcfe, compared with 9.4 Bcfe in 4Q2010. Natural gas, natural gas liquids and crude oil sales revenues from the PDC's continuing operations for 4Q2011 were up 52% to $80 million, compared with $53 million for 4Q2010.

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