PDC Energy Inc. will continue its focus on the Wattenberg formation heading into next year, devoting most of its 2016 capital budget to exploration and production (E&P) activity in the Colorado play, the company said Monday.

The Denver-based E&P said it plans to spend $450-500 million in 2016, with spending likely to be front-loaded for the year as it completes wells spud in 2015. The 2016 budget represents a reduction from the $557 million PDC budgeted for this year (see Shale Daily, Dec. 10, 2014). The company said it plans to spend around $440 million on a four-rig program in the Wattenberg, having dropped from five rigs last month.

PDC said it plans to spud 135 wells and turn-in-line 160 wells in the Wattenberg in 2016, adding that reduced drill times from spud-to-spud have led to a 25% increase in lateral feet drilled per rig-year. The E&P said it plans to drill a mix of standard reach lateral, mid-length lateral and extended reach lateral wells in 2016, at average costs of $2.9 million, $3.9 million and $5 million per well, respectively.

PDC said projected well costs and production guidance reflect an associated uplift of up to 15% from the use of plug-and-perf technology.

As for its Utica Shale acreage, PDC said it will spend $34 million in early 2016 to drill, complete and turn-in-line five wells.

PDC has set its 2016 production guidance at 20-22 million boe (54,650-60,100 boe/d), a 35-40% increase over this year. The company projects most of its production growth to occur in 2Q2016 and 3Q2016, with a production mix of 42% oil, 20% natural gas liquids and 38% natural gas.

PDC said 62% of its planned 2016 natural gas production volume is hedged at close to $3.65/Mcf, with nearly 50% of its oil volumes hedged at around $85/bbl.

Analyst reactions were generally positive following the announcement of PDC’s 2016 guidance.

Topeka Capital Markets analyst Gabriele Sorbara said PDC’s 13% reduction in its 2016 budget is “less than we expect to see from peers at current strip prices given the company’s strong asset base and hedge book.”

Sorbara said the company may have also been “conservative” in estimating the “potential upside” from using plug-and-perforated well completions.