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Colorado’s Civitas, PDC Energy Expect to Maintain Strong Natural Gas, Oil Production Levels
Despite inflationary pressures, Denver-based Civitas Resources Inc. and PDC Energy Inc. expect continued strong oil and natural gas production levels through 2022 as each capitalizes on acquisitions and strong demand.
Civitas Resources Inc., the largest producer in the Denver-Julesburg (DJ) Basin, on average produced 175,223 boe/d — 46% oil, 30% natural gas and 24% natural gas liquids (NGL) in 2Q2022 — up four-fold year/year.
“We beat our internal total production targets and came in under” the company’s capital expenditure (capex) estimate, “and that’s in the face of continuing inflationary pressure,” Civitas CEO Christopher Doyle said on the second-quarter earnings call earlier this month.
“We are seeing the benefits of 18 months of large-scale DJ Basin-focused M&A allowing us to deliver better-than-expected volumes, manage industry-wide cost inflation, and generate significant free cash flow,” he added.
Civitas formed through a series of mergers. In 2021, it rolled up DJ rivals Crestone Peak Resources, Extraction Oil & Gas Inc. and HighPoint Resources Corp. Earlier this year, it purchased Bison Oil & Gas II LLC.
More DJ deals may lie ahead. “We’re in continuous dialogue with multiple folks within the basin,” Doyle said.
Looking ahead, he said production was likely to moderate but at strong levels.
Meanwhile, Civitas said net crude oil, natural gas, and NGL revenue for the second quarter increased to $1.2 billion from $817.8 million the prior quarter, driven by higher realized prices and increased sales volumes. Crude accounted for 68% of total revenue for the second quarter.
Capital expenditures were $238.6 million for the second quarter. The company drilled 40 gross operated wells, and it completed and turned to sales 27 gross operated wells.
Civitas posted net income of $468.8 million ($5.52/share) for 2Q2022, swinging year/year from a $25.3 million loss (minus 83 cents).
PDC Forges Ahead
PDC Energy reported production of 235,000 boe/d (75,000 b/d of oil). Total production rose 19% from the prior quarter, driven in large part by its acquisition of Great Western Petroleum LLC.
PDC in May acquired Great Western, a privately held operator focused on Colorado’s Wattenberg field, in a $1.3 billion cash-and-stock deal. It expects to continue to build on the deal and maintain output momentum.
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The company also said it extended its multi-year DJ Basin permit inventory in the quarter with approval of its Kenosha Oil and Gas Development Plan (OGDP) and its Broe OGDP permits, accounting for 99 new wells.
“The company has made tremendous progress obtaining permits in Colorado,” CEO Bart Brookman said on the company’s earning call this month. “I believe our regulatory team has actually cracked the code.”
The company’s Wattenberg team’s schedule is now “mapped for the next four years.”
The outlook for PDC is “incredibly strong. Our capital programs are on track, drilling projects are well mapped for the next several years, delivering substantial returns for our investors,” Brookman added. “Great Western should be fully integrated by mid-third quarter.”
For the second half of 2022, PDC expects total production to be in a range of 245,000-255,000 boe/d (80,000-84,000 b/d oil). Capital investments in crude and natural gas properties are expected to be between $515 million and $565 million.
The company expects full-year 2022 production to range between 230,000 to 240,000 boe/d (73,000-77,000 b/d oil).
Full-year 2022 capital investments in crude and natural gas properties are expected to be between $1.025 billion and $1.075 billion.
PDC reported net income of $662 million ($6.83/share) for 2Q2022. That marked a reversal from a net loss of $87.0 million (minus 88 cents) a year earlier.
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