PDC Energy (PDCE)
Q4 2012 Earnings Call
February 27, 2013 11:00 am ET
Executives
James M. Trimble - Chief Executive Officer, President, Director and Member of Planning & Finance Committee
Gysle R. Shellum - Chief Financial Officer
Barton R. Brookman - Senior Vice President of Exploration & Production
Lance A. Lauck - Senior Vice President of Corporate Development
Analysts
John Malone - Global Hunter Securities, LLC, Research Division
Ryan Oatman - SunTrust Robinson Humphrey, Inc., Research Division
Michael S. Scialla - Stifel, Nicolaus & Co., Inc., Research Division
Irene O. Haas - Wunderlich Securities Inc., Research Division
Welles W. Fitzpatrick - Johnson Rice & Company, L.L.C., Research Division
David R. Tameron - Wells Fargo Securities, LLC, Research Division
Joseph D. Allman - JP Morgan Chase & Co, Research Division
Adam R. Michael - Miller Tabak + Co., LLC, Research Division
David E. Beard - Iberia Capital Partners, Research Division
Jack N. Aydin - KeyBanc Capital Markets Inc., Research Division
Brian L. Kuzma - Weiss Multi-Strategy Advisers, LLC
Presentation
Operator
Greetings, and welcome to the PDC Energy 2012 Fourth Quarter and Year End Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.
On the call today is Mr. James Trimble, Chief Executive Officer and President of PDC Energy. Joining Mr. Trimble on the call is Mr. Gysle Shellum, Chief Financial Officer; Mr. Barton Brookman, Senior Vice President, Exploration and Development; and Mr. Lance Lauck, Senior Vice President, Corporate Development.
It is now my pleasure to introduce your host, Mr. James Trimble. Mr. Trimble, you may now begin.
James M. Trimble
Thank you. And good morning, and thank you for joining us today to discuss PDC's fourth quarter and year end 2012 results.
Before I begin, let me draw your attention to our Safe Harbor language at the beginning of our presentation which will cover any forward-looking statements made today during our presentation.
I will discuss some highlights for the quarter followed by Gysle on the financials, and then Bart on operations. Both will provide additional detail.
Overall, the fourth quarter and full year for 2012 was an exciting and excellent period for PDC. Although we realized a net loss of $126 million or $4.17 per diluted share, or $131 million for the year, the losses were primarily a result of 2012 commodity pricing and impairments related to the previously announced expected asset sale in the Piceance Basin, plus the extinguishment of debt related to the early redemption of our 12% Senior Notes in the fourth quarter. Gysle will expand on this shortly.
Net cash flow from operations increased 4% to $174 million for 2012 compared to $167 million for 2011.
We continue to have a strong operational execution in the fourth quarter. Total production was 13 Bcf, an increase of 2% over fourth quarter '11 and 8% over the third quarter of '12. Growth was driven by all 3 core operating areas. For the full year, the company produced 49.6 Bcfe from continuing operations as compared to 45 Bcfe in 2011, a 10% increase. We also decreased lease operating expense on a per Mcf basis for the full year of 2012. In keeping with our stated goal to increase oil and NGL production percentages, liquid production increased to 36% in the quarter with Wattenberg production accounting for 99% of the crude oil and NGLs. This compares to a ratio of 33% liquids in the third quarter, 2012.
Total reserves increased 14% to approximately 1.2 Tcfe at 12/31, 48% liquids with a PV10 of $1.7 million. And 3P reserves increased to over 3.6 Tcfe for the company, a 70% increase over 2011.
In the Wattenberg Field, we expensed continued success with the horizontal Niobrara drilling program and narrow our experiencing success with the horizontal Codell wells and downspacing initiatives. Bart will discuss the activity in the Wattenberg in more detail shortly.
In the second -- on the fourth quarter -- no, in the second quarter of 2012, we acquired over 30,000 additional acreage and related production in the core Wattenberg Field. In 2012, we completed the acquisition of approximately 45,000 net acres in the Utica play in Southeast Ohio for approximately $2,000 per acre. This is an excellent entry point from a calls per acre standpoint compared to recent transactions. We believe the Utica play has the potential to be a world-class shale development, and Bart will discuss further and give some insights into our recent well tests in the Utica, which we announced this morning.
At present, we have 4 rigs drilling all horizontal wells, 2 in the Niobrara play, 1 in the Utica and 1 in the Marcellus. We continue to focus on maintaining a strong balance sheet and have announced several initiatives over the last year that will fund a 2013 development program.
The company announced the divestiture of our Permian Basin position for a total of $189 million in the first quarter of 2012. The company closed an equity offering in May for 6.5 million shares or about $165 million. In October, we completed a private placement of $500 million of 7 3/4% senior notes due in 2022. As part of our semiannual redetermination process and adjusting for the high-yield placement, the revolving credit facility with our bank was increased to $450 million. We exited the year with $399 million of available liquidity on a consolidated basis.
And most recently, we announced the sale of a non-core Colorado natural gas assets for $200 million.
So to summarize, PDC had an excellent year in 2012, both financially and operationally. We continue to focus on adding value for our shareholders and expect to be in an excellent position to execute our 2013 capital program and business plan, focusing on 3 high-quality horizontal plays.
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