Petroleum Development Corporation (dba PDC Energy) ("PDC," or the
"Company") (Nasdaq:PETD) today reported its first quarter 2012
operating and financial results.
First Quarter 2012 Highlights
- Net income attributable to shareholders for the quarter ended
March 31, 2012 was $15.8 million, or $0.66 per diluted share,
compared to a net loss of $19.9 million, or $0.85 per diluted
share, in the first quarter of 2011. Adjusted net income
attributable to shareholders, a non-GAAP financial measure defined
below, was $14.9 million for the quarter ended March 31, 2012,
compared to an adjusted net loss of $2.7 million for the same 2011
period.
- Net income attributable to shareholders and adjusted net income
attributable to shareholders, for the quarter ended March 31, 2012,
include an after-tax gain of $12.7 million, as a result of the
divestiture on February 28, 2012 of the Company's Permian Basin
assets.
- Adjusted cash flows from operations, a non-GAAP financial
measure defined below, increased 90% to $49.5 million for the first
quarter of 2012, compared to $26.1 million in the first quarter
2011.
- Net production from continuing operations increased 25% to 13.1
billion cubic feet equivalent ("Bcfe") in the first quarter of
2012, compared to 10.5 Bcfe in the first quarter of 2011.
- Crude oil production from continuing operations for the first
quarter of 2012 increased 73% over the first quarter of 2011, and
natural gas liquids ("NGLs") production from continuing operations
for the first quarter of 2012 increased 54% over the same 2011
period.
- During the first quarter of 2012, the Company sold its
remaining Permian Basin assets for $184.4 million. Proceeds from
the sale were used to reduce outstanding borrowings under the
Company's revolving credit facility.
- The Company's available liquidity at March 31, 2012 was $308
million. On May 4, 2012, as a result of the semi-annual
redetermination by PDC's bank group, the Company's borrowing base
under its revolving credit facility was increased by $25 million to
$425 million.
James Trimble, President and Chief Executive Officer, stated,
"We experienced an excellent first quarter from both an operational
and financial standpoint. Net production exceeded our expectations
due to solid operational execution and warmer weather in the
western region. We continued to increase our percentage of liquids
production as oil and natural gas liquids increased to 36% of our
total net production in the quarter compared to 27% for the 2011
first quarter. We also strengthened our balance sheet and created
liquidity to fund our 2012 capital budget with the proceeds from
the sale of our remaining Permian Basin assets and the $25 million
increase in our borrowing base under our revolving credit
facility."
Financial Results
Total revenues for the first quarter of 2012 increased 93% to
$100 million, compared to $52 million for the first quarter of
2011. Natural gas, NGL and crude oil sales revenues increased 28%
to $75.3 million for the first quarter of 2012, from $58.8 million
for the same 2011 period. The average sales price of natural gas,
NGLs and crude oil in the first quarter of 2012, including realized
gains and losses on derivatives, increased 9% to $6.52 per thousand
cubic feet equivalent ("Mcfe") compared to $5.97 per Mcfe in the
first quarter of 2011.
The average sales price for natural gas, NGLs and crude oil,
excluding realized gains and losses on derivatives, for the first
quarter of 2012 was $5.76 per Mcfe, compared to $5.61 per Mcfe for
the same quarter of 2011.
Commodity price risk management activities resulted in a gain of
$11.5 million for the first quarter of 2012. The gain was comprised
of a $9.9 million realized gain and a $1.6 million unrealized gain.
For the first quarter of 2011, commodity price risk management
resulted in a loss of $23.9 million, which was comprised of a $3.8
million realized gain and a $27.7 million unrealized loss.
Production costs, which include lease operating expenses,
production taxes, overhead, and other production expenses, were
$19.2 million, or $1.47 per Mcfe for the first quarter of 2012,
compared to $18.5 million, or $1.76 per Mcfe for the first quarter
of 2011. Lease operating expense ("LOE") for the first quarter of
2012 increased slightly to $11.5 million, compared to $11.1 million
in the first quarter of 2011. The increase was primarily the result
of the 25% increase in production offset in part by a decrease in
saltwater disposal and water hauling expenses following the
completion of a saltwater disposal facility in the Piceance Basin.
On a per Mcfe basis, LOE decreased 17% to $0.88. Production taxes,
which fluctuate with natural gas, NGL and crude oil revenues,
increased slightly to $5.0 million for the first quarter of 2012,
compared to $4.1 million for the same 2011 period due to an
increase in production volumes. Overhead and other production
expenses decreased slightly to $2.7 million for the first quarter
2012, compared to $3.3 million for the first quarter of 2011.
Exploration expense increased from $1.7 million in the first
quarter of 2011 to $2.1 million in the first quarter of 2012. The
slight increase was related to activity in the eastern operating
area during the first quarter of 2012.
General and administrative expenses increased to $14.7 million
in the first quarter of 2012, compared to $13.9 million in the same
2011 period. The slight increase was primarily due to increased
payroll and employee benefits of $1.9 million and increased
transaction and legal costs of $0.7 million, partially offset by a
$1.6 million charge in 2011 related to the Company's West Virginia
royalty lawsuit settlement agreement.
Depreciation, depletion and amortization ("DD&A") expense
related to natural gas and crude oil properties for the first
quarter of 2012 increased 30% to $38.0 million, or $2.90 per Mcfe,
compared to $29.3 million, or $2.79 per Mcfe, in the first quarter
2011. The increase was driven primarily by the increase in
production volumes in the first quarter of 2012. Total DD&A
expense for the first quarter of 2012 was $39.8 million compared to
$31.0 million for the first quarter of 2011.
Interest expense increased $1.4 million to $10.4 million in the
first quarter of 2012, from $9.1 million in the same 2011 period.
The increase was primarily due to higher average outstanding
balances on the Company's revolving credit facility during the
first quarter of 2012.
Drilling Activity
As of March 31, 2012, a total of 10.5 net wells were in process
and waiting to be completed and/or for pipeline connection.
During the first quarter of 2012, PDC continued to focus its
drilling activity in the liquid-rich Wattenberg Field in Colorado.
The Company drilled six horizontal wells in the core Wattenberg
Field, of which three were completed and turned in line as of March
31, 2012. PDC shifted its activities in the Wattenberg Field from
drilling a combination of both vertical and horizontal wells to
drilling horizontal wells which has resulted in significantly fewer
wells being drilled in the first quarter of 2012. Horizontal wells
require greater capital investment, however, provide greater
estimated ultimate recoveries (EURs) and economic returns. The
Company plans to continue drilling horizontal wells throughout
2012. PDC also executed 59 refrac/recompletion projects on 31 wells
during the first quarter of 2012.
The following table provides production by area of operation, as
well as the weighted average sales price for the quarters ended
March 31, 2012 and 2011, excluding realized derivative gains or
losses:
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2012 |
2011 |
Percent |
|
|
|
|
Natural gas (MMcf) |
|
|
|
Western |
6,880.2 |
6,787.5 |
1.4% |
Eastern |
1,485.5 |
866.9 |
71.4% |
Other |
8.4 |
11.8 |
(28.8)% |
Total |
8,374.1 |
7,666.2 |
9.2% |
|
|
|
|
Weighted Average Sales Price |
$ 2.09 |
$ 3.06 |
(31.7)% |
|
|
|
|
Crude oil (MBbls) |
|
|
|
Western |
552.8 |
320.0 |
72.8% |
Eastern |
2.4 |
1.1 |
118.2% |
Other |
— |
0.1 |
(100.0)% |
Total |
555.2 |
321.2 |
72.9% |
|
|
|
|
Weighted Average Sales Price |
$ 92.61 |
$ 89.62 |
3.3% |
|
|
|
|
NGLs (MBbls) |
|
|
|
Western |
227.2 |
147.5 |
54.0% |
Other |
1.6 |
1.3 |
23.1% |
Total |
228.8 |
148.8 |
53.8% |
|
|
|
|
Weighted Average Sales Price |
$ 28.12 |
$ 44.32 |
(36.6)% |
|
|
|
|
Natural gas equivalent (MMcfe) |
|
|
|
Western |
11,559.0 |
9,592.0 |
20.5% |
Eastern |
1,499.8 |
873.7 |
71.7% |
Other |
19.0 |
20.2 |
(5.9)% |
Total |
13,077.8 |
10,485.9 |
24.7% |
|
|
|
|
Weighted Average Sales Price |
$ 5.76 |
$ 5.61 |
2.7% |
|
|
|
|
Commodity Price Risk Management Activities
The Company uses various derivative instruments to manage
fluctuations in natural gas and crude oil prices. PDC has in place
a series of floors, collars, fixed price and basis swaps on a
portion of its natural gas, NGL, and crude oil production. A
complete listing of the Company's derivative positions as of March
31, 2012 is included in the Company's Form 10-Q, available at the
Company's website at www.petd.com.
Non-GAAP Financial Measures
PDC customarily refers to "adjusted cash flow from operations",
"adjusted net income (loss) attributable to shareholders", and
"adjusted EBITDA", each of which are non-GAAP financial measures.
Adjusted cash flow from operations is the cash flow earned or
incurred from operating activities without regard to the collection
or payment of associated receivables or payables. Adjusted net
income (loss) attributable to shareholders is net income (loss)
excluding the after tax impact of unrealized gains or losses from
the change in the mark-to-market value of the Company's derivatives
during the period. Adjusted EBITDA is net income (loss) plus
unrealized derivative loss, interest expense, net of interest
income, income taxes, impairment of natural gas and crude oil
properties and depreciation, depletion and amortization for the
period minus unrealized derivative gains. The Company believes it
is important to consider adjusted cash flow from operations,
adjusted net income (loss) attributable to shareholders and
adjusted EBITDA separately, as the Company believes it can often be
a better way to discuss changes in operating trends in its business
caused by changes in production, prices, operating costs, and
related operational factors, without regard to fluctuations in
future commodity prices and without regard to whether the earned or
incurred item was collected or paid during that year. The Company
also uses these measures because the collection of its receivables
or payment of its obligations and the change in fair market value
of derivatives has not been a significant issue for the Company's
business, but merely a timing issue from one period to the next,
with fluctuations generally caused by considerable changes in
commodity prices. Adjusted cash flow from operations, adjusted net
income (loss) attributable to shareholders, and adjusted EBITDA are
not measures of financial performance under U.S. GAAP and should be
considered in addition to, not as a substitute for, cash flows from
operations, investing, or financing activities, nor as a liquidity
measure or indicator of cash flows reported in accordance with U.S.
GAAP.
The following tables provide the calculation of adjusted cash
flow from operations, adjusted net income (loss) attributable to
shareholders, and adjusted EBITDA, non-GAAP measures, from its
nearest U.S. GAAP measure (in millions, except per share data):
|
|
|
Adjusted Cash Flow from
Operations |
|
Three Months Ended March
31, |
|
2012 |
2011 |
Adjusted cash flow from operations: |
|
|
Net cash provided by operating
activities |
$ 44.3 |
$ 15.5 |
Changes in assets and liabilities |
5.2 |
10.6 |
Adjusted cash flow from
operations |
$ 49.5 |
$ 26.1 |
|
|
|
|
|
|
Adjusted Net Income
(Loss) Attributable to Shareholders |
|
Three Months Ended |
|
March 31, |
|
2012 |
2011 |
Adjusted net income (loss) attributable to
shareholders: |
|
|
Net income (loss) attributable to
shareholders |
$ 15.8 |
$ (19.9) |
Unrealized (gain) loss on derivatives,
net |
(1.5) |
27.7 |
Tax effect of above adjustments |
0.6 |
(10.5) |
Adjusted net income (loss)
attributable to shareholders |
$ 14.9 |
$ (2.7) |
Weighted average diluted shares
outstanding |
23,889 |
23,428 |
Adjusted diluted earnings (loss) per
share |
$ 0.62 |
$ (0.12) |
|
|
|
|
|
|
Adjusted EBITDA |
|
Three Months Ended |
|
March 31, |
|
2012 |
2011 |
Adjusted EBITDA: |
|
|
Net income (loss) attributable to
shareholders |
$ 15.8 |
$ (19.9) |
Unrealized (gain) loss on derivatives,
net |
(1.5) |
27.7 |
Interest expense, net |
10.4 |
9.0 |
Income tax expense (benefit) |
9.5 |
(12.3) |
Impairment of natural gas and crude oil
properties |
0.7 |
0.5 |
Depreciation, depletion and
amortization |
39.8 |
32.4 |
Adjusted EBITDA |
$ 74.7 |
$ 37.4 |
|
|
|
|
|
|
PETROLEUM DEVELOPMENT
CORPORATION |
(dba PDC
Energy) |
Consolidated Statements
of Operations |
(in thousands except
per share data) |
|
|
|
|
Three Months Ended |
|
March 31, |
|
2012 |
2011 |
|
|
|
Revenues: |
|
|
Natural gas, NGL and crude oil sales |
$ 75,310 |
$ 58,810 |
Sales from natural gas marketing |
11,834 |
15,202 |
Commodity price risk management gain
(loss), net |
11,501 |
(23,882) |
Well operations, pipeline income and
other |
1,701 |
1,843 |
Total revenues |
100,346 |
51,973 |
|
|
|
Costs, expenses and other: |
|
|
Production costs |
19,189 |
18,472 |
Cost of natural gas marketing |
11,492 |
14,993 |
Exploration expense |
2,063 |
1,669 |
Impairment of natural gas and crude oil
properties |
653 |
453 |
General and administrative expense |
14,708 |
13,873 |
Depreciation, depletion and
amortization |
39,814 |
30,985 |
Gain on sale of properties and
equipment |
(154) |
— |
Total costs, expenses and
other |
87,765 |
80,445 |
|
|
|
Income (loss) from operations |
12,581 |
(28,472) |
Interest income |
2 |
9 |
Interest expense |
(10,444) |
(9,062) |
Income (loss) from continuing operations
before income taxes |
2,139 |
(37,525) |
Provision (benefit) for income taxes |
759 |
(14,278) |
Income (loss) from continuing operations |
1,380 |
(23,247) |
Income (loss) from discontinued operations,
net of tax |
14,455 |
3,323 |
Net income (loss) |
15,835 |
(19,924) |
|
|
|
Earnings (loss) per share: |
|
|
Basic |
|
|
Income (loss) from
continuing operations |
$ 0.06 |
$ (0.99) |
Income (loss) from
discontinued operations |
0.61 |
0.14 |
Net income
(loss) |
$ 0.67 |
$ (0.85) |
Diluted |
|
|
Income (loss) from
continuing operations |
$ 0.06 |
$ (0.99) |
Income (loss) from
discontinued operations |
0.60 |
0.14 |
Net income
(loss) |
$ 0.66 |
$ (0.85) |
|
|
|
Weighted average common shares
outstanding |
|
|
Basic |
23,609 |
23,428 |
Diluted |
23,889 |
23,428 |
|
|
|
2012 First Quarter Teleconference and Webcast
PDC will host a conference call with investors to discuss 2012
first quarter results. The Company invites you to join James
Trimble, President and Chief Executive Officer; Gysle Shellum,
Chief Financial Officer; Barton Brookman, Senior Vice President –
Exploration and Production; and Lance Lauck, Senior Vice President
– Corporate Development, for a conference call on Thursday, May 10,
2012, for a discussion of its results. The related slide
presentation will also be available on PDC's website at
www.petd.com.
Conference Call and Webcast:
Date/Time: Thursday, May 10, 2012, 11:00 a.m. EDT (9:00
a.m. MDT) Webcast available at:
www.petd.com Domestic (toll free): 877-312-5520
International: 253-237-1142 Conference ID: 72984023
Replay Numbers:
Domestic (toll free): 855-859-2056 International:
404-537-3406 Conference ID: 72984023
The replay of the call will be available through Thursday, May
17, 2012.
About PDC Energy
PDC Energy is an independent energy company engaged in the
development, production and marketing of natural gas, NGLs and
crude oil. Its operations are focused primarily in the
Wattenberg Field of Colorado, including the horizontal Niobrara,
the Marcellus Shale development in West Virginia and the Utica
Shale in Ohio. PDC is included in the S&P SmallCap 600
Index and the Russell 3000 Index of Companies.
NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933
("Securities Act") and Section 21E of the Securities Exchange Act
of 1934 ("Exchange Act") regarding PDC's business, financial
condition, results of operations and prospects. All statements
other than statements of historical facts included in and
incorporated by reference into this report are forward-looking
statements. Words such as expects, anticipates, intends, plans,
believes, seeks, estimates and similar expressions or variations of
such words are intended to identify forward-looking statements
herein, which include statements of estimated natural gas and oil
production and reserves, drilling plans, future cash flows,
anticipated liquidity, anticipated capital expenditures and
management's strategies, plans and objectives. However, these are
not the exclusive means of identifying forward-looking statements
herein. Although forward-looking statements contained in this
report reflect the Company's good faith judgment, such statements
can only be based on facts and factors currently known to PDC.
Consequently, forward-looking statements are inherently subject to
risks and uncertainties, including risks and uncertainties
incidental to the exploration for, and the acquisition,
development, production and marketing of natural gas and oil, and
actual outcomes may differ materially from the results and outcomes
discussed in the forward-looking statements. Important factors that
could cause actual results to differ materially from the
forward-looking statements include, but are not limited to:
- changes in production volumes, worldwide demand and commodity
prices for natural gas and oil;
- changes in estimates of proved reserves;
- declines in the values of PDC's natural gas and oil properties
resulting in impairments;
- the timing and extent of the Company's success in discovering,
acquiring, developing and producing natural gas and oil
reserves;
- PDC's ability to acquire leases, drilling rigs, supplies and
services at reasonable prices;
- reductions in the borrowing base under the Company's credit
facility;
- risks incident to the drilling and operation of natural gas and
oil wells;
- future production and development costs;
- the availability of sufficient pipeline and other
transportation facilities to carry PDC's production and the impact
of these facilities on price;
- the effect of existing and future laws, governmental
regulations and the political and economic climate of the United
States of America ("U.S.");
- changes in environmental laws and the regulations and
enforcement related to those laws;
- the identification of and severity of environmental events and
governmental responses to the events;
- the effect of natural gas and oil derivative activities;
- conditions in the capital markets; and
- losses possible from pending or future litigation.
Further, PDC urges you to carefully review and consider the
cautionary statements made in this press release, the Item 1-A Risk
Factors in the 2011 annual report on Form 10-K for the year ended
December 31, 2011, filed with the Securities and Exchange
Commission ("SEC") on March 1, 2011, and other subsequent filings
with the SEC for further information on risks and uncertainties
that could affect the Company's business, financial condition and
results of operations, which are incorporated by this reference as
though fully set forth herein. The Company cautions you not to
place undue reliance on forward-looking statements, which speak
only as of the date made. Other than as required under
the securities laws, PDC undertakes no obligation to update any
forward-looking statements in order to reflect any event or
circumstance occurring after the date of this release or currently
unknown facts or conditions or the occurrence of unanticipated
events. All forward looking statements are qualified in their
entirety by this cautionary statement.
CONTACT: Ron Wirth
Director - Investor Relations
303-860-5830
rwirth@petd.com
Marti Dowling
Investor Relations Manager
303-831-3926
mdowling@petd.com
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