PDC Energy Announces Entry into the Core Delaware Basin through Transformative Acquisition of Approximately 57,000 Net Acres
OREANDA-NEWS. August 24, 2016. PDC Energy, Inc. (“PDC” or the “Company”) (Nasdaq:PDCE) today announced that it has entered into definitive agreements to acquire two privately held companies managed by Kimmeridge Energy Management Company for approximately \\$1.5 billion, subject to due diligence and certain customary closing conditions. The privately negotiated transaction includes approximately 57,000 net acres in Reeves and Culberson Counties, Texas with an average working interest of approximately 93 percent. Current net production is approximately 7,000 barrels of oil equivalent per day (“Boe/d”) from 21 horizontal wells, with two additional wells in the completion and flowback phase. The transaction is expected to close in the fourth quarter of 2016.
Key Acquisition Highlights
- Approximately \\$1.5 billion privately negotiated acquisition of approximately 57,000 net acres in the Core Delaware Basin with approximately 41,000 net acres in Reeves County and 16,000 net acres in Culberson County.
- Approximately 7,000 Boe/d of net production consisting of approximately 42 percent oil and 65 percent liquids.
- More than 700 gross estimated horizontal drilling locations targeting the Wolfcamp A, B and C zones with significant upside potential through downspacing and additional intervals.
- Approximately 530 million barrels of oil equivalent (“MMBoe”) of preliminary estimated net reserve potential based on combined total of only 4 to 12 wells per section.
- Scalable owned and operated midstream infrastructure including gas gathering systems, pipelines, right-of-ways and five salt water disposal wells.
President and Chief Executive Officer, Bart Brookman commented, “This is truly a remarkable opportunity for PDC, its employees and its shareholders. Through a methodical approach, we were able to execute our stated acquisition strategy and add an extensive inventory of highly-economic drilling locations that complement our already strong portfolio. I am extremely thrilled with the work of our team and am very excited to begin applying our operating expertise to this premier Delaware Basin acreage position.”
Transaction Terms and Financing
Consideration in the transaction includes approximately \\$915 million of cash and approximately 9.4 million shares of PDC Energy common stock privately placed to the sellers and valued at approximately \\$590 million. The Company intends to fund the cash portion of the acquisition through potential equity and debt financings prior to closing. Through committed financing from J.P. Morgan, the Company has secured incremental liquidity, bringing its current liquidity to approximately \\$1.4 billion.
The Company will continue to prioritize its balance sheet strength and is targeting a pro forma debt to EBITDAX of less than 2.5 times.
J.P. Morgan served as the exclusive financial advisor to PDC on the acquisition and sole provider of committed financing. Davis Graham & Stubbs LLP served as legal counsel to PDC. Evercore served as financial advisor and Sidley Austin LLP served as legal counsel to each of the sellers on the acquisition.
2016 Delaware Basin Operating Plan
In the remainder of the year, the Company plans to spud approximately nine horizontal wells – seven of which have 1.5 or 2 mile laterals – and expand certain midstream infrastructure for an expected total capital outlay of approximately \\$55 to \\$65 million. Additionally, the Company is finishing completion operations on two horizontal wells and plans to operate two drilling rigs by year-end 2016.
Lance Lauck, Executive Vice President Corporate Development and Strategy, commented, “This acquisition is a significant step towards executing our vision of becoming a premier mid-cap E&P company. Adding this Delaware position to our Core Wattenberg acreage gives us more than one billion net Boe of liquid-rich reserve potential in two of the top-tier U.S. onshore basins. We are very well positioned to continue providing strong returns and delivering long-term shareholder value. PDC will continue to emphasize the importance of a strong balance sheet while we pursue additional value creation through operational enhancements and inventory expansion.”
Conference Call Information
Please join PDC senior management for an investor call on Wednesday, August 24, 2016 at 11 a.m. Eastern time for a detailed discussion on this transaction. The related slide presentation will be available on PDC’s website at www.pdce.com.
Conference Call and Webcast:
Date/Time: Wednesday, August 24, 2016, 11:00 a.m. ET
Webcast available at: www.pdce.com
Domestic (toll free): 877-312-5520
Conference ID: 69242652
About PDC Energy, Inc.
PDC Energy, Inc. is a domestic independent exploration and production company that produces, develops, acquires and explores for crude oil, natural gas and NGLs with primary operations in the Wattenberg Field in Colorado and in the Utica Shale in southeastern Ohio. The Wattenberg Field operations are focused on the liquid-rich horizontal Niobrara and Codell plays and the Ohio operations are focused in the condensate and wet gas portion of the Utica Shale play. PDC is included in the S&P SmallCap 600 Index and the Russell 2000 Index of Companies.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding PDC's business, financial condition and results of operations. These statements and all other statements other than statements of historical facts included in and incorporated by reference into this press release are "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, plans, believes, seeks, estimates, projects and similar expressions or variations of such words are intended to identify forward-looking statements herein. Such statements include those regarding the Company's future financial and operating results, including the successful closing of the transaction described herein and anticipated closing date; expected benefits of the transaction; development plans for the acquired acreage; 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 release 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 known and unknown 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 risk factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to:
- potential inability to close the transaction described herein in the timeframe expected or at all or to achieve the anticipated benefits of the transaction;
- transaction and other costs incurred in connection with the transaction or unanticipated liabilities assumed as a result of the transaction;
- changes in worldwide production volumes and demand, including economic conditions that might impact demand;
- volatility of commodity prices for crude oil, natural gas and NGLs and the risk of an extended period of depressed prices;
- reductions in the borrowing base under PDC’s revolving credit facility;
- impact of governmental policies and/or regulations, including changes in environmental and other laws, the interpretation and enforcement related to those laws and regulations, liabilities arising thereunder and the costs to comply with those laws and regulations;
- declines in the value of crude oil, natural gas and NGLs properties resulting in impairments;
- changes in estimates of potential reserves;
- inaccuracy of reserve estimates and expected production rates;
- potential for production decline rates from wells being greater than expected;
- timing and extent of success in discovering, acquiring, developing and producing reserves;
- availability of sufficient pipeline, gathering and other transportation facilities and related infrastructure to process and transport the Company’s production and the impact of these facilities and regional capacity on the prices received for its production;
- timing and receipt of necessary regulatory permits;
- risks incidental to the drilling and operation of crude oil and natural gas wells;
- future cash flows, liquidity and financial condition;
- competition within the oil and gas industry;
- availability and cost of capital;
- success in marketing crude oil, natural gas and NGLs;
- effect of crude oil and natural gas derivatives activities;
- impact of environmental events, governmental and other third-party responses to such events, and the Company’s ability to insure adequately against such events;
- cost of pending or future litigation;
- effect that acquisitions may have on capital expenditures;
- ability to retain or attract senior management and key technical employees; and
- success of strategic plans, expectations and objectives for future operations.
Further, PDC urges you to carefully review and consider the cautionary statements made in this press release and the Company's 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 the forward-looking statements, which speak only as of the date hereof. 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.
Reserve potential and other estimates of non-proved reserves include potentially recoverable quantities that are subject to substantially greater risk than proved reserves.