PDC Flies Solo in Utica Development
PDC Energy, Inc. announced it is pursuing development of its Utica Shale position in southeast Ohio independently and is no longer actively seeking a joint venture ("JV") partner to develop the play. The Company received various joint ownership and development proposals from interested potential JV partners in August and early September, 2012 and has determined that the proposals do not meet PDC's value expectations.
PDC believes that developing its approximate 45,000 net acre Utica position on a standalone basis will produce greater long-term value, particularly given the very high initial production rates and high liquids content from recent well results announced by other E&P companies in close proximity to the Company's acreage positions. While the 2013 budget is not finalized, the Company anticipates it will invest approximately $50 million in the Utica next year which is expected to be funded from cash flow and borrowings under its revolving credit facility.
The emerging Utica play is exceeding the Company's expectations in several key areas including initial production rates, liquids mix, the pace of de-risking, and the delineation of the gas condensate window of the play which encompasses a substantial portion of PDC's leasehold position. One of the Company's initial criteria for establishing a Utica JV was to accelerate the de-risking of PDC's leasehold position, which has been substantially achieved by PDC and other operators' activity in the area. Furthermore, PDC has development flexibility for its estimated 200 horizontal locations given that approximately 50 percent of its acreage is held by production and the remaining 50 percent are multi-year primary term leases.
2012 Drilling Activity
PDC has drilled its first two horizontal wells in Guernsey County, Ohio and is very encouraged by drilling, mud log and geological data results. The Company's first horizontal well, the Onega Commissioners #14-25H, is currently being completed. The well will be shut in for an approximate 60-day rest period and is anticipated to be flow tested in November 2012. The Company's second horizontal well, the Detweiler #42-3H, is expected to be completed around year-end 2012 and flow tested in the first quarter of 2013 subsequent to its rest period. A third horizontal well is expected to be spud in the fourth quarter of 2012 in northern Washington County. The well will be the first horizontal well drilled in the Company's southern acreage. First sales from the three horizontal wells are anticipated in the second quarter of 2013.
Utica Development Plan
PDC plans to continue to de-risk and develop its existing 45,000 net acre position, and does not expect to materially increase its leasehold. The Company plans to finalize its mid-stream strategy for gas gathering and processing and complete its marketing arrangements to sell condensate, natural gas and NGLs by year-end 2012. PDC anticipates establishing a district field office in southeast Ohio in the first quarter of 2013. The Company's 2012 Utica capital program is expected to total approximately $95 million for drilling, completion and leasing activity. PDC anticipates a Utica capital budget of approximately $50 million in 2013 to drill, complete and connect four to five horizontal wells in Guernsey, northern Noble and northwest Washington Counties. The 2012 and 2013 drilling programs will test a substantial portion of the Company's leasehold.
James Trimble, President and Chief Executive Officer, stated, "We are extremely pleased with our Utica position and believe it is in the best long-term interest of our shareholders to develop our current position without a joint venture partner. Results from PDC and the industry continue to reinforce our position that the Utica could be one of the top tier economic shale plays in the US onshore. The high liquids mix from initial Utica well results further enhances our corporate strategy to transition towards more liquid-rich assets in our portfolio. We have formulated a Utica development plan and believe we have the financial capacity to execute this plan in 2012 and beyond."
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