PDCE - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and welcome to the PDC Energy Fourth Quarter and Year-End Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time.

As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference call, Mr. Investor Director, Senior Edwards, Relations. Mike

sir. You may begin,

Michael G. Edwards

Good morning, and welcome. everyone,

and Brookman, we CEO; Scott On release Financial and Officer; that our today, slide our we Bart Yesterday Reasoner, Meyers, President afternoon, Officer. Operating posted President; the call press Vice remarks have today. and issued Chief Executive Lance Chief presentation a Scott accompanies Lauck,

which like Investor We presentation are the call press release Relations of to statements also page and our filed I'd our of on XX-K this is our attention your slide website on to that morning. the pdce.com. The forward-looking available presentation. X

will those your numbers over today, attention non-U.S. CEO. With that, GAAP We find get that so call appendix GAAP our Bart? the you'll to of financial and call slides measures. like some the present can I'll turn to presentation to we non-U.S. of I'd started Brookman, reconciliation financial Bart where also a

Barton R. Brookman

welcome, The you, XXXX everyone. execution. operational XXXX, and year as and ongoing solid a ever premier with company Thank assets. Mike, two of enters strong as growth

programs continue growth. pleased our are strength we our on to assembled tremendous teams exceptional as XXXX, and the Delaware emerge we We have Wattenberg and drilling financial production talent value-focused for with and extremely strong expect with

barrels me our XX,XXX oil enhanced and XX% increase from barrels Prairie of capital production oil of a for two Plains, reserves highlights: XX% are to swaps XXX oil our and We one focus In efficiencies. of team tremendous announced and Let approximately XXXX Delaware, and significant line proved two-mile growth, recently potential. in hit providing In per very the instrumental of the a production to and drill million the reserve pleased of operating at in see XXXX Basin. equivalent a in increase Wattenberg, improved to as strong oil of year to exited this opportunity and a These barrels Scott XX.X XXX%. year-end some to times, from momentum contribution XXXX and and areas: replacement Delaware strong moment. cover the the XX% helped increase began areas production a exited year year-end more million detail acquisition XXXX equivalent. we're with blocks. resource equivalent oil We we laterals we lot acreage gained our we as three and acreage Kersey, create Lance operating three will in throughout day, staffed sight

the under with of costs pleased from at held up equivalent; we the company we condition operating and Some key liquidity oil financial the for barrel year-end activities very wrapped up net our Overall, ratio, million; $XXX per under capital was year-end for XXXX: as were leverage ended lifting $X year XX%. of metrics X.X%; just $XXX spend improved cash million; financial XXXX.

update XXXX. me on let everyone Now,

production spend announced That in XX% overall on $XXX capital basis. million oil XX a be previously between to million $XXX of implies barrels and range million. million in growth Production Our expected to equivalent. a is approximately XX Boe December our remains

Scott count expected will a in company midstream Delaware December and for Oil DCP this increase the increase in to In considerably anticipate year. it for the throughout drilling growth be announcement XX% in primarily compared Wattenberg, the have modest However, cover anticipate production to the strong should should and range pace. of company our volumes half in mix we second expansions. crude we but spud grow expect steady with year, XX%. between oil do and due moment. our to we up a slight Delaware, planned will the approximately In growth the we half the XX%, and And first by ramp

oil of We December and approximately day. expect lease our barrel XXX,XXX barrels equivalent, $X per per oil exit operating of expenses to equivalent should remain be rate under

growth Our quality particular, a their is EH&S credit strong efforts to focus facility. and their as us company's combined come. update again to to company's X.X. And Reasoner. improve in most half the With the we XXXX should will revolving for safety. be with oil over operations turn with thank positive drilling you employees our Liquidity expect that, strength drawing flow call all once $XX year-end position expected like be on He year on company In The should to to programs ongoing barely success our leverage over XXXX. for our and I the teams for of the assets, the on like ratio cash years to exit and for barrel, importantly, many continued Scott would PDC closing, operations. this for when value-focused organizational in I'd financial to second

Scott J. Reasoner

Thanks, and Bart, morning, good everyone.

our by things we to worked into thanking third first proud Wattenberg quarter. production just of over But production carried down operating start call our teams. challenges say percent. increases to and XX,XXX Slide barrels to the that quarter is of the annual actually production a per hair gives XX-plus also year the and for together oil well of out. tremendous statistics oil an including day Let very of of without key compared A equivalent few some me throughout I'm very X at XXXX momentum the XXXX. wasn't times. overview

year. XX,XXX Wattenberg Delaware, of the of which expect growth quarter-over-quarter As in six of that Obviously, continue next which see, captured for we quarter barrels but for as said XX% expect us the to Delaware third in have our midstream in we I with quarter. turn-in-lines reiterate main our To Wattenberg the which due to grew in is third quarter, the XX the company engine fully of we fourth to over to the believe challenged day. first brings a the we constraints down you couple quarters equivalent constrained, call, growth oil per on guidance, little what the XX serving for to can months had be from the terms the the

Moving to breakdown X, give for detailed slide capital we year. the a

thanks million in just very below year $XXX came our As quarter, capital to over million. totaling approximately fourth mentioned, of Bart expectations, in efficient total for part $XXX a the

and right-hand you through slide, this of as asset as a with slide we spud continue build provide the gas water million to bit both on the in turn-in-line quarterly each can as our X a management trends plan the for LOE well our Delaware see We $XX right side moving value accelerate related and details On to We into oil to gathering and XXXX infrastructure. and look production our in assets. direction.

of our equivalent per XX,XXX the in barrels the period, XXXX. In compared day deeper fourth to same a over represents of XX% fourth in quarter growth and the terms over oil oil at the has time Digging you outpaced of looking see little also growth can larger compared becoming a it is production, with do more lot This it our LOE of total even the operating production part a obviously basin, more impressive. growing by to the the a to XX%. XX% is expensive trend good bit, Delaware Considering portfolio. quarter

had compared While operations. XXXX to did virtually XXXX, Delaware no per LOE XXXX Boe increase

we come we're more expectations, in on $X. structure. expect XXXX color happy current So, cost give to very to Scott but will our maintain below our

we've this XX to of new the isn't there now. been XX, on we slide some really part at on Wattenberg alleviate nine of the to cover to seeing pressures Plant better much as point continue Moving for months wait to

right can gathering average back You we've line been see on to going pressure fighting. DCP's are what just the on shown The system XXXX.

more XX. It a few profile XXXX fourth once Plant is percent production that But on more for back relatively dotted that next couple for I'd it's operational especially put more development, we online. XXX for accomplish Lucerne since summer ongoing production with minutes some some we has the in shows don't XX,XXX Obviously, a to Plant as in of and to of average really the of flush We've to the improve I'll able the asset to XX, now, in feel expect with had oily than quarters. easier highlighting several of that XX X spring you is here. Plant oil to changed DCP's note the the helped day start expectations XX, and DCP in behind Delaware. you slide quarterly so production spend scheduled terms to necessarily right The XXX-plus at total decreased this the to of which similar us able the we of moves like of activity progress next by a really and expect quarter equivalent confident been Starting over then same XXXX, approximately over drop issue all. Plant the wedge completions consistently behind base, for with in kind production to significant a drilling execution clearly caution off impact XXXX and with some shape but do we've been important our a line operator grow per shown see barrels to making double that of line through. the or the discussions new pressures and first lot pipe pad relief, coming quarters after see pounds

of north to wells and Area. our Eastern in and XX X of Speaking turn-in-line Block focus spud Central of between plan the and XXXX, two we the areas XX in Area acreage our central

the shows XX year clearly really that the In which with of spuds and day. we've Three was increased captured recent improvements sure our the happy result for the three you pretty Starting throughout wells. well the and drilling budget, fit to in step. better We're on here. drilling very get up picked year. in slide have we've improvement our rigs see for operating the the we're the of feel currently of pace, first each XXXX, I'm as many expected XXXX what terms is of led direct original XX% better a from you rigs as with increase our Finding efficiencies throughout strong things we performance purpose specific made the proper

product some well, we finally, improve increased, on move time, of our than lease and which of XX% key best crews we're began consistent initiatives, time fewer areas. understanding fewer and off. having but Most plenty our evidenced to is through surprises. by is a still faster paid geologic more is really our obligation pace. there really drilling has current to two over and early we experiencing importantly, met Second year our focus of room And as average Over the has as

of results terms XXXX. and delivering our continue per throughout with impressive we're very to In productivity are excited happy well, recent performance

our up As in tenures wells longer actually choke see the you our results and of our peers the at left-hand we when slide, back longer stack to side Important very with relative well production basin. production XX-day can looking note, much our time improved operators on pretty the the on graph, wells with aggressively, to periods.

In release terms initial haven't cost our budget time expectations from per in December. our changed well, of the of XXXX

and increase XXXX. expect on service $XX drill on and closely us and that cost inventory between are per Look We any time million pace, offset improvements material DUC well $X lateral as monitor continued will we capital total length million completion and for our to spend, through refinement hopeful the side. depending move

XX, at a we slide Eastern moving our forward. area to focus Block Moving a Area look X, closer key take

XRL our our past, of are oil very for EURs. As oil curves. type this to us above early, million four equivalent showing tracking X.X production area. million have wells quarter, the still our area compared we're Generally to million recent equivalent A barrel B barrels million the expectations our normalizing you've in equivalent speaking, oil of and as very trending million feet, the well Wolfcamp leading and the barrel of results it's are curves between most while impressive, X this the seen XRLs X to of Instead XRL X,XXX curve, X.X cumulative from increase Wolfcamp wells X.X production been

outperforming you wells sample, see, can to-date. average crude. early more note, four XX% As through Of wells all albeit an than are these

is map at which per and C, activity, the planned a Central, turn-in-lines planned gathering XXXX this expect of Wolfcamp focus the activity Grizzly well focused XX A, slide of with about section a other a the area, XX in side North the our be our in of crude Grizzly including our Bear system. XXXX. terms the area testing our look to the pad, wells testing in primary previous installation equivalent two-thirds highlighting oil a format West closer In as similar on right-hand Slide Wolfcamp takes

see thank a teams again the accomplishments not their believe Last, speak. the things Central four starting in production everything XX, You our location year work now. I direction wells Area pad may in from keep year. acquisition-type can to throughout initial this of the time by with that including look additional the XX In with Greenwich hard right flowback expected key for XXXX, to value captured tracking XXXX our we see wide good and and well at to that as updated well also a a footprint above want the operationally pads, approximately do and of some XXXX acreage. a set curve. accomplished all start turn-in-lines moving incredibly We as three-well the we We've to we've multi-well to in we're North few we're off Sunnyside XXXX, XXXX are we right out planned the excited key this starting wells in XXXX. of be unlocking some cover In a quick four on initiatives. turn-in-lines fully slide With

of our Meyers financials I'll and XXXX that, are to for realizing very our look excited really from later on the test focus our throughout in areas as to prolific turn Delaware over acreage. focus, With results call our efficiencies a Delaware continue Scott to two terms program we XXXX hope in detailed this downspacing we analyze guidance. In and year our at

R. Scott Meyers

and Thanks, Scott, good morning.

smooth reminder overview for going of started, last million reference morning, in net more was share $XX extremely night materials for a to per a speaking, the XXXX, a presented This share current for the cost. XXXX this give on we I'll well release extinguishment $XX of adjustment federal or quarter a the metrics of an $X.XX number our couple tax morning. filed you more liquidity debt our ask On income fourth per XX-K this to operational before million fourth for you was getting on standpoint. of our the a quarter and into or large key Before quarter and from noise Net lot hedge quick of a financial compared of touch the loss $X.XX and as our year our color derivatives XXXX. press issued on the profile guidance. changes, and has impact the with the mark-to-market Generally details as the quarter

let's Gas the driven XXXX's has operating cash increase from million and $XXX $XXX sales and the to million and and quarter. compared sales our more which of quarter a about look sequentially. increased fourth XXXX This full XX% from a to Oil activities than So, $XXX and net respectively. XX% for flow quarter or a for jump million to better to growth Oil Gas quarter, fourth at which the represents XX%, year or fourth growth XX%

quarter. as approximately the in in represents slide cash an year XX, to realized full for tax cash was As and million] primarily between on in impacted $XXX cash production our all approximately this EBITDAX operations in The was adjusted increase can quarter comparable activities growth [$XXX the the be the quarterly by increased $XXX similar on the legislation basis. by cash well adjusted that reconciliation a quarter the flow mind previously (XX:XX:XX) a trends periods. detailed periods. non-GAAP production as mentioned, XXXX deferred for metrics and see the the (sic) tax found net both Please Adjusted due fourth two as increase in prices million volumes leading liabilities a of million of in decreased net basin. fourth Appendix. XX% adjusted and to keep tax operating flow of can benefit our by you item, to $XXX The right our flow show the from million graphs quarterly trends the from income On

terms and the In costs, XX, a as for give on production of LOE, bit I'll Bart on have this detail. more but slide is Scott already highlight touched company, a

by the cost our actually XXXX, Although our appears with in compared great testament in is that a done contract our a to to at production Boe a Wattenberg, year-over-year. TGP has glance Wattenberg shows in LOE throughout Boe year. Meanwhile, team Overall, the second the decreased there be managing uptick first you breakdown can than expected. per This per to costs to the is LOE slight be increased job are see in sales, primarily our while due of our the higher the the is line to quarter change change which Delaware lifting have costs to XXXX. basin made

XXXX in Our net to compared margins overall improved XXXX.

geographical. increase is this here shown purely TGP highlighting So,

you'll our XXXX As minute, the Boe in change revenue new recognition standards to TGP due a is adopted. per see we've to expected in

debt look give issued maturity this to our schedule a senior year. X.XX% updated $XXX Moving earlier note on XX, at our we slide including million

As you an in or currently of revolver maturities we have our undrawn will all debt see, later. with XXXX

of forma X Bayswater closing Our approximately million. year-end $XXX acquisition was liquidity XXXX the January for pro the

leverage debt times. year-end Our ratio was X.X

XXXX leverage our our X.X reduce to activity expect We to lead ratio us to times.

timing the on XXXX on we and of of our the to end at expect revenues depending drawn year, revolver. Additionally, the minimally exit received payments

leverage of terms we almost approximately In We've of have do MMBtu. it's seen that differentials $X and our gas per out $XX our important to bit XX% hedges, of we hedged barrel point a production recently, at approximately the and XXXX. crude just expand at on per appendix a XX% XXXX basis for under swaps gas approximately this point place to to with MMBtu. improvements production in expected XX% I'll of XX% for in standpoint continued have approximately more and you a strong in very basis trades. Overall, liquidity expected out $X.XX those at details the from

back in spend to previously time like over and December. from notable guidance few current to guidance I'd XX. a slide going Moving our on released some our changes

production First, and capital.

$XXX ranges consistent first XX had XX drill we've completions. Essentially with our XX timing MMBoe XX to the in a obviously push our thanks that already has half included in pre-released These touched increase ranges of activity production and are few Delaware turn-in-lines and to our that back additional forward, As improvement Wattenberg and looking our offset our spuds expansions, despite XXXX midstream remain changes a handful and able Scott times at ranges earlier, to been in freeze-offs drill which spuds capital the Delaware, Wattenberg. with by December the budget turn-in-lines. to $XXX a of million the in in of December to MMBoe provided on, year million. we've Scott Bart and in few and namely at In led unchanged have schedule, curtailments

equivalent for However, and to for XX% drill and growth a With all paid production. also essentially for budget, wells. Lance now exit XX generation. in the projected XX move purposes, were times, as as December and the in and we're throughout intents – growth the to profile X be XXX,XXX for returns cash equivalent our flow on to rate approximately barrels capital turn-in-lines than of December a is day a the our And year, look will spuds as these and closely in in barrels add XXXX, in detail the XXXX. monitor Block partially our and our we a second, some an results free our able from XXXX production XXX,XXX more in result explains of us placing emphasis XX% prior turn-in-lines able range day a estimated expectation now late-year improvement This of

to for for standards, lowers are our XX% the XX% These realizations per TGP changes to Our of TGP we've increasing XX% to rev but XX% well see NGLs. gas will experienced which as crude, updated Boe exclude below. gas, differentials as rec that realizations do and XX% include the you price natural to impact lately basis XX% for

larger Obviously, higher relatively LOE Boe in Delaware consider a direction. per of a our we cost trending cost portfolio, the shown are and projected with its lifting right the metrics portion Our positive. holding becoming flat overall

expected the the tremendous major commodity the Finally, year. difference one guidance change value our drives this mix from and December is in that

guidance you oil. crude XX% indicated recall, the As

total realized should well crude production well anticipate impacts prices of to our is in we This positive to production. and lead Now, as the increase for to to per results XX% oil as Delaware XX% due Boe our on account margins. per

XX, wrapping up slide first, takeaways, year. a Finally, highlighted on it for few the I've expected key our outspend

less we're to When This With transactions barrel ratio moves expect base half unlocking flow year. the for year of and of This the of X.X approximately by recent $XX that, for outspend XXXX. expect able of improves potentials fully leverage Mcf the XXXX Assuming strength look call highlighted alluded outspend inventory outspend And our to price closer the an second us the the updated cash X.X differentials that it We around updated the for at multiyear from cash our the per end turn and Lance including I outlook. be again, million to our impact in the Lance the and asset minute, $XX.XX XXXX. year. and as a throughout earlier, to $XX positive $X obviously look than considerations moving flow including carry the will first will of shows from gas I'll in the tremendous now by over year gas to to generate. for and our our and to increased returns touch closer million our at creation we to approximately includes the that being deck per momentum a times half the in into on a year. that proceeds of two be

Lance A. Lauck

call, updates provide to we're going XXXX And inventory, Scott. will year-end free today's multiple last we and of cash deliver section outlook currently that of material this corporate our in project status flow XXXX. drilling including transactions, in Thanks, several

Let's month, our XXXX proved begin XX. with this slide we announced year-end Earlier reserves.

highlights. the of some provide Let me key

grew total a last oil over of equivalent, increase million representing about year. XXX proved XX% our barrels First, to reserves

to our equivalent XXXX. million approximately reserve assets, barrels as driven component of reserve Additionally, year-end Delaware. both largest The ratio increases strong all-sources Wattenberg XXX%, XXX by came and Delaware replacement from we of increase in grew posted a of which the nearly very of Basin strong reserve

approximately the significant million in table the million earlier, value several highlighted improvements of barrels performance, unlocking increase of step additions towards Basin are XX another equivalent slide oil demonstrates block at we our our reserve equivalent. in of proved our oil shows Delaware from of XXXX including these approximately our of from XXX bottom seeing assets. reserves year-end and The net proved measured barrels Scott As

our BTAX SEC the XX the over provides by both increased driven value XX% our in year-end year-end by PV-XX gas. XXXX update of mid to and our increase Wattenberg in and as $X.X our improve drilling inventory. Finally, closed to XX% to of NYMEX Both by Side billion reserves that price average more our oil our capital XXXX to trades in XX% XXXX, inventory January extended-reach efficiency and our converting bolt-on acquisition continue XXXX laterals. of and of increase

the feet compared the feet, three-rig One that million in But lateral four for X pace. and footage maintained of of utilized X.X takeaways lateral current drilling of that's a we key gross to good rigs the XXXX. our overall about lateral we million year, after is portion

X,XXX per well as our to average per lateral nearly efficiencies which feet from increased year-end lengths compared demonstrates Wattenberg of Field. to XXXX teams are delivering our continued XXXX, well Our by XX% year-end

Kersey, focused drilling economic three returns program is of of Plains, positions The provides our deliver and our our Prairie. expect currently the field. drilling into where pie locations area a in Our we our core breakout of highest in some Kersey chart to

other to more convert acreage We laterals. continue companies trades inventory of to to consider with our longer

acquisition lateral X-mile reflects converts was date Basin presentation our more closely on as And our to up ongoing program. Delaware which equivalents, our Today's laterals. on based now recall, our inventory. bring inventory me inventory drilling everyone to you X.X-mile Let

on start the me portion graph. waterfall let left the So, of

feet footage First lateral X.X-mile a locations to XXX X.X basis. of inventory on all, our million original approximately of acquisition equivalent converts

primary us of approximately This in million inventory potential highest impaired additional focused inventory, XXX that resulting our XXXX map. total locations, per X.X of oil or the XXX crude drill estimated oilier-focused XXX year-end approximately XX- equivalent rates of upon provides in XX-year in about our activities. range in locations laterals wells, make or locations Basin inventory, our that inventory these may as balance about drilled currently very including equivalent to from defining more additional of the X.X valuation. efficiency the recent then inventory consistent capital the approximate oil a of in on based mix X.X million locations, EURs acreage the or have peer an on companies. test increase highlights with we We Delaware Slide The our We're the are barrels and to several planned XXX return XX depending or development Of developing oil-focused our consolidations. XX% XXX in still identified spacing early a to stages assets locations X.X million exist to about areas downspacing. Spring, lateral of Bone pace. from length. well downspacing our and of from trades provide current other initial of non-contiguous remind offset potential lateral locations or This on based The of inventory feet. highlighted our further may a additional brings intervals, GOR, more I assumptions in locations require or X.X-mile representing want to XXX our inventory XX% feet. our and plans to areas wells XXXX, potential everyone that million During Wolfcamp we're from XX typically an inventory focused to XXX higher contain lateral XXX technical business

Bayswater. all, of First

about million Prairie our was the million into acquisition portion in $XXX previously include plus estimated $XX Boe inventory that final updated The was locations Wattenberg in day. to to adjusted this which core PDC XX XXX acres about acquisition to field. included Bayswater month, earlier DUC acquisition approximately to closed brings northern production our per wells complete X,XXX This of the our are oilier of prior and certain consolidates closing. As Wattenberg, we purchase about Area adjustments The disclosed price gross X,XXX after count. net

of like commitment no Wattenberg the acquisition crude I'd there gathering million committed strengthens Black paid of Gathering Diamond truck part exchange our that reduce Butte increasing and it to pipeline, for were transaction to the where note contract put AMI. the the in fees traffic. PDC changes approximately that oil of A and second key they as transaction. to thereby, benefit is acreage Our to from this volumes extending our Saddle was oil $XX on pipe this now term gathering more

about provides from we day where about update and per Butte cover based a today. Our This $XX input that strong, The Boe $XX build slide outspend, a Gathering we million. and third a is delivering on about X,XXX assumptions divestiture slide modeled growth approximately resulting while sheet $XX quarter on sell XXXX Utica XXXX to of The million currently Diamond in assets capable they XX,XXX for agreement We sustainable cash highlights our where to based our benefit capital-efficient of definitive to Saddle XXXX our strengthening about portfolio contain positive first projecting of net a transaction reduction and strong close. several production the and an transactions that's Utica balance outlook. acres. Black XXXX. flow about the Shale It's anticipate next in are corporate sit two-thirds million. The our signed

with continue at at output. and the corresponding corporate we the project a of XXXX. rigs for compounding Consistent and the three and midpoint three-year midpoint prior just in for XX% Let's fall, three the production about XXXX, look first our some key in growth of the outlook rate growth growth approximately at Wattenberg utilize approximately total Delaware. last XXXX projection assumptions We XX% through with XX% XXXX input to six

XXXX million midpoint estimates XXXX. in and about at outlook of in the at capital Our $XXX spending approximately billion $X midpoint the

$X at portfolio, price flow, in the cash and midpoint team. our scenario that's a is quality that almost about midpoint strength of outputs X of of our projected our Implied the million in NYMEX free we flow cash at leverage focus the upon only as the X.X. about XXXX based a times well demonstrate project of are cash billion projections in XXXX flow and One XXXX a $XX our results, XXXX. key the this represents XXXX our $XXX these metrics and material and of $X.XX ratio of financial We as of financial on believe year-end

drive demonstrates case will be while commitment flexibility XXXX. in projecting build we summarize the to this capital summarize, balance a to material XXXX. company's a exciting final what very flow cash efficiency, This our the So, project to sheet slide

Let me of several initiatives year. key our the for summarize

Boe with X.X. production Projected growth to of in Delaware production million XX in off, to EBITDAX XX% volumes about production to First to our midpoint XXX% oil XX% growth compared of the XXXX. total mix with a at debt year-end XXXX

to over with per first and turn Utica I'll focus X, million, tests for outspend than be we're projected pursuing transactions projected our our cover to that of to And is XX and Q&A. Boe. we Black In employees we than of from proceeds projected it continue also LOE on the Block to Our Wolfcamp their And wells at contributions in less A In closing, outspend. to to Diamond with C operator of margins section, less that, bench. the two-thirds equivalent we're Wolfcamp strong $X are $XX the and per for PDC. the thank want downspacing testing success

Operator

comes from question Welles first with Fitzpatrick SunTrust Our Humphrey. Robinson

Welles Fitzpatrick

Hey. quarter good Good on and congrats morning positive guidance. the and

Barton R. Brookman

Thanks, Welles.

Welles Fitzpatrick

jump stream? the Scott you gas XX% facilities gas function function lower XX% that of entirely TG&P is realizations about, towards or I more back that's hearing that the a to realizations, accounting guided from and in it little to between of what XXXX. these bit is that newer of obviously, little to that right than a talked some Just processing a bit extracting a Am of guide the

R. Scott Meyers

two our done it's guidance TGP, revenue the forecast now would have going $XX using. forward first with to where that more we're basin budget new our which in stream. is Also the moving in of depending from is the it widening mixture in our to to XX% those rev to a $XX above million which previously like million, have that on One I is XX% differential rec XX% we moving to increased would up differentials a and about things, reduction say. It's

Welles Fitzpatrick

Butte per Okay. the payment come on be pipeline. or does in unit one a million, pipeline? just going the That's savings that on a via perfect. And That then on that you is $XX onetime Saddle to quick to all cash

Lance A. Lauck

Lance. onetime Welles. a It's Yeah, is cash payment. This

Welles Fitzpatrick

Scott I probably several Okay. enough Lance. or for And one to combined to years? move over you last be thoughts then (XX:XX:XX) give all's are processing you this all those the just mean, and to in on Newborn, Lupton next is Can one XXXX broader O'Connor, your going XXXX, mind?

Scott J. Reasoner

over with see negotiations This as we're XXXX. line But obviously in in today the And something pressure that the pressure see in pressures step last drop Plant obviously, the that XXXX. increments, seen takes years is as high that the coming these it's much it significantly in then really something of to alleviate important then timed another like where increases get frequent to that will to plant a going feel involved hand this right that XXXX, in plan is plants see several we XX particularly, really that from less early well not we're DCP sure we we at consistently. excited see helping we've way it a now needing as over to sit we in point. start is Scott, about line more not got that Welles, on think and really and We calculated where We're We that we're really we some it us it in system. installation today. we're and

Welles Fitzpatrick

Latham pressures Should really you we then or think non-DCP you? helping as DCP And the be (XX:XX:XX) those ones? what alleviate on for the should the we and Lupton such on have of the Okay. all as just focused plant,

Scott J. Reasoner

some have job where trying off of of our do to room them nice And gas going on a gas a a portion goes. site. have comes DCP Aka, so around really gas. And is get portion done volumes to system, that fairly the Much with of processed, flexibility their teams although which our the the that offloads there where them significant to on get move we Anadarko more to

much – obviously, more but something more focused volumes with our that helps, So, it's DCP. it's associated much with on we're DCP,

Welles Fitzpatrick

Very so helpful. Thanks much.

Operator

question with Merrill Asit next Bank comes Sen from of Lynch. America Our

Asit Sen

could guys. day provide And exit XXX,XXX you morning, color Good little a for assumptions in XXXX. production if Could a barrels rate contribution Delaware of provide more on the cadence? Thanks. your wondering was you

Scott J. Reasoner

We really Delaware haven't given the numbers contribution. on

a going little bit I'm more to so, And cadence. by and about production pass talk that

with things, Wattenberg put fairly seen as flat numbers be we out or One second out put more production of much the recently that plant where on the in and coming line, quarter, release, the And gain expected we've the is quarter get through we quarters. then a accelerated these just in third definitely in slight first fourth uptick. we a maybe this to the

Delaware So, say, the I best would idea really where that hopefully, you some consistent gives is across description a headed. that assets, growth, the and fairly with we're

Asit Sen

slide looks above think, color best you potentially like anything day any feet on then be well this the well, on average. your And could believe zone, great. provide per is that I X,XXX That's XX, results repeatable? geology, Can well, you your

Scott J. Reasoner

I little that it's a to pace. that of think say we'll Yeah, early all to get them

efficient year. the of. where the that well see it we in – that can comments achieve would an of did can in we a that's way as think the area is have that, earlier, well is like a thing I improving in you having job want get I first feel tremendous an It's such that the and something the the team I state. also issues we and determining our that described operation, a it's my But determining of through to number significant

much real consistent can wouldn't I number a that of kind get So, more about, so, could answer term, or is this where to the I think the expect look of we point. number. a start at when that to period But we at we year achieve talking short over point next the we're that as a

Asit Sen

you cost, end million variables $XX high-end last to Well And take me. Lance, that zone, guidance, could the versus to talk cetera? million the et the for one about us Great. low $X

Lance A. Lauck

of is on It's different completion design, with then end. in X-milers is the X-milers, high designs. But length and mostly of is end the with end some the X-milers X-milers. lateral on variation the result areas There's of end the some really casing the low low the high the

Asit Sen

Thank Great. you.

Operator

Our next Stifel. question from with Scialla comes Michael

Michael Stephen Scialla

about cash flow – think forecast I XXXX guys. to want the in for morning, Good how the your you're thinking of priorities your correct. if Hi. excess is use

Barton R. Brookman

Yeah, Mike.

Let as XX% outlook, rigs in start with with and he a production covered. got we've – three rigs midpoint our as three said, and that's Lance me

of production that So, with I level think growth. we're really comfortable

a then we'll some some think give adding when on which and and process, to be our budget we got get in we late give adding would some year consideration XXXX we've I to consideration the to the some may if flow, cash move growth. DUCs rigs, really accelerating, free production

give XX% the think, capital give at the are two I but the those some focus dramatically want company that that the we'll midpoint us next year. which moves for focus capital us So, growth I up don't is up both are A, the basins acreage for think ramp efficient. is we big think inventory, I most additional some spend his and trying Then market looking trying second consideration, thing, us to I that a have of give and X-milers, Lance drill everyone think, to ability And X-milers. in the understands continue team, to block strong to our to

to the right priority dividends. is questions priorities getting and seem So, lower priorities, which which those our now, lower that moves a for size, be I then And say on I are new is think are company but those and we our two share list. would around, two probably repurchases

Michael Stephen Scialla

additional Have helps. taken see thoughts your I Scott, getting talked concerns, in guess, of basin widening on That you any firm agreements any you market or or I the in to the Thanks, Any to you've swaps about if gas the that wanted in differentials there? Bart. some transport Permian? – done.

Lance A. Lauck

Yeah.

this So, Lance. is Mike,

in the pipe issues the of that getting out coming Waha. don't our be I in Delaware, there going that's a announced we to think gas extension to that has Morgan any in a opportunities large Bcf So, see There's Kinder sometime think, market. Yes. Waha transportation of netbacks nearly to X overall we there. out going I add, Do at firm look margins? and to our improve some XXXX day to lock coming that's

at for look those company. to review the continue and We opportunities those

has and good into on dialed marketing is our so, that very pulse a that. much team And

monitor continue sense, that. we And look a very take strong it makes that. if at So, to we'll

Michael Stephen Scialla

did for me production announce the XXXX your you really Thanks. I a Okay. And is, Utica you question, housekeeping more one sale but of last but then guess, here. didn't guidance, change

assume should we of it's that a sale? just leave okay I Utica big need So, right to that production adjust for to not it is but know we now? don't where the production, piece production

Barton R. Brookman

would clearly Mike, Yeah. the range. yeah, say, I it's in

Boe production – X,XXX of we on day there'll the you the three Utica end range. close of so of about months me at per excuse about If in there, year-end a rough -the that that contribution the quarter, projecting the March, at of look are be end first

Michael Stephen Scialla

good. you. Very Thank

Barton R. Brookman

Mike. Thanks,

Operator

Irene Haas Our comes with from next Capital. Imperial question

Irene Haas

tests you basically I in Delaware Basin, you spacing my like second also assumption right your Yes. to would any bench spacing planned? tackle the much do Bone of soon has question you ask what that are have how now in would do per and the able drilling to Spring? left how is with terms and you to whole to for be Then acreage

Scott J. Reasoner

Sure.

that the spacing new our includes so potential Irene, XXX So, assumptions locations. additional

the me B wells of a X Let wells bench in Block the total wells be six and now A bench XX section. is Block for start to XX estimated per with X. in

Okay.

And our our and X forecast Block for so, the estimates that's area. that's

the XX We half to well equates know, are, tests. you a testing our Grizzly wells equivalent with per Bear as which six on section a section,

So, on... that's results test we that have to begin should a

Lance A. Lauck

Midyear.

Scott J. Reasoner

...midyear.

Lance A. Lauck

Yeah.

Scott J. Reasoner

to secondly, to have this wells we bench, total the updated section. Area, in XX in bench, the if Then in our and again, A have B the wells C North for two wells of XX you inventory four Central go per then wells area bench, a the

these basis in So, that increase primarily XXX-location count areas. the of that's oilier

As the drilling working there with time like far and about two rigs in we drilling with provisions just maintain estimate that take point or so our holding we rig drilling estimates this usually acreage and continuous this additional We rigs hold about. to acreage, two to rough help testing our one on is us at year. position talked as

Irene Haas

And Bone Spring you can intervals? how crack a soon the at take

Lance A. Lauck

we're planned the XXXX. we current able doing look and group may bunch science rock. it, wells. have We're of logging we And but the good outside we're the at speak, learn positive can for work wells, we understanding Irene. that a really our obviously as a that's as that our question, there. that not With situation, XXXX, on That's in the and sections definitely neighborhood only of for in We be drill we which thing is science hopeful they're of about We're to us. very science particular don't from these activity anything seeing our more work but a doing

So, at this point, not XXXX, maybe XXXX.

Irene Haas

Great. Thank you.

Operator

(USA), Our guys water morning. next I guess, - the do question comes down the Grigel an outlook you Hi. handling the have wells or of Macquarie. and Grigel first Capital Macquarie from both in Inc. Good Basin, out with Paul in Delaware any any on on Paul commentary logistics down Permian? outbound, needs, inbound

Scott J. Reasoner

work got we've and amount going tremendous that. a of Scott, into is This

to both for Our I both manage pipe the hard, We've build the disposal. comes companies and both water take to supply water, well with and disposal job and get team still adding those to the and going wells. with same the to as of the third-party described, gas need very as we're done. takeaway the we water At we're see that been oil to working the water away, of contracted some water water is as time,

supply, there's things as two As water far there.

eastern acreage building where started the part a water. of add building to infrastructure and also We've continue in really we're there have the to We facility a activity. water recycle but supply up the blocked lot we're wells, particularly of

recycled think, either to So, start following pad the the next we're quickly I on, very expect running pad or using some that path and actually water. down that

fracking and we've recognize this both to are Capital Macquarie (USA), on that we a side. got going the see I of it got it's sides, different that the to water supply the that, both process production - takeaway, you something on point, maintain bunch the hard on. teams And said, want if efforts call a good Paul disposal handle that So, the critical as Grigel at on in our front. Like that Inc. we've in working on and for

changing focusing for that's XXXX on made guys Has potential time Well, on point commented tones incentives forward, I helpful. you management in bit, been the going flow? cash to free a any creation returns then, compensation guess, at for Thanks, decisions specifically changes either in this flow free Okay. cash or XXXX. And there Scott. little on

Barton R. Brookman

no should kind Inc. similar Paul this around been of we at to - year's entailed? that. or things proxy time point Are what in being those (USA), there's are Grigel last expect that No, discussion considered Macquarie Capital

Barton R. Brookman

as anything - I our changes continue as those having Paul the be far if know I'm considered. don't discussions we'll discuss we being board with if I Capital (USA), are Inc. Grigel what's sure any outlook, Macquarie as refine needed. there's to can

an keep the proxy. you. eye on We'll Okay. Thank

Operator

Our from comes Deckelbaum next question with David KeyBanc.

Barton R. Brookman

David. Hi,

David A. Deckelbaum

to generation. wanted guess, so performance I slightly guys disclosure, Are the some through all XXXX better at XXXX, improvement XXXX. looks in with looks times there's walked the free like like look ask you? along are faster are now that How cash times cycle it that into Morning. or up faster far? I you those you any guys. in I it, as right cycle XXXX into It an implied oil some you Morning, leads baking XXXX carrying you oil improvements increase on mix mix. price to

Barton R. Brookman

And times, say when you times? talking about cycle drill you're

David A. Deckelbaum

Yeah, especially Delaware. I guess in the

Lance A. Lauck

the be that generates, our one you difference say I at very Delaware the would outlook, for plan to for similar mean, our which would XXXX I XXXX XXXX. as No, I looking say is in more the in can start a of few number a more on see little lowering on investment probably DUCs basin. slide as turning the Wattenberg our capital in is we XX, wells bit we'll

capacity, midstream wells from those we'll away produce production. other to additional without wells be the other our taking able With adding or and

a capital bit XXXX. that's little more in think the leading to XXXX to I what's numbers compared So, intensity

David A. Deckelbaum

think why the emphasize it continuing feed not to might Bart, be be like shouldn't much you're improvement in wanted before you could that the sooner? something kind now? program which end Delaware, XXXX rig of sounded the potentially Okay. guess, would guys addressed really you it that program. that if how are of of XXXX the program, cadence I a or of considered we performance change Is that And, of this capital to thinking it And really XXXX for

Barton R. Brookman

Yeah. to three And an we've three outlook got a this through. with Obviously, lot and think rigs. we're giving

everything. David, get think we an around at our in I growth right cycle would the Wattenberg's performance in is November, probably it Wattenberg and is move midstream our likely go on performing, be in depending rig how late any maybe in was I'm performing, basins. how XXXX one Delaware in deploying but shot the how somewhere made, we But the of with most a be both, our XXXX in now, plus the of October, a forecast extra that we'd for the lot sure to would not year, when completion of the in production in levels bit if be arm budget production. September, we got And the that flexibility like So, positives, spend ability to looking cash the move probably little have a XXXX in I pace we'll into that some flow. more money, we've said, there of

the the So, oil to recognize we but take look that hard year, has in now. side. Things right have back that obviously, discussion. that's real We to are $XXs. to pretty at cautious move proud way the this of we've as and look evolved, things here price I this optimistic, the could have nice have it, we're a prices think through there's on go and this teams still into we're and flexibility got it's we're but at the the way high-level going we even a and And

David A. Deckelbaum

relatively move into the And back if plan still things same? remains the $XXs, this

Barton R. Brookman

sir. Yeah. Yes,

average said, this around Meyers Scott an is a As of XXXX $XX.XX built guidance barrel.

David A. Deckelbaum

guys. you, Thank

Operator

with Our Heikkinen next from Maccurdy question comes Energy Advisors. Kevin

Kevin Moreland Maccurdy

guys. morning, Good

Barton R. Brookman

Hi, Kevin.

Kevin Moreland Maccurdy

whether that you think think so Delaware Just continue much why in recently can higher oil in curious you have been on the XXXX? the cuts and

Scott J. Reasoner

graph, and mix, Buzzard at Scott the wells came line we Grizzlies on is two very of This recently, XXXX Kevin. of three There's actually turned Hi, drilling, that on those is they're on that you that wells the just big five when XX% that the that Bear in same the they're on contributions oil pad line are range at look the oil we is the a significant. that that plot. call shown and area we're in contribution. Grizzly that as shown wells in portion When for and

wells so really the reasonable was the really more that had was driven but combination that oily it. overall well we it point. come you have what XX% year. it's So, And of a contributing look pretty group driving on the When is to toward it for Hermit strong in this company really gassy, very at seems that prior, gas in, that things pointed Lance at look at this side terms to, for XX% of point the the of as

Kevin Moreland Maccurdy

Okay. Basin, DJ consistent That's the update are interest lengths And in lateral change? helpful. working or inventory and across different fairly areas do the the regarding they

Scott J. Reasoner

way, months we're so. Plains both Plains and to And initiatives (XX:XX:XX) working one interest are the same highest and I the Area, they're Area, Prairie with the would on They in that's over to of initiatives in working that the Kersey we area. of up and the working to a that And that focused the say, and strengthen or with bit acres Kersey the highest continue and try areas, the have Prairie companies is next offset block XX one that in lower areas. interests, the

Barton R. Brookman

And, average XX% interest. waterfall have Kevin, question to the the because when actually a X,XXX, the it's had working mapping look great we you think that X,XXX I locations a at

a You got XX%. can we've see now

our but longer So, longer we've interest inventory, though less also per well increased have average feet. even lateral or have we actually working we

Scott J. Reasoner

part it, are that to And to Area and Kersey a is definitely when love we'd more Prairie shorter in Area, why the has which areas, you continue of Lance up up longer the that there. the as much Plains look across at laterals described block laterals

Kevin Moreland Maccurdy

helpful, Very Great. guys. Thanks.

Barton R. Brookman

Yeah.

Operator

comes next from with question Rezvan Mizuho. Tim Our

Timothy Rezvan

think call. wonder, $XX infrastructure million CapEx do my the sort spending? last I How and the your the looks you over like highlighting you midstream little topic in And update million the a about pick Day. more. couple taking year for the years of year, Thanks It Analyst see gave at next folks. How on then last hump morning, $XX trend? spending Good looks you at over once it get you Hi. like big XXXX. in of a do of value

Lance A. Lauck

Tim, Lance. this is

how XXXX what Delaware see in and to we you it of very that's relates our forward So, the about going and for, we're allocation XX% of spend D&C solve allocation Delaware on to approximately capital think you capital Midstream midstream assets, side, to consistent as our to modeling capital. for if will, the using the

we value our midstream group, come as with assets far value and from the together midstream group, proposition teams creation, in teams As really working Basin. our can the are in define Delaware marketing that and to the both operation the

are just values We're we're assets, would be we're that that creation just off that that's very kicking in still looking required be And And can here market and the midstream and generated would started scenarios from capital closely. the value We've the getting throughput, assessment. that. been that some the Basin that that's the out our towards build-out, for and something on for plan build-outs, looking so, really at potential those come time that talking Delaware the at about working on. from the long-term we

But that will see first most take and to of this year, the we creation next maybe those ultimately got finalize something get to midstream the assets. to a can long-term value ownership bring. of probably place of that's year that pleased us So, assets work part the assess. that that we know very got with we've valuations very we're of ahead of we've from pleased us can We're But that lot with those.

now. working that's on So, we're what

Timothy Rezvan

highlight XXXX, value comments not we The to appreciate similar the Basin, I your feasible. or to are think in think was can on that central XXXX other And activity, be I who maybe putting trying more of acreage in parts done that kind very how of getting work across what prepared may in the properties? topic your Scott looking sort Delaware I your thoughts rigs those concentrated, it delineation response. Basin eastern of mean, a block? Delaware mentioned in Okay. then

Scott J. Reasoner

work answer acreage the maybe that the across we as question have I in not we're to be There's also only this the year Tim, that done to a is lot your on zones. of think yet, focused but not other

a cleanly. the a we or Spring C chance today, into do constant about The we part we maintain of Bone we look, okay, that process the to test steps, haven't for next we doing as go we to decision-making can need we up brought drill process a how of doing on those do those acreage. yet, know we can So, what acreage, of and it's that to in we around, bench had our or constant – a in most execute we're do X that effective different the was form need fashion Block one venture another do things that

bunch and that vertical faced with these themselves. lateral And that go only on so, all at are together really a log well and We've as choices that doing job logging our and coupling constant out done sections the as of laterals wells it's pilot doing our looking there not a teams various well some of data basis, that work. as we're the with as the in a we both are good those peers we're acquiring holes

about all of these to is me to a put when to to our in you're the well think to together. need difficult the what It's do with really back So, And of say. obviously starting all each teams We but already one complex things XXXX laid puzzle out those. we are we have. making very happened different it. we're XXXX, and one for really to Again, deal do around to decisions pretty that that pointing expectations of watching

Timothy Rezvan

Okay.

still similar... to could be it's if early say XXXX too So,

Scott J. Reasoner

(XX:XX:XX). No, I think

Timothy Rezvan

...as areas? far as two focus

Scott J. Reasoner

we and the to is What say steps to get Yeah, in to on zones pass need that overall the here of are position I or challenge think a to that have. XXXX what value acreage next to it's ultimate. work through the we

Timothy Rezvan

you. Thank Okay.

Operator

Jeffrey Campbell question comes next from with Brothers. Tuohy Our

Jeffrey Campbell

internal that you or any arrived test. de-risk On seen slide for call. XX, Good peer you to just this my results choice curious I morning. way? for was it your analysis taking helped first how location purely C in Wolfcamp have geologic Thanks the at Was

Scott J. Reasoner

production in much say the the acreage year, more a already done type based a there. early It's that later spot I might us chance see we've we we of on the of thing. work bit it's gives It of would a assessment that little Say, in our to production. probably see really of spoke because rig year, I in logging that the good terms midyear, we like. have like a spot data those which But a any things it's, there It's said, from make year, we rig of the And that from to our little mid later decision. part where enough of in the all have the the Grizzlies early choices. that that down we a the into with like went in data good testing see idea I coupled but year. in before it's the it's year and a probably it's

Jeffrey Campbell

XX North in that you. I the complete locations earlier the Thank wells slide you wondering you're the in On could Lance intervals. Area. mentioning XX, assumptions those in Central was was Okay. spacing identify going XXXX, to

Lance A. Lauck

Yeah. Yeah.

intervals? specific the So,

Jeffrey Campbell

Yeah.

Lance A. Lauck

have may some those of (XX:XX:XX)... I

Scott J. Reasoner

I a bit little can do of good there.

Lance A. Lauck

Scott. Thanks,

Scott J. Reasoner

probably We're area, combination we're at Bs. of in and As the looking Greenwich a –

Bs three The wells a layered of specifics, not-too-distant there, we'll be something believe Bs. and I We the and this this Again, we'll two the can't are into others I point process have or five at don't combination at that As reverse in As of have exactly. remember out that. C in there a but looking With the future.

Jeffrey Campbell

Well, was My last actually. that No. helpful quite question.

pursuing blocking something You've swapping and in talked I acreage kind that the well. for the those in Delaware just do a currently you're you opportunities Basin and exist Wattenberg. of as about lot is wondered

Lance A. Lauck

in where we seen willingness doing group and real more our at development block with of and efficient From We we sit us laterals, a time drill be spent talking real out answer business the ways And see Lance. it's and yes. we've today, acreage the to would Jeff, down operators sit working offset several to both willingness with that that. can look longer, there.

front like been have the the to consolidations of of type So, kicks we've like We work we'd in a same that kind accomplish us. we area. in to that's of off able lot successfully on in that. Wattenberg do what a initiatives of lot But of Delaware the something got

Jeffrey Campbell

Thank it. Great. Appreciate Okay. you.

Operator

And to showing I'd to further back I'm at like this for questions call comments. not time. closing any turn the Bart Brookman

Barton R. Brookman

and the everybody great Yeah. and of Thank Thank the questions. your ongoing for to you, support company you. thank just operator, you

Operator

that Ladies today's and concludes gentlemen, presentation.

disconnect have and now day. may a You wonderful

Michael G. Edwards	PDC Energy, Inc.
Barton R. Brookman	PDC Energy, Inc.
Scott J. Reasoner	PDC Energy, Inc.
R. Scott Meyers	PDC Energy, Inc.
Lance A. Lauck	PDC Energy, Inc.
Welles Fitzpatrick	SunTrust Robinson Humphrey, Inc.
Asit Sen	Bank of America Merrill Lynch
Michael Stephen Scialla	Stifel, Nicolaus & Co., Inc.
Irene Haas	Imperial Capital LLC
Paul Grigel	Macquarie Capital (NYSE:USA), Inc.
David A. Deckelbaum	KeyBanc Capital Markets, Inc.
Kevin Moreland Maccurdy	Heikkinen Energy Advisors LLC
Timothy Rezvan	Mizuho Securities USA LLC
Jeffrey Campbell	Tuohy Brothers Investment Research, Inc.

PDC Energy (PDCE) 27 Feb 182017 Q4 Earnings call transcript