PDC “Temporarily” Suspends All Marcellus Drilling Operations
Petroleum Development Corporation (PDC) announced yesterday that they are “temporarily” suspending drilling operations in the Marcellus Shale because of “depressed” natural gas prices. They will keep their planned 2012 capital budget the same, at $284 million, and reallocate the $12 million they would have used in the Marcellus operation to other liquids-rich operations. So far this year PDC has drilled three Marcellus wells and they will finish drilling a fourth well before suspending all Marcellus operations.
From the PDC press release:
Petroleum Development Corporation (dba PDC Energy) today announced the Company closed on the sale of its remaining Permian Basin assets.
The Company’s Permian Basin assets were sold to Concho Resources Inc. (NYSE:CXO) for a total sale price of approximately $184.4 million after customary closing adjustments. Proceeds from the sale will be used to reduce outstanding borrowings on the Company’s revolving credit facility and provide liquidity to fund the Company’s 2012 capital budget. The Company previously sold its non-core Permian assets in the fourth quarter of 2011 for$13.3 million, resulting in total proceeds from the sale of the Permian Basin assets of approximately $198 million. In 2011, the Permian Basinrepresented approximately 5%, or 2.5 billion cubic feet equivalent ("Bcfe"), of total production and 6%, or 65 Bcfe, of year-end proved reserves.
PDC also reported the Company’s joint venture, PDC Mountaineer, LLC ("PDCM"), has elected to temporarily suspend drilling in the Marcellus Shale play due to the current depressed natural gas price environment. PDCM is currently drilling its third horizontal Marcellus well in 2012 and plans to drill one additional well prior to suspending drilling operations. PDCM also plans to proceed with the completion of seven wells over the next several months, including three wells that were drilled in 2011.
PDC’s previously announced 2012 capital budget of $284 million will remain unchanged. The Company plans to reallocate the $12 million PDCM equity contribution portion of the capital budget to liquid-rich projects in the Wattenberg Field. The Company reconfirms its production guidance of 53 Bcfe for 2012.
James Trimble, President and Chief Executive Officer, commented, "The sale of our remaining Permian Basin assets enables us to pay down a significant portion of our revolving bank debt and strengthen our balance sheet as we focus on increasing liquids production in our core Wattenberg Field and de-risking our emerging Utica Shale position. Further, I wish to emphasize that we are very pleased with our West Virginia Marcellusprogram results of five to seven Bcf per well. Substantially all of our Marcellus acreage position is held by production, which provides us the flexibility to wait for improved gas pricing before recommencing our drilling program."*
*Petroleum Development Corporation (Feb 29, 2012) – PDC Energy Announces Closing of Permian Basin Asset Sale; Plans to Suspend Drilling in the Marcellus Shale; Updates 2012 Capital Budget and Confirms Previous Production Guidance of 53 Bcfe