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PDC Energy Fourth Quarter, Full Year 2021 Results

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PDC Energy, Inc. reported its fourth quarter and full year 2021 results.

2021 Fourth Quarter and Year-End Results

In the fourth quarter of 2021, PDC generated approximately $340 million of FCF and reduced total debt by approximately $300 million, exiting the year with a trailing twelve-month net leverage ratio of 0.6x. Additionally, PDC returned approximately $110 million of capital to shareholders through the $0.12 per share payment of its quarterly base dividend, the repurchase of approximately 1.0 million shares of common stock and a $0.50 per share special dividend. For the year, the Company generated approximately $950 million of FCF, reduced total net debt by approximately $700 million and returned approximately $245 million to shareholders.

Capital investments in the fourth quarter were approximately $134 million with total production of 19.4 million Boe, or 211,000 Boe per day, and oil production of 6.3 million Bbls, or 68,750 Bbls per day. Daily total production and daily oil production represent approximately three and four percent sequential increases from the third quarter of 2021. In 2021, PDC invested approximately $584 million to produce 71.3 million Boe, or 195,000 Boe per day, and 22.7 million Bbls of oil, or 62,000 Bbls per day.

Operations Overview

Wattenberg

In Wattenberg, the Company invested approximately $106 million in the fourth quarter to operate one drilling rig and one completion crew, resulting in 15 spuds and 36 turn-in-lines ("TILs"). Total production was 16.7 million Boe, or approximately 182,000 Boe per day, while oil production was 5.3 million Bbls, or approximately 57,500 Bbls per day. Full-year Wattenberg activity consisted of capital investments of approximately $432 million, 78 spuds and 149 TILs. Total production and oil production averaged approximately 170,000 Boe per day and 52,000 Bbls of oil per day, respectively.

In the Delaware Basin, PDC invested approximately $28 million to operate one drilling rig, resulting in four spuds and zero TILs in the quarter as the Company finished its 2021 completion activity in the second quarter. Total production was 2.7 million Boe, or approximately 29,000 Boe per day, while oil production was approximately 1.0 million Bbls, or approximately 11,000 Bbls per day. Fourth quarter total production and oil production benefited from the installation and utilization of five electrical submersible pumps and several workover projects completed in the third quarter, as well as strong non-operated well performance. For the full-year, PDC invested approximately $152 million to drill and TIL 18 wells. Total production and oil production averaged approximately 26,000 Boe per day and 10,000 Bbls per day, respectively.

Year-End Proved Reserves and Inventory

PDC's estimated SEC proved reserves as of year-end 2021 were 814 million Boe, with proved developed reserves accounting for approximately 49 percent of the total. Year-end 2021 reserves reflect an increase of 11 percent compared to year-end 2020 and equate to a 217% reserve replacement ratio. Under SEC pricing of approximately $67 per Bbl WTI, $3.60 per MMBtu natural gas and NGL realizations of approximately $25 per Bbl, the Company's standardized measure value of its proved reserves was $7.9 billion and the discounted pre-tax PV-10 of those reserves was $9.7 billion.

Pro forma for the Acquisition, PDC's estimated year-end 2021 SEC proved reserves were approximately 1,000 MMBoe, with proved developed reserves accounting for approximately 50 percent of the total. The Company's discounted pre-tax PV-10 value of the pro forma year-end 2021 proved reserves was nearly $12.0 billion.

In Wattenberg, the Company's estimated year-end undeveloped inventory, including DUCs, was approximately 1,800 locations with an average lateral length of approximately 9,700 feet, an increase of nearly 10 percent compared to the average lateral length of undeveloped locations as of year-end 2020. Total inventory represents an inventory life of more than ten years at the current development pace.

Pro forma Wattenberg undeveloped inventory was approximately 2,100 locations.

Oil and Gas Production, Sales and Operating Cost Data

Fourth quarter crude oil, natural gas and NGLs sales, excluding net settlements on derivatives, were $848 million, a 147 percent increase over 2020 levels of $343 million. The increase in sales between periods was due to a 111 percent increase in weighted average realized sales price per Boe to $43.71 from $20.72. The increase in sales price was driven by 89 percent, 159 percent and 157 percent increases in weighted average realized crude oil, natural gas and NGL prices, respectively. The combined revenue from crude oil, natural gas and NGLs sales and net settlements on commodity derivative instruments was approximately $653 million in 2021 compared to approximately $395 million in 2020.

Full-year crude oil, natural gas and NGLs sales, excluding net settlements on derivatives, were $2,553 million, a 122 percent increase over 2020 levels of $1,153 million. The increase in sales between periods was due to a 112 percent increase in weighted average realized sales price per Boe to $35.78 from $16.86. The increase in sales price was driven by 96 percent, 174 percent and 182 percent increases in weighted average realized crude oil, natural gas and NGL prices, respectively. The combined revenue from crude oil, natural gas and NGLs sales and net settlements on commodity derivative instruments was approximately $2,142 million in 2021 compared to approximately $1,432 million in 2020.

Financial Results

Net income for the fourth quarter and full-year 2021 were $473 million, or $4.78 per diluted share, and $522 million, or $5.22 per diluted share, respectively, compared to net losses of $7 million, or $0.07 per diluted share, and $724 million, or $7.37 per diluted share in the comparable 2020 periods. Adjusted net income, a non-U.S. GAAP financial measure defined below, was $283 million in the fourth quarter of 2021 and $800 million for the full year compared to $111 million and a net loss of $625 million in the comparable 2020 periods. The year-over-year change between fourth quarter metrics was primarily due to an increase in sales partially offset by an increase in net derivative settlement losses and an increase in production taxes whereas the year-over-year difference between annual metrics was primarily due to an $882 million impairment expense in 2020.

Net cash from operating activities for the fourth quarter of 2021 was approximately $520 million compared to $221 million in 2020. Adjusted cash flows from operations, a non-U.S. GAAP metric defined below, was approximately $473 million in the fourth quarter of 2021 compared to approximately $269 million in 2020. Full year 2021 net cash from operating activities was $1,548 million compared to $870 million in 2020 while adjusted cash flows from operations were $950 million and $400 million, respectively. The year-over-year increase in each metric was primarily due to the increase in sales partially offset by the increase in costs and change in derivative settlements.

G&A, which includes cash and non-cash expense, was $31 million, or $1.62 per Boe, in the fourth quarter of 2021 compared to $31 million, or $1.88 per Boe, in 2020. G&A for the full year 2021 was $128 million, or $1.79 per Boe, compared to $161 million, or $2.36 per Boe in 2020. The 14 percent decrease in G&A per Boe between fourth quarter periods was primarily due to increased production volumes whereas the 24 percent decrease between annual periods is primarily attributable to transaction and transition costs associated with the acquisition of SRC Energy in 2020.