PDC Energy Inc (PDCE)

[Timothy Smith]

PDC Energy announced a substantial $203 million, 46% YOY capex increase next year, with a focus on the company’s high-return, liquids rich Wattenberg and Utica positions. The $647 million budget will see 72% go to the Wattenberg, up from last year’s 63% and rising in real terms from $280 million to $467 million. PDC will build to five rigs in the play, spudding 115 gross horizontal wells.

The Utica will also see a large increase, rising from 2013’s $96 million to $162 million and from 22% of total spend to 25%. PDC will build to two rigs in the Utica, anticipating 18 horizontal wells on the year. Roughly nine-tenths of next year’s total budget is for development, the remainder is for leasehold spending.

In addition to the overall spending increase, PDC is cutting back significantly in its 50/50 PDCM Marcellus JV, reducing spending from $57 million to $16 million. PDC is suspending drilling in the play and selling its shallow Upper Devonian assets. Modest capital spent will be used on four horizontal wells and midstream infrastructure.

These moves are expected to grow production 34% YOY to a midpoint estimate of 26,700 boepd (60% liquids), with a YE14 exit projection of 33,000 boepd. PDC chief James Trimble also projected strong production growth this quarter.