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Thursday, December 12, 2013

PDC Energy Announces Intentions to Continue Developing Utica Shale


PDC Energy issued a press release that reveals some of the company's plans for next year. Here are the portions that are relevant to the Utica shale (click here to see the release in its entirety):

2014 Capital Budget and Production Guidance
PDC's capital budget for 2014 is approximately $647 million, including $576 million of development capital and $71 million for leasehold acquisitions, exploration and other expenditures. The 2014 capital budget is targeting organic growth within PDC's inventory of high-return, liquid-rich projects in the core Wattenberg Field and Utica Shale.
PDC estimates net production volumes for 2014 will average between 9.5 million and 10 million barrels of oil equivalent ("Boe") and anticipates that its crude oil and natural gas liquids ("NGLs") will increase to approximately 60%. Production guidance includes a reduction in dry gas volumes in 2014 due to the anticipated closing of the sale of its shallow Upper Devonian assets and the suspension of drilling in its Marcellus Shale assets. The Company estimates its 2014 production exit rate to be approximately 33,000 Boe/d.

2014 Utica Shale Capital Overview
Approximately $162 million is expected to be invested in the Utica Shale in southeast Ohio to spud 18 horizontal wells, including 8 wells in the Company's northern acreage and 10 wells in its southern acreage. A second drilling rig is expected to be deployed in the second half of 2014. The Utica capital budget includes approximately $30 million to acquire additional contiguous leasehold.

Operations Update – Utica Shale
The Company recently turned its eighth, ninth and tenth Utica Shale horizontal wells to sales. One additional well is expected to be turned to sales before year-end 2013. The Company expects gross production from its 11 wells by the end of December 2013 to be approximately 5,200 Boe/d which assumes full ethane recovery with approximately 70% liquids. To optimize ultimate recoveries (EURs) for wells located in the retrograde condensate window, the Company plans to continue maintaining high reservoir pressures by restricting flow rates. Well performance has been very strong on the relatively small chokes with significant casing pressures supporting greater long-term production rates and higher EURs.
The Garvin 1H, the Company's first Utica Shale well in Washington County, Ohio, continues to produce on a restricted choke. Gross production, after approximately thirty days of sales, averaged slightly over 100 barrels of condensate per day and nearly 4 million cubic feet per day of high-BTU gas. The Company is actively drilling two offset wells on the Garvin pad which are expected to be completed in early 2014.
The Neill 1H well, located in northwest Washington County, with a 6,000' lateral and 33 frac stages, has been on flowback for over 30 days and continues to recover condensate, high-BTU natural gas and frac load water. The well is exhibiting different frac load recovery characteristics than prior Utica wells. To date, during the cleanup, 24-hour peak hydrocarbon recovery was approximately 327 Boe/d assuming full ethane recovery. The Company expects production to improve as the frac load is recovered.

CEO Comments
James Trimble, President and CEO, stated, "We expect strong production growth in the fourth quarter 2013 from our Wattenberg, Utica and Marcellus operations. The fourth rig recently arrived in the Wattenberg Field and we anticipate meaningful production growth from both the Niobrara and Codell formations in 2014. We are excited about participating in the 26-well per section test in Wattenberg that could add significantly to our liquid-rich 3P inventory. Production from this test is expected to begin in the fourth quarter of 2014. In the Utica, we are extremely pleased with early results which support ongoing development in both our northern and southern Utica acreage positions. Our 60% liquids mix forecast for total company production in 2014 further demonstrates our transition from a natural gas focused company to a liquids focused one."


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