PDC Energy, Inc. agreed to sell its fifty percent interest in PDC Mountaineer LLC, a Marcellus Joint Venture ("JV"), to Mountaineer Keystone Energy, LLC for approximately $250 million subject to certain purchase price adjustments. PDC's net pre-tax proceeds from the sale, after its share of JV debt repayment and other working capital adjustments, is expected to be approximately $190 million comprised of $150 million in cash and a $40 million note. The transaction includes the buyer's assumption of PDC's share of the firm transportation obligations related to the assets owned by PDCM as well as PDC's share of certain PDCM natural gas hedging positions for the years 2014 and 2015.
The effective date of the transaction is January 1, 2014 and it is expected to close on or about October 15, 2014, subject to customary closing conditions. The assets are approximately 99% natural gas and include an estimated 240 billion cubic feet (Bcf) of proved reserves net to PDC, as of December 31, 2013. The assets produced approximately 24 million cubic feet equivalent per day (MMcfe/d) net to PDC in the first quarter of 2014. Tudor Pickering Holt acted as advisor on the sale.
2013 Year End SEC Proved Reserves - Pro Forma
Total proved reserves for PDC as of December 31, 2013 pro forma for the sale are estimated to be 226 million barrels oil equivalent ("MMBoe") with the liquid mix of those reserves increasing from 54% to 63%. Pro forma for the sale, PDC's per unit SEC PV-10 proved reserve value increases from $10.16 to $11.50 per Boe.
Utica Shale Acreage and Inventory Update
Through a series of transactions, the Company recently added approximately 13,000 net acres, subject to confirmation of title, in the liquid-rich windows of the Utica Shale play in southeast Ohio. The newly acquired acreage closely offsets PDC's existing acreage in southern Utica including the Company's recently drilled Palmer unit acreage in eastern Morgan County as well as leasehold in northern Washington County. The cost for the additional acreage is approximately $35 million which the Company expects to be funded within its existing 2014 capital budget of approximately $647 million.
PDC's total acreage position in the Utica Shale with the additional acreage increases from approximately 54,000 to 67,000 net acres. Total gross horizontal well inventory is projected to increase from approximately 300 to 350 locations. The Company's acreage position in southern Utica is substantially contiguous in the wet-gas and condensate windows and provides for increased drilling, operational and midstream synergies. The Company continues to pursue additional acreage acquisitions that complement its existing Utica Shale position.
PDC recently added a second drilling rig in the play. The Company is progressing with completion operations on its two-well Palmer pad, and has re-initiated production from its three-well Garvin pad in Washington County that was temporarily shut in due to midstream issues.
2014 Guidance Update
The Company intends to provide updated production and financial guidance for 2014 along with an updated outlook for 2015 and 2016 on its second quarter conference call currently scheduled for August 8, 2014.
James Trimble, Chief Executive Officer, stated, "This divestiture represents a final step in our transition towards a high quality, liquid-rich asset base and positions us to fully focus our efforts on the horizontal development of our higher-return Wattenberg Field and Utica Shale assets. Our acquisition of additional acreage in the liquid-rich area of the Utica Shale demonstrates our strong commitment to the southern portion of the play. Proceeds from this sale along with internally generated cash flow and cash on the books at the beginning of the year are expected to fully fund our previously announced 2014 capital program. This transaction further strengthens our balance sheet and debt metrics, increases per-unit margins, and enhances our long-term growth profile."
For more information about related Opportunities and Key Players visit Shale Gas Projects