PDC Energy expands Permian footprint with Delaware Basin deal close

On December 30, 2016, PDC Energy Inc. (Nasdaq:PDCE) closed on a deal to expand its Permian Basin footprint, acquiring approximately 4,500 net acres in Reeves and Culberson Counties, Texas, from Fortuna Resources Holdings LLC, for approximately $118 million in cash.

PDC's working interest in the acquired leasehold is 100% and PDC expects to operate 100% of the properties. The acquired properties are concentrated in the company's central acreage block contiguous with the company's acreage from the recently closed acquisition of approximately 57,000 net acres in Reeves and Culberson Counties. Current net production associated with the acquisition is approximately 300 barrels of oil equivalent per day. Also included is a drilled, but uncompleted (DUC) horizontal well, and a salt water disposal well.

Assuming $35M/Boe/d for 300 Boe/d, said Stifel analysts in a Wednesday note, the implied purchase price is ~$24M/acre, in line with recent purchases in the area, they continued.

PDC Energy estimates the acquired acreage contains 75 gross one-mile horizontal drilling locations, based on four wells per section in each of the Wolfcamp A, B and C zones. This estimate is based on the assumptions utilized by the company in its prior Delaware Basin acquisition. PDC Energy plans to integrate the newly acquired acreage into its development drilling plans for its Central acreage block.   

Financing for the deal is expected to come from existing cash and PDC’s $750 million credit facility, the analysts said, noting that the company’s balance sheet “remains strong as we project YE17 and YE18 debt/EBITDA of 1.4x and 1.0x and 2017 and 2018 interest coverage of 15.9x and 17.8x.”

Fortuna Resources Holdings LLC, is a Permian Basin focused independent oil and natural gas producer sponsored by certain affiliates of Och-Ziff Capital Management Group LLC.



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