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Pdc Energy Inc   (PDCE)
Other Ticker:  
 
    Sector  Energy    Industry Oil And Gas Production
   Industry Oil And Gas Production
   Sector  Energy
 


Pdc Energy Inc Segments

 
 

Business Segments III. Quarter
Revenues
(in millions $)
(Sep 30 2020)
%
(of total Revenues)
III. Quarter
Income
(in millions $)
(Sep 30 2020)
%
(Profit Margin)
Total
249.22 100 % -30.78 -

• View Income Statement • View Competition by Segment • View Annual Report

Growth rates by Segment III. Quarter
Y/Y Revenue
%
(Sep 30 2020)
Q/Q Revenue
%
III. Quarter
Y/Y Income
%
(Sep 30 2020)
Q/Q Income
%
Total
-36.21 % 357.98 % - -

• View Growth rates • View Competitors Segment Growth • View Market Share

To get more information on Pdc Energy Inc 's Total segment. Select each division with the arrow.

  Pdc Energy Inc 's

Business Segments Description



We divide our operating activities into two segments: (1) Oil and Gas Exploration and Production and (2) Gas Marketing.

Oil and Gas Exploration and Production

The results of our Oil and Gas Exploration and Production segment primarily reflect revenues and expenses from the production and sale of crude oil, natural gas, and NGLs, commodity price risk management, and well operations. The exploration for and production of crude oil, natural gas, and NGLs involves the acquisition or leasing of mineral rights and related surface rights. Prior to development of these properties, we assess the economic viability of potential well development opportunities. We then develop the reserves through the permitting, drilling and completion of oil and gas wells, which are then turned-in-line to sales and production. Following completion, we operate and maintain the producing wells while managing associated production, operating, and transportation costs. At the end of a well's economic life, the well is plugged and surface disturbances surrounding the well and producing facilities are remediated. The Oil and Gas Exploration and Production segment's most significant customers are Suncor Energy Marketing, Inc., DCP Midstream, LP ("DCP"), Aka Energy Group, LLC ("Aka"), Concord Energy, LLC, and Bridger Energy, LLC. Sales to each of these parties constitute more than 10 percent of our revenues in 2016. We believe that the loss of any purchaser or the aggregate loss of several customers could be managed by selling to alternative purchasers given the liquidity in the market for the sale of hydrocarbons.

Within the Oil and Gas Exploration and Production Segment, our crude oil, natural gas, and NGLs production is gathered, marketed and sold as follows:


Crude oil. In the Wattenberg Field, our crude oil is sold under various purchase contracts with monthly and longer term pricing provisions based on New York Mercantile Exchange ("NYMEX") pricing, adjusted for differentials. Since we do not refine any of our crude oil production, we sell to companies that either transport or resell the commodity, or process the crude oil in their own facilities. Title to the crude oil transfers at the time the crude oil leaves our lease site and is either placed in a truck or enters a pipeline. We have entered into commitments ranging in term from one month to over three years to deliver crude oil to competitive markets, resulting in improved average overall deductions of $4.39 for 2016 compared to $9.95 for 2015. During 2016, there was sufficient take away capacity in the Wattenberg Field for crude oil. This was a function of decreases in drilling activity and corresponding decreases in production from other producers, and the completion of additional crude oil pipelines to the Cushing, Oklahoma market. We believe that there will continue to be adequate take away capacity for crude oil through either pipeline or trucking options in the Wattenberg Field in the near- and mid-term. We continue to pursue various alternatives with respect to crude oil transportation, with a view toward further improving pricing and increasing the amount of crude oil transported by pipeline and limiting our use of trucking. For example, in mid-2015, we began delivering crude oil in accordance with our long term commitment to the White Cliffs Pipeline, LLC ("White Cliffs") pipeline. Our volume of crude oil sales going through the White Cliffs pipeline in 2016 was 16 percent of our Wattenberg Field crude oil production compared to 23 percent during the second half of 2015. By having a variety of off-take arrangements, we seek to optimize our marketing to result in the best possible net realized price per barrel. The White Cliffs agreement is one of several we have entered into to facilitate deliveries of a portion of our crude oil to the Cushing, Oklahoma market. In addition to the White Cliffs agreement, we have signed a long-term agreement with Saddle Butte Rockies Midstream, LLC for gathering of crude oil at the wellhead by pipeline from several of our producing pads in the Wattenberg Field, with a view toward minimizing truck traffic, increasing reliability, reducing the overall physical footprint of our well pads, and reducing emissions. We began delivering crude oil into this pipeline during the fourth quarter of 2015. The system became fully operational in 2016 and we did not experience any subsequent curtailment of operations due to lack of takeaway capacity for crude oil in the basin. We do not expect to experience any curtailments in 2017.

In the Delaware Basin, our crude oil production is sold at the wellhead and transported via trucks to pipelines that deliver the oil to the Midland, Texas, crude oil market. Given the increased level of activity in the form of acquisitions, leasing, and the increases in rig count in the Delaware Basin over the last six months, we expect the balance between production and pipeline takeaway capacity to tighten during 2017. At the current time, there are pipeline, truck and rail pathways out of the basin, all of which are available to us. We are evaluating near-term and longer-term solutions that contemplate the increased activity levels we expect, as well as our anticipated future production. These may include longer-term sales agreements.

In the Utica Shale, crude oil and condensate is sold to local purchasers at each individual well site based on NYMEX pricing, adjusted for differentials, and is typically transported by the purchasers via truck to local refineries, rail facilities, or barge loading terminals on the Ohio River. To date, we have not experienced any significant issues with take away capacity in this region for our crude oil.


Natural gas. We sell substantially all of our natural gas to midstream service providers and marketers. We have entered into firm gathering and processing agreements for all of our natural gas production in the Wattenberg Field to ensure there is infrastructure available to process the gas and deliver our product to market. In the Wattenberg Field, the majority of our leasehold is dedicated to our primary midstream provider, DCP, which gathers and processes natural gas produced in the basin and sells our residue gas to various markets. We also sell natural gas into a system owned and operated by Aka, and have committed production from dedicated acreage and a drilling program with a specific number of wells to be drilled and completed by the end of 2017. Pursuant to the agreement, Aka is required to install and operate, or contract for the use of, facilities necessary to receive and purchase the production volumes committed under the agreement.

In the Wattenberg Field, title to the natural gas transfers at the custody transfer meter located at our wellheads, except when we have multiple wells being gathering to a common pad, in which case the natural gas is sold as it passes through the custody transfer meter located on our well pads after water and crude oil have been separated from the natural gas stream. Our Wattenberg Field natural gas is transported through third-party gathering systems and pipelines where we incur gathering, processing, and transportation expenses via percent-of-proceeds ("POP") contracts whereby the gatherer/processor markets the natural gas and NGLs on a best efforts basis and then retains a portion of the revenue attributable to the residue gas and NGL sales. Substantially all of the natural gas that we produce in the Wattenberg Field is sold by the midstream service providers and is priced based on Colorado Interstate Gas ("CIG") or local distribution company monthly/daily pricing provisions. There have been periods in the past where transportation of natural gas was a significant issue, however, such has not been the case recently based on pipeline and development activity by midstream providers, as well as relatively decreased activity levels by other operators in the other areas of the Wattenberg Field. We anticipate gathering system pressures to vary throughout the year, with increases coinciding with the warmer summer months. We plan for these increases and work with our mid-stream providers to manage production during these times. There was a new processing plant built in the portion of the Wattenberg Field in mid-2015 that provided significant relief and when coupled with the overall decrease in activity in the field near our operations, we did not experience any curtailments in 2016. We recently signed a contract to support a midstream provider's construction of an additional processing plant in the area. This midstream provider expects the plant to be placed into service towards the end of 2018. If the midstream provider is delayed in its expansion efforts, we could experience higher line pressures which could impact our production volumes. In 2016, approximately 90 percent of our production in the Wattenberg Field was delivered from horizontal wells, with the remaining 10 percent coming from vertical wells. The horizontal wells are less prone to issues than the vertical wells in that they are newer and have greater producing capacity and higher formation pressures and therefore tend to be more resilient from periodic gas system pressure issues. Based on the expected activity levels and production in the region coupled with the current and committed construction activities in the area, we anticipate that we will have adequate takeaway capacity in the region for the next few years.

In the Delaware Basin, title to the natural gas transfers at the delivery point off of our gathering systems. In certain cases, we are paid the total value of the natural gas and the value of the NGLs processed by the purchasers, and we pay specific processing costs or fees. In other cases, we incur gathering, processing, and transportation expenses via POP contracts whereby the gatherer/processor retains a portion of the revenue attributable to the residue gas and NGL sales. Our Delaware Basin midstream service providers sell the residue gas at prices based on indexed prices per MMBtu using either the Waha or El Paso Permian monthly and daily price provisions. These index prices are established monthly and daily in the gas trading market, and represent the value of the natural gas delivered to the NYMEX Henry Hub delivery point, net of the transportation and margin embedded in the basis differential.

In the Utica Shale, natural gas produced in our northern acreage is gathered and processed pursuant to a firm gathering and processing agreement with MarkWest Utica EMG ("MarkWest") under a fee based contract, while natural gas produced in our southern acreage is gathered and processed by Blue Racer Midstream LLC ("Blue Racer"), also under a fee based contract. As a result, we receive the full revenue stream attributable to the residue gas and NGL sales, less the applicable gathering and processing fees. The natural gas sales from both the Blue Racer plant and the MarkWest plant are based on TETCO M-2 index pricing per MMbtu delivered to the plant. We anticipate that the significant Appalachian pipeline differentials that impact our Utica Shale natural gas, which make economics challenging, will continue to be highly volatile into 2017.


NGLs. Our NGL sales are priced based upon the components of the product and are correlated to the price of crude oil. In the Wattenberg Field, all of our NGLs are sold by the midstream service provider at the tailgate of the processing plants based on a combination of prices from the Conway hub in Kansas and Mt. Belvieu in Texas where the NGLs are marketed.

As noted above, the value of the NGLs extracted from the natural gas by our midstream providers in the Delaware Basin is based on processing contracts. Based on the percentage of NGLs in the natural gas stream, we receive the net proceeds of the NGLs processed by the midstream providers as sold into the Mt. Belvieu market.


In the Utica Shale, our NGLs are fractionated and marketed by MarkWest and Blue Racer and sold based on month-to-month pricing in various markets. Our NGL production is sold by our midstream service providers under both short- and long-term contracts.

Gas Marketing

Our Gas Marketing segment is comprised solely of the operating activities of our wholly-owned subsidiary Riley Natural Gas ("RNG"). RNG specializes in the purchase, aggregation, and sale of natural gas production in the Appalachian Basin. The natural gas is marketed to third-party marketers, natural gas utilities, and industrial and commercial customers through transportation services provided by regulated interstate/intrastate pipeline companies. RNG is party to long-term firm transportation, sales, and processing agreements for pipeline capacity through August 2022. RNG acquired these firm transportation rights and associated agreements at a time when PDC owned operating interests in oil and natural gas wells through a joint venture in the Appalachian Basin referred to as PDCM. Although PDC sold its interest in PDCM in 2014, RNG retained the majority of its firm natural gas transportation commitment. Financial results from our gas marketing segment have resulted in an operating loss contribution of $1.5 million, $0.8 million, and $0.4 million, for 2016, 2015, and 2014, respectively.

   

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