By Oil & Gas Financial Journal staff
Denver, CO-based PDC Energy (NASDAQ: PETD) plans to enter the Utica shale play by acquiring and operating 30,000 acres spread across southeastern Ohio for an investment of roughly $50 million to $10 million in 2011 and $40 million in 2012 after a title confirmation. Funding is expected to come from the company’s revolving credit facility.
The acreage is located primarily in Noble, Monroe, Washington, Morgan and Guernsey counties of Southeastern Ohio. Of the acreage to be acquired, nearly 22,500 acres (75%) are currently held by production as a result of shallow producing wells. The company has put together a drilling program that calls for the first vertical Utica well to be drilled in 4Q11 with two more vertical test wells and two horizontal wells to be drilling in 2012.
James M. Trimble, president and CEO, stated, "These lease acquisitions are consistent with our exploration strategy to enhance shareholder value by gaining early entry into emerging oil and liquid-rich plays which are capable of contributing substantial resources to our drilling portfolio."
Ultimately, the company expects to continue its lease acquisition in the Utica with the possibility of increasing its total holdings to 80,000 - 100,000 acres by year-end 2012. Part of the acquisition strategy in the play includes searching for a joint-venture partner.
Acreage values in the play are trending higher, and the $1,600 per acre purchase price could turn out to be a bargain for PDC as the play continues to show signs of being the next “it” play, noted Global Hunter Securities (GHS) in a September 8 report citing the growth of the Eagle Ford Shale now fetching $20,000 per acre.
“PETD was one of the first natural gas companies to shift to liquids and continues on this path with the Utica containing both oil and liquids rich gas. Given the stock was at or near a 52-week low, this news has brought a lot of eye balls back to this company, and we would expect it to continue to outperform, especially given the lack of investment opportunities currently with exposure to the Utica,” noted GHS analysts.
