PDC cuts 2020 capital expenditure by 50% from original budget

PDC Energy Inc., Denver, plans to reduce its 2020 capital investments to $500-600 million, a 50% decrease compared to its original budget, and further reduce planned drilling and completion activity. 

In the Delaware basin, the company plans to release its drilling rig in May, resulting in zero drilling and completion activity in the basin for the remainder of the year as its completion crew was released in March.

In the Wattenberg, the company will reduce its rig count to one from three in May. The remaining rig is currently expected to run for the rest of 2020. The completion crew will be released upon completion of the current pad, with the expectation of resuming completions early in the fourth quarter.

The company currently expects to curtail 20-30% of its anticipated May and June production volumes, on a barrel of oil equivalent basis, in response to decreases in NYMEX pricing and widened differentials.

Production for the year, compared to pro forma 2019 volumes, is expected to decrease 10% on a boe basis and 20% on an oil basis. Both figures reflect the impact of the reductions in completion activity and production curtailments, with the assumption that curtailments are reduced in the third quarter and eliminated by the fourth quarter.

The company expects to generate more than $100 million of free cash flow in 2020 assuming $25/bbl WTI crude oil, $2/MMBtu NYMEX natural gas, and NGL realizations of $5/bbl for the remainder of the year.

Additionally, PDC is implementing payroll and non-payroll general and administrative expense initiatives, including a 15% voluntary pay cut to its senior management team and board of directors, layoffs, and tiered pay cuts for many of the remaining employees.