PDC Energy Tightens Capex, Stalls Share Buyback on Crude Woes

PDC Energy, Inc. PDCE has announced capex cuts and share repurchase deferrals in a bid to preserve cash for maintaining strong liquidity amid a possible financial crisis due to the coronavirus outbreak.

This energy player notified plans to trim its 2020 capex guidance by nearly 50% from the midpoint of its prior expectation of $1-$1.1 billion to the $500-$600 million range after reckoning the ongoing softness in commodity prices.

Further, the company’s top brass decided to retrench its employee strength on random basis and slash up to 15% salaries of personnel at the executive ranks along with tiered pay cuts for the remaining staff in light of the coronavirus-induced recession. 

This Colorado-based exploration and production company further decides to discharge its Delaware Basin drilling rig next month, indicating no drilling and completion activity in the basin for the remainder of the year. It further plans to cut back its Wattenberg rig count in May to just one. 

For the next couple of months, this second-largest oil producer in the Denver-Julesburg Basin behind Houston-based Occidental Petroleum OXY might curb its total production volumes by 20-30% due to declining Nymex pricing from its prior projection. For 2020, PDC Energy’s total production is anticipated to drop 10% whereas its oil production is expected to see a 20% fall from the year-ago figures.  

This Zacks Rank #3 (Hold) company’s 2021 capital budget is projected to be in line with the current year’s updated capex plan. However, its oil production is estimated to improve 5-10% in the period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lastly, the company expects to generate free cash flow in excess of $100 million this year, presuming the WTI crude prices to be $25 per barrel, natural gas at $2 per MMBtu NYMEX and NGL prices of roughly $5 per barrel for the rest of 2020.

Even though PDC Energy hopes to gain traction from these key endeavors, it looks to keep close tabs on the commodity price movement, aligning with the capex adjustment plans further in response to a volatile price scenario.

PDC Energy, Inc. Price

PDC Energy, Inc. Price

PDC Energy, Inc. price | PDC Energy, Inc. Quote

To save cash and sustain liquidity, various E&P players in the energy sector are resorting to capex cuts and stock-buyback suspensions. Citing the uncertainty around the coronavirus pandemic, Apache Corporation APA and Matador Resources Company MTDR among others also announced plans to restrict their capital investments.

Given the rising possibility of a depression in 2020, cash seems the king for businesses and investors. Therefore, amid the coronavirus crisis, many companies might be forced to take stringent measures for cash preservation. So, until the fog clears, investors should brace up for more capex reductions and share-buyback delays.

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Apache Corporation (APA) : Free Stock Analysis Report
 
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
 
PDC Energy, Inc. (PDCE) : Free Stock Analysis Report
 
Matador Resources Company (MTDR) : Free Stock Analysis Report
 
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