PDC Energy To Bulk Up Niobrara Portfolio With Merit Energy Deal

To buy 35,000 net acres in CO Wattenberg Field in Weld & Adams cos., gaining 2,800 BOE/d, 29.2 MMBOE proved.

PDC Energy, Denver, (Nasdaq: PETD) plans to acquire Colorado Wattenberg Field assets from privately held, Dallas-based Merit Energy Co. for approximately $330.6 million.

The assets are almost entirely in the core Wattenberg Field of Weld and Adams counties, Colorado, and are approximately 94% operated. The acquired assets include an estimated 35,000 net acres featuring approximately 700 wells producing primarily from the Niobrara and Codell formations. The acquired leasehold is 100% held by production and has an average working interest of approximately 93% (81% average net revenue interest).

Net production is approximately 2,800 barrels of oil equivalent per day. Net proved reserves as of year-end 2011 was 29.2 million barrels of oil equivalent (58% oil and gas liquids, 54% proved developed).

Upside includes 180 gross proven plus probable horizontal Niobrara drilling locations on the acquisition properties using current PDC spacing methodology of five gross (four net) wells per 640-acre section. The company anticipates the acquired horizontal Niobrara acreage will deliver, on a gross well basis, reserves of 300,000 to 500,000 barrels of oil equivalent per well and generate an estimated $4- to $8 million of present value per well.

A significant portion of the leasehold is in close proximity to PDC's current position in the core Wattenberg Field which should provide opportunities for operational, midstream and marketing synergies.

Pro forma, PDC’s Wattenberg leasehold position is estimated to increase to about 109,000 net acres (103,000 net acres in the Core Wattenberg) with a current combined inventory of 546 gross liquid-rich horizontal Niobrara drilling locations. Net production from Wattenberg is estimated to increase to approximately 15,600 barrels equivalent per day (60% liquids). Net proved reserves from Wattenberg are estimated to increase to 106 million barrels equivalent (60% liquids).

PDC president and chief executive James Trimble says, “This core Wattenberg acquisition provides substantial upside opportunities and is a significant step toward completing our transition to a liquid-rich company. We now have the capability to reach a 50% liquids production mix over the next several years.”

The effective date of the transaction is April 1 with closing currently scheduled for June 29.