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Why PDC Energy Is Trading Near an All-Time High

PART:
1 2 3 4 5 6
Part 5
Why PDC Energy Is Trading Near an All-Time High PART 5 OF 6

How Will PDC Energy Benefit from Its Hedging Activities?

PDC Energy’s hedging advantage

For 3Q16, net settlements on commodity derivatives increased PDC Energy’s (PDCE) revenues from crude oil, natural gas, and natural gas liquids sales by ~$48 million.

In 3Q16, excluding derivative gains, PDCE reported crude oil, natural gas, and natural gas liquids sales of ~$141 million, meaning that commodity hedging activities increased PDCE’s revenue from crude oil, natural gas, and natural gas liquids by 34%.

How Will PDC Energy Benefit from Its Hedging Activities?

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The chart above shows PDC Energy’s crude oil (USO) and natural gas (UNG) hedge positions for 4Q16, 2017, and 2018. In 4Q16, PDCE had excellent hedges in place, with a weighted average floor price of $73.92 per barrel for crude oil and $3.42 per Mcf (thousand cubic feet) for natural gas.

Overall, on September 30, 2016, PDCE had derivative coverage for ~40% of its forecast 4Q16 total production.

Other upstream companies Marathon Oil (MRO), California Resources (CRC), and W&T Offshore (WTI) had derivative coverages of ~55%, ~50%, and 28% of their forecasted crude oil productions for 4Q16, respectively.

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