Small-Cap Stocks to Buy: PDC Energy Inc (PDCE)
PDC Energy Inc (NASDAQ:PDCE) is an independent exploration and production company with core assets in the 60,000 net acres in the Delaware Basin (Reeves County, West Texas) and 95,500 net acres in Core Wattenberg Gas Field in Colorado.
These are high-quality oil and gas deposits that will drive a 35% production CAGR from 2016 – 2019. The leverage ratio should be managed down to 1.1x from 1.7x this year. Its second quarter showed a blended 54% increase in production year-over-year. Delaware production alone was up 49% YOY. Drilling in the Permian Basin continues to drive growth and cash flow and further efficiencies could produce better-than-expected economics — often rewarded by markets.
Both projects are in good form. At Wattenberg, said drilling efficiencies have led PDCE to reduce the rig count from four to three by the end of the fiscal year. At Delaware, well costs have increased but the pilot hole program continues as does the investment in midstream.
The track record is impressive and gives confidence toward future endeavors. In 2014, PDCE did just 9.3 million boe and should reach 32-33 million for fiscal 2017. Meanwhile, operating costs during that four-year period are expected to improve 60%. The formula goes as follows: production up massively + costs down dramatically = stock outperformance.