DENVER, Aug. 4, 2011 (GLOBE NEWSWIRE) -- Petroleum Development Corporation (dba PDC Energy) ("PDC" or the "Company") (Nasdaq:PETD) today reported its second quarter 2011 operating and financial results.

Second Quarter 2011 Highlights
  • The Company reported net income from continuing operations for the quarter ended June 30, 2011 of $9.2 million, or $0.39 per diluted share. The adjusted net loss attributable to shareholders, a non-GAAP financial measure defined below, for the second quarter 2011 was $2.4 million, or $0.10 per diluted share.
  • Production from continuing operations increased 21% to 11.0 billion cubic feet equivalent ("Bcfe") in the second quarter 2011, compared to 9.0 Bcfe in the second quarter 2010.
  • The Company drilled a total of 41.6 net wells during the second quarter 2011, compared to 44.2 net wells drilled in the same 2010 period.
  • PDC closed its acquisition of the 2005 partnerships for $43.0 million in the second quarter of 2011, and announced its offer to repurchase all of the 2003 partnerships and the single 2002-D partnership. The Company expects to close the repurchase of this next group of partnerships in the fourth quarter 2011.

James M. Trimble, President and Chief Executive Officer, stated, "We were extremely pleased with our results from ongoing operations in the second quarter. Production is increasing from all of our core areas and our drilling program is on target with the upwardly revised capital budget we recently announced. We are also on target to complete our accelerated partnership repurchase program by the end of 2012."

Financial Results

Natural gas, natural gas liquids ("NGLs") and crude oil sales revenues for the second quarter 2011 increased 48% to $72.2 million, from $48.7 million for the same 2010 period. The average sales price of natural gas, NGLs and crude oil in the second quarter 2011, including realized gains and losses on derivatives, increased 8% to $6.75 per thousand cubic feet equivalent ("Mcfe") in the second quarter 2011 compared to $6.26 per Mcfe in the second quarter 2010 and increased 10% compared to $6.16 per Mcfe for the first quarter 2011.

The average sales price for natural gas, NGLs and crude oil, excluding realized gains and losses on derivatives, for the second quarter 2011 was $6.58 per Mcfe, an increase of 22% from $5.39 per Mcfe for the same quarter 2010, and a 13% increase compared to $5.82 per Mcfe for the first quarter 2011.

Adjusted cash flows from operations, a non-GAAP financial measure defined below, was $34.1 million for the second quarter 2011, compared to $28.8 million for the second quarter 2010 and $26.1 million for the first quarter 2011. The increase in second quarter 2011 over second quarter 2010 was attributable to increased production volumes and stronger commodity prices.

Commodity price risk management activities contributed a gain of $20.5 million for the second quarter 2011. The gain was comprised of a $1.8 million realized gain and an $18.7 million unrealized gain. For the second quarter 2010, commodity price risk management resulted in a gain of $12.3 million, which was comprised of a $7.9 million realized gain and a $4.4 million unrealized gain.

Production costs increased 23% to $19.7 million, or $1.79 per Mcfe for the second quarter 2011, compared to $16.0 million, or $1.77 per Mcfe for the second quarter 2010. The increase was primarily attributable to increased production during the second quarter 2011, including production from the Permian Basin properties which were acquired in July and November 2010. Production taxes, which fluctuate with natural gas, NGL and crude oil revenues, increased 88% to $4.7 million in the second quarter 2011, compared to the same quarter 2010. The increase was primarily related to higher ad valorem rates in new areas of production and the increase in natural gas, NGL and crude oil sales in the second quarter of 2011.

Depreciation, depletion and amortization ("DD&A") expense related to natural gas and crude oil properties for the second quarter 2011 increased 23% to $31 million, from $25.2 million in the second quarter 2010. The increase was driven primarily by an increase in production. DD&A expense per Mcfe increased to $2.82 per Mcfe from $2.78 per Mcfe, in the respective quarter in 2010. Total DD&A expense for the second quarter 2011 was $32.7 million compared to $26.9 million for the second quarter 2010.

The Company's exploration expense decreased from $3.8 million in the second quarter 2010 to $1.7 million in the second quarter 2011. Exploration expense in the second quarter 2010 included dry hole costs related to an exploratory well in northeastern Colorado, and costs related to several deep exploratory zone tests in the Piceance Basin.

General and administrative expenses increased to $19.5 million in the second quarter 2011, from $9.9 million in the same 2010 period. The increase was primarily attributable to an increase in payroll and payroll related expenses of $7.3 million, of which $6.7 million was related to a separation agreement with the Company's former chief executive officer.

Interest expense increased $1.4 million to $9.1 million in the second quarter 2011, from $7.7 million in the same period of 2010, primarily related to an increase in debt issuance amortization expense, as well as a higher average outstanding debt balance. The increase in the outstanding debt balance was primarily related to the Company's November 2010 convertible debt issuance; however, this increase was reduced in part by a reduction in outstanding borrowings under PDC's bank credit facility. Debt to book capitalization was 33% at June 30, 2011.

Gas and Oil Sales and Production

Second quarter 2011 production was 11.0 Bcfe, a 21% increase compared to 9.0 Bcfe for the second quarter 2010. The increase in second quarter 2011 production was primarily attributable to production growth in the Wattenberg Field and Appalachian Basins, and the acquisition of the Permian Basin assets and multiple partnerships in the second half of 2010. The increase in second quarter 2011 production drove the 48% increase in natural gas, NGL and crude oil sales for the second quarter 2010.

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