Analyst Actions: PDC Energy Estimates Revised at Credit Suisse

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Permian Sale Alleviates Funding Gap Concern; Revising Estimates.

We Lower Estimates on Asset Sale and 2012 Guidance: PETD announced the sale of its Permian Basin assets, consisting of ~1.3 mboe/d of production and 23 mmboe of reserve potential on 40-acre Wolfberry development for $188 million in proceeds. The company also adjusted its 2012 production guidance to 53 bcfe (from a range of 54-58 bcfe) and announced its 2012 capital budget of $284 million, inclusive of $54 million in previously announced Utica leasehold cost. As a result of the asset sale and a lower than projected liquids mix in production guidance, we lower our 2011-2013 EBITDA estimates 2%/24%/25%. We also revise our 2011/2012/2013 EPS estimates to $0.35/$0.16/$1.85 (from $0.33/$1.62/$4.36).

Additional Asset Sales in the Works: At its October analyst PETD outlined its plans to sell non-core assets including Permian and NECO assets, as well as seek a JV partner in the Utica with a goal of receiving $350-450 million in proceeds. Recent transactions in the Utica have valued leasehold at $8-13k/acre and ROSE sold gas assets in the DJ Basin in 2011, though the transaction details were not disclosed. With the Permian sale getting the company nearly half the way to the midpoint of the proceeds goal range, we are confident that PETD will achieve its goal.

Filling the Funding Gap: The 2012 capital budget of $284 million was below the $350 million budget we expected. Factoring in production guidance of 53 bcfe (prior estimate of 55.7 bcfe) we now expect PETD to outspend 2012 cash flow by $107 million. PETD had $173 million drawn on its $350 million borrowing base at the end of 3Q11. We expect PETD to exit 2011 with a 33% net debt-to-cap ratio and ~$60 million drawn on its revolver, leaving ample liquidity to fund 2012 before additional asset sales.

Valuation: PETD trades at a 10% discount to our 'PD Plus' NAV estimate of $41/sh and 6.0x our new 2012 EBITDA estimate of $222 million, compared to the Credit Suisse SMID-cap E&P group at a 24% discount and 5.3x.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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