EX-99.1 2 ppt20100312.htm SLIDE PRESENTATION 2010 ANALYST DAY ppt20100312.htm
NASDAQ:PETD
PETROLEUM DEVELOPMENT
CORPORATION
Analyst Day
March 12, 2010
 
 

 
See Slide 2 regarding Forward Looking Statements
The following information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements are based on Management’s current expectations and beliefs, as well as a number
of assumptions concerning future events.
These statements are based on certain assumptions and analyses made by Management in light of its experience and its
perception of historical trends, current conditions and expected future developments as well as other factors it believes are
appropriate in the circumstances. However, whether actual results and developments will conform with Management’s
expectations and predictions is subject to a number of risks and uncertainties, general economic, market or business
conditions; the opportunities (or lack thereof) that may be presented to and pursued by Petroleum Development Corporation;
actions by competitors; changes in laws or regulations; and other factors, many of which are beyond the control of Petroleum
Development Corporation.
You are cautioned not to put undue reliance on such forward-looking statements because actual results may vary materially
from those expressed or implied, as more fully discussed in our safe harbor statements found in our SEC filings, including,
without limitation, the discussion under the heading “Risk Factors” in the Company’s 2009 annual report on Form 10-K and in
subsequent Form 10-Qs.
All forward-looking statements are based on information available to Management on this date
and Petroleum Development Corporation assumes no obligation to, and expressly disclaims any obligation to, update
or revise any forward looking statements, whether as a result of new information, future events or otherwise.
The SEC permits oil and gas companies to disclose in their filings with the SEC only proved reserves, which are reserve
estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. The Company uses in this presentation the terms
“probable” and “possible” reserves. Probable reserves are unproved reserves that are more likely than not to be recoverable.
Possible reserves are unproved reserves that are less likely to be recoverable than probable reserves. Estimates of probable
and possible reserves which may potentially be recoverable through additional drilling or recovery techniques are by nature
more uncertain than estimates of proved reserves and accordingly are subject to substantially greater risk of not actually being
realized by the Company. In addition, the Company’s reserves and production forecasts and expectations for future periods are
dependent upon many assumptions, including estimates of production decline rates from existing wells and the undertaking and
outcome of future drilling activity, which may be affected by significant commodity price declines or drilling cost increases.
This material also contains certain non-GAAP financial measures as defined under the Securities and Exchange Commission
rules.
Disclaimer
2
 
 

 
See Slide 2 regarding Forward Looking Statements
3
Welcome
 Peter G. Schreck
 Vice President - Finance and Treasurer
 
 Introductions
  Richard W. McCullough
  Chairman and Chief Executive Officer
 
  Barton R. Brookman
  Senior Vice President - Exploration and Production
  Gysle R. Shellum
  Chief Financial Officer
 
  Lance A. Lauck
  Senior Vice President - Business Development
See Slide 2 regarding Forward Looking Statements
 
 

 
See Slide 2 regarding Forward Looking Statements
Rick McCullough
Chairman & Chief Executive Officer
4
 
 

 
See Slide 2 regarding Forward Looking Statements
(1) Appalachian Basin (Marcellus and Shallow Devonian) JV
(2) EBITDAX and Cash Flow estimates as per analyst consensus
(3) From 3/1 to 2/28
 Petroleum Development Corporation is an
 independent oil and natural gas company
 with operations primarily in the Rocky
 Mountain region, Appalachian Basin and
 Michigan Basin
 PDC was founded in 1969 in Bridgeport, WV
 and is now headquartered in Denver, CO
Enterprise Value
Capitalization
Corporate Profile
5
2008
2009
Share Price (3/09 and 3/10)
$9.70
$22.61
Diluted Share Outstanding
(MM)
 14.8
 19.2
Market Capitalization ($MM)
$144
$435
Net debt total @ year-end
 344
 249
Minority Interest @ year-end
 -
 48
Enterprise Value
$488
$731
52-Week High ($/share) (3)
$78.35
$24.65
52-Week Low ($/share) (3)
$11.73
$9.70
Corporate Summary
2008
2009
Net Debt Total @ year-end
$344
$249
Common Equity
  512
  491
Minority Interest (1)
  1
  48
Total Capitalization ($MM)
$856
$787
Debt Ratios:
Debt/EBITDAX (LTM) (2)
 1.70x
 1.54x
Senior Debt/EBITDAX (LTM) (2)
 0.85x
 1.10x
EBITDAX/ Interest Net (LTM)
(2)
 8.4x
 4.9x
Debt/Book Cap
44%
34%
PDC increased its market capitalization
by 202% since last year’s analyst
meeting
 
 

 
See Slide 2 regarding Forward Looking Statements
6
2009 PLANS:
PROVIDED AT MARCH 2009 ANALYST DAY
MEETING
Implementing an internal strategic reassessment process
  Measuring activities based on their contribution to shareholder value
  Entire company involved
  Will drive future decision making
 
Review of all major elements of cost
Basin by basin operational enhancement review
  Costs; logistics; marketing
2009 Theme - cost control and operational enhancements
2009 Capex will be reduced with intensified focus on:
  Capital cost improvements
  Production engineering / production optimization
  LOE improvements
 
 

 
See Slide 2 regarding Forward Looking Statements
7
2009 PLANS:
PROVIDED AT JULY 2009 ANALYST DAY
MEETING
Scale and Cost Control
  Control / reduce CAPEX/OPEX through strategic negotiations
  Gain scale / mediate cost sensitivity in basins which are highly
 sensitive to commodity pricing (particularly Wattenberg)
 
Alternative Capital Sources
  Pursue joint ventures in emerging Shale plays
  Position the Company financially to capitalize on strategic alternatives
 which could drive shareholder value creation
 
Financial Focus
  Implement long-term hedging strategy to mitigate risk and solidify
 value preservation
 
Diversify and Increase Projects
  Continue to monitor/assess acquisition and divestiture opportunities,
 and enhance A&D capabilities
 
 
 

 
See Slide 2 regarding Forward Looking Statements
 Goal
8
REVIEW OF 2009 GOALS:
HOW DID WE DO?
 Results
1
Liquidity target at year-end of >$155 MM
2
Cash flow per share target of >$7.20/share
3
Scale and cost control:
*
~15% - 20% reduction in oil and gas production and well operations
cost/Mcfe
*
12% reduction in G&A expenses per Mcfe
4
Alternative capital sources:
*
Pursue joint ventures
*
Balance sheet strength and liquidity at year-end
5
Financial focus:
*
Opportunistic hedging implementation; at March 2009 hedge
position of 70% for 2010 and 30% for 2011
*
Minimize loss of bank borrowing base size
6
Diversify and increase projects:
*
Position Company to pursue project diversification
1
Liquidity of $257 MM
2
Cash flow per share of $10.35 with greater shares outstanding than
forecasted
3
Scale and cost control:
*
From $2.05/Mcfe to $1.50/Mcfe, down ~$27%
*
29% increase from $0.97/Mcfe to $1.25/Mcfe due to non-recurring
expenses; 2010 reduction of ~7.5%
4
Alternative capital sources:
*
Closed ~$160 MM PDC Mountaineer JV on 10/1/09
*
~$100MM of liquidity improvement, and improvement in balance
sheet leverage and coverage measures
5
Financial focus:
*
Hedging contributed over $100MM to revenue in 2009; solid hedge
position (60% - 80%) for 2010-2013 significantly insulates results from
commodity price volatility
*
$305 MM - despite low price environment and JV asset contribution
maintained levels
6
Diversify and increase projects:
*
Net headcount flat at 326 full-time employees, yet created business
development department; added SVP and support staff
 
 

 
See Slide 2 regarding Forward Looking Statements
What to Expect for 2010?
 Allocation of drilling capital to all of PDC’s major core
 basins
 
 Potential expansion of drilling in Wattenberg Field and
 Piceance Basin
 
 Potential repurchase of Limited Partner’s interest in
 Partnerships
 
 Pursuit of small asset acquisitions
 Continue focus on increase in shareholder value
9
 
 

 
See Slide 2 regarding Forward Looking Statements
2010 Metric Targets
Metric
Target Range
Adjusted Cash Flow per Share
$7.25 - $8.45
Capital Efficiency
225% - 300%
TTM Operating and G&A Expense per Mcfe
$2.40 - $3.30
Reserve Replacement
200% - 300%
Production Volumes
33,900 - 39,300
10
 
 

 
See Slide 2 regarding Forward Looking Statements
11
For Debt/Market Cap:
* Price, market capitalization as of 3/4/2010.
(1) Per EnerCom, at 12/31/09.
 
 

 
See Slide 2 regarding Forward Looking Statements
Bart Brookman
SVP - Exploration and Production
12
 
 

 
See Slide 2 regarding Forward Looking Statements
2010 Operational Themes
 CAPEX investment will be reestablished in all major
 operating basins; returns forecasted to exceed minimum
 return thresholds
 Continued focus on achieving operational efficiencies
 and reserve enhancements
 Continued focus on production and PDP optimization
 Determination of a prospective Midstream strategy for
 each operating area
 Investment and development of Marcellus acreage
 through PDC Mountaineer JV
 Approved exploration projects should provide opportunity
 to enhance long-term reserve / production potential
13
 
 

 
See Slide 2 regarding Forward Looking Statements
Core Operating Regions
See Slide 2 regarding Forward Looking Statements
2009 Proved Reserves: 641 Bcfe
2009 Production:            37.8 Bcfe  
2010E Production:          31.0 Bcfe
Rocky Mountains
2009 Proved Reserves: 15 Bcfe
2009 Production:            1.4 Bcfe
2010E Production:          1.3 Bcfe
Michigan Basin
2009 Proved Reserves*:   61 Bcfe
2009 Production:               4.1 Bcfe
2010E Production:             3.4 Bcfe
Appalachian Basin
2009 Proved Reserves
717 Bcfe
Appalachian Basin (9%)*
2009 Production
43.3 Bcfe
Michigan
Basin (3%)
Appalachian Basin (9%)
Rocky
Mountains (87%)
*Appalachian Basin includes 100% of PDC Mountaineer, LLC Reserves at Year-End 2009
14
 
 

 
See Slide 2 regarding Forward Looking Statements
Operating Highlights
2009 Drilling Activity
Gross Wells Drilled   100
Net Wells Drilled    79
Net Development   71
Net Exploratory   8
Planned 2010 Drilling Activity
Gross Wells   252
Net Wells   204
15
 2009 Production increased
 12% to 43.3 Bcfe
 2009 Proved Reserves
 decreased 5% to 717 Bcfe
Annual Drilling Activity
2010E
 
 

 
See Slide 2 regarding Forward Looking Statements
Net Production
Partnership
Buybacks
Aceite
Acquisition
Castle
Acquisition
End of
Partnership
Drilling
65%
CAPEX
Reduction
Marcellus
Joint
Venture
Significant
Increase in
Drilling
Activity
Piceance
Divestiture
EXCO
Acquisition
Unioil
Acquisition
 **2004-09 CAGR of 27%**
16
 
 

 
See Slide 2 regarding Forward Looking Statements
17
Quarterly Net Production
2010 Production Guidance
 E
 
 

 
See Slide 2 regarding Forward Looking Statements
Production by Area
(Bcfe)
18
Area
2008
2009
% Increase/
(Decrease)
2010E
% Increase/
(Decrease)
Wattenberg
15.4
16.3
6%
14.1
-13%
Piceance
12.5
15.8
26%
11.9
-25%
NECO
5.0
5.3
6%
4.6
-11%
Appalachia
3.9
4.1
5%
3.4
-17%
Other (ND, TX, WY, MI)
1.9
1.8
5%
1.7
-11%
TOTAL
38.7
43.3
12%
35.7
-18%
Bcfe = One billion cubic feet of natural gas equivalent.
 
 

 
See Slide 2 regarding Forward Looking Statements
Well Summary
19
Operating Area
YE2009
Gross Wells
2009 Gross
Wells Drilled
2009 Net
Wells Drilled
2010 Gross
Wells Planned
Wattenberg
1,484
82
65
180
Piceance
306
1
1
21
NECO
717
8
4.5
25
Appalachia
2,251
8
8
26
Michigan
215
0
0
0
Other
17
1
0.5
4
Total
4,990
100
79
252
 
 

 
See Slide 2 regarding Forward Looking Statements
Total Proved Reserves
by Area at Year-End 2009
717 Bcfe
 
 

 
See Slide 2 regarding Forward Looking Statements
Reserve Summary
at Year-End 2009
753 Bcfe
Revisions &
Pricing
Adjustments
Drops /
Scheduling
Adjustments
Production
Adds /
Extensions
Revisions, LOE
Improvements,
Operations
 
 

 
See Slide 2 regarding Forward Looking Statements
22
Proved Reserves
at Year-End 2009
 Proved reserves declined 5% from 2008 levels
 PDP declined 6% from 2008, however, 58% of production was replaced despite a
 significant reduction in CAPEX for 2009
 New SEC valuation methodology for commodity pricing and 5-year PUD booking
 rules impacted 2009 year-end reserves
 New SEC methodology for resource bookings, cost improvements, and operational
 results provided growth in certain areas
 Conservative booking of Marcellus reserves
(1) Independent reserve engineer’s estimates.
  Summary Reserve Data  
Proved Reserves (Bcfe)(1)
  Area
2008 YE
2009 YE
  % Growth
 % Developed
% Natural Gas
Rockies
620
641
3%
35%
83%
Appalachia
113
61
(46%)
90%
100%
Michigan
20
15
(25%)
100%
98%
Total
753
717
(5%)
41%
85%
 
 

 
See Slide 2 regarding Forward Looking Statements
Proved Reserves
by Area at Year-End 2009 (Bcfe)
23
Area 
2008
2009
2008
2009
2008
2009
2008
2009
Wattenberg
79
89
1
1
119
140
199
230
Piceance
107
103
6
0
260
275
373
378
NECO
40
31
3
0
5
0
48
31
Appalachia
53
42
21
13
39
6
113
61
Other
20
16
0
1
0
0
20
17
TOTAL
299
281
31
15
423
421
753
717*
% Total Proved
40%
39%
4%
2%
56%
59%
100%
100%
Bcfe = One billion cubic feet of natural gas equivalent.
* Using year-end spot pricing methodology, as was used at year-end 2008, total reported reserves would have been 811 Bcfe.
 
 

 
See Slide 2 regarding Forward Looking Statements
3P Reserves(1)
by Area at Year-End 2009 (Bcfe)
24
Proved + Probable
+ Possible
 Area
2008
2009
2008
2009
2008
2009
Wattenberg
199
230
236
305
241
332
Piceance
373
378
486
449
538
465
NECO
48
31
57
31
74
31
Appalachia
113
61
126
113
136
145
Other
20
17
20
17
20
17
TOTAL
753
717
925
915
1,009
990
Bcfe = One billion cubic feet of natural gas equivalent.
(1) 3P estimates are non-SEC.
 
 

 
See Slide 2 regarding Forward Looking Statements
25
Lifting Cost Improvements
Twelve Months
Ended
December 31, 2008
Twelve Months
Ended
December 31, 2009
2009
Improvement %
Direct Well Expenses
$0.84
$0.59
30%
Indirect Well Expenses
$0.23
$0.24
-4%
Lifting Cost ($ per Mcfe)
$1.07
$0.83
22%
 
 

 
See Slide 2 regarding Forward Looking Statements
Acreage Inventory
Area
Lease Gross
Acres
PDC Net Acres
Net Developed
Acres
Net Undeveloped
Acres
State
Wattenberg
72,200
64,900
45,500
19,400
Colorado
Piceance
8,000
8,000
2,700
5,300
Colorado
NECO
127,100
105,100
19,600
85,500
Colorado/Kansas
Appalachia
120,900
117,600
106,800
10,800
WV / PA
Marcellus Shale*
57,500
57,500
2,400
55,100
WV / PA
Michigan
26,800
23,300
14,800
8,500
Michigan
New York
18,700
15,900
0
15,900
New York
North Dakota
66,800
30,200
4,600
25,600
North Dakota
Wyoming
19,500
19,300
100
19,200
Wyoming
Texas Barnett
8,900
6,000
400
5,600
Texas
Total
468,900
390,300
194,500
195,800
26
* A subset of Appalachian Basin Shallow Devonian - Net and gross acres included in Appalachia totals.
 
 

 
See Slide 2 regarding Forward Looking Statements
Net Capital Budget
27
(1) Subject to bi-annual approval by PDC Mountaineer Board of Directors. 2010 CAPEX funded by PDC Mountaineer
 partner, PDC has no capital investment obligation.
 
 

 
See Slide 2 regarding Forward Looking Statements
28
Marcellus
16 Verticals
10 Horizontals
Shallow Devonian
50 Recompletes
29 Workovers
NECO
25 New Drills
50 Workovers
Wattenberg
180 New Drills
-138 Operated New Drills
-42 Non-Op New Drills
12 Refracs/Recompletes
Piceance
21 New Drills
-11 Mesa
-10 Valley
See Slide 2 regarding Forward Looking Statements
PDC has over 2,200 identified
projects in Inventory
 
 

 
See Slide 2 regarding Forward Looking Statements
Development CAPEX Summary
29
1. December Price Strip.
2. Adjusted For Net 2010-11 Capital Carryout of ($5MM).
Anticipated IRR for 184.8 CAPEX is 32%.
 
 

 
See Slide 2 regarding Forward Looking Statements
Operations Forecast Comparison
2009
2010E
% Change
Total Net Production (Bcfe)(1)
43.3
35.7
-18%
Gross Exit Rate (MMcfe/d)
187
185
-1%
Net Exit Rate (MMcfe/d)
107
106
-1%
Net Development Capital (MM$)
$79
$127
61%
Gross Number of Drilling
Projects
100
252
152%
Gross Number of Other
Projects
38
62
63%
30
(1) 12% production decrease excluding impact of PDC Mountaineer JV.
 
 

 
See Slide 2 regarding Forward Looking Statements
31
Wattenberg Field
 
 

 
See Slide 2 regarding Forward Looking Statements
Wattenberg Field
  
 Gross operated wells  1,410
 Undeveloped acreage  19,400
 Undeveloped, gross, locations   1,533
 831 total net PDC
 - PUD   373
 - Probable     315
 - Possible    141
 - Subeconomic Resources
   2
 Other considerations:
  On March 5th acquired 47 wells producing 1MMcfe/d
 from Suncor through preferential right.
  Technical improvements on fracs continue to enhance
 project production performance.
  DCP recently announced major pipeline expansion.
32
 
 

 
See Slide 2 regarding Forward Looking Statements
Key Economic Parameters:
Wattenberg Field - Codell/Niobrara
 Reserves per Well*
 0.287 Bcfe
 IP Rate*
 113 Mcf/d, 24 Bbl/d
 Gross Cost per Well
 $575K D&C
 Average PUD Working Interest
 77%
 Net Revenue Interest
 61%
 Operation Cost/Well/Month
 $791
 Well Life*
 34 Years
33
*NE Codell/Niobrara type curve.
 
 

 
See Slide 2 regarding Forward Looking Statements
34
2009
2010E
% Change
Total Net Production (Bcfe)
16.3
14.1
-13%
Net Exit Rate (MMcfe/d)
41.2
42.2
2%
Developmental Capital (MM$)
48.7
$87.6
80%
Drilling Projects, Gross (Net)
82 (65)
180 (143)
120% (120%)
Other Projects, Gross (Net)
10 (9)
12 (11.5)
20% (28%)
2010 Planned Development:
Wattenberg Field
 
 

 
See Slide 2 regarding Forward Looking Statements
35
Piceance Basin
 
 

 
See Slide 2 regarding Forward Looking Statements
Piceance Basin
 Gross operated wells   288
 Undeveloped acreage   5,300
 Undeveloped, gross, 10 acre locations 433
 362 total net PDC
 Number of net remaining locations
 - PUD    243
 - Probable    63
 - Possible     14
 - Subeconomic Resources
   42
 Other considerations:
  Anticipate dramatic improvements in 2010 lifting cost
 due to water disposal projects.
  Reserve upside due to mega fracs under technical
 review.
  Deep test of Niobrara/Mancos underway.
36
 
 

 
See Slide 2 regarding Forward Looking Statements
Key Economic Parameters:
Piceance Basin
 Reserves per Well*
 1.483 Bcfe
 IP Rate*  
 1082 Mcfe/d
 Gross Cost per Well 
 $1.8 MM
 Average PUD Working Interest
  84%
 Net Revenue Interest 
 71%
 Operation Cost/Well/Month
 $3,500
 Well Life*  
 43 Years
*Mesa type curve.
 
 

 
See Slide 2 regarding Forward Looking Statements
38
2009
2010E
% Change
Total Net Production (Bcfe)
15.8
11.9
-25%
Net Exit Rate (MMcfe/d)
34.1
34.5
1%
Developmental Capital (MM$)
20.7
$34.8
68%
Drilling Projects, Gross (Net)
1 (1)
21 (21)
2,100%
2010 Planned Development:
Piceance Basin
 
 

 
See Slide 2 regarding Forward Looking Statements
39
NECO Area
 
 

 
See Slide 2 regarding Forward Looking Statements
40
NECO Area
 Gross operated wells at year end 489
 Undeveloped acreage   85,500
 Undeveloped locations   319
 Number of remaining net locations  297
  PUD    0
  Probable    0
  Possible    0
  Subeconomic Resources 
  297
 Other considerations:
  Recent exploration oil test in Lansing Kansas City
 formation a success.
  2nd test planned in 1st half 2010.
 
 

 
See Slide 2 regarding Forward Looking Statements
Key Economic Parameters:
NECO Area
 Reserves per Well*
 0.188 Bcfe 
 IP Rate*
 86 Mcf/d
 Gross Cost per Well
 $189K
 Average PUD Working Interest
 91%
 Net Revenue Interest
 76%
 Operation Cost Well/Month
 $782
 Well Life*
 25 Years
41
*Shallow Niobrara type curve.
 
 

 
See Slide 2 regarding Forward Looking Statements
42
2009
2010E
% Change
Total Net Production (Bcfe)
5.3
4.7
-11%
Net Exit Rate (MMcfe/d)
12.9
12.6
-5%
Developmental Capital (MM$)
2.6
$4.4
69%
Drilling Projects, Gross (Net)
8 (4.5)
25 (24.5)
225% (444%)
2010 Planned Development:
NECO Area
 
 

 
See Slide 2 regarding Forward Looking Statements

PDC Mountaineer Joint Venture
43
PDC Mountaineer, LLC
 Appalachian JV Effective Oct 1, 2009
 Strategic Joint Venture with Lime Rock Partners
 Formed to Develop our Marcellus and Shallow
 Devonian Acreage
  Allows for a More Aggressive Development of the Asset
  Provides PDC with Cash
  Gives PDC More Financial Flexibility in Developing
 Other Assets and in the A&D Markets
 Operations Funded by Lime Rock until 50/50 parity is
 Reached
  PDC ownership % Goes Down as More Capital is
 Contributed by Lime Rock
 Managed by a joint board of PDC and Lime Rock
+
=
Marcellus & Devonian Shallow
(1) 2010 CAPEX to be funded by PDC Mountaineer partner, PDC has no capital investment obligation.
 
 

 
See Slide 2 regarding Forward Looking Statements
44
Appalachian Operating Area
 
 

 
See Slide 2 regarding Forward Looking Statements
45
PDC Mountaineer JV Shallow Devonian
  
 Gross operated wells at year end   2,125
 Undeveloped acreage  10,800
 Undeveloped locations   569
 Number of remaining locations 
  PUD    32
  Probable     82
  Possible     37
  Subeconomic Resources 
   418
 
 

 
See Slide 2 regarding Forward Looking Statements
Key Economic Parameters:
Appalachian Basin Upper Devonian
 Reserves per Well*
 0.184 Bcfe 
 IP Rate*
 115 Mcf/d
 Gross Cost Per Well
 $367K
 Average PUD Working Interest
 100%
 Net Revenue Interest
 87%
 Operation Cost Well/Month
 $302 + compression
 Well Life*
 49 Years
46
 
 

 
See Slide 2 regarding Forward Looking Statements
Pennsylvania Acreage Map
15,219 Net Marcellus Rights
42,354 Net Marcellus Rights
West Virginia Acreage Map
Appalachian Basin Acreage -
Marcellus Shale
HBP NET
ACRES
UNDEVELOPED
NET ACRES
TOTAL
NET ACRES
AVERAGE
NRI
As of 2-22-2010
PA: 9,981
WV: 38,395
PA: 5,238
WV: 3,959
PA: 15,219
WV: 42,354
82.80%
86.70%
47
 
 

 
See Slide 2 regarding Forward Looking Statements
Gas Shale
Success
Factors
Barnett
Fayetteville
Haynesville
Marcellus
PDC
Marcellus
Wells
Depth
5,400’ -9,600’
1,200’ - 7,500’
10,000’-
13,000’
2,500’ - 8,500’
7,100’ - 7,650’
Thickness
200’ - 500’
50’ - 200’
200’ - 300’
50’ - 300’
103’ - 240’
TOC (Total
Organic Carbon)
2% - 7%
2% - 5%
≈ 4%
2% - 14%
1% - 12%
Maturity (%Ro)
1.1% - 1.7%
1.2% - 3.0%
2.2% - 3.0%
0.4% - 3.5%
1.5% - 2.5%+
Avg. Log
Porosity
7%
4% - 12%
10%
5.5% - 7.5%
2% - 16%
Water Saturation
25% - 35%
15% - 50%
15% - 20%
2% - 35%
5% - 33%
Pressure (psi/ft)
0.52
0.435
0.9
0.4 - 0.7
0.55-0.60
Shale Gas Play Comparisons
48
 
 

 
See Slide 2 regarding Forward Looking Statements
West Virginia Vertical
Marcellus Results
(1) Approx. Recovery Factor based on 20-40 acre drainage
 7 Vertical Marcellus wells in Harrison, Taylor, and
 Barbour counties
  IP : 200 - 480 Mcf/day
  Reserves: 0.2 - 0.55 Bcfe
  30 - 60 Bcf/section
  10%-20% approx. recovery factors(1)
  Pressure: 0.55 -0.60 psi/ft
  Thickness: 103’ - 240’
  5 single-stage frac’d wells and 2 dual-stage frac’d
 wells
49
 
 

 
See Slide 2 regarding Forward Looking Statements
(1) Economics run using 12/31/209 NYMEX strip prices effective 1/1/2010
PDC Horizontal Marcellus
Type Well Economics
Vertical
Horizontal
50
Gross EUR (Bcfe) = .435
 
 

 
See Slide 2 regarding Forward Looking Statements
Key Economic Parameters:
Appalachian Basin Marcellus Shale
 Vertical / Horizontal
 Reserves per Well*
  0.435 / 3.0 Bcfe
 IP Rate*
  400 / 2,800 Mcf/d
 Gross Cost per Well
  $850K / $3,483K
  100% / 100%
 Net Revenue Interest
  85% / 85%
 Operation Cost Well/Month
  $1000 / $1500 + compression
 Well Life*
  40 / 60 Years
51
 
 

 
See Slide 2 regarding Forward Looking Statements
18
Marcellus Shale 3-D Seismic Shoot
  6,680 acres
  Potential for 30
 horizontal locations
3D Seismic
52
 
 

 
See Slide 2 regarding Forward Looking Statements
Vertical vs. Horizontal Results
53
Company
Zone
Vertical IP
(MCF/D)
Horizontal IP
(MCF/D)
Fold
Increase
Newfield
Woodford
238
3816
16
Williams
Caney
33
330
10
XTO
Barnett
600
2500
4
SEECO
Fayetteville
200
1700
8
*Cabot
Marcellus
690
6250
9
PDC
Marcellus
400
Modeled 2800
7
*30 - 60 day production averages; 4 horizontal; 13 vertical wells (4/29/09)
Note: There can be no assurance PDC’s horizontal wells will reflect similar multiples of vertical wells.
53
 
 

 
See Slide 2 regarding Forward Looking Statements
54
2009
PDC
2010E
JV (PDC)
PDC %
 Change
Total Net Production (Bcfe)
4.1
5.8(3.4)
-20%
Net Exit Rate (MMcfe/d)
11
24(13)
24%
Dev. & Explor. CAPEX (MM$)
$16.2
$58.01(0)
-100%
Drilling Projects, Gross (Net)
9 (8.8)
26 (15)
41%
Other Projects, Gross (Net)
22 (21.6)
50 (29)
26%
2010 Planned Development:
Appalachian Basin
1.Funded by PDC Mountaineer Partner.
 
 

 
See Slide 2 regarding Forward Looking Statements
2010 Operations Guidance
 Production of 35.7 Bcfe
 CAPEX of $150MM
 PDC Mountaineer CAPEX of $64.5MM to be funded
 by JV partner
 252 developmental wells
 First horizontal Marcellus well to spud in early March
 Production expected to increase in Q4 to YE2009
 levels
 Financial flexibility to expand core developmental
 drilling, re-purchase partnerships, or acquire
 properties
55
 
 

 
See Slide 2 regarding Forward Looking Statements
Takeaways
 PDC has built an exceptional technical/geoscience team over the past
 several years
  Positioned for increased activity
  Focused on technical innovation
  Continuation of ongoing exploration efforts
 Current assets provide company flexibility to grow organically
  Large inventory of projects
  Value add projects exist in all operating basins
 Marcellus provides large production / reserve upside
  Plan to accelerate development in 2010
  1st horizontal production anticipated in the first half of 2010
  Midstream strategy to be announced mid 2010
 Company is well positioned for reserve growth over next several years
  Continued proved enhancements in existing properties
  Pricing improvements
  Marcellus development
  Acquisitions
56
 
 

 
See Slide 2 regarding Forward Looking Statements
Gysle Shellum
Chief Financial Officer
57
 
 

 
See Slide 2 regarding Forward Looking Statements
Summary Financial Results
Year Ended
December 31,
($ in millions except per share data)
2009
2008
Income (loss) from operations
($90.0)
$195.7
Net Income (loss) attributable to shareholders
($79.3)
$113.3
Diluted earnings (loss) per share attributable to
shareholders
($4.82)
$7.63
Year Ended
December 31,
 ($ in millions except per share data)
2009
2008
Adjusted net income (loss) (1)
($2.9)
$39.7
Adjusted earnings (loss) per share (1)
($0.18)
$2.67
58
(1) Excludes unrealized derivative gains & losses.
 
 

 
See Slide 2 regarding Forward Looking Statements
Summary Financial Results
(1) O&G operating margin is defined as O&G revenue less O&G production and well operations costs.
(2) See appendix for GAAP reconciliation of Adjusted Cash Flow and Adjusted EBITDA, respectively.
(3) Includes non-recurring items related to the Q4 joint venture, EVP separation agreement, and corporate office relocation costs.
59
Year Ended
December 31,
($ in millions except per share data)
2009
2008
O&G Revenues
$179.1
$321.9
O&G Production & Well Operations Costs
$64.7
$79.4
O&G Operating Margin(1)
$114.4
$242.5
Adjusted cash flow from operations(2)
$170.2
$199.9
Adjusted cash flow from operations (per share) (2)
$10.35
$13.46
Adjusted EBITDA(2)
$159.7
$189.4
DD&A
$131.0
$104.6
G&A(3)
$54.0
$37.7
 
 

 
See Slide 2 regarding Forward Looking Statements
60
Adjusted Cash Flow from Operations
2008
2007
2009
 Adjusted cash flow from
 operations represents cash flow
 from operations before normal
 working capital changes
 Incorporates impact of hedging
 gains
 CAPEX reduced 66% in 2009
 
 

 
See Slide 2 regarding Forward Looking Statements

Financial Summary Results
61
1) Other income: income from gas marketing activities, well ops and pipeline income
2009
Actual
 2009 Guidance
Low
High
($ in Millions except per share data)
Total O&G Revenue
$286
$259
$286
Other Income(1)
 14
 12
 12
Total Revenue
 300
 272
 299
O&G Production & Well Ops Cost
 65
 70
 73
G&A
 54
 42
 45
Adjusted EBITDAX
 181
 160
 181
Exploration Expense
 23
 14
 14
DD&A
 131
 121
 121
Net Interest Expense
 37
 33
 33
Taxes
 (7)
 (3)
 5
Adjusted Net Income / (Loss)
($3)
($5)
$8
Stock-based Compensation
 6
 6
 6
DD&A
 131
 121
 121
Exploratory / Dry Hole Cost
 1
 5
 5
Other
 35
 (20)
 (19)
Adjusted Cash Flows from Operations
$170
$107
$121
CFFO/Share
$10.35
$7.23
$8.18
EPS
($0.18)
($0.33)
$0.57
 
 

 
See Slide 2 regarding Forward Looking Statements
62
 $305 million revolver matures
  in May 2012
 
 Maturity schedule reflects:
  Mitigation of liquidity risk
 
  Diversification of funding
 sources
 
 As of December 31, 2009:
  $80 MM drawn balance
  $18.7 MM undrawn L.O.C
  $31.9 MM cash balance
  $238.2 MM available liquidity
 
 Borrowing base redetermination
 will occur in May 2010
Debt Maturity Schedule
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
$80
$203
$305
See Slide 2 regarding Forward Looking Statements
(as of December 31, 2009)
 
 

 
See Slide 2 regarding Forward Looking Statements
Energy Market Exposure
Percentage of Mcfe Sold by Market
(as of December 31, 2009)
See Slide 2 regarding Forward Looking Statements
63
 
 

 
See Slide 2 regarding Forward Looking Statements
2009 Summary - Oil and Gas Hedges
(1) Based on 12/31/09 PDP curve (i.e., may represent 50% or less of actual production for the future year)
(2) Based on forward pricing curves as of 3/1/2010
(3) Blended price for forecasted production at hedged and at forward prices
 Continued focus on hedging enabled the Company to protect its cash flow, capital
 programs, and organic drilling economics from commodity price fluctuations
  Realized gains of $108MM
  Substantial hedge positions through 2013 via swaps (2010-2011) and collars (2012-2013) at solid
 historical commodity price levels should continue to provide on-going protection
  Price sensitivity of 2010’s budget has been significantly mitigated. Variation of $1.00/Mcfe for natural
 gas and $10.00/bbl for oil results in less than a 5% variation in cash flow from operations
64
 As of March 1, 2010 
2010
2011
2012
2013
Weighted Average Hedge Price (Mcfe) (1)
With Floors
$7.60
$6.87
$6.39
$6.39
With Ceilings
$8.43
$7.76
$7.97
$8.21
% of Forecasted Production(1)
89%
74%
66%
65%
Weighted Avg Forward Price(2)
$6.22
$6.78
$7.04
$7.17
Weighted Avg Price of Forecasted
Production(3)
$7.45
$6.85
$6.61
$6.66
 
 

 
See Slide 2 regarding Forward Looking Statements
“E&P’s may have waited too long to hedge.”
Credit Suisse analyst’s quotes from Platt’s Gas Daily, February 24,
2010:
“With 2011 gas future curve now below $6/MMBtu and service costs
on the rise, the hedging window for US gas producers may be
closing.”
“Providers appeared to have been holding out for hedging
opportunities closer to $7/MMBtu and, as a result, have only hedged
20% of their North American gas volumes for 2011 - at an average
floor price of $6.52/MMBtu.”
“Simply put, more dollars and more volumes need to be protected
heading into 2011.”
“… they may have waited too long… last week the 2011 gas curve
fell below $6/MMBtu for the first time.”
“A margin squeeze could be in store… could continue to narrow.”
65
 
 

 
See Slide 2 regarding Forward Looking Statements
66
Average Annual Costs Related
to Oil and Gas Drilling
Year Ended
December 31,
(per Mcfe)
2009
2008
Average lifting costs (1)
$0.83
$1.07
DD&A (O&G properties only)
$2.83
$2.51
(1) Lifting costs represent natural gas and oil lease operating expenses, exclusive of production taxes, on a per unit basis.
 
 

 
See Slide 2 regarding Forward Looking Statements
67
2009 Metrics
Natural Gas Equivalent(1)
Natural Gas Equivalent(1)
Oil & Gas Production and Well
Operations Costs(2)
(Bcfe)
($/Mcfe)
($MM)
Capital Spending
Increased production by 12% and reduced L.O.E $/Mcfe by just under 30%.
Improved L.O.E $/Mcfe should be sustainable beyond 2009 and should improve incremental capital investment
 returns.
(1) Average Sales Price excluding gain/loss on derivatives
(2) Includes direct and indirect well expenses, production taxes, and overhead and other production expenses.
 
 

 
See Slide 2 regarding Forward Looking Statements
2009 Credit Ratios
Total Debt / Capital Base
(%)
(1) EBITDAX: Earnings before Interest, Taxes, Depreciation, Depletion and Amortization , unrealized hedge gains/losses, and Exploration Expense.
EBITDAX (1)/ Interest, net (TTM)
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
 Reduced capital spending and operating costs improvements resulted in substantial available liquidity and
 improvement in leverage and coverage measures
 
 ~$50MM equity raise, and ~$160MM PDC and Lime Rock Partners joint venture to develop Marcellus Shale and
 Shallow Devonian assets, reflected the company’s ability to access alternative capital markets, and improve
 liquidity, leverage and coverage measures
* Liquidity excludes $18.7 million L.C.
68
$305
$203
x
x
x
$80
 
 

 
See Slide 2 regarding Forward Looking Statements
2010 Guidance
69
 
 

 
See Slide 2 regarding Forward Looking Statements
2010 Guidance
70
 Reserves, production and capital expenditures
 per the internal operational plan
 Production taxes and direct operating costs
 determined on a field basis
 General and administrative costs slightly
 improved versus 2009 after adjustment for non
 -recurring items
 
 

 
See Slide 2 regarding Forward Looking Statements
71
 DD&A based on a by-field analysis
 2010 commodity pricing based on high and low
 pricing scenarios with differentials on a field basis
 Revolver interest rate at pricing grid plus LIBOR
 spread
2010 Guidance
 
 

 
See Slide 2 regarding Forward Looking Statements
Income Statement and Cash Flow Analysis
72
1) Other income: income from gas marketing activities, well ops and pipeline income
  Despite 17.6% reduction in
 production in 2010 versus 2009, the
 Company budgeted 2010 net income
 versus a loss in 2009 and budgeted
 strong year over year adjusted cash
 flow from operations.
  Year-over-year change in net income
 and cash flow from operations were
 primarily due to improved:
  Price realizations
  Capital efficiency
  G&A expense - non-
 recurrence of 2009 one time
 items.
($ in MM except per share data)
2009
Actual
2010
Low
2010
High
Bcfe
 43.3
 35.7
 35.7
Total O&G Revenue
$286
$239
$258
Other Income(1)
14
12
12
Total Revenue
$300
$251
$270
O&G Production & Well Ops Cost
65
59
63
G&A Expense
54
43
39
Adjusted EBITDAX
$181
$150
$169
Exploration Expense/Dry Hole Cost
23
9
8
DD&A
131
116
116
Net Interest Expense
37
34
34
Taxes/ (Benefit)
(7)
(4)
4
Adjusted Net Income (loss)
($3)
($6)
$7
Stock-based Compensation
6
7
5
DD&A
131
116
116
Exploratory/Dry Hole Cost
1
2
1
Other
35
28
28
Adjusted Cash Flows From Operations
$170
$148
$158
Weighted # of share outstanding
16,448
19,300
19,300
CFFO/Share
$10.35
$7.67
$8.17
EPS
($0.18)
($0.32)
$0.34
 
 

 
See Slide 2 regarding Forward Looking Statements
73
Costs Metrics
(1) Lifting costs represent natural gas and oil lease operating expenses, exclusive of production taxes, on a per unit basis.
(per Mcfe)
2010E
2009
2008
Average lifting costs(1)
$0.95
$0.83
$1.07
DD&A (O&G properties only)
$2.98
$2.83
$2.51
 
 

 
See Slide 2 regarding Forward Looking Statements

2010 Debt & Liquidity Analysis
74
1) Includes $9MM of PDC share of J.V cash flow in J.V oil & gas properties in 2010
2) Other includes $9MM payment of debt issuance costs in 2009
31-Dec
Annual
2009
2010
($ in Millions)
Beginning Debt ($MM) (Credit Facility)
$195
$80
- Adjusted Cash Flow From Ops
(170)
(148) - (158)
+/- Proceeds From Equity Offering & JV
(103)
-
+ Capital Expenditures(1)
143
159
+/- Change in Working Capital
26
-
+/- Net Decrease in Cash
(19)
-
+/- Other / Deferred Tax(2)
9
-
Ending Debt Balance
$80
$91 - $81
Current Borrowing Base
$305
$305
Standby L.O.C
19
19
Available Borrowing Base
206
195 - 205
Cash Available
32
32
Total Liquidity
$238
$227 - $237
 
 

 
See Slide 2 regarding Forward Looking Statements
Weighted Average Cost of Capital
(“WACC”) Analysis
 Year-over-year WACC improvement of 80 basis points due primarily to lower after tax cost of
 debt offset by higher equity proportion of capital structure.
 
75
12/31/2008
12/31/2009
Cost of Equity
15.2%
14.4%
Equity %
49.0%
61.0%
After Tax Cost of Debt
9.5%
7.0%
Debt %
51.0%
39.0%
WACC
12.3%
11.5%
PDC 12% Notes due 2018 yield
19.7%
10.7%
 
 

 
See Slide 2 regarding Forward Looking Statements
Lance Lauck
SVP - Business Development
76
 
 

 
See Slide 2 regarding Forward Looking Statements
IncreasingValue in 2010 and Beyond
 Additional Organic Drilling - Possibly beginning 2nd half 2010
 - Ramp up in Piceance and Wattenberg
 - Focus on enhancing Piceance economics
 Marcellus JV - drilling 26 horizontal and vertical wells in 2010
 - Large operator in WV achieved reserves of 3.6 Bcfe per
 horizontal well near PDC acreage
 - Over 150 Marcellus permits issued in WV counties surrounding
 PDC position
 Partnership Purchases - Three Year Plan
 - Non-operated interests in certain existing PDC operated
 Wattenberg and Piceance Assets
 Acquisitions - Asset and Small Corporate
 - Anticipate substantial A&D deal flow in 2010
 Exploration - Moderate Risk Resource Plays
 - Niobrara Wattenberg; Mancos Shale Piceance; Bakken; Others
77
 
 

 
See Slide 2 regarding Forward Looking Statements
Partnership Purchases:
Three-Year Plan
 Limited Partners’ non-operated interest is typically at 60-80% of
 certain PDC operated wells (Rockies principally)
 28 Limited Partnerships have net reserves of approximately 125
 Bcfe and net production of approximately 25 MMcfe/d owned by the
 Limited Partners
 PDC strategy to purchase Limited Partners’ interest over next three
 years
  Production and reserve adds in existing operated core acreage
  Reduction/optimization of internal G&A costs
  9 SEC compliant partnerships represent over 60% of net reserves and over
 75% of total cash flows owned by the Limited Partners
  Elimination of Limited Partnerships through repurchases would finalize PDC’s
 transition to a traditionally capitalized E&P company
78
 
 

 
See Slide 2 regarding Forward Looking Statements
ACQUISITION POSITIONING
 Staff of five employees fully dedicated to acquisitions
 Liquidity increased to ~$250 million
 Focus on core areas and new areas with similar characteristics
 Completing basin study to target new value-adding areas
 Pursuing a pro-active approach
 Capable of deal sizes of $200 - $400 million
 Acquisitions metrics consistent with corporate goals
 Acquisitions to be executed in conjunction with five-year
 business plan
 Support of PDC Board of Directors
79
 
 

 
See Slide 2 regarding Forward Looking Statements
ACQUISITION STRATEGY
Focus Areas:
  Core Area Acquisitions - Rockies and Appalachia / Marcellus
  Current production with growth upside - close to existing PDC operations
  New Basin Acquisitions - Align with PDC Strengths
  Basin study results (Permian, Mid Continent, ETX/NLA)
  Scale and repeatability
  Primary production; not focused on EOR, GOM, Gulf Coast or International
  Joint Ventures - Drill to Earn
  Conventional assets or new shale plays
  Win-Win approach
  100+ drilling opportunities, target up to $3 million / well net D&C costs
Asset Type:
  PDP 25% to 50%, a significant future growth through drilling
  Focused on conventional gas and oil plays
  Add at least one additional shale resource play
Asset Mix:
  Prefer oilier plays, however, economics will be the determiner
80
 
 

 
See Slide 2 regarding Forward Looking Statements
ACQUISITION APPROACH
Pro-Actively Contact Companies
 Public E&P companies
 Private E&P companies
 Private equity sponsors
Marketed Deals
 Investment banks
 A&D advisors
81
 
 

 
See Slide 2 regarding Forward Looking Statements
SOURCE OF ACQUISITIONS
  Companies selling conventional assets
  Transforming portfolios to pure shale / resource growth
  Follow-on divestitures
  Post corporate mergers or large asset acquisitions
  Super major / large cap portfolio cleanup
  Companies with high debt levels
  Large acreage positions / limited capital to develop
  Companies allocating capital to other areas
82
 
 

 
See Slide 2 regarding Forward Looking Statements
 Strong Focus on creating Shareholder value
 Strong core asset base with improved drilling economics
 Marcellus Shale JV with Lime Rock Partners provides potential
 catalyst for strong production and cash flow growth
 Evaluating potential acquisition, joint venture, and exploration
 opportunities which could provide value-added growth
 Strong balance sheet with liquidity of ~$250 million
 Experienced and highly effective management team
 PDC is undervalued and poised for growth
Summary
83
 
 

 
See Slide 2 regarding Forward Looking Statements
A P P E N D I X
84
 
 

 
See Slide 2 regarding Forward Looking Statements
Adjusted Net Income Reconciliation
85
(1) Includes natural gas marketing activities.
Year Ended
December 31,
 ($ in millions)
2009
2008
Net Income (loss) attributable to shareholders
($79.3)
$113.3
Unrealized loss (gain) on derivatives, net (1)
116.6
(117.5)
Provision for underpayment of gas sales
2.7
4.0
Tax effect of above adjustment
(43.0)
39.9
Adjusted Net Income (loss) attributable to
shareholders
($2.9)
$39.7
Weighted average diluted shares outstanding
16,448
14,848
Adjusted diluted earnings (loss) per share
($0.18)
$2.67
 
 

 
See Slide 2 regarding Forward Looking Statements
Adjusted Cash Flow Reconciliation
86
Year Ended
December 31,
($ in millions)
2009
2008
Net Cash provided by operating activities
$143.9
$139.1
Changes in assets and liabilities related to
operations
26.3
60.8
Adjusted cash flow from operations
$170.2
$199.9
Weighted average diluted shares outstanding
16,448
14,848
Adjusted cash flow per share
$10.35
$13.46
 
 

 
See Slide 2 regarding Forward Looking Statements
Adjusted EBITDA Reconciliation
(1) Includes natural gas marketing activities.
87
Year Ended
December 31,
($ in millions)
2009
2008
Net Income (loss) attributable to shareholders
($79.3)
$113.3
Unrealized loss (gain) on derivatives, net (1)
116.6
(117.5)
Interest, net
37.0
27.5
Income taxes expense (benefit)
(45.6)
61.5
Depreciation, depletion & amortization
131.0
104.6
Adjusted EBITDA
$159.7
$189.4
Weighted average diluted shares outstanding
16,448
14,848
Adjusted EBITDA per share
$9.71
$12.76
 
 

 
NASDAQ:PETD
PETROLEUM DEVELOPMENT
CORPORATION
Analyst Day
March 12, 2010