Please ensure Javascript is enabled for purposes of website accessibility

Why PDC Energy Stock Is Surging Today

By Matthew DiLallo - Feb 25, 2021 at 11:07AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The oil and gas producer reported some good news.

What happened

Shares of PDC Energy (PDCE 3.89%) rallied as much as 16.4% by 10:30 a.m. EST on Thursday. Fueling the oil stock was its fourth-quarter results and its plan to return cash to shareholders later this year. 

So what

PDC Energy posted a fourth-quarter adjusted profit of $1.10 per share, which beat analysts' expectations by $0.21 per share. The company also generated $270 million of adjusted cash from operations, enabling it to fund its $110 million capital program while producing $160 million in free cash flow. That pushed its full-year free cash total to more than $400 million, enabling it to reduce debt by $300 million since closing its acquisition of SRC Energy

An oil pumping unit at sunset.

Image source: Getty Images.

The oil and gas producer also unveiled its 2021 game plan. It expects to invest between $500 million and $600 million on capital projects this year, which should enable it to maintain its current production rate. At $45 oil, it can fully fund that spending plan with about $400 million to spare. The company plans to use some of those funds to reduce debt, targeting to repay more than $200 million in debt this year. Meanwhile, it expects to return more than $120 million in cash to shareholders via a stock repurchase plan and a new dividend program that it intends on launching by midyear. 

Now what

PDC Energy spent much of the past year reducing costs, thanks in part to its increased scale from its merger with SCR. Because of that, it's cashing in on higher crude oil prices. It's aiming to keep its output roughly flat with last year's level, allowing it to generate significant free cash flow at higher prices. That's giving it the flexibility to further enhance its balance sheet and return capital to shareholders later this year if prices continue cooperating. Those catalysts could give its stock the fuel to keep rallying.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

PDC Energy, Inc. Stock Quote
PDC Energy, Inc.
PDCE
$70.47 (3.89%) $2.64

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.