Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of mid-cap oil and natural gas exploration and production company PDC Energy (PDCE) powered higher by as much as 10% following the release of its year-end proved reserves report and announcing the sale of some of its natural gas assets.
So what: If you're looking for a company with rapidly increasing reserves, then PDC Energy just might be your stock! Total proven reserves increased 14% to 1.16 trillion cubic feet equivalent in 2012 from the year-ago period, as reserve replacement from all sources came in at 512%. More importantly, the proven reserves demonstrated that liquids are becoming an increasingly important part of PDC's production potential. The company's CEO, James Trimble, signaled the company's commitment to horizontal drilling in Wattenberg, Utica Shale, and the West Virginia Marcellus region. Furthermore, to fund its Wattenberg and Utica Shale development, PDC announced the sale of non-core natural gas assets in Colorado to Caerus Oil & Gas for $200 million.
Now what: This definitely looks like a win-win for shareholders: total reserves are going up, liquid reserves (which often carry better margins) are moving higher, and the company is selling off what could be distracting non-core assets to help fund drilling in its three focused regions. Understandably, with the stock at 72 times forward earnings, I'm a little leery of chasing PDC Energy here, but I can definitely see the potential for shareholders to be rewarded for their patience over the long term.
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