Company Quick10K Filing
PDC Energy
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 66 $2,282
10-Q 2019-11-07 Quarter: 2019-09-30
10-Q 2019-08-08 Quarter: 2019-06-30
10-Q 2019-05-02 Quarter: 2019-03-31
10-K 2019-02-28 Annual: 2018-12-31
10-Q 2018-11-06 Quarter: 2018-09-30
10-Q 2018-08-09 Quarter: 2018-06-30
10-Q 2018-05-03 Quarter: 2018-03-31
10-K 2018-02-27 Annual: 2017-12-31
10-Q 2017-11-07 Quarter: 2017-09-30
10-Q 2017-08-08 Quarter: 2017-06-30
10-Q 2017-05-05 Quarter: 2017-03-31
10-K 2017-02-28 Annual: 2016-12-31
10-Q 2016-11-03 Quarter: 2016-09-30
10-Q 2016-08-09 Quarter: 2016-06-30
10-Q 2016-05-06 Quarter: 2016-03-31
10-K 2016-02-22 Annual: 2015-12-31
10-Q 2015-11-05 Quarter: 2015-09-30
10-Q 2015-08-10 Quarter: 2015-06-30
10-Q 2015-05-07 Quarter: 2015-03-31
10-K 2015-02-19 Annual: 2014-12-31
10-Q 2014-11-06 Quarter: 2014-09-30
10-Q 2014-08-08 Quarter: 2014-06-30
10-Q 2014-05-06 Quarter: 2014-03-31
10-K 2014-02-21 Annual: 2013-12-31
10-Q 2013-10-31 Quarter: 2013-09-30
10-Q 2013-08-01 Quarter: 2013-06-30
10-Q 2013-05-01 Quarter: 2013-03-31
10-K 2013-02-27 Annual: 2012-12-31
10-Q 2012-11-01 Quarter: 2012-09-30
10-Q 2012-08-02 Quarter: 2012-06-30
10-Q 2012-05-10 Quarter: 2012-03-31
10-K 2012-03-01 Annual: 2011-12-31
10-Q 2011-11-03 Quarter: 2011-09-30
10-Q 2011-08-04 Quarter: 2011-06-30
10-Q 2011-05-10 Quarter: 2011-03-31
10-K 2011-02-24 Annual: 2010-12-31
10-Q 2010-11-08 Quarter: 2010-09-30
10-Q 2010-08-09 Quarter: 2010-06-30
10-Q 2010-05-10 Quarter: 2010-03-31
10-K 2010-03-04 Annual: 2009-12-31
8-K 2020-01-14 Enter Agreement, M&A, Off-BS Arrangement, Off-BS Arrangement, Officers, Other Events, Exhibits
8-K 2020-01-13 Shareholder Vote
8-K 2020-01-03 Other Events
8-K 2019-12-05 Other Events
8-K 2019-11-06 Earnings, Exhibits
8-K 2019-08-30 Enter Agreement, Exhibits
8-K 2019-08-25 Enter Agreement, Regulation FD, Other Events, Exhibits
8-K 2019-08-16 Officers
8-K 2019-08-07 Earnings, Exhibits
8-K 2019-06-13 M&A
8-K 2019-05-31 M&A, Other Events
8-K 2019-05-29 Shareholder Vote
8-K 2019-05-01 Earnings, Exhibits
8-K 2019-03-07 Other Events, Exhibits
8-K 2019-02-27 Earnings, Exhibits
8-K 2019-02-11 Earnings, Regulation FD, Exhibits
8-K 2018-12-12 Officers
8-K 2018-11-05 Earnings, Exhibits
8-K 2018-08-08 Earnings, Exhibits
8-K 2018-06-20 Officers
8-K 2018-05-30 Officers, Shareholder Vote, Exhibits
8-K 2018-05-23 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-05-02 Earnings, Exhibits
8-K 2018-02-26 Earnings, Exhibits
8-K 2018-02-26 Earnings, Exhibits
8-K 2018-02-05 Officers, Exhibits
8-K 2018-01-03 Officers
PDCE 2019-09-30
Part I - Financial Information
Item 1. Financial Statements
Note 1 - Nature of Operations and Basis of Presentation
Note 2 - Summary of Significant Accounting Policies
Note 3 - Pending Acquisition
Note 4 - Revenue Recognition
Note 5 - Fair Value of Financial Instruments
Note 6 - Commodity Derivative Financial Instruments
Note 7 - Properties and Equipment
Note 8 - Other Accrued Expenses and Other Liabilities
Note 9 - Long-Term Debt
Note 10 - Leases
Note 11 - Asset Retirement Obligations
Note 12 - Commitments and Contingencies
Note 13 - Common Stock
Note 14 - Income Taxes
Note 15 - Earnings per Share
Note 16 - Supplemental Disclosures of Cash Flow Information
Note 17 - Subsidiary Guarantor
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities - None.
Item 4. Mine Safety Disclosures - Not Applicable.
Item 5. Other Information - None.
Item 6. Exhibits
EX-31.1 a201910q3ex311.htm
EX-31.2 a201910q3ex312.htm
EX-32.1 a201910q3ex321.htm

PDC Energy Earnings 2019-09-30

PDCE 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
KOS 2,527 4,466 3,582 1,237 0 23 578 4,517 0% 7.8 1%
PTEN 2,518 5,192 1,913 3,043 0 -354 -301 3,388 0% -11.3 -7%
PDCE 2,282 4,595 2,216 1,879 0 124 686 3,478 0% 5.1 3%
MTDR 2,140 3,751 1,911 890 0 197 570 2,056 0% 3.6 5%
CDEV 2,021 4,535 1,268 916 0 85 148 2,870 0% 19.4 2%
TELL 1,882 417 176 13 9 -139 -129 1,836 71% -14.2 -33%
MGY 1,810 3,531 747 1,073 0 120 572 2,113 0% 3.7 3%
OAS 1,745 7,710 3,844 2,251 0 236 1,208 4,621 0% 3.8 3%
RRC 1,737 9,728 5,546 3,580 3,009 -1,599 -799 5,558 84% -7.0 -16%
JAG 1,734 1,914 1,013 432 0 107 152 2,349 0% 15.4 6%

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to _________

Commission File Number 001-37419
logo123114a15.jpg
PDC ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
95-2636730
(State of incorporation)
(I.R.S. Employer Identification No.)
1775 Sherman Street, Suite 3000
Denver, Colorado 80203
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (303) 860-5800

Securities registered pursuant to Section 12(b) of the Act.
Title of each class
 
Ticker Symbol
 
Name of each exchange on which registered
Common stock, par value $0.01 per share
 
PDCE
 
Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
x
Accelerated filer 
Non-accelerated filer  
Smaller reporting company 
 
 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 61,616,700 shares of the Company's Common Stock ($0.01 par value) were outstanding as of October 21, 2019.


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PDC ENERGY, INC.


TABLE OF CONTENTS

 
PART I – FINANCIAL INFORMATION
 
Page
 
 
 
 
Item 1.
Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
Item 3.
 
Item 4.
 
 
 
 
 
PART II – OTHER INFORMATION
 
 
 
 
Item 1.
 
Item 1A.
 
Item 2.
 
Item 3.
 
Item 4.
 
Item 5.
 
Item 6.
 
 
 
 
 
 
 




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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 ("Securities Act"), Section 21E of the Securities Exchange Act of 1934 ("Exchange Act") and the United States ("U.S.") Private Securities Litigation Reform Act of 1995 regarding our business, financial condition, results of operations and prospects. All statements other than statements of historical fact included in and incorporated by reference into this report are "forward-looking statements." Words such as expect, anticipate, intend, plan, believe, seek, estimate, schedule and similar expressions or variations of such words are intended to identify forward-looking statements herein. Forward-looking statements include, among other things, the pending acquisition of SRC Energy, Inc. ("SRC") and the effects thereof; the expected timing of the acquisition of SRC; statements regarding future: production, costs and cash flows; drilling locations, zones and growth opportunities; commodity prices and differentials; capital expenditures and projects, including the number of rigs employed; cash flows from operations relative to future capital investments; our stock repurchase program, which may be modified or discontinued at any time; potential additional payments from the sale of our midstream assets; financial ratios and compliance with covenants in our revolving credit facility and other debt instruments; impacts of certain accounting and tax changes; timing and adequacy of infrastructure projects of our midstream providers and the related impact on our midstream capacity and related curtailments; fractionation capacity; impacts of Colorado political matters and expected timing of rulemakings; ability to meet our volume commitments to midstream providers; ability to obtain permits from the Colorado Oil and Gas Conservation Commission ("COGCC") in a timely manner; ongoing compliance with our consent decree and expected timing of certain litigation; and reclassification of the Denver Metro/North Front Range NAA ozone classification to serious.

The above statements are not the exclusive means of identifying forward-looking statements herein. Although forward-looking statements contained in this report reflect our good faith judgment, such statements can only be based on facts and factors currently known to us. Forward-looking statements are always subject to risks and uncertainties, and become subject to greater levels of risk and uncertainty as they address matters further into the future. Throughout this report or accompanying materials, we may use the term “projection” or similar terms or expressions, or indicate that we have “modeled” certain future scenarios. We typically use these terms to indicate our current thoughts on possible outcomes relating to our business or our industry in periods beyond the current fiscal year. Because such statements relate to events or conditions further in the future, they are subject to increased levels of uncertainty.

Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to:

changes in global production volumes and demand, including economic conditions that might impact demand and prices for the products we produce;
volatility of commodity prices for crude oil, natural gas and natural gas liquids ("NGLs") and the risk of an extended period of depressed prices;
volatility and widening of differentials;
reductions in the borrowing base under our revolving credit facility;
impact of governmental policies and/or regulations, including changes in environmental and other laws, the interpretation and enforcement of those laws and regulations, liabilities arising thereunder and the costs to comply with those laws and regulations;
impact of recent regulatory developments in Colorado with respect to additional permit scrutiny;
declines in the value of our crude oil, natural gas and NGLs properties resulting in impairments;
changes in estimates of proved reserves;
inaccuracy of reserve estimates and expected production rates;
potential for production decline rates from our wells being greater than expected;
timing and extent of our success in discovering, acquiring, developing and producing reserves;
availability of sufficient pipeline, gathering and other transportation facilities and related infrastructure to process and transport our production and the impact of these facilities and regional capacity on the prices we receive for our production;
timing and receipt of necessary regulatory permits;
risks incidental to the drilling and operation of crude oil and natural gas wells;
difficulties in integrating our operations as a result of any significant acquisitions, including the acquisition of SRC, or acreage exchanges;
increases or changes in costs and expenses;
limitations in the availability of supplies, materials, contractors and services that may delay the drilling or completion of our wells;
potential losses of acreage due to lease expirations or otherwise;


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increases or changes in costs and expenses;
future cash flows, liquidity and financial condition;
competition within the oil and gas industry;
availability and cost of capital;
our success in marketing crude oil, natural gas and NGLs;
effect of crude oil and natural gas derivative activities;
impact to our operations, personnel retention, strategy, stock price and expenses caused by the actions of activist shareholders;
impact of environmental events, governmental and other third-party responses to such events and our ability to insure adequately against such events;
cost of pending or future litigation, including litigation related to the acquisition of SRC;
effect that acquisitions we may pursue have on our capital requirements;
our ability to retain or attract senior management and key technical employees; and
success of strategic plans, expectations and objectives for our future operations.
 
Further, we urge you to carefully review and consider the cautionary statements and disclosures, specifically those under the heading "Risk Factors," made in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the U.S. Securities and Exchange Commission ("SEC") on February 28, 2019 (the "2018 Form 10-K"), and our other filings with the SEC for further information on risks and uncertainties that could affect our business, financial condition, results of operations and prospects, which are incorporated by this reference as though fully set forth herein. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to update any forward-looking statements in order to reflect any event or circumstance occurring after the date of this report or currently unknown facts or conditions or the occurrence of unanticipated events. All forward-looking statements are qualified in their entirety by this cautionary statement.

REFERENCES

Unless the context otherwise requires, references in this report to "PDC Energy," "PDC," "the Company," "we," "us," "our" or "ours" refer to the registrant, PDC Energy, Inc. and all subsidiaries consolidated for the purposes of its financial statements, including our proportionate share of the financial position, results of operations, cash flows and operating activities of our affiliated partnerships.


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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PDC ENERGY, INC.
Condensed Consolidated Balance Sheets
(unaudited; in thousands, except share and per share data)
 
 
September 30, 2019
 
December 31, 2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
4,567

 
$
1,398

Accounts receivable, net
 
253,077

 
181,434

Fair value of derivatives
 
75,830

 
84,492

Prepaid expenses and other current assets
 
7,938

 
7,136

Total current assets
 
341,412

 
274,460

Properties and equipment, net
 
4,165,156

 
4,002,862

Assets held-for-sale, net
 

 
140,705

Fair value of derivatives
 
33,185

 
93,722

Other assets
 
43,851

 
32,396

Total Assets
 
$
4,583,604

 
$
4,544,145

 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
Liabilities
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
147,893

 
$
181,864

Production tax liability
 
71,569

 
60,719

Fair value of derivatives
 
2,953

 
3,364

Funds held for distribution
 
88,047

 
105,784

Accrued interest payable
 
16,280

 
14,150

Other accrued expenses
 
81,049

 
75,133

Total current liabilities
 
407,791

 
441,014

Long-term debt
 
1,267,471

 
1,194,876

Deferred income taxes
 
193,707

 
198,096

Asset retirement obligations
 
86,182

 
85,312

Liabilities held-for-sale
 

 
4,111

Fair value of derivatives
 
661

 
1,364

Other liabilities
 
268,037

 
92,664

Total liabilities
 
2,223,849

 
2,017,437

 
 
 
 
 
Commitments and contingent liabilities
 

 

 
 
 
 
 
Stockholders' equity
 
 
 
 
Common shares - par value $0.01 per share, 150,000,000 authorized, 62,087,818 and 66,148,609 issued as of September 30, 2019 and December 31, 2018, respectively
 
621

 
661

Additional paid-in capital
 
2,390,658

 
2,519,423

Retained earnings (deficit)
 
(26,993
)
 
8,727

Treasury shares - at cost, 139,415 and 45,220
as of September 30, 2019 and December 31, 2018, respectively
 
(4,531
)
 
(2,103
)
Total stockholders' equity
 
2,359,755

 
2,526,708

Total Liabilities and Stockholders' Equity
 
$
4,583,604

 
$
4,544,145




See accompanying Notes to Condensed Consolidated Financial Statements
1

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PDC ENERGY, INC.
Condensed Consolidated Statements of Operations
(unaudited; in thousands, except per share data)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues
 
 
 
 
 
 
 
 
Crude oil, natural gas and NGLs sales
 
$
307,409

 
$
372,439

 
$
967,464

 
$
1,003,597

Commodity price risk management gain (loss), net
 
54,867

 
(94,394
)
 
(87,858
)
 
(257,760
)
Other income
 
3,667

 
2,672

 
11,495

 
8,011

Total revenues
 
365,943

 
280,717

 
891,101

 
753,848

Costs, expenses and other
 
 
 
 
 
 
 
 
Lease operating expenses
 
36,498

 
33,046

 
106,047

 
94,942

Production taxes
 
13,039

 
23,984

 
57,849

 
66,757

Transportation, gathering and processing expenses
 
10,999

 
9,234

 
34,631

 
25,511

Exploration, geologic and geophysical expense
 
209

 
1,032

 
3,492

 
4,553

Impairment of properties and equipment
 
167

 
1,488

 
37,021

 
194,230

General and administrative expense
 
41,091

 
48,240

 
123,497

 
121,183

Depreciation, depletion and amortization
 
171,839

 
147,540

 
491,784

 
409,952

Accretion of asset retirement obligations
 
1,356

 
1,200

 
4,503

 
3,773

Loss on sale of properties and equipment
 
43,872

 
2,118

 
9,599

 
3,199

Other expenses
 
2,492

 
2,711

 
8,882

 
8,187

Total costs, expenses and other
 
321,562

 
270,593

 
877,305

 
932,287

Income (loss) from operations
 
44,381

 
10,124

 
13,796

 
(178,439
)
Interest expense
 
(17,859
)
 
(17,622
)
 
(53,742
)
 
(52,561
)
Interest income
 
48

 
188

 
63

 
405

Income (loss) before income taxes
 
26,570

 
(7,310
)
 
(39,883
)
 
(230,595
)
Income tax (expense) benefit
 
(10,662
)
 
3,876

 
4,163

 
53,765

Net income (loss)
 
$
15,908

 
$
(3,434
)
 
$
(35,720
)
 
$
(176,830
)
 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.25

 
$
(0.05
)
 
$
(0.55
)
 
$
(2.68
)
Diluted
 
$
0.25

 
$
(0.05
)
 
$
(0.55
)
 
$
(2.68
)
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
62,547

 
66,073

 
64,835

 
66,032

Diluted
 
62,595

 
66,073

 
64,835

 
66,032

 
 
 
 
 
 
 
 
 


 

See accompanying Notes to Condensed Consolidated Financial Statements
2

Table of contents


PDC ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited; in thousands)
 
 
Nine Months Ended September 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(35,720
)
 
$
(176,830
)
Adjustments to net loss to reconcile to net cash from operating activities:
 
 
 
 
Net change in fair value of unsettled commodity derivatives
 
68,058

 
167,218

Depreciation, depletion and amortization
 
491,784

 
409,952

Impairment of properties and equipment
 
37,021

 
194,230

Accretion of asset retirement obligations
 
4,503

 
3,773

Non-cash stock-based compensation
 
18,124

 
16,357

Loss on sale of properties and equipment
 
9,599

 
3,199

Amortization of debt discount and issuance costs
 
10,139

 
9,454

Deferred income taxes
 
(4,389
)
 
(53,029
)
Other
 
2,761

 
1,025

Changes in assets and liabilities
 
73,845

 
2,485

Net cash from operating activities
 
675,725

 
577,834

Cash flows from investing activities:
 
 
 
 
Capital expenditures for development of crude oil and natural gas properties
 
(780,581
)
 
(685,549
)
Capital expenditures for other properties and equipment
 
(15,522
)
 
(3,739
)
Acquisition of crude oil and natural gas properties
 
(12,445
)
 
(181,572
)
Proceeds from sale of properties and equipment
 
1,528

 
2,443

Proceeds from divestitures
 
202,046

 
43,493

Restricted cash
 
8,001

 
1,249

Net cash from investing activities
 
(596,973
)
 
(823,675
)
Cash flows from financing activities:
 
 
 
 
Proceeds from revolving credit facility
 
1,300,000

 
629,000

Repayment of revolving credit facility
 
(1,235,500
)
 
(554,000
)
Payment of debt issuance costs
 
(53
)
 
(4,086
)
Purchase of treasury shares
 
(142,665
)
 

Purchase of treasury shares for employee stock-based compensation tax withholding obligations
 
(3,874
)
 
(4,700
)
Principal payments under financing lease obligations
 
(1,492
)
 
(873
)
Other
 

 
(55
)
Net cash from financing activities
 
(83,584
)
 
65,286

Net change in cash, cash equivalents and restricted cash
 
(4,832
)
 
(180,555
)
Cash, cash equivalents and restricted cash, beginning of period
 
9,399

 
189,925

Cash, cash equivalents and restricted cash, end of period
 
$
4,567

 
$
9,370




See accompanying Notes to Condensed Consolidated Financial Statements
3

Table of contents


PDC ENERGY, INC.
Condensed Consolidated Statements of Equity
(unaudited; in thousands, except share data)

 
Nine Months Ended September 30, 2019
 
Common Stock
 
 
 
Treasury Stock
 
 
 
 
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Shares
 
Amount
 
Retained Earnings (Deficit)
 
Total Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2018
66,148,609

 
$
661

 
$
2,519,423

 
(45,220
)
 
$
(2,103
)
 
$
8,727

 
$
2,526,708

Net loss

 

 

 

 

 
(120,176
)
 
(120,176
)
Stock-based compensation
48,254

 
1

 
4,682

 

 

 

 
4,683

Purchase of treasury shares for employee stock-based compensation tax withholding obligations

 

 

 
(41,787
)
 
(1,460
)
 

 
(1,460
)
Issuance of treasury shares

 

 
(2,547
)
 
64,372

 
2,547

 

 

Balance, March 31, 2019
66,196,863

 
662

 
2,521,558

 
(22,635
)
 
(1,016
)
 
(111,449
)
 
2,409,755

Net income

 

 

 

 

 
68,548

 
68,548

Stock-based compensation
148,040

 
1

 
7,574

 

 

 

 
7,575

Purchase of treasury shares for employee stock-based compensation tax withholding obligations

 

 

 
(54,784
)
 
(2,257
)
 

 
(2,257
)
Retirement of treasury shares for employee stock-based compensation tax withholding obligations
(2,182
)
 

 
(78
)
 
2,182

 
78

 

 

Purchase of treasury shares

 

 

 
(3,136,406
)
 
(105,215
)
 

 
(105,215
)
Retirement of treasury shares
(2,822,259
)
 
(28
)
 
(94,085
)
 
2,822,259

 
94,113

 

 

Issuance of treasury shares

 

 
(995
)
 
24,604

 
995

 

 

Balance, June 30, 2019
63,520,462

 
635

 
2,433,974

 
(364,780
)
 
(13,302
)
 
(42,901
)
 
2,378,406

Net income

 

 

 

 

 
15,908

 
15,908

Stock-based compensation
10,808

 

 
5,866

 

 

 

 
5,866

Purchase of treasury shares for employee stock-based compensation tax withholding obligations

 

 

 
(4,750
)
 
(157
)
 

 
(157
)
Retirement of treasury shares for employee stock-based compensation tax withholding obligations
(995
)
 

 
(32
)
 
995

 
32

 

 

Purchase of treasury shares

 

 

 
(1,228,310
)
 
(40,268
)
 

 
(40,268
)
Retirement of treasury shares
(1,442,457
)
 
(14
)
 
(48,536
)
 
1,442,457

 
48,550

 

 

Issuance of treasury shares

 

 
(614
)
 
14,973

 
614

 

 

Balance, September 30, 2019
62,087,818

 
$
621

 
$
2,390,658

 
(139,415
)
 
$
(4,531
)
 
$
(26,993
)
 
$
2,359,755



















See accompanying Notes to Condensed Consolidated Financial Statements
4

Table of contents


PDC ENERGY, INC.
Condensed Consolidated Statements of Equity
(unaudited; in thousands, except share data)
 
Nine Months Ended September 30, 2018
 
Common Stock
 
 
 
Treasury Stock
 
 
 
 
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Shares
 
Amount
 
Retained Earnings (Deficit)
 
Total Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2017
65,955,080

 
$
659

 
$
2,503,294

 
(55,927
)
 
$
(3,008
)
 
$
6,704

 
$
2,507,649

Net loss

 

 

 

 

 
(13,139
)
 
(13,139
)
Stock-based compensation
43,930

 
1

 
5,260

 

 

 

 
5,261

Purchase of treasury shares for employee stock-based compensation tax withholding obligations

 

 

 
(41,357
)
 
(2,255
)
 

 
(2,255
)
Issuance of treasury shares

 

 
(3,891
)
 
70,603

 
3,891

 

 

Non-employee directors' deferred compensation plan

 

 

 
(2,574
)
 
(142
)
 

 
(142
)
Balance, March 31, 2018
65,999,010

 
660

 
2,504,663

 
(29,255
)
 
(1,514
)
 
(6,435
)
 
2,497,374

Net loss

 

 

 

 

 
(160,257
)
 
(160,257
)
Stock-based compensation
134,015

 
1

 
5,517

 

 

 

 
5,518

Purchase of treasury shares for employee stock-based compensation tax withholding obligations

 

 

 
(45,706
)
 
(2,239
)
 

 
(2,239
)
Issuance of treasury shares

 

 
(397
)
 
7,792

 
397

 

 

Other

 

 
(90
)
 

 

 

 
(90
)
Balance, June 30, 2018
66,133,025

 
661

 
2,509,693

 
(67,169
)
 
(3,356
)
 
(166,692
)
 
2,340,306

Net loss

 

 

 

 

 
(3,434
)
 
(3,434
)
Stock-based compensation
3,402

 

 
5,578

 

 

 

 
5,578

Purchase of treasury shares for employee stock-based compensation tax withholding obligations

 

 

 
(3,402
)
 
(206
)
 

 
(206
)
Issuance of treasury shares

 

 
(410
)
 
8,306

 
410

 

 

Balance, September 30, 2018
66,136,427

 
$
661

 
$
2,514,861

 
(62,265
)
 
$
(3,152
)
 
$
(170,126
)
 
$
2,342,244




See accompanying Notes to Condensed Consolidated Financial Statements
5

Table of Contents
PDC ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2019
(unaudited)


NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION

PDC Energy, Inc. is a domestic independent exploration and production company that acquires, explores and develops properties for the production of crude oil, natural gas and NGLs, with operations in the Wattenberg Field in Colorado and the Delaware Basin in Texas. Our operations in the Wattenberg Field are focused in the horizontal Niobrara and Codell plays and our Delaware Basin operations are primarily focused in the Wolfcamp zones. We previously operated properties in the Utica Shale in Southeastern Ohio; however, we divested these properties during the first quarter of 2018. As of September 30, 2019, we owned an interest in approximately 2,700 gross productive wells. We are engaged in two operating segments: our oil and gas exploration and production segment and our gas marketing segment. Our gas marketing segment does not meet the quantitative thresholds to require disclosure as a separate reportable segment. All of our material operations are attributable to our exploration and production business; therefore, all of our operations are presented as a single segment for all periods presented.
 
The accompanying unaudited condensed consolidated financial statements include the accounts of PDC, our wholly-owned subsidiaries and our proportionate share of our affiliated partnerships. Pursuant to the proportionate consolidation method, our accompanying condensed consolidated financial statements include our pro rata share of assets, liabilities, revenues and expenses of the entities which we proportionately consolidate. All material intercompany accounts and transactions have been eliminated in consolidation.

In our opinion, the accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of our financial statements for interim periods in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, pursuant to such rules and regulations, certain notes and other financial information included in audited financial statements have been condensed or omitted. The December 31, 2018 condensed consolidated balance sheet data was derived from audited statements, but does not include all disclosures required by U.S. GAAP. The information presented in this Quarterly Report on Form 10-Q should be read in conjunction with our audited consolidated financial statements and notes thereto included in our 2018 Form 10-K. Our results of operations and cash flows for the nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year or any other future period.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board ("FASB") issued an accounting update and subsequent amendments aimed at increasing the transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about related leasing arrangements (the “New Lease Standard”). For leases with terms of more than 12 months, the accounting update requires lessees to recognize a right-of-use ("ROU") asset and lease liability for its right to use the underlying asset and the corresponding lease obligation. As provided by practical expedients, we made accounting policy elections to not recognize ROU assets and lease liabilities that arise from short-term leases and to not separate lease and non-lease components for any class of underlying asset. The FASB issued an accounting update which provides an optional transition practical expedient for the adoption of the New Lease Standard that, if elected, permits an organization to not evaluate the accounting for existing land easements that are not accounted for under the previous lease accounting standard. We elected this practical expedient, and accordingly, existing land easements at December 31, 2018 were not assessed. All new or modified land easements entered into after January 1, 2019 are evaluated under the New Lease Standard. The New Lease Standard does not apply to leases of mineral rights to explore for or use crude oil and natural gas. Adoption of the New Lease Standard resulted in increases to other assets of $20.1 million, other accrued expenses of $4.6 million and other liabilities of $15.5 million at January 1, 2019, with no adjustment to the opening balance of retained earnings.

Recently Issued Accounting Standards

In June 2016, the FASB issued an accounting update and subsequent amendments on the impairment of financial instruments. The update added a new impairment model, known as the current expected credit loss model, which is based upon expected credit losses, rather than incurred losses. Under the new guidance, an allowance will be recognized based upon

6

Table of contents
PDC ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2019
(unaudited)


the entity's estimate of lifetime expected credit losses. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years and early adoption is permitted. Based on implementation efforts performed to date, we do not expect adoption of the update to have a material impact on our condensed consolidated financial statements.

NOTE 3 - PENDING ACQUISITION

On August 25, 2019, we and SRC entered into an Agreement and Plan of Merger (the “Merger Agreement”) under which we will acquire SRC in an all-stock transaction (the “SRC Acquisition”). We expect the SRC Acquisition to be completed early in the first quarter of 2020, subject to PDC and SRC shareholder approval and the satisfaction of certain customary closing conditions, including the receipt of federal regulatory approvals. The Merger Agreement may be terminated by us or SRC in certain circumstances. We will account for the SRC Acquisition as a business combination using the acquisition method of accounting.
 
Upon completion of the SRC Acquisition, SRC shareholders will automatically receive 0.158 of a share of our common stock in exchange for each share of SRC common stock. This exchange ratio is fixed and will not be adjusted for changes in our or SRC’s stock price. The value of the SRC Acquisition, which will include assumption of SRC's net debt, will be dependent upon the market value of our common stock on the date of closing. We estimate that we will issue up to approximately 40 million shares of our common stock in connection with the SRC Acquisition.

During the nine months ended September 30, 2019, we recorded transaction costs related to the SRC Acquisition of $5.0 million, which are included in general and administrative expense in our condensed consolidated statement of operations. The liabilities associated with such amounts are included in other accrued expenses in our condensed consolidated balance sheet as of September 30, 2019.

Subject to closing the SRC Acquisition, the borrowing base on our revolving credit facility will increase from $1.6 billion to $2.1 billion. In addition, we elected to increase the aggregate commitment amount under our revolving credit facility to (i) $1.7 billion upon closing of the SRC Acquisition and (ii) up to $1.9 billion, at our sole discretion, at any time following closing of the SRC Acquisition before April 30, 2020. As described below, if the SRC Acquisition results in a "Change of Control" under the indenture governing SRC’s $550 million 6.25% Senior Notes due December 2025 (the "SRC Senior Notes"), we will be required to offer to purchase those notes. We expect that our decision regarding the expansion of the commitment to $1.9 billion will be based in part on whether we make such an offer and, if so, the amount of SRC Senior Notes tendered in the offer.

Upon closing the SRC Acquisition, we will assume the SRC Senior Notes and be required to pay off and terminate SRC's revolving credit facility. As of September 30, 2019, SRC had $165 million outstanding under its revolving credit facility. The SRC Senior Notes contain a change of control provision pursuant to which, if the consummation of the SRC Acquisition results in a “Change of Control” under the indenture governing the SRC Senior Notes, we will be required to make an offer to repurchase the SRC Senior Notes at a price equal to 101 percent of the principal amount of the notes, together with any accrued and unpaid interest to the date of purchase.

Additionally, in August 2019, contingent on the closing of the SRC Acquisition, our Board of Directors (the "Board") approved an increase and extension to the Stock Repurchase Program from $200 million to $525 million with a target completion date of December 31, 2021.
 
NOTE 4 - REVENUE RECOGNITION

Crude oil, natural gas and NGLs revenues are recognized when we have transferred control of crude oil, natural gas or NGLs production to the purchaser. We consider the transfer of control to have occurred when the purchaser has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the crude oil, natural gas or NGLs production. We record sales revenue based on an estimate of the volumes delivered at estimated prices as determined by the applicable sales agreement. We estimate our sales volumes based on company-measured volume readings. We then adjust our crude oil, natural gas and NGLs sales in subsequent periods based on the data received from our purchasers that reflects actual volumes delivered and prices received. We receive payment for sales one to two months after actual delivery has occurred. The differences in sales estimates and actual sales are recorded one to two months later. Historically, these differences have not been material.        


7

Table of contents
PDC ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2019
(unaudited)


Disaggregated Revenue. The following table presents crude oil, natural gas and NGLs sales disaggregated by
commodity and operating region for the three and nine months ended September 30, 2019 and 2018:

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Revenue by Commodity and Operating Region
 
2019
 
2018
 
Percent Change
 
2019
 
2018
 
Percentage Change
 
 
(in thousands)
Crude oil
 
 
 
 
 
 
 
 
 
 
 
 
Wattenberg Field
 
$
185,543

 
$
216,346

 
(14.2
)%
 
$
569,518

 
$
576,645

 
(1.2
)%
Delaware Basin
 
70,175

 
68,341

 
2.7
 %
 
191,452

 
184,357

 
3.8
 %
Utica Shale (1)
 

 
 
*

 

 
2,696

 
*

Total
 
$
255,718

 
$
284,687

 
(10.2
)%
 
$
760,970

 
$
763,698

 
(0.4
)%
 Natural gas
 
 
 
 
 
 
 
 
 
 
 
 
Wattenberg Field
 
$
23,949

 
$
27,762

 
(13.7
)%
 
$
100,779

 
$
80,174

 
25.7
 %
Delaware Basin
 
2,613

 
6,994

 
(62.6
)%
 
9,293

 
22,145

 
(58.0
)%
Utica Shale (1)
 

 

 
*