Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 8-K
 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 7, 2019
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PDC Energy, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
001-37419
 
95-2636730
(State or other jurisdiction of
 
(Commission
 
(I.R.S. Employer
incorporation or organization)
 
File Number)
 
Identification Number)

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


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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. ¨







Item 2.02 Results of Operations and Financial Condition.

The following information is furnished pursuant to Item 2.02.
 
On August 7, 2019, PDC Energy, Inc. issued a press release announcing its operating and financial results for the second quarter ended June 30, 2019. A copy of the press release is furnished as Exhibit 99.1 and incorporated by reference herein.

The information in this Current Report on Form 8-K, including the exhibit hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits
Exhibit No.
 
Description
 
 
 
99.1
 
 






SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 7, 2019
PDC ENERGY, INC.

By:
/s/ Nicole Martinet
 
Nicole Martinet
 
General Counsel, Senior Vice President and Corporate Secretary



Exhibit


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August 7, 2019
PDC Energy Announces 2019 Second Quarter Results, Decreases Full-Year Capital Investment Guidance and Increases Full-Year Production Range
DENVER, August 7, 2019: PDC Energy, Inc. ("PDC" or the "Company") (NASDAQ: PDCE) today reported its 2019 second quarter operating and financial results while announcing improvements to its 2019 capital efficiency by reducing its full-year capital investment guidance and increasing its full-year production guidance.
Company Highlights:
Lowered full-year capital investment guidance to a range of $810 to $840 million from $810 to $870 million, which includes reducing the Wattenberg rig count from three to two in September.
Reduced corporate headcount in June by approximately 15 percent to more closely align with the updated operational plan, contributing to second half projected 2019 G&A expense between $2.60 and $2.80 per Boe.
Increased full-year production to a range of 48 to 50 MMBoe, reflecting the benefit of increased operational efficiencies in both basins driving increased production in the first half of the year.
Returned $125 million to shareholders through July with the repurchase of approximately 3.7 million shares via the previously announced $200 million stock repurchase program.
Received approximately $264 million of cash in the second quarter from closing of all three Delaware midstream sales. An additional unconditional payment of $82 million is due June 2020.
Received nearly $35 million through the sale of approximately 6,500 net Delaware acres that were scheduled to expire in 2019.
Second Quarter Highlights:
Oil production of 4.9 MMBbls, or approximately 53,800 Bbls per day, a 24 percent increase from the second quarter of 2018 and a seven percent increase from the first quarter of 2019.
Total production of 12.4 MMBoe, or approximately 136,500 Boe per day, a 32 percent increase from the second quarter of 2018 and a ten percent increase from the first quarter of 2019.

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LOE of $2.76 per Boe, a 20 percent improvement from the second quarter of 2018 and a 12 percent decrease from the first quarter of 2019.
Further improved Delaware basin drill times, from spud to rig release, to an average of 23 days, a 33 percent, or 11 day improvement, from the second quarter of 2018.
CEO Commentary
President and Chief Executive Officer, Bart Brookman commented, “Throughout the second quarter, our operating teams continued to deliver improved drilling and completion efficiencies while building on the momentum created earlier in the year. The combination of lowering our full-year capital investment guidance while increasing our full-year production guidance enables PDC to generate in excess of $150 million of free cash flow in the second half of 2019. Additionally, the adjustments to our business plan clearly demonstrate our ability to execute on a strategy centered on delivering sustainable free cash flow in a volatile commodity price environment. Over the past several months, we have met extensively with our long-term shareholders and are confident our cost control measures, slowed Wattenberg development pace and return of capital all align with our long-term value proposition.”
Operations Update
Production for the second quarter of 2019 was 12.4 million barrels of oil equivalent (“MMBoe”), or approximately 136,500 Boe per day, an increase of 32 percent from the second quarter of 2018 and ten percent from the first quarter of 2019. Oil production of 4.9 million barrels (“MMBbls”) in the second quarter represents an increase of approximately 24 percent compared to the second quarter of 2018 and seven percent from the first quarter of 2019. Both total production and oil production growth, on a year-over-year and sequential basis, are largely attributable to increased operational efficiencies and the corresponding acceleration of planned turn-in-lines (“TILs”) in both the Wattenberg and Delaware Basins. As a result, the Company has increased its full-year production range by one MMBoe at the mid-point to 48 to 50 MMBoe.
In Wattenberg, the Company spud 43 wells and TIL’d 27 wells with average working interests of 92 percent. The Company’s completion crew has averaged approximately 17 stages per day in the first half of 2019, more than ten percent above initial 2019 expectations. The Company’s Wattenberg activity year-to-date has largely focused on the western side of its Kersey acreage block, which has a slightly gassier production mix than average Kersey wells. Additionally, the Company now expects prolonged elevated Wattenberg line pressures in the second half of 2019 as a result of the slightly delayed processing capacity expansion from its primary third-party midstream provider. The cumulative impact is expected to result in a Wattenberg and total Company full-year oil mix of approximately 40 percent.
In the Delaware Basin, the Company spud ten wells and TIL’d eight wells with average working interests of approximately 92 percent. Second quarter production of 31,500 Boe per day was approximately 43 percent oil and represented 26 percent growth in total production and oil production compared to the first quarter of 2019. The

Page | 2



Company’s average second quarter drill times, in terms of spud to rig release, averaged 23 days, a 33 percent improvement from the second quarter of 2018 and 15 percent improvement from the first quarter of 2019. In June, the Company decreased its rig count from three to two, and in July, the Company released its completion crew. The Company expects to operate two drilling rigs for the remainder of 2019 and to resume completions in 2020.
Capital investments for the quarter were approximately $277 million and included $10 million of Delaware Basin midstream related capital. The Company anticipates a decrease to its projected cash flows from operations as compared to its previously released guidance for the full-year due to higher than expected natural gas and NGL differentials realized in the second quarter and projected in the second half of the year, as well as a slight decrease to projected oil volumes. The Company now projects full-year natural gas and NGL realizations, excluding transportation, gathering and processing expenses (“TGP”), to be approximately 40 to 45 percent and 20 to 25 percent of NYMEX pricing, respectively. This compares to prior estimates of 50 to 55 percent for natural gas and 30 to 35 percent for NGLs.
In order to generate free cash flow in 2019, the Company plans to decrease its Wattenberg rig count from three to two in September while maintaining its original completion activity of approximately 110 to 125 TILs. Due to operating efficiencies accelerating the timing of completions and TILs, the Company expects limited completion activity in the fourth quarter. As a result of these operating plan adjustments, as well as additional capital allocation decisions, the Company has lowered its full-year expected capital investments by $15 million at the mid-point to a range of $810 million to $840 million, excluding corporate capital. This plan is expected to deliver between $160 million and $190 million of free cash flow in the second half of 2019 with a production profile of flat to modest second half growth on a daily basis.
Stock Repurchase Program
Year-to-date, the Company has returned $125 million of capital to shareholders through the repurchase of approximately 3.7 million shares of common stock outstanding via its previously announced $200 million stock repurchase program (the “Program”). The remaining repurchases under the Program are currently expected to be conducted in open markets, at the Company’s discretion and in compliance with safe harbor provisions. The Program has a target completion date of December 31, 2020 and can be modified or discontinued by the Board of Directors at any time. The Company projects to generate a sufficient level of free cash flow in the second half of 2019 and full-year 2020 to fund the Program while maintaining the ability to pursue additional future return of capital programs, depending on market conditions.
Oil and Gas Production, Sales and Operating Cost Data

Crude oil, natural gas and NGLs sales, excluding net settlements on derivatives, increased four percent to $339.0 million in the second quarter of 2019, compared to $325.9 million in the second quarter of 2018. The increase in sales was due to a 32 percent increase in total production offsetting a decrease in the sales price per Boe, excluding

Page | 3



net settlements on derivatives, of 22 percent to $27.28 in the second quarter of 2019 from $34.74 in the comparable 2018 period. The decrease in sales price per Boe was driven by 42 percent and 27 percent decreases in the weighted-average NGL and natural gas sales prices, respectively, in the second quarter of 2019 compared to the second quarter of 2018. Including the impact of net settlements on derivatives and the change in fair value of unsettled derivatives, combined revenues increased 84 percent to $390.7 million from $212.5 million between periods.
 
The following table provides production and weighted-average sales price, by area, for the three and six months ended June 30, 2019 and 2018, excluding net settlements on derivatives and TGP:

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
Percent Change
 
2019
 
2018
 
Percent Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Crude oil (MBbls)
 
 
 
 
 
 
 
 
 
 
 
 
Wattenberg Field
 
3,681

 
2,943

 
25.1
 %
 
7,253

 
5,823

 
24.6
 %
Delaware Basin
 
1,218

 
1,005

 
21.2
 %
 
2,172

 
1,876

 
15.8
 %
Utica Shale
 

 

 
*

 

 
46

 
*

Total
 
4,899

 
3,948

 
24.1
 %
 
9,425

 
7,745

 
21.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average price
 
$
55.96

 
$
63.99

 
(12.5
)%
 
$
53.61

 
$
61.85

 
(13.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 Natural gas (MMcf)
 
 
 
 
 
 
 
 
 
 
 
 
Wattenberg Field
 
23,233

 
15,836

 
46.7
 %
 
44,193

 
31,360

 
40.9
 %
Delaware Basin
 
5,759

 
4,851

 
18.7
 %
 
10,450

 
8,500

 
22.9
 %
Utica Shale
 

 

 
*

 

 
414

 
*

Total
 
28,992

 
20,687

 
40.1
 %
 
54,643

 
40,274

 
35.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average price
 
$
1.07

 
$
1.46

 
(26.7
)%
 
$
1.53

 
$
1.71

 
(10.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
NGLs (MBbls)
 
 
 
 
 
 
 
 
 
 
 
 
Wattenberg Field
 
2,007

 
1,544

 
30.0
 %
 
3,908

 
2,973

 
31.4
 %
Delaware Basin
 
686

 
443

 
54.9
 %
 
1,200

 
826

 
45.3
 %
Utica Shale
 

 

 
*

 

 
34

 
*

Total
 
2,693

 
1,987

 
35.5
 %
 
5,108

 
3,833

 
33.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average price
 
$
12.53

 
$
21.76

 
(42.4
)%
 
$
13.96

 
$
21.78

 
(35.9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Crude oil equivalent (MBoe)
 
 
 
 
 
 
 
 
 
 
 
 
Wattenberg Field
 
9,561

 
7,126

 
34.2
 %
 
18,526

 
14,023

 
32.1
 %
Delaware Basin
 
2,864

 
2,256

 
27.0
 %
 
5,114

 
4,118

 
24.2
 %
Utica Shale
 

 

 
*

 

 
149

 
*

Total
 
12,425

 
9,382

 
32.4
 %
 
23,640

 
18,290

 
29.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average price
 
$
27.28

 
$
34.74

 
(21.5
)%
 
$
27.92

 
$
34.51

 
(19.1
)%

Production costs for the second quarter of 2019, which include lease operating expenses (“LOE”), production taxes and TGP, were $69.1 million, or $5.57 per Boe, compared to $63.9 million, or $6.81 per Boe, for the comparable 2018 period. The 18 percent decrease in production costs per Boe between periods is largely attributable to a 20 percent decrease in LOE per Boe. Wattenberg LOE per Boe in the second quarter of 2019 was $2.46 compared to $3.29 in the second quarter of 2018. Delaware Basin LOE decreased between periods to $3.76 from $3.92 per Boe.

Page | 4



The decreases were primarily attributable to the 32 percent company-wide production growth in the second quarter of 2019 compared to the second quarter of 2018.

The following table provides the components of production costs for the three and six months ended June 30, 2019 and 2018:

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Lease operating expenses
$
34.3

 
$
32.3

 
$
69.5

 
$
61.9

Production taxes
22.6

 
22.6

 
44.8

 
42.8

Transportation, gathering and processing expenses
12.2

 
9.0

 
23.6

 
16.3

Total
$
69.1

 
$
63.9

 
$
137.9

 
$
121.0


 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Lease operating expenses per Boe
$
2.76

 
$
3.44

 
$
2.94

 
$
3.38

Production taxes per Boe
1.82

 
2.41

 
1.90

 
2.34

Transportation, gathering and processing expenses per Boe
0.99

 
0.96

 
1.00

 
0.89

Total per Boe
$
5.57

 
$
6.81

 
$
5.84

 
$
6.61


Financial Results

Net income for the second quarter of 2019 was $68.5 million, or $1.04 per diluted share, compared to net loss of $160.3 million, or $2.43 per diluted share, for the comparable 2018 period. The year-over-year difference was primarily attributable to a $160.3 million difference in fair value of unsettled derivatives, a $130.6 million decrease in impairments of property and equipment and a $33.6 million difference in gain on sale of properties and equipment. Adjusted net income for the second quarter, a non-GAAP financial measure defined below, was $22.5 million, or $0.34 per diluted share in 2019 compared to an adjusted net loss of $84.5 million, or $1.28 per diluted share in 2018.

Net cash from operating activities was $260.4 million in the second quarter of 2019, compared to $175.7 million in the comparable 2018 period. The increase between periods is primarily a result of an accounting treatment related to the divestiture of the Company’s Delaware Basin midstream assets in the second quarter of 2019. Adjusted cash flows from operations, a non-GAAP financial measure defined below, were $207.0 million in the second quarter of 2019, compared to $199.3 million in the comparable 2018 period.

G&A was $42.8 million, or $3.45 per Boe, for the second quarter of 2019 compared to $37.2 million, or $3.97 per Boe in the comparable 2018 period. In June 2019, the Company reduced its current corporate headcount by approximately 15 percent while also reducing its future hiring plans. These changes were made to more closely align with the updated operating plan. The expenses for cash and non-cash severance, as well as shareholder

Page | 5



activism expenses and the settlement of the Company’s final partnership agreements, net a one-time insurance credit, totaled approximately $4.3 million, or $0.35 per Boe. Excluding these expenses would result in a normalized G&A per Boe of approximately $3.10 for the second quarter of 2019, a 15 percent decrease compared to the comparable 2018 period. In the second half of 2019, the Company estimates G&A per Boe of $2.60 to $2.80, assuming the mid-point of its updated production guidance range.

2019 Capital Investment Outlook and Financial Guidance
The following table summarizes the Company’s updated 2019 financial guidance:
 
Low
 
High
Production (MMBoe)
48.0

 
50.0

Capital Investment in Crude Oil and Natural Gas Properties (millions)
$
810

 
$
840

 
 
 
 
Operating Expenses
Lease operating expense ($/Boe)
$
2.85

 
$
3.00

Transportation, gathering and processing expenses ($/Boe)
$
0.90

 
$
1.00

Production taxes (% of Crude oil, natural gas & NGL sales)
6
%
 
7
%
General and administrative expense ($/Boe)
$
3.00

 
$
3.20

Estimated Price Realizations (% of NYMEX) (excludes TGP)
Crude oil
90%
 
95%
Natural gas
40%
 
45%
NGLs
20%
 
25%

The Company projects to generate free cash flow in the third quarter as it expects a material reduction in capital investments compared to the second quarter, driven primarily through reduced Delaware Basin completion activity. Additionally, the Company projects its third quarter production volumes to reflect modest growth in each basin compared to the second quarter.
In 2020, the Company projects to generate between $100 million and $200 million of free cash flow after updating its assumptions to reflect an anticipated increase in natural gas and NGL price differentials, lower corporate cost structure and reduced Wattenberg rig count and projected oil volumes.
Non-GAAP Financial Measures

PDC uses "adjusted cash flows from operations," "adjusted net income (loss)" and "adjusted EBITDAX," non-U.S. GAAP financial measures, for internal management reporting, when evaluating period-to-period changes and, in some cases, providing public guidance on possible future results. These measures are not measures of financial performance under U.S. GAAP and should be considered in addition to, not as a substitute for, net income (loss) or cash flows from operations, investing or financing activities, and should not be viewed as liquidity measures or indicators of cash flows reported in accordance with U.S. GAAP. The non-U.S. GAAP financial measures that we use may not be comparable to similarly titled measures reported by other companies. Also, in the future, PDC may

Page | 6



disclose different non-U.S. GAAP financial measures in order to help investors more meaningfully evaluate and compare future results of operations to previously reported results of operations. PDC strongly encourages investors to review our financial statements and publicly filed reports in their entirety and not rely on any single financial measure.

The following tables provide reconciliations of adjusted cash flows from operations, adjusted net income (loss) and adjusted EBITDAX to their most comparable U.S. GAAP measures (in millions, except per share data):

Adjusted Cash Flows from Operations
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Adjusted cash flows from operations:
 
 
 
 
 
 
 
 
Net cash from operating activities
 
$
260.4

 
$
175.7

 
$
442.2

 
$
380.9

Changes in assets and liabilities
 
(53.4
)
 
23.6

 
(42.7
)
 
(6.6
)
Adjusted cash flows from operations
 
$
207.0

 
$
199.3

 
$
399.5

 
$
374.3


Adjusted Net Income (Loss)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Adjusted net income (loss):
 
 
 
 
 
 
 
 
Net income (loss)
 
$
68.5

 
$
(160.3
)
 
$
(51.6
)
 
$
(173.4
)
(Gain) loss on commodity derivative instruments
 
(47.3
)
 
116.1

 
142.7

 
163.4

Net settlements on commodity derivative instruments
 
(13.2
)
 
(16.4
)
 
(21.6
)
 
(42.4
)
Tax effect of above adjustments
 
14.5

 
(23.9
)
 
(29.0
)
 
(29.0
)
Adjusted net income (loss)
 
$
22.5

 
$
(84.5
)
 
$
40.5

 
$
(81.4
)
Weighted-average diluted shares outstanding
 
65.9

 
66.1

 
66.0

 
66.0

Adjusted diluted earnings per share
 
$
0.34

 
$
(1.28
)
 
$
0.61

 
$
(1.23
)

Adjusted EBITDAX
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Net income (loss) to adjusted EBITDAX:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
68.5

 
$
(160.3
)
 
$
(51.6
)
 
$
(173.4
)
(Gain) loss on commodity derivative instruments
 
(47.3
)
 
116.1

 
142.7

 
163.4

Net settlements on commodity derivative instruments
 
(13.2
)
 
(16.4
)
 
(21.6
)
 
(42.4
)
Non-cash stock-based compensation
 
7.6

 
5.5

 
12.3

 
10.8

Interest expense, net
 
18.9

 
17.3

 
35.9

 
34.7

Income tax expense (benefit)
 
22.6

 
(45.3
)
 
(14.8
)
 
(49.9
)
Impairment of properties and equipment
 
29.0

 
159.5

 
36.9

 
192.7

Exploration, geologic and geophysical expense
 
0.6

 
0.9

 
3.3

 
3.5

Depreciation, depletion and amortization
 
168.5

 
135.6

 
319.9

 
262.4

Accretion of asset retirement obligations
 
1.6

 
1.4

 
3.1

 
2.6

Adjusted EBITDAX
 
$
256.8

 
$
214.3

 
$
466.1

 
$
404.4

 
 
 
 
 
 
 
 
 
Cash from operating activities to adjusted EBITDAX:
 
 
 
 
 
 
 
 
Net cash from operating activities
 
$
260.4

 
$
175.7

 
$
442.2

 
$
380.9

Interest expense, net
 
18.9

 
17.3

 
35.9

 
34.7

Amortization of debt discount and issuance costs
 
(3.4
)
 
(3.1
)
 
(6.7
)
 
(6.4
)
Gain (loss) on sale of properties and equipment
 
33.9

 
0.4

 
34.3

 
(1.1
)
Exploration, geologic and geophysical expense
 
0.6

 
0.9

 
3.3

 
3.5

Other
 
(0.2
)
 
(0.5
)
 
(0.2
)
 
(0.6
)
Changes in assets and liabilities
 
(53.4
)
 
23.6

 
(42.7
)
 
(6.6
)
Adjusted EBITDAX
 
$
256.8

 
$
214.3

 
$
466.1

 
$
404.4


Page | 7



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

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
Crude oil, natural gas and NGLs sales
$
338,956

 
$
325,933

 
$
660,055

 
$
631,158

Commodity price risk management gain (loss), net
47,349

 
(116,126
)
 
(142,725
)
 
(163,366
)
Other income
4,353

 
2,724

 
7,828

 
5,339

Total revenues
390,658

 
212,531

 
525,158

 
473,131

Costs, expenses and other
 
 
 
 
 
 
 
Lease operating expenses
34,328

 
32,260

 
69,549

 
61,896

Production taxes
22,642

 
22,604

 
44,810

 
42,773

Transportation, gathering and processing expenses
12,208

 
8,964

 
23,632

 
16,277

Exploration, geologic and geophysical expense
640

 
875

 
3,283

 
3,521

Impairment of properties and equipment
28,979

 
159,554

 
36,854

 
192,742

General and administrative expense
42,808

 
37,247

 
82,406

 
72,943

Depreciation, depletion and amortization
168,523

 
135,624

 
319,945

 
262,412

Accretion of asset retirement obligations
1,563

 
1,285

 
3,147

 
2,573

(Gain) loss on sale of properties and equipment
(33,904
)
 
(351
)
 
(34,273
)
 
1,081

Other expenses
2,836

 
2,708

 
6,390

 
5,476

Total costs, expenses and other
280,623

 
400,770

 
555,743

 
661,694

Income (loss) from operations
110,035

 
(188,239
)
 
(30,585
)
 
(188,563
)
Interest expense
(18,905
)
 
(17,410
)
 
(35,883
)
 
(34,939
)
Interest income
5

 
69

 
15

 
217

Income (loss) before income taxes
91,135

 
(205,580
)
 
(66,453
)
 
(223,285
)
Income tax (expense) benefit
(22,587
)
 
45,323

 
14,825

 
49,889

Net income (loss)
$
68,548

 
$
(160,257
)
 
$
(51,628
)
 
$
(173,396
)
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.04

 
$
(2.43
)
 
$
(0.78
)
 
$
(2.63
)
Diluted
$
1.04

 
$
(2.43
)
 
$
(0.78
)
 
$
(2.63
)
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
Basic
65,815

 
66,066

 
65,998

 
66,012

Diluted
65,926

 
66,066

 
65,998

 
66,012














Page | 8




PDC ENERGY, INC.
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except share and per share data)

 
 
June 30, 2019
 
December 31, 2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
1,474

 
$
1,398

Accounts receivable, net
 
277,321

 
181,434

Fair value of derivatives
 
41,425

 
84,492

Prepaid expenses and other current assets
 
5,607

 
7,136

Total current assets
 
325,827

 
274,460

Properties and equipment, net
 
4,196,335

 
4,002,862

Assets held-for-sale, net
 

 
140,705

Fair value of derivatives
 
31,655

 
93,722

Other assets
 
41,087

 
32,396

Total Assets
 
$
4,594,904

 
$
4,544,145

 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
Liabilities
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
219,158

 
$
181,864

Production tax liability
 
69,951

 
60,719

Fair value of derivatives
 
19,775

 
3,364

Funds held for distribution
 
88,879

 
105,784

Accrued interest payable
 
14,273

 
14,150

Other accrued expenses
 
86,523

 
75,133

Total current liabilities
 
498,559

 
441,014

Long-term debt
 
1,197,744

 
1,194,876

Deferred income taxes
 
183,120

 
198,096

Asset retirement obligations
 
78,909

 
85,312

Liabilities held-for-sale
 

 
4,111

Fair value of derivatives
 
927

 
1,364

Other liabilities
 
257,239

 
92,664

Total liabilities
 
2,216,498

 
2,017,437

 
 
 
 
 
Stockholders' equity
 
 
 
 
Common shares - par value $0.01 per share, 150,000,000 authorized, 63,520,462 and 66,148,609 issued as of June 30, 2019 and December 31, 2018, respectively
 
635

 
661

Additional paid-in capital
 
2,433,974

 
2,519,423

Retained earnings (deficit)
 
(42,901
)
 
8,727

Treasury shares - at cost, 364,780 and 45,220
as of June 30, 2019 and December 31, 2018, respectively
 
(13,302
)
 
(2,103
)
Total stockholders' equity
 
2,378,406

 
2,526,708

Total Liabilities and Stockholders' Equity
 
$
4,594,904

 
$
4,544,145

 
 
 
 
 

Page | 9



PDC ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
68,548

 
$
(160,257
)
 
$
(51,628
)
 
$
(173,396
)
Adjustments to net income (loss) to reconcile to net cash from operating activities:
 
 
 
 
 
 
 
 
Net change in fair value of unsettled commodity derivatives
 
(60,542
)
 
99,718

 
121,080

 
120,920

Depreciation, depletion and amortization
 
168,523

 
135,624

 
319,945

 
262,412

Impairment of properties and equipment
 
28,979

 
159,554

 
36,854

 
192,742

Accretion of asset retirement obligations
 
1,563

 
1,285

 
3,147

 
2,573

Non-cash stock-based compensation
 
7,575

 
5,518

 
12,258

 
10,779

(Gain) loss on sale of properties and equipment
 
(33,904
)
 
(351
)
 
(34,273
)
 
1,081

Amortization of debt discount and issuance costs
 
3,382

 
3,126

 
6,731

 
6,372

Deferred income taxes
 
22,512

 
(45,372
)
 
(14,975
)
 
(50,181
)
Other
 
374

 
459

 
395

 
974

Changes in assets and liabilities
 
53,373

 
(23,596
)
 
42,702

 
6,581

Net cash from operating activities
 
260,383

 
175,708

 
442,236

 
380,857

Cash flows from investing activities:
 
 
 
 
 
 
 
 
Capital expenditures for development of crude oil and natural gas properties
 
(275,851
)
 
(235,718
)
 
(542,791
)
 
(432,635
)
Capital expenditures for other properties and equipment
 
(5,627
)
 
(1,384
)
 
(10,453
)
 
(2,450
)
Acquisition of crude oil and natural gas properties
 
(4,146
)
 
(227
)
 
(4,146
)
 
(181,052
)
Proceeds from sale of properties and equipment
 
1,052

 
1,762

 
1,154

 
1,782

Proceeds from divestitures
 
199,430

 

 
199,430

 
39,023

Restricted cash
 
8,001

 

 
8,001

 
1,249

Net cash from investing activities
 
(77,141
)
 
(235,567
)
 
(348,805
)
 
(574,083
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
Proceeds from revolving credit facility
 
458,000

 
198,000

 
890,000

 
233,000

Repayment of revolving credit facility
 
(552,000
)
 
(176,000
)
 
(892,500
)
 
(211,000
)
Payment of debt issuance costs
 
(36
)
 
(4,060
)
 
(36
)
 
(4,060
)
Purchase of treasury shares
 
(94,113
)
 

 
(94,113
)
 

Purchase of treasury shares for employee stock-based compensation tax withholding obligations
 
(2,257
)
 
(2,239
)
 
(3,717
)
 
(4,494
)
Other
 
(475
)
 
(340
)
 
(990
)
 
(719
)
Net cash from financing activities
 
(190,881
)
 
15,361

 
(101,356
)
 
12,727

Net change in cash, cash equivalents and restricted cash
 
(7,639
)
 
(44,498
)
 
(7,925
)
 
(180,499
)
Cash, cash equivalents and restricted cash, beginning of period
 
9,113

 
53,924

 
9,399

 
189,925

Cash, cash equivalents and restricted cash, end of period
 
$
1,474

 
$
9,426

 
$
1,474

 
$
9,426


Page | 10





Page |
2019 Second Quarter Teleconference and Webcast
The Company invites you to join Bart Brookman, President and Chief Executive Officer; Scott Meyers, Chief Financial Officer; Lance Lauck, Executive Vice President Corporate Development and Strategy; and Scott Reasoner, Chief Operating Officer, for a conference call on Thursday, August 8, 2019, to discuss its 2019 second quarter results. The related slide presentation will be available on PDC's website at www.pdce.com.
Conference Call and Webcast:
Date/Time: Thursday, August 8, 2019, 11:00 a.m. ET
Webcast available at: www.pdce.com
Domestic (toll free): 877-312-5520
International: 253-237-1142
Conference ID: 3583153

Replay Numbers:
Domestic (toll free): 855-859-2056
International: 404-537-3406
Conference ID: 3583153

The replay of the call will be available for six months on PDC's website at www.pdce.com.

Upcoming Investor Presentations

PDC is scheduled to attend the following conferences: EnerCom’s The Oil and Gas Conference in Denver on Tuesday, August 13; Barclay’s Energy Conference in New York on Wednesday, September 4; and the Johnson Rice Energy Conference in New Orleans on Tuesday, September 24. Presentation materials will be posted to the Company’s website, www.pdce.com, prior to the start of the conference.

About PDC Energy, Inc.

PDC Energy, Inc. is a domestic independent exploration and production company that acquires, produces, develops, and explores for crude oil, natural gas and NGLs with operations in the Wattenberg Field in Colorado and the Delaware Basin in West Texas. Its operations are focused on the liquid-rich horizontal Niobrara and Codell plays in the Wattenberg Field and the liquid-rich Wolfcamp zones in the Delaware Basin.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Page | 11




This press release 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 press release 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, 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, and that cash flows from operations will exceed expected capital investments in crude oil and natural gas properties for 2019 and 2020; 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; 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 press release 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;
impact to our operations, personnel retention, strategy, stock price and expenses caused by the actions of activist shareholders;

Page | 12



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;
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 or acreage exchanges;
increases or changes in costs and expenses;
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;
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 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;
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 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"), our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 filed with the SEC on May 2, 2019 (the

Page | 13



"2019 Q1 Form 10-Q") 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.

Contacts:    Michael Edwards
Senior Director Investor Relations
303-860-5820
michael.edwards@pdce.com

Kyle Sourk
Manager Investor Relations
303-318-6150
kyle.sourk@pdce.com


Page | 14