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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, 2020
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
https://cdn.kscope.io/caf0eb2a59d6dad2860537e59b4cff52-pdce-20200930_g1.jpg
PDC ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware95-2636730
(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 classTicker SymbolName of each exchange on which registered
Common stock, par value $0.01 per sharePDCENasdaq 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: 99,637,673 shares of the Company's Common Stock ($0.01 par value) were outstanding as of October 22, 2020.


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PDC ENERGY, INC.


TABLE OF CONTENTS
PART I – FINANCIAL INFORMATIONPage
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PART II – OTHER INFORMATION
   
Item 1.
Item 1A.
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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, 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 currently suspended stock repurchase program; 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; impacts of Colorado political matters, including recent rulemaking initiatives given our geographic concentration; ability to meet our volume commitments to midstream providers; ongoing compliance with our consent decree; risk of our counterparties non-performance on derivative instruments; and our ability to repay our 2021 Convertible Notes and fund planned activities.

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:

the COVID-19 pandemic, including its effects on commodity prices, downstream capacity, employee health and safety, business continuity and regulatory matters;
changes in global production volumes and demand, including economic conditions that might impact demand and prices for the products we produce;
geopolitical factors, such as events that may reduce or increase production from particular oil-producing regions and/or from members of the Organization of Petroleum Exporting Countries;
impacts of Colorado political matters;
volatility of commodity prices for crude oil, natural gas and natural gas liquids ("NGLs") and the risk of an extended period of depressed prices, including risks relating to decreased revenue, income and cash flow, write-downs and impairments and availability of capital;
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;
timing and receipt of necessary regulatory permits;
impact of regulatory developments in Colorado, particularly 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 and cost 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;
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 merger with SRC Energy Inc. ("SRC"), or acreage exchanges;
increases in costs and expenses;


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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;
future cash flows, liquidity and financial condition;
competition within the oil and gas industry;
availability and cost of capital;
success in marketing our 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;
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, 2019 filed with the U.S. Securities and Exchange Commission ("SEC") on February 26, 2020 (the "2019 Form 10-K"), our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 8, 2020 (the "First Quarter 2020 Form 10-Q"), our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 filed with the SEC on August 6, 2020 (the "Second Quarter 2020 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.

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.


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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PDC ENERGY, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
September 30, 2020December 31, 2019
Assets
Current assets:
Cash and cash equivalents$3,818 $963 
Accounts receivable, net207,151 266,354 
Fair value of derivatives138,652 28,078 
Prepaid expenses and other current assets11,964 8,635 
Total current assets361,585 304,030 
Properties and equipment, net4,885,234 4,095,202 
Fair value of derivatives13,027 3,746 
Other assets72,682 45,702 
Total Assets$5,332,528 $4,448,680 
Liabilities and Stockholders' Equity
Liabilities
Current liabilities:
Accounts payable$103,504 $98,934 
Production tax liability122,555 76,236 
Fair value of derivatives63,957 2,921 
Funds held for distribution174,084 98,393 
Accrued interest payable21,179 14,284 
Other accrued expenses81,892 70,462 
Current portion of long-term debt190,608  
Total current liabilities757,779 361,230 
Long-term debt1,525,999 1,177,226 
Deferred income taxes 195,841 
Asset retirement obligations133,356 95,051 
Fair value of derivatives46,460 692 
Other liabilities250,535 283,133 
Total liabilities2,714,129 2,113,173 
Commitments and contingent liabilities (Note 12)
Stockholders' equity
Common shares - par value $0.01 per share, 150,000,000 authorized, 99,639,727 and 61,652,412 issued as of September 30, 2020 and December 31, 2019, respectively996 617 
Additional paid-in capital3,383,648 2,384,309 
Accumulated Deficit(765,575)(47,945)
Treasury shares - at cost, 17,150 and 34,922
as of September 30, 2020 and December 31, 2019, respectively
(670)(1,474)
Total stockholders' equity2,618,399 2,335,507 
Total Liabilities and Stockholders' Equity$5,332,528 $4,448,680 


See accompanying Notes to Condensed Consolidated Financial Statements
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PDC ENERGY, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues
Crude oil, natural gas and NGLs sales$314,920 $307,409 $809,156 $967,464 
Commodity price risk management gain (loss), net(68,061)54,867 245,851 (87,858)
Other income2,358 3,667 5,656 11,495 
Total revenues249,217 365,943 1,060,663 891,101 
Costs, expenses and other
Lease operating expenses37,338 36,498 122,680 106,047 
Production taxes14,621 13,039 40,937 57,849 
Transportation, gathering and processing expenses24,399 10,999 54,844 34,631 
Exploration, geologic and geophysical expense162 209 1,026 3,492 
General and administrative expense32,490 41,091 130,007 123,497 
Depreciation, depletion and amortization144,504 171,839 470,152 491,784 
Accretion of asset retirement obligations2,420 1,356 7,398 4,503 
Impairment of properties and equipment1,221 167 882,327 37,021 
Loss (gain) on sale of properties and equipment(289)43,872 (642)9,599 
Other expenses1,936 2,492 6,083 8,882 
Total costs, expenses and other258,802 321,562 1,714,812 877,305 
Income (loss) from operations(9,585)44,381 (654,149)13,796 
Interest expense, net(21,022)(17,811)(66,977)(53,679)
Income (loss) before income taxes(30,607)26,570 (721,126)(39,883)
Income tax benefit (expense)(176)(10,662)3,496 4,163 
Net income (loss)$(30,783)$15,908 $(717,630)$(35,720)
Earnings (loss) per share:
Basic$(0.31)$0.25 $(7.34)$(0.55)
Diluted$(0.31)$0.25 $(7.34)$(0.55)
Weighted-average common shares outstanding:
Basic99,617 62,547 97,762 64,835 
Diluted99,617 62,595 97,762 64,835 


See accompanying Notes to Condensed Consolidated Financial Statements
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PDC ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended September 30,
20202019
Cash flows from operating activities:
Net loss$(717,630)$(35,720)
Adjustments to net loss to reconcile to net cash from operating activities:
Net change in fair value of unsettled commodity derivatives(18,338)68,058 
Depreciation, depletion and amortization470,152 491,784 
Impairment of properties and equipment882,327 37,021 
Accretion of asset retirement obligations7,398 4,503 
Non-cash stock-based compensation17,441 18,124 
Loss (gain) on sale of properties and equipment(642)9,599 
Amortization and write-off of debt discount, premium and issuance costs12,546 10,139 
Deferred income taxes(2,431)(4,389)
Other1,950 2,761 
Changes in assets and liabilities(3,461)49,092 
Net cash from operating activities649,312 650,972 
Cash flows from investing activities:
Capital expenditures for development of crude oil and natural gas properties(445,505)(755,828)
Capital expenditures for other properties and equipment(1,940)(15,522)
Acquisition of crude oil and natural gas properties(139,812)(12,445)
Proceeds from sale of properties and equipment1,539 1,528 
Proceeds from divestitures1,796 202,046 
Restricted cash 8,001 
Net cash from investing activities(583,922)(572,220)
Cash flows from financing activities:
Proceeds from revolving credit facility and other borrowings1,485,600 1,300,000 
Repayment of revolving credit facility and other borrowings(1,204,600)(1,235,500)
Proceeds from senior notes148,500  
Payment of debt issuance costs(6,197)(53)
Purchase of treasury shares(23,819)(142,665)
Purchase of treasury shares for employee stock-based compensation tax withholding obligations(8,412)(3,874)
Redemption of senior notes(452,153) 
Principal payments under financing lease obligations(1,454)(1,492)
Net cash from financing activities(62,535)(83,584)
Net change in cash, cash equivalents and restricted cash2,855 (4,832)
Cash, cash equivalents and restricted cash, beginning of period963 9,399 
Cash, cash equivalents and restricted cash, end of period$3,818 $4,567 


See accompanying Notes to Condensed Consolidated Financial Statements
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PDC ENERGY, INC.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except share data)
(Unaudited)
Nine Months Ended September 30, 2020
Common StockTreasury Stock
SharesAmountAdditional Paid-in CapitalSharesAmountAccumulated DeficitTotal Stockholders' Equity
Balance, December 31, 201961,652,412 $617 $2,384,309 (34,922)$(1,474)$(47,945)$2,335,507 
Net loss— — — — — (465,015)(465,015)
Issuance pursuant to acquisition39,182,045 391 1,014,921 — — — 1,015,312 
Stock-based compensation120,952 1 3,713  1,958 — 5,672 
Purchase of treasury shares for employee stock-based compensation tax withholding obligations— — — (306,185)(7,693)— (7,693)
Retirement of treasury shares for employee stock-based compensation tax withholding obligations(251,287)(3)(6,425)251,287 6,428 — — 
Purchase of treasury shares— — — (1,266,000)(23,819)— (23,819)
Retirement of treasury shares(1,266,000)(12)(23,807)1,266,000 23,819 — — 
Issuance of treasury shares   69,327  — — 
Balance, March 31, 202099,438,122 994 3,372,711 (20,493)(781)(512,960)2,859,964 
Net loss— — — — — (221,832)(221,832)
Stock-based compensation212,809 2 6,164  198 — 6,364 
Purchase of treasury shares for employee stock-based compensation tax withholding obligations— — — (64,219)(487)— (487)
Retirement of treasury shares for employee stock-based compensation tax withholding obligations(39,374)— (322)39,374 322 — — 
Issuance of treasury shares   12,200  —  
Balance, June 30, 202099,611,557 996 3,378,553 (33,138)(748)(734,792)2,644,009 
Net loss— — — — — (30,783)(30,783)
Stock-based compensation36,826  5,216  189 — 5,405 
Purchase of treasury shares for employee stock-based compensation tax withholding obligations— — — (16,642)(232)— (232)
Retirement of treasury shares for employee stock-based compensation tax withholding obligations(8,656)— (121)8,656 121 — — 
Issuance of treasury shares   23,974  —  
Balance, September 30, 202099,639,727 $996 $3,383,648 (17,150)$(670)$(765,575)$2,618,399 

See accompanying Notes to Condensed Consolidated Financial Statements
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Nine Months Ended September 30, 2019
Common StockTreasury Stock
SharesAmountAdditional Paid-in CapitalSharesAmountRetained Earnings (Accumulated Deficit)Total Stockholders' Equity
Balance, December 31, 201866,148,609 $661 $2,519,423 (45,220)$(2,103)$8,727 $2,526,708 
Net loss— — — — — (120,176)(120,176)
Stock-based compensation48,254 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, 201966,196,863 662 2,521,558 (22,635)(1,016)(111,449)2,409,755 
Net income— — — — — 68,548 68,548 
Stock-based compensation148,040 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, 201963,520,462 $635 $2,433,974 (364,780)$(13,302)$(42,901)$2,378,406 
Net income— — — — — 15,908 15,908 
Stock-based compensation10,808  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, 201962,087,818 $621 $2,390,658 (139,415)$(4,531)$(26,993)$2,359,755 

See accompanying Notes to Condensed Consolidated Financial Statements
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PDC ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(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. As of September 30, 2020, we owned an interest in approximately 3,800 gross productive wells.

The accompanying unaudited condensed consolidated financial statements include the accounts of PDC and our wholly-owned subsidiaries. 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 presentation 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, 2019 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 2019 Form 10-K. Our results of operations and cash flows for the nine months ended September 30, 2020 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 Pronouncement

In March 2020, the SEC adopted final rules that amend the financial disclosure requirements for subsidiary issuers and guarantors of registered debt securities in Rule 3-10 of Regulation S-X. The amended rules, which can be found under new Rule 13-01 of Regulation S-X, narrow the circumstances that require separate financial statements of subsidiary issuers and guarantors and streamline the alternative disclosures required in lieu of those statements. The amended rules allow registrants, among other things, to disclose summarized financial information of the issuer and guarantors on a combined basis and to present only the most recently completed fiscal year and subsequent year-to-date interim period. The rule replaces the requirement to provide condensed consolidating financial information with a requirement to present summarized financial information of the issuers and guarantors. These disclosures may be provided outside the notes to the condensed consolidated financial statements. The rule is effective in the first quarter of 2021, with earlier adoption permitted. We early adopted the rule in the first quarter of 2020 and have provided these disclosures outside the notes to the condensed consolidated financial statements.

Recently Issued Accounting Pronouncement but Not Yet Adopted

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-06, Debt - Debt with conversion and other options and derivatives and hedging on contracts in entity's own equity. Amendments in this ASU simplify accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. The amendments remove the separation models for convertible debt instruments with cash conversion features and convertible instruments with beneficial conversion features. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost as long as no other features require bifurcation and recognition as derivatives. The amendments also modify the accounting for certain contracts in an entity's own equity that are currently accounted for as derivatives because of specific settlement provisions. Lastly, the earnings per share ("EPS") calculation is being amended to (i) require entities to use the if-converted method for all convertible instruments and include the effect of potential share settlement; (ii) clarify that the average market price for the period should be used in the computation of the diluted EPS denominator; and (iii) require entities to use the weighted-average share count from each quarter when calculating the year-to-date weighted average share count for all potentially dilutive securities. The amendments in this ASU are effective for fiscal years beginning after December 31, 2021, including interim periods within those fiscal years and early adoption is permitted. We are in the process of evaluating the potential impact of adopting this ASU and we do not expect to adopt the amendments early.
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PDC ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(unaudited)

In August 2020, the SEC issued a final rule that modernizes the disclosure requirements in Regulation S-K relating to the description of the business, legal proceedings, and risk factors, which are required in many SEC filings, including Form 10-K and registration statements. The final rule is effective on November 9, 2020, 30 days after its date of publication in the Federal Register. We will consider the amendments when preparing our annual report for the year ending December 31, 2020.

NOTE 3 - BUSINESS COMBINATION

In January 2020, we merged with SRC in a transaction valued at $1.7 billion, inclusive of SRC's net debt (the "SRC Acquisition"). Upon closing, we issued approximately 39 million shares of our common stock to SRC shareholders and holders of SRC equity awards, reflecting the issuance of 0.158 of a share of our common stock in exchange for each outstanding share of SRC common stock and the cancellation of outstanding SRC equity awards pursuant to the merger agreement that we entered into with SRC (the "Merger Agreement"). During the nine months ended September 30, 2020, we recorded transaction costs related to the SRC Acquisition of $20.2 million. These expenses were accounted for separately from the assets and liabilities assumed and are included in general and administrative expense in the condensed consolidated statements of operations.
     
The details of the estimated purchase price and the preliminary allocation of the purchase price are as follows:
Nine Months Ended September 30, 2020
(in thousands)
Consideration:
Cash$40 
Retirement of seller's credit facility166,238 
Total cash consideration166,278 
Common stock issued1,009,015 
Shares withheld in lieu of taxes6,299 
Total consideration$1,181,592 
Recognized amounts of identifiable assets acquired and liabilities assumed:
Assets acquired:
Current assets$149,538 
Properties and equipment, net - proved1,607,175 
Properties and equipment, net - unproved109,615 
Properties and equipment, net - other16,242 
Deferred tax asset193,410 
Other assets13,266 
Total assets acquired2,089,246 
Liabilities assumed:
Current liabilities(257,285)
Senior notes(555,500)
Asset retirement obligations(41,901)
Other liabilities(52,968)
Total liabilities assumed(907,654)
Total identifiable net assets acquired$1,181,592 

This acquisition was accounted for under the acquisition method of accounting for business combinations. Accordingly, we conducted assessments of the net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition were expensed as incurred. The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market, and therefore represent Level 3 inputs. The fair values of crude oil and natural gas properties and asset retirement obligations were measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of proved and unproved crude oil and natural gas properties include estimates of reserves, future operating and development costs, future commodity prices, estimated future cash flows, lease
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PDC ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(unaudited)

terms and expirations and a market-based weighted-average cost of capital rate of 10 percent. These inputs require significant judgments and estimates by management at the time of the valuation. As of the date of this report, we expect that the measurement period will extend into the fourth quarter of 2020, and the value of the assets and liabilities may be revised as appropriate.

The results of operations for the SRC Acquisition since the closing date have been included in our condensed consolidated financial statements for the three and nine months ended September 30, 2020 and include approximately $82.0 million and $233.8 million of total revenue, respectively, and $20.7 million and $19.3 million of loss from operations for the three and nine months ended September 30, 2020, respectively.

Pro Forma Information. The following unaudited pro forma financial information represents a summary of the consolidated results of operations for the nine months ended September 30, 2020 and for the three and nine months ended September 30, 2019, assuming the acquisition had been completed as of January 1, 2019. The financial information for the three months ended September 30, 2020 is included in our condensed consolidated statements of operations and therefore does not require a pro forma disclosure. The pro forma amounts for the nine months ended September 30, 2020 include an immaterial non-recurring adjustment which was not included in our pro forma information disclosed in our six months ended June 30, 2020 and our three months ended March 31, 2020 footnotes. The pro forma financial information includes certain non-recurring pro forma adjustments that were directly attributable to the business combination. The pro forma financial information is not necessarily indicative of the results of operations that would have been achieved if the acquisition had been effective as of these dates, or of future results.
Three Months Ended September 30,Nine Months Ended September 30,
201920202019
(in thousands, except per share data)
Total revenue$511,110 $1,082,003 $1,373,739 
Net income (loss)63,092 (677,636)128,337 
Earnings (loss) per share:
Basic$0.62 $(6.79)$1.23 
Diluted0.62 (6.79)1.23 

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.        

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PDC ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(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, 2020 and 2019:

Three Months Ended September 30,Nine Months Ended September 30,
Revenue by Commodity and Operating Region20202019Percent Change20202019Percent Change
(in thousands)
Crude oil
Wattenberg Field$183,420 $185,543 (1.1)%$483,608 $569,518 (15.1)%
Delaware Basin42,591 70,175 (39.3)%107,347 191,452 (43.9)%
Total$226,011 $255,718 (11.6)%$590,955 $760,970 (22.3)%
 Natural gas
Wattenberg Field$39,759 $23,949 66.0 %$109,279 $100,779 8.4 %
Delaware Basin 2,140 2,613 (18.1)%3,183 9,293 (65.7)%
Total$41,899 $26,562 57.7 %$112,462 $110,072 2.2 %
NGLs
Wattenberg Field$38,871 $16,906 129.9 %$86,875 $67,305 29.1 %
Delaware Basin8,139 8,223 (1.0)%18,864 29,117 (35.2)%
Total$47,010 $25,129 87.1 %$105,739 $96,422 9.7 %
Crude oil, natural gas and NGLs
Wattenberg Field$262,050 $226,398 15.7 %$679,762 $737,602 (7.8)%
Delaware Basin52,870 81,011 (34.7)%129,394 229,862 (43.7)%
Total$314,920 $307,409 2.4 %$809,156 $967,464 (16.4)%
Contract Assets.    Contract assets include material contributions in aid of construction, which are common in purchase and processing agreements with midstream service providers that are our customers. The intent of the payments is primarily to reimburse the customer for actual costs incurred related to the construction of its gathering and processing infrastructure. Contract assets are included in other assets in the condensed consolidated balance sheet. The contract assets are amortized as a reduction to crude oil, natural gas and NGLs sales revenue during the periods in which the related production is transferred to the customer.

The following table presents the changes in carrying amounts of the contract assets associated with our crude oil, natural gas and NGLs sales revenue for the nine months ended September 30, 2020:
Amount
(in thousands)
Beginning balance, January 1, 2020$11,494 
Additions15,627 
Amortized as a reduction to crude oil, natural gas and NGLs sales(1,588)
Ending balance, September 30, 2020$25,533 

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