PDCE – Base Case iCDS 159bps, Negative Case iCDS 219bps, 2026 5.750% Bond YTW of 6.801%, iYTW of 5.351%, Ba2 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
May 19, 2023
- Credit markets are overstating PDCE’s credit risk, with a cash bond YTW of 6.801%, relative to an Intrinsic YTW of 5.351% and an Intrinsic CDS of 159 bps. Meanwhile, Moody’s is overstating the firm’s fundamental credit risk, with its Ba2 credit rating four notches lower than Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ ™ analysis highlights positive signals for credit holders. PDCE’s metrics should generally drive management to focus on improving margins and asset utilization, which could lead to Uniform ROA expansion and increased cash flows available for obligations going forward. Furthermore, most management members are material owners of PDCE equity relative to their annual compensation, indicating they may be well-aligned with shareholders to pursue long-term value creation for the company. In addition, most management members have low change-in-control compensation relative to their annual compensation, indicating they may not be sufficiently incentivized to pursue a takeover or accept a sale of the company, reducing event risk for creditors.
