PDCE – Base Case iCDS 179bps, Negative Case iCDS 258bps, 2026 5.750% Bond YTW of 7.348%, iYTW of 6.298%, Ba2 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

March 6, 2023

  • Credit markets are overstating PDCE’s credit risk, with a cash bond YTW of 7.348%, relative to an Intrinsic YTW of 6.298% and an Intrinsic CDS of 179 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 mostly 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. Moreover, management is incentivized to reduce leverage, which is positive for bondholders. 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.

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