PDCE – No Traded CDS, Base Case iCDS 109bps, Negative Case iCDS 387bps, 2026 5.750% Bond YTW of 3.764%, iYTW of 1.914%, Ba2 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need

• Credit markets are materially overstating PDCE’s credit risk, with a cash bond YTW of 3.764%, relative to an Intrinsic YTW of 1.914% and an Intrinsic CDS of 109bps. Meanwhile, Moody’s is overstating the firm’s fundamental credit risk, with its Ba2 credit rating three notches lower than Valens’ IG4 (Baa2) credit rating.
• Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. PDCE’s compensation metrics incentivize management to improve all three value drivers: sales, margins, and asset utilization, which should drive Uniform ROA improvement and lead to increased cash flows available for servicing obligations going forward. Moreover, most management members are not well-compensated in a change in control, indicating they are not incentivized to pursue a sale or accept a buyout of the firm, reducing event risk. Finally, most members of management are material holders of PDCE equity relative to their annual compensation, indicating they may be well-aligned with shareholders for long-term value creation.
• Earnings Call Forensics™ of the firm’s Q2 2021 earnings call (8/5) highlights that management generated an excitement marker when saying they will continue to work with trades and join acreage to drill longer laterals. Additionally, they are confident their debt paydown will come down once they hit their leverage targets.