PDCE – No Traded CDS, Base Case iCDS 148bps, Negative Case iCDS 236bps, 2026 5.750% Bond YTW of 7.390%, iYTW of 4.740%, Ba2 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

July 1, 2022

  • Credit markets are grossly overstating credit risk, with a cash bond YTW of 7.390%, relative to an Intrinsic YTW of 4.740% and an Intrinsic CDS of 148bps. 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 drive management to focus on improving margins and asset utilization, which could lead to Uniform ROA expansion and increased cash flows available for obligations. Moreover, management is specifically incentivized to reduce leverage, which is positive for bondholders. In addition, 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.

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