EX-99.1 2 exhibit991_pdcm.htm PRO FORMA FINANCIAL INFORMATION Exhibit 99.1_PDCM


Exhibit 99.1

PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated financial statements are based on the historical consolidated financial statements of PDC Energy, Inc. (the "Company") and have been adjusted to give effect to the divestiture of the Company's interests in the Marcellus Shale basin assets and liabilities held by PDC Mountaineer, LLC, a Delaware limited liability company (the “Divestiture”). The unaudited pro forma condensed consolidated balance sheet as of June 30, 2014 gives effect to the Divestiture as if it had occurred on June 30, 2014. The unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2013, 2012 and 2011 and the six month periods ended June 30, 2014 and 2013 give effect to the Divestiture as if it had occurred on January 1, 2011. The unaudited pro forma condensed consolidated financial statements include pro forma adjustments that are based on the best information available and assumptions that management believes are reasonable, factually supportable and are expected to have a continuing impact to the Company. The unaudited pro forma condensed consolidated financial statements are provided for illustrative and informational purposes only and are not intended to reflect the Company’s financial position and results of operations had the Divestiture and related transactions occurred as of the dates indicated and are not necessarily indicative of the Company’s future financial position or results of operations.

The unaudited pro forma condensed consolidated information should be read in conjunction with the Company's historical consolidated financial statements and accompanying notes which are included in its Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 21, 2014, and its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014, as filed with the SEC on August 8, 2014.

The pro forma condensed consolidated statements of operations for the years ended December 31, 2013, 2012 and 2011 and the six month periods ended June 30, 2014 and 2013 include the following adjustments:

•
Natural gas, NGL and crude oil sales and well operations, pipeline and other income have been adjusted downward to reflect the reduction in revenue related to the Divestiture;

•
Sales from natural gas marketing and cost of natural gas marketing have been adjusted upward to reflect recognition of activity between the gas marketing segment and the Divestiture;

•
Commodity price risk management has been adjusted upward/downward to reflect the increase/decrease in gain/loss related to the derivative financial instruments included in the Divestiture;

•
Production costs, exploration expense, impairment of natural gas and crude oil properties, depreciation, depletion and amortization, general and administrative expense, accretion of asset retirement obligations, gain (loss) on sale of properties and equipment, interest expense, interest income and provision for income taxes have been adjusted downward to reflect the costs and expenses directly associated with the Divestiture;

•
Income taxes are reflected using statutory tax rates; and

•
Earnings per share from continuing operations reflect the effect of the above-mentioned revenue and expense adjustments.

The pro forma condensed consolidated balance sheet as of June 30, 2014 includes the following adjustments:

•
Net pre-tax proceeds of approximately $190 million, comprised of $150 million in cash and a $40 million promissory note, included in other assets;

•
The adjustment to other current assets, properties and equipment, net, other assets, current liabilities, long-term debt, deferred income taxes, asset retirement obligations and other liabilities reflects a reduction in the book value of the assets and related liabilities being divested; and

•
The after-tax net gain on the transaction is reflected as an adjustment to retained earnings, deferred income taxes, current assets and current liabilities.








PDC ENERGY, INC.
Pro Forma Condensed Consolidated Statements of Operations
(unaudited; in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
2014
 
2013
 
As Reported
 
Pro Forma Adjustments
 
Pro Forma
 
As Reported
 
Pro Forma Adjustments
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Natural gas, NGLs and crude oil sales
$
269,768

 
$
(18,738
)
 
$
251,030

 
$
156,976

 
$
(7,331
)
 
$
149,645

Sales from natural gas marketing
49,352

 
16,080

 
65,432

 
31,749

 
7,488

 
39,237

Commodity price risk management gain (loss), net
(80,566
)
 
3,014

 
(77,552
)
 
2,369

 
(306
)
 
2,063

Well operations, pipeline income and other
1,180

 
(51
)
 
1,129

 
2,037

 
(22
)
 
2,015

Total revenues
239,734

 
305

 
240,039

 
193,131

 
(171
)
 
192,960

Costs, expenses and other:
 
 
 
 
 
 
 
 
 
 
 
Production costs
47,958

 
(6,102
)
 
41,856

 
32,034

 
(3,378
)
 
28,656

Cost of natural gas marketing
49,298

 
16,080

 
65,378

 
31,801

 
7,488

 
39,289

Exploration expense
584

 
(1
)
 
583

 
3,126

 
(321
)
 
2,805

Impairment of natural gas and crude oil properties
1,917

 
(160
)
 
1,757

 
47,961

 
(403
)
 
47,558

General and administrative expense
64,277

 
(2,352
)
 
61,925

 
30,898

 
(1,979
)
 
28,919

Depreciation, depletion, and amortization
100,382

 
(7,856
)
 
92,526

 
55,749

 
(4,830
)
 
50,919

Accretion of asset retirement obligations
1,716

 
(33
)
 
1,683

 
2,320

 
(10
)
 
2,310

(Gain) loss on sale of properties and equipment
362

 
193

 
555

 
(47
)
 
16

 
(31
)
Total cost, expenses and other
266,494

 
(231
)
 
266,263

 
203,842

 
(3,417
)
 
200,425

Income (loss) from operations
(26,760
)
 
536

 
(26,224
)
 
(10,711
)
 
3,246

 
(7,465
)
Interest expense
(25,890
)
 
1,513

 
(24,377
)
 
(26,446
)
 
520

 
(25,926
)
Interest income
403

 
(132
)
 
271

 
3

 
—

 
3

Income (loss) from continuing operations before income taxes
(52,247
)
 
1,917

 
(50,330
)
 
(37,154
)
 
3,766

 
(33,388
)
Provision for income taxes
21,933

 
(728
)
 
21,205

 
12,701

 
(1,431
)
 
11,270

Income (loss) from continuing operations attributable to shareholders
$
(30,314
)
 
$
1,189

 
$
(29,125
)
 
$
(24,453
)
 
$
2,335

 
$
(22,118
)
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share from continuing operations:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
(0.85
)
 
 
 
$
(0.82
)
 
$
(0.81
)
 
 
 
$
(0.73
)
Diluted
$
(0.85
)
 
 
 
$
(0.82
)
 
$
(0.81
)
 
 
 
$
(0.73
)
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
35,726

 
 
 
35,726

 
30,301

 
 
 
30,301

Diluted
35,726

 
 
 
35,726

 
30,301

 
 
 
30,301







PDC ENERGY, INC.
Pro Forma Condensed Consolidated Statements of Operations
(unaudited; in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December, 31
 
2013
 
2012
 
2011
 
As Reported
 
Pro Forma Adjustments
 
Pro Forma
 
As Reported
 
Pro Forma Adjustments
 
Pro Forma
 
As Reported
 
Pro Forma Adjustments
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Natural gas, NGL and crude oil sales
$
359,398

 
$
(18,603
)
 
$
340,795

 
$
238,361

 
$
(10,371
)
 
$
227,990

 
$
223,297

 
$
(7,250
)
 
$
216,047

Sales from natural gas marketing
69,787

 
17,350

 
87,137

 
45,371

 
10,689

 
56,060

 
63,470

 
11,305

 
74,775

Commodity price risk management gain (loss), net
(23,905
)
 
(14
)
 
(23,919
)
 
32,339

 
(3,060
)
 
29,279

 
46,090

 
(6,873
)
 
39,217

Well operations, pipeline income and other
6,034

 
(32
)
 
6,002

 
4,534

 
(38
)
 
4,496

 
4,432

 
(19
)
 
4,413

Total revenues
411,314

 
(1,299
)
 
410,015

 
320,605

 
(2,780
)
 
317,825

 
337,289

 
(2,837
)
 
334,452

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs, expenses and other:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Production costs
73,390

 
(8,540
)
 
64,850

 
54,700

 
(5,317
)
 
49,383

 
44,832

 
(2,579
)
 
42,253

Cost of natural gas marketing
70,084

 
17,350

 
87,434

 
45,023

 
10,689

 
55,712

 
62,831

 
11,305

 
74,136

Exploration expense
7,039

 
(705
)
 
6,334

 
20,894

 
(2,692
)
 
18,202

 
5,734

 
(2,670
)
 
3,064

Impairment of natural gas and crude oil properties
53,435

 
(926
)
 
52,509

 
5,895

 
(875
)
 
5,020

 
2,301

 
(591
)
 
1,710

General and administrative expense
63,969

 
(4,012
)
 
59,957

 
58,815

 
(4,031
)
 
54,784

 
61,454

 
(4,265
)
 
57,189

Depreciation, depletion and amortization
127,260

 
(11,636
)
 
115,624

 
98,778

 
(7,667
)
 
91,111

 
87,633

 
(4,613
)
 
83,020

Accretion of asset retirement obligations
4,586

 
(20
)
 
4,566

 
3,687

 
(17
)
 
3,670

 
1,398

 
—

 
1,398

(Gain) loss on sale of properties and equipment
1,392

 
630

 
2,022

 
(4,353
)
 
4,170

 
(183
)
 
(196
)
 
113

 
(83
)
Total costs, expenses and other
401,155

 
(7,859
)
 
393,296

 
283,439

 
(5,740
)
 
277,699

 
265,987

 
(3,300
)
 
262,687

Income from operations
10,159

 
6,560

 
16,719

 
37,166

 
2,960

 
40,126

 
71,302

 
463

 
71,765

Loss on extinguishment of debt
—

 
—

 
—

 
(23,283
)
 
—

 
(23,283
)
 
—

 
—

 
—

Interest expense
(51,898
)
 
1,755

 
(50,143
)
 
(48,287
)
 
783

 
(47,504
)
 
(36,985
)
 
228

 
(36,757
)
Interest income
470

 
(11
)
 
459

 
8

 
(2
)
 
6

 
47

 
(3
)
 
44

Income (loss) from continuing operations before income taxes
(41,269
)
 
8,304

 
(32,965
)
 
(34,396
)
 
3,741

 
(30,655
)
 
34,364

 
688

 
35,052

Provision for income taxes
14,797

 
(3,156
)
 
11,641

 
12,701

 
(1,422
)
 
11,279

 
(11,800
)
 
(261
)
 
(12,061
)
Income (loss) from continuing operations attributable to shareholders
$
(26,472
)
 
$
5,148

 
$
(21,324
)
 
$
(21,695
)
 
$
2,319

 
$
(19,376
)
 
$
22,564

 
$
427

 
$
22,991

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share from continuing operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
(0.82
)
 
 
 
$
(0.66
)
 
$
(0.78
)
 
 
 
$
(0.70
)
 
$
0.96

 
 
 
$
0.98

Diluted
$
(0.82
)
 
 
 
$
(0.66
)
 
$
(0.78
)
 
 
 
$
(0.70
)
 
$
0.95

 
 
 
$
0.96

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
32,426

 
 
 
32,426

 
27,677

 
 
 
27,677

 
23,521

 
 
 
23,521

Diluted
32,426

 
 
 
32,426

 
27,677

 
 
 
27,677

 
23,871

 
 
 
23,871







PDC ENERGY, INC.
Pro Forma Condensed Consolidated Balance Sheet
(unaudited; in thousands, except share and per share data)
 
 
 
 
 
 
 
June 30, 2014
 
As Reported
 
Pro Forma Adjustments
 
Pro Forma
Assets
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
40,357

 
$
149,512

 
$
189,869

Other current assets
173,211

 
(18,849
)
 
154,362

Total current assets
213,568

 
130,663

 
344,231

Properties and equipment, net
1,828,721

 
(170,415
)
 
1,658,306

Other assets
44,136

 
33,181

 
77,317

Total Assets
$
2,086,425

 
$
(6,571
)
 
$
2,079,854

 
 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
 
Liabilities
 
 
 
 
 
Current liabilities
$
381,335

 
$
8,779

 
$
390,114

Long-term debt
562,000

 
(62,000
)
 
500,000

Deferred income taxes
116,948

 
2,040

 
118,988

Asset retirement obligations
38,911

 
(265
)
 
38,646

Other liabilities
43,960

 
(2,632
)
 
41,328

Total liabilities
1,143,154

 
(54,078
)
 
1,089,076

 
 
 
 
 
 
Commitments and contingent liabilities
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
Shareholders' equity:
 
 
 
 
 
Preferred shares, par value $0.01 per share; authorized 50,000,000 shares; issued: none
—

 
—

 
—

Common shares, par value $0.01 per share; 150,000,000 authorized shares; issued: 35,857,560
359

 
—

 
359

Additional paid-in capital
681,019

 
—

 
681,019

Retained earnings
262,953

 
47,507

 
310,460

Treasury shares, at cost 18,580
(1,060
)
 
—

 
(1,060
)
Total shareholders' equity
943,271

 
47,507

 
990,778

Total Liabilities and Equity
$
2,086,425

 
$
(6,571
)
 
$
2,079,854