SUBSIDIARY GUARANTOR

Our subsidiary PDC Permian, Inc. guarantees our obligations under our publicly-registered Notes. The following presents the condensed consolidating financial information separately for:



(i)	PDC Energy, Inc. ("Parent"), the issuer of the guaranteed obligations, including non-material subsidiaries;
(ii)	PDC Permian, Inc., the guarantor subsidiary ("Guarantor"), as specified in the indentures related to our Notes;
(iii)	Eliminations representing adjustments to (a) eliminate intercompany transactions between or among Parent, Guarantor, and our other subsidiaries and (b) eliminate the investments in our subsidiaries; and
(iv)	Parent and subsidiaries on a consolidated basis ("Consolidated").

The Guarantor is 100% owned by the Parent beginning in December 2016. The Notes are fully and unconditionally guaranteed on a joint and several basis by the Guarantor. The guarantee is subject to release in limited circumstances only upon the occurrence of certain customary conditions. Each entity in the condensed consolidating financial information follows the same accounting policies as described in the notes to the condensed consolidated financial statements.

The following condensed consolidating financial statements have been prepared on the same basis of accounting as our condensed consolidated financial statements. Investments in subsidiaries are accounted for under the equity method. Accordingly, the entries necessary to consolidate the Parent and Guarantor are reflected in the eliminations column.



	Condensed Consolidating Balance Sheets
	September 30, 2017
	Parent		Guarantor		Eliminations			Consolidated
	(in thousands)
Assets
Current assets	$	299,239	$	35,463	$	—		$	334,702
Properties and equipment, net	1,911,759		1,970,941		—			3,882,700
Intercompany receivable	199,871		—		(199,871		)	—
Investment in subsidiaries	1,467,623		—		(1,467,623		)	—
Noncurrent assets	89,245		640		—			89,885
Total Assets	$	3,967,737	$	2,007,044	$	(1,667,494	)	$	4,307,287

Liabilities and Stockholders' Equity
Current liabilities	$	310,997	$	62,791	$	—		$	373,788
Intercompany payable	—		199,871		(199,871		)	—
Long-term debt	1,051,571		—		—			1,051,571
Other noncurrent liabilities	178,567		276,759		—			455,326
Stockholders' equity	2,426,602		1,467,623		(1,467,623		)	2,426,602
Total Liabilities and Stockholders' Equity	$	3,967,737	$	2,007,044	$	(1,667,494	)	$	4,307,287



	Condensed Consolidating Balance Sheets
	December 31, 2016
	Parent		Guarantor		Eliminations			Consolidated
	(in thousands)
Assets
Current assets	$	387,309	$	12,516	$	—		$	399,825
Properties and equipment, net	1,884,147		2,118,847		—			4,002,994
Intercompany receivable	9,415		—		(9,415		)	—
Investment in subsidiaries	1,765,092		—		(1,765,092		)	—
Goodwill	—		62,041		—			62,041
Noncurrent assets	20,811		171		—			20,982
Total Assets	$	4,066,774	$	2,193,575	$	(1,774,507	)	$	4,485,842

Liabilities and Stockholders' Equity
Current liabilities	$	235,121	$	35,457	$	—		$	270,578
Intercompany payable	—		9,415		(9,415		)	—
Long-term debt	1,043,954		—		—			1,043,954
Other noncurrent liabilities	164,945		383,611		—			548,556
Stockholders' equity	2,622,754		1,765,092		(1,765,092		)	2,622,754
Total Liabilities and Stockholders' Equity	$	4,066,774	$	2,193,575	$	(1,774,507	)	$	4,485,842



	Condensed Consolidating Statements of Operations
	Three Months Ended September 30, 2017
	Parent			Guarantor			Eliminations		Consolidated
	(in thousands)

Operating and other revenues	$	150,015		$	33,220		$	—	$	183,235
Production and other operating expenses	41,891			13,129			—		55,020
General and administrative	26,207			3,092			—		29,299
Exploration, geologic, and geophysical expense	217			41,691			—		41,908
Depreciation depletion and amortization	106,623			18,615			—		125,238
Impairment of properties and equipment	1,148			251,592			—		252,740
Impairment of goodwill	—			75,121			—		75,121
Interest (expense) income	(19,168		)	372			—		(18,796		)
Loss before income taxes	(45,239		)	(369,648		)	—		(414,887		)
Income tax benefit	30,274			92,076			—		122,350
Equity in loss of subsidiary	(277,572		)	—			277,572		—
Net loss	$	(292,537	)	$	(277,572	)	$	277,572	$	(292,537	)



	Condensed Consolidating Statements of Operations
	Nine Months Ended September 30, 2017
	Parent			Guarantor			Eliminations		Consolidated
	(in thousands)

Operating and other revenues	$	657,102		$	74,998		$	—	$	732,100
Production and other operating expenses	118,779			26,049			—		144,828
General and administrative	76,353			8,792			—		85,145
Exploration, geologic, and geophysical expense	744			43,151			—		43,895
Depreciation depletion and amortization	317,088			43,479			—		360,567
Impairment of properties and equipment	2,282			280,217			—		282,499
Impairment of goodwill	—			75,121			—		75,121
Provision for uncollectible notes receivable	(40,203		)	—			—		(40,203		)
Interest (expense) income	(57,557		)	685			—		(56,872		)
Income (loss) before income taxes	124,502			(401,126		)	—		(276,624		)
Income tax expense (benefit)	(32,174		)	103,657			—		71,483
Equity in loss of subsidiary	(297,469		)	—			297,469		—
Net loss	$	(205,141	)	$	(297,469	)	$	297,469	$	(205,141	)

Net losses of the Guarantor for the three and nine months ended September 30, 2017 are primarily the result of the exploratory dry hole expense, impairment of certain unproved Delaware Basin leasehold positions during the relevant periods, and the impairment of goodwill during the three months ended September 30, 2017.



	Condensed Consolidating Statements of Cash Flows
	Nine Months Ended September 30, 2017
	Parent			Guarantor			Eliminations			Consolidated
	(in thousands)

Cash flows from operating activities	$	382,715		$	28,687		$	—		$	411,402
Cash flows from investing activities:
Capital expenditures for development of crude oil and natural properties	(315,718		)	(213,132		)	—			(528,850		)
Capital expenditures for other properties and equipment	(2,488		)	(1,252		)	—			(3,740		)
Acquisition of crude oil and natural gas properties, including settlement adjustments and deposit for pending acquisition	(19,761		)	5,279			—			(14,482		)
Proceeds from sale of properties and equipment	3,322			—			—			3,322
Sale of promissory note	40,203			—			—			40,203
Restricted cash	(9,250		)	—			—			(9,250		)
Sales of short-term investments	49,890			—			—			49,890
Purchases of short-term investments	(49,890		)	—			—			(49,890		)
Intercompany transfers	(189,239		)	—			189,239			—
Net cash from investing activities	(492,931		)	(209,105		)	189,239			(512,797		)
Cash flows from financing activities:
Purchase of treasury stock	(5,325		)	—			—			(5,325		)
Other	(906		)	(45		)	—			(951		)
Intercompany transfers	—			189,239			(189,239		)	—
Net cash from financing activities	(6,231		)	189,194			(189,239		)	(6,276		)
Net change in cash and cash equivalents	(116,447		)	8,776			—			(107,671		)
Cash and cash equivalents, beginning of period	240,487			3,613			—			244,100
Cash and cash equivalents, end of period	$	124,040		$	12,389		$	—		$	136,429