PDCE - Valens Credit Report - 2022 04 01
Credit markets are materially overstating PDCE's credit risk, with a cash bond YTW of 5.494%, relative to an Intrinsic YTW of 3.934% and an Intrinsic CDS of 138bps. 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 compensation metrics should incentivize management to improve margins and asset utilization, leading to Uniform ROA improvement and increased cash flows available for servicing obligations. Moreover, management members have low change-in-control compensation, indicating they are unlikely to seek a sale or pursue a buyout firm, reducing event risk for creditors. Furthermore, management is specifically incentivized to reduce leverage, which bodes well for current bondholders.
Earnings Call Forensics™ of the firm's Q4 2021 earnings call (3/1) highlights that management is confident they are looking to retire approximately 1% of their shares outstanding per month as a part of their buyback program and that they are seeing a favorable pace of drilling, with 10 3-mile lateral completions from spud to rig release in a little over 5 days average.
PDC Energy is an independent exploration and production company that acquires, explores and develops properties for the production of crude oil, natural gas, and natural gas liquids with operations in the Wattenberg Field in Colorado and the Delaware Basin in Texas. The company's operations in the Wattenberg Field are focused in the horizontal Niobrara and Codell plays and its Delaware Basin operations are primarily focused in the Wolfcamp zones. The company is engaged in two operating segments: its oil and gas exploration and production segment and its gas marketing segment.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
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- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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