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PDC Energy Announces 2013 Second Quarter Results; Production From Continuing Operations Up 34%; Production Mix 54% Liquids; Wattenberg Production Increased 40%

Depreciation, depletion and amortization ("DD&A") expense related to crude oil and natural gas properties was $27 million, or $16.14 per Boe, in the second quarter of 2013, compared to $23 million, or $18.45 per Boe, in the second quarter of last year. Per unit DD&A expense in 2013 decreased due to an increase in production during the year and lower weighted-average DD&A rates.

Interest expense for the second quarter of 2013 was $13 million compared to $10 million for the second quarter of 2012. The $3 million increase in interest expense resulted from the October 2012 issuance of $500 million of 7.75% senior notes due 2022, the proceeds of which were used to redeem the $203 million of then-outstanding 12% senior notes due in 2018 and to reduce borrowings under the Company's revolving credit facility.

In May 2013, the Company entered into a third amended and restated credit agreement with its current group of lenders and the Company's borrowing base of $450 million was reaffirmed following the divestiture of the Company's non-core Colorado assets. The Company's available consolidated liquidity position as of June 30, 2013 was $479 million, compared to $399 million as of December 31, 2012. As of June 30, 2013, PDC had zero drawn and an undrawn letter of credit of $18.7 million outstanding on its $450 million revolving credit facility.

Oil and Gas Operations Cost, Production and Sales Data

The following table provides the components of production costs for the three and six months ended June 30, 2013 and 2012:

  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
  (in millions)
Lease operating expenses  $ 8.2  $ 6.9  $ 15.6  $ 13.8
Production taxes 5.3 3.7 10.7 8.2
Cost of well operations, overhead and other production expenses 2.7 1.8 5.7 3.3
Total production costs  $ 16.2  $ 12.4  $ 32.0  $ 25.3
Total production costs per Boe  $ 9.83  $ 10.06  $ 9.67  $ 9.55

The following table provides production from continuing operations by area, as well as the weighted-average sales price, for the three and six months ended June 30, 2013 and 2012, excluding realized derivative gains or losses:

  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 Percent 2013 2012 Percent
             
Crude oil (MBbls)            
Western - Wattenberg Field 605.5 439.7 37.7% 1,256.2 981.0 28.1%
Eastern - Appalachian Basin 12.2 2.6 * 29.8 5.7 *
Total 617.7 442.3 39.7% 1,286.0 986.7 30.3%
             
Weighted-Average Sales Price $ 87.32 $ 87.97 (0.7)% $ 87.13 $ 90.67 (3.9)%
             
Natural gas (MMcf)            
Western - Wattenberg Field 2,916.2 2,116.3 37.8% 5,891.7 4,514.7 30.5%
Eastern - Appalachian Basin 1,595.3 1,462.7 9.1% 3,169.6 2,948.8 7.5%
Total 4,511.5 3,579.0 26.1% 9,061.3 7,463.5 21.4%
             
Weighted-Average Sales Price $ 3.79 $ 2.05 84.9% $ 3.44 $ 2.33 47.6%
             
NGLs (MBbls)            
Western - Wattenberg Field 275.2 191.6 43.6% 513.5 418.8 22.6%
Eastern - Appalachian Basin 1.3 * 1.3 *
Total 276.5 191.6 44.3% 514.8 418.8 22.9%
             
Weighted-Average Sales Price $ 23.55 $ 26.65 (11.6)% $ 26.76 $ 27.39 (2.3)%
             
Crude oil equivalent (MBoe)            
Western - Wattenberg Field 1,366.7 984.0 38.9% 2,751.7 2,152.2 27.9%
Eastern - Appalachian Basin 279.4 246.4 13.4% 559.4 497.2 12.5%
Total 1,646.1 1,230.4 33.8% 3,311.1 2,649.4 25.0%
             
Weighted-Average Sales Price $ 47.10 $ 41.73 12.9% $ 47.41 $ 44.65 6.2%
* Percentage change is not meaningful or equal to or greater than 300%.

Commodity Price Risk Management Activities

The Company uses various derivative instruments to manage fluctuations in natural gas and crude oil prices. PDC has in place a series of floors, collars, fixed price and basis swaps on a portion of its expected natural gas and crude oil production. A complete listing of the Company's derivative positions as of June 30, 2013 is included in the Company's Quarterly Report on Form 10-Q, available at the Company's website at www.pdce.com.

Non-GAAP Financial Measures

PDC uses "adjusted cash flows from operations," "adjusted net income (loss)," and "adjusted EBITDA," non-U.S. GAAP financial measures, for internal management reporting, when evaluating period-to-period changes and when providing public guidance on possible future results. PDC believes that each of these measures is useful in providing transparency with respect to certain aspects of its operations. Each of these measures is calculated by eliminating the items set forth in the relevant table below from the most closely comparable U.S. GAAP measure. See Management's Discussion and Analysis of Financial Condition and Results of Operation - Reconciliation of Non-U.S. GAAP Financial Measures in PDC's Annual Report on Form 10-K for the year ended December 31, 2012, and other subsequent filings with the SEC for additional disclosure concerning these non-U.S. GAAP measures. These measures are not measures of financial performance under U.S. GAAP and should be considered in addition to, not as a substitute for, net income, cash flows from operations, investing or financing activities or other U.S. GAAP financial measures, and should not be viewed as liquidity measures or indicators of cash flows reported in accordance with U.S. GAAP. The non-U.S. GAAP financial measures that PDC uses may not be comparable to similarly titled measures reported by other companies. Also, in the future, PDC may disclose different non-U.S. GAAP financial measures in order to help its investors more meaningfully evaluate and compare its future results of operations to its previously reported results of operations. PDC strongly encourages investors to review the Company's financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.

The following tables provide reconciliations of adjusted cash flows from operations, adjusted net income (loss), and adjusted EBITDA to their most comparable U.S. GAAP measures (in millions, except per share data):

Adjusted Cash Flows from Operations
  Three Months Ended June 30, Six Months Ended June 30,
  2013 2012 2013 2012
Adjusted cash flows from operations:        
Net cash from operating activities  $ (2.2)  $ 25.4  $ 42.0  $ 69.7
Changes in assets and liabilities 48.6 4.1 56.7 9.5
Adjusted cash flows from operations  $ 46.4  $ 29.5  $ 98.7  $ 79.2
         
         
Adjusted Net Income (Loss)
  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
Adjusted net income (loss):        
Net income (loss)  $ 19.9  $ 12.3  $ (19.5)  $ 28.1
Unrealized (gain) loss on derivatives, net (20.8) (22.6) 9.9 (24.1)
Tax effect of above adjustments 7.9 8.6 (3.8) 9.2
Adjusted net income (loss) $ 7.0 $ (1.7) $ (13.4) $ 13.2
Weighted-average diluted shares outstanding 31.0 26.7 30.3 25.3
Adjusted diluted net income (loss) per share  $ 0.23  $ (0.06)  $ (0.44)  $ 0.52
         
         
Adjusted EBITDA        
  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
Net income (loss) to adjusted EBITDA:        
Net income (loss)  $ 19.9  $ 12.3  $ (19.5)  $ 28.1
Unrealized (gain) loss on derivatives, net (20.8) (22.6) 9.9 (24.1)
Interest expense, net 13.1 10.1 26.4 20.5
Income tax provision 11.4 6.1 (10.0) 15.6
Impairment of crude oil and natural gas properties 1.5 0.3 48.0 1.0
Depreciation, depletion and amortization 27.8 34.5 58.0 74.3
Accretion of asset retirement obligations 1.2 0.8 2.5 1.6
Adjusted EBITDA  $ 54.1  $ 41.5  $ 115.3  $ 117.0
         
Cash from operating activities to adjusted EBITDA:        
Net cash from operating activities  $ (2.2)  $ 25.4  $ 42.0  $ 69.7
Interest expense, net 13.1 10.1 26.4 20.5
Exploratory dry hole costs (0.1) (0.4) (0.1) (0.4)
Stock-based compensation (4.4) (2.0) (7.0) (3.9)
Amortization of debt discount and issuance costs (1.7) (1.9) (3.4) (3.5)
Gain on sale of properties and equipment (1.1) 1.8 (1.0) 22.3
Other 1.9 4.4 1.7 2.8
Changes in assets and liabilities 48.6 4.1 56.7 9.5
Adjusted EBITDA  $ 54.1  $ 41.5  $ 115.3  $ 117.0
 
PDC ENERGY, INC.
Condensed Consolidated Statements of Operations
(unaudited; in thousands, except per share data)
         
  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
         
Revenues:        
Crude oil, Natural gas and NGLs sales  $ 77,537  $ 51,342  $ 156,976  $ 118,297
Sales from natural gas marketing 18,079 8,613 31,749 19,994
Commodity price risk management gain, net 24,724 38,729 2,369 50,230
Well operations, pipeline income and other 965 1,056 2,037 2,225
Total revenues 121,305 99,740 193,131 190,746
         
Costs, expenses and other:        
Production costs 16,176 12,373 32,034 25,309
Cost of natural gas marketing 18,065 8,490 31,801 19,581
Exploration expense 1,437 2,374 3,126 4,246
Impairment of crude oil and natural gas properties 1,502 356 47,961 944
General and administrative expense 15,783 14,378 30,898 29,086
Depreciation, depletion and amortization 27,800 23,839 55,749 51,751
Accretion of asset retirement obligations 1,172 732 2,320 1,459
Gain on sale of properties and equipment (9) (2,246) (47) (2,400)
Total costs, expenses and other 81,926 60,296 203,842 129,976
Income (loss) from operations 39,379 39,444 (10,711) 60,770
Interest expense (13,089) (10,053) (26,446) (20,497)
Interest income 3 3 2
Income (loss) from continuing operations before income taxes 26,293 29,391 (37,154) 40,275
Provision for income taxes (9,791) (10,213) 12,701 (14,333)
Income (loss) from continuing operations 16,502 19,178 (24,453) 25,942
Income (loss) from discontinued operations, net of tax 3,416 (6,907) 4,953 2,164
Net income (loss)  $ 19,918  $ 12,271  $ (19,500)  $ 28,106
         
Earnings per share:        
Basic        
Income (loss) from continuing operations  $ 0.55  $ 0.72  $ (0.80)  $ 1.03
Income (loss) from discontinued operations 0.11 (0.26) 0.16 0.09
Net income (loss)  $ 0.66  $ 0.46  $ (0.64)  $ 1.12
Diluted        
Income (loss) from continuing operations  $ 0.53  $ 0.72  $ (0.80)  $ 1.03
Income (loss) from discontinued operations 0.11 (0.26) 0.16 0.08
Net income (loss)  $ 0.64  $ 0.46  $ (0.64)  $ 1.11
         
Weighted-average common shares outstanding:        
Basic 30,332 26,597 30,301 25,103
Diluted 31,014 26,728 30,301 25,268

2013 Second Quarter Teleconference and Webcast

PDC plans to host a conference call with investors to discuss 2013 second quarter results. The Company invites you to join James Trimble, Chief Executive Officer and President; Barton Brookman, Executive Vice President and Chief Operating Officer; Gysle Shellum, Chief Financial Officer; and Lance Lauck, Senior Vice President – Corporate Development, for a conference call on Thursday, August 1, 2013, for a discussion of its results. The related slide presentation will also be available on PDC's website at www.pdce.com .

Conference Call and Webcast:

Date/Time: Thursday, August 1, 2013, 11:00 a.m. ET Webcast available at: www.pdce.com Domestic (toll free): 877-312-5520 International: 253-237-1142 Conference ID: 87840390

Replay Numbers:

Domestic (toll free): 855-859-2056 International: 404-537-3406 Conference ID: 87840390

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