September 26, 2012 / 2:51 PM / 5 years ago

TEXT-S&P rates PDC Energy notes 'B-' rtg

Sept 26 - Standard & Poor's Ratings Services today assigned its 'B-'
issue-level rating to PDC Energy Inc.'s (PDC's) proposed $400 million
senior unsecured notes due 2022. At the same time, we assigned a '5' recovery
rating to this issue, indicating modest (10% to 30%) recovery in the event of a
payment default (see list). PDC, formerly Petroleum Development Corp., intends
to use the net proceeds from this 
offering to redeem its 12% senior notes due 2018, to repay other debt, and for 
general corporate purposes.

The ratings on Denver-based PDC reflect our view that natural gas prices will 
remain weak in the near term. The rating also reflects the company's limited 
scale with significant concentration in the Rocky Mountain region and our 
estimate that the company will outspend operating cash flows in 2012. We also 
incorporated PDC's long reserve life, the increasing percentage of oil and 
natural gas liquids in its production mix, and adequate liquidity and 
satisfactory credit metrics for the rating. 

We characterize PDC's business risk profile as "vulnerable", given its 
significant exposure to weak natural gas prices, the company's limited scale, 
and its high concentration in the Rockies (where natural gas typically trades 
at a discount to Henry Hub). PDC is a relatively small, independent 
exploration and production (E&P) company, with 1.015 trillion cubic feet 
equivalent (Tcfe) of total proved reserves--66% natural gas and 46% proved 
developed. About 91% of PDC's proven reserves at fiscal year-end 2011 are in 
the Rockies and about 50% of its reserves are Rockies natural gas.

For the corporate rating rationale, see our summary analysis on PDC, published 
on April 26, 2012, on Ratings Direct.

RELATED RESEARCH AND CRITERIA

     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
 
RATINGS LIST

PDC Energy Inc.
Corporate Credit Rating           B/Stable/--

Ratings Assigned 
PDC Energy Inc.

$400M sr unsecd notes
 due 2022                         B-
  Recovery Rating                 5


Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.

Our Standards:The Thomson Reuters Trust Principles.
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