uploads///Net debt to EBITDA

Is PDC Energy at an Elevated Level of Indebtedness?


Oct. 7 2015, Updated 4:05 a.m. ET

PDC Energy’s level of indebtedness

PDC Energy’s (PDCE) net debt to EBITDA (earnings before interest, tax, depreciation, and amortization) has been volatile. It had generally been falling until it increased very sharply in 4Q14. Since then, it has once again been falling. During 2Q15, PDCE’s net debt to EBITDA multiple was ~5x, which is 11% lower than the previous quarter.

Net debt to EBITDA reflects how easily a company can repay its debts from its operational earnings and available cash. PDC Energy’s peer Energen’s (EGN) net debt to EBITDA’s was ~1.3x at the end of 2Q15.

PDC Energy’s net debt to EBITDA touched a 13-quarter high of 6.9x in 4Q14. That’s when EBITDA decreased sharply as revenues from oil and gas sales fell due to the energy price slump. Since then, PDCE’s net debt to EBITDA has improved, or decreased.

With PDCE’s long-term debt remaining steady, higher EBITDA pushed 2Q15 net debt to EBITDA lower, offsetting the effect of decreased cash and marketable securities on net debt.

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Debt for PDC Energy and its peers

PDC Energy’s long-term debt was $554 million at the end of 2Q15 compared to $562 million in 2Q14, a 1.5% decrease. Of this, a $115 million senior convertible note debt is due for redemption in May 2016 or after. The note became convertible to PDCE shares on June 16, when PDCE’s common share price exceeded $55.12.

In addition, a $500 million senior note is due for redemption in October 2022. The company also had $268 million revolving credit facility outstanding as of June 30.

In comparison, Cimarex Energy’s (XEC) long-term debt stood at $1.5 billion at the end of 2Q15, unchanged from a year ago. Cimarex Energy is 0.06% of the SPDR S&P 500 ETF (SPY).

Next, we’ll discuss PDC Energy’s capital expenditures.


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