PDC Energy, Inc.

Press release and presentation are available on the investor relations page of our website, www.pdce.com. On today's call, we will reference both forward-looking statements and non-US GAAP financial measures. The appropriate disclosures and reconciliations can be found in our presentation. Additionally, we've modified our terminology from free cash flow to adjusted free cash flow. The definition and formula remain unchanged from prior disclosure. I'll turn the call over to our CEO, Mark Brittman.

Thank you, Kyle, and hello, everyone. Let me begin this call with some numbers. For the third quarter and our revised outlook for the year 2020 and 2021, I encourage you to study these results as I believe they demonstrate the strength of the company and the tremendous value PDC presents. For the quarter, $225 million to free cash flow. It's approximately 20% of the company's current market capitalization. Debt for the quarter was reduced by approximately $215 million, and a leverage ratio quarter ending of 1.7. Production, 17.7 million barrels of oil equivalent, well above our expectations. And a cost structure. a result of both the SRC merger and our intense focus in this area. $4 per BOE. That is combined LOE and GNA, a record for the company. And for PDC's revised outlook, 2020 annualized free cash flow is anticipated to exceed $350 million. Going forward, you can expect quarter after quarter pursuit of free cash flow and next year we anticipate approximately $300 million of free cash flow at $40 oil. This calculates to a yield based on the enterprise value of the company over 10%, top tier amongst our peers. In the near future, we believe our total debt level will be reduced below $1.5 billion, and our long-term goal remains to drive our leverage ratio to the 1.0 level, which we consider the gold standard for today's industry. Now let me cover a few key themes I'd like you to take from the call today. First, sustainability of our capital programs, particularly in the state of Colorado. Later in the call, Dave Lillo will review our turn-in-line schedule that is virtually assured, well into 2024. with over 475 combined DUCs and approved permits in hand. We've obtained 32 permits over the last two months, and we remain very confident this will continue under the recent modifications to the approval process at the State of Colorado. Second theme, improvements to our capital efficiency and the tremendous positive strides our operating teams have made in both basins. We expect a 5% to 10% improvement in our per well costs as we finalize our 2021 budget, helping us drive continued quality drilling returns in the Wattenberg and Delaware. Third theme, the financial focus I've already touched upon. Balance sheet strength as we strive for long-term 1.0 leverage ratio, consistent and sustainable free cash flow, and intense cost management. And the last theme, Expect modest production growth of up to 10% while we continue to obtain permits, drive quality drilling returns, and deliver the outstanding financial metrics I have outlined. So in closing, let me thank all of the PDC employees. During this pandemic, we have experienced demand destruction, incredible commodity price volatility, an overhaul to our work environment, including extra health protocols, and working remotely. you have demonstrated the commitment and resolve to help PDC remain strong, resilient, and focused during this uncertainty. Again, I thank you. With that, I'm going to turn the call over to Dave Lillo for an operational update.

Thanks, Bart. Before I begin, I'd like to take a moment to thank the team for their tremendous effort in the recent months. Our planning and development, regulatory, permitting, and land groups have worked tirelessly, collectively to ensure PDC is well positioned both now and the future. Moving to the third quarter, slide seven, we invested approximately $35 million to run one Wattenberg drilling rig for three months while resuming Wattenberg completions in September. Due to the lack of new turning lines in the basin, And as we articulated in our last call, both production and oil production were relatively flat on a sequential basis compared to the second quarter. More specifically, total production of 192,000 BOE per day represented an increase of 3% from the second quarter, while oil production of 65,000 barrels per day was a decrease of 4%. The discrepancy lies between the movement in total production and oil production is primarily related to late second quarter activity in each basin. In Wattenberg, we returned to production previously curtailed higher GOR wells that offset quarter over quarter growth in the Delaware, which was driven by late second quarter turn in lines. Finally, from an LOE standpoint, I'm extremely proud of our results for the quarter of just over $2 per BOE. In Wattenberg, our team has done a great job of optimizing the size and utilization of our compression fleet and renegotiating contracts while effectively managing the staff and realizing the benefits of consistently lower line pressures. In Delaware, we have converted several locations to the power grid and eliminated the need for electrical generation. We're very excited about our trend in our LOE the last quarters, but are keeping a close eye on our cost as there is potential for some of these savings to erode in 2021 due to the changing Colorado regulatory backdrop. Slide eight takes us to a look at Wattenberg drilling and completion efficiencies that we have realized through 2020. Beginning at the top of the slide, you can see a 10% improvement in the number of hours per day spent pumping compared to the first quarter of 2019. Simply put, if non-productive time is reduced, our team is completing and not swapping equipment and dealing with minor maintenance. there is a direct correlation in the number of stages per day and ultimately dollars per well. Recently, our Wattenberg team has reached levels of safely completing an amazing 20 plus stages per day. From a drilling standpoint, the story is much the same. The spud to spud drill times for our Wattenberg XRLs are down to an average of six days in 2020. This is an improvement of 20% compared to only a year ago. These efficiencies, as well as cost concessions in each basin, give us the confidence that our 2021 wells' well costs could improve by 5 to 10% from the current messaging of 400 a foot in Wattenberg and 800 a foot in Delaware for drilling, completions, and facilities. Again, and this is very important, we just started to formalize our 2021 budget process, and we'll be evaluating the implications of faster drilling and completions with lower well costs. In an ideal world, we would like to avoid frack holidays and lumpiness in our development program, but are committed to prioritizing sustainable free cash flow with little emphasis on production growth. Next on slide nine, I want to spend a few moments going over our continually improving permit story in Colorado. If you recall, our previous disclosure estimated that PDC would exit 2020 with approximately 200 approved permits compared to our current estimate of approximately 275. This is an increase of equivalent to a full year of drilling with one rig. As Bart mentioned, we now project to exit the year with 475 combined permits and ducts, or approximately four years of future turn in line activity at our current one rig pace. Over the course of the third quarter, our team was able to secure a number of additional surface locations, or Form 2As, as well as individual permits, or Form 2s. There are a couple important takeaways here. First, 32 well permits were approved in September and October, during and immediately after the initial rulemaking sessions. This is a strong indicator that PDCs Permit process is directly in line in what we believe the COGCC will require moving forward. Second, business density and proximity. As we show in the middle of the slide, the four surface locations associated with the 32 well permits had an average of 10 building units within 2,000 feet. and an average distance to the nearest BU of less than 1,000 feet. I know this is tough to visualize, but less than 10 building units within a radius of nearly a half a mile is representative of our rural nature of our position. Finally, our team is hopeful that we will receive additional permits between now and the end of the year. which will further increase our projected year-end counts to north of 500 combined and secure our turn-in-line activity into 2025 at the current pace. Moving to slide 10, we provide a comparison of our permitted and unpermitted surface locations. First, it's very important we don't overlook the most important factor of our position. We are 100% located within Weld County, Colorado. Much of this story becomes extremely challenged if that were not the case. Next, it is critical that you keep in mind that none of these future locations have gone through potential surface pad optimization or alternative site analysis that could favorably change some of the stats. Finally, our permitting strategy moving forward is focused on taking advantage of our contiguous acreage, positioned by several surface locations together to form oil and gas development plans, or OGDPs, and comprehensive area plans, or CAPs. This is aligned with the COGCC's stated desire for operators to take advantage of the long-term approach to planning and development in our state. I won't go through all the data on this slide, but you can see we provided a look of our permitted and unpermitted locations in terms of both building unit density and proximity to the nearest building unit, or BU. We feel these measures are important as they characterize our ability to either gain unanimous consent or demonstrate equivalent protections in the COGCC hearing process. Our intent on slides eight or nine and 10 is to paint a very clear picture. The combination of our best management practices, our community relationships, our rural acreage position entirely in Weld County positions PDC for successful partnership with the COGCC. We have tremendous confidence in our long-term Wattenberg development plan. With that, I would like to turn it over to Scott Myers, Chief Financial Officer.