SUBSIDIARY GUARANTOR

PDC Permian, Inc., our wholly-owned subsidiary, guarantees our obligations under our publicly-registered senior notes. The following presents the condensed consolidating financial information separately for:



(i)	PDC Energy, Inc. ("Parent"), the issuer of the guaranteed obligations, including non-material subsidiaries;
(ii)	PDC Permian, Inc., the guarantor subsidiary ("Guarantor"), as specified in the indentures related to our senior notes;
(iii)	Eliminations representing adjustments to (a) eliminate intercompany transactions between or among Parent, Guarantor and our other subsidiaries and (b) eliminate the investments in our subsidiaries; and
(iv)	Parent and subsidiaries on a consolidated basis ("Consolidated").

The Guarantor is 100 percent owned by the Parent. The senior notes are fully and unconditionally guaranteed on a joint and several basis by the Guarantor. The guarantee is subject to release in limited circumstances only upon the occurrence of certain customary conditions. Each entity in the condensed consolidating financial information follows the same accounting policies as described in the notes to the condensed consolidated financial statements.

The following condensed consolidating financial statements have been prepared on the same basis of accounting as our condensed consolidated financial statements. Investments in subsidiaries are accounted for under the equity method. Accordingly, the entries necessary to consolidate the Parent and Guarantor are reflected in the eliminations column.



	Condensed Consolidating Balance Sheets
	June 30, 2018
	Parent			Guarantor			Eliminations			Consolidated
	(in thousands)

Current assets:
Cash and cash equivalents	$	1,425		$	—		$	—		$	1,425
Accounts receivable, net	149,120			46,197			—			195,317
Fair value of derivatives	14,817			—			—			14,817
Prepaid expenses and other current assets	5,379			1,365			—			6,744
Total current assets	170,741			47,562			—			218,303
Properties and equipment, net	2,191,985			2,000,623			—			4,192,608
Intercompany receivable	352,436			—			(352,436		)	—
Investment in subsidiaries	1,493,829			—			(1,493,829		)	—
Other assets	27,069			4,174			—			31,243
Total Assets	$	4,236,060		$	2,052,359		$	(1,846,265	)	$	4,442,154

Liabilities and Stockholders' Equity
Liabilities
Current liabilities:
Accounts payable	$	135,677		$	79,473		$	—		$	215,150
Production tax liability	52,768			3,998			—			56,766
Fair value of derivatives	186,605			—			—			186,605
Funds held for distribution	80,439			21,915			—			102,354
Accrued interest payable	12,556			5			—			12,561
Other accrued expenses	35,143			745			—			35,888
Total current liabilities	503,188			106,136			—			609,324
Intercompany payable	—			352,436			(352,436		)	—
Long-term debt	1,179,117			—			—			1,179,117
Deferred income taxes	48,740			93,071			—			141,811
Asset retirement obligations	67,142			6,407			—			73,549
Fair value of derivatives	36,430			—			—			36,430
Other liabilities	61,137			480			—			61,617
Total liabilities	1,895,754			558,530			(352,436		)	2,101,848

Commitments and contingent liabilities

Stockholders' Equity
Stockholders' equity
Common shares	661			—			—			661
Additional paid-in capital	2,509,693			1,766,775			(1,766,775		)	2,509,693
Retained earnings	(166,692		)	(272,946		)	272,946			(166,692		)
Treasury shares	(3,356		)	—			—			(3,356		)
Total stockholders' equity	2,340,306			1,493,829			(1,493,829		)	2,340,306
Total Liabilities and Stockholders' Equity	$	4,236,060		$	2,052,359		$	(1,846,265	)	$	4,442,154



	Condensed Consolidating Balance Sheets
	December 31, 2017
	Parent			Guarantor			Eliminations			Consolidated
	(in thousands)

Current assets:
Cash and cash equivalents	$	180,675		$	—		$	—		$	180,675
Accounts receivable, net	160,490			37,108			—			197,598
Fair value of derivatives	14,338			—			—			14,338
Prepaid expenses and other current assets	8,284			329			—			8,613
Total current assets	363,787			37,437			—			401,224
Properties and equipment, net	1,891,314			2,042,153			—			3,933,467
Assets held-for-sale, net	40,084			—			—			40,084
Intercompany receivable	250,279			—			(250,279		)	—
Investment in subsidiaries	1,617,537			—			(1,617,537		)	—
Other assets	42,547			2,569			—			45,116
Total Assets	$	4,205,548		$	2,082,159		$	(1,867,816	)	$	4,419,891

Liabilities and Stockholders' Equity
Liabilities
Current liabilities:
Accounts payable	$	85,000		$	65,067		$	—		$	150,067
Production tax liability	35,902			1,752			—			37,654
Fair value of derivatives	79,302			—			—			79,302
Funds held for distribution	83,898			11,913			—			95,811
Accrued interest payable	11,812			3			—			11,815
Other accrued expenses	42,543			444			—			42,987
Total current liabilities	338,457			79,179			—			417,636
Intercompany payable	—			250,279			(250,279		)	—
Long-term debt	1,151,932			—			—			1,151,932
Deferred income taxes	62,857			129,135			—			191,992
Asset retirement obligations	65,301			5,705			—			71,006
Fair value of derivatives	22,343			—			—			22,343
Other liabilities	57,009			324			—			57,333
Total liabilities	1,697,899			464,622			(250,279		)	1,912,242

Commitments and contingent liabilities

Stockholders' Equity
Stockholders' equity
Common shares	659			—			—			659
Additional paid-in capital	2,503,294			1,766,775			(1,766,775		)	2,503,294
Retained earnings	6,704			(149,238		)	149,238			6,704
Treasury shares	(3,008		)	—			—			(3,008		)
Total stockholders' equity	2,507,649			1,617,537			(1,617,537		)	2,507,649
Total Liabilities and Stockholders' Equity	$	4,205,548		$	2,082,159		$	(1,867,816	)	$	4,419,891



	Condensed Consolidating Statements of Operations
	Three Months Ended June 30, 2018
	Parent			Guarantor			Eliminations		Consolidated
	(in thousands)

Revenues
Crude oil, natural gas and NGLs sales	$	242,903		$	83,030		$	—	$	325,933
Commodity price risk management loss, net	(116,126		)	—			—		(116,126		)
Other income	2,479			245			—		2,724
Total revenues	129,256			83,275			—		212,531
Costs, expenses and other
Lease operating expenses	23,432			8,828			—		32,260
Production taxes	16,189			6,415			—		22,604
Transportation, gathering and processing expenses	3,610			5,354			—		8,964
Exploration, geologic and geophysical expense	296			579			—		875
Impairment of properties and equipment	86			159,468			—		159,554
General and administrative expense	33,152			4,095			—		37,247
Depreciation, depletion and amortization	93,217			42,407			—		135,624
Accretion of asset retirement obligations	1,177			108			—		1,285
Gain on sale of properties and equipment	(351		)	—			—		(351		)
Other expenses	2,708			—			—		2,708
Total costs, expenses and other	173,516			227,254			—		400,770
Loss from operations	(44,260		)	(143,979		)	—		(188,239		)
Interest expense	(17,915		)	505			—		(17,410		)
Interest income	69			—			—		69
Loss before income taxes	(62,106		)	(143,474		)	—		(205,580		)
Income tax benefit	13,348			31,975			—		45,323
Equity in loss of subsidiary	(111,499		)	—			111,499		—
Net loss	$	(160,257	)	$	(111,499	)	$	111,499	$	(160,257	)



	Condensed Consolidating Statements of Operations
	Three Months Ended June 30, 2017
	Parent			Guarantor			Eliminations		Consolidated
	(in thousands)

Revenues
Crude oil, natural gas and NGLs sales	$	190,828		$	22,774		$	—	$	213,602
Commodity price risk management gain, net	57,932			—			—		57,932
Other income	3,586			38			—		3,624
Total revenues	252,346			22,812			—		275,158
Costs, expenses and other
Lease operating expenses	15,557			4,471			—		20,028
Production taxes	13,388			1,654			—		15,042
Transportation, gathering and processing expenses	5,767			721			—		6,488
Exploration, geologic and geophysical expense	256			777			—		1,033
Impairment of properties and equipment	531			27,035			—		27,566
General and administrative expense	26,617			2,914			—		29,531
Depreciation, depletion and amortization	108,727			17,286			—		126,013
Accretion of asset retirement obligations	1,589			77			—		1,666
Gain on sale of properties and equipment	(532		)	—			—		(532		)
Provision for uncollectible notes receivable	(40,203		)	—			—		(40,203		)
Other expenses	3,890			—			—		3,890
Total costs, expenses and other	135,587			54,935			—		190,522
Income (loss) from operations	116,759			(32,123		)	—		84,636
Interest expense	(19,800		)	183			—		(19,617		)
Interest income	768			—			—		768
Income (loss) before income taxes	97,727			(31,940		)	—		65,787
Income tax (expense) benefit	(36,285		)	11,748			—		(24,537		)
Equity in loss of subsidiary	(20,192		)	—			20,192		—
Net income (loss)	$	41,250		$	(20,192	)	$	20,192	$	41,250



	Condensed Consolidating Statements of Operations
	Six Months Ended June 30, 2018
	Parent			Guarantor			Eliminations		Consolidated
	(in thousands)

Revenues
Crude oil, natural gas and NGLs sales	$	476,397		$	154,761		$	—	$	631,158
Commodity price risk management loss, net	(163,366		)	—			—		(163,366		)
Other income	4,995			344			—		5,339
Total revenues	318,026			155,105			—		473,131
Costs, expenses and other
Lease operating expenses	44,794			17,102			—		61,896
Production taxes	32,270			10,503			—		42,773
Transportation, gathering and processing expenses	6,841			9,436			—		16,277
Exploration, geologic and geophysical expense	609			2,912			—		3,521
Impairment of properties and equipment	92			192,650			—		192,742
General and administrative expense	64,711			8,232			—		72,943
Depreciation, depletion and amortization	187,593			74,819			—		262,412
Accretion of asset retirement obligations	2,377			196			—		2,573
Loss on sale of properties and equipment	1,081			—			—		1,081
Other expenses	5,476			—			—		5,476
Total costs, expenses and other	345,844			315,850			—		661,694
Loss from operations	(27,818		)	(160,745		)	—		(188,563		)
Interest expense	(36,012		)	1,073			—		(34,939		)
Interest income	217			—			—		217
Loss before income taxes	(63,613		)	(159,672		)	—		(223,285		)
Income tax benefit	13,925			35,964			—		49,889
Equity in loss of subsidiary	(123,708		)	—			123,708		—
Net loss	$	(173,396	)	$	(123,708	)	$	123,708	$	(173,396	)



	Condensed Consolidating Statements of Operations
	Six Months Ended June 30, 2017
	Parent			Guarantor			Eliminations		Consolidated
	(in thousands)

Revenues
Crude oil, natural gas and NGLs sales	$	361,567		$	41,727		$	—	$	403,294
Commodity price risk management gain, net	138,636			—			—		138,636
Other income	6,884			51			—		6,935
Total revenues	507,087			41,778			—		548,865
Costs, expenses and other
Lease operating expenses	31,374			8,443			—		39,817
Production taxes	24,532			2,909			—		27,441
Transportation, gathering and processing expenses	10,982			1,408			—		12,390
Exploration, geologic and geophysical expense	527			1,460			—		1,987
Impairment of properties and equipment	1,134			28,625			—		29,759
General and administrative expense	50,146			5,700			—		55,846
Depreciation, depletion and amortization	210,465			24,864			—		235,329
Accretion of asset retirement obligations	3,274			160			—		3,434
Gain on sale of properties and equipment	(692		)	—			—		(692		)
Provision for uncollectible notes receivable	(40,203		)	—			—		(40,203		)
Other expenses	7,418			—			—		7,418
Total costs, expenses and other	298,957			73,569			—		372,526
Income (loss) from operations	208,130			(31,791		)	—		176,339
Interest expense	(39,397		)	313			—		(39,084		)
Interest income	1,008			—			—		1,008
Income (loss) before income taxes	169,741			(31,478		)	—		138,263
Income tax (expense) benefit	(62,448		)	11,581			—		(50,867		)
Equity in loss of subsidiary	(19,897		)	—			19,897		—
Net income (loss)	$	87,396		$	(19,897	)	$	19,897	$	87,396



	Condensed Consolidating Statements of Cash Flows
	Six Months Ended June 30, 2018
	Parent			Guarantor			Eliminations			Consolidated
	(in thousands)

Cash flows from operating activities	$	267,551		$	113,306					$	380,857
Cash flows from investing activities:
Capital expenditures for development of crude oil and natural gas properties	(218,614		)	(214,021		)	—			(432,635		)
Capital expenditures for other properties and equipment	(1,898		)	(552		)	—			(2,450		)
Acquisition of crude oil and natural gas properties, including settlement adjustments	(180,981		)	(71		)	—			(181,052		)
Proceeds from sale of properties and equipment	1,782			—			—			1,782
Proceeds from divestiture	39,023			—			—			39,023
Restricted cash	1,249			—			—			1,249
Intercompany transfers	(101,398		)	—			101,398			—
Net cash from investing activities	(460,837		)	(214,644		)	101,398			(574,083		)
Cash flows from financing activities:
Proceeds from revolving credit facility	233,000			—			—			233,000
Repayment of revolving credit facility	(211,000		)	—			—			(211,000		)
Payment of debt issuance costs	(4,060		)	—			—			(4,060		)
Purchases of treasury stock	(4,494		)	—			—			(4,494		)
Other	(659		)	(60		)	—			(719		)
Intercompany transfers	—			101,398			(101,398		)	—
Net cash from financing activities	12,787			101,338			(101,398		)	12,727
Net change in cash, cash equivalents and restricted cash	(180,499		)	—			—			(180,499		)
Cash, cash equivalents and restricted cash, beginning of period	189,925			—			—			189,925
Cash, cash equivalents and restricted cash, end of period	$	9,426		$	—		$	—		$	9,426



	Condensed Consolidating Statements of Cash Flows
	Six Months Ended June 30, 2017
	Parent			Guarantor			Eliminations			Consolidated
	(in thousands)

Cash flows from operating activities	$	255,378		$	17,069		$	—		$	272,447
Cash flows from investing activities:
Capital expenditures for development of crude oil and natural gas properties	(198,954		)	(135,452		)	—			(334,406		)
Capital expenditures for other properties and equipment	(1,792		)	(507		)	—			(2,299		)
Acquisition of crude oil and natural gas properties, including settlement adjustments	—			5,372			—			5,372
Proceeds from sale of properties and equipment	1,293			—			—			1,293
Sale of promissory note	40,203			—			—			40,203
Restricted cash	(9,250		)	—			—			(9,250		)
Sale of short-term investments	49,890			—			—			49,890
Purchase of short-term investments	(49,890		)	—			—			(49,890		)
Intercompany transfers	(109,923		)	—			109,923			—
Net cash from investing activities	(278,423		)	(130,587		)	109,923			(299,087		)
Cash flows from financing activities:
Purchases of treasury stock	(5,274		)	—			—			(5,274		)
Other	(627		)	(18		)	—			(645		)
Intercompany transfers	—			109,923			(109,923		)	—
Net cash from financing activities	(5,901		)	109,905			(109,923		)	(5,919		)
Net change in cash, cash equivalents and restricted cash	(28,946		)	(3,613		)	—			(32,559		)
Cash, cash equivalents and restricted cash, beginning of period	240,487			3,613			—			244,100
Cash, cash equivalents and restricted cash, end of period	$	211,541		$	—		$	—		$	211,541