PDCE merger with SRC Energy (SRCI) to close early in 2019

[dan_s]

Merger with PDC Energy: On August 25, 2019, the Company (SRCI) entered into an Agreement and Plan of Merger ("PDC Merger Agreement") with PDC Energy, Inc., a
Delaware corporation ("PDC"), which provides that, among other things, and subject to the terms and conditions of the PDC Merger Agreement, SRC will be
merged with and into PDC, with PDC continuing as the surviving corporation (the “PDC Merger”). Pursuant to the PDC Merger Agreement, at the effective time
of the PDC Merger, the Company's shareholders will receive 0.158 of a share of PDC common stock for each outstanding share of the Company's common stock,
plus cash in lieu of any fractional PDC shares that otherwise would have been issued (the "Merger Consideration"). The PDC Merger Agreement also addresses
the treatment of SRC equity awards in the PDC Merger. PDC’s common stock is listed and traded on the NASDAQ Global Select Market under the symbol
PDCE. The transaction was unanimously approved by the Boards of Directors of both companies.

Completion of the PDC Merger is expected to occur early in the
first quarter of 2020, subject to the approval of the Company's shareholders and PDC's stockholders and other customary closing conditions. For three and nine
months ended September 30, 2019, the Company has incurred $8.0 million of merger transaction costs recognized in general and administrative expense of the
condensed consolidated statements of operations.

[dan_s]

We will be sending out an updated profile for PDC Energy this week. My valuation will be based on the assumption that the all stock merger with SRC Energy closes early in 2020.

I've modeled both companies for over five years, so I'm just adding the two forecast models together, adjusting the share count per the merger terms and putting some reasonable "cushions" in the cash flow from operations calculation for the "Post Merger PDCE".

When the merger closes, PDC will have over 200,000 Boepd of production and should increase production to average 221,000 Boepd for full-year 2020. This compares to PDC's actual Q3 2019 production of 137,716 boepd and SRC's actual Q3 2019 production of 58,746 Boepd.

This merger creates a nice mid-cap with a lot of running room. IMO this deal is 1+1= 2.2 and a win-win for the shareholders. Sized does matter in this business.

Individual forecast/valuation models for both companies have been posted the EPG website in case you want to add them together on your own.