From The Wall Street Journal

A shareholder activist will challenge PDC Energy Inc. in an effort to change the way the oil producer pays its executives, part of a broader push by investors to force U.S. energy producers to focus more on profitability than growth.

Kimmeridge Energy Management Co., which last month disclosed a 5.1% stake in PDC, said it is putting forth a slate of directors to challenge the three board members whose terms expire this year. Denver-based PDC’s chief executive, Barton Brookman, is among those up for re-election.

Kimmeridge said it wants the company to align executive compensation more with shareholder returns than production growth. The firm is also advocating for a dividend, exploration of potential deals with rivals and a reduction of administrative costs at PDC, which has a market value of about $2.5 billion.

“A lot of the problems in the exploration-and-production space could be fixed with proper compensation structures aligning management with shareholders,” Kimmeridge managing partner Ben Dell, who is one of the firm’s three nominees, said in an interview.

PDC, which drills in Colorado as well as in West Texas fields that it bought from Kimmeridge in 2016 for about $1.6 billion, said Thursday that its current directors “bring financial and operational experience and relevant expertise, including in the areas of oil and gas, leadership, corporate management, accounting and finance, and mergers and acquisitions.”

Kimmeridge’s urgings are an example of a wider push by investors to wean shale drillers from the growth-at-all-costs mentality that has swamped commodity markets and produced piddly returns for shareholders over the past several years.

The SPDR S&P Oil & Gas Exploration & Production exchange-traded fund, which tracks the performance of more than 60 U.S. producers including PDC, has lost 59% over the past five years. In the same period, the S&P 500 stock index has gained 48%. PDC shares, meanwhile, have fallen 39%.

Investors blame compensation structures that reward executives for boosting output and adding reserves with little regard for commodity prices. Such pay plans encourage executives to drill wells even if doing so is uneconomic. The practice stems from the shale boom’s early days, when companies raced to exploit newly viable drilling fields.

By late 2014, most of the shale fields had been spoken for and oil prices began their five-year slump, dropping to levels that made many new wells unprofitable. Still, producers have largely continued to pay executives to produce more oil and gas than they did the year before.

PDC’s average daily production, for example, has more than quadrupled since the end of 2014, though that ramp-up has failed to lift its shares.

PDC has based an unspecified portion of Mr. Brookman’s past bonuses on whether the company tops year-over-year production-growth targets, according to securities filings. PDC last week proposed adding two new metrics to its pay formula that it said would help measure how efficiently it operates. In 2017, Mr. Brookman received compensation valued at $5.8 million, according to a securities filing. His 2018 compensation is to be disclosed in a forthcoming filing.

In response to flagging stocks, investors have all but shut off the infusions of capital that have sustained the shale boom, and there have been shareholder revolts across the oil patch. In the past year or so, Energen Corp., EQT Corp. and Hess Corp. have each made concessions to activist investors to stave off proxy fights.

In a note sent to clients earlier this week, UBS analyst Lloyd Byrne said shareholder pressure on exploration-and-production companies was “as poignant as I’ve seen in 25 years covering energy.” Mr. Byrne said one thing that could help draw general investors back to energy stocks is to tie executive pay directly to shareholder returns and financial performance.

From PDC

PDC Energy Confirms Receipt of Director Nominations

DENVER, March 07, 2019 (GLOBE NEWSWIRE) — PDC Energy, Inc. (“PDC” or the “Company”) (NASDAQ: PDCE) today confirmed that Kimmeridge Energy Management Company (“Kimmeridge”) has provided notice of its intent to nominate three individuals to stand for election to the PDC Board of Directors at the 2019 Annual Meeting of Shareholders.

The PDC Board and its Nominating and Governance Committee will review the proposed Kimmeridge nominees and present the Board’s recommendation regarding director nominees in the Company’s definitive proxy materials, which will be filed with the Securities and Exchange Commission and mailed to all shareholders eligible to vote at the 2019 Annual Meeting.

The date of the Company’s 2019 Annual Meeting has not yet been announced. PDC shareholders are not required to take action at this time.

The PDC Board comprises eight highly qualified directors, seven of whom are independent and all of whom are actively engaged in the execution of the Company’s strategic plan. These directors bring financial and operational experience and relevant expertise, including in the areas of oil and gas, leadership, corporate management, accounting and finance, and mergers and acquisitions. The Board is also committed to regular refreshment and has appointed three new independent directors since 2017.

The Board and management are collectively focused on acting in the best interest of PDC shareholders, and will continue to engage with shareholders and take appropriate action in this regard.

J.P. Morgan is serving as financial advisor to PDC and Davis Graham & Stubbs LLP and Wachtell, Lipton, Rosen & Katz are serving as legal advisors.

About PDC Energy, Inc.

PDC Energy, Inc. is a domestic independent exploration and production company that acquires, explores and develops properties for the production of crude oil, natural gas and NGLs, with operations in the Wattenberg Field in Colorado and the Delaware Basin in Reeves and Culberson Counties, Texas.  PDC’s operations are focused in the horizontal Niobrara and Codell plays in the Wattenberg Field and in the Wolfcamp zones in the Delaware Basin.


This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (“Securities Act”), Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”) and the United States (“U.S.”) Private Securities Litigation Reform Act of 1995 regarding our business, strategy, the 2019 Annual Meeting, and potential nominees for the board of directors. All statements other than statements of historical fact included in and incorporated by reference into this report are “forward-looking statements.” Words such as expect, anticipate, intend, plan, believe, seek, estimate and similar expressions or variations of such words are intended to identify forward-looking statements herein. Although forward-looking statements contained in this press release reflect our good faith judgment, such statements can only be based on facts and factors currently known to us. Forward-looking statements are always subject to risks and uncertainties, and become subject to greater levels of risk and uncertainty as they address matters further into the future. Because such statements relate to events or conditions further in the future, they are subject to increased levels of uncertainty.

Further, we urge you to carefully review and consider the cautionary statements and disclosures, specifically those under the heading “Risk Factors,” made in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the U.S. Securities and Exchange Commission (“SEC”) on February 28, 2019, and our other filings with the SEC for further information on risks and uncertainties that could affect our business, financial condition, results of operations and prospects, which are incorporated by this reference as though fully set forth herein. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to update any forward-looking statements in order to reflect any event or circumstance occurring after the date of this report or currently unknown facts or conditions or the occurrence of unanticipated events. All forward-looking statements are qualified in their entirety by this cautionary statement.


PDC intends to file a proxy statement and WHITE proxy card with the SEC in connection with its solicitation of proxies for the 2019 Annual Meeting. PDC SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE DEFINITIVE PROXY STATEMENT (AND ANY AMENDMENTS AND SUPPLEMENTS THERETO) AND ACCOMPANYING WHITE PROXY CARD WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders may obtain the proxy statement, any amendments or supplements to the proxy statement and other documents as and when filed by PDC with the SEC without charge from the SEC’s website at


PDC, its directors and certain of its executive officers may be deemed to be participants in connection with the solicitation of proxies from PDC’s shareholders in connection with the matters to be considered at the 2019 Annual Meeting. Information regarding the ownership of PDC’s directors and executive officers in PDC common shares is included in their SEC filings on Forms 3, 4, and 5, which can be found through the SEC’s website at Information can also be found in PDC’s other SEC filings. More detailed and updated information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with the SEC. These documents can be obtained free of charge from the sources indicated above.

From Kimmeridge

Kimmeridge Energy Nominates Three Highly Qualified Directors for the Board of PDC Energy, Inc.

Kimmeridge compelled to make nominations given PDC Energy’s steep discount to intrinsic value and management’s apparent unwillingness to adopt numerous operational and strategic initiatives to maximize shareholder value Over the past 3, 5, and 10 years,(1) PDC Energy’s return on average capital employed is materially lower than its weighted average cost of capital Ben Dell, Alice Gould, and James Adelson would bring strong, relevant backgrounds, financial and operational expertise to PDC Energy’s Board

NEW YORK and DENVER, March 7, 2019 /PRNewswire/ — Kimmeridge Energy Management Company, LLC (“Kimmeridge”), beneficial owners of 5.1% of the common shares of PDC Energy, Inc. (“PDC” or the “Company”) (NYSE: PDCE), today announced that it is nominating three highly qualified candidates for election to PDC’s Board of Directors at the Company’s 2019 Annual Meeting of Stockholders. In addition, Kimmeridge has released an investor presentation discussing its reasons for making the nominations and detailing how it believes the Company should create value for stockholders. The presentation can be accessed here:

Ben Dell, Founder and Managing Partner of Kimmeridge, said, “Despite holding enviable assets, we believe PDC has consistently delivered poor financial and operational performance across a host of critical metrics. In addition, management has repeatedly appeared to be unwilling to meaningfully address the Company’s failings, which has, in our view resulted in a steep discount to PDC’s intrinsic value. The election of three new directors will instill much needed accountability and a fresh perspective at the Company. It’s certainly time for change.

“Those who are familiar with PDC, and the public U.S. E&P space, fully understand that the sector is becoming increasingly ‘uninvestable’ due, in large part, to excessive SG&A, a misguided focus on production growth, and misalignment of executive compensation. Under the watch of PDC’s current Board, the Company continues to resoundingly check each of these value destructive boxes while claiming a ‘commitment to capital efficiency.’

“The Board nominees that we have put forth are solely committed to doing what is in the best interests of the Company and all of its stockholders over the near and long term. Each nominee possesses extensive E&P expertise – both operational and financial – and we believe the election of Dell, Gould, and Adelson would send a strong signal from the investment community that they want the Company to seriously consider taking required steps towards improving performance, maximizing shareholder value and, in turn, becoming an attractive investment opportunity.”

Nominee bios:

Ben Dell is the founder of Kimmeridge where he leads the firm’s investment activities, including overseeing the screening and diligence of new geological opportunities as well as the negotiation and execution of investment strategies. In 2016, Mr. Dell led the sale of Kimmeridge’s Delaware Basin assets to PDC. Prior to founding Kimmeridge, Mr. Dell served as Co-Head of Energy Investments at AllianceBernstein and prior to that he was a Senior Equity Research Analyst for Oil and Gas E&P at Sanford Bernstein. Mr. Dell was also a member of British Petroleum’s M&A and finance group. He received an undergraduate degree in Earth Sciences from St. Peter’s College, Oxford.

Alice Gould is a member of the Board of Directors of CorePoint Lodging, Inc. (NYSE: CPLG), serving on its Compensation and Nominating and Corporate Governance Committees. Alice previously led the Private Investments team at DUMAC, Inc., an investment office that manages over $18 billion for Duke University’s endowment and other assets.  Her responsibilities included the evaluation, selection, and monitoring of venture capital, leveraged buyout, credit, real estate, energy, and natural resources investments. She has also served on the advisory boards of over 20 private equity and real assets partnerships in the U.S. and abroad. Prior to joining DUMAC, Alice was a management consultant and worked for ten years at IBM in various management roles. Alice received a B.S. in Engineering from Duke University (magna cum laude) and an MBA from The Fuqua School of Business at Duke University(Fuqua Scholar).

James Adelson serves as the President and CEO of Nadel and Gussman, LLC, a fourth-generation family oil and gas business. He also serves as manager or managing partner of Nadel and Gussman’s various energy affiliates, as well as Ellbar Partners, LLC, the family office entity that focuses on non-energy related opportunities. Jim is an experienced industry executive with over 30 years in oil and gas, including management, operational strategy, exploration and development, together with significant financial expertise in corporate finance, strategic planning and risk management. Jim received his B.A. in Economics from Cornell University.

Schulte Roth & Zabel LLP is providing legal counsel to Kimmeridge Energy.

About Kimmeridge Energy
Founded in 2012 by Ben Dell, Dr. Neil McMahon and Henry Makansi, Kimmeridge Energy is an energy private equity firm focused on making direct investments in unconventional oil and gas assets in the U.S. Rather than partner with separate management teams, Kimmeridge identifies, owns and operates each of its assets directly, maintaining an in-house geology and operating team with experience across all major E&P functions.





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