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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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Form 10-Q

Commission File Numbers:
Denver Parent Corporation 333-191602
Venoco, Inc. 001-33152

Denver Parent Corporation
Venoco, Inc.

Registrant's telephone number, including area code: (303) 626-8300

N/A
(Former name or former address, and former fiscal year, if changed since last report)

         Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

         As of May 15, 2015, there were 30,297,459 shares of common stock of Denver Parent Corporation and 29,936,378 shares of common stock of Venoco, Inc. outstanding.

   

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This report on Form 10-Q contains forward-looking statements. The use of any statements containing the words "anticipate," "intend," "believe," "estimate," "project," "expect," "plan," "should" or similar expressions are intended to identify such statements. Forward-looking statements included in this report relate to, among other things, expected future production, expenses and cash flows, the nature, timing and results of capital expenditure projects, amounts of future capital expenditures, our future debt levels and liquidity and Venoco's future ability to pay cash dividends and its compliance with obligations under their respective debt agreements. The expectations reflected in such forward-looking statements may prove to be incorrect. Disclosure of important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are included under the heading "Risk Factors" in this report and in the Venoco, Inc. / Denver Parent Corporation Annual Report on Form 10-K for the year ended December 31, 2014. Certain cautionary statements are also included elsewhere in this report, including, without limitation, in conjunction with the forward-looking statements. All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. We undertake no obligation to update any forward-looking statement. Factors that could cause actual results to differ materially from our expectations include, among others, those factors referenced in the "Risk Factors" section of this report and the Venoco, Inc. / Denver Parent Corporation Annual Report on Form 10-K for the year ended December 31, 2014 and such things as:

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changes in oil and natural gas prices, including reductions in prices that would adversely affect our revenues, income, cash flow from operations, liquidity and reserves;



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adverse conditions in global credit markets and in economic conditions generally;



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risks relating to the concentration of our properties in a limited number of areas in California;



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risks related to our indebtedness and a potential inability to effect deleveraging transactions or otherwise reduce those risks;



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our ability to replace oil and natural gas reserves;



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risks arising out of our hedging transactions;



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our inability to access oil and natural gas markets due to operational impediments;



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uninsured or underinsured losses in, or operational problems affecting, our operations;



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variable nature and uncertainty in reserve estimates and expected production rates;



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risks associated with litigation, arbitration or other legal proceedings that we are involved in, including the costs of participating in those proceedings and the risk of adverse outcomes;



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exploitation, development and exploration results, including in the onshore Monterey shale, where our results will depend on, among other things, our ability to identify productive intervals and drilling and completion techniques necessary to achieve commercial production from those intervals;



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the consequences of changes we have made, or may make from time to time in the future, to our capital expenditure budget, including the impact of those changes on our production levels, reserves, results of operations and liquidity;



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challenges and difficulties in managing expenses, including expenses associated with asset retirement obligations;



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a lack of available capital and financing;

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the potential unavailability of drilling rigs and other field equipment and services;



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the existence of unanticipated liabilities or problems relating to acquired businesses or properties;



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difficulties involved in the integration of operations we have acquired or may acquire in the future;



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the effect of any business combination, joint venture or other significant transaction we may pursue or have pursued, or the costs of litigation related thereto, and purchase price or other adjustments in connection with such transactions that may be unfavorable to us;



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factors affecting the nature and timing of our capital expenditures;



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the impact and costs related to compliance with or changes in laws or regulations governing or affecting our operations, including changes resulting from the Deepwater Horizon well blowout in the Gulf of Mexico, from the Dodd-Frank Wall Street Reform and Consumer Protection Act or its implementing regulations and from regulations relating to greenhouse gas emissions;



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delays, denials or other problems relating to our receipt of operational consents and approvals from governmental entities and other parties;



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environmental liabilities;



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loss of senior management or technical personnel;



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natural disasters, including severe weather;



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acquisitions and other business opportunities (or the lack thereof) that may be presented to and pursued by us;



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risk factors discussed in this report; and



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other factors, many of which are beyond our control.

Explanatory Note

        This Quarterly Report on Form 10-Q is a combined report being filed by Denver Parent Corporation ("DPC") and Venoco, Inc. ("Venoco"), a direct 100% owned subsidiary of DPC. DPC is a holding company formed to acquire all of the common stock of Venoco in a going private transaction that was completed in October 2012. Unless otherwise indicated or the context otherwise requires, (i) references to "DPC" refer only to DPC, (ii) references to the "Company," "we," "our" and "us" refer, for periods following the going private transaction, to DPC and its subsidiaries, including Venoco and its subsidiaries, and for periods prior to the going private transaction, to Venoco and its subsidiaries and (iii) references to "Venoco" refer to Venoco and its subsidiaries. Each registrant included herein is filing on its own behalf all of the information contained in this quarterly report that pertains to such registrant. When appropriate, disclosures specific to DPC or Venoco are identified as such. Each registrant included herein is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information. Where the information provided is substantially the same for both companies, such information has been combined. Where information is not substantially the same for both companies, we have provided separate information. In addition, separate financial statements for each company are included in the Financial Statements section.

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        We operate DPC and Venoco as one business, with one management team. Management believes combining the Quarterly Reports on Form 10-Q of DPC and Venoco provides the following benefits:

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Enhances investors' understanding of DPC and Venoco by enabling investors to view the business as a whole, the same manner in which management views and operates the business;



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Provides a more readable presentation of required disclosures with less duplication, since a substantial portion of the disclosures apply to both DPC and Venoco; and



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Creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

        All of Venoco's net assets are owned by DPC and all of DPC's operations are conducted by Venoco.

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES
Form 10-Q for the Quarterly Period Ended March 31, 2015

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PART I—FINANCIAL INFORMATION

VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share amounts)

   

See notes to condensed consolidated financial statements.

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands)

   

See notes to condensed consolidated financial statements.

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

(In thousands)

VENOCO, INC. AND SUBSIDIARIES

DENVER PARENT CORPORATION AND SUBSIDIARIES

   

See notes to condensed consolidated financial statements.

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

   

See notes to condensed consolidated financial statements.

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES

        Description of Operations    Denver Parent Corporation, a Delaware corporation ("DPC"), was formed in January 2012 for the purpose of acquiring all of the outstanding common stock of Venoco, Inc., a Delaware corporation ("Venoco"), in a transaction referred to as the "going private transaction". The going private transaction was completed in October 2012. DPC has no operations and no material assets other than 100% of the common stock of Venoco. Venoco is engaged in the acquisition, exploration, exploitation and development of oil and natural gas properties with a focus on properties offshore and onshore in California.

        Basis of Presentation    In 2011, Venoco's board of directors received a proposal from its then-chairman and chief executive officer, Timothy Marquez, to acquire all of the outstanding shares of common stock of Venoco of which he was not the beneficial owner for $12.50 per share in cash. On October 3, 2012, Mr. Marquez and certain of his affiliates, including DPC, completed the going private transaction and acquired all of the outstanding stock of Venoco. As a result, Venoco's common stock is no longer publicly traded and Venoco is a wholly owned subsidiary of DPC. DPC is majority-owned and controlled by Mr. Marquez and his affiliates.

        This Quarterly Report on Form 10-Q is a combined report being filed by DPC and Venoco. Unless otherwise indicated or the context otherwise requires, (i) references to "DPC" refer only to DPC, (ii) references to the "Company," "we," "our" and "us" refer, for periods following the going private transaction, to DPC and its subsidiaries, including Venoco and its subsidiaries, and for periods prior to the going private transaction, to Venoco and its subsidiaries and (iii) references to "Venoco" refer to Venoco and its subsidiaries. Each registrant included herein is filing on its own behalf all of the information contained in this report that pertains to such registrant. When appropriate, disclosures specific to DPC and Venoco are identified as such. Each registrant included herein is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information. Where the information provided is substantially the same for both companies, such information has been combined. Where information is not substantially the same for both companies, we have provided separate information. In addition, separate financial statements for each company are included in this report.

        The unaudited condensed consolidated financial statements include the accounts of DPC and its subsidiaries, and Venoco and its subsidiaries. All such subsidiaries are wholly owned. The financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial reporting. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all material adjustments considered necessary for a fair presentation of the Company's interim results have been reflected. All such adjustments are considered to be of a normal recurring nature. The Company has evaluated subsequent events and transactions for matters that may require recognition or disclosure in the financial statements. The Annual Report on Form 10-K for the year ended December 31, 2014 for Venoco and DPC includes certain definitions and a summary of significant accounting policies and should be read in conjunction with this report. The results for interim periods are not necessarily indicative of annual results.

        In the course of preparing the condensed consolidated financial statements, management makes various assumptions, judgments and estimates to determine the reported amount of assets, liabilities, revenue and expenses, and in the disclosures of commitments and contingencies. Changes in these

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES (Continued)

assumptions, judgments and estimates will occur as a result of the passage of time and the occurrence of future events and, accordingly, actual results could differ from amounts initially established. Significant areas requiring the use of assumptions, judgments and estimates include (1) oil and gas reserves; (2) cash flow estimates used in ceiling tests of oil and natural gas properties; (3) depreciation, depletion and amortization; (4) asset retirement obligations; (5) assigning fair value and allocating purchase price in connection with business combinations; (6) accrued revenue and related receivables; (7) valuation of commodity derivative instruments; (8) accrued liabilities; (9) valuation of share-based payments and (10) income taxes. Although management believes these estimates are reasonable, actual results could differ from these estimates.

        Liquidity    The additional indebtedness that the Company incurred in connection with the going private transaction and the associated financial covenants in Venoco's revolving credit facility (which was subsequently paid down in April 2015) have increased debt-related risks. We have undertaken a variety of measures to reduce our indebtedness, including in particular sales of our Sacramento Basin and West Montalvo properties for an aggregate price of approximately $450 million. However, our deleveraging efforts have been impacted by various operational issues, including an extended shutdown of the pipeline that transports our South Ellwood field production in 2014 and apparent communication issues affecting production from some of our wells in the same field. More recently, our deleveraging efforts have also been affected by the dramatic decline in the price of oil that occurred over the second half of 2014 with prices remaining low in and the first quarter of 2015. Prior to the termination of Venoco's revolving credit facility in April 2015, we were required to obtain numerous amendments to and waivers from the lenders under the facility as a result of these factors. We may be forced to seek further amendments or waivers from current or future lenders, and there is no assurance that we will be able to obtain them in a timely manner or at all. We are currently exploring additional deleveraging efforts and have significantly curtailed our planned capital expenditures for 2015 relative to prior years.

        Income Taxes    The Company computes its quarterly taxes under the effective tax rate method based on applying an anticipated annual effective rate to its year-to-date income or loss, except for discrete items. Income taxes for discrete items are computed and recorded in the period in which the specific transaction occurs.

        As of December 31, 2014, DPC has net operating loss carryovers ("NOLs") of $499 million for federal income tax purposes and $459 million for financial reporting purposes, and Venoco has net NOLs as of December 31, 2014 of $418 million for federal income tax purposes and $377 million for financial reporting purposes. The difference between the federal income tax NOLs and the financial reporting NOLs of $40 million relates to tax deductions for compensation expense for financial reporting purposes for which the benefit will not be recognized until the related deductions reduce taxes payable. The net operating loss carryovers may be carried back two years and forward twenty years from the year the net operating loss was generated. The net operating losses may be used to offset taxable income through 2034.

        Venoco has incurred losses before income taxes in 2008, 2009, and 2012 as well as taxable losses in each of the tax years from 2008 through 2013. DPC has incurred losses before income taxes in 2008,

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES (Continued)

2009, 2012, 2013 and 2014 as well as taxable losses in each of the tax years from 2008 through 2014. These losses and expected future taxable losses were a key consideration that led Venoco and DPC to provide a full valuation allowance against its net deferred tax assets as of December 31, 2014 and March 31,2015, since it cannot conclude that it is more likely than not that its net deferred tax assets will be fully realized on future income tax returns.

        The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. At each reporting period, management considers the scheduled reversal of deferred tax liabilities, available taxes in carryback periods, tax planning strategies and projected future taxable income in making this assessment. Future events or new evidence which may lead the Company to conclude that it is more likely than not that its net deferred tax assets will be realized include, but are not limited to, cumulative historical pre-tax earnings; consistent and sustained pre-tax earnings; sustained or continued improvements in oil and natural gas commodity prices; meaningful incremental oil production and proved reserves from the Company's development efforts at its Southern California legacy properties; consistent, meaningful production and proved reserves from the Company's onshore Monterey shale project; meaningful production and proved reserves from the CO₂ project at the Hastings Complex; and taxable events resulting from one or more deleveraging transactions. The Company will continue to evaluate whether the valuation allowance is needed in future reporting periods.

        As long as the Company concludes that it will continue to have a need for a full valuation allowance against its net deferred tax assets, the Company likely will not have any income tax expense or benefit other than for federal alternative minimum tax expense, a release of a portion of the valuation allowance for net operating loss carryback claims or for state income taxes.

        Reclassifications    Certain amounts in prior years footnotes to the financials have been reclassified to 2015 presentation. Reclassified amounts were not material to the financials presentation.

        Recently Issued Accounting Standards    In May 2014, the FASB issued new authoritative accounting guidance related to the recognition of revenue. This authoritative accounting guidance is effective for the annual period beginning after December 15, 2016, including interim periods within that reporting period, and is to be applied using one of two acceptable methods. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company's consolidated financial statements and disclosures.

        In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern, which requires management to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and provide related footnote disclosures. The guidance is effective for annual and interim reporting periods beginning on or after December 15, 2016. Early adoption is permitted for financial statements that have not been previously issued. The standard allows for either a full retrospective or modified retrospective transition method. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company's consolidated financials.

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES (Continued)

        In April 2015, the FASB issued ASU 2015-03 to revise the presentation of debt issuance costs. Under ASU 2015-03, entities will present debt issuance costs in their balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the deferred costs will continue to be included in interest expense. The guidance is effective for annual and interim reporting periods beginning on or after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. The standard will be applied retrospectively to all prior periods. The company is currently evaluating provisions of this guidance and assessing its impact on the Company's consolidated financials.

2. DEBT

        As of the dates indicated, the Company's long-term debt consisted of the following (in thousands):

        We recently completed a series of financing transactions in response to our indebtedness and liquidity situation. On April 2, 2015, Venoco entered into agreements relating to three new debt instruments: (i) first lien senior secured notes with an aggregate principal amount of $175 million (the "first lien secured notes"), (ii) second lien senior secured notes with an aggregate principal amount of $150 million (the "second lien secured notes") and (iii) a $75 million cash collateralized senior secured credit facility (the "term loan facility"). Approximately $72 million of proceeds from the issuance of the first lien secured notes and the term loan facility were used to repay all amounts outstanding under Venoco's revolving credit facility, which was then terminated. The second lien secured notes were issued in exchange for $194 million aggregate principal amount of, and accrued interest on, Venoco's outstanding 8.875% senior notes due 2019. The terms of the new debt instruments are summarized in "—Liquidity and Capital Resources—Capital Resources and Requirements." These transactions increased our indebtedness overall, but reduced our near-term cash interest expense and provided us with flexibility and additional liquidity that we intend to use to advance longer term projects.

        The following summarizes the terms of the agreements governing the Company's debt outstanding as of March 31, 2015.

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

2. DEBT (Continued)

        Venoco Revolving Credit Facility.    Prior to its refinancing and termination in April 2015, Venoco was party to a fifth amended and restated credit agreement which governed its revolving credit facility. The credit facility had a maximum size of $500 million and a maturity date of March 31, 2016. The borrowing base, which was subject to redetermination twice each year, and was subject to redetermination at other times at Venoco's request or at the request of the lenders, was $88.5 million as of March 31, 2015. The credit facility was secured by a first priority lien on substantially all of Venoco's oil and natural gas properties and other assets, including the equity interests in all of its subsidiaries, and was unconditionally guaranteed by each of those subsidiaries other than Ellwood Pipeline, Inc. The collateral also secured Venoco's obligations to hedging counterparties that were also lenders, or affiliates of lenders, under the facility. Loans made under the revolving credit facility were designated, at our option, as either "Base Rate Loans" or "LIBO Rate Loans." Loans designated as Base Rate Loans under the facility bore interest at a floating rate equal to (i) the greater of (x) the administrative agent's announced prime rate, (y) the federal funds rate plus 0.50% and (z) the one-month LIBOR plus 1.0%, plus (ii) an applicable margin ranging from 1.25% to 2.00%, based on utilization. Loans designated as LIBO Rate Loans under the facility bore interest at (i) LIBOR plus (ii) an applicable margin ranging from 2.25% to 3.00%, based upon utilization. The applicable margin for both Base Rate Loans and LIBO Rate Loans was increased by 0.50% when Venoco's debt to adjusted EBITDA ratio exceeded 3.75 to 1.00 on the last day of each of the two fiscal quarters most recently ended. A commitment fee of 0.50% per annum was payable with respect to unused borrowing availability under the facility. The agreement governing the facility contained customary representations, warranties, events of default, indemnities and covenants, including operational covenants that restricted Venoco's ability to incur indebtedness and certain financial covenants.

        The borrowing base under the revolving credit facility was allocated at various percentages to a syndicate of banks. As of March 31, 2015, Venoco had approximately $71.4 million outstanding on the facility and had available borrowing capacity of $13.5 million under the facility, net of the outstanding balance and $3.6 million in outstanding letters of credit.

        The revolving credit facility generally permitted Venoco, subject to certain conditions, to pay cash dividends to DPC up to a maximum amount of $35 million in a four-quarter period on a rolling basis. Venoco paid cash dividends of $3.9 million to DPC in February 2014.

        Venoco 8.875% Senior Notes.    In February 2011, Venoco issued $500 million in 8.875% senior notes due in February 2019 at par. The notes pay interest semi-annually in arrears on February 15 and August 15 of each year. Venoco may redeem the notes prior to February 15, 2015 at a "make whole premium" defined in the indenture. Beginning February 15, 2015, Venoco may redeem the notes at a redemption price of 104.438% of the principal amount and declining to 100% by February 15, 2017. The notes are senior unsecured obligations and contain operational covenants that, among other things, limit Venoco's ability to make investments, incur additional indebtedness, issue preferred stock, pay dividends, repurchase its stock, create liens or sell assets.

        DPC 12.25% / 13.00% Senior PIK Toggle Notes.    In August 2013, DPC issued $255 million principal amount of 12.25% / 13.00% senior PIK toggle notes due August 2018 at 97.304% of par. Interest on the notes is payable on February 15 and August 15 of each year, commencing February 15,

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

2. DEBT (Continued)

2014. The initial interest payment on the notes was required to be paid in cash. For each interest period after the initial interest period (other than for the final interest period ending at the stated maturity, which will be paid in cash), DPC will, in certain circumstances, be permitted to pay interest on the notes by increasing the principal amount of the notes or issuing new notes (collectively, "PIK interest"). Cash interest on the notes accrues at the rate of 12.25% per annum. PIK interest on the notes accrues at the rate of 13.00% per annum until the next payment of cash interest. The August 2014 interest payment was paid 25% in cash and 75% PIK interest, and the February 2015 interest payment was paid entirely as PIK interest. DPC is a holding company that owns no material assets other than stock of Venoco; accordingly, it will be able to pay cash interest on its notes only to the extent that it receives cash dividends or distributions from Venoco. The notes are not currently guaranteed by any of DPC's subsidiaries. DPC may redeem the notes, in whole or in part, at any time prior to August 15, 2015, at a "make-whole" redemption price described in the indenture. DPC may also redeem all or any part of the notes on and after August 15, 2015 at a redemption price of 106.125% of the principal amount and declining to 100% by August 15, 2017. The notes are senior unsecured obligations and contain operational covenants that, among other things, limit our ability to make investments, incur additional indebtedness, issue preferred stock, pay dividends, repurchase stock, create liens or sell assets.

        The Company was in compliance with all debt covenants at March 31, 2015.

3. HEDGING AND DERIVATIVE FINANCIAL INSTRUMENTS

        Commodity Derivative Agreements.    The Company utilizes swap and collar agreements and option contracts in an effort to hedge the effect of commodity price changes on its cash flows. The objective of the Company's hedging activities and the use of derivative financial instruments is to achieve more predictable cash flows. While the use of these derivative instruments limits the downside risk of adverse price movements, they also may limit future cash flows from favorable price movements. The Company may, from time to time, opportunistically restructure existing derivative contracts or enter into new transactions to effectively modify the terms of current contracts in order to improve the pricing parameters in existing contracts or realize the current value of the Company's existing positions. The Company may use the proceeds from such transactions to secure additional contracts for periods in which the Company believes it has additional unmitigated commodity price risk or for other corporate purposes.

        The use of derivatives involves the risk that the counterparties to such instruments will be unable to meet the financial terms of such contracts. The Company generally has netting arrangements with the counterparties that provide for the offset of payables against receivables from separate derivative arrangements with that counterparty in the event of contract termination. The derivative contracts may be terminated by a non-defaulting party in the event of default by one of the parties to the agreement.

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

3. HEDGING AND DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

        The components of commodity derivative losses (gains) in the condensed consolidated statements of operations are as follows (in thousands):

        As of March 31, 2015, the Company had entered into certain swap, collar and put agreements related to its oil production. The aggregate economic effects of those agreements are summarized below. Location and quality differentials attributable to the Company's properties are not included in the following prices. The agreements provide for monthly settlement based on the differential between the agreement price and the price per the applicable index, Inter-Continental Exchange Brent ("Brent").

        Fair Value of Derivative Instruments.    The estimated fair values of derivatives included in the condensed consolidated balance sheets at March 31, 2015 and December 31, 2014 are summarized below. The net fair value of the Company's derivatives decreased by $2.0 million from a net asset of $78.1 million at December 31, 2014 to a net asset of $76.1 million at March 31, 2015, primarily due to (i) changes in the futures prices for oil, which are used in the calculation of the fair value of commodity derivatives, (ii) settlement of commodity derivative positions during the current period and (iii) changes to the Company's commodity derivative portfolio in 2015. The Company does not offset asset and liability positions with the same counterparties within the financial statements; rather, all contracts are presented at their gross estimated fair value. As of the dates indicated, the Company's derivative assets and liabilities are presented below (in thousands). These balances represent the estimated fair value of the contracts. The Company has not designated any of its derivative contracts as

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

3. HEDGING AND DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

cash-flow hedging instruments for accounting purposes. The main headings represent the balance sheet captions for the contracts presented (in thousands).

4. ASSET RETIREMENT OBLIGATIONS

        The following table summarizes the activities for the Company's asset retirement obligations for the three months ended March 31, 2014 and 2015 (in thousands):

        Discount rates used to calculate the present value vary depending on the estimated timing of the obligation, but typically range between 4% and 9%. During the fourth quarter of 2014, the liabilities settled or disposed of $9.4 million for 2014 primarily relate to the Montalvo asset sale.

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

5. SHARE-BASED PAYMENTS

        The Company has granted cash settlement or liability awards to officers, directors and certain employees of the Company including rights-to-receive awards (RTR), restricted share unit awards (RSUs), share appreciation rights (SARs) and ESOP restricted share units. The Company measures its liability awards based on the award's fair value remeasured at each reporting date until the date of settlement. Compensation cost for each period until settlement is based on the change (or a portion of the change, depending on the percentage of the requisite service that has been rendered at the reporting date). Changes in the fair value of a liability that occur after the end of the requisite service period are compensation cost of the period in which the changes occur. Any difference between the amount for which a liability award is settled and its fair value at the settlement date is an adjustment of compensation cost in the period of settlement.

6. FAIR VALUE MEASUREMENTS

        Fair value is defined as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. The FASB has established a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

        The three levels of the fair value hierarchy are as follows:

        Level 1—Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

        Level 2—Pricing inputs are other than quoted prices in active markets included in level 1, but are either directly or indirectly observable as of the reported date and for substantially the full term of the instrument. Inputs may include quoted prices for similar assets and liabilities. Level 2 includes those financial instruments that are valued using models or other valuation methodologies.

        Level 3—Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value.

        Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value of assets and liabilities and their placement within the fair value hierarchy levels. The following

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

6. FAIR VALUE MEASUREMENTS (Continued)

table sets forth by level within the fair value hierarchy the Company's financial assets and liabilities that were accounted for at fair value as of March 31, 2015 (in thousands).

        Derivative instruments.    The Company's commodity derivative instruments consist primarily of swaps and collars for oil and natural gas. The Company values the derivative contracts using industry standard models, based on an income approach, which considers various assumptions including quoted forward prices and contractual prices for the underlying commodities, time value and volatility factors, as well as other relevant economic measures. Substantially all of the assumptions can be observed throughout the full term of the contracts, can be derived from observable data or are supportable by observable levels at which transactions are executed in the marketplace and are therefore designated as level 2 within the fair value hierarchy. The discount rates used in the assumptions include a component of non-performance risk. The Company utilizes the relevant counterparty valuations to assess the reasonableness of the calculated fair values.

        Share-based compensation.    The Company's current share-based compensation liability includes a liability for restricted share unit awards (RSUs), share appreciation rights (SARs) and employee stock ownership plan unit awards (ESOP). The fair value of DPC common stock is a significant input for determining the share-based compensation amounts and the liability amounts for these cash settled awards. DPC is a privately held entity for which there is no available market price or principal market for DPC common shares. Inputs for determining the fair market value of this instrument are unobservable and are therefore classified as Level 3 inputs. The Company utilizes various valuation methods for determining the fair market value of this instrument including a net asset value approach, a comparable company approach, a discounted cash flow approach and a transaction approach. The Company's estimate of the value of DPC shares is highly dependent on commodity prices, cost assumptions, discount rates, oil and natural gas proved reserves, overall market conditions and the identification of companies and transactions that are comparable to the Company's operations and reserve characteristics. While some inputs to the Company's calculation of fair value of DPC shares are from published sources, others, such as reserve values, the discount rate and expected future cash flows, are derived from the Company's own calculations and estimates. Significant changes in the unobservable inputs, summarized above, could result in a significantly different fair value estimate.

        The grant date fair value of each SAR is estimated using the Black-Scholes valuation model. The fair market value of DPC common shares is a significant input into the Black-Scholes valuation model. Valuation models require the input of highly subjective assumptions, including the expected volatility of the price of the underlying stock. DPC shares have characteristics significantly different from those of traded shares, and because changes in the subjective input assumptions can materially affect the fair value estimate, it is management's opinion that the valuations afforded by existing models are different from the value that the shares would realize if traded in the market.

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

6. FAIR VALUE MEASUREMENTS (Continued)

        The following table summarizes the changes in fair value of financial assets (liabilities), which represent primarily share-based compensation liabilities, designated as Level 3 in the valuation hierarchy (in thousands):

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(1)

The transfers into Level 3 liability during the first quarter of 2015 and 2014 relate to RSU, SAR and ESOP grants made by the Company to officers, directors and certain employees, and requisite service period expense.

(2)

The transfers out of Level 3 liability during the first quarter of 2015 and 2014 relate to cash settlements of RSU grants, and forfeitures of RSU, SAR and ESOP grants as a result of employee terminations.

        Fair Value of Financial Instruments.    The Company's financial instruments consist primarily of cash and cash equivalents, accounts receivable and payable, derivatives (discussed above) and long-term debt. The carrying values of cash equivalents and accounts receivable and payable are representative of their fair values due to their short-term maturities. The carrying amount of Venoco's revolving credit facility approximated fair value because the interest rate of the facility was variable. The fair value of the Venoco senior notes listed in the table below was derived from available market data (Level 1). We used available market data and valuation techniques (Level 2) to estimate the fair value of the DPC PIK toggle notes. This disclosure does not impact our financial position, results of operations or cash flows (in thousands).

        Assets and Liabilities Measured on a Non-recurring Basis.    The Company uses fair value to determine the value of its asset retirement obligations ("ARO"). The inputs used to determine such fair value under the expected present value technique are primarily based upon internal estimates prepared by reservoir engineers for costs of dismantlement, removal, site reclamation and similar activities associated with the Company's oil and gas properties and would be classified Level 3 inputs.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

7. CONTINGENCIES

        In the ordinary course of our business we are named from time to time as a defendant in various legal proceedings. We maintain liability insurance and believe that our coverage is reasonable in view of the legal risks to which our business is subject.

        Delaware Litigation—In August 2011 Timothy Marquez, the then-Chairman and CEO of Venoco, submitted a nonbinding proposal to the board of directors of Venoco to acquire all of the shares of Venoco he did not beneficially own for $12.50 per share in cash (the "Marquez Proposal"). As a result of that proposal, five lawsuits were filed in the Delaware Court of Chancery in 2011 against Venoco and each of its directors by shareholders alleging that Venoco and its directors had breached their fiduciary duties to the shareholders in connection with the Marquez Proposal. On January 16, 2012, Venoco entered into a Merger Agreement with Mr. Marquez and certain of his affiliates pursuant to which Venoco, Mr. Marquez and his affiliates would effect the going private transaction. Following announcement of the Merger Agreement, five additional suits were filed in Delaware and three suits were filed in federal court in Colorado naming as defendants Venoco and each of its directors. In March 2013 the plaintiffs in Delaware filed a consolidated amended class action complaint in which they requested that the court determine among other things that (i) the merger consideration is inadequate and the Merger Agreement was entered into in breach of the fiduciary duties of the defendants and is therefore unlawful and unenforceable and (ii) the merger should be rescinded or in the alternative, the class should be awarded damages to compensate them for the loss as a result of the breach of fiduciary duties by the defendants. The Colorado actions have been administratively closed pending resolution of the Delaware case. Venoco has reviewed the allegations contained in the amended complaint and believes they are without merit. Trial is expected to occur in 2015.

        Denbury Arbitration—In January 2013 Venoco and its wholly owned subsidiary, TexCal Energy South Texas, L.P. ("TexCal"), notified Denbury Resources, Inc. through its subsidiary Denbury Onshore, LLC ("Denbury") that it was invoking the arbitration provisions contained in contracts between TexCal and Denbury pursuant to which TexCal conveyed its interest in the Hastings Complex to Denbury and retained a reversionary interest. Denbury is obligated to convey the reversionary interest to TexCal at "payout" as defined in the contracts. The dispute involves the calculation of the cost of CO₂ delivered to the Hastings Complex which is used in Denbury's enhanced oil recovery operations. The Company believes that Denbury has materially overcharged the payout account for the cost of CO₂ and the cost of transporting it to the Hastings Complex. In December 2013, the three judge arbitration panel unanimously agreed with Venoco's position. In January 2014 Denbury requested that the arbitration panel modify its decision in a way that could increase the cost of CO₂. In March 2014 the Arbitration Panel modified its original award consistent with the Company's position and awarded the Company approximately $1.8 million in attorneys' fees and costs incurred in the arbitration. In late March 2014 Denbury appealed the arbitration ruling to the District Court for Harris County, Texas asking the court to vacate the arbitration award. On February 11, 2015 the District Court granted Venoco's motion to confirm the arbitration award. On March 12, 2015 Denbury filed a motion for a new trial with the District Court.

        Other—In addition, Venoco is a party from time to time to other claims and legal actions that arise in the ordinary course of business. Venoco believes that the ultimate impact, if any, of these other

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

7. CONTINGENCIES (Continued)

claims and legal actions will not have a material effect on its consolidated financial position, results of operations or liquidity.

8. GUARANTOR FINANCIAL INFORMATION

        All subsidiaries of Venoco other than Ellwood Pipeline Inc. ("Guarantors") have fully and unconditionally guaranteed, on a joint and several basis, Venoco's obligations under its 8.875% senior notes. Ellwood Pipeline, Inc. is not a Guarantor (the "Non-Guarantor Subsidiary"). The condensed consolidating financial information for prior periods has been revised to reflect the guarantor and non-guarantor status of the Company's subsidiaries as of March 31, 2015. All Guarantors are 100% owned by Venoco. Presented below are Venoco's condensed consolidating balance sheets, statements of operations and statements of cash flows as required by Rule 3-10 of Regulation S-X of the Securities Exchange Act of 1934. There are currently no guarantors of DPC's 12.25%/13.00% senior PIK toggle notes.

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

8. GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATING BALANCE SHEETS
AT DECEMBER 31, 2014 (Unaudited)
(in thousands)

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

8. GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATING BALANCE SHEETS
AT MARCH 31, 2015 (Unaudited)
(in thousands)

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

8. GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2014 (Unaudited)
(in thousands)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

8. GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2015 (Unaudited)
(in thousands)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

8. GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2014 (Unaudited)
(in thousands)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

8. GUARANTOR FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2015 (Unaudited)
(in thousands)

9. SUBSEQUENT EVENTS

        On April 2, 2015, Venoco entered into agreements relating to three new debt instruments: (i) first lien senior secured notes with an aggregate principal amount of $175 million (the "first lien secured notes"), (ii) second lien senior secured notes with an aggregate principal amount of $150 million (the

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

9. SUBSEQUENT EVENTS (Continued)

"second lien secured notes") and (iii) a $75 million cash collateralized senior secured credit facility (the "term loan facility"). Approximately $72 million of proceeds from the issuance of the first lien secured notes and the term loan facility were used to repay all amounts outstanding under Venoco's revolving credit facility, which was then terminated. The second lien secured notes were issued in exchange for $194 million aggregate principal amount of and accrued interest on Venoco's outstanding 8.875% senior notes due 2019.

        First lien secured notes.    The first lien secured notes bear interest at 12% per annum and mature in February 2019. The indenture governing the first lien secured notes includes covenants customary for instruments of this type, including restrictions on Venoco's ability to incur additional indebtedness, create liens on its properties, pay dividends and make investments, in each case subject to exceptions. The covenants regarding the incurrence of additional indebtedness contain exceptions for, among other things, (i) up to $25 million of additional secured or unsecured indebtedness that may be issued or incurred in connection with certain projects approved by the holders of the notes, (ii) up to $50 million of additional second lien secured notes that may be issued in exchange for Venoco's outstanding 8.875% senior notes due 2019 and (iii) up to $150 million of additional third lien or unsecured indebtedness that may be issued or incurred in exchange for the Venoco's outstanding 8.875% senior notes or to fund acquisitions. The indenture also includes restrictions on capital expenditures and an operational covenant pursuant to which Venoco is generally required to maintain a specified level of production for each quarterly period until maturity. Other covenants are generally similar to those contained in the indenture governing the existing 8.875% senior notes. Venoco's obligations under the first lien secured notes are guaranteed by all of its subsidiaries other than Ellwood Pipeline, Inc. and secured by a first priority lien on substantially all of the assets of Venoco and the guarantors other than the cash collateral under the term loan facility. Venoco may redeem the first lien secured notes at a redemption price of 109% of the principal amount beginning on January 1, 2016 and declining to 100% by January 1, 2019.

        Second lien secured notes.    The second lien secured notes bear interest at 8.875% if paid in cash or 12% if paid in kind. Interest may be paid in cash or in kind, at Venoco's option, for semiannual interest periods commencing within 24 months following issuance, but may become payable entirely in cash earlier upon the occurrence of certain events. The second lien secured notes mature in February 2019. The indenture governing the second lien secured notes includes covenants, and exceptions thereto, substantially similar to those set forth in the indenture governing the first lien secured notes. Venoco's obligations under the notes are guaranteed by Venoco's subsidiaries that guarantee the first lien secured notes and are secured by a second priority lien on the same assets securing its obligations under the first lien secured notes. Venoco may redeem the second lien secured notes on the same terms as the existing 8.875% senior notes. The first lien secured notes were issued under an Indenture dated as of April 2, 2015 among Venoco, the guarantors and U.S. Bank National Association, as trustee and collateral agent.

        Term loan facility.    The term loan facility, which was fully drawn at closing, matures in October 2015. Amounts borrowed under the facility will bear interest at 4.0% per annum for the first thirty days and at 12% thereafter. Venoco may repay or refinance the term facility at any time. The facility contains representations, warranties and covenants typical for instruments of this type. Venoco's

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

9. SUBSEQUENT EVENTS (Continued)

obligations under the term loan facility are secured by a first priority lien on cash collateral, which collateral may be released upon the occurrence of certain events, and are guaranteed by Venoco's subsidiaries that guarantee the first lien secured notes and second lien secured notes. The term facility was incurred under a term loan and security agreement dated as of April 2, 2015 among Venoco, the guarantors and the lenders party thereto.

        Derivatives.    In connection with the debt transactions noted above that were entered into on April 2, 2015 Venoco unwound our 2016 derivative contract with ABN AMRO which hedged 1,715 barrels per day of our 2016 oil production, receiving proceeds of $15.6 million. We also novated the remaining derivative contracts to Bank of America Merrill Lynch (BAML).

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ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of Operation

        This Quarterly Report on Form 10-Q is a combined report being filed by Denver Parent Corporation ("DPC") and Venoco, Inc. ("Venoco"), a direct 100% owned subsidiary of DPC. DPC is a holding company formed to acquire all of the common stock of Venoco in a going private transaction that was completed in October 2012. Unless otherwise indicated or the context otherwise requires, (i) references to "DPC" refer only to DPC, (ii) references to the "company," "we," "our" and "us" refer, for periods following the going private transaction, to DPC and its subsidiaries, including Venoco and its subsidiaries, and for periods prior to the going private transaction, to Venoco and its subsidiaries and (iii) references to "Venoco" refer to Venoco and its subsidiaries. See "Explanatory Note" immediately preceding Part I of this report. Venoco and DPC are filing this combined report to satisfy reporting requirements under the indentures governing their respective senior notes.

        The following discussion and analysis should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Venoco / DPC Annual Report on Form 10-K for the year ended December 31, 2014 as well as with the financial statements and related notes and the other information appearing elsewhere in this report.

Overview

        We are an independent energy company primarily engaged in the acquisition, exploration, exploitation and development of oil and natural gas properties. Our strategy is to grow through exploration, exploitation and development projects we believe to have the potential to add significant reserves on a cost- effective basis and through selective acquisitions of underdeveloped properties. In the execution of our strategy, our management is principally focused on economically developing additional reserves and on maximizing production levels through exploration, exploitation and development activities in a manner consistent with preserving adequate liquidity and financial flexibility.

Recent Developments

        We completed the going private transaction in October 2012 and incurred a substantial amount of additional debt in order to do so. We have undertaken a variety of measures to reduce our indebtedness, including sales of our Sacramento Basin and West Montalvo assets. However, our deleveraging efforts have been impacted by various operational issues, including an extended shutdown of the pipeline that transports our South Ellwood field production in 2014 and apparent communication affecting production from some of our wells in the same field. More recently, our deleveraging efforts have also been affected by the dramatic decline in the price of oil that occurred over the second half of 2014, with low prices continuing into 2015. We have been required to obtain numerous amendments to and waivers from the lenders under Venoco's revolving credit facility as a result of these factors, and we have significantly curtailed our planned capital expenditures for 2015 relative to prior years.

        We recently completed a series of financing transactions in response to our indebtedness and liquidity situation. On April 2, 2015, Venoco entered into agreements relating to three new debt instruments: (i) first lien senior secured notes with an aggregate principal amount of $175 million (the "first lien secured notes"), (ii) second lien senior secured notes with an aggregate principal amount of $150 million (the "second lien secured notes") and (iii) a $75 million cash collateralized senior secured credit facility (the "term loan facility"). Approximately $72 million of proceeds from the issuance of the first lien secured notes and the term loan facility were used to repay all amounts outstanding under Venoco's revolving credit facility, which was then terminated. The second lien secured notes were issued in exchange for $194 million aggregate principal amount of, and accrued interest on, Venoco's outstanding 8.875% senior notes due 2019. The terms of the new debt instruments are summarized in "—Liquidity and Capital Resources—Capital Resources and Requirements." These transactions

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increased our indebtedness overall, but reduced our near-term cash interest expense and provided us with flexibility and additional liquidity that we intend to use to advance longer term projects.

Capital Expenditures

        Our 2015 development, exploitation and exploration capital expenditure budget is $18 million, of which approximately $16.5 million is expected to be devoted to our legacy Southern California assets and approximately $1.5 million to onshore Monterey shale activities. In the first quarter of 2015 our development, exploitation and exploration capital expenditures were $3.8 million, with approximately $3.0 million incurred for Southern California legacy projects and $0.8 million for onshore Monterey projects.

        The aggregate levels of capital expenditures for the remainder of 2015, and the allocation of those expenditures, are dependent on a variety of factors, including changes in commodity prices, permitting matters, the availability of capital resources to fund the expenditures and changes in our business assessments as to where our capital can be most profitably employed. Accordingly, the actual levels of capital expenditures and the allocation of those expenditures may vary materially from our estimates. The following summarizes certain significant aspects of our 2015 capital spending program.

        In the first quarter of 2015, we focused our capital spending primarily on operational improvements, regulatory, health, safety and environmental compliance and progressing other long lead-time projects, primarily at our legacy Southern California assets. The aggregate levels of capital expenditures through the first quarter of 2015 were relatively in-line with our budget estimates.

        In the third quarter of 2014 our application to adjust the lease line at the South Ellwood field was deemed complete by the California State Lands Commission ("CSLC"). The application is subject to review by the CSLC under the California Environmental Quality Act ("CEQA"). In the first quarter of 2015 CSLC initiated efforts on the environmental impact review and related report as required by CEQA. We anticipate that the review period will be approximately one year from the initiation of the EIR, but it could be longer. Our application may not be granted on the terms we request or at all.

        During the first quarter of 2015 in the Sockeye field, we focused capital spending primarily on advancing long lead-time projects and on operational improvements. We spent $0.2 million on onshore Monterey shale activities during the first quarter of 2015, primarily on land and leasehold rental payments.

        With respect to our reversionary interest in the Hastings Complex CO₂ project being developed by Denbury, in January 2013 Venoco notified Denbury that it was invoking the arbitration provisions contained in contracts relating to the project. The dispute involves the calculation of the cost of CO₂ delivered to the Hastings Complex which is used in Denbury's enhanced oil recovery operations. Venoco believes that Denbury has materially overcharged the payout account for the cost of CO₂ and the cost of transporting it to the Hastings Complex. In December 2013 a three member arbitration panel ruled unanimously that Venoco's interpretation of the contracts was correct. In January 2014, Denbury requested that the arbitration panel modify its decision in a way that could increase the cost of CO₂ delivered to the Hastings Complex. In March 2014, the arbitration panel affirmed its decision consistent with Venoco's position. In late March 2014 Denbury filed a petition in Harris County Texas District Court to modify and vacate the arbitration award. In May 2014 Venoco filed an opposition to Denbury's petition and requested that the Texas District Court confirm the arbitration award. On February 11, 2015 the District Court granted Venoco's motion to confirm the arbitration award. On March 12^th, Denbury filed a motion for a new trial with the District Court. On May 12^th, Denbury notified Venoco they were appealing the District Court's ruling.

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Trends Affecting our Results of Operations

        Oil and Natural Gas Prices.    Historically, prices received for our oil and natural gas production have been volatile and unpredictable, and that volatility is expected to continue. Changes in the market prices for oil directly impact many aspects of our business, including our financial condition, revenues, results of operations, liquidity, rate of growth, carrying value of our properties and value of our proved reserves, all of which depend in part upon those prices. We therefore expect to have minimal exposure to changes in natural gas prices for the foreseeable future. Due to continued depressed commodity prices, we currently expect to recognize a non-cash ceiling test impairment charge in the second quarter of 2015.

        We employ a hedging strategy designed to reduce the variability in cash flows resulting from changes in commodity prices. As of March 31, 2015, we had hedge contract floors covering 4,595 barrels of oil per day for 2015. We have also secured hedge contracts for portions of our 2016 production. See "Quantitative and Qualitative Disclosures About Market Risk—Commodity Derivative Transactions" for further details concerning our hedging activities.

        Production.    Average BOE per day for the first quarter of 2015 was 6,016 compared to 6,612 for the year ended 2014. The reduction in production is due the sale of West Montalvo. Our 2015 capital spending has been allocated approximately 92% to our legacy Southern California fields and 8% to our onshore Monterey shale program. In light of current commodity prices and our need to preserve liquidity, we have substantially reduced our capital expenditure budget for 2015. This capital program is focused on operational improvements, meeting regulatory and EHS requirements, and progressing long lead-time projects. As a result, we expect production to decline year over year from 2014.

        Lease Operating Expenses.    Lease operating expenses ("LOE") of $27.55 per BOE for the first quarter of 2015 were higher than our full year 2014 results of $26.77 per BOE. However, we expect that our LOE per BOE for the full year 2015 will be generally consistent with 2014.

        Property and Production Taxes.    Property and production taxes of $3.93 per BOE for the first quarter of 2015 were higher than our full year 2014 results of $2.82 per BOE. We expect our 2015 property and production taxes to be higher on a per BOE basis than they were in 2014. Our ad valorem tax expense is highly sensitive to drilling results and the estimated present value of future net cash flows from new wells, and may be volatile in the future.

        General and Administrative Expenses.    General and administrative expenses were $12.24 per BOE (excluding non-cash share-based compensation charges of $0.07 per BOE) for the first quarter of 2015 compared to $8.39 per BOE for the full year 2014 (excluding non-cash share-based compensation decreases of $1.01 per BOE). During 2014 we implemented a reduction in work force program to reduce our overhead to be more reflective of the asset base we have following the Sacramento Basin and West Montalvo asset sales. Excluding share-based compensation charges and certain one-time charges, we expect our 2015 G&A costs to be less than they were in 2014, but, on a per BOE basis, to increase in 2015 compared to 2014 due to our lower expected production in 2015.

        Depreciation, Depletion and Amortization (DD&A).    DD&A for the first quarter of 2015 was $16.27 per BOE compared to $16.31 per BOE for the full year 2014. We expect our 2015 DD&A to be similar on a per BOE basis compared to our 2014 results.

        Commodity Derivative Gains and Losses.    We do not account for commodity derivative contracts as cash flow hedges. Commodity derivative gains and losses include settlements of commodity derivative contracts, changes in fair value of open commodity derivative contracts and amortization of derivative premiums. The fair value of the open commodity derivative instruments will continue to change in value until the transactions are settled. Therefore, we expect our net income to reflect the volatility of commodity price forward markets. Our cash flows will only be affected upon settlement of the

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transactions at the current market prices at that time. Cash settlement of derivative instruments represents the difference between the strike prices in contracts settled during the period and the ultimate settlement prices. Payments actually due to or from counterparties on these derivatives will typically be offset by corresponding changes in prices ultimately received from the sale of our production. We have incurred significant commodity derivative gains and losses in recent periods and may continue to incur these types of gains and losses in the future.

        Income Tax Provision (Benefit).    We incurred losses before income taxes in 2008, 2009, and 2012, as well as taxable losses in each of the tax years from 2008 through 2013. These losses and expected future taxable losses were key considerations that led us to conclude that we should maintain a full valuation allowance against our net deferred tax assets at December 31, 2014 and March 31, 2015 since we could not conclude that it is more likely than not that the net deferred tax assets will be fully realized. As long as we continue to conclude that we have a need for a full valuation allowance against our net deferred tax assets, we likely will not have any income tax expense or benefit other than for federal alternative minimum tax expense or for state income taxes. Future events or new evidence which may lead us to conclude that it is more likely than not that our net deferred tax assets will be realized include, but are not limited to, cumulative historical pre-tax earnings; consistent and sustained pre-tax earnings; sustained or continued improvements in oil and natural gas commodity prices; meaningful incremental oil production and proved reserves from development efforts at our Southern California legacy properties; meaningful production and proved reserves from the CO₂ project at the Hastings Complex; and taxable events resulting from one or more deleveraging transactions. We will continue to evaluate whether the valuation allowance is needed in future reporting periods.

        Our expectations with respect to future production rates, expenses and the other matters discussed above are subject to a number of uncertainties, including those discussed and referenced in "Risk Factors." For example, with respect to future production rates, uncertainties include those associated with third party services, limitations on capital expenditures resulting from the terms of our debt agreements, the availability of drilling rigs, oil prices, events resulting in unexpected downtime, permitting issues and drilling success rates.

Results of Operations

        The following table reflects the components of our oil and natural gas production and sales prices, and our operating revenues, costs and expenses, for the periods indicated. No pro forma adjustments have been made for the acquisitions and divestitures of oil and natural gas properties, which will affect the comparability of the data below. The information set forth below is not necessarily indicative of

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future results. Except for the items identified below as being specific to Venoco or DPC, all information shown is for both companies.

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(1)

Amounts shown are oil production volumes for offshore properties and sales volumes for onshore properties (differences between onshore production and sales volumes are minimal). Revenue accruals are adjusted for actual sales volumes since offshore oil inventories can vary significantly from month to month based on pipeline inventories and oil pipeline sales nominations.

(2)

BOE is determined using the ratio of one barrel of oil or natural gas liquids to six Mcf of natural gas.

(3)

Net of amounts capitalized.

Comparison of Quarter Ended March 31, 2015 to Quarter Ended March 31, 2014

        Oil and Natural Gas Sales.    Oil and natural gas sales decreased $42.8 million (68%) to $19.7 million in the first quarter of 2015 compared to $62.5 million in the first quarter of 2014. The decrease was due to lower oil and natural gas production, and lower oil prices, as described below.

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        Oil sales decreased by $41.7 million (68%) in the first quarter of 2015 to $19.2 million compared to $60.9 million in the first quarter of 2014. Oil production decreased by 21%, with production of 515 MBbls in the first quarter of 2015 compared to 655 MBbls in the first quarter of 2014. The decrease is primarily due to the sale of our West Montalvo Field in the fourth quarter of 2014. Our average realized price for oil decreased $56.38 per Bbl (60%) from $94.55 per Bbl in the first quarter of 2014 to $38.17 per Bbl for the first quarter of 2015.

        Natural gas sales decreased $1.1 million (69%) in the first quarter of 2015 to $0.5 million compared to $1.6 million in the first quarter of 2014. Natural gas production decreased by 40% in the first quarter of 2015, with production of 160 MMcf compared to 269 MMcf in the first quarter of 2014. The decrease is primarily due to the sale of our West Montalvo assets. Our average realized price for natural gas decreased $2.88 per Mcf (48%) from $6.06 per Mcf in the first quarter of 2014 to $3.18 per Mcf in the first quarter of 2015.

        Other Revenues.    Other revenues increased $0.2 million in the first quarter of 2015 to $0.7 million compared to $0.5 million in the first quarter of 2014. The increase is primarily due to higher pipeline revenue in the first quarter of 2015.

        Lease Operating Expenses.    Lease operating expenses ("LOE") decreased $4.6 million (24%) in the first quarter of 2015 to $14.9 million compared to $19.5 million in the first quarter of 2014. The decrease was primarily due to the sale of the West Montalvo field in the fourth quarter of 2014, as well as lower lease operating expenses at the South Ellwood and Sockeye fields. On a per unit basis, LOE decreased by $0.26 per BOE from $27.81 in the first quarter of 2014 to $27.55 in the first quarter of 2015.

        Property and Production Taxes.    Property and production taxes increased $0.4 million (24%) in the first quarter of 2015 to $2.1 million compared to $1.7 million in the first quarter of 2014. The increase is primarily due to higher property taxes from prior drilling results at our South Ellwood field. On a per BOE basis, property and production taxes increased $1.45 per BOE to $3.93 in the first quarter of 2015 from $2.48 in the first quarter of 2014.

        Depletion, Depreciation and Amortization (DD&A).    DD&A expense decreased $2.4 million (21%) to $8.8 million in the first quarter of 2015 compared to $11.2 million in the first quarter of 2014. The decrease was primarily due to the sale of the West Montalvo assets in the third quarter of 2014. DD&A expense on a per unit basis increased $0.40 per BOE to $16.27 per BOE for the first quarter of 2015 compared to $15.97 per BOE for the first quarter of 2014.

        Accretion of Abandonment Liability.    Accretion expense decreased $0.2 million (29%) to $0.5 million in the first quarter of 2015 compared to $0.7 million in the first quarter of 2014.

        General and Administrative (G&A).    The following table summarizes the components of Venoco's general and administrative expense incurred during the periods indicated (in thousands):

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        Venoco G&A expenses decreased $2.0 million (23%) to $6.7 million in the first quarter of 2015 compared to $8.7 million in the first quarter of 2014. The decrease is due to lower employee related G&A costs as a result of the reduction in work force program introduced in 2014 to reduce our overhead to be more reflective of the asset base we have following the Sacramento Basin and West Montalvo asset sales.

        DPC incurred nominal G&A expenses during the first quarter of 2015 of $0.1 million.

        Interest Expense.    For Venoco, interest expense decreased $1.5 million (12%) to $11.4 million in the first quarter of 2015 compared to $12.9 million in the first quarter of 2014. The decrease was primarily the result lower total outstanding borrowings on the revolving credit facility. For DPC, interest expense decreased $0.4 million (2%) to $20.7 million in the first quarter of 2015 compared to $21.1 million in the first quarter of 2014. The incremental difference of $9.3 million from Venoco's total interest expense to DPC's total consolidated interest expense was due to interest on DPC's 12.25% / 13.00% senior PIK toggle notes.

        Amortization of Deferred Loan Costs.    For Venoco, amortization of deferred loan costs decreased $0.2 million (25%) to $0.6 million in the first quarter of 2015 compared to $0.8 million in the first quarter of 2014. For DPC, amortization of deferred loan costs decreased $0.2 million (18%) to $0.9 million in the first quarter of 2015 compared to $1.1 million in the first quarter of 2014. The costs incurred relate to our loan agreements and are amortized over the estimated lives of the agreements.

        Commodity Derivative Losses (Gains), Net.    The following table sets forth the components of commodity derivative losses (gains), net in our condensed consolidated statements of operations for the periods indicated (in thousands):

        Realized commodity derivative gains or losses represent the difference between the strike prices in the contracts settled during the period and the ultimate settlement prices. The realized commodity derivative gains in the first quarter of 2014 and 2015 reflect the settlement of contracts at prices below the relevant strike prices. Unrealized commodity derivative (gains) losses represent the change in the fair value of our open derivative contracts from period to period. Derivative premiums are amortized over the term of the underlying derivative contracts.

        Income Tax Expense (Benefit).    Due to our valuation allowance, there was no income tax expense (benefit) recorded for the quarters ended March 31, 2015 or 2014. As long as we continue to conclude that we have a need for a full valuation allowance against our net deferred tax assets, we likely will not have any income tax expense or benefit other than for federal alternative minimum tax expense or for state income taxes.

        Net Income (Loss).    For Venoco, net loss for the first quarter of 2015 was $11.8 million compared to the net income of $9.6 million for the same period in 2014. For DPC, net loss for the first quarter of 2015 was $21.4 million compared to the net income of $0.9 million for the same period in 2014. The changes between periods are the result of the items discussed above.

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Liquidity and Capital Resources

        Venoco's primary sources of liquidity are cash generated from our operations and proceeds from debt transactions. In addition, Venoco has commodity derivative positions with a net asset value of $76.1 million as of March 31, 2015. If unwound, these positions could provide an additional source of liquidity subject to the commodity price environment at the relevant time. Venoco unwound one position on April 2, 2015, which hedged 1,715 barrels per day of our 2016 oil production, receiving proceeds of $15.6 million. DPC's primary sources of liquidity are distributions from Venoco and the issuance of debt securities.

Cash Flows

        Net cash used by operating activities for Venoco was $10.7 million in the first quarter of 2015 compared to net cash provided by operating activities of $4.3 million in the 2014 period. Cash flows used in operating activities in the first quarter of 2015 as compared to cash flows provided by operating activities in the first quarter of 2014 were impacted by the lower oil prices and lower oil and natural gas production.

        Net cash used in operating activities for DPC was $10.7 million in the first quarter of 2015 compared to $11.5 million used in the 2014 period. The difference in the amounts between Venoco and DPC relates to additional DPC interest expense.

        Net cash used in investing activities for Venoco and DPC was $2.9 million in the first quarter of 2015 compared to net cash provided by investing activities of $26.4 million in the 2014 period. The primary investing activities in the first quarter of 2015 were $4.5 million in capital expenditures on oil properties related to our capital expenditure program, partially offset by a $1.8 million final settlement from the sale of Montalvo and certain other assets. The primary investing activities in the first quarter of 2014 were $26.2 million in capital expenditures on oil properties related to our capital expenditure program.

        Net cash provided by financing activities for Venoco was $6.0 million in the first quarter of 2015 compared to net cash provided by financing activities of $38.1 million during the 2014 period. The primary financing activities in the first quarter of 2015 were net borrowings of $6.4 million on the revolving credit facility. The primary financing activities in the first quarter of 2014 were net borrowings of $42.0 million on the revolving credit facility and a dividend paid to DPC of $3.9 million.

        Net cash provided by financing activities for DPC was $5.9 million in the first quarter of 2015 compared to net cash provided by financing activities of $42.0 million during the 2014 period.

Capital Resources and Requirements

        Our 2015 capital expenditure budget is $18 million. This amount is substantially less than it has been in past years and is reflective of current market and economic conditions. We expect our 2015 capital expenditures to be devoted primarily to operational improvements, regulatory, health, safety and environmental compliance and progressing other long lead-time projects. The aggregate levels of capital expenditures in 2015, and the allocation of those expenditures, are dependent on a variety of factors,

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including changes in commodity prices, permitting matters, the availability of capital resources to fund the expenditures and changes in our business assessments as to where our capital can be most profitably employed. Accordingly, the actual levels of capital expenditures and the allocation of those expenditures may vary materially from our estimates. Our other principal anticipated uses of cash are ongoing operating expenses and interest payments on our indebtedness. Historically, we have used funds from operations and borrowings under our revolving credit facility as our primary sources of liquidity. We project that cash flow from operations and cash on hand resulting from our recent financing transactions will be sufficient to fund our planned capital expenditures and ongoing operations for 2015.

        We are currently pursuing a number of actions to improve our balance sheet including minimizing our capital expenditures by suspending drilling operations for 2015, effectively managing our working capital and improving our cash flows from operations. We cannot assure you that these initiatives will be successful. Uncertainties relating to our capital resources and requirements include the possibility that one or more of the counterparties to our hedging arrangements may fail to perform under the contracts, the effects of changes in commodity prices and differentials, and the possibility of an unexpected interruption in production.

        In addition, Venoco is subject to various legal and contractual limitations on its ability to pay dividends or otherwise make distributions to DPC, and DPC will be able to pay interest on its 12.25% /13.00% senior PIK toggle notes in cash only if it receives cash dividends or distributions from Venoco. The agreements permit Venoco to pay dividends to DPC in certain circumstances. We do not expect these criteria to be met in 2015. The February 2015 interest payment on DPC's notes was made 100% in kind, and we expect to continue making interest payments 100% in kind for the foreseeable future.

        The following is a summary of the terms of our significant debt agreements as of March 31,2015 and as of the date of this report. As discussed in "—Recent Events," Venoco entered into financing transactions in April 2015 pursuant to which it (i) issued the first lien secured notes and the second lien secured notes, (ii) entered into the term loan facility, (iii) repaid all amounts outstanding under its revolving credit facility and terminated the facility and (iv) repurchased $194 million aggregate principal amount of, and accrued interest on, its 8.875% senior notes due 2019.

        Revolving Credit Facility ($71.4 million outstanding as of March 31, 2015; terminated as of the date of this report).    In October 2012, Venoco entered into a fifth amended and restated credit agreement governing its revolving credit facility, and entered into several subsequent amendments to the agreement. The facility had a maturity date of March 31, 2016. The agreement contained customary representations, warranties, events of default, indemnities and covenants, including covenants that restricted Venoco's ability to incur indebtedness and required it to meet specified financial tests. As of March 31, 2015, all covenants under the facility were satisfied or waived.

        Loans under the revolving credit facility designated as "Base Rate Loans" bore interest at a floating rate equal to (i) the greater of (x) the administrative agent's announced base rate, (y) the federal funds rate plus 0.50% and (z) the one-month LIBOR plus 1.0%, plus (ii) an applicable margin ranging from 1.25% to 2.00%, based upon utilization. Loans designated as "LIBO Rate Loans" under the revolving credit facility bore interest at (i) LIBOR plus (ii) an applicable margin ranging from 2.25% to 3.00%, based upon utilization. The applicable margin for both Base Rate Loans and LIBO Rate Loans was increased by 0.50% when Venoco's debt to EBITDA ratio exceeded 3.75 to 1.00 on the last day of each of the two fiscal quarters most recently ended. A commitment fee of 0.50% per annum was payable with respect to unused borrowing availability under the facility. The revolving credit facility was secured by a first priority lien on substantially all of Venoco's assets.

        The revolving credit facility had a total capacity of $500.0 million, but was limited by the lesser of commitments from participating lenders and the borrowing base, both of which were $88.5 million as of

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March 31, 2015. The borrowing base was subject to redetermination twice each year, was subject to redetermination at other times at our request or at the request of the lenders. Lending commitments under the facility were allocated at various percentages to a syndicate of eleven banks. As of March 31, 2015, we had approximately $71.4million outstanding under the facility at an average interest rate of 3.9% and $13.5 million in available borrowing capacity, net of the outstanding balance and $3.6 million of outstanding letters of credit.

        Venoco 8.875% Senior Notes ($500 million outstanding as of March 31, 2015; $308 million outstanding as of the date of this report).    In February 2011, Venoco issued $500 million in 8.875% senior unsecured notes due in February 2019 at par. Concurrently with the sale of the 8.875% senior notes, Venoco repaid in full the outstanding principal balance of $455.3 million on its second lien term loan then in place. The 8.875% senior notes pay interest semi-annually in arrears on February 15 and August 15 of each year. Venoco may redeem the notes prior to February 15, 2015 at a "make whole premium" defined in the indenture. Beginning February 15, 2015, Venoco may redeem the notes at a redemption price of 104.438% of the principal amount and declining to 100% by February 15, 2017. The 8.875% senior notes are senior unsecured obligations and contain operational covenants that, among other things, limit Venoco's ability to make investments, incur additional indebtedness or create liens on its assets.

        DPC 12.25% / 13.00% Senior PIK Toggle Notes ($285 million outstanding as of the date of this report).    In August 2013, DPC issued $255 million principal amount of 12.25% / 13.00% senior PIK toggle notes due 2018 at 97.304% of par. Interest on the notes is payable on February 15 and August 15 of each year, commencing February 15, 2014. The initial interest payment on the notes was required to be paid in cash. For each interest period thereafter (other than for the final interest period ending at the stated maturity, which will be paid in cash), DPC will, in certain circumstances, be permitted to pay interest on the notes by increasing the principal amount of the notes or issuing new notes (collectively, "PIK interest"). Cash interest on the notes accrues at the rate of 12.25% per annum. PIK interest on the notes accrues at the rate of 13.00% per annum until the next payment of cash interest. The notes are not currently guaranteed by any of DPC's subsidiaries. DPC may redeem the notes, in whole or in part, at any time prior to August 15, 2015, at a "make-whole" redemption price described in the indenture. DPC may also redeem all or any part of the notes on and after August 15, 2015 at a redemption price of 106.125% of the principal amount and declining to 100% by August 15, 2017. The notes are senior unsecured obligations and contain operational covenants that, among other things, limit our ability to make investments, incur additional indebtedness, issue preferred stock, pay dividends, repurchase stock, create liens or sell assets.

        First lien secured notes (zero outstanding as of March 31, 2015; $175 million outstanding as of the date of this report).    The first lien secured notes bear interest at 12% per annum and mature in February 2019. The indenture governing the first lien secured notes includes covenants customary for instruments of this type, including restrictions on Venoco's ability to incur additional indebtedness, create liens on its properties, pay dividends and make investments, in each case subject to exceptions. The covenants regarding the incurrence of additional indebtedness contain exceptions for, among other things, (i) up to $25 million of additional secured or unsecured indebtedness that may be issued or incurred in connection with certain projects approved by the holders of the notes, (ii) up to $50 million of additional second lien secured notes that may be issued in exchange for Venoco's outstanding 8.875% senior notes and (iii) up to $150 million of additional third lien or unsecured indebtedness that may be issued or incurred in exchange for the 8.875% senior notes due 2019 or to fund acquisitions. The indenture also includes restrictions on capital expenditures and an operational covenant pursuant to which Venoco is generally required to maintain a specified level of production for each quarterly period until maturity. Other covenants are generally similar to those contained in the indenture governing the existing 8.875% senior notes. Venoco's obligations under the first lien secured notes are guaranteed by all of its subsidiaries other than Ellwood Pipeline, Inc. and are secured by a first priority

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lien on substantially all of the assets of Venoco and the guarantors other than the cash collateral under the term loan facility. Venoco may redeem the first lien secured notes at a redemption price of 109% of the principal amount beginning on January 1, 2016, 106% of the principal amount beginning on January 1, 2017, and declining to 100% by January 1, 2018.

        Second lien secured notes (zero outstanding as of March 31, 2015; $150 million outstanding as of the date of this report).    The second lien secured notes bear interest at 8.875% if paid in cash or 12% if paid in kind. Interest may be paid in cash or in kind, at Venoco's option, for semiannual interest periods commencing within 24 months following issuance, but may become payable entirely in cash earlier upon the occurrence of certain events. The second lien secured notes mature in February 2019. The indenture governing the second lien secured notes includes covenants, and exceptions thereto, substantially similar to those set forth in the indenture governing the first lien secured notes. Venoco's obligations under the notes are guaranteed by Venoco's subsidiaries that guarantee the first lien secured notes and are secured by a second priority lien on the same assets securing its obligations under the first lien secured notes. Venoco may redeem the second lien secured notes on the same terms as the existing 8.875% senior notes.

        Term loan facility (zero outstanding as of March 31, 2015; $75 million outstanding as of the date of this report).    The term loan facility, which was fully drawn at closing, matures in October 2015. Amounts borrowed under the facility will bear interest at 4.0% per annum for the first thirty days and at 12% thereafter. The facility contains representations, warranties and covenants typical for instruments of this type. Venoco's obligations under the term loan facility are secured by a first priority lien on cash collateral, which collateral may be released upon the occurrence of certain events. We expect to refinance this facility prior to its maturity with a substantially similar, but longer-term, instrument.

        Because we must dedicate a substantial portion of our cash flow from operations to the payment of amounts due under our debt agreements, that portion of our cash flow is not available for other purposes. Our ability to make scheduled interest payments on our indebtedness, maintain compliance with the covenants in our debt agreements and pursue our capital expenditure plan will depend to a significant extent on our financial and operating performance, which is subject to prevailing economic conditions, commodity prices and a variety of other factors. If our cash flow and other capital resources are insufficient to fund our debt service obligations and our capital expenditure budget while also allowing us to maintain compliance with our debt agreements, we may be forced to reduce or delay scheduled capital projects, sell material assets or operations, seek to restructure our indebtedness, and/or seek additional capital. Needed capital may not be available on acceptable terms or at all. Our ability to raise funds through the incurrence of additional indebtedness and certain other means is limited by covenants in our debt agreements. In addition, pursuant to mandatory prepayment provisions in our debt agreements, our ability to respond to a shortfall in our expected liquidity by selling assets or incurring additional indebtedness would be limited by provisions in the agreements that require us to use some or all of the proceeds of such transactions to reduce amounts outstanding under the agreements in some circumstances. If we are unable to obtain funds when needed and on acceptable terms, we may not be able to complete acquisitions that may be favorable to us, meet our debt obligations or finance the capital expenditures necessary to replace our reserves.

        The additional indebtedness we incurred in connection with the going private transaction and, more recently significant decreases in the price of oil, have increased the debt-related risks we face, including the risks that we may default on our obligations under our debt agreements, that our ability to replace our reserves and maintain our production may be adversely affected by capital constraints and the financial covenants under our debt agreements and that we may be more vulnerable to further adverse changes in commodity prices and other economic conditions. Prior to the termination of Venoco's revolving credit facility, we were required to obtain numerous amendments to and waivers from the lenders under the facility as a result of anticipated or actual breaches of the covenants in the

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facility. We may be forced to seek similar amendments or waivers from current or future lenders, and there is no assurance that we will be able to obtain them in a timely manner or at all. We are currently exploring additional deleveraging efforts and have significantly curtailed our planned capital expenditures for 2015 relative to prior years. There can be no assurance that our deleveraging efforts will be successful.

Off-Balance Sheet Arrangements

        At March 31, 2015, we had no existing off-balance sheet arrangements, as defined under SEC rules, that have or are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Adjusted Consolidated Net Tangible Assets

        As of March 31, 2015, DPC's "Adjusted Consolidated Net Tangible Assets," as that term is defined in the indenture governing its 12.25% / 13.00% senior PIK toggle notes, was $0.76 billion.

ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk

        This section provides information about derivative financial instruments we use to manage commodity price volatility. Due to the historical volatility of crude oil and natural gas prices, we have implemented a hedging strategy aimed at reducing the variability in cash flows resulting from changes in commodity prices. Currently, we purchase puts and enter into other derivative transactions such as collars and fixed price swaps in order to hedge our exposure to changes in commodity prices. All contracts are settled with cash and do not require the delivery of a physical quantity to satisfy settlement. While this hedging strategy may result in us having lower cash flows than we would have if we were unhedged in times of higher oil and natural gas prices, management believes that reducing volatility associated with commodity prices is beneficial. We may, from time to time, opportunistically restructure existing derivative contracts or enter into new transactions to effectively modify the terms of current contracts in order to improve the pricing parameters in existing contracts or realize the current value of our existing positions. We may use the proceeds from such transactions to secure additional contracts for periods in which we believe there is additional unmitigated commodity price risk or for other corporate purposes.

        This section also provides information about our interest rate risk. See "—Interest Rate Risk."

Commodity Derivative Transactions

        Commodity Derivative Agreements.    As of March 31, 2015, we had entered into various swap, collar and option agreements related to our oil and natural gas production. The aggregate economic effects of those agreements are summarized below. Location and quality differentials attributable to our properties are not included in the following prices. The agreements provide for monthly settlement based on the differential between the agreement price and the price per the applicable index, Inter-Continental Exchange Brent ("Brent") (oil).

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Portfolio of Derivative Transactions

        Our portfolio of commodity derivative transactions as of March 31, 2015 is summarized below:

Oil

        In April 2015, Venoco unwound one position, which hedged 1,715 barrels per day of our 2016 oil production at a price of $24.85 per Bbl, receiving proceeds of $15.6 million.

        We enter into derivative contracts, primarily collars, swaps and option contracts, in an effort to mitigate the risk of market price fluctuations. The objective of our hedging activities and the use of derivative financial instruments are to achieve more predictable cash flows. Our hedging activities seek to mitigate our exposure to price declines and allow us more flexibility to continue to execute our capital expenditure plan even if market prices decline. Our collar and swap contracts, however, prevent us from receiving the full advantage of increases in oil or natural gas prices above the maximum fixed amount specified in the hedge agreement. We do not enter into hedge positions for amounts greater than our expected production levels; however, if actual production is less than the amount we have hedged and the price of oil or natural gas exceeds a fixed price in a hedge contract, we will be required to make payments against which there are no offsetting sales of production. This could impact our liquidity and our ability to fund future capital expenditures.

        In addition, the use of derivatives involves the risk that the counterparties to such instruments will be unable to meet the financial terms of such contracts. We generally have netting arrangements with our counterparties that provide for the offset of payables against receivables from separate derivative arrangements with that counterparty in the event of contract termination. The derivative contracts may be terminated by a non-defaulting party in the event of default by one of the parties to the agreement.

        We have elected not to apply cash flow hedge accounting to any of our derivative transactions and we therefore recognize mark-to-market gains and losses in earnings currently, rather than deferring such amounts in accumulated other comprehensive income for those commodity derivatives that would qualify as cash flow hedges.

        All derivative instruments are recorded on the balance sheet at fair value. Fair value is generally determined based on the difference between the fixed contract price and the underlying market price at the determination date. Changes in the fair value of derivatives are recorded in commodity derivative (gains) losses on the consolidated statement of operations. As of March 31, 2015, the fair value of our commodity derivatives was a net asset of $76.1 million.

Interest Rate Risk

        We were previously subject to interest rate risk with respect to amounts borrowed from time to time under Venoco's revolving credit facility because those amounts bear interest at variable rates. The interest rates associated with the Venoco and DPC senior notes are fixed for the term of the notes. As of April 2, 2015 we no longer have any variable rate borrowings.

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        See notes to our consolidated financial statements for a discussion of our long-term debt as of March 31, 2015.

ITEM 4.    Controls and Procedures

Disclosure Controls and Procedures

        Our management, with the participation of Venoco's and DPC's principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2015. Based on the evaluation, those officers believe that:

•

our disclosure controls and procedures (including those of both Venoco and DPC) were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms; and



•

our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 was accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

        There has not been any change in our internal control over financial reporting that occurred during the quarter ended March 31, 2015 that has materially affected, or is likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.    LEGAL PROCEEDINGS

        The information set forth in the financial statements included in this report is incorporated by reference herein.

Item 1A.    RISK FACTORS

        In addition to the other information set forth in this report, you should carefully consider the factors discussed in "Risk Factors" in the Venoco / DPC Annual Report on Form 10-K for the year ended December 31, 2014, which could materially affect our business, financial condition and/or future results. The risks described in this report and in the Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

        Not Applicable

Item 3.    DEFAULTS UPON SENIOR SECURITIES

        Not Applicable

Item 4.    MINE SAFETY DISCLOSURES

        Not Applicable

Item 5.    OTHER INFORMATION

        Not Applicable

Item 6.    EXHIBITS

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

May 15, 2015

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

May 15, 2015

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