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

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Form 10-Q

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

Venoco, Inc.
Denver Parent Corporation

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 November 19, 2014, there were 30,297,459 shares of common stock 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 proposed lease line adjustment in the South Ellwood field, our future debt levels and liquidity and Venoco's future ability to pay cash dividends, its compliance with covenants under its revolving credit agreement, possible waivers in the event of non-compliance with those covenants or amendments to the agreement, and the availability of potential deleveraging transactions. 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, 2013. 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, 2013 and such things as:

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changes in oil 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, including the risk that Venoco will breach covenants under its revolving credit facility and that lenders may accelerate some or all of our indebtedness;



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a potential inability to effect deleveraging transactions or otherwise reduce risks relating to our indebtedness;



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our ability to replace reserves;



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risks arising out of our hedging transactions;



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our inability to access markets due to operational impediments;



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



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inaccuracy 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;



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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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our ability to manage expenses, including expenses associated with asset retirement obligations;

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a lack of available capital and financing, including as a result of a reduction in the borrowing base under Venoco's revolving credit facility or the termination of the lenders' commitments under the facility;



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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, including in connection with our proposed lease line adjustment in the South Ellwood field;



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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

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

        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 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.

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VENOCO, INC. AND SUBSIDIARIES AND DENVER PARENT
CORPORATION AND SUBSIDIARIES
Form 10-Q for the Quarterly Period Ended September 30, 2014

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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. ORGANIZATION AND 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, 2013 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. ORGANIZATION AND 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.

        No condensed consolidated statement of comprehensive income (loss) is presented because the Company had no comprehensive income or loss activity in the periods presented.

        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 have increased debt-related risks. The agreement governing the revolving credit facility requires, among other things, that Venoco maintain a specified minimum ratio of current assets to current liabilities and a specified maximum ratio of secured debt to EBITDA. In addition, until October 2014, the agreement required that Venoco maintain a maximum debt to EBITDA ratio that varied over time. See note 2 for more information regarding the revolving credit agreement. As disclosed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, at the time that report was filed, we projected that Venoco would be out of compliance with the debt to EBITDA ratio covenant as of September 30, 2014. Because this non-compliance would have allowed the revolving credit facility lenders to accelerate the indebtedness under the facility, and that acceleration would have then allowed the holders of both Venoco's and DPC's senior notes to accelerate the indebtedness represented by those notes, the consolidated balance sheet of Venoco included in that report reflected all of the amounts outstanding under the revolving credit facility and the Venoco 8.875% senior notes as current liabilities as of June 30, 2014. For the same reasons, the balance sheet of DPC included in that report reflected that indebtedness, plus the DPC 12.25% / 13.00% senior PIK toggle notes, as current liabilities as of June 30, 2014.

        On August 18, 2014, Venoco entered into a purchase and sale agreement for the sale of its West Montalvo properties for $200 million, subject to certain adjustments. On October 15, 2014, Venoco entered into an amendment to its revolving credit facility that, among other things, (i) eliminated the debt-to-EBITDA covenant and (ii) reduced the borrowing base under the facility to $90 million, effective upon completion of the West Montalvo sale. The sale was completed on October 29, 2014, and Venoco used the sale proceeds of $200.2 million to reduce amounts outstanding under the facility to approximately $65 million. Final sales proceeds are subject to customary post-closing adjustments.

        Since the filing of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, oil prices have declined significantly. Due primarily to those declines, we currently project that Venoco will be out of compliance with the secured debt to EBITDA covenant in its revolving credit facility as of September 30, 2015. For the reasons discussed above with respect to the previously anticipated September 30, 2014 breach of the debt to EBITDA covenant, the indebtedness under the credit facility and Venoco's and DPC's senior notes are reflected as current liabilities as of September 30, 2014 in the

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

applicable balance sheets included in this report. In addition, due to the resulting increase in Venoco's current liabilities as of September 30, 2014, Venoco would have been out of compliance with the current assets to current liabilities ratio covenant as of that date had that breach not been waived pursuant to the October 15, 2014 amendment. The amendment did not waive any prospective breaches of that covenant, and, because we expect to continue to classify Venoco's credit facility and senior notes indebtedness as current as of December 31, 2014, we expect such a breach to occur as of that date. In the event that we are unable to obtain an amendment or waiver of the revolving credit facility to address that breach, and other actual or potential future breaches that may occur, our creditors could elect to declare some or all of our debt to be immediately due and payable and the lenders under the revolving credit facility could elect to terminate their commitments and cease making further loans.

        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, 2013, DPC and Venoco have net operating loss carryovers ("NOLs") for federal income tax purposes of $502 million and $457 million, respectively. DPC has incurred losses before income taxes in 2008, 2009, 2012 and 2013 as well as taxable losses in each of the tax years from 2008 through 2013. 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. These losses and expected future taxable losses were a key consideration that led each of Venoco and DPC to provide a full valuation allowance against its net deferred tax assets as of December 31, 2013 and September 30, 2014, 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 prices; meaningful incremental oil production and proved reserves from the Company's development efforts at its 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. 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.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

        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 does not expect this standard to have a material impact on the Company's financial statements upon adoption.

2. DEBT

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

        The following summarizes the terms of the agreements governing the Company's debt outstanding as of September 30, 2014.

        Venoco Revolving Credit Facility.    Venoco is party to a fifth amended and restated credit agreement which governs its revolving credit facility. The credit facility has a maximum size of $500 million and a maturity date of March 31, 2016. The borrowing base, which is subject to redetermination twice each year, and may be redetermined at other times at Venoco's request or at the request of the lenders, is currently $90 million. The credit facility is 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 is unconditionally guaranteed by each of those subsidiaries other than Ellwood Pipeline, Inc. The collateral also secures Venoco's obligations to hedging counterparties that are also lenders, or affiliates of lenders, under the facility. Loans made under the revolving credit facility are designated, at our option, as either "Base Rate Loans" or "LIBO Rate Loans." Loans designated as Base Rate Loans

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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)

under the facility bear 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 bear 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 will be increased by 0.50% in the event that Venoco's debt to adjusted EBITDA ratio exceeds 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 is payable with respect to unused borrowing availability under the facility. The agreement governing the facility contains customary representations, warranties, events of default, indemnities and covenants, including operational covenants that restrict Venoco's ability to incur indebtedness and financial covenants that require Venoco to maintain specified ratios of current assets to current liabilities, secured debt to EBITDA and interest coverage. In April 2014, the Company entered into an amendment to the revolving credit agreement pursuant to which, among other things, certain financial covenants were changed and the borrowing base under the facility increased from $270 million to $280 million. The Company entered into an additional amendment to the agreement in October 2014 pursuant to which, among other things, the debt to EBITDA ratio covenant was eliminated, certain other financial covenants were changed and the borrowing base was reduced to $90 million, effective upon completion of the Company's sale of its West Montalvo properties.

        The borrowing base under the revolving credit facility has been allocated at various percentages to a syndicate of banks. As of November 19, 2014, Venoco had approximately $65 million outstanding on the facility and had available borrowing capacity of $20 million under the facility, net of the outstanding balance and $3.6 million in outstanding letters of credit.

        The revolving credit facility generally permits 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 $15.8 million and $3.9 million to DPC in September 2013 and February 2014, respectively.

        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 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. The August 2014 interest payment was paid 25% in cash and 75% 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

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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)

extent that it receives cash dividends or distributions from Venoco. 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 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.

3. HEDGING AND DERIVATIVE FINANCIAL INSTRUMENTS

        Commodity Derivative Agreements.    The Company utilizes swap and collar agreements and option contracts to hedge the effect of price changes on a portion of its future oil production. 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 revenues 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 Company's derivative contracts generally provide for monthly settlement based on the difference between a fixed price established in the derivative contract and a benchmark price, typically either Inter-Continental Exchange Brent ("Brent") or WTI. Historically, the two price indexes have frequently demonstrated a close correlation with each other and with the Southern California indexes on which the Company sells a significant percentage of its oil. The Company cannot predict how the differential between Brent (or WTI) and the Southern California indexes applicable to our production will change in the future, and it is possible that it will increase. Because our hedging arrangements are based on benchmark prices, they do not protect us from adverse changes in the differential between the benchmark price and the Southern California indexes applicable to our production. The difficulty involved in predicting that differential makes it difficult for us to effectively hedge our production.

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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):

        In January 2013, in connection with the sale of the Company's Sacramento Basin natural gas properties, the Company unwound all of its then outstanding natural gas derivative contracts, as well as all natural gas basis swaps, and incurred a realized loss of $3.8 million. In February 2013, the Company unwound 25%, or 975 barrels per day, of oil basis swaps, incurring a realized loss of $2.1 million. The total amount paid to settle derivative contracts in the first quarter of 2013 was $5.9 million.

        The Company has paid premiums related to certain of its outstanding derivative contracts. These premiums are amortized into commodity derivative (gains) losses over the period for which the contracts are effective. At September 30, 2014, the balance of unamortized net derivative premiums paid was $4.9 million, of which $1.2 million and $3.7 million will be amortized in the remainder of 2014 and 2015, respectively.

        The aggregate economic effects of the Company's derivative contracts as of September 30, 2014 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, Brent (oil) or Henry Hub (natural gas).

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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)

        Fair Value of Derivative Instruments.    The estimated fair values of derivatives included in the condensed consolidated balance sheets at September 30, 2014 and December 31, 2013 are summarized below. The net fair value of the Company's derivatives changed by $22.7 million from a net liability of $23.7 million at December 31, 2013 to a net liability of $1.0 million at September 30, 2014, 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 2014. 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 cash-flow hedging instruments for accounting purposes. The main headings represent the balance sheet captions for the contracts presented (in thousands):

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

4. ASSET RETIREMENT OBLIGATIONS

        The following table summarizes the activities for the Company's asset retirement obligations for the nine months ended September 30, 2013 and 2014 (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%.

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.

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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 (Continued)

        The following table summarizes the Company's share-based compensation liability at (in thousands):

        The following summarizes the composition of the share-based compensation liability at (in thousands):

        The Company recognized total share-based compensation costs as follows (in thousands):

        As of September 30, 2014, there were $10.2 million of total unrecognized compensation cost, which is expected to be recognized over a period of 3.25 years.

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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 (Continued)

        The following summarizes the Company's cash settlement awards granted during the nine months ended September 30, 2014:

        Additional information related to SARs outstanding at September 30, 2014 is as follows:

        The grant date fair value of each SAR is estimated using 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. The Company's units have characteristics significantly different from those of traded units, 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 units 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)

5. SHARE-BASED PAYMENTS (Continued)

        The following assumptions were used to compute the grant date fair value of SARs outstanding at:

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).

        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 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 September 30, 2014 (in thousands).

        The Company's commodity derivative instruments consist primarily of swaps, collars and option contracts for oil. 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.

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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)

        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, 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 following table summarizes the changes in fair value of financial assets (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 nine months of 2014 and 2013 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 nine months of 2014 and 2013 relate to cash settlements of RSU and SAR 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 is variable. The fair value of the senior notes and senior PIK toggle notes listed in the tables below were derived from available 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)

data. This disclosure does not impact our financial position, results of operations or cash flows (in thousands).

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.

        Beverly Hills Litigation—Between June 2003 and April 2005, six lawsuits were filed against Venoco, certain other energy companies, the City of Beverly Hills (the "City") and the Beverly Hills Unified School District in Los Angeles County Superior Court by persons who attended Beverly Hills High School or who were or are citizens of Beverly Hills/Century City or visitors to that area during the time period running from the 1930s to 2005 (the "Beverly Hills Lawsuits"). Plaintiffs alleged that exposure to substances in the air, soil and water that originated from either oil-field or other operations in the area were the cause of their cancers and other maladies. In July 2012 Venoco entered into a settlement agreement, for an immaterial amount, pursuant to which all pending cases against it were dismissed with prejudice.

        The City and its insurance companies have made claims for indemnity against Venoco and others related to costs incurred by the City in defending itself against the Beverly Hills Lawsuits, which Venoco and the other defendants are disputing. Venoco believes that these claims for indemnity are without merit. In July 2014 a Los Angeles County Superior Court Judge granted Venoco's motion for summary judgment dismissing the claims of the City's two insurance companies against Venoco. The two insurance companies have appealed that ruling. Venoco believes that it will prevail in the appeal. In September 2014 Venoco and the City entered into a settlement agreement and the City subsequently dismissed its claim.

        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 September 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

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CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

7. CONTINGENCIES (Continued)

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 for this matter 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. 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 judge arbitration panel unanimously agreed with Venoco's position. In January 2014, Denbury requested that the 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 modified its original award consistent with Venoco'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. In May 2014 Venoco filed an answer to Denbury's petition and requested that the court confirm the arbitration award. Venoco believes the arbitration results are final and binding and that the court will uphold the award.

        Other—In addition, the Company is a party from time to time to other claims and legal actions that arise in the ordinary course of business. The Company believes that the ultimate impact, if any, of these other 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 (and, until October 2013, under its 11.50% senior notes). Ellwood Pipeline, Inc. is not a Guarantor (the "Non-Guarantor Subsidiary"). 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, 2013 (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 SEPTEMBER 30, 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 STATEMENTS OF OPERATIONS
THREE MONTHS ENDED September 30, 2013 (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 SEPTEMBER 30, 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 STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2013 (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
NINE MONTHS ENDED SEPTEMBER 30, 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 STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 (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 NINE MONTHS ENDED SEPTEMBER 30, 2014 (Unaudited)
(in thousands)

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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, 2013 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. We currently conduct our operations in one reportable geographical segment—the United States.

Recent Developments

        On August 18, 2014, Venoco entered into a Purchase and Sale Agreement for the sale of our West Montalvo properties for $200.2 million, subject to certain closing adjustments. The sale was completed on October 29, 2014 and the company applied 100% of the net proceeds to reduce the principal balance outstanding on Venoco's revolving credit facility. The assets included in the sale had proved reserves of approximately 7,302 MBOE as of December 31, 2013. Production from those assets averaged 1,614 BOE/d in 2013 and 1,415 BOE/d in the first nine months of 2014.

Capital Expenditures

        Our 2014 development, exploitation and exploration capital expenditure budget is $88 million, of which approximately $84 million is expected to be devoted to our legacy Southern California assets and approximately $4 million to onshore Monterey shale activities. In the first nine months of 2014 our development, exploitation and exploration capital expenditures were $72.1 million, with approximately $68.9 million incurred for Southern California legacy projects and $2.3 million for onshore Monterey projects.

        The aggregate levels of capital expenditures for the remainder of 2014 will be slightly less than our budget estimates. The following summarizes certain significant aspects of our 2014 capital spending program.

        In the first nine months of 2014, production from the South Ellwood field was adversely affected by a prolonged shutdown of the third party pipeline that delivers oil from the field. In order to minimize full-year 2014 downtime, we moved our annual South Ellwood maintenance shutdown from

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October up to March to coincide with the pipeline shutdown. In addition, we have determined that certain wells near the field's lease boundary are in communication, and, as a result, we have no current plans to drill additional wells in that area. However, production rates from the most productive wells in the area have stabilized.

        The Coal Oil Point structure is located on the north east side of the South Ellwood field. We successfully completed a well drilled to a probable location in the Coal Oil Point structure in the second half of 2013. In the first nine months of 2014, we drilled another Coal Oil Point well. The lowest zone of the well tested wet, but in August, we completed a higher zone of the well, which proved to be hydrocarbon bearing and was placed on initial production on August 20, 2014. This zone initially produced at an average rate approximately 450 Bbls/d.

        We have submitted an application to adjust the lease line at the South Ellwood field. If made, the adjustment could significantly increase the reserves associated with the field. Our application, which has now been deemed complete by the California State Lands Commission ("CSLC"), will be subject to review by the CSLC under the California Environmental Quality Act. We anticipate that the review period will be approximately one year, but it could be longer. Our application may not be granted on the terms we request or at all.

        In the West Montalvo field, during the first nine months of 2014, we spud two new locations and completed two wells spud in 2013.

        During the first nine months of 2014, we performed one recompletion at Sockeye and began drilling one development well in the M-2 zone from Platform Gail. Previous to drilling this infill development well, we were producing from the Sockeye M-2 zone, and we believed it to be underdeveloped. The well began producing on October 15, 2014 and initially produced approximately 610 Bbls/d.

        We spent $0.4 million on onshore Monterey shale activities in the first nine months of 2014 and plan to spend an additional $0.3 million (excluding capitalized G&A) in the last three months of 2014 to improve and stabilize production in the Sevier field.

        With respect to our reversionary interest in the Hastings Complex CO₂ project being developed by Denbury Resources, Inc. ("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. Venoco believes that the court will uphold the arbitration award.

        As of September 30, 2014, Venoco estimates that the proved reserves and PV-10 associated with its reversionary interest in the Hastings Complex were 8.9 MMBOE and $127 million, respectively.

Trends Affecting our Results of Operations

        The company experienced reduced income from operations for the first nine months of 2014 compared to the first nine months of 2013, due primarily to production and pricing declines. However, we had a significant increase in net income as a result of changes in the valuation of our hedging

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positions in the third quarter of 2014 and a loss on extinguishment of debt recorded in the third quarter of 2013.

        Oil and Natural Gas Prices.    Historically, prices received for our 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, value of our proved reserves and borrowing capacity under Venoco's revolving credit facility, all of which depend in part upon those prices. We expect to have only modest exposure to changes in natural gas prices for the foreseeable future.

        We employ a hedging strategy designed to reduce the variability in cash flows resulting from changes in commodity prices. As of September 30 2014, we had hedge contract floors covering 6,175 barrels of oil per day and 2,000 Mcf per day of natural gas for the remainder of 2014. We have also secured hedge contracts for portions of our 2015 and 2016 production. See "Quantitative and Qualitative Disclosures About Market Risk—Commodity Derivative Transactions" for further details concerning our hedging activities.

        Expected Production.    Our 2014 capital spending has been allocated approximately 95% to our legacy Southern California fields and 5% to our onshore Monterey shale program. As discussed above, our first nine months of production were adversely affected by a prolonged shutdown of the pipeline that transports our South Ellwood field oil, and we have experienced declines in production from certain wells drilled in recent years at our South Ellwood, Sockeye and West Montalvo fields. In addition, we have experienced delays in the completion of the Coal Oil Point well, the lowest zone of which was unproductive, and delays in converting newly drilled wells at West Montalvo from a no-flow status to artificial lift. Furthermore, the operator of the pipeline that transports our South Ellwood oil conducted another pipeline shutdown in October 2014. The shutdown lasted five days and was completed October 17, 2014. For these reasons, we expect production for 2014 to be down compared to 2013.

        The factors that negatively affected our production during the first nine months of 2014 had a corresponding negative impact on our per BOE expense metrics for the period.

        We have not yet established a capital expenditures budget for 2015. However, we expect that constraints on our liquidity will significantly limit our 2015 spending.

        Lease Operating Expenses.    Lease operating expenses ("LOE") of $26.67 per BOE for the first nine months of 2014 were higher than our full year 2013 results of $22.44 per BOE. We expect that our LOE per BOE for the full year 2014 will be slightly higher than 2013 because of lower production experienced in the first nine months of the year and expected for the remainder of 2014. Full year 2014 LOE on an aggregate basis is expected to lower than in 2013 due to the sale of West Montalvo and lower share based compensation.

        Property and Production Taxes.    Property and production taxes of $2.93 per BOE for the first nine months of 2014 were higher than our full year 2013 results of $1.02 per BOE. We expect our 2014 property and production taxes to be higher on a per BOE basis than they were in 2013. 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 $9.07 per BOE (excluding non-cash share-based compensation charges and one-time G&A costs of $1.44 per BOE) for the first nine months of 2014 compared to $11.75 per BOE for the full year 2013 (excluding non-cash share-based compensation charges of $2.79 per BOE). We expect our 2014 G&A costs to be less than they were in 2013 on an aggregate and per BOE basis. DPC incurs only nominal general and administrative expenses.

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        Depreciation, Depletion and Amortization (DD&A).    DD&A for the first nine months of 2014 was $16.58 per BOE compared to $14.09 per BOE for the full year 2013. We expect our 2014 DD&A to be slightly higher on a per BOE basis compared to our 2013 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 derivative transactions at the current benchmark 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 benchmark 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).    DPC has incurred losses before income taxes in 2008, 2009, 2012 and 2013 as well as taxable losses in each of the tax years from 2008 through 2013. 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. 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, 2013 and September 30, 2014 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 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 September 30, 2014 to Quarter Ended September 30, 2013

        Oil and Natural Gas Sales.    Oil and natural gas sales decreased $22.5 million (28%) to $57.2 million in the third quarter of 2014 compared to $79.7 million in the third quarter of 2013. The decrease was mainly due to lower oil production, as described below.

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        Oil sales decreased by $22.4 million (28%) in the third quarter of 2014 to $56.2 million compared to $78.6 million in the third quarter of 2013. Oil production decreased by 18%, with production of 642 MBbls in the third quarter of 2014 compared to 786 MBbls in the third quarter of 2013. The decrease is primarily due to lower production at our South Ellwood, Sockeye and West Montalvo fields resulting from production declines from new wells drilled in recent years at these three fields, production at South Ellwood being curtailed during the drilling of the Coal Oil Point well, and lost production from a significant well at Sockeye that was shut in for replacement of an electric submersible pump. Our average realized price for oil decreased $11.32 per Bbl (11%) from $99.16 per Bbl in the third quarter of 2013 to $87.84 per Bbl for the third quarter of 2014.

        Natural gas sales decreased by $0.1 million (12%) in the third quarter of 2014 to $1.0 million compared to $1.1 million in the third quarter of 2013. Natural gas production decreased by 26% in the third quarter of 2014, with production of 202 MMcf compared to 272 MMcf in the third quarter of 2013. Our average realized price for natural gas increased $0.79 per Mcf (19%) from $4.19 per Mcf in the third quarter of 2013 to $4.98 per Mcf in the third quarter of 2014.

        Other Revenues.    Other revenues decreased $0.6 million in the third quarter of 2014 to $0.6 million compared to $1.2 million in the third quarter of 2013. The decrease is primarily due to lower pipeline revenue in the third quarter of 2014.

        Lease Operating Expenses.    Lease operating expenses ("LOE") decreased $0.1 million in the third quarter of 2014 to $18.2 million compared to $18.3 million in the third quarter of 2013. However, due to lower production on a per unit basis, LOE increased by $4.97 per BOE from $21.99 in the third quarter of 2013 to $26.96 in the third quarter of 2014.

        Property and Production Taxes.    Property and production taxes increased $2.6 million (550%) in the third quarter of 2014 to $2.1 million compared to $(0.5) million in the third quarter of 2013. The increase is primarily due to revised year-to-date supplemental property tax estimates that were recorded in the third quarter of 2013. On a per BOE basis, property and production taxes increased $3.71 per BOE to $3.14 in the third quarter of 2014 from $(0.57) in the third quarter of 2013.

        Depletion, Depreciation and Amortization (DD&A).    DD&A expense decreased $0.8 million (6%) to $11.8 million in the third quarter of 2014 compared to $12.6 million in the third quarter of 2013. The decrease was primarily due to lower production in the third quarter of 2014. DD&A expense on a per unit basis increased $2.29 per BOE to $17.39 per BOE for the third quarter of 2014 compared to $15.10 per BOE for the third quarter of 2013.

        Impairment.    We did not record any impairment to oil and gas properties in the third quarter of 2013 or 2014.

        Accretion of Abandonment Liability.    Accretion expense remained constant at $0.6 million in the third quarter of 2014 and 2013.

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        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):

        Venoco G&A expenses decreased $2.5 million (23%) to $8.4 million in the third quarter of 2014 compared to $10.9 million in the third quarter of 2013. The decrease is due to lower employee related G&A costs and lower share-based compensation of $3.6 million (net of amount capitalized) charged to G&A in the third quarter of 2014 compared to $2.2 million (net of amount capitalized) in the third quarter of 2013. The lower employee related G&A costs and share based compensation expenses are due to decreases in personnel and the recapture of related share-based compensation expense previously recognized due to the lower estimated value of DPC stock. Excluding the effect of the non-cash share-based compensation expense, G&A expense decreased to $7.29 per BOE in the third quarter of 2014 from $9.26 per BOE in the third quarter of 2013.

        DPC incurred incremental G&A expenses of $0.1 million during the third quarters of 2013 and 2014.

        Interest Expense.    For Venoco, interest expense decreased $2.0 million (13%) to $13.6 million in the third quarter of 2014 compared to $15.6 million in the third quarter of 2013. The decrease was primarily the result of the repayment of Venoco's 11.50% $150 million senior notes in the third quarter of 2013. For DPC, interest expense increased $1.5 million (7%) to $22.6 million in the third quarter of 2014 compared to $21.1 million in the third quarter of 2013. The incremental difference of $8.9 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 remained constant at $0.9 million in the third quarter of 2014 and 2013. For DPC, amortization of deferred loan costs remained constant at $1.2 million in the third quarter of 2014 and 2013. 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 benchmark settlement prices. The realized

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commodity derivative losses in the third quarter of 2013 and 2014 reflect the settlement of contracts at benchmark prices above the relevant strike prices. In addition, in the third quarter of 2013, we settled all of our basis swaps, realizing total losses of $3.6 million. 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 September 30, 2014 or 2013. 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, the net income for the third quarter of 2014 was $39.5 million compared to net loss of $2.9 million for the same period in 2013. For DPC, the net income for the third quarter of 2014 was $30.2 million compared to net loss of $28.6 million for the same period in 2013. The changes between periods are the result of the items discussed above and the loss on extinguishment of debt recognized in the third quarter of 2013.

Comparison of Nine Months Ended September 30, 2014 to Nine Months Ended September 30, 2013

        Oil and Natural Gas Sales.    Oil and natural gas sales decreased $60.8 million (25%) to $186.3 million in the nine months ended September 30, 2014 compared to $247.1 million in the nine months ended September 30, 2013. The decrease was primarily due to lower oil and natural gas production, as described below.

        Oil sales decreased by $59.0 million (24%) in the first nine months of 2014 to $182.5 million compared to $241.5 million in the first nine months of 2013. Oil production decreased by 19%, with production of 1,978 MBbls in the first nine months of 2014 compared to 2,449 MBbls in the first nine months of 2013. The decrease is primarily due to lower production at our South Ellwood field in the first quarter of 2014 resulting from a prolonged shutdown of the third party pipeline that delivers our South Ellwood oil, lower production in the first nine months of 2014 at our South Ellwood, Sockeye and West Montalvo fields resulting from production declines from new wells drilled in recent years at these three fields, production at South Ellwood being curtailed during the drilling of the Coal Oil Point well, and lost production from a significant well at Sockeye that was shut in for the replacement of an electric submersible pump. Our average realized price for oil decreased $4.62 per Bbl (5%) from $97.36 per Bbl in the first nine months of 2013 to $92.74 per Bbl for the first nine months of 2014.

        Natural gas sales decreased $1.7 million (31%) in the first nine months of 2014 to $3.9 million compared to $5.6 million in the first nine months of 2013. Natural gas production decreased by 50% in the first nine months of 2014, with production of 702 MMcf compared to 1,412 MMcf in the first nine months of 2013. The decrease is partly due to the sale of Sacramento Basin assets in 2013 and partly due to the reductions in oil production, and therefore associated natural gas production, as well as a reduction in gas sales from the Sockeye field in the first nine months of 2014 compared to the first nine months of 2013. Our average realized price for natural gas increased $1.54 per Mcf (39%) from $3.97 per Mcf in the first nine months of 2013 to $5.51 per Mcf in the first nine months of 2014.

        Other Revenues.    Other revenues decreased $1.9 million in the first nine months of 2014 to $1.5 million compared to $3.4 million in the first nine months of 2013. The decrease is primarily due to lower pipeline revenue in the first nine months of 2014.

        Lease Operating Expenses.    Lease operating expenses ("LOE") increased $1.2 million (2%) in the first nine months of 2014 to $55.9 million compared to $54.7 million in the first nine months of 2013. The increase was primarily due to the timing of the annual maintenance shutdown at our South Ellwood field. The shutdown occurred in the fourth quarter of 2013, however the annual shutdown was

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moved up to the first quarter of 2014 in order to correspond with the pipeline shutdown, higher unplanned repairs at Sockeye and higher well maintenance costs at Montalvo in the first nine months of 2014. The expenses incurred as a result of the annual maintenance shutdown occurred concurrently with a period of reduced production, which resulted in an increase in the per unit costs. On a per unit basis, LOE increased by $6.28 per BOE from $20.39 in the first nine months of 2013 to $26.67 in the first nine months of 2014.

        Property and Production Taxes.    Property and production taxes increased $4.0 million (197%) in the first nine months of 2014 to $6.1 million compared to $2.1 million in the first nine months of 2013. The increase is primarily due to revised year-to-date supplemental property tax estimates that were recorded in the third quarter of 2013. On a per BOE basis, property and production taxes increased $2.16 per BOE to $2.93 in the first nine months of 2014 from $0.77 in the first nine months of 2013.

        Depletion, Depreciation and Amortization (DD&A).    DD&A expense decreased $1.8 million (5%) to $34.7 million in the first nine months of 2014 compared to $36.5 million in the first nine months of 2013. The decrease was primarily due to lower production in the first nine months of 2014. DD&A expense on a per unit basis increased $2.97 per BOE to $16.58 per BOE for the first nine months of 2014 compared to $13.61 per BOE for the first nine months of 2013.

        Impairment.    We recorded an impairment to oil and gas properties of $0.8 million in the first nine months of 2014 for costs incurred related to the evaluation of certain South American properties. We abandoned further efforts to evaluate expansion outside the U.S.A. in the second quarter of 2014.

        Accretion of Abandonment Liability.    Accretion expense remained relatively constant at $1.9 million in the first nine months of 2014 and 2013.

        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):

        Venoco G&A expenses decreased $11.7 million (38%) to $19.0 million in the first nine months of 2014 compared to $30.7 million in the first nine months of 2013. The decrease is due to lower employee related G&A costs and lower share-based compensation of $1.5 million (net of amount capitalized) charged to G&A in the first nine months of 2014 compared to $7.4 million (net of amount capitalized) in the first nine months of 2013. The lower employee related G&A costs and share based compensation expenses are due to decreases in personnel and the recapture of related share-based compensation expense previously recognized due to the lower estimated value of DPC stock. Our G&A expenses for the period include one-time G&A costs relate to a write-off of $1.7 million of deferred costs relating to an MLP offering that was aborted in the second quarter of 2014, and severance costs of $1.3 million related to a G&A reduction that was initiated in the second quarter of 2014. Excluding the effect of the non-cash share-based compensation expense and one-time general and administrative charges, G&A expense decreased to $9.02 per BOE in the first nine months of 2014 from $11.00 per BOE in the first nine months of 2013.

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        DPC incurred incremental G&A expenses during the first nine months of 2014 of $0.4 million compared to $0.2 million in the first nine months of 2013.

        Interest Expense.    For Venoco, interest expense decreased $12.0 million (23%) to $39.9 million in the first nine months of 2014 compared to $51.9 million in the first nine months of 2013. The decrease was primarily the result of the repayment of Venoco's 11.50% $150 million senior notes in the third quarter of 2013. For DPC, interest expense increased $0.2 million to $65.5 million in the first nine months of 2014 compared to $65.3 million in the first nine months of 2013. The incremental difference of $25.6 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 $0.3 million (11%) to $2.6 million in the first nine months of 2014 compared to $2.9 million in the first nine months of 2013. For DPC, amortization of deferred loan costs decreased $0.4 million (10%) to $3.3 million in the first nine months of 2014 compared to $3.7 million in the first nine months of 2013. 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 benchmark settlement prices. The realized commodity derivative losses in the first nine months of 2013 and 2014 reflect the settlement of contracts at benchmark prices above the relevant strike prices. In addition, in the first nine months of 2013, we unwound all then-outstanding natural gas derivative contracts for $3.8 million as a result of the Sacramento Basin asset sale, and unwound all of our oil basis swaps for $5.7 million, realizing total losses of $9.5 million. 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 nine month periods ended September 30, 2014 or 2013. 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 income for the first nine months of 2014 was $40.3 million compared to net income of $34.1 million for the same period in 2013. For DPC, the net income for the first nine months of 2014 was $13.6 million compared to net loss of $0.2 million for the same period in 2013. The changes between periods are the result of the items discussed above and the loss on extinguishment of debt recognized in the third quarter of 2013.

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Liquidity and Capital Resources

        Venoco's primary sources of liquidity are cash generated from operations and amounts available under its revolving credit facility. DPC's primary sources of liquidity are distributions from Venoco and the issuance of debt securities.

Cash Flows

        Net cash provided by operating activities for Venoco was $34.6 million in the first nine months of 2014 compared to net cash provided by operating activities of $61.9 million in the 2013 period. Cash flows provided by operating activities in the first nine months of 2014 as compared to cash flows provided by operating activities in the first nine months of 2013 were unfavorably impacted by lower production, partly offset by lower interest expense and general and administrative costs.

        Net cash provided by operating activities for DPC was $14.7million in the first nine months of 2014 compared to $57.6 million in the 2013 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 $76.4 million in the first nine months of 2014 compared to net cash provided by investing activities of $19.4 million in the 2013 period. The primary investing activities in the first nine months of 2014 were $76 million in capital expenditures on oil properties related to our capital expenditure program. The primary investing activities in the first nine months of 2013 were sales proceeds of $100 million received as a result of the Sacramento Basin asset sale, partially offset by $79 million in capital expenditures on oil properties related to our capital expenditure program.

        Net cash provided by financing activities for Venoco was $55.7 million in the first nine months of 2014 compared to net cash used in financing activities of $135.1 million during the 2013 period. The primary financing activities in the first nine months of 2014 were net borrowings of $60 million on the revolving credit facility and a dividend paid to DPC of $3.9 million. The primary financing activities in the first nine months of 2013 were (i) repayment of $315 million on our second lien term loan with a combination of Sacramento Basin asset sale proceeds of $208 million and borrowings on our revolving credit facility of $107 million and (ii) net additional borrowings of $76 million on our revolving credit facility.

        Net cash provided by financing activities for DPC was $59.5 million in the first nine months of 2014 compared to net cash used in financing activities of $114.1 million during the 2013 period.

Capital Resources and Requirements

        We plan to make substantial capital expenditures in the future for the acquisition, exploration, exploitation and development of oil and natural gas properties. Our 2014 exploration, exploitation and development capital expenditures budget is currently $88 million. We expect to fund these expenditures with cash flow from operations and borrowings under our revolving credit facility. We have not yet established a capital expenditures budget for 2015, but expect that it will be substantially less than the

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2014 budget due to significant recent decreases in the price of oil and constraints on our liquidity. We will continue to pursue deleveraging transactions, which may include debt refinancings or restructurings, asset sales, joint ventures or other transactions. 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, results from our drilling and other development activities, and the possibility that we will pursue one or more significant acquisitions that would require additional debt or equity financing. In addition, as discussed below under "Revolving Credit Facility", Venoco has experienced events of actual and potential non-compliance with financial covenants in its revolving credit facility and such non-compliance could result in, among other things, the termination of the lenders' commitment to make further loans. Our ability to obtain any necessary amendments or waivers of the revolving credit agreement, or to refinance the facility, is uncertain and depends on many factors outside of our control which may adversely affect our liquidity.

        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 principal contractual limits on Venoco's ability to pay dividends or make distributions to DPC are the covenants regarding restricted payments in the indenture governing Venoco's 8.875% senior notes and the agreement governing its revolving credit facility. As of September 30, 2014, Venoco would have been permitted to pay aggregate cash dividends to DPC of approximately $184 million under the indenture governing the 8.875% senior notes without violating the restricted payment covenant in the indenture. This amount is only an estimate and the actual amount payable by Venoco from time to time pursuant to the indenture, if any, may be substantially different. Under the current terms of the revolving credit agreement, Venoco is permitted to pay dividends in certain circumstances up to a maximum amount of $35 million in a four-quarter period on a rolling basis. The amount of dividends permitted under Venoco's debt agreements will vary over time, in part due to factors such as our operating performance, commodity prices and general economic factors, many of which are outside of our control, and they may vary further as a result of amendments to the agreements that we enter into or the terms of new agreements. The February 2015 interest payment on DPC's notes will be 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, consisting of Venoco's revolving credit facility, Venoco's 8.875% senior notes and DPC's 12.25% / 13.00% senior PIK toggle notes. Venoco entered into an amendment to its revolving credit facility in October 2014 pursuant to which, among other things, several of the financial covenants in the agreement were changed. The following summary of the revolving credit facility reflects its terms as amended through the date of this report.

        Revolving Credit Facility.    In October 2012, Venoco entered into a fifth amended and restated credit agreement governing its revolving credit facility, and has entered into several subsequent amendments to the agreement. The facility has a maturity date of March 31, 2016. The agreement contains customary representations, warranties, events of default, indemnities and covenants, including covenants that restrict Venoco's ability to incur indebtedness and require it to maintain specified ratios of current assets to current liabilities and interest coverage. The minimum ratio of current assets to current liabilities (as those terms are defined in the agreement) is 1.00 to 1.00 and the minimum interest coverage ratio (as defined in the agreement) is 1.30 to 1.00. The agreement also requires that Venoco's ratio of secured debt (as defined) to EBITDA not exceed 2.25 to 1.00 as of September 30, 2014 or 1.25 to 1.00 thereafter. The agreement requires us to reduce amounts outstanding under the facility with the proceeds of certain transactions or events, including sales of assets, in certain

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circumstances. The revolving credit facility is secured by a first priority lien on substantially all of our assets.

        The revolving credit facility generally permits 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.

        Loans under the revolving credit facility designated as "Base Rate Loans" bear 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 bear 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 will be increased by 0.50% in the event that Venoco's debt to EBITDA ratio exceeds 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 is payable with respect to unused borrowing availability under the facility.

        The revolving credit facility has a total capacity of $500.0 million, but is limited by the lesser of commitments from participating lenders and the borrowing base, both of which are currently $90 million. The borrowing base is subject to redetermination twice each year, and may be redetermined at other times at our request or at the request of the lenders. In addition, asset sales will result in a decrease to our borrowing base. Lending commitments under the facility have been allocated at various percentages to a syndicate of eleven banks. A failure of any members of the syndicate to fund under the facility, or a further reduction in the borrowing base, would adversely affect our liquidity. As of November 19, 2014, we had approximately $65 million outstanding under the facility at an average interest rate of 3.7% and $20 million in available borrowing capacity, net of the outstanding balance and $3.6 million of outstanding letters of credit.

        As a result of the additional debt incurred in connection with the going private transaction and the associated financial covenants, our debt-related risks have increased. These include risks that we may default on our obligations under our debt agreements, that our ability to replace reserves and maintain production may be adversely affected by capital constraints and the financial covenants under our debt agreements and that we may be more vulnerable to adverse changes in commodity prices, operational risks and economic conditions. As disclosed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, at the time that report was filed, we projected that Venoco would be out of compliance with the debt to EBITDA ratio covenant in the revolving credit facility as of September 30, 2014. Because this non-compliance would have allowed the revolving credit facility lenders to accelerate the indebtedness under the facility, and that acceleration would have then allowed the holders of both Venoco's and DPC's senior notes to accelerate the indebtedness represented by those notes, the consolidated balance sheet of Venoco included in that report reflected all of the amounts outstanding under the revolving credit facility and the Venoco 8.875% senior notes as current liabilities as of June 30, 2014. For the same reasons, the balance sheet of DPC included in that report reflected that indebtedness, plus the DPC 12.25% / 13.00% senior PIK toggle notes, as current liabilities as of June 30, 2014. In October 2014, Venoco entered into an amendment to the revolving credit agreement that, among other things, eliminated the debt to EBITDA covenant and waived related non-compliance with the current assets to current ratio covenant, with such waivers being effective upon the sale of Venoco's West Montalvo properties, which occurred on October 29, 2014.

        In recent weeks, oil prices have declined significantly. Due primarily to those declines, we currently project that Venoco will be out of compliance with the secured debt to EBITDA covenant in its revolving credit facility as of September 30, 2015. For the reasons discussed above with respect to the previously anticipated September 30, 2014 breach of the debt to EBITDA covenant, the indebtedness under the credit facility and Venoco's and DPC's senior notes are reflected as current liabilities as of September 30, 2014 in the applicable balance sheets included in this report. In addition, due to the

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resulting increase in Venoco's current liabilities as of September 30, 2014, Venoco would have been out of compliance with the current assets to current liabilities ratio covenant as of that date had that breach not been waived pursuant to the October 15, 2014 amendment. The amendment did not waive any prospective breaches of that covenant, and, because we expect to continue to classify Venoco's credit facility and senior notes indebtedness as current as of December 31, 2014, we expect such a breach to occur as of that date. In the event that we are unable to obtain an amendment or waiver of the revolving credit facility to address that breach, and other actual or potential future breaches that may occur, our creditors could elect to declare some or all of our debt to be immediately due and payable and the lenders under the revolving credit facility could elect to terminate their commitments and cease making further loans.

        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 has 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 adverse changes in commodity prices and other economic conditions.

Off-Balance Sheet Arrangements

        At September 30, 2014, 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 September 30, 2014, 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 $1.1 billion.

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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 revenues 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 September 30, 2014, 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 difference between the fixed price established in the agreement and a benchmark price, typically either Inter-Continental Exchange Brent ("Brent") or NYMEX WTI for oil or Henry Hub for natural gas.

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Portfolio of Derivative Transactions

        Our portfolio of commodity derivative transactions as of September 30, 2014 is summarized below:

Oil

Natural Gas

        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, is 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. In addition, because our derivative arrangements are based on index prices, they do not protect us from adverse changes in the difference between the prices we receive for our production and the index prices. 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. If we were unable to satisfy such a payment obligation, that default could result in a cross-default under Venoco's revolving credit agreement.

        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. Our derivative contracts are with multiple counterparties to minimize our exposure to any individual counterparty. 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. All of the counterparties to our derivative contracts are also lenders, or affiliates of lenders, under Venoco's revolving credit facility. Collateral under the revolving credit facility supports our collateral obligations under our derivative contracts. Therefore, we are not required to post additional collateral when we are in a derivative liability position. Venoco's revolving

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credit facility and derivative contracts contain provisions that provide for cross defaults and acceleration of those debt and derivative instruments in certain situations.

        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 September 30, 2014, the fair value of our commodity derivatives was a net liability of $0.8 million.

Interest Rate Risk

        We are 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 our senior notes are fixed for the term of the notes. A 1.0% increase in interest rates would have resulted in additional annualized interest expense of $2.7 million on our variable rate borrowings of $265 million as of September 30, 2014.

        See notes to our consolidated financial statements for a discussion of our long-term debt as of September 30, 2014.

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 September 30, 2014. 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 that occurred during the quarter ended September 30, 2014 that has materially affected, or is likely to materially affect, our internal control over financial reporting. As previously disclosed, Tim Ficker and Doug Griggs, previously the Chief Financial Officer and Chief Accounting Officer, respectively, of Venoco and DPC resigned their positions in October 2014 and Scott Pinsonnault and Heather Hatfield assumed the duties of principal financial officer and principal accounting officer, respectively, of both companies in November 2014. This change in personnel is not expected to materially change either company's internal control structure except that the controls will be overseen by the new personnel.

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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

        As discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources—Capital Resources and Requirements," Venoco has recently faced events of actual and potential non-compliance with financial covenants in its revolving credit facility. Any future non-compliance, including the anticipated breach of the current assets to current liabilities ratio covenant as of December 31, 2014 if not waived, would allow the revolving credit facility lenders to cease making loans under the facility and accelerate the then-existing indebtedness under the facility. Such an acceleration would also allow the holders of Venoco's and DPC's senior notes to accelerate the indebtedness represented by those notes. We may not be able to obtain any waiver or amendment to the revolving credit facility that may be necessary in the future or otherwise prevent such an acceleration of our indebtedness, and if such an acceleration occurs, a bankruptcy, liquidation or restructuring of our company could result.

        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, 2013, 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.

November 19, 2014

        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.

November 19, 2014

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