NEWS FROM
Petroleum Development Corporation
FOR IMMEDIATE RELEASE: July 30, 582004
CONTACT:Steven R. Williams - (304) 842-3597 www.petd.com
Petroleum Development Corporation Announces Record Second Quarter
And Six Month Operating Results
Bridgeport, West Virginia... Petroleum Development Corporation (NASDAQ/NMS PETD) today announced second quarter and six month operating results. Net income for the second quarter of 2004 was $8.6 million ($.52 per diluted share) compared to $4.6 million ($.29 per diluted share) for the same period in 2003. Net income for the six months of 2004 was $17.1 million ($1.04 per diluted share) compared to $9.4 million ($.59 per diluted share) for the first half of 2003.
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||
| 2004 | 2003 |
| 2004 | 2003 |
Revenues | $73,923,800 | $42,192,500 |
| $144,972,300 | $96,186,900 |
Income before income taxes and cumulative effect of change in accounting principle |
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Net income | $ 8,613,100 | $ 4,629,600 |
| $17,052,500 | $9,425,700 |
Basic earnings per share | $ .53 | $ .29 |
| $ 1.06 | $ .60 |
Diluted earnings per share | $ .52 | $ .29 |
| $ 1.04 | $ .59 |
Weighted average common shares outstanding |
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Steven R. Williams, CEO of Petroleum Development Corporation, said, "We are pleased to report these record results for the second quarter and first six months of 2004. Higher oil and natural gas production, up 43% compared to the first six months of 2003, was the major factor for the earnings increase. Increased drilling revenue from our public drilling programs, strong results from our natural gas marketing group, and higher oil and natural gas sales prices also played key roles."
Operations
Strong sales of our drilling partnerships continue to fuel our record drilling operations. During the second quarter, PDC drilled 27 new wells, all of which were successful. This brings the total for the year to 69 wells with one dry hole. Nineteen of the second quarter wells were drilled in Wattenberg field and eight were drilled in the Piceance Basin. This brings the totals to 49 Wattenberg and 20 Piceance Basin wells for the year. Currently, the Company plans to conduct most of its 2004 drilling activities in these two areas.
At the end of the second quarter approximately $23.4 of drilling advances remained to fund operations in future periods. We also funded our second drilling program of the year with investor subscriptions of $18 million on July 2nd.Funds in the program will be used for third and fourth quarter drilling operations.
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Two additional partnerships with combined maximum subscriptions of $53 million are planned for 2004. The Company purchases a 20% interest in each partnership.
In addition to drilling, the Company also continued its Codell recompletion program in Wattenberg Field. Five wells were treated during the second quarter which brings the total for the year to 13. The Company plans to continue the recompletion program throughout 2004. The Company received regulatory approval to drill wells on its northeast Colorado properties (NECO) on 40 acre spacing, down from the original spacing of 80 acres. These consist primarily of the properties purchased from Williams in 2003. The Company is planning to begin drilling on those properties in the third quarter of this year.
The Company also intends to spud an exploratory well in Moffat County, Colorado in early third quarter 2004. The Fox Federal 1-13 well will be drilled to an approximate depth of 12,000 feet to test the Mesaverde Formation. The well, a western Sand Wash Basin test, is located in Township 9 North, Range 97 West, approximately 40 miles northwest of the town of Craig, Colorado. The Company will fund the drilling of the well from its corporate capital budget and will have a 100% working interest. The well has a dry hole cost of approximately $1.2 million dollars and a completed well cost of approximately $2.0 million dollars.
Oil and natural gas production for the second quarter increased to 3.12 billion cubic feet equivalent (Bcfe) from 2.47 Bcfe in the second quarter of 2003 (an increase of 27%). All of the increase was attributable to the Rocky Mountain Region where the Company's drilling, development and acquisition activities have been focused for the past several years. The Rocky Mountain Region production increased 46% compared to the year earlier period, while production in the Appalachian Basin declined 8.0% and Michigan Basin production declined 4.3%.
Oil and gas sales also benefited from higher sales prices for both oil and natural gas compared to the second quarter of 2003. In the second quarter of 2004 the Company sold its natural gas for an average price of $5.01 per thousand cubic feet (Mcf), compared to $4.34 per Mcf in the second quarter of 2003. Similarly the average price of oil this year was $32.41 per barrel (Bbl) compared to $29.52 in the second quarter of 2003. The following table summarizes the production by region and pricing for the second quarters of 2004 and 2003.
| Three Months Ended June 30, 2004 |
| Three Months Ended June 30, 2003 | ||||
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(Bbl) | Natural Gas (Mcf) | Natural Gas Equivalents (Mcfe) |
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(Bbl) | Natural Gas (Mcf) | Natural Gas Equivalents (Mcfe) |
Appalachian Basin | 1,138 | 431,040 | 437,868 |
| 1,212 | 468,884 | 476,156 |
Michigan Basin | 1,853 | 425,854 | 436,972 |
| 1,462 | 447,847 | 456,619 |
Rocky Mountains | 93,113 | 1,689,576 | 2,248,254 |
| 55,618 | 1,201,739 | 1,535,447 |
Total | 96,104 | 2,546,470 | 3,123,094 |
| 58,292 | 2,118,470 | 2,468,222 |
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Average Sales Price | $32.41 | $5.01 | $5.08 |
| $29.52 | $4.34 | $4.42 |
Oil and natural gas production for the first six months of 2004 increased to 6.37 Bcfe from 4.45 Bcfe compared to the same period in 2003 (an increase of 43%). This increase was also fueled by our Rocky Mountain production. The average sales price per Mcfe also increased significantly from $4.44 per Mcfe during the six months of 2003 to $5.03 per Mcfe for the same period in 2004.
The Company's oil and natural gas production for the first six month of 2004 and 2003 by area of operations along with average sales price is presented below:
| Six Months Ended June 30, 2004 |
| Six Months Ended June 30, 2003 | ||||
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(Bbl) | Natural Gas (Mcf) | Natural Gas Equivalents (Mcfe) |
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(Bbl) | Natural Gas (Mcf) | Natural Gas Equivalents (Mcfe) |
Appalachian Basin | 2,342 | 888,258 | 902,310 |
| 2,014 | 973,446 | 985,530 |
Michigan Basin | 3,004 | 869,816 | 887,840 |
| 3,294 | 933,075 | 952,839 |
Rocky Mountains | 194,894 | 3,411,388 | 4,580,752 |
| 109,827 | 1,855,274 | 2,514,236 |
Total | 200,240 | 5,169,462 | 6,370,902 |
| 115,135 | 3,761,795 | 4,452,605 |
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Average Sales Price | $32.11 | $4.96 | $5.03 |
| $27.80 | $4.41 | $4.44 |
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Current Hedging of Commodity Transactions
The Company has entered into commodity-based derivative transactions to manage a portion of the exposure to price risk associated with its sales of oil and natural gas. During the second quarter of 2004 the Company had average production per month of 849,000 Mcf of natural gas and 32,000 Bbls of oil. The current positions in effect on the Company's share of production are shown in the following table:
Floors | Ceilings | ||||||
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| Monthly Quantity Mmbtu | Contract Price | Monthly Quantity Mmbtu | Contract Price | ||
NYMEX Based Hedges - (Appalachian and Michigan Basins) | |||||||
1/04 | Jul 2004 - Oct 2004 | 122,000 | $5.00 | - | - | ||
10/03 | Jul 2004 - Oct 2004 | 81,000 | $4.00 | 81,000 | $5.65 | ||
5/04 | Nov 2004 - Mar 2005 | 180,000 | $5.67 | 90,000 | $7.00 | ||
2/04 | Apr 2005 - Oct 2005 | 122,000 | $4.28 | 61,000 | $5.00 | ||
Rocky Mountain Region | |||||||
Colorado Interstate Gas (CIG) Based Hedges (Piceance Basin) | |||||||
10/03 | Jul 2004 - Oct 2004 | 25,000 | $3.20 | 25,000 | $4.70 | ||
1/04 | Jul 2004 - Oct 2004 | 25,000 | $4.17 | - | - | ||
5/04 | Nov 2004 - Mar 2005 | 60,000 | $5.04 | 30,000 | $6.00 | ||
2/04 | Apr 2005- Oct 2005 | 33,000 | $3.10 | 16,000 | $4.43 | ||
Colorado Interstate Gas (CIG) Based Hedges (Wattenberg Field) | |||||||
7/04 | Nov 2004 - Mar 2005 | 80,000 | $5.00 | 40,000 | $6.20 | ||
NYMEX Based Hedges (Williams acquisition) | |||||||
6/03 | Jul 2004 - Dec 2004 | 150,000 | $4.50 | -
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7/04 | Jan 2005 - Mar 2005 | 150,000 | $5.32 | - | - | ||
2/04 | Apr 2005 - Oct 2005 | 150,000 | $4.26 | 75,000 | $5.00 | ||
Oil hedges (Wattenberg Field) | |||||||
| Monthly Quantity Barrels | Contract Price | |||||
2/04 | Jul 2004 - Dec 2004 | 10,000 | $31.63 | ||||
The Company's natural gas marketing segment had excellent results in the first two quarters of 2004. With natural gas prices moderately higher than the first half of 2003, Riley Natural Gas (RNG), the Company's gas marketing subsidiary, increased revenues by 26.9% to $49.5 million compared to $39 million in 2003. The natural gas marketing margin for the first six months increased from $245,000 in 2003 to $961,000 in 2004.
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PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
Three Months and Six Months ended June 30, 2004 and 2003
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||
| 2004 | 2003 | 2004 | 2003 |
Revenues: |
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Oil and gas well drilling operations | $29,453,800 | $11,866,400 | $58,953,100 | $33,363,900 |
Gas sales from marketing activities | 26,011,400 | 17,353,200 | 49,468,800 | 38,958,300 |
Oil and gas sales | 15,859,200 | 10,919,200 | 32,055,400 | 19,778,000 |
Well operations and pipeline income | 1,912,400 | 1,768,600 | 3,749,900 | 3,416,900 |
Other income | 687,000 | 285,100 | 745,100 | 669,800 |
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| 73,923,800 | 42,192,500 | 144,972,300 | 96,186,900 |
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Costs and expenses: |
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Cost of oil and gas well drilling operations | 24,967,300 | 10,120,000 | 50,323,000 | 27,795,800 |
Cost of gas marketing activities | 25,648,900 | 17,112,200 | 48,503,600 | 38,459,600 |
Oil and gas production costs | 4,036,000 | 3,460,400 | 7,942,100 | 6,317,400 |
General and administrative expenses | 900,900 | 1,186,600 | 1,895,100 | 2,364,300 |
Depreciation, depletion, and amortization | 4,663,300 | 3,143,600 | 9,171,000 | 6,389,200 |
Interest | 255,000 | 259,800 | 498,500 | 496,000 |
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| 60,471,400 | 35,282,600 | 118,333,300 | 81,822,300 |
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Income before income taxes and cumulative effect of change in accounting principle |
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Income taxes | 4,839,300 | 2,280,300 | 9,586,500 | 4,740,300 |
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Net income before cumulative effect of change in accounting principle |
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Cumulative effect of change in accounting principle (net of income taxes of $121,700) |
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Net income | $8,613,100 | $4,629,600 | $ 17,052,500 | $ 9,425,700 |
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Basic earnings per common share before accounting change |
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Cumulative effect of change in accounting principle | $ - | $ - | $ - | $(0.01) |
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Basic earnings per common share | $0.53 | $0.29 | $1.06 | $0.60 |
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Diluted earnings per share before accounting change | $0.52 | $0.29 | $1.04 | $0.60 |
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Cumulative effect of change in accounting principle | $ - | $ - | $ - | $(0.01) |
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Diluted earnings per share | $0.52 | $0.29 | $1.04 | $0.59 |
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Non-GAAP Financial Measure
The United States Securities and Exchange Commission has disclosure requirements for public companies concerning references to Non-GAAP financial measures. (GAAP refers to generally accepted accounting principles.) Non-GAAP financial measures may be provided if the company explains the relevance of the information. The company must also reconcile the Non-GAAP financial measure to related GAAP information. "Adjusted Cash Flow" is a Non-GAAP financial measure provided by PDC in this earnings release. Adjusted Cash Flow is net income before deferred income taxes, depreciation, depletion, and amortization. PDC believes Adjusted Cash Flow is relevant because it is a measure of cash available to fund the company's capital expenditures and to service its debt. PDC also believes Adjusted Cash Flow is a useful measure for estimating the value of the company's operations.
| Three months Ended June 30, | Six months Ended June 30, | ||
| 2004 | 2003 | 2004 | 2003 |
Net income | $8,613,100 | $4,629,600 | $17,052,500 | $9,425,700 |
Deferred income tax expense | 2,842,800 | 1,537,900 | 5,629,400 | 3,196,900 |
Depreciation, depletion and amortization | 4,663,300 | 3,143,600 | 9,171,000 | 6,389,200 |
Adjusted cash flow | $16,119,200 | $9,311,100 | $31,852,900 | $19,011,800 |
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10-Q and Quarterly Conference Call
The Company filed its Quarterly Report on Form 10-Q on July 30, 2004. You can access the report at the Company's website (www.petd.com), or contact the Company for a paper copy. The Company invites you to join Steve Williams, Chief Executive Officer, and Darwin Stump, Chief Financial Officer, for a conference call on August 3, 2004 for a discussion of the results.
What: Petroleum Development Second Quarter Earnings Conference Call
When: Tuesday, August 3, 2004 at 11:00 a.m. Eastern Standard Time
Where: www.petd.com/
How: Log on to the web address above or call(877) 407-8033
Replay Number: (877) 660-6853 (Account #1628 and Conference ID #103568)
(Replay will be available until 8/10/04)
Contact: Steve Williams, Petroleum Development Corporation, (800) 624-3821 E-mail: petd@petd.com
Please go to the website at least 15 minutes prior to the call and register, download and install any necessary audio software. If you are unable to listen to the live broadcast, an outline rebroadcast will be available shortly after the conclusion of the call.
About Petroleum Development Corporation
Petroleum Development Corporation (www.petd.com) is an independent energy company engaged in the development, production and marketing of natural gas. The Company currently has operations in the Appalachian Basin, the Rocky Mountains and Michigan. The Company was added to the Russell 3000 Index of companies in 2003. It has been named on the FSB: Fortune Small Business Magazine list of America's 100 Fastest-Growing Small Companies in 2001 and 2002.
Certain matters discussed within this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although PDC believes the expectations reflected in such forward- looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from expectations include financial performance, oil and gas prices, drilling program results, drilling results, regulatory changes, changes in local or national economic conditions and other risks detailed from time to time in the Company's reports filed with the SEC, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K.
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103 East Main Street - P. O. Box 26 - Bridgeport, West Virginia - Phone: (304) 842-3597
