CONFORMED COPY
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
For the period ended March 31, 1995
or
[ ] Transition Report Pursuant to Section 13 of 15(d) of
the Securities and Exchange Act of 1934
For the transition period from to
Commission file number 0-7246
I.R.S. Employer Identification Number 95-2636730
PETROLEUM DEVELOPMENT CORPORATION
(A Nevada Corporation)
103 East Main Street
Bridgeport, WV 26330
Telephone: (304) 842-6256
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed 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. Yes XX No
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date: 11,040,627 shares of the
Company's Common Stock ($.01 par value) were outstanding as of March 31, 1995.
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Independent Auditors' Review Report 1
Condensed Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 2
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows-Three
Months Ended March 31, 1995 and 1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Statement by Management Concerning Review of Interim
Financial Information by Independent Certified Public
Accountants 8
PART II OTHER INFORMATION
Item l. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 9
PART I - FINANCIAL INFORMATION
Independent Auditors' Review Report
The Board of Directors
Petroleum Development Corporation
We have reviewed the accompanying condensed consolidated balance
sheet of Petroleum Development Corporation and subsidiaries as of March 31,
1995, and the related condensed consolidated statements of operations and cash
flows for the three-month periods ended March 31, 1995 and 1994. These
financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Petroleum Development
Corporation and subsidiaries as of December 31, 1994 and the related
consolidated statements of operations, retained earnings, and cash flows for
the year then ended (not presented herein); and in our report dated March 15,
1995, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1994, is fairly
presented, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
May 9, 1995
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 1995 and December 31, 1994
ASSETS
1995 1994
(Unaudited)
Current assets:
Cash and cash equivalents $ 4,033,900 $ 8,906,800
Accounts and notes receivable 1,893,600 1,975,400
Inventories 344,400 390,200
Prepaid expenses 731,400 850,600
Total current assets 7,003,300 12,123,000
Properties and equipment 44,890,200 44,959,900
Less accumulated depreciation, depletion,
and amortization 19,738,300 19,204,400
25,151,900 25,755,500
Other assets 384,500 446,800
$32,539,700 $38,325,300
(Continued)
-2-
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets, Continued
March 31, 1995 and December 31, 1994
LIABILITIES AND
STOCKHOLDERS' EQUITY
1995 1994
(Unaudited)
Current liabilities:
Current maturities of long-term debt $ 24,900 $ 36,300
Accounts payable and accrued expenses 5,004,400 4,133,800
Advances for future drilling contracts 1,954,400 9,199,900
Funds held for future distribution 441,900 366,700
Total current liabilities 7,425,600 13,736,700
Long-term debt, excluding current
maturities 2,800,000 3,100,000
Other liabilities 353,500 328,600
Deferred income taxes 2,851,600 2,779,500
Stockholders' equity:
Common stock 110,400 110,400
Additional paid-in capital 6,873,600 6,873,600
Retained earnings 12,125,000 11,396,500
Total stockholders' equity 19,109,000 18,380,500
$32,539,700 $38,325,300
See accompanying notes to condensed consolidated financial statements.
-3-
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months ended March 31, 1995 and 1994
(Unaudited)
1995 1994
Revenues:
Oil and gas well drilling operations $7,293,700 $6,527,300
Oil and gas sales 1,162,000 1,302,400
Well operations and pipeline income 1,002,600 958,000
Other income 78,700 46,200
9,537,000 8,833,900
Costs and expenses:
Cost of oil and gas well drilling
operations 6,135,800 6,061,300
Oil and gas purchases and production costs 1,310,300 1,034,600
General and administrative expenses 450,300 498,100
Depreciation, depletion, and
amortization 588,400 457,100
Interest 83,400 68,600
8,568,200 8,119,700
Income before income taxes 968,800 714,200
Income taxes 240,300 160,700
Net income $ 728,500 $ 553,500
Earnings per common and
common equivalent share $ .06 $ .05
See accompanying notes to condensed consolidated financial statements
-4-
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1995 and 1994
(Unaudited)
1995 1994
Cash flows from operating activities:
Net income $ 728,500 $ 553,500
Adjustments to net income
to reconcile to cash provided by
operating activities:
Deferred federal income taxes 72,100 18,700
Depreciation, depletion & amortization 588,400 457,100
Leasehold acreage expired or surrendered 143,500 30,400
(Gain) loss on disposal of assets (8,300) 27,700
Decrease (Increase) in current assets 246,800 (730,700)
Decrease in other assets 54,600 55,900
Decrease in current liabilities (6,299,700) (5,699,000)
Increase in other liabilities 24,900 18,000
Total adjustments (5,177,700) (5,821,900)
Net cash used in
operating activities (4,449,200) (5,268,400)
Cash flows from investing activities:
Capital expenditures (231,600) (367,100)
Proceeds from sale of leases 111,000 94,500
Proceeds from sale of assets 8,300 20,800
Net cash used in
investing activities (112,300) (251,800)
Cash flows from financing activities:
Retirement of debt (311,400) (276,300)
Net cash used in
financing activities (311,400) (276,300)
Net changes in cash and
cash equivalents (4,872,900) (5,796,500)
Cash and cash equivalents, beginning of period 8,906,800 10,578,800
Cash and cash equivalents, end of period $ 4,033,900 $ 4,782,300
See accompanying notes to condensed consolidated financial statements.
-5-
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1995
(Unaudited)
1. Accounting Policies
Reference is hereby made to the Company's Annual Report on Form 10-K for
1994, which contains a summary of major accounting policies followed by
the Company in the preparation of its consolidated financial statements.
These policies were also followed in preparing the quarterly report
included herein.
2. Basis of Presentation
The Management of the Company believes that all adjustments (consisting of
only normal recurring accruals) necessary to a fair statement of the
results of such periods have been made. The results of operations for the
three months ended March 31, 1995 are not necessarily indicative of the
results to be expected for the full year.
3. Oil and Gas Properties
Oil and Gas Properties are reported on the successful efforts method.
4. Earnings Per Share
Computation of earnings per common and common equivalent share are as
follows for the three months ended March 31,
1995 1994
Weighted average common shares outstanding 11,717,352 12,216,817
Net income $ 728,500 $ 553,500
Earnings per common and
common equivalent share $ .06 $ .05
-6-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three Months Ended March 31, 1995 Compared With March 31, 1994
Total revenues increased $703,100 in the first quarter of 1995 compared to
the same period in 1994 primarily as a result of increased drilling activity.
Drilling revenues increased 11.7% as a result of higher volumes of drilling and
completion activities in connection with the drilling of the wells of the PDC
1994-D Partnership closed on December 31, 1994, in the first quarter of 1995
compared to the same period in 1994. Oil and gas sales decreased 10.8% as a
result of lower average sales prices offset in part by increased sales volumes.
Costs and expenses increased $448,500 primarily as a result of higher oil
and gas purchases and production costs and depreciation, depletion, and
amortization. Oil and gas purchase and production costs increased 26.4% as a
result of gas purchased for resale. Depreciation, depletion, and amortization
increased 28.7% as a result of an increase in the Company's investment in
natural gas wells and increased production levels.
The foregoing resulted in net income of $728,500 as compared to a net
income of $533,500 for the first quarter of 1994. The provision for income
taxes in 1995 consists of $168,200 of current taxes payable and $72,100 of
deferred income taxes. The provision for income taxes in 1994 consisted of
$142,000 of current taxes payable and $18,700 of deferred income taxes.
Liquidity and Capital Resources
Sales volumes of natural gas continue to increase while the natural gas
prices fluctuated monthly over the past year. The Company's gas sales prices
are subject to increase and decrease based on various market sensitive indices.
Price levels of natural gas are currently depressed and are not predictable in
the coming year. The volumes of gas sales are expected to continue to increase
as a result of continued drilling activities.
The Company has registered a 1994-1995 public drilling program consisting
of eight partnerships and has commenced sales of units in the fifth partnership
which is scheduled to close in May, 1995, with the wells scheduled to be drilled
in the second and third quarters of 1995. The Company's public drilling
programs continue to receive wide market acceptance.
The Company is party to a credit agreement providing up to $7.5 million in
borrowing capacity. At March 31, 1995 the Company has activated $5 million of
that facility and has $2.8 million outstanding.
The Company continues to pursue capital investment opportunities in
producing gas properties along with its commitment to participate in its
sponsored gas drilling partnerships. Management believes that the Company has
adequate capital to meet its operating requirements and continues to pursue
opportunities for operating improvements and cost efficiencies.
-7-
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
STATEMENT BY MANAGEMENT CONCERNING
REVIEW OF INTERIM FINANCIAL INFORMATION
BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The March 31, 1995 and 1994 condensed consolidated financial statements included
in this filing on Form 10-Q have been reviewed by KPMG Peat Marwick LLP,
independent certified public accountants, in accordance with established
professional standards and procedures for such reviews. The report of KPMG Peat
Marwick LLP commenting upon their review accompanies the condensed consolidated
financial statements included in Item 1 of Part I.
-8-
CONFORMED COPY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is party to various legal actions in the normal course of
business which would not materially affect the Company's operations.
Item 6. Exhibits and Reports on Form 8-K
(a) None.
(b) No reports on Form 8-K have been filed during the quarter ended
March 31, 1995.
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.
Petroleum Development Corporation
(Registrant)
Date: May 10, 1995 /s/ Steven R. Williams
Steven R. Williams
President
Date: May 10, 1995 /s/ Dale G. Rettinger
Dale G. Rettinger
Executive Vice President
and Treasurer
-9-