CONFORMED COPY
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 September 30, 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
September 30, 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 -
September 30, 1995 and December 31, 1994 2
Condensed Consolidated Statements of Operations -
Three Months and Nine Months Ended
September 30, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows - Nine
Months Ended September 30, 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 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
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
September 30, 1995, and the related condensed consolidated statements of
operations for the three-month and nine-month periods ended September 30,
1995 and 1994 and the related condensed consolidated statements of cash
flows for the nine-month periods ended September 30, 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
November 8, 1995
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
ASSETS
1995 1994
(Unaudited)
Current assets:
Cash and cash equivalents $ 2,333,600 $ 8,906,800
Accounts and notes receivable 1,633,900 1,975,400
Inventories 192,700 390,200
Prepaid expenses 784,400 850,600
Total current assets 4,944,600 12,123,000
Properties and equipment 46,005,000 44,959,900
Less accumulated depreciation,
depletion,and amortization 20,731,300 19,204,400
25,273,700 25,755,500
Other assets 278,700 446,800
$30,497,000 $38,325,300
(Continued)
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PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets, Continued
September 30, 1995 and December 31, 1994
LIABILITIES AND
STOCKHOLDERS' EQUITY
1995 1994
(Unaudited)
Current liabilities:
Current maturities of long-term debt $ 6,500 $ 36,300
Accounts payable and accrued expenses 3,835,900 4,133,800
Advances for future drilling contracts 900,100 9,199,900
Funds held for future distribution 326,300 366,700
Total current liabilities 5,068,800 13,736,700
Long-term debt, excluding current
maturities 2,700,000 3,100,000
Other liabilities 469,900 328,600
Deferred income taxes 2,878,400 2,779,500
Stockholders' equity:
Common stock 110,400 110,400
Additional paid-in capital 6,873,600 6,873,600
Retained earnings 12,395,900 11,396,500
Total stockholders' equity 19,379,900 18,380,500
$30,497,000 $38,325,300
See accompanying notes to condensed consolidated financial statements.
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PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three and Nine Months ended September 30, 1995 and 1994
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Revenues:
Oil and gas well
drilling operations $1,857,400 $1,807,500 $11,530,500 $10,958,800
Oil and gas sales 801,000 944,000 2,980,800 3,394,000
Pipeline and well
operations income 868,600 885,700 2,840,600 2,840,400
Other income 55,500 78,500 200,400 201,100
3,582,500 3,715,700 17,552,300 17,394,300
Costs and expenses:
Cost of oil and gas
well drilling operations 1,355,100 1,724,000 9,480,600 10,621,400
Oil and gas purchases
and production costs 818,100 951,800 3,224,900 2,963,100
General and administrative
expenses 600,700 635,200 1,571,900 1,665,600
Depreciation, depletion,
and amortization 591,300 463,600 1,715,200 1,438,300
Interest 71,000 81,200 230,700 219,400
3,436,200 3,855,800 16,223,300 16,907,800
Income (loss) before
income taxes 146,300 (140,100) 1,329,000 486,500
Income taxes 36,300 (39,800) 329,600 101,200
Net income (loss) $ 110,000 $(100,300) $ 999,400 $ 385,300
Earnings (loss) per common
and common equivalent share $ .01 $ (.01) $ .09 $ .03
See accompanying notes to condensed consolidated financial statements.
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PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1995 and 1994
(Unaudited)
1995 1994
Cash flows from operating activities:
Net income $ 999,400 $ 385,300
Adjustments to net income
to reconcile to cash used in
operating activities:
Deferred federal income taxes 98,900 19,400
Depreciation, depletion & amortization 1,715,200 1,438,300
Leasehold acreage expired or surrendered 203,500 91,800
(Gain) loss on disposal of assets (29,300) 18,300
Decrease (Increase) in current assets 605,200 (556,700)
Decrease in other assets 147,600 68,600
Decrease in current liabilities (8,638,100) (6,180,500)
Increase in other liabilities 141,300 52,200
Total adjustments (5,755,700) (5,048,600)
Net cash used in
operating activities (4,756,300) (4,663,300)
Cash flows from investing activities:
Capital expenditures (1,653,600) (3,126,400)
Proceeds from sale of leases 236,500 194,600
Proceeds from sale of assets 30,000 34,200
Net cash used in
investing activities (1,387,100) (2,897,600)
Cash flows from financing activities:
Proceeds from debt - 800,000
Retirement of debt (429,800) (735,900)
Net cash (used in) provided by
financing activities (429,800) 64,100
Net change in cash and
cash equivalents (6,573,200) (7,496,800)
Cash and cash equivalents, beginning of period 8,906,800 10,578,800
Cash and cash equivalents, end of period $ 2,333,600 $ 3,082,000
See accompanying notes to condensed consolidated financial statements.
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PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 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 nine months
ended September 30, 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 (loss) per common and common equivalent share
are as follows for the three months and nine months ended September 30, 1995 and
1994:
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Weighted average common
shares outstanding 11,519,653 12,172,968 11,557,565 12,217,924
Net income (loss) $ 110,000 $ (100,300) $ 999,400 $ 385,300
Earnings (loss) per common
and common equivalent share $ .01 $ (.01) $ .09 $ .03
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three Months Ended September 30, 1995 Compared With September 30, 1994
Total revenues decreased $133,200 in the third quarter of 1995 compared
to the same period in 1994 primarily as a result of decreased oil and gas sales.
Oil and gas sales decreased 15.1% as a result of lower average sales prices
offset in part by increased sales volumes.
Costs and expenses decreased $419,600 primarily as a result of lower
well drilling costs and oil and gas purchases and production costs offset in
part by higher depreciation, depletion and amortization. Well drilling costs
decreased 21.4% as a result of the significantly lower average well costs. Oil
and gas purchases and production costs decreased 14.0% as a result of lower
natural gas purchased for resale. Depreciation, depletion and amortization
increased 27.5% as a result the increased investment in and production from
Company owned wells.
The foregoing resulted in net income of $110,000 as compared to a net
loss of $100,300 for the third quarter of 1994. The provision for income taxes
in 1995 consists of $25,400 of current taxes and $10,900 of deferred income
taxes. The income tax benefit in 1994 consisted of $42,800 of current tax
benefits and $3,000 of deferred income taxes.
Nine Months Ended September 30, 1995 Compared with September 30, 1994
Total revenues increased $158,000 during the first nine months of 1995
compared to the same period in 1994 primarily as a result of increased drilling
activity offset in part by decreased oil and gas sales. Drilling revenues
increased 5.2% during the first nine months of 1995 compared to the same period
in 1994 as a result of higher volumes of drilling and completion activities.
Oil and gas sales decreased 12.2% as a result of lower average sales prices
offset in part by increased sales volumes.
Costs and expenses decreased $684,500 as a result of lower well
drilling costs offset in part by higher oil and gas purchases and production
costs and depreciation, depletion and amortization. Well drilling costs
decreased 10.7% as a result of significantly lower average well costs. Oil
and gas purchases and production costs increased 8.8% as a result of
increased production costs associated with the increased sales volumes and
increased leasehold acreage expiration costs. Depreciation, depletion and
amortization increased 19.3% as a result of the increased investment in and
production from Company owned wells.
The foregoing resulted in net income of $999,400 compared to a net
income of $385,300 for the first nine months of 1994. The provision for income
taxes in 1995 consists of $230,700 of current taxes payable and $98,900 of
deferred income taxes. The provision for income taxes in 1994 consisted of
$81,800 current taxes payable and $19,400 of deferred income taxes.
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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 closed its second drilling program of 1995 in the third
quarter and has drilled the wells during the third and fourth quarters of 1995.
The Company will close its third and fourth drilling programs of 1995 in the
fourth quarter and will drill the wells during the fourth quarter of 1995 and
the first quarter of 1996. The Company's public drilling program continues to
receive wide market acceptance.
The Company is party to a credit agreement providing up to $7.5 million
in borrowing capacity. At September 30, 1995 the Company has activated $5
million of that facility and has $2.7 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.
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PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
STATEMENT BY MANAGEMENT CONCERNING
REVIEW OF INTERIM FINANCIAL INFORMATION
BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The September 30, 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.
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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
September 30, 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: November 10, 1995 /s/ Steven R. Williams
Steven R. Williams
President
Date: November 10, 1995 /s/ Dale G. Rettinger
Dale G. Rettinger
Executive Vice President
and Treasurer
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