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, 1998
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: 15,510,762 shares of the
Company's Common Stock ($.01 par value) were outstanding as of September 30,
1998.
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, 1998 and December 31, 1997 2
Condensed Consolidated Statements of Income - Three
Months and Nine Months Ended September 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows - Nine
Months Ended September 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
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, 1998, and the related condensed consolidated statements of income for the
three-month and nine-month periods ended September 30, 1998 and 1997 and the
related condensed consolidated statements of cash flows for the nine-month
periods ended September 30, 1998 and 1997. 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, 1997 and the related
consolidated statements of income, stockholders' equity, and cash flows for
the year then ended (not presented herein); and in our report dated March 5,
1998, 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, 1997, 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 5, 1998
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 1998 and December 31, 1997
ASSETS
1998 1997
(Unaudited)
Current assets:
Cash and cash equivalents $21,987,000 $46,561,000
Accounts and notes receivable 7,103,800 4,923,400
Inventories 398,500
297,900
Prepaid expenses 1,953,300 2,076,500
Total current assets 31,442,600 53,858,800
Properties and equipment 81,555,000 67,792,200
Less accumulated depreciation, depletion,
and amortization 26,483,200 24,222,900
55,071,800 43,569,300
Other assets 1,574,200 983,500
$88,088,600 $98,411,600
(Continued)
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PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets, Continued
September 30, 1998 and December 31, 1997
LIABILITIES AND
STOCKHOLDERS' EQUITY
1998 1997
(Unaudited)
Current liabilities:
Accounts payable and accrued expenses $11,796,700 $12,424,300
Advances for future drilling contracts 8,111,300 23,291,600
Funds held for future distribution 1,589,500 1,659,700
Total current liabilities 21,497,500 37,375,600
Other liabilities 2,301,400 1,684,000
Deferred income taxes 3,413,200 3,585,900
Stockholders' equity:
Common stock 155,100 152,500
Additional paid-in capital 31,615,000 31,617,600
Warrants outstanding 46,300 46,300
Retained earnings 29,115,500 24,014,200
Unamortized stock award (55,400) (64,500)
Total stockholders' equity 60,876,500 55,766,100
$88,088,600 $98,411,600
See accompanying notes to condensed consolidated financial statements.
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PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Revenues:
Oil and gas well drilling operations $ 5,764,600 $ 5,265,300 $29,463,000 $24,542,100
Oil and gas sales 9,273,300 7,363,300 26,705,800 23,712,100
Well operations and pipeline income 1,190,900 1,111,500 3,337,400 3,359,600
Other income 420,600 214,900 1,552,200 666,400
16,649,400 13,955,000 61,058,400 52,280,200
Costs and expenses:
Cost of oil and gas well drilling
operations 5,217,900 3,833,500 25,294,100 19,592,300
Oil and gas purchases
and production costs 9,175,000 6,968,800 25,058,500 21,685,200
General and administrative expenses 731,600 631,900 1,782,700 1,723,400
Depreciation, depletion, and
amortization 764,300 607,400 2,336,400 1,827,800
Interest - 83,600 - 288,100
15,888,800 12,125,200 54,471,700 45,116,800
Income before income taxes 760,600 1,829,800 6,586,700 7,163,400
Income taxes 180,400 376,800 1,485,400 1,800,900
Net income $ 580,200 $ 1,453,000 $ 5,101,300 $ 5,362,500
Basic earnings per common share $ .04 $ .14 $ .33 $ .51
Diluted earnings per common and
common equivalent share $ .03 $ .12 $ .31 $ .46
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, 1998 and 1997
(Unaudited)
1998 1997
Cash flows from operating activities:
Net income $ 5,101,300 $ 5,362,500
Adjustments to net income
to reconcile to cash used in
operating activities:
Deferred federal income taxes (172,700) 374,900
Depreciation, depletion & amortization 2,336,400 1,827,800
Leasehold acreage expired or surrendered 144,500 100,000
Employee compensation paid in stock 9,200 9,200
Gain on disposal of assets (43,300) (69,500)
(Increase) decrease in current assets (2,157,800) 1,158,400
Increase in other assets (610,500) (117,200)
Decrease in current liabilities (15,878,100) (13,970,300)
Increase in other liabilities 617,400 216,700
Total adjustments (15,754,900) (10,470,000)
Net cash used in operating activities (10,653,600) (5,107,500)
Cash flows from investing activities:
Capital expenditures (14,895,800) (5,856,900)
Proceeds from sale of leases 922,100 882,800
Proceeds from sale of other assets 53,300 71,000
Net cash used in investing activities (13,920,400) (4,903,100)
Cash flows from financing activities:
Proceeds from sale of common stock - 2,017,200
Retirement of debt - (2,320,000)
Net cash used in financing activities - (302,800)
Net changes in cash and cash equivalents (24,574,000) (10,313,400)
Cash and cash equivalents, beginning of period 46,561,000 20,615,400
Cash and cash equivalents, end of period $ 21,987,000 $10,302,000
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, 1998
(Unaudited)
1. Accounting Policies
Reference is hereby made to the Company's Annual Report on Form 10-K
for 1997, 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, 1998 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 six months ended September 30, 1998 and 1997:
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Weighted average common
shares outstanding 15,510,762 10,567,927 15,503,967 10,511,028
Weighted average common and
common equivalent shares outstanding 16,324,670 12,038,142 16,356,520 11,775,663
Net income $ 580,200 $ 1,453,000 $ 5,101,300 $ 5,362,500
Basic earnings per common share $ .04 $ .14 $ .33 $ .51
Diluted earnings per common and
common equivalent share $ .03 $ .12 $ .31 $ .46
5. Acquisitions
On June 12, 1998 the Company purchased for $3.1 million a majority
interest in the assets of Pemco Gas, Inc., a Pennsylvania producing company.
The assets include 122 natural gas wells, 2,700 undeveloped acres, gathering
systems, natural gas compressors and other facilities. The Company estimates
that its interest includes 4.7 Bcf of natural gas reserves. The Company
utilized capital received from its Public Stock Offering to fund this purchase.
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6. Commitments and Contingencies
The nature of the independent oil and gas industry involves a
dependence on outside investor drilling capital and involves a concentration
of gas sales to a few customers. The Company sells natural gas to various
public utilities and industrial customers. One customer, Hope Gas Inc., a
regulated public utility, accounted for 6.8% of total revenues in the first
nine months of 1998.
Substantially all of the Company's drilling programs contain a
repurchase provision where Investors may tender their partnership units for
repurchase at any time beginning with the third anniversary of the first cash
distribution. The provision provides that the Company is obligated to
purchase an aggregate of 10% of the initial subscriptions per calendar year
(at a minimum price of three times the most recent 12 months' cash
distributions), only if such units are tendered, subject to the Company's
financial ability to do so. The maximum annual 10% repurchase obligation,
if tendered by the investors, is currently approximately $1.0 million.
The Company has adequate capital to meet this obligation.
The Company is not party to any legal action that would materially
affect the Company's results of operations or financial condition.
7. Subsequent Event
On November 2, 1998 the Company announced that it has agreed to
purchase all of the working interest in a 13 well Antrim Shale production
unit and adjacent development locations in Montmorency County, Michigan. The
company estimates that the purchase includes approximately 4 Bcf of proved
developed producing reserves and 1.5 Bcf of proved undeveloped reserves,
with an acquisition cost of approximately $2.8 million. The effective date
of the transaction is November 1, 1998 with closing scheduled for
November 16, 1998.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three Months Ended September 30, 1998 Compared With September 30, 1997
Revenues. Total revenues for the three months ended September 30,
1998 were $16.6 million compared to $14.0 million for the three months ended
September 30, 1997, an increase of approximately $2.6 million, or 18.6
percent. Such increase was primarily a result of increased drilling revenues
and oil and gas sales. Drilling revenues for the three months ended
September 30, 1998 were $5.8 million compared to $5.3 million for the three
months ended September 30, 1997, an increase of approximately $500,000, or
9.4 percent. Such increase resulted from higher volumes of drilling and
completion activities due to increased levels of drilling partnership-related
financing. Oil and gas sales for the three months ended September 30, 1998
were $9.3 million compared to $7.4 million for the three months ended
September 30, 1997, an increase of approximately $1.9 million, or 25.7
percent. Such increase was due primarily to the natural gas marketing
activities of Riley Natural Gas (RNG), the Company's marketing subsidiary,
along with increased production from the Company's producing properties,
offset in part by lower average sales prices from the Company's producing
properties. Well operations and pipeline income for the three months ended
September 30, 1998 were $1.2 million compared to $1.1 million for the three
months ended September 30, 1997, an increase of approximately $100,000, or
9.1 percent. Such increase resulted from an increase in the number of wells
operated by the Company. Other income for the three months ended September
30, 1998 was $421,000 compared to $215,000 for the three months ended
September 30, 1997, an increase of approximately $206,000, or 95.8 percent.
Such increase resulted from interest earned on higher average cash balances.
Costs and expenses. Costs and expenses for the three months ended
September 30, 1998 were $15.9 million compared to $12.1 million for the three
months ended September 30, 1997, an increase of approximately $3.8 million
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or 31.4 percent. Oil and gas well drilling operations costs for the three
months ended September 30, 1998 were $5.2 million compared to $3.8 million
for the three months ended September 30, 1997, an increase of approximately
$1.4 million, or 36.8 percent. Such increase resulted from additional
expenses resulting from the increased drilling activity. Oil and gas
purchases and production costs for the three months ended September 30,
1998 were $9.2 million compared to $7.0 million for the three months ended
September 30, 1997, an increase of approximately $2.2 million or 31.4 percent.
Such increase was due primarily to natural gas purchases by RNG for resale
along with production costs associated with the increased production from
the Company's producing properties. General and administrative expenses for
the three months ended September 30, 1998 increased to $732,000 compared with
$632,000 for the three months ended September 30, 1997. Depreciation,
depletion, and amortization costs for the three months ended September 30,
1998 were $764,000 compared to $607,000 for the three months ended September
30, 1997, an increase of $157,000 or 25.9 percent. Such increase was due to
the increased amount of investment in oil and gas properties owned by the
Company. Interest costs were eliminated after the Company extinguished the
balance on its bank credit line in November 1997.
Net income. Net income for the three months ended September 30,
1998 was $580,000 compared to a net income of $1,453,000 for the three months
ended September 30, 1997, a decrease of approximately $873,000.
Nine Months Ended September 30, 1998 Compared with September 30, 1997
Revenues. Total revenues for the nine months ended September 30,
1998 were $61.1 million compared to $52.3 million for the nine months ended
September 30, 1997, an increase of approximately $8.8 million, or 16.8
percent. Such increase was primarily a result of increased drilling revenues
and oil and gas sales. Drilling revenues for the nine months ended September
30, 1998 were $29.5 million compared to $24.5 million for the nine months
ended September 30, 1997, an increase of approximately $5.0 million, or 20.4
percent. Such increase resulted from higher volumes of drilling and
completion activities, due to increased levels of drilling partnership-
related financing. Oil and gas sales for the nine months ended September 30,
1998 were $26.7 million compared to $23.7 million for the nine months
ended September 30, 1997, an increase of approximately $3.0 million, or 12.7
percent. Such increase was due primarily to the natural gas marketing
activities of RNG, along with increased production from the Company's
producing properties offset in part by lower average sales prices from the
Company's producing properties and lower volumes of gas purchased for
resale. Well operations and pipeline income for the nine months ended
September 30, 1998 remained relatively constant at approximately $3.3
million. Other income for the nine months ended September 30, 1998 was $1.6
million compared to $666,000 for the nine months ended September 30, 1997,
an increase of approximately $934,000, or 140.2 percent. Such increase
resulted from interest earned on higher average cash balances.
Costs and expenses. Costs and expenses for the nine months
ended September 30, 1998 were $54.5 million compared to $45.1 million for
the nine months ended September 30, 1997, an increase of approximately $9.4
million or 20.8 percent. Oil and gas well drilling operations costs for the
nine months ended September 30, 1998 were $25.3 million compared to
$19.6 million for the nine months ended September 30, 1997, an increase of
approximately $5.7 million, or 29.1 percent. Such increase resulted from
additional expenses resulting from the increased drilling activity. Oil and
gas purchases and production costs for the nine months ended September 30,
1998 were $25.1 million compared to $21.7 million for the nine months
ended September 30, 1997, an increase of approximately $3.4 million, or 15.7
percent. Such increase was due primarily to natural gas marketing activities
of RNG along with production costs associated with the increased production
from the Company's producing properties, offset in part by lower volumes of
gas purchased for resale by the Company. General and administrative expenses
for the nine months ended September 30, 1998 remained relatively constant at
approximately $1.7 million. Depreciation, depletion, and amortization costs
for the nine months ended September 30, 1998 were $2.3 million compared to
$1.8 million for the nine months ended September 30, 1997, an increase of
approximately $500,000 or 27.8 percent. Such increase was due to the
increased amount of investment in oil and gas properties owned by the
Company. Interest costs were eliminated after the Company extinguished the
balance on its bank credit line in November 1997.
Net income. Net income for the nine months ended September 30,
1998 was $5.1 million compared to a net income of $5.4 million for the nine
months ended September 30, 1997, a decrease of approximately $300,000 or 5.6
percent.
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Liquidity and Capital Resources
The Company funds its operations through a combination of cash
flow from operations, capital raised through drilling partnerships, and use
of the Company's credit facility. Operational cash flow is generated by
sales of natural gas from the Company's well interests, well drilling and
operating activities for the Company's investor partners, natural gas
gathering and transportation, and natural gas marketing. Cash payments from
Company-sponsored partnerships are used to drill and complete wells for the
partnerships, with operating cash flow accruing to the Company to the extent
payments exceed drilling costs. The Company utilizes its revolving credit
arrangement, if needed, to meet the cash flow requirements of its operating
and investment activities.
Sales volumes of natural gas have continued to increase while
natural gas prices fluctuate monthly. The Company's natural gas sales prices
are subject to increase and decrease based on various market-sensitive
indices. A major factor in the variability of these indices is the seasonal
variation of demand for natural gas, which typically peaks during the winter
months. The volumes of natural gas sales are expected to continue to
increase as a result of continued drilling activities and additional
investment by the Company in oil and gas properties. The Company utilizes
commodity-based derivative instruments (natural gas futures contracts traded
on the NYMEX) as hedges to manage a portion of its exposure to this price
volatility. The futures contracts hedge committed and anticipated natural
gas purchases and sales, generally forecasted to occur within a three to
twelve-month period.
The Company has a bank credit agreement with First National Bank
of Chicago, which provides a borrowing base of $10.0 million, subject to
adequate oil and natural gas reserves. At the request of the Company, the
bank, at its sole discretion, may increase the borrowing base to $20.0
million. As of September 30, 1998, no balance is outstanding on the line of
credit. Interest accrues at prime, with LIBOR (London Interbank Market Rate)
alternatives available at the discretion of the Company. No principal
payments are required until the credit agreement expires on December 31, 1999.
The Company closed its first drilling program of 1998 in the
second quarter and has drilled the wells in the second and third quarters of
1998. The Company's first drilling program of 1998 closed with $5.3 million
in investor subscriptions, approximately 27% higher subscriptions than the
first program of 1997. The Company closed its second drilling program
of 1998 in September and have drilled wells during the third and fourth
quarters of 1998. This second drilling program of 1998 closed with $7.1
million in investor subscriptions, approximately 5.7% higher subscriptions
than the second program of 1997. Additional programs are scheduled to close
in November and December of 1998. The Company generally invests, as its
equity contribution to each drilling partnership, an additional sum
approximating 20% of the aggregate subscriptions received for that particular
drilling partnership. As a result, the Company is subject to substantial
cash commitments at the closing of each drilling partnership. The Company
has adequate capital to meet this funding obligation. The funds received
from these programs are restricted to use in future drilling operations. No
assurance can be made that the Company will continue to receive this level of
funding from these or future programs.
The Company was notified that it had submitted a successful bid
for the acquisition of Columbia Gas Transmission Company's Rimersburg natural
gas gathering system, located in northern Pennsylvania. If consummated, this
transaction would be signed in the fourth quarter of 1998 and upon regulatory
approval the funding would occur in the second quarter of 1999. This
acquisition would add to the Company's existing natural gas gathering system
207 miles of pipeline located in an area contiguous to the Company's
Pennsylvania drilling operations, at a cost to the Company of $1.4 million.
In the fourth quarter of 1997, the Company completed a public
offering of 4,077,500 shares of its common stock at a price of $6.25 per
share. Net proceeds to the Company of approximately $23 million from the
sale of the common stock has been partially used to extinguish the balance
on the Company's bank credit line and to purchase producing oil and gas
properties. The remaining $10 million will be used primarily to fund
development drilling on new and existing properties, acquisition of
producing properties and general corporate purposes, including working
capital and possible acquisitions of complementary businesses.
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On February 19, 1998, the Company offered to purchase from
Investors their units of investment in the Company's Drilling Programs
formed prior to 1993. The Company purchased approximately $2.2 million of
producing oil and gas properties in conjunction with this offer, which
expired on March 31, 1998. The Company utilized capital received from its
Public Stock Offering to fund this purchase.
On June 12, 1998 the Company purchased for $3.1 million a
majority interest in the assets of Pemco Gas, Inc., a Pennsylvania producing
company. The assets include 122 natural gas wells, 2,700 undeveloped acres,
gathering systems, natural gas compressors and other facilities. The Company
estimates that its interest includes 4.7 Bcf of natural gas reserves. The
Company utilized capital received from its Public Stock Offering to fund this
purchase.
On November 2, 1998 the Company announced that it has agreed to
purchase all of the working interest in a 13 well Antrim Shale production
unit and adjacent development locations in Montmorency County, Michigan.
The company estimates that the purchase includes approximately 4 Bcf of
proved developed producing reserves and 1.5 Bcf of proved undeveloped
reserves, with an acquisition cost of approximately $2.8 million. The
effective date of this transaction is November 1, 1998 with closing
scheduled for November 16, 1998.
The Company continues to pursue capital investment opportunities
in producing natural gas properties as well as its plan to participate in its
sponsored natural gas drilling partnerships, while pursuing opportunities
for operating improvements and costs efficiencies. Management believes that
the Company has adequate capital to meet its operating requirements.
Year 2000 Issue
State of Readiness
The Year 2000 Issue is the risk that computer programs using two-
digit data fields will fail to properly recognize the year 2000, with the
result being business interruption due to computer system failures by the
Company's software or hardware or that of government entities, service
providers and vendors. The Company has assessed the extent of the Year
2000 Issues affecting the Company. The Company believes that the new
computer system including operating software currently being installed along
with modifications being made by the Company's computer technicians will
address the dating system flaw inherent in most operating systems. The
Company expects to be fully Year 2000 Compliant by the end of 1998.
The Company has initiated formal communications with its
significant suppliers and service providers to determine the extent to which
the Company may be vulnerable to their failure to correct their own Year
2000 issues. It is expected that full identification will be completed by
March 31, 1999. To the extent that responses to Year 2000 readiness are
unsatisfactory, the Company intends to take appropriate action, including
identifying alternative suppliers and service providers who have
demonstrated Year 2000 readiness.
Cost of Readiness
Expenditures related to Year 2000 remediation are not expected to
exceed $25,000. These expenditures include costs related to the data
processing transition, a new computer system, purchase of software,
modifications and implementation costs. A portion of these costs are being
capitalized and will be amortized over the estimated useful life of the asset
beginning in the third quarter of 1998. The remainder of these costs have
been or will be expensed as incurred. Management believes that the cost to
become Year 2000 Compliant is not material to the Company's financial
position or results of operations.
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Risks of Year 2000 Issues
The Company presently believes that upon remediation of its
business software and hardware applications, the Year 2000 Issue will not
present a materially adverse risk to the Company's future consolidated
results of operations, liquidity, and capital resources. However, if such
remediation is not completed in a timely manner or the level of the timely
compliance by key suppliers or service providers is not sufficient, the Year
2000 Issue could have a material impact on the Company's operations
including, but not limited to, increased operating costs, loss of customers
or suppliers, loss of accounting functions, including well revenue
distributions, or other significant disruptions to the Company's business.
Contingency Plan
The Company has a contingency plan, and will implement it on any
system that remains non-complaint at December 31, 1998, if any, by early 1999.
New Accounting Standards
The Company will implement SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information in its full year 1998
financial statements. SFAS No. 131 establishes standards for the way that
public enterprises report information about operating segments in annual and
interim financial statements. Because SFAS No. 131 has a disclosure-only
effect on the notes to the Company's financial statements, adoption of SFAS
No. 131 has no impact on the Company's result of operations or financial
condition. In the year of adoption, the disclosure requirements of SFAS No.
131 need not be applied to interim financial statements.
Statement of Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS No. 133), was issued by
the Financial Accounting Standards Board in June, 1998. Statement 133
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts. The Company must adopt
SFAS No. 133 by January 1, 2000; however, early adoption is permitted. On
adoption, the provisions of SFAS No. 133 must be applied prospectively. At
the present time, the Company cannot determine the impact that SFAS No. 133
will have on its financial statements upon adoption, as such impact will be
based on the extent of derivative instruments, such as natural gas futures
contracts, outstanding at the date of adoption.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any legal actions that would
materially affect the Company's operations or financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
(a) An annual meeting of the Registrant's stockholders was held
on September 4, 1998.
(c) The following matters were voted upon with the results as
indicated below:
1. Common Stock
a. Increase the number of authorized shares of common
stock.
b. Repeal Class A Common Stock
c. Restatement of Articles of Incorporation to Conform
to Nevada Law.
Number of Votes Casted For - 11,621,944
Number of Votes Casted Against - 939,894
Number of Abstentions or Withheld - 104,822
2. Limitation of Personal Liability of Directors and
Officers of the Company.
Number of Votes Casted For - 12,055,982
Number of Votes Casted Against - 699,760
Number of Abstentions or Withheld - 108,314
3. Ratification of Selection of KPMG Peat Marwick as
Independent Accountants
Number of Votes Casted For - 12,500,613
Number of Votes Casted Against - 52,608
Number of Abstentions or Withheld - 66,748
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, 1998.
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CONFORMED COPY
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 6, 1998 /s/ Steven R. Williams
Steven R. Williams
President
Date: November 6, 1998 /s/ Dale G. Rettinger
Dale G. Rettinger
Executive Vice
President
and Treasurer
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