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 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 033-63635-08
I.R.S. Employer Identification Number 55-0751154
PDC 1997-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
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
<PAGE>
PDC 1997-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
INDEX
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Balance Sheets - September 30, 1998 (unaudited)
and December 31, 1997 1
Statements of Operations - Three Months and
Nine Months Ended September 30, 1998 (unaudited) 2
Statement of Partners' Equity -
Nine Months Ended September 30, 1998 (unaudited) 3
Statement of Cash Flows-
Nine Months Ended September 30, 1998 (unaudited) 4
Notes to Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II OTHER INFORMATION
Item 1. Legal Proceedings 7
Item 6. Exhibits and Reports on Form 8-K 7
<PAGE>
PDC 1997-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Balance Sheets
September 30, 1998 and December 31, 1997
<TABLE>
<C> <C> <C>
Assets
1998 1997
(Unaudited)
Current assets:
Cash $ 1,103 $ 20,000
Accounts receivable - oil and gas revenues 296,168 -
Total current assets 297,271 20,000
Oil and gas properties, successful
efforts method 11,045,989 20,120,043
Less accumulated depreciation, depletion,
and amortization 588,763 -
10,457,226 20,120,043
$10,754,497 $20,140,043
Current Liabilities and Partners' Equity
Current liabilities:
Accrued expenses $ 2,989 $ 21,876
Total current liabilities 2,989 21,876
Partners' Equity 10,751,508 20,118,167
$10,754,497 $20,140,043
</TABLE>
See accompanying notes to financial statements.
-1-
<PAGE>
PDC 1997-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Statements of Operations
Three Months and Nine Months ended September 30, 1998
(Unaudited)
<TABLE>
<C> <C> <C>
Three Months Nine Months
Ended Ended
September 30, September 30,
1998 1998
Revenues:
Sales of oil and gas $ 390,576 $ 580,336
390,576 580,336
Expenses:
Lifting cost 80,239 124,932
Direct administrative cost - 10
Loss on impairment of oil
and gas properties 9,074,054 9,074,054
Depreciation, depletion,
and amortization 402,957 588,763
9,557,250 9,787,759
Net loss $(9,166,674) $(9,207,423)
Net loss per limited and
additional general
partner unit $ (7,920) $ (7,955)
</TABLE>
See accompanying notes to financial statements.
-2-
<PAGE>
PDC 1997-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Statement of Partners' Equity
Nine Months ended September 30, 1998
(Unaudited)
<TABLE>
<C> <C> <C> <C>
Limited and
additional Managing
general partners general partner Total
Balance, December 31, 1997 $16,094,533 $4,023,634 $20,118,167
Net loss (7,365,938) (1,841,485) (9,207,423)
Distributions to partners (127,389) (31,847) (159,236)
Balance, September 30, 1998 $ 8,601,206 $2,150,302 $10,751,508
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE>
PDC 1997-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Statement of Cash Flows
Nine Months ended September 30, 1998
(Unaudited)
<TABLE>
<C> <C>
Cash flows from operating activities:
Net loss $(9,207,423)
Adjustments to reconcile net loss to net cash
provided from operating activities:
Depreciation, depletion, and amortization 588,763
Loss on impairment of oil and gas properties 9,074,054
Changes in operating assets and liabilities:
Increase in accounts receivable - oil and gas revenues (296,168)
Decrease in accrued expenses (18,887)
Net cash provided from operating activities 140,339
Cash flows from financing activities:
Distributions to partners (159,236)
Net cash used by financing activities (159,236)
Net change in cash (18,897)
Cash at beginning of period 20,000
Cash at end of period $ 1,103
</TABLE>
See accompanying notes to financial statements.
-4-<PAGE>
PDC 1997-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements
(Unaudited)
1. Accounting Policies
Reference is hereby made to the Partnership's Annual Report on Form 10-K
for 1997, which contains a summary of significant accounting policies
followed by the Partnership in the preparation of its financial statements.
These policies were also followed in preparing the quarterly report
included herein.
2. Basis of Presentation
The Management of the Partnership 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
The Partnership follows the successful efforts method of accounting for the
cost of exploring for and developing oil and gas reserves. Under this
method, costs of development wells, including equipment and intangible
drilling costs related to both producing wells and developmental dry holes,
and successful exploratory wells are capitalized and amortized on an annual
basis to operations by the units-of-production method using estimated
proved developed reserves determined at September 30, 1998 by the Managing
General Partners' petroleum engineers. If a determination is made that an
exploratory well has not discovered economically producible reserves, then
its costs are expensed as dry hole costs.
The Partnership assesses impairment of capitalized costs of proved oil and
gas properties by comparing net capitalized costs to undiscounted future
net cash flows on a field-by-field basis using expected prices. Prices
utilized for measurement purposes and expected costs are held constant. If
net capitalized costs exceed undiscounted future net cash flow, the
measurement of impairment is based on estimated fair value which would
consider future discounted cash flows. During the third quarter of 1998,
the loss on impairment of oil and gas properties amounted to $9,074,054.
Based on the Managing General Partner's experience, management believes
site restoration, dismantlement and abandonment costs, net of salvage to be
immaterial in relation to operating costs. These costs are being expensed
when incurred.
-5-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership was funded with initial Limited and Additional General
Partner contributions of $18,519,579 and the Managing General Partner,
Petroleum Development Corporation (PDC), contributed $4,028,009 in
accordance with the Agreement. Syndication and management fee costs of
$2,407,545 were incurred leaving available capital of $20,140,043 for
Partnership activities.
The Partnership began exploration and development activities
subsequent to the funding of the Partnership and completed well drilling
activities by March 31, 1998. One hundred and one wells have been drilled,
of which ninety-four have been completed as producing wells.
Operations will be conducted with available funds and revenues
generated from oil and gas activities. No bank borrowings are anticipated.
The Partnership had net working capital at September 30, 1998 of
$294,282.
The Partnership's revenues from oil and gas will be affected by
changes in prices. As a result of changes in federal regulations, gas
prices are highly dependent on the balance between supply and demand. The
Partnership's gas sales prices are subject to increase and decrease based
on various market sensitive indices.
Results of Operations
Three Months Ended September 30, 1998
A total of fifty-four of the Partnership's ninety-four productive
wells were producing natural gas for the entire three months ended
September 30, 1998. The remaining wells are scheduled to be put into
service during the fourth quarter of 1998. While the Partnership
experienced a loss, depreciation, depletion and amortization and loss on
impairment of oil and gas properties are non-cash expenses, therefore the
partnership distributed $159,236 to the partners during the third quarter
of 1998.
Nine Months Ended September 30, 1998
The Partnership began and completed exploration and development
activities during the first nine months of 1998. Oil and gas sales
commenced during the first quarter and cash distributions to the partners
commenced during the third quarter. A total of fifty-eight of the
Partnership's ninety-four productive wells are producing natural gas as of
September 30, 1998.
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 PDC's
software or hardware or that of government entities, service providers and
vendors. PDC, who administers all aspects of the Partnership, has assessed
the extent of the Year 2000 Issues affecting PDC and the Partnership. PDC
believes that the new computer system including operating software
currently being installed along with modifications being made by PDC's
computer technicians will address the dating system flaw inherent in most
operating systems. PDC expects to be fully Year 2000 Compliant by the end
of 1998.
-6-
<PAGE>
PDC has initiated formal communications with its significant suppliers
and service providers to determine the extent to which PDC 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, PDC
intends to take appropriate action, including identifying alternative
suppliers and service providers who have demonstrated Year 2000 readiness.
Cost of Readiness
PDC does not currently expect to charge the Partnership for any
portion of PDC's cost to become Year 2000 Complaint.
Risks of Year 2000 Issues
PDC presently believes that upon remediation of its business software
and hardware applications, the Year 2000 Issue will not present a
materially adverse risk to PDC's or the Partnership'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 PDC's or the Partnership'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 PDC's or the
Partnership's business.
Contingency Plan
PDC 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
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 Partnership 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 Partnership 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.
-7-
<PAGE>
CONFORMED COPY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
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.
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.
PDC 1997-D Limited Partnership
(Registrant)
By its Managing General Partner
Petroleum Development Corporation
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
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,103
<SECURITIES> 0
<RECEIVABLES> 296,168
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 297,271
<PP&E> 11,045,989
<DEPRECIATION> 588,763
<TOTAL-ASSETS> 10,754,497
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,754,497
<SALES> 580,336
<TOTAL-REVENUES> 580,336
<CGS> 124,932
<TOTAL-COSTS> 9,797,759
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,207,423)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,207,423)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,207,423)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
