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 June 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 June 30, 1995.<PAGE>
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 -
June 30, 1995 and December 31, 1994 2
Condensed Consolidated Statements of Operations -
Three Months and Six Months Ended June 30, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows - Six
Months Ended June 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
<PAGE>
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 June 30,
1995, and the related condensed consolidated statements of operations for the
three-month and six-month periods ended June 30, 1995 and 1994 and the related
condensed consolidated statements of cash flows for the six-month periods
ended June 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
July 31, 1995
<PAGE>
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 1995 and December 31, 1994
ASSETS
1995 1994
(Unaudited)
Current assets:
Cash and cash equivalents $ 2,351,900 $ 8,906,800
Accounts and notes receivable 1,892,800 1,975,400
Inventories 251,700 390,200
Prepaid expenses 732,400 850,600
Total current assets 5,228,800 12,123,000
Properties and equipment 45,306,100 44,959,900
Less accumulated depreciation, depletion,
and amortization 20,195,800 19,204,400
25,110,300 25,755,500
Other assets 330,800 446,800
$30,669,900 $38,325,300
(Continued)
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<PAGE>
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets, Continued
June 30, 1995 and December 31, 1994
LIABILITIES AND
STOCKHOLDERS' EQUITY
1995 1994
(Unaudited)
Current liabilities:
Current maturities of long-term debt $ 15,600 $ 36,300
Accounts payable and accrued expenses 3,823,400 4,133,800
Advances for future drilling contracts 1,148,600 9,199,900
Funds held for future distribution 355,500 366,700
Total current liabilities 5,343,100 13,736,700
Long-term debt, excluding current
maturities 2,750,000 3,100,000
Other liabilities 439,400 328,600
Deferred income taxes 2,867,500 2,779,500
Stockholders' equity:
Common stock 110,400 110,400
Additional paid-in capital 6,873,600 6,873,600
Retained earnings 12,285,900 11,396,500
Total stockholders' equity 19,269,900 18,380,500
$30,669,900 $38,325,300
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three and Six Months ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<S> <S> <S> <S> <S>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Revenues:
Oil and gas well drilling operations $2,379,400 $2,624,000 $ 9,673,100 $ 9,151,300
Oil and gas sales 1,017,800 1,147,600 2,179,800 2,450,000
Pipeline and well operations income 969,400 996,700 1,972,000 1,954,700
Other income 66,200 76,400 144,900 122,600
4,432,800 4,844,700 13,969,800 13,678,600
Costs and expenses:
Cost of oil and gas well drilling
operations 1,989,700 2,836,100 8,125,500 8,897,400
Oil and gas purchases
and production costs 1,096,500 976,700 2,406,800 2,011,300
General and administrative expenses 520,900 532,300 971,200 1,030,400
Depreciation, depletion, and
amortization 535,500 517,600 1,123,900 974,700
Interest 76,300 69,600 159,700 138,200
4,218,900 4,932,300 12,787,100 13,052,000
Income (loss) before income taxes 213,900 (87,600) 1,182,700 626,600
Income taxes 53,000 (19,700) 293,300 141,000
Net income (loss) $ 160,900 $ (67,900) $ 889,400 $ 485,600
Earnings (loss) per common and
common equivalent share $ .02 $ (.01) $ .08 $ .04
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1995 and 1994
(Unaudited)
1995 1994
Cash flows from operating activities:
Net income $ 889,400 $ 485,600
Adjustments to net income
to reconcile to cash used in
operating activities:
Deferred federal income taxes 88,000 16,400
Depreciation, depletion & amortization 1,123,900 974,700
Leasehold acreage expired or surrendered 173,500 62,800
(Gain) loss on disposal of assets (23,600) 24,800
Decrease (Increase) in current assets 339,300 (1,045,200)
Decrease in other assets 100,700 57,700
Decrease in current liabilities (8,372,900) (7,152,100)
Increase in other liabilities 110,800 35,200
Total adjustments (6,460,300) (7,025,700)
Net cash used in
operating activities (5,570,900) (6,540,100)
Cash flows from investing activities:
Capital expenditures (845,300) (2,002,600)
Proceeds from sale of leases 207,700 168,600
Proceeds from sale of assets 24,300 27,800
Net cash used in
investing activities (613,300) (1,806,200)
Cash flows from financing activities:
Proceeds from debt - 800,000
Retirement of debt (370,700) (553,200)
Net cash (used in) provided by
financing activities (370,700) 246,800
Net changes in cash and
cash equivalents (6,554,900) (8,099,500)
Cash and cash equivalents, beginning of period 8,906,800 10,578,800
Cash and cash equivalents, end of period $ 2,351,900 $ 2,479,300
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 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 six months
ended June 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 six months ended June 30, 1995 and 1994
<TABLE>
<S> <S> <S> <S> <S>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Weighted average common
shares outstanding 11,756,190 12,247,795 11,683,882 12,232,216
Net income (loss) $ 160,900 $ (67,900) $ 889,400 $ 485,600
Earnings (loss) per common and
common equivalent share $ .02 $ (.01) $ .08 $ .04
</TABLE>
5. Common Stock
During the quarter ended June 30, 1994, 55,000 shares of common stock were
issued at $2.00 per share as partial consideration of the purchase price of
oil and gas properties.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three Months Ended June 30, 1995 Compared With June 30, 1994
Total revenues decreased $411,900 in the second quarter of 1995 compared
to the same period in 1994 primarily as a result of decreased drilling
activity and oil and gas sales. Drilling revenues decreased 9.3% as a result
of lower volumes of drilling and completion activities. Oil and gas sales
decreased 11.3% as a result of lower average sales prices offset in part by
increased sales volumes.
Costs and expenses decreased $713,400 primarily as a result of lower well
drilling costs offset in part by higher oil and gas purchases and production
costs. Well drilling costs decreased 29.8% as a result of the decreased
drilling and completion activity referred to above and significantly lower
average well costs. Oil and gas purchases and production costs increased 12.3%
as a result of higher production costs associated with the higher volumes of
natural gas sold.
The foregoing resulted in net income of $160,900 as compared to a net
loss of $67,900 for the second quarter of 1994. The provision for income
taxes in 1995 consists of $37,100 of current taxes and $15,900 of deferred
income taxes. The provision for income taxes (benefit) in 1994 consisted of
$17,400 of current taxes and $2,300 of deferred income taxes.
Six Months Ended June 30, 1995 Compared with June 30, 1994
Total revenues increased $291,200 during the first six months of 1995
compared to the same period in 1994 as a result of increased drilling activity
offset in part by decreased oil and gas sales. Drilling revenues increased
5.7% during the first six 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 11.0% as a result of lower average sales prices offset in
part by increased sales volumes.
Costs and expenses decreased $264,900 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 8.7%
as a result of significantly lower average well costs. Oil and gas purchases
and production costs increased 19.7% as a result of increased production
costs associated with the increased sales volumes and increased leasehold
acreage expiration costs.
The foregoing resulted in net income of $889,400 compared to a net income
of $485,600 for the first six months of 1994. The provision for income taxes
in 1995 consists of $205,300 of current taxes payable and $88,000 of deferred
income taxes. The provision for income taxes in 1994 consisted of $124,600
current taxes payable and $16,400 of deferred income taxes.
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<PAGE>
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 first drilling program of 1995 in the second
quarter and has drilled the wells in the second and third quarters of 1995.
The Company will close its second drilling program of 1995 in September, 1995
and will drill the wells during the third and fourth quarters of 1995. 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 June 30, 1995 the Company has activated $5 million
of that facility and has $2.75 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.
-8-
<PAGE>
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES
STATEMENT BY MANAGEMENT CONCERNING
REVIEW OF INTERIM FINANCIAL INFORMATION
BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The June 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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<PAGE>
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 June 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: August 2, 1995 /s/ Steven R. Williams
Steven R. Williams
President
Date: August 2, 1995 /s/ Dale G. Rettinger
Dale G. Rettinger
Executive Vice President
and Treasurer
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