SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File Number 033-50192
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transaction period from to
PDC 1993-E LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
West Virginia 55-0728949
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
103 East Main Street, Bridgeport, West Virginia 26330
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (304) 842-3597
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
General and Limited Partnership Interests
(Title of class)
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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
<PAGE>
PART I
ITEM 1. BUSINESS.
General
PDC 1993-E Limited Partnership ("the Partnership") is a limited
partnership formed on December 31, 1993 pursuant to the West Virginia
Uniform Limited Partnership Act. Petroleum Development Corporation ("PDC")
serves as Managing General Partner of the Partnership.
Since the commencement of operations on December 31, 1993, the
Partnership has been engaged in onshore, domestic gas exploration
exclusively in the northern Appalachian Basin. A total of 5 limited
partners contributed initial capital of $110,000; a total of 527 additional
general partners contributed initial capital of $7,248,795; and PDC
(Managing General Partner) contributed $715,438 in capital as a participant
in accordance with contribution provisions of the Limited Partnership
Agreement (the Agreement).
Under the terms of the Agreement, the allocation of revenues is as
follows:
Allocation
of Revenues
Additional General and
Limited Partners 82%
Managing General Partner 18%
Operating and direct costs are allocated and charged to the additional
general and limited partners and the Managing General Partner in the same
percentages as revenues are allocated. Leasehold, drilling and completion
costs, and equipment costs are borne 90% by the additional general and
limited partners and 10% by the Managing General Partner.
Employees
The Partnership has no employees, however, PDC has approximately 72
employees which include a staff of geologists, petroleum engineers, landmen
and accounting personnel who administer all of the partnership's operations.
Plan of Operations
The Partnership participated in the drilling of approximately 36 gross
wells and will continue to operate and produce its 34 gross productive
wells. The Partnership does not have unexpended initial capital and no
additional drilling activity is planned.
See Item 2 herein for information concerning the Partnership's gas
wells.
Markets for Oil and Gas
The availability of a market for any oil and gas produced from the
operations of the Partnership will depend upon a number of factors beyond
the control of the Partnership which cannot be accurately predicted. These
factors include the proximity of the Partnership wells to and the capacity
of natural gas pipelines, the availability and price of competitive fuels,
fluctuations in seasonal supply and demand, and government regulation of
supply and demand created by its pricing and allocation restrictions.
Oversupplies of gas can be expected to occur from time to time and may
result in the Partnership's wells being shut-in or curtailed. Increased
imports of oil and natural gas have occurred and are expected to continue.
The effects of such imports could adversely impact the market for domestic
oil and natural gas.
Competition
The Partnership competes in marketing its gas with numerous companies
and individuals, many of which have financial resources, staffs and
facilities substantially greater than those of the Partnership or Petroleum
Development Corporation.
2
<PAGE>
State Regulations
State regulatory authorities have established rules and regulations
requiring permits for well operations, reclamation bonds and reports
concerning operations. States also have statutes and regulations concerning
the spacing of wells, environmental matters and conservation, and have
established regulations concerning the unitization and pooling of oil and
gas properties and maximum rates of production from oil and gas wells. The
Partnership believes it has complied in all material respects with
applicable state regulations.
Federal Regulations
Regulation of Liquid Hydrocarbons. Liquid hydrocarbons (including crude
oil and natural gas liquids) were subject to federal price and allocation
controls until January 1981 when controls were effectively eliminated by
executive order of the President. As a result, to the extent the
Partnership sells oil produced from its properties, those sales are at
unregulated market prices.
Although it appears unlikely under present circumstances that controls
will be reimposed upon liquid hydrocarbons, it is possible Congress may
enact such legislation at a future date. The impact of such legislation on
the Partnership would be minimal since the partnership expects to sell only
small quantities of liquid hydrocarbons, if any.
Natural Gas Regulation. Sale of natural gas by the Partnership is
subject to regulation of production, transportation and pricing by
governmental regulatory agencies. Generally, the regulatory agency in the
state where a producing well is located regulates production activities and,
in addition, the transportation of gas sold intrastate. The Federal Energy
Regulatory Commission (FERC) regulates the operation and cost of interstate
pipeline operators who transport gas. Currently the price of gas sold by
the Partnership is not regulated by any state or federal agency.
The FERC has adopted major changes in certain of its regulations and
continues to make additional changes that will significantly affect future
transportation and marketing of natural gas.
The Partnership is uncertain how the recent or proposed regulations will
affect the marketing of its gas because it is unable to predict how all
interstate pipelines that receive its gas will respond to such rulemakings.
Proposed Regulation. Numerous proposals concerning energy are being
considered by the United States Congress, various state legislatures and
regulatory agencies. The possible outcome and effect of these proposals
cannot be accurately predicted.
Environmental and Safety Regulation. The Partnership believes that it
complies, in all material respects, with all legislation and regulations
affecting its operations in the drilling and production of oil and gas wells
and the discharge of wastes. To date, compliance with such provisions and
regulations has not had a material effect upon the Partnership's
expenditures for capital equipment, its operations or its competitive
position. The cost of such compliance is not anticipated to be material in
the future.
ITEM 2. PROPERTIES.
Drilling Activity.
The following table sets forth the results of drilling activity from
December 31, 1993 (date of inception) to March 15, 1997, of the Partnership
which was conducted in the continental United States.
3
<PAGE>
<TABLE>
<S> <>S <S> <S> <S> <S> <S>
Development Wells
Gross Net
Productive Dry Total Productive Dry Total
Period Ended
March 15, 1997. . . 34 2 36 33.33 1.99 35.32
</TABLE>
The Partnership has not participated in any exploratory wells. No
additional drilling activity is planned.
Productive Wells
The following table summarizes the Partnership's total gross and net
interests in productive wells at March 15, 1997. No additional drilling
activity is planned.
<TABLE>
<S> <S> <S> <S> <S>
Productive Gas Wells
Well Name County State Gross Net
Fischer #2 Barbour WV 1 .995
Cook #1 Taylor WV 1 .995
Duckworth #2 Barbour WV 1 .995
Coaltrain #9 Taylor WV 1 .995
Shriver #1, S. Taylor WV 1 .995
Marsh #3 Taylor WV 1 .995
Underwood #1 Doddridge WV 1 .995
Shriver #1, J. Taylor WV 1 .995
Underwood #2 Doddridge WV 1 .995
Skyhawk Dev #1 Harrison WV 1 .995
USA #34 Lewis WV 1 .970
Wilson #2 Doddridge WV 1 .995
Gobel #2 Taylor WV 1 .995
Pond Fork #117 Boone WV 1 .920
Cox Heirs #2 Doddridge WV 1 .995
USA #30 Lewis WV 1 .970
Dot #1 Harrison WV 1 .995
Wilson #1 Doddridge WV 1 .995
Pond Fork #114 Boone WV 1 .920
Cox Heirs #3 Doddridge WV 1 .995
USA #15 Lewis WV 1 .970
Rogers #1 Doddridge WV 1 .995
Cox Heirs #1 Doddridge WV 1 .995
Zinn #1 Barbour WV 1 .995
Pond Fork #115 Boone WV 1 .920
USA #91 Lewis WV 1 .970
Cox Heirs #4 Doddridge WV 1 .995
Pond Fork #116 Boone WV 1 .920
Dustman #1 Barbour WV 1 .995
USA #81 Lewis WV 1 .970
Mayle #1, F. Barbour WV 1 .995
Pond Fork #118 Boone WV 1 .920
Upton #1 Barbour WV 1 .995
Cox Heirs #5 Doddridge WV 1 .995
34 33.330
</TABLE>
A "productive well" is a well producing, or capable of producing, oil
and gas in commercial quantities. For purposes of the above table, a "gross
well" is one in which the Partnership has a working interest and a "net
well" is a gross well multiplied by the Partnership's working interest to
which it is entitled under its drilling agreement.
Title to Properties
The Partnership's interests in producing acreage are in the form of
assigned direct interests in leases. Such properties are subject to
customary royalty interests generally contracted for in connection with the
acquisition of properties and could be subject to liens incident to
operating agreements, liens for current taxes and other burdens. The
Partnership believes that none of these burdens materially interfere with
the use of such properties in the operation of the Partnership's business.
4
<PAGE>
As is customary in the oil and gas industry, little or no investigation
of title is made at the time of acquisition of undeveloped properties (other
than a preliminary review of local mineral records). Investigations are
generally made, including in most cases receiving a title opinion of legal
counsel, before commencement of drilling
operations. A thorough examination of title has been made with respect to
all of the Partnership's producing properties and the Partnership believes
that it has generally satisfactory title to such properties.
ITEM 3. LEGAL PROCEEDINGS.
The Managing General Partner as driller/operator is not party to any
legal action that would materially affect the Managing General Partner's or
Partnership's operations or financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
One matter was submitted to a vote of the security holders of the
Partnership during the year 1996. The partners voted to amend the
partnership agreement with regard to the "engineering reports prepared by
the qualified independent petroleum engineer" by deleting the word
"indepedent." No other matters have been submitted to a vote for the period
December 31, 1993 (date of inception) to December 31, 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND SECURITY HOLDER
MATTERS.
At December 31, 1996, PDC 1993-E Limited Partnership had one Managing
General Partner, 5 Limited Partners who fully paid for 5.50 units at $20,000
per unit of limited partnership interests and a total of 527 Additional
General Partners who fully paid for 362.44 units at $20,000 per unit of
additional general partnership interests. No established public trading
market exists for the interests.
Limited and additional general partnership interests are transferable,
however no assignee of an interest in the Partnership can become a
substituted partner without the written consent of the transferor and the
Managing General Partner.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data presented below has been derived from
audited financial statements of the Partnership appearing elsewhere herein.
<TABLE>
<S> <S> <S> <S>
Years ended December 31,
1996 1995 1994
Oil and Gas Sales . . . . . . . . . . . . . . . . $ 804,950 696,058 534,792
Costs and Expenses . . . . . . . . . . . . . . . 656,671 759,930 456,058
Net income (loss) . . . . . . . . . . . . . . . . 154,318 (55,703) 95,327
Allocation of Net Income (loss):
Managing General Partner. . . . . . . . . . . . . 44,687 24,540 39,292
Limited and Additional General Partners . . . . . 109,631 (80,243) 56,035
Per Limited and Additional General Partner Unit . 298 (218) 152
Total Assets. . . . . . . . . . . . . . . . . . . 6,169,974 6,549,353 7,026,696
Distributions:
Managing General Partner. . . . . . . . . . 82,792 73,940 46,050
Limited and Additional General Partners . . 455,616 357,759 209,689
</TABLE>
ITEM 7. 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 $7,358,795 and the Managing General Partner
contributed $715,438 in accordance with the Agreement. Offering,
organization and legal costs of $919,850 were incurred leaving available
capital of $7,154,383 for Partnership activities.
The Partnership began exploration and development activities subsequent
to the funding of the Partnership and completed well activities by December
31, 1996. Thirty-six wells have been drilled, of which thirty-four have
been completed as producing wells.
The Partnership had net working capital at December 31, 1996 of
$110,598.
5<PAGE>
Operations are expected to be conducted with available funds and
revenues generated from oil and gas activities. No bank borrowings are
anticipated.
Results of Operations
1996 Compared with 1995
Oil and gas sales increased 15.6% in 1996 compared to 1995 due to higher
average sales prices offset in part by lower sales volumes. Cash
distributions to the partners increased from $431,699 in 1995 to $538,408
during 1996 for the reasons outlined above.
1995 Compared with 1994
Oil and gas sales increased 30.2% in 1995 compared to 1994 due to
increased sales
volumes offset in part by lower average sales prices. Cash distributions
to the partners increased from $255,739 in 1994 to $431,699 during 1995 for
the same reason outlined above.
1994 Compared to 1993
The Partnership was funded on December 31, 1993 and its wells were
drilled during the first quarter of 1994. Most of the wells went into
production during the second quarter of 1994 and therefore 1994 was not a
full production year.
The Partnership's revenues from natural gas sales will be affected by
changes in prices. Natural gas prices are subject to general market
conditions which drive the pricing changes.
The principal effects of inflation upon the Partnership relate to the
costs required to drill, complete and operate oil and gas wells. The
Partnership expects these costs to remain somewhat stable over the next
year.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
The response to this Item is set forth herein in a separate section of
this Report, beginning on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
NONE.
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The Partnership has no directors or executive officers. The partnership
is managed by Petroleum Development Corporation (the Managing General
Partner). Petroleum Development Corporation's common stock is traded in the
NASDAQ National Market and Form 10-K for 1996 has been filed with the
Securities and Exchange Commission.
ITEM 11. MANAGEMENT REMUNERATIONS AND TRANSACTIONS.
NON-APPLICABLE.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
NON-APPLICABLE.
6
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Pursuant to the authorization contained in the Limited Partnership
Agreement, PDC receives fees for services rendered and reimbursement of
certain expenses from the Partnership. The following table presents
compensation or reimbursements by the Partnership to PDC or other related
parties during the years ended December 31.
<TABLE>
<S> <S> <S> <S>
1996 1995 1994
Sales of Leases - - 102,267
Footage Drilling Contracts, Services,
Chemicals, Supplies, and Equipment - - (174,878)
Operator's Charges $249,371 250,467 148,454
Tax return preparation 3,160 3,550 3,675
Direct adminstrative cost 1,851 1,714 830
</TABLE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements
See Index to Financial Statements on F-2
(2) Financial Statement Schedules
See Index to Financial Statements on page F-2. All financial
statement schedules are omitted because they are not required,
inapplicable, or the information is included in the Financial
Statements or Notes thereto.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 1993-E Limited Partnership
By its Managing General
Partner Petroleum Development
Corporation
By /s/ James N. Ryan
James N. Ryan, Chairman
March 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ James N. Ryan Chairman, Chief Executive
James N. Ryan Officer and Director March 24, 1997
/s/ Steven R. Williams President and Director
Steven R. Williams March 24, 1997
/s/ Dale G. Rettinger Executive Vice President,
Dale G. Rettinger Treasurer and Director March 24, 1997
(principal financial and
accounting officer)
/s/ Roger J. Morgan Secretary and Director
Roger J. Morgan March 24, 1997
8
<PAGE>
PDC 1993-E LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Financial Statements for Annual Report
on Form 10-K to Securities and Exchange
Commission
Years Ended December 31, 1996, 1995 and 1994
(With Independent Auditors' Report Thereon)
F-1<PAGE>
PDC 1993-E LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Index to Financial Statements
Independent Auditors' Report F-3
Balance Sheets - December 31, 1996 and 1995 F-4
Statements of Operations
- Years Ended December 31, 1996, 1995 and 1994 F-5
Statements of Partners' Equity
- Years Ended December 31, 1996, 1995 and 1994 F-6
Statements of Cash Flows
- Years Ended December 31, 1996, 1995 and 1994 F-7
Notes to Financial Statements F-8
All financial statement schedules have been omitted because they are not
applicable or not required or for the reason that the required information
is shown in the financial statements or notes thereto.
F-2
<PAGE>
Independent Auditors' Report
To the Partners
PDC 1993-E Limited Partnership:
We have audited the financial statements of PDC 1993-E Limited Partnership
(a West Virginia limited partnership) as listed in the accompanying index.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PDC 1993-E Limited
Partnership as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years ended December 31, 1996, 1995
and 1994, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
March 20, 1997
F-3
<PAGE>
PDC 1993-E LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Balance Sheets
December 31, 1996 and 1995
<TABLE>
<S> <S> <S>
Assets 1996 1995
Current assets:
Cash $ 728 1,713
Accounts receivable - oil and gas revenues 140,097 139,624
Total current assets 140,825 141,337
Oil and gas properties,
successful efforts method
(Notes 3 and 5):
Oil and gas properties 7,115,383 7,115,383
Less accumulated depreciation, depletion,
and amortization 1,098,679 726,308
6,016,704 6,389,075
Other assets (net of amortization of
$20,033 and $13,537) 12,445 18,941
$6,169,974 6,549,353
Current Liabilities and Partners' Equity
Current liabilities:
Accrued expenses $ 30,227 25,516
Total current liabilities 30,227 25,516
Partners' equity 6,139,747 6,523,837
$6,169,974 $6,549,353
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
PDC 1993-E LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Statements of Operations
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<S> <S> <S> <S>
1996 1995 1994
Revenues:
Sales of oil and gas $804,950 696,058 534,792
Transportation revenue 4,047 5,146 16,185
Interest income 1,992 3,023 408
810,989 704,227 551,385
Expenses (note 3):
Lifting cost 249,371 250,467 148,454
Independent audit fee 6,795 7,293 6,108
Franchise taxes 16,177 22,411 21,137
Tax return preparation 3,610 3,550 3,675
Direct administrative cost 1,851 1,714 830
Independent engineering cost - 4,549 6,500
Depreciation, depletion and amortization 378,867 469,946 269,354
656,671 759,930 456,058
Net income (loss) $154,318 (55,703) 95,327
Net income (loss) per limited and
additional general partner unit $ 298 (218) 152
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
PDC 1993-E LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Statements of Partners' Equity
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<S> <S> <S> <S>
Limited and
additional Managing
general partners general partner Total
Balance, December 31, 1993 $6,511,763 708,720 7,220,483
Net income 56,035 39,292 95,327
Return of capital (43,971) (4,861) (48,832)
Distributions to partners (209,689) (46,050) (255,739)
Balance, December 31, 1994 6,314,138 697,101 7,011,239
Net income (loss) (80,243) 24,540 (55,703)
Distributions to partners (357,759) (73,940) (431,699)
Balance, December 31, 1995 5,876,136 647,701 6,523,837
Net income 109,631 44,687 154,318
Distributions to partners (455,616) (82,792) (538,408)
Balance,December 31, 1996 $5,530,151 609,596 6,139,747
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
PDC 1993-E LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<S> <S> <S> <S>
1996 1995 1994
Cash flows from operating activities:
Net income (loss) $154,318 (55,703) 95,327
Adjustments to reconcile net
income (loss) to net cash
provided from operating activities:
Depreciation, depletion, and
amortization 378,867 469,946 269,354
Changes in operating assets and
liabilities:
(Increase) decrease in
accounts receivable - oil
and gas revenues (473) 7,068 (146,692)
Increase in accrued expenses 4,711 10,059 792
Net cash provided from
operating activities 537,423 431,370 218,781
Cash flows from investing activities:
Refund for unevaluated
oil and gas properties - - 72,611
Refund for other assets - - 221
Net cash provided from
investing activities - - 72,832
Cash flows from financing activities:
Limited and additional general
partner return contributions - - (43,971)
Managing General Partner
return contribution - - (4,861)
Distributions to partners (538,408) (431,699) (255,739)
Net cash used by
financing activities (538,408) (431,699) (304,571)
Net decrease in cash (985) (329) (12,958)
Cash at beginning of period 1,713 2,042 15,000
Cash at end of period $ 728 1,713 2,042
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
PDC 1993-E LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements
Years Ended December 31, 1996, 1995 and 1994
(1) Summary of Significant Accounting Policies
Partnership Financial Statement Presentation Basis
The financial statements include only those assets, liabilities and
results of operations of the partners which relate to the business of
PDC 1993-E Limited Partnership (the Partnership). The statements do
not include any assets, liabilities, revenues or expenses attributable
to any of the partners' other activities.
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 by the Managing
General Partner's petroleum engineers at December 31, 1996 and by an
independent petroleum engineer, Wright & Company, Inc. at December 31,
1995 and 1994. 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 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.
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.
Other Assets
Other assets consist of costs incurred to organize the entity as a
limited partnership. Other assets are being amortized over five years
for both tax and financial reporting purposes.
Income Taxes
Since the taxable income or loss of the Partnership is reported in the
separate tax returns of the partners, no provision has been made for
income taxes on the Partnership's books.
Under federal income tax laws, regulations and administrative rulings,
certain types of transactions may be accorded varying interpretations.
Accordingly, the Partnership's tax return and, consequently,
individual tax returns of the partners may be changed to conform to
the tax treatment resulting from a review by the Internal Revenue
Service.
New Pronouncement
The Partnership adopted Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of", effective January 1, 1996. This
statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances
(Continued)
F-8<PAGE>
PDC 1993-E LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
indicate that the carrying amount of an asset may not be recoverable.
In performing the review for recoverability, the entity should
estimate the future cash flows expected to result from the use of the
asset and its eventual disposition. If the sum of the expected future
cash flows (undiscounted and with out interest charges) is less than
the carrying amount of the asset, an impairment loss is recognized.
Measurement of animpairment loss for long-lived assets and
identifiable tangibles is based on the fair value of an asset. The
adoption of this accounting standard did not have any impact on the
Partnership's financial statements.
Use of Estimates
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
revenues and expenses and the disclosure of contingent assets and
liablities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ
from those estimates. Estimates which are particularly significant
to the financial statements include estimates of oil and gas reserves
and future cash flows from oil and gas properties.
(2) Organization
The Partnership was organized as a limited partnership on December 31,
1993 in accordance with the laws of the State of West Virginia for the
purpose of engaging in the drilling, completion and operation of oil
and gas development and exploratory wells in West Virginia.
Purchasers of partnership units subscribed to and fully paid for 5.5
units of limited partner interests and 362.44 units of additional
general partner interests at $20,000 per unit (collectively, Investor
Partners). Petroleum Development Corporation has been designated the
Managing General Partner of the Partnership. Although costs, revenues
and cash distributions allocable to the limited and additional general
partners are shared pro rata based upon the amount of their
subscriptions, including the Managing General Partner to the extent
of its 10% capital contributions, there are significant differences
in the federal income tax effects and liability associated with these
different types of units in the Partnership.
Upon written notice to the Managing General Partner, additional general
partners have the right to convert their units into units of limited
partner interests at any time after one year and thereafter become
limited partners of the Partnership. Limited partners do not have any
rights to convert their units into units of additional general partner
interests in the Partnership.
In accordance with the terms of the Partnership Agreement (the
Agreement), the Managing General Partner manages all activities of the
Partnership and acts as the intermediary for substantially all
Partnership transactions.
(3) Transactions with Managing General Partner and Affiliates
The Partnership's transactions with the Managing General Partner
include charges for the following:
Years ended December 31,
1996 1995 1994
Drilling, completion
and lease costs - - $(72,611)
Lifting costs $249,371 $250,467 148,454
Tax return preparation 3,610 3,550 3,675
Direct administrative cost 1,851 1,714 830
(Continued)
F-9
<PAGE>
PDC 1993-E LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
(4) Allocation
The table below summarizes the participation of the Managing General
Partner and the Investor Partners, taking account of the Managing
General Partner's capital contribution equal to 10% of the Initial
Operating Capital, in the costs and revenues of the Partnership.
<TABLE>
<S> <S> <S>
Managing General
Partnership costs Investor Partners Partner
Organization and offering costs 99% 1%
Undeveloped lease costs 90% 10%
Drilling and completion costs 90% 10%
Intangible drilling and development
costs 99% 1%
Operating costs (1) 82% 18%
Direct costs (2) 82% 18%
Administrative costs 0% 100%
Interest expense (3) (3)
Partnership revenues
Sale of oil and gas production (4) 82% 18%
Sale of productive properties (5) 82% 18%
Sale of undeveloped leases 90% 10%
Interest income 82% 18%
</TABLE>
(1) Represents operating costs incurred after the completion
of productive wells, including monthly per-well charges paid
to the Managing General Partner.
(2) Direct costs will be allocated 90% to the Investor Partners and
10% to the Managing General Partner during drilling. After
drilling, allocations will be made in accordance with the table
above. The Managing General Partner will receive monthly
reimbursement from the Partnership for direct costs incurred
by the Managing General Partner on behalf of the Partnership.
(3) Although borrowings by the Partnership are not anticipated,
interest, associated expenses of borrowings, and deductions
attributable to such borrowings if any, will be allocated and
charged to the Investor Partners and the Managing General
Partner according to the partners' shares of "economic risk of
loss" in the loans, or, if no partner bears the economic risk
of loss, in accordance with the partnership agreement.
(4) The revenues and expenses to be allocated to the partners are
subject to a special provision in the partnership agreement,
whereby the allocable share of revenues and expenses of the
Investor Partners in each producing well may be increased and
the interest of the Managing General Partner in each well may
be decreased if such well fails to meet certain production
levels. The shifting of the allocable share of revenues and
expenses to the Investor Partners in the event that certain
prescribed production levels are not attained may also serve
to shift an increased amount of cash distributions to the
Investor Partners and a decreased amount of cash distributions
to the Managing General Partner.
(Continued)
F-10<PAGE>
PDC 1993-E LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
(5) In the event of the sale or other disposition of a productive
well, a lease upon which such well is situated, or any
equipment related to any such lease or well, the proceeds from
such sale or disposition shall be allocated and credited to the
partners as oil and gas revenues are allocated. The term
"proceeds" above does not include revenues from a royalty,
overriding royalty, lease interest reserved, or other
promotional consideration received by the Partnership in
connection with any sale or disposition, which revenues shall
be allocated to the Investor Partners and the Managing General
Partner in the same percentages that oil and gas revenues are
allocated.
(5) Costs Relating to Oil and Gas Activities
The Partnership is engaged solely in oil and gas activities, all of
which are located in the continental United States. Information
regarding aggregate capitalized costs and results of operations
for these activities is located in the basic financial statements.
Costs capitalized for these activities are presented below:
December 31,
1996 1995
Lease acquisition costs $ 102,267 102,267
Intangible development costs 5,022,812 5,022,812
Well equipment 1,990,304 1,990,304
$7,115,383 7,115,383
(6) Income Taxes
As a result of the differences in the treatment of certain items for
income tax purposes as opposed to financial reporting purposes,
primarily depreciation, depletion and amortization of oil and gas
properties and the recognition of intangible drilling costs as an
expense or capital item, the income tax basis of oil and gas
properties differs from the basis used for financial reporting
purposes. At December 31, 1996 and 1995, the income tax basis of
the partnership's oil and gas properties was $972,663 and
$1,320,821, respectively.
F-11
<PAGE>
PDC 1993-E LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
(7) Supplemental Reserve Information (Unaudited)
Proved reserves of the Partnership have been estimated by a the
Managing General Partner's petroleum engineers at December 31, 1996
and by an independent petroleum engineer, Wright & Company, Inc.
at December 31, 1995 and 1994. These reserves have been prepared
in compliance with the Securities and Exchange Commission rules
based on year end prices. Since December 31, 1996 prices have
declined to seasonal levels. A copy of the reserve report has been
made available to all partners. All of the partnership's reserves
are proved developed. An analysis of the change in estimated
quantities of proved developed reserves is shown below:
Natural gas
(mcf)
Proved developed reserves as of
December 31, 1993 (date of inception) -
Extensions, discoveries and other
additions 6,842,341
Production (252,729)
Proved developed reserves as of
December 31, 1994 6,589,612
Revisions of previous estimates (910,249)
Production (355,043)
Proved developed reserves as of
December 31, 1995 5,324,320
Revisions of previous estimates (314,378)
Production (265,803)
Proved developed reserves as of
December 31, 1996 4,744,139
F-12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 728
<SECURITIES> 0
<RECEIVABLES> 140,097
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 140,825
<PP&E> 7,115,383
<DEPRECIATION> 1,098,679
<TOTAL-ASSETS> 6,169,974
<CURRENT-LIABILITIES> 30,227
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,139,747
<TOTAL-LIABILITY-AND-EQUITY> 6,169,747
<SALES> 804,950
<TOTAL-REVENUES> 810,989
<CGS> 249,371
<TOTAL-COSTS> 656,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 154,318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 154,318
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
