CONFORMED COPY
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 033-70568
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transaction period from to
PDC 1994-D LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
West Virginia 55-0737400
(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 1994-D Limited Partnership ("the Partnership") is a limited
partnership formed on December 30, 1994 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 30, 1994, the
Partnership has been engaged in onshore, domestic gas exploration
exclusively in the northern Appalachian Basin. A total of 9 limited
partners contributed initial capital of $90,000; a total of 519 additional
general partners contributed initial capital of $7,458,761; and PDC
(Managing General Partner) contributed $1,651,292 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 80%
Managing General Partner 20%
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 80% by the additional general and
limited partners and 20% 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 43 gross wells and will
continue to operate and produce its 39 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 to be 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 30, 1994 (date of inception) to March 15, 1997, of the Partnership
which was conducted in the Continental United States.
Development Wells
Gross Net
Productive Dry Total Productive Dry Total
Period Ended
March 15, 1997. . . 39 4 43 35.42 3.99 39.41
The Partnership has not participated in any exploratory wells. No
additional drilling activity is planned.
3<PAGE>
Productive Wells
The following table summarizes the Partnership's total gross and net
interests in productive wells at March 15, 1997.
<TABLE>
<S> <S> <S> <S> <S>
Productive Gas Wells
Well Name County State Gross Net
Pond Fork #121 Boone WV 1 .9225
Vandevender #2 Taylor WV 1 .9975
Vandevender #3 Taylor WV 1 .9975
Mitchell #261 Clearfield PA 1 .7475
Vandevender #4 Taylor WV 1 .9975
Mitchell #272 Clearfield PA 1 .7475
Irvin #258 Clearfield PA 1 .7475
Veltri #1, A. Taylor WV 1 .9975
Kaufman #221 Clearfield PA 1 .7475
Graham #217 Clearfield PA 1 .7475
Berwind #1804 McDowell WV 1 .9645
Smith #1, J. Barbour WV 1 .9975
Stout #2, J. Doddridge WV 1 .9975
Mitchell #266 Clearfield PA 1 .7475
Berwind #1803 McDowell WV 1 .9645
Vandevender #5 Taylor WV 1 .9975
Berwind #1808 McDowell WV 1 .9645
Mitchell #265 Clearfield PA 1 .7475
Berwind #1801 McDowell WV 1 .9645
Willis #2, F. Taylor WV 1 .9975
Winters #3, S. Washington OH 1 .9975
Bumgardner #1 Harrison WV 1 .9975
Ware #1, J. Barbour WV 1 .9975
Berwind #1802 McDowell WV 1 .9645
Price #1 Clearfield PA 1 .7475
McDaniel #1 Taylor WV 1 .9975
Berwind #1806 McDowell WV 1 .9645
Graham #229 Clearfield PA 1 .7475
Zinn #2, J. Taylor WV 1 .9975
Winters #4 Washington OH 1 .9975
Berwind #1807 McDowell WV 1 .9645
Graham #231 Clearfield PA 1 .7475
Mangelo #2 Taylor WV 1 .9975
Zirkle #1, W. Barbour WV 1 .9975
Thompson Land #5 Clay WV 1 .9975
Compton #2 Taylor WV 1 .9975
Zinn #4 Taylor WV 1 .9975
Ware #2A, J. Barbour WV 1 .9975
Berwind #1819 McDowell WV 1 .3200
39 35.4200
</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.
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.
4<PAGE>
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.
No matters were submitted to a vote of the security holders of the
Partnership for the period from December 30, 1994 (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 1994-D Limited Partnership had one Managing
General Partner, 9 Limited Partners who fully paid for 4.50 units at $20,000
per unit of limited partnership interests and a total of 519 Additional
General Partners who fully paid for 372.938 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>
Periods ended December 31,
1996 1995 1994
Oil and Gas Sales . . . . . . . . . . . . . . . . . .$1,136,669 $582,423 $ -
Costs and Expenses . . . . . . . . . . . . . . . 1,994,230 723,043 202,219
Net Loss . . . . . . . . . . . . . . . . . . . . 854,991 133,005 202,219
Allocation of Net Loss:
Managing General Partner. . . . . . . . . . 171,805 26,601 2,700
Limited and Additional General Partners . . 683,186 106,404 199,519
Per Limited and Additional
General Partner Unit 1,810 282 529
Total Assets. . . . . . . . . . . . . . . . . . . 6,206,085 7,856,884 8,256,458
Distributions:
Managing General Partner. . . . . . . . . . .158,640 57,552 -
Limited and Additional General Partners . . .638,753 230,209 -
</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 $7,548,761 and the Managing General Partner
contributed $1,651,292 in accordance with the Agreement. Syndication and
management fee costs of $943,595 were incurred leaving available capital of
$8,256,458 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. Forty-three wells have been drilled, of which thirty-nine have
been completed as producing wells.
The Partnership had net working capital at December 31, 1996 of
$160,472.
Operations are expected to be conducted with available funds and
revenues generated from oil and gas activities. No bank borrowings are
anticipated.
5
<PAGE>
Results of Operations
1996 Compared to 1995
Oil and gas sales increased 95.2% in 1996 compared to 1995 due to
increased sales volumes (1995 was not a full production year, see note
below) and higher average sales prices of natural gas. The net loss of
$845,911 in 1996 was primarily due to the impairment charge for oil and gas
properties. This charge did not affect cash distributions to the partners
which increased from $287,761 in 1995 to $797,393 in 1996.
1995 Compared to 1994
The Partnership's wells were drilled and completed during the first
quarter of 1995 with production starting in the second quarter. Total
natural gas sales for this year were $582,423 with cash distributions to the
partners of $287,761.
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 periods listed below:
<TABLE>
<S> <S> <S> <S>
Periods Ended December 31,
1996 1995 1994
Footage Drilling Contracts, Services,
Chemicals, Supplies, and Equipment - - $8,235,684
Syndication and management fee - - 943,595
Operator's charges $269,792 150,908 -
Tax return preparation 3,605 3,560 4,500
Direct administrative cost 1,614 1,410 1,250
</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>
CONFORMED COPY
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 1994-D 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 1994-D 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
Period from December 30, 1994 (Date of Inception)
to December 31, 1994
(With Independent Auditors' Report Thereon)
F-1<PAGE>
PDC 1994-D 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 and 1995
and Period from December 30, 1994 (Date of Inception)
to December 31, 1994 F-5
Statements of Partners' Equity - Years Ended December 31, 1996 and 1995
and Period from December 30, 1994 (Date of Inception)
to December 31, 1994 F-6
Statements of Cash Flows - Years Ended December 31, 1996 and 1995
and Period from December 30, 1994 (Date of Inception)
to December 31, 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 1994-D Limited Partnership:
We have audited the financial statements of PDC 1994-D 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 1994-D 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 and 1995
and the period from December 30, 1994 (date of inception) to December 31,
1994, in conformity with generally accepted accounting principles.
As discussed in note 1 to the financial statements, effective January 1,
1996, the Partnership adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of."
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
March 20, 1997
F-3<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Balance Sheets
December 31, 1996 and 1995
<TABLE>
<S> <S> <S>
Assets 1996 1995
Current assets:
Cash $ 920 7,752
Accounts receivable - oil and gas revenues 195,829 150,412
Total current assets 196,749 158,164
Oil and gas properties,
successful efforts method
(Notes 3 and 5):
Oil and gas properties 7,174,936 8,235,684
Less accumulated depreciation, depletion,
and amortization 1,165,600 536,964
6,009,336 7,698,720
$6,206,085 7,856,884
Current Liabilities and Partners' Equity
Current liabilities:
Accrued expenses $ 36,277 34,692
Total current liabilities 36,277 34,692
Partners' equity 6,169,808 7,822,192
$6,206,085 7,856,884
</TABLE>
See accompanying notes to financial statements.
F-4<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Statements of Operations
Years Ended December 31, 1996 and 1995 and the
Period from December 30, 1994 (Date of Inception) to December 31, 1994
<TABLE>
<S> <S> <S> <S>
1996 1995 1994
Revenues:
Sales of oil and gas $ 1,136,669 582,423 -
Transportation revenue - 6,802 -
Interest income 2,570 813 -
1,139,239 590,038 -
Expenses (note 3):
Lifting cost 269,792 150,908 -
Management fee - - 188,719
Independent audit fee 7,230 7,204 7,000
Franchise taxes 15,190 17,497 750
Tax return preparation 3,605 3,560 4,500
Direct administrative cost 1,614 1,410 1,250
Independent engineering cost 7,415 5,500 -
Depreciation, depletion and amortization 628,636 536,964 -
Loss on impairment of oil and
gas properties 1,060,748 - -
1,994,230 723,043 202,219
Net loss $ (854,991) $(133,005) (202,219)
Net loss per limited
and additional
general partner unit $ (1,810) $ (282) (529)
</TABLE>
See accompanying notes to financial statements.
F-5<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Statements of Partners' Equity
Years Ended December 31, 1996 and 1995 and the
Period from December 30, 1994 (Date of Inception) to December 31, 1994
<TABLE>
<S> <S> <S> <S>
Limited
and additional Managing
general partners general partner Total
Partners' initial capital
contributions $7,548,761 1,651,292 9,200,053
Syndication costs (754,876) - (754,876)
Net loss (199,519) (2,700) (202,219)
Balance, December 31, 1994 6,594,366 1,648,592 8,242,958
Net loss
Distributions to partners (106,404) (26,601) (133,005)
(230,209) (57,552) (287,761)
Balance, December 31, 1995 6,257,753 1,564,439 7,822,192
Net loss (683,186) (171,805) (854,991)
Distributions to partners (638,753) (158,640) (797,393)
Balance, December 31, 1996 $4,935,814 1,233,994 6,169,808
</TABLE>
See accompanying notes to financial statements.
F-6<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Statements of Cash Flows
Years Ended December 31, 1996 and 1995 and the
Period from December 30, 1994 (Date of Inception) to December 31, 1994
<TABLE>
<S> <S> <S> <S>
1996 1995 1994
Cash flows from operating activities:
Net loss $ (854,991) (133,005) (202,219)
Adjustments to reconcile net
loss to net cash provided from
(used by) operating activities:
Depreciation, depletion and
amortization 628,636 536,964 -
Loss on impairment of oil
and gas properties 1,060,748 - -
Changes in operating assets and
liabilities:
Increase in accounts receivable -
oil and gas revenues (45,417) (150,412) -
Increase in accrued expenses 1,585 21,192 13,500
Net cash provided from
(used by) operating activities 790,561 274,739 (188,719)
Cash flows from investing activities:
Expenditures for unevaluated
oil and gas properties - - (8,235,684)
Net cash used by
investing activities - - (8,235,684)
Cash flows from financing activities:
Limited and additional general
partner contributions - - 7,548,761
Managing General Partner contribution - - 1,651,292
Syndication cost paid - - (754,876)
Distributions to partners (797,393) (287,761) -
Net cash (used by) provided from
financing activities (797,393) (287,761) 8,445,177
Net (decrease) increase in cash (6,832) (13,022) 20,774
Cash at beginning of period 7,752 20,774 -
Cash at end of period $ 920 7,752 20,774
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements
Years Ended December 31, 1996, 1995 and the
Period from December 30, 1994 (date of inception) to December 31, 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 1994-D 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 at year end by
an independent petroleum engineer, Wright & Company, Inc. 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.
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 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
(Continued)
F-8<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
amount of the asset, an impairment loss is recognized. Measurement
of an impairment loss for long-lived assets and identifiable tangibles
is based on the fair value of an asset. During 1996 the loss on
impairment of oil and gas properties as reflected in the Statement of
Operations amounted to $1,060,748.
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 disclosures of contingent assets and
liabilities 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 30,
1994 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 the Northern Appalachian
Basin.
Purchasers of partnership units subscribed to and fully paid for 4.5
units of limited partner interests and 372.938 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 20% 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 completion of the drilling phase of the Partnership's wells, all
additional general partners units are converted into units of limited
partner interests 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:
Periods ended December 31,
1996 1995 1994
Drilling, completion
and lease costs - - $8,235,684
Offering and organization costs
(includes reimbursements of
commissions, and management fee) - - 943,595
Lifting costs $269,792 $150,908 -
Tax return preparation 3,605 3,560 4,500
Direct administrative cost 1,614 1,410 1,250
F-9<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
(4) Allocation
The following table summarizes the participation of the Managing General
Partner and the Investor Partners, taking account of the Managing
General Partner's capital contribution equal to 20% of the Initial
Operating Capital, in the costs and revenues of the Partnership.
Managing
Investor General
Partnership Costs Partners Partner
Broker-dealer Commissions and Expenses(1). . 100% 0%
Management Fee . . . . . . . . . . . . . . . 100% 0%
Undeveloped Lease Costs. . . . . . . . . . . 0% 100%
Drilling and Completion Costs. . . . . . . . 80% 20%
Tangible Equipment . . . . . . . . . . . . . 0% 100%
Intangible Drilling and Development Costs. . 100% 0%
Operating Costs(2) . . . . . . . . . . . . . 80% 20%
Direct Costs(3). . . . . . . . . . . . . . . 80% 20%
Administrative Costs . . . . . . . . . . . . 0% 100%
Partnership Revenues
Sale of Oil and Gas Production(4). . . . . . 80% 20%
Sale of Productive Properties(5) . . . . . . 80% 20%
Sale of Undeveloped Leases . . . . . . . . . 80% 20%
Interest Income. . . . . . . . . . . . . . . 80% 20%
____________________
(1) Organization and Offering Costs, net of the Dealer Manager
commissions, discounts, and due diligence expenses, of the
Partnerships will be paid by the Managing General Partner and not
from Partnership funds. In addition, Organization and Offering
Costs in excess of 10% of Subscriptions will be paid by the Managing
General Partner, without recourse to the Partnership.
(2) Represents Operating costs incurred after the completion of
productive wells, including monthly per-well charges paid to the
Managing General Partner.
(3) The Managing General Partner will receive monthly reimbursement from
the Partnership for the direct costs incurred by the Managing
General Partner on behalf of the Partnership.
(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.
F-10
<PAGE>
PDC 1994-D 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 as follows:
December 31,
1996 1995
Lease acquisition costs $ 232,411 232,411
Intangible development costs 6,667,795 6,667,795
Well equipment 1,335,478 1,335,478
Impairment charge (1,060,748) -
$ 7,174,936 8,235,684
The following costs were incurred for the Partnership's oil and gas
activities:
Periods ended December 31,
1996 1995 1994
Costs capitalized:
Unevaluated oil
and gas properties $ - - 8,235,684
$ - - 8,235,684
(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 $1,406,105 and $1,501,027, respectively.
F-11
<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
(7) Supplemental Reserve Information (Unaudited)
Proved oil and gas reserves of the Partnership have been estimated by an
independent petroleum engineer, Wright & Company, Inc. 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 oil and gas
reserves is shown below:
Natural gas
(mcf)
Proved developed reserves as of
December 30, 1994 (date of inception) -
Extensions, discoveries and other additions 6,162,998
Production (285,834)
Proved developed reserves as of
December 31, 1995 5,877,164
Revisions of prior estimates (885,225)
Production (392,496)
Proved developed reserves as of
December 31, 1996 4,599,443
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> 920
<SECURITIES> 0
<RECEIVABLES> 195,829
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 196,749
<PP&E> 7,174,936
<DEPRECIATION> 1,165,600
<TOTAL-ASSETS> 6,206,085
<CURRENT-LIABILITIES> 36,277
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,169,808
<TOTAL-LIABILITY-AND-EQUITY> 6,206,085
<SALES> 1,136,669
<TOTAL-REVENUES> 1,139,239
<CGS> 269,792
<TOTAL-COSTS> 1,994,230
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (854,991)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (854,991)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
