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, 1997
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 75
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, 1998, 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, 1998. . . 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, 1998.
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
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.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND SECURITY HOLDER MATTERS.
At December 31, 1997, 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 $20,000 per unit of
additional general partnership interests. No established public trading
market exists for the interests.
Limited and additional general partnership interests are transferable,
however no assignee of an interest in the Partnership can become a
substituted partner without the written consent of the transferor and the
Managing General Partner.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data presented below has been derived from audited
financial statements of the Partnership appearing elsewhere herein.
<TABLE>
<S> <S> <S> <S>
Years ended December 31,
1997 1996 1995
Oil and Gas Sales . . . . . . . . . . . . . . . . .$ 850,100 $1,136,669 $ 582,423
Costs and Expenses . . . . . . . . . . . . . . . 647,676 1,994,230 723,043
Net Income (loss) . . . . . . . . . . . . . . . . 207,697 (854,991) (133,005)
Allocation of Net Income (loss):
Managing General Partner. . . . . . . . . . 35,438 (171,805) (26,601)
Limited and Additional General Partners . . 172,259 (683,186) (106,404)
Per Limited and Additional
General Partner Unit . . . . . . . . . . . 456 (1,810) (282)
Total Assets. . . . . . . . . . . . . . . . . . . 5,749,320 6,206,085 7,856,884
Distributions:
Managing General Partner. . . . . . . . . . 127,070 158,640 57,552
Limited and Additional General Partners . . 540,267 638,753 230,209
</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, 1997. Forty-three wells have been drilled, of which thirty-nine have
been completed as producing wells. No additional wells will be drilled.
The Partnership had net working capital at December 31, 1997 of $129,588.
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
1997 Compared to 1996
Oil and gas sales decreased 25.2% in 1997 compared to 1996 due to lower
average sales prices and sales volumes. Cash distributions to the partners
decreased from $797,393 in 1996 to $667,337 during 1997 due to the factors
outlined above.
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) 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
impairment resulted from net capitalized costs exceeding estimated
undiscounted future net cash flow. The impairment was based on estimated fair
value which considered future discounted cash flows. This charge did not
affect cash distributions to the partners which increased from $287,761 in
1995 to $797,393 in 1996.
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.
Year 2000 Issue
PDC, who administers all aspects of the Partnership, has assessed the
extent of 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. PDC expects to
be fully Year 2000 Compliant by the end of 1998. PDC does not currently
expect to charge the Partnership for any portion of PDC's cost to become Year
2000 Compliant.
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 1997 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,
1997 1996 1995
Operator's charges $187,565 269,792 150,908
Tax return preparation 6,295 3,605 3,560
Direct administrative cost 1,384 1,614 1,410
</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 23, 1998
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 23, 1998
/s/ Steven R. Williams President and Director
Steven R. Williams March 23, 1998
/s/ Dale G. Rettinger Executive Vice President,
Dale G. Rettinger Treasurer and Director March 23, 1998
(principal financial and
accounting officer)
/s/ Roger J. Morgan Secretary and Director
Roger J. Morgan March 23, 1998
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, 1997, 1996 and 1995
(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, 1997 and 1996 F-4
Statements of Operations - Years Ended December 31, 1997,
1996 and 1995 F-5
Statements of Partners' Equity - Years Ended December 31, 1997,
1996 and 1995 F-6
Statements of Cash Flows - Years Ended December 31, 1997,
1996 and 1995 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, 1997 and 1996, and the results of its
operations and its cash flows for each of the years in the three year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
March 19, 1998
F-3<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Balance Sheets
December 31, 1997 and 1996
<TABLE>
<S> <S> <S>
Assets 1997 1996
Current assets:
Cash $ 1,847 920
Accounts receivable - oil and gas revenues 166,893 195,829
Total current assets 168,740 196,749
Oil and gas properties,
successful efforts method
(Notes 3 and 5):
Oil and gas properties 7,174,936 7,174,936
Less accumulated depreciation, depletion,
and amortization 1,594,356 1,165,600
5,580,580 6,009,336
$5,749,320 6,206,085
Current Liabilities and Partners' Equity
Current liabilities:
Accrued expenses $ 39,152 36,277
Total current liabilities 39,152 36,277
Partners' equity 5,710,168 6,169,808
$5,749,320 6,206,085
</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, 1997, 1996 and 1995
<TABLE>
<S> <S> <S> <S>
1997 1996 1995
Revenues:
Sales of oil and gas $ 850,100 1,136,669 582,423
Transportation revenue 2,438 - 6,802
Interest income 2,835 2,570 813
855,373 1,139,239 590,038
Expenses (note 3):
Lifting cost 187,565 269,792 150,908
Independent audit fee 7,656 7,230 7,204
Franchise taxes 16,020 15,190 17,497
Tax return preparation 6,295 3,605 3,560
Direct administrative cost 1,384 1,614 1,410
Independent engineering cost - 7,415 5,500
Depreciation, depletion
and amortization 428,756 628,636 536,964
Loss on impairment of oil and
gas properties - 1,060,748 -
647,676 1,994,230 723,043
Net income (loss) $ 207,697 (854,991) (133,005)
Net income (loss) per limited
and additional
general partner unit $ 456 (1,810) (282)
</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, 1997, 1996 and 1995
<TABLE>
<S> <S> <S> <S>
Limited and Managing
additional general
general partners partner Total
Balance, December 31, 1994 $6,594,366 1,648,592 8,242,958
Net loss (106,404) (26,601) (133,005)
Distributions to partners (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
Net income 172,259 35,438 207,697
Distributions to partners (540,267) (127,070) (667,337)
Balance, December 31, 1997 $4,567,806 1,142,362 5,710,168
</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, 1997, 1996 and 1995
<TABLE>
<S> <S> <S> <S>
1997 1996 1995
Cash flows from operating activities:
Net income (loss) $ 207,697 (854,991) (133,005)
Adjustments to reconcile net income
(loss) to net cash provided from
operating activities:
Depreciation, depletion and
amortization 428,756 628,636 536,964
Loss on impairment of oil
and gas properties - 1,060,748 -
Changes in operating assets and
liabilities:
Decrease (increase) in accounts
receivable - oil and gas revenues 28,936 (45,417) (150,412)
Increase in accrued expenses 2,875 1,585 21,192
Net cash provided from
operating activities 668,264 790,561 274,739
Cash flows from financing activities:
Distributions to partners (667,337) (797,393) (287,761)
Net cash used by
financing activities (667,337) (797,393) (287,761)
Net increase (decrease) in cash 927 (6,832) (13,022)
Cash at beginning of period 920 7,752 20,774
Cash at end of period $ 1,847 920 7,752
</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, 1997, 1996 and 1995
(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 December 31, 1997 by the Managing General
Partner's petroleum engineers and at December 31, 1996 and 1995 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. During 1996 the loss on impairment
of oil and gas properties as reflected in the Statements of
Operations amounted to $1,060,748.
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.
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.
(Continued)
F-8<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
(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:
<TABLE>
<S> <S> <S> <S>
Years ended December 31,
1997 1996 1995
Lifting costs $187,565 $269,792 $150,908
Tax return preparation 6,295 3,605 3,560
Direct administrative cost 1,384 1,614 1,410
</TABLE>
(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.
<TABLE>
<S> <S> <S>
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%
F-9
<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
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%
____________________
</TABLE>
[FN]
(1) Organization and Offering Costs, net of the Dealer Manager
commissions, discounts, and due diligence expenses, of the
Partnerships were paid by the Managing General Partner and not from
Partnership funds. In addition, Organization and Offering Costs in
excess of 10% of Subscriptions were 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 receives 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 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.
(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. No such sales have occurred.
</FN>
F-10
<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
(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:
<TABLE>
<S> <S> <S>
December 31,
1997 1996
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) (1,060,748)
$ 7,174,936 7,174,936
</TABLE>
There were no costs incurred for the Partnership's oil and gas
activities during the years ended December 31, 1997, 1996 or 1995.
(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, 1997 and 1996, the income tax basis of the partnership's
oil and gas properties was $1,311,183 and $1,406,105, respectively.
(7) Supplemental Reserve Information (Unaudited)
Proved oil and gas reserves of the Partnership have been estimated by the
Managing General Partner's petroleum engineers at December 31, 1997 and
by an independent petroleum engineer, Wright & Company, Inc. at December
31, 1996 and 1995. These reserves have been prepared in compliance with
the Securities and Exchange Commission rules based on year end prices.
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 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
Revisions of prior estimates 273,660
Production (323,884)
Proved developed reserves as of
December 31, 1997 4,549,219
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,847
<SECURITIES> 0
<RECEIVABLES> 166,893
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 168,740
<PP&E> 7,174,936
<DEPRECIATION> 1,594,356
<TOTAL-ASSETS> 5,749,320
<CURRENT-LIABILITIES> 39,152
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,749,320
<SALES> 850,100
<TOTAL-REVENUES> 855,373
<CGS> 187,565
<TOTAL-COSTS> 647,676
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 207,697
<INCOME-TAX> 0
<INCOME-CONTINUING> 207,697
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 207,697
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
