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, 1998
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 81
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.
2
<PAGE>
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.
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.
3
<PAGE>
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, 1999, of the Partnership
which was conducted in the Continental United States.
<TABLE>
<C> <C> <C> <C> <C> <C> <C>
Development Wells
Gross Net
Productive Dry Total Productive Dry Total
Period Ended
March 15, 1999. . . 38 5 43 34.42 4.99 39.41
</TABLE>
The Partnership has not participated in any exploratory wells.
No additional drilling activity is planned.
4
<PAGE>
Productive Wells
The following table summarizes the Partnership's total
gross and net interests in productive wells at March 15, 1999.
<TABLE>
<C> <C> <C> <C> <C>
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
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
38 34.4200
</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.
5
<PAGE>
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.
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, 1998, 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.
6
<PAGE>
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>
<C> <C> <C> <C>
Years ended December 31,
1998 1997 1996
Oil and Gas Sales . . . . . . . . . . . . . . . . .$622,277 850,100 $1,136,669
Costs and Expenses . . . . . . . . . . . . . . . 3,311,879 647,676 1,994,230
Net Income (loss) . . . . . . . . . . . . . . . . (2,683,629) 207,697 (854,991)
Allocation of Net Income (loss):
Managing General Partner. . . . . . . . . . (541,366) 35,438 (171,805)
Limited and Additional General Partners . .(2,142,263) 172,259 (683,186)
Per Limited and Additional
General Partner Unit . . . . . . . . . . . (5,676) 456 (1,810)
Total Assets. . . . . . . . . . . . . . . . . . . 2,566,214 5,749,320 6,206,085
Distributions:
Managing General Partner. . . . . . . . . . 93,732 127,070 158,640
Limited and Additional General Partners . . 402,072 540,267 638,753
</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, 1995. Forty-three wells have been drilled, of which thirty-eight have
been completed as producing wells. No additional wells will be drilled.
The Partnership had net working capital at December 31, 1998 of $57,525.
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
1998 Compared to 1997
Oil and gas sales decreased 26.8% in 1998 compared to 1997 due to
decreased sales volumes and lower average sales prices of natural gas. The
net loss of $2,638,629 was primarily due to the impairment charge for oil
and gas properties which amounted to $2,712,304 in 1998. This impairment
resulted from net capitalized costs exceeding extimated undiscounted future
net cash flow. The impairment was based on estimated fair value which
considered future discounted cash flows. This charge did not effect cash
distributions to the partners which decreased from $667,337 in 1997 to
$495,804 in 1998 as a result of the decreased volumes and average sales
prices of natural gas.
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.
7
<PAGE>
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
State of Readiness
The Year 2000 Issue is the risk that computer programs using two-digit
data fields will fail to properly recognize the year 2000, with the result
being business interruption due to computer system failures by PDC's
software or hardware or that of government entities, service providers and
vendors. PDC, who administers all aspects of the Partnership, has assessed
the extent of the Year 2000 Issues affecting PDC and the Partnership. PDC
believes that the new computer system including operating software installed
during 1998 along with modifications made by PDC's computer technicians have
addressed the dating system flaw inherent in most operating systems. PDC
has completed a remediation plan and believes it is currently fully Year
2000 compliant.
PDC has initiated formal communications with its significant suppliers
and service providers to determine the extent to which PDC may be vulnerable
to their failure to correct their own Year 2000 issues. It is expected that
full identification will be completed by April 30, 1999. To the extent that
responses to Year 2000 readiness are unsatisfactory, PDC intends to take
appropriate action, including identifying alternative suppliers and service
providers who have demonstrated Year 2000 readiness.
Cost of Readiness
PDC does not currently expect to charge the Partnership for any portion
of PDC's cost to become Year 2000 Compliant.
Risks of Year 2000 Issues
PDC presently believes the Year 2000 Issue will not present a materially
adverse risk to PDC's or the Partnership's future results of operations,
liquidity, and capital resources. However, if the level of the timely
compliance by key suppliers or service providers is not sufficient, the Year
2000 Issue could have a material impact on PDC's or the Partnership's
operations including, but not limited to, increased operating costs, loss
of customers or suppliers, loss of accounting functions, including well
revenue distributions, or other significant disruptions to PDC's or the
Partnership's business.
Contingency Plan
PDC has a contingency plan, and will implement it on any system that
remains non-compliant at December 31, 1999, if any.
New Accounting Standards
Statement of Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS No. 133), was issued by the
Financial Accounting Standards Board in June, 1998. Statement 133
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts. The Partnership must
adopt SFAS No. 133 by January 1, 2000; however, early adoption is permitted.
On adoption, the provisions of SFAS No. 133 must be applied prospectively.
At the present time, the Partnership cannot determine the impact that SFAS
No. 133 will have on its financial statements upon adoption, as such impact
will be based on the extent of derivative instruments, such as natural gas
futures and options contracts, outstanding at the date of adoption.
8<PAGE>
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 1998 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.
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>
<C> <C> <C> <C>
Periods Ended December 31,
1998 1997 1996
Operator's charges $177,562 187,565 269,792
Tax return preparation 4,955 6,295 3,605
Direct administrative cost 1,187 1,384 1,614
</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.
9<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, 1999
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, 1999
/s/ Steven R. Williams President and Director
Steven R. Williams March 24, 1999
/s/ Dale G. Rettinger Executive Vice President,
Dale G. Rettinger Treasurer and Director March 24, 1999
(principal financial and
accounting officer)
/s/ Roger J. Morgan Secretary and Director
Roger J. Morgan March 24, 1999
10
<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, 1998, 1997 and 1996
(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, 1998 and 1997 F-4
Statements of Operations - Years Ended December 31, 1998,
1997 and 1996 F-5
Statements of Partners' Equity - Years Ended December 31, 1998,
1997 and 1996 F-6
Statements of Cash Flows - Years Ended December 31, 1998,
1997 and 1996 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, 1998 and 1997, and the results of its
operations and its cash flows for each of the years in the three year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Pittsburgh, Pennsylvania
March 23, 1999
F-3<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Balance Sheets
December 31, 1998 and 1997
<TABLE>
<C> <C> <C>
Assets 1998 1997
Current assets:
Cash $ 2,652 1,847
Accounts receivable - oil and gas revenues 90,352 166,893
Total current assets 93,004 168,740
Oil and gas properties,
successful efforts method
(Notes 3 and 5):
Oil and gas properties 4,462,632 7,174,936
Less accumulated depreciation, depletion,
and amortization 1,989,422 1,594,356
2,473,210 5,580,580
$2,566,214 5,749,320
Current Liabilities and Partners' Equity
Current liabilities:
Accrued expenses $ 35,479 39,152
Total current liabilities 35,479 39,152
Partners' equity 2,530,735 5,710,168
$2,566,214 5,749,320
</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, 1998, 1997 and 1996
<TABLE>
<C> <C> <C> <C>
1998 1997 1996
Revenues:
Sales of oil and gas $ 622,277 850,100 1,136,669
Transportation revenue 2,972 2,438 -
Interest income 3,001 2,835 2,570
628,250 855,373 1,139,239
Expenses (note 3):
Lifting cost 177,562 187,565 269,792
Independent audit fee 6,428 7,656 7,230
Franchise taxes 14,377 16,020 15,190
Tax return preparation 4,955 6,295 3,605
Direct administrative cost 1,187 1,384 1,614
Independent engineering cost - - 7,415
Depreciation, depletion
and amortization 395,066 428,756 628,636
Loss on impairment of oil and
gas properties 2,712,304 - 1,060,748
3,311,879 647,676 1,994,230
Net income (loss) $(2,683,629) 207,697 (854,991)
Net income (loss) per limited
and additional
general partner unit $ (5,676) 456 (1,810)
</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, 1998, 1997 and 1996
<TABLE>
<C> <C> <C> <C>
Limited and Managing
additional general
general partners partner Total
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
Net loss (2,142,263) (541,366)(2,683,629)
Distributions to partners (402,072) (93,732) (495,804)
Balance, December 31, 1998 $2,023,471 507,264 2,530,735
</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, 1998, 1997 and 1996
<TABLE>
<C> <C> <C> <C>
1998 1997 1996
Cash flows from operating activities:
Net income (loss) $(2,683,629) 207,697 (854,991)
Adjustments to reconcile net income
(loss) to net cash provided from
operating activities:
Depreciation, depletion and
amortization 395,066 428,756 628,636
Loss on impairment of oil
and gas properties 2,712,304 - 1,060,748
Changes in operating assets and
liabilities:
Decrease (increase) in accounts
receivable - oil and gas revenues 76,541 28,936 (45,417)
(Decrease) increase in
accrued expenses (3,673) 2,875 1,585
Net cash provided from
operating activities 496,609 668,264 790,561
Cash flows from financing activities:
Distributions to partners (495,804) (667,337) (797,393)
Net cash used by
financing activities (495,804) (667,337) (797,393)
Net increase (decrease) in cash 805 927 (6,832)
Cash at beginning of period 1,847 920 7,752
Cash at end of period $ 2,652 1,847 920
</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, 1998, 1997 and 1996
(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, 1998 and 1997 by the Managing General
Partner's petroleum engineers and at December 31, 1996 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 in each years calculation 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 1998 and 1996 the loss on
impairment of oil and gas properties as reflected in the Statements
of Operations amounted to $2,712,304 and $1,060,748, respectively.
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.
(Continued)
F-8
<PAGE>
PDC 1994-D LIMITED PARTNERSHIP
(A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
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:
Years ended December 31,
1998 1997 1996
Lifting costs $177,562 $187,565 $269,792
Tax return preparation 4,955 6,295 3,605
Direct administrative cost 1,187 1,384 1,614
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 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.
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. No such sales have occurred.
(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,
19981997
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 (3,773,052) (1,060,748)
$ 4,462,632 7,174,936
There were no costs incurred for the Partnership's oil and gas
activities during the years ended December 31, 1998, 1997 or 1996.
(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, 1998 and 1997, the income tax basis of the
partnership's oil and gas properties was $1,216,261 and $1,311,183,
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
the Managing General Partner's petroleum engineers at December 31,
1998 and 1997 by an independent petroleum engineer, Wright & Company,
Inc. at December 31, 1996. 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
Revisions of prior estimates (751,526)
Production (251,094)
Proved developed reserves as of
December 31, 1998 3,546,599
F-12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,652
<SECURITIES> 0
<RECEIVABLES> 90,352
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 93,004
<PP&E> 4,462,632
<DEPRECIATION> 1,989,422
<TOTAL-ASSETS> 2,566,214
<CURRENT-LIABILITIES> 35,479
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,566,214
<SALES> 622,277
<TOTAL-REVENUES> 628,250
<CGS> 177,562
<TOTAL-COSTS> 3,311,879
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,683,629)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,683,629)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,683,629)
<EPS-PRIMARY> 0
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