CONFORMED COPY QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the period ended March 31, 1995 or [ ] Transition Report Pursuant to Section 13 of 15(d) of the Securities and Exchange Act of 1934 For the transition period from to Commission file number 0-7246 I.R.S. Employer Identification Number 95-2636730 PETROLEUM DEVELOPMENT CORPORATION (A Nevada Corporation) 103 East Main Street Bridgeport, WV 26330 Telephone: (304) 842-6256 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes XX No Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 11,040,627 shares of the Company's Common Stock ($.01 par value) were outstanding as of March 31, 1995.
PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES INDEX PART I - FINANCIAL INFORMATION Page No. Item 1. Financial Statements Independent Auditors' Review Report 1 Condensed Consolidated Balance Sheets - March 31, 1995 and December 31, 1994 2 Condensed Consolidated Statements of Operations - Three Months Ended March 31, 1995 and 1994 4 Condensed Consolidated Statements of Cash Flows-Three Months Ended March 31, 1995 and 1994 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Statement by Management Concerning Review of Interim Financial Information by Independent Certified Public Accountants 8 PART II OTHER INFORMATION Item l. Legal Proceedings 9 Item 6. Exhibits and Reports on Form 8-K 9 PART I - FINANCIAL INFORMATION Independent Auditors' Review Report The Board of Directors Petroleum Development Corporation We have reviewed the accompanying condensed consolidated balance sheet of Petroleum Development Corporation and subsidiaries as of March 31, 1995, and the related condensed consolidated statements of operations and cash flows for the three-month periods ended March 31, 1995 and 1994. These financial statements are the responsibility of the company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Petroleum Development Corporation and subsidiaries as of December 31, 1994 and the related consolidated statements of operations, retained earnings, and cash flows for the year then ended (not presented herein); and in our report dated March 15, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1994, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. KPMG PEAT MARWICK LLP Pittsburgh, Pennsylvania May 9, 1995 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets March 31, 1995 and December 31, 1994 ASSETS 1995 1994 (Unaudited) Current assets: Cash and cash equivalents $ 4,033,900 $ 8,906,800 Accounts and notes receivable 1,893,600 1,975,400 Inventories 344,400 390,200 Prepaid expenses 731,400 850,600 Total current assets 7,003,300 12,123,000 Properties and equipment 44,890,200 44,959,900 Less accumulated depreciation, depletion, and amortization 19,738,300 19,204,400 25,151,900 25,755,500 Other assets 384,500 446,800 $32,539,700 $38,325,300 (Continued) -2- PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets, Continued March 31, 1995 and December 31, 1994 LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994 (Unaudited) Current liabilities: Current maturities of long-term debt $ 24,900 $ 36,300 Accounts payable and accrued expenses 5,004,400 4,133,800 Advances for future drilling contracts 1,954,400 9,199,900 Funds held for future distribution 441,900 366,700 Total current liabilities 7,425,600 13,736,700 Long-term debt, excluding current maturities 2,800,000 3,100,000 Other liabilities 353,500 328,600 Deferred income taxes 2,851,600 2,779,500 Stockholders' equity: Common stock 110,400 110,400 Additional paid-in capital 6,873,600 6,873,600 Retained earnings 12,125,000 11,396,500 Total stockholders' equity 19,109,000 18,380,500 $32,539,700 $38,325,300 See accompanying notes to condensed consolidated financial statements. -3- PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations Three Months ended March 31, 1995 and 1994 (Unaudited) 1995 1994 Revenues: Oil and gas well drilling operations $7,293,700 $6,527,300 Oil and gas sales 1,162,000 1,302,400 Well operations and pipeline income 1,002,600 958,000 Other income 78,700 46,200 9,537,000 8,833,900 Costs and expenses: Cost of oil and gas well drilling operations 6,135,800 6,061,300 Oil and gas purchases and production costs 1,310,300 1,034,600 General and administrative expenses 450,300 498,100 Depreciation, depletion, and amortization 588,400 457,100 Interest 83,400 68,600 8,568,200 8,119,700 Income before income taxes 968,800 714,200 Income taxes 240,300 160,700 Net income $ 728,500 $ 553,500 Earnings per common and common equivalent share $ .06 $ .05 See accompanying notes to condensed consolidated financial statements -4- PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 1995 and 1994 (Unaudited) 1995 1994 Cash flows from operating activities: Net income $ 728,500 $ 553,500 Adjustments to net income to reconcile to cash provided by operating activities: Deferred federal income taxes 72,100 18,700 Depreciation, depletion & amortization 588,400 457,100 Leasehold acreage expired or surrendered 143,500 30,400 (Gain) loss on disposal of assets (8,300) 27,700 Decrease (Increase) in current assets 246,800 (730,700) Decrease in other assets 54,600 55,900 Decrease in current liabilities (6,299,700) (5,699,000) Increase in other liabilities 24,900 18,000 Total adjustments (5,177,700) (5,821,900) Net cash used in operating activities (4,449,200) (5,268,400) Cash flows from investing activities: Capital expenditures (231,600) (367,100) Proceeds from sale of leases 111,000 94,500 Proceeds from sale of assets 8,300 20,800 Net cash used in investing activities (112,300) (251,800) Cash flows from financing activities: Retirement of debt (311,400) (276,300) Net cash used in financing activities (311,400) (276,300) Net changes in cash and cash equivalents (4,872,900) (5,796,500) Cash and cash equivalents, beginning of period 8,906,800 10,578,800 Cash and cash equivalents, end of period $ 4,033,900 $ 4,782,300 See accompanying notes to condensed consolidated financial statements. -5- PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements March 31, 1995 (Unaudited) 1. Accounting Policies Reference is hereby made to the Company's Annual Report on Form 10-K for 1994, which contains a summary of major accounting policies followed by the Company in the preparation of its consolidated financial statements. These policies were also followed in preparing the quarterly report included herein. 2. Basis of Presentation The Management of the Company believes that all adjustments (consisting of only normal recurring accruals) necessary to a fair statement of the results of such periods have been made. The results of operations for the three months ended March 31, 1995 are not necessarily indicative of the results to be expected for the full year. 3. Oil and Gas Properties Oil and Gas Properties are reported on the successful efforts method. 4. Earnings Per Share Computation of earnings per common and common equivalent share are as follows for the three months ended March 31, 1995 1994 Weighted average common shares outstanding 11,717,352 12,216,817 Net income $ 728,500 $ 553,500 Earnings per common and common equivalent share $ .06 $ .05 -6- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three Months Ended March 31, 1995 Compared With March 31, 1994 Total revenues increased $703,100 in the first quarter of 1995 compared to the same period in 1994 primarily as a result of increased drilling activity. Drilling revenues increased 11.7% as a result of higher volumes of drilling and completion activities in connection with the drilling of the wells of the PDC 1994-D Partnership closed on December 31, 1994, in the first quarter of 1995 compared to the same period in 1994. Oil and gas sales decreased 10.8% as a result of lower average sales prices offset in part by increased sales volumes. Costs and expenses increased $448,500 primarily as a result of higher oil and gas purchases and production costs and depreciation, depletion, and amortization. Oil and gas purchase and production costs increased 26.4% as a result of gas purchased for resale. Depreciation, depletion, and amortization increased 28.7% as a result of an increase in the Company's investment in natural gas wells and increased production levels. The foregoing resulted in net income of $728,500 as compared to a net income of $533,500 for the first quarter of 1994. The provision for income taxes in 1995 consists of $168,200 of current taxes payable and $72,100 of deferred income taxes. The provision for income taxes in 1994 consisted of $142,000 of current taxes payable and $18,700 of deferred income taxes. Liquidity and Capital Resources Sales volumes of natural gas continue to increase while the natural gas prices fluctuated monthly over the past year. The Company's gas sales prices are subject to increase and decrease based on various market sensitive indices. Price levels of natural gas are currently depressed and are not predictable in the coming year. The volumes of gas sales are expected to continue to increase as a result of continued drilling activities. The Company has registered a 1994-1995 public drilling program consisting of eight partnerships and has commenced sales of units in the fifth partnership which is scheduled to close in May, 1995, with the wells scheduled to be drilled in the second and third quarters of 1995. The Company's public drilling programs continue to receive wide market acceptance. The Company is party to a credit agreement providing up to $7.5 million in borrowing capacity. At March 31, 1995 the Company has activated $5 million of that facility and has $2.8 million outstanding. The Company continues to pursue capital investment opportunities in producing gas properties along with its commitment to participate in its sponsored gas drilling partnerships. Management believes that the Company has adequate capital to meet its operating requirements and continues to pursue opportunities for operating improvements and cost efficiencies. -7- PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES STATEMENT BY MANAGEMENT CONCERNING REVIEW OF INTERIM FINANCIAL INFORMATION BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The March 31, 1995 and 1994 condensed consolidated financial statements included in this filing on Form 10-Q have been reviewed by KPMG Peat Marwick LLP, independent certified public accountants, in accordance with established professional standards and procedures for such reviews. The report of KPMG Peat Marwick LLP commenting upon their review accompanies the condensed consolidated financial statements included in Item 1 of Part I. -8- CONFORMED COPY PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is party to various legal actions in the normal course of business which would not materially affect the Company's operations. Item 6. Exhibits and Reports on Form 8-K (a) None. (b) No reports on Form 8-K have been filed during the quarter ended March 31, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Petroleum Development Corporation (Registrant) Date: May 10, 1995 /s/ Steven R. Williams Steven R. Williams President Date: May 10, 1995 /s/ Dale G. Rettinger Dale G. Rettinger Executive Vice President and Treasurer -9-