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, 1995

   Commission File Number  0-7246

- -    Transition Report Pursuant to Section 13 or 15(d) of the Securities 
              Exchange Act of 1934 for the transaction period from
                                 to               

                    PETROLEUM DEVELOPMENT CORPORATION                     
          (Exact name of registrant as specified in its charter)

          Nevada                                          95-2636730       
(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:

      Petroleum Development Corporation Common Stock, $.01 par value
                             (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.  [  ]

As of March 15, 1996, 7,394,522 shares of the Registrant's Common Stock were
issued and outstanding, and the aggregate market value of such shares held by 
non-affiliates of the Registrant on such date was $14,789,044 (based on the
last traded price of $2.00).

                    DOCUMENTS INCORPORATED BY REFERENCE
Document                                          Form 10-K Part III
Proxy                                             Items 11 and 12


                                  PART I

Item 1.  Business

General

     Petroleum Development Corporation is a Nevada corporation which was
formed in 1955 and commenced gas and oil operations in 1969.  The Company
and its subsidiaries are engaged in the leasing of natural gas and oil
mineral rights, the development of these rights by drilling exploratory and
development gas and oil wells, the production and sale of gas and oil from
these wells,  the operation of gas and oil wells for a fee, the marketing of
natural gas for itself and other producers, and the distribution of natural
gas to residential, commercial and industrial customers.

     The Company typically develops its oil and gas properties in
conjunction with outside investors through partnerships, joint ventures, or
similar arrangements.  These arrangements allow the Company to reduce the
risk of its development investments through increased diversification.  In
addition the Company is compensated for its management of the development
process through payments for services rendered to the investor partners and
through an increased share in the revenues produced by the developed
properties.

     Prior to 1984, virtually all of the outside investment capital was
contributed by unaffiliated partnerships and joint ventures.  Beginning in
1984 the Company began sponsoring as the managing general partner drilling
partnerships which have invested their proceeds in Company development
projects.  Currently a majority of the investment in Company development
programs originates from this source, however, a majority of the wells
operated by the Company continue to be associated with non-affiliated
investors.

     In order to facilitate the marketing of natural gas from the wells
operated by PDC, the Company constructs and operates gas gathering systems
which interconnect to industrial customers, interstate pipeline company
facilities, and/or local distribution utilities.  The Company receives
gathering fees for the use of these systems.

     Gas and oil produced by wells are primarily marketed by the Company,
although gas brokers are occasionally used to assist with the sales.

     The Company has an Ohio subsidiary, Paramount Natural Gas Company
(PNG), which commenced operations in October of 1992 as a regulated Ohio
distribution utility.  The company acquired the pipeline assets of Paramount
Transmission Corporation (PTC), another Ohio subsidiary of the Company.  PTC
focused its efforts on the acquisition and marketing of Ohio gas production.

Exploration and Development Activities

Prospect Generation and Leasing

     PDC's staff of professional geologists is responsible for identifying
areas with potential for economic production of natural gas and oil.  To
further this end the Company has collected and continues to collect logs,
core data, production information and other raw data available from state
and private agencies, other companies and individuals actively drilling in
the region.  From this information the geologists develop models of the
subsurface structures and stratigraphy which are used to predict areas with
above average prospects for economic development.

     On the basis of these models the geologists instruct the land
department to obtain available gas and oil leaseholds in these prospective
areas.  These leases are then obtained, if possible, by the Company's land
department or contract landmen under the direction of the Company's land
manager.  In most cases, these leases are obtained for a lease bonus and
annual rental payments changing to a 12.5% royalty on gross production     

                                    -2-

revenue.  In some instances additional overriding royalty payments may be
made to third parties or royalty owners with particularly attractive
prospects.  As of December 31, 1995, the Company had a total leasehold
inventory of approximately 89,300 gross acres and 87,400 net acres.  See
"Properties - Oil and Gas Leases".

Drilling Activities

     When prospects have been identified and leased, the Company develops
these properties by drilling exploratory or development wells.  Typically
the Company will act as driller-operator for these prospects, entering into
contracts with partnerships, including Company sponsored partnerships, and
other entities that are interested in exploration or development of the
prospects.  The Company generally retains an interest in each well it
drills.  This arrangement is beneficial to all parties, which benefit from
the diversification of risk.  See "Financing of Exploration and Development
Activities".

     The Company enters into a development agreement with each of its
investor partners, wherein the Company agrees to assign rights in the
property to be drilled to the partnership or other entity which thereby
becomes owner of a working interest in the property.  The Company also
agrees to supervise and manage all drilling activities on the property and
to supply, either directly or through subcontractors, all necessary drilling
and related services and equipment.  All work associated with drilling,
completing and connecting wells is performed under the direct supervision of
the Company.  However, much of the work, including drilling, fracturing,
logging and pipeline construction is performed by subcontractors
specializing in those operations, as is common in the industry.  Because the
prices paid to the Company by its investor partners  are frequently fixed
before the wells are drilled, the Company is subject to risk that prices of
goods or services used in the development process could increase, rendering
its contracts with its investor partners less profitable or unprofitable. 
In addition, problems encountered in the process can substantially increase
development costs, sometimes without recourse for the Company to recover its
costs from its partners.  To minimize these risks, the Company seeks to lock
in its costs in advance of drilling and when possible at the same time it is
committing to its investor partners.  A large part of the materials and
services used by the Company in the development process is acquired through
competitive bidding by approved vendors.  The company also negotiates rates
and costs for services and supplies when conditions indicate that such an
approach is warranted.

     The Company's development contracts with its investor partners are
negotiated with each partner and have historically taken many different
forms.  Generally the agreements can be classified as "turnkey", in which a
specified amount is paid for drilling and another amount for completion;
"cost-plus", in which the Company is reimbursed for its actual cost of
drilling plus some additional amount for overhead and profit, or a "footage
based" rate whereby the Company receives drilling and completion payments
based on the depth of the well.  As part of its compensation for its
services, the Company also generally receives some interest in the
production from the well in the form of an overriding royalty interest,
working interest or other proportionate share of revenue or profits.

     Development Agreements with Partnerships sponsored by the Company
provide for a combination of several of the aforementioned payment options. 
Basic drilling and completion operations are performed on a footage-based
rate, with leases and gathering pipelines being contributed at Company cost. 
The Company also purchases a working interest in the properties.

     The  majority of the activity currently being pursued by the Company is
focused on the development of natural gas production in West Virginia,
eastern Ohio, and western Pennsylvania.  During 1995 the Company was one of
the most active drilling companies in the state of West Virginia.  Despite
the level of activity, the Company was able to maintain a high level of
environmental sensitivity and was selected for the fourth year in a row by

                                    -3-

the West Virginia Department of Environmental Protection for the state's top
award for the quality of the environmental and reclamation work in its
drilling activities.  As a matter of corporate policy and commitment, the
Company attempts to minimize the adverse environmental impact of all its
operations.

     The sale of natural gas requires that wells be connected by pipeline to
gas markets.  Over the years the Company has developed extensive gathering
systems in its areas of operations.  The Company also continues to construct
new trunklines as necessary to provide for the marketing of gas being
developed from new areas, and to enhance or maintain its existing systems. 
The Company is paid a transportation fee for gas which is moved through
these pipeline systems.  In many cases the Company has been able to receive
higher gas prices as a result of its ability to move gas to more attractive
markets through this pipeline system, to the benefit of both the Company and
its investor partners.

Acquisitions of Producing Properties

     In addition to drilling new wells, the Company continues to pursue
opportunities to purchase existing producing wells from other producers and
interests in the wells it operates.  Generally, outside interests purchased
include a majority interest in the wells and well operations.

     In 1994 the Company purchased the Pond Fork Field with 57 operating gas
wells in Boone County, West Virginia.  The wells added 1.9 Bcf of proved
producing reserves to the Company's 1994 total.  In addition, the Company
purchased various royalty, overriding royalty or working interests from
investor partners and outside parties.

Production Operations

     The Company currently operates approximately 850 wells in the
Appalachian Basin.  On average, the Company has an approximate 25% ownership
interest in the wells it operates, with the balance belonging to investor
partners.  The Company employs engineers, supervisors and welltenders who
are responsible for the day to day operation of the wells and pipeline
systems.  Currently these wells produce an aggregate of about 15.8 million
cubic feet of gas per day, including the Company's share of about 3.7
million cubic feet per day.  The Company's share of oil production is about
11,000 barrels per year.  See "Properties - Production"

     The Company is paid a monthly operating charge for each well it
operates.  The rate is competitive with rates charged by other operators in
the area.  The charge covers monthly operating and accounting costs,
insurance and other recurring costs.  The Company may also receive
additional compensation for special non-recurring activities like reworks
and recompletions.

Oil and Gas Marketing

     In West Virginia, the Company markets the gas from its own and its
investor partner interests as a part of the services provided under the
basic monthly operating charge.  This gas is marketed to gas utilities,
pipelines and industrial and commercial customers, either directly through
the Company's gathering system, or utilizing transportation services
provided by regulated interstate pipeline companies.  Generally the Company
negotiates its own contacts with customers.  However, occasionally the
services of outside gas brokers or marketers are used.

     In Ohio, the Company's subsidiary, Paramount Transmission Company
(PTC), purchases gas from local producers and gas brokers and sells gas to
industrial and commercial customers utilizing open access transportation
services provided by interstate pipelines and the Company's subsidiary,
Paramount Natural Gas Company (PNG), which is a regulated Ohio distribution
utility.   PNG, which was formed in 1992, acquired the pipeline system
previously operated by PTC.  The majority of PNG's throughput is           

                                    -4-

attributable to gas transported for PTC and industrial customers, for a
transportation tariff, with the balance being sales to residential,
commercial and industrial customers.

     The Company produces oil from wells in Tennessee, Ohio and West
Virginia.  All of the oil produced is sold on a spot basis to local refinery
customers.  See "Market for Oil and Gas".

Financing of Exploration and Development Activities

     The Company conducts drilling activities for its own account and for
other investors.  Prior to 1984, most of the Company's drilling funds came
from unaffiliated partnerships, companies and individuals.  In 1984 the
Company began sponsoring private limited partnerships, and in 1989 the
Company began to register public drilling programs with the Securities and
Exchange Commission.  Because of the Company's success with its own
partnerships, and declining sales nationwide of unaffiliated partnerships,
most drilling and development funds now come from partnerships in which the
Company serves as Managing General Partner.  However, because wells produce
for a number of years, the Company continues to serve as operator for a
large number of unaffiliated parties.

     The level of the Company's drilling and development activity is
dependent upon the amount of subscriptions in its public drilling
partnerships and investment from other partnerships or other joint venture
partners.  Funds received pursuant to drilling contracts were $13,619,000 in
1995, $14,858,000 in 1994 and $15,872,400 in 1993.  While funds were
received by the Company pursuant to drilling contracts in the years
indicated, the Company recognizes revenues from drilling operations on the
percentage of completion method as the wells are drilled, rather than when
funds are received.

     The Company believes that investments in drilling activities, whether
through Company-sponsored partnerships or other sources, are influenced by
the favorable treatment which such investments enjoy under the Federal
income tax laws.  

     As a result of rules associated with the registration and sale of
public drilling programs, the operating margin on drilling activities
associated with the Company's current partnerships is less than it has
typically realized in activities with non-affiliated entities.  Such
constraints are expected to continue in the future, and the Company expects
to realize less revenue and profit than it might realize from an equivalent
amount of activity for non-affiliated partnerships or other investors.

     The Company invests in drilling activities through a 20% investment in
the partnerships it sponsors, and through direct working interest
investments.  Certain conflict of interest provisions in joint venture and
partnership agreements limit the Company's ability to benefit
disproportionately from discoveries made through partnership activities. 
Company investments in drilling activities are funded from internally
generated funds.

Market for Oil and Gas

     The market for the Company's oil and gas depends upon a number of
factors including the availability of other domestic production, crude oil
and natural gas imports, the proximity of oil and gas pipelines and general
fluctuations in the supply and demand for oil and gas.

     For nearly a decade the United States has experienced an oversupply of
natural gas.  This oversupply was caused primarily by a decrease in market
demand and unusually warm weather conditions.  Seasonal variations exist to
the extent that the demand for natural gas is somewhat lower during the
summer months than during the winter season.

                                    -5-

     Generally, the Company has been and expects to continue to be able to
produce and market gas from its wells without curtailment by providing gas
to purchasers at competitive prices.  Open access transportation on the
country's interstate pipeline system has greatly increased the range of
potential markets.  Whenever feasible the Company allows for multiple market
possibilities from each of its gathering systems, while seeking the best
available market for its gas at any point in time. 

     Natural gas is sold by the Company under contracts ranging from month
to month spot to a 3 year term.  Virtually all of the Company's contracts
have pricing tied to a market index, so the price of the gas moves to remain
competitive with other available gas supplies.  As a result the revenue from
the sale of gas will suffer if market prices decline or benefit if they
increase.  The provisions of the Company's gas contracts are believed by the
Company to be customary in the industry.

     The Company's sales of natural gas are to various customers, of which
Hope Gas, Inc. accounted for 39.7% of the Company's revenues from oil and
gas sales (7.4% of total revenues) in 1995.  Hope Gas, Inc. is a regulated
gas distribution company.  In general, the prices it pays for gas, and the
producers from which it purchases gas, are influenced by the state and
federal agencies that regulate them.  Natural gas sales to one industrial
customer accounted for 23.8% of oil and gas sales (4.4% of total revenues)
in 1995.  No other single purchaser of the Company's natural gas accounted
for 10% or more of the Company's revenues from oil and gas sales in 1995.

     Gas produced by the Company sold at December 31, 1995 at prices per Mcf
ranging from $1.71 to $4.16, depending upon the location, the date of the
sales contract and whether the gas was sold in interstate or intrastate
commerce.  The weighted net average price of gas sold by the Company in 1995
was $1.75 per Mcf at the wellhead.

     The Company is presently able to sell all the oil which it can produce
under existing sales contracts with petroleum refiners and marketers.  The
Company's crude oil production is sold to purchasers at or near the
Company's wells under short-term purchase contracts at prices and in
accordance with arrangements which are customary in the oil industry.  None
of the Company's oil production is sold under long-term contracts.  The
Company does not refine any of its oil production.

     No single purchaser of the Company's crude oil accounted for 10% or
more of the Company's revenues from oil and gas sales in 1995.

     Oil produced by the Company sold at December 31, 1995 at prices ranging
from $14.75 to $17.50 per barrel, depending upon the location, quality of
oil and governmental price controls.  In 1995, the weighted net average
price per barrel of oil sold by the Company was $15.80.

Governmental Regulation

     The Company's business and the oil and gas industry in general are
highly regulated.  The Company's services to investor partnerships include
taking the steps necessary to comply with applicable regulations.

     Local Regulation.  All of the Company's oil and gas production is from
properties in states in which drilling activities and well operations are
regulated by state authorities.  These regulations, among other things,
require the Company to obtain permits to build roads and drill wells and
impose land restoration and minimum spacing requirements.  See also
"Environmental Matters".

     Paramount Natural Gas Company, which is an Ohio public utility, is
subject to regulation by the Public Utilities Commission of Ohio in
virtually all of its activities, including pricing and supply of services,
addition of and abandonment of service to customers, design and construction
of facilities, and safety issues.


                                    -6-

     Federal Regulations.  Pricing of gas sold by the Company is now fully
deregulated from Federal Price controls, and no proposals currently exist to
reimpose controls.

     All of the interstate pipelines which the Company uses to transport gas
from wells to markets are regulated by the Federal Energy Regulatory
Commission (FERC).  Over the past few years FERC has changed regulations on
these interstate pipeline systems, forcing them, among other things, to
offer open access transportation service, to unbundle the various services
they provide to allow customers to pay only for those services which they
use, and to change the structure of the rates which they charge.  These
policy changes have not yet been fully determined or implemented, and it is
impossible at this time to predict the impact on the Company's business.

     Also, the Company cannot determine to what extent future operations and
earnings of the Company may be affected by new legislation, new regulations
or changes in existing regulations.

Environmental Matters

     The petroleum industry is subject to numerous federal and state
environmental statutes, regulations and other pollution controls.  In
general, the Company is and will continue to be subject to present and
future environmental statutes and regulations, and in the future the cost of
its drilling and exploration and other activities may materially increase as
a result.

     The Company's expenses relating to preserving the environment during
1995 were not significant in relation to operating costs and the Company
expects no material change in 1996.  Environmental regulations have had no
materially adverse effect on the Company's petroleum operations to date, but
no assurance can be given that environmental regulations will not, in the
future, result in a curtailment of production or otherwise have a materially
adverse effect on the Company's operations or financial condition.

Competition

     The Company competes with many other companies in the search for and
acquisition of oil and gas properties and leases for exploration and
development, and also competes with other companies in its activities as
drilling contractor.  Many of these companies have substantially greater
financial, technical and other resources than the Company.  Competition
among petroleum companies for favorable oil and gas prospects can be
expected to continue.  It is anticipated that the cost of acquiring oil and
gas properties will increase appreciably.  The Company is not a significant
factor in the oil and gas industry.

     Likewise, the Company competes with a number of other companies which
offer interests in drilling partnerships with a wide range of investment
objectives and program structures.  Competition for investment capital for
both public and private drilling programs is intense.

Other Industry Factors

     Oil and gas drilling operations are subject to hazards such as fire,
explosion, blowouts, cratering and oil spills, each of which could result in
substantial damage to oil and gas wells, producing facilities, other
property and the environment or in personal injury.  Although the Company
maintains liability insurance in an amount which it considers adequate, the
nature of these risks is such that liabilities could exceed policy limits in
which event the Company could incur significant costs that could have a
materially adverse effect upon its financial condition.

Employees

     As of December 31, 1995, the Company had 65 employees.  The Company's
employees are not covered by a collective bargaining agreement.  The Company
considers relations with its employees to be excellent.
                                    -7-

Item 2.  Properties

Drilling Activity

     The following table summarizes the Company's drilling activity for the
past five years.  There is no correlation between the number of productive
wells completed during any period and the aggregate reserves attributable to
those wells.
                                      Exploratory Wells Drilled           

                              Total       Productive Gas          Dry    
                           Drilled  Net   Drilled    Net     Drilled  Net
     1991                     -      -       -        -         -      - 
     1992                     -      -       -        -         -      - 
     1993                     3     .75      -        -         3     .75
     1994                     -      -       -        -         -      - 
     1995                     -      -       -        -         -      - 

     Total                    3     .75      -        -         3     .75

                                      Development Wells Drilled           

                               Total      Productive Gas        Dry   
                           Drilled   Net  Drilled    Net     Drilled  Net

     1991                    53     10.64    49       9.85      4      .79
     1992                    80     15.86    73      14.47      7     1.39
     1993                    56     10.00    49       8.75      7     1.25
     1994                    75     13.76    71      13.00      4      .76
     1995                    72     13.40    64      11.80      8     1.60
          Total             336     63.66   306      57.87     30     5.79

     The term "exploratory well" means a well drilled with the hope of
greatly extending the limits of an already developed pool or in search of an
undiscovered pool of oil or gas.  A "development well" is one drilled to
extend the limits of an already developed pool, or within a proved area of
an oil or gas reservoir to the depth of a stratigraphic horizon known to be
productive.  A "dry well (hole)" is an exploratory or a development well
found to be incapable of producing either oil or gas in sufficient
quantities to justify completion as an oil or gas well.

     A "drilled" well is a well for which the Company supervised drilling
activity or in which it has a working interest.  A "net" well is deemed to
be held when the sum of the fractional working interests owned by the
Company in wells equals one.

Production

     The following table shows the Company's net production in barrels
("Bbls") of crude oil and in thousands of cubic feet ("Mcf") of natural gas
and the costs and weighted average selling prices thereof, for the periods
indicated.

                                    Year Ended December 31,              

                            1995       1994     1993     1992       1991 
Production (1):
  Oil (Bbls)               11,000     11,000   10,000    16,000    12,205
  Natural Gas (Mcf)     1,336,000  1,195,000  965,000   948,000   867,208
  Equivalent 
   Barrels (2)            233,667    210,167  170,833   174,000   156,740
Average sales price
per equivalent 
barrel (3)                 $10.86     $12.40   $12.88    $13.20    $12.55

Average production
cost (lifting cost) per
equivalent barrel(4)       $ 3.16     $ 3.50   $ 3.40    $ 2.87    $ 3.26

                                    -8-
     (1)  Production as shown in the 
table, which is net after the royalty interests of others, is determined by
multiplying the gross production volume of properties in which the Company
has an interest by the percentage of the leasehold or other property interest
owned by the Company.

     (2)  The ratio of energy content of oil and gas (six Mcf of gas equals
one barrel of oil) was used to obtain a conversion factor to convert natural
gas production into equivalent barrels of oil.

     (3)  The average sales price per barrel of oil sold by the Company was
$15.80 in 1995, $14.41 in 1994, $16.62 in 1993, $18.21 in 1992, and $17.52
in 1991, and the average sales price per Mcf of gas was $1.75 in 1995, $2.01
in 1994, $2.24 in 1993, $2.41 in 1992, and $2.16 in 1991.

     (4)  The average production cost per Mcf of gas based on the relative
energy content of six Mcf of gas equals one barrel of oil was $.53 in 1995,
$.58 in 1994, $.57 in 1993, $.48 in 1992, and $.54 in 1991.  Production
costs represent oil and gas operating expenses as reflected in the financial
statements of the Company plus depreciation of support equipment and
facilities.

     Summary of Productive Wells.  The table below gives the number of the
Company's productive gross and net wells at December 31, 1995.

                                         WELLS                  
                                Gas                 Oil       
Location               Gross          Net    Gross       Net
Ohio                      16         5.50       9        2.02
Tennessee                  1          .57      60       21.80
Pennsylvania              26         3.51      -          -
West Virginia            726       234.53      51       41.42
   Total                 769       244.11     120       65.24

Reserves

     All of the Company's oil and gas reserves are located in the United
States.

     "Proved reserves" are those quantities of crude oil and natural gas
which, upon analysis of geologic and engineering data, appear with
reasonable certainty to be recoverable in the future from known oil and gas
reservoirs on leases held by the Company under existing economic and
operating conditions.  The Company's approximate net proved reserves were
estimated by the Company to be 91,000 barrels of oil and 24,660,000 Mcf of
gas at December 31, 1993 and 79,000 barrels of oil and 32,225,000 Mcf of gas
at December 31, 1994 and 140,000 barrels of oil and 33,829,000 Mcf of gas at
December 31, 1995.

     "Proved developed reserves" are proved reserves which are expected to
be recovered through existing wells with existing equipment and operating
methods.  The Company's approximate net proved developed reserves were
estimated by the Company to be 91,000 barrels of oil and 20,181,000 Mcf of
gas at December 31, 1993 and 79,000 barrels of oil and 27,746,000 Mcf of gas
at December 31, 1994 and 140,000 barrels of oil and 29,326,000 Mcf of gas at
December 31, 1995.

     No major discovery or other favorable or adverse event which would
cause a significant change in estimated reserves is believed by the Company
to have occurred since December 31, 1995.  Reserves cannot be measured
exactly as reserve estimates involve subjective judgment.  The estimates
must be reviewed periodically and adjusted to reflect additional information
gained from reservoir performance, new geological and geophysical data and
economic changes.

     The standardized measure of discounted future net cash flows
attributable to the Company's proved oil and gas reserves giving effect to
future estimated income tax expenses, was estimated by the Company to be

                                    -9-

$14,018,000 as of December 31, 1993, $14,445,000 as of December 31, 1994 and
$21,060,000 as of December 31, 1995.  The values expressed are estimates
only, and may not reflect realizable values or fair market values of the oil
and gas ultimately extracted and recovered.  The standardized measure of
discounted future net cash flows may not accurately reflect proceeds of
production to be received in the future from the sale of oil and gas
currently owned and does not necessarily reflect the actual costs that would
be incurred to acquire equivalent oil and gas reserves.

     Substantially all of the Company's oil and gas reserves have been
mortgaged or pledged as security for bank loans to the Company.  See Note 3
of Notes to Consolidated Financial Statements.

     For additional information concerning oil and gas reserves and
activities, see Notes 15, 16 and 17 of Notes to Consolidated Financial
Statements.

     The Company has not filed any estimates (on a consolidated basis) of
its oil and gas reserves with, nor were such estimates included in any
reports to, any Federal or foreign governmental agency other than the
Securities and Exchange Commission within the 12 months prior to the date of
this filing.

Oil and Gas Leases

     The following table sets forth, as of December 31, 1995, the acres of
developed and undeveloped oil and gas properties in which the Company had an
interest, listed alphabetically by state.
                                                          
                                  Developed Acreage    Undeveloped Acreage

                                  Gross        Net     Gross         Net

Ohio                               1,200        800     1,400       1,400

Pennsylvania                         100        100     4,500       4,500

Tennessee                          5,400      5,400      -           -   

West Virginia                     50,700     49,300    26,000      25,900

                                  57,400     55,600    31,900      31,800
"Undeveloped acreage" is that leasehold acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas regardless of whether or not such acreage contains proved reserves. A "gross" acre is an acre in which the Company owns a working interest. A "net" acre is deemed to exist when the sum of the fractional working interests owned by the Company in gross acres equals one. As is customary in the oil and gas industry, only a perfunctory title examination is conducted at the time the properties believed to be suitable for drilling operations are acquired by the Company. Prior to the commencement of drilling operations, a title examination is conducted and curative work is performed with respect to defects which the Company deems to be significant. A title examination has been performed with respect to substantially all of the Company's producing properties. The Company believes that the title to such properties is good and indefeasible in accordance with standards generally accepted in the oil and gas industry, subject to such exceptions stated in the opinion of counsel employed in the various areas in which the Company conducts its exploration activities which, in the Company's judgment, are not so material as to detract substantially from the use of such property. Also, no single property represents a material portion of the Company's holdings. -10- The properties owned by the Company are subject to royalty, overriding royalty and other outstanding interests customary in the industry. The properties are also subject to burdens such as liens incident to operating agreements, current taxes, development obligations under oil and gas leases, farmout arrangements and other encumbrances, easements and restrictions. The Company does not believe that any of these burdens will materially interfere with the use of the properties. Item 3. Legal Proceedings 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 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. PART II Item 5. Market for the Company's Common Stock and Related Security Holder Matters The common stock of the Company is traded in the over-the-counter market under the symbol PETD. The following table sets forth, for the periods indicated, the high and low bid quotations per share of the Company's common stock in the over-the-counter market, as reported by the National Quotation Bureau Incorporated. These quotations represent inter- dealer prices without retail markups, markdowns, commissions or other adjustments and may not represent actual transactions. High Low 1994 First Quarter 2 9/16 1 9/16 Second Quarter 2 1/4 1 3/4 Third Quarter 2 1/16 1 5/8 Fourth Quarter 1 13/16 1 1/16 1995 First Quarter 1 3/8 7/8 Second Quarter 1 9/16 1 1/16 Third Quarter 1 3/8 1 Fourth Quarter 1 5/8 31/32
As of December 31, 1995, there were approximately 2,341 record holders of the Company's common stock. The Company has not paid any dividends on its common stock and currently intends to retain earnings for use in its business. Therefore, it does not expect to declare cash dividends in the foreseeable future. Further, the Company's Credit Agreement restricts the payment of dividends. -11- Item 6. Selected Financial Data (1) Year Ended December 31, 1995 1994 1993 1992 1991 Revenues Oil and gas well drilling operations $13,941,000 $15,190,200 $12,073,500 $14,930,700 $11,070,200 Oil and gas sales 4,150,600 4,361,300 4,471,200 4,867,300 3,567,200 Well operations income 3,750,900 3,730,300 3,843,100 2,935,900 2,694,500 Other income 504,000 524,400 97,600 432,600 507,000 Total $22,346,500 $23,806,200 $20,485,400 $23,166,500 $17,838,900 Costs and Expenses (excluding interest and depreciation, depletion and amortization) $18,042,300 $20,559,500 $17,116,700 $18,826,000 $14,931,000 Interest Expense $ 319,700 $ 300,200 $ 55,500 $ 54,000 $ 56,400 Depreciation, Depletion and Amortization $ 2,152,100 $ 1,848,200 $ 1,717,400 $ 1,671,600 $1,505,500 Income before extraordinary item $ 1,481,500 $ 921,600 $ 1,320,800 $ 1,748,100 $ 869,700 Extraordinary item net of income taxes - - 269,000 - - Net Income $ 1,481,500 $ 921,600 $ 1,589,800 $ 1,748,100 $ 869,700 Primary earnings per common and common equivalent share Income before extraordinary item $ .13 $ .08 $ .11 $.16 $.08 Net income $ .13 $ .08 $ .14 $.16 $.08 Fully diluted earnings per common and common equivalent share Income before extraordinary item $ .12 $ .08 $ .11 $.14 $.07 Net income $ .12 $ .08 $ .14 $.14 $.07 Average Common and Common Equivalent Shares Outstanding During the Year 11,606,690 11,990,497 11,563,648 11,190,709 11,059,031 December 31, 1995 1994 1993 1992 1991 Total Assets $40,620,100 $38,325,300 $36,412,900 $34,631,500 $32,040,300 Working Capital $(1,519,700) $(1,613,700) $ 289,000 $ (590,100) $ (997,100) Long-Term Debt, excluding current maturities $ 2,500,000 $ 3,100,000 $ 3,167,300 $ 3,968,900 $5,354,000 Stockholders' Equity $19,920,900 $18,380,500 $17,235,700 $15,347,100 $13,264,000
(1) See Consolidated Financial Statements elsewhere herein. -12- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations 1995 Compared with 1994 Total revenue decreased 6.1% from $23,806,200 to $22,346,500 in 1995. Revenues relating to the Company's drilling activities decreased $1,249,200 due to a slight decrease in drilling and completion activities in 1995 compared to 1994. Overall oil and gas sales decreased 4.8% in 1995 compared to 1994 as a result of lower average gas sales prices offset by increased volumes of natural gas sold. Costs and expenses decreased 9.7% from $22,707,900 to $20,514,100 principally as a result of decreased drilling activity. Cost of oil and gas well drilling operations decreased $2,345,700 as a result of the decrease in drilling and completion activities referred to above. General and administrative expenses decreased 11.0% as a result of a general company wide cost cutting program. Depreciation, depletion, and amortization increased 16.4% in 1995 compared to 1994 as a result of an increase in the Company's investment in natural gas wells and increased production levels. The foregoing resulted in income before income taxes of $1,832,400 compared to $1,098,300 in 1994. Net income for 1995 was $1,481,500 compared to net income of $921,600 in 1994. 1994 Compared with 1993 Total revenue increased 16.2% from $20,485,400 to $23,806,200 in 1994. Revenues relating to the Company's drilling activities increased $3,116,700 due to an increase in drilling and completion activities in 1994 compared to 1993. Overall oil and gas sales decreased slightly in 1994 compared to 1993 as a result of lower average gas sales prices offset for the most part by increased volumes of gas sold. Other income increased by $426,800 in 1994 compared to 1993 as a result of management fee income from the Company's 1994 public drilling program. Costs and expenses increased 20.2% from $18,889,600 to $22,707,900 principally as a result of increased drilling activity. Cost of oil and gas well drilling operations increased $3,188,700 as a result of the increase in drilling and completion activities referred to above. General and administrative expenses increased 16.2% as a result of corporate public relations costs incurred by the Company in 1994 along with generally higher personnel costs. Depreciation, depletion, and amortization increased 7.6% in 1994 compared to 1993 as a result of an increase in the Company's investment in natural gas wells and increased production levels. Interest expense increased to $300,200 in 1994 from $55,000 in 1993 principally due to a loan agreement executed in November, 1993. Under a prior debt restructuring arrangement all interest paid was treated as retirement of principal. The foregoing resulted in income before income taxes and extraordinary item of $1,098,300 compared to $1,595,800 in 1993. Net income for 1994 was $921,600 compared to net income of $1,589,800 in 1993. Liquidity and Capital Resources Sales volumes of natural gas continued to increase while the natural gas prices fluctuated monthly and resulted in a lower average price than the prior year. The Company's gas sales prices are subject to increase and decrease based on various market sensitive indices. A major factor in the variability of these indices is the seasonal variation of demand for natural gas, which typically peaks during the winter months. The volumes of gas sales are expected to continue to increase as a result of continued drilling activities. There has been a dramatic increase in the price of natural gas since December 31 which will have a positive effect on the Company's 1996 -13- liquidity. While prices cannot be predicted for the entire year it is generally believed that the sales price of natural gas will be higher in 1996 than in 1995. The Company closed its fourth drilling partnership of 1995 on December 30th and will drill approximately 45 wells during the first quarter of 1996. Typically, the Company's drilling activity peaks during the winter months. The Company has registered a 1996-1997 public drilling program consisting of eight partnerships and has commenced sales of units in the first partnership which is scheduled to close in May, 1996. The Company's public drilling programs continue to receive wide market acceptance. 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 investing and operating requirements and continues to pursue opportunities for operating improvements and cost efficiencies. Recently Issued Accounting Standards In November, 1995, the FASB issued SFAS 123, Accounting for Stock-Based Compensation. SFAS 123 establishes a fair value based approach for accounting for stock-based compensation arrangements under which employees receive shares of stock or other equity instruments of the employer, or the employer otherwise incurs liabilities to its employees in amounts based on the price of its stock. The Statement provides a choice of accounting methods for transactions within the scope of APB Opinion No. 25 Accounting for Stock Issued to Employees ("Opinion 25"). Companies may continue to apply Opinion 25 in accounting for its stock-based employee compensation arrangements. However, an entity that does so shall disclose pro forma net income and earnings per share determined as if the fair value based method had been applied in measuring compensation cost. SFAS 123 is effective for financial statements for fiscal years beginning after December 15, 1995. The Company currently plans to continue to value its stock options using the guidance of Opinion 25 and to implement SFAS No. 123 by including the pro forma disclosures in the notes to its consolidated financial statements for the year ended December 31, 1996. The Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", effective Janaury 1, 1995. 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 without interest charges) is less that the carrying 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 the asset. The impact from the adoption of this accounting standard was not significant. PART III 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. -14- Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 10. Directors and Executive Officers of the Company The executive officers and directors of the Company, their principal occupations for the past five years and additional information are set forth below: Held Current Name Age Positions and Offices Held Position Since James N. Ryan 64 Chairman, Chief Executive Officer and Director March, 1983 Steven R. Williams 45 President and Director March, 1983 Roger J. Morgan 68 Secretary and Director November, 1969 Vincent F. D'Annunzio 43 Director February, 1989 Dale G. Rettinger 51 Executive Vice President, Treasurer and Director July, 1980 Jeffrey C. Swoveland 41 Director March, 1991 The term of directors is three years expiring in alternating years. Executive officers have a term of one year and until a successor is elected. Such elections are expected to occur at the Company's next annual meeting presently scheduled for June, 1996. There is no family relationship between any director or executive officer and any other director or executive officer of the Company. There are no arrangements or understandings between any director or officer and any other person pursuant to which such person was selected as an officer. The following is a brief account of the business experience during the past five years of each director and executive officer: James N. Ryan has served as President and Director of the Company from 1969 to 1983 and was elected Chairman and Chief Executive Officer in March, 1983. Steven R. Williams has served as President and Director of the Company since March 1983. Prior to joining the Company, Mr. Williams was employed by Exxon until 1979 and attended Stanford Graduate School of Business, graduating in 1981. He then worked with Texas Oil and Gas until July, 1982, when he joined Exco Enterprises as Manager of Operations. Roger J. Morgan has been a member of the law firm of Young, Morgan & Cann, Clarksburg, West Virginia, for more than the past five years. Mr. Morgan is not active in the day-to-day business of the Company, but his law firm provides legal services to the Company. Vincent F. D'Annunzio has for the past five years served as President of Beverage Distributors, Inc. located in Clarksburg, West Virginia. Mr. D'Annunzio is a director of CB&T Bank of Clarksburg, West Virginia. Dale G. Rettinger has served as Vice President and Treasurer of the Company since July, 1980. Mr. Rettinger was elected Director in 1985. Previously, Mr. Rettinger was a partner with KMG Main Hurdman, Certified Public Accountants, having served in that capacity since 1976. Jeffrey C. Swoveland Director of Finance with Equitable Resources since the fall of 1994. Mr. Swoveland previously served as Vice President and a lending officer, with Mellon Bank, N.A. from July, 1989 to late 1994. -15- Item 11. Management Remuneration and Transactions There is incorporated by reference herein in response to this Item the material under the heading "Election of Directors - Remuneration of Directors and Officers", "Election of Directors - Stock Options" and "Election of Directors - Interest of Management in Certain Transactions" in the Company's definitive proxy statement for its 1996 annual meeting of stockholders filed or to be filed with the Commission on or before April 30, 1996. Item 12. Security Ownership of Certain Beneficial Owners and Management There is incorporated by reference herein in response to this Item, the material under the heading "Election of Directors", in the Company's definitive proxy statement for its 1996 annual meeting of stockholders filed or to be filed with the Commission on or before April 30, 1996. Item 13. Certain Relationships and Related Transactions The response to this item is set forth herein in Note 9 in the Notes to Consolidated Financial Statements. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) (1) Financial Statements: See Index to Financial Statements and Schedules on page F-1. (2) Financial Statement Schedules: See Index to Financial Statements and Schedules on page F-1. Schedules and Financial Statements Omitted All other financial statement schedules are omitted because they are not required, inapplicable, or the information is included in the Financial Statements or Notes thereto. (3) Exhibits: See Exhibits Index on page E-1. (b) During the fourth quarter of 1995, the Company filed no report on Form 8-K. -16- 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. PETROLEUM DEVELOPMENT CORPORATION By /s/ James N. Ryan James N. Ryan, Chairman March 25, 1996 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 March 25, 1996 James N. Ryan Officer and Director /s/ Steven R. Williams President and Director March 25, 1996 Steven R. Williams /s/ Dale G. Rettinger Executive Vice President, March 25, 1996 Dale G. Rettinger Treasurer and Director (principal financial and accounting officer) /s/ Roger J. Morgan Secretary and Director March 25, 1996 Roger J. Morgan -17- PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Index to Financial Statements and Financial Statement Schedules 1. Financial Statements: Independent Auditors' Report F-2 Consolidated Balance Sheets - December 31, 1995 and 1994 F-3 & 4 Consolidated Statements of Income - Years Ended December 31, 1995, 1994, and 1993 F-5 Consolidated Statements of Stockholders' Equity - Years Ended December 31, 1995, 1994, and 1993 F-6 Consolidated Statements of Cash Flows - Years Ended December 31, 1995, 1994, and 1993 F-7 Notes to Consolidated Financial Statements F-8 - 19 2. Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts and Reserves F-20 F-1 Independent Auditors' Report The Stockholders and Board of Directors Petroleum Development Corporation: We have audited the consolidated financial statements of Petroleum Development Corporation and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Petroleum Development Corporation and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/KPMG PEAT MARWICK LLP KPMG PEAT MARWICK LLP Pittsburgh, Pennsylvania March 15, 1996 F-2 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets December 31, 1995 and 1994
1995 1994 Assets Current assets: Cash and cash equivalents $10,053,600 8,906,800 Notes and accounts receivable (note 2) 2,016,600 1,975,400 Inventories 217,900 390,200 Prepaid expenses 868,800 850,600 Total current assets 13,156,900 12,123,000 Properties and equipment (notes 1 and 3): Oil and gas properties (successful efforts accounting method) 37,992,000 35,051,300 Pipelines 6,851,900 6,525,200 Transportation and other equipment 2,546,900 2,540,100 Land and buildings 849,200 843,300 48,240,000 44,959,900 Less accumulated depreciation, depletion and amortization 21,127,100 19,204,400 27,112,900 25,755,500 Other assets (note 2) 350,300 446,800 $40,620,100 38,325,300
(Continued) F-3 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets December 31, 1995 and 1994 1995 1994 Liabilities and Stockholders' Equity Current liabilities: Current maturities of long-term debt (note 3) $ - 36,300 Accounts payable 2,119,100 2,484,700 Accrued taxes 155,100 44,900 Other accrued expenses 1,628,800 1,604,200 Advances for future drilling contracts 10,069,600 9,199,900 Funds held for future distribution 704,000 366,700 Total current liabilities 14,676,600 13,736,700 Long-term debt, excluding current maturities (note 3) 2,500,000 3,100,000 Other liabilities 601,700 328,600 Deferred income taxes (note 4) 2,920,900 2,779,500 Commitments and contingencies (note 10) Stockholders' equity (note 5): Common stock, par value $.01 per share; authorized 22,250,000 shares; issued and outstanding 11,208,627 and 11,040,627 112,100 110,400 Common stock, Class A, par value $.01 per share; authorized 2,750,000 shares; issued and outstanding - none - - Additional paid-in capital 7,019,800 6,873,600 Retained earnings 12,878,000 11,396,500 Unamortized stock award (89,000) - Total stockholders' equity 19,920,900 18,380,500 $40,620,100 38,325,300
See accompanying notes to consolidated financial statements. F-4 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Consolidated Statements of Income Years Ended December 31, 1995, 1994 and 1993 1995 1994 1993 Revenues: Oil and gas well drilling operations $13,941,000 15,190,200 12,073,500 Oil and gas sales 4,150,600 4,361,300 4,471,200 Well operations and pipeline income 3,750,900 3,730,300 3,843,100 Other income 504,000 524,400 97,600 22,346,500 23,806,200 20,485,400 Costs and expenses: Cost of oil and gas well drilling operations 11,943,000 14,288,700 11,100,000 Oil and gas purchases and production cost 4,138,700 4,067,000 4,119,700 General and administrative expenses 1,960,600 2,203,800 1,897,000 Depreciation, depletion and amortization 2,152,100 1,848,200 1,717,400 Interest 319,700 300,200 55,500 20,514,100 22,707,900 18,889,600 Income before income taxes and extraordinary item 1,832,400 1,098,300 1,595,800 Income taxes (note 4) 350,900 176,700 275,000 Income before extraordinary item 1,481,500 921,600 1,320,800 Extraordinary item (less applicable income taxes of $89,600) (note 7) - - 269,000 Net income $ 1,481,500 921,600 1,589,800 Primary earnings per common and common equivalent share (note 8): Income before extraordinary item $.13 .08 .11 Net income $.13 .08 .14 Fully diluted earnings per common and common equivalent share (note 8): Income before extraordinary item $.12 .08 .11 Net income $.12 .08 .14
See accompanying notes to consolidated financial statements. F-5 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity Years Ended December 31, 1995, 1994 and 1993 Common stock issued Number Additional of paid-in Retained Unamortized shares Amount capital earnings Stock Award Total Balance December 31, 1992 10,027,903 $100,200 6,361,800 8,885,100 - 15,347,100 Issuance of common stock: Exercise of employee stock options 142,960 1,500 39,200 - - 40,700 Exercise of warrants 1,993,073 19,900 1,980,100 - - 2,000,000 Purchase of treasury stock for cancellation or reissuance (1,424,323) (14,200) (1,877,700) - - (1,891,900) Reissuance of Treasury stock to profit sharing plan (note 6) 92,308 900 149,100 - - 150,000 Net income - - - 1,589,800 - 1,589,800 Balance, December 31, 1993 10,831,921 108,300 6,652,500 10,474,900 - 17,235,700 Issuance of common stock: Purchase of properties 55,000 500 109,500 - - 110,000 Exercise of employee stock options 153,706 1,600 111,600 - - 113,200 Net income 921,600 - 921,600 Balance, December 31, 1994 11,040,627 $110,400 6,873,600 11,396,500 - 18,380,500 Issuance of common stock: Exercise of employee stock options 78,000 800 45,800 - 46,600 Stock award 90,000 900 100,400 - (101,300) - Amortization of stock award - - - - 12,300 12,300 Net income - - - 1,481,500 - 1,481,500 Balance, December 31, 1995 11,208,627 $112,100 7,019,800 12,878,000 (89,000) 19,920,900
See accompanying notes to consolidated financial statements. F-6 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Years Ended December 31, 1995, 1994 and 1993 1995 1994 1993 Cash flows from operating activities: Net income $1,481,500 921,600 1,589,800 Adjustment to net income to reconcile to cash provided by operating activities: Extraordinary gain on debt restructuring - - (358,600) Deferred income taxes 112,600 97,400 166,700 Depreciation, depletion and amortization 2,152,100 1,848,200 1,717,400 Disposition of leasehold acreage 201,300 173,600 97,400 Employee compensation paid in stock 12,300 108,200 - Profit sharing plan contribution - - 150,000 (Increase) decrease in notes and accounts receivable (41,200) 39,400 128,700 Decrease (increase) in inventories 172,300 (38,100) (90,400) Decrease (increase) in prepaid expenses 10,600 (211,000) (100,700) Decrease in other assets 65,800 65,100 15,000 Increase (decrease) in accounts payable and accrued expenses 42,300 92,200 (1,397,700) Increase in advances for future drilling contracts 869,700 1,071,900 3,019,300 Increase (decrease) in funds held for future distribution 337,300 (474,300) 1,700 Other (95,800) 18,300 8,600 Total adjustments 3,839,300 2,790,900 3,357,400 Net cash provided by operating activities 5,320,800 3,712,500 4,947,200 Cash flows from investing activities: Capital expenditures (3,910,400) (5,606,500) (2,630,200) Proceeds from sale of leases 289,400 282,100 359,600 Proceeds from sale of fixed assets 36,700 34,200 64,400 Net cash used in investing activities (3,584,300) (5,290,200) (2,206,200) Cash flows from financing activities: Proceeds from debt - 800,000 3,399,000 Proceeds from issuance of stock 46,600 5,000 40,700 Purchase of treasury stock - - (1,892,000) Retirement of debt (636,300) (899,300) (2,952,700) Net cash used in financing activities (589,700) (94,300) (1,405,000) Net increase (decrease) in cash and cash equivalents 1,146,800 (1,672,000) 1,336,000 Cash and cash equivalents, beginning of year 8,906,800 10,578,800 9,242,800 Cash and cash equivalents, end of year $10,053,600 8,906,800 10,578,800
See accompanying notes to consolidated financial statements. F-7 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Years Ended December 31, 1995, 1994 and 1993 (1) Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of Petroleum Development Corporation and its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. The Company accounts for its investment in limited partnerships under the proportionate consolidation method. Under this method, the Company's balance sheets and operating statements include its prorata share of assets and liabilities and revenues and expenses, respectively, of the limited partnerships in which it participates. The Company is principally involved in oil and gas exploration, production and development and related property management which is considered one business segment for financial reporting purposes. The Company grants credit to purchasers of oil and gas and the owners of managed properties, substantially all of whom are located in the Appalachian Basin area of West Virginia, Tennessee, Pennsylvania and Ohio. Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Inventories Inventories of well equipment, parts and supplies are valued at the lower of average cost or market. Oil and Gas Properties Exploration and development costs are accounted for by the successful efforts method. The Company assesses impairment of capitalized costs of proved oil and gas properties by comparing net capitalized costs to undiscounted future net 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. Property acquisition costs are capitalized when incurred. Geological and geophysical costs and delay rentals are expensed as incurred. The costs of drilling exploratory wells are capitalized pending determination of whether the wells have discovered economically producible reserves. If reserves are not discovered, such costs are expensed as dry holes. Development costs, including equipment and intangible drilling costs related to both producing wells and developmental dry holes, are capitalized. Unproved properties are assessed on a property-by-property basis and properties considered to be impaired are charged to expense when such impairment is deemed to have occurred. (Continued) F-8 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Costs of proved properties, including leasehold acquisition, exploration and development costs and equipment, are depreciated or depleted by the unit-of-production method based on estimated proved developed oil and gas reserves. Upon sale or retirement of complete units of depreciable or depletable property, the net cost thereof, less proceeds or salvage value, is credited or charged to income. Upon retirement of a partial unit of property, the cost thereof is charged to accumulated depreciation and depletion. Based on the Company's experience, management believes site restoration, dismantlement and abandonment costs to be immaterial in relation to operating costs. These costs are being expensed when incurred. Transportation Equipment, Pipelines and Other Equipment Transportation equipment, pipelines and other equipment are carried at cost. Depreciation is provided principally on the straight-line method over useful lives of 3 to 17 years. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments are capitalized. Upon the sale or other disposition of assets, the cost and related accumulated depreciation, depletion and amortization are removed from the accounts, the proceeds applied thereto and any resulting gain or loss is reflected in income. Buildings Buildings are carried at cost and depreciated on the straight-line method over estimated useful lives of 30 years. Retirement Plans The Company has a 401-K contributory retirement plan (401-K Plan) covering full-time employees. The Company provides a discretionary matching of employee contributions to the plan. The Company also has a profit sharing plan covering full-time employees. The Company's contributions to this plan are discretionary. During 1994, the Company established a deferred compensation arrangement covering executive officers of the Company as a supplemental retirement benefit. During 1995, the Company established split-dollar life insurance arrangements with certain executive officers. Under these arrangements, advances are made to these officers equal to the premiums due. The advances are collateralized by the cash surrender value of the policies. The Company records as other assets its share of the cash surrender value of the policies. Revenue Recognition Oil and gas wells are drilled primarily on a contract basis. The Company follows the percentage-of-completion method of income recognition for drilling operations in progress. Well operations income consists of operation charges for well upkeep, maintenance and operating lease income on tangible well equipment. (Continued) F-9 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and revenues and expenses and the disclosure of contingent assets and 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 consolidated financial statements include estimates of oil and gas reserves and future undiscounted cash flows from oil and gas properties. New Pronouncement The Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", effective Janaury 1, 1995. 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 without interest charges) is less that the carrying 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 the asset. The impact from the adoption of this accounting standard was not significant. (2) Notes and Accounts Receivable The Company holds notes receivable from officers, directors and employees with interest from 8% to 12% as of December 31, 1995 and 1994, in the amounts of $33,300 and $41,900, respectively, of which $200 and $8,700 are current. Included in other assets are noncurrent notes and accounts receivable as of December 31, 1995 and 1994, in the amounts of $168,400 and $368,000, net of the allowance for doubtful accounts of $368,800 and $254,000, respectively. The allowance for doubtful current accounts receivable as of December 31, 1995 and 1994 was $20,200 and $175,400, respectively. (3) Long-Term Debt Long-term debt at December 31, 1995 and 1994, consisted of the following: (Continued) F-10 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements 1995 1994 Note payable to bank, under a credit agreement, due in November 1998 with interest payable monthly at prime (8.5% at December 31, 1995) plus 1/2% $2,500,000 3,100,000 Mortgage note payable to bank with interest at prime (8.5% at December 31, 1994) plus 1-1/2%, due in monthly installments of $2,700, secured by real property - 28,200 Installment notes payable with various interest rates ranging to 8.5%, payable in monthly installments of approximately $1,300 plus interest through 1995, secured by equipment - 8,100 2,500,000 3,136,300 Current maturities - 36,300 Long-term debt, excluding current maturities $2,500,000 3,100,000
On November 17, 1993, the Company entered into a Credit Agreement providing a borrowing base of $7,500,000 subject to adequate natural gas reserve levels. During 1995 an amendment to the Credit Agreement was executed which reduced the interest rate and extended the Agreement until 1998. The Credit Agreement requires no principal payments until it matures in November, 1998. The Company has activated $5,000,000 of the credit line and is required to pay an annual commitment fee of 1/2% on the unused portion of the activated credit facility. The loan is secured by substantially all properties and equipment of the Company. The Credit Agreement requires the existence of satisfactory levels of natural gas reserves, and additionally provides, among other things, for the maintenance of certain working capital and tangible net worth ratios along with limitations on dividend payments. (4) Income Taxes The Company's provision for income taxes consisted of the following: 1995 1994 1993 Current: Federal $ 128,400 66,600 111,800 State 109,900 12,700 86,100 Total current income taxes 238,300 79,300 197,900 Deferred: Federal 87,300 75,500 129,200 State 25,300 21,900 37,500 Total deferred income taxes 112,600 97,400 166,700 Total taxes $ 350,900 176,700 364,600 Income tax expense is included in the financial statements as follows: Operations $ 350,900 176,700 275,000 Extraordinary item - - 89,600 $ 350,900 176,700 364,600
(Continued) F-11 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Income tax expense attributable to income from continuing operations was $350,900, $176,700 and $275,000 for the years ended December 31, 1995, 1994 and 1993, respectively, and differed from the amounts computed by applying the U.S. federal income tax rate of 34 percent to pretax income from continuing operations as a result of the following: 1995 1994 1993 Amount Amount Amount Computed "expected" tax $ 623,000 373,400 542,600 State income tax 108,800 71,200 95,000 Percentage depletion (155,900) (136,000) (240,200) Nonconventional source fuel credit (127,300) (18,000) (147,000) Adjustment to oil and gas properties - (132,700) - Adjustments to valuation allowance (100,700) Other 3,000 18,800 24,600 $ 350,900 176,700 275,000
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1995, and 1994 are presented below: 1995 1994 Deferred tax assets: Drilling notes, principally due to allowance for doubtful accounts $ 671,300 839,700 Investment tax credit carryforwards 233,300 342,100 Alternative minimum tax credit carryforwards (Section 29) 909,400 698,600 Other 440,600 340,200 Total gross deferred tax assets 2,254,600 2,220,600 Less valuation allowance (941,300) (842,700) Deferred tax assets 1,313,300 1,377,900 Less current deferred tax assets (included in prepaid expenses) (386,200) (275,000) Net non-current deferred tax assets 927,100 1,102,900 Deferred tax liabilities: Plant and equipment, principally due to differences in depreciation and amortization (3,848,000) (3,882,400) Total gross deferred tax liabilities (3,848,000) (3,882,400) Net deferred tax liability $(2,920,900) (2,779,500)
The Company has evaluated each deferred tax asset and has provided a valuation allowance where it is believed more likely than not that some portion of the asset will not be realized. The valuation allowance for deferred tax assets as of January 1, 1993 was $698,000. The net changes in the total valuation allowance for the years ended December 31, 1995, 1994, and 1993 were increases of $98,600, $45,000 and $99,700, respectively. At December 31, 1995, the Company has investment tax credit carryforwards for federal income tax purposes of approximately $233,300 which are (Continued) F-12 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements available to reduce future federal income taxes, if any, through 2000. In addition, the Company has alternative minimum tax credit carryforwards (Section 29) of approximately $909,400 which are available to reduce future federal regular income taxes, if any, over an indefinite period. (5) Common Stock Options Options amounting to 210,000 and 128,500 shares were granted during 1995 and 1993, respectively to certain employees and directors under the Company's Stock Option Plans. These options were granted at market value as of the date of grant and the outstanding options expire from 1995 to 2002. Number of Shares Average Range Outstanding December 31, 1992 2,398,750 $0.64 .38 - 1.00 Granted 128,500 $1.63 1.63 - 1.63 Exercised (156,000) $0.42 .38 - .65 Expired (189,000) $0.64 .55 - .72 Outstanding December 31, 1993 2,182,250 $0.71 .38 - 1.63 Granted - $ - - Exercised (226,250) $0.50 .44 - .69 Expired - $ - - Outstanding December 31, 1994 1,956,000 $0.77 .38 - 1.63 Granted 210,000 $1.13 .94 - .94 Exercised (78,000) $0.60 .56 - .72 Expired (235,350) $0.68 .38 - 1.63 Outstanding December 31, 1995 1,852,650 $0.91 .50 - 1.63
Stock Redemption Agreement The Company has stock redemption agreements with three officers of the Company. The agreements require the Company to maintain life insurance on each executive in the amount of $1,000,000. The agreements provide that the Company shall utilize the proceeds from such insurance to purchase from such executives' estates or heirs, at their option, shares of the Company's stock. The purchase price for the outstanding common stock is to be based upon the average closing asked price for the Company's stock as quoted by NASDAQ during a specified period. The Company is not required to purchase any shares in excess of the amount provided for by such insurance. (6) Employee Benefit Plans The Company made 401-K Plan contributions of $71,800, $68,700 and $63,200 for 1995, 1994 and 1993, respectively. The Company has a profit sharing plan (the Plan) covering full-time employees. The Company contributed $28,500 to the plan in cash during 1995 and 92,308 shares of the Company's stock (treasury shares) with a market value of $150,000 plus $5,000 in cash in 1993. The Company did not make a contribution to the Plan during 1994. During 1995 and 1994, the Company expensed and established a liability for $90,000 each year under a deferred compensation arrangement with the executive officers of the Company. (Continued) F-13 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements In 1995, a total of 90,000 restricted shares of the Company's common stock were granted to certain employees and available to them upon retirement. The market value of shares awarded was $101,300. This amount was recorded as unamortized stock award and is shown as a separate component of stockholders' equity. The unamortized stock award is being amortized to expense over the employees' expected years to retirement and amounted to $12,300 in 1995. At December 31, 1995, the Company has recorded as other assets $60,000 as its share of the cash surrender value of the life insurance pledged as collateral for the payment of premiums on split-dollar life insurance policies owned by certain executive officers. (7) Extraordinary Item As discussed in Note 3, the Company executed a new credit agreement on November 17, 1993. As a result of the early retirement of the outstanding obligation under the previously existing credit arrangement, the Company wrote off the remaining liability for future interest amounting to $358,600 established in connection with a debt restructuring in 1990. Consistent with the accounting for the 1990 restructuring, the write-off of $358,600 before applicable income taxes of $89,600 has been accounted for as an extraordinary item. (8) Earnings Per Share Earnings per share is based on the weighted average number of common and common equivalent shares outstanding of 11,606,690 for 1995, 11,990,497 for 1994 and 11,563,648 for 1993. Fully diluted earnings per share is based upon the weighted average number of common and common equivalent shares outstanding of 11,937,130, 11,990,497 and 11,563,648, for 1995, 1994 and 1993, respectively. Stock warrants and options are considered to be common stock equivalents and, to the extent appropriate, have been added to the weighted average common shares outstanding. (9) Transactions with Affiliates As part of its duties as well operator, the Company received $11,397,000 in 1995, $12,834,300 in 1994 and $11,894,200 in 1993 representing proceeds from the sale of oil and gas and made distributions to investor groups according to their working interests in the related oil and gas properties. (10) Commitments and Contingencies The nature of the independent oil and gas industry involves a dependence on outside investor drilling capital and involves a concentration of gas sales to a few customers. The Company sells natural gas to various public utilities and industrial customers, none of which accounted for more than 10% of total revenues. The Company is not party to any legal action that would materially affect the Company's operations or financial statements. (11) Supplemental Disclosure of Cash Flows The Company paid $319,700, $300,200 and $55,000 for interest in 1995, 1994 and 1993, respectively. The Company paid income taxes in 1994 and 1993 in the amounts of $312,500 and $261,000, respectively. (Continued) F-14 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (12) Noncash Financing and Investing Activities In 1994 the Company issued 55,000 shares of common stock for the purchase of producing properties. Also in 1994, employees exercised stock options for 143,706 shares of common stock and surrendered options for 72,544 common shares in lieu of cash payments in connection with the options exercised. This resulted in compensation expense of $108,200. In 1993 warrant holders exercised warrants for 1,993,073 shares of common stock and surrendered warrants for 756,927 common shares, in lieu of cash payments in connection with the warrants exercised. (13) Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities Costs incurred by the Company in oil and gas property acquisition, exploration and development are presented below: Years Ended December 31, 1995 1994 1993 Property acquisition cost: Proved undeveloped properties $ 167,800 426,200 267,500 Producing properties 218,500 1,332,100 59,700 Exploration costs - - 97,800 Development costs 2,977,700 2,260,800 1,412,000 $3,364,000 4,019,100 1,837,000
Property acquisition costs include costs incurred to purchase, lease or otherwise acquire a property. Exploration costs include the cost of geological and geophysical activity, dry holes and drilling and equipping exploratory wells. Development costs include costs incurred to gain access to and prepare development well locations for drilling, to drill and equip development wells and to provide facilities to extract, treat, gather and store oil and gas. (14) Oil and Gas Capitalized Costs Aggregate capitalized costs for the Company related to oil and gas exploration and production activities with applicable accumulated depreciation, depletion and amortization are presented below: December 31, 1995 1994 Proved properties: Intangible drilling costs $16,582,000 16,363,400 Tangible well equipment 16,831,800 13,854,200 Well equipment leased to others 4,063,600 4,063,600 Undeveloped properties 514,600 770,100 37,992,000 35,051,300 Less accumulated depreciation, depletion and amortization 14,529,900 13,021,600 $23,462,100 22,029,700
(Continued) F-15 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (15) Results of Operations for Oil and Gas Producing Activities The results of operations for oil and gas producing activities (excluding marketing) are presented below: Years Ended December 31, 1995 1994 1993 Revenue: Oil and gas sales $2,534,000 2,610,100 2,201,800 Expenses: Production costs 596,000 734,700 580,700 Depreciation, depletion and amortization 1,000,700 922,300 981,900 1,596,700 1,657,000 1,562,600 Results of operations for oil and gas producing activities before provision for income taxes 937,300 953,100 639,200 Provision for income taxes 137,800 146,600 75,100 Results of operations for oil and gas producing activities (excluding corporate overhead and interest costs) $ 799,500 806,500 564,100
Production costs include those costs incurred to operate and maintain productive wells and related equipment, including such costs as labor, repairs, maintenance, materials, supplies, fuel consumed, insurance and other production taxes. In addition, production costs include administrative expenses and depreciation applicable to support equipment associated with these activities. Depreciation, depletion and amortization expense includes those costs associated with capitalized acquisition, exploration and development costs, but does not include the depreciation applicable to support equipment. The provision for income taxes is computed at the statutory federal income tax rate and is reduced to the extent of permanent differences, such as investment tax credits and statutory depletion allowed for income tax purposes. (16) Net Proved Oil and Gas Reserves (Unaudited) The proved reserves of oil and gas of the Company as estimated by the Company, all of which are located within the United States, are as follows: Oil (BBLS) 1995 1994 1993 Proved developed and undeveloped reserves: Beginning of year 79,000 91,000 78,000 Revisions of previous estimates 72,000 (1,000) 23,000 Beginning of year as revised 151,000 90,000 101,000 Production (11,000) (11,000) (10,000) End of year 140,000 79,000 91,000 Proved developed reserves: Beginning of year 79,000 91,000 78,000 End of year 140,000 79,000 91,000
(Continued) F-16 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Gas (MCF) 1995 1994 1993 Proved developed and undeveloped reserves: Beginning of year 32,225,000 24,660,000 24,980,000 Revisions of previous estimates 686,000 4,472,000 (889,000) Beginning of year as revised 32,911,000 29,132,000 24,091,000 New discoveries and extensions 2,119,000 2,345,000 1,534,000 Acquisitions 135,000 1,943,000 - Production (1,336,000) (1,195,000) (965,000) End of year 33,829,000 32,225,000 24,660,000 Proved developed reserves: Beginning of year 27,746,000 20,181,000 20,477,000 End of year 29,326,000 27,746,000 20,181,000
(17) Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Gas Reserves (Unaudited) Summarized in the following table is information for the Company with respect to the standardized measure of discounted future net cash flows relating to proved oil and gas reserves. Future cash inflows are derived by applying current oil and gas prices to estimated future production. Future production, development, site restoration and abandonment costs are derived based on current costs assuming continuation of existing economic conditions. Future income tax expenses are computed by applying the statutory rate in effect at the end of each year to the future pretax net cash flows, less the tax basis of the properties and gives effect to permanent differences, tax credits and allowances related to the properties. Years Ended December 31, 1995 1994 1993 Future estimated cash flows $99,478,000 73,316,000 64,588,000 Future estimated production and development costs (29,288,000) (24,370,000) (18,736,000) Future estimated income tax expense (20,004,000) (13,950,000) (13,068,000) Future net cash flows 50,186,000 34,996,000 32,784,000 10% annual discount for estimated timing of cash flows (29,126,000) (20,551,000) (18,766,000) Standardized measure of discounted future estimated net cash flows $21,060,000 14,445,000 14,018,000
(Continued) F-17 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table summarizes the principal sources of change in the standardized measure of discounted future estimated net cash flows: Years Ended December 31, 1995 1994 1993 Sales of oil and gas production, net of production costs $(1,938,000) (1,875,000) (1,621,000) Net changes in prices and production costs 17,024,000 (9,560,000) (6,046,000) Extensions, discoveries and improved recovery, less related cost 4,609,000 3,875,000 2,818,000 Acquisitions 294,000 2,745,000 - Development costs incurred during the period 2,978,000 2,261,000 1,412,000 Revisions of previous quantity estimates 1,700,000 8,222,000 (1,607,000) Changes in estimated income taxes (6,054,000) (882,000) 3,803,000 Accretion of discount (8,575,000) (1,785,000) 1,572,000 Other (3,423,000) (2,574,000) (1,828,000) $ 6,615,000 427,000 (1,497,000)
It is necessary to emphasize that the data presented should not be viewed as representing the expected cash flow from, or current value of, existing proved reserves since the computations are based on a large number of estimates and arbitrary assumptions. Reserve quantities cannot be measured with precision and their estimation requires many judgmental determinations and frequent revisions. The required projection of production and related expenditures over time requires further estimates with respect to pipeline availability, rates of demand and governmental control. Actual future prices and costs are likely to be substantially different from the current prices and costs utilized in the computation of reported amounts. Any analysis or evaluation of the reported amounts should give specific recognition to the computational methods utilized and the limitations inherent therein. (Continued) F-18 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (18) Quarterly Financial Data (Unaudited) Summarized quarterly financial data for the years ended December 31, 1995 and 1994, are as follows: 1995 Quarter Year First Second Third Fourth Revenues $9,537,000 $4,432,800 $3,582,500 $4,794,200 $22,346,500 Cost of operations 8,034,500 3,621,700 2,764,500 3,813,100 18,233,800 Gross profit 1,502,500 811,100 818,000 981,100 4,112,700 General and administrative expenses 450,300 520,900 600,700 388,700 1,960,600 Interest expense 83,400 76,300 71,000 89,000 319,700 533,700 597,200 671,700 477,700 2,280,300 Income before income taxes 968,800 213,900 146,300 503,400 1,832,400 Income taxes 240,300 53,000 36,300 21,300 350,900 Net income $ 728,500 $ 160,900 $ 110,000 $ 482,100 $ 1,481,500 Primary earnings per share $ .06 $ .02 $ .01 $ .04 $ .13 1994 Quarter Year First Second Third Fourth Revenues $8,833,900 $4,844,700 $3,715,700 $6,411,900 $23,806,200 Cost of operations 7,553,000 4,330,400 3,139,400 5,181,100 20,203,900 Gross profit 1,280,900 514,300 576,300 1,230,800 3,602,300 General and administrative expenses 498,100 532,300 635,200 538,200 2,203,800 Interest expense 68,600 69,600 81,200 80,800 300,200 566,700 601,900 716,400 619,000 2,504,000 Income (loss) before income taxes 714,200 (87,600) (140,100) 611,800 1,098,300 Income taxes 160,700 (19,700) (39,800) 75,500 176,700 Net income (loss) $ 553,500 $ (67,900) $ (100,300) $ 536,300 $ 921,600 Primary earnings (loss) per share $.05 $(.01) $(.01) $ .05 $ .08
Cost of operations include cost of oil and gas well drilling operations, oil and gas purchases and production costs and depreciation, depletion and amortization. (19) Subsequent Event On January 31, 1996, the Company purchased 1,200,000 shares of its common stock pursuant to an option agreement. The option was obtained in connection with a debt restructuring in 1990. The company utilized its' revolving credit line to acquire the shares for $1,000,000 or $0.83 a share. The shares representing approximately 11% of the currently outstanding stock were retired by the Company. F-19 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Years Ended December 31, 1995, 1994 and 1993 Column A Column B Column C Column D Column E Additions, Balance at Charged to Balance Beginning Costs and at End Description of Period Expenses Deductions of Period Allowance for doubtful accounts deducted from accounts and notes receivable in the balance sheet 1995 $429,400 $210,000 $250,400 $389,000 1994 $362,300 $ 75,100 $ 8,000 $429,400 1993 $ 58,400 $410,000 $106,100 $362,300
F-20 Petroleum Development Corporation Index to Exhibits 11 Schedule of Computation of Net Income Per Share E-2 E-1 PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES EXHIBIT 11 SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE Years Ended December 31, PRIMARY 1995 1994 1993 Net income for primary income per common share before extraordinary item $1,481,500 $ 921,600 $ 1,320,800 Net income for primary income per common share $1,481,500 $ 921,600 $ 1,589,800 Weighted average number of common shares outstanding during the year 10,056,441 10,878,601 10,312,501 Add - common equivalent shares (determined using the "treasury stock" method) represent- ing shares issuable upon exercise of employee stock options 1,550,249 1,111,896 1,251,147 Weighted average number of shares used in calculation of primary income per share 11,606,690 11,990,497 11,563,648 Primary income per share before extraordinary item $ .13 $ .08 $ .11 Primary income per share $ .13 $ .08 $ .14 FULLY DILUTED Net income for primary income per common share before extraordinary item $ 1,481,500 $ 921,600 $ 1,320,800 Net income for primary income per common share $ 1,481,500 $ 921,600 $ 1,589,800 Add: Interest reduction on payment of debt from issuance of stock proceeds, net of applicable income taxes - - - Net income for fully diluted net income per share before extraordinary item $ 1,481,500 $ 921,600 $ 1,320,800 Net income for fully diluted net income per share $ 1,481,500 $ 921,600 $ 1,589,800 Weighted average number of shares used in calculating primary income per common share 11,606,690 11,990,497 11,563,648 Shares issuable upon exercise of stock options used in primary calculation above (1,550,249) (1,111,896) (1,251,147) Shares issuable for fully diluted calculation 1,880,689 1,111,896 1,251,147 Weighted average number of shares used in calculation of fully diluted income per share 11,937,130 11,990,497 11,563,648 Fully diluted earnings per share before extraordinary item $ .12 $ .08 $ .11 Fully diluted earnings per share $ .12 $ .08 $ .14 E-11
 

5 1 12-MOS DEC-31-1995 DEC-31-1995 10,053,600 0 2,016,600 389,000 217,900 13,156,900 48,240,000 21,127,100 40,620,100 14,676,600 2,500,000 0 0 112,100 19,808,800 40,620,100 4,150,600 22,346,500 4,138,700 20,514,100 0 210,000 319,700 1,832,400 350,900 1,481,500 0 0 0 1,481,500 .13 .12