BRIDGEPORT, W.Va., Jan. 17 /PRNewswire-FirstCall/ -- Petroleum
Development Corporation (NASDAQ:PETDE) today announced third
quarter and nine month operating results for 2005. Net income for
the third quarter of 2005 was $7.5 million ($.46 per diluted share)
compared to a restated $7.9 million ($.47 per diluted share) for
the same period in 2004. Net income for the nine months of 2005 was
a record $28.5 million ($1.73 per diluted share) compared to a
restated $24.0 million ($1.45 per diluted share) for the first nine
months of 2004. Three Months Ended Nine Months Ended September 30,
September 30, (unaudited) (unaudited) 2005 2004 2005 2004
(Restated) (Restated) Revenues: $85,787,000 $72,267,900
$251,983,700 $215,254,400 Income before income taxes $11,918,800
$12,422,200 $45,276,600 $37,654,600 Net income $ 7,505,800
$7,915,800 $28,524,300 $24,058,400 Basic earnings per common share
$0.46 $0.49 $1.74 $1.50 Diluted earnings per share $0.46 $0.47
$1.73 $1.45 Weighted average common shares outstanding 16,271,593
16,284,827 16,433,859 16,140,358 Weighted average common and common
equivalent shares outstanding 16,322,795 16,694,637 16,484,787
16,542,623 Steven R. Williams, CEO of Petroleum Development
Corporation, said, "Strong energy prices, increasing production and
strong partnership sales have allowed the Company to continue to
report outstanding results. We are continuing a strong drilling and
development program, and the increasing cash flow is also allowing
us to pursue higher risk opportunities with the drill bit that
could offer substantial upside for the future." The Company has
added a new line item, "Oil and gas price risk management loss,
net" to the income statement to present the results of PDC's
unwinding its previous treatment of hedge accounting. This line
item, which is shown below, is comprised of the change in fair
value of oil and natural gas derivatives related to our oil and gas
production and includes both realized and unrealized gains and
losses. This line item does not include changes in fair values of
commodity-based derivative transactions related to its gas
marketing activities. Realized gains or losses result from
derivative transactions that settled during the period. Unrealized
gains or losses relate to derivative transactions that have not
settled as of the end of the reporting period and may or may not
occur. The change in fair value for non- settled derivatives is
based on the closing price of the derivatives at the end of the
period. The "Oil and gas price risk management loss, net" as
presented in the income statement later in this release is made up
of the following realized and unrealized portions. Three months
ended Nine months ended September 30, September 30, September 30,
September 30, 2005 2004 2005 2004 (restated) (restated) Realized
loss $2,121,400 $463,300 $3,396,600 $933,100 Unrealized loss
$7,800,900 $1,915,500 $9,326,400 $3,144,400 Total $9,922,300
$2,378,800 $12,723,000 $4,077,500 Operations Record sales of public
drilling partnerships during the first half of 2005 enabled the
Company to utilize $39.7 million to drill 37 wells during the third
quarter of 2005 for its public partnerships. This brings the total
through the first three quarters of 2005 to 121 wells, all of which
are successful. Thirty of the third quarter partnership wells were
drilled in the Wattenberg Field and seven were drilled in the
Piceance Basin. This brings the totals to 96 Wattenberg and 25
Piceance Basin wells through the first three quarters of 2005. All
of the wells drilled by the Company in these two areas were in
conjunction with its public drilling fund partnerships. The Company
has conducted the remainder of its 2005 partnership drilling
activity in the same two areas. As of September 30, 2005 the
Company had funds for future drilling for partnerships of $24.8
million. On December 30, 2005, the Company funded its third and
final partnership of the year with subscriptions of approximately
$36 million. The funds available at the end of the third quarter
funded primarily fourth quarter drilling and completion operations.
The final Partnership's funds are available for operations during
first quarter 2006. The Company also participated in the drilling
of 7 gross (2.5 net) additional wells located on its northeast
Colorado properties (NECO), during the third quarter, bringing the
total to 53 gross wells (34 net wells) drilled on its NECO
properties through the first three quarters of 2005. The Company
drilled or participated in approximately 29 additional wells during
the fourth quarter of 2005 in this area. The wells are being
drilled on locations created by the regulatory approval of the
reduction in well spacing from 80 to 40 acres on the properties the
Company acquired in Yuma County in 2003. In addition to drilling,
the Company also continued its Codell re- completion program in
Wattenberg Field, re-completing 18 wells during the third quarter
of 2005 for a total of 58 Codell re-completions through the first
three quarters of 2005. The Company continued this program through
the fourth quarter of 2005 with 18 additional Codell
re-completions. Exploratory Wells During the second quarter of
2005, the exploratory Fox Federal #1-13 well in Moffat County,
Colorado was tested and determined to be non-commercial. It will be
plugged and abandoned. Under the successful efforts method of
accounting, this cost is required to be expensed in the period when
the dry hole determination is made (second quarter, 2005). This
amounted to a $5.4 million expense which is included in the Income
Statement under Exploratory dry hole costs. The Company's second
exploratory well, the Coffeepot Springs #24-34 in Moffat County,
Colorado has been drilled to total depth, completed in three zones,
tested and has been deemed to be productive under the successful
efforts method of accounting. The Company has a 100% working
interest in this well. The cost of this well, which is
approximately $5.2 million as of November 30, 2005 will be
capitalized and depreciated over the life of the well using the
units of production depreciation method. Early in the third quarter
the Company commenced the drilling of a horizontal Bakken
exploratory well, the Fedora #34-22H in Dunn County, North Dakota
which has been drilled to total depth, completed and placed in
production in late September, 2005. The Company has a 100% working
interest in this well. The cost of this well, which is
approximately $4.1 million as of November 30, 2005, will be
capitalized and depreciated over the life of the well using units
of production depreciation method. The Company has commended
drilling operations on its second exploratory Bakken well. The
Violet-Olsen 31-29H, located in Williams County, North Dakota,
targets the middle member of the Bakken Formation at a depth of
approximately 10,000 feet with an additional single leg horizontal
component of approximately 8,000 feet for a total estimated
measured depth of approximately 18,000 feet. This well is located
approximately 50 miles north of the Company's Fedora well
referenced above. The estimated dry hole cost for this well is
approximately $2.1 million. Production Oil and natural gas
production for the third quarter increased to 3.43 billion cubic
feet equivalent (Bcfe) from 3.12 Bcfe in the third quarter of 2004
an increase of 9.9%. All of the increase was attributable to the
Rocky Mountain Region where the Company's drilling, development and
acquisition activities have been focused for the past several
years. The Rocky Mountain Region production increased 20.2%
compared to the year earlier period, while production in the
Appalachian Basin declined 14.1% and Michigan Basin production
declined 14.6% year to year. Oil and gas sales also benefited from
higher prices for both oil and natural gas compared to the third
quarter of 2004. In the third quarter of 2005 the Company sold its
natural gas for an average price of $8.07 per thousand cubic feet
(Mcf), compared to a restated $5.13 per Mcf in the third quarter of
2004. Similarly the average price of oil this quarter was $54.66
per barrel (Bbl) compared to a restated $37.65 per barrel in the
third quarter of 2004. These prices for the three and nine months
ended September 30, 2005 and 2004, do not include gains or losses
from derivative transactions. The following table summarizes the
production by region and pricing for the third quarters of 2005 and
2004. Three Months Ended Three Months Ended September 30, 2005
September 30, 2004 Natural Natural Gas Natural Natural Gas Oil Gas
Equivalents Oil Gas Equivalents (Bbl) (Mcf) (Mcfe) (Bbl) (Mcf)
(Mcfe) Appalachian Basin 1,218 394,982 402,290 1,589 458,657
468,191 Michigan Basin 1,177 379,824 386,886 1,301 445,013 452,819
Rocky Mountains 116,170 1,941,513 2,638,533 85,414 1,682,360
2,194,844 Total 118,565 2,716,319 3,427,709 88,304 2,586,030
3,115,854 (Restated)(Restated)(Restated) Average Price $54.66 $8.07
$8.29 $37.65 $ 5.13 $5.32 Oil and natural gas production for the
first nine months of 2005 increased to 10.1 Bcfe from 9.49 Bcfe
compared to the same period in 2004 an increase of 6.4%. This
increase was fueled by our Rocky Mountain production. The average
sales price per Mcfe also increased significantly from a restated
$5.18 per Mcfe during the first nine months of 2004 to $6.80 per
Mcfe for the same period in 2005. The Company's oil and natural gas
production for the first nine months of 2005 and 2004 by area of
operations along with average sales price is presented below: Nine
Months Ended Nine Months Ended September 30, 2005 September 30,
2004 Natural Natural Gas Natural Natural Gas Oil Gas Equivalents
Oil Gas Equivalents (Bbl) (Mcf) (Mcfe) (Bbl) (Mcf) (Mcfe)
Appalachian Basin 3,073 1,238,724 1,257,162 3,931 1,346,915
1,370,501 Michigan Basin 3,391 1,172,638 1,192,984 4,305 1,314,829
1,340,659 Rocky Mountains 324,355 5,698,298 7,644,428 280,308
5,093,748 6,775,596 Total 330,819 8,109,660 10,094,574 288,544
7,755,492 9,486,756 (Restated) (Restated) (Restated) Average Price
$47.60 $6.52 $6.80 $34.78 $5.04 $5.18 Current Hedging of Commodity
Transactions The Company has entered into commodity-based
derivative transactions to manage a portion of the exposure to
price risk associated with its sales of oil and natural gas. During
the third quarter of 2005 the Company had average production per
month of 905,400 Mcf of natural gas and 39,500 Bbls of oil. The
current positions and as of the fourth quarter of 2005 in effect on
the Company's share of production are shown in the following table:
Floors Ceilings Monthly Monthly Quantity Contract Quantity Contract
Month Set Month Mmbtu Price Mmbtu Price Colorado Interstate Gas
(CIG) Based Derivatives (Piceance Basin) Feb-04 Oct 05 33,000 $3.10
16,000 $4.43 Mar-05 Oct 05 38,000 $4.75 19,000 $8.12 Jan-05 Nov
2005-Mar 2006 60,000 $4.50 30,000 $7.15 Jul-05 Nov 2005-Mar 2006
27,500 $6.50 13,750 $8.27 Sep-05 Nov 2005-Mar 2006 78,700 $9.00 - -
Mar-05 Apr 2006-Oct 2006 42,000 $4.50 21,000 $7.25 Jul-05 Apr
2006-Oct 2006 27,500 $5.50 13,750 $7.63 Jul-05 Nov 2006-Mar 2007
27,500 $6.00 13,750 $8.40 New York Mercantile Exchange (NYMEX)
Based Derivatives - (Appalachian and Michigan Basins) Feb-04 Oct 05
122,000 $4.28 61,000 $5.00 Mar-05 Oct 05 39,000 $5.75 19,500 $8.37
Jan-05 Nov 2005-Mar 2006 156,000 $5.00 78,000 $8.50 Sep 05 Nov
2005-Mar 2006 156,000 $10.50 - - Mar-05 Apr 2006-Oct 2006 78,000
$5.50 39,000 $7.40 Jul-05 Apr 2006-Oct 2006 61,000 $6.25 30,000
$8.98 Jul-05 Nov 2006-Mar 2007 68,000 $7.00 34,000 $9.27 NYMEX
Based Derivatives (NECO) Area Feb-04 Oct 05 150,000 $4.26 75,000
$5.00 Jan-05 Nov 2005-Mar 2006 150,000 $5.00 75,000 $8.45 Panhandle
Based Derivatives (NECO) Area Sep-05 Nov 2005-Mar 2006 100,000
$10.00 - - Mar-05 Apr 2006-Oct 2006 150,000 $5.00 75,000 $8.62
Jul-05 Nov 2006-Mar 2007 150,000 $6.50 75,000 $8.56 Oil - NYMEX
Based (Wattenberg) Bbl Bbl Aug-04 Oct 2005-Dec 2005 15,000 $32.30
7,500 $40.00 Other Income Included in Other income for the nine
months ended September 30, 2005 are the profit from the sale of a
portion of one of our undeveloped leases in Garfield County,
Colorado, which we sold to an unaffiliated person in the first
quarter of 2005 for a pre-tax gain of $6.2 million and a second
quarter pre-tax gain on sale to an unaffiliated person of some
Pennsylvania wells in the amount of $1.7 million. Common Stock
Repurchase On January 13, 2006, the Company's Board of Directors
authorized the repurchase of up to 10% (1,627,500 shares) of the
Company's common stock during 2006. Stock repurchases under this
program may be made in the open market or in private transactions,
at times and in amounts that management deems appropriate. The
Company may terminate or limit the stock repurchase program at any
time. PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES Condensed
Consolidated Statements of Income Three Months and Nine Months
Ended September 30, 2005 and 2004 (Unaudited) Three Months Ended
Nine Months Ended September 30, September 30, 2005 2004 2005 2004
(Restated) (Restated) Revenues: Oil and gas well drilling
operations $39,710,600 $30,394,400 $108,118,300 $89,347,500 Gas
sales from marketing activities 14,970,300 22,630,200 58,409,400
69,643,400 Oil and gas sales 28,413,400 16,580,500 68,619,900
49,105,700 Well operations and pipeline income 2,483,300 2,073,800
6,840,100 5,823,700 Other income 209,400 589,000 9,996,000
1,334,100 Total revenues 85,787,000 72,267,900 251,983,700
215,254,400 Cost and expenses: Cost of oil and gas well drilling
operations 36,177,500 26,005,400 95,112,200 76,328,400 Cost of gas
marketing activities 14,269,500 22,047,400 58,348,400 68,542,900
Oil and gas production and well operations cost 6,455,400 3,952,400
15,356,700 11,894,500 Exploratory dry hole costs 135,800 -
5,382,800 - General and administrative expenses 1,645,500 926,300
4,529,000 2,821,400 Depreciation, depletion and amortization
5,120,000 4,312,300 14,822,000 13,308,000 Total expenses 63,803,700
57,243,800 193,551,100 172,895,200 Income from operations
21,983,300 15,024,100 58,432,600 42,359,200 Interest expense
142,200 223,100 433,000 627,100 Oil and gas price risk management
loss, net 9,922,300 2,378,800 12,723,000 4,077,500 Income before
income taxes 11,918,800 12,422,200 45,276,600 37,654,600 Income
taxes 4,413,000 4,506,400 16,752,300 13,596,200 Net income
$7,505,800 $7,915,800 $28,524,300 $24,058,400 Basic earnings per
common share $0.46 $0.49 $1.74 $1.50 Diluted earnings per share
$0.46 $0.47 $1.73 $1.45 Non-GAAP Financial Measure The United
States Securities and Exchange Commission has disclosure
requirements for public companies concerning references to Non-GAAP
financial measures. (GAAP refers to generally accepted accounting
principles.) Non-GAAP financial measures may be provided if the
company explains the relevance of the information. The company must
also reconcile the Non-GAAP financial measure to related GAAP
information. "Adjusted Cash Flow" is a Non-GAAP financial measure
provided by PDC in this earnings release. Adjusted Cash Flow is net
income before deferred income taxes, depreciation, depletion, and
amortization and unrealized losses on derivative transactions. PDC
believes Adjusted Cash Flow is relevant because it is a measure of
cash available to fund the Company's capital expenditures and to
service its debt. PDC also believes Adjusted Cash Flow is a useful
measure for estimating the value of the Company's operations. Three
months Ended Nine months Ended September 30, September 30, 2005
2004 2005 2004 Restated Restated Net income $7,505,800 $7,915,800
$28,524,300 $24,058,400 Deferred income tax expense 2,054,100
1,524,900 6,683,900 7,670,500 Depreciation, depletion and
amortization 5,120,000 4,312,300 14,822,000 13,308,000 Unrealized
loss on derivative transactions 7,036,300 2,219,100 9,416,200
2,592,900 Adjusted cash flow $21,716,200 $15,972,100 $59,446,400
$47,629,800 10-Q and Quarterly Conference Call The Company filed
its Quarterly Report on Form 10-Q on January 12, 2006. You can
access the report at the Company's website (http://www.petd.com/),
or contact the Company for a paper copy. The Company invites you to
join Steve Williams, Chief Executive Officer, and Darwin Stump,
Chief Financial Officer, for a conference call on Thursday, January
19, 2006 for a discussion of the results. What: Petroleum
Development Third Quarter Earnings Conference Call When: January
19, 2006 at 11:00 a.m. Eastern Standard Time Where:
http://www.petd.com/ How: Log on to the web address above or call
(877) 407-8033 Contact: Steve Williams, Petroleum Development
Corporation, (800) 624-3821 E-mail: About Petroleum Development
Corporation Petroleum Development Corporation
(http://www.petd.com/) is an independent energy company engaged in
the development, production and marketing of natural gas. The
Company operations are focused in the Rocky Mountains with
additional operations in the Appalachian Basin and Michigan. During
the third quarter of 2004, the Company was added to the S&P
SmallCap 600 Index. Additionally, PDC was added to the Russell 3000
Index of companies in 2003. PDC was named on the FSB: Fortune Small
Business Magazine list of America's 100 Fastest-Growing Small
Companies in 2001 and 2002. Certain matters discussed within this
press release are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Although PDC
believes the expectations reflected in such forward- looking
statements are based on reasonable assumptions, it can give no
assurance that its expectations will be attained. Factors that
could cause actual results to differ materially from expectations
include financial performance, oil and gas prices, drilling program
results, drilling results, regulatory changes, changes in local or
national economic conditions and other risks detailed from time to
time in the Company's reports filed with the SEC, including
quarterly reports on Form 10-Q, reports on Form 8-K and annual
reports on Form 10-K. First Call Analyst: FCMN Contact: DATASOURCE:
Petroleum Development Corporation CONTACT: Steven R. Williams of
Petroleum Development Corporation, +1-304-842-3597 Web site:
http://www.petd.com/
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