EX-99 3 news33020051.htm

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NEWS   FROM

Petroleum Development Corporation

 

FOR IMMEDIATE RELEASE:  March 31, 2005

CONTACT:  Steven R. Williams - (304) 842-3597   www.petd.com

Petroleum Development Corporation Announces Record 2004 Results

Production, Prices and Drilling Activity Increase Net Income 51%

 

Bridgeport, West Virginia - Petroleum Development Corporation (NASDAQ/NMS PETD) today announced financial and operating results for the full year and fourth quarter of 2004. Net Income for the year was $34.1 million ($2.05 per diluted share) compared to $22.6 million ($1.39 per diluted share) in 2003. Net Income for the fourth quarter was $8.3 million ($.49 per diluted share) compared to $8.0 million ($.49 per diluted share) in the prior year. Driving the improved performance were record oil and natural gas production, strong energy prices, and higher levels of drilling activity.

Three Months Ended
December 31,

Year Ended
December 31,

2004

2003

2004

2003

 

 

 

 

Revenues

$72,590,100

$59,456,200

$290,719,800

$202,851,000

Income before income taxes and cumulative

 effect of change in accounting principle


$14,342,800


$12,791,900


$54,603,100


$34,923,500

Net income

$8,316,500

$7,989,500

$34,060,600

$22,619,100

Basic earnings per share

$.50

$.52

$2.10

$1.45

Diluted earnings per share

$.49

$.49

$2.05

$1.39

Weighted average common shares outstanding

16,539,163

15,628,433

16,240,604

15,659,591

 

 

 

 

Weighted average common and common

equivalent shares outstanding


16,906,383


16,452,784


16,647,174


16,297,793

Steven R. Williams, CEO of Petroleum Development Corporation (PDC), said, "Our operating performance in 2004 was outstanding and contributed to the substantial increase in net income and earnings per share.  High energy prices were certainly a factor in our performance, but a 21% production increase and a 28% increase in sales of units in our drilling program were also critical to our record performance. In fact, all of our operating segments contributed to the improved earnings. It was exciting to see the market recognize the strong results as our stock price continued the excellent performance that began in 2003".

Operations

The Company drilled a total of 158 new wells during 2004, including 55 wells in the fourth quarter. The total included 137 development wells in Wattenberg and Grand Valley Fields drilled in conjunction with Company sponsored partnerships in which PDC owns a 20% working interest.   In addition the Company drilled 20 infill development wells on its northeast Colorado properties (NECO), and one exploratory well on the Company's Legacy prospect in the Sand Wash Basin in Northwest Colorado. The Company owns an average of 85% of the working interest in the NECO wells and a 100% working interest in the Legacy exploratory well.  Only four wells, all in Wattenberg Field, were dry holes. Successful wells included 97 wells in Wattenberg Field, 36 wells in Grand Valley Field and the 20 NECO wells.

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Testing of the Legacy prospect, a 12,778 foot Almond Sands well, has not yet been completed so it has not been classified as either successful or dry. Expenditures to date on the well have been approximately $4,400,000. Under the successful efforts accounting method, if the well is determined to be successful these costs will be capitalized as a part of the Company's oil and gas properties.  If it is determined to be dry, the costs will be expensed as exploratory dry hole cost in the period when that determination is made.  Testing of the well was suspended in January due to restrictions on the federal lease, but will be resumed late in the second quarter.  Thereafter it will be determined whether the well is successful or dry.

The Legacy prospect is the first of a planned series of exploratory wells. A second well in the Sand Wash Basin on the Company's Coffeepot prospect is currently being drilled to a planned depth of 13,500 feet to test Upper Cretaceous Sands, with additional tests planned depending on the results of the first two wells.  The Company currently has 6,300 acres in the two prospect areas, with options on approximately another 55,000 acres.  To the north of the two Sand Wash Basin prospects the Company has acquired development rights to approximately 27,000 acres in the Red Desert Basin,  Sweetwater County, Wyoming. Current plans call for a well later this year to test various Upper Cretaceous formations at depths of up to 12,000 feet.

In addition to these deep tests, the Company also has a number of prospects on its NECO properties that could offer attractive possible future drilling opportunities.  These range from offset development opportunities to step out exploratory prospects.  The Company expects to include 60 or more of these prospects in its drilling operations in 2005.

Sales of interests in Company sponsored drilling programs and the resulting drilling and development activity continue to be a major contributor to the Company's success. The Company sold a total of $100 million of partnership interests in four partnerships during 2004. PDC serves as general partner of the partnerships and as driller/operator for the partnership wells.  The Company also earns a profit for managing the drilling process.  At the end of 2004 there was a carryover of $42.5 million of projects to be drilled in 2005. The carryover will be used for drilling and completion activities in the first six months of 2005. Interest in the Company's partnerships continues unabated in 2005 as the first 2005 partnership was fully subscribed for $40 million within days of opening.  Currently the Company plans two additional 2005 partnerships with total possible subscriptions for the year (including the $40 million from the first partnership) of $115 million. Actual sales will depend on many factors, including the success of the Company's prior drilling programs and oil and natural gas prices.

During 2004 the Company increased its total proved reserves by 9% from 199 Bcfe to 217 Bcfe, with proved developed reserves increasing 9% from 152 billion cubic feet equivalent (Bcfe) to 165 Bcfe. Capital expenditures associated with the increases were $42.2 million.  A table showing reserves by area is included at the end of this release.

Production from the Company's oil and gas properties in 2004 was 12.7 Bcfe up from 10.4 Bcfe in 2003, and included 10.4 Bcf of natural gas and 381 thousand barrels of oil. Oil and natural gas production in the fourth quarter of 2004 was 3.2 Bcfe, or about 34.5 million cubic feet equivalent (MMcfe) per day. Approximately 82% of the Company's production in 2004 was natural gas. The increased production resulted from the combination of production from new wells drilled by the Company in 2004, recompletions of wells in Wattenberg Field in Colorado, and contributions from wells drilled and property acquisitions completed by the Company in the prior year. Higher energy prices were a major factor in the Company's success in 2004. Overall the Company's average price was $5.37 per thousand cubic feet equivalent (Mcfe) in 2004, compared to $4.50 per Mcfe in 2003. A conversion of one barrel of oil equaling six Mcfe is used in calculating equivalent Mcf. The following table shows details for oil and natural gas prices for the fourth quarter and full year, of 2004 compared with 2003 and a breakdown of production by region for both periods.

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Three Months Ended December 31, 2004

Three Months Ended December 31, 2003

Natural

Natural Gas

Natural

Natural Gas

Oil 

Gas

Equivalents

Oil 

Gas

Equivalents

(Bbl)

(Mcf)

(Mcfe)

(Bbl)

(Mcf)

(Mcfe)

Appalachian Basin

962 

465,492

471,264 

857

461,786

466,928

Michigan Basin

1,481 

413,606

422,492 

1,717

450,205

460,507

Rocky Mountains

 90,174 

 1,737,284 

2,278,328 

91,680

1,660,415

2,210,495

Total

 92,617 

  2,616,382 

3,172,084 

 

94,254

2,572,406

3,137,930

Average Price

$43.05 

$6.03 

$6.23 

 

$32.17

$4.32

$4.51

Year Ended December 31, 2004

Year Ended December 31, 2003

Natural

Natural Gas

Natural

Natural Gas

Oil 

Gas

Equivalents

Oil 

Gas

Equivalents

(Bbl)

(Mcf)

(Mcfe)

 

(Bbl)

(Mcf)

(Mcfe)

Appalachian Basin

4,893

1,812,407

1,841,765

3,992

1,921,200

1,945,152

Michigan Basin

5,786

1,728,435

1,763,151

6,627

1,832,737

1,872,499

Rocky Mountains

370,482

6,831,032

9,053,924

278,874

4,958,245

6,631,489

Total

381,161

10,371,874

12,658,840

 

289,493

8,712,182

10,449,140

Average Price

$35.13

$5.26

$5.37

 

$29.39

$4.42

$4.50

To protect itself from the potential effects of falling oil and natural gas prices, the Company uses natural gas derivatives. During 2004 the net impact of the hedges was a cost of $.09 per Mcfe. This cost is included in the prices the Company records for its oil and natural gas sales. A table at the end of this release summarizes the Company's current natural gas and oil futures positions. Some of these positions have been set since the end of 2004.

The Company's two other business segments also had excellent results in 2004. With strong natural gas prices Riley Natural Gas (RNG), the Company's natural gas marketing subsidiary, increased revenues by 28% to $93.2 million compared to 2003 revenue of $73.1 million. Income before income taxes increased from $689,000 in 2003 to $1,324,000 in 2004. Income before income taxes on the Company's well operations segment increased from $3.1 million in 2003 to $4.4 million in 2004.

 

Current Commodity-Based Derivative 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 fourth quarter of 2004 the Company had average production per month of 872,000 Mcf of natural gas and 31,000 Bbl of oil. The volumes shown are estimates of the hedges currently in place on the Company's share of production:

           Floors             

        Ceilings              



Month Set



Month

Monthly Quantity

Mmbtu

Contract

 Price 

Monthly Quantity

Mmbtu

Contract

 Price 

NYMEX Based Hedges - (Appalachian and Michigan Basins)

5/04

Jan 2005 - Mar 2005

180,000

$5.67

90,000

$7.00

2/04

Apr 2005 - Oct 2005

122,000

$4.28

61,000

$5.00

3/05

Apr 2005 - Oct 2005

39,000

$5.75

19,500

$8.37

1/05

Nov 2005 - Mar 2006

156,000

$5.00

78,000

$8.50

3/05

Apr 2006 - Oct 2006

78,000

$5.50

39,000

$7.40

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Page 4

 

Colorado Interstate Gas (CIG) Based Hedges (Piceance Basin)

5/04

Jan 2005 - Mar 2005

60,000

$5.04

30,000

$6.00

2/04

Apr 2005- Oct 2005

33,000

$3.10

16,000

$4.43

3/05

Apr 2005 - Oct 2005

38,000

$4.75

19,000

$8.12

1/05

Nov 2005 - Mar 2006

60,000

$4.50

30,000

$7.15

3/05

Apr 2006 - Oct 2006

42,000

$4.50

21,000

$7.25

Colorado Interstate Gas (CIG) Based Hedges (Wattenberg)

7/04

Jan 2005 - Mar 2005

80,000

$5.00

40,000

$6.20

NYMEX Based Hedges (NECO)

7/04

Jan 2005 - Mar 2005

150,000

$5.32

-

-   

2/04

Apr 2005 - Oct 2005

150,000

$4.26

75,000

$5.00

1/05

Nov 2005 - Mar 2006

150,000

$5.00

75,000

$8.45

Oil - NYMEX Based (Wattenberg)

 

Bbls

 

Bbls

 

8/04

Jan 2005 - Dec 2005

15,000

$32.30

7,500

$40.00

[this area left blank intentionally]

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Page 5

PETROLEUM DEVELOPMENT CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Income

Three Months and Twelve Months ended December 31, 2004 and 2003

(Unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2004

2003

2004

2003

Revenues:

  Oil and gas well drilling operations

$29,863,000 

$24,397,500 

$119,210,500

$71,841,500 

  Gas sales from marketing activities

19,779,600 

16,496,700 

93,231,400

73,141,100 

  Oil and gas sales

19,775,100 

14,155,400 

67,947,700

47,021,600 

  Well operations and pipeline income

2,560,800 

2,065,600 

8,384,500

7,347,700 

  Other income

   611,600 

 2,341,000 

1,945,700

 3,499,100 

72,590,100 

59,456,200 

290,719,800

202,851,000 

Costs and expenses:

  Cost of oil and gas well drilling operations

26,502,300 

21,526,300 

102,830,700

61,277,800 

  Cost of gas marketing activities

19,413,900 

16,520,500 

91,898,100

72,443,600 

  Oil and gas production costs

6,155,300 

3,445,600 

18,049,800

13,749,200 

  General and administrative expenses

1,684,200 

1,232,800 

4,505,600

4,974,400 

  Depreciation, depletion, and amortization

4,368,400 

3,521,000 

17,958,200

14,153,400 

  Interest

   123,200 

   418,100 

874,300

 1,329,100 

58,247,300 

46,664,300 

236,116,700

167,927,500 

          Income before income taxes and cumulative

           effect of change in accounting principle


14,342,800 


12,791,900 

            54,603,100


34,923,500 

Income taxes

 6,026,300 

 4,802,400 

20,542,500

12,105,800 

          Net income before cumulative effect

           of change in accounting principle


8,316,500 


7,989,500 

            34,060,600


22,817,700 

Cumulative effect of change in accounting principle

 (net of taxes of $121,700)


       -    


       -    


       -    


  (198,600)

          Net income

$8,316,500 

$7,989,500 

$34,060,600

$22,619,100 

Basic earnings per common share before

 accounting change


 $0.50 


 $0.52 

                      $2.10


$1.46 

 Cumulative effect of change in accounting principle

$ -   

$ -   

$ -   

$(0.01)

Basic earnings per common share

$0.50 

$0.52 

$2.10 

$1.45 

Diluted earnings per share before accounting change

 $0.49 

 $0.49 

$2.05 

$1.40 

 Cumulative effect of change in accounting principle

$ -   

$ -   

$ -   

$(0.01)

Diluted earnings per share

$0.49 

$0.49 

$2.05 

$1.39 

 

 

 

 

 

 

 

 

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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. 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 valuable measure for estimating the value of the Company's operations.

Three months Ended

Twelve months Ended

December 31,

 

December 31,

2004

2003

 

2004

2003

Net income

$8,316,500

$7,989,500

$34,060,000

$22,619,100

  Deferred income tax expense

1,853,200

4,583,600

10,443,600

8,870,700

  Depreciation, depletion and amortization

4,368,400

3,521,000

 

17,958,200

14,153,400

Adjusted cash flow

$14,538,100

$16,094,100

$62,461,400

$45,643,200

 

 

 

 

 

Oil and Natural Gas Reserves

     The Company's oil and natural gas reserves by region are as follows as of December 31, 2004:


    Oil    

       (Mbbl)


Gas   

(Mmcf)

Natural Gas

Equivalent

(Mmcfe)



%

Proved Developed Reserves

Appalachian Basin

48

41,384

41,672

25.21%

Michigan Basin

52

24,895

25,207

15.25%

Rocky Mountain Region

3,090

79,873

98,413

59.54%

Total Proved Developed Reserves

3,190

146,152

165,292

100.00%

Proved Undeveloped Reserves

Appalachian Basin

0

0

0

0.00%

Michigan Basin

0

630

630

1.21%

Rocky Mountain Region

126

50,767

51,523

98.79%

Total Proved Undeveloped

126

51,397

52,153

100.00%

Total Proved Reserves

Appalachian Basin

48

41,384

41,672

19.16%

Michigan Basin

52

25,525

25,837

11.88%

Rocky Mountain Region

3,216

130,640

149,936

68.96%

Total Proved Reserves

3,316

197,549

217,445

100.00%

Continued to Page 7


Page 7

The Company plans to file its Annual Report on Form 10-K on Thursday, March 31, 2005. Everyone is invited to join Steve Williams, Chief Executive Officer, and Darwin Stump, Chief Financial Officer, for a conference call on March 31, 2005 to discuss the results with a question and answer period to follow.

What:     Petroleum Development Fourth Quarter Earnings Conference Call

When:    Thursday, March 31, 2005 at 11:00 a.m. Eastern Standard Time

Where:   www.petd.com

How:       Live on the Internet - log on to the web address above or call (877) 407-8033

(Passcode 235468) for telephone participation.

Contact: Darwin Stump, Petroleum Development Corporation, (800) 624-3821 E-mail: petd@petd.com

Please go to the website at least 15 minutes prior to the call and register, download and install any necessary audio software. If you are unable to listen to the live broadcast, an outline rebroadcast will be available shortly after the conclusion of the call.

About Petroleum Development Corporation

Petroleum Development Corporation (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.

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103 East Main Street • P. O. Box 26 • Bridgeport, West Virginia • Phone:  (304) 842-3597