8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):May 11, 2012

PETROLEUM DEVELOPMENT CORPORATION

(Doing Business as PDC Energy)

(Exact name of registrant as specified in its charter)

NEVADA	0-7246	95-2636730
(State or other jurisdiction of	(Commission	(I.R.S. Employer
incorporation or organization)	File Number)	Identification Number)

1775 Sherman Street, Suite 3000

Denver, Colorado 80203

Registrant’s telephone number, including area code: (303) 860-5800

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01. Other Events

On May 11, 2012, Petroleum Development Corporation (dba PDC Energy) (the "Company") entered into a Purchase and Sale Agreement ("PSA") with certain affiliates of Merit Energy ("Merit"), pursuant to which the Company has agreed to purchase from Merit certain Wattenberg Field oil and natural gas properties, leasehold mineral interests and related assets for aggregate cash consideration of approximately $330.6 million (the "Merit Acquisition"), subject to customary adjustments to the purchase price, including adjustments based on title and environmental diligence to be conducted by the Company and subject to customary closing conditions. There can be no assurance such conditions to closing will be satisfied.

As the PSA is deemed probable and individually significant, in accordance with Rule 3-05 under SEC Regulation S-X, the Company is providing audited and unaudited financial statements and unaudited pro forma financial information in connection with this acquisition. The unaudited statements of revenues and direct operating expenses, including the notes thereto, for the three months ended March 31, 2012 and 2011, and the audited statement of revenues and direct operating expenses, including the notes thereto, for the year ended December 31, 2011, and the independent auditors' report related thereto, are attached as Exhibit 99.1 and incorporated herein by reference.

The unaudited pro forma condensed consolidated balance sheet of PDC Energy as of March 31, 2012, and the unaudited pro forma condensed consolidated statements of operations of PDC Energy for the three months ended March 31, 2012, and for the year ended December 31, 2011, which give effect to the acquisition, are attached as Exhibit 99.2.

Item 9.01. Financial Statements and Exhibits

(a) Financial Statements of Business Acquired

The unaudited statements of revenues and direct operating expenses, including the notes thereto, for the three months ended March 31, 2012 and 2011, and the audited statement of revenues and direct operating expenses, including the notes thereto, for the year ended December 31, 2011, and the independent auditors' report related thereto, are attached as Exhibit 99.1 and incorporated herein by reference.

(b) Pro Forma Financial Information

The unaudited pro forma condensed consolidated balance sheet as of March 31, 2012 and the unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2012 and for the year ended December 31, 2011 to reflect the Merit Acquisition are filed as Exhibit 99.2 to this current report and are incorporated herein by reference.

(d) Exhibits

Exhibit No.	Description
23.1	Consent of Independent Auditors, KPMG LLP, dated as of May 14, 2012.
99.1	The unaudited statements of revenues and direct operating expenses, including the notes thereto, for the assets under contract for the three months ended March 31, 2012 and 2011, and the audited statement of revenues and direct operating expenses, including the notes thereto, for the assets under contract for the year ended December 31, 2011, and the independent auditors' report related thereto.
99.2	The unaudited pro forma condensed consolidated balance sheet of PDC Energy as of March 31, 2012 and the unaudited pro forma condensed consolidated statements of operations of PDC Energy for the three months ended March 31, 2012 and for the year ended December 31, 2011, which give effect to the Merit Acquisition.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: May 14, 2012

PETROLEUM DEVELOPMENT CORPORATION
By:	/s/ Daniel W. Amidon
	Daniel W. Amidon
	General Counsel and Secretary

EXHIBIT INDEX

Exhibit No.	Description
23.1	Consent of Independent Auditors, KPMG LLP, dated as of May 14, 2012.
99.1	The unaudited statements of revenues and direct operating expenses, including the notes thereto, for the assets under contract for the three months ended March 31, 2012 and 2011, and the audited statement of revenues and direct operating expenses, including the notes thereto, for the assets under contract for the year ended December 31, 2011, and the independent auditors' report related thereto.
99.2	The unaudited pro forma condensed consolidated balance sheet of PDC Energy as of March 31, 2012 and the unaudited pro forma condensed consolidated statements of operations of PDC Energy for the three months ended March 31, 2012 and for the year ended December 31, 2011, which give effect to the Merit Acquisition.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the registration statements (No. 333-179123) on Form S-3/ASR and (Nos. 333-167945, 333-137836, 333-118222 and 333-118215) on Form S-8 of Petroleum Development Corporation of our report dated May 11, 2012, with respect to the Statement of Revenues and Direct Operating Expenses of the Oil and Gas Properties Under Contract for Purchase by Petroleum Development Corporation from Merit Energy for the year ended December 31, 2011, which report appears in the Form 8-K of Petroleum Development Corporation dated May 14, 2012. Our report dated May 11, 2012 contains an explanatory paragraph that states the statement of revenues and direct operating expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and is not intended to be a complete presentation of the revenues and expenses of the properties.

/s/ KPMG LLP

Dallas, Texas

May 11, 2012

EX-99.1

Exhibit 99.1

STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

OF THE OIL AND GAS PROPERTIES UNDER CONTRACT FOR PURCHASE BY

PETROLEUM DEVELOPMENT CORPORATION FROM MERIT ENERGY

THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (UNAUDITED)

AND THE YEAR ENDED DECEMBER 31, 2011

CONTENTS

	Page
Independent Auditors' Report	3
Statements of Revenues and Direct Operating Expenses	4
Notes to Statements of Revenues and Direct Operating Expenses	5

2

Independent Auditors' Report

The Members

Merit Energy Company, LLC:

We have audited the accompanying statement of revenues and direct operating expenses of Merit Energy Company's oil and gas properties under contract for purchase by Petroleum Development Corporation (the Properties) for the year ended December 31, 2011. This statement is the responsibility of the Properties' management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Properties' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

The accompanying statement referred to above was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission. The statement is not intended to be a complete presentation of the revenues and expenses of the Properties.

In our opinion, the statement referred to above presents fairly, in all material respects, the revenues and direct operating expenses of Merit Energy Company's oil and gas properties under contract for purchase by Petroleum Development Corporation for the year ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Dallas, Texas

May 11, 2012

STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

OF THE OIL AND GAS PROPERTIES UNDER CONTRACT FOR PURCHASE BY

PETROLEUM DEVELOPMENT CORPORATION FROM MERIT ENERGY

(In thousands)

	Three Months Ended March 31,				Year Ended
	2012		2011		2011
	(Unaudited)
Revenues	$	8,553	$	10,916	$	43,074
Direct Operating Expenses	2,305		2,234		6,171
Excess of Revenues over Direct     Operating Expense	$	6,248	$	8,682	$	36,903

See accompanying Notes to Statements of Revenues and Direct Operating Expenses

4

NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

OF THE OIL AND GAS PROPERTIES UNDER CONTRACT FOR PURCHASE BY

PETROLEUM DEVELOPMENT CORPORATION FROM MERIT ENERGY

THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (UNAUDITED)

AND THE YEAR ENDED DECEMBER 31, 2011

Note 1 - BASIS OF PRESENTATION

On May 11, 2012, Petroleum Development Corporation (“PDC Energy”) entered into a Purchase and Sale agreement (“PSA”) with Merit Energy Company and certain of its affiliates (“Merit Energy”) to purchase oil and gas properties and related facilities located in the Wattenberg Field in Colorado as further defined in the PSA (the “Properties”) for approximately $330.6 million, subject to normal closing adjustments, with an effective date of April 1, 2012. The accompanying statements of revenues and direct operating expenses relate only to the properties to be divested by Merit Energy and subsequently acquired by PDC Energy (“PDC Energy Properties”).

Historical financial statements prepared in accordance with accounting principles generally accepted in the United States of America have never been prepared for the PDC Energy Properties. During the periods presented, the PDC Energy Properties were not accounted for or operated as a consolidated entity or as a separate division by Merit Energy. The accompanying statements of revenues and direct operating expenses related to the PDC Energy Properties were prepared from the historical accounting records of Merit Energy.

Certain indirect expenses, as further described in Note 4, were not allocated to the PDC Energy Properties and have been excluded from the accompanying statements. Any attempt to allocate these expenses would require significant and judgmental allocations, which would be arbitrary and may not be indicative of the performance of the properties on a stand-alone basis.

These statements of revenues and direct operating expenses do not represent a complete set of financial statements reflecting the financial position, results of operations, stakeholder's equity and cash flows of the PDC Energy Properties and are not necessarily indicative of the results of operations for the PDC Energy Properties going forward.

The accompanying statements of revenues and direct operating expenses for the three months ended March 31, 2012 and 2011 are unaudited but, in the opinion of management, include all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the revenues and direct operating expenses of the PDC Energy Properties for those periods.

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

The preparation of statements of revenues and direct operating expenses in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

Revenue Recognition

Merit Energy utilizes the sales method of accounting for oil and natural gas revenues whereby revenues, net of royalties, are recognized based on the actual volumes of oil and natural gas production sold to purchasers. The amount of gas sold may differ from the amount to which Merit Energy is entitled based on its revenue interests in the properties.

5

NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

OF THE OIL AND GAS PROPERTIES UNDER CONTRACT FOR PURCHASE BY

PETROLEUM DEVELOPMENT CORPORATION FROM MERIT ENERGY

THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (UNAUDITED)

AND THE YEAR ENDED DECEMBER 31, 2011

Direct Operating Expenses

Direct operating expenses, which are recognized on an accrual basis, relate to the direct expenses of operating the PDC Energy Properties. The direct operating expenses include lease operating, ad valorem tax and production tax expense. Lease operating expenses include lifting costs, well repair expenses, surface repair expenses, well workover costs and other field expenses. Lease operating expenses also include expenses directly associated with support personnel, support services, equipment and facilities directly related to oil and natural gas production activities.

Note 3 - CONTINGENCIES

The activities of the PDC Energy Properties are subject to potential claims and litigation in the normal course of operations. Merit Energy management does not believe that any liability resulting from any pending or threatened litigation will have a material adverse effect on the operations or financial results of the PDC Energy Properties.

Note 4 - EXCLUDED EXPENSES

The PDC Energy Properties are part of a much larger enterprise prior to their sale by Merit Energy to PDC Energy. Indirect general and administrative expenses, interest, income taxes, and other indirect expenses were not allocated to the PDC Energy Properties and have been excluded from the accompanying statements. In addition, any allocation of such indirect expenses may not be indicative of costs which would have been incurred by the PDC Energy Properties on a stand-alone basis.

Depreciation, depletion, and amortization have been excluded from the accompanying statements of revenues and direct operating expenses as such amounts would not be indicative of the depletion calculated on the PDC Energy Properties on a stand-alone basis.

6

NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

OF THE OIL AND GAS PROPERTIES UNDER CONTRACT FOR PURCHASE BY

PETROLEUM DEVELOPMENT CORPORATION FROM MERIT ENERGY

THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (UNAUDITED)

AND THE YEAR ENDED DECEMBER 31, 2011

Note 5 - SUPPLEMENTARY OIL AND GAS INFORMATION (UNAUDITED)

Estimated Net Quantities of Oil and Natural Gas Reserves

The estimates of Proved Oil and Gas Reserves as of December 31, 2011 were prepared for Merit Energy utilizing year-end estimates of reserve quantities provided by third-party independent petroleum engineering consultants. The estimated proved net recoverable reserves presented below include only those quantities that were expected to be commercially recoverable at the SEC applicable prices and costs for each year under the then existing regulatory practices and with conventional equipment and operating methods. Proved Developed Reserves represent only those reserves estimated to be recovered through existing wells. Proved Undeveloped Reserves include those reserves that may be recovered from new wells on undrilled acreage or from existing wells on which a relatively major expenditure for recompletion or secondary recovery operation is required. All of the PDC Energy Properties' Proved Reserves set forth herein are located in Colorado. The estimate of reserves, and the standardized measure of discounted future net cash flow shown below reflect Merit Energy's development plan for the PDC Energy Properties rather than PDC Energy's development plan for those properties.

Discounted future cash flow estimates like those shown below are not intended to represent estimates of the fair value of our oil and natural gas properties. Estimates of fair value should also consider unproved reserves, anticipated future oil and natural gas prices, interest rates, changes in development and production costs and risks associated with future production. Because of these and other considerations, any estimate of fair value is subjective and imprecise.

The following table sets forth estimates of the proved oil and natural gas reserves (net of royalty interests) for the PDC Energy Properties and changes therein, for the periods indicated. Reserves for oil include natural gas liquids.

	Oil (BBLS)		Gas (MCF)
Proved Reserves
Balance at December 31, 2010	9,678,383		71,768,609
Production	(560,118	)	(3,466,551	)
Revisions	2,315,875		1,780,184
Balance at December 31, 2011	11,434,140		70,082,242

	Oil (BBLS)	Gas (MCF)
Proved Developed Reserves
December 31, 2010	6,748,388	53,907,562
December 31, 2011	8,632,098	53,426,493

7

NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

OF THE OIL AND GAS PROPERTIES UNDER CONTRACT FOR PURCHASE BY

PETROLEUM DEVELOPMENT CORPORATION FROM MERIT ENERGY

THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (UNAUDITED)

AND THE YEAR ENDED DECEMBER 31, 2011

Standardized Measure of Discounted Future Net Cash Flows

We have summarized the Standardized Measure related to our proved oil, natural gas and NGL reserves. We have based the following summary on a valuation of Proved Reserves using discounted cash flows based on SEC pricing applicable for each year, costs and economic conditions and a 10% discount rate. The additions to Proved Reserves from the purchase of reserves in place and new discoveries and extensions could vary significantly from year to year; additionally, the impact of changes to reflect current prices and costs of reserves proved in prior years could also be significant. Accordingly, you should not view the information presented below as an estimate of the fair value of our oil and natural gas properties, nor should you consider the information indicative of any trends.

Standardized Measure of Oil and Gas

	December 31,
In Thousands	2011
Future Cash Inflows	$	944,179
Future Production Costs	(247,358		)
Future Development Costs	(102,936		)
Future Net Cash Flows	593,885
Discount of 10% per annum	(370,869		)
Standardized Measure of Discounted Future Net Cash Flows	$	223,016

During recent years, prices paid for oil and natural gas have fluctuated significantly. Estimated discounted future net cash flows in the table above for December 31, 2011 were computed using NYMEX prices of $95.84 per barrel of oil, and $4.15 per MMBTU of natural gas.

8

NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

OF THE OIL AND GAS PROPERTIES UNDER CONTRACT FOR PURCHASE BY

PETROLEUM DEVELOPMENT CORPORATION FROM MERIT ENERGY

THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (UNAUDITED)

AND THE YEAR ENDED DECEMBER 31, 2011

The following table sets forth the changes in standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves for the period indicated.

Changes in Standardized Measure

	(In thousands)
Balance at December 31, 2010	$	169,162
Sales of oil and natural gas produced, net	(36,903		)
Net changes in prices and production costs	27,622
Previously estimated development costs incurred	1,361
Net changes in future development costs	100
Revisions of previous quantity estimates	29,576
Accretion of discount	16,916
Changes in timing and other	15,182
Balance at December 31, 2011	$	223,016

9

EX-99.2

Exhibit 99.2

PETROLEUM DEVELOPMENT CORPORATION

(dba PDC ENERGY)

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INDEX

Financial InformationPage Number

Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2012        2    

Pro Forma Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2012        3

Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2011        4

Notes to Pro Forma Condensed Consolidated Financial Statements            5

1

PETROLEUM DEVELOPMENT CORPORATION

(dba PDC ENERGY)

Pro Forma Condensed Consolidated Balance Sheet

(unaudited; in thousands, except share and per share data)

	March 31, 2012
	Historical			Pro Forma Adjustments (1)				Pro Forma
Assets
Current assets:
Cash and cash equivalents	$	1,655		$	—			$	1,655
Other current assets	158,318			—				158,318
Total current assets	159,973			—				159,973
Properties and equipment, net	1,329,460			335,445			(a)	1,664,905
Other assets	76,136			(10,000		)	(c)	66,136
Total Assets	$	1,565,569		$	325,445			$	1,891,014
Liabilities and Equity
Liabilities
Current liabilities	$	165,262		$	—			$	165,262
Long-term debt	414,809			129,100			(b)	543,909
Deferred income taxes	198,082			—				198,082
Asset retirement obligations	45,172			4,845			(e)	50,017
Other liabilities	61,012			—				61,012
Total liabilities	884,337			133,945				1,018,282
Equity
Shareholders' equity:
Preferred shares, par value $0.01 per share; authorized 50,000,000 shares; issued: none	—			—				—
Common shares, par value $0.01 per share; authorized 100,000,000 shares; issued: 23,618,831 (historical); 29,868,831 (pro forma)	237			63			(a)	300
Additional paid-in capital	219,139			191,437			(a)	410,576
Retained earnings	462,115			—				462,115
Treasury shares, at cost: 7,671	(259		)	—				(259		)
Total shareholders' equity	681,232			191,500			(a)	872,732
Total Liabilities and Equity	$	1,565,569		$	325,445			$	1,891,014

(1) See Note 4

See accompanying Notes to Pro Forma Condensed Consolidated Financial Statements

2

PETROLEUM DEVELOPMENT CORPORATION

(dba PDC ENERGY)

Pro Forma Condensed Consolidated Statement of Operations

(unaudited; in thousands, except share and per share data)

	Three Months Ended March 31, 2012
	PDC Energy			Merit Properties		Pro Forma (1)				PDC Energy
	Historical			Historical		Adjustments				Pro Forma
Revenues:
Natural gas, NGL and crude oil sales	$	75,310		$	8,553	$	—			$	83,863
Sales from natural gas marketing	11,834			—		—				11,834
Commodity price risk management gain, net	11,501			—		—				11,501
Well operations, pipeline income and other	1,701			—		—				1,701
Total revenues	100,346			8,553		—				108,899
Costs, expenses and other:
Production costs	19,189			2,305		121			(e)	21,615
Cost of natural gas marketing	11,492			—		—				11,492
Exploration expense	2,063			—		—				2,063
Impairment of natural gas and crude oil properties	653			—		—				653
General and administrative expense	14,708			—		—				14,708
Depreciation, depletion and amortization	39,814			—		227			(d)	40,041
Gain on sale of properties and equipment	(154		)	—		—				(154		)
Total costs, expenses and other	87,765			2,305		348				90,418
Income from operations	12,581			6,248		(348		)		18,481
Interest income	2			—		—				2
Interest expense	(10,444		)	—		(1,356		)	(f)	(11,800		)
Income from continuing operations before income taxes	2,139			6,248		(1,704		)		6,683
Provision (benefit) for income taxes	759			—		1,580			(g)	2,339
Income from continuing operations	$	1,380		$	6,248	$	(3,284	)		$	4,344
Earnings (loss) per share attributable to shareholders:
Basic
Income from continuing operations	$	0.06								$	0.15
Diluted
Income from continuing operations	$	0.06								$	0.14
Weighted average common shares outstanding:
Basic	23,609									29,859
Diluted	23,889									30,139

(1) See Note 4

See accompanying Notes to Pro Forma Condensed Consolidated Financial Statements

3

PETROLEUM DEVELOPMENT CORPORATION

(dba PDC ENERGY)

Pro Forma Condensed Consolidated Statement of Operations

(unaudited; in thousands, except share and per share data)

	Year Ended December 31, 2011
	PDC Energy			Merit Properties		Pro Forma (1)				PDC Energy
	Historical			Historical		Adjustments				Pro Forma
Revenues:
Natural gas, NGL and crude oil sales	$	276,605		$	43,074	$	—			$	319,679
Sales from natural gas marketing	66,419			—		—				66,419
Commodity price risk management gain, net	46,090			—		—				46,090
Well operations, pipeline income and other	6,846			—		—				6,846
Total revenues	395,960			43,074		—				439,034
Costs, expenses and other:
Production costs	69,085			6,171		453			(e)	75,709
Cost of natural gas marketing	65,465			—		—				65,465
Exploration expense	6,253			—		—				6,253
Impairment of natural gas and crude oil properties	25,159			—		—				25,159
General and administrative expense	61,454			—		—				61,454
Depreciation, depletion and amortization	128,907			—		2,197			(d)	131,104
Gain on sale of properties and equipment	(196		)	—		—				(196		)
Total costs, expenses and other	356,127			6,171		2,650				364,948
Income from operations	39,833			36,903		(2,650		)		74,086
Interest income	47			—		—				47
Interest expense	(36,985		)	—		(5,286		)	(f)	(42,271		)
Income from continuing operations before income taxes	2,895			36,903		(7,936		)		31,862
Provision (benefit) for income taxes	(183		)	—		12,131			(g)	11,948
Income from continuing operations	$	3,078		$	36,903	$	(20,067	)		$	19,914
Earnings (loss) per share attributable to shareholders:
Basic
Income from continuing operations	$	0.13								$	0.67
Diluted
Income from continuing operations	$	0.13								$	0.66
Weighted average common shares outstanding:
Basic	23,521									29,771
Diluted	23,871									30,121

(1) See Note 4

See accompanying Notes to Pro Forma Condensed Consolidated Financial Statements

4

PETROLEUM DEVELOPMENT CORPORATION

(dba PDC ENERGY)

Notes To Pro Forma Condensed Consolidated Financial Statements

Three Months Ended March 31, 2012 And The Year Ended December 31, 2011

(unaudited)

Note 1 - Basis of Presentation

The unaudited pro forma condensed consolidated balance sheet of PDC Energy as of March 31, 2012, is derived from:

• the historical consolidated balance sheet of Petroleum Development Company (“PDC Energy” or the “Company”); and

• the preliminary values assigned to the identifiable assets to be acquired and the liabilities to be assumed from Merit Management Partners I, L.P., Merit Energy Partners III, L.P, and Merit Energy Partner D-IV, L.P. (“Merit Partnerships”).

The unaudited pro forma condensed consolidated statements of operations of PDC Energy for the three months ended March 31, 2012, and year ended December 31, 2011, are derived from:

• the historical consolidated statements of operations of PDC Energy; and

• the historical statements of revenues and direct operating expenses of certain oil and natural gas properties to be acquired from the Merit Partnerships (the “Merit Properties”).

The unaudited pro forma condensed consolidated balance sheet gives effect to the pending acquisition of the Merit Properties as if the transaction had occurred on March 31, 2012. The unaudited pro forma condensed consolidated statements of operations give effect to the acquisitions of the Merit Properties and the subsequent issuance of the Company's common shares as if the transactions had occurred on January 1, 2011. The transactions and the related adjustments are described in the accompanying notes to the financial statements. In the opinion of Company management, all adjustments have been made that are necessary to present fairly, in accordance with Regulation S-X of the Securities and Exchange Commission ("SEC"), the pro forma condensed consolidated statements of operations.

The unaudited pro forma condensed consolidated balance sheet and statements of operations are presented for illustrative purposes only, and do not purport to be indicative of the results of operations that would actually have occurred if the transaction described had occurred as presented in such statements or that may be obtained in the future. In addition, future results may vary significantly from those reflected in such statements due to factors described in “Risk Factors” included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, and elsewhere in the Company's reports and filings with the SEC.

The unaudited pro forma condensed consolidated balance sheet and statements of operations should be read in conjunction with the Company's historical consolidated financial statements and the notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2011. The pro forma statements should also be read in conjunction with the historical statements of revenues and direct operating expenses for the Merit Properties and the notes thereto filed as Exhibit 99.1 to the Current Report on Form 8-K of which this Exhibit 99.2 is a part.

Note 2 - Acquisition Date

The Company anticipates the acquisition of the Merit Properties will close June 29, 2012, for an estimated closing price of approximately $330.6 million, which includes a $10 million deposit made as of March 31, 2012, subject to customary closing conditions including adjustments based on title and environmental due diligence, and will have an effective date of April 1, 2012. There can be no assurance the acquisition will close or the timing of any such closing.

Note 3 - Preliminary Acquisition Accounting

The transaction is accounted for under the acquisition method of accounting. Accordingly, the Company conducts assessments of net assets acquired and recognizes amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition are expensed as incurred. The preliminary purchase allocation presented within is based on our initial assessment of the limited financial information available. The final purchase price allocation for the business combination will be performed subsequent to closing and adjustments to estimated amounts, or recognition of additional assets acquired or liabilities assumed, may occur as more detailed analyses are completed and additional information is obtained about the facts and circumstances that existed as of the

5

PETROLEUM DEVELOPMENT CORPORATION

(dba PDC ENERGY)

Notes To Pro Forma Condensed Consolidated Financial Statements

Three Months Ended March 31, 2012 And The Year Ended December 31, 2011

(unaudited)

acquisition date.

The following presents the estimated values assigned to the net assets to be acquired in the pending acquisition (in thousands):

Assets:
Natural gas and crude oil properties - proved and unproved	$	335,445
Total assets to be acquired	$	335,445
Liabilities:
Asset retirement obligations	$	4,845
Net assets to be acquired	$	330,600

The fair value of oil and natural gas properties and asset retirement obligations were measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of oil and natural gas properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; (iv) estimated future cash flows; and (v) a market-based weighted average cost of capital rate.

Note 4 - Pro Forma Adjustments

The pro forma condensed consolidated financial statements have been adjusted to reflect the estimated closing price to be paid by PDC Energy for the purchase of the Merit Properties, the estimated net proceeds received from the expected issuance of the Company's common stock and adjustments to historical book values of the Merit Properties to their estimated fair values in accordance with the acquisition method of accounting, including to:

(a) reflect the assumed estimated net proceeds received in the amount of $191.5 million from the expected issuance of the Company's common stock to partially fund the estimated closing price for the Merit Properties;

(b) reflect the assumed incremental draw on our existing credit facility of approximately $129.1 million incurred to partially fund the estimated closing price for the Merit Properties;

(c) reflect the $10.0 million expenditure made during the three months ended March 31, 2012 as an application to the estimated closing price of the Merit Properties;

(d) record incremental depreciation, depletion and amortization expense, using the unit-of-production method, related to oil and natural gas properties acquired for the period from January 1 through March 31, 2012, and for the year ended December 31, 2011, $0.2 millionand $2.2 million, respectively, related to the Merit Properties;

(e) record accretion expense related to asset retirement obligations on oil and natural gas properties acquired for the period from January 1 through March 31, 2012, and for the year ended December 31, 2011, $0.1 million and $0.5 million, respectively, related to the Merit Properties;

(f) record interest expense related to incremental debt of approximately $129.1 million incurred under the revolving credit facility to partially fund the estimated closing price for the Merit Properties; the assumed interest rate was 3.8% (the actual interest rate will differ pursuant to the terms of the revolving credit facility); and

(g) record the estimated income tax provision related to the incremental income from the Merit Properties using an effective income tax rate of 37.5%.

The pro forma condensed consolidated statements of operations also include an adjustment to the weighted average common shares outstanding to reflect shares issued to fund the purchase price of the Merit Properties.

Note 5 - Supplemental Oil and Natural Gas Reserve Information

The following tables set forth certain unaudited pro forma information concerning the Company's proved oil, natural gas and natural gas liquids (“NGL”) reserves for the year December 31, 2011, giving effect to the acquisition of the Merit Properties as if it had occurred on January 1, 2011. There are numerous uncertainties inherent in estimating the quantities of proved reserves and projecting future rates of production and timing of development costs. The estimates of reserves, and the standardized measure of future net cash flow, shown below, reflect Merit Partnership's development plan for the Merit Properties rather than

6

PETROLEUM DEVELOPMENT CORPORATION

(dba PDC ENERGY)

Notes To Pro Forma Condensed Consolidated Financial Statements

Three Months Ended March 31, 2012 And The Year Ended December 31, 2011

(unaudited)

PDC Energy's development plan for the properties. The following reserve data represent estimates only and should not be construed as being precise. Merit Properties' oil reserves include natural gas liquids.

	PDC		Merit		PDC		PDC		Merit		PDC
	Energy		Properties		Energy		Energy		Properties		Energy
	Historical		Historical		Historical		Historical		Historical		Pro Forma
	Natural Gas				NGLs		Crude Oil, Condensate				Total
	(MMcf)				(MBbls)		(MBbls)				(MMcfe)
Proved Reserves:
Proved reserves, January 1, 2011	657,306		71,769		10,649		23,236		9,678		990,453
Revisions of previous estimates	(161,654	)	1,780		3,163		(1,904	)	2,316		(138,424	)
Extension and discoveries	176,689		—		5,633		17,092		—		313,039
Purchases of reserves	32,761		—		1,052		1,605		—		48,703
Dispositions	(2,070	)	—		(94	)	(435	)	—		(5,244	)
Production	(30,887	)	(3,467	)	(815	)	(1,958	)	(560	)	(54,352	)
Proved reserves, December 31, 2011 (1)	672,145		70,082		19,588		37,636		11,434		1,154,175
Proved developed reserves as of:
January 1, 2011	227,341		53,908		4,013		8,287		6,748		395,537
December 31, 2011 (1)	299,369		53,426		11,753		16,910		8,632		576,565
Proved undeveloped reserves:
January 1, 2011	429,965		—		6,636		14,949		—		559,475
December 31, 2011 (1)	372,776		—		7,835		20,726		—		544,142

(1) Includes estimated reserve data related to our Permian asset group, which was held for sale and under a purchase and sale agreement. The divestiture of our Permian assets closed on February 28, 2012. See Note 11, Commitments and Contingencies - Purchase and Sale Agreement, and Note 13, Assets Held for Sale, Divestitures and Discontinued Operations, to our 2011 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2011. Total proved reserves include 6,242 MMcf of natural gas, 7,825 MBbls of crude oil, 1,971 MBbls of NGLs and 65,018 MMcfe of natural gas equivalent related to our Permian asset group. Similarly, total proved developed reserves include 1,750 MMcf, 1,815 MBbls, 550 MBbls and 15,940 MMcfe, respectively, and proved undeveloped reserves include 4,492 MMcf, 6,010 MBbls, 1,421 MBbls and 49,078 MMcfe, respectively.

Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Reserves

Summarized in the following table is information for the standardized measure of discounted cash flows relating to proved reserves as of December 31, 2011, giving effect to the acquisition of the Merit Properties. Future estimated cash flows were based on a 12-month average price calculated as the unweighted arithmetic average of the prices on the first day of each month, January through December applied to the year-end estimated proved reserves. Prices were adjusted by field for Btu content, transportation and regional price differences; however, they were not adjusted to reflect the value of commodity derivatives. Production and development costs were based on prices as of December 31, 2011. The amounts shown do not give effect to non-property related expenses, such as corporate general and administrative expenses, debt service or to depreciation, depletion and amortization expense. Production and development costs include those cash flows associated with the ultimate settlement of our asset retirement obligation. Future estimated income tax expense is 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.

7

PETROLEUM DEVELOPMENT CORPORATION

(dba PDC ENERGY)

Notes To Pro Forma Condensed Consolidated Financial Statements

Three Months Ended March 31, 2012 And The Year Ended December 31, 2011

(unaudited)

Changes in the demand for natural gas, NGLs and crude oil, inflation, and other factors make such estimates inherently imprecise and subject to substantial revision. This table should not be construed to be an estimate of the current market value of the Company's proved reserves.

	December 31, 2011
	PDC			Merit						PDC
	Energy			Properties			Pro Forma			Energy
	Historical			Historical			Adjustments			Pro Forma
	(in thousands)
Future estimated revenues	$	6,415,255		$	944,179		$	—		$	7,359,434
Future estimated production costs	(1,704,645		)	(247,358		)	—			(1,952,003		)
Future estimated development costs	(1,474,137		)	(102,936		)	—			(1,577,073		)
Future estimated income tax expense	(946,849		)	—			(98,732		)	(1,045,581		)
Future net cash flows	2,289,624			593,885			(98,732		)	2,784,777
10% annual discount for estimated timing of cash flows	(1,348,415		)	(370,869		)	79,050			(1,640,234		)
Standardized measure of discounted future net cash flows	$	941,209		$	223,016		$	(19,682	)	$	1,144,543
Representative NYMEX prices:
Natural gas (MMBtu)	$	3.41		$	4.15
NGLs (per Bbl)	$	39.59		—
Oil (Bbl)	$	88.94		$	95.84

The following table summarizes the principal sources of change in the standardized measure of discounted future net cash flows:

	December 31, 2011
	PDC			Merit			PDC
	Energy			Properties			Energy
	Historical			Historical			Pro Forma
	(in thousands)
Sales of natural gas, NGL and crude oil production, net of production costs	$	(226,227	)	$	(36,903	)	$	(263,130	)
Net changes in prices and production costs	383,293			27,622			410,915
Extensions, discoveries and improved recovery, less related costs	467,347			—			467,347
Sales of reserves	(4,224		)	—			(4,224		)
Purchases of reserves	64,761			—			64,761
Development costs incurred during the period	94,941			1,361			96,302
Revisions of previous quantity estimates	(112,468		)	29,576			(82,892		)
Changes in estimated income taxes	(204,377		)	—			(204,377		)
Net changes in future development costs	(29,827		)	100			(29,727		)
Accretion of discount	65,284			16,916			82,200
Timing and other	(45,712		)	15,182			(30,530		)
Total	$	452,791		$	53,854		$	506,645

8

PETROLEUM DEVELOPMENT CORPORATION

(dba PDC ENERGY)

Notes To Pro Forma Condensed Consolidated Financial Statements

Three Months Ended March 31, 2012 And The Year Ended December 31, 2011

(unaudited)

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 recent average prices and current 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.

9