Petroleum Development Corp., Bridgeport, W.Va., (Nasdaq: PETD) reports that it will file amendments to its 2004 annual report and first-quarter 2005 quarterly report to amend financial statements for the years 2004 to 2000, for each of the quarters in 2004 and 2003, and for the first quarter of 2005. The issues to be addressed in the restatements are PDC's use of hedge accounting for derivative positions that did not qualify for hedge accounting and the company's oil and gas property accounting. PDC discovered the hedge accounting problem during the preparation of its second-quarter financial statements. The company then commenced an accounting review. KPMG, the company's accountant, agrees that restatements are necessary. Meanwhile, PDC is in violation of Nasdaq listing standards that require companies to have current financial statements filed with the SEC. While the company's stock is not delisted, it is temporarily trading as PETDE. "The required revisions to financial statements will affect the reported net income for the various periods covered, with net income increasing in some periods and decreasing in others," says Steven Williams, chief executive. Darwin Stump, chief financial officer, says, "It's not so much a cash impact as it is the timing of accounting for gains and losses. "The way the company interpreted rules for accounting for its oil and gas properties in the Rocky Mountain area was [also] incorrect. But the necessary adjustments will have no impact on cash flow or previously reported oil and gas reserves." PDC's division of its properties into fields to determine impairments and depreciation, the method used to calculate depreciation by quarter, and the portion of the company's oil and gas reserves and future costs used in determining depreciation were all examined. One of the determinations was that PDC's accounting methods included areas that should have been treated as separate fields as part of a single field. The issue was being resolved at press time. Williams says there is the possibility for an extension of 30 more days. "But we don't want to do that. Everything we're doing now is to get things resolved before Nov. 13. In the end, we'll be even more confident in the statements we'll have than what we had before."
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