EXHIBIT
10.1
 
 
 FORM
OF DRILLING AND OPERATING AGREEMENT
 
 
 
 DRILLING
AND OPERATING AGREEMENT
 This
Agreement is entered into by and between PDC 2005-A Limited Partnership,
hereinafter designated and referred to as the "Partnership", and Petroleum
Development Corporation, hereinafter referred to and designated as
"PDC".
 
 Whereas,
the parties to this agreement desire to enter into an agreement to explore and
develop certain Prospects for the production of oil and gas as hereinafter
provided,
 
 It is
agreed as follows:
 
 ARTICLE
I
 
 DEFINITIONS
 
 As used
in this agreement, the following words and terms shall be defined as
follows:
 
 A.           The
term "oil and gas" shall mean oil, gas, casinghead gas, gas condensate. and all
other liquid or gaseous hydrocarbons and other marketable substances produced
therewith, unless an intent to limit the inclusiveness of this term is
specifically stated.
 
 B.           The
term "Prospect" shall mean a spacing unit established according to state
regulatory guidelines and industry practice on which the Partnership proposes to
drill a well. Generally , the spacing unit for Colorado wells will encompass
approximately 32 acres for wells drilled in the Wattenberg Field and
approximately 20 acres for wells drilled in the Grand Valley Field.
 
 C.           "Royalty"
shall mean a payment from gross revenues made to the owner of the oil and gas
mineral rights of a Prospect.
 
 D.           "Overriding
royalty" shall mean a payment from gross revenues to a party other than the
owner of oil and gas mineral rights of a Prospect.
 
 E.           "Proportionate
Working Interest" shall mean an interest in a well or Prospect of less than 100%
which bears that same percentage of costs of development and production as it
receives in production revenues after deducting for royalty and overriding
royalties.
 
 F.           "Non-operators"
shall mean all parties holding a proportionate working interest in a Prospect,
including the Additional General Partners and the Limited Partners, but
excluding PDC if it is also serving as Operator.
 
 ARTICLE
II
 
 EXHIBITS
 
 The
following exhibits are incorporated in and made a part of this
agreement:
 
 A.           Exhibit
"A", Prospects.
 1.           Identification
of each Prospect to be drilled.
 
 2.           Target
formation.
 
 3.           The
Partnership fractional interest therein.
 B.           Exhibit
"B", Insurance.
 
 C.           Exhibit
"C", Additional Prospects.
 
 1.           Identification
of additional Prospects added or substituted after the original date of this
agreement, and if substituted, identification of the Prospect which is
replaced.
 
 2.           Target
formation.
 
 3.           The
Partnership fractional interest therein.
 
 4.           Approval
by the Partnership and PDC.
 
 ARTICLE
III
 
 OPERATOR
 
 A.           Designation
and Responsibilities of Operator:
 
 PDC shall
be the Operator of the Prospects, and shall conduct and direct and have full
control of all operations on the Prospects as permitted and required by, and
within the limits of this agreement. It shall conduct all such operations in a
good workmanlike manner, but it shall have no liability as Operator to the
Partnership for losses sustained or liabilities incurred, except such as may
result from negligence or misconduct. The Managing General Partner may
subcontract with another operator or operators to perform some of all of the
duties of the operator, on Terms and conditions substantially the same as those
discussed herein. The Managing General Partner will supervise operations by
other non-affiliated drilling contractors and subcontractors.
 
 B.           Resignation
or Removal of Operator and Selection of Successor:
 
 1.           Resignation
or Removal of Operator: PDC may resign as Operator at any time by giving written
notice thereof to the Partnership. If PDC terminates its legal existence, no
longer owns an interest in the Prospects, has filed a petition under the Federal
bankruptcy laws or any state insolvency law or a receiver, fiscal agent, or
similar officer has been appointed by a court for the business or property of
PDC, or is otherwise no longer capable of serving as Operator, PDC shall be
deemed to have resigned without any action by the Partnership, except the
selection of a successor. PDC may be removed by the affirmative vote of
Non-Operators owning a majority working interest in each Prospect after
excluding the voting interest of Operator. Such resignation or removal shall not
become effective until 7:00 o'clock A.M., Eastern time, on the first day of
calendar month following the expiration of ninety (90) days after the giving of
notice of resignation of PDC or action by the Non-Operators to remove PDC as
Operator, unless a successor Operator has been selected and assumes the duties
of PDC at an earlier date. PDC, after effective date of resignation or removal,
shall be bound by the terms hereof as a Non-Operator. A change of a corporate
name or structure of PDC or transfer of PDC's interest to any single subsidiary,
parent or successor corporation shall not be the basis for removal of PDC as
Operator.
 
 2.           Selection
of Successor Operator: Upon the resignation or removal of PDC, a successor
Operator shall be selected by the parties. The successor Operator shall be
selected by the affirmative vote of parties owning a majority working interest
in each Prospect: provided, however, if an Operator which has been removed fails
to vote or votes only to succeed itself, the successor Operator shall be
selected by the affirmative vote of parties owning a majority interest after
excluding the voting interest of the Operator that was
removed.
 
 C.           Employees:
 
 The
number of employees used by PDC in conducting operations hereunder, their
selection, and the hours of labor and the compensation for services performed
shall be determined by PDC.
  
  ARTICLE
IV
 
 DRILLING
PROSPECTS
 
 A.           Prospects:
 
 Exhibit
"A" lists Prospects initially to be acquired by the Partnership, and its
proportionate working interest in each Prospect. Most wells to be drilled by (he
Partnerships will be offsets to producing wells. Therefore, it is unlikely that
a well drilled on a Prospect will prove up any additional acreage outside the
Prospect. If a Partnership well does prove up additional acreage, PDC will
assign the Partnership a proportionate interest in such spacing
units.
 
 B.
           Cost:
 
 The
Partnership shall reimburse PDC for its proportionate share of the lesser
of:
 
 1.
                The
      fair market value of the Prospect,
or
 
 2.
                The
      "Cost" of acquisition of the Prospect including: (a) the price paid by PDC
      for such property; (b) title examination, abstracting, brokers
      commissions, filing fees, recording costs, transfer taxes, and other
      charges incurred in connection with the acquisition of the property; (c)
      bonuses, rentals and ad valorem taxes paid by PDC with respect to the
      Prospect to the date of its transfer to the Partnership, interest on funds
      used to acquire or maintain such property, and such portion of PDC's
      expenses for geological, drafting, accounting, legal and other like
      services allocated to the Prospect in accordance with generally accepted
      accounting principles, not including for expenses incurred in the prior
      drilling of wells, and provided such expenses shall have been incurred not
      more than 36 months prior to the purchase by the
  program.
 
 C.           Substitution:
 
 As
drilling progresses other, more desirable Prospects may become may become less
desirable as a result of additional information not available as of the date of
this agreement. For any undrilled Prospect, the Partnership may request that PDC
substitute another Prospect, in which case the entire acquisition cost paid for
the Prospect or a substitute thereof will be applied against the cost of the
substituted Prospect, and against other costs of this contract if and to the
extent the cost of the substitute Prospect is less than the cost of the original
Prospect it replaces. An amendment to this agreement in the form of Exhibit "C"
shall be used for the addition or substitution of a Prospect.
 
 D.           Title
Examination and Opinion:
 
 Title
examination shall be made by outside attorneys on the drillsite of any proposed
well prior to commencement of drilling operations. The opinion will include
ownership of the working interest, mineral, royalty, overriding royalty, and
production payments under the applicable leases. A copy of the opinion will be
furnished to the Partnership.
 
 PDC shall
take such steps as are necessary in its best judgment to render title to the
leases assigned to the Partnership acceptable for the purposes of the
Partnership.  No operation shall be commenced on leases acquired by
the Partnership unless the Partnership Manager is satisfied that necessary title
requirements have been satisfied by PDC and that the undertaking of such
operation would be in the interest of the Partnership. PDC shall be free,
however, to use their own best judgment in waiving title requirements and shall
not be liable to the Partnership, or Participants for any mistakes of judgment;
nor shall PDC be deemed to be making any warranties or representations, express
or implied, as to the validity or merchantability of the title to any lease
assigned to the Partnership or the extent of the interest covered
thereby.
  
  ARTICLE
V
 
 INTEREST
IN COSTS AND PRODUCTION
 
 A.           Royalties
and Overriding Royalties:
 The
Partnership interest in production from drilling Prospects will be subject to
the payment to non-affiliated parties of royalties and overriding royalties,
provided the weighted average of all royalties for all Partnership Prospects
drilled shall not exceed 25% gross revenues. No such royalty or overriding
royalty will be paid to PDC or its affiliates.
 B. Proportionate
Working Interest:
 The
Partnership may acquire 100% of the working interest in a Prospect or a
proportionate interest of less than 100%. In the event the Partnership acquires
a proportionate interest, the respective obligations and benefits acquired by
the Partnership will be proportionately the same as the working interest
acquired. PDC and its affiliates may not retain any overrides or other burdens
on the interest conveyed to the Partnership. The Partnership will pay a
proportionate share of the total of lease, development, and operating costs, and
will be entitled to receive a proportionate share of production subject only to
royalties and overriding royalties discussed in Article V, A,
 C. Joint Venture
Activities:
 PDC may
retain an interest or convey interests in undrilled Prospects to other Joint
Venturers, retaining for its own account a profit or promotional interest on the
interest conveyed. PDC shall require any party acquiring such an interest to
acquire a proportionate working interest and to assume and bear alone all
obligation associated with such an interest, and to bear alone and hold the
Partnership and other Joint Venturers harmless from all costs, claims, and
burdens associated with the interest acquired. At the discretion of the Managing
General Partner, the Partnership may enter into joint ventures which allow a
functional allocation of tangible, intangible and lease costs, where each joint
venturer is responsible for its overhead costs, provided the Partnerships
interest in the revenues and income of such a joint venture is proportional to
its contribution to the total cost of such venture.
 D.           Adjustments:
 Payment
of any bill shall not prejudice the right of Partnership to protest or question
the correctness thereof: provided, however, all bills and statements rendered to
Partnership by PDC during any calendar year shall conclusively be presumed to be
true and correct after a twenty-four (24) month period unless the Partnership
takes written exception thereto and makes claim on PDC for adjustment. No
adjustment favorable to PDC shall be made unless it is made within the same
prescribed period. The provisions of this paragraph shall not prevent
adjustments resulting from a physical inventory of controllable
material.
 E.           Audits:
 
 The
Partnership, upon notice in writing to PDC and all other Non-Operators, shall
have the right to audit PDC's accounts and records relating to the Partnership
wells for any calendar year within the twenty-four (24) month period following
the end of such calendar year; provided, however the making of an audit shall
not extend the time for the taking of written exception to and the adjustments
of account. Where there are two or more Non-Operators, the Non-Operators shall
make every reasonable effort to conduct a joint audit in a manner which will
result in a minimum of inconvenience to PDC. PDC shall bear no portion of the
Non-Operators audit cost incurred under this paragraph unless agreed to by PDC.
The audits shall not be conducted more than once each year without prior
approval of PDC, except upon the resignation or removal of PDC as operator, and
shall be made at the expense of those Non-Operators requesting such
audit.
 
 PDC shall
reply in writing to an audit report within 75 days after receipt of such
report.
  
  ARTICLE
VI
 
 DRILLING
AND DEVELOPMENT
 
 A.           Agreement
To Drill and Complete:
 
 PDC shall
commence drilling of a well or wells on each Prospect within 180 days of the
date of the initial formation of the Partnerships, but in no case later than
March 30, 2005 [2006 for PDC 2005-designated Partnerships and 2007 for PDC
2006-designated Partnerships] and shall continue drilling thereafter with due
diligence to the Target formation unless a condition which renders further
drilling impractical is encountered at a lesser depth, or unless the Partnership
agrees to complete or abandon the well at a lesser depth.
 
 PDC shall
make reasonable tests of all formations encountered during drilling which give
indication of containing economic quantities of oil and/or gas. If such tests
indicate the presence of economic quantities of oil and/or gas, PDC shall
complete the well and install such surface and well equipment, gathering
pipelines, heaters, separators, etc., as are necessary and normal in the area in
which the Prospect is located. If it is determined that the well is not likely
to produce oil and/or gas in commercial quantities PDC shall plug and abandon
the well in accordance with applicable regulations.
 
 B. Cost of
Drilling and Completion;
 
 The
Partnership shall bear its proportionate share of the cost of drilling and
completing or drilling and abandoning each Partnership well, where the Managing
General Partner serves as operator as follows:
 
 1.
                The
      Cost of the Prospect, as defined;
and
 
 2.
                For
      intangible well Costs:
 
 a.
                For
      each well completed and placed in production, an amount equal to the depth
      of the well in feet at its deepest penetration as recorded by the drilling
      contractor multiplied by the "intangible drilling and completion cost" in
      the following table, plus the actual extra completion cost of zones
      completed in excess of the cost of the first zone and actual additional
      costs incurred in the event that an intermediate or third string of
      surface casing is run, rig mobilization and trucking costs, the additional
      cost for directional drilling and drill stem testing, sidetracking,
      Fishing of drilling tools; or
 
 b.
                For
      each well which the partnership elects not to complete, an amount equal to
      the "intangible dry hole cost" in the following table, plus the additional
      costs incurred in the event that an intermediate or third string of
      surface casing is run, rig mobilization and trucking costs, the additional
      cost for directional drilling and drill stem testing, sidetracking,
      fishing of drilling tools;
and
 
 3.
                The
      tangible Costs of drilling and completing the Partnership wells and of
      gathering pipelines necessary to connect the well to the nearest
      appropriate sales point or delivery
point.
 
 To the
extent that a Partnership acquires less than 100% of a Prospect, its Drilling
and Completion Costs of that Prospect will proportionately
decrease.
  
  FOOTAGE
BASED RATES
 Location
              Target
      Formations
              Approximate Well
      Depth
              Intangible Drilling And
      Completion Costs
              IntangibleDry Hole
      CostWattenberg
      Field Colorado
              Cretaceous
      Codell
              6,500'
      -7, 800'
              $60
      per foot
              $20
      per footWattenberg
      Field Colorado
              Cretaceous
      J Sandstone
              7,000'
      - 8,000'
              $72
      per foot
              $23
      per footPiceance
      Basin Colorado
              Cretaceous
      Mesaverde
              7,000'
      - 10,000'
              $150
      per foot
              $85
      per footSand
      Wash Basin Colorado
              Cretaceous
      and Tertiary Sands
              8000'
      - 12,000'
              $150
      per foot
              $85
      per footRed
      Desert Basin Wyoming
              Cretaceous
      and Tertiary Sands
              8,000
      to 12,000 Ft.
              $150
      per foot.
              $85
      per foot.
 * The
depth used for determination well charges will be the deepest penetration by the
drilling bit.
 In the
event the foregoing rates exceed competitive rates available from other
non-affiliated persons in the area engaged in the business of rendering or
providing comparable services or equipment, the foregoing rates will adjust to
an amount equal to that competitive rate.
 
 In the
event the foregoing rates exceed competitive rates available from other persons
in the area engaged in the business of rendering comparable services or
equipment, the foregoing rates will be adjusted to an amount equal to that
competitive rate, but not less than the cost of providing such services or
equipment,
 
 C.           Completion
By Less Than All Parties:
 
 In the
event not all Participants in a well wish to participate in a completion
attempt, the parties desiring to do so may pay all costs of the completion
attempt including the cost of necessary well equipment and a gathering pipeline,
and such parties shall receive all income and pay all operating costs from the
well until they have received an amount equal to 300% of the completion and
connection costs, after which time the non-consenting parties shall have the
right to receive their original interest in further revenues and
expenses.
 
 D.           Prepayment:
 The
Partnership agrees to pay PDC the Prospect cost for each planned well prior to
the spud date. The Partnership shall pay drilling and completion costs of the
Operator as incurred. Notwithstanding the foregoing, PDC may require full
prepayment by December 31, 2004 with respect to partnership PDC 2004-D Limited
Partnership, 2005 with respect to PDC 2005-D Limited Partnership and 2006 with
respect to PDC 2006-D Limited Partnership in order to assure the Partnership of
the rates quoted in Article VI, B, to arrange for the drilling equipment for the
wells through subcontractors and to provide PDC with working capital for the
drilling of the wells.
 E.           Refunds:
 In no
event shall PDC be obligated to refund any moneys paid to it by the Partnership
under this Agreement, In the event any amounts paid under Article VI, D exceed
costs due under Article VI, B, such excess shall be credited to the Partnership
and shall be expended for additional drilling.
 
 ARTICLE
VII
 
 PRODUCTION
AND SUBSEQUENT OPERATIONS
 
 A.           Commencement
of Production:
 
 For
purposes of this agreement, production will commence:
 
 1.
                In
      the case of gas wells when gas is first delivered from the well through a
      pipeline or other delivery system to a
  purchaser;
  
  2.
                In
      the case of oil wells when the well has produced 100 barrels;
      or
 
 3.
                In
      the case of combination wells when either of criteria have been
      satisfied,
 
 A well
will be deemed to be "in production" in any month thereafter in which oil or gas
are produced in commercial quantities.
 
 B.           Production
Operations:
 PDC shall
provide all necessary labor, vehicles, supervision, management, accounting, and
overhead services for normal production operations, and lease accounting, and
shall be entitled to deduct from Partnership revenues a monthly well-tending fee
of $325 per Wattenberg Field well and $600 per Piceance Basin , Sand Wash Basin
or Red Desert Basin well and a monthly Partnership Administration charge of $75
per well. If the Partnership has producing wells in areas different from those
above, the operator will charge a monthly Partnership Administration fee of $75
per well plus a competitive industry rate for operations and field supervision.
Nonroutine operations will be billed to the Partnership at their proportionate
cost. Any nonroutine operation with an estimated cost exceeding $2,000 will be
authorized for expenditure ("AFE" or "AFE'd") and submitted to the
"Non-Operators for approval. Approval of a majority of the working interest
owners will be required to authorize such operations. If the Partnership
authorized such operations PDC shall have the right to deduct payment for the
cost from Partnership revenues.
 C.           Abandonment
of Wells That Have Produced:
 Any well
which has been completed as a producer shall not be plugged and abandoned
without the consent of all Non-Operators. If all parties consent to such
abandonment, the well shall be plugged and abandoned in accordance with
applicable regulations and at the cost, risk of expense of all owners. If,
within (30) days after receipt of the notice of the proposed abandonment of any
well, all parties do not agree to the abandonment of such well, those wishing to
continue its operations from the interval(s) of the formation(s) then open to
production shall tender to each of the other parties its proportionate shale of
the value of the wells salvageable material and equipment, less the estimated
cost of salvaging and assign the non-abandoning parties, without warranty,
express or implied, as to title or as to quantity, or fitness for use of the
equipment and material, all of its interest in the well and related equipment,
together with its interest in leasehold estate as to, but only as to, the
interval or intervals of the formation or formations then open to
production.
 D.           Marketing
of Production:
 
 The
Partnership shall have the right to take in kind and separately dispose of its
share of all oil and gas produced from the Prospects, excluding its
proportionate share of production required for lease operations and production
unavoidably lost. Initially the Partnership designates PDC as its agent to
market such production and authorizes PDC to enter into and bind the Partnership
in such agreements as it deems in the best interest of the Partnership for the
sale of such oil and/or gas. The Partnership may rescind the designation of PDC
as its agent with regard to all subsequent marketing agreements by written
notice at any time, but agrees to be bound by such agreements as may then be in
effect during their terms. The Partnership shall bear its proportionate share of
all marketing costs, if any. In the event PDC provides marketing services, its
charge shall be no greater than those charges made by unaffiliated marketers. If
pipelines which have been built by PDC are used in the delivery of natural gas
to market, PDC may charge a gathering fee not to exceed that which would be
charged by a nonaffiliated third party for a similar service.
 
 E.           Escalation
in the Event of Rising Costs:
 
 The
production and accounting charges provided in Article VII, B, may be adjusted
annually beginning January 1, 2005, to an amount equal to the rates from Article
VII, B, multiplied by the ratio of the then current average weekly earnings of
Crude Petroleum and Gas Production workers to the average weekly earnings of
Crude Petroleum and Gas Production workers for 2004, as published by the United
States Department of Labor, Bureau of Labor Statistics, provided that the charge
may not exceed the rate which would be charged by other comparable operators in
the area of operations.
  
  ARTICLE
VIII
 
 LIABILITY
OF PARTIES
 
 A.           Liability
of Parties:
 
 If the
Partnership participates in a well with third parties the liability of the
parties shall be several, not joint or collective. The Partnership shall be
responsible only for its obligations, and shall be liable only for its
proportionate share of the costs of developing and operating the Prospects. It
is not the intention of the parties to create, nor shall this agreement be
construed as creating, a mining or other partnership or association, or to
render the parties liable as partners.
 
 B.           Liens
and Payment Defaults:
 
 The
Partnership grants to PDC a lien upon its oil and gas rights in the Contract
Area, and a security interest in its share of oil and/or gas when extracted and
its interest in all equipment, to secure payment of its share of expense,
together with interest thereon. To the extent that PDC has a security interest
under the Uniform Commercial Code of the state, PDC shall be entitled to
exercise the rights and remedies of a secured party under the Code. The bringing
of a suit and the obtaining of judgment by PDC for the secured indebtedness
shall not be deemed an election of remedies or otherwise affect the lien rights
or security interest as security for the payment thereof. In addition, upon
default by the Partnership in the payment of its share of expense, PDC shall
have the right, without prejudice to other rights or remedies, to collect from
the purchaser the proceeds from the sale of the Partnership's share of oil
and/or gas until the amount owed by the Partnership, plus interest, has been
paid. Each purchaser shall be entitled to rely upon PDC's written statement
concerning the amount of any default. PDC grants a like lien and security
interest to the Partnership to secure payment of PDC's proportionate share of
expenses.
 
 If any
party fails or is unable to pay its share of expense within sixty (60) days
after rendition of a statement therefor by PDC, PDC shall pay the unpaid amount
in the proportion that the interest of each such party bears to the interest of
all such parties.
 
 C.           Payments
and Accounting:
 
 Except as
herein otherwise specifically provided, PDC shall promptly pay and discharge
expenses incurred in the development and operation of the Contract Area pursuant
to this agreement. PDC shall keep an accurate record of the account hereunder,
showing expenses incurred and charges and credits made and
received.
 
 Regardless
of which party has contributed the lease(s) and/or oil and gas interest(s)
hereto on which royalty is due and payable, PDC shall pay or deliver or cause to
be paid or delivered the royalty and overriding royalty payments due under the
terms associated with the acquisition of each Prospect, and shall deduct such
payments from the revenue of the Partnership.
 
 D.           Taxes:
 
 Unless
Partnership elects to take production in kind, PDC shall pay or cause to be paid
all production, severance, excise, gathering and other taxes imposed upon or
with respect to the production or handling of such party's share of oil and/or
gas produced under the terms of this agreement, and shall be entitled to
reimbursement for such taxes from partnership revenue.
 
 E.           Insurance:
 
 At all
times while operations are conducted hereunder, PDC shall comply with the
workmen's compensation laws of the state of West Virginia. PDC shall also carry
or provide insurance as outlined in Exhibit "B", attached to and made a part
hereof. PDC shall require all contractors engaged in work on or for the Contract
Area to comply with the workmen's compensation law of the state where the
operations are being conducted and to maintain such other insurance as PDC may
require.
  
  No
additional charge will be made for such insurance during drilling and completion
operations. When wells have been placed in production PDC may bill for the cost
of providing such insurance, allocated among wells and operations in accordance
with generally accepted accounting principles.
 
 ARTICLE
IX
 
 INTERNAL
REVENUE CODE ELECTION
 
 This
agreement is not intended to create, and shall not be construed to create, a
relationship of partnership or an association for profit between or among the
parties hereto. Notwithstanding any provision herein that the rights and
liabilities hereunder are several and not joint or collective, or that this
agreement and operations hereunder shall not constitute a partnership, if, for
federal income tax purposes, this agreement and the operations hereunder are
regarded as a partnership, each party hereby affected elects to be excluded from
the application of all of the provisions of Subchapter "K", Chapter 1, Subtitle
"A", of the Internal Revenue Code of 1986, as amended (the "Code") as permitted
and authorized by Code Section 761 and the regulations promulgated thereunder.
PDC is authorized and directed to execute on behalf of the Partnership such
evidence of this election as may be required by the Secretary of the Treasury of
the United States or the Federal Internal Revenue Service, including
specifically, but not by way of limitation, all of the returns, statements, and
the data required by Regulations 1.761. Should there be any requirement that
each party hereby affected to give further evidence of this election, each such
party shall execute such documents and furnish such other evidence as may be
required by the Federal Internal Revenue Service or as may be necessary to
evidence this election. No such party shall give any notices or take any other
action inconsistent with the election made hereby. If any present or future
income tax laws of the state or states in which the Contract Area is located or
any future income tax laws of the United States contain provisions similar to
those in Subchapter "K", Chapter 1, Subtitle "A", of the Code, under which an
election similar to that provided by Section 761 of the Code is permitted, each
party hereby affected shall make such election as may be permitted or required
by such laws. In making the foregoing election, each such party states that the
income derived by such parly from operations hereunder can be adequately
determined without the computation of partnership taxable
income.
 
 ARTICLE
X
 
 CLAIMS
AND LAWSUITS
 
 PDC may
settle any single uninsured third party damage claim or suit arising from
operations hereunder if the expenditure does not exceed One Thousand Dollars
($1,000.00) and if the payment is in complete settlement of such claim or suit.
If the amount required for settlement exceeds the above amount, the Partnership
shall assume and take over the further handling of its interest in the claim
suit, unless such authority is delegated to PDC. All costs and expenses of
handling, settling, or otherwise discharging such claim or suit shall be at the
joint expenses of the parties participating in the operation from which the
claim or suit arises. If a claim is made against any party or if any party is
sued on account of any matter arising from operations hereunder over which such
individual has no control because of the rights given Operator by mis agreement,
such party shall immediately notify all other parties, and the claim or suit
shall be treated as any other claim or suit involving operations hereunder all
claims and suits involving title to any interest subject to this Agreement shall
be treated as a claim or suit against all parties participating in the Prospect
so affected.
 
 ARTICLE
XI
 
 FORCE
MAJEURE
 
 If either
party is rendered unable, wholly or in part, by force majeure to carry out its
obligations under this agreement, other than the obligation to make money
payments, that party shall give to the other party prompt written notice of the
force majeure with reasonably full particulars concerning its; thereupon, the
obligations of the party giving the notice, so far as they are affected by the
force majeure, shall be suspended during, but no longer than, the continuance of
the force majeure. The affected party shall use all reasonable diligence to
remove the force majeure situation as quickly as
practicable.
  
  The
requirement that any force majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes, lockouts, or other labor
difficulty by the party involved, contrary to its wishes; how all such
difficulties shall be handled shall be entirely within the discretion of the
party concerned.
 
 The term
"force majeure", as here employed, shall mean act of God, strike, lockout, or
other industrial disturbance act of the public enemy, war, blockade, public
riot, lightning, fire, storm, flood, explosion, governmental action,
governmental delay, restraint or inaction, unavailability of equipment or market
for oil and/or gas, and any other cause, whether of the kind specifically
enumerated above or otherwise, which is not reasonably within the control of the
party claiming suspension.
 
 ARTICLE
XII
 
 NOTICES
 
 All
notices required by this agreement shall be given in writing addressed to the
parties as follows:
 
 1.
                For
      the Partnership:
 
 Petroleum
Development Corporation, Managing General Partner PDC 2004- Limited Partnership
[PDC 2005- Limited Partnership; PDC 2006- Limited Partnership] P.O. Box 26
Bridgeport, WV 26330
 
 2.
                For
      PDC:
 
 Petroleum
Development Corporation
 P.O. Box
26
 Bridgeport,
WV 26330
 
 Each
party shall have the right to change its address at any time, by giving written
notice to all other parties.
 
 ARTICLE
XIII
 
 TERM OF
AGREEMENT
 
 In the
event a well drilled under any provision of this agreement, results in
production of oil and/or gas in paying quantities, this agreement shall continue
in force so long as any such well or wells produce, or are capable of
production, and for an additional period of 180 days fromcessation of all
production; provided, however, if, prior to the expiration of such additional
period, one or more of the parties hereto are engaged in drilling, reworking,
deepening, plugging back, testing or attempting to complete a well or wells
hereunder, this agreement shall continue in force until such operations have
been completed and if production results therefrom, this agreement shall
continue in force as provided herein.
 
 It is
agreed, however, that the termination of this agreement shall not relieve any
party hereto from any liability which has accrued or attached prior to the date
of such termination.
 
 ARTICLE
XIV
 
 COMPLIANCE
WITH LAWS AND REGULATIONS
 
 A.           Laws,
Regulations and Order:
 
 This
agreement shall be subject to the conservation laws of the state in which the
Prospects are located, to the valid rules, regulations, and orders of any duly
constituted regulatory body of said state; and to all other applicable federal,
state, and local laws, ordinances, rules, regulations, and
orders.
  
  B.           Governing
Law:
 
 This
agreement and all matters pertaining hereto, including, but not limited to
matters of performance, non-performance, breach, remedies, procedures, rights,
duties and interpretation or construction, shall be governed and determined by
the law of the state in which the Prospect is located.
 
 C.           Regulatory
Agencies:
 
 Nothing
herein contained shall grant, or be construed to grant, PDC the right or
authority to waive or release any rights, privileges, or obligations which
Partnership may have federal or state laws or under rules, regulations or orders
promulgated under such laws in reference to oil, gas and mineral operations,
including the location, operation, or production of wells, on tracts offsetting
or adjacent to the Contract Area.
 
 With
respect to operations hereunder, the Partnership agrees to release PDC from any
and all losses, damages, injuries, claims and causes of action arising out of,
incident to or resulting directly or indirectly from Operator's interpretation
or application of rules, rulings, regulations, or orders of the Department of
Energy or predecessor or successor agencies to the extent such interpretation or
application was made in good faith. The Partnership further agrees to reimburse
PDC for any amounts applicable to Partnerships share of production that PDC may
be required to refund, rebate or pay as a result of such an incorrect
interpretation or application,
 
 ARTICLE
XV
 
 MISCELLANEOUS
 This
agreement shall be binding upon and shall inure to the benefit of the parties
hereto and to their respective heirs, devisees, legal representative, successors
and assigns.
 This
instrument may be executed in any number of counterparts, each of which shall be
considered an original for all purposes.
 
 IN
WITNESS WHEREOF, this agreement shall be effective as of 9th day of February
2005.
 
 /s/ Darwin L.
Stump
 Darwin L.
Stump
 CFO and
Treasurer
 Petroleum
Development Corporation
 
 
 
 /s/ Thomas E.
Riley
 Thomas E.
Riley, President
 Petroleum
Development Corporation
 Managing
General Partner
 PDC
2005-A Limited Partnership