UNITED STATES

SECURITIES AND EXCHANGECOMMISSION

Washington, D.C.  20549

**FORM 10-K**

ANNUAL REPORT 

PURSUANT TO SECTIONS 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACTOF 1934

                               (Mark One)

[X] ANNUAL REPORTPURSUANT TO SECTION 13 or 15 (d) OFTHE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended **December 31, 2005**

OR

[ ] TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the transition periodfrom                 to

Commission File Number  000-51452

**PDC 2005-B LIMITED PARTNERSHIP**

(Exact name of registrant asspecified in its charter)

|                                                                                                                                        |                                                                                    |
|----------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------|
|         West  Virginia             |       20-2088726       |
| (State or other jurisdiction of                                                                                                        | (I.R.S. Employer                                                                   |
| incorporation or organization)                                                                                                         | Identification No.)                                                                |

103 East Main Street,Bridgeport, West Virginia  26330

(Address of principal executive offices)    (zip code)

Registrant's telephone number,including area code        (304) 842-3597

SECURITIES REGISTERED PURSUANTTO SECTION 12(b) OF THE ACT:  NONE

SECURITIES REGISTERED PURSUANTTO SECTION 12(g) OF THE ACT:

General and Limited PartnershipInterest

(Title of class)

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Indicate by check mark if the registrant is a well-knownseasoned issuer, as defined in Rule 405 of the Securities Act.  Yes      No   X  

Indicate by check mark if registrant is not required to filereports pursuant to Section 13 or Section 15(d) of the Act. Yes      No   X  

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months and (2) has been subject tosuch filing requirements for the past 90 days.  Yes        No    X      

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, and willbe contained, to the best of registrant's knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K.  [ X ]

Indicate by check mark whether the registrant is a largeaccelerated filer, an accelerated filer, or non-accelerated file. See definition of "accelerated filer and larger acceleratedfiler" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer   [ ]                         AcceleratedFiler  [ ]                          Non-Accelerated Filer [ X ]

Indicate by check mark whether the registrant is a shellcompany (as defined in Rule 12b-2 of the Exchange Act).  

Yes        No   X  

There is no trading marketfor the registrant's securities.

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TABLE OF CONTENTS

**PART I**

                  

Item1                Business

Item1A             Risk Factors

Item1B              Unresolved Staff Comments

Item2                Properties

Item3                Legal Proceedings

Item4                Submission of Matters to a Vote of Security Holders

**PART II**

Item5                Market for Registrant's Common Equity and Related Stockholder Matters andIssuer Purchases of Equity Securities 

Item6                Selected Financial Data

Item7                Management's Discussion and Analysis of Financial Condition and Results ofOperations

Item7A             Quantitative and Qualitative Disclosures About MarketRisk

Item8                Financial Statements and Supplementary Data

Item9                Changes in and Disagreement with Accountants on Accounting and FinancialDisclosure

Item9A             Controls and Procedures

Item9B              Other Information

**PART III**

Item10              Directors and Executive Officers of the Registrant

Item11              Executive Compensation

Item12              Security Ownership of Certain Beneficial Owners and Management and RelatedStockholders Matters

Item 13              Certain Relationships and Related Transactions

Item14              Principal Accountant Fees and Services

**PART IV**

Item15              Exhibits and Financial Statement Schedules

Signatures

Financial Statements

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**PART I**

** **

**ITEM 1.****  BUSINESS**

## **Overview**

This Annual Report onForm 10-K for the year ended December 31, 2005 includes the financialstatements of PDC 2005-B Limited Partnership ("the Partnership") for the yearended December 31, 2005 and substantiallyall of the information for the quarters ended June 30, 2005 and September 30,2005 that would normally be contained in Quarterly Reports on Form 10-Q.  

Aspreviously reported in an update included in Form 12b-25 (Notification of LateFiling) filed with the SEC on March 31, 2006, the Managing General Partner hadsuspended filing financial reports pending the complete assessment of itsPartnership oil and gas property accounting and to correct potential errorsrelated to depreciation, asset impairments, asset retirement obligations andhedge accounting.  

General

PDC2005-B Limited Partnership was organized as a limited partnership pursuant tothe West Virginia Uniform Limited Partnership Act for the purpose ofaggregating funds for the exploration and production of oil and natural gas. Business operations of the Partnership commenced on May 18, 2005,upon the closing of the offering for the sale of partnership units. 

Pursuantto a registration statement filed with the Securities and Exchange Commission,limited and general partnership interests were registered for an offering underthe PDC 2004-2006 Drilling Program for the formation of a series of limitedpartnerships.  PDC 2005-B Limited Partnership was formed with totalcapital contributions of $40,452,761 from limited partners and additionalgeneral partners (collectively, the "Investor Partners") and $8,942,916 incapital contributed by Petroleum Development Corporation ("PDC"), the ManagingGeneral Partner. Total funding of the Partnership was $49,395,677.  Thecapital contributions from the Investor Partners consisted of 2,022.64partnership units at a unit price of $20,000 each. After syndication costs of$4,074,306 and a one time management fee to the Managing General Partner of$606,791, the Partnership had available cash of $44,714,580 to commencePartnership activities for the drilling of natural gas and oil wells. 

Under the terms of thepartnership agreement, the allocation of production revenues among the InvestorPartners and the Managing General Partner is as follows:

|                     |      Allocation |
|--------------------------|--------------------------------|
|                     |  of Revenues              |
| Investor Partners        | 80%                            |
| Managing General Partner | 20%                            |
|                     |                           |

Operatingand direct costs are allocated and charged to the Investor Partners and theManaging General Partner in the same percentages as revenues areallocated.  See "Note 4 - Allocation of Partners' Interests" in the Notesto the Financial Statements for a complete description of the allocation of allPartnership revenues and costs.

DrillingActivities

Sinceits formation, the Partnership has been engaged in onshore, domestic oil andnatural gas exploration and production exclusively in the Rocky MountainRegion. The Partnership participated in the drilling of only developmentwells.  Due to natural gas being the predominant production, all wells areclassified as gas wells, although significant amounts of oil can be produced inassociation with the gas. The followingtable summarizes the Partnership's drilling activities during 2005 related toits 52 wells:

 

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|                              | Wattenberg Field (DJ Basin) | Grand Valley Field (Piceance Basin) |  

Total  |
|-----------------------------------|-----------------------------|-------------------------------------|----------------|
| Drilled,  completed and producing | 42                          |    1                      |  43       |
| Drilled but not completed         |    -              |   7                       |    7 |
| Drilling in progress              |    -              |    2                      |    2 |
| Dry holes                         |    -              |    -                      |    - |
| Totals                            | 42                          | 10                                  | 52             |

Asof December 31, 2005, completion of nine wells, all in theGrand Valley Field, were delayed until the spring of 2006 due to weatherconditions restricting access to the well sites.  As of the date of thisreport, all 52 of the Partnership's wells have been completed.  The 52wells in the table above are the only wells the Partnership will drill becauseall of the capital contributions provided by the partnership offering will havebeen utilized upon completion of these remaining wells.  

Additional informationconcerning the Partnership's gas wells is contained in "Item 2 - Properties"below.

Plan ofOperations

Under agreement with the Investor Partners, the ManagingGeneral Partner serves as operator for the drilling of the Partnership's wellsand for the production and sale of natural gas and oil from the wells. Once producing, the Partnership's wells will beproduced until they are depleted or until they are uneconomical toproduce.  PDC plans to recomplete the Codell formation in most of the wells in the WattenbergField after 5 or more years of production because these wells will usually haveexperienced a significant decline in production in that time period. These Codell recompletionstypically increase the production rates and recoverable reserves.  Priorexperience of PDC and other producers with Codell recompletions has resulted in significant productionincreases for most wells, although not all recompletionshave been successful. The cost of a Codell recompletion is about one-third of the cost of a new well(currently about $180,000).  The Managing General Partner will arrange forcontractors to perform the work, the cost of which will be paid out of overallrevenues of the Partnership.  PDC will pay its proportionate share ofcosts based on the operating costs sharing ratios of the Partnership.

Employees

ThePartnership has no employees. Services to the Partnership are provided by PDC,which has a total of approximately 170 employees, including personnel inaccounting and finance, administration, engineering, geology, field operations,and natural gas marketing. 

Markets for Oil and Gas

Theavailability of a market for any oil and natural gas produced from theoperation of the Partnership's wells will depend upon a number of factors beyondthe control of the Partnership which cannot be accurately predicted. These factors include the proximity of the Partnership wells to and thecapacity of natural gas pipelines, the availability and price of competitivefuels, fluctuations in seasonal supply and demand, and government regulation ofsupply and demand created by its pricing and allocation restrictions. Oversupplies of gas can be expected to occur from time to time and may resultin the Partnership's wells being shut-in or production being curtailed. Increased imports of oil and natural gas have occurred and are expected tocontinue. The effects of such imports could adversely impact the market fordomestic oil and natural gas. 

 

PDCutilizes the services of its wholly-owned subsidiary, Riley Natural Gas (RNG),in marketing the oil and natural gas produced from Partnership wells.  RNGhas been in the gas marketing business since 1986. All oil and natural gas issold under contracts based on market sensitive indexes that vary from month tomonth. No fixed price contracts are in place.  Purchase contracts for thesale of oil are cancelable on 30 days notice, whereas purchase contracts forthe sale of natural gas may range from spot market sales of short duration tocontracts with a term of a number of years and that may require the dedicationof the gas from a well for a period ranging up to the life of the well. PDC will not make any commitment of future production that does not primarilybenefit the Partnership.  RNG is entitled to charge reasonable fees forits services, including out-of-pocket costs, which will be equal to or lessthan fees charged to non-affiliated producers for similar services. ThePartnership sold its oil and natural gas to three customers during 2005, whichaccounted for 75%, 23% and 2% of the Partnership's total oil and natural gassales for the period.

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Derivatives and HedgingActivities

Historically,PDC and RNG have utilized commodity based derivative instruments to manage aportion of the exposure to price volatility stemming from natural gas and crudeoil production.  In order to provide a more predictable cash flow stream,PDC expects to continue the use of derivative instruments, including thePartnership's production of natural gas and oil, and will enter into derivativecontracts on behalf of the Partnership.  PDC may use financial hedges, putoptions, call options, and other derivative instruments to offset variations inprices.  The contracts hedge committed and anticipated natural gas and oilsales generally forecasted to occur within the next two-year period. TheManaging General Partner does not hold or issue derivatives for trading orspeculative purposes and permits utilization of hedges only if there is anunderlying physical position.  See "Commodity Price Risk" under Item 7Abelow.

Competition

The Partnership competes in marketing its gas and oilwith numerous companies and individuals, many of which have financialresources, staffs and facilities substantially greater than those of the Partnershipor PDC.

Governmental Regulations

Federal and state regulatory authorities haveestablished rules and regulations requiring permits for well operations,reclamation bonds and reports concerning operations.  States also havestatutes and regulations concerning the spacing of wells, environmental mattersand conservation, and have established regulations concerning the unitizationand pooling of oil and gas properties and maximum rates of production from oiland gas wells. 

Natural Gas Regulation. Sale of natural gas by the Partnership is subject to regulation of production,transportation and pricing by governmental regulatory agencies. Generally, the regulatory agency in the state where a producing well is locatedregulates production activities and, in addition, the transportation of gassold intrastate.  The Federal Energy Regulatory Commission (FERC)regulates the operation and cost of interstate pipeline operators who transportgas.  Currently, the price of gas sold by the Partnership is not regulatedby any state or federal agency.

Environmental and SafetyRegulations.  The Partnership believes that it complies, inall material respects, with all legislation and regulations relating toenvironmental and safety matters in the drilling and production of oil and gaswells and the discharge of wastes.  Compliance with such provisions andregulations is significant during well development but has not had a materialeffect upon the Partnership's expenditures for capital equipment, its operationsor its competitive position.  The cost of such compliance is notanticipated to be material in the future.

ThePartnership believes it has complied in all material respects with applicablestate and federal regulations. The Partnership estimates it has spentapproximately $630,000 in 2005 to comply with federal and state regulations,primarily relating to environmental permitting and compliance.

**ITEM1A.****  RISKFACTORS**

In the course of its normalbusiness, the Partnership is subject to a number of risks that could adverselyimpact its business, operating results, financial condition, and cashdistributions.  The following risk factors should be considered carefullyin addition to the other information included in this report.

Drilling natural gas and oil wells isspeculative and may be unprofitable or result in the total loss of investment. The drilling and completionoperations undertaken by the Partnership for the development of natural gas andoil reserves are inherently speculative and involve a high degree of risk andthe possibility of a total loss of investment.  Drilling activities mayresult in unprofitable well operations, not only from non-productive wells, butalso from wells that do not produce natural gas or oil in sufficient quantitiesor quality to return a profit on the amounts expended.  Consequently,Partnership wells may not produce sufficient natural gas and oil for investorsto receive a profit or even to recover their initial investment.  Only oneof the prior Partnerships sponsored by PDC has, to date, generated cashdistributions in excess of investor subscriptions without tax savings. PDC cannot predict whether any prospect will produce commercial quantities ofnatural gas or oil.  PDC cannot predict the life and the ultimateproduction of any well, and the actual lives could differ from thoseanticipated.

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The partnership units are notregistered, there will be no public market for the units, and as a result, anInvestor Partner may not be able to sell his or her units.  There is and will beno public market for the units nor will a public market develop for theunits.  Investor Partners may not be able to sell their Partnershipinterests or may be able to sell them only for less than fair marketvalue.  The offer and sale of units have not been, and will not in thefuture, be registered under the Securities Act or under any state securitieslaws.  Each purchaser of units has been required to represent that suchinvestor has purchased the units for his or her own account for investment andnot with a view to resale or distribution.  No transfer of a unit may bemade unless the transferee is a "qualified investor" and suchtransfer is registered under the Securities Act and applicable state securitieslaws, or an exemption therefrom is available. The Partnership may require that the transferor provide an opinion of legalcounsel stating that the transfer complies with all applicable securitieslaws.  A sale or transfer of units by an investor requires PDC's prior written consent.  For these and otherreasons, an investor must anticipate that he or she will have to hold his orher Partnership interests indefinitely and will not be able to liquidate his orher investment in the Partnership.  Consequently, an investor must be ableto bear the economic risk of investing in the Partnership for an indefiniteperiod of time.

The additional general partners willbe individually liable for Partnership obligations and liabilities that aroseprior to conversion to limited partners (which can occur only after thedrilling completion operations are finished) that are beyond the amount oftheir subscriptions, partnership assets, and the assets of the Managing GeneralPartner.  UnderWest Virginia law, the state in which the Partnership has organized, generalpartners of a limited partnership have unlimited liability with respect to thepartnership.  Therefore, the additional general partners of thePartnership will be liable individually and as a group for all obligations andliabilities of creditors and claimants, whether arising out of contract or tortor in the conduct of the Partnership's operations, until such time as theadditional general partners are converted to limited partners.  Under thePartnership Agreement, this conversion is not scheduled to occur until thedrilling and completion operations are finished.  Irrespective ofconversion, the additional general partners will remain fully liable forobligations and liabilities that arose prior to conversion.  Investors asadditional general partners may be liable for amounts in excess of theirsubscriptions, the assets of the Partnership, including insurance coverage, andthe assets of the Managing General Partner.

The Partnership may retainPartnership revenues if needed for Partnership operations to fully develop thePartnership's wells; if full development of the Partnership's wells provescommercially unsuccessful, an investor might anticipate a reduction in cashdistributions.  ThePartnership intends to utilize substantially all available capital raised in the offering for the drilling and completion ofwells and will have only nominal funds available for Partnership purposes priorto the time of production from Partnership well operations.  In the future,PDC may wish to rework or recomplete Partnershipwells but PDC has not held money from the initial investment for that futurework.  There is no assurance that future development of the Partnership'swells will prove commercially successful and that the further-developedPartnership wells will generate sufficient funds from production to increasedistributions to the investors to cover revenues retained.  If futuredevelopment of the Partnership's wells is not commercially successful, the use offunds retained from production revenues could result in a reduction of cashdistributions to the Investor Partners. 

Increases in prices of oil andnatural gas have increased the cost of drilling and development and may affectthe performance of the Partnership in both the short and long term.  In the current highprice environment, most oil and gas companies have increased their expendituresfor drilling new wells.  This has resulted in increased demand and highercost for leases, oilfield services and well equipment.  Because of thesehigher costs, the risk to the Partnership of decreased profitability fromfuture decreases in oil and natural gas prices is increased.

Reductions in prices of oil andnatural gas reduce the profitability of the Partnership's productionoperations.  Globaleconomic conditions, political conditions, and energy conservation have createdunstable prices.  Revenues of the Partnership are directly related tonatural gas and oil prices for which PDC cannot predict.  The prices fordomestic natural gas and oil production have varied substantially over time andby location, and are likely to remain extremely unstable.  Revenue from the sale of oil and natural gas increases when pricesfor these commodities increase and declines when prices decrease. These unpredictable price changes can occur rapidly and are not within thecontrol of the Partnership.  A decline in natural gas and/or oil priceswould result in lower revenues for the Partnership and a reduction of cashdistributions to the partners of the Partnership.

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The high level of drilling activitycould result in an oversupply of natural gas on a regional or national level,resulting in much lower commodity prices.  Recently, the natural gas market has beencharacterized by excess demand compared to the supplies available, leading ingeneral to higher prices for natural gas.  The high level of drilling,combined with a reduction in demand resulting from higher prices, could resultin an oversupply of natural gas.  In the Rocky Mountain region, rapidgrowth of production and increasing supplies may result in lower prices andproduction curtailment due to limitations on available pipeline facilities ormarkets not developed to utilize or transport the new supplies.  In bothcases, the result would probably be lower prices for the natural gas thePartnership produces, reduced profitability for thePartnership and reduced cash distributions to the Investor Partners.

Sufficient insurance coverage may notbe available for the Partnership, thereby increasing the risk of loss for theInvestor Partners. It is possible that some or all of the insurance coverage which the Partnershiphas available may become unavailable or prohibitively expensive.  In thatcase, PDC might elect to change the insurance coverage.  The additionalgeneral partners could be exposed to additional financial risk due to thereduced insurance coverage and due to the fact that additional general partnerswould continue to be individually liable for obligations and liabilities of thePartnership.  Investor Partners could be subject to greater risk of lossof their investment because less insurance would be available to protect thePartnership from casualty losses.  Moreover, should the Partnership's costof insurance become more expensive, the amount of cash distributions to theinvestors will be reduced.

Through their involvement inPartnership and other non-partnership activities, the Managing General Partnerand its affiliates have interests which conflict with those of the InvestorPartners; actions taken by the Managing General Partner in furtherance of itsown interests could result in the Partnership's being less profitable and areduction in cash distributions to the investors.  PDC's continuedactive participation in oil and natural gas activities for its own account andon behalf of other partnerships organized or to be organized by PDC and themanner in which Partnership revenues are allocated create conflicts of interestwith the Partnership.  PDC has interests which inherently conflict withthe interests of the investor partners.  In operating the Partnership, theManaging General Partner and its affiliates could take actions which benefitthemselves and which do not benefit the Partnership.  These actions couldresult in the Partnership's being less profitable.  In that event, anInvestor Partner could anticipate a reduction of cash distributions.

The Partnership and otherpartnerships sponsored by the Managing General Partner may compete with eachother for prospects, equipment, contractors, and personnel; as a result, thePartnership may find it more difficult to operate effectively and profitably.  During and after 2006,PDC plans to offer interests in other partnerships to be formed forsubstantially the same purposes as those of the Partnership.  Therefore, anumber of partnerships with unexpended capital funds, including thosepartnerships formed before and after the Partnership, may exist at the sametime.  The Partnership may compete for equipment, contractors, and PDCpersonnel (when the Partnership is also needful of equipment, contractors andPDC personnel), which may make it more difficult and more costly to obtainservices for the Partnership.  In that event, it is possible that the Partnershipwould be less profitable.  Additionally, because PDC must divide itsattention in the management of its own affairs as well as the affairs of the 74limited partnerships PDC has organized in previous programs, the Partnershipwill not receive PDC's full attention and efforts atall times.

The Partnership's derivativeactivities could result in reduced revenue compared to the level thePartnership might experience if no derivative instruments were in place.  The Partnership expectsto use derivative instruments to reduce the impact of price movements onrevenue.  While these derivative instruments protect the Partnershipagainst the impact of declining prices, they also may limit the positive impactof price increases.  As a result, the Partnership may have lower revenueswhen prices are increasing than might otherwise be the case, and may alsoreduce the Partnership's cash flows and cash distributions to the InvestorPartners.

Hedging transactions have in the pastand may in the future impact our cash flow from operations.  Our commodityhedging may prevent us from benefiting fully from price increases and mayexpose us to other risks. PDC will enter into hedging arrangements to reduce the Partnership's exposureto fluctuations in natural gas and crude oil prices and to achieve morepredictable cash flow.  Although the Partnership's hedging activities maylimit the Partnership's exposure to declines in natural gas and crude oilprices, these activities may also limit and have in the past limited, additionalrevenues from increases in natural gas and crude oil prices.  To theextent that the Partnership engages in hedging activities to protect itselffrom commodity price volatility, the Partnership may be prevented fromrealizing the benefits of price increases above the levels of the hedges. 

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Additionally, the hedging transactions PDC has enteredinto, or will enter into, may not adequately protect the Partnership fromfinancial loss due to circumstances such as:

•        Highly volatile natural gas andcrude oil prices;

•        Production beingless than expected; or

•        A counterparty defaults on itscontractual obligations.

A significant financial loss by theManaging General Partner could result in PDC'sinability to indemnify additional general partners for personal losses sufferedbecause of Partnership liabilities.  As a result of PDC'scommitments as Managing General Partner of several partnerships and because ofthe unlimited liability of a general partner to third parties, PDC's net worth is at risk of reduction if PDC suffers asignificant financial loss.  Because PDC is primarily responsible for theconduct of the Partnership's affairs, as well as the affairs of otherpartnerships for which PDC serves as managing general partner, a significantadverse financial reversal for PDC could result in PDC'sinability to pay for Partnership liabilities and obligations.  Theadditional general partners of the Partnership might be personally liable forpayments of the Partnership's liabilities and obligations.  Therefore, theManaging General Partner's financial incapacity could increase the risk ofpersonal liability as an additional general partner because PDC would be unableto indemnify the additional general partners for any personal losses theysuffered arising from Partnership operations.

The Managing General Partnermay not have sufficient funds or budget to repurchase limited partnershipunits.  As a result of the Managing General Partner being a generalpartner in several partnerships, the Partnership's net worth is at risk ofreduction if PDC suffers a significant financial loss.  Because theinvestors may request the Managing General Partner to repurchase the units inthe Partnership, subject to certain conditions and restrictions, a significantadverse financial reversal could result in the Managing General Partner'sinability to pay for Partnership obligations or the repurchase of investorunits.  

Fluctuating marketconditions and government regulations may cause a decline in the profitabilityof the Partnership.  The sale of any natural gas and oil produced bythe Partnership will be affected by fluctuating market conditions andgovernmental regulations, including environmental and safety standards set bystate and federal agencies.  From time-to-time, a surplus of natural gasor oil may occur in areas of the United States.  The effect of a surplusmay be to reduce the price the Partnership receives for the natural gas or oilproduction, or to reduce the amount of natural gas or oil that the Partnershipmay produce and sell.  As a result, the Partnership may not beprofitable.  Lower prices and/or lower production and sales will result inlower revenues for the Partnership and a reduction in cash distributions to thepartners of the Partnership.

Environmental hazards involved indrilling natural gas and oil wells may result in substantial liabilities forthe Partnership. There are numerous natural hazards involved in the drilling of wells, includingunexpected or unusual formations, pressures, blowouts involving possibledamages to property and third parties, surface damages, personal injury or lossof life, damage to and loss of equipment, reservoir damage and loss ofreserves.  Uninsured liabilities would reduce the funds available to thePartnership, may result in the loss of Partnership properties, and may createliability for additional general partners.  The Partnership may becomesubject to liability for pollution, abuses of the environment and other similardamages and insurance coverage may be insufficient to protect the Partnershipagainst all potential losses.  In that event, Partnership assets would beused to pay personal injury and property damage claims and the costs ofcontrolling blowouts or replacing destroyed equipment rather than for drillingactivities.  These payments would cause an otherwise profitablepartnership to be less profitable or unprofitable and would result in areduction of cash distributions to the partners of the Partnership.

Informationconcerning our reserves and future net revenues estimates is inherentlyuncertain.  The accuracy of proved reserves estimates andestimated future net revenues from such reserves is a function of the qualityof available geological, geophysical, engineering and economic data and issubject to various assumptions, including assumptions required by the SECrelating to oil and gas prices, drilling and operating expenses, and othermatters. Although we believe that our estimated proved reserves representreserves that we are reasonably certain to recover, actual future production,oil and gas prices, revenues, taxes, development expenditures, operatingexpenses and quantities of recoverable oil and gas reserves will most likelyvary from the assumptions and estimates used to determine proved reserves. Anysignificant variance could materially affect the estimated quantities and valueof our oil and gas reserves, which in turn could adversely affect our cashflow, results of operations and the availability of capital resources. Inaddition, we may adjust estimates of proved reserves to reflect productionhistory, results of exploration and development, prevailing oil and gas pricesand other factors, many of which are beyond our control. Downward adjustmentsto our estimated proved reserves could require us to write down the carryingvalue of our oil and gas properties, which would reduce our earnings and ourpartners' equity.

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Thepresent value of proved reserves will not necessarily equal the current fair marketvalue of our estimated oil and gas reserves. In accordance with the reservereporting requirements of the SEC, the estimateddiscounted future net cash flows from proved reserves are based on prices andcosts as of the date of the estimate. Actual future prices and costs may bematerially higher or lower than those as of the date of the estimate. Thetiming of both the production and the expenses with respect to the developmentand production of oil and gas properties will affect the timing of future netcash flows from proved reserves and their present value.

Seasonalweather conditions may adversely affect the Partnership's ability to conductdrilling, completion and production activities in some of the areas where weoperate.  Oil and natural gas operationsin the Rocky Mountains are adversely affected by seasonal weather conditions.In certain areas, drilling and other oil and natural gas activities arerestricted or prevented by weather conditions for up to 6 months out of theyear. This limits operations in those areas and can intensify competitionduring those months for drilling rigs, oil field equipment, services, suppliesand qualified personnel, which may lead to periodic shortages. Theseconstraints and the resulting shortages or high costs could delay operationsand materially increase operating and capital costs and therefore, adverselyaffect profitability. 

**ITEM1B.****  UNRESOLVEDSTAFF COMMENTS**

None.

**ITEM2.****  PROPERTIES**

The Partnership's properties consist ofoil and gas wells, associated well equipment, and the ownership in leaseholdacreage assigned to the spacing units on which the 52 Partnership wells weredrilled.  The Partnership has no undeveloped acreage. 

Drilling Activity

The Partnership commenced drilling activities on May 31, 2005, followingfunding of the Partnership.  All of the Partnership's wells are located inthe state of Colorado. The following table sets forth the results of thePartnership's drilling activity as of December 31, 2005.  

|                                                                                             |     Gross  Wells   |  Net Wells                                     |
|---------------------------------------------------------------------------------------------|---------------------------------------------|-----------------------------------------------------|
| Development wells:                                                                          |                                        |                                                |
| Drilled, completed  and producing.......................................                    | 43                                     |    42.85                                  |
| Drilled and not  completed.........................                                         | 7                                      |      6.08                            |
| Drilling in  progress................................................................       |  2                                |      1.50                            |
| Dry  hole.................................................................................. |     -              |           - |
| Total Wells  Drilled................................................................        |  52                               |       50.43                     |

Asof the date of this report, all 52 wells drilled by the Partnership areconsidered to be productive wells. The Partnership did not participate in thedrilling of any exploratory wells. Completion of the nine wells that werestarted but not completed in 2005 was delayed until the spring of 2006 due toweather conditions restricting access to the well site.  The 52 wells inthe table above are the only wells to be drilled by the Partnership since allof the funds raised in the Partnership offering of $44,714,580 will have been utilizedupon the completion of the nine remaining wells.  

Adevelopment well is a well that is drilled close to and into the same formationas wells which have already produced and sold oil ornatural gas.  An exploratory well is one which is drilled in an area wherethere has been no oil or natural gas production, or a well which is drilled toa previously untested or non-producing zone in an area where there are wellsproducing from other formations.  Productive wells consist of producingwells and wells capable of producing oil and gas in commercial quantities,including gas wells awaiting pipeline connections to commence deliveries. A gross well refers to the number of wells in which the Partnership has an interest. A net well refers to a gross well multiplied by the percentage working interestin the wells owned by the Partnership.

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Reserves

See"Note 7 - Supplemental Reserve Information (Unaudited)"in the Financial Statements for information related to the Partnership's oiland gas reserves as of December 31, 2005.

### Production

See "Item 7 - Management's Discussion and Analysis andResults of Operations" below for information related to volumes, prices andproduction costs. 

Title to Properties 

The Partnership's interests in producing acreage arein the form of assigned direct interests in leases. Such properties are subjectto customary royalty interests generally contracted for in connection with theacquisition of properties and could be subject to liens incident to operatingagreements, liens for current taxes, and other burdens.  The Partnershipbelieves that none of these burdens materially interfere with the use of suchproperties in the operation of the Partnership's business.

Asis customary in the oil and gas industry, little or no investigation of titleis made at the time of acquisition of undeveloped properties (other than apreliminary review of local mineral records).  Investigations aregenerally made, including in most cases receiving a title opinion of legalcounsel, before commencement of drilling operations.  A thoroughexamination of title has been made with respect to all of the Partnership'sproducing properties and the Partnership believes that it has satisfactory titleto such properties.

**ITEM3.****  LEGALPROCEEDINGS**

The Registrant is not a party to any legal proceedings.

PDC, as Managing General Partner and operator of thePartnership's wells, may be subject to various legal proceedings from time totime arising in the normal course of business.  Any such outstanding andpending legal actions are not considered material to the operations of thePartnership or PDC.

**ITEM4.****  SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

** **

None.

**PART II**

**ITEM 5.**** MARKET FOR REGISTRANT'S COMMON EQUITY ANDRELATED STOCKHOLDER MATTERS**

AtDecember 31, 2005, the Partnership had 1,645 Investor Partners holding a totalof 2,022.64 partnership units and one Managing General Partner.  Noestablished public trading market exists for the units, nor will a publictrading market ever develop for the units.  Limited and additional generalpartnership interests are transferable, however noassignee of an interest in the Partnership can become a substituted partnerwithout the written consent of the transferor and the Managing General Partner.

**ITEM 6.****  SELECTED FINANCIAL DATA**

** **

The selected financial datapresented below has been derived from audited financial statements of thePartnership.  See the Financial Statements included with this Form 10-K.

-8-

** **

** **

----

** **

|                                              |  |                                                                                                                                                       |                                                                                                                 | Period From                                                                                     |
|----------------------------------------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|
|                                              |  |                                                                                                                                                       |                                                                                                                 | May 18, 2005                                                                                    |
|                                              |  |                                                                                                                                                       |                                                                                                                 | (date of inception)                                                                             |
|                                              |  |                                                                                                                                                       |                                                                                                                 | Through                                                                                         |
|                                              |  |                                                                                                                                                       |                                                                                                                 | December 31, 2005                                                                               |
|                                              |  |                                                                                                                                                       |                                                                                                                 |                                                                                                 |
| Oil and gas sales                            |  |                                                                                                                                                       |                                                                                                                 |  $             4,442,990            |
| Costs and expenses                           |  |                                                                                                                                                       |                 3,344,476                 |
| Oil and gas price risk  management loss, net |  |                      31,322                            |
| Net income                                   |  |                                                                                                                                                       |                                                                                                                 |                 1,468,684 |
| Allocation of Net income:                    |  |                                                                                                                                                       |
| Managing  General Partner                    |  |                    415,095                                       |
| Investor  Partners                           |  |                                                                                                                                                       |                 1,053,589                 |
| Per  Investor Partner unit                   |  |                           521 |
| Total assets at end of year                  |  |               46,864,262                                                                  |
| Cash distributions:                          |  |                                                                                                                                                       |                                                                                                                 |
| Managing  General Partner                    |  |                    156,085                                       |
| Investor  Partners                           |  |                                                                                                                                                       |                    624,341 |
| Per  Investor Partner unit                   |  |                           309 |
|                                              |  |                                                                                                                                                       |                                                                                                                 |                                                                                                 |

 

** **

**ITEM7.****MANAGEMENT'S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

Safe Harbor Statement Under thePrivate Securities Litigation Reform Act of 1995

Statements, other than historical facts, contained inthis Annual Report on Form 10-K, including statements of estimated oil and gasproduction and reserves, future cash flows and the Partnership's strategies,plans and objectives, are "forward-looking statements" within the meaning ofSection 27A of the Securities Act of 1933, as amended (the "Securities Act"),and Section 21E of the Securities Exchange Act of 1934, as amended (the"Exchange Act").  Although the Partnership believes that its forwardlooking statements are based on reasonable assumptions, it cautions that suchstatements are subject to a wide range of risks, trends and uncertainties,incidental to the production and marketing of oil and gas that could causeactual results to differ materially from those projected.  Among thoserisks, trends and uncertainties are important factors that could cause actualresults to differ materially from the forward looking statements, including,but not limited to, changes in production volumes, worldwide demand andcommodity prices for petroleum natural resources; risks incidental to theoperation of oil and gas wells; future production and development costs; theeffect of existing and future laws, governmental regulations and the politicaland economic climate of the United States; the effect of derivative activities;and conditions in the capital markets.  In particular, carefulconsideration should be given to cautionary statements made in this Form 10-Kand in the various reports the Partnership has filed with the Securities andExchange Commission.  The Partnership undertakes no duty to update or revisethese forward-looking statements.

Whenused in this Form 10-K, the words, "expect," "anticipate," "intend," "plan,""believe," "seek," "estimate" and similar expressions are intended to identifyforward-looking statements, although not all forward-looking statements containthese identifying words. Because these forward-looking statements involve risksand uncertainties, actual results could differ materially from those expressedor implied by these forward-looking statements for a number of important reasons,including those discussed under "Item 1A - Risk Factors"  and elsewhere inthis Form 10-K.

 

-9-

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Overview

ThePartnership was funded on May 18, 2005, with initial Investor Partnercontributions of $40,452,761 and the Managing General Partner's cash contributionof $8,942,916.  After payment of syndication costs of $4,074,306 and aone-time management fee to the Managing General Partner of $606,791, thePartnership had available cash of $44,714,580 to commence the Partnership'sdrilling activities.

Thedrilling of oil and gas wells on prospects evaluated and designated by PDCcommenced on May 31, 2005.  As of December 31, 2005, forty-three wellshave been completed and are producing and nine additional wells were in variousstages of completion.  The remaining work on these nine wells was delayedinto 2006 primarily due to weather conditions restricting access to the wellsites.  The Partnership drilled only development wells and did notparticipate in the drilling of exploratory wells.  Drilling of one of thetwo wells that was started but not finished in 2005 had drilling finished inJanuary of 2006 and the other well is to be finished in 2006. No additionalwells will be drilled by the Partnership.  The table in "Item 1 -Business" summarizes the Partnership's drilling activity during 2005. 

Results of Operations 

The following table presents significant operationalinformation for the above referenced period in the Partnership's first year ofoperations:

----

|                                               |                                                                                                   | 2005 |
|-----------------------------------------------|---------------------------------------------------------------------------------------------------|------|
|                                               |                                                                                                   |      |
| Oil and gas sales                             |  $       4,442,990                                                  |
| Gas sales - Mcf                               |              116,200                       |
| Average gas price/Mcf                         |  $                9.62 |
| Oil sales - Bbls                              | 60,050                                                                                            |
| Average oil price/Bbl                         |  $              55.38            |
|                                               |                                                                                                   |      |
| Production and operating costs                |  $          679,519                                  |
| Production and operating  costs/Mcfe          |  $                1.43 |
| Depreciation, depletion and  amortization     |  $       2,021,701                                                  |
|                                               |                                                                                                   |      |
| Net income                                    |  $       1,468,684                                                  |
| Partnership cash  distributions               |  $          780,426                                  |
|                                               |                                                                                                   |      |
| Oil and gas price risk  management loss, net: |                                                                                                   |
| Realized  loss                                |  $            31,322                       |
|                                               |                                                                                                   |      |
| Working capital at year end                   |  $       3,320,810                                                  |
|                                               |                                                                                                   |      |

 

* Definitions: 

•         Bbl - One barrel or 42 U.S.gallons of liquid volume.

•         Mcf - One thousand cubic feet.

•        Mcfe - One thousand cubic feet ofnatural gas equivalents, based on a ratio of 6 Mcffor each barrel of oil, which reflects the relative energy content.

Initial production from the Partnership wells commencedduring the third quarter of 2005, as wells were drilled, completed andconnected to pipelines. Sales of natural gas and oil from the Partnership'swells increased steadily during 2005 as additional wells were completed andplaced into production.  The table below reflects the production volumes,net to the Partnership, for each of the quarters in 2005.  

-10-

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|  |             | No. of    |  | Gas                                                                                                                               |                                                                                          | Oil |                                                                                                                       |                                                                                          |
|--|-------------|-----------|--|-----------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|-----|-----------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|
|  |             | Producing |  |                                                                                                                                   | Average                                                                                  |     |                                                                                                                       | Average                                                                                  |  | Oil and Gas |
|  |             | Wells     |  | Mcf                                                                                                                               | Price                                                                                    |     | Bbls                                                                                                                  | Price                                                                                    |  | Sales |
|  | Quarter 2   | -         |  |                      -   |  $             -   |     |                    -   |  $             -   |  |  $                       - |
|  | Quarter 3   | 21        |  |              22,215                                                        |             8.03                       |     |            13,147                                                        |           59.08                                  |  |               955,079 |
|  | Quarter 4   | 43        |  |              93,985                                                        |             9.99                       |     |            46,903                                                        |           54.34                                  |  |            3,487,911 |
|  | Total  2005 |           |  |            116,200                                                                   |  $         9.62                                  |     |            60,050                                                        |  $       55.38                                             |  |  $        4,442,990 |
|  |             |           |  |                                                                                                                                   |                                                                                          |     |                                                                                                                       |                                                                                          |  |  |

 

The Partnership's future revenues from oil and naturalgas sales will be affected by changes in prices.  As a result of changesin market conditions, gas prices are highly dependent on the balance betweensupply and demand. The Partnership's sales prices for natural gas and oil aresubject to increases and decreases based on various market sensitive indices.

Interest income was earned by the Partnership during2005 on bank balances that existed while awaiting capital expenditures on thedrilling of the remaining oil and gas wells.

In accordance with the Partnership Agreement, a one-timemanagement fee equal to 11⁄2% of investors' subscriptions, or $606,791, was paidby the Partnership to the Managing General Partner upon funding of thePartnership.

Thenet loss of $31,322 from oil and gas price risk management is comprised of the changein fair value of oil and natural gas derivatives related to the Partnership'soil and gas production for derivative contracts entered into on behalf of thePartnership by the Managing General Partner.  The Partnership views thesetransactions as a gain or loss on financial instruments and not a part of oiland gas sales.

Liquidity and Capital Resources

The Partnership had a working capital balance at December31, 2005, of $3,320,810, which was primarily the result of receivables from oiland gas sales during the fourth quarter and cash on hand. Future operations areexpected to be conducted with available funds and revenues generated from oiland gas production activities.   Other than the planned future recompletionsin the Codell formation, there is no provisionin the Partnership Agreement for additional development or exploration beyondthese 52 wells and there are no present additional capital needs of thePartnership. Current production revenues exceed operating costs by a widemargin. However, PDC plans to recomplete the Codell formation in most of the 42 wells in the WattenbergField after 5 years or more of production. TheseCodell recompletionstypically increase the production rates and recoverable reserves.  Priorexperience of PDC and other producers with Codell recompletions has resulted in significant productionincreases for most wells, although not all recompletionshave been successful.  The cost of a Codellrecompletion is about one-third of the cost of a newwell (currently about $180,000 for the recompletion).The Partnership is not permitted to borrow under the Partnership Agreement;therefore, the cost of the recompletions will be paidout of overall revenues of the Partnership.  The Managing General Partneris allowed to and may withhold production revenues in advance of recompletion work.  This would reduce cashdistributions to the partners at the time of the recompletions,but should result in additional cash distributions following the recompletions.

Oiland Gas Reserves

Provedoil and gas reserves of the Partnership have been estimated at December 31,2005, to include 743,000 barrels of oil and 11,899,000 Mcfsof natural gas.  See "Note 7 - Supplemental Reserve Information (Unaudited)" in the Financial Statements for additionalreserve information.

#  

Thefollowing table sets forth the quarterly information for each of the quartersduring the year ended December 31, 2005.  See also "Note 9 - QuarterlyFinancial Data (Unaudited)" in the FinancialStatements.

 

-11-

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|                                               |                                                                                                                                               | May 18, 2005                                                                                                                       |                                                                                             |              |
|-----------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|--------------|
|                                               |                                                                                                                                               | (Inception)                                                                                                                        | For the Three Months Ended                                                                  |
|                                               |                                                                                                                                               | to June 30,                                                                                                                        | September 30,                                                                               | December 31, |
|                                               |                                                                                                                                               | 2005                                                                                                                               | 2005                                                                                        | 2005         |
| Oil and gas sales                             |  $                    -              |  $          955,079                                                                   |  $      3,487,911                                                  |
| Gas sales - Mcf                               |                        -   |                22,215                                             |               93,985            |
| Average gas price/Mcf                         |  $                    -              |  $                8.03                                  |  $               9.99 |
| Oil sales - Bbls                              |                        -   | 13,147                                                                                                                             | 46,903                                                                                      |
| Average oil price/Bbl                         |  $                    -              |  $              59.08                                             |  $             54.34            |
|                                               |                                                                                                                                               |                                                                                                                                    |                                                                                             |              |
| Production and operating  costs               |  $                    -              |  $          156,891                                                                   |  $         522,628                                  |
| Production and operating  costs/Mcfe          |  $                    -              |  $                4.44                                  |  $               1.18 |
| Depreciation, depletion and  amortization     |  $                    -              |  $          358,600                                                                   |  $      1,663,101                                                  |
|                                               |                                                                                                                                               |                                                                                                                                    |                                                                                             |              |
| Net (loss) income                             |  $         (516,094)                                                                                  |  $          593,952                                                                   |  $      1,390,826                                                  |
| Partnership cash  distributions               |  $                    -              |  $                      - |  $         780,426                                  |
|                                               |                                                                                                                                               |                                                                                                                                    |                                                                                             |              |
| Oil and gas price risk management  loss, net: |                                                                                                                                               |                                                                                                                                    |                                                                                             |
| Realized  loss/(gain)                         |  $                    -              |  $            17,759                                                        |  $           13,563                       |
| Unrealized  loss/(gain)                       |  $                    -              |  $            19,935                                                        |  $          (19,935)                           |
|                                               |                                                                                                                                               |                                                                                                                                    |                                                                                             |              |
| Working capital at end of  period             |  $     38,325,559                                                                                                         |  $     17,119,549                                                                                              |  $      3,320,810                                                  |
|                                               |                                                                                                                                               |                                                                                                                                    |                                                                                             |              |

 

 

Management'sDiscussion and Analysis

Periodfrom May 18 to June 30, 2005

ThePartnership began operations in May 2005 and drilled 9 wells by June 30,2005.  Interest income of $91,243 was earned in this quarter onPartnership funds in a bank awaiting expenditure for the drilling of additionalwells.  Expenses in the quarter reflect a one time management fee equal to1 1⁄2 % of investors' subscriptions, or $607,299, which was paid to the ManagingGeneral Partner upon funding of the Partnership in May 2005 in accordance withprovisions of the Partnership Agreement.

ThreeMonths Ended September 30, 2005

*Resultsof Operation -*During the**quarter,the Partnership had net income of $593,952 resulting from the commencement ofproduction of oil and gas.  Production commenced as wells were drilled,completed and connected to a pipeline.  During the quarter 21 wells beganproduction. Total production for the Partnership during the quarter was 22,215 Mcf of natural gas and 13,147 barrels of oil. The resultsincluded net losses related to oil and gas price risk management of $37,694which included an unrealized loss of $19,935 and a realized loss of$17,759.  The Partnership's strategy in its derivative policy is toprovide protection on declining oil and natural gas prices.  During thisperiod of rising oil and natural gas prices, the Partnership recorded losses asmarket prices exceeded contract prices related to the Partnership's oil and gassales.  The Partnership made no partner distributions during the quarter.

# Critical Accounting Policies and Estimates

Wehave identified the following policies as critical to the understanding of theresults of operations. This is not a comprehensive list of all of ouraccounting policies. In many cases, the accounting treatment of a particulartransaction is specifically dictated by accounting principles generallyaccepted in the United States, with no need for management's judgment in theirapplication. There are also areas in which management's judgment in selectingany available alternative would not produce a materially different result.However, certain accounting policies are important to the portrayal of thePartnership's financial condition and results of operations and requiremanagement's most subjective or complex judgments. In applying those policies,management uses its judgment to determine the appropriate assumptions to beused in the determination of certain estimates. Those estimates are based onour historical experience, our observance of trends in the industry, andinformation available from other outside sources, as appropriate. For a moredetailed discussion on the application of these and other accounting policies,see "Note 2 - Summary of Significant Accounting Policies" and other relatednotes in the Financial Statements. The Partnership's critical accountingpolicies and estimates are as follows:

-12-

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Oiland Gas Properties 

The Partnership accounts for its oil and gas propertiesunder the successful efforts method of accounting.  Costs of proveddeveloped producing properties, successful exploratory wells and developmentdry hole costs are depreciated or depleted by the unit-of-production methodbased on estimated proved developed producing oil and gas reserves. Property acquisition costs are depreciated or depleted on theunit-of-production method based on estimated proved oil and gas reserves. The Partnership obtains new reserve reports from independent petroleumengineers annually as of December 31st of each year.  The Partnershipadjusts for any major acquisitions, new drilling and divestures during the yearas needed.  The Partnership does not maintain an inventory of undrilled leases.

Upon sale or retirement ofsignificant or entire portions of fields of depreciable or depletableproperty, the book value thereof, less proceeds, is credited or charged toincome.  Upon sale of a partial unit of property, the proceeds arecredited to accumulated depreciation and depletion.

Useof Estimates in Testing for Impairment in Long-Lived Assets

Impairment testing for long-livedassets is required when circumstances indicate those assets may beimpaired.  The Partnership assesses impairment of capitalized costs ofproved oil and gas properties by comparing net capitalized costs to theestimated undiscounted future net cash flows on a field-by-field basis usingestimated production and based upon prices at which management reasonablyestimates such products will be sold. These estimates of future product pricesmay differ from current market prices of oil and gas. Any downward revisions tothe Partnership's estimates of future production or product prices could resultin an impairment of the Partnership's oil and gas properties in subsequentperiods. If net capitalized costs exceed undiscounted future net cash flows,the measurement of impairment is based on estimated fair value calculated usingfuture discounted cash flows.

RevenueRecognition

Salesof natural gas are recognized when natural gas has been delivered to a custodytransfer point, persuasive evidence of a sales arrangement exists, the rightsand responsibility of ownership pass to the purchaser, collection of revenuefrom the sale is reasonably assured, and the sales price is fixed ordeterminable.  Natural gas is sold by the Managing General Partner undercontracts with terms ranging from one month up to the life of the well. Virtually all of the Managing General Partner's contracts' pricing provisionsare tied to a market index with certain adjustments based on, among otherfactors, whether a well delivers to a gathering or transmission line, qualityof natural gas and prevailing supply and demand conditions, so that the priceof the natural gas fluctuates to remain competitive with other availablenatural gas supplies.  As a result, the Partnership's revenues from thesale of natural gas will suffer if market prices decline and benefit if theyincrease.  However, the Managing General Partner may from time to timeenter into derivative agreements, usually with a term of two years or less whichmay either fix or collar a price in order to reduce market price fluctuations.The Partnership believes that the pricing provisions of its natural gascontracts are customary in the industry. 

TheManaging General Partner currently uses the "Net-Back" method of accounting fortransportation arrangements of natural gas sales.  The Managing GeneralPartner sells gas at the wellhead and collects a price and recognizes revenuesbased on the wellhead sales price since transportation costs downstream of thewellhead are incurred by the Managing General Partner's customers and reflectedin the wellhead price.

Salesof oil are recognized when persuasive evidence of a sales arrangement exists,the oil is verified as produced and is delivered from a stock tank to a purchaser,collection of revenue from the sale is reasonably assured, and the sales priceis determinable.  The Partnership does not refine any of its oilproduction.  The Partnership's crude oil production is sold to purchasersat or near the Partnership's wells under short-term purchase contracts atprices and in accordance with arrangements that are customary in the oilindustry.

 

-13-

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Derivative Financial Instruments

The Partnership accounts for derivative financialinstruments in accordance with FAS Statement No. 133 "Accounting forDerivative Instruments and Certain Hedging Activities" as amended. During 2005, none of the derivative contracts qualified for hedge accountingunder the terms of FAS No. 133.  Accordingly, the derivative instrumentsare recorded as an asset or liability on the balance sheet at fair value andthe change in the fair value is recorded in oil and gas price risk managementloss (gain), net.  Because derivative arrangements are entered into by theManaging General Partner on behalf of the Partnership, the fair value of openderivative positions is reported on the balance sheet as a net short-term orlong-term receivable due from or payable due to the Managing GeneralPartner.  

The measurement of fair value is based on actively quotedmarket prices, if available. Otherwise, the Managing General Partner seeksindicative price information from external sources including broker quotes andindustry publications. If pricing information from external sources is notavailable, measurement involves judgment and estimates. These estimates arebased on valuation methodologies considered appropriate by the Managing GeneralPartner. 

By using derivative financial instruments to manageexposures to changes in commodity prices, the Partnership exposes itself tocredit risk.  Credit risk is the failure of the counterparty to performunder the terms of the derivative contract.  When the fair value of aderivative contract is positive, the counterparty owes the Managing GeneralPartner, which in turn owes the Partnership thus creating repayment risk. The Managing General Partner minimizes the credit or repayment risk inderivative instruments by entering into transactions with high-qualitycounterparties.

RecentlyIssued Accounting Standards

In June 2005, the FASBissued SFAS No. 154, "Accounting Changes and Error Corrections" - areplacement of APB Opinion No. 20 and FASB Statement No. 3, which replacesAccounting Principles Board Opinion No. 20, "Accounting Changes," andSFAS No. 3, "Reporting Accounting Changes in Interim FinancialStatements," and changes the requirements for the accounting for andreporting of a change in accounting principle. SFAS No. 154 requiresretrospective application for voluntary changes in accounting principle unlessit is impracticable to do so, and it applies to all voluntary changes inaccounting principle. SFAS No. 154 is effective for accounting changes andcorrections of errors made in fiscal years beginning after December 15, 2005.Consequently, we will adopt the provisions of SFAS 154 for our fiscal yearbeginning January 1, 2006. We currently believe that adoption of the provisionsof SFAS No. 154 will not have a material impact on our financial statements.

**Item7A.****  Quantitativeand Qualitative Disclosure About Market Risk**

Market-SensitiveInstruments and Risk Management

ThePartnership's primary market risk exposure is commodity price risk for the oiland gas the Partnership produces and sells.  

Commodity Price Risk

TheManaging General Partner utilizes commodity-based derivative instruments,entered into on behalf of the Partnership, to manage a portion of thePartnership's exposure to price risk from oil and natural gas sales. These instruments consist of CIG (Colorado Interstate Gas) index-basedcontracts traded by JP Morgan for Colorado natural gas production. Thesederivative instruments have the effect of locking in for specified periods (atpredetermined prices or ranges of prices) the prices the Managing GeneralPartner will receive for the volume of oil and natural gas to which thederivative relates.  As a result, while these derivative instruments arestructured to reduce Partnership's exposureto changes in price associated with the derivative commodity, they also limitthe benefit the Partnership might otherwise have received from price changesassociated with the commodity.  The Partnership has adopted the policy ofthe Managing General Partner prohibiting the use of oil and natural gas futureand option contracts for speculative purposes.

Derivative arrangements are entered intoby the Managing General Partner on behalf of the Partnership and are reportedon the Partnership's balance sheet at fair value as a net short-term orlong-term receivable due from or payable to the Managing General Partner. Changes in the fair value of the Partnership's share of derivatives arerecorded in the statement of operations. The Partnership held no derivativepositions as of December 31, 2005.

 

-14-

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Disclosure of Limitations

Asthe information above incorporates only those exposures that exist at December31, 2005, it does not consider those exposures or positions which could ariseafter that date. As a result, the Partnership's ultimate realized gain or losswith respect to commodity price fluctuations will depend on the exposures thatarise during the period, the Partnership's hedging strategies at the time andcommodity prices at the time.

**ITEM8.****  FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA**

Thefinancial statements are attached to this Form 10-K beginning at page F-1.

**ITEM 9.****  CHANGES IN AND DISAGREEMENTS WITHACCOUNTANTS ON ACCOUNTING AND****FINANCIALDISCLOSURE**

None.

**ITEM9A.****CONTROLS ANDPROCEDURES **

*IntroductoryExplanation* - As disclosed in more detailin "Item 1 - Business" above, the Partnership has no management or officersbecause all of the management, officers and other employees that may provideservices to or on behalf of the Partnership are employed by the ManagingGeneral Partner.  As used for the disclosures in this Item 9A, managementand officers of the Partnership refers to the management and officers of theManaging General Partner.  

*Evaluationof disclosure controls and procedures*- The Partnership carried out an evaluation, under the supervision and with theparticipation of management including the Chief Executive Officer and the ChiefFinancial Officer, of the effectiveness of the design and operation of itsdisclosure controls and procedures pursuant to Exchange Act Rule 13a-14(a) asof the end of the period covered by this Annual Report on Form 10-K. Based uponand as of the date of this evaluation, the Chief Executive Officer and theChief Financial Officer concluded that as of the date of this report, thePartnership's disclosure controls and procedures were not effective because ofthe material weaknesses described below.

*Materialweaknesses in internal control -*During2005, the Partnership identified material weaknesses relatedto its policies and procedures and technical expertise in U.S. generallyaccepted accounting principles to ensure the preparation of accurate andreliable interim and annual financial statements. Specifically, the Partnershiplacked personnel with sufficient technical accounting and financial reportingexpertise and policies and procedures in place to determine and document theappropriate application of accounting principles. These deficiencies impactedthe Partnership's accounting for derivatives, asset retirement obligations anddepreciation, depletion and amortization, and result in more than a remotelikelihood that a material misstatement of the annual or interim financialstatements would not be prevented or detected.  

Inlight of the material weaknesses described above, the Partnership performedadditional analyses and other post-closing procedures to ensure its financialstatements are prepared in accordance with generally accepted accountingprinciples. Accordingly, notwithstanding the material weaknesses discussed inthis Item 9A, management believes that the financial statements included inthis report fairly present in all material respects our financial position,results of operations and cash flows for the periods presented. 

* *

*Changes in internal control over financial reporting* - 

 

Therehave not been any changes in the Partnership's internal control over financialreporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of theSecurities Exchange Act of 1934) during the most recent fiscal quarter thathave materially affected or are reasonably likely to materially affect internalcontrol over financial reporting, except for changes in the fourth quarter of2005 as noted below.  

•       The Partnershiphas increased its technical expertise through development of training programsand acquisition of accounting research software during the fourth quarter of2005.  Training will be on-going; however, programs provided during 2005included oil and gas accounting, general accounting and SEC financialreporting.

•       The Partnershiphas enhanced the documentation of its policies and procedures and relatedtemplates and analyses that support the application of accounting principles inseveral areas, including derivatives, oil and gas properties, and assetretirement obligations.

 

-15-

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In addition, during the third quarter of fiscal 2005and subsequently in 2006, the Partnership made the following changes andremediation:

At the direction of the board of directors and auditcommittee, the Partnership has spent and continues to spend a significantamount of time and resources to improve its control environment.  ThePartnership is committed to instilling strong internal control policies andprocedures and ensuring that the "tone at the top" fully supportsaccuracy and completeness in all financial reporting.  In support of thisposition, the Partnership's progress toward improving internal control overfinancial reporting has been openly communicated with the Audit Committee, andthe Partnership has undertaken to improve the design and effectiveness of itsinternal control over financial reporting. The initiatives developed were bothorganizational and process focused.  Organizational changes made during2005 and through the date of this filing include, among others:

•      The Partnership has enhanced the corporate accounting and reporting functionsin the third quarter of 2005 by creating and filling several new positions withprofessionals highly experienced in oil and gas accounting. Two newprofessionals hold degrees in accounting and are Certified Public Accountants.One additional Certified Public Accountant and a financial reporting directorwere hired during 2006.

•      The Partnership engaged a team of highly experienced advisors in early 2006 toassist with various accounting research, projects and monitoringactivities.  They assist with accounting and reporting issues including,but not limited to, derivatives, oil and gas activities, new accountingstandards or rules, SEC reporting and on-going monitoring of changes that may impactthe Partnership's application of accounting principles.

•      The Partnership began the process of implementing measures related todocumentation of its controls and procedures, segregation of duties, timelyreconciliations and the use of disclosure checklists to support the financialreporting process.

The Partnership has also implemented or is planning toimplement several process changes to improve the documentation supportingcertain accounting and reporting activities as well as to improve the documentationof its application of accounting principles.

•      The Partnership has evaluated and selected a third-party integrated oil and gasaccounting software system, which it plans to implement during 2006.

The Partnership believes the measures taken to dateand planned for the future will address the reported material weaknesses andintends to complete the remediation efforts during 2006.  In addition, thePartnership will continue to develop and implement other initiatives during2006 that will further improve both the effectiveness and efficiency of itsinternal control over financial reporting. 

 

Beginning with the fiscal year ending December 31,2007, Section 404 of the Sarbanes-Oxley Act of 2002 will require us to includean internal control report of management with our Annual Report on Form 10-K.The internal control report must contain (1) a statement of management'sresponsibility for establishing and maintaining adequate internal control overfinancial reporting, (2) a statement identifying the framework used bymanagement to conduct the required evaluation of the effectiveness of ourinternal control over financial reporting, (3) management's assessment of theeffectiveness of our internal control over financial reporting as of the end ofour most recent fiscal year, including a statement as to whether or not ourinternal control over financial reporting is effective, and (4) a statementthat our independent registered public accountants have issued an attestationreport on management's assessment of our internal control over financialreporting.

 

-16-

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In order to achieve compliance with Section 404 withinthe prescribed period, management has begun to assess the adequacy of our internalcontrol over financial reporting, remediate any control weaknesses that may beidentified, and implement a continuous reporting and improvement process forinternal control over financial reporting. We expect to continue to makechanges in our internal control over financial reporting during the periodsprior to December 31, 2007, in connection with our Section 404 complianceefforts. Except as described above, there have been no changes in our internalcontrol over financial reporting (as defined in Rule 13(a)-15(f) under theExchange Act) that occurred during the quarters ended June 30, 2005, September30, 2005 and December 31, 2005, that have materially affected or are reasonablylikely to materially affect our internal control over financial reporting. 

*Limitations on the effectiveness of internal control.* A control system, no matter how well conceived andoperated, can provide only reasonable, not absolute, assurance that theobjectives of the internal control system are met. Because of the inherentlimitations of any internal control system, no evaluation of controls canprovide absolute assurance that all control issues, if any, within a companyhave been detected.

**ITEM 9B.****  OTHER INFORMATION**

None.

**PART III**

**ITEM10.****DIRECTORS ANDEXECUTIVE OFFICERS OF THE REGISTRANT**

ThePartnership has no directors or executive officers.  The Partnership ismanaged by Petroleum Development Corporation ("PDC"), the Managing GeneralPartner.  PDC's common stock is listed on theNASDAQ Global Select Market and Form 10-K for 2005 has been filed with theSecurities and Exchange Commission.    

Althoughthe Partnership has no Code of Ethics, PDC has a Code of Ethics that applies toits senior executive officers.  The Code of Ethics, and other information relatedto PDC, is posted on PDC's website at www.petd.com. 

**ITEM 11.****  EXECUTIVE COMPENSATION**

The Partnership, having no executive officers ordirectors, pays no executive compensation.  None of PDC'sofficers or directors received any direct remuneration or other compensationfrom the Partnership. These persons receive remuneration and compensationsolely from PDC.

**ITEM 12.****  SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS, MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

ThePartnership has no equity compensation plans.

PDCowns a 20% partnership interest in the Partnership.

**ITEM13.****CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS**

PDC,as the Managing General Partner, and its wholly-owned subsidiaries, RileyNatural Gas and PDC Securities Incorporated, are reimbursed for certainPartnership operating expenses and receive fees for services as provided for inthe partnership agreement. The following table presents reimbursements andservice fees paid by the Partnership to PDC or its affiliates during 2005. 

 

-17-

----

| May 18, 2005 (inception)  through December 31, 2005: |
|------------------------------------------------------|
| Management  fee                                      |  |  $                 606,791 |
| Drilling  services                                   |  |                44,714,580 |
| Syndication  costs*                                  |  |                     809,055 |
| Well  operations fees                                |  |                       49,402 |
|                                                      |  |  |

 

*     Consists of organizationand offering costs, excluding costs of organizing and selling the offering paiddirectly to non-affiliated broker dealers as provided in the dealer/manager andselling agreements.

Additional informationconcerning commodity-based derivative instruments entered into by the ManagingGeneral Partner on behalf of the Partnership is contained in Item 7A.

** **

**ITEM 14.****  PRINCIPAL ACCOUNTANT FEES AND SERVICES**

Forthe period from inception to December 31, 2005, there have been billings of$6,958 from the Partnership's independent auditors for professional servicesrendered to the Partnership. 

Pre-Approval Policies andProcedures

The Sarbanes-Oxley Act of 2002 requires that allservices provided to the Partnership by its independent accountants be subjectto pre-approval by the Audit Committee or authorized members of the Committee.The Partnership does not have an Audit Committee; however, the Managing GeneralPartner's Audit Committee also serves for the Partnership.  The AuditCommittee has adopted policies and procedures for pre-approval of all auditservices and non-audit services to be provided by the Partnership's independentaccountants. Actual fees incurred for all services performed by the independentaccountant are reported to the Audit Committee after the services are fullyperformed.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-18-

----

**PART IV**

** **

**ITEM15.****EXHIBITS ANDFINANCIAL STATEMENT SCHEDULES**

(1)   Financial Statements

The Index to Financial Statements is located at F-2. 

(2)   Financial StatementSchedules

All financial statement schedules are omitted becausethey are not required, inapplicable, or the information is included in theFinancial Statements or Notes thereto.

(3)   Exhibits 

                               Exhibit

                                No.                Description   

4.1                  Form of Limited Partnership Agreement (incorporated by reference to Appendix Ato Post-Effective Amendment No. 2 to Form S-1, SEC File No. 333-111260, andRule 424 final prospectus, dated May 25, 2004, of PDC 2004-2006 DrillingProgram, filed with the SEC on May 21, 2004).

14                   Code of Ethics of Petroleum Development Corporation, the Managing GeneralPartner of the limited partnership (incorporated by reference to the codeposted on the web site of Petroleum Development Corporation at www.petd.com).

31.1                Rule 13a-14(a)/15d-14(c) Certification of Chief Executive Officer of PetroleumDevelopment Corporation, the Managing General Partner of the limitedpartnership.

31.2                Rule 13a-14(a)/15d-14(c) Certification of Chief FinancialOfficer of Petroleum Development Corporation, the Managing General Partner ofthe limited partnership.

32                   Title 18 U.S.C. Section 1350 (Section 906 of Sarbanes-Oxley Act of 2002)Certifications by Chief Executive Officer and Chief Financial Officer ofPetroleum Development Corporation, the Managing General Partner of the limitedpartnership.

 

 

-19-

----

 

SIGNATURES

Pursuant to the requirementsof Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registranthas duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

PDC 2005-B Limited Partnership

By its Managing General Partner

Petroleum Development Corporation

By /s/ Steven R. Williams

Steven R. Williams, CEO

September 7, 2006

Pursuant to the requirementsof the Securities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the Registrant and in the capacities and onthe dates indicated:

  

| Signature                                      | Title                                                                                                                                   | Date              |
|------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------|-------------------|
| /s/ Steven R. Williams                         | Chairman, Chief Executive  Officer  and                 | September 7, 2006 |
|     Steven  R. Williams    | Director of Petroleum  Development Corporation,                                                                                         |              |
|                                           | Managing General Partner of  the                                                                                                        |              |
|                                           | Registrant                                                                                                                              |              |
|                                           |                                                                                                                                    |              |
| /s/ Darwin L. Stump                            |  Chief Financial Officer and  Treasurer                                | September 7, 2006 |
|     Darwin  L. Stump       |  of Petroleum Development Corporation,                                                                                             |              |
|                                           |  the Managing General Partner of the                                                                                               |              |
|                                           | Registrant                                                                                                                              |              |
|                                           | (Principal Financial and  Accounting Officer)                                                                                           |              |
|                                           |                                                                                                                                    |              |
|                                           |                                                                                                                                    |              |
| /s/ Thomas E. Riley                            |  President and  Director                      | September 7, 2006 |
|     Thomas  E. Riley       |  of Petroleum Development Corporation,                                                                                             |              |
|                                           | the Managing General  Partner of the                                                                                                    |              |
|                                           | Registrant                                                                                                                              |              |
|                                           |                                                                                                                                    |              |
| /s/ Donald B. Nestor                      |  Director of Petroleum Development  Corporation,                                                                                   | September 7, 2006 |
|     Donald  B. Nestor      |  the Managing General Partner of the                                                                                               |              |
|                                           | Registrant                                                                                                                         |              |
|                                           |                                                                                                                                    |              |
| /s/ Vincent F.  D'Annunzio                |  Director of Petroleum Development  Corporation,                                                                                   | September 7, 2006 |
|     Vincent  F. D'Annunzio | the Managing General  Partner of the                                                                                                    |              |
|                                           | Registrant                                                                                                                         |              |

 

 

-20-

 

----

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

Financial Statements for Annual Report

on Form10-K to Securities and Exchange

Commission

May 18, 2005 (date of inception) Through December 31,2005

(With Independent Registered Public Accounting Firm'sReport Thereon)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-1

----

Index to Financial Statements

|                                                                          |   |
|-------------------------------------------------------------------------------|--------|
| Report of Independent  Registered Public Accounting Firm                      | F-3    |
|                                                                               |   |
| Balance Sheet - December  31, 2005                                            | F-4    |
|                                                                               |   |
| Statement of Operations -  Period from May 18, 2005 (date of inception)       | F-5    |
|          to December 31, 2005              |   |
|                                                                               |   |
| Statement of Partners'  Equity - Period from May 18, 2005 (date of inception) | F-6    |
|          to December 31, 2005              |   |
|                                                                               |   |
| Statement of Cash Flows -  Period from May 18, 2005 (date of inception)       | F-7    |
|          to December 31, 2005              |   |
|                                                                               |   |
| Notes to Financial  Statements                                                | F-8    |
|                                                                               |   |
|                                                                               |   |

----

 

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

 

Report of Independent Registered Public Accounting Firm

To the Partners

PDC 2005-B Limited Partnership:

We have audited the accompanying balance sheet of PDC2005-B Limited Partnership as of December 31, 2005, and the related statementsof operations, partners' equity and cash flows for the period from May 18, 2005(date of inception) to December 31, 2005.  These financial statements arethe responsibility of the Partnership's management.  Our responsibility isto express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).  Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements.  An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation.  We believe that our audit provides a reasonable basis forour opinion.

In our opinion, the financial statements referred to abovepresent fairly, in all material respects, the financial position of PDC 2005-BLimited Partnership as of December 31, 2005, and the results of its operationsand its cash flows for the period from May 18, 2005 (date of inception) toDecember 31, 2005, in conformity with U.S. generally accepted accountingprinciples.

KPMG LLP

Pittsburgh, Pennsylvania

July 20, 2006

 

 

 

 

 

F-3

----

 

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

 

 

| Balance Sheet                                              |
|------------------------------------------------------------|
| December 31, 2005                                          |
|                                                       |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |
| Assets                                                     |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |
| Current assets:                                            |   |   |   |   |   |   |
| Cash  and cash equivalents                                 |   |   |   |   |  $            401,621 |
| Accounts  receivable - oil and gas sales                   |   |   |   |             3,487,911 |
|                                                       |   |   |   |   |   |   |
| Total  current assets                                      |   |   |   |   |             3,889,532 |
|                                                       |   |   |   |   |   |   |
| Oil and gas properties,  successful efforts method         |   |   |   |           44,996,431 |
| Less accumulated  depreciation, depletion and amortization |   |           (2,021,701) |
|                                                       |   |   |   |   |   |           42,974,730 |
|                                                       |   |   |   |   |   |   |
| Total Assets                                               |   |   |   |   |   |  $      46,864,262 |
|                                                       |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |
| Liabilities and Partners'  Equity                          |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |
| Current liabilities:                                       |   |   |   |   |   |   |
| Accounts  payable and accrued expenses                     |   |   |   |  $            568,722 |
| Total  current liabilities                                 |   |   |   |   |                568,722 |
|                                                       |   |   |   |   |   |   |
| Asset retirement obligations                               |   |   |   |   |                285,911 |
|                                                       |   |   |   |   |   |   |
| Partners' equity                                           |   |   |   |   |   |           46,009,629 |
|                                                       |   |   |   |   |   |   |
| Total Liabilities and  Partners' Equity                    |   |   |   |   |  $      46,864,262 |
|                                                       |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |
| See accompanying notes to  financial statements.           |   |
|                                                       |   |   |   |   |   |   |

F-4

----

 

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

 

 

| Statement of Operations                                                  |
|--------------------------------------------------------------------------|
|                                                                     |   |   |   |   |
| Period from May 18, 2005 (date of inception)  to  December 31, 2005 |
|                                                                     |   |   |   |   |
|                                                                     |   |   |   |   |
| Revenues:                                                                |   |   |   |   |
| Oil  and gas sales                                                       |   |   |   |  $        4,442,990 |
|                                                                     |   |   |   |   |
| Costs and expenses:                                                      |   |   |   |   |
| Production  and operating costs                                          |   |   |                679,519 |
| Management  fee                                                          |   |   |   |                606,791 |
| Direct  costs                                                            |   |   |   |                  32,405 |
| Depreciation,  depletion and amortization                                |   |             2,021,701 |
| Accretion  of asset retirement obligations                               |   |                    4,060 |
| Total  costs and expenses                                                |   |   |             3,344,476 |
|                                                                     |   |   |   |   |
| Income from operations                                                   |   |   |             1,098,514 |
|                                                                     |   |   |   |   |
| Interest income                                                          |   |   |   |                401,492 |
| Oil and gas price risk  management loss, net                             |   |                (31,322) |
|                                                                     |   |   |   |   |
| Net income                                                               |   |   |   |  $         1,468,684 |
|                                                                     |   |   |   |   |
| Net income per Investor  Partner unit                                    |   |   |  $               521 |
|                                                                     |   |   |   |   |
|                                                                     |   |   |   |   |
| See accompanying notes to  financial statements.                         |   |   |
|                                                                     |   |   |   |   |

F-5

----

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

 

 

| Statement of Partners' Equity                                            |
|--------------------------------------------------------------------------|
|                                                                     |   |   |   |   |   |   |   |   |
| Period from May 18, 2005 (date of inception)  to  December 31, 2005 |
|                                                                     |   |   |   |   |   |   |   |   |
|                                                                     |   |   |   |   |   | Managing |   |   |
|                                                                     |   |   |   | Investor |   | General |   |   |
|                                                                     |   |   |   | Partners |   | Partner |   | Total |
|                                                                     |   |   |   |   |   |   |   |   |
| Partners' initial capital  contributions                                 |   |   |  $       40,452,761 |   |  $         8,942,916 |   |  $      49,395,677 |
|                                                                     |   |   |   |   |   |   |   |   |
| Syndication costs                                                        |   |   |   |           (4,074,306) |   |                            - |   |           (4,074,306) |
|                                                                     |   |   |   |   |   |   |   |   |
| Distributions to partners                                                |   |   |              (624,341) |   |              (156,085) |   |              (780,426) |
|                                                                     |   |   |   |   |   |   |   |   |
| Net income                                                               |   |   |   |             1,053,589 |   |                415,095 |   |             1,468,684 |
|                                                                     |   |   |   |   |   |   |   |   |
| Balance, December 31, 2005                                               |   |   |  $      36,807,703 |   |  $         9,201,926 |   |  $      46,009,629 |
|                                                                     |   |   |   |   |   |   |   |   |
|                                                                     |   |   |   |   |   |   |   |   |
|                                                                     |   |   |   |   |   |   |   |   |
| See accompanying notes to  financial statements.                         |   |   |   |   |   |   |
|                                                                     |   |   |   |   |   |   |   |   |

 

 

 

F-6

----

 

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

 

| Statement of Cash Flows                                                         |
|---------------------------------------------------------------------------------|
|                                                                            |   |   |   |   |
| Period from May 18, 2005 (date of inception)  to  December 31, 2005        |
|                                                                            |   |   |   |   |
|                                                                            |   |   |   |   |
|                                                                            |   |   |   | 2005 |
| Cash flows from operating  activities:                                          |   |   |   |
| Net income                                                                      |   |   |   |  $             1,468,684 |
| Adjustments to reconcile  net income to                                         |   |   |
|       net  cash provided by operating activities: |   |   |
| Depreciation,  depletion and amortization                                       |   |                 2,021,701 |
| Accretion  of asset retirement obligation                                       |   |                        4,060 |
| Changes  in operating assets and liabilities:                                   |   |   |
| Increase  in accounts receivable - oil and gas sales                            |   |                (3,487,911) |
| Increase  in accounts payable and accrued expenses                              |   |                    568,722 |
| Net  cash provided by operating activities                                      |   |                    575,256 |
|                                                                            |   |   |   |   |
| Cash flows from investing  activities:                                          |   |   |   |
| Expenditures  for oil and gas properties                                        |   |              (44,714,580) |
| Net  cash used in investing activities                                          |   |              (44,714,580) |
|                                                                            |   |   |   |   |
| Cash flows from financing  activities:                                          |   |   |   |
| Investor  Partner contributions                                                 |   |   |               40,452,761 |
| Managing  General Partner contribution                                          |   |                 8,942,916 |
| Syndication  costs paid                                                         |   |   |                (4,074,306) |
| Distributions  to partners                                                      |   |   |                   (780,426) |
| Net  cash provided by financing activities                                      |   |               44,540,945 |
|                                                                            |   |   |   |   |
| Net increase in cash and  cash equivalents                                      |   |                    401,621 |
| Cash and cash equivalents  at beginning of period                               |   |                                - |
| Cash and cash equivalents at  end of period                                     |   |  $                401,621 |
|                                                                            |   |   |   |   |
| See accompanying notes to  financial statements.                                |   |   |
|                                                                            |   |   |   |   |
|                                                                            |   |   |   |   |

F-7

----

 PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

Notes to Financial Statements

 

(1)   Organization

The PDC 2005-B LimitedPartnership (the "Partnership") was organized as a limited partnership inaccordance with the laws of the State of West Virginia for the purpose ofengaging in the drilling, completion and operation of oil and gas developmentand exploratory wells in the Rocky Mountain Region. Businessoperations of the Partnership commenced on May 18, 2005, upon the closing of anoffering for the sale of partnership units.

Purchasers of partnership unitssubscribed to and fully paid for 37.77 units of limited partner interests and1,984.87 units of additional general partner interests at $20,000 per unit.Petroleum Development Corporation ("PDC") has been designated the ManagingGeneral Partner of the Partnership.  Generally, throughout the term of thePartnership, revenues, costs and cash available for distributions are allocated80% to the limited and additional general partners pro rata based on theirinvestment in the Partnership and 20% to the Managing General Partner. The limited and additional general partners are referred to collectively as"Investor Partners."

In accordance with the terms of theLimited Partnership Agreement (the "Agreement"), the Managing General Partnermanages all activities of the Partnership and acts as the intermediary forsubstantially all Partnership transactions.

 (2)  Summary of Significant AccountingPolicies

Partnership Financial StatementPresentation Basis

The financial statements include onlythose assets, liabilities and results of operations of the partners which relateto the business of the Partnership.  The statements do not include anyassets, liabilities, revenues or expenses attributable to any of the partners'other activities. 

Oil and Gas Properties

The Partnershipaccounts for its oil and gas properties under the successful efforts method ofaccounting. Costs of proved developed producing properties and development dryhole costs are depreciated or depleted by the unit-of-production method basedon estimated proved developed producing oil and gas reserves.  Propertyacquisition costs are depreciated or depleted on the unit-of-production methodbased on estimated proved oil and gas reserves.  The Partnership obtainsnew reserve reports from independent petroleum engineers annually as of December31st of each year.  The Partnership adjusts for any major acquisitions,new drilling and divestures during the year as needed.  The Partnershipdoes not maintain an inventory of undrilled leases.

Upon sale orretirement of significant or entire portions of fields of depreciable or depletable property, the book value thereof less proceeds, is credited or charged to income.  Upon saleof a partial unit of property, the proceeds are credited to accumulateddepreciation and depletion.

Impairment ofLong-Lived Assets

Impairment testingfor long-lived assets is required when circumstances indicate those assets maybe impaired.  The Partnership assesses impairment of capitalized costs ofproved oil and gas properties by comparing net capitalized costs to estimatedundiscounted future net cash flows on a field-by-field basis using estimatedproduction based upon prices at which management reasonably estimates suchproducts will be sold. These estimates of future product prices may differ fromcurrent market prices of oil and gas. Any downward revisions to thePartnership's estimates of future production or product prices could result inan impairment of the Partnership's oil and gas properties in subsequentperiods. If net capitalized costs exceed undiscounted future net cash flows, an impairment is recorded.  The measurement ofimpairment is based on estimated fair value which may consider futurediscounted cash flows.

 

F-8

----

 

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

Notes to Financial Statements

 

Revenue Recognition

Sales of natural gas are recognized whennatural gas has been delivered to a custody transfer point, persuasive evidenceof a sales arrangement exists, the rights and responsibility of ownership passto the purchaser upon delivery, collection of revenue from the sale isreasonably assured, and the sales price is fixed or determinable.  Naturalgas is sold by the Managing General Partner under contracts with terms rangingfrom one month up to the life of the well (see Note 3).  Virtually all ofthe Managing General Partner's contracts pricing provisions are tied to amarket index with certain adjustments based on, among other factors, whether awell delivers to a gathering or transmission line, quality of natural gas andprevailing supply and demand conditions, so that the price of the natural gas fluctuatesto remain competitive with other available natural gas supplies.  As aresult, the Partnership's revenues from the sale of natural gas will suffer ifmarket prices decline and benefit if they increase.  However, the ManagingGeneral Partner may from time to time enter into derivative agreements, usuallywith a term of two years or less which may either fix or collar a price inorder to reduce market price fluctuations. The Partnership believes that thepricing provisions of its natural gas contracts are customary in the industry. 

The Managing General Partner currentlyuses the "Net-Back" method of accounting for transportation arrangements ofnatural gas sales.  The Managing General Partner sells gas at the wellheadand collects a price and recognizes revenues based on the wellhead sales pricesince transportation costs downstream of the wellhead are incurred by theManaging General Partner's customers and reflected in the wellhead price.

Sales of oil are recognized whenpersuasive evidence of a sales arrangement exists, the oil is verified asproduced and is delivered in a stock tank, collection of revenue from the saleis reasonably assured and the sales price is determinable.  ThePartnership is currently able to sell all the oil that it can produce underexisting sales contracts with petroleum refiners and marketers.  ThePartnership does not refine any of its oil production.  The Partnership'scrude oil production is sold to purchasers at or near the Partnership's wellsunder short-term purchase contracts at prices and in accordance witharrangements that are customary in the oil industry.

The Partnership sold oil and natural gasto three customers during 2005, which accounted for 75%, 23% and 2% of thePartnership's total oil and natural gas sales for the period.

AssetRetirement Obligations

The Partnership accounts for assetretirement obligations by recording the fair value of its plugging andabandonment obligations when incurred, which is at the time the well iscompletely drilled. Upon initial recognition of an asset retirement obligation,the Partnership increases the carrying amount of the long-lived asset by thesame amount as the liability. Over time, asset retirement obligations areaccreted for the change in their present value. The initial capitalized costsare depleted over the useful lives of therelated assets, through charges to depreciation, depletion and amortization. 

####  

Derivative Financial Instruments

The Partnership accounts for derivativefinancial instruments in accordance with FAS Statement No. 133 "Accountingfor Derivative Instruments and Certain Hedging Activities" asamended.  During 2005, none of the derivative contracts qualified forhedge accounting under the terms of FAS No. 133.  Accordingly, thederivative instruments are recorded as an asset or liability on the balancesheet at fair value and the change in the fair value is recorded in oil and gasprice risk management loss (gain), net.  Because derivative arrangementsare entered into by the Managing General Partner on behalf of the Partnership,the fair value of open positions is reported on the balance sheet as a netshort-term or long-term receivable due from or payable due to the ManagingGeneral Partner.  Amounts due to the Managing General Partner for realizedlosses and gains on closed derivative positions are included in accountspayable in the amount of $13,563 at December 31, 2005.

The measurement of fair value is based onactively quoted market prices, if available. Otherwise, the Managing GeneralPartner seeks indicative price information from external sources includingbroker quotes and industry publications. If pricing information from externalsources is not available, measurement involves judgment and estimates. Theseestimates are based on valuation methodologies considered appropriate by theManaging General Partner. 

By using derivative financialinstruments to manage exposures to changes in commodity prices, the Partnershipexposes itself to credit risk.  Credit risk is the failure of thecounterparty to perform under the terms of the derivative contract.  Whenthe fair value of a derivative contract is positive, the counterparty owes theManaging General Partner, which in turn owes the Partnership thus creatingrepayment risk.  The Managing General Partner minimizes the credit orrepayment risk in derivative instruments by entering into transactions withhigh-quality counterparties.

 

F-9

----

 

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

Notes to Financial Statements

 

#### Income Taxes

Since the taxableincome or loss of the Partnership is reported in the separate tax returns ofthe partners, no provision has been made for income taxes on the Partnership'sbooks.

Use of Estimates

The Partnership has made a number ofestimates and assumptions relating to the reporting of assets and liabilitiesand revenues and expenses and the disclosure of contingent assets andliabilities to prepare these financial statements in conformity with accountingprinciples generally accepted in the United States of America. Actual resultscould differ from those estimates. Estimates which are particularly significantto the financial statements include estimates of oil and gas reserves andfuture cash flows from oil and gas properties which are used in assessing impairmentof long-lived assets.

FairValue of Financial Instruments

The carrying valuesof the Company's receivables, payables and debt obligations are estimated to besubstantially the same as the fair values as of December 31, 2005.

Recently Issued Accounting Standards

In June 2005, theFASB issued SFAS No. 154, "Accounting Changes and Error Corrections"- a replacement of APB Opinion No. 20 and FASB Statement No. 3, which replacesAccounting Principles Board Opinion No. 20, "Accounting Changes," andSFAS No. 3, "Reporting Accounting Changes in Interim FinancialStatements," and changes the requirements for the accounting for andreporting of a change in accounting principle. SFAS No. 154 requiresretrospective application for voluntary changes in accounting principle unlessit is impracticable to do so, and it applies to all voluntary changes inaccounting principle.  SFAS No. 154 is effective for accounting changesand corrections of errors made in fiscal years beginning after December 15,2005. Consequently, we will adopt the provisions of SFAS 154 for our fiscalyear beginning January 1, 2006. We currently believe that adoption of theprovisions of SFAS No. 154 will not have a material impact on our financialstatements.

(3)   Transactions with Managing GeneralPartner and Affiliates

The Managing General Partner and itswholly-owned subsidiaries, Riley Natural Gas and PDC Securities Incorporated,are regularly reimbursed for operating expenses and receive fees for services asprovided for in the Agreement. The table below presents to the transactionswith the Managing General Partner for the period from May 18, 2005, throughDecember 31, 2005. 

|                  |                                                                                                                 |                                                                                                      |                                                                           |
|-----------------------|----------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------|
| Management  fee       |                                                                                                                 |  $               606,791            |
| Drilling  services    |                                                                                                                 |                                                                                                      |              44,714,580 |
| Syndication  costs    |                                                                                                                 |                   809,055 |
| Well  operations fees |                     49,402 |
|                  |                                                                                                                 |                                                                                                      |                                                                           |

 

In addition, as the operator of thePartnership's wells, the Managing General Partner receives all  proceedsfrom the sale of oil and gas produced and pays for all costs incurred relatedto services, equipment and supplies from vendors for all well production andoperating costs and other direct costs for the Partnership.  Net revenuefrom oil and gas operations is generally distributed monthly to all partnersbased on their share of costs and revenues.  However, the Partnershipretains the underlying credit risk related to the sale of all oil and gasproduced.  

F-10

----

 

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

Notes to Financial Statements

 

As described above, the Managing GeneralPartner utilizes commodity-based derivative instruments, entered into on behalfof the Partnership, to manage a portion of the Partnership's exposure to pricerisk from oil and natural gas sales.  The Partnership had no open derivativepositions as of December 31, 2005.  

(4)   Allocation ofPartners' Interests

The table belowsummarizes the participation of the Managing General Partner and the InvestorPartners in the costs and revenues of the Partnership.   At December31, 2005, the Managing General Partner's owns a 20% equity ownership in thePartnership.

|                                                             |   |   |   |         |   |  Managing |
|------------------------------------------------------------------|--------|--------|--------|--------------|--------|----------------|
|                                                             |   |   |   | Investor     |   | General        |
| Partnership Costs                                                |   |   |   | Partners (e) |   | Partner (e)    |
| Offering  Costs - Commissions, Due Diligence and Wholesaling (a) | 100%   |   | 0%     |
| Other  Organization and Offering Costs (a)                       |   |   | 0%     |         | 100%   |
| Management  Fee (b)                                              |   |   |   | 100%         |   | 0%             |
| Lease  Costs                                                     |   |   |   | 0%           |   | 100%           |
| Tangible  Well Costs                                             |   |   |   | 0%           |   | 100%           |
| Intangible  Drilling Costs                                       |   |   |   | 100%         |   | 0%             |
| Operating  Costs (c)                                             |   |   |   | 80%          |   | 20%            |
| Direct  Costs (d)                                                |   |   |   | 80%          |   | 20%            |
|                                                             |   |   |   |         |   |           |
| Partnership Revenues                                             |   |   |   |         |   |           |
| Sale  of Oil and Gas Production                                  |   |   | 80%    |         | 20%    |
| Sale  of Productive Properties                                   |   |   | 80%    |         | 20%    |
| Sale  of Equipment                                               |   |   |   | 0%           |   | 100%           |
| Interest  Income                                                 |   |   |   | 80%          |   | 20%            |
|                                                             |   |   |   |         |   |           |
|                                                             |   |   |   |         |   |           |

 

(a)  The Managing General Partner paid alllegal, accounting, printing, and filing fees associated with the organizationof the Partnership and the offering of units and is allocated 100% of thesecosts.  The Investor Partners paid all dealer manager commissions,discounts, and due diligence reimbursements and are allocated 100% of thesecosts. 

(b)  Represents a one-time fee paid to theManaging General Partner upon the funding of the Partnership equal to 1-1/2% oftotal Investor Partner subscriptions.

(c)   Represents operating costsincurred after the completion of productive wells, including monthly per-wellcharges paid to the Managing General Partner for well tending fees andPartnership administration fees.

(d)   The Managing General Partner isreimbursed by the Partnership for direct costs incurred by the Managing GeneralPartner on behalf of the Partnership, such as for independent auditor, reserveengineer and tax preparation fees.

(e)  To the extent that Investor Partnersreceive preferred cash distributions, the allocations for Investor Partnerswill be increased accordingly and the allocation for the Managing GeneralPartner will likewise be decreased.  See "Performance Standard Obligationof Managing General Partner" below.

Performance StandardObligation of Managing General Partner

The Agreement provides for theenhancement of investor cash distributions if the Partnership does not meet aperformance standard defined in the Agreement during the first 10 years beginning6 months after the close of the Partnership.  In general, if the averageannual rate of return to the Investor Partners is less than 12.5% of theirsubscriptions, the allocation rate of cash distributions to Investor Partnerswill increase by one-half of the Managing General Partner's interest until theaverage annual rate increases to 12.5%, with a corresponding decrease to theManaging General Partner.  The 12.5% rate of return is calculated byincluding the estimated benefit of a 25% income tax savings on the investmentin the first year in addition to cash distributions made to the InvestorPartners.  During 2005, no obligation of the Managing General Partnerarose under this provision.

 

 

F-11

----

 

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

Notes to Financial Statements

 

Unit Repurchase Provisions

Investor Partners may request that theManaging General Partner repurchase units at any time beginning with the thirdanniversary of the first cash distribution of the Partnership.  Therepurchase price is set at a minimum of four times the most recent twelvemonths' of cash distributions from production.  The Managing GeneralPartner is obligated to purchase in any calendar year Investor Partner unitsaggregating to 10% of the initial subscriptions if requested by the InvestorPartners, subject to its financial ability to do so and opinions ofcounsel.  No partnership units can be purchased under this provision bythe Managing General Partner until 2008.

(5) AssetRetirement Obligations

Changes in carrying amounts ofthe asset retirement obligations associated with our oil and gas properties areas follows:

|                                             |   |                                                                                                                        |                                                                                                                                                                               | Period from                                                                                                                                       |
|--------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|                                             |   |                                                                                                                        |                                                                                                                                                                               | May 18, 2005                                                                                                                                      |
|                                             |   |                                                                                                                        |                                                                                                                                                                               | (date of inception)                                                                                                                               |
|                                             |   |                                                                                                                        |                                                                                                                                                                               | through                                                                                                                                           |
|                                             |   |                                                                                                                        |                                                                                                                                                                               | December 31, 2005                                                                                                                                 |
|                                             |   |                                                                                                                        |                                                                                                                                                                               |                                                                                                                                              |
| Balance at beginning of  period                  |   |                                                                                                                        |  $                            -   |
| Obligations assumed with  development activities |   |                      281,851 |
| Accretion expense                                |   |                                                                                                                        |                                                                                                                                                                               |                          4,060 |
| Balance at end of year                           |   |                                                                                                                        |                                                                                                                                                                               |  $                  285,911                                  |
|                                             |   |                                                                                                                        |                                                                                                                                                                               |                                                                                                                                              |

 

The discount rateused in calculating the asset retirement obligations was 5%.  This rateapproximates the borrowing rate of the Managing General Partner.

 (6)  Costs Relating to Oiland Gas Activities

The Partnershipis engaged solely in oil and gas activities, all of which are located in thecontinental United States.  Information regarding aggregate capitalizedcosts and results of operations for these activities is located in the basicfinancial statements.  Costs capitalized for these activities are asfollows:

|                   |   | Period from      May 18,  2005                                                    |
|------------------------|--------|------------------------------------------------------------------------------------------------------------|
|                   |   | (date of inception)                                                                                        |
|                   |   | through                                                                                                    |
|                   |   | December 31, 2005                                                                                          |
|                   |   |                                                                                                       |
| Lease acquisition cost |   |  $                 635,880 |
| Development costs      |   |                30,590,842                 |
| Wells in progress      |   |                13,769,709                 |
|                   |   |  $            44,996,431                            |
|                   |   |                                                                                                       |

F-12

----

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

Notes to Financial Statements

 

** **

 (7)  SupplementalReserve Information (Unaudited)

Proved oil and gas reservesof the Partnership have been estimated at December 31, 2005, by independentpetroleum engineers. These reserves have been prepared in compliance with theSecurities and Exchange Commission rules based on year end prices. All of thePartnership's reserves are proved developed reserves.  An analysis of thechange in estimated quantities of proved developed oil and gas reserves isshown below:

|                            |                                                                                                                                                                              | Oil (Bbls)                                                                                                                                                                        |   |
|---------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                            |                                                                                                                                                                              | 2005                                                                                                                                                                              |   |
| Proved  developed reserves:     |                                                                                                                                                                              |                                                                                                                                                                              |   |
| Beginning of year               |                                                                                                                                                                              |                              -   |   |
| Revisions of previous estimates |                              -   |                                                                                                                                                                              |
| New discoveries and extensions  |                     803,000                                                             |                                                                                                                                                                              |
| Production                      |                                                                                                                                                                              |                     (60,000)                                                            |   |
| End of Year                     |                                                                                                                                                                              |                     743,000                                                             |   |
|                            |                                                                                                                                                                              |                                                                                                                                                                              |   |
|                            |                                                                                                                                                                              |  Gas (MCF)                                                                                                                                                                   |   |
|                            |                                                                                                                                                                              | 2005                                                                                                                                                                              |   |
| Proved  developed reserves:     |                                                                                                                                                                              |                                                                                                                                                                              |   |
| Beginning of year               |                                                                                                                                                                              |                              -   |   |
| Revisions of previous estimates |                              -   |                                                                                                                                                                              |
| New discoveries and extensions  |                12,015,000                                                                                        |                                                                                                                                                                              |
| Production                      |                                                                                                                                                                              |                   (116,000)                                                                       |   |
| End of Year                     |                                                                                                                                                                              |                11,899,000                                                                                        |   |
|                            |                                                                                                                                                                              |                                                                                                                                                                              |   |

 

(8)  Standardized Measure of Discounted Future Net Cash Flows and Changes ThereinRelating to Proved Oil

and Gas Reserves (Unaudited)

Summarized in the followingtable is information for the Partnership with respect to the standardized measureof discounted future net cash flows relating to proved oil and gasreserves.  Future cash inflows are computed by applying year-end prices ofoil and gas relating to the Partnership's proved reserves to the year-endquantities of those reserves.  Future production, development, siterestoration and abandonment costs are derived based on current costs assumingcontinuation of existing economic conditions. 

|                                                         |  |                                                                                                   |  | As of             |
|---------------------------------------------------------|--|---------------------------------------------------------------------------------------------------|--|-------------------|
|                                                         |  |                                                                                                   |  | December 31, 2005 |
| Future estimated  revenues                              |  |  $           139,312,000                        |
| Future  estimated production costs                      |  |               (31,322,000)            |
| Future  estimated development costs                     |  |                 (5,132,000) |
|    Future  net cash flows                |  |               102,858,000             |
| 10% annual  discount for estimated timing of cash flows |  |               (49,437,000)            |
| Standardized  measure of discounted future              |  |                                                                                                   |
|    estimated  net cash flows             |  |  $             53,421,000             |
|                                                         |  |                                                                                                   |  |                   |

 

The followingtable summarizes the principal sources of change in the standardized measure ofdiscounted future estimated net cash flow:

 

F-13

----

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

Notes to Financial Statements

 

 

|                                                      |                                                                                             |   |   | As of                                                                                 |
|-----------------------------------------------------------|--------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------|
|                                                      |                                                                                             |   |   | December 31, 2005                                                                     |
| Sales of oil  and gas production, net of production costs |  $             (3,763,000)           |
| Discoveries,  less related costs                          |                 57,184,000 |
|                                                      |                                                                                             |   |   |  $             53,421,000 |
|                                                      |                                                                                             |   |   |                                                                                  |

 

It is necessary to emphasize that thedata presented should not be viewed as representing the expected cash flowfrom, or current value of, existing proved reserves since the computations arebased on a large number of estimates and arbitrary assumptions.  Reservequantities cannot be measured with precision and their estimation requires manyjudgmental determinations and frequent revisions.  The required projectionof production and related expenditures over time requires further estimateswith respect to pipeline availability, rates of demand and governmentalcontrol. Actual future prices and costs are likely to be substantiallydifferent from the current prices and costs utilized in the computation ofreported amounts.  Any analysis or evaluation of the reported amountsshould give specific recognition to the computational methods utilized and thelimitations inherent therein.

 (9) Quarterly Financial Data(Unaudited)

Quarterly financial data for the period from May 18,2005 (date of inception) through December 31, 2005 is as follows:

 

 

|                                                | Period May 18,                                                                                                                                      | Three Months Ended                                                                                                                |                                                                                              |
|-----------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|
|                                                | to June 30,                                                                                                                                         | September 30,                                                                                                                     | December 31,                                                                                      | Year |
|                                                | 2005                                                                                                                                                | 2005                                                                                                                              | 2005                                                                                              | 2005 |
| Revenues:                                           |                                                                                                                                                |                                                                                                                              |                                                                                              |   |
|  Oil and gas sales                             |  $                     -              |  $        955,079                                                                              |  $      3,487,911                                                        |  $      4,442,990 |
|                                                |                                                                                                                                                |                                                                                                                              |                                                                                              |   |
| Costs and Expenses:                                 |                                                                                                                                                |                                                                                                                              |                                                                                              |   |
| Production  and operating costs                     |                         -   |            156,891                                                                   |             522,628                             |             679,519 |
| Management  fee                                     |               607,299                                                                   |                      -   |                  (508) |             606,791 |
| Direct  costs                                       |                        38                  |                      -   |               32,367                  |               32,405 |
| Depreciation,  depletion and amortization           |                         -   |            358,600                                                                   |          1,663,101                                             |          2,021,701 |
| Accretion  of asset retirement obligation           |                         -   |                   851                             |                 3,209       |                 4,060 |
| Total  costs and expenses                           |               607,337                                                                   |            516,342                                                                   |          2,220,797                                             |          3,344,476 |
|                                                |                                                                                                                                                |                                                                                                                              |                                                                                              |   |
| (Loss) income from  operations                      |              (607,337)                                                                       |            438,737                                                                   |          1,267,114                                             |          1,098,514 |
|                                                |                                                                                                                                                |                                                                                                                              |                                                                                              |   |
| Interest income                                     |                 91,243                                                        |            192,909                                                                   |             117,340                             |             401,492 |
| Oil and gas price risk  management (loss) gain, net |                         -   |            (37,694)                                                                  |                 6,372       |              (31,322) |
|                                                |                                                                                                                                                |                                                                                                                              |                                                                                              |   |
| Net (loss) income                                   |  $          (516,094)                                                                                  |  $        593,952                                                                              |  $      1,390,826                                                        |  $      1,468,684 |
|                                                |                                                                                                                                                |                                                                                                                              |                                                                                              |   |
| Net (loss) income per  Investor Partner Unit        |  $                 (264)                                            |  $               235                                        |  $                550  |  $                521 |
|                                                |                                                                                                                                                |                                                                                                                              |                                                                                              |   |

 

Thefollowing presents substantially all of the information for the quarters endedJune 30, 2005 and September 30, 2005 that would normally be contained inquarterly reports on Form 10-Q but are instead reported as part of this 10-K.

 

F-14

 

----

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

Notes to Financial Statements

 

 

| Balance Sheets                                             |                                                                                                                              | June 30,                                                                                                                          | Sept. 30,                                                                        |
|------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|
|                                                       |                                                                                                                              | 2005                                                                                                                              | 2005                                                                             |
|                                                       |                                                                                                                              |                                                                                                                              |                                                                             |
| Cash and cash equivalents                                  |                                                                                                                              |  $  42,969,290                                                                                                          |  $    20,635,453                                                  |
| Accounts receivable - oil  and gas sales                   |                                                                                                                              |                      -   |             955,079            |
| Due from escrow agent                                      |                                                                                                                              |              84,516                                                        |               15,971 |
| Total  current assets                                      |                                                                                                                              |       43,053,806                                                                                              |        21,606,503                                       |
|                                                       |                                                                                                                              |                                                                                                                              |                                                                             |
| Oil and gas properties,  successful efforts method         |                                                                                                                              |         2,411,473                                                                                   |        21,917,731                                       |
| Less accumulated  depreciation, depletion and amortization |                      -   |           (358,600)                                                                       |
| Wells in progress                                          |                                                                                                                              |         4,068,246                                                                                   |          6,795,545                            |
|                                                       |                                                                                                                              |                                                                                                                              |                                                                             |
|                                                       |                                                                                                                              |         6,479,719                                                                                   |        28,354,676                                       |
|                                                       |                                                                                                                              |                                                                                                                              |                                                                             |
| Total  Assets                                              |                                                                                                                              |  $  49,533,525                                                                                                          |  $    49,961,179                                                  |
|                                                       |                                                                                                                              |                                                                                                                              |                                                                             |
|                                                       |                                                                                                                              |                                                                                                                              |                                                                             |
| Accounts payable and  accrued expenses                     |                                                                                                                              |  $                  -              |  $         174,650                       |
| Due to Managing General  Partner - wells                   |                                                                                                                              |         4,728,248                                                                                   |          4,292,370                            |
| Due to Managing General Partner  - derivatives             |                                                                                                                              |                      -   |               19,935 |
| Total  current liabilities                                 |                                                                                                                              |         4,728,248                                                                                   |          4,486,955                            |
|                                                       |                                                                                                                              |                                                                                                                              |                                                                             |
| Asset retirement  obligations                              |                                                                                                                              |                      -   |               74,995 |
|                                                       |                                                                                                                              |                                                                                                                              |                                                                             |
| Partners' equity                                           |                                                                                                                              |       44,805,277                                                                                              |        45,399,229                                       |
|                                                       |                                                                                                                              |                                                                                                                              |                                                                             |
| Total  Liabilities and Partners' Equity                    |                                                                                                                              |  $  49,533,525                                                                                                          |  $    49,961,179                                                  |
|                                                       |                                                                                                                              |                                                                                                                              |                                                                             |
|                                                       |                                                                                                                              |                                                                                                                              |                                                                             |

 

----

| Statements of Partners'  Equity                  |                                                                                   | Managing                                                                                                                          |                                                                       |
|--------------------------------------------------|-----------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------|
|                                                  | Investor                                                                          | General                                                                                                                           |                                                                       |
|                                                  | Partners                                                                          | Partner                                                                                                                           | Total                                                                 |
|                                                  |                                                                                   |                                                                                                                                   |                                                                       |
| Partners' initial capital  contributions         |  $      40,452,761                                       |  $     8,942,916                                                                                              |  $   49,395,677                                        |
| Syndication costs                                |           (4,074,306)                     |                        - |       (4,074,306)                            |
| Net income (loss) - quarter  ended June 30, 2005 |              (534,335)     |              18,241                                                        |           (516,094)           |
| Balance, June 30, 2005 (unaudited)               |          35,844,120                            |        8,961,157                                                                                    |       44,805,277                             |
|                                                  |                                                                                   |                                                                                                                                   |                                                                       |
| Net income - quarter ended  September 30, 2005   |               475,162 |            118,790                                                                   |             593,952 |
| Balance, September 30, 2005  (unaudited)         |          36,319,282                            |        9,079,947                                                                                    |       45,399,229                             |
|                                                  |                                                                                   |                                                                                                                                   |                                                                       |
| Distributions to partners                        |              (624,341)     |         (156,085)                                                                              |           (780,426)           |
| Net income - quarter ended  December 31, 2005    |            1,112,661                 |            278,165                                                                   |         1,390,826                  |
| Balance, December 31, 2005                       |  $     36,807,602                                        |  $    9,202,027                                                                                               |  $   46,009,629                                        |
|                                                  |                                                                                   |                                                                                                                                   |                                                                       |

 

 F-15

 

----

 

PDC 2005-B LIMITED PARTNERSHIP

(A West Virginia Limited Partnership)

Notes to Financial Statements

 

| Statements of Cash Flows                                                    |   | Period                                                                                                                            | Period                                                                                                                                                    |
|-----------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                        |   | May 18 to                                                                                                                         | May 18 to                                                                                                                                                 |
|                                                                        |   | June 30,                                                                                                                          | September 30,                                                                                                                                             |
|                                                                        |   | 2005                                                                                                                              | 2005                                                                                                                                                      |
| Cash flows from operating  activities:                                      |   |                                                                                                                              |                                                                                                                                                      |
| Net (loss) income                                                           |   |  $      (516,094)                                                                                        |  $              77,858                                                                   |
| Adjustments to reconcile  net (loss) income to                              |   |                                                                                                                              |                                                                                                                                                      |
|       net  cash used in operating activities: |   |                                                                                                                              |                                                                                                                                                      |
| Depreciation,  depletion and amortization                                   |   |                      -   |                358,600                                                                   |
| Accretion  of asset retirement obligation                                   |   |                      -   |                       851                             |
| Unrealized  loss on derivative transactions                                 |   |                      -   |                  19,935                                                        |
| Changes  in operating assets and liabilities:                               |   |                                                                                                                              |                                                                                                                                                      |
| Increase  in accounts receivable - oil and gas sales                        |   |                      -   |              (955,079)                                                                             |
| Increase  in due from escrow agent                                          |   |            (84,516)                                                                  |                (15,971)                                                                  |
| Increase  in accounts payable and accrued expenses                          |   |                      -   |                174,650                                                                   |
| Net  cash used in operating activities                                      |   |         (600,610)                                                                              |              (339,156)                                                                             |
|                                                                        |   |                                                                                                                              |                                                                                                                                                      |
| Cash flows from investing  activities:                                      |   |                                                                                                                              |                                                                                                                                                      |
| Expenditures  for oil and gas properties                                    |   |       (1,751,471)                                                                                             |         (24,346,762)                                                                                                        |
| Net  cash used in investing activities                                      |   |       (1,751,471)                                                                                             |         (24,346,762)                                                                                                        |
|                                                                        |   |                                                                                                                              |                                                                                                                                                      |
| Cash flows from financing  activities:                                      |   |                                                                                                                              |                                                                                                                                                      |
| Investor  Partner contributions                                             |   |       40,452,761                                                                                              |           40,452,761                                                                                              |
| Managing  General Partner contribution                                      |   |        8,942,916                                                                                    |             8,942,916                                                                                   |
| Syndication  costs paid                                                     |   |      (4,074,306)                                                                                              |           (4,074,306)                                                                                             |
| Net  cash provided by financing activities                                  |   |      45,321,371                                                                                               |           45,321,371                                                                                              |
|                                                                        |   |                                                                                                                              |                                                                                                                                                      |
| Net increase in cash and  cash equivalents                                  |   |       42,969,290                                                                                              |           20,635,453                                                                                              |
| Cash and cash equivalents  at beginning of period                           |   |                        - |                            - |
| Cash and cash equivalents  at end of period                                 |   |  $  42,969,290                                                                                                          |  $      20,635,453                                                                                                          |
|                                                                        |   |                                                                                                                              |                                                                                                                                                      |

 

|   |
|--------|

F-16