CONFORMED COPY

**UNITED STATES**

**SECURITIES ANDEXCHANGE COMMISSION**

Washington, D.C.20549

**FORM 10-Q**

[X] Quarterly ReportPursuant to Section 13 or 15(d) of

the SecuritiesExchange Act of 1934

For the period endedJune 30, 2005

**OR**

[ ] TransitionReport Pursuant to Section 13 of 15(d) of

the SecuritiesExchange Act of 1934

For the transitionperiod from         to

Commission filenumber 0-7246

I.R.S. EmployerIdentification Number 95-2636730

**PETROLEUMDEVELOPMENT CORPORATION**

**(A NevadaCorporation)**

**103 East Main Street**

**Bridgeport, WV 26330**

**Telephone: (304)842-6256**

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 (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  Yes        NoXX

Indicate the number of shares outstanding of each of theissuer's classes of common stock, as of the latest practicable date: 16,268,028shares of the Company's Common Stock ($.01 par value) were outstanding as ofJuly 29, 2005.

Indicate by check mark whether the registrant is anaccelerated filer (as definition in Rule 12b-2 of the Exchange Act). Yes  XX  No      

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PETROLEUM DEVELOPMENTCORPORATION AND SUBSIDIARIES

INDEX

|                                                                     |                                                                                                                      |          |
|---------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|----------|
|                                                                     |                                                                                                                      |
|                                                                     |                                                                                                                      | Page No. |
|                                                                     |                                                                                                                      |          |
| Explanatory Note - 2005 Restatement

PART I - FINANCIAL INFORMATION | 1                                                                                                                    |
|                                                                     |                                                                                                                      |
|  Item 1.  Financial Statements                            |                                                                                                                      |
|                                                                     |                                                                                                                      |          |
|                                                                     | Report of Independent Registered Public Accounting Firm                                                              | 2        |
|                                                                     |                                                                                                                      |          |
|                                                                     | Condensed Consolidated Balance Sheets -

June 30, 2005 (Unaudited) and December 31, 2004  (Restated)                 |  3  |
|                                                                     |                                                                                                                      |          |
|                                                                     |                                                                                                                      |          |
|                                                                     | Condensed Consolidated Statements of Income -

Three Months and Six Months Ended June 30, 2005 and  2004 (Unaudited) |  5  |
|                                                                     |                                                                                                                      |          |
|                                                                     |                                                                                                                      |          |
|                                                                     | Condensed Consolidated Statements of Cash Flows-Six  Months

Ended June 30, 2005 and 2004 (Unaudited)                | 6        |
|                                                                     |                                                                                                                      |          |
|                                                                     |                                                                                                                      |          |
|                                                                     | Notes to Condensed Consolidated Financial Statements                                                                 | 7        |
|                                                                     |                                                                                                                      |          |
|  Item 2.                                                       | Management's Discussion and Analysis of Financial 

Condition and Results of Operations                              | 11       |
|                                                                     |                                                                                                                      |          |
|  Item 3.                                                       | Quantitative and Qualitative Disclosure About Market  Risk                                                           | 28       |
|                                                                     |                                                                                                                      |          |
|  Item 4.                                                       | Controls and Procedures                                                                                              | 30       |
|                                                                     |                                                                                                                      |          |
| PART II                                                             | OTHER INFORMATION                                                                                                    | 32       |
|                                                                     |                                                                                                                      |          |

|  |
|--|

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PETROLEUM DEVELOPMENTCORPORATION AND SUBSIDIARIES

Explanatory Note -2005 Restatement

As described in our Amended Annual Report on Form 10-K/Afor the year ended December 31, 2004 and our Amended Quarterly Report on Form 10-Q/Afor the three months ended March 31, 2005, we restated certain financialstatements and other information, including such statements and information foreach of the quarters of 2004 and the quarter ended March 31, 2005. Theserestatements related to our accounting for derivative transactions, certainaspects of the Company's oil and gas property accounting, asset retirementobligations and accounting for income taxes.

| 1 |
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** **

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PART I - FINANCIALINFORMATION

Report of IndependentRegistered Public Accounting Firm

The Board of Directors

Petroleum Development Corporation:

                          We have reviewed the accompanying condensed consolidated balance sheet ofPetroleum Development Corporation and subsidiaries as of June 30, 2005, therelated condensed consolidated statements of income for the three-month andsix-month periods ended June 30, 2005 and 2004, and the related condensedconsolidated statements of cash flows for the six-month periods ended June 30,2005 and 2004. These condensed consolidated financial statements are theresponsibility of the Company's management.

                          We conducted our reviews in accordance with the standards of the Public CompanyAccounting Oversight Board (United States).  A review of interim financialinformation consists principally of applying analytical review procedures andmaking inquiries of persons responsible for financial and accountingmatters.  It is substantially less in scope than an audit conducted inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the objective of which is the expression of an opinionregarding the financial statements taken as a whole.  Accordingly, we donot express such an opinion.

                          Based on our reviews, we are not aware of any material modifications thatshould be made to the condensed consolidated financial statements referred toabove for them to be in conformity with U. S. generally accepted accountingprinciples.

                          We have previously audited, in accordance with standards of Public CompanyAccounting Oversight Board (United States), the consolidated balance sheet ofPetroleum Development Corporation and subsidiaries as of December 31, 2004, andthe related consolidated statements of income, stockholders' equity and cashflows for the year then ended (not presented herein); and in our report datedMarch 30, 2005, except as to the restatement discussed in Note 22 to theconsolidated financial statements which is as of December 2, 2005, we expressedan unqualified opinion on those consolidated financial statements. As discussedin that report, the consolidated financial statements as of December 31, 2004and 2003, and for each of the years in the three year period ended December 31,2004 have been restated and the report also included an explanatory paragraphreferring to a change in accounting for asset retirement obligations in2003.  In our opinion, the information set forth in the accompanyingcondensed consolidated balance sheet as of December 31, 2004 is fairly stated,in all material respects, in relation to the consolidated balance sheet fromwhich it has been derived.

As discussed in notes 21 and 22 to the Company's Form10-K/A as of December 31, 2004 the Company has restated the condensedconsolidated balance sheet as of December 31, 2004 and the condensedconsolidated statements of income and cash flows for the three and six monthperiods ended June 30, 2004.

KPMG LLP

Pittsburgh, Pennsylvania

January 5, 2006

| 2 |
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** **

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PETROLEUMDEVELOPMENT CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

June 30, 2005 and December 31, 2004

| ASSETS                                                         |                                                             |                                                  |                                                             |
|----------------------------------------------------------------|-------------------------------------------------------------|--------------------------------------------------|-------------------------------------------------------------|
|                                                                |                                                             |                                                  |                                                             |
|                                                                | 2005                                                        |                                                  | 2004                                                        |
| (Unaudited)                                                    | (Restated)                                                  |
| Current  assets:                                               |                                                             |                                                  |                                                             |
|   Cash  and cash equivalents     | $     96,519,900                        |                                                  | $     77,735,300                        |
|   Accounts  and notes receivable                     |         35,311,900            |                                                  |         36,065,300            |
|   Inventories                                        |           5,559,400 |                                                  |           1,657,300 |
|   Prepaid  expenses                                  |           7,210,900 |                                                  |           9,878,900 |
|                                                                |                                                             |                                                  |                                                             |
|      Total  current assets            |     144,602,100                              |                                                  |      125,336,800                        |
|                                                                |                                                             |                                                  |                                                             |
|                                                                |                                                             |                                                  |                                                             |
|                                                                |                                                             |                                                  |                                                             |
| Properties  and equipment                                      |     330,955,700                              |                                                  |      299,748,700                        |
|   Less  accumulated depreciation, depletion          |                                                             |                                                  |                                                             |
|    and  amortization                            |     100,423,300                              |         92,165,400 |
|                                                                |     230,532,400                              |                                                  |      207,583,300                        |
|                                                                |                                                             |                                                  |                                                             |
| Other  assets                                                  |          2,549,800       |                                                  |          2,108,200       |
|                                                                |                                                             |                                                  |                                                             |
|                                                                | $  377,684,300                                         |                                                  |  $  335,028,300                                   |
|                                                                |                                                             |                                                  |                                                             |

| 3 |
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PETROLEUMDEVELOPMENT CORPORATION AND SUBSIDIARIES

CondensedConsolidated Balance Sheets, Continued

June 30, 2005 andDecember 31, 2004

|  LIABILITIES  AND STOCKHOLDERS' EQUITY                                  |                                                                                         |  |                                                                                         |
|------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|--|-----------------------------------------------------------------------------------------|
|                                                                              |                                                                                         |  |                                                                                         |
|                                                                              | 2005                                                                                    |  | 2004                                                                                    |
|                                                                              | (Unaudited)                                                                             |  | (Restated)                                                                              |
|                                                                              |                                                                                         |  |                                                                                         |
| Current  liabilities:                                                        |                                                                                         |  |                                                                                         |
|   Accounts  payable and accrued expenses                           |  $       69,415,900                                       |  |  $       69,696,600                                       |
|   Advances  for future drilling contracts                          |           63,880,400                            |  |           42,497,300                            |
|   Funds  held for future distribution                              |           13,673,000                            |  |           12,911,800                            |
|                                                                              |                                                                                         |  |                                                                                         |
|       Total  current liabilities               |         146,969,300                                       |  |         125,105,700                                       |
|                                                                              |                                                                                         |  |                                                                                         |
|                                                                              |                                                                                         |  |                                                                                         |
| Long-term  debt                                                              |           22,000,000                            |  |           21,000,000                            |
| Other  liabilities                                                           |             5,675,300                 |  |             3,927,500                 |
| Deferred  income taxes                                                       |           27,606,100                            |  |           22,976,300                            |
| Asset  retirement obligations                                                |             8,015,800                 |  |             7,998,200                 |
|                                                                              |                                                                                         |  |                                                                                         |
|                                                                              |                                                                                         |  |                                                                                         |
| Stockholders'  equity:                                                       |                                                                                         |  |                                                                                         |
|   Common  stock par value $0.01 per share;                         |                                                                                         |  |                                                                                         |
|     authorized  50,000,000 shares; issued and            |                                                                                         |  |                                                                                         |
|     outstanding  16,268,028 shares and 16,589,824 shares |                162,700 |  |                165,800 |
|   Additional  paid-in capital                                      |           30,064,500                            |  |           37,684,300                            |
|   Retained  earnings                                               |         138,071,000                                       |  |         117,052,500                                       |
|    Unamortized stock award                                              |              (880,400)           |  |              (882,000)           |
|      Total  stockholders' equity                    |         167,417,800                                       |  |         154,020,600                                       |
|                                                                              |                                                                                         |  |                                                                                         |
|                                                                              |  $    377,684,300                                                   |  |  $    335,028,300                                                   |
|                                                                              |                                                                                         |  |                                                                                         |

See accompanying notes to unaudited condensed consolidated financialstatements.

| 4 |
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PETROLEUMDEVELOPMENT CORPORATION AND SUBSIDIARIES

CondensedConsolidated Statements of Income

Three Months and SixMonths ended June 30, 2005 and 2004

(Unaudited)

|                                                                                  | Three Months Ended June 30,                                                                             |  | Six Months Ended June 30,                                                                               |
|----------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|--|---------------------------------------------------------------------------------------------------------|
|                                                                                  | 2005                                                                                                    |  | 2004                                                                                                    |  | 2005 |  | 2004 |
|                                                                                  |                                                                                                         |  | (Restated)                                                                                              |  |  |  | (Restated) |
| Revenues:                                                                        |                                                                                                         |  |                                                                                                         |  |  |  |  |
|   Oil  and gas well drilling operations                                |  $      36,056,500                                                             |  |  $      29,453,800                                                             |  |  $      68,407,700 |  |  $      58,953,100 |
|   Gas  sales from marketing activities                                 |          25,917,100                                                  |  |          24,954,300                                                  |  |          43,439,100 |  |          47,013,200 |
|   Oil  and gas sales                                                   |          21,542,800                                                  |  |          16,209,000                                                  |  |          40,206,500 |  |          32,525,200 |
|   Well  operations and pipeline income                                 |            2,244,400                                       |  |            1,912,400                                       |  |            4,356,800 |  |            3,749,900 |
|   Other  income                                                        |            3,572,800                                       |  |               687,000                       |  |            9,786,600 |  |               745,100 |
|            Total revenues           |          89,333,600                                                  |  |          73,216,500                                                  |  |       166,196,700 |  |        142,986,500 |
|                                                                                  |                                                                                                         |  |                                                                                                         |  |  |  |  |
| Costs and  expenses:                                                             |                                                                                                         |  |                                                                                                         |  |  |  |  |
|   Cost  of oil and gas well drilling operations                        |          31,688,700                                                  |  |          24,967,300                                                  |  |          59,317,700 |  |          50,323,000 |
|   Cost  of gas marketing activities                                    |          26,177,300                                                  |  |          24,605,800                                                  |  |          44,078,900 |  |          46,495,500 |
|  Oil and  gas production and well operations cost                           |            4,737,900                                       |  |            4,036,000                                       |  |            8,901,300 |  |            7,942,100 |
|    Exploratory dry hole costs                                               |            4,864,000                                       |  |  -                                                                                                 |  |            4,864,000 |  |  - |
|   General  and administrative expenses                                 |            1,266,000                                       |  |               900,900                       |  |            2,883,500 |  |            1,895,100 |
|   Depreciation,  depletion, and amortization                           |            4,845,100                                       |  |            4,451,300                                       |  |            9,702,000 |  |            8,995,700 |
|            Total costs and expenses |          73,579,000                                                  |  |          58,961,300                                                  |  |        129,747,400 |  |        115,651,400 |
|                                                                                  |                                                                                                         |  |                                                                                                         |  |  |  |  |
|  Income  from operations                                                    |          15,754,600                                                  |  |          14,255,200                                                  |  |          36,449,300 |  |          27,335,100 |
|    Interest expense                                                         |               143,000                       |  |               194,400                       |  |               290,800 |  |               404,000 |
|  Oil and  gas price risk management (gain) loss, net                        |             (858,400)                                 |  |               868,700                       |  |            2,800,700 |  |            1,698,700 |
|                                                                                  |                                                                                                         |  |                                                                                                         |  |  |  |  |
|  Income  before income taxes                                                |          16,470,000                                                  |  |          13,192,100                                                  |  |          33,357,800 |  |          25,232,400 |
|  Income  taxes                                                              |            6,091,400                                       |  |            4,755,400                                       |  |          12,339,300 |  |            9,089,800 |
|                                                                                  |                                                                                                         |  |                                                                                                         |  |  |  |  |
|  Net  income                                                                |  $      10,378,600                                                             |  |  $        8,436,700                                                  |  |  $      21,018,500 |  |  $      16,142,600 |
|                                                                                  |                                                                                                         |  |                                                                                                         |  |  |  |  |
|  Basic  earnings per common share                                           |  $                 0.63 |  |  $                 0.52 |  |  $                 1.27 |  |  $                 1.01 |
|                                                                                  |                                                                                                         |  |                                                                                                         |  |  |  |  |
|  Diluted  earnings per common share                                         |  $                 0.63 |  |  $                 0.51 |  |  $                 1.27 |  |  $                 0.98 |
|                                                                                  |                                                                                                         |  |                                                                                                         |  |  |  |  |

See accompanying notes to unaudited condensed consolidated financialstatements.

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PETROLEUMDEVELOPMENT CORPORATION AND SUBSIDIARIES

CondensedConsolidated Statements of Cash Flows

Six Months EndedJune 30, 2005 and 2004

(Unaudited)

|                                                                                                                                      | 2005                                                           |  | 2004                                                                      |
|--------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------|--|---------------------------------------------------------------------------|
|                                                                                                                                      |                                                                |  | (Restated)(a)                                                             |
| Cash flows from operating activities:                                                                                                |                                                                |  |                                                                           |
|   Net income                                                                                                               |  $21,018,500                                              |  |  $16,142,600                                                         |
|   Adjustments to net income to reconcile to cash                                                                           |                                                                |  |
|    provided by operating activities:                                                                                  |                                                                |  |                                                                           |
|     Deferred income taxes                                                                                             |       4,629,800                            |  |       6,145,600                                       |
|     Depreciation, depletion &  amortization                                                                  |       9,702,000                            |  |       8,995,700                                       |
|     Unrealized loss on derivative transactions                                                                        |       2,379,900                            |  |          373,800                       |
|     Exploratory dry hole cost                                                                                         |       4,864,000                            |  |  -                                                                   |
|     Accretion of asset retirement obligations                                                                         |          228,600            |  |          213,200                       |
|    (Gain) loss from sale of assets                                                                                         |    (7,856,500)                                       |  |            13,200            |
|     Leasehold acreage expired or surrendered                                                                          |          392,900            |  |          171,000                       |
|     Amoritization of stock award                                                                                      |          257,500            |  |              1,800 |
|     Decrease (increase) in current assets                                                                        |       1,920,800                            |  |    (9,488,000)                                                  |
|     Decrease (increase) in other assets                                                                               |            24,300 |  |        (142,100)                                 |
|     Increase (decrease) in current  liabilities                                                                  |    19,593,100                                        |  |  (20,744,000)                                                        |
|     (Decrease) increase in other liabilities                                                                     |        (257,500)                      |  |          425,700                       |
|           Total  adjustments                                                       |    35,878,900                                        |  |  (14,034,100)                                                        |
|                Net  cash provided by operating activities |    56,897,400                                        |  |       2,108,500                                       |
|                                                                                                                                      |                                                                |  |                                                                           |
| Cash flows from investing activities:                                                                                                |                                                                |  |                                                                           |
|   Capital expenditures                                                                                                     |  (42,215,200)                                             |  |  (10,945,600)                                                        |
|  Proceeds from sale of leases                                                                                                   |      1,406,500                             |  |          992,500                       |
|  Proceeds from sale of fixed assets                                                                                             |       9,574,700                            |  |            51,400            |
|                Net  cash used in investing activities     |  (31,234,000)                                             |  |    (9,901,700)                                                  |
|                                                                                                                                      |                                                                |  |                                                                           |
| Cash flows from financing activities:                                                                                                |                                                                |  |                                                                           |
|  Net proceeds from/(retirement of) long-term debt                                                                               |       1,000,000                            |  |  (23,000,000)                                                        |
|  Proceeds from issuance of common stock                                                                                         |  -                                              |  |       2,020,200                                       |
|   Repurchase and cancellation of treasury stock                                                                            |    (7,878,800)                                       |  |    (2,749,100)                                                  |
|                Net  cash used in financing activities     |    (6,878,800)                                       |  |  (23,728,900)                                                        |
|                                                                                                                                      |                                                                |  |                                                                           |
| Net increase (decrease) in cash and cash equivalents                                                                                 |    18,784,600                                        |  |  (31,522,100)                                                        |
| Cash and cash equivalents, beginning of period                                                                                       |    77,735,300                                        |  |    80,379,300                                                   |
|                                                                                                                                      |                                                                |  |                                                                           |
| Cash and cash equivalents, end of period                                                                                             |  $96,519,900                                              |  |  $48,857,200                                                         |

See accompanying notes to unaudited condensed consolidated financialstatements.

(a) Only certainindividual line items within cash provided from operating activities have beenrestated. Net cash provided by operating activities is the same as the original10-Q filing.

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PETROLEUMDEVELOPMENT CORPORATION AND SUBSIDIARIES

Notes to CondensedConsolidated Financial Statements

June 30, 2005

(Unaudited)

1.     Accounting Policies

 Reference ishereby made to Petroleum Development Corporation and Subsidiaries (the Company)Annual Report on Form 10-K/A for 2004, which contains a summary of significantaccounting policies followed by the Company in the preparation of itsconsolidated financial statements. These policies were also followed inpreparing the quarterly report included herein.

As described in ourAmended Annual Report on Form 10-K/A for the year ended December 31, 2004 andour Amended Quarterly Report on Form 10-Q/A for the three months ended March31, 2005, we restated certain financial statements and other information,including such statements and information for each of the quarters of 2004 andthe quarter ended March 31, 2005. These restatements related to our accountingfor derivative transactions, certain aspects of the Company's oil and gasproperty accounting, asset retirement obligations and accounting for incometaxes.

2.     Stock Compensation

The Company applies the intrinsic-value basedmethod of accounting prescribed by Accounting Principles Board (APB) OpinionNo. 25, "Accounting for Stock Issued to Employees", and relatedinterpretations including FASB Interpretation No. 44, "Accounting forCertain Transactions involving Stock Compensation, an interpretation of APBOpinion No. 25", to account for its fixed-plan stock options.  Underthis method, compensation expense is recorded on the date of grant only if thecurrent market price of the underlying stock exceeded the exercise price. FASB Statement No. 123, "Accounting for Stock-Based Compensation" andFASB Statement No. 148, "Accounting for Stock Based Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123",established accounting and disclosure requirements using a fair-value-basedmethod of accounting for stock-based employee compensation plans.  Aspermitted by existing accounting standards, the Company has elected to continueto apply the intrinsic-value-based method of accounting described above, and hasadopted only the disclosure requirements of Statement 123, as amended andStatement 148.  If the fair-value-based method had been applied to alloutstanding and unvested awards in each period, the impact in 2005 would havebeen $47,600. There would have been no impact on reported net income in 2004. 

|                                                           |  | Three Months Ended                                                              |  | Six Months Ended                                              |
|-----------------------------------------------------------|--|---------------------------------------------------------------------------------|--|---------------------------------------------------------------|
|                                                           |  | June 30,                                                                        |  | June 30,                                                      |
|                                                           |  | 2005                                                                            |  | 2004                                                          |  | 2005 |  | 2004 |
|                                                           |  |                                                                                 |  | (Restated)                                                    |  |  |  | (Restated) |
| Net income, as  reported                                  |  | $  10,378,600                                                              |  |  $ 8,436,700                                             |  | $   21,018,500 |  | $ 6,142,600 |
| Stock-based  employee compensation expense                |  |                                                                                 |  |                                                               |  |  |  |  |
|     included in reported net income, net of     |  |                                                                                 |  |                                                               |  |  |  |  |
|     related tax effects                         |  | 88,400                                                                          |  | 600                                                           |  | 162,200 |  | 1,200 |
| Deduct total  stock-based employee                        |  |                                                                                 |  |                                                               |  |  |  |  |
|    compensation expense determined under             |  |                                                                                 |  |                                                               |  |  |  |  |
|  fair-value  based method for all awards, net of tax |  | (112,200)                                                                       |  | (600)                                                         |  | (209,800) |  | (1,200) |
|                                                           |  |                                                                                 |  |                                                               |  |  |  |  |
| Pro forma net  income                                     |  | $  10,354,800                                                              |  |  $ 8,436,700                                             |  | $   20,970,900 |  | $6,142,600 |
|                                                           |  |                                                                                 |  |                                                               |  |  |  |  |
| Basic earnings  per share as reported                     |  | $              0.63 |  |  $          0.52 |  | $               1.27 |  | $          1.01 |
|                                                           |  |                                                                                 |  |                                                               |  |  |  |  |
| Pro forma  basic earnings per share                       |  | $              0.63 |  |  $          0.52 |  | $               1.27 |  | $          1.01 |
|                                                           |  |                                                                                 |  |                                                               |  |  |
| Diluted  earnings per share as reported                   |  | $              0.63 |  |  $          0.51 |  | $               1.27 |  | $          0.98 |
|                                                           |  |                                                                                 |  |                                                               |  |  |  |  |
| Pro forma  diluted earnings per share                     |  | $              0.63 |  |  $          0.51 |  | $               1.27 |  | $          0.98 |
|                                                           |  |                                                                                 |  |                                                               |  |

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OnDecember 16, 2004, the Financial Accounting Standards Board (FASB) issued FASBStatement No. 123R (revised 2004), "Share-Based Payment" which is arevision of FASB Statement No. 123, "Accounting for Stock-BasedCompensation".  Statement 123R supersedes APB opinion No. 25,"Accounting for Stock Issued to Employees", and amends FASB StatementNo. 95, "Statement of Cash Flows".  Generally, the approach inStatement 123R is similar to the approach described in Statement 123.  However,Statement 123R requires all share-based payments to employees, including grantsof employee stock options, to be recognized in the income statement based ontheir fair values.  Pro-forma disclosure is no longer analternative.  On April 14, 2005, the SEC amended the effective date of theprovisions of this statement.  The effect of this amendment by the SEC isthat we will have to comply with Statement 123R and use the Fair Value basedmethod of accounting no later than the first quarter of 2006.  Managementhas not determined the impact that this statement will have on our consolidatedfinancial statements. 

3.     Basis of Presentation

The Management ofthe Company believes that all adjustments (consisting of only normal recurring accruals)necessary to a fair statement of the results of such periods have beenmade.  The results of operations for the six months ended June 30, 2005are not necessarily indicative of the results to be expected for the full year.

4.     Oil and Gas Properties

Oil and GasProperties are reported on the successful efforts method. 

5.     Earnings Per Share

Computation ofearnings per common and common equivalent share is as follows for the threemonths and six months ended June 30, 2005 and 2004.

|                                                                    | Three Months Ended                                            |  | Six Months Ended                                                                |
|--------------------------------------------------------------------|---------------------------------------------------------------|--|---------------------------------------------------------------------------------|
|                                                                    | June 30,                                                      |  | June 30,                                                                        |
|                                                                    | 2005                                                          |  | 2004                                                                            |  | 2005 |  | 2004 |
| Weighted  average common shares outstanding                        | 16,443,657                                                    |  | 16,272,763                                                                      |  | 16,516,337 |  | 16,067,300 |
| Weighted  average common and                                       |                                                               |  |                                                                                 |  |  |  |  |
|     common equivalent shares outstanding                 | 16,492,174                                                    |  | 16,679,382                                                                      |  | 16,567,128 |  | 16,471,709 |
|                                                                    |                                                               |  | (Restated)                                                                      |  |  |  | (Restated) |
|            Net income |  $  10,378,600                                      |  |  $   8,436,700                                                   |  |  $  21,018,500 |  |  $  16,142,600 |
|                                                                    |                                                               |  |                                                                                 |  |  |  |  |
| Basic earnings  per share                                          |  $          0.63 |  |  $             0.52 |  |  $          1.27 |  |  $              1.01 |
| Diluted  earnings per share                                        |  $          0.63 |  |  $             0.51 |  |  $          1.27 |  |  $              0.98 |
|                                                                    |                                                               |  |                                                                                 |  |  |  |  |

6.     Business Segments 

PDC's operating activitiescan be divided into four major segments: drilling and development, natural gasmarketing, oil and gas sales, and well operations and pipeline income. The Company drills natural gas wells for Company-sponsored drillingpartnerships and retains an interest in each well.  A wholly-ownedsubsidiary, Riley Natural Gas, engages in the marketing of natural gas tocommercial and industrial end-users.  The Company owns an interest in over2,700 wells from which it derives oil and gas working interests. The Companycharges Company-sponsored partnerships and other third parties competitiveindustry rates for well operations and gas gathering.  All materialinter-company accounts and transaction between segments have been eliminated.Segment information for the three and six months ended June 30, 2005 and 2004is as follows: (All amounts presented below are in thousands)

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|                                                              |  | Three Months Ended                                 |  | Six Months Ended                                               |  |
|--------------------------------------------------------------|--|----------------------------------------------------|--|----------------------------------------------------------------|--|
|                                                              |  | June 30,                                           |  | June 30,                                                       |  |
|                                                              |  | 2005                                               |  | 2004                                                           |  | 2005 |  | 2004 |  |
| REVENUES                                                     |  |                                                    |  | (Restated)                                                     |  |  |  | (Restated) |  |
|    Drilling and Development                             |  |  $    36,057              |  |  $       29,454             |  |  $    68,408  |  |  $    58,953  |
|  Natural  Gas Marketing                                 |  | 25,993                                        |  | 24,960                                                    |  | 43,575  |  | 47,028  |
|  Oil and  Gas Sales                                     |  | 21,542                                        |  | 16,209                                                    |  | 40,206  |  | 32,525  |
|  Well  Operations and Pipeline Income                   |  | 2,244                                         |  | 1,912                                                     |  | 4,357  |  | 3,750  |
|    Unallocated Amounts (1)                              |  | 3,498                                         |  | 682                                                       |  | 9,651  |  | 731  |
|       Total                              |  |  $    89,334              |  |  $       73,217             |  |  $  166,197  |  |  $  142,987  |
|                                                              |  |                                                    |  |                                                                |  |  |  |  |
| SEGMENT  INCOME BEFORE                                       |  |                                                    |  |                                                                |  |  |  |  |
| INCOME  TAXES                                                |  |                                                    |  |                                                                |  |  |  |  |
|   Drilling  and Development                        |  |  $       4,368  |  |  $         4,487  |  |  $       9,090  |  |  $       8,630  |
|   Natural  Gas Marketing                           |  | (188)                                              |  | 353                                                       |  | (509) |  | 529  |
|   Oil  and Gas Sales(3)                            |  | 9,348                                         |  | 7,911                                                     |  | 16,367  |  | 15,966  |
|   Well  Operations and pipeline income             |  | 1,003                                         |  | 961                                                       |  | 2,233  |  | 1,881  |
|   Unallocated  amounts (2)                         |  |                                                    |  |                                                                |  |  |  |  |
|     General  and Administrative expenses |  | (1,266)                                            |  | (901)                                                          |  | (2,883) |  | (1,895) |
|   Interest  expense                                |  | (143)                                              |  | (194)                                                          |  | (291) |  | (404) |
|   Other  (1)                                       |  | 3,348                                         |  | 576                                                       |  | 9,351  |  | 526  |
|       Total                    |  |  $    16,470              |  |  $       13,192             |  |  $    33,358  |  |  $    25,233  |
|                                                              |  |                                                    |  |                                                                |  |  |  |  |  |
|                                                              |  |                                                    |  |                                                                |  |  |  |  |  |  |  |  |  |  |  |

|                                                  |  | June 30, 2005                                                                                         |  | December 31, 2004                                                                                                                                     |
|--------------------------------------------------|--|-------------------------------------------------------------------------------------------------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| SEGMENT  ASSETS                                  |  |                                                                                                       |  | (Restated)                                                                                                                                            |
|   Drilling  and Development            |  |  $          89,229                                       |  |  $                  64,348                                       |
|   Natural  Gas Marketing               |  |              31,345                            |  |                      31,234                            |
|   Oil  and Gas Sales                   |  |            226,529                                       |  |                    211,255                                       |
|   Well  Operations and pipeline income |  |              22,818                            |  |                      16,518                            |
|   Unallocated  amounts(2)              |  |                                                                                                       |  |                                                                                                                                                       |
|     Cash                     |  |                   267 |  |                           112 |
|     Other                    |  |                7,492                 |  |                       11,561                      |
|        Total  |  |  $        377,680                                                  |  | $                 335,028                                                  |
|                                                  |  |                                                                                                       |  |                                                                                                                                                       |

(1)    Includesgains on sales of assets, interest on investments and partnership managementfees which are not

                    allocated in assessing segment performance.

(2)  Items which are not allocated in assessing segment performance.

(3)   Includes$4,864 in exploratory dry hole cost in the three and six months ended June 30,2005.

7.    Sale of Undeveloped Acreage

During the firstquarter of 2005, the Company sold a portion of one of its undeveloped GarfieldCounty, Colorado leases to an unaffiliated entity.  The proceeds of thesale were $6.2 million and the Company's carrying value of the property waszero.  The Company was required to remit $1.0 million to the originallessor, unless it commenced construction of certain facilities adjacent to thisundeveloped property subject to certain timing conditions. The gain of $5.2million was recognized during the first quarter of 2005 and is included in"Other Income" in the accompanying condensed consolidated statements of income.During the second quarter of 2005, the Company commenced construction of thefacilities and recorded income of $1.0 million which is included in "OtherIncome" in the accompanying condensed consolidated statements of income.

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8.     Sale of Producing Wells

During the secondquarter of 2005, the Company completed the sale to an unaffiliated entity of111 Pennsylvania wells it purchased from Pemco Gas, Inc. in 1998.  TheCompany received proceeds of $3.4 million and recorded a gain of approximately$1.5 million which is included in "Other Income" in the accompanyingcondensed consolidated statements of income.  In addition during thesecond quarter of 2005, the Company recorded an additional gain ofapproximately $234,000 because the asset retirement obligation liabilityrelated to the Pemco sale was no longer necessary after the sale.

9.     Exploratory Dry Hole

During the secondquarter of 2005, the exploratory Fox Federal #1-13 well was deemed to benon-commercial after well tests were completed and will be plugged andabandoned. Under the successful efforts method of accounting, this cost isrequired to be expensed in the period when such determination is made. Thisamounted to a $4.9 million expense which is included in the accompanyingcondensed consolidated statements of income under Exploratory Dry Hole Costs.Due to the dry hole, the Company reevaluated the Company's adjacent leases andwrote-off acreage of approximately $383,000 which is included in the condensedconsolidated statements of income as an expense under Cost of oil and gas welldrilling operations.

10.   Commitments and Contingencies

The nature of theindependent oil and gas industry involves a dependence on outside investordrilling capital and involves a concentration of gas sales to a fewcustomers.  The Company sells natural gas to various public utilities,natural gas marketers, industrial and commercial customers.

The Company would beexposed to natural gas price fluctuations on underlying purchase and salecontracts should the counterparties to the Company's derivative instruments notperform.  Such nonperformance is not anticipated.  There were nocounterparty default losses in the first six months of 2005 or the year 2004.

Substantially all ofthe Company's drilling programs contain a repurchase provision where Investorsmay request the Company to repurchase their partnership units at any timebeginning with the third anniversary of the first cash distribution. Theprovision provides that the Company is obligated to purchase an aggregate of10% of the initial subscriptions per calendar year (at a minimum price of fourtimes the most recent 12 month's cash distributions), if investors request theCompany to repurchase such units, subject to the Company's financial ability todo so. The maximum annual 10% repurchase obligation, if requested by investors,is currently approximately $8.4 million. The Company believes it has adequateliquidity to meet this obligation should it arise.

The Company'sdrilling programs formed since 1996 contain a performance standard which statesthat if certain performance levels are not met, the Company must remit apayment equal to one-half of its share of revenue from such partnership to theinvesting partners.  For the six months ended June 30, 2005 and 2004, theCompany paid partnerships a total of $237,900 and $198,300 respectively inaccordance with the provision.

As Managing General Partner of 10 privatelimited partnerships and 64 public limited partnerships, the Company hasliability for any potential casualty losses in excess of the partnership assetsand insurance. The Company is the sole general partner of each of these variouslimited partnerships. The Company believes its casualty insurance coverage isadequate to meet this potential liability.

In order to securethe services for drilling rigs, the Company makes commitments to the drillingcontractor that call for penalties for a specified amount of time if theCompany ceases to use such drilling rigs, an event that is not anticipated tooccur.  As of June 30, 2005, the Company has an outstanding commitment for$26.9 million. 

From time to time the Company is a partyto various legal proceedings in the ordinary course of business.  TheCompany is not currently a party to any litigation that it believes would havea materially adverse affect on the Company's business, financial condition,results of operations, or liquidity. 

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11.   Common Stock Repurchase

On March 18, 2005the Company publicly announced the authorization by its Board of Directors torepurchase up to 2% of the Company's outstanding common stock (331,796 shares)at fair market value at the date of purchase. At a meeting held June 10, 2005,the Board of Directors of Petroleum Development Corporation approved anamendment of the size of the stock repurchase from 2% to 10% (1,658,980 shares)of the Company's then outstanding common stock. Under the program, the Boardhas discretion as to the dates of purchase and amounts of stock to be purchasedand whether or not to make purchases. This program is scheduled to expire onDecember 31, 2005. The following activity has occurred since inception of theplan on March 18, 2005 until June 30, 2005.

| Month of Purchase                      | May, 2005            |
|----------------------------------------|----------------------|
| Average Price paid per share           | $23.75               |
| Broker/Dealer                          | McDonald Investments |
| Number of Shares Purchased             | 331,796              |
| Remaining Number of Shares to purchase | 1,327,184            |

Item 2.  Management's Discussion and Analysis ofFinancial Condition and Results of Operations

2005 Restatement

As described in our Amended Annual Report on Form 10-K/Afor the year ended December 31, 2004 and our Amended Quarterly Report on Form10-Q/A for the three months ended March 31, 2005, we restated certain financialstatements and other information, including such statements and information foreach of the quarters of 2004 and the quarter ended March 31, 2005. Theserestatements related to our accounting for derivative transactions, certainaspects of the Company's oil and gas  property accounting, assetretirement obligations, and accounting for income taxes. The followingdiscussions have been restated for the above mentioned restatement and allnumbers restated are marked as restated.

TheCompany has recorded historically strong revenues, income and cash flow for thefirst two quarters of 2005.  High oil and natural gas prices incombination with record Company production have been the largest contributorsto both income and cash flow.  The high energy prices have also increasedthe Company's revenues for sales of Company-owned production. Management alsobelieves that high energy prices have increased the attractiveness of its partnershipinvestment programs to investors resulting in a significant increase in thesale of program interests and as a result increased drilling activity, revenuesand profits for the Drilling and Development segment.  The new wellsdrilled for the partnerships also led to an increase in revenues for operatingwells for the partnerships and others.  

Theincreased level of activities also increased the costs associated with thedrilling and development and well operations activities since more goods,services and other costs were incurred as a result of the higher levels ofactivities.   Similarly, higher oil and natural gas prices alsoincreased the cost of purchasing gas for resale in the Company's gas marketingunit.

Theincreased profitability and cash flow from operations allowed the company tocontinue to invest in capital projects. The majority of the capital investmentwas for oil and gas drilling and development activities. In addition theCompany repurchased common stock for approximately $7.9 million. 

Amore detailed explanation of the various components for the most recent quarterand first two quarters of 2005 follows:

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Results of Operations

Three Months Ended June 30, 2005 Compared with June 30,2004

Revenues

Total revenues for the three months ended June 30, 2005were $89.3 million compared to a restated $73.2 million for the three monthsended June 30, 2004, an increase of approximately $16.1 million or 22.0percent. Such increase was a result of increased drilling revenues, gas salesfrom marketing activities, oil and gas sales, well operations and pipelineincome along with other income.

Costs and Expenses

Costs and expenses for the three months ended June 30,2005 were $73.6 million compared to a restated $59.0 million for the threemonths ended June 30, 2004, an increase of approximately $14.6 million or 24.7percent. Such increase was primarily the result of exploratory dry hole costsof $4.9 million in 2005 compared to zero in 2004 and increased cost of oil andgas well drilling operations, cost of gas marketing activities, oil and gasproduction and well operations costs, general and administrative costs, anddepreciation, depletion and amortization.

Drilling Operations

Drilling revenues for the three months ended June 30,2005 were $36.1 million compared to $29.5 million for the three months endedJune 30, 2004, an increase of approximately $6.6 million or 22.4 percent. Such increase was due to the increased drilling funds raised through the Company'sPublic Drilling Programs.  The Company started the second quarter of 2005with advances for future drilling from March 31, 2005 of $54.4 million. The Company funded its second drilling partnership of the year in the secondquarter with $40 million in subscriptions and commenced drilling of thepartnership wells late in the second quarter.  We believe in part thatthis increase in drilling program partnership subscriptions is fueled by theincrease in oil and natural gas prices which has improved the performance ofour prior programs which in turn has helped to increase our current drillingprogram sales.

Oil and gas well drilling operations costs for the threemonths ended June 30, 2005 were $31.7 million compared to a restated $25.0million for the three months ended June 30, 2004, an increase of approximately$6.7 million or 26.8 percent. Such increase was due to the higher levels ofdrilling activity from our Public Drilling Programs referred to above. Thegross margin on the drilling activities for the three months ended June 30,2005 was 12.1% compared with 15.2% for the three months ended June 30, 2004, adecrease in gross margin of 3.1% as a result of the rising well fracturing andsteel costs for casing and other well equipment. For the first two partnershipsin 2005, the Company has raised the footage-based drilling rates it charges toits Public Drilling Partnerships.

Natural Gas Marketing Activities

Natural gas sales from the marketing activities of Riley NaturalGas (RNG), the Company's gas marketing subsidiary, for the three months endedJune 30, 2005 were $25.9 million compared to a restated $25.0 million for thethree months ended June 30, 2004, an increase of approximately $900,000 or 3.6percent. Such increase was due to unrealized gains (losses) on derivativetransactions which amounted to a $2.0 million gain and a $1.1 million loss forthe three months ended June 30, 2005 and 2004, respectively and higher averagesales prices of natural gas sold, offset in part by lower volumes. 

The costs of gas marketing activities for the threemonths ended June 30, 2005 were $26.2 million compared to a restated $24.6million for the three months ended June 30, 2004, an increase of $1.6 millionor 6.5 percent. Such increase was due to  higher average purchase pricesand unrealized gains (losses) on derivative transactions, which amounted to aloss of $2.2 million and a gain of $1.0 million for the three months ended June30, 20 05 and 2004, respectively, offset in part by lower volumes of naturalgas purchased for resale. Income before income taxes for the Company's naturalgas marketing subsidiary decreased from a restated income of $353,000 for thethree months ended June 30, 2004 to a $188,000 loss for the three months endedJune 30, 2005.  

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Oil and Gas Sales

Oil and gas sales from the Company's producing propertiesfor the three months ended June 30, 2005 were $21.5 million compared to a restated$16.2 million for the three months ended June 30, 2004 an increase of $5.3million or 32.7 percent. The increase was due to increased volumes sold athigher average sales prices of oil and natural gas. The volume of natural gassold for the three months ended June 30, 2005 was 2.7 million Mcf at an averagesales price of $6.04 per Mcf compared to 2.5 million Mcf at an average restatedsales price of $5.05 per Mcf for the three months ended June 30, 2004. Oilsales were 111,000 barrels at an average sales price of $47.26 per barrel forthe three months ended June 30, 2005 compared to 96,000 barrels at an averagerestated sales price of $34.81 per barrel for the three months ended June 30,2004. The increase in natural gas and oil volumes was the result of theCompany's increased investment in oil and gas properties, primarilyrecompletions of existing wells, wells drilled in our NECO, Colorado area ofoperation, and the investment in oil and gas properties we own in our publicdrilling program partnerships.

Oil and Gas Production

The Company's oil and natural gas production by area ofoperations along with average sales price is presented below:

|                    |                 | Three Months Ended June 30,  2005 |       | Three Months Ended June 30,  2004 |
|--------------------|-----------------|-----------------------------------|-------|-----------------------------------|
|                    |                 |                                   |       | Natural                           |  | Natural  Gas |  |  |  | Natural |  | Natural Gas |
|                    | Oil   |                                   | Gas   |                                   | Equivalents |  | Oil   |  | Gas |  | Equivalents |
|                    | (Bbl)      |                                   | (Mcf) |                                   | (Mcfe)* |  | (Bbl)  |  | (Mcf) |  | (Mcfe)* |
| Appalachian  Basin |                 | 756                               |       | 392,690                           |  | 397,226 |  | 1,138 |  | 431,040 |  | 437,868 |
| Michigan  Basin    |                 | 1,232                             |       | 380,266                           |  | 387,658 |  | 1,853 |  | 425,854 |  | 436,972 |
| Rocky  Mountains   |                 | 109,370                           |       | 1,924,150                         |  | 2,580,370 |  | 93,113 |  | 1,689,576 |  | 2,248,254 |
| Total              |                 | 111,358                           |       | 2,697,106                         |  | 3,365,254 |  | 96,104 |  | 2,546,470 |  | 3,123,094 |
|                    |                 |                                   |       |                                   |  |  |  |  |  |  |  |  |
|                    |                 |                                   |       |                                   |  |  |  | (Restated) |  | (Restated) |  | (Restated) |
| Average  Price     |                 | $47.26                            |       | $6.04                             |  | $6.40 |  | $34.81 |  | $5.05 |  | $5.19 |
|                    |                 |                                   |       |                                   |  |  |  |  |  |  |  |  |

*One barrel of oil is equal to the energy equivalent of six Mcf of natural gas.

Financialresults depend upon many factors, particularly the price of natural gas and ourability to market our production effectively. In recent years, natural gas andoil prices have been among the most volatile of all commodity prices. Theseprice variations can have a material impact on our financial results. Naturalgas prices in Colorado continue to trail prices which we receive for ourAppalachian and Michigan gas which are based upon NYMEX. The Company'smanagement believes the lower prices in the Rocky Mountain Region, includingColorado, resulted from increasing local supplies that exceeded the localdemand and pipeline capacity available to move gas from the region. In 2003 apipeline expansion project was completed, leading to improved natural gasprices in the region, which reduced local supplies. There is currently asubstantial amount of drilling activity in the Rockies, and if future additionsto the pipeline system are not made in a timely fashion it is possible thatpipeline constraints could create a local oversupply situation in the futurewhich could mean lower natural gas prices.  Like most other producers inthe area we rely on major interstate pipeline companies to construct thesefacilities, so their timing and construction is not within our control.

Oil and Gas Derivative Activities

Because of uncertainty surrounding natural gas prices wehave used various derivative instruments to manage some of the impact offluctuations in prices. Through March of 2007 we have in place a series offloors and ceilings on part of our natural gas and oil production. Under thearrangements, if the applicable index rises above the ceiling price, we pay thecounterparty, however if the index drops below the floor the counterparty paysus. During the three months ended June 30, 2005 the Company averaged naturalgas volumes sold of 899,000 Mcf per month and oil sales of 37,000 barrels permonth. The positions in effect as of July 31, 2005 on the Company's share ofproduction are shown in the following table.

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|                                                                   |  |                      |  | FLOORS                                                                                                  |   | CEILINGS |
|-------------------------------------------------------------------|--|----------------------|--|---------------------------------------------------------------------------------------------------------|--------|----------|
|                                                                   |  |                      |  | Monthly                                                                                                 |        |          |  | Monthly |  |  |
|                                                                   |  |                      |  | Quantity                                                                                                |        | Contract |  | Quantity |  | Contract |
| Month  Set                                                        |  | Month                |  |            Mmbtu        |        | Price    |       Mmbtu        |  | Price |
| Colorado  Interstate Gas (CIG) Based Derivatives (Piceance Basin) |
| Feb-04                                                            |  | Jul  2005 - Oct 2005 |  | 33,000                                                                                                  |        | $3.10    |  | 16,000 |  | $4.43 |
| Mar-05                                                            |  | Jul  2005 - Oct 2005 |  | 38,000                                                                                                  |        | $4.75    |  | 19,000 |  | $8.12 |
| Jan-05                                                            |  | Nov  2005 - Mar 2006 |  | 60,000                                                                                                  |        | $4.50    |  | 30,000 |  | $7.15 |
| Jul-05                                                            |  | Nov  2005 - Mar 2006 |  | 27,500                                                                                                  |        | $6.50    |  | 13,750 |  | $8.27 |
| Mar-05                                                            |  | Apr  2006 - Oct 2006 |  | 42,000                                                                                                  |        | $4.50    |  | 21,000 |  | $7.25 |
| Jul-05                                                            |  | Apr  2006 - Oct 2006 |  | 27,500                                                                                                  |        | $5.50    |  | 13,750 |  | $7.63 |
| Jul-05                                                            |  | Nov  2006 - Mar 2007 |  | 27,500                                                                                                  |        | $6.00    |  | 13,750 |  | $8.40 |

| NYMEX Based  Derivatives - (Appalachian and Michigan Basins) |
|--------------------------------------------------------------|
| Feb-04                                                       |  | Jul 2005 - Oct  2005 |  | 122,000 |  | $4.28 |  | 61,000 |  | $5.00 |
| Mar-05                                                       |  | Jul 2005 - Oct  2005 |  | 39,000 |  | $5.75 |  | 19,500 |  | $8.37 |
| Jan-05                                                       |  | Nov 2005 - Mar  2006 |  | 156,000 |  | $5.00 |  | 78,000 |  | $8.50 |
| Mar-05                                                       |  | Apr 2006 - Oct  2006 |  | 78,000 |  | $5.50 |  | 39,000 |  | $7.40 |
| Jul-05                                                       |  | Apr 2006 - Oct  2006 |  | 61,000 |  | $6.25 |  | 30,000 |  | $8.98 |
| Jul-05                                                       |  | Nov 2006 - Mar  2007 |  | 68,000 |  | $7.00 |  | 34,000 |  | $9.27 |
| NYMEX Based  Derivatives (NECO Area)                         |
| Feb-04                                                       |  | Jul 2005 - Oct  2005 |  | 150,000 |  | $4.26 |  | 75,000 |  | $5.00 |
| Jan-05                                                       |  | Nov 2005 - Mar  2006 |  | 150,000 |  | $5.00 |  | 75,000 |  | $8.45 |
| Panhandle  Based Derivatives (NECO Area)                     |  |  |  |  |  |  |
| Jul-05                                                       |  | Apr 2006 - Oct  2006 |  | 150,000 |  | $5.00 |  | 75,000 |  | $8.62 |
| Jul-05                                                       |  | Nov 2006 - Mar  2007 |  | 150,000 |  | $6.50 |  | 75,000 |  | $8.56 |
| Oil - NYMEX  Based (Wattenberg)                              |  |  |  |  |  |  |  |  |
|                                                              |  |  |  | Bbls |  |  |  | Bbls |  |  |
| Aug-04                                                       |  | Jul 2005 - Dec  2005 |  | 15,000 |  | $32.30 |  | 7,500 |  | $40.00 |
|                                                              |  |  |  |  |  |  |  |  |  |  |

Oil and Gas Production and Well Operations Costs

Oil and gas production and well operations costs from theCompany's producing properties for the three months ended June 30, 2005 were$4.7 million compared to $4.0 million for the three months ended June 30, 2004,an increase of approximately $700,000 or  17.5 percent.  Suchincrease was due to increased production costs and severance and property taxeson the increased volumes and higher sales prices of natural gas and oil sold,along with the increased number of wells and pipelines operated by the Company. Lifting cost per Mcfe increased from $1.02 to $1.13 per Mcfe due to increasedseverance and property taxes on the significantly increased oil and gas pricesalong with additional well workovers and production enhancements workperformed. 

Exploratory Dry Hole Cost

During the second quarter of 2005, the exploratory FoxFederal #1-13 well, was deemed to be non-commercial after well tests werecompleted and will be plugged and abandoned. Under the successful effortsmethod of accounting, this cost is required to be expensed in the period whensuch determination is made. This amounted to a $4.9 million expense which isincluded under Exploratory Dry Hole Costs. There were no exploratory dry holecosts in 2004. 

Well Operations and Pipeline Income

Well operations and pipeline income for the three monthsended June 30, 2005 was $2.2 million compared to $1.9 million for the threemonths ended June 30, 2004, an increase of approximately $300,000 or 15.8percent. Such increase was due to an increase in the number of wells andpipeline systems operated by the Company for our drilling program partnershipsas well as third parties.  

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Other Income

Other income for the three months ended June 30, 2005 was$3.6 million compared to $687,000  other income for the three months endedJune 30, 2004, an increase of $2.9 million. Such increase was due to the gainon sale of some Pennsylvania wells (See Note 8) in the amount of $1.5 million,a gain on sale of undeveloped acreage in Colorado of $1.0 million (see Note 7)and increased management fee income from the increased partnershipsubscriptions and increased interest income earned on higher average cashbalances and higher interest rates.

General and Administrative Expenses

General and administrative expenses for the three monthsended June 30, 2005 were $1.3 million compared to $901,000 for the three monthsended June 30, 2004, an increase of approximately $399,000 or 44.3%. Suchincrease was due to the costs of complying with the various provisions ofSarbanes Oxley, in particular with Section 404 (Internal Controls) andincreased administrative activity associated with an expanding Company.

Depreciation, Depletion, and Amortization

Depreciation, depletion, and amortization costs for thethree months ended June 30, 2005 increased to $4.8 million from a restated $4.5million for the three months ended June 30, 2004, an increase of approximately$300,000 or 6.7 percent. Such increase was due to the increased production andinvestment in oil and gas properties by the Company.

Interest Expense

Interest expense for the three months ended June 30, 2005was $143,000 compared to a restated $194,000 for the three months ended June 30,2004, an decrease of $51,000.  Such decrease was due to significantlylower average outstanding balances of our credit facility offset in part by anunrealized gain on an interest rate swap in 2004, higher interest rates andincreased accretion related to asset retirement obligations.  Interestexpense for the three months ended June 30, 2004 included an unrealized gainfrom an interest rate swap of $159,000. There was no interest rate swap in2005. The Company utilizes its daily cash balances to reduce its line of creditto lower its costs of interest.  The average daily outstanding debtbalance for the three months ended June 30, 2005 was $1.0 million compared to$12.1 million for the three months ended June 30, 2004.

Oil and Gas Price Risk Management (Gain) Loss, Net

For the three months ended June 30, 2005, the Companyrecorded unrealized gains of $1,933,100 and realized losses of $1,074,700compared to the three months ended June 30, 2004 which is comprised of arestated unrealized loss of $518,900 and restated realized losses of $349,800.The 2005 change is the result of increasing natural gas prices. Oil and gasprice risk management (gain) loss, net is comprised of the change in fair valueof oil and natural gas derivatives related to our oil and gas production (thisline does not include commodity based derivative transactions related totransactions from marketing activities).

Provision for Income Taxes

The effective income tax rate for the Company's provisionfor income taxes increased from approximately 36 percent to 37 percentprimarily because of a reduction in the benefit from percentage depletion,offset in part by additional benefit to be realized for the tax deduction fordomestic production activities.

NetIncome and Earnings per Share

Net income for thethree months ended June 30, 2005 was $10.4 million compared to a restated netincome of $8.4 million for the three months ended June 30, 2004, an increase ofapproximately $2.0 million or 23.8 percent.

Diluted earnings pershare for the three months ended June 30, 2005 was $0.63 per share compared toa restated $0.51 per share for the three months ended June 30, 2004, anincrease of $0.12 per share or 23.5 percent.

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Six Months Ended June 30, 2005 Compared with June 30,2004

Revenues

Total revenues for the six months ended June 30, 2005were $166.2 million compared to a restated $143.0 million for the six months endedJune 30, 2004, an increase of approximately $23.2 million or 16.2 percent. Suchincrease was a result of increased drilling revenues, oil and gas sales, welloperations and pipeline income, and other income, offset in part from lower gassales from marketing activities.

Costs and Expenses

Costs and expenses for the six months ended June 30, 2005were $129.7 million compared to a restated $115.7 million for the six monthsended June 30, 2004, an increase of approximately $14.0 million or 12.1 percent.Such increase was primarily the result of exploratory dry hole costs of $4.9million in 2005 as compared to zero in 2004 and increased cost of oil and gaswell drilling operations, oil and gas production and well operations cost,general and administrative expenses, and depreciation, depletion andamortization, offset in part by lower cost of gas marketing activities.

Drilling Operations

Drilling revenues for the six months ended June 30, 2005were $68.4 million compared to $59.0 million for the six months ended June 30,2004, an increase of approximately $9.4 million or 15.9 percent.  Suchincrease was due to the increased drilling funds raised through the Company'sPublic Drilling Programs.  The Company started 2005 with advances for futuredrilling from December 31, 2004 of $23.4 million.  The Company has fundedtwo drilling partnerships during the year with $40 million in subscriptionseach and has commenced drilling of the partnerships wells.  We believe inpart that this increase in drilling program partnership subscriptions is fueledby the increase in oil and natural gas prices which has improved theperformance of our prior programs which in turn has helped to increase ourcurrent drilling program sales.

Oil and gas well drilling operations costs for the sixmonths ended June 30, 2005 were $59.3 million compared to $50.3 million for thesix months ended June 30, 2004, an increase of approximately $9.0 million or17.9 percent. Such increase was due to the higher levels of drilling activity fromour Public Drilling Programs referred to above.  The gross margin on thedrilling activities for the six months ended June 30, 2005 was 13.3% comparedwith 14.6% for the six months ended June 30, 2004, a decrease in gross marginof 1.3% as a result of the rising well fracturing and steel costs for casingand other well equipment. For the first two partnerships in 2005, the Companyhas raised its footage-based drilling rates it charges to its Public DrillingPartnerships. 

Natural Gas Marketing Activities

Natural gas sales from the marketing activities of RileyNatural Gas (RNG), the Company's gas marketing subsidiary for the six monthsended June 30, 2005 were $43.4 million compared to a restated $47.0 million forthe six months ended June 30, 2004, a decrease of approximately $3.6 million or7.7 percent. Such decrease was primarily due to unrealized losses on derivativetransactions which amounted to $4.7 million and $2.5 million for the six monthsended June 30, 2005 and 2004, respectively. 

The costs of gas marketing activities for the six monthsended June 30, 2005 were $44.1 million compared to a restated $46.5 million forthe six months ended June 30, 2004, a decrease of $2.4 million or 5.2 percent.Such decrease was due to unrealized gains on derivative transactions whichamounted to $3.9 million and $2.0 million for the six months ended June 30,2005 and 2004, respectively and lower volumes of natural gas purchased forresale, offset in part by higher average purchase prices. Income before incometaxes for the Company's natural gas marketing subsidiary decreased from arestated $529,000 income for the six months ended June 30, 2004 to a $509,000loss for the six months ended June 30, 2005.  

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Oil and Gas Sales

Oil and gas sales from the Company's producing propertiesfor the six months ended June 30, 2005 were $40.2 million compared to arestated $32.5 million for the six months ended June 30, 2004 an increase of$7.7 million or 23.7 percent. The increase was due to increased volumes sold athigher average sales prices of oil and natural gas. The volume of natural gassold for the six months ended June 30, 2005 was 5.4 million Mcf at an averagesales price of $5.65 per Mcf compared to 5.2 million Mcf at an average restatedsales price of $4.99 per Mcf for the six months ended June 30, 2004. Oil saleswere 212,200 barrels at an average sales price of $45.80 per barrel for the sixmonths ended June 30, 2005 compared to 200,200 barrels at an average restatedsales price of $33.51 per barrel for the six months ended June 30, 2004. Theincrease in natural gas and oil volumes was the result of the Company'sincreased investment in oil and gas properties, primarily recompletions ofexisting wells, wells drilled in our NECO, Colorado area of operation, and theinvestment in oil and gas properties we own in our public drilling programpartnerships.

Oil and Gas Production

The Company's oil and natural gas production by area ofoperations along with average sales price is presented below:

|                   |                 | Six Months Ended June 30,  2005 |       | Six Months Ended June 30,  2004 |
|-------------------|-----------------|---------------------------------|-------|---------------------------------|
|                   |                 |                                 |       | Natural                         |  | Natural  Gas |  |  |  | Natural |  | Natural Gas |
|                   | Oil   |                                 | Gas   |                                 | Equivalents |  | Oil   |  | Gas |  | Equivalents |
|                   | (Bbl)      |                                 | (Mcf) |                                 | (Mcfe)* |  | (Bbl)  |  | (Mcf) |  | (Mcfe)* |
| Appalachian Basin |                 | 1,855                           |       | 843,742                         |  | 854,872 |  | 2,342 |  | 888,258 |  | 902,310 |
| Michigan  Basin   |                 | 2,214                           |       | 792,814                         |  | 806,098 |  | 3,004 |  | 869,816 |  | 887,840 |
| Rocky  Mountains  |                 | 208,185                         |       | 3,756,785                       |  | 5,005,895 |  | 194,894 |  | 3,411,388 |  | 4,580,752 |
| Total             |                 | 212,254                         |       | 5,393,341                       |  | 6,666,865 |  | 200,240 |  | 5,169,462 |  | 6,370,902 |
|                   |                 |                                 |       |                                 |  |  |  |  |  |  |  |  |
|                   |                 |                                 |       |                                 |  |  |  | (Restated) |  | (Restated) |  | (Restated) |
| Average  Price    |                 | $45.80                          |       | $5.65                           |  | $6.03 |  | $33.51 |  | $4.99 |  | $5.11 |
|                   |                 |                                 |       |                                 |  |  |  |  |  |  |  |  |

*One barrel of oil is equal to the energy equivalent of six Mcf of natural gas.

Financialresults depend upon many factors, particularly the price of natural gas and ourability to market our production effectively. In recent years, natural gas andoil prices have been among the most volatile of all commodity prices. Theseprice variations can have a material impact on our financial results. Naturalgas prices in Colorado continue to trail prices which we receive for ourAppalachian and Michigan gas which are based upon NYMEX. The Company'smanagement believes the lower prices in the Rocky Mountain Region, includingColorado, resulted from increasing local supplies that exceeded the localdemand and pipeline capacity available to move gas from the region. In 2003 apipeline expansion project was completed reducing the local surplus and leadingto improved natural gas prices in the region. There is currently a substantialamount of drilling activity in the Rockies, and if future additions to thepipeline system are not made in a timely fashion it is possible that pipelineconstraints could create a local oversupply situation in the future which couldmean lower natural gas prices.  Like most other producers in the area werely on major interstate pipeline companies to construct these facilities, sotheir timing and construction is not within our control. See Management'sDiscussion and Analysis for the three months ended June 30, 2005 compared withrestated June 30, 2004 for a complete schedule of derivative positions. 

Oil and Gas Production and Well Operations Costs

Oil and gas production and well operations costs from theCompany's producing properties for the six months ended June 30, 2005 were $8.9million compared to $7.9 million for the six months ended June 30, 2004, anincrease of approximately $1.0 million or 12.7 percent.  Such increase wasdue to increased production costs and severance and property taxes on the increasedvolumes and higher sales prices of natural gas and oil sold, along with theincreased number of wells and pipelines operated by the Company.  Liftingcost per Mcfe increased from $1.00 to $1.11 per Mcfe due to increased severanceand property taxes on the significantly increased oil and gas prices along withadditional well workovers and production enhancements work performed. 

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Exploratory Dry Hole Cost

During the second quarter of 2005, the exploratory Fox Federal#1-13 well, was deemed to be non-commercial after well tests were completed andwill be plugged and abandoned. Under the successful efforts method ofaccounting, this cost is required to be expensed in the period when suchdetermination is made. This amounted to a $4.9 million expense which isincluded under Exploratory Dry Hole Costs. There were no exploratory dry holecosts in 2004.

Well Operations and Pipeline Income

Well operations and pipeline income for the six months endedJune 30, 2005 was $4.4 million compared to $3.7 million for the six monthsended June 30, 2004, an increase of approximately $700,000 or 18.9 percent.Such increase was due to an increase in the number of wells and pipelinesystems operated by the Company for our drilling program partnerships as wellas third parties.

Other Income

Other income for the six months ended June 30, 2005 was$9.8 million compared to $745,000 for the six months ended June 30, 2004, anincrease of $9.1 million. The increase is a result of a sale of a portion ofone of our undeveloped leases in Garfield County, Colorado, which we sold inthe first quarter of 2005 (See Note 7) for a pre-tax gain of $6.2 million, asecond quarter gain on sale of some Pennsylvania wells (See Note 8) in theamount of $1.5 million, management fees collected from the funding of twodrilling partnerships, and interest earned on higher average cash balances andhigher interest rates.

General and Administrative Expenses

General and administrative expenses for the six monthsended June 30, 2005 were $2.9 million compared to $1.9 million for the sixmonths ended June 30, 2004, an increase of approximately $1.0 million or 52.6%.Such increase was due to the costs of complying with the various provisions ofSarbanes Oxley, in particular with Section 404 (Internal Controls) andincreased administrative activity associated with an expanding Company.

Depreciation, Depletion, and Amortization

Depreciation, depletion, and amortization costs for thesix months ended June 30, 2005 increased to $9.7 million from a restated $9.0million for the six months ended June 30, 2004, an increase of approximately$700,000 or 7.8 percent. Such increase was due to the increased production andinvestment in oil and gas properties by the Company.

Interest Expense

Interest expense for the six months ended June 30, 2005was $291,000 compared to a restated $404,000 for the six months ended June 30,2004, a decrease of $113,000 or 28.0 percent.  Such decrease was due tosignificantly lower average outstanding balances of our credit facility offsetin part by an unrealized gain on an interest rate swap in 2004, higher interestrates and increased accretion related to asset retirement obligations. Interestexpense for the six months ended June 30, 2004 included an unrealized gain froman interest rate swap of $290,000. There was no interest rate swap in2005.  The Company utilizes its daily cash balances to reduce its line ofcredit to lower its costs of interest.  The average daily outstanding debtbalance for the six months ended June 30, 2005 was $950,000 compared to $12.1million for the six months ended June 30, 2004.

Oil and Gas Price Risk Management (Gain) Loss, Net

For the six months ended June 30, 2005, the Companyrecorded unrealized losses of $1,525,500 and realized losses of $1,275,200compared to the six months ended June 30, 2004 balance which is comprised ofrestated unrealized losses of $1,228,900 and restated realized losses of $469,800.The 2005 change is the result of increasing natural gas prices. Oil and gasprice risk management (gain) loss, net is comprised of the change in fair valueof oil and natural gas derivatives related to our oil and gas production (thisline item does not include commodity based derivative transactions related totransactions from marketing activities).

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Provision for Income Taxes

The effective income tax rate for the Company's provisionfor income taxes increased from approximately 36 percent to 37 percentprimarily because of a reduction in the benefit from percentage depletion,offset in part by additional benefit to be realized for the tax deduction fordomestic production activities.

Netincome and Earnings per share

Net income for thesix months ended June 30, 2005 was $21.0 million compared to a restated netincome of $16.1 million for the six months ended June 30, 2004, an increase ofapproximately $4.9 million or 30.4 percent.

Diluted earnings pershare for the six months ended June 30, 2005 was $1.27 per share compared to arestated $0.98 per share for the six months ended June 30, 2004, an increase of$0.29 share or 29.6 percent.

Liquidity and Capital Resources

TheCompany funds its operations through a combination of cash flow from operationsand use of the Company's credit facility.  Operational cash flow isgenerated by sales of natural gas and oil from the Company's well interests,natural gas marketing, profits from well drilling and operating activities forthe Company's public drilling programs and others, and natural gas gatheringand transportation. Cash payments from Company-sponsored partnerships are usedto drill and complete wells for the partnerships, with operating cash flowaccruing to the Company to the extent payments exceed drilling costs.  TheCompany utilizes its revolving credit arrangement to meet the cash flowrequirements of its operating and investment activities.

Oil and GasDerivative Activities

Becauseof the uncertainty surrounding natural gas and oil prices we have used variousderivative instruments to manage some of the impact of fluctuations in prices.Through March, 2007 we have in place a series of floors and ceilings on part ofour natural gas and oil production. Under the arrangements, if the applicableindex rises above the ceiling price, we pay the counterparty, however if theindex drops below the floor the counterparty pays us. See previous pages inthis Management's Discussion and Analysis for a schedule of open derivative positions.

TheCompany also enters into derivative instruments for its partners' share ofproduction as well as its own production. Actual wellhead prices will varybased on local contract conditions, gathering and other costs and factors.

Natural GasPricing and Pipeline Capacity

TheCompany sells natural gas under contracts that are priced based on spot pricesor price indexes that reflect current market prices for the commodity.  Asa result variations in the market are reflected in the revenue we receive. Theprice of natural gas has varied substantially over short periods of time in thepast, and there is every reason to expect a continuation of that variability inthe future.  During the first two quarters prices for natural gas wereclose to or above record levels, and future expectations as reflected in theNYMEX futures market are for continuing high price levels for the balance of2005 and beyond.  Strong domestic and international demand for energy andinadequate short term supplies  are believed to be key causes of thestrong prices.  High prices could encourage the development of new energysources and reduced consumption as users find more efficient ways to use energyor substitute other energy forms.  High energy prices could also slowglobal economic growth, further reducing demand.  As a result the energyprice outlook could change rapidly from current expectations.  Reducednatural gas prices would reduce the profitability and cash flow from theCompany's gas production operations.

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Naturalgas prices throughout the country tend to be fairly closely related afterallowing for differences in the quality and energy content of the gas, the locationand distance to market, and other factors.  Sometimes prices in aparticular area may vary from historical relationships.  This can occurwhen a local condition restricts the marketability of the natural gas. For example limits on pipeline delivery capacity for natural gas can result inlower than normal prices for wells that use the system to deliver gas tomarket.  This situation occurred in 2002 to 2003 in the Rocky Mountains,when the productive capacity of wells in the region exceeded the amount of gasthat could be used by local markets or shipped out of the area.  In orderto access the available capacity producers were forced to sell their gas atlower than normal prices with the alternative being to shut wells in. Since that time, additional pipeline capacity has been added, and furtheradditions are planned in the future, so prices have returned to the historicalrelationship to other producing regions.  However future deliveryconstraints could result in lower than anticipated prices or production in anyof the Company's producing areas.

Oil Pricing

Oilprices were near or above record levels for most of the first two quarters of2005.  The Company's oil prices are largely determined by oil prices inthe world market.  Global supply and demand and geopolitical factors arethe key determinants of oil prices.  The rapid growth of energy use indeveloping countries, most notably China, is driving a rapid increase inworldwide oil consumption.  Higher prices could result in reducedconsumption and/or increasing supplies that could moderate the current highprice levels.  Over the past several years oil has been an increasing partof the Company's production mix.  As a result higher oil prices havecontributed to the Company's increased revenue from oil and gas sales more thanin the past, and the Company would suffer a greater impact if oil prices wereto decrease.

Public Drilling Programs

During January, 2005, the Company commenced sales andfunded its first 2005 Partnership (PDC 2005-A) at its maximum subscriptions of$40 million.  The Company commenced the drilling operations of thepartnership late in the first quarter and will continue to drill for thepartnership into the second and third quarters of 2005.

In April, 2005, the Company commenced sales and fundedits second 2005 Partnership (PDC 2005-B) at its maximum allowable subscriptionsof $40 million.  The Company commenced drilling operations of thispartnership late in the second quarter and will continue to drill for thepartnership during the third and fourth quarters of 2005.

In December, 2005 the Company commenced sales and fundedits third 2005 partnership, a private limited partnership, Rockies RegionPrivate Limited Partnership with subscriptions of approximately $36 million.Drilling operations will commence in the first quarter of 2006.

Substantiallyall of the Company's drilling programs contain a repurchase provision allowingInvestors to request that the Company repurchase their partnership units at anytime beginning with the third anniversary after the first cash distribution.The provision provides that the Company is obligated to purchase an aggregateof 10% of the initial subscriptions per calendar year (at a minimum price offour times the most recent 12 months' cash distributions), only if investorsrequest the Company to repurchase such units and subject to the Company'sfinancial ability to do so. The maximum annual 10% repurchase obligation, ifrequested by the investors, is currently approximately $8.4 million. TheCompany has adequate liquidity to meet this obligation. During the first sixmonths of 2005, the Company purchased $151,275 under this provision.

Drilling Activity

Duringthe first six months 2005, the Company drilled along with its public drillingfund partnerships a total of 84 successful wells. The Company drilled 66successful wells in its Wattenberg field in the Denver-Julesburg Basin and 18successful wells in the Piceance Basin in western Colorado, all of the wellsthat the Company drills in these two areas are in conjunction with its publicdrilling fund partnerships. The Company plans to conduct the remainder of its2005 partnership drilling activity in these two areas.

Throughthe second quarter of 2005, the Company has drilled for its own account a 46gross and 31.5 net  wells on its northeast Colorado properties (NECO). Thewells are being drilled on locations created by the regulatory approval of thereduction in well spacing from 80 to 40 acres on the properties the Companyacquired in Yuma County in 2003. 

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ExploratoryWells

Duringthe second quarter of 2005, the exploratory Fox Federal #1-13 well, was deemed tobe non-commercial after well tests were completed and will be plugged andabandoned.  Under the successful efforts method of accounting, this costis required to be expensed in the period when such determination is made. This amounted to a $4.9 million expense which is included in the IncomeStatement under Exploratory Dry Hole Costs.

TheCompany's second exploratory well, the Coffeepot Springs #24-34 has beendrilled to total depth, completed in three zones, tested and has been deemed tobe productive under the successful efforts method of accounting. The Companyhas a 100% working interest in this well. The cost of this well, which isapproximately $5.2 million as of November 30, 2005 will be capitalized anddepreciated over the life of the well using the units of productiondepreciation method.

Earlyin the third quarter the Company commenced the drilling of a horizontal Bakkenexploratory well, the Fedora #34-22H in Dunn County, North Dakota which hasbeen drilled to total depth, completed and placed in production in lateSeptember, 2005. The Company has a 100% working interest in this well. The costof this well, which is approximately $4.1 million as of November 30, 2005, willbe capitalized and depreciated over the life of the well using units ofproduction depreciation method. 

Allthe costs of the above three exploratory wells were incurred 100% by theCompany as no costs were incurred by the drilling fund partnerships.

Purchase of Oiland Gas Properties

Althoughthe Company made several offers to purchase producing oil and gas propertiesfrom other companies during the first six months of 2005, it was not successfulin purchasing any of those properties.  The Company did purchase a numberof small interests in its partnerships from investors wishing to liquidatetheir holdings under the repurchase provision of the partnerships.

Costsincurred by the Company in oil and gas acquisitions, exploration anddevelopment for the six months ended June 30, 2005 are presented below:

| Property  acquisition cost:    |  |             |
|--------------------------------|--|-------------|
| Proved  undeveloped properties |  | $4,979,982  |
| Producing  properties          |  | 178,775     |
| Development  costs             |  | 29,572,159  |
| Exploration  costs             |  | 4,570,210   |
|                                |  | $39,301,126 |

Common StockRepurchase Program

On March 18, 2005 the Company publicly announced theauthorization by its Board of Directors to purchase up to 2% of the Company'soutstanding common stock (331,796) at fair market value at the date ofpurchase. At a meeting held June 10, 2005, the Board of Directors of PetroleumDevelopment Corporation approved an amendment of the size of the stockrepurchase from 2% to 10% (1,658,980 shares) of the Company's outstandingcommon stock. Under the program, the Board has discretion as to the dates ofpurchase and amounts of stock to be purchased and whether or not to makepurchases. This program is scheduled to expire on December 31, 2005. Thefollowing activity has occurred since inception of the plan on March 18, 2005until June 30, 2005.

| Month of Purchase            |  | May, 2005            |
|------------------------------|--|----------------------|
| Average Price Paid per Share |  | $23.75               |
| Broker/Dealer                |  | McDonald Investments |
| Number of Shares Purchased   |  | 1,327,184            |

                    

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WorkingCapital 

Althoughthe Working Capital of the Company as of June 30, 2005 is a negative $2.4million this amount included a net liability of $3.2 million related to thefair value of derivatives.  Such amount may or may not be realizeddepending on the change in the fair value of derivatives between June 30, 2005and settlement and will not require additional expenditures of cash since itwill be funded with proceeds from future oil and gas sales.

Long-TermDebt

TheCompany has a $200 million credit facility agented by JP Morgan Securities,Inc. and BNP Paribas subject to and secured by adequate levels of oil and gasreserves. The maximum available borrowing base is $125.0 million as of April 1, 2005, of which the Company has activated $80 million of thefacility.  The Company is required to pay a commitment fee of 1⁄4 percentannually on the unused portion of the activated credit facility. Interestaccrues at prime, with LIBOR (London Interbank Market Rate) alternativesavailable at the discretion of the Company and subject to a pricing grid whichdefines the spread over LIBOR. No principal payments are required until thecredit agreement expires on November 4, 2010.

Asof June 30, 2005, the outstanding balance was $22,000,000.  Any amountsoutstanding under the credit facility are secured by substantially allproperties of the Company.  The credit agreement requires, among otherthings, the existence of satisfactory levels of natural gas reserves andmaintenance of certain financial and negative covenants customary for a facilityof this size. At June 30, 2005, the outstanding balance was subject to a primerate of 6.25%. As of this filing the Company was in compliance with allfinancial covenants in the credit agreement except for timely filing of theSeptember 30, 2005, Form 10-Q. The Company has been granted a waiver throughJanuary 12, 2006, for the delivery of its quarterly reporting requirements forthe quarter ended September 30, 2005.  

ContractualObligations

Contractual obligationsand due dates are as follows:

|                               |                                      |  | Less than                                                                                                                    |  |                                                                                                                              |  |                                                                                                           |  | More than                                                                                                                    |
|-------------------------------|--------------------------------------|--|------------------------------------------------------------------------------------------------------------------------------|--|------------------------------------------------------------------------------------------------------------------------------|--|-----------------------------------------------------------------------------------------------------------|--|------------------------------------------------------------------------------------------------------------------------------|
| Contractual  Obligations      | Total                                |  | 1 year                                                                                                                       |  | 1-3 Years                                                                                                                    |  | 3-5 Years                                                                                                 |  | 5 years                                                                                                                      |
| Long-Term Debt                |  $    22,000,000 |  |  $                     - |  |  $                     - |  |  $      22,000,000                                                               |  |  $                     - |
| Operating  Leases             | 737,600                              |  | 281,300                                                                                                                      |  | 309,100                                                                                                                      |  | 107,200                                                                                                   |  | 40,000                                                                                                                       |
| Asset  Retirement Obligations | 8,015,800                            |  | 50,000                                                                                                                       |  | 100,000                                                                                                                      |  | 100,000                                                                                                   |  | 7,765,800                                                                                                                    |
| Drilling Rig  Commitment      | 26,950,000                           |  | 5,621,000                                                                                                                    |  | 11,242,000                                                                                                                   |  | 10,087,000                                                                                                |  |                    -                    |
| Derivative  Agreements        | 12,450,900                           |  | 10,133,800                                                                                                                   |  | 2,317,100                                                                                                                    |  |                    - |  |                    -                    |
| Other Liabilities             | 3,326,200                            |  | 40,000                                                                                                                       |  | 250,000                                                                                                                      |  | 250,000                                                                                                   |  | 2,786,200                                                                                                                    |
| Total                         | $    73,480,500       |  |  $    16,126,100                                                                                         |  |  $    14,218,200                                                                                         |  |  $    32,544,200                                                                      |  |  $      10,592,000                                                                                  |
|                               |                                      |  |                                                                                                                              |  |                                                                                                                              |  |                                                                                                           |  |                                                                                                                              |

Long-term debt in the above table does not include interest as interestrates are variable and principal balances fluctuate significantly from periodto period.  The Companycontinues to pursue capital investment opportunities in producing natural gasproperties as well as its plan to participate in its sponsored natural gasdrilling partnerships.  Management believes that the Company has adequatecapital to meet its operating requirements.

Commitments andContingencies

As ManagingGeneral Partner of 10 private limited partnerships and 64 public limitedpartnerships, the Company has liability for any potential casualty losses inexcess of the partnership assets and insurance. The Company is generally thesole general partner of each of these various limited partnerships. The Companybelieves its casualty insurance coverage is adequate to meet this potentialliability.

Factors That MayAffect Future Results and Financial Conditions

Inthe course of its normal business the Company is subject to a number of risksthat could potentially adversely impact its revenues, expenses and financialcondition.  The following is a discussion of some of the more significantrisks. 

* *

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*Drillingof oil and natural gas wells is highly speculative and may be unprofitable orresult in the loss of the entire investment in a well and the lease on which itis located.*  To theextent the Company drills unsuccessful developmental wells its future profitabilitywill be reduced on production from the field where the well is located, sincethe investment in the well will be included in the investment in the field anddepreciated on the unit-of-production method.  Recently the Company hasbegun drilling several planned exploratory wells that could lead to significantfuture development opportunities.  Under the Successful Efforts methodused by the Company, the costs of exploratory dry holes are taken as an expensein the period when it is determined that they are non-productive.  As aresult exploratory dry holes, if any additional are drilled, will result in animmediate reduction in net income for that period. 

* *

*Reductionsin prices of oil and natural gas reduce the profitability of the Company'sproduction operations. *Revenuefrom the sale of oil and gas increases when prices increase and declines whenprices decrease.  These price changes can occur rapidly and are notpredictable nor within the control of the Company. 

* *

*Changesin prices of oil and natural gas may also affect sales of drillingprograms. *Recentenergy price increases have coincided with increased sales of the Company'spartnership investments, and increased profitability from thoseoperations.  It is likely that declining prices could have the oppositeeffect, reducing partnership sales and profitability.  Because the Companyhas not been able to meet the demand for oil and gas investments from itsBroker/Dealer network, those Broker/Dealers have been seeking investments fromother oil and gas program sponsors.  These new competitors couldpotentially take business from the Company, particularly in a declining pricemarket for oil and gas.  

*Increasesin prices of oil and natural gas have increased the cost of drilling, the costof potential acquisitions and other factors affecting the performance of theCompany in both the short and long term.* In the current high price environment most oil and gascompanies have increased their expenditures for drilling new wells.  Thishas resulted in increased demand and higher prices for leases, oilfieldservices and well equipment.  Similarly higher energy prices haveincreased the price purchasers are willing to pay for producing properties andincreased competition for the properties that are available.  Thesefactors make it more difficult to add to the Company's production, and increasethe cost of additions.  To the extent that new reserves and production areadded at these higher prices in addition to the increased drilling costs, therisk to the Company of decreased profitability from future decreases in oil andgas prices is increased.

*TheCompany's derivative activities could result in reduced revenue compared to thelevel the Company would experience if no derivatives were in place. *The Company uses derivatives to reducethe impact of price movements on revenue.  While these derivatives protectthe Company against the impact of declining prices, they also may limit thepositive impact of price increases.  As a result the Company may havelower revenues when prices are increasing than might otherwise be the case.

*Thehigh level of drilling activity could result in an oversupply of natural gas ona regional or national level resulting in much lower commodity prices. *Recently the natural gas market beencharacterized by excess demand compared to the supplies available.  Thehigh level of drilling, combined with reduction in demand resulting from highprices could result in an oversupply of natural gas.  On a local levelincreasing supplies could exceed available pipeline capacity.  In bothcases the result would probably be lower prices for the natural gas the Companyproduces and reduced profitability for the Company.

*TheCompany owns interests in and operates more than 2,700 wells and drills manynew wells each year. Environmental hazards and unpredictable costs associatedwith those wells could have a negative impact on the performance of theCompany.*While many ofthe wells the Company drills are relatively low risk development wells, theCompany also plans to drill exploratory wells to test new areas in comingmonths.  Under the terms of the Company's drilling agreements with itspartnerships the Company also bears the risk for the investor partners interestsin new wells through an indemnification agreement.  The costs associatedwith problems encountered in drilling, completing and operating wells can besignificant, and could adversely affect the profitability of the Company ifsuch problems are encountered. 

*Changesin the Tax Code could reduce the attractiveness of the Company's partnershipinvestments and reduce the revenues and profitability of thoseoperations. *Thepartnership interests sold by the Company offer investors significant taxbenefits under current tax regulations.  If the Congress changes the Codeand eliminates or reduces those benefits investments in the partnerships wouldbe less attractive to investors and fewer investors might invest.

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*Increasinginterest rates could increase the cost of the Company's borrowing. *Higher interest rates would increase theinterest costs of the Company's borrowing, and would make additional borrowingless attractive.  This could also make potential acquisitions and otheractivities funded with borrowed money less profitable, potentially reducing therate of growth of production and reserves. Consequently, the Company'sprofitability could be reduced.

CriticalAccounting Policies and Estimates

We have identified the following policies as criticalto our business operations and the understanding of our results of operations.This listing is not a comprehensive list of all of our accounting policies. Inmany cases, the accounting treatment of a particular transaction isspecifically dictated by accounting principles generally accepted in the UnitedStates, with no need for management's judgment in their application. There arealso areas in which management's judgment in selecting any availablealternative would not produce a materially different result. However, certainof our accounting policies are particularly important to the portrayal of ourfinancial position and results of operations and may require the application ofsignificant judgment by our management; as a result, they are subject to aninherent degree of uncertainty. In applying those policies, our management usesits judgment to determine the appropriate assumptions to be used in thedetermination of certain estimates. Those estimates are based on our historicalexperience, our observance of trends in the industry, and information availablefrom other outside sources, as appropriate. For a more detailed discussion onthe application of these and other accounting policies, see "Note 1 -Summary of significant accounting policies" in our financial statementsand related notes on Form 10-K/A. Our critical accounting policies andestimates are as follows:

Revenue Recognition

TheCompany's drilling segment recognizes revenue from our drilling contracts withour publicly registered drilling programs using the percentage of completionmethod. These contracts are footage rate based and completed within nine totwelve months after the commencement of drilling. The Company providesgeological, engineering, and drilling supervision on the drilling andcompletion process and uses subcontractors to perform drilling and completionservices. The percentage of completion method measures the percentage ofcontract costs incurred to date to the estimated total contract costs for eachcontract. The Company utilizes this method because reasonably dependableestimates of the total estimated costs can be made. Because the revenuerecognized depends on estimates of the final contract costs, which are assessedcontinually during the term of the contract, recognized revenues are subject torevisions as the contract progresses. Anticipated losses, if any, onuncompleted contracts would be recorded at the time that our estimated costsexceeded the contract revenue. The Company has not experienced any contractlosses in 2005 or 2004.

Naturalgas marketing is recorded on the gross accounting method.  Riley NaturalGas ("Riley"), our marketing subsidiary, purchases gas from manysmall producers and bundles the gas together to sell in larger amounts topurchasers of natural gas for a price advantage.  Riley has latitude inestablishing price and discretion in supplier and purchaser selection. Naturalgas marketing revenues and expenses reflect the full cost and revenue of thosetransactions because Riley takes title to the gas it purchases from the variousproducers and bears the risks and enjoys the benefits of that ownership. Boththe realized and unrealized portions of the Riley commodity based derivativetransactions for natural gas marketing activities are included in gas salesfrom marketing activities or cost of gas marketing activities, as applicable.

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 upon delivery, collectionof revenue from the sale is reasonably assured and the sales price is fixed ordeterminable.  Natural gas is sold by the Company under contracts with termsranging from one month to three years.  Virtually all of the Company'scontracts pricing provisions are tied to a market index, with certainadjustments based on, among other factors, whether a well delivers to agathering or transmission line, quality of natural gas and prevailing supplyand demand conditions, so that the price of the natural gas fluctuates toremain competitive with other available natural gas supplies.  As aresult, the Company's revenues from the sale of natural gas will suffer if marketprices decline and benefit if they increase.  The Company believes thatthe pricing provisions of its natural gas contracts are customary in theindustry.

TheCompany currently uses the "Net-Back" method of accounting for transportationarrangements of our natural gas sales.  The Company sells gas at thewellhead and collects a price and recognizes revenues based on the wellheadsales price since transportation costs downstream of the wellhead are incurredby our customers and reflected in the wellhead price.

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Salesof oil are recognized when persuasive evidence of a sales arrangement exists,the oil is verified as produced and is delivered in a stock tank, collection ofrevenue from the sale is reasonably assured and the sales price isdeterminable.  The Company is currently able to sell all the oil that itcan produce under existing sales contracts with petroleum refiners andmarketers.  The Company does not refine any of its oil production. The Company's crude oil production is sold to purchasers at or near theCompany's wells under short-term purchase contracts at prices and in accordancewith arrangements that are customary in the oil industry.

Welloperations and pipeline income is recognized when persuasive evidence of anarrangement exists, services have been rendered, collection of revenues isreasonably assured and the sales price is fixed or determinable.  TheCompany is paid a monthly operating fee for each well it operates for outsideowners including the limited partnerships sponsored by the Company.  Thefee is competitive with rates charged by other operators in the area.  Thefee covers monthly operating and accounting costs, insurance and otherrecurring costs.  The Company may also receive additional compensation forspecial non-recurring activities, such as reworks and recompletions.

Valuation ofAccounts Receivable 

Managementreviews accounts receivable to determine which are doubtful ofcollection.  In making the determination of the appropriate allowance fordoubtful accounts, management considers the Company's history of write-offs,relationships and overall credit worthiness of its customers, and wellproduction data for receivables related to well operations.

Accounting forDerivatives Contracts at Fair Value

The Company uses derivative instruments to manage itscommodity and financial market risks. Accounting requirements for derivativesare complex; interpretation of these requirements by standard-setting bodies isongoing. The Company currently does not use hedge accounting treatment for itsderivatives. 

Derivatives are reported on the Consolidated BalanceSheets at fair value. Changes in fair value of derivatives are recorded inearnings in the consolidated statements of income as none of the Company'sderivatives qualified for hedge accounting under the provisions of FAS No. 133.

The measurement offair value is based on actively quoted market prices, if available. Otherwise,the Company 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 theCompany's management. For individual contracts, the use of differentassumptions could have a material effect on the contract's estimated fairvalue. 

Use of Estimates in Long-Lived Asset Impairment Testing

Impairment testing for long-lived assets and intangibleassets with definite lives is required when circumstances indicate those assetsmay be impaired. In performing the impairment test, the Company estimates thefuture cash flows associated with individual assets or groups of assets.Impairment must be recognized when the undiscounted estimated future cash flowsare less than the related asset's carrying amount. In those circumstances, theasset must be written down to its fair value, which, in the absence of marketprice information, may be estimated as the present value of its expected futurenet cash flows, using an appropriate discount rate. Although cash flowestimates used by the Company are based on the relevant information availableat the time the estimates are made, estimates of future cash flows are, bynature, highly uncertain and may vary significantly from actual results.

Oiland Gas Properties

Explorationand development costs are accounted for by the successful efforts method.

The Company assesses impairment ofcapitalized costs of proved oil and gas properties by comparing net capitalizedcosts to estimated undiscounted future net cash flows on a field-by-field basisusing expected prices. Prices utilized in each year's calculation formeasurement purposes and expected costs are held constant throughout theestimated life of the properties. If net capitalized costs exceed undiscountedfuture net cash flows, the measurement of impairment is based on estimated fairvalue which would consider future discounted cash flows.

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Propertyacquisition costs are capitalized when incurred.  Geological and geophysicalcosts and delay rentals are expensed as incurred.  The costs of drillingexploratory wells are capitalized pending determination of whether the wellshave discovered economically producible reserves.  If reserves are notdiscovered, such costs are expensed as dry holes. Development costs, includingequipment and intangible drilling costs related to both producing wells anddevelopmental dry holes are capitalized.

Unprovedproperties or leases are written-off to expense when it is determined that theywill expire or be abandoned.

Costsof proved developed properties, exploration and development costs andequipment, 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 Company obtains new reservereports from an independent petroleum engineer annually as of December 31stof each year. The Company adjusts for any major acquisitions, new drilling anddivestures during the year as needed.

Uponsale or retirement of complete fields of depreciable or depletable property,the book value thereof, less proceeds or salvage value, is credited or chargedto income.  Upon sale of a partial unit of property, the proceeds arecredited to accumulated depreciation and depletion.

Deferred TaxAsset Valuation Allowance

Deferredtax assets are recognized for deductible temporary differences, net operating losscarry-forwards, and credit carry-forwards if it is more likely than not thatthe tax benefits will be realized.  To the extent a deferred tax assetcannot be recognized under the preceding criteria, a valuation allowance hasbeen established.

Thejudgments used in applying the above policies are based on management'sevaluation of the relevant facts and circumstances as of the date of thefinancial statements.  Actual results may differ from thoseestimates.  

NewAccounting Standards

TheFASB issued FIN 46, "Consolidation of Variable Interest Entities", inJanuary 2003 and amended the interpretation in December 2003. A variableinterest entity (VIE) is an entity in which its voting equity investors lackthe characteristics of having a controlling financial interest or where theexisting capital at risk is insufficient to permit the entity to finance itsactivities without receiving additional financial support from otherparties.  FIN 46 requires the consolidation of entities which are determinedto be VIEs when the reporting company determines itself to be the primarybeneficiary (the entity that will absorb a majority of the VIE's expectedlosses, receive a majority of the VIE's residual returns, or both).  Theamended interpretation was effective for the first interim or annual reportingperiod ending after March 15, 2004, with the exception of special purposeentities for which the statement was effective for periods ending afterDecember 15, 2003.  We have completed a review of our partnership investmentsand have determined that those entities do not qualify as VIEs.

OnDecember 16, 2004, the Financial Accounting Standards Board (FASB) issued FASBStatement No. 123R (revised 2004), "Share-Based Payment" which is arevision of FASB Statement No. 123, "Accounting for Stock-BasedCompensation".  Statement 123R supersedes APB opinion No. 25,"Accounting for Stock Issued to Employees", and amends FASB StatementNo. 95, "Statement of Cash Flows".  Generally, the approach inStatement 123R is similar to the approach described in Statement 123. However, Statement 123R requires all share-based payments to employees,including grants of employee stock options, to be recognized in the incomestatement based on their fair values.  Pro-forma disclosure is no longeran alternative.  The provisions of this statement become effective for ourfirst quarter 2006.  Management has not determined the impact that thisstatement will have on our consolidated financial statements. 

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RecentlyIssued Accounting Pronouncements

OnMarch 30, 2005, the FASB issued FASB Interpretation No. 47, "Accounting forConditional Asset Retirement Obligations" (FIN No. 47). This interpretationclarifies that the term "conditional asset retirement obligation" as used inStatement No. 143 refers to a legal obligation to perform an asset retirementactivity in which the timing and/or method of settlement are conditional on afuture event that may or may not be within the control of the entity incurringthe obligation. The obligation to perform the asset retirement activity isunconditional even though uncertainty exists about the timing and/or method ofsettlement. Thus, the timing and/or method of settlement may be conditional ona future event. Accordingly, an entity is required to recognize a liability forthe fair value of a conditional asset retirement obligation if the fair valueof the liability can be reasonably estimated. Uncertainty about the timingand/or method of settlement of a conditional asset retirement obligation shouldbe factored into the measurement of the liability, rather than the timing ofrecognition of the liability, when sufficient information exits. FIN No. 47will be effective for the Company no later than the end of the fiscal year endedDecember 31, 2005. The Company does not expect any impact on the Company'sfinancial position or results of operations upon adoption of FIN No. 47.

OnApril 4, 2005, the FASB issued FASB Staff Position (FSP) FAS 19-1 "Accountingfor Suspended Well Costs."  This staff position amends FASB Statement No.19 "Financial Accounting and Reporting by Oil and Gas Producing Companies" andprovides guidance about exploratory well costs to companies which use thesuccessful efforts method of accounting.  The position states thatexploratory well costs should continue to be capitalized if: 1) a sufficientquantity of reserves are discovered in the well to justify its completion as aproducing well and 2) sufficient progress is made in assessing the reserves andthe well's economic and operating feasibility.  If the exploratory wellcosts do not meet both of these criteria, these costs should be expensed, netof any salvage value. Additional annual disclosures are required to provideinformation about management's evaluation of capitalized exploratory wellcosts. In addition, the FSP requires annual disclosure of: 1) net changes fromperiod to period of capitalized exploratory well costs for wells that arepending the determination of proved reserves, 2) the amount of exploratory wellcosts that have been capitalized for a period greater than one year after thecompletion of drilling and 3) an aging of exploratory well costs suspended forgreater than one year with the number of wells it related to.  Further,the disclosures should describe the activities undertaken to evaluate thereserves and the projects, the information still required to classify theassociated reserves as proved and the estimated timing for completing theevaluation.  The guidance in the FSP is required to be applied to thefirst reporting period beginning after April 4, 2005 on a prospective basis toexisting and newly capitalized exploratory well costs.  The Company doesnot expect the application of this FSP to have a significant impact on the Company'sfinancial position or results of operations.

InJune 2005, the FASB issued SFAS No. 154, *Accounting Changes and ErrorCorrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3,*whichreplaces Accounting Principles Board Opinion No. 20, *Accounting Changes,*andSFAS No. 3, *Reporting Accounting Changes in Interim Financial Statements,*andchanges the requirements for the accounting for and reporting of a change inaccounting principle. SFAS No. 154 requires retrospective application forvoluntary changes in accounting principle unless it is impracticable to do so,and it applies to all voluntary changes in accounting principle.  It alsoapplies to changes required by an accounting pronouncement in the unusualinstance that the pronouncement does not include specific transitionprovisions. When a pronouncement includes specific transition provisions, thoseprovisions should be followed. 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 No. 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 consolidatedfinancial statements.

InJune 2005, the EITF reached a consensus on EITF Issue No. 04-5, *DeterminingWhether a General Partner, or the General Partners  as a Group, Controls aLimited Partnership or Similar Entity When the Limited Partners Have Certain Rights.* This consensus applies to voting right entities not within the scope ofFASB Interpretation No. 46(R), *Consolidation of Variable Interest Entities*inwhich the investor is the general partner in a limited partnership orfunctional equivalent. The EITF consensus is that the general partner in alimited partnership is presumed to control that limited partnership regardlessof the extent of the general partner's ownership interest, and therefore,should include the limited partnership in its consolidated financialstatements. The general partner may overcome this presumption of control andnot consolidate the entity if the limited partners have either: (a) thesubstantive ability to dissolve (liquate) the limited partnership or otherwiseremove the general partner through substantive kick-out rights that can beexercised without having to show cause; or (b) substantive participating rightsin managing the partnership. This guidance became immediately effective uponratification by the FASB on June 29, 2005, for all newly formed limitedpartnerships and for 

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existinglimited partnerships for which the partnership agreements have been modified.For general partners in all other limited partnerships, the guidance iseffective no later than the beginning of the first reporting period in fiscalyears beginning after December 15, 2005. We do not expect the adoption of thisguidance to have a material impact on our consolidated financial statements.

DisclosureRegarding Forward Looking Statements 

ThisForm 10-Q contains "forward-looking statements" within the meaning of Section27A of the Securities Act of 1933, as amended (the "Securities Act"), andSection 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").All statements other than statements of historical facts included in andincorporated by reference into this Form 10-Q are forward-looking statements.These forward-looking statements are subject to certain risks, trends anduncertainties that could cause actual results to differ materially from thoseprojected. Among those risks, trends and uncertainties are the Company'sestimate of the sufficiency of its existing capital sources, its ability toraise additional capital to fund cash requirements for future operations, theuncertainties involved in estimating quantities of proved oil and natural gasreserves, in prospect development and property acquisitions and in projectingfuture rates of production, the timing of development expenditures and drillingof wells, and the operating hazards attendant to the oil and gas business. Inparticular, careful consideration should be given to cautionary statements madein this form 10-Q and in the various reports the Company has filed with theSecurities and Exchange Commission. The Company undertakes no duty to update orrevise these forward-looking statements. 

Whenused in the Form 10-Q, 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 importantreasons, including those discussed under "Management's Discussions and Analysisof Financial Condition and Results of Operations" and elsewhere in this Form10-Q. 

Item3. Quantitative and Qualitative Disclosure About Market Risk

InterestRate Risk

Therehave been no material changes in the reported market risks faced by the Companysince December 31, 2004.

Commodity Price Risk

The Company utilizes commodity-based derivative instrumentsto manage a portion of its exposure to price risk from its oil and natural gassales and marketing activities. These instruments consist of NYMEX-tradednatural gas futures contracts and option contracts for Appalachian and Michiganproduction and CIG-based contracts traded by JP Morgan for Colorado productionand purchase and sales contracts with customers deemed to be derivatives usedby its gas marketing company, Riley Natural Gas. These derivative instrumentshave the effect of locking in for specified periods (at predetermined prices orranges of prices) the prices the Company will receive for the volume to whichthe derivative relates and, in the case of RNG, the cost of gas suppliespurchased for marketing activities. As a result, while these derivativeinstruments are structured to reduce the Company's exposure to changes in priceassociated with the commodity, they also limit the benefit the Company mightotherwise have received from price changes associated with the commodity. TheCompany's policy prohibits the use of oil and natural gas future and optioncontracts for speculative purposes.

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The following tables summarize the openderivative and purchase and sale contracts for Riley Natural Gas and PDC as of June30, 2005 and 2004.

| Riley Natural Gas                                                                                                  |
|--------------------------------------------------------------------------------------------------------------------|
| Open Derivatives Contracts                                                                                         |
| Commodity                                                                                                          |  | Type |  | Quantity |  | Weighted |  | Total |  | Fair |
|                                                                                                                    |  | Gas-Mmbtu |  | Average |  | Contract |  | Market |
|                                                                                                                    |  | Oil-Barrels |  | Price |  | Amount |  | Value |
| Total  Contracts as of June 30, 2005                                                                               |
| Natural Gas                                                                                                        |  | Cash  Settled Sale |  | 4,064,000 |  | $6.46 |  |  $           26,257,050 |  |  $       (4,942,194) |
| Natural Gas                                                                                                        |  | Cash  Settled Purchase |  | 1,345,000 |  | $6.95 |  | 9,353,030 |  | 850,113 |
| Natural Gas                                                                                                        |  | Cash  Settled Sale Option |  | 200,000 |  | $5.45 |  |  |  | 5,029 |
| Natural Gas                                                                                                        |  | Cash  Settled Purchase Option |  | 100,000 |  | $7.06 |  |  |  | (50,567) |
| Natural Gas                                                                                                        |  | Physical  Contract Sale |  | 657,800 |  | $7.79 |  | 5,122,908 |  | (392,300) |
| Natural Gas                                                                                                        |  | Physical  Contract Purchase |  | 3,543,200 |  | $6.68 |  |  $           23,655,200 |  |  $        4,406,500 |
|                                                                                                                    |  |  |  |  |  |  |  |  |  |  |
| Contracts  maturing in 12 months following June 30, 2005                                                           |
| Natural Gas                                                                                                        |  | Cash  Settled Sale |  | 3,024,000 |  | $6.60 |  |  $           19,965,270 |  |  $       (3,162,634) |
| Natural Gas                                                                                                        |  | Cash  Settled Purchase |  | 1,115,000 |  | $6.86 |  | 7,650,680 |  | 752,508 |
| Natural Gas                                                                                                        |  | Cash  Settled Sale Option |  | 200,000 |  | $5.45 |  |  |  | 5,029 |
| Natural Gas                                                                                                        |  | Cash  Settled Purchase Option |  | 100,000 |  | $7.06 |  |  |  | (50,567) |
| Natural Gas                                                                                                        |  | Physical  Contract Sale |  | 602,900 |  | $8.24 |  | 4,697,691 |  | (360,300) |
| Natural Gas                                                                                                        |  | Physical  Contract Purchase |  | 2,683,200 |  | $6.87 |  |  $           18,421,000 |  |  $        2,752,100 |
|                                                                                                                    |  |  |  |  |  |  |  |  |  |  |
| Prior  Year Total Contracts as of June 30, 2004                                                          |
| Natural Gas                                                                                                        |  | Cash  Settled Sale |  | 3,660,000 |  | $5.10 |  |  $           18,681,050 |  |  $       (3,742,180) |
| Natural Gas                                                                                                        |  | Cash  Settled Purchase |  | 430,000 |  | $5.53 |  | 2,378,320 |  | 369,300 |
| Natural Gas                                                                                                        |  | Cash  Settled Sale Option |  | 270,000 |  | $4.75 |  |  |  | 0 |
| Natural Gas                                                                                                        |  | Cash  Settled Purchase Option |  | 135,000 |  | $6.74 |  |  |  | (1,440) |
| Natural Gas                                                                                                        |  | Physical  Contract Sale |  | 223,000 |  | $6.24 |  | 1,391,870 |  | (116,500) |
| Natural Gas                                                                                                        |  | Physical  Contract Purchase |  | 3,654,300 |  | $5.37 |  |  $           19,609,900 |  |  $        3,462,900 |
| The  maximum term over which RNG is hedging exposure to the variability of cash  flows for commodity price risk is |
| 40  months.                                                                                                        |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                    |  |  |  |  |  |  |  |  |  |  |

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| Petroleum Development  Corporation                                                                                  |
|---------------------------------------------------------------------------------------------------------------------|
| Open Derivatives Contracts                                                                                          |
| Commodity                                                                                                           |  | Type |  | Quantity |  | Weighted |  | Total |  | Fair |
|                                                                                                                     |  | Gas-Mmbtu |  | Average |  | Contract |  | Market |
|                                                                                                                     |  | Oil-Barrels |  | Price |  | Amount |  | Value |
| Total  Contracts as of June 30, 2005                                                                                |
| Natural  Gas                                                                                                        | Purchase |  | 23,472 |  | $6.65 |  |  $                156,187 |  |  $             16,380 |
| Natural  Gas                                                                                                        | Sale  Option |  | 5,166,404 |  | $4.81 |  |  |  | 152,072 |
| Natural  Gas                                                                                                        | Purchase  Option |  | 2,583,202 |  | $7.41 |  |  |  | (2,490,039) |
| Crude  Oil                                                                                                          | Sale  Option |  | 79,488 |  | $32.30 |  |  |  | 333 |
| Crude  Oil                                                                                                          | Purchase  Option |  | 39,744 |  | $40.00 |  |  |  | (723,515) |
|                                                                                                                     |  |  |  |  |  |  |  |  |  |  |
| Contracts  maturing in 12 months following June 30, 2005                                                            |
| Natural  Gas                                                                                                        |  | Purchase |  | 23,472 |  | $6.65 |  |  $                156,187 |  |  $             16,380 |
| Natural  Gas                                                                                                        |  | Sale  Option |  | 4,096,084 |  | $4.74 |  |  |  | 74,710 |
| Natural  Gas                                                                                                        |  | Purchase  Option |  | 2,048,042 |  | $7.24 |  |  |  | (2,198,717) |
| Crude  Oil                                                                                                          |  | Sale  Option |  | 79,488 |  | $32.30 |  |  |  | 333 |
| Crude  Oil                                                                                                          |  | Purchase  Option |  | 39,744 |  | $40.00 |  |  |  | (723,515) |
|                                                                                                                     |  |  |  |  |  |  |  |  |  |  |
| Prior  Year Total Contracts as of June 30, 2004                                                           |
| Natural  Gas                                                                                                        |  | Purchase |  | 21,552 |  | $4.73 |  |  $                101,941 |  |  $             33,976 |
| Natural  Gas                                                                                                        |  | Sale  Option |  | 5,114,680 |  | $4.48 |  |  |  | 557,708 |
| Natural  Gas                                                                                                        |  | Purchase  Option |  | 2,035,500 |  | $5.45 |  |  |  | (1,837,458) |
| Crude  Oil                                                                                                          |  | Sale  Option |  | 68,868 |  | $31.63 |  | 2,178,294 |  |  $             26,420 |
| The  maximum term over which PDC is managing exposure to the variability of cash  flows for commodity price risk is |
| 16  months.                                                                                                         |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                     |  |  |  |  |  |  |  |  |  |  |

See"Working Capital" in Management's Discussions of Liquidity andCapital Resources for the effect of these contracts on the Company'sConsolidated Balance Sheet.

Theaverage NYMEX closing price for natural gas for the six months of 2005 and theyear 2004 was $6.50 Mmbtu and $6.14 Mmbtu. The average NYMEX closing price foroil for the six months of 2005 and the year 2004 was $49.93 bbl and $41.44bbl.  Future near-term gas prices will be affected by various supply anddemand factors such as weather, government and environmental regulation and newdrilling activities within the industry.

Item 4.          Controlsand Procedures

***(a)******       *****Evaluation ofdisclosure controls and procedures**

The Company maintains disclosure controlsand procedures that are designed to ensure that information required to bedisclosed in the Company's reports under the Exchange Act is recorded,processed, summarized and reported within the time periods specified in theSEC's rules and forms, and that such information is accumulated andcommunicated to management, including the Company's Chief Executive Officer andChief Financial Officer, and the Company's Audit Committee and Board of Directors,as appropriate, to allow timely decisions regarding required disclosure. TheCompany's management, with participation of the Company's Chief ExecutiveOfficer and Chief Financial Officer, has conducted an evaluation of theeffectiveness of the Company's disclosure controls and procedures (as definedin Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of theperiod covered by this quarterly report on Form 10-Q. 

As previously disclosed in the Company'sAmended Annual Report on Form 10-K/A for the year ended December 31, 2004, andin its amended quarterly report on Form 10-Q/A for the quarter ended March 31,2005, the Company determined that, as of December 31, 2004 and March 31, 2005,there were material weaknesses affecting its internal control over financialreporting and, as a result of those weaknesses, the Company's disclosurecontrols and procedures were not effective. Based upon the evaluation of theeffectiveness of the Company's disclosure controls and procedures as of June30, 2005, the Company's Chief Executive Officer and Chief Financial Officerconcluded that the Company disclosure controls and procedures were noteffective. 

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*Remediationof Material Weaknesses in Internal Control*

As previously disclosed in the Company'sAmended Annual Report on Form 10-K/A for the year ended December 31, 2004, andin its amended quarterly report on Form 10-Q/A for the quarter ended March 31,2005, the Company determined that, as of the end of the fiscal 2004, there werematerial weaknesses in its internal control over financial reporting relatingto improper accounting of (1) derivatives transactions, (2) oil and gasproperty, (3) asset retirement obligations, and (4) provision for income taxes.The Company's management and Audit Committee have dedicated significantresources to assessing the underlying issues giving rise to the aforementionedaccounting errors and to ensure that proper steps have been and are being takento improve our internal controls.  We have assigned the highest priorityto the correction of the related control deficiencies and have taken and willcontinue to take action to fully correct them.  Management is committed toinstilling strong control policies and procedures and ensuring that the 'toneat the top' is committed to accuracy and completeness in all financialreporting.  The Company's Audit Committee will continually be updated asto the progress and status of the remediation initiatives to ensure they areadequately implemented.  As of the date of this filing, while we havecorrected the financial statements, we have not completed the remediation ofthese material weaknesses; however, we believe that the remediation initiativesoutlined below, when completed, will be sufficient to eliminate the materialweaknesses in internal control over financial reporting as discussedabove.  

Asof the date of this filing, the remediation initiatives management has and willcontinue to implement include:  

- The     Company is implementing a training initiative to increase the Company's     technical expertise.  The programs offered through this training     initiative will include basic and advanced oil and natural gas accounting     training programs, as well as general accounting, financial reporting     (including SEC reporting), and income tax training programs.  Also,     related to this initiative, the Company has purchased licenses for     accounting research software. Additionally, the CFO or a qualified     designee will be responsible for the periodic review of the documentation     and calculations related to oil and gas properties.
- The     Company currently does not use hedge accounting treatment; however, in the     future when using hedge accounting, the Company will implement additional     controls with respect to accounting for derivative transactions in     accordance with SFAS No. 133.  These controls include thorough and     formal documentation of all potential derivative transactions prior to     initiation of the transaction.  This documentation will include the     hedging relationship, the entity's risk management objective and strategy     for undertaking the hedge, including identification of the hedging     instrument, the hedged item, the nature of the risk being hedged, and the     method of assessing the hedging instrument's effectiveness.  The     Company is in the process of evaluating derivative accounting software to     be implemented to calculate the impact of derivative contracts on the     financial statements.  The Company will also seek the input of its     independent derivative expert to assist with the selection of the     derivative accounting software.  Additionally, the CFO or a qualified     designee will be responsible for the periodic review of the documentation     and calculations of derivative transactions.  The Company also has     utilized a derivative expert to assist the Company in evaluating its     current derivative transactions to ensure that they have been properly     reported and will utilize derivative experts in the future as needed.
- The     Company has re-evaluated and corrected its documentation, policies and     procedures, and templates with respect to accounting for its oil and gas     properties in compliance with generally accepted accounting     principles.  The design and effective operation of proper policies     and procedures as well as the correction of these documents will ensure     the accuracy of oil and gas property valuation in accordance with     generally accepted accounting principles.  This includes documented     procedures to identify significant components of oil and gas property     calculations including field designation, reserves and applicable set-up     costs.  This documentation also includes correcting the carry-forward     schedules utilized to calculate the depreciation, depletion and     amortization with the correct information and identification of the     components of the calculation.  Additionally, the CFO or a qualified     designee will be responsible for the periodic review of the documentation     and accounting for oil and gas properties, including related calculations.     Also, the Company plans to utilize an independent specialist to review the     Company's accounting for oil and natural gas properties, including the     Company's documentation as well as templates. The specialist will be an     accounting firm with significant oil and natural gas accounting and income     tax experience and SEC experience and will also be utilized in identifying     and implementing new accounting standards and review of our income tax     reporting procedures.

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- The     Company has reevaluated and corrected its documentation, policies and     procedures, and templates with respect to its accounting for asset     retirement obligations. The specialist discussed in the previous paragraph     will also be utilized to help verify these practices and implement any new     requirements.
- The     Company has reevaluated and corrected its documentation, policies and     procedures, and templates with respect to its accounting for income taxes and     the related disclosures in its financial statements. The Company will     utilize a qualified independent tax expert to periodically review the     calculation of income taxes and the related disclosures for reporting     purposes and to identify and help implement any new rules or regulations.

**{b}Changes in Internal Control Over Financial Reporting**

As previously reported, there was nochange in our internal control over financial reporting during the quarterended June 30, 2005, that materially affects, or is reasonably likely tomaterially affect, our internal control over financial reporting. However,subsequent to June 30, 2005, we are in the process of implementing the remedialactions described above.

Although we have taken steps as referredto above to correct the material weaknesses, they were not remediated as ofDecember 31, 2005.

Effective January 1, 2006 the Companyreorganized the structure of its accounting department to provide a betterdistribution of responsibilities and the work load associated with theCompany's accounting and financial reporting. As a part of the reorganization,several additional positions were created in the accounting department. TheController's position was eliminated and new positions for a Director ofAccounting Operations and a Director of Financial Reporting were created. TheCompany's controller was slated to become the Director of Financial Reporting,however, she chose to resign her position with the Company but is continuing toact as a consultant and will continue to perform the same duties untilappropriate replacements are trained. The CFO will oversee the responsibilitiesof the Director of Financial Reporting until a qualified candidate has beenhired to fill the position. The Company is currently seeking qualifiedaccountants to fill certain of the new positions. The Company believes that thereorganization, when completed, will allow it to better meet its currentfinancial and accounting obligations and to grow to fill future needs.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is not a party to any legal actions thatwould materially affect the Company's operations or financial statements.

Item 2.  Changes in Securities, Use of Proceedsand Issuer Purchases of Equity Securities

| ISSUER PURCHASES OF EQUITY SECURITIES |
|---------------------------------------|
|                                       |  |  |  |  |  |  |  | (d) |
|                                       |  |  |  |  |  | (c) |  | Maximum  Number |
|                                       |  |  |  |  |  | Total  Number |  | (or  Approximate |
|                                       |  |  |  |  |  | of  Shares |  | Dollar  Value) of |
|                                       |  | (a) |  |  |  | Purchased  as |  | Shares  that May |
|                                       |  | Total  Number |  | (b) |  | Part  of Publicly |  | Yet  Be Purchased |
|                                       |  | Of  Shares |  | Average  Price |  | Announced  Plans |  | Under  the Plans |
| Period                                |  | Purchased |  | Paid  per Share |  | or  Programs |  | or  Programs |
| May  1 - May 31, 2005                 |  | 331,796 |  | $23.75 |  | 331,796 |  | 1,327,184 |
| Total                                 |  | 331,796 |  | $23.75 |  | 331,796 |  | 1,327,184 |
|                                       |  |  |  |  |  |  |  |  |

On March 18, 2005the Company publicly announced the authorization by its Board of Directors topurchase up to 2% of the Company's outstanding common stock (331,796) at fair marketvalue at the date of purchase. At a meeting held June 10, 2005, the Board ofDirectors of Petroleum Development Corporation approved an amendment of thesize of the stock repurchase from 2% to 10% (1,658,980 shares) of the Company'soutstanding common stock. Under the program, the Board has discretion as to thedates of purchase and amounts of stock to be purchased and whether or not tomake purchases. This program is scheduled to expire on December 31, 2005. SeeNote 11 to the financial statements above.

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Item 4.  Submission of Matters to a Vote of Security Holders

(a)    TheAnnual Meeting of Shareholders was held on June 10, 2005 in Bridgeport, WV.

(b)    Briefdescription of matters voted upon.

1.    Electedthe named directors to serve three-year terms expiring 2008 as follows:

|                      | Shares For | Shares

Withheld |
|----------------------|------------|------------------|
| Jeffrey C. Swoveland | 14,456,293 | 652,611          |
| David C. Parke       | 14,625,404 | 483,500          |

                       

            The following Directors terms continued after the Annual Meeting ofShareholders.

            Steven R. Williams

            Thomas E. Riley

            Vincent F. D'Annunzio

            Donald B. Nestor

            Kimberly Luff Wakim

        2. Ratification of KPMG LLPas the Company's Independent Registered Public Accounting Firm.

| Shares For | Shares Against | Shares Abstain |
|------------|----------------|----------------|
| 15,011,597 | 89,115         | 8,193          |

        3. Approval of the Company's2005 Non-Employee Director Restricted Stock Plan.

| Shares For | Shares Against | Shares Abstain |
|------------|----------------|----------------|
| 10,725,151 | 989,393        | 27,159         |

Item 6.  Exhibits

(a)        Exhibits

| Exhibit Name                                                                                                                                                                          | Exhibit

Number | Location        |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|-----------------|
| Acknowledgement of Independent Registered Public  Accounting Firm                                                                                                                     | 23.1            | Filed herewith  |
| Rule 13a-14(a)/15d-14(a) Certification by  Chief 

  Executive Officer                                                                                                 | 31.1            | Filed herewith. |
| Rule 13a-14(a)/15d-14(a) Certification by Chief 

  Financial Officer                                                                                                  | 31.2            | Filed herewith. |
| Title 18 U.S.C. Section 1350 (Section 906 of  Sarbanes-Oxley Act of 2002) Certifications by Chief Executive Officer and  Chief Financial Officer of Petroleum Development Corporation | 32              | Filed herewith. |

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** **

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SIGNATURES

Pursuant to the requirements of the Securities ExchangeAct of 1934 the registrant has duly caused this report to be signed on itsbehalf by the undersigned thereunto duly authorized.

|                                         | Petroleum Development Corporation

 (Registrant)                                                                                                                                      |
|-----------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                         |                                                                                                                                                                                            |
|                                         |                                                                                                                                                                                            |
| Date:    January 6, 2006 | /s/ Steven R.  Williams                   

Steven R. Williams

Chief Executive Officer and President |
|                                         |                                                                                                                                                                                            |
| Date:    January 6, 2006 | /s/ Darwin L. Stump                   

Darwin L. Stump

Chief Financial Officer                      |
|                                         |                                                                                                                                                                                            |

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