UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
PDC 2002-D LIMITED PARTNERSHIP
(Name of Issuer)
Limited Partnership Units
(Title of Class of Securities)
(CUSIP Number)
Daniel W. Amidon
1775 Sherman Street, Suite 3000
Denver, CO 80203
(303) 860-5800
(Name, Address and Telephone Number
of Person Authorized to Receive Notices
and Communications)
January 31, 2008
June 20, 2011
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report this
acquisition that is the subject of this Schedule 13D, and is filing this Schedule because of
§§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box: o
Note: Schedules filed in paper format shall include a signed original and five copies of the
schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.
The information required on the remainder of this cover page shall not be deemed to be “filed”
for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject
to the liabilities of that section of the Act but shall be subject to all other provisions of the
Act.
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| Item 1. |
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Security and Issuer. |
This Schedule 13D relates to the limited partnership units (the “Units”) of PDC 2002-D
Limited Partnership, a West Virginia limited partnership (the “Partnership”), which has its
principal executive offices at 1775 Sherman Street, Suite 3000, Denver, CO 80203.
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| Item 2. |
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Identity and Background. |
(a) - (c) This Schedule 13D is being filed by Petroleum Development Corporation
(“PDC”), a Nevada corporation with its principal office located at 1775 Sherman Street,
Suite 3000, Denver, CO 80203. PDC is principally engaged in the exploration, development,
production and marketing of oil and natural gas. PDC serves as the managing general partner of 26
partnerships, including the Partnership, formed to drill, own and operate natural gas and oil
wells. PDC controls the Partnership through its 20% managing general partner interest in the
Partnership.
In accordance with the provisions of General Instruction C to Schedule 13D, information
concerning the executive officers and directors of PDC, as applicable (collectively, the
“Listed Persons”), required by Item 2 of this Schedule 13D is provided on Appendix
A and is incorporated herein by reference.
(d) - (e) During the last five years, neither PDC nor, to the best of PDC’s knowledge, any of
the Listed Persons has been: (i) convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with respect to such laws.
(f) Each of the Listed Persons is a citizen of the United States.
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| Item 3. |
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Source and Amount of Funds or Other Consideration. |
Since July 2006, the third anniversary of the date of the Partnership’s first cash
distributions, investors of the Partnership have had the ability to request that PDC repurchase
their Units, subject to an aggregate total repurchase limit during any calendar year. PDC acquired
its beneficial ownership of 9.83% of the Units by purchasing Units from investors through the
Partnership’s Unit repurchase program or on a privately negotiated basis from time to time.
As of April 7, 2011, PDC suspended the Unit repurchase program, pending the outcome of the proposed merger described below.
PDC will need approximately $5.3 million in
cash to complete the merger described in Item 4 of this Schedule 13D (which Item 4 is incorporated herein by reference). PDC will
finance the merger by borrowing funds under its revolving credit facility. There are no material conditions to PDC’s ability to obtain
the funds through the revolving credit facility. PDC has established no alternative financing arrangements besides the aforementioned.
PDC expects to repay borrowings from the credit facility with cash from operations in the ordinary course of business or capital market
transactions.
PDC operates under a credit facility dated
as of November 5, 2010, as amended December 22, 2010, with an aggregate revolving commitment or borrowing base of $321.2 million.
The maximum allowable facility amount is $600 million. The credit facility is with certain commercial lending institutions and is
available for working capital requirements, capital expenditures, acquisitions, general corporate purposes and to support letters of
credit.
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| Item 4. |
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Purpose of the Transaction. |
PDC’s previous purchases of Units were made through its Unit repurchase program or as an
accommodation to individual investors, and without a view towards any plans or proposals of the
type referred to in clauses (a) through (j) of Item 4 of Schedule 13D. Because drilling
partnerships are not part of PDC’s strategic plan going forward, PDC wishes to buy them back, to
the extent feasible. PDC has not established a drilling partnership since 2007 and has publicly
announced a fundamental shift in its business strategy away from the partnership model to a more
traditional exploration and production company model. PDC also wishes to position itself as a
growth company, and PDC believes that consummation of the merger transaction described below will
allow PDC to invest further capital in the Partnership’s assets on a timetable of its own choosing. In addition, PDC
expects that the merger will result in administrative efficiencies and cost reductions in the
management and operation of the properties now owned by the Partnership, particularly in the areas
of audit, accounting and tax services, SEC reporting, engineering services, bookkeeping, data
processing, record maintenance and communication with the partners. Finally, since no liquid market
currently exists for the Partnership’s Units, the merger will afford investors the opportunity to
cash out their investment in the Partnership.
On June 20, 2011, the Partnership, PDC and DP 2004 Merger Sub, LLC, a wholly-owned subsidiary
of PDC (the “merger sub”), entered into an Agreement and Plan of Merger, dated as of June
20, 2011 (the “merger agreement”), pursuant to which the Partnership will merge with and
into the merger sub, with the merger sub being the surviving entity. The merger agreement is
subject to the vote and approval of the holders of a majority of the Units of the Partnership,
other than PDC and its affiliates (the “investors”), as well as the satisfaction of other
customary closing conditions. The merger can only be completed if a majority of the outstanding
Units held by investors also vote to approve an amendment to the partnership agreement of the
Partnership. Upon consummation of the merger, all of the Partnership’s outstanding Units (other
than Units owned by PDC or any subsidiary thereof and other than Units owned by investors who
properly exercise appraisal rights) will be converted into the right to receive cash in an amount
equal to $4,024 per Unit, subject to any adjustments made to the merger consideration for certain increases in commodity
prices between the date of signing the merger agreement and the filing of the definitive proxy
statement, plus the sum of the amounts withheld from per Unit cash distributions
by the Partnership from October 1, 2010 through August 31, 2011 for the Partnership’s additional
Codell formation development plan, less the sum of the per unit cash distributions made after
August 31, 2011 and before the transaction closes. In the event holders of less than a majority of
the outstanding Units held by investors vote to approve the amendment to the partnership agreement
or the merger agreement, PDC will withdraw the offer and the merger will not proceed.
The merger agreement has been approved by the board of directors of PDC and by a special
committee (the “special committee”) of PDC’s board of directors (consisting of four
non-employee members of PDC’s board, namely Anthony J. Crisafio, Larry Mazza, David C. Parke and
Jeffrey C. Swoveland). The board of directors of PDC formed the special committee in late 2008 in
an attempt to formally address the conflicts inherent in the relationships among PDC, its limited
partnerships and the officers and directors of PDC. The special committee was authorized, among
other things:
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to act on behalf of PDC’s board in representing the interests of the
limited partnerships, including the Partnership, and their investors
with respect to all matters relating to a merger or any related or
alternative transactions thereto; and |
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to exercise all lawfully delegable powers of PDC’s board (acting in
its capacity as the governing decision-making body of the managing
general partner on behalf of the limited partnerships) to take any and
all actions and to make any and all decisions relating to a merger or
any related or alternative transactions thereto, including without
limitation the consideration, evaluation, negotiation, rejection or
acceptance thereof, all on behalf of the limited partnerships,
including the Partnership, and as the special committee deemed to be
advisable and in the best interests of the limited partnerships and
their investors. |
The special committee retained its own financial advisor and legal counsel in reviewing
proposals from PDC related to the proposed merger transaction. In addition, each of the members of
the special committee abstained and will abstain in the future from any vote of PDC’s board of
directors with respect to the merger on behalf of PDC. However, because each of the members of the
special committee is also a member of PDC’s board of directors, notwithstanding the creation of the
special committee, an inherent conflict continues to exist with respect to each committee member’s
duties to the investors in his capacity as a member of the special committee, on the one hand, and
such member’s duties to the shareholders of PDC in his capacity as a member of PDC’s board of
directors, on the other hand. The creation of the special committee and the abstention by its
members from any board vote regarding a merger on behalf of PDC may lessen the inherent conflicting
interests of PDC’s directors in this transaction. However, establishment of a special committee
cannot entirely eliminate the inherent conflicting interests of PDC’s directors in this
transaction. Under the terms of the merger agreement, the special committee may cause the
Partnership to abandon the proposed merger with, and acquisition by, PDC, at any time prior to the
approval of the merger by the investors, if the special committee believes it has received a
superior offer that is in the best interests of the investors. As of
June 22, 2011, neither PDC
nor the special committee has received any offer from any third party to acquire the Partnership or
its assets.
If approved by the investors and completed, the separate existence of the Partnership will
terminate and the investors will receive a cash payment in the amount
of $4,024 per Unit, subject to any adjustments made to the merger consideration for certain increases in commodity
prices between the date of signing the merger agreement and the filing of the definitive proxy
statement, plus
the sum of the amounts withheld from per Unit cash distributions by the Partnership from October 1,
2010 through August 31, 2011 for the Partnership’s additional Codell formation development plan,
less the sum of the per unit cash distributions made after August 31, 2011 and before the
transaction closes. Additionally, the merger sub shall be the
surviving entity of the merger and shall be wholly-owned by PDC, and the investors will have no continuing interest in
the Partnership, since the Partnership will cease as a separate business entity. Following the
merger, there will be no trading market for the Units of the Partnership, and no further
distributions will be paid to the former investors. In addition, following the consummation of the
merger, the registration of any Units of the Partnership under the Securities Exchange Act of 1934
will be terminated.
The merger agreement may be terminated:
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if the parties thereto agree to such termination by mutual consent; |
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by any party thereto if the proposed merger has not occurred by
December 15, 2011; |
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by any party thereto if consummation of the merger becomes illegal or
is otherwise prohibited by law or regulation; |
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by any party thereto if any suit or action is pending against parties
to the agreement challenging the legality or any aspect of the merger
transaction; |
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by the special committee, on behalf of the Partnership and prior to
approval by investors, if the special committee believes it has
received a superior offer that is more favorable to the investors; or |
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by either PDC or the Partnership, if the other fails to perform its
obligations under the merger agreement and such failure has a
non-curable material adverse effect on the PDC or the Partnership, as
the case may be, or materially and adversely affects the transactions
contemplated by the merger agreement. |
Closing of the merger is conditioned on approval by a majority vote of the investors to (1)
amend the limited partnership agreement of the Partnership to expressly provide investors the right
to approve merger transactions and (2) approve the merger
agreement. On June 23, 2011, the
Partnership filed a Preliminary Proxy Statement on Schedule 14A (the “Proxy Statement”)
relating to the merger with the SEC. The Proxy Statement is in preliminary form and is subject to
completion or amendment. Concurrently with the filing of the Proxy Statement, the Partnership filed
a Rule 13e-3 “Going Private” Transaction Statement on Schedule 13E-3 (the “Schedule 13E-3”)
with the SEC. The Schedule 13E-3 will be amended to reflect the completion or amendment of the
Proxy Statement. Although there is no assurance of the likelihood or timing of the merger
transaction, upon clearance by the SEC, a definitive proxy statement will be mailed to the
Partnership’s investors.
The foregoing description of the merger agreement does not purport to be complete and is
qualified in its entirety by reference to the full text of the merger agreement, which is filed as
Exhibit 99.3 hereto and is incorporated by reference herein. Investors should also read the
Partnership’s Proxy Statement, Schedule 13E-3 and other relevant documents regarding the merger
transaction filed with the SEC because they contain important information relevant to the decision
to approve the merger transaction. Investors will be able to receive these documents (when they
become available), as well as other documents filed by PDC, the Partnership or their respective
affiliates with respect to the merger, free of charge at the SEC’s website, www.sec.gov.
Other than described above, PDC does not have any plans or proposals of the type referred to
in clauses (a) through (j) of Item 4 of Schedule 13D, although it reserves the right to formulate
such plans or proposals in the future.
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| Item 5. |
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Interests in Securities of the Issuer. |
(a) and
(b) As of June 22, 2011, PDC holds directly 143.1 Units, representing
approximately 9.83% of the outstanding Units. PDC controls the Partnership through its 20%
managing general partner interest in the Partnership. PDC has sole voting and dispositive power
over the 143.1 Units beneficially owned by PDC, but has no control over the voting of Units held
by other limited partners of the Partnership. None of the Listed Persons beneficially owns any
Units of the Partnership.
(c) There have been no
transactions in Units of the Partnership during the past 60 days by PDC or any of the Listed
Persons. As of April 7, 2011, PDC suspended the Partnership’s Unit repurchase program, pending the outcome of the proposed merger.
(d) PDC acts as managing general partner of the partnership and transacts all of the
Partnership’s business on behalf of the Partnership. Other than PDC, no person has the right to
receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the
Units beneficially owned by PDC.
(e) Not applicable.
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| Item 6. |
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Contracts, Arrangements; Understandings or Relationships with Respect to Securities of the
Issuer |
PDC is soliciting investor approval of the merger agreement and transactions
contemplated thereby pursuant to a proxy statement. Whether or not the merger is consummated, all costs and expenses incurred by PDC,
the partnership, the merger sub and certain Listed Persons in connection with the merger agreement and the transactions contemplated
thereby (including without limitation the solicitation of proxies in connection therewith) shall be paid by PDC. PDC will reimburse
fiduciaries, nominees and others for their out-of-pocket expenses in forwarding proxy materials to investors. PDC (acting in its
capacity as the managing general partner of the partnership and pursuant to the authority and direction of the special transaction
committee) has retained PDC Securities Incorporated, a wholly-owned subsidiary of PDC (“PDC Securities”), to assist in the solicitation
of proxies from holders of Units of the Partnership.
PDC Securities was the dealer-manager for the partnership’s public
offering of Units in 2002. Two of its registered representatives will assist in the solicitation of proxies from holders of Units
of the Partnership and be available to answer questions raised by the broker-dealer home offices and the selling representatives
who previously sold these Units. If each of the amendment to the partnership agreement and the merger transaction is approved by
holders of a majority of the outstanding Units held by the investors, PDC will pay these two representatives a commission equal
to 1.5% of the aggregate merger consideration for their services and will reimburse them for any expenses they incur. If either
the amendment to the partnership agreement or the merger transaction is not approved, then the two representatives will not
receive any commission or fee other than reimbursement for any expenses they incurred in connection with their solicitation
of proxies from holders of Units. Other employees of PDC Securities are full-time employees of PDC and will assist in the
solicitation of proxies but will not receive any additional compensation for their solicitation efforts.
The limited partnership agreement of the Partnership contains
various provisions with respect to the Units governing, among other matters, distributions, transfers and allocations of
profits and losses to the holders of the Units. In connection with the merger transaction, PDC is soliciting investor
approval to amend the limited partnership agreement of the Partnership to expressly provide investors the right to approve
merger transactions.
The information set forth under Items 3, 4 and 5, and the agreements
and other documents set forth as Exhibits 99.1, 99.2, and 99.3 are incorporated by reference into this Item 6.
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