ITEM 1. BUSINESS.
General
PDC 1996-B Limited Partnership ("the Partnership") is a limited partnership formed on September 9, 1996 pursuant to the West Virginia Uniform Limited Partnership Act. Petroleum Development Corporation ("PDC") serves as Managing General Partner of the Partnership.
Since the commencement of operations on September 9, 1996, the Partnership has been engaged in onshore, domestic gas exploration exclusively in the northern Appalachian Basin. A total of 4 limited partners contributed $60,000; a total of 219 additional general partners contributed initial capital of $2,624,707; and PDC (Managing General Partner) contributed $583,924 in capital as a participant in accordance with contribution provisions of the Limited Partnership Agreement (the Agreement).
Under the terms of the Agreement, the allocation of revenues is as follows:
Allocation of Revenues Additional General and Limited Partners 80%
Managing General Partner 20%
Operating and direct costs are allocated and charged to the additional general and limited partners and the Managing General Partner in the same percentages as revenues are allocated. Leasehold, drilling and completion costs, and equipment costs are borne 80% by the additional general and limited partners and 20% by the Managing General Partner.
Employees
The Partnership has no employees, however, PDC has approximately 72 employees which include a staff of geologists, petroleum engineers, landmen and accounting personnel who administer all of the partnership's operations.
Plan of Operations
The Partnership participated in the drilling of fifteen gross wells and will continue to operate and produce its fifteen gross productive wells. The Partnership does not have unexpended initial capital and no additional drilling activity is planned.
See Item 2

ITEM 2. PROPERTIES.
Drilling Activity
The following table sets forth the results of drilling activity from September 9, 1996 (date of inception) to March 15, 1997, of the Partnership which was conducted in the Continental United States.
Development Wells Gross Net Productive Dry Total Productive Dry Total Period Ended March 15, 1997. . . 15 0 15 13.185 0 13.185 The Partnership has not participated in any exploratory wells. No additional drilling activity is planned.
Productive Wells
The following table summarizes the Partnership's total gross and net interests in productive wells at March 15, 1997.
A "productive well" is a well producing, or capable of producing, oil and gas in commercial quantities. For purposes of the above table, a "gross well" is one in which the Partnership has a working interest and a "net well" is a gross well multiplied by the Partnership's working interest to which it is entitled under its drilling agreement.
Title to Properties
The Partnership's interests in producing acreage are in the form of assigned direct interests in leases. Such properties are subject to customary royalty interests generally contracted for in connection with the acquisition of properties, and could be subject to liens incident to operating agreements, liens for current taxes and other burdens. The Partnership believes that none of these burdens materially interfere with the use of such properties in the operation of the Partnership's business.
As is customary in the oil and gas industry, little or no investigation of title is made at the time of acquisition of undeveloped properties (other than a preliminary review of local mineral records). Investigations are generally made, including in most cases receiving a title opinion of legal counsel, before commencement of drilling operations. A thorough examination of title has been made with respect to all of the Partnership's producing properties and the Partnership believes that it has generally satisfactory title to such properties.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS.
The Managing General partner as driller/operator a not party to any legal action that would materially affect the Managing General Partner's or Partnership's operations or financial statements.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the security holders of the Partnership for the period September 9, 1996 (date of inception) to December 31, 1996.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND SECURITY HOLDER MATTERS.
At December 31, 1996, PDC 1996-B Limited Partnership had one Managing General Partner, 4 Limited Partners who fully paid for 3 units at $20,000 per unit of limited partnership interests and a total of 219 Additional General Partners who fully paid for 131.235 units at $20,000 per unit of additional general partnership interests. No established public trading market exists for the interests.
Additional general partnership interests are transferable, however no assignee of an interest in the Partnership can become a substituted partner without the written consent of the transferor and the Managing General Partner.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data presented below has been derived from audited financial statements of the Partnership appearing elsewhere herein.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources
The Partnership was funded with initial Limited and Additional General Partner contributions of $2,684,707 and the Managing General Partner contributed $583,924 in accordance with the Agreement. Syndication cost and Management fee of $349,012 were incurred leaving available capital of $2,919,619 for Partnership activities.
The Partnership began exploration and development activities subsequent to the funding of the Partnership and completed these activities by December 31, 1996. Fifteen wells have been drilled, all of which have been completed as producers.
The Partnership had net working capital at December 31, 1996 of $95,673.
Operations are expected to be conducted with available funds and revenues generated from oil and gas activities. No bank borrowings are anticipated.
Results of Operations
The Partnership's revenues from natural gas sales will be affected by changes in prices. Natural gas prices are subject to general market conditions which drive the pricing changes.
The principal effects of inflation upon the Partnership relate to the costs required to drill, complete and operate oil and gas wells. The Partnership expects these costs to remain somewhat stable over the next year.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
The response to this Item is set forth herein in a separate section of this Report, beginning on Page.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
NONE.
Part III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The Partnership has no directors or executive officers. The Partnership is managed by Petroleum Development Corporation (the Managing General Partner). Petroleum Development Corporation's common stock is traded in the NASDAQ National Market and Form 10-K for 1996 has been filed with the Securities and Exchange Commission.
ITEM 11.

ITEM 11. MANAGEMENT REMUNERATIONS AND TRANSACTIONS.
NON-APPLICABLE.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
NON-APPLICABLE.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Pursuant to the authorization contained in the Limited Partnership Agreement, PDC receives fees for services rendered and reimbursement of certain expenses from the Partnership. The following table presents compensation or reimbursements by the Partnership to PDC or other related parties during the period ended December 31, 1996.
Sales of Leases $ 106,360 Footage Drilling Contracts, Services, Chemicals, Supplies, and Equipment 2,793,258 Operator's Charges 10,842 Syndication cost and management fee 349,012 Tax return preparation 2,945 Direct administrative cost 1,000
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements
See Index to Financial Statements on
(2) Financial Statement Schedules
See Index to Financial Statements on page. All financial statement schedules are omitted because they are not required, inapplicable, or the information is included in the Financial Statements or Notes thereto.
(3) Exhibits
See Exhibits Index on page E-1
CONFORMED COPY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PDC 1996-B Limited Partnership By its Managing General Partner Petroleum Development Corporation
By /s/ James N. Ryan James N. Ryan, Chairman
March 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ James N. Ryan Chairman, Chief Executive James N. Ryan Officer and Director March 24, 1997
/s/ Steven R. Williams President and Director Steven R. Williams March 24, 1997
/s/ Dale G. Rettinger Executive Vice President, Dale G. Rettinger Treasurer and Director March 24, 1997 (principal financial and accounting officer)
/s/ Roger J. Morgan Secretary and Director Roger J. Morgan March 24, 1997
PDC 1996-B LIMITED PARTNERSHIP (A West Virginia Limited Partnership)
Financial Statements for Annual Report on Form 10-K to Securities and Exchange Commission
Period from September 9, 1996 (Date of Inception) to December 31, 1996
(With Independent Auditors' Report Thereon)
PDC 1996-B LIMITED PARTNERSHIP (A West Virginia Limited Partnership)
Independent Auditors' Report Balance Sheet - December 31, 1996 Statement of Operations - Period from September 9, 1996 (Date of Inception) to December 31, 1996 Statement of Partners' Equity - Period from September 9, 1996 (Date of Inception) to December 31, 1996 Statement of Cash Flows - Period from September 9, 1996 (Date of Inception) to December 31, 1996 Notes to Financial Statements
All financial statement schedules have been omitted because they are not applicable or not required or for the reason that the required information is shown in the financial statements or notes thereto.
Independent Auditors' Report
To the Partners PDC 1996-B Limited Partnership:
We have audited the financial statements of PDC 1996-B Limited Partnership (a West Virginia limited partnership) as listed in the accompanying index. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PDC 1996-B Limited Partnership as of December 31, 1996, and the results of its operations and its cash flows for the period from September 9, 1996 (date of inception) to December 31, 1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania March 20, 1997
PDC 1996-B LIMITED PARTNERSHIP (A West Virginia Limited Partnership)
Balance Sheet
December 31, 1996
Assets
Current assets: Cash $ 30,706 Accounts receivable - oil and gas revenues 79,517
Total current assets 110,223
Oil and gas properties, successful efforts method (Notes 3 and 5): Oil and gas properties 2,899,619 Less accumulated depreciation, depletion and amortization 36,709 2,862,910
$ 2,973,133
Current Liabilities and Partners' Equity
Current liabilities: Accrued expenses $ 9,474 Due to Managing General Partner 5,076 Total current liabilities 14,550
Partners' equity 2,958,583
$ 2,973,133
See accompanying notes to financial statements.
PDC 1996-B LIMITED PARTNERSHIP (A West Virginia Limited Partnership)
Statement of Operations
Period from September 9, 1996 (Date of Inception) to December 31, 1996
Revenues: Sales of oil and gas $ 90,359 Interest income 5,630 95,989
Expenses (note 3): Management fee 67,118 Lifting costs 10,842 Independent engineering fee 2,000 Independent audit fee 3,273 Franchise taxes 256 Direct administrative cost 1,000 Tax return preparation 2,945 Depreciation, depletion and amortization 36,709
124,143
Net loss $(28,154)
Net loss per limited and additional general partner unit $ (268)
See accompanying notes to financial statements.
PDC 1996-B LIMITED PARTNERSHIP (A West Virginia Limited Partnership)
Statement of Partners' Equity
Period from September 9, 1996 (Date of Inception) to December 31, 1996
Limited Managing and additional general general partners partner Total
Partners' initial capital contributions $ 2,684,707 $ 583,924 $3,268,631 Syndication costs (281,894) - (281,894) Net income (loss) (35,947) 7,793 (28,154) Balance, December 31, 1996 $ 2,366,866 $ 591,717 $2,958,583
See accompanying notes to financial statements.
PDC 1996-B LIMITED PARTNERSHIP (A West Virginia Limited Partnership)
Statement of Cash Flows
Period from September 9, 1996 (Date of Inception) to December 31, 1996
Cash flows from operating activities: Net loss $ (28,154) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation, depletion and amortization 36,709 Changes in operating assets and liabilities: Accounts receivable - oil and gas revenues (79,517) Accrued expenses 9,474 Due to Managing General Partner 5,076
Net cash used by operating activities (56,412)
Cash flows from investing activities: Expenditures for oil and gas properties (2,899,619)
Net cash used by investing activities (2,899,619)
Cash flows from financing activities: Limited and additional general partner contributions 2,684,707 Managing General Partner contribution 583,924 Syndication cost paid (281,894)
Net cash provided from financing activities 2,986,737
Net increase in cash 30,706 Cash at beginning of period - Cash at end of period $ 30,706
See accompanying notes to financial statements.
PDC 1996-B LIMITED PARTNERSHIP (A West Virginia Limited Partnership)
Notes to Financial Statements
December 31, 1996
(1) Summary of Significant Accounting Policies
Partnership Financial Statement Presentation Basis
The financial statements include only those assets, liabilities and results of operations of the partners which relate to the business of PDC 1996-B Limited Partnership (the Partnership). The statements do not include any assets, liabilities, revenues or expenses attributable to any of the partners' other activities.
Oil and Gas Properties
The Partnership follows the successful efforts method of accounting for the cost of exploring for and developing oil and gas reserves. Under this method, costs of development wells, including equipment and intangible drilling costs related to both producing wells and developmental dry holes, and successful exploratory wells are capitalized and amortized on an annual basis to operations by the units-of-production method using estimated proved developed reserves determined at year end by an independent petroleum engineer, Wright & Company, Inc. If a determination is made that an exploratory well has not discovered economically producible reserves, then its costs are expensed as dry hole costs.
The Partnership assesses impairment of capitalized costs of proved oil and gas properties by comparing net capitalized costs to undiscounted future net cash flows on a field-by-field basis using expected prices. Prices utilized for measurement purposes and expected costs are held constant. If net capitalized costs exceed undiscounted future net cash flow, the measurement of impairment is based on estimated fair value which would consider future discounted cash flows.
Based on the Managing General Partner's experience, management believes site restoration, dismantlement and abandonment costs, net of salvage to be immaterial in relation to operating costs. These costs are being expensed when incurred.
Income Taxes
Since the taxable income or loss of the Partnership is reported in the separate tax returns of the partners, no provision has been made for income taxes on the Partnership's books.
Under federal income tax laws, regulations and administrative rulings, certain types of transactions may be accorded varying interpretations. Accordingly, the Partnership's tax return and, consequently, individual tax returns of the partners may be changed to conform to the tax treatment resulting from a review by the Internal Revenue Service.
Use of Estimates
Management of the Partnership has made a number of estimates and assumptions relating to the reporting of assets and liabilities and revenues and expenses and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. Estimates which are particularly significant to the financial statements include estimates of oil and gas reserves and future cash flows from oil and gas properties.
(Continued)
PDC 1996-B LIMITED PARTNERSHIP (A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
(2) Organization
The Partnership was organized as a limited partnership on September 9, 1996, in accordance with the laws of the State of West Virginia for the purpose of engaging in the drilling, completion and operation of oil and gas development and exploratory wells in the Northern Appalachian Basin.
Purchasers of partnership units subscribed to and fully paid for 3 units of limited partner interests and 131.235 units of additional general partner interests at $20,000 per unit (Investor Partners). Petroleum Development Corporation has been designated the Managing General Partner of the Partnership. Although costs, revenues and cash distributions allocable to the limited and additional general partners are shared pro rata based upon the amount of their subscriptions, including the Managing General Partner to the extent of its 20% capital contributions, there are significant differences in the federal income tax effects and liability associated with these different types of units in the Partnership.
Upon completion of the drilling phase of the Partnership's wells, all additional general partners units are converted into units of limited partner interests and thereafter become limited partners of the Partnership. Limited partners do not have any rights to convert their units into units of additional general partner interests in the Partnership.
In accordance with the terms of the Partnership Agreement (the Agreement), the Managing General Partner manages all activities of the Partnership and acts as the intermediary for substantially all Partnership transactions.
(3) Transactions with Managing General Partner and Affiliates
The Partnership's transactions with the Managing General Partner include charges for the following: Period from September 9, 1996 (date of inception) to December 31, 1996
Drilling and completion costs $2,793,258 Lease acquisitions, at cost 106,361 Offering and organization costs (includes reimbursements of commissions and management fee) 349,012 Lifting costs 10,842 Tax return preparation 2,945 Direct administrative cost 1,000
(4) Allocation
The table below summarizes the participation of the Managing General Partner and the Investor Partners, taking account of the Managing General Partner's capital contribution equal to 20% of the Initial Operating Capital, in the costs and revenues of the Partnership.
(Continued)
PDC 1996-B LIMITED PARTNERSHIP (A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
Managing Investor General Partners Partner Partnership Costs Broker-dealer Commissions and Expenses(1). . 100% 0% Management Fee . . . . . . . . . . . . . . . 100% 0% Undeveloped Lease Costs. . . . . . . . . . . 0% 100% Drilling and Completion Costs. . . . . . . . 80% 20% Tangible Equipment . . . . . . . . . . . . . 0% 100% Intangible Drilling and Development Costs. . 100% 0% Operating Costs(2) . . . . . . . . . . . . . 80% 20% Direct Costs(3). . . . . . . . . . . . . . . 80% 20% Administrative Costs . . . . . . . . . . . . 0% 100% Partnership Revenues
Sale of Oil and Gas Production(4). . . . . . 80% 20% Sale of Productive Properties(5) . . . . . . 80% 20% Sale of Equipment . . . . . . . . . . . . . 0% 100% Sale of Undeveloped Leases . . . . . . . . . 80% 20% Interest Income. . . . . . . . . . . . . . . 80% 20%
____________________
(1) Organization and Offering Costs, net of the Dealer Manager commissions, discounts, due diligence expenses, and wholesaling fees of the Partnership will be paid by the Managing General Partner and not from Partnership funds. In addition, Organization and Offering Costs in excess of 10-1/2% of Subscriptions will be paid by the Managing General Partner, without recourse to the Partnership.
(2) Represents Operating costs incurred after the completion of productive wells, including monthly per-well charges paid to the Managing General Partner.
(3) The Managing General Partner will receive monthly reimbursement from the Partnership for their direct costs incurred by the Managing General Partner on behalf of the Partnership.
(4) The revenues and expenses to be allocated to the partners are subject to a special provision in the partnership agreement, whereby the allocable share of revenues and expenses of the Investor Partners may be increased and the interest of the Managing General Partner may be decreased if certain cash distribution levels are not met. The shifting of the allocable share of revenues and expenses to the Investor Partners in the event that certain prescribed cash distribution levels are not attained may also serve to shift an increased amount of cash distributions to the Investor Partners and a decreased amount of cash distributions to the Managing General Partner.
(5) In the event of the sale or other disposition of a productive well, a lease upon which such well is situated, or any equipment related to any such lease or well, the proceeds from such sale or disposition shall be allocated and credited to the Partners as oil and gas revenues are allocated. The term "proceeds" above does not include revenues from a royalty, overriding royalty, lease interest reserved, or other promotional consideration received by the Partnership in connection with any sale or disposition, which revenues shall be allocated to the Investor Partners and the Managing General Partner in the same percentages that oil and gas revenues are allocated.
(Continued)
PDC 1996-B LIMITED PARTNERSHIP (A West Virginia Limited Partnership)
Notes to Financial Statements, Continued
(5) Costs Relating to Oil and Gas Activities
The Partnership is engaged solely in oil and gas activities, all of which are located in the continental United States. Information regarding aggregate capitalized costs and results of operations for these activities is located in the basic financial statements. Costs capitalized for these activities at December 31, 1996, are as follows:
Lease acquisition costs $ 106,360 Intangible development costs 2,319,695 Well equipment 473,564 $2,899,619
The following costs were incurred for the Partnership's oil and gas activities:
Period from September 9, 1996 (date of inception) to December 31, 1996 Costs capitalized: Property acquisition costs $ 106,360 Development costs 2,793,259 $2,899,619 (6) Income Taxes
As a result of the differences in the treatment of certain items for income tax purposes as opposed to financial reporting purposes, primarily depreciation, depletion and amortization of oil and gas properties and the recognition of intangible drilling costs as an expense or capital item, the income tax basis of oil and gas properties differs from the basis used for financial reporting purposes. At December 31, 1996, the income tax basis of the Partnership's oil and gas properties was $577,076.
(7) Supplemental Reserve Information (Unaudited)
Proved oil and gas reserves of the Partnership have been estimated by an independent petroleum engineer, Wright & Company, Inc. These reserves have been prepared in compliance with the Securities and Exchange Commission rules based on year end prices. Since December 31, 1996 prices have declined to seasonal levels. A copy of the reserve report has been made available to all partners. All of the partnership's reserves are proved developed. An analysis of the change in estimated quantities of proved developed oil and gas reserves is shown below:
Natural gas (mcf)
Proved developed reserves as of September 9, 1996 (date of inception) - Extensions, discoveries and other additions 2,406,498 Production (29,366)
Proved developed reserves as of December 31, 1996 2,377,132