We are maintaining our Buy recommendation, but lowering our price objective and estimates for Petroleum Development (PETD) ahead of the company’s fourth-quarter results. The negative revisions primarily reflect our new (lower) commodity-price deck.

Our new fourth-quarter 2008 and full-year 2009 EPS estimates are $0.66 and $3.54, down from $1.46 and $5.10, respectively. Despite recent turmoil, the PETD story remains intact, with low risk drilling in its three Colorado operating areas along with accretive acquisitions providing the fuel for double-digit production growth through 2010. We project that the company can sustain production growth in 2009 even while reducing capital outlays.

In our NAV [net asset value] model for Petroleum Development, we have taken the company’s mid-year 2008 proved reserves base and future development opportunities into account. We discount expected future cash flows from each drilling area, net of expenses, and then subtract out certain liabilities such as debt, to come up with a per-share valuation. While we have evaluated each of the company’s major projects in our model, we give them no credit for the ongoing Barnett Shale exploratory effort.

Neil Malkin contributed to this report.

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