UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number: 811-02736
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PETROLEUM & RESOURCES CORPORATION
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(Exact name of registrant as specified in charter)
7 Saint Paul Street, Suite 1140, Baltimore, Maryland 21202
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(Address of principal executive offices) (Zip code)
Lawrence L. Hooper, Jr.
Petroleum & Resources Corporation
7 Saint Paul Street
Suite 1140
Baltimore, Maryland 21202
Registrant's telephone number, including area code: 410-752-5900
Date of fiscal year end: December 31, 2008
Date of reporting period: September 30, 2008
SCHEDULE OF INVESTMENTS
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September 30, 2008
(unaudited)
Shares Value (A)
--------- ------------
Common Stocks -- 99.3%
Energy -- 92.9%
Integrated -- 39.0%
Chevron Corp. 915,000 $ 75,469,200
ConocoPhillips 556,891 40,792,266
Exxon Mobil Corp. 1,245,000 96,686,700
Hess Corp. 195,000 16,005,600
Marathon Oil Co. 240,000 9,568,800
Murphy Oil Corp. 266,500 17,093,310
Royal Dutch Shell plc ADR 265,000 15,637,650
Suncor Energy 300,000 12,642,000
Total S.A. ADR 390,000 23,665,200
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307,560,726
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Exploration & Production -- 17.1%
Apache Corp. 200,000 20,856,000
Devon Energy Corp. 250,000 22,800,000
EOG Resources, Inc. (B) 200,000 17,892,000
Forest Oil Corp (C) 69,477 3,446,059
Noble Energy, Inc. 340,000 18,900,600
Occidental Petroleum Corp. 400,000 28,180,000
XTO Energy Inc. 487,500 22,678,500
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134,753,159
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Services -- 25.8%
Baker Hughes, Inc. 205,000 12,410,700
Complete Production Services,
Inc. (C)(D) 400,500 8,062,065
Halliburton Co. 700,000 22,673,000
Hercules Offshore, Inc. (C)(D) 588,300 8,918,628
Nabors Industries Ltd. (C)(D) 520,000 12,958,400
National Oilwell Varco, Inc. (C) 138,538 6,958,764
Noble Corp. (D) 600,000 26,340,000
Schlumberger Ltd. 700,000 54,663,000
Transocean Inc. (C) 237,953 26,136,758
Weatherford International,
Ltd. (C) 987,120 24,816,197
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203,937,512
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Utilities -- 11.0%
Energen Corp. 300,000 13,584,000
Equitable Resources Inc. 398,800 14,627,984
MDU Resources Group, Inc. (D) 375,000 10,875,000
National Fuel Gas Co. (D) 200,000 8,436,000
New Jersey Resources Corp. (B)(D) 300,000 10,767,000
Northeast Utilities 200,000 5,130,000
Questar Corp. 240,000 9,820,800
Spectra Energy Corp. (D) 108,812 2,589,726
Williams Companies, Inc. 450,000 10,642,500
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86,473,010
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Shares/
Prin. Amt. Value (A)
---------- ------------
Basic Industries -- 6.4%
Basic Materials & Other -- 6.4%
Air Products and Chemicals, Inc. 115,000 $ 7,876,350
CONSOL Energy Inc. 200,000 9,178,000
du Pont (E.I.) de Nemours and
Co. (B) 157,500 6,347,250
International Coal Group,
Inc. (C)(D) 3,000,000 18,720,000
Massey Energy Co. 230,808 8,232,920
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50,354,520
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Total Common Stocks
(Cost $410,134,785) 783,078,927
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Short-Term Investments -- 1.0%
Time Deposit -- 0.0%
Citibank, 3.47%, due 10/1/08 236,732
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Commercial Paper -- 1.0%
General Electric Capital Corp.,
2.20%, due 10/2/08 $1,500,000 1,499,908
Prudential Funding, LLC,
2.10%, due 10/9/08 $3,100,000 3,098,553
Toyota Motor Credit Corp.,
2.24%, due 10/7/08 $3,100,000 3,098,843
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7,697,304
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Total Short-Term Investments
(Cost $7,934,036) 7,934,036
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Total Securities Lending Collateral -- 6.2%
(Cost $49,020,899)
Brown Brothers Investment
Trust, 2.32% (E) 49,020,899
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Total Investments -- 106.5%
(Cost $467,089,720) 840,033,862
Cash, receivables, prepaid
expenses and other assets, less
liabilities -- (6.5)% (51,127,660)
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Net Assets -- 100% $788,906,202
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Notes:
(A)See note 1 to financial statements. Securities are listed on the New York
Stock Exchange, the American Stock Exchange or the NASDAQ.
(B)All or a portion of this security is pledged to cover open written call
option contracts. Aggregate market value of such pledged securities is
$505,070.
(C)Presently non-dividend paying.
(D)A portion of shares held are on loan. See note 8 to financial statements.
(E)Rate presented is as of period-end and represents the annualized yield
earned over the previous seven days.
10
PORTFOLIO SUMMARY
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September 30, 2008
(unaudited)
TEN LARGEST PORTFOLIO HOLDINGS
Market Value % of Net Assets
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Exxon Mobil Corp. $ 96,686,700 12.3%
Chevron Corp. 75,469,200 9.6
Schlumberger Ltd. 54,663,000 6.9
ConocoPhillips 40,792,266 5.2
Occidental Petroleum Corp. 28,180,000 3.5
Noble Corp. 26,340,000 3.3
Transocean Inc. 26,136,758 3.3
Weatherford International, Ltd. 24,816,197 3.2
Total S.A. ADR 23,665,200 3.0
Devon Energy Corp. 22,800,000 2.9
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Total $419,549,321 53.2%
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SECTOR WEIGHTINGS
[CHART]
Integrated 39.0%
Exploration & Production 17.1%
Services 25.8%
Utilities 11.0%
Basic Materials & Other 6.4%
Sort-Term Investments 1.0%
11
SCHEDULE OF OUTSTANDING OPTION CONTRACTS
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September 30, 2008
(unaudited)
Contracts Contract
(100 shares Strike Expiration
each) Security Price Date Value
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COVERED CALLS
100 du Pont (E.I.) de Nemours and Co.. $ 55 Oct 08 $1,000
100 EOG Resources, Inc................ 170 Oct 08 1,000
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200 $2,000
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12
(SELECTED) NOTES TO FINANCIAL STATEMENTS (Unaudited)
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1. SIGNIFICANT ACCOUNTING POLICIES
Petroleum & Resources Corporation (the Corporation) is
registered under the Investment Company Act of 1940 as a non-
diversified investment company. The Corporation is an
internally-managed fund emphasizing petroleum and other
natural resource investments. The investment objectives of
the Corporation are preservation of capital, the attainment
of reasonable income from investments, and an opportunity
for capital appreciation.
Security Transactions and Investment Income-Investment
transactions are accounted for on the trade date. Gain or
loss on sales of securities and options is determined on the
basis of identified cost. Dividend income and distributions
to stockholders are recognized on the ex-dividend date, and
interest income is recognized on the accrual basis.
Security Valuation-Investments in securities traded on
national security exchanges are valued at the last reported
sale price on the day of valuation. Over-the-counter and
listed securities for which a sale price is not available
are valued at the last quoted bid price. Short-term
investments (excluding purchased options) are valued at
amortized cost which approximates fair value. Purchased and
written options are valued at the last quoted asked price.
The Corporation adopted Financial Accounting Standard Board
Statement of Financial Accounting Standards No. 157, Fair
Value Measurements ("FAS 157"), effective January 1, 2008.
There was no impact on the fair value of assets individually
or in aggregate upon adoption. In accordance with FAS 157,
fair value is defined as the price that the Corporation
would receive upon selling an investment in an orderly
transaction to an independent buyer. FAS 157 established a
three-tier hierarchy to establish classification of fair
value measurements, summarized as follows:
. Level 1 -- fair value is determined based on market
data obtained from independent sources; for example, quoted
prices in active markets for identical investments,
. Level 2 -- fair value is determined using other
assumptions obtained from independent sources; for example,
quoted prices for similar investments,
. Level 3 -- fair value is determined using the
Corporation's own assumptions, developed based on the best
information available in the circumstances.
The Corporation's investments at September 30, 2008 are
classified as follows:
Investment in
securities Written options
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Level 1 $ 783,078,927 $2,000
Level 2 56,954,935* --
Level 3 -- --
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Total $840,033,862 $2,000
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* Consists of short-term investments and securities lending
collateral.
For federal income tax purposes, the identified cost of
securities at September 30, 2008 was $467,059,897 and net
unrealized appreciation aggregated $372,973,965, of which
the related gross unrealized appreciation and depreciation
were $399,448,533 and $26,474,568, respectively.
8 . PORTFOLIO SECURITIES LOANED
The Corporation makes loans of securities to approved
brokers to earn additional income. It receives as collateral
cash deposits, U.S. Government securities, or bank letters
of credit valued at 102% of the value of the securities on
loan. The market value of the loaned securities is
calculated based upon the most recent closing prices and any
additional required collateral is delivered to the
Corporation on the next business day. Cash deposits are
placed in an investment trust fund that may invest in money
market instruments, commercial paper, repurchase agreements,
U.S. Treasury Bills, and U.S. agency obligations. The
Corporation accounts for securities lending transactions as
secured financing and receives compensation in the form of
fees or retains a portion of interest on the investment of
any cash received as collateral. The Corporation also
continues to receive interest or dividends on the securities
loaned. Gain or loss in the fair value of securities loaned
that may occur during the term of the loan will be for the
account of the Corporation. At September 30, 2008, the
Corporation had securities on loan of $51,290,735 and held
cash collateral of $49,020,899; additional collateral was
delivered the next business day in accordance with the
procedure described above. The Corporation is indemnified by
the Custodian, serving as lending agent, for loss of loaned
securities and has the right under the lending agreement to
recover the securities from the borrower on demand.
Item 2. CONTROLS AND PROCEDURES.
Conclusions of principal officers concerning controls and
procedures:
(a) As of October 24, 2008, an evaluation was performed
under the supervision and with the participation of the
officers of Petroleum & Resources Corporation (the
"Corporation"), including the principal executive officer
("PEO") and principal financial officer ("PFO"), of the
effectiveness of the Corporation's disclosure controls and
procedures. Based on that evaluation, the Corporation's
officers, including the PEO and PFO, concluded that, as of
October 24, 2008, the Corporation's disclosure controls and
procedures were reasonably designed so as to ensure: (1)
that information required to be disclosed by the Corporation
on Form N-Q is recorded, processed, summarized and reported
within the time periods specified by the rules and forms of
the Securities and Exchange Commission; and (2) that
material information relating to the Corporation is made
known to the PEO and PFO as appropriate to allow timely
decisions regarding required disclosure.
(b) There have been no significant changes in the
Corporation's internal control over financial reporting (as
defined in Rule 30 a-3(d) under the Investment Company Act
of 1940 (17 CFR 270.30a-3(d)) that occurred during the
Corporation's last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the
Corporation's internal control over financial reporting.
Item 3. EXHIBITS.
The certifications of the principal executive officer and
principal financial officer pursuant to Rule 30 a-2(a) under
the Investment Company Act of 1940 are attached hereto as
Form N-Q Certifications.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, the
registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PETROLEUM & RESOURCES CORPORATION
BY: /s/ Douglas G. Ober
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Douglas G. Ober
Chief Executive Officer
Date: October 24, 2008
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, this report
has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
BY: /s/ Douglas G. Ober
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Douglas G. Ober
Chief Executive Officer
(Principal Executive Officer)
Date: October 24, 2008
BY: /s/ Maureen A. Jones
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Maureen A. Jones
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: October 24, 2008