<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended Commission File Number
September 30, 1995 2-59769-03 (1978-1)
2-59769-04 (1978-2)
DYCO 1978 OIL AND GAS PROGRAMS
(TWO LIMITED PARTNERSHIPS)
(Exact Name of Registrant as specified in its charter)
41-1343930 (1978-1)
Minnesota 41-1343935 (1978-2)
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
Samson Plaza, Two West Second Street, Tulsa, Oklahoma 74103
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(918) 583-1791
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
----- -----
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DYCO OIL AND GAS PROGRAM 1978-1 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1995 1994
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . $103,652 $ 35,769
Accrued oil and gas sales, including
$22,657 and $22,230 due from
related parties (Note 2) . . . . . . 25,756 26,596
-------- --------
Total current assets . . . . . . . $129,408 $ 62,365
NET OIL AND GAS PROPERTIES, utilizing
the full cost method . . . . . . . . . 203,414 259,917
DEFERRED CHARGE . . . . . . . . . . . . . 43,290 43,290
-------- --------
$376,112 $365,572
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . $ 2,023 $ 2,781
-------- --------
Total current liabilities . . . . . . $ 2,023 $ 2,781
ACCRUED LIABILITY . . . . . . . . . . . . 22,425 22,425
CONTINGENCIES (Note 3)
PARTNERS' CAPITAL:
General Partner, issued and outstanding,
24 units . . . . . . . . . . . . . . 3,517 3,404
Limited Partners, issued and outstanding,
2,400 units . . . . . . . . . . . . 348,147 336,962
-------- --------
Total Partners' capital . . . . . . $351,664 $340,366
-------- --------
$376,112 $365,572
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1978-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
---------- ---------
REVENUES:
Oil and gas sales, including
$73,913 and $20,803 of sales
to related parties (Note 2) . . . . $77,571 $26,304
Interest . . . . . . . . . . . . . . . 499 415
------- -------
$78,070 $26,719
------- -------
COSTS AND EXPENSES:
Oil and gas production . . . . . . . . $18,141 $13,243
Depreciation, depletion, and amortization
of oil and gas properties . . . . . . . 27,104 9,498
Provision to reduce carrying value of
oil and gas properties (Note 1) . . 13,949 -
General and administrative (Note 2) . 7,011 7,276
------- -------
$66,205 $30,017
------- -------
NET INCOME (LOSS) . . . . . . . . . . . . $11,865 ($ 3,298)
======= =======
GENERAL PARTNER (1%) - net income (loss) $ 119 ($ 33)
======= =======
LIMITED PARTNERS (99%) - net income (loss) $11,746 ($ 3,265)
======= =======
NET INCOME (LOSS) PER UNIT . . . . . . . $ 5 ($ 2)
======= =======
UNITS OUTSTANDING . . . . . . . . . . . . 2,424 2,424
======= =======
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1978-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
---------- ---------
REVENUES:
Oil and gas sales, including
$126,176 and $142,823 of sales
to related parties (Note 2) . . . . $143,435 $180,990
Interest . . . . . . . . . . . . . . . 1,432 1,472
-------- --------
$144,867 $182,462
-------- --------
COSTS AND EXPENSES:
Oil and gas production . . . . . . . . $ 43,509 $ 51,426
Depreciation, depletion, and amortization
of oil and gas properties . . . . . . . 50,394 56,037
Provision to reduce carrying value of
oil and gas properties (Note 1) . . 13,949 -
General and administrative (Note 2) . 25,717 23,588
-------- --------
$133,569 $131,051
-------- --------
NET INCOME . . . . . . . . . . . . . . . $ 11,298 $ 51,411
======== ========
GENERAL PARTNER (1%) - net income . . . . $ 113 $ 514
======== ========
LIMITED PARTNERS (99%) - net income . . . $ 11,185 $ 50,897
======== ========
NET INCOME PER UNIT . . . . . . . . . . . $ 5 $ 21
======== ========
UNITS OUTSTANDING . . . . . . . . . . . . 2,424 2,424
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1978-1 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . $ 11,298 $ 51,411
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation, depletion, and amortiza-
tion of oil and gas properties . . . . 50,394 56,037
Provision to reduce carrying value of
oil and gas properties . . . . . . 13,949 -
Decrease in accrued oil gas sales 840 5,172
(Decrease) increase in accounts
payable ( 758) 674
Decrease in related party payable . - ( 171,055)
-------- --------
Net cash provided (used) by operating
activities . . . . . . . . . . . . $ 75,723 ($ 57,761)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties . ($ 8,386) ($ 11,985)
Retirements of oil and gas properties 546 -
-------- --------
Net cash used by investing activities ($ 7,840) ($ 11,985)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions . . . . . . . . . . $ - ($109,080)
-------- --------
Net cash used by financing activities $ - ($109,080)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . $ 67,833 ($178,826)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 35,769 234,274
-------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $103,652 $ 55,448
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1978-2 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1995 1994
---------------------------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . $ 5,785 $ 7,831
Accrued oil and gas sales, including
$11,812 and $17,560 due from
related parties (Note 2) . . . . . . 15,716 27,923
------- --------
Total current assets . . . . . . . $21,501 $ 35,754
NET OIL AND GAS PROPERTIES, utilizing
the full cost method . . . . . . . . . 51,877 80,941
DEFERRED CHARGE . . . . . . . . . . . . . 10,687 10,687
------- --------
$84,065 $127,382
======= ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . $ 4,282 $ 3,111
------- --------
Total current liabilities . . . . . $ 4,282 $ 3,111
ACCRUED LIABILITY . . . . . . . . . . . . 12,878 12,878
CONTINGENCIES (Note 3)
PARTNERS' CAPITAL:
General Partner, issued and outstanding,
16 units . . . . . . . . . . . . . . 669 1,114
Limited Partners, issued and outstanding,
1,600 units . . . . . . . . . . . . 66,236 110,279
------- --------
Total Partners' capital . . . . . . $66,905 $111,393
------- --------
$84,065 $127,382
======= ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1978-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ---------
REVENUES:
Oil and gas sales, including
$17,260 and $28,369 of sales
to related parties (Note 2) . . . . $26,674 $63,688
Interest . . . . . . . . . . . . . . . 184 333
------- -------
$26,858 $64,021
------- -------
COSTS AND EXPENSES:
Oil and gas production . . . . . . . . $14,902 $13,356
Depreciation, depletion, and amortization
of oil and gas properties . . . . . . . 6,837 8,490
Provision to reduce carrying value of
oil and gas properties (Note 1) . . 8,231 -
General and administrative (Note 2) . 5,964 6,040
------- -------
$35,934 $27,886
------- -------
NET (LOSS) INCOME . . . . . . . . . . . . ($ 9,076) $36,135
======= =======
GENERAL PARTNER (1%) - net (loss) income ($ 91) $ 361
======= =======
LIMITED PARTNERS (99%) - net (loss) income ($ 8,985) $35,774
======= =======
NET (LOSS) INCOME PER UNIT . . . . . . . ($ 6) $ 22
======= =======
UNITS OUTSTANDING . . . . . . . . . . . . 1,616 1,616
======= =======
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1978-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ---------
REVENUES:
Oil and gas sales, including
$62,114 and $101,268 of sales
to related parties (Note 2) . . . . $82,643 $215,384
Interest . . . . . . . . . . . . . . . 465 658
------- --------
$83,108 $216,042
------- --------
COSTS AND EXPENSES:
Oil and gas production . . . . . . . . $45,143 $ 51,560
Depreciation, depletion, and amortization
of oil and gas properties . . . . . . . 20,731 41,408
Provision to reduce carrying value of
oil and gas properties (Note 1) . . 8,231 -
General and administrative (Note 2) . 21,171 19,762
------- --------
$95,276 $112,730
------- --------
NET (LOSS) INCOME . . . . . . . . . . . . ($12,168) $103,312
======= ========
GENERAL PARTNER (1%) - net (loss) income ($ 122) $ 1,033
======= ========
LIMITED PARTNERS (99%) - net (loss) income ($12,046) $102,279
======= ========
NET (LOSS) INCOME PER UNIT . . . . . . . ($ 8) $ 64
======= ========
UNITS OUTSTANDING . . . . . . . . . . . . 1,616 1,616
======= ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1978-2 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income . . . . . . . . . . ($12,168) $103,312
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation, depletion, and amortization
of oil and gas properties . . . . . . 20,731 41,408
Provision to reduce carrying value of
oil and gas properties . . . . . . 8,231 -
Decrease (increase) in accrued oil and
gas sales . . . . . . . . . . . . 12,207 ( 2,723)
Increase (decrease) in accounts
payable 1,171 ( 180)
Decrease in payable to General Partner - ( 6,900)
------- --------
Net cash provided by operating
activities $30,172 $134,917
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties . $ - ($ 2,391)
Retirements of oil and gas properties 102 -
------- --------
Net cash provided (used) by investing
activities . . . . . . . . . . . . $ 102 ($ 2,391)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions . . . . . . . . . . ($32,320) ($137,360)
------- --------
Net cash used by financing activities ($32,320) ($137,360)
------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS ($ 2,046) ($ 4,834)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 7,831 24,573
------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 5,785 $ 19,739
======= ========
The accompanying condensed notes are an
integral part of these financial statements.
-9-
<PAGE>
DYCO OIL AND GAS PROGRAM 1978-1 LIMITED PARTNERSHIP
DYCO OIL AND GAS PROGRAM 1978-2 LIMITED PARTNERSHIP
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheets as of September 30, 1995, statements of
operations for the three and nine months ended September 30,
1995 and 1994, and statements of cash flows for the nine months
ended September 30, 1995 and 1994 have been prepared by Dyco
Petroleum Corporation ("Dyco"), the General Partner of the Dyco
Oil and Gas Program 1978-1 and 1978-2 Limited Partnerships
(individually, the "1978-1 Program" or the "1978-2 Program", as
the case may be, or, collectively, the "Programs"), without
audit. In the opinion of management all adjustments (which
include only normal recurring adjustments) necessary to present
fairly the financial position at September 30, 1995, results of
operations for the three and nine months ended September 30,
1995 and 1994, and changes in cash flows for the nine months
ended September 30, 1995 and 1994 have been made.
Information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto
included in the Programs' Annual Report on Form 10-K for the
year ended December 31, 1994. The results of operations for the
period ended September 30, 1995 are not necessarily indicative
of the results to be expected for the full year.
The limited partners' net income or loss per unit is based upon
each $5,000 initial capital contribution.
OIL AND GAS PROPERTIES
----------------------
Oil and gas operations are accounted for using the full cost
method of accounting. All productive and non-productive costs
associated with the acquisition, exploration and development of
oil and gas reserves are capitalized. In the event the
unamortized cost of oil and gas properties being amortized
exceeds the full cost ceiling (as defined by the Securities and
Exchange Commission), the excess is charged to expense in the
period during which such excess occurs. At September 30, 1995,
the unamortized cost of oil and gas properties exceeded the full
cost ceiling by $13,949 on the 1978-1 Program and by $8,231 on
the 1978-2 Program. These excesses were charged to expense
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<PAGE>
during the three and nine months ended September 30, 1995.
Sales and abandonments of properties are accounted for as
adjustments of capitalized costs with no gain or loss
recognized, unless such adjustments would significantly alter
the relationship between capitalized costs and proved oil and
gas reserves.
The provision for depreciation, depletion, and amortization of
oil and gas properties is calculated by dividing the oil and gas
sales dollars during the year by the estimated future gross
income from the oil and gas properties and applying the
resulting rate to the net remaining costs of oil and gas
properties that have been capitalized, plus estimated future
development costs.
2. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
Under the terms of each of the Program's partnership agreement,
Dyco is entitled to receive a reimbursement for all direct
expenses and general and administrative, geological and
engineering expenses it incurs on behalf of the Program. During
the three months ended September 30, 1995 and 1994 the 1978-1
Program incurred such expenses totaling $7,011 and $7,276,
respectively, of which $6,219 and $6,219 were paid to Dyco.
During the nine months ended September 30, 1995 and 1994 the
1978-1 Program incurred such expenses totaling $25,717 and
$23,588, respectively, of which $18,657 and $18,657 were paid to
Dyco. During the three months ended September 30, 1995 and 1994
the 1978-2 Program incurred such expenses totaling $5,964 and
$6,040, respectively, of which $5,472 and $5,472 were paid to
Dyco. During the nine months ended September 30, 1995 and 1994
the 1978-2 Program incurred such expenses totaling $21,171 and
$19,762, respectively, of which $16,416 and $16,416 were paid to
Dyco.
Affiliates of the Programs are the operators of certain of the
Programs' properties and their policy is to bill the Programs
for all customary charges and cost reimbursements associated
with their activities, together with any compressor rentals,
consulting, or other services provided.
The Programs sell gas at market prices to Premier Gas Company
("Premier"), an affiliated company, and Premier may then resell
such gas to third parties at market prices. During the three
months ended September 30, 1995 and 1994 these sales for the
1978-1 Program totaled $73,913 and $20,803, respectively.
During the nine months ended September 30, 1995 and 1994 these
sales for the 1978-1 Program totaled $126,176 and $142,823,
respectively. At September 30, 1995 accrued oil and gas sales
for the 1978-1 Program included $22,657 due from Premier.
During the three months ended September 30, 1995 and 1994 these
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<PAGE>
sales for the 1978-2 Program totaled $17,260 and $28,369,
respectively. During the nine months ended September 30, 1995
and 1994 these sales for the 1978-2 Program totaled $62,114 and
$101,268, respectively. At September 30, 1995 accrued oil and
gas sales for the 1978-2 Program included $11,812 due from
Premier.
3. CONTINGENCIES
-------------
On November 12, 1993, two royalty owners filed a class action
lawsuit against Dyco in which the plaintiffs alleged entitlement
to a share of the proceeds of a take-or-pay settlement with a
gas purchaser which involved a well in which the 1978-1 and
1978-2 Programs share a working interest. This lawsuit is a
successor lawsuit to a suit that was filed in 1991 and dismissed
in 1993 following a district court's failure to certify a class
action. The lawsuit also alleged claims based on breach of
contract, bad faith breach of contract, breach of an implied
covenant to market, unjust enrichment, and constructive fraud
and requested an accounting and a temporary restraining order.
The plaintiffs have not quantified the amount of their alleged
damages. The district court has certified the matter as a class
action and Dyco has appealed the court's order. Dyco's appeal
is currently pending. Dyco has also filed its answer in the
matter in which it denied all of the plaintiffs' allegations.
Discovery is proceeding in the matter and Dyco intends to
vigorously defend the lawsuit. As of the date of these
financial statements, management cannot determine the amount of
any alleged damages which would be allocable to either the 1978-
1 or 1978-2 Program.
On March 5, 1992 Walter K. Spurlin, et al. filed a lawsuit
against Dyco in which the plaintiffs alleged that Dyco, as
operator of a well in which the 1978-1 and 1978-2 Programs share
a working interest, failed to respond to their request for an
accounting of production. The plaintiffs are seeking a full
accounting of all production from the well and judgment for
breach of contract and their alleged share of the proceeds from
certain gas contract settlements. The plaintiffs have not
quantified the amount of their alleged damages. Dyco has filed
its answer in the matter in which it denied all of the
plaintiffs' allegations and discovery is ongoing. Dyco intends
to vigorously defend the lawsuit. On April 21, 1992, Dyco's
motion to dismiss plaintiff's claim for tortious breach of
contract was granted, thereby eliminating any punitive damages
claims. As of the date of these financial statements,
management cannot determine the amount of alleged damages which
would be allocable to either the 1978-1 or 1978-2 Program.
-12-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net proceeds from the Programs' operations less necessary
operating capital are distributed to investors on a quarterly
basis. The net proceeds from production are not reinvested in
productive assets, except to the extent that producing wells
are improved or where methods are employed to permit more
efficient recovery of the Programs' reserves which would
result in a positive economic impact. Over the last several
years, the domestic energy industry and the Programs have
contended with volatile, but generally low, oil and gas
prices. Over the past few years, the oil and gas market
appears to have moved from periods of relative stability in
supply and demand to excess supply and weakened demand. These
trends have led to the volatility in pricing and demand noted
over the past years.
The Programs' available capital from subscriptions has been
spent on oil and gas drilling activities. There should not be
any further material capital resource commitments in the
future. The Programs' have no bank debt commitments. Cash
for operational purposes will be provided by current oil and
gas production.
RESULTS OF OPERATIONS
---------------------
1978-1 PROGRAM
THREE MONTHS ENDED SEPTEMBER 30, 1995 AS COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1994.
Three months ended September 30,
-------------------------------
1995 1994
---- ----
Oil and gas sales $77,571 $26,304
Oil and gas production expenses $18,141 $13,243
Barrels produced 264 359
Mcf produced 47,685 15,271
Average price/Bbl $ 13.86 $ 15.32
Average price/Mcf $ 1.55 $ 1.36
As shown in the table, oil and natural gas sales increased
194.9% for the three months ended September 30, 1995 as
compared to the three months ended September 30, 1994. This
increase resulted from increases in the volumes and average
price of natural gas sold, partially offset by decreases in
the volumes and average price of oil sold during the three
-13-
<PAGE>
months ended September 30, 1995 as compared to the three
months ended September 30, 1994. Volumes of oil sold
decreased 95 barrels, while volumes of natural gas sold
increased 32,414 Mcf for the three months ended September 30,
1995 as compared to the three months ended September 30, 1994.
The decrease in the volumes of oil sold was primarily due to a
current dispute over revenues with the operator of one of the
1978-1 Program's wells during the three months ended September
30, 1995. The increase in the volumes of natural gas sold was
primarily a result of significant positive prior period volume
adjustments from a purchaser on several of the 1978-1
Program's wells during the three months ended September 30,
1995. Average natural gas prices increased to $1.55 per Mcf
for the three months ended September 30, 1995 from $1.36 per
Mcf for the three months ended September 30, 1994, while
average oil prices decreased to $13.86 per barrel for the
three months ended September 30, 1995 from $15.32 per barrel
for the three months ended September 30, 1994.
Oil and gas production expenses (including lease operating
expenses and production taxes) increased $4,898 for the three
months ended September 30, 1995 as compared to the three
months ended September 30, 1994. This increase was primarily
a result of workover charges on one of the 1978-1 Program's
wells during the three months ended September 30, 1995
incurred to improve the recovery of reserves. As a percentage
of oil and gas sales, these expenses decreased to 23.4% for
the three months ended September 30, 1995 from 50.3% for the
three months ended September 30, 1994. This percentage
decrease was primarily a result of the increase in the volumes
of natural gas sold during the three months ended September
30, 1995 as compared to the three months ended September 30,
1994 associated with the prior period adjustments and the
increase in the average price of natural gas sold for the
three months ended September 30, 1995 as compared to the three
months ended September 30, 1994.
Depreciation, depletion, and amortization of oil and gas
properties increased $17,606 for the three months ended
September 30, 1995 as compared to the three months ended
September 30, 1994. This increase was primarily a result of
the increase in volumes of natural gas sold during the three
months ended September 30, 1995 as compared to the three
months ended September 30, 1994. As a percentage of oil and
gas sales, this expense remained relatively constant at 34.9%
for the three months ended September 30, 1995 compared to
36.1% for the three months ended September 30, 1994.
As a result of recent declines in oil and natural gas prices
(not withstanding the average natural gas price increase for
the three months ended September 30, 1995 due to the prior
period adjustments as discussed above) as compared to the oil
and natural gas prices used in the valuation of oil and
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<PAGE>
natural gas reserves at December 31, 1994, the 1978-1 Program
has recognized a non-cash charge against earnings of $13,949
during the three months ended September 30, 1995. The
valuation allowance for oil and gas properties at September
30, 1995 was necessary due to the unamortized costs of oil and
gas properties exceeding the present value of the future net
revenues from the oil and gas properties. No allowance was
necessary during the three months ended September 30, 1994.
General and administrative expenses decreased slightly by $265
for the three months ended September 30, 1995 as compared to
the three months ended September 30, 1994. As a percentage of
oil and gas sales, these expenses decreased to 9.0% for the
three months ended September 30, 1995 from 27.7% for the three
months ended September 30, 1994. This percentage decrease was
primarily due to the increase in the volumes and average
prices of natural gas sold during the three months ended
September 30, 1995 as compared to the three months ended
September 30, 1994.
NINE MONTHS ENDED SEPTEMBER 30, 1995 AS COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1994.
Nine months ended September 30,
-------------------------------
1995 1994
---- ----
Oil and gas sales $143,435 $180,990
Oil and gas production expenses $ 43,509 $ 51,426
Barrels produced 686 980
Mcf produced 93,334 115,533
Average price/Bbl $ 14.77 $ 14.65
Average price/Mcf $ 1.43 $ 1.44
As shown in the table, oil and natural gas sales decreased
20.7% for the nine months ended September 30, 1995 as compared
to the nine months ended September 30, 1994. This decrease
resulted primarily from decreases in the volumes of oil and
natural gas sold during the nine months ended September 30,
1995 as compared to the nine months ended September 30, 1994.
Volumes of oil and natural gas sold decreased 294 barrels and
22,199 Mcf, respectively, for the nine months ended September
30, 1995 as compared to the nine months ended September 30,
1994. The decrease in the volumes of oil sold was primarily
due to a current dispute over revenues with the operator of
one of the 1978-1 Program's wells during the nine months ended
September 30, 1995. The decrease in the volumes of natural
gas sold was primarily the result of significant positive
prior period volume adjustments from certain purchasers on
several wells during the nine months ended September 30, 1994,
partially offset by similar adjustments on several of the
1978-1 Program's wells during the nine months ended September
30, 1995. Average natural gas prices remained relatively
constant at $1.43 per Mcf for the nine months ended September
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<PAGE>
30, 1995 compared to $1.44 per Mcf for the nine months ended
September 30, 1994, while average oil prices increased
slightly to $14.77 per barrel for the nine months ended
September 30, 1995 from $14.65 per barrel for the nine months
ended September 30, 1994.
Oil and gas production expenses (including lease operating
expenses and production taxes) decreased $7,917 for the nine
months ended September 30, 1995 as compared to the nine months
ended September 30, 1994. This decrease was primarily a
result of significant workover charges on several of the 1978-
1 Program's wells during the nine months ended September 30,
1994 incurred to improve the recovery of reserves. As a
percentage of oil and gas sales, these expenses increased
slightly to 30.3% for the nine months ended September 30, 1995
from 28.4% for the nine months ended September 30, 1994. This
percentage increase was primarily a result of the decrease in
the volumes of natural gas sold during the nine months ended
September 30, 1995 as compared to the nine months ended
September 30, 1994.
Depreciation, depletion, and amortization of oil and gas
properties decreased $5,643 for the nine months ended
September 30, 1995 as compared to the nine months ended
September 30, 1994. This decrease was primarily a result of
the decreases in the volumes of oil and natural gas sold
during the nine months ended September 30, 1995 as compared to
the nine months ended September 30, 1994. As a percentage of
oil and gas sales, this expense increased to 35.1% for the
nine months ended September 30, 1995 from 31.0% for the nine
months ended September 30, 1994. This percentage increase was
primarily due to the decrease in the volumes of natural gas
sold during the nine months ended September 30, 1995 as
compared to the nine months ended September 30, 1994.
As a result of recent declines in oil and natural gas prices
as compared to the oil and natural gas prices used in the
valuation of oil and natural gas reserves at December 31,
1994, the 1978-1 Program recognized a non-cash charge against
earnings of $13,949 during the nine months ended September 30,
1995. The valuation allowance for oil and gas properties at
September 30, 1995 was necessary due to the unamortized costs
of oil and gas properties exceeding the present value of the
future net revenues from the oil and gas properties. No
allowance was necessary during the nine months ended September
30, 1994.
-16-
<PAGE>
General and administrative expenses increased by $2,129 for
the nine months ended September 30, 1995 as compared to the
nine months ended September 30, 1994. This dollar increase
resulted primarily from an increase in the 1978-1 Program's
professional fees during the nine months ended September 30,
1995 as compared to the nine months ended September 30, 1994.
As a percentage of oil and gas sales, these expenses increased
to 17.9% for the nine months ended September 30, 1995 from
13.0% for the nine months ended September 30, 1994. This
percentage increase was primarily due to decreases in the
volumes of oil and natural gas sold during the nine months
ended September 30, 1995 as compared to the nine months ended
September 30, 1994.
1978-2 PROGRAM
THREE MONTHS ENDED SEPTEMBER 30, 1995 AS COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1994.
Three months ended September 30,
--------------------------------
1995 1994
----- -----
Oil and gas sales $26,674 $63,688
Oil and gas production expenses $14,902 $13,356
Barrels produced 514 1,731
Mcf produced 14,556 21,188
Average price/Bbl $ 17.91 $ 17.88
Average price/Mcf $ 1.20 $ 1.55
As shown in the table, oil and natural gas sales decreased
58.1% for the three months ended September 30, 1995 as
compared to the three months ended September 30, 1994. This
decrease resulted primarily from decreases in the volumes of
oil and natural gas sold and a decrease in the average price
of natural gas sold during the three months ended September
30, 1995 as compared to the three months ended September 30,
1994. Volumes of oil and natural gas sold decreased 1,217
barrels and 6,632 Mcf, respectively, for the three months
ended September 30, 1995 as compared to the three months ended
September 30, 1994. The decrease in the volumes of oil and
natural gas sold was primarily the result of (i) a dispute
with the operator of one of the 1978-2 Program's wells and
(ii) the shutting in another of the 1978-2 Program's wells
during a portion of the three months ended September 30, 1995
in order to improve future production capabilities by
increasing pressure on the well. Average natural gas prices
decreased to $1.20 per Mcf for the three months ended
September 30, 1995 from $1.55 per Mcf for the three months
ended September 30, 1994, while average oil prices increased
slightly to $17.91 per barrel for the three months ended
September 30, 1995 from $17.88 per barrel for the three months
ended September 30, 1994.
-17-
<PAGE>
Oil and gas production expenses (including lease operating
expenses and production taxes) increased $1,546 for the three
months ended September 30, 1995 as compared to the three
months ended September 30, 1994. This increase was primarily
due to workover charges on one of the 1978-2 Program's wells
during the three months ended September 30, 1995 in order to
improve the recovery of reserves. As a percentage of oil and
gas sales, these expenses increased to 55.9% for the three
months ended September 30, 1995 from 21.0% for the three
months ended September 30, 1994. This percentage increase was
primarily due to the dollar increase in production expenses
and the decrease in the average price of natural gas sold
during the three months ended September 30, 1995 as compared
to the three months ended September 30, 1994.
Depreciation, depletion, and amortization of oil and gas
properties decreased $1,653 for the three months ended
September 30, 1995 as compared to the three months ended
September 30, 1994. This decrease was primarily a result of
the decreases in volumes of oil and natural gas sold during
the three months ended September 30, 1995 as compared to the
three months ended September 30, 1994. As a percentage of oil
and gas sales, this expense increased to 25.6% for the three
months ended September 30, 1995 as compared to 13.3% for the
three months ended September 30, 1994. This percentage
increase was primarily the result of the decrease in the
average price of natural gas sold during the three months
ended September 30, 1995 as compared to the three months ended
September 30, 1994.
As a result of recent declines in natural gas prices, the
1978-2 Program recognized a non-cash charge against earnings
of $8,231 during the three months ended September 30, 1995.
The valuation allowance for oil and gas properties at
September 30, 1995 was necessary due to the unamortized costs
of oil and gas properties exceeding the present value of the
future net revenues from the oil and gas properties. No
allowance was necessary during the three months ended
September 30, 1994.
General and administrative expenses remained relatively
constant for the three months ended September 30, 1995 as
compared to the three months ended September 30, 1994. As a
percentage of oil and gas sales, these expenses increased to
22.4% for the three months ended September 30, 1995 from 9.5%
for the three months ended September 30, 1994. This
percentage increase was primarily due to decreases in the
-18-
<PAGE>
volumes and average price of natural gas sold during the three
months ended September 30, 1995 as compared to the three
months ended September 30, 1994.
NINE MONTHS ENDED SEPTEMBER 30, 1995 AS COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1994.
Nine months ended September 30,
------------------------------
1995 1994
---- ----
Oil and gas sales $82,643 $215,384
Oil and gas production expenses $45,143 $ 51,560
Barrels produced 1,147 3,980
Mcf produced 49,341 98,329
Average price/Bbl $ 17.90 $ 16.96
Average price/Mcf $ 1.26 $ 1.72
As shown in the table, oil and natural gas sales decreased
61.6% for the nine months ended September 30, 1995 as compared
to the nine months ended September 30, 1994. This decrease
resulted from decreases in the volumes of oil and natural gas
sold and a decrease in the average price of natural gas sold,
partially offset by an increase in the average price of oil
sold during the nine months ended September 30, 1995 as
compared to the nine months ended September 30, 1994. Volumes
of oil and natural gas sold decreased 2,833 barrels and 48,988
Mcf, respectively, for the nine months ended September 30,
1995 as compared to the nine months ended September 30, 1994.
The decrease in the volumes of oil and natural gas sold was
primarily the result of a dispute with the operator of one of
the 1978-2 Program's wells during the nine months ended
September 30, 1995 and another well being shut-in during a
portion of the nine months ended September 30, 1995 in order
to improve the well's future production capabilities by
increasing pressure on the well. Average natural gas prices
decreased to $1.26 per Mcf for the nine months ended September
30, 1995 from $1.72 per Mcf for the nine months ended
September 30, 1994, while average oil prices increased to
$17.90 per barrel for the nine months ended September 30, 1995
from $16.96 per barrel for the nine months ended September 30,
1994.
-19-
<PAGE>
Oil and gas production expenses (including lease operating
expenses and production taxes) decreased $6,417 for the nine
months ended September 30, 1995 as compared to the nine months
ended September 30, 1994. This decrease was primarily due to
decreases in the volumes of oil and natural gas sold during
the nine months ended September 30, 1995 as compared to the
nine months ended September 30, 1994, partially offset by
workover charges on one of the 1978-2 Program's wells during
the nine months ended September 30, 1995 in order to improve
recovery of reserves. As a percentage of oil and gas sales,
these expenses increased to 54.6% for the nine months ended
September 30, 1995 from 23.9% for the nine months ended
September 30, 1994. This percentage increase was primarily
due to the workover charges and the decrease in the average
price of natural gas sold during the nine months ended
September 30, 1995 as compared to the nine months ended
September 30, 1994.
Depreciation, depletion, and amortization of oil and gas
properties decreased $20,677 for the nine months ended
September 30, 1995 as compared to the nine months ended
September 30, 1994. This decrease was primarily a result of
the decreases in the volumes of oil and natural gas sold
during the nine months ended September 30, 1995 as compared to
the nine months ended September 30, 1994. As a percentage of
oil and gas sales, this expense increased to 25.1% for the
nine months ended September 30, 1995 as compared to 19.2% for
the nine months ended September 30, 1994. This percentage
increase was primarily due to the decrease in the average
price of natural gas sold during the nine months ended
September 30, 1995 as compared to the nine months ended
September 30, 1994.
As a result of recent declines in natural gas prices, the
1978-2 Program recognized a non-cash charge against earnings
of $8,231 during the nine months ended September 30, 1995.
The valuation allowance for oil and gas properties at
September 30, 1995 was necessary due to the unamortized costs
of oil and gas properties exceeding the present value of the
future net revenues from the oil and gas properties. No
allowance was necessary during the nine months ended September
30, 1994.
General and administrative expenses increased by $1,409 for
the nine months ended September 30, 1995 as compared to the
nine months ended September 30, 1994. This dollar increase
resulted primarily from an increase in the 1978-2 Program's
professional fees during the nine months ended September 30,
1995 as compared to the nine months ended September 30, 1994.
As a percentage of oil and gas sales, these expenses increased
to 25.6% for the nine months ended September 30, 1995 from
9.2% for the nine months ended September 30, 1994. This
percentage increase was primarily due to decreases in the
-20-
<PAGE>
volumes and average price of natural gas sold during the nine
months ended September 30, 1995 as compared to the nine months
ended September 30, 1994.
-21-
<PAGE>
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
-22-
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
DYCO OIL AND GAS PROGRAM 1978-1 LIMITED
PARTNERSHIP
DYCO OIL AND GAS PROGRAM 1978-2 LIMITED
PARTNERSHIP
(Registrant)
By: DYCO PETROLEUM CORPORATION
General Partner
Date: November 9, 1995 By: /s/Dennis R. Neill
--------------------------
(Signature)
Dennis R. Neill
Senior Vice President
Date: November 9, 1995 By: /s/Patrick M. Hall
---------------------------
(Signature)
Patrick M. Hall
Senior Vice President -
Controller
Principal Accounting Officer
-23-
<PAGE>
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<ARTICLE> 5
<CIK> 0000215718
<NAME> DYCO OIL AND GAS PROGRAM 1978-1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 103,652
<SECURITIES> 0
<RECEIVABLES> 25,756
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 129,408
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 376,112
<CURRENT-LIABILITIES> 2,023
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 351,664
<TOTAL-LIABILITY-AND-EQUITY> 376,112
<SALES> 143,435
<TOTAL-REVENUES> 144,867
<CGS> 0
<TOTAL-COSTS> 133,569
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,298
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,298
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,298
<EPS-PRIMARY> 5
<EPS-DILUTED> 0
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000806572
<NAME> DYCO OIL AND GAS PROGRAM 1978-2
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,785
<SECURITIES> 0
<RECEIVABLES> 15,716
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,501
<PP&E> 0
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<CURRENT-LIABILITIES> 4,282
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0
0
<OTHER-SE> 66,905
<TOTAL-LIABILITY-AND-EQUITY> 84,065
<SALES> 82,643
<TOTAL-REVENUES> 83,108
<CGS> 0
<TOTAL-COSTS> 95,276
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (12,168)
<INCOME-TAX> 0
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<NET-INCOME> (12,168)
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