FORM 10-K405
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998
Commission File Number 0-8881
DYCO OIL AND GAS PROGRAM 1978-1
(A LIMITED PARTNERSHIP)
(Exact name of registrant as specified in its charter)
Minnesota 41-1343930
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Samson Plaza
Two West Second Street
Tulsa, Oklahoma 74103
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (918) 583-1791
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Units of limited partnership interest
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 the
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K405 or any amendment to
this Form 10-K405. [X]
The units of limited partnership are not publicly traded, therefore,
registrant cannot compute the aggregate market value of the voting units held by
non-affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE: NONE.
-1-
<PAGE>
FORM 10-K405
DYCO 1978-1 OIL AND GAS PROGRAM
(A Minnesota limited partnership)
TABLE OF CONTENTS
PART I.......................................................................3
ITEM 1. BUSINESS...................................................3
ITEM 2. PROPERTIES.................................................7
ITEM 3. LEGAL PROCEEDINGS.........................................11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS.......11
PART II.....................................................................11
ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP UNITS AND
RELATED LIMITED PARTNER MATTERS...........................11
ITEM 6. SELECTED FINANCIAL DATA...................................13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.................................14
ITEM 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...............23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE..................................34
PART III....................................................................34
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........34
ITEM 11. EXECUTIVE COMPENSATION....................................35
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT ...............................................39
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............39
PART IV.....................................................................41
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K ............................................. 41
SIGNATURES..................................................................43
-2-
<PAGE>
PART I
ITEM 1. BUSINESS
General
The Dyco Oil and Gas Program 1978-1 Limited Partnership (the "Program") is
a Minnesota limited partnership engaged in the production of oil and gas. The
Program commenced operations on April 1, 1978 with the primary financial
objective of investing its limited partners' subscriptions in the drilling of
oil and gas prospects and then distributing to its limited partners all
available cash flow from the Program's on-going production operations. Dyco
Petroleum Corporation ("Dyco") serves as the General Partner of the Program. See
"Item 2. Properties" for a description of the Program's reserves and properties.
The limited partnership agreement for the Program (the "Program
Agreement") provides that limited partners are allocated 99% of all Program
costs and revenues and Dyco, as General Partner, is allocated 1% of all Program
costs and revenues. Included in such costs is the Program's reimbursement to
Dyco of the Program's proportionate share of Dyco's geological, engineering, and
general and administrative expenses.
Dyco currently serves as General Partner of 31 limited partnerships,
including the Program. Dyco is a wholly-owned subsidiary of Samson Investment
Company. Samson Investment Company and its various corporate subsidiaries,
including Dyco, (collectively, "Samson") are primarily engaged in the production
and development of and exploration for oil and gas reserves and the acquisition
and operation of producing properties. At January 31, 1999, Samson owned
interests in approximately 10,500 oil and gas wells located in 19 states of the
United States and the countries of Canada, Venezuela, and Russia. At January 31,
1999, Samson operated approximately 2,900 oil and gas wells located in 15 states
of the United States, as well as Canada, Venezuela, and Russia.
As a limited partnership, the Program has no officers, directors, or
employees. It relies instead on the personnel of Dyco and Samson. As of March 1,
1999, Samson employed approximately 900 persons. No employees are covered by
collective bargaining agreements, and management believes that Samson provides a
sound employee relations environment. For information regarding the executive
officers of Dyco, see "Item 10. Directors and Executive Officers of the
Registrant."
Dyco's and the Program's principal place of business is located at Samson
Plaza, Two West Second Street, Tulsa, Oklahoma 74103, and their telephone number
is (918) 583-1791 or (800) 283-1791.
-3-
<PAGE>
Funding
Although the Program Agreement permits the Program to incur borrowings,
the Program's operations and expenses are currently funded out of the Program's
revenues from oil and gas sales. Dyco may, but is not required to, advance funds
to the Program for the same purposes for which Program borrowings are
authorized.
Principal Products Produced and Services Rendered
The Program's sole business is the development and production of oil and
gas with a concentration on gas. The Program does not hold any patents,
trademarks, licenses, or concessions and is not a party to any government
contracts. The Program has no backlog of orders and does not participate in
research and development activities. The Program is not presently encountering
shortages of oilfield tubular goods, compressors, production material, or other
equipment.
Oil, Gas, and Environmental Control Regulations
Regulation of Production Operations -- The production of oil and gas is
subject to extensive federal and state laws and regulations governing a wide
variety of matters, including the drilling and spacing of wells, allowable rates
of production, prevention of waste and pollution, and protection of the
environment. In addition to the direct costs borne in complying with such
regulations, operations and revenues may be impacted to the extent that certain
regulations limit oil and gas production to below economic levels.
Regulation of Sales and Transportation of Oil and Gas -- Sales of crude
oil and condensate are made by the Program at market prices and are not subject
to price controls. The sale of gas may be subject to both federal and state laws
and regulations. The provisions of these laws and regulations are complex and
affect all who produce, resell, transport, or purchase gas, including the
Program. Although virtually all of the Program's gas production is not subject
to price regulation, other regulations affect the availability of gas
transportation services and the ability of gas consumers to continue to purchase
or use gas at current levels. Accordingly, such regulations may have a material
effect on the Program's operations and projections of future oil and gas
production and revenues.
Future Legislation -- Legislation affecting the oil and gas industry is
under constant review for amendment or expansion. Because such laws and
regulations are frequently amended or reinterpreted, management is unable to
predict what additional
-4-
<PAGE>
energy legislation may be proposed or enacted or the future cost and impact of
complying with existing or future regulations.
Regulation of the Environment -- The Program's operations are subject to
numerous laws and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection. Compliance with
such laws and regulations, together with any penalties resulting from
noncompliance, may increase the cost of the Program's operations or may affect
the Program's ability to timely complete existing or future activities.
Management anticipates that various local, state, and federal environmental
control agencies will have an increasing impact on oil and gas operations.
Significant Customers
Purchases of gas by El Paso Energy Marketing Company ("El Paso") accounted
for approximately 96.3% of the Program's oil and gas sales during the year ended
December 31, 1998. In the event of interruption of purchases by this significant
customer or the cessation or material change in availability of open-access
transportation by the Program's pipeline transporters, the Program may encounter
difficulty in marketing its gas and in maintaining historic sales levels.
Alternative purchasers or transporters may not be readily available.
The Program's principal customers for crude oil production are refiners
and other companies which have pipeline facilities near the producing properties
of the Program. In the event pipeline facilities are not conveniently available
to production areas, crude oil is usually trucked by purchasers to storage
facilities.
Competition and Marketing
The domestic oil and gas industry is highly competitive, with a large
number of companies and individuals engaged in the exploration and development
of oil and gas properties. The ability of the Program to produce and market oil
and gas profitably depends on a number of factors that are beyond the control of
the Program. These factors include worldwide political instability (especially
in oil-producing regions), United Nations export embargoes, the supply and price
of foreign imports of oil and gas, the level of consumer product demand (which
can be heavily influenced by weather patterns), government regulations and
taxes, the price and availability of alternative fuels, the overall economic
environment, and the availability and capacity of transportation and processing
facilities. In addition, on March 12, 1999 several major oil producing nations
agreed to curtail oil exports in an effort to increase worldwide oil prices. The
effect of these factors on future oil and gas industry trends cannot be
accurately predicted or anticipated.
-5-
<PAGE>
The most important variable affecting the Program's revenues is the prices
received for the sale of oil and gas. Predicting future prices is not possible.
Concerning past trends, average yearly wellhead gas prices in the United States
have been volatile for a number of years. For the past ten years, such average
prices have generally been in the $1.40 to $2.40 per Mcf range.
Substantially all of the Program's gas reserves are being sold on the
"spot market." Prices on the spot market are subject to wide seasonal and
regional pricing fluctuations due to the highly competitive nature of the spot
market. In addition, such spot market sales are generally short-term in nature
and are dependent upon the obtaining of transportation services provided by
pipelines. Spot prices for the Program's gas decreased from approximately $2.32
per Mcf at December 31, 1997 to approximately $1.93 per Mcf at December 31,
1998. Such prices were on an MMBTU basis and differ from the prices actually
received by the Program due to transportation and marketing costs, BTU
adjustments, and regional price and quality differences. Continued very low oil
prices as discussed below may cause downward pressure on gas prices due to some
users of gas converting to oil as a cheaper fuel alternative.
For the past ten years, average oil prices have generally been in the
$16.00 to $24.00 per barrel range. Due to global consumption and supply trends
over the last year as well as at least a short-term slowdown in Asian energy
demand, oil prices over the past year have reached historically low levels,
dropping to as low as approximately $9.00 per barrel. It is not known whether
this trend will continue. Prices for the Program's oil decreased from
approximately $16.25 per barrel at December 31, 1997 to approximately $9.50 per
barrel at December 31, 1998.
As of February 28, 1999 oil and gas prices were approximately $9.50 per
barrel and $1.55 per Mcf, respectively. Future prices for both oil and gas will
likely be different from (and may be lower than) the prices in effect on
December 31, 1998 and February 28, 1999. As of the date of this Annual Report,
oil prices have increased slightly over the February 28, 1999 price, primarily
due to the March 1999 announcement that several oil producing nations intend to
curtail oil exports. Management is unable to predict whether future oil and gas
prices will (i) stabilize, (ii) increase, or (iii) decrease.
Insurance Coverage
The Program is subject to all of the risks inherent in the exploration for
and production of oil and gas, including blowouts, pollution, fires, and other
casualties. The Program maintains insurance coverage as is customary for
entities of a similar size engaged in operations similar to that of the
-6-
<PAGE>
Program, but losses can occur from uninsurable risks or in amounts in excess of
existing insurance coverage. The occurrence of an event which is not fully
covered by insurance could have a material adverse effect on the Program's
financial condition and results of operations.
ITEM 2. PROPERTIES
Well Statistics
The following table sets forth the numbers of gross and net productive
wells of the Program as of December 31, 1998.
Well Statistics(1)
As of December 31, 1998
Gross productive wells(2):
Oil 1
Gas 14
--
Total 15
Net productive wells(3):
Oil .09
Gas .67
---
Total .76
- ----------
(1) The designation of a well as an oil well or gas well is made by Dyco based
on the relative amount of oil and gas reserves for the well. Regardless of
a well's oil or gas designation, it may produce oil, gas, or both oil and
gas.
(2) As used throughout this Annual Report on Form 10-K405 ("Annual Report"),
"Gross Well" refers to a well in which a working interest is owned. The
number of gross wells is the total number of wells in which a working
interest is owned.
(3) As used throughout this Annual Report, "Net Well" refers to the sum of the
fractional working interests owned in gross wells. For example, a 15%
working interest in a well represents one Gross Well, but 0.15 Net Well.
Drilling Activities
The Program participated in no drilling activities for the year ended
December 31, 1998.
-7-
<PAGE>
Oil and Gas Production, Revenue, and Price History
The following table sets forth certain historical information concerning
the oil (including condensates) and gas production, net of all royalties,
overriding royalties, and other third party interests, of the Program, revenues
attributable to such production, and certain price and cost information.
Net Production Data
Year Ended December 31,
-------------------------------------
1998 1997 1996
-------- -------- --------
Production:
Oil (Bbls)(1) 382 405 1,239
Gas (Mcf)(2) 74,479 168,303 96,208
Oil and gas sales:
Oil $ 4,173 $ 7,016 $ 21,949
Gas 143,087 322,637 200,611
------- ------- -------
Total $147,260 $329,653 $222,560
======= ======= =======
Total direct operating
expenses(3) $ 50,799 $ 94,591 $ 62,715
======= ======= =======
Direct operating expenses
as a percentage of oil
and gas sales 34.5% 28.7% 28.2%
Average sales price:
Per barrel of oil $10.92 $17.32 $17.72
Per Mcf of gas 1.92 1.92 2.09
Direct operating expenses per
equivalent Mcf of gas(4) $ .66 $.55 $.61
- ----------
(1) As used throughout this Annual Report, "Bbls" refers to barrels of 42 U.S.
gallons and represents the basic unit for measuring the production of
crude oil and condensate oil.
(2) As used throughout this Annual Report, "Mcf" refers to volume of 1,000
cubic feet under prescribed conditions of pressure and temperature and
represents the basic unit for measuring the production of gas.
(3) Includes lease operating expenses and production taxes.
(4) Oil production is converted to gas equivalents at the rate of six Mcf per
barrel, representing the estimated relative energy content of gas and oil,
which rate is not necessarily
-8-
<PAGE>
indicative of the relationship of oil and gas prices. The respective
prices of oil and gas are affected by market and other factors in addition
to relative energy content.
Proved Reserves and Net Present Value
The following table sets forth the Program's estimated proved oil and gas
reserves and net present value therefrom as of December 31, 1998. The schedule
of quantities of proved oil and gas reserves was prepared by Dyco in accordance
with the rules prescribed by the Securities and Exchange Commission (the "SEC").
As used throughout this Annual Report, "proved reserves" refers to those
estimated quantities of crude oil, gas, and gas liquids which geological and
engineering data demonstrate with reasonable certainty to be recoverable in
future years from known oil and gas reservoirs under existing economic and
operating conditions.
Net present value represents estimated future gross cash flow from the
production and sale of proved reserves, net of estimated oil and gas production
costs (including production taxes, ad valorem taxes, and operating expenses),
and estimated future development costs, discounted at 10% per annum. Net present
value attributable to the Program's proved reserves was calculated on the basis
of current costs and prices at December 31, 1998. Such prices were not escalated
except in certain circumstances where escalations were fixed and readily
determinable in accordance with applicable contract provisions. The prices used
by Dyco in calculating the net present value attributable to the Program's
proved reserves do not necessarily reflect market prices for oil and gas
production subsequent to December 31, 1998. There can be no assurance that the
prices used in calculating the net present value of the Program's proved
reserves at December 31, 1998 will actually be realized for such production.
The process of estimating oil and gas reserves is complex, requiring
significant subjective decisions in the evaluation of available geological,
engineering, and economic data for each reservoir. The data for a given
reservoir may change substantially over time as a result of, among other things,
additional development activity, production history, and viability of production
under varying economic conditions; consequently, it is reasonably possible that
material revisions to existing reserve estimates may occur in the near future.
Although every reasonable effort has been made to ensure that these reserve
estimates represent the most accurate assessment possible, the significance of
the subjective decisions required and variances in available data for various
reservoirs make these estimates generally less precise than other estimates
presented in connection with financial statement disclosures.
-9-
<PAGE>
Proved Reserves and
Net Present Value
From Proved Reserves
As of December 31, 1998
Estimated proved reserves:
Gas (Mcf) 444,604
Oil and liquids (Bbls) 1,010
Net present value
(discounted at 10% per annum) $358,465
No estimates of the proved reserves of the Program comparable to those
included herein have been included in reports to any federal agency other than
the SEC. Additional information relating to the Program's proved reserves is
contained in Note 5 to the Program's financial statements, included in Item 8 of
this Annual Report.
Significant Properties
As of December 31, 1998, the Program's properties consisted of 15 gross
(.76 net) productive wells. The Program also owned a non-working interest in an
additional 13 wells. Affiliates of the Program operate 11 (39%) of its total
wells. All of the Program's properties are located onshore in the continental
United States. Substantially all of the Program's reserves are located in the
Anadarko Basin of western Oklahoma and the Texas panhandle, which is an
established oil and gas producing basin.
As of December 31, 1998, the Program's properties in the Anadarko Basin
consisted of 13 gross (.62 net) wells. The Program also owned a non-working
interest in an additional 12 wells in the Anadarko Basin. Affiliates of the
Program operate 9 (36%) of its total Anadarko Basin wells. As of December 31,
1998, the Program had estimated total proved reserves in the Anadarko Basin of
approximately 419,002 Mcf of gas and approximately 784 barrels of crude oil,
with a present value (discounted at 10% per annum) of estimated future net cash
flow of approximately $340,542.
Title to Oil and Gas Properties
Management believes that the Program has satisfactory title to its oil and
gas properties. Record title to substantially all of the Program's properties is
held by Dyco as nominee.
Title to the Program's properties is subject to customary royalty,
overriding royalty, carried, working, and other similar interests and
contractual arrangements customary in the oil and
-10-
<PAGE>
gas industry, to liens for current taxes not yet due, and to other encumbrances.
Management believes that such burdens do not materially detract from the value
of such properties or from the Program's interest therein or materially
interfere with their use in the operation of the Program's business.
ITEM 3. LEGAL PROCEEDINGS
On February 13, 1998, Walter K. Spurlin L.L.C. filed a lawsuit against
Dyco alleging that Dyco amended or terminated certain gas purchase contracts and
fraudulently concealed the settlement of these contracts. (Walter K. Spurlin
L.L.C., et al. vs. Dyco Petroleum Corporation, CJ-98-3, District Court of Roger
Mills County, Oklahoma.) The Plaintiff filed the petition as a class action on
behalf of all individuals who leased Oklahoma mineral leases to Dyco which were
subject to certain gas purchase contracts. The Plaintiff, a lessor of the
Spurlin No. 1-23 well, alleges that Dyco's actions resulted in a breach of the
express and implied obligations of the leases and reckless indifference and/or
actual fraud on behalf of Dyco. The Plaintiff has not specified the amount of
alleged damages. Dyco filed its answer in the matter on April 1, 1998 in which
it denied all of the Plaintiff's allegations and asserted a number of
affirmative defenses, including failure to state a claim and running of the
statute of limitations. Dyco's affirmative defenses also alleged that the
Plaintiff's claims were contrary to the Oklahoma Supreme Court's decision in
Roye Realty and Developing, Inc. v. Watson, 949 P.2d 1208 (Okla. 1996) and that
Dyco acted as a prudent operator and in accordance with the lease terms. A class
certification hearing is pending. The Program had an approximate 8.7% working
interest in the Spurlin No. 1-23 well during the periods applicable to this
lawsuit.
Except for the foregoing, to the knowledge of the management of Dyco and
the Program, neither Dyco, the Program, nor the Program's properties are subject
to any litigation, the results of which would have a material effect on the
Program's or Dyco's financial condition or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS
There were no matters submitted to a vote of the Program's limited
partners during 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP
UNITS AND RELATED LIMITED PARTNER MATTERS
The Program does not have an established trading market for its units of
limited partnership interest ("Units"). Pursuant to
-11-
<PAGE>
the terms of the Program Agreement, Dyco, as General Partner, is obligated to
annually issue a repurchase offer which is based on the estimated future net
revenues from the Program's reserves and is calculated pursuant to the terms of
the Program Agreement. Such repurchase offer is recalculated monthly in order to
reflect cash distributions made to the limited partners and extraordinary
events. The following table sets forth, for the periods indicated, Dyco's
repurchase offer per Unit and the amount of the Program's cash distributions per
Unit for the same period. For purposes of this Annual Report, a Unit represents
an initial subscription of $5,000 to the Program.
Repurchase Cash
Price Distributions
---------- ----------------
1997:
First Quarter $169 $30
Second Quarter 139 -
Third Quarter 176 25
Fourth Quarter 126 -
1998:
First Quarter $126 $70
Second Quarter 56 -
Third Quarter 120 25
Fourth Quarter 95 -
1999:
First Quarter $ 95 $ -
As of March 1, 1999, the Program has 2,400 Units outstanding and
approximately 750 Limited Partners of record.
-12-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected financial data for the Program. This
data should be read in conjunction with the financial statements of the Program,
and the respective notes thereto, included elsewhere in this Annual Report. See
"Item 8. Financial Statements and Supplementary Data."
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Oil and gas sales $147,260 $329,653 $222,560 $188,215 $218,555
Total revenues 149,733 331,988 224,511 190,843 220,607
Lease operating expenses 39,941 70,618 46,425 49,891 59,991
Production taxes 10,858 23,973 16,290 13,220 15,993
General and administrative
expenses 31,524 33,807 33,079 32,626 30,575
Depreciation, depletion,
and amortization of
oil and gas properties 18,706 44,478 21,753 33,373 74,132
Impairment provision - - - 13,949 -
Net income 48,704 159,112 106,964 47,784 39,916
per Unit 20.09 65.64 44.13 19.71 16.47
Cash distributions 230,280 133,320 109,080 96,960 157,560
per Unit 95 55 45 40 65
Summary Balance Sheet Data:
Total assets 165,851 357,596 314,601 323,611 365,572
Partners' capital 133,290 314,866 289,074 291,190 340,366
</TABLE>
-13-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Use of Forward-Looking Statements and Estimates
This Annual Report contains certain forward-looking statements. The words
"anticipate," "believe," "expect," "plan," "intend," "estimate," "project,"
"could," "may," and similar expressions are intended to identify forward-looking
statements. Such statements reflect management's current views with respect to
future events and financial performance. This Annual Report also includes
certain information which is, or is based upon, estimates and assumptions. Such
estimates and assumptions are management's efforts to accurately reflect the
condition and operation of the Program.
Use of forward-looking statements and estimates and assumptions involve
risks and uncertainties which include, but are not limited to, the volatility of
oil and gas prices, the uncertainty of reserve information, the operating risk
associated with oil and gas properties (including the risk of personal injury,
death, property damage, damage to the well or producing reservoir, environmental
contamination, and other operating risks), the prospect of changing tax and
regulatory laws, the availability and capacity of processing and transportation
facilities, the general economic climate, the supply and price of foreign
imports of oil and gas, the level of consumer product demand, and the price and
availability of alternative fuels. Should one or more of these risks or
uncertainties occur or should estimates or underlying assumptions prove
incorrect, actual conditions or results may vary materially and adversely from
those stated, anticipated, believed, estimated, or otherwise indicated.
General Discussion
The following general discussion should be read in conjunction with the
analysis of results of operations provided below. The most important variable
affecting the Program's revenues is the prices received for the sale of oil and
gas. Predicting future prices is not possible. Concerning past trends, average
yearly wellhead gas prices in the United States have been volatile for a number
of years. For the past ten years, such average prices have generally been in the
$1.40 to $2.40 per Mcf range.
Substantially all of the Program's gas reserves are being sold on the
"spot market." Prices on the spot market are subject to wide seasonal and
regional pricing fluctuations due to the highly competitive nature of the spot
market. In addition, such spot market sales are generally short-term in nature
and are dependent upon the obtaining of transportation services provided by
pipelines. Spot prices for the Program's gas decreased from
-14-
<PAGE>
approximately $2.32 per Mcf at December 31, 1997 to approximately $1.93 per Mcf
at December 31, 1998. Such prices were on an MMBTU basis and differ from the
prices actually received by the Program due to transportation and marketing
costs, BTU adjustments, and regional price and quality differences. Continued
very low oil prices as discussed below may cause downward pressure on gas prices
due to some users of gas converting to oil as a cheaper fuel alternative.
For the past ten years, average oil prices have generally been in the
$16.00 to $24.00 per barrel range. Due to global consumption and supply trends
over the last year as well as at least a short-term slowdown in Asian energy
demand, oil prices over the past year have reached historically low levels,
dropping to as low as approximately $9.00 per barrel. It is not known whether
this trend will continue. Prices for the Program's oil decreased from
approximately $16.25 per barrel at December 31, 1997 to approximately $9.50 per
barrel at December 31, 1998.
As of February 28, 1999, oil and gas prices were approximately $9.50 per
barrel and $1.55 per Mcf, respectively. Future prices for both oil and gas will
likely be different from (and may be lower than) the prices in effect on
December 31, 1998 and February 28, 1999. As of the date of this Annual Report,
oil prices have increased slightly over the February 28, 1999 price, primarily
due to the March 1999 announcement that several oil producing nations intend to
curtail oil exports. Management is unable to predict whether future oil and gas
prices will (i) stabilize, (ii) increase, or (iii) decrease.
Results of Operations
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
-------------------------------------
Total oil and gas sales decreased $182,393 (55.3%) in 1998 as compared to
1997. Of this decrease, approximately $180,000 was related to a decrease in
volumes of gas sold. Volumes of oil and gas sold decreased 23 barrels and 93,824
Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of gas
sold resulted primarily from (i) a positive gas balancing adjustment by the
operator on one well in 1997, (ii) a positive prior period volume adjustment
made by the purchaser on one well during 1997, and (iii) a negative prior period
volume adjustment by the purchaser on another well during 1998. Average oil
prices decreased to $10.92 per barrel in 1998 from $17.32 per barrel in 1997.
Average gas prices remained constant at $1.92 per Mcf during 1998 and 1997.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $43,792 (46.3%) in 1998
-15-
<PAGE>
as compared to 1997. This decrease resulted primarily from decreases in (i)
lease operating expenses associated with the decreases in volumes of oil and gas
sold and (ii) production taxes associated with the decrease in oil and gas
sales. As a percentage of oil and gas sales, these expenses increased to 34.5%
in 1998 from 28.7% in 1997. This percentage increase was primarily due to the
prior period volume adjustments during 1998 and 1997 discussed above.
Depreciation, depletion, and amortization of oil and gas properties
decreased $25,772 (57.9%) in 1998 as compared to 1997. This decrease resulted
primarily from the decrease in volumes of oil and gas sold and an upward
revision in the estimate of remaining gas reserves at December 31, 1998. As a
percentage of oil and gas sales, this expense decreased to 12.7% in 1998 from
13.5% in 1997.
General and administrative expenses decreased $2,283 (6.8%) in 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 21.4% in 1998 from 10.3% in 1997. This percentage increase was primarily due
to the decrease in oil and gas sales.
Year Ended December 31, 1997 Compared
to Year Ended December 31, 1996
-------------------------------------
Total oil and gas sales increased $107,093 (48.1%) in 1997 as compared to
1996. Of this increase, approximately $151,000 was related to an increase in
volumes of gas sold, which increase was partially offset by decreases of
approximately (i) $15,000 related to a decrease in volumes of oil sold and (ii)
$29,000 related to the decrease in the average price of gas sold. Volumes of oil
sold decreased 834 barrels, while volumes of gas sold increased 72,095 Mcf in
1997 as compared to 1996. The decrease in volumes of oil sold resulted primarily
from (i) the sale of one well in 1996 and (ii) the release in 1996 of previously
held revenues by the operator of one well due to a production tax adjustment
settlement. The increase in volumes of gas sold resulted primarily from a
positive gas balancing adjustment by the operator on one well in 1997. Average
oil and gas prices decreased to $17.32 per barrel and $1.92 per Mcf,
respectively, in 1997 from $17.72 per barrel and $2.09 per Mcf, respectively, in
1996.
Oil and gas production expenses (lease operating expenses and production
taxes) increased $31,876 (50.8%) in 1997 as compared to 1996. This increase
resulted primarily from the increase in volumes of gas sold in 1997. As a
percentage of oil and gas sales, these expenses remained relatively constant at
28.7% in 1997 and 28.2% in 1996.
Depreciation, depletion, and amortization of oil and gas
-16-
<PAGE>
properties increased $22,725 (104.5%) in 1997 as compared to 1996. This increase
resulted primarily from the decrease in the oil and gas prices used in the
valuation of reserves at December 31, 1997 and the increase in volumes of gas
sold in 1997. As a percentage of oil and gas sales, this expense increased to
13.5% in 1997 from 9.8% in 1996. This percentage increase was primarily due to
the dollar increase in depreciation, depletion, and amortization.
General and administrative expenses increased $728 (2.2%) in 1997 as
compared to 1996. As a percentage of oil and gas sales, these expenses decreased
to 10.3% in 1997 from 14.9% in 1996. This percentage decrease was primarily due
to the increase in oil and gas sales.
Liquidity and Capital Resources
Net proceeds from operations less necessary operating capital are
distributed to the limited partners on a quarterly basis. See "Item 5. Market
for the Registrant's Limited Partnership Units and Related Limited Partner
Matters." 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 reserves, thereby resulting in
a positive economic impact. Assuming 1998 production levels for future years,
the Program's proved reserve quantities at December 31, 1998 would have a
remaining life of approximately 6.0 years for gas reserves and 2.6 years for oil
reserves. However, since the Program's reserve estimates are based on oil and
gas prices at December 31, 1998, it is possible that a significant decrease in
oil and gas prices from December 31, 1998 levels will reduce such reserves and
their corresponding life-span.
The Program's available capital from the limited partners' subscriptions
has been spent on oil and gas drilling activities and there should be no further
material capital resource commitments in the future. Occasional expenditures by
the Program for well completions or workovers, however, may reduce or eliminate
cash available for a particular quarterly cash distribution. The Program has no
debt commitments. Cash for operational purposes will be provided by current oil
and gas production.
There can be no assurance as to the amount of the Program's future cash
distributions. The Program's ability to make cash distributions depends
primarily upon the level of available cash flow generated by the Program's
operating activities, which will be affected (either positively or negatively)
by many factors beyond the control of the Program, including the price of and
demand for oil and gas and other market and economic conditions. Even if prices
and costs remain stable, the amount of cash available for distributions will
decline over time (as the volume
-17-
<PAGE>
of production from producing properties declines) since the Program is not
replacing production through acquisitions of producing properties and drilling.
Inflation and Changing Prices
Prices obtained for oil and gas production depend upon numerous factors,
including the extent of domestic and foreign production, foreign imports of oil,
market demand, domestic and foreign economic conditions in general, and
governmental regulations and tax laws. The general level of inflation in the
economy did not have a material effect on the operations of the Program in 1998.
Oil and gas prices have fluctuated during recent years and generally have not
followed the same pattern as inflation. See "Item 2. Properties Oil and Gas
Production, Revenue, and Price History."
Year 2000 Computer Issues
In General
The Year 2000 Issue ("Y2K") refers to the inability of computer and other
information technology systems to properly process date and time information,
stemming from the earlier programming practice of using two digits rather than
four to represent the year in a date. For example, computer programs and
imbedded chips that are date sensitive may recognize a date using (00) as the
year 1900 rather than the year 2000. The consequence of Y2K is that computer and
imbedded processing systems may be at risk of malfunctioning, particularly
during the transition from 1999 to 2000.
The effects of Y2K are exacerbated by the interdependence of computer and
telecommunication systems throughout the world. This interdependence also exists
among the Program, Samson, and their vendors, customers, and business partners,
as well as with regulators. The potential risks associated with Y2K for an oil
and gas production company fall into three general areas: (i) financial,
leasehold and administrative computer systems, (ii) imbedded systems in field
process control units, and (iii) third party exposures. As discussed below, Dyco
does not believe that these risks will be material to the Program's operations.
The Program's business is producing oil and gas. The day-to-day production
of the Program's oil and gas is not dependent on computers or equipment with
imbedded chips. As further discussed below, management anticipates that the
Program's daily business activities will not be materially affected by Y2K.
The Program relies on Samson to provide all of its
-18-
<PAGE>
operational and administrative services on either a direct or indirect basis.
Samson is addressing each of the three Y2K areas discussed above through a
readiness process that seeks to:
1. increase the awareness of the issue among key employees;
2. identify areas of potential risk;
3. assess the relative impact of these risks and Samson's ability to
manage them; and
4. remediate these risks on a priority basis wherever possible.
Samson Investment Company's Chief Financial Officer is responsible for
communicating to its Board of Directors Y2K actions and for the ultimate
implementation of its Y2K plan. He has delegated to Samson Investment Company's
Senior Vice President-Technology and Administrative Services principal
responsibility for ensuring Y2K compliance within Samson.
Samson has been planning for the impact of Y2K on its information
technology systems since 1993. As of March 1, 1999, Samson is in the final
stages of implementation of a Y2K plan, as summarized below:
Financial and Administrative Systems
1. Awareness. Samson has alerted its officers, managers and supervisors of
Y2K issues and asked them to have their employees participate in the
identification of potential Y2K risks which might otherwise go unnoticed by
higher level employees and officers. As a result, awareness of the issue is
considered high.
2. Risk Identification. Samson's most significant financial and
administrative systems exposure is the Y2K status of the accounting and land
administration system used to collect and manage data for internal management
decision making and for external revenue and accounts payable purposes. Other
concerns include network hardware and software, desktop computing hardware and
software, telecommunications, and office space readiness.
3. Risk Assessment. The failure to identify and correct a material Y2K
problem could result in inaccurate or untimely financial information for
management decision-making or cash flow and payment purposes, including
maintaining oil and gas leases.
4. Remediation. Since 1993, Samson has been upgrading its accounting and
land administration software. Substantially all of the Y2K upgrades have been
completed, with the remainder scheduled to be completed during the 2nd quarter
of 1999. In addition, in 1997 and 1998 Samson replaced or applied software
patches to substantially all of its network and desktop software applications
and believes them to be generally Y2K compliant.
-19-
<PAGE>
Additional patches or software upgrades will be applied no later than May 15,
1999 to complete this process. The costs of all such risk assessments and
remediation are not expected to be material to the Program.
5. Contingency Planning. Notwithstanding the foregoing, should there be
significant unanticipated disruptions in Samson's financial and administrative
systems, all of the accounting processes that are currently automated will need
to be performed manually. Samson will consider in the second half of 1999 its
options with respect to contingency arrangements for temporary staffing to
accommodate such situations.
Imbedded Systems
1. Awareness. Samson's Y2K program has involved all levels of field
personnel from production foremen and higher. Employees at all levels of the
organization have been asked to participate in the identification of potential
Y2K risks, which might otherwise go unnoticed by higher level employees and
officers of Samson, and as a result, awareness of the issue is considered high.
2. Risk Identification. Samson has inventoried all possible exposures to
imbedded chips and systems. Such exposures can be classified as either (i) oil
and gas production and processing equipment or (ii) office machines such as
faxes, copiers, phones, etc.
With respect to oil and gas production and processing equipment, neither
Samson nor the Program operate offshore wells, significant processing plants, or
wells with older electronic monitoring systems. As a result, Samson's inventory
identified less than 10 applications using imbedded chips. All of these are in
the process of being tested by the respective vendors and are expected to be Y2K
compliant or replaced no later than May 30, 1999. Oil and gas production related
to such equipment is very minor with respect to the entire Samson group, and, in
fact, the Program's production may not use such equipment at all.
Office machines are currently being tested by Samson and vendors. It is
expected that such machines will be made compliant or replaced no later than
May 15, 1999.
3. Risk Assessment and Remediation. The failure to identify and correct a
material Y2K problem in an imbedded system could result in outcomes ranging from
errors in data reporting to curtailments or shutdowns in production. As noted
above, Samson has identified less than 10 imbedded system applications that may
have a Y2K problem. None of these applications are believed to be material to
Samson or the Program. Once identified, assessed and prioritized, Samson intends
to test and upgrade imbedded components and systems in field process control
units deemed to
-20-
<PAGE>
pose the greatest risk of significant non-compliance and capable of testing.
Samson believes that sufficient manual processes are available to minimize any
such field level risk and that there will be no material impact on the Program
with respect to these applications.
4. Contingency Planning. Should material production disruptions occur as a
result of Y2K failures in field operations, Samson will utilize its existing
field personnel in an attempt to avoid any material impact on operating cash
flow. Samson is not able to quantify any potential exposure in the event of
systems failure or inadequate manual alternatives.
Third Party Exposures
1. Awareness. Samson has advised management to consider Y2K implications
with its outside vendors, customers, and business partners. Management has been
asked to participate in the identification of potential third party Y2K risks
and, as a result, awareness of the issue is considered high.
2. Risk Identification. Samson's most significant third party Y2K exposure
is its dependence on third parties for the receipt of revenues from oil and gas
sales. However, virtually all of these purchasers are very large and
sophisticated companies. Other Y2K concerns include the availability of electric
power to Samson's field operations, the integrity of telecommunication systems,
and the readiness of commercial banks to execute electronic fund transfers.
3. Risk Assessment. Because of the high awareness of the Y2K problem in
the U.S., Samson has not undertaken and does not plan to undertake a formal
company wide plan to make inquiries of third parties on the subject of Y2K
readiness. If it did so, Samson has no ability to require responses to such
inquiries or to independently verify their accuracy. Samson has, however,
received oral assurances from its significant oil and gas purchasers of Y2K
compliance. If significant disruptions from major purchasers were to occur,
however, there could be a material and adverse impact on the Program's results
of operations, liquidity, and financial conditions.
It is important to note that third party oil and gas purchasers have
significant incentives to avoid disruptions arising from a Y2K failure. For
example, most of these parties are under contractual obligations to purchase oil
and gas or disperse revenues to Samson. The failure to do so will result in
contractual and statutory penalties. Therefore, Dyco believes that it is
unlikely that there will be material third party non-compliance with purchase
and remittance obligations as a result of Y2K issues.
4. Remediation. Where Samson perceives significant risk
-21-
<PAGE>
of Y2K non-compliance that may have a material impact on it, and where the
relationship between Samson and a vendor, customer, or business partner permits,
joint testing may be undertaken during 1999 to further identify these risks.
5. Contingency Planning. In the unlikely event that material production
disruptions occur as a result of Y2K failures of third parties, the Program's
operating cash flow could be impacted. This contingency will be factored into
deliberations on the level of quarterly cash distributions paid out during any
such period of cash flow disruption.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
The Program does not hold any market risk sensitive instruments.
-22-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
DYCO OIL AND GAS PROGRAM 1978-1 LIMITED PARTNERSHIP
In our opinion, the accompanying balance sheets and the related statements
of operations, changes in partners' capital and cash flows present fairly, in
all material respects, the financial position of the Dyco Oil and Gas Program
1978-1 Limited Partnership, a Minnesota limited partnership, at December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Program's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
March 5, 1999
-23-
<PAGE>
DYCO OIL AND GAS PROGRAM
1978-1 LIMITED PARTNERSHIP
Balance Sheets
December 31, 1998 and 1997
ASSETS
------
1998 1997
-------- --------
CURRENT ASSETS:
Cash and cash equivalents $ 24,203 $ 78,463
Accrued oil and gas sales 18,937 138,683
------- -------
Total current assets $ 43,140 $217,146
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 105,692 128,114
DEFERRED CHARGE 17,019 12,336
------- -------
$165,851 $357,596
======= =======
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,199 $ 19,373
Gas imbalance payable - 690
------- -------
Total current liabilities $ 1,199 $ 20,063
ACCRUED LIABILITY $ 31,362 $ 22,667
CONTINGENCY (Note 4)
PARTNERS' CAPITAL:
General Partner, 24 general
partner units $ 1,333 $ 3,149
Limited Partners, issued and
outstanding, 2,400 Units 131,957 311,717
------- -------
Total Partners' capital $133,290 $314,866
------- -------
$165,851 $357,596
======= =======
The accompanying notes are an integral part of these
financial statements.
-24-
<PAGE>
DYCO OIL AND GAS PROGRAM
1978-1 LIMITED PARTNERSHIP
Statements of Operations
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
-------- -------- --------
REVENUES:
Oil and gas sales $147,260 $329,653 $222,560
Interest 2,473 2,335 1,951
------- ------- -------
$149,733 $331,988 $224,511
COSTS AND EXPENSES:
Lease operating $ 39,941 $ 70,618 $ 46,425
Production taxes 10,858 23,973 16,290
Depreciation, depletion, and
amortization of oil and gas
properties 18,706 44,478 21,753
General and administrative 31,524 33,807 33,079
------- ------- -------
$101,029 $172,876 $117,547
------- ------- -------
NET INCOME $ 48,704 $159,112 $106,964
======= ======= =======
GENERAL PARTNER (1%) - NET INCOME $ 487 $ 1,591 $ 1,070
======= ======= =======
LIMITED PARTNERS (99%) - NET INCOME $ 48,217 $157,521 $105,894
======= ======= =======
NET INCOME per Unit $ 20.09 $ 65.64 $ 44.13
======= ======= =======
UNITS OUTSTANDING 2,424 2,424 2,424
======= ======= =======
The accompanying notes are an integral
part of these financial statements.
-25-
<PAGE>
DYCO OIL AND GAS PROGRAM
1978-1 LIMITED PARTNERSHIP
Statements of Changes in Partners' Capital
For the Years Ended December 31, 1998, 1997, and 1996
General Limited
Partner Partners Total
-------- ---------- ---------
Balances at Dec. 31, 1995 $2,912 $288,278 $291,190
Cash distributions ( 1,091) ( 107,989) ( 109,080)
Net income 1,070 105,894 106,964
----- ------- -------
Balances at Dec. 31, 1996 $2,891 $286,183 $289,074
Cash distributions ( 1,333) ( 131,987) ( 133,320)
Net income 1,591 157,521 159,112
----- ------- -------
Balances at Dec. 31, 1997 $3,149 $311,717 $314,866
Cash distributions ( 2,303) ( 227,977) ( 230,280)
Net income 487 48,217 48,704
----- ------- -------
Balances at Dec. 31, 1998 $1,333 $131,957 $133,290
===== ======= =======
The accompanying notes are an integral part of these
financial statements.
-26-
<PAGE>
DYCO OIL AND GAS PROGRAM
1978-1 LIMITED PARTNERSHIP
Statements of Cash Flows
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
-------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 48,704 $159,112 $106,964
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil
and gas properties 18,706 44,478 21,753
(Increase) decrease in accrued
oil and gas sales 119,746 ( 91,842) ( 16,253)
(Increase) decrease in deferred
charge ( 4,683) 28,411 2,624
Increase (decrease) in
accounts payable ( 18,174) 16,237 ( 675)
Increase (decrease) in
gas imbalance payable ( 690) 690 ( 4,762)
Increase (decrease) in
accrued liability 8,695 276 ( 1,457)
------- ------- -------
Net cash provided by
operating activities $172,304 $157,362 $108,194
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of
oil and gas properties $ 4,007 $ 94 $ 26,774
Additions to oil and gas
Properties ( 291) - ( 778)
------- ------- -------
Net cash provided by
investing activities $ 3,716 $ 94 $ 25,996
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($230,280) ($133,320) ($109,080)
------- ------- -------
Net cash used by financing
activities ($230,280) ($133,320) ($109,080)
------- ------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ($ 54,260) $ 24,136 $ 25,110
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 78,463 54,327 29,217
------- ------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 24,203 $ 78,463 $ 54,327
======= ======= =======
The accompanying notes are an integral
part of these financial statements.
-27-
<PAGE>
DYCO OIL AND GAS PROGRAM 1978-1 LIMITED PARTNERSHIP
Notes to Financial Statements
For the Years Ended December 31, 1998, 1997, and 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The Dyco Oil and Gas Program 1978-1 Limited Partnership (the
"Program"), a Minnesota limited partnership, commenced operations on April
1, 1978. Dyco Petroleum Corporation ("Dyco") is the General Partner of the
Program. Affiliates of Dyco owned 1,159 (48.3%) of the Program's Units at
December 31, 1998.
The Program's sole business is the development and production of oil
and gas with a concentration on gas. Substantially all of the Program's
gas reserves are being sold regionally in the "spot market." Due to the
highly competitive nature of the spot market, prices on the spot market
are subject to wide seasonal and regional pricing fluctuations. In
addition, such spot market sales are generally short-term in nature and
are dependent upon the obtaining of transportation services provided by
pipelines. The prices received for the Program's oil and gas are subject
to influences such as global consumption and supply trends.
Cash and Cash Equivalents
The Program considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents. Cash
equivalents are not insured, which cause the Program to be subject to
risk.
Credit Risk
Accrued oil and gas sales which are due from a variety of oil and
gas purchasers subject the Program to a concentration of credit risk. Some
of these purchasers are discussed in Note 3 - Major Customers.
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. Capitalized costs are depleted on a gross revenue method
using estimates of proved reserves. The full
-28-
<PAGE>
cost amortization rates per equivalent Mcf of gas produced during the
years ended December 31, 1998, 1997, and 1996 were $0.24, $0.26, and
$0.21, respectively. The Program's calculation of depreciation, depletion,
and amortization includes estimated future expenditures to be incurred in
developing proved reserves and estimated dismantlement and abandonment
costs, net of estimated salvage values. 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 ("SEC")) the excess
is charged to expense in the year during which such excess occurs. 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.
Deferred Charge
The Deferred Charge at December 31, 1998 and 1997 represents costs
deferred for lease operating expenses incurred in connection with the
Program's underproduced gas imbalance positions. The rate used in
calculating the deferred charge is the average of the annual production
costs per Mcf. At December 31, 1998, cumulative total gas sales volumes
for underproduced wells were less than the Program's pro-rata share of
total gas production on these wells by 49,245 Mcf, resulting in prepaid
lease operating expenses of $17,019. At December 31, 1997, cumulative
total gas sales volumes for underproduced wells were less than the
Program's pro-rata share of total gas production on these wells by 49,425
Mcf, resulting in prepaid lease operating expenses of $12,336.
Accrued Liability
The Accrued Liability at December 31, 1998 and 1997 represents
charges accrued for lease operating expenses incurred in connection with
the Program's overproduced gas imbalance positions. The rate used in
calculating the accrued liability is the average of the annual production
costs per Mcf. At December 31, 1998, cumulative total gas sales volumes
for overproduced wells exceeded the Program's pro-rata share of total gas
production on these wells by 90,746 Mcf, resulting in accrued lease
operating expenses of $31,362. At December 31, 1997, cumulative total gas
sales volumes for overproduced wells exceeded the Program's pro-rata share
of total gas production on these wells by 90,812 Mcf, resulting in accrued
lease operating expenses of $22,667.
-29-
<PAGE>
Oil and Gas Sales and Gas Imbalance Payable
The Program's oil and condensate production is sold, title passed,
and revenue recognized at or near the Program's wells under short-term
purchase contracts at prevailing prices in accordance with arrangements
which are customary in the oil industry. Sales of gas applicable to the
Program's interest in producing oil and gas leases are recorded as income
when the gas is metered and title transferred pursuant to the gas sales
contracts covering the Program's interest in gas reserves. During such
times as the Program's sales of gas exceed its pro rata ownership in a
well, such sales are recorded as income unless total sales from the well
have exceeded the Program's share of estimated total gas reserves
underlying the property at which time such excess is recorded as a
liability. The rates per Mcf used to calculate this liability are based on
the average gas prices received for the volumes at the time the
overproduction occurred. No such liability was recorded at December 31,
1998. At December 31, 1997, total sales exceeded the Program's share of
estimated total gas reserves on one well by $690 (460 Mcf).
Use of Estimates in Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Further, the deferred charge, the accrued liability, the gas
imbalance payable, and the litigation contingency (see Note 4) all involve
estimates which could materially differ from the actual amounts ultimately
realized in the near term. Oil and gas reserves (see Note 5) also involve
significant estimates which could materially differ from the actual
amounts ultimately realized.
Income Taxes
Income or loss for income tax purposes is includable in the income
tax returns of the partners. Accordingly, no recognition has been given to
income taxes in the accompanying financial statements.
-30-
<PAGE>
2. TRANSACTIONS WITH RELATED PARTIES
Under the terms of the Program 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 years ended December 31, 1998, 1997, and 1996,
such expenses totaled $31,524, $33,807, and $33,079, respectively, of
which $24,876 was paid each year to Dyco and its affiliates.
Affiliates of the Program operate certain of the Program's
properties. Their policy is to bill the Program for all customary charges
and cost reimbursements associated with these activities, together with
any compressor rentals, consulting, or other services provided. Such
charges are comparable to third party charges in the area where the wells
are located and are the same as charged to other working interest owners
in the wells.
3. MAJOR CUSTOMERS
The following purchaser individually accounted for 10% or more of
the combined oil and gas sales of the Program for the years ended December
31, 1998, 1997, and 1996:
Purchaser 1998 1997 1996
--------- ----- ----- -----
El Paso Energy
Marketing Company 96.3% 87.3% 88.4%
In the event of interruption of purchases by this significant
customer or the cessation or material change in availability of
open-access transportation by the Program's pipeline transporters, the
Program may encounter difficulty in marketing its gas and in maintaining
historic sales levels. Alternative purchasers or transporters may not be
readily available.
4. CONTINGENCY
On February 13, 1998, a royalty owner filed a lawsuit against Dyco
alleging that Dyco amended or terminated certain gas purchase contracts
and fraudulently concealed the settlement of these contracts. The lawsuit
involves the Spurlin No. 1-23 Well. Dyco has filed an Answer asserting
various affirmative defenses, and intends to vigorously defend this
lawsuit. A class certification hearing is currently pending. As of the
date of these financial statements, the Program is not able to determine
the ultimate outcome of this lawsuit or the assessment of any damages that
may result.
-31-
<PAGE>
5. SUPPLEMENTAL OIL AND GAS INFORMATION
The following supplemental information regarding the oil and gas
activities of the Program is presented pursuant to the disclosure
requirements promulgated by the SEC.
Capitalized Costs
The Program's capitalized costs and accumulated depreciation,
depletion, amortization, and valuation allowance at December 31, 1998 and
1997 were as follows:
December 31,
----------------------------
1998 1997
------------- -------------
Proved properties $14,936,350 $14,940,066
Less accumulated depre-
ciation, depletion,
amortization, and
valuation allowance ( 14,830,658) ( 14,811,952)
---------- ----------
Net oil and gas properties $ 105,692 $ 128,114
========== ==========
Costs Incurred
The Program incurred no oil and gas property acquisition or
exploration costs during 1998, 1997, and 1996. Costs incurred by the
Program in connection with its oil and gas property development activities
during 1998, 1997, and 1996 were as follows:
December 31,
------------------------------
1998 1997 1996
------- ------- ------
Development costs $291 $ - $778
==== === =====
-32-
<PAGE>
Quantities of Proved Oil and Gas Reserves - Unaudited
Set forth below is a summary of the changes in the net quantities of
the Program's proved crude oil and gas reserves for the years ended
December 31, 1998, 1997, and 1996. Proved reserves were estimated by
petroleum engineers employed by affiliates of the Program. All of the
Program's reserves are located in the United States. The following
information includes certain gas balancing adjustments which cause the gas
volumes to differ from the reserve information prepared by Dyco.
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ ------------------
Oil Gas Oil Gas Oil Gas
(Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf)
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Proved reserves,
beginning of year 1,030 437,603 1,478 504,395 4,679 615,025
Revisions of previous
Estimates 362 84,776 ( 43) 101,511 860 ( 11,130)
Sales of reserves - ( 3,296) - - (2,822) ( 3,292)
Production ( 382) ( 74,479) ( 405) (168,303) (1,239) ( 96,208)
----- ------- ----- ------- ----- -------
Proved reserves,
end of year 1,010 444,604 1,030 437,603 1,478 504,395
===== ======= ===== ======= ===== =======
Proved developed reserves:
Beginning of year 1,030 437,603 1,478 504,395 4,679 615,025
----- ------- ----- ------- ----- -------
End of year 1,010 444,604 1,030 437,603 1,478 504,395
===== ======= ===== ======= ===== =======
</TABLE>
-33-
<PAGE>
The process of estimating oil and gas reserves is complex, requiring
significant subjective decisions in the evaluation of available
geological, engineering, and economic data for each reservoir. The data
for a given reservoir may change substantially over time as a result of,
among other things, additional development activity, production history,
and viability of production under varying economic conditions;
consequently, it is reasonably possible that material revisions to
existing reserve estimates may occur in the near future. Although every
reasonable effort has been made to ensure that the reserve estimates
reported herein represent the most accurate assessment possible, the
significance of the subjective decisions required and variances in
available data for various reservoirs make these estimates generally less
precise than other estimates presented in connection with financial
statement disclosures. The Program's reserves were determined at December
31, 1998 using oil and gas prices of $9.50 per barrel and $2.03 per Mcf,
respectively.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Program is a limited partnership and has no directors or executive
officers. The following individuals are directors and executive officers of
Dyco, the General Partner. The business address of such directors and executive
officers is Two West Second Street, Tulsa, Oklahoma 74103.
NAME AGE POSITION WITH DYCO
---------------- --- ------------------------------
Dennis R. Neill 47 President and Director
Patrick M. Hall 40 Chief Financial Officer
Judy K. Fox 48 Secretary
The director will hold office until the next annual meeting of
shareholders of Dyco and until his successor has been duly elected and
qualified. All executive officers serve at the discretion of the Board of
Directors.
Dennis R. Neill joined Samson in 1981, was named Senior Vice President and
Director of Dyco on June 18, 1991, and was named President of Dyco on June 30,
1996. Prior to joining Samson, he
-34-
<PAGE>
was associated with a Tulsa law firm, Conner and Winters, where his principal
practice was in the securities area. He received a Bachelor of Arts degree in
political science from Oklahoma State University and a Juris Doctorate degree
from the University of Texas. Mr. Neill also serves as Senior Vice President of
Samson Investment Company and as President and Director of Samson Properties
Incorporated, Samson Hydrocarbons Company, Berry Gas Company, Circle L Drilling
Company, Compression, Inc., and Geodyne Resources, Inc. and its subsidiaries.
Patrick M. Hall joined Samson in 1983, was named a Vice President of Dyco
on June 18, 1991, and was named Chief Financial Officer of Dyco on June 30,
1996. Prior to joining Samson he was a senior accountant with Peat Marwick Main
& Co. in Tulsa. He holds a Bachelor of Science degree in accounting from
Oklahoma State University and is a Certified Public Accountant. Mr. Hall also
serves as Senior Vice President - Controller of Samson Investment Company.
Judy K. Fox joined Samson in 1990 and was named Secretary of Dyco on June
30, 1996. Prior to joining Samson, she served as Gas Contract Manager for Ely
Energy Company. Ms. Fox is also Secretary of Berry Gas Company, Circle L
Drilling Company, Compression, Inc., Samson Hydrocarbons Company, Samson
Properties Incorporated, and Geodyne Resources, Inc.
and its subsidiaries.
Section 16(a) Beneficial Ownership Reporting Compliance
To the best knowledge of the Program and Dyco, there were no officers,
directors, or ten percent owners who were delinquent filers during 1998 of
reports required under Section 16(a) of the Securities and Exchange Act of 1934.
ITEM 11. EXECUTIVE COMPENSATION
The Program is a limited partnership and, therefore, has no officers or
directors. The following table summarizes the amounts paid by the Program as
compensation and reimbursements to Dyco and its affiliates for the three years
ended December 31, 1998:
-35-
<PAGE>
Compensation/Reimbursement to Dyco and its affiliates
Three Years Ended December 31, 1998
Type of Compensation/Reimbursement(1) Expense
- ------------------------------------- -----------------------------
1998 1997 1996
-------- ------- -------
Compensation:
Operations (2) (2) (2)
Reimbursements:
General and Administrative,
Geological, and Engineering
Expenses and Direct Expenses(3) $24,876 $24,876 $24,876
- ----------
(1) The authority for all of such compensation and reimbursement is the
Program Agreement. With respect to the Operations activities noted in the
table, management believes that such compensation is equal to or less than
that charged by unaffiliated persons in the same geographic areas and
under the same conditions.
(2) Affiliates of the Program serve as operator of some of the Program's
wells. Dyco, as general partner, contracts with such affiliates for
services as operator of the wells. As operator, such affiliates are
compensated at rates provided in the operating agreements in effect and
charged to all parties to such agreement. The dollar amount of such
compensation paid by the Program to such affiliates is impossible to
quantify as of the date of this Annual Report.
(3) The Program reimburses Dyco and its affiliates for reasonable and
necessary general and administrative, geological, and engineering expenses
and direct expenses incurred in connection with their management and
operation of the Program. The directors, officers, and employees of Dyco
and its affiliates receive no direct remuneration from the Program for
their services to the Program. See "Salary Reimbursement Table" below. The
allocable general and administrative, geological, and engineering expenses
are apportioned on a reasonable basis between the Program's business and
all other oil and gas activities of Dyco and its affiliates, including
Dyco's management and operation of affiliated oil and gas limited
partnerships. The allocation to the Program of these costs is made by Dyco
as General Partner.
As noted in the Compensation/Reimbursement Table above, the directors,
officers, and employees of Dyco and their affiliates receive no direct
remuneration from the Program for their services. However, to the extent such
services represent direct involvement with the Program, as opposed to general
corporate functions, such persons' salaries are allocated to and reimbursed by
the Program. Such allocation to the Program's general and administrative,
geological, and engineering expenses of the
-36-
<PAGE>
salaries of directors, officers, and employees of Dyco and its affiliates is
based on internal records maintained by Dyco and its affiliates, and represents
investor relations, legal, accounting, data processing, management, gas
marketing, and other functions directly attributable to the Program's
operations. The following table indicates the approximate amount of general and
administrative expense reimbursement attributable to the salaries of the
directors, officers, and employees of Dyco and its affiliates for the three
years ended December 31, 1998:
-37-
<PAGE>
<TABLE>
<CAPTION>
Salary Reimbursement
Three Years Ended December 31, 1998
Long Term Compensation
------------------------------
Annual Compensation Awards Payouts
--------------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Philip Tholen
President,
Chief Executive
Officer(1)(2) 1996 - - - - - - -
Dennis R. Neill,
President(2)(3) 1996 - - - - - - -
1997 - - - - - - -
1998 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(4) 1996 $14,552 - - - - - -
1997 $14,681 - - - - - -
1998 $14,722 - - - - - -
- ----------
(1) Mr. Tholen served as President and Chief Executive Officer of Dyco until
June 30, 1996.
(2) The general and administrative expenses paid by the Program and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Tholen or Mr. Neill.
(3) Mr. Neill became President of Dyco on June 30, 1996.
(4) No officer or director of Dyco or its affiliates provides full-time
services to the Program and no individual's salary or other compensation
reimbursement from the Program equals or exceeds $100,000 per annum.
</TABLE>
-38-
<PAGE>
Samson maintains necessary inventories of new and used field equipment.
Samson may have provided some of this equipment for wells in which the Program
has an interest. This equipment was provided at prices or rates equal to or less
than those normally charged in the same or comparable geographic area by
unaffiliated persons or companies dealing at arm's length. The operators of
these wells bill the Program for a portion of such costs based upon the
Program's interest in the well.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information as to the beneficial ownership of
the Program's Units as of March 1, 1999 by each beneficial owner of more than 5%
of the issued and outstanding Units and by the directors, officers, and
affiliates of Dyco. The address of each of such persons is Samson Plaza, Two
West Second Street, Tulsa, Oklahoma 74103.
Number of Units
Beneficially
Owned (Percent
Beneficial Owner of Outstanding)
- ------------------------------- -------------------
Samson Resources Company 1,159 (48.3%)
All directors, officers, and
affiliates of Dyco as a group
and Dyco (5 persons) 1,159 (48.3%)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain affiliates of Dyco engage in oil and gas activities independently
of the Program which result in conflicts of interest that cannot be totally
eliminated. The allocation of acquisition and drilling opportunities and the
nature of the compensation arrangements between the Program and such affiliates
also create potential conflicts of interest. An affiliate of the Program owns a
significant amount of the Program's Units and therefore has an identity of
interest with other limited partners with respect to the operations of the
Program.
In order to attempt to assure limited liability for limited partners as
well as an orderly conduct of business, management of the Program is exercised
solely by Dyco. The Program Agreement grants Dyco broad discretionary authority
with respect to the Program's participation in drilling prospects and
expenditure and control of funds, including borrowings. These provisions are
similar to those contained in prospectuses and partnership agreements for other
public oil and gas drilling partnerships.
-39-
<PAGE>
Broad discretion as to general management of the Program involves circumstances
where Dyco has conflicts of interest and where it must allocate costs and
expenses, or opportunities, among the Program and other competing interests.
Dyco does not devote all of its time, efforts, and personnel exclusively
to the Program. Furthermore, the Program does not have any employees, but
instead relies on the personnel of Samson. The Program thus competes with Samson
(including other oil and gas programs) for the time and resources of such
personnel. Samson devotes such time and personnel to the management of the
Program as are indicated by the circumstances and as are consistent with Dyco's
fiduciary duties.
Affiliates of the Program are solely responsible for the negotiation,
administration, and enforcement of oil and gas sales agreements covering the
Program's leasehold interests. Because affiliates of the Program who provide
services to the Program have fiduciary or other duties to other members of
Samson, contract amendments and negotiating positions taken by them in their
effort to enforce contracts with purchasers may not necessarily represent the
positions that the Program would take if it were to administer its own contracts
without involvement with other members of Samson. On the other hand, management
believes that the Program's negotiating strength and contractual positions have
been enhanced by virtue of its affiliation with Samson.
Samson Resources Company, an affiliate of Dyco, ("Resources") owns
approximately 48% of the Program's outstanding Units as of March 1, 1999. The
Program Agreement permits Resources to independently vote its Units. Resources'
significant Unit ownership will therefore likely determine the outcome of any
matter submitted for a vote of the Limited Partners.
-40-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules, and Exhibits.
(1) Financial Statements: The following financial statements for
the Program as of December 31, 1998 and 1997 and for the years
ended December 31, 1998, 1997, and 1996 are filed as part of
this report:
Report of Independent Accountants
Balance Sheets
Statements of Operations
Statements of Changes in Partners' Capital
Statements of Cash Flows
Notes to Financial Statements
(2) Financial Statement Schedules:
None.
(3) Exhibits:
4.1 Drilling Agreement dated April 1, 1978 for Dyco Drilling
Program 1978-1 by and between the Dyco Oil and Gas
Program 1978-1, Dyco Petroleum Corporation, and Jaye F.
Dyer filed as Exhibit 4.1 to Annual Report on Form 10-K
for the year ended December 31, 1991 on April 10, 1992
and is hereby incorporated by reference.
4.2 Program Agreement dated April 1, 1978 for Dyco Oil and
Gas Program 1978-1 by and between Dyco Petroleum
Corporation and Participants filed as Exhibit 4.2 to
Annual Report on Form 10-K for the year ended December
31, 1991 on April 10, 1992 and is hereby incorporated by
reference.
4.3 Amendment to Program Agreement for Dyco Oil and Gas
Program 1978-1 dated February 9, 1989 filed as Exhibit
4.3 to Annual Report on Form 10K for the year ended
December 31, 1991 on April 10, 1992 and is hereby
incorporated by reference.
-41-
<PAGE>
4.4 Certificate of Limited Partnership for Dyco Oil and Gas
Program 1978-1 Limited Partnership filed as Exhibit 4.3
to Annual Report on Form 10-K for the year ended
December 31, 1991 on April 10, 1992 and is hereby
incorporated by reference.
*27.1 Financial Data Schedule containing summary financial
information extracted from the Dyco Oil and Gas Program
1978-1 Limited Partnership's financial statements as of
December 31, 1998 and for the year ended December 31,
1998.
All other Exhibits are omitted as inapplicable.
------------------
* Filed herewith.
(b) Reports on Form 8-K filed during the fourth quarter of 1998:
None.
-42-
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 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 organized.
DYCO OIL AND GAS PROGRAM 1978-1
LIMITED PARTNERSHIP
By: DYCO PETROLEUM CORPORATION
General Partner
March 23, 1999
By: /s/ Dennis R. Neill
------------------------------
Dennis R. Neill
President
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 on the dates indicated.
By: /s/ Dennis R. Neill President and March 23, 1999
------------------- Director (Principal
Dennis R. Neill Executive Officer)
/s/ Patrick M. Hall Chief Financial March 23, 1999
------------------- Officer (Principal
Patrick M. Hall Financial and
Accounting Officer)
/s/ Judy K. Fox Secretary March 23, 1999
-------------------
Judy K. Fox
-43-
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
4.1 Drilling Agreement dated April 1, 1978 for Dyco Drilling Program
1978-1 by and between the Dyco Oil and Gas Program 1978-1, Dyco
Petroleum Corporation, and Jaye F. Dyer filed as Exhibit 4.1 to
Annual Report on Form 10-K for the year ended December 31, 1991
on April 10, 1992 and is hereby incorporated by reference.
4.2 Program Agreement dated April 1, 1978 for Dyco Oil and Gas
Program 1978-1 by and between Dyco Petroleum Corporation and
Participants filed as Exhibit 4.2 to Annual Report on Form 10-K
for the year ended December 31, 1991 on April 10, 1992 and is
hereby incorporated by reference.
4.3 Amendment to Program Agreement for Dyco Oil and Gas Program
1978-1 dated February 9, 1989 filed as Exhibit 4.3 to Annual
Report on Form 10-K for the year ended December 31, 1991 on April
10, 1992 and is hereby incorporated by reference.
4.4 Certificate of Limited Partnership for Dyco Oil and Gas Program
1978-1 Limited Partnership filed as Exhibit 4.3 to Annual Report
on Form 10-K for the year ended December 31, 1991 on April 10,
1992 and is hereby incorporated by reference.
*27.1 Financial Data Schedule containing summary financial information
extracted from the Dyco Oil and Gas Program 1978-1 Limited
Partnership's financial statements as of December 31, 1998 and
for the year ended December 31, 1998.
- ------------------
* Filed herewith.
-44-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000215718
<NAME> DYCO OIL & GAS PROGRAM 1978-1 LIMITED PSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 24,203
<SECURITIES> 0
<RECEIVABLES> 18,937
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 43,140
<PP&E> 14,936,350
<DEPRECIATION> 14,830,658
<TOTAL-ASSETS> 165,851
<CURRENT-LIABILITIES> 1,199
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 133,290
<TOTAL-LIABILITY-AND-EQUITY> 165,851
<SALES> 147,260
<TOTAL-REVENUES> 149,733
<CGS> 0
<TOTAL-COSTS> 101,029
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 48,704
<INCOME-TAX> 0
<INCOME-CONTINUING> 48,704
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,704
<EPS-PRIMARY> 20.09
<EPS-DILUTED> 0
</TABLE>
