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
March 31, 2000 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 (I.R.S. Employer Identification
of incorporation or Number)
organization)
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
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DYCO OIL AND GAS PROGRAM 1978-1 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
2000 1999
--------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 5,782 $ 2,459
Accrued oil and gas sales 23,588 20,310
-------- --------
Total current assets $ 29,370 $ 22,769
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 119,208 121,369
DEFERRED CHARGE 11,701 11,701
-------- --------
$160,279 $155,839
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 1,660 $ 1,518
Payable to General Partner (Note 2) 2,000 5,000
-------- --------
Total current liabilities $ 3,660 $ 6,518
ACCRUED LIABILITY $ 27,584 $ 27,584
PARTNERS' CAPITAL:
General Partner, 24 general
partner units $ 1,290 $ 1,217
Limited Partners, issued and
outstanding, 2,400 Units 127,745 120,520
-------- --------
Total Partners' capital $129,035 $121,737
-------- --------
$160,279 $155,839
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
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DYCO OIL AND GAS PROGRAM 1978-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
2000 1999
-------- --------
REVENUES:
Oil and gas sales $33,790 $24,727
Interest 12 217
------- -------
$33,802 $24,944
COSTS AND EXPENSES:
Oil and gas production $ 7,800 $ 7,652
Depreciation, depletion, and
amortization of oil and gas
properties 3,584 4,153
General and administrative
(Note 2) 15,120 10,498
------- -------
$26,504 $22,303
------- -------
NET INCOME $ 7,298 $ 2,641
======= =======
GENERAL PARTNER (1%) - net income $ 73 $ 26
======= =======
LIMITED PARTNERS (99%) - net income $ 7,225 $ 2,615
======= =======
NET INCOME PER UNIT $ 3.01 $ 1.09
======= =======
UNITS OUTSTANDING 2,424 2,424
======= =======
The accompanying condensed notes are an integral part of
these financial statements.
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DYCO OIL AND GAS PROGRAM 1978-1 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
2000 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,298 $ 2,641
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 3,584 4,153
(Increase) decrease in accrued
oil and gas sales ( 3,278) 3,295
Increase in accounts payable 142 1,229
Decrease in payable to General
Partner ( 3,000) -
------- -------
Net cash provided by operating
activities $ 4,746 $11,318
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties ($ 1,423) $ -
------- -------
Net cash used by investing
activities ($ 1,423) $ -
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash used by financing
activities $ - $ -
------- -------
NET INCREASE IN CASH AND CASH
EQUIVALENTS $ 3,323 $11,318
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,459 24,203
------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 5,782 $35,521
======= =======
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
CONDENSED NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheet as of March 31, 2000, statements of operations for the
three months ended March 31, 2000 and 1999, and statements of cash flows
for the three months ended March 31, 2000 and 1999 have been prepared by
Dyco Petroleum Corporation ("Dyco"), the General Partner of the Dyco Oil
and Gas Program 1978-1 Limited Partnership (the "Program"), without audit.
In the opinion of management all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position
at March 31, 2000, results of operations for the three months ended March
31, 2000 and 1999, and changes in cash flows for the three months ended
March 31, 2000 and 1999 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 Program's Annual Report on Form 10-K for
the year ended December 31, 1999. The results of operations for the period
ended March 31, 2000 are not necessarily indicative of the results to be
expected for the full year.
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. 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), the excess is
charged to expense in the period during which such excess occurs. Sales
and abandonments of
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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 period 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 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 March 31, 2000 and 1999 the
Program incurred such expenses totaling $15,120 and $10,498, respectively,
of which $7,188 and $6,219, respectively, were paid each period 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.
The payable to General Partner at March 31, 2000 represents audit fees
paid by the General Partner on behalf of the Program. This amount was
reimbursed to the General Partner in April 2000. The payable to General
Partner at December 31, 1999 represents an operating advance from the
General Partner. Such amount was repaid in January 2000.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
USE OF FORWARD-LOOKING STATEMENTS AND ESTIMATES
- -----------------------------------------------
This Quarterly 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
Quarterly 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, and otherwise indicated.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net proceeds from the Program's 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 reserves, thereby resulting
in a positive economic impact.
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<PAGE>
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. The Program
has no debt commitments. Management believes that cash for ordinary
operational purposes will be provided by current oil and gas production.
RESULTS OF OPERATIONS
- ---------------------
GENERAL DISCUSSION
The following general discussion should be read in conjunction with the
analysis of results of operations provided below. The most important
variables affecting the Program's revenues are the prices received for the
sale of oil and gas and the volumes of oil and gas produced. The Program's
production is mainly natural gas, so such pricing and volumes are the most
significant factors.
Due to the volatility of oil and gas prices, forecasting future prices is
subject to great uncertainty and inaccuracy. 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. Such spot market
sales are generally short-term in nature and are dependent upon the
obtaining of transportation services provided by pipelines. It is likewise
difficult to predict production volumes. However, oil and gas are
depleting assets, so it can be expected that production levels will
decline over time. Recent gas prices have been higher than the Program's
historical average. This is attributable to the higher prices for crude
oil, a substitute fuel in some markets, and reduced production due to low
prices in 1998.
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<PAGE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1999.
Three Months Ended March 31,
----------------------------
2000 1999
------- -------
Oil and gas sales $33,790 $24,727
Oil and gas production expenses $ 7,800 $ 7,652
Barrels produced 45 111
Mcf produced 13,782 15,027
Average price/Bbl $ 25.62 $ 9.47
Average price/Mcf $ 2.37 $ 1.58
As shown in the table above, total oil and gas sales increased $9,063
(36.7%) for the three months ended March 31, 2000 as compared to the three
months ended March 31, 1999. Of this increase, approximately $11,000 was
related to an increase in the average price of gas sold. This increase was
partially offset by a decrease of approximately $2,000 related to a
decrease in the volumes of gas sold. Volumes of oil and gas sold decreased
66 barrels and 1,245 Mcf, respectively, for the three months ended March
31, 2000 as compared to the three months ended March 31, 1999. Average oil
and gas prices increased to $25.62 per barrel and $2.37 per Mcf,
respectively, for the three months ended March 31, 2000 from $9.47 per
barrel and $1.58 per Mcf, respectively, for the three months ended March
31, 1999.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $148 (1.9%) for the three months ended March
31, 2000 as compared to the three months ended March 31, 1999. As a
percentage of oil and gas sales, these expenses decreased to 23.1% for the
three months ended March 31, 2000 from 30.9% for the three months ended
March 31, 1999. This percentage decrease was primarily due to the
increases in the average prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $569 (13.7%) for the three months ended March 31, 2000 as
compared to the three months ended March 31, 1999. This decrease was
primarily due to the decreases in the volumes of oil and gas sold. As a
percentage of oil and gas sales, this expense decreased to 10.6% for the
three months ended March 31, 2000 from 16.8% for the three months ended
March 31, 1999. This percentage decrease was primarily due to the
increases in the average prices of oil and gas sold.
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<PAGE>
General and administrative expenses increased $4,622 (44.0%) for the three
months ended March 31, 2000 as compared to the three months ended March
31, 1999. This increase was primarily due to an increase in audit fees. As
a percentage of oil and gas sales, these expenses increased to 44.7% for
the three months ended March 31, 2000 from 42.5% for the three months
ended March 31, 1999.
YEAR 2000 COMPUTER ISSUES
- -------------------------
The year 2000 issue 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. To the knowledge
of the General Partner, the Program has not experienced any material
effects from the year 2000 issue. Costs incurred by the Program in order
to ensure year 2000 compatibility were not material to the Program.
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<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
The Program does not hold any market risk sensitive instruments.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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
March 31, 2000 and for the three months ended March 31,
2000, filed herewith.
All other exhibits are omitted as inapplicable.
(b) Reports on Form 8-K.
None.
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<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
(Registrant)
BY: DYCO PETROLEUM CORPORATION
General Partner
Date: May 2, 2000 By: /s/Dennis R. Neill
-------------------------------
(Signature)
Dennis R. Neill
President
Date: May 2, 2000 By: /s/Patrick M. Hall
-------------------------------
(Signature)
Patrick M. Hall
Chief Financial Officer
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<PAGE>
INDEX TO EXHIBITS
NUMBER DESCRIPTION
- ------ -----------
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 March 31, 2000 and for the
three months ended March 31, 2000, filed herewith.
All other exhibits are omitted as inapplicable.
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000215718
<NAME> DYCO OIL AND GAS PROGRAM 1978-1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,782
<SECURITIES> 0
<RECEIVABLES> 23,588
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,370
<PP&E> 14,967,523
<DEPRECIATION> 14,848,315
<TOTAL-ASSETS> 160,279
<CURRENT-LIABILITIES> 3,660
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 129,035
<TOTAL-LIABILITY-AND-EQUITY> 160,279
<SALES> 33,790
<TOTAL-REVENUES> 33,802
<CGS> 0
<TOTAL-COSTS> 26,504
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,298
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,298
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,298
<EPS-BASIC> 3.01
<EPS-DILUTED> 0
</TABLE>
