UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For quarter ended June 30, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 2-70390
SANCHEZ-O'BRIEN 1981-A DRILLING COMPANY
(Exact name of registrant as specified in its charter)
TEXAS 74-2216121
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
5847 San Felipe, Suite 1900 Houston, Texas 77057
(Address of principal executive offices) (Zip Code)
(713) 783-8000
(Registrant's telephone number, including area code)
N/A
(Former name, address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
SANCHEZ-O'BRIEN 1981-A DRILLING COMPANY
QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1999
INDEX
PART I - Financial information:
Item 1. Financial Statements
Balance Sheets for the periods June 30, 1999 and
December 31, 1998
Statements of Operations for the six months ended
June 30, 1999 and 1998
Statement of Partners' Equity as of June 30, 1999
Statements of Cash Flow for the six months ended
June 30, 1999 and 1998
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - Other information:
Item 1. Legal Proceedings
Item 2. Changes in Securities (not applicable)
Item 3. Defaults upon Senior Securities (not applicable)
Item 4. Submission of Matters to a Vote of Security Holders
(not applicable)
Item 5. Other Information (not applicable)
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
<TABLE>
Part I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
Sanchez-O'Brien 1981-A Drilling Company
(a limited partnership)
Balance Sheets
(Unaudited)
<CAPTION>
June 30, December 31,
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,810,375 1,011,552
Accounts receivable 0 18,843
Total current assets 1,810,375 1,030,395
Oil and natural gas properties (full cost
method), at cost, pledged (note 2) 0 31,022,493
Less accumulated depreciation, depletion
and amortization (note 2) 0 30,469,924
Net oil and natural gas properties 0 552,569
Organization costs, less applicable
amortization 0 0
1,810,375 1,582,964
<CAPTION>
<S> <C> <C>
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable 129,117 64,730
Suspense payable-investors 180,555 180,555
Future expenses-Lawsuit 300,000 0
Total current liabilities 609,672 245,285
Partners' equity:
Limited partners 1,188,701 1,324,307
General partner 12,002 13,372
<PAGE>
Total partners' equity 1,200,703 1,337,679
$ 1,810,375 1,582,964
See accompanying notes to financial statements.
<PAGE>
<PAGE>
</TABLE>
<TABLE>
Sanchez-O'Brien 1981-A Drilling Company
(a limited partnership)
Statements of Operations
(Unaudited)
Six Months Ended
June 30,
1999 1998
<CAPTION>
<S> <C> <C>
REVENUES:
Oil and natural gas sales $ 20,897 410,729
Interest income 14,780 9,609
Other income 6,460 0
Gain on sale of wells 161,920 0
204,057 420,338
EXPENSES:
Operating expenses 15,609 79,734
General and administrative 25,424 30,913
Future Expenses - Lawsuite 300,000 0
Depreciation, depletion
and amortization (note 2) 0 79,000
341,033 189,647
Net (Loss)/Income $(136,976) 230,691
See accompanying notes to financial statements.
<PAGE>
</TABLE>
<TABLE>
<PAGE>
Sanchez-O'Brien 1981-A Drilling Company
(a limited partnership)
Statement of Partners' Equity
Six Months Ended June 30, 1999
(Unaudited)
Limited General
Partners Partner Total
<CAPTION>
<S> <C> <C> <C>
Balances at December 31, 1998 $1,324,307 13,372 1,337,679
Cash distributions 0 0 0
Net Loss (135,606) (1,370) (136,976)
Balances at June 30, 1999 $1,188,701 12,002 1,200,703
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<PAGE>
Sanchez-O'Brien 1981-A Drilling Company
(a limited partnership)
Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
1999 1998
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net income $ 163,024 116,210
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, depletion and
amortization 0 53,000
Net gain on sale of wells (161,920) 0
Change in assets and liabilities:
Accounts receivable 18,843 12,127
Accounts payable 64,387 (4,001)
Suspense payable 0 (2,610)
Total adjustments (78,690) 58,516
Net cash provided by operating
activities 84,334 174,726
<PAGE>
Cash flows from investing activities:
Cash distributions - -
Purchases of property and equipment 0 27,516
Proceeds from sale of wells 714,489 0
Net cash used in investing
activities 714,489 27,516
Cash flows from financing activities:
Payment of long-term debt 0 0
Proceeds from long-term debt 0 0
Net cash provided (used) by financing
activities 0 0
Net increase in cash and cash equivalents 798,823 202,242
Cash and cash equivalents at beginning of
year 1,011,552 665,680
Cash and cash equivalents at end of
quarter $1,810,375 867,922
See accompanying notes to financial statements.
<PAGE>
Sanchez-O'Brien 1981-A Drilling Company
(a limited partnership)
Notes to Financial Statements
June 30, 1999
(Unaudited)
(1) Organization and Summary of Significant Accounting Policies
a.Organization
Sanchez-O'Brien 1981-A Drilling Company (the Drilling
Company), is a Texas limited partnership formed on
December 18, 1980. Sanchez Drilling Corporation
is the General Partner and an Organizational Limited
Partner of the Drilling Company and has a 1% interest
therein.
Effective January 1, 1998 Sanchez O'Brien Drilling Corporation's
name was changed to Sanchez Drilling Company. Also, Sanchez-
O'Brien Oil & Gas Corporation's name was changed to Sanchez
Oil & Gas Corporation.
The Drilling Company was initially formed with an
Organizational Limited Partner on December 18, 1980. Upon
the closing of subscriptions on June 23, 1981, with 3,207
Limited Partners contributing $26,520,000, the
Organizational Limited Partner was refunded his initial
contribution. In June, 1981, the Drilling Company entered
into a separate agreement to form a general partnership,
Sanchez-O'Brien 1981-A Drilling Partnership (the Drilling
Partnership), with Sanchez Oil & Gas Corporation
(Sanchez) as Managing General Partner. The
purpose of the Drilling Partnership is to conduct oil and
natural gas exploration activity in the continental United
States. Sanchez-O'Brien Drilling Corporation is a wholly
owned subsidiary of Sanchez.
b.Basis of Financial Statement Presentation
The financial statements include the accounts of the
Drilling Company and its proportionate share in the
specific assets, liabilities and operating accounts of the
Drilling Partnership. All significant intercompany
balances have been eliminated.
<PAGE>
c.General
The financial statements included herein were prepared by
the Managing General Partner. In the opinion of
management, all adjustments have been made which are
necessary for a fair presentation of the financial
position of the Drilling Company at June 30, 1999 and the
results of operations for the period then ended.
(2) Oil and Gas Properties
The Drilling Company follows the full cost method of
accounting for its proportionate interest in the oil and gas
operations of the Drilling Partnership. Under this method,
all costs incurred in the acquisition, exploration and
development of properties, including costs of surrendered and
abandoned leaseholds, delay lease rentals and dry holes, are
capitalized. Dispositions of oil and gas properties are
accounted for as adjustments to capitalized costs, with no
gain or loss recognized. Depreciation, depletion and
amortization of oil and gas properties is provided by the
units-of-production method based on proved oil and gas
reserves.
Under the full cost method of accounting for oil and gas
operations, capitalized costs of oil and gas properties are
not to exceed the present value of future net revenues from
estimated production of proved oil and gas properties plus the
lower of cost or estimated fair market value of unproved
properties. If capitalized costs exceed this limitation, an
additional provision is to be made to depreciation, depletion
and amortization.
(3)Notes Payable
As of June 30, 1999, The Drilling Company does not have any
debt.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
As of June 30, 1999, forty-three wells have been drilled.
Of this number, twenty-four were dry holes or have been depleted and
abandoned and all remaining wells were sold effective January 1, 1999.
On May 25, 1999, the ramaining wells in the 1981-A Drilling Partnership
were sold to Coastal Oil & Gas Corporation effective January 1, 1999.
Sales prices for the wells was $1,219.585 with $714,489 being the
Drilling Company's share.
As of June 30, 1999, each Limited Partner has received $435
per each $5,000. Future distributions will be made after
litigation on the S. W. Escobas (Trevino leases) has been settled.
<PAGE>
PART II. Other Information
ITEM 1. LEGAL PROCEEDINGS
The litigation against Pennzoil Exploration and Prodution Company
(Pennzoil) and Sanchez Oil and Gas Corporation (Sanchez) on the Trevino
Leases in the S.W. Escobas Prospect is ongoing. The interests in the
Trevino Leases, which comprise part of the S.W. Escobas Prospect, were
acquired from Pennzoil. There are currently four producing wells on the
Trevino Leases, in which the Drilling Partnership holds between 22.53%-
23.177% gross working interest. The interest in dispute in this lawsuit
is 7/96 or 7.9% of Sanchez-O'Brien's and Pennzoil's interest. The trial
judge, on November 9, 1992, ruled in favor of the defendants, Pennzoil
and Sanchez. The plaintiffs appealed the trial court ruling to the Court
of Appeals for the Fourth District of Texas at San Antonio. In May 1994,
the San Antonio Court of Appeals affirmed the trial court's judgement.
The appellants (plaintiffs) filled an application for writ of error to the
Texas Supreme Court after the Fourth Court Appeals rejected a motion for
a rehearing. On november 6, 1994, the Texas Supreme Court denied the writ
of error. On December 8, 1994, plaintiffs filed a motion for a rehearing
with Texas Supreme Court. The Texas Supreme Court granted a rehearing and
heard oral arguments during September 1995. On October 18, 1996, the
Texas Supreme Court reversed the judgements of both lower courts. On
November 20, 1996, a motion for rehearing was filed. The Texas Supreme
Court granted the motion for a rehearing, but on February 26, 1998, the
Texas Supreme Court rendered an opinion reversing the San Antonio Court
of Appeals and the trial court and rendering judgement for plaintiff.
A motion for a rehearing was filed during March 1998. The motion for a
rehearing was filed during March 1998. The motion for a rehearing was
denied and all appeals exhausted.
As a result of the unfavorable ruling, the Drilling Company will have to
forfeit the funds being held in escrow. In addition, the Drilling Company
would lose approximately 7.29% of its' interest in the Trevino properties.
On July 23, 1999, the Drilling Partnership paid Pennzoil $164,082, with
$82,041 being the Drilling Company Share, for the plaintiffs net revenue
from May 1, 1987 less the applicable share of well cost thru May 1992.
Prior to May 1992, Sanchez did not escrow funds; therefore, cash at
June 30, 1999 was used.
On July 29, 1999, the Drilling Partnership paid Pennzoil $520,118, with
$260,059 being the Drilling Companys share for the plaintiffs net revenue
from June 1992 thru August 1998. Beginning in June 1992, Sanchez started
escrowing the amounts in dispute. At June 30, 1999, the total Drilling
Partnership funds escrowed were $504,519 with $254,542 escrowed
for the Drilling Company. Funds not escrowed for the Drilling Company will
be paid from available cash at June 30, 1999.
As of August 13, 1999, several issues need to be settled before lawsuit is
over. Amounts paid were based on estimates in order for interest
not be accrued. An escrow account for $300,000 was set up for future
legal expenses. Future payments will be made from cash available at June
30, 1999.
<PAGE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
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.
SANCHEZ-O'BRIEN 1981-A DRILLING COMPANY
(Registrant)
By Sanchez-O'Brien Drilling Corporation.
General Partner
Date: 05/14/99 By: FRANK GUERRA
Frank Guerra
President
Date: 05/14/99 By: JORGE MENDOZA
Jorge Mendoza
Financial/Revenue Manager
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1810375
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1810375
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1810375
<CURRENT-LIABILITIES> 609672
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1200703
<TOTAL-LIABILITY-AND-EQUITY> 1810375
<SALES> 204057
<TOTAL-REVENUES> 204057
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 341033
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (136,976)
<INCOME-TAX> 0
<INCOME-CONTINUING> (136,976)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (136,976)
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
