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 March 31, 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
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.
<PAGE>
SANCHEZ-O'BRIEN 1981-A DRILLING COMPANY
QUARTERLY REPORT ON FORM 10-Q MARCH 31, 1999
INDEX
PART I - Financial information:
Item 1. Financial Statements
Balance Sheets for the periods March 31, 1999 and
December 31, 1998
Statements of Operations for the three months ended
March 31, 1999 and 1998
Statement of Partners' Equity as of March 31, 1999
Statements of Cash Flow for the three months ended
March 31, 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>
March 31, December 31,
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,052,624 1,011,552
Accounts receivable 14,163 18,843
Total current assets 1,066,787 1,030,395
Oil and natural gas properties (full cost
method), at cost, pledged (note 2) 31,022,634 31,022,493
Less accumulated depreciation, depletion
and amortization (note 2) 30,488,924 30,469,924
Net oil and natural gas properties 533,710 552,569
Organization costs, less applicable
amortization 0 0
1,600,497 1,582,964
<CAPTION>
<S> <C> <C>
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable 52,407 64,730
Suspense payable-investors 180,555 180,555
Total current liabilities 232,962 245,285
Partners' equity:
Limited partners 1,353,864 1,324,307
General partner 13,671 13,372
Total partners' equity 1,367,535 1,337,679
$ 1,600,497 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)
Three Months Ended
March 31,
1999 1998
<CAPTION>
<S> <C> <C>
REVENUES:
Oil and natural gas sales $ 79,579 132,354
Interest income 6,766 5,211
Other income 0 0
86,345 137,565
EXPENSES:
Operating expenses 31,417 40,206
General and administrative 6,072 17,571
Interest 0 0
Depreciation, depletion
and amortization (note 2) 19,000 27,000
56,489 84,777
Net income $ 29,856 52,788
See accompanying notes to financial statements.
<PAGE>
</TABLE>
<TABLE>
<PAGE>
Sanchez-O'Brien 1981-A Drilling Company
(a limited partnership)
Statement of Partners' Equity
Three Months Ended March 31, 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 income 29,557 299 29,856
Balances at March 31, 1999 $1,353,864 13,671 1,367,535
See accompanying notes to financial statements.
<PAGE>
</TABLE>
TABLE
<PAGE>
Sanchez-O'Brien 1981-A Drilling Company
(a limited partnership)
Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
1999 1998
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net income $ 29,856 52,788
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, depletion and
amortization 19,000 27,000
Change in assets and liabilities:
Accounts receivable 4,680 5,381
Accounts payable (12,323) (4,232)
Suspense payable 0 (1,740)
Total adjustments 11,357 26,409
Net cash provided by operating
activities 41,213 79,197
Cash flows from investing activities:
Cash distributions - -
Purchases of property and equipment (141) 27,239
Net cash used in investing
activities (141) 27,239
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 41,072 106,436
Cash and cash equivalents at beginning of
year 1,011,552 665,680
Cash and cash equivalents at end of
quarter $1,052,624 772,116
See accompanying notes to financial statements.
<PAGE>
Sanchez-O'Brien 1981-A Drilling Company
(a limited partnership)
Notes to Financial Statements
March 31, 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 March 31, 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 March 31, 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 March 31, 1999, forty-three wells have been drilled.
Of this number, ten wells are commercially productive,
twenty-four were dry holes or have been depleted and
abandoned, seven have been sold and two are shut-in.
As of March 31, 1999, the Drilling Company's share of capital
expenditures of the Drilling Partnership were in excess of the
available funds of the Drilling Company. Financing of these
expenditures was provided through borrowings from the Managing
General Partner.
As of March 31, 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 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.
The Company should have enough funds in escrow to pay the plantiff.
<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: M. M. FREEMAN
M. M. Freeman
Senior Vice President, Treasurer,
Secretary and Director (Principal
Financial Officer)
Date: 05/14/99 By: OLIVER GARZA
Oliver Garza
Vice President
Acctg./Administration
</TABLE>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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0
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