<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the year ended
December 31, 1995 Commission File Number 2-71865
- ----------------- ------------------------------
TEXLAND DRILLING PROGRAM-1981
-----------------------------
(Name of Registrant)
TEXAS 75-1791491
- --------------------- ----------------------
State of Organization) I. R. S. Employer Identification No.
500 Throckmorton Street, Suite 3100
Fort Worth, Texas 76102
- ------------------------------------- --------
(Address of Executive Offices) Zip Code
Registrant's Telephone Number (817) 336-2751
--------------
Securities registered pursuant to Section 12(b) of the Act:
Units of Limited Partnership Interest None .
- ------------------------------------- -------------
(Title of Class) (Voting Units)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 of 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 NO X
-
This report contains a total of 21 pages.
1
<PAGE>
PART I
Item 1. Business
- -----------------
Texland Drilling Program-1981 (a Limited Partnership) was formed on July 20,
1981 with $12,125,000 in aggregate Limited Partnership subscriptions for the
purpose of engaging in the exploration for oil and gas. Such exploration has
taken place principally in the geological area known as the Texas Permian Basin.
The Partnership's drilling and exploration phase is complete. Development of
the Partnership's properties is also substantially complete; however,
development drilling will be undertaken on the Partnerships secondary recovery
properties to the extent necessary to insure the maximum commercial recovery of
reserves.
The Partnership has no plans to borrow funds or reinvest significant amounts of
oil and gas revenues. To the extent that in-fill development is deemed
necessary, however; such operations will be funded from available cash flow.
See Note 6 of Notes to the Financial Statements on page 17 for information about
major purchasers. Sales to such purchasers are on a competitive basis on short-
term contracts customarily used in the industry. Should sales to these
refineries become interrupted, management believes alternative purchasers would
be immediately available on similar terms.
The price of oil and gas is affected by world wide supply and demand beyond the
Partnership's control. The average posted price during the past five years for
West Texas Sour (before adjustment for gravity), the primary type of Partnership
oil, is as follows:
1991 $18.66
1992 $17.87
1993 $15.60
1994 $14.28
1995 $15.42
From January 1, 1996 to April 30, 1996 oil prices have been particularily
volatile with the posted price of such oil ranging from a low of $13.75 to a
high of $21.50.
Item 2 - Properties
- -------------------
The Partnership currently has an interest in 287 active gross oil and gas wells,
representing 20.33 net wells. Two of the gross wells and .6393 of the net wells
are gas wells and the remainder are oil wells.
The Partnership currently has 279 oil wells included in 10 different enhanced
recovery projects operated by Texland Petroleum, Inc. Such enhanced recovery
projects are designed to repressure the oil bearing reservoirs and increase the
producing rates, property life and overall ultimate recovery of oil.
2
<PAGE>
Item 3 - Legal Proceedings
- --------------------------
None
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None
PART II
Item 5 - Market for Registrant's Common Equity and Related
- -----------------------------------------------------------
Stockholder Matters
- -------------------
Omitted. Not applicable.
Item 6 - Selected Financial Data
- --------------------------------
The following tables present selected financial data for each of the past five
years ended December 31, 1995. The data has been derived from the audited
financial statements:
TEXLAND DRILLING PROGRAM-1981
SELECTED FINANCIAL INFORMATION
FOR THE YEAR ENDED DECEMBER 31
------------------------------
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA:
- -----------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $1,213,648 $1,061,713 $1,292,410 $1,339,010 $1,495,005
Net Income/(Loss):
Limited Partners 86,433 ( 40,855) (51,272) 80,140 17,172
General Partners 141,732 29,776 45,305 151,524 176,306
---------- --------- --------- --------- ----------
Net Income/(Loss) $ 228,165 $(11,079) $( 5,967) $231,664 $193,478
========== ========== ========== ========== ========
Net Income/(Loss) per $5,000
Limited Partner Units (2,425
Units Outstanding)
$ 94 $ ( 17) $ ( 21) $ 33 $ 7
========== ========== ========== ========= ========
BALANCE SHEET DATA:
- -------------------
Total Assets $3,513,673 $3,673,969 $3,969,544 $4,487,163 $4,928,527
Total Liabilities $64,086 $51,736 $46,240 $44,008 $46,170
Partners' Equity $3,449,587 $3,621,960 $3,923,304 $4,443,155 $4,882,357
PARTNERSHIP CASH DISTRIBUTIONS
- --------------------------------
Limited Partner (per $5,000
unit) $ 95 $ 57 $ 115 $ 140 $ 160
General Partner $247,450 $188,500 $335,000 $369,650 $401,500
</TABLE>
3
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations.
- --------------
Oil and gas sales increased by approximately 14% in 1995 as compared to 1994.
The average price of Partnership oil increased by approximately 8.0% in 1995. In
addition, several additional in-fill development wells were drilled on a
property in which the Partnership owns a 10% working interest. Increased
production from this lease in 1995 accounted for an additional $67,000 in oil
sales. Modest but normal declines in production were also experienced on most
other Partnership properties in 1995. Oil and gas sales were down 18% in 1994
over that experienced in 1993 due primarily to a decline in the average price of
oil and normal expected declines in production rates from Partnership
properties. Gas sales are not a significant part of overall sales.
Depreciation, depletion and amortization are calculated on the units-of-
production method. A decline in these expenses from 1994 to 1993 are due to
upward revisions in future reserve estimates offset somewhat by production
declines on properties with high capitalized costs. The decline in the price of
oil had the effect of reducing the ultimate estimated recovery of oil and gas
and the resulting units-of-production provisions for 1994.
Production expenses decreased by 14% in 1995. Partnership workover costs
decreased by approximately $68,000 in 1995, primrily due to a decrease in the
number of wells on which remedial work was performed. Production expenses were
relatively stable in 1994 as compared to 1993.
Changes in oil prices substantially impact the net income and cash flow of the
Partnership. All oil produced by the Partnership is sold under short term
contracts which are immediately affected by changes in oil prices. Since 1981,
world oil supply and demand conditions have caused prices to rise and decline in
an essentially unpredictable manner. No changes in these circumstances is
foreseen in the immediate future.
Texland Drilling Program-1981 has substantially completed all the exploration
and development on the oil and gas properties in which it has an interest. No
long-term debt will be incurred and no new properties will be acquired.
Therefore, no future liquidity problems are anticipated by the Partnership.
Item 8 - Financial Statements and Supplementary Data:
- -----------------------------------------------------
See Index to Financial Statements on Page 9 of this report.
Item 9 - Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosures.
- ----------------------
None.
4
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The Partnership has no officers, employees or directors. The background of the
General Partners is as follows:
R. J. Schumacher - Age 67, President and Director of Texland Petroleum, Inc.
- ----------------
since May, 1967, has been an independent oil operator involved in drilling and
producing operations and the financing of oil and gas prospects, principally in
West Texas, Oklahoma and Arkansas. He has served as an executive officer with
Texland since its incorporation. For more than ten years prior to becoming an
independent oil operator, Mr. Schumacher was the chief financial officer,
contract drilling manager and land supervisor for an independent oil and gas
drilling contractor and operator. Mr. Schumacher is a Certified Public
Accountant. He received a Bachelor of Science in Commerce degree from Texas
Christian University in 1950 and a Master in Professional Accounting degree from
the University of Texas in 1951.
W. E. Rector - Age 61 Chairman of the Board and Director of Texland Petroleum,
- ------------
Inc., has been an independent petroleum geologist and oil operator since May,
1969. He has served as an executive officer with Texland since its
incorporation. He has had experience as a consulting petroleum geologist and as
an independent oil operator, has been involved in the origination and
development of oil and gas prospects and in raising funds for their financing in
the Mid-Continent area since 1969. For more than ten years prior to becoming an
independent oil operator, Mr. Rector was associated with Pan American Petroleum
as an exploration petroleum geologist. Mr. Rector received a Bachelor of
Science degree in Geology from Ohio State University in 1957 and a Master of
Science degree in Geology from the University of Michigan in 1958. He is a
member of the American Association of Petroleum Geologists and is a Certified
Petroleum Geologist.
J. N. Namy - Age 57 Vice-President and Director of Texland Petroleum, Inc., was
- ----------
employed by Texland as a geologist in June, 1978. From 1967 to 1970 he was
employed by Pan American Petroleum Corp. in the Fort Worth Division. From 1970
to 1978 he taught at Baylor University achieving the rank of Associate
Professor. During this time, he served as a consultant for several independent
petroleum companies working on exploration and development projects in the
Eastern Shelf and the Permian Basin of West Texas and New Mexico, as well as the
southern Rockies of New Mexico and Colorado. He received his Bachelor and
Master degrees from Western Reserve University in Cleveland, Ohio and his Ph. D.
degree from the University of Texas at Austin in 1969. Mr. Namy is a member of
the American Association of Petroleum Geologists, Geological Society of America
and the Society of Economic Paleontologists and Mineralogists.
5
<PAGE>
J. H. Wilkes - Age 40, Senior Vice President of Production and Director of
- ------------
Texland Petroleum, Inc. , was employed by Texland as a reservoir engineer in
August 1984. From 1978 to 1984, he was employed by Sun Exploration and
Production Company in Midland and Abilene, Texas. The first three years he
served as a production engineer and for the remaining three years he served as a
reservoir engineer. He received a Bachelor of Science degree in Petroleum
Engineering from Texas A&M University in 1978. He is a member of the Society of
Petroleum Engineers, A.I.M.E. and is a registered professional engineer in
Texas.
Item 11. Executive Compensation
- --------------------------------
See Note 5 of Notes to Financial Statements on page 17 of this report for
information with respect to payments to the Managing General Partner.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
Omitted. Not applicable to Registrant.
Texland Petroleum, Inc. and Texland Properties-1981 are General Partners of the
Partnership. Texland Petroleum, Inc. is the managing General Partner. Texland
Properties-1981 is a general partnership formed between W. E. Rector, R. J.
Schumacher and Texland Petroleum, Inc.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
See Notes 4 and 5 of Notes to Financial Statement on page 17 of this report for
information with respect to certain relationships and related transactions.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------------------------------------------------------------------------
(a)1 and (a)2 Financial Statement and Financial Statement Schedules
See Index to Financial Statements on page 9 of this report.
(a)3 Item 601 (Reg S-K) Exhibits:
None
(b) Reports on Form 8-K:
None
(c) Item 601 (Reg. S-K) Exhibits:
None
(d) Other Financial Statements and Financial Statement Schedules:
Not applicable.
6
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 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 authorized.
TEXLAND DRILLING PROGRAM-1981
- -----------------------------
Registrant
By__________________________________.
M.E.Chapman, Vice President
Texland Petroleum, Inc.,
Managing General Partner Date May 21, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacities and on the dates indicated.
By__________________________________.
W.E.Rector, Chairman of the
Board, Texland Petroleum, Inc.
Managing General Partner.
By__________________________________.
R.J.Schumacher, President,
Director, Texland Petroleum, Inc.
Managing General Partner
By__________________________________.
J.N.Namy, Executive Vice President,
Director, Texland Petroleum, Inc.
Managing General Partner
By__________________________________.
J.H.Wilkes, Senior Vice President
Director, Texland Petroleum, Inc.
Managing General Partner
7
<PAGE>
- --------------------------------------------------------------------------------
TEXLAND DRILLING PROGRAM-1981, LTD.
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
8
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD.
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
REPORT OF INDEPENDENT AUDITORS 10
FINANCIAL STATEMENTS
Balance Sheets 11
Statement of Operations 12
Statements of Partners' Equity 13
Statements of Cash Flows 14
Notes to Financial Statements 15
SUPPLEMENTAL INFORMATION
Schedule V - Property and Equipment 21
Schedule VI - Accumulated Depreciation,Depletion and
Amortization of Property and Equipment 21
</TABLE>
All other financial statement schedules not listed have been omitted since the
required information is included in the financial statements or the notes
thereto or is not applicable or not required.
- --------------------------------------------------------------------------------
9
<PAGE>
[LETTERHEAD OF SPROLES WOODARD L.L.P APPEARS HERE]
REPORT OF INDEPENDENT AUDITORS
The Partners
Texland Drilling Program-1981, Ltd.
We have audited the balance sheets of Texland Drilling Program-1981, Ltd. as of
December 31, 1995 and 1994, and the related statements of operations, partners'
equity and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements listed in the accompanying table of
contents to the financial statements present fairly, in all material respects,
the financial position of Texland Drilling Program-1981, Ltd. at December 31,
1995 and 1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information listed in the
accompanying table of contents to the financial statements is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Sproles Woodard L.L.P.
Fort Worth, Texas
April 4, 1996
10
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD.(A LIMITED PARTNERSHIP)
BALANCE SHEET
DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
--------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 70,913 $ 44,753
Accounts receivable:
Trade (Note 6) 165,044 103,623
General partner 3,243
--------------- ----------------
235,957 151,619
--------------- ----------------
PROPERTY AND EQUIPMENT, AT COST (SUCCESSFUL
EFFORTS METHOD) (NOTES 2, 3, 4, 5 AND 8)
Intangible development costs 7,598,675 7,533,723
Lease and well equipment 4,384,516 4,310,734
Producing leaseholds
372,066 368,562
--------------- ----------------
12,355,257 12,213,019
Accumulated depreciation, depletion and amortization (9,077,541) (8,690,942)
--------------- ----------------
3,277,716 3,522,077
--------------- ----------------
$ 3,513,673 $ 3,673,696
=============== ================
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Accounts payable - general partner (Note 5) $ 64,086 $ 51,736
--------------- ----------------
PARTNERS' EQUITY (NOTES 4 AND 7)
Limited partners - 2,425 units outstanding 2,442,101 2,586,043
General partners 1,007,486 1,035,917
--------------- ----------------
3,449,587 3,621,960
--------------- ----------------
$ 3,513,673 $ 3,673,696
=============== ================
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
11
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD.(A LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- --------------
<S> <C> <C> <C>
REVENUE
Oil and gas sales (Note 6) $ 1,211,335 $ 1,060,885 $ 1,290,692
Interest income 2,313 828 1,718
------------- ------------- --------------
1,213,648 1,061,713 1,292,410
------------- ------------- --------------
EXPENSE
Fees to managing general partner (Note 5) 64,200 84,000 86,400
Production expense (Note 5) 463,200 539,261 552,845
Severance tax 58,816 50,021 62,957
Depreciation, depletion and amortization 386,599 382,759 569,940
Loss on sale of assets 10,642
Other 12,668 16,751 15,593
------------- ------------- --------------
985,483 1,072,792 1,298,377
------------- ------------- --------------
NET INCOME (LOSS) $ 228,165 $ (11,079) $ (5,967)
============= ============== ==============
NET INCOME (LOSS) ALLOCATION (NOTE 7)
Limited partners $ 86,433 $ (40,855) $ (51,272)
General partners 141,732 29,776 45,305
------------- --------------- --------------
$ 228,165 $ (11,079) $ (5,967)
============= =============== ==============
NET INCOME (LOSS) PER $5,000
LIMITED PARTNER UNIT
(2,425 UNITS OUTSTANDING) $ 94.09 $ (16.85) $ (21.14)
============= ============== ==============
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
12
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD. (A LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
-------------- -------------- --------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 $ 3,095,270 $ 1,347,885 $ 4,443,155
Partners' distributions (278,875) (335,000) (613,875)
Partners' contributions (Note 4) 99,991 99,991
Net income (loss) (51,272) 45,305 (5,967)
-------------- -------------- --------------
BALANCE AT DECEMBER 31, 1993 2,765,123 1,158,181 3,923,304
Partners' distributions (138,225) (188,500) (326,725)
Partners' contributions (Note 4) 36,460 36,460
Net income (loss) (40,855) 29,776 (11,079)
-------------- -------------- --------------
BALANCE AT DECEMBER 31, 1994 2,586,043 1,035,917 3,621,960
Partners' distributions (230,375) (247,450) (477,825)
Partners' contributions (Note 4) 77,287 77,287
Net income 86,433 141,732 228,165
-------------- -------------- --------------
BALANCE AT DECEMBER 31, 1995 $ 2,442,101 $ 1,007,486 $ 3,449,587
============== ============== ==============
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
13
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD. (A LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------ -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 228,165 $ (11,079) $ (5,967)
-------------- ------------ -------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 386,599 382,759 569,940
Loss on sale of assets 10,642
(Increase) decrease in accounts receivable (58,178) (11,844) 15,260
Increase in accounts payable 12,350 5,496 2,232
Other 137
-------------- ------------ -------------
340,908 376,411 598,074
-------------- ------------ -------------
Net cash provided by operating activities 569,073 365,332 592,107
-------------- ------------ -------------
INVESTING ACTIVITIES
Acquisition of property and equipment (142,375) (61,900) (195,125)
Proceeds from sale of property and equipment 2,419 74,643
-------------- ------------ -------------
Net cash used in investing activities (142,375) (59,481) (120,482)
-------------- ------------ -------------
FINANCING ACTIVITIES
Partners' contributions 77,287 36,460 99,991
Partners' distributions (477,825) (326,725) (613,875)
-------------- ------------ -------------
(400,538 (290,265) (513,884)
Net cash used in financing activities -------------- ------------ -------------
NET INCREASE (DECREASE) IN CASH 26,160 15,586 (42,259)
Cash at beginning of year 44,753 29,167 71,426
-------------- ------------ -------------
CASH AT END OF YEAR $ 70,913 $ 44,753 $ 29,167
============== ============ =============
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
14
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD. (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Texland Drilling Program-1981, Ltd. (the "Partnership") was organized as a
limited partnership on July 20, 1981, for the purpose of engaging in oil and gas
exploration and production. Texland Properties-1981, a general partnership, and
Texland Petroleum, Inc. are the general partners. The managing general partner
is Texland Petroleum, Inc. Partnership operations are conducted predominately
in West Texas.
The Partnership shall continue in existence, unless terminated sooner through
the occurrence of a final terminating event as defined by the partnership
agreement, until December 31, 2001, as extended through approval by the limited
partners owning a majority of aggregate Partnership subscriptions.
The Partnership's accounting policies are summarized below:
BASIS OF ACCOUNTING
The Partnership maintains its financial records on the income tax basis. The
financial statements are presented in accordance with generally accepted
accounting principles. The primary differences in accounting methods are
identified in Note 7.
USE OF ESTIMATES
The preparation of financial statements in accordance 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
reported revenues and expenses during the reported period. Actual results could
differ from those estimates.
PROPERTY AND EQUIPMENT
Costs incurred for the acquisition of producing and nonproducing leaseholds are
capitalized. Costs of intangible development and lease and well equipment
incurred to drill and equip successful exploratory and development wells are
capitalized. Costs to drill and equip unsuccessful exploratory wells are
charged to operations while costs of unsuccessful development wells remain
capitalized. Costs associated with uncompleted wells are capitalized as wells-
in-progress.
NONPRODUCING LEASEHOLDS
Costs of nonproducing properties are charged to expense at such time as they are
deemed to be impaired, based upon periodic assessments of such costs.
AMORTIZATION AND DEPLETION
Leasehold costs of producing properties are amortized on the unit-of-production
method based on estimated proved oil and gas reserves. Intangible development
costs of producing properties are amortized on the unit-of-production method
based on estimated proved developed oil and gas reserves.
DEPRECIATION
Depreciation of equipment is provided by the unit-of-production method based on
estimated proved developed oil and gas reserves.
- --------------------------------------------------------------------------------
15
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD. (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL INCOME TAX
The Partnership (which pays no federal income tax) files its federal income tax
return on the accrual basis maintained for income tax purposes.
STATEMENT OF CASH FLOWS
For purposes of these statements, the Partnership considers cash on deposit and
highly liquid money market funds as cash and cash equivalents.
NET INCOME ALLOCATION
Revenues and costs of the Partnership are allocated between the general and
limited partners in accordance with the Partnership agreement.
2. COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES
The following summarizes the Partnership's costs incurred in its oil and gas
activities, all of which were domestic, for the years ended December 31:
<TABLE>
<CAPTION>
Lease Acquisition Costs Development Costs
----------------------------- -----------------------------
Expensed Capitalized Expensed Capitalized
----------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
1993 $ $ 47 $ 505 $ 195,078
1994 54 61,900
1995 3,504 205 138,871
</TABLE>
3. ACQUISITION OF NONPRODUCING PROPERTIES
The Partnership acquired working interests in certain oil and gas properties
through assignments from other Texland Drilling Program partnerships. These
acquisitions involved no cost to the Partnership and are subject to retained
nonworking interests by the assignor. Upon payout of these properties, the
assignor has an option to convert the retained nonworking interest to a working
interest.
- --------------------------------------------------------------------------------
16
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD. (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
4. CONTRIBUTIONS BY GENERAL PARTNERS
Under terms of the Partnership agreement, Texland Properties-1981 is charged for
certain costs related to drilling and production operations, which are required
to be capitalized for federal income tax purposes. These costs are treated as
capital contributions. In addition, Texland Properties-1981 and Texland
Petroleum, Inc. have invested in limited partnership units in the amount of
$95,000 and $30,000, respectively. These investments as a limited partner are
reported with other limited partners' equity in the accompanying financial
statements.
5. FEES TO MANAGING GENERAL PARTNER
The Partnership was charged $138,998, $180,218, and $175,016 in 1995, 1994, and
1993, respectively, for technical and accounting services performed by employees
of the managing general partner. These charges are included in intangible
development costs, production expenses and fees to managing general partner.
Supervisory fees charged to the Partnership by the managing general partner for
drilling and operating the partnership wells were $142,980, $131,054, and
$141,629 in 1995, 1994, and 1993, respectively, and are included in intangible
development costs and production expenses.
These charges are allocated between the general and limited partners based upon
applicable revenue and expense sharing rates.
6. MAJOR PURCHASERS
Purchasers which accounted for 10 percent or more of the Partnership's sales
were:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Lantern Petroleum, Corp. 21% 46% 29%
Scurlock Permian Corporation 12% 16%
ARCO Oil and Gas Company 45% 24%
AMOCO Production Company 40% 22%
------------ ------------ ------------
78% 86% 91%
============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD. (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
7. RECONCILIATION OF BOOK-TAX REPORTING DIFFERENCES
Although the Partnership financial statements are prepared in accordance with
generally accepted accounting principles, its books and records are maintained
on the basis of accounting used for federal income tax purposes.
The following summarizes book-tax reporting differences for the year ended
December 31, 1995:
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
-------------- -------------- -------------
<S> <C> <C> <C>
NET INCOME (LOSS) DIFFERENCES:
Net income (loss) for financial reporting
purposes $ 86,433 $ 141,732 $ 228,165
-------------- -------------- -------------
Expenses for federal income tax purposes
capitalized for financial reporting purposes (64,952) (168) (65,120)
Excess of depreciation, depletion and
amortization expense for financial
reporting purposes over amounts for
federal income tax purposes 222,124 120,372 342,496
-------------- -------------- -------------
Additional income for federal income
tax purposes 157,172 120,204 277,376
-------------- -------------- --------------
Net income for federal income tax purposes $ 243,605 $ 261,936 $ 505,541
============== ============== ==============
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD. (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECE4MBER 31, 1995
- --------------------------------------------------------------------------------
7. RECONCILIATION OF BOOK-TAX REPORTING DIFFERENCES (CONTINUED)
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
-------------- -------------- ---------------
<S> <C> <C> <C>
PARTNERS' EQUITY DIFFERENCES:
Partners' equity at December 31, 1995,
for financial reporting purposes $ 2,442,101 $ 1,007,486 3,449,587
Additional income (loss) for federal
income tax purposes:
1995 157,172 120,204 277,376
1994 197,999 107,966 305,965
1993 277,730 214,742 492,472
1992 240,459 100,370 340,829
1991 318,408 152,615 471,023
1990 550,882 160,269 711,151
1989 552,963 120,851 673,814
1988 795,772 (36,000) 759,772
1987 517,630 (3,242) 514,388
1986 332,931 (253,798) 79,133
1985 921,282 (682,039) 239,243
1984 1,276,759 (479,063) 797,696
1983 1,145,881 76,871 1,222,752
1982 (503,533) (134,627) (638,160)
1981 (8,051,462) (125,697) (8,177,159)
Investment tax credit basis reduction not
recognized for financial reporting purposes (39,178) (39,178)
-------------- --------------- ---------------
Partners' equity December 31, 1995,
for federal income tax purposes $ 1,172,974 $ 307,730 $ 1,480,704
============== =============== ===============
</TABLE>
- --------------------------------------------------------------------------------
19
<PAGE>
TEXTLAND DRILLING PROGRAM-1981, LTD. (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
8. ESTIMATED FUTURE NET REVENUES FROM PROVED RESERVES
At December 31, 1995, the estimated future net reserves from partnership proved
reserves as determined by Texland Petroleum, Inc., using product prices and
operating conditions existing as of that date were as follows:
<TABLE>
<CAPTION>
Future Net
Revenue
Future Net Discounted
Revenue at 10%
----------- -----------
<S> <C> <C>
Limited Partners $2,197,648 $1,347,473
General Partners 2,111,466 1,294,631
----------- -----------
$4,309,114 $2,642,104
=========== ===========
</TABLE>
Because of uncertainties inherent in the reserve estimation process,
management's estimate of future net revenues and the timing of such revenues may
change in the near term as the result new engineering or economic conditions.
However, the amount of the change that is reasonably possible cannot be
estimated.
- --------------------------------------------------------------------------------
20
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD. (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
SCHEDULE V - PROPERTY AND EQUIPMENT
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY AND EQUIPMENT
Neither total additions nor total retirements during the years ended December
31, 1995, 1994, or 1993 amounted to more than 10 percent of the ending asset
balance for these years. Accordingly, no detailed information is provided for
schedules V and VI.
Total property and equipment additions and retirements for each of the three
years ended December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Additions
At Cost Retirements
----------- -----------
<S> <C> <C>
1993 $ 195,125 $ 417,442
1994 61,955 2,473
1995 142,375 137
</TABLE>
- --------------------------------------------------------------------------------
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT DECEMBER 31, 1995 AND DECEMBER 31, 1994 AND THE STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND DECEMBER 31,1994 ANDIS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> DEC-31-1995 DEC-31-1994
<CASH> 70,913 44,753
<SECURITIES> 0 0
<RECEIVABLES> 165,044 103,623
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 235,951 151,019
<PP&E> 12,355,251 12,213,019
<DEPRECIATION> 9,077,541 8,690,942
<TOTAL-ASSETS> 3,513,673 3,673,696
<CURRENT-LIABILITIES> 64,086 51,736
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 3,449,587 3,621,960
<TOTAL-LIABILITY-AND-EQUITY> 3,513,673 3,673,696
<SALES> 1,211,335 1,060,885
<TOTAL-REVENUES> 1,213,648 1,061,713
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 985,483 1,072,792
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 228,165 (11,079)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 228,165 (11,079)
<EPS-PRIMARY> 94,09 (16.85)
<EPS-DILUTED> 94.09 (16.85)
</TABLE>
