<PAGE>
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
September 30, 1998 Commission File Number 2-71865
- --------------------- ------------------------------
TEXLAND DRILLING PROGRAM-1981, LTD.
-----------------------------------
(Name of Registrant)
TEXAS 75-1791491
- ----------------------- ------------------------------------
(State of Organization) (I.R.S. Employer Identification No.)
500 Throckmorton Street, Suite 3100
Fort Worth, Texas 76102
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(Address of Executive Offices) Zip Code
Registrant's Telephone Number (817) 336-2751
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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 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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This report contains a total of 10 pages.
1
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TEXLAND DRILLING PROGRAM-1981, LTD.
INDEX TO FINANCIAL STATEMENTS
Reference Page
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Balance Sheets at September 30, 1998 and 3
December 31, 1997.
Statements of Operations for the Nine Months 4
Ended September 30, 1998 and 1997.
Statement of Partners' Equity at September 30, 1998. 5
Statements of Cash Flows for Nine Months Ended 6
September 30, 1998 and 1997.
Notes to Financial Statements. 7-8
2
<PAGE>
TEXLAND DRILLING PROGRAM - 1981, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
9/30/98 12/31/97
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 48,229 $ 63,132
Accounts Receivable
Trade 67,747 117,054
General Partner - -
----------- -----------
Total Current Assets 115,976 180,186
PROPERTY AND EQUIPMENT, AT COST
(SUCCESSFUL EFFORTS METHOD)
Intangible Development Costs 7,857,131 7,856,354
Lease and Well Equipment 4,582,228 4,562,176
Producing Leaseholds 373,226 373,188
----------- -----------
12,812,585 12,791,718
Less: Accumulated Depreciation, Depletion & Amortization 10,081,769 9,845,056
----------- -----------
2,730,816 2,946,662
Wells-in-Progress
Nonproducing Leaseholds - -
----------- -----------
Net Property, Plant and Equipment 2,730,816 2,946,662
Organizational Costs (net of $1,141,028 amortization in 1991
and $1,069,798 in 1990) - -
----------- -----------
Total Assets $ 2,846,792 $ 3,126,848
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Accounts Payable - Trade 76,060 49,218
----------- -----------
Total Current Liabilities 76,060 49,218
PARTNERS' EQUITY
Limited Partners - 2,425 Units Outstanding 2,013,438 2,232,831
General Partner 757,293 844,799
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Total Partners' Equity 2,770,732 3,077,630
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Total Liabilities and Partners' Equity 2,846,792 3,126,848
=========== ===========
</TABLE>
See Accompanying Notes
3
<PAGE>
TEXLAND DRILLING PROGRAM - 1981, LTD.
(A LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
REVENUES
Oil and Gas Sales $205,288 $441,758 $700,038 $1,168,840
Interest Income 212 893 957 2,210
Gain on Sale 26,368 - 26,368 -
-------- -------- -------- ----------
231,867 442,651 727,363 1,171,050
-------- -------- -------- ----------
EXPENSES
Fees to Managing General Partner 28,020 16,050 72,010 48,150
Production Expenses 129,946 112,264 403,140 330,680
Severance Tax Withholding 9,443 21,859 32,202 55,305
Depreciation, Depletion & Amortization Expenses 78,905 89,066 236,714 267,199
Other Expenses 2,061 (6,947) 15,748 14,378
-------- -------- -------- ----------
248,374 232,292 759,814 715,712
-------- -------- -------- ----------
NET INCOME (LOSS) $(16,507) $210,359 $(32,451) $ 455,338
-------- -------- -------- ----------
NET INCOME (LOSS) ALLOCATION
Limited Partners (15,806) 105,336 (43,505) 208,892
General Partner (701) 105,024 11,054 246,445
-------- -------- -------- ----------
$(16,507) $210,360 $(32,451) $ 455,337
-------- -------- -------- ----------
NET INCOME (LOSS) PER $5,000 LIMITED PARTNER UNIT
(2,425 UNITS OUTSTANDING) $ (7) $ 43 $ (18) $ 86
-------- -------- -------- ----------
</TABLE>
See Accompanying Notes
4
<PAGE>
TEXLAND DRILLING PROGRAM - 1981, LTD.
(A LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' EQUITY
Nine Months Ended September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Limited General
Total Partner Partner
---------- ---------- ---------
<S> <C> <C> <C>
BALANCE DECEMBER 31, 1997 $3,077,630 $2,225,481 $ 852,149
Partners' Contributions 20,090 20,090
Partners' Distributions (294,538) (168,538) (126,000)
Net Income (Loss) (32,451) (43,505) 11,054
---------- ---------- ---------
BALANCE SEPTEMBER 30, 1998 $2,770,732 $2,013,438 $ 757,293
========== ========== =========
</TABLE>
See Accompanying Notes
5
<PAGE>
TEXLAND DRILLING PROGRAM - 1981, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOW
Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (32,451) $ 321,909
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation, Depletion and Amortization Expenses 236,714 226,743
Abandoned Leaseholds
Loss on Sale of Assets
Change in Accounts Receivable 49,307 69,571
Change in Accounts Payable 26,842 35,709
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Total Adjustments 312,863 332,023
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Net Cash Provided by Operating Activities 280,412 653,932
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Property and Equipment (20,867) (230,993)
Proceeds from Sale of Property and Equipment - -
--------- ---------
Net Cash Used by Investing Activities (20,867) (230,993)
CASH FLOWS FROM FINANCING ACTIVITIES
Partners' Contributions 20,090 93,953
Partners' Distributions (294,538) (555,650)
--------- ---------
Net Cash Used by Financing Activities (274,447) (461,697)
NET INCREASE IN CASH (14,903) (38,758)
Cash at Beginning of Year 63,132 92,858
--------- ---------
CASH AT END OF QUARTER $ 48,229 $ 54,100
========= =========
</TABLE>
See Accompanying Notes
6
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership was organized as a limited partnership on June 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. The
Partnership's accounting policies are summarized below:
BASIS OF ACCOUNTING
The Partnership follows generally accepted accounting principles applicable to
established enterprises in the extractive industries under a method which is
generally known as the successful method of accounting.
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.
ABANDONED 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.
DEPLETION
Leasehold costs of producing properties are amortized on the unit of production
method based on 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 using the unit of production method
based on estimated proved developed oil and gas reserves.
ORGANIZATION COSTS
These costs are amortized by the straight-line method over ten years, the life
of the Partnership.
FEDERAL INCOME TAX
The Partnership files its federal income tax return on the accrual basis.
7
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TEXLAND DRILLING PROGRAM-1981, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1998
(Unaudited)
2. CONTRIBUTIONS BY GENERAL PARTNER (TEXLAND PROPERTIES-1981)
Under terms of the Partnership Agreement, the General Partner 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 by the General Partner. 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.
3. FEES TO MANAGING GENERAL PARTNER (TEXLAND PETROLEUM, INC.)
In consideration of its management services rendered, the Managing General
Partner is entitled to charge management fees to the Partnership. In addition,
for the nine months ended September 30, 1998 and September 30, 1997, the
Partnership was charged $69,447 and $110,436 respectively for technical
services, accounting services, and supervisory services performed by the
employees of the Managing General Partner and such charges are included in
intangible development costs, production expenses and fees to Managing General
Partner. These charges are allocated between the General and Limited Partners
based upon applicable revenue and expense sharing rates.
8
<PAGE>
TEXLAND DRILLING PROGRAM-1981, LTD.
(A LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
September 30, 1998
The Partnership's average price per barrel of oil for the third quarter of 1998
was $8.44 as compared to $14.74 for the third quarter of 1997. The decreased
revenue and related severance tax expense result primarily from the decrease in
average oil prices.
Production expenses for 1998 increased from the comparable period in 1997, due
to increased remedial workover activity and, in particular, a significant
workover expenditure on a deep South Texas gas well in which the Partnership has
a substantial interest.
The Partnership was formed with cash contributions from the Limited and General
Partners. Management does not intend to incur any substantial indebtedness and
any developmental drilling which is necessary will be processed by farmout to
other parties or by reinvestment of internally generated funds. Management,
therefore, anticipates no liquidity problems during the life of the Partnership.
9
<PAGE>
PART II
Items 1 through 6
- -----------------
Omitted - Not applicable to Registrant.
SIGNATURE
---------
Pursuant to the requirements of the Securities and 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, Ltd.
By /s/ M. E. Chapman
--------------------------------------
M. E. Chapman, Vice President
of Texland Petroleum, Inc.,
General Partner - Texland
Properties-1981
Date: November 13, 1998
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1998 AND DECEMBER 31, 1997 AND THE STATEMENT OF
OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 48,229
<SECURITIES> 0
<RECEIVABLES> 67,747
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 115,976
<PP&E> 12,812,585
<DEPRECIATION> 10,081,769
<TOTAL-ASSETS> 2,730,816
<CURRENT-LIABILITIES> 76,060
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,770,732
<TOTAL-LIABILITY-AND-EQUITY> 2,846,792
<SALES> 700,038
<TOTAL-REVENUES> 727,363
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 759,814
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (32,451)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,451)
<EPS-PRIMARY> (17.94)
<EPS-DILUTED> (17.94)
</TABLE>
