FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-10268
C&K 1981 FUND-A, LTD.
(Exact name of registrant as specified in its charter)
Texas 76-0307703
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7555 East Hampden Avenue, Suite 600
Denver, Colorado 80231
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-695-3600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class Which Registered
None None
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.
X
Yes No
The C&K 1981 Fund-A, Ltd. is a Texas limited partnership.
<PAGE>
INDEX TO FORM 10-Q
C&K 1981 Fund-A, Ltd.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
March 31, 1997 and December 31, 1996
Statements of Operations
Three months ended March 31, 1997 and 1996
Statements of Changes in Partners' Capital (Deficit)
Three months ended March 31, 1997 and 1996
Statements of Cash Flows
Three months ended March 31, 1997 and 1996
Notes to the Financial Statements
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
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
<PAGE>
C&K 1981 FUND-A, LTD.
(A Texas Limited Partnership)
BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Oil and gas properties and equipment,
at cost, using the full cost
method of accounting $ 21,894,850 $21,881,166
Less: Accumulated depreciation,
depletion and amortization (20,736,692) (20,632,021)
Total Assets $ 1,158,158 $ 1,249,145
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accrued liabilities $ 8,460 $ 10,991
Current payable to General Partner 545,000 400,000
Long-term payable to General Partner 509,077 811,381
Total Liabilities 1,062,537 1,222,372
Partners' Capital (Deficit):
General Partner 194,535 211,117
Limited Partners (140,359) (229,536)
Combining adjustment 41,445 45,192
Total Partners' Capital (Deficit) 95,621 26,773
Total Liabilities and Partners'
Capital (Deficit) $ 1,158,158 $ 1,249,145
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
<PAGE>
C&K 1981 FUND-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
<S> <C> <C>
Revenues:
Oil and gas sales $659,421 $388,467
Expenses:
Lease operating 111,487 39,415
Production tax 76,484 54,458
Marketing deductions 679 3,621
Depreciation, depletion
and amortization 104,671 32,928
General and administrative 65,212 62,162
Interest - affiliated 28,643 23,932
387,176 216,516
Net income $272,245 $171,951
Net income (loss) allocation:
General Partner $186,815 $105,460
Limited Partners 89,177 69,447
Combining adjustment (3,747) (2,956)
Net income $272,245 $171,951
Net income per limited
partnership unit
(3,302 outstanding) $ 27.01 $ 21.03
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
<PAGE>
C&K 1981 FUND-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31, 1996
Combining
General Limited Adjustment
Partner Partners (Note 3) Total
<S> <C> <C> <C> <C>
Balance at
January 1, 1996 $ 184,921 $(453,932) $60,081 $(208,930)
Contributions 50,065 -- -- 50,065
Distributions (165,193) -- -- (165,193)
Net income (loss) 105,460 69,447 (2,956) 171,951
Balance at
March 31, 1996 $ 175,253 $(384,485) $57,125 $(152,107)
Three months ended March 31, 1997
Combining
General Limited Adjustment
Partner Partners (Note 3) Total
<S> <C> <C> <C> <C>
Balance at
January 1, 1997 $ 211,117 $(229,536) $45,192 $ 26,773
Contributions 87,732 -- -- 87,732
Distributions (291,129) -- -- (291,129)
Net income (loss) 186,815 89,177 (3,747) 272,245
Balance at
March 31, 1997 $ 194,535 $(140,359) $41,445 $ 95,621
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
<PAGE>
C&K 1981 FUND-A, LTD.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $272,245 $171,951
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation, depletion and amortization 104,671 32,928
Changes in operating assets and liabilities:
Decrease in accrued liabilities (2,531) (7,487)
Decrease in payable to General Partner (157,304) (83,863)
Net cash provided by operating activities 217,081 113,529
Cash flows from investing activities:
Retirements of (additions to) oil and gas
properties and equipment (13,684) 1,599
Net cash provided by (used in)
investing activities (13,684) 1,599
Cash flows from financing activities:
Distributions to General Partner (291,129) (165,193)
Contributions by General Partner 87,732 50,065
Net cash used in financing
activities (203,397) (115,128)
Net increase (decrease) in cash -- --
Cash at beginning of period -- --
Cash at end of period $ -- $ --
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
<PAGE>
C&K 1981 FUND-A, LTD.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The C&K 1981 Fund-A, Ltd. (the "Partnership"), a Texas Limited
Partnership, was organized on December 16, 1980, to acquire, explore,
develop and operate onshore oil and gas properties in the United States
and commenced operations on May 12, 1981. Total initial Limited Partner
contributions were $8,255,000 including $100,000 contributed by C&K
Petroleum, Inc. ("C&K"), the initial General Partner.
C&K, after several corporate reorganizations beginning in September of
1984 and ending in December of 1991, was acquired by Ultramar Oil and Gas
Limited ( UOGL ), an indirect wholly-owned subsidiary of LASMO plc.
Effective November 18, 1992, UOGL was sold to Williams-Cody Limited
Liability Company, a Wyoming limited liability company ("WCLLC"), owned by
Williams Gas Management Company ("WGMan") and Cody Resources, Inc.
("CRI"). On January 1, 1993, UOGL changed its name to Williams-Cody, Inc.
("Williams-Cody").
Effective May 1, 1993, Cody Company, a wholly owned subsidiary of The
Gates Corporation, purchased the units of WCLLC owned by WGMan. As a
result of this acquisition, the unit holders of WCLLC are Cody Company and
its wholly owned subsidiary, CRI. Subsequently, effective May 15, 1993,
the name of Williams-Cody, Inc. was changed to CODY ENERGY, INC. ("CODY"),
and the name of Williams-Cody Limited Liability Company was changed to
Gates-Cody Energy Company ("GCEC"), a Limited Liability Company. CODY is
the surviving corporation and, pursuant to the authority provided in the
Partnership Agreement, manages and controls the Partnership's affairs and
is responsible for the activities of the Partnership.
On January 1, 1997, CODY created two new subsidiary companies to hold
its Texas assets. To the first company, CODY TEXAS, L.P., a Texas
limited partnership ("CODY TEXAS"), CODY transferred its interest in the
Partnership, with CODY TEXAS becoming the successor general partner of the
Partnership. The second company, Cody Oil and Gas, Inc., a wholly owned
subsidiary of CODY, serves as the general partner of CODY TEXAS.
Basis of Accounting
The accounts of the Partnership are maintained on the accrual basis in
accordance with accounting practices permitted for federal income tax
reporting purposes. In order to present the accompanying financial
statements on the basis of generally accepted accounting principles for
financial reporting purposes, adjustments have been made to account for
oil and gas properties under the full cost method of accounting.
Oil and Gas Properties
The Partnership uses the full cost method of accounting for oil and gas
properties in accordance with rules prescribed by the Securities and
Exchange Commission ("SEC"). Under this method, all costs incurred in
connection with the exploration for and development of oil and gas
reserves are capitalized. Such capitalized costs include lease
acquisition, geological and geophysical work, delay rentals, drilling,
completing and equipping oil and gas wells and other related costs
together with costs applicable to CODY's technical personnel directly
engaged in evaluating and maintaining oil and gas prospects and drilling
oil and gas wells. Maintenance and repairs are charged against income when
incurred. Renewals and betterments which extend the useful life of
properties are capitalized.
The capitalized costs of all oil and gas properties are depleted on a
composite units-of-revenue method computed on a future gross revenue
basis. An additional depletion provision is made if the total capitalized
costs of oil and gas properties exceed the "capitalization ceiling" which
is calculated as the present value of future net revenues from estimated
production of the Partnership's proved oil and gas reserves as furnished by
independent petroleum engineers.
Future gross revenues have been estimated using rules prescribed by the
SEC. Under these rules, year-end prices are utilized in determining future
gross revenues.
New Accounting Standard
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" (SFAS No. 121), which requires impairment losses to be recorded on
long-lived assets used in operations when indications of impairment are
present. The Partnership adopted SFAS No. 121 during 1996, with no
impact on its financial statements.
Contributions and Distributions
Contributions by the General Partner, as presented in the Statements
of Changes in Partners' Capital (Deficit), represent amounts paid by the
General Partner for its allocated share of the Partnership's costs and
expenses. Distributions to the General Partner represent amounts
collected by the General Partner for its allocated share of the
Partnership's revenues.
Net Income (Loss) per Limited Partnership Unit
Net income (loss) per limited partnership unit is computed by
obtaining the Limited Partners' net income (loss) (see Statements of
Changes in Partners' Capital (Deficit)) and dividing by the total Limited
Partnership units outstanding.
Payable to the General Partner
The Partnership's payable to the General Partner is the Limited
Partners' obligation for their share of costs, arising from Partnership
operations, which are funded entirely by the General Partner. The current
portion of the liability is the amount estimated to be collectible from
the Limited Partners' net operating revenues over the current operating
cycle (one year).
Revenue Recognition
The Partnership recognizes oil and gas revenues for only its ownership
percentage of total production under the entitlement method. Purchase,
sale and transportation of natural gas and crude oil are recognized upon
completion of the sale and when transported volumes are delivered.
Concentration of Credit Risk
Financial instruments which subject the Partnership to concentrations
of credit risk consist principally of trade receivables. The Partnership's
policy is to evaluate, prior to entering agreements, each purchaser's
financial condition. The Partnership sells to purchasers with different
geographic and economic characteristics.
Use of Estimates
The preparation of the Partnership's financial statements in conformity
with generally accepted accounting principles necessarily 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 balance sheet dates and the reported amount of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
Reclassification
Certain amounts from prior years have been reclassified to be
consistent with the financial statement presentation for 1997. Such
reclassifications had no effect on net income.
NOTE 2 - GAS CONTRACT
Since June 1, 1993, Williams Gas Marketing has purchased all of the
Partnership's natural gas production under an agreement that calls for
market responsive prices which are tied to a published index. The
Partnership remains responsible for all costs related to production,
gathering, processing or severance of the gas prior to Delivery Point.
These costs have been recorded as marketing deductions in the financial
statements.
NOTE 3 - ALLOCATION OF PARTNERSHIP REVENUES, COSTS AND EXPENSES
The Partnership Agreement provides that revenues, costs and expenses
shall be allocated to the partners as follows:
Limited General
Partners Partner
REVENUES,
Sale of Production . . . . . . . . . . . . . . . . . . . 50% 50%
Sale of Equipment . . . . . . . . . . . . . . . . . . . . 50 50
Interest Income . . . . . . . . . . . . . . . . . . . . . 99 1
COSTS AND EXPENSES
Organization and Offering Expenses Other
than Sales Commissions . . . . . . . . . . . . . . . . . 0 100
Leasehold Acquisition Costs . . . . . . . . . . . . . . . 0 100
Subsequent Leasehold Acquisition Costs . . . . . . . . . 50 50
Intangible Drilling Costs . . . . . . . . . . . . . . . . 99 1
Tangible Drilling and Completion Costs Relating to
Commercially Productive Wells . . . . . . . . . . . . . 0 100
Post-Completion Costs . . . . . . . . . . . . . . . . . . 50 50
Operating Costs . . . . . . . . . . . . . . . . . . . . . 50 50
Special Costs . . . . . . . . . . . . . . . . . . . . . . 99 1
General and Administrative Expenses . . . . . . . . . . . 50 50
The depreciation, depletion and amortization provision is calculated
based on discrete calculations utilizing the Partnership's and the
partners' share of the related capital costs and estimated future net
revenues. For financial statement purposes, each partner's depreciation,
depletion and amortization has been increased by the amount that his share
of unamortized costs exceeded the capitalization ceiling. At March 31,
1997 and 1996, the net capitalized costs of the Partnership's oil and gas
properties did not exceed the capitalization ceiling.
The combining adjustment included in partners' capital of $41,445 and
$57,125 at March 31, 1997 and 1996, respectively, represents the difference
resulting from computing the full cost ceiling test on the total
partnership basis, which is used for financial reporting purposes, and the
limited partners and general partner basis. The adjustment is an
allocation of partners' capital and does not affect net income.
NOTE 4 - PURCHASE OF LIMITED PARTNERS' INTERESTS
The Limited Partners may require the General Partner to purchase up to
ten percent of their interests annually. The purchase price is based on
the Limited Partners' proportionate share of the sum of (i) two-thirds of
the present worth of estimated future net revenues discounted at the prime
rate in effect on the applicable valuation date plus one percent, (ii) the
present value of the estimated salvage value of all production facilities
and tangible assets, and (iii) the net book value of all other assets and
liabilities.
In addition to the 40 units purchased by the General Partner for its
initial capital contribution, a total of 1,485.75 units have been purchased
from Limited Partners as of December 31, 1996. At January 1, 1997, the
General Partner calculated a purchase price of $61.63 per limited partner
unit, and the Limited Partners have until June 30, 1997 to tender units for
repurchase. At March 31, 1997, the General Partner owned a total of
1,525.75 units.
NOTE 5 - SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
The General Partner is reimbursed for administrative and overhead costs
incurred in conducting the business of the Partnership. Such
reimbursements have been the maximum allowed under the terms of the
Partnership Agreement, and were $61,912 for each three month period ended
March 31, 1997 and 1996.
During the first three months of 1997 and 1996, the Partnership
distributed $291,129 and $165,193, respectively, to the General Partner for
its allocated share of net revenues, and the General Partner contributed
$87,732 and $50,065, respectively, for its share of costs and expenses.
After such time as total contributions from the Limited Partners have
been expended, the General Partner may advance funds to the Limited
Partners for their share of costs and expenses for continuing operations.
Interest was charged to the Limited Partners on such advances at a rate
which approximated 9.2% and 9.4% during the three months ended March 31,
1997 and 1996, respectively. The General Partner is reimbursed for funds
advanced to the Limited Partners from revenues otherwise allocable to the
Limited Partners.
NOTE 6 - INCOME TAXES
Income taxes are not levied at the Partnership level, but rather on the
individual partners; therefore, no provision for liability for federal and
state income taxes has been reflected in the accompanying financial
statements. The tax returns, the qualification of the Partnership as a
partnership for tax purposes, and the amount of the Partnership's income or
loss is subject to examination by federal and state tax authorities. If
such examinations result in changes with respect to the Partnership's
qualifications or in changes in the Partnership's income or loss, the tax
liability of the partners could be changed accordingly.
NOTE 7 - CONTINGENCIES
The Partnership has a working capital deficiency and a net capital
deficiency. As a result of the deficit capital position of the Limited
Partners' interests, all net cash flows attributable to the Limited
Partners' share of the Partnership's operations are presently applied
entirely against its indebtedness for past funds advanced by the General
Partner and are not available to fund Partnership needs. Funds required by
the Partnership in excess of those generated by operations will be advanced
by the General Partner.
The General Partner is currently considering either transferring its
limited partner and general partner interests in the Partnership,
withdrawing as general partner of the Partnership, or taking other actions
to reduce its responsibilities in the Partnership, which could lead to the
ultimate dissolution of the Partnership. These conditions raise
substantial doubt about the Partnership's ability to continue as a going
concern. As long as CODY TEXAS remains the General Partner of the
Partnership, GCEC intends to continue advancing funds required by the
Partnership in excess of those generated by operations, through CODY
TEXAS. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
C&K 1981 FUND-A, LTD.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow for the three months ended March 31, 1997 was applied to
the Limited Partners' debt to the General Partner, which was reduced by
$157,304 during this period. Consequently, the Partnership has no cash on
hand at March 31, 1997.
The Partnership's financing requirements for operating expenses and
capital expenditures are currently provided by revenues from its producing
operations. Any funds required by the Partnership in excess of those
generated by operating proceeds will continue to be advanced by the
General Partner.
Capital expenditures during the first three months of 1997 were $13,684,
primarily attributable to work performed on the McIlhenny #2 EA well in an
effort to increase the production and reserves for that well. The
Partnership has no plans for additional exploratory or developmental
capital programs, except those necessary to maintain well productivity for
1997.
The Partnership cannot predict with any degree of certainty the prices
it will receive in the remainder of 1997 or in future years for its crude
oil and natural gas. The Partnership's financial condition, operating
results and liquidity will be materially affected by any significant
fluctuations in sales prices. The Limited Partners' ability to reimburse
funds advanced by the General Partner will be similarly affected.
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1997 was $272,245, an
increase of $100,294 or 58% from net income of $171,951 reported for the
same period in 1996. This increase resulted primarily from an increase
in net oil and gas revenues offset by increases in lease operating and
depreciation, depletion and amortization expenses.
Crude oil and natural gas sales of $659,421 for the three months ended
March 31, 1997 increased by $270,954 or 70% compared to the same period
in 1996. Crude oil production increased to 288 barrels per day, natural
gas production remained at 202 mcf per day, and plant products decreased to
32 equivalent mcf per day during the first quarter of 1997, compared to the
first quarter 1996 volumes of 200 barrels, 202 mcf, and 39 equivalent mcf,
respectively, per day. The completion of the McIlhenny #1-Sidetrack #3 well
in April, 1996 and production enhancements on the McIlhenny #2 EA well
during the first quarter of 1997 added production of approximately 97
barrels per day for the first three months of 1997. Average sales prices
were $22.95 per barrel for crude oil, $3.09 per mcf for natural gas, and
$3.07 per equivalent mcf for plant products during the first quarter of
1997 compared to $18.52, $2.48 and $1.64, respectively, for the same period
in 1996.
Lease operating expense for the three months ended March 31, 1997
increased by $72,072 or 183% compared to the corresponding period in 1996.
This increase is partially due to a timing difference between the first and
second quarters of 1996 for right-of-way charges on the McIlhenny wells in
Louisiana, which were expensed in the second quarter of 1996. Lease
operating expenses also increased due to approximately $17,000 spent on a
workover to enhance production on the McIlhenny #1-Sidetrack #3 well, in
addition to the normal monthly operating expenses on that well.
. Production tax expense for the first quarter of 1997 increased by $22,026
or 40% compared to the same period in 1996, which primarily related to the
increase in crude oil production. Marketing deductions were $679 for the
three months ended March 31, 1997 compared to $3,621 for the corresponding
period in 1996. Depreciation, depletion and amortization expense
increased by $71,743 or 218% in 1997 compared to the same period in 1996.
This increase is the result of increases in oil and gas revenues and
additions to the depletion base and reserves assigned to the properties by
independent reserve engineers, effective January 1, 1997. General and
administrative expenses for the first quarter of 1997 increased by $3,050
or 5% compared to the same period in 1996. Interest expense increased by
$4,711 or 20% in 1997, attributable to the capital expenditures incurred
for the drilling of the McIlhenny #1-Sidetrack #3 well.
<PAGE>
PART II - OTHER INFORMATION
C&K 1981 FUND-A, LTD.
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
<PAGE>
SIGNATURE
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.
C&K 1981 Fund-A, LTD.
(Registrant)
By: /s/ Dan R. Taylor
Dan R. Taylor
Vice President, Finance & Accounting
CODY TEXAS, L.P.
Successor General Partner
DATE: May 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,894,850
<DEPRECIATION> 20,736,692
<TOTAL-ASSETS> 1,158,158
<CURRENT-LIABILITIES> 553,460
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 95,621
<TOTAL-LIABILITY-AND-EQUITY> 1,158,158
<SALES> 659,421
<TOTAL-REVENUES> 659,421
<CGS> 0
<TOTAL-COSTS> 387,176
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,643
<INCOME-PRETAX> 272,245
<INCOME-TAX> 0
<INCOME-CONTINUING> 272,245
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 272,245
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
