<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 Commission File Number
September 30, 1995 0-10442
DYCO OIL AND GAS PROGRAM 1981-1
(A LIMITED PARTNERSHIP)
(Exact Name of Registrant as specified in its charter)
Minnesota 41-1411953
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Samson Plaza, Two West Second Street, Tulsa, Oklahoma 74103
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(918) 583-1791
--------------------------------------------------
(Registrant's telephone number, including area code)
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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1995 1994
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . $103,381 $ 91,259
Accrued oil and gas sales, including
$22,590 and $29,152 due from
related parties (Note 2) . . . . . . 26,899 35,597
-------- --------
Total current assets . . . . . . . $130,280 $126,856
NET OIL AND GAS PROPERTIES, utilizing
the full cost method . . . . . . . . . 155,169 153,111
DEFERRED CHARGE . . . . . . . . . . . . . 43,842 43,842
-------- --------
$329,291 $323,809
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . $ 26,359 $ 25,883
Gas imbalance payable . . . . . . . . 15,434 15,434
-------- --------
Total current liabilities . . . . . $ 41,793 $ 41,317
ACCRUED LIABILITY . . . . . . . . . . . . 64,783 64,783
CONTINGENCY (Note 3)
PARTNERS' CAPITAL:
General Partner, issued and outstanding,
70 units . . . . . . . . . . . . . . 2,226 2,176
Limited Partners, issued and outstanding,
7,000 units . . . . . . . . . . . . 220,489 215,533
-------- --------
Total Partners' capital . . . . . . $222,715 $217,709
-------- --------
$329,291 $323,809
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
-2-
<PAGE>
DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ---------
REVENUES:
Oil and gas sales, including
$50,011 and $49,745 of sales
to related parties (Note 2) . . . . $54,740 $63,260
Interest . . . . . . . . . . . . . . . 1,015 518
------- -------
$55,755 $63,778
------- -------
COSTS AND EXPENSES:
Oil and gas production . . . . . . . . $21,714 $21,983
Depreciation, depletion, and amortization
of oil and gas properties . . . . . 15,568 10,729
General and administrative (Note 2) . 14,626 15,289
------- -------
$51,908 $48,001
------- -------
NET INCOME . . . . . . . . . . . . . . . $ 3,847 $15,777
======= =======
GENERAL PARTNER (1%) - net income . . . . $ 38 $ 158
======= =======
LIMITED PARTNERS (99%) - net income . . . $ 3,809 $15,619
======= =======
NET INCOME PER UNIT . . . . . . . . . . . $ 1 $ 2
======= =======
UNITS OUTSTANDING . . . . . . . . . . . . 7,070 7,070
======= =======
The accompanying condensed notes are an
integral part of these financial statements.
-3-
<PAGE>
DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ----------
REVENUES:
Oil and gas sales, including
$140,672 and $232,760 of sales
to related parties (Note 2) . . . . $167,504 $278,712
Interest . . . . . . . . . . . . . . . 3,598 2,378
-------- --------
$171,102 $281,090
-------- --------
COSTS AND EXPENSES:
Oil and gas production . . . . . . . . $ 73,090 $ 95,822
Depreciation, depletion, and amortization
of oil and gas properties . . . . . 36,424 48,024
General and administrative (Note 2) . 56,582 49,887
-------- --------
$166,096 $193,733
-------- --------
NET INCOME . . . . . . . . . . . . . . . $ 5,006 $ 87,357
======== ========
GENERAL PARTNER (1%) - net income . . . . $ 50 $ 874
======== ========
LIMITED PARTNERS (99%) - net income . . . $ 4,956 $ 86,483
======== ========
NET INCOME PER UNIT . . . . . . . . . . . $ 1 $ 12
======== ========
UNITS OUTSTANDING . . . . . . . . . . . . 7,070 7,070
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
-4-
<PAGE>
DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . $ 5,006 $ 87,357
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion, and amortization
of oil and gas properties . . . . . 36,424 48,024
Decrease in accrued oil and gas sales 8,698 21,431
Increase in accounts payable . . . . 476 20,853
Decrease in gas imbalance payable . - ( 5,146)
Increase in accrued liability . . . - 484
-------- --------
Net cash provided by operating
activities $ 50,604 $173,003
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties . ($ 38,482) $ -
Retirements of oil and gas properties - 2
-------- --------
Net cash (used) provided by investing
activities . . . . . . . . . . . ($ 38,482) $ 2
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions . . . . . . . . . . $ - ($176,750)
-------- --------
Net cash used by financing activities $ - ($176,750)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . $ 12,122 ($ 3,745)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD . . . . . . . . . . . . . . 91,259 83,688
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD . . . . . . . . . . . . . . . . $103,381 $ 79,943
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
-5-
<PAGE>
DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheets as of September 30, 1995, statements of
operations for the three and nine months ended September 30, 1995
and 1994, and statements of cash flows for the nine months ended
September 30, 1995 and 1994 have been prepared by Dyco Petroleum
Corporation ("Dyco"), the general partner (the "General Partner")
of the Dyco Oil and Gas Program 1981-1 Limited Partnership (the
"Program"), without audit. In the opinion of management all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position at September 30,
1995, results of operations for the three and nine months ended
September 30, 1995 and 1994 and changes in cash flows for the nine
months ended September 30, 1995 and 1994 have been made.
Information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is
suggested that these financial statements be read in conjunction
with the financial statements and notes thereto included in the
Program's Annual Report on Form 10-K for the year ended December
31, 1994. The results of operations for the period ended September
30, 1995 are not necessarily indicative of the results to be
expected for the full year.
The limited partners' net income or loss per unit is based upon
each $5,000 initial capital contribution.
OIL AND GAS PROPERTIES
----------------------
Oil and gas operations are accounted for using the full cost method
of accounting. All productive and non-productive costs associated
with the acquisition, exploration and development of oil and gas
reserves are capitalized. Sales and abandonments of properties are
accounted for as adjustments of capitalized costs with no gain or
loss recognized, unless such adjustments would significantly alter
the relationship between capitalized costs and proved oil and gas
reserves.
The provision for depreciation, depletion, and amortization of oil
and gas properties is calculated by dividing the oil and gas sales
dollars during the year by the estimated future gross income from
the oil and gas properties and applying the resulting rate to the
net remaining costs of oil and gas properties that have been
capitalized, plus estimated future development costs.
-6-
<PAGE>
2. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
Under the terms of the Program's partnership agreement, Dyco is
entitled to receive a reimbursement for all direct expenses and
general and administrative, geological and engineering expenses it
incurs on behalf of the Program. During the three months ended
September 30, 1995 and 1994 such expenses totaled $14,626 and
$15,289, respectively, of which $12,513 and $12,513 were paid to
Dyco. During the nine months ended September 30, 1995 and 1994
such expenses totaled $56,582 and $49,887 respectively, of which
$37,539 and $37,539 were paid to Dyco.
Affiliates of the Program are the operators of certain of the
Program's properties and their policy is to bill the Program for
all customary charges and cost reimbursements associated with their
activities, together with any compressor rentals, consulting, or
other services provided.
The Program sells gas at market prices to Premier Gas Company
("Premier"), an affiliated company, and Premier may then resell
such gas to third parties at market prices. During the three
months ended September 30, 1995 and 1994 these sales totaled
$50,011 and $49,745, respectively. During the nine months ended
September 30, 1995 and 1994 these sales totaled $140,672 and
$232,760, respectively. At September 30, 1995 accrued oil and gas
sales included $22,590 due from Premier.
3. CONTINGENCY
-----------
On November 12, 1992, two individuals filed a lawsuit against Dyco
and others in which the plaintiffs alleged damages to their land as
a result of remediation operations conducted on one of the
Program's wells located on an adjoining property. The lawsuit
alleged claims based on negligence, private nuisance, public
nuisance, trespass, unjust enrichment, constructive fraud, and
permanent injunctive relief, all in amounts to be determined at
trial. A trial was conducted in the matter on February 22, 1994 in
which the jury entered a verdict in favor of the plaintiffs in the
amount of approximately $5.5 million, consisting of approximately
$2.7 million in actual damages and approximately $2.7 million in
punitive damages. Dyco is presently appealing the matter.
Included in these financial statements as of September 30, 1995 is
an accrual by the General Partner of $20,000 representing the
Program's share of estimated ultimate damages resulting from this
contingency.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net proceeds from the Program's operations less necessary
operating capital are distributed to investors on a
quarterly basis. The net proceeds from production are not
reinvested in productive assets, except to the extent that
producing wells are improved, or where methods are employed
to permit more efficient recovery of the Program's reserves
which would result in a positive economic impact. Over the
last several years, the domestic energy industry and the
Program have contended with volatile, but generally low, oil
and gas prices. Over the past few years, the oil and gas
market appears to have moved from periods of relative
stability in supply and demand to excess supply and weakened
demand. These trends have led to the volatility in pricing
and demand noted over the past years.
The Program's available capital from subscriptions has been
spent on oil and gas drilling activities. There should not
be any further material capital resource commitments in the
future. The Program has no bank debt commitments. Cash for
operational purposes will be provided by current oil and gas
production.
RESULTS OF OPERATIONS
---------------------
THREE MONTHS ENDED SEPTEMBER 30, 1995 AS COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 1994.
Three months ended September 30,
--------------------------------
1995 1994
---- ----
Oil and gas sales $54,740 $63,260
Oil and gas production
expenses $21,714 $21,983
Barrels produced 324 516
Mcf produced 41,443 37,693
Average price/Bbl $ 14.60 $ 14.76
Average price/Mcf $ 1.21 $ 1.48
As shown in the table, oil and natural gas sales decreased
13.5% for the three months ended September 30, 1995 as
compared to the three months ended September 30, 1994. This
decrease resulted primarily from a decrease in (i) volumes
of oil sold and (ii) the average price of natural gas sold,
partially offset by an increase in the volumes of natural
gas sold during the three months ended September 30, 1995 as
compared to the three months ended September 30, 1994.
-8-
<PAGE>
Volumes of oil sold decreased by 192 barrels, while volumes
of natural gas sold increased by 3,750 Mcf for the three
months ended September 30, 1995 as compared to the three
months ended September 30, 1994. Oil and natural gas prices
decreased to averages of $14.60 per barrel and $1.21 per
Mcf, respectively, for the three months ended September 30,
1995 from averages of $14.76 per barrel and $1.48 per Mcf,
respectively, for the three months ended September 30, 1994.
Oil and gas production expenses (including lease operating
expenses and production taxes) remained relatively constant
for the three months ended September 30, 1995 as compared to
the three months ended September 30, 1994. As a percentage
of oil and gas sales, these expenses increased to 39.7% for
the three months ended September 30, 1995 from 34.8% for the
three months ended September 30, 1994. This percentage
increase was primarily a result of the decreases in the
average prices of oil and natural gas sold during the three
months ended September 30, 1995 as compared to the three
months ended September 30, 1994.
Depreciation, depletion, and amortization of oil and gas
properties increased $4,839 for the three months ended
September 30, 1995 as compared to the three months ended
September 30, 1994. This increase was primarily a result of
the increase in the volumes of natural gas sold during the
three months ended September 30, 1995 as compared to the
three months ended September 30, 1994. As a percentage of
oil and gas sales, this expense increased to 28.4% for the
three months ended September 30, 1995 from 17.0% for the
three months ended September 30, 1994. This percentage
increase resulted primarily from the decreases in the
average prices of oil and natural gas sold for the three
months ended September 30, 1995 as compared to the three
months ended September 30, 1994.
General and administrative expenses decreased $663 for the
three months ended September 30, 1995 as compared to the
three months ended September 30, 1994. As a percentage of
oil and gas sales, these expenses increased to 26.7% for the
three months ended September 30, 1995 from 24.2% for the
three months ended September 30, 1994. This percentage
increase was primarily a result of the decreases in the
average prices of oil and natural gas sold during the three
months ended September 30, 1995 as compared to the three
months ended September 30, 1994.
NINE MONTHS ENDED SEPTEMBER 30, 1995 AS COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1994.
Nine months ended September 30,
-------------------------------
1995 1994
---- ----
Oil and gas sales $167,504 $278,712
Oil and gas production
expenses $ 73,090 $ 95,822
Barrels produced 580 1,283
Mcf produced 124,952 152,113
Average price/Bbl $ 15.50 $ 13.76
Average price/Mcf $ 1.27 $ 1.72
-9-
<PAGE>
As shown in the table, oil and natural gas sales decreased
39.9% for the nine months ended September 30, 1995 as
compared to the nine months ended September 30, 1994. This
decrease resulted from the decrease in (i) volumes of oil
and natural gas sold and (ii) the average price of natural
gas sold, partially offset by an increase in the average
price of oil sold during the nine months ended September 30,
1995 as compared to the nine months ended September 30,
1994. Volumes of oil and natural gas sold decreased 703
barrels and 27,161 Mcf, respectively, for the nine months
ended September 30, 1995 as compared to the nine months
ended September 30, 1994. The decrease in the volumes of
oil sold resulted primarily from diminished production on
one of the Program's wells which was shut-in due to
mechanical difficulties during a portion of the nine months
ended September 30, 1995. The decrease in volumes of
natural gas sold was primarily due to gas balancing
adjustments on one of the Program's wells during the nine
months ended September 30, 1995. Natural gas prices
decreased to an average of $1.27 per Mcf for the nine months
ended September 30, 1995 from an average of $1.72 per Mcf
for the nine months ended September 30, 1994, while oil
prices increased to an average of $15.50 per barrel for the
nine months ended September 30, 1995 from an average of
$13.76 per barrel for the nine months ended September 30,
1994.
Oil and gas production expenses (including lease operating
expenses and production taxes) decreased $22,732 for the
nine months ended September 30, 1995 as compared to the nine
months ended September 30, 1994. This decrease resulted
primarily from an accrual for certain legal contingencies
during the nine months ended September 30, 1994. As a
percentage of oil and gas sales, these expenses increased to
43.6% for the nine months ended September 30, 1995 from
34.4% for the nine months ended September 30, 1994. This
percentage increase was primarily a result of the decrease
in the average price of natural gas sold during the nine
months ended September 30, 1995 as compared to the nine
months ended September 30, 1994.
Depreciation, depletion, and amortization of oil and gas
properties decreased $11,600 for the nine months ended
September 30, 1995 as compared to the nine months ended
September 30, 1994. This decrease was primarily the result
of the decrease in the volumes of oil and natural gas sold
during the nine months ended September 30, 1995 as compared
to the nine months ended September 30, 1994. As a
-10-
<PAGE>
percentage of oil and gas sales, this expense increased to
21.7% for the nine months ended September 30, 1995 from
17.2% for the nine months ended September 30, 1994. This
percentage increase resulted primarily from the decrease in
the average price of natural gas sold during the nine months
ended September 30, 1995 as compared to the nine months
ended September 30, 1994.
General and administrative expenses increased by $6,695 for
the nine months ended September 30, 1995 as compared to the
nine months ended September 30, 1994. This increase
resulted primarily from an increase in the Program's
professional fees during the nine months ended September 30,
1995 as compared to the nine months ended September 30,
1994. As a percentage of oil and gas sales, these expenses
increased to 33.8% for the nine months ended September 30,
1995 from 17.9% for the nine months ended September 30,
1994. This percentage increase was primarily a result of
the dollar increase in general and administrative expenses
as discussed above and the decrease in the volumes and
average price of natural gas sold during the nine months
ended September 30, 1995 as compared to the nine months
ended September 30, 1994.
-11-
<PAGE>
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
-12-
<PAGE>
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.
DYCO OIL AND GAS PROGRAM 1981-1 LIMITED
PARTNERSHIP
(Registrant)
By: DYCO PETROLEUM CORPORATION
General Partner
Date: November 9, 1995 By: /s/Dennis R. Neill
-----------------------------
(Signature)
Dennis R. Neill
Senior Vice President
Date: November 9, 1995 By: /s/Patrick M. Hall
---------------------------
(Signature)
Patrick M. Hall
Senior Vice President -
Controller
Principal Accounting Officer
-13-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000702402
<NAME> DYCO OIL AND GAS PROGRAM 1981-1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 103,381
<SECURITIES> 0
<RECEIVABLES> 26,899
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 130,280
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 329,291
<CURRENT-LIABILITIES> 41,793
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 222,715
<TOTAL-LIABILITY-AND-EQUITY> 329,291
<SALES> 167,504
<TOTAL-REVENUES> 171,102
<CGS> 0
<TOTAL-COSTS> 166,096
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,006
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,006
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 0
</TABLE>
