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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
June 30, 1996 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 (I.R.S. Employer Identification
of incorporation or Number)
organization)
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
---- ----
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
June 30, December 31,
1996 1995
-------- ------------
CURRENT ASSETS:
Cash and cash equivalents $197,477 $ 86,202
Accrued oil and gas sales, including
$33,346 due from related parties
in 1995 (Note 2) 47,060 37,810
-------- --------
Total current assets $244,537 $124,012
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 112,310 179,288
DEFERRED CHARGE 31,560 31,560
-------- --------
$388,407 $334,860
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 24,330 $ 25,822
Gas imbalance payable 1,383 1,383
-------- --------
Total current liabilities $ 25,713 $ 27,205
ACCRUED LIABILITY 78,165 78,165
CONTINGENCIES (Note 3)
PARTNERS' CAPITAL:
General Partner, issued and
outstanding, 70 units 2,844 2,294
Limited Partners, issued and
outstanding 7,000 units 281,685 227,196
-------- --------
Total Partners' capital $284,529 $229,490
-------- --------
$388,407 $334,860
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
1996 1995
-------- --------
REVENUES:
Oil and gas sales, including
$38,644 of sales to related
parties in 1995 (Note 2) $64,767 $44,064
Interest 1,576 1,360
------- -------
$66,343 $45,424
COST AND EXPENSES:
Oil and gas production $18,555 $24,387
Depreciation, depletion, and
amortization of oil and gas
properties 9,701 8,202
General and administrative (Note 2) 18,576 19,820
------- -------
$46,832 $52,409
------- -------
NET INCOME (LOSS) $19,511 ($ 6,985)
======= =======
GENERAL PARTNER (1%) - net income
(loss) $ 195 ($ 69)
======= =======
LIMITED PARTNERS (99%) - net income
(loss) $19,316 ($ 6,916)
======= =======
NET INCOME (LOSS) PER UNIT $ 3 ($ 1)
======= =======
UNITS OUTSTANDING 7,070 7,070
======= =======
The accompanying condensed notes are an
integral part of these financial statements.
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DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
1996 1995
-------- --------
REVENUES:
Oil and gas sales, including
$90,661 of sales to related
parties in 1995 (Note 2) $151,571 $112,764
Interest 2,438 2,583
-------- --------
$154,009 $115,347
COST AND EXPENSES:
Oil and gas production $ 36,931 $ 51,376
Depreciation, depletion, and
amortization of oil and gas
properties 21,130 20,856
General and administrative (Note 2) 40,909 41,956
-------- --------
$ 98,970 $114,188
-------- --------
NET INCOME $ 55,039 $ 1,159
======== ========
GENERAL PARTNER (1%) - net
income $ 550 $ 12
======== ========
LIMITED PARTNERS (99%) - net
income $ 54,489 $ 1,147
======== ========
NET INCOME PER UNIT $ 8 $ -
======== ========
UNITS OUTSTANDING 7,070 7,070
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
1996 1995
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 55,039 $ 1,159
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 21,130 20,856
(Increase) decrease in accrued oil
and gas sales ( 9,250) 4,708
Increase (decrease) in accounts
payable ( 1,492) 791
-------- --------
Net cash provided by operating
activities $ 65,427 $ 27,514
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties ($ 17,084) ($ 11,417)
Retirements of oil and gas
properties 62,932 -
-------- --------
Net cash provided (used) by
investing activities $ 45,848 ($ 11,417)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash used by financing
activities $ - $ -
-------- --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS $111,275 $ 16,097
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 86,202 91,259
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $197,477 $107,356
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
CONDENSED NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheet as of June 30, 1996, statements of operations
for the three and six months ended June 30, 1996 and 1995, and
statements of cash flows for the six months ended June 30, 1996
and 1995 have been prepared by Dyco Petroleum Corporation
("Dyco"), 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 June 30, 1996, results of operations for the three
and six months ended June 30, 1996 and 1995 and changes in cash
flows for the six months ended June 30, 1996 and 1995 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, 1995. The results of operations for the
period ended June 30, 1996 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.
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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.
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 June 30, 1996 and 1995 such expenses totaled $18,576 and
$19,820, respectively, of which $12,513 and $12,513 were paid to
Dyco. During the six months ended June 30, 1996 and 1995 such
expenses totaled $40,909 and $41,956, respectively, of which
$25,026 and $25,026 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 sold gas at market prices to Premier Gas Company
("Premier") and Premier then resold such gas to third parties at
market prices. Premier was an affiliate of the Program until
December 6, 1995. During the three months ended June 30, 1995
these sales totaled $38,644. During the six months ended June
30, 1995 these sales totaled $90,661. At December 31, 1995,
accrued oil and gas sales included $33,346 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
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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
$2.75 million in actual damages and approximately $2.75 million
in punitive damages. Dyco appealed the district court's verdict
and on March 5, 1996 the Oklahoma Court of Appeals reversed the
district court's verdict and ordered a new trial. Both Dyco and
the plaintiffs have filed petitions for certiorari with the
Supreme Court of Oklahoma seeking a further review of the Court
of Appeals' opinion. Included in these financial statements as
of December 31, 1995 and June 30, 1996 is an accrual by the
General Partner of $20,000 representing the Program's share of
estimated ultimate damages resulting from this contingency.
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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 JUNE 30, 1996 AS COMPARED TO THE THREE MONTHS
ENDED JUNE 30, 1995.
Three months ended June 30,
---------------------------
1996 1995
------- -------
Oil and gas sales $64,767 $44,064
Oil and gas production expenses $18,555 $24,387
Barrels produced 52 114
Mcf produced 31,938 31,291
Average price/Bbl $ 20.10 $ 17.96
Average price/Mcf $ 2.00 $ 1.34
As shown in the table, oil and gas sales increased $20,703
(47.0%) for the three months ended June 30, 1996 as compared to
the three months ended June 30, 1995. Of this increase, $20,652
was related to the increase in the average price of natural gas
sold. Volumes of oil sold decreased 62 barrels, while volumes of
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natural gas sold increased 647 Mcf for the three months ended
June 30, 1996 as compared to the three months ended June 30,
1995. The decrease in the volumes of oil sold resulted primarily
from diminished production on one well which was shut-in during
the three months ended June 30, 1996 due to mechanical
difficulties. Average oil and natural gas prices increased to
$20.10 per barrel and $2.00 per Mcf, respectively, for the three
months ended June 30, 1996 from $17.96 per barrel and $1.34 per
Mcf, respectively, for the three months ended June 30, 1995.
Oil and gas production expenses (including lease operating
expenses and production taxes) decreased $5,832 for the three
months ended June 30, 1996 as compared to the three months ended
June 30, 1995. This decrease resulted primarily from (i) a
decrease in general operating expenses due to one well being
shut-in during the three months ended June 30, 1996 due to
mechanical difficulties and (ii) workover expenses incurred on
one well during the three months ended June 30, 1995 in order to
improve the recovery of reserves. As a percentage of oil and gas
sales, these expenses decreased to 28.6% for the three months
ended June 30, 1996 from 55.3% for the three months ended June
30, 1995. This percentage decrease was primarily a result of
increases in the average prices of oil and natural gas sold
during the three months ended June 30, 1996 as compared to the
three months ended June 30, 1995.
Depreciation, depletion, and amortization of oil and gas
properties increased $1,499 for the three months ended June 30,
1996 as compared to the three months ended June 30, 1995. This
increase was primarily the result of an increase in the price
associated with the Program's remaining natural gas reserves used
in the calculation of depreciation, depletion, and amortization
for the three months ended June 30, 1996 as compared to the three
months ended June 30, 1995. As a percentage of oil and gas
sales, this expense decreased to 15.0% for the three months ended
June 30, 1996 from 18.6% for the three months ended June 30,
1995. This percentage decrease resulted primarily from increases
in the average prices of oil and natural gas sold during the
three months ended June 30, 1996 as compared to the three months
ended June 30, 1995.
General and administrative expenses decreased $1,244 for the
three months ended June 30, 1996 as compared to the three months
ended June 30, 1995. This decrease was primarily due to a
decrease in printing and postage expenses during the three months
ended June 30, 1996 as compared to the three months ended
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June 30, 1995. As a percentage of oil and gas sales, these
expenses decreased to 28.7% for the three months ended June 30,
1996 from 45.0% for the three months ended June 30, 1995. This
percentage decrease resulted primarily from increases in the
average prices of oil and natural gas sold during the three
months ended June 30, 1996 as compared to the three months ended
June 30, 1995.
SIX MONTHS ENDED JUNE 30, 1996 AS COMPARED TO THE SIX MONTHS
ENDED JUNE 30, 1995.
Six months ended June 30,
---------------------------
1996 1995
-------- ------
Oil and gas sales $151,571 $112,764
Oil and gas production expenses $ 36,931 $ 51,376
Barrels produced 138 256
Mcf produced 78,104 83,509
Average price/Bbl $ 18.24 $ 16.64
Average price/Mcf $ 1.91 $ 1.30
As shown in the table, oil and gas sales increased $38,807
(34.4%) for the six months ended June 30, 1996 as compared to the
six months ended June 30, 1995. Of this increase, $50,940 was
related to the increase in the average price of natural gas sold,
partially offset by a $10,324 decrease related to the decrease in
the volumes of natural gas sold. Volumes of oil and natural gas
sold decreased 118 barrels and 5,405 Mcf, respectively, for the
six months ended June 30, 1996 as compared to the six months
ended June 30, 1995. The decrease in the volumes of oil sold
resulted primarily from diminished production on one well which
was shut-in during the six months ended June 30, 1996 due to
mechanical difficulties. The decrease in the volumes of natural
gas sold was primarily due to normal declines in production from
diminished natural gas reserves during the six months ended June
30, 1996 as compared to the six months ended June 30, 1995,
partially offset by increased production during the six months
ended June 30, 1996 on one well which was shut-in during a
portion of the six months ended June 30, 1995. Average oil and
natural gas prices increased to $18.24 per barrel and $1.91 per
Mcf, respectively, for the six months ended June 30, 1996 from
$16.64 per barrel and $1.30 per Mcf, respectively, for the six
months ended June 30, 1995.
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Oil and gas production expenses (including lease operating
expenses and production taxes) decreased $14,445 for the six
months ended June 30, 1996 as compared to the six months ended
June 30, 1995. This decrease resulted primarily from (i) a
decrease in general operating expenses due to one well being
shut-in during the six months ended June 30, 1996 due to
mechanical difficulties, (ii) workover expenses incurred on one
well during the six months ended June 30, 1995 in order to
improve the recovery of reserves, and (iii) higher general repair
and maintenance expenses incurred on another well during the six
months ended June 30, 1995. As a percentage of oil and gas
sales, these expenses decreased to 24.4% for the six months ended
June 30, 1996 from 45.6% for the six months ended June 30, 1995.
This percentage decrease was primarily a result of increases in
the average prices of oil and natural gas sold during the six
months ended June 30, 1996 as compared to the six months ended
June 30, 1995.
Depreciation, depletion, and amortization of oil and gas
properties remained relatively constant for the six months ended
June 30, 1996 as compared to the six months ended June 30, 1995.
As a percentage of oil and gas sales, this expense decreased to
13.9% for the six months ended June 30, 1996 from 18.5% for the
six months ended June 30, 1995. This percentage decrease
resulted primarily from increases in the average prices of oil
and natural gas sold during the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995.
General and administrative expenses decreased $1,047 for the six
months ended June 30, 1996 as compared to the six months ended
June 30, 1995. This decrease was primarily due to a decrease in
printing and postage expenses during the six months ended June
30, 1996 as compared to the six months ended June 30, 1995. As a
percentage of oil and gas sales, these expenses decreased to
27.0% for the six months ended June 30, 1996 from 37.2% for the
six months ended June 30, 1995. This percentage decrease
resulted primarily from increases in the average prices of oil
and natural gas sold during the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995.
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PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule containing summary
financial information extracted from the Dyco Oil
and Gas Program 1981-1 Limited Partnership's
financial statements as of June 30, 1996 and for
the six months ended June 30, 1996, filed
herewith.
(b) Reports on Form 8-K
None
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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: August 5, 1996 By: /s/Dennis R. Neill
-----------------------------------
(Signature)
Dennis R. Neill
President
Date: August 5, 1996 By: /s/Drew S. Phillips
-----------------------------------
(Signature)
Drew S. Phillips
Chief Financial Officer
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INDEX TO EXHIBITS
NUMBER DESCRIPTION
- ------ -----------
27.1 Financial Data Schedule containing summary financial
information extracted from the Dyco Oil and Gas Program
1981-1 Limited Partnership's financial statements as of June
30, 1996 and for the six months ended June 30, 1996, filed
herewith.
All other exhibits are omitted as inapplicable.
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000702402
<NAME> DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 197,477
<SECURITIES> 0
<RECEIVABLES> 47,060
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 244,537
<PP&E> 41,140,179
<DEPRECIATION> 41,027,869
<TOTAL-ASSETS> 388,407
<CURRENT-LIABILITIES> 25,713
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 284,529
<TOTAL-LIABILITY-AND-EQUITY> 388,407
<SALES> 151,571
<TOTAL-REVENUES> 154,009
<CGS> 0
<TOTAL-COSTS> 98,970
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 55,039
<INCOME-TAX> 0
<INCOME-CONTINUING> 55,039
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,039
<EPS-PRIMARY> 8.00
<EPS-DILUTED> 0
</TABLE>
