<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
June 30, 1997 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,
1997 1996
---------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 94,890 $197,842
Accrued oil and gas sales 33,854 55,764
-------- --------
Total current assets $128,744 $253,606
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 79,441 116,932
DEFERRED CHARGE 68,024 68,024
-------- --------
$276,209 $438,562
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 9,533 $ 11,961
Gas imbalance payable 26,912 26,912
-------- --------
Total current liabilities $ 36,445 $ 38,873
ACCRUED LIABILITY 127,351 127,351
PARTNERS' CAPITAL:
General Partner, issued and
outstanding, 70 units 1,123 2,722
Limited Partners, issued and
outstanding, 7,000 units 111,290 269,616
-------- --------
Total Partners' capital $112,413 $272,338
-------- --------
$276,209 $438,562
======== ========
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, 1997 AND 1996
(Unaudited)
1997 1996
-------- --------
REVENUES:
Oil and gas sales $37,249 $64,767
Interest 578 1,576
------- -------
$37,827 $66,343
COST AND EXPENSES:
Oil and gas production $ 3,603 $18,555
Depreciation, depletion, and
amortization of oil and gas
properties 236 9,701
General and administrative (Note 2) 16,220 18,576
------- -------
$20,059 $46,832
------- -------
NET INCOME $17,768 $19,511
======= =======
GENERAL PARTNER (1%) - net
income $ 178 $ 195
======= =======
LIMITED PARTNERS (99%) - net
income $17,590 $19,316
======= =======
NET INCOME PER UNIT $ 2.51 $ 2.76
======= =======
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, 1997 AND 1996
(Unaudited)
1997 1996
-------- --------
REVENUES:
Oil and gas sales $117,524 $151,571
Interest 2,442 2,438
-------- --------
$119,966 $154,009
COST AND EXPENSES:
Oil and gas production $ 44,651 $ 36,931
Depreciation, depletion, and
amortization of oil and gas
properties 14,287 21,130
General and administrative (Note 2) 44,203 40,909
-------- --------
$103,141 $ 98,970
-------- --------
NET INCOME $ 16,825 $ 55,039
======== ========
GENERAL PARTNER (1%) - net
income $ 168 $ 550
======== ========
LIMITED PARTNERS (99%) - net
income $ 16,657 $ 54,489
======== ========
NET INCOME PER UNIT $ 2.38 $ 7.78
======== ========
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, 1997 AND 1996
(Unaudited)
1997 1996
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,825 $ 55,039
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 14,287 21,130
(Increase) decrease in accrued oil
and gas sales 21,910 ( 9,250)
Decrease in accounts payable ( 2,428) ( 1,492)
-------- --------
Net cash provided by operating
activities $ 50,594 $ 65,427
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of oil and
gas properties $ 24,289 $ 62,932
Additions to oil and gas properties ( 1,085) ( 17,084)
-------- -------
Net cash provided by investing
activities $ 23,204 $ 45,848
-------- --------
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 ($102,952) $111,275
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 197,842 86,202
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 94,890 $197,477
======== ========
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, 1997
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheet as of June 30, 1997, statements of operations
for the three and six months ended June 30, 1997 and 1996, and
statements of cash flows for the six months ended June 30, 1997
and 1996 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, 1997, results of operations for the three
and six months ended June 30, 1997 and 1996 and changes in cash
flows for the six months ended June 30, 1997 and 1996 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, 1996. The results of operations for the
period ended June 30, 1997 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. The Program's calculation
of depreciation, depletion, and amortization includes estimated
future expenditures to be incurred in developing proved reserves
and estimated dismantlement and abandonment costs, net of
estimated salvage values. In the event the unamortized cost of
oil and gas properties being amortized exceeds the full cost
ceiling (as defined by the Securities and Exchange Commission),
the excess is charged to expense in the period during which such
excess occurs. 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 period 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.
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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, 1997 and 1996 such expenses totaled $16,220 and
$18,576, respectively, of which $12,513 was paid quarterly to
Dyco and its affiliates. During the six months ended June 30,
1997 and 1996 such expenses totaled $44,203 and $40,909,
respectively, of which $25,026 was paid each period to Dyco and
its affiliates.
Affiliates of the Program operate certain of the Program's
properties. Their policy is to bill the Program for all
customary charges and cost reimbursements associated with these
activities.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
USE OF FORWARD-LOOKING STATEMENTS AND ESTIMATES
- -----------------------------------------------
This Quarterly Report contains certain forward-looking
statements. The words "anticipate," "believe," "expect," "plan,"
"intend," "estimate," "project," "could," "may," and similar
expressions are intended to identify forward-looking statements.
Such statements reflect management's current views with respect
to future events and financial performance. This Quarterly
Report also includes certain information, which is, or is based
upon, estimates and assumptions. Such estimates and assumptions
are management's efforts to accurately reflect the condition and
operation of the Program.
Use of forward-looking statements and estimates and assumptions
involve risks and uncertainties which include, but are not
limited to, the volatility of oil and gas prices, the uncertainty
of reserve information, the operating risk associated with oil
and gas properties (including the risk of personal injury, death,
property damage, damage to the well or producing reservoir,
environmental contamination, and other operating risks), the
prospect of changing tax and regulatory laws, the availability
and capacity of processing and transportation facilities, the
general economic climate, the supply and price of foreign imports
of oil and gas, the level of consumer product demand, and the
price and availability of alternative fuels. Should one or more
of these risks or uncertainties occur or should estimates or
underlying assumptions prove incorrect, actual conditions or
results may vary materially and adversely from those stated,
anticipated, believed, estimated, or otherwise indicated.
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.
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
- ---------------------
GENERAL DISCUSSION
The following general discussion should be read in conjunction
with the analysis of results of operations provided below. The
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most important variable affecting the Program's revenues is the
prices received for the sale of oil and gas. Predicting future
prices is very difficult. Substantially all of the Program's gas
reserves are being sold in the "spot market". Prices on the spot
market are subject to wide seasonal and regional pricing
fluctuations due to the highly competitive nature of the spot
market. In addition, such spot market sales are generally short-
term in nature and are dependent upon the obtaining of
transportation services provided by pipelines. Management is
unable to predict whether future oil and gas prices will (i)
stabilize, (ii) increase, or (iii) decrease.
THREE MONTHS ENDED JUNE 30, 1997 AS COMPARED TO THE THREE MONTHS
ENDED JUNE 30, 1996.
Three months ended June 30,
---------------------------
1997 1996
------- -------
Oil and gas sales $37,249 $64,767
Oil and gas production expenses $ 3,603 $18,555
Barrels produced 44 52
Mcf produced 18,637 31,938
Average price/Bbl $ 17.16 $ 20.10
Average price/Mcf $ 1.82 $ 2.00
As shown in the table above, total oil and gas sales decreased
$27,518 (42.5%) for the three months ended June 30, 1997 as
compared to the three months ended June 30, 1996. Of this
decrease, approximately $27,000 was related to a decrease in
volumes of gas sold. Volumes of oil and gas sold decreased 8
barrels and 13,301 Mcf, respectively, for the three months ended
June 30, 1997 as compared to the three months ended June 30,
1996. The decrease in the volumes of gas sold resulted primarily
from (i) normal declines in production due to diminished gas
reserves on two wells and (ii) the sale of two gas producing
wells during 1996 and the second quarter of 1997. Average oil
and gas prices decreased to $17.16 per barrel and $1.82 per Mcf,
respectively, for the three months ended June 30, 1997 from
$20.10 per barrel and $2.00 per Mcf, respectively, for the three
months ended June 30, 1996.
Oil and gas production expenses (including lease operating
expenses and production taxes) decreased $14,952 (80.6%) for the
three months ended June 30, 1997 as compared to the three months
ended June 30, 1996. This decrease resulted primarily from (i) a
decrease in production taxes associated with the decrease in oil
and gas sales discussed above, (ii) a decrease in volumes of gas
sold during the three months ended June 30, 1997 as compared to
the three months ended June 30, 1996, (iii) recompletion expenses
incurred on one well during the three months ended June 30, 1996
in order to improve the recovery of reserves, and (iv) credits
received from the operator on two wells for prior period
marketing deductions during the three months ended June 30, 1997.
As a percentage of oil and gas sales, these expenses decreased to
9.7% for the three months ended June 30, 1997 from 28.6% for the
three months ended June 30, 1996. This percentage decrease was
primarily due to the dollar decrease in production expenses
discussed above.
Depreciation, depletion, and amortization of oil and gas
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properties decreased $9,465 (97.6%) for the three months ended
June 30, 1997 as compared to the three months ended June 30,
1996. This decrease resulted primarily from (i) an increase in
the gas price used in the valuation of reserves at June 30, 1997,
(ii) a decrease in volumes of gas sold during the three months
ended June 30, 1997 as compared to the three months ended June
30, 1996, and (iii) a decrease in oil and gas properties subject
to amortization due to the sale of two wells discussed above. As
a percentage of oil and gas sales, this expense decreased to 0.6%
for the three months ended June 30, 1997 from 15.0% for the three
months ended June 30, 1996. This percentage decrease was
primarily due to the dollar decrease in depreciation, depletion,
and amortization discussed above.
General and administrative expenses decreased $2,356 (12.7%) for
the three months ended June 30, 1997 as compared to the three
months ended June 30, 1996. This decrease resulted primarily
from a decrease in professional fees during the three months
ended June 30, 1997 as compared to the three months ended June
30, 1996. As a percentage of oil and gas sales, these expenses
increased to 43.5% for the three months ended June 30, 1997 from
28.7% for the three months ended June 30, 1996. This percentage
increase was primarily due to the decrease in oil and gas sales
discussed above.
SIX MONTHS ENDED JUNE 30, 1997 AS COMPARED TO THE SIX MONTHS
ENDED JUNE 30, 1996.
Six months ended June 30,
-------------------------
1997 1996
-------- --------
Oil and gas sales $117,524 $151,571
Oil and gas production expenses $ 44,651 $ 36,931
Barrels produced 103 138
Mcf produced 48,199 78,104
Average price/Bbl $ 20.08 $ 18.24
Average price/Mcf $ 2.34 $ 1.91
As shown in the table above, total oil and gas sales decreased
$34,047 (22.5%) for the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996. Of this
decrease, approximately $57,000 was related to a decrease in the
volumes of gas sold, partially offset by an increase of
approximately $21,000 related to an increase in the average price
of gas sold. Volumes of oil and gas sold decreased 35 barrels
and 29,905 Mcf, respectively, for the six months ended June 30,
1997 as compared to the six months ended June 30, 1996. The
decrease in volumes of gas sold resulted primarily from (i)
normal declines in production due to diminished gas reserves on
two wells and (ii) the sale of two gas producing wells during
1996 and the second quarter of 1997. Average oil and gas prices
increased to $20.08 per barrel and $2.34 per Mcf, respectively,
for the six months ended June 30, 1997 from $18.24 per barrel and
$1.91 per Mcf, respectively, for the six months ended June 30,
1996.
Oil and gas production expenses (including lease operating
expenses and production taxes) increased $7,720 (20.9%) for the
six months ended June 30, 1997 as compared to the six months
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ended June 30, 1996. This increase resulted primarily from
workover expenses incurred on one well during the six months
ended June 30, 1997 in order to improve the recovery of reserves,
partially offset by (i) a decrease in volumes of gas sold during
the six months ended June 30, 1997 as compared to the six months
ended June 30, 1996 and (ii) a decrease in production taxes
associated with the decrease in oil and gas sales discussed
above. As a percentage of oil and gas sales, these expenses
increased to 38.0% for the six months ended June 30, 1997 from
24.4% for the six months ended June 30, 1996. This percentage
increase was primarily due to the workover expenses discussed
above.
Depreciation, depletion, and amortization of oil and gas
properties decreased $6,843 (32.4%) for the six months ended June
30, 1997 as compared to the six months ended June 30, 1996. This
decrease resulted primarily from a decrease in volumes of oil and
gas sold during the six months ended June 30, 1997 as compared to
the six months ended June 30, 1996. As a percentage of oil and
gas sales, this expense remained relatively constant at 12.2% for
the six months ended June 30, 1997 as compared to 13.9% for the
six months ended June 30, 1996.
General and administrative expenses increased $3,294 (8.1%) for
the six months ended June 30, 1997 as compared to the six months
ended June 30, 1996. This increase resulted primarily from an
increase in both professional fees and miscellaneous expenses
during the six months ended June 30, 1997 as compared to the six
months ended June 30, 1996. As a percentage of oil and gas
sales, these expenses increased to 37.6% for the six months ended
June 30, 1997 from 27.0% for the six months ended June 30, 1996.
This percentage increase was primarily due to the decrease in oil
and gas sales discussed above.
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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 Program's
financial statements as of June 30, 1997 and for
the six months ended June 30, 1997, filed
herewith.
All other exhibits are omitted as inapplicable.
(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 7, 1997 By: /s/Dennis R. Neill
--------------------------------
(Signature)
Dennis R. Neill
President
Date: August 7, 1997 By: /s/Patrick M. Hall
--------------------------------
(Signature)
Patrick M. Hall
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, 1997 and for the six months ended June 30, 1997, 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 94,890
<SECURITIES> 0
<RECEIVABLES> 33,854
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 128,744
<PP&E> 41,122,321
<DEPRECIATION> 41,042,880
<TOTAL-ASSETS> 276,209
<CURRENT-LIABILITIES> 36,445
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 112,413
<TOTAL-LIABILITY-AND-EQUITY> 276,209
<SALES> 117,524
<TOTAL-REVENUES> 119,966
<CGS> 0
<TOTAL-COSTS> 103,141
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,825
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,825
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,825
<EPS-PRIMARY> 2.38
<EPS-DILUTED> 0
</TABLE>
