<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 0-10478
DYCO OIL AND GAS PROGRAM 1981-2
(A LIMITED PARTNERSHIP)
(Exact Name of Registrant as specified in its charter)
Minnesota 41-1411952
(State or other jurisdiction (I.R.S. Employer Identification
of 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 1981-2 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1995 1994
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . $215,731 $163,279
Accrued oil and gas sales, including
$20,628 and $49,800 due from
related parties (Note 2) . . . . . . 34,569 51,195
-------- --------
Total current assets . . . . . . . $250,300 $214,474
NET OIL AND GAS PROPERTIES, utilizing
the full cost method . . . . . . . . . 146,905 173,279
DEFERRED CHARGE . . . . . . . . . . . . . 60,571 60,571
-------- --------
$457,776 $448,324
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . $ 27,848 $ 27,536
Gas imbalance payable . . . . . . . . 9,730 9,730
-------- --------
Total current liabilities . . . . . $ 37,578 $ 37,266
ACCRUED LIABILITY . . . . . . . . . . . . 120,306 120,306
CONTINGENCY (Note 3)
PARTNERS' CAPITAL:
General Partner, issued and outstanding,
74 units . . . . . . . . . . . . . . 2,998 2,907
Limited Partners, issued and outstanding,
6,000 units . . . . . . . . . . . . 296,894 287,845
-------- --------
Total Partners' capital . . . . . . $299,892 $290,752
-------- --------
$457,776 $448,324
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
-2-
<PAGE>
DYCO OIL AND GAS PROGRAM 1981-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ---------
REVENUES:
Oil and gas sales, including
$23,878 and $65,453 of sales
to related parties (Note 2) . . . . $41,004 $74,280
Interest . . . . . . . . . . . . . . . 1,949 918
------- -------
$42,953 $75,198
------- -------
COSTS AND EXPENSES:
Oil and gas production . . . . . . . . $29,898 $30,391
Depreciation, depletion, and amortization
of oil and gas properties . . . . . 5,157 6,948
General and administrative (Note 2) . 13,864 13,209
------- -------
$48,919 $50,548
------- -------
NET (LOSS) INCOME . . . . . . . . . . . . ($ 5,966) $24,650
======= =======
GENERAL PARTNER (1%) - net (loss) income ($ 60) $ 246
======= =======
LIMITED PARTNERS (99%) - net (loss) income ($ 5,906) $24,404
======= =======
NET (LOSS) INCOME PER UNIT . . . . . . . ($ 1) $ 4
======= =======
UNITS OUTSTANDING . . . . . . . . . . . . 6,074 6,074
======= =======
The accompanying condensed notes are an
integral part of these financial statements.
-3-
<PAGE>
DYCO OIL AND GAS PROGRAM 1981-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ---------
REVENUES:
Oil and gas sales, including
$140,908 and $185,556 of sales
to related parties (Note 2) . . . . $181,992 $212,496
Interest . . . . . . . . . . . . . . . 6,784 1,984
-------- --------
$188,776 $214,480
-------- --------
COSTS AND EXPENSES:
Oil and gas production . . . . . . . . $ 89,298 $110,826
Depreciation, depletion, and amortization
of oil and gas properties . . . . . 37,751 30,448
General and administrative (Note 2) . 52,587 45,596
-------- --------
$179,636 $186,870
-------- --------
NET INCOME . . . . . . . . . . . . . . . $ 9,140 $ 27,610
======== ========
GENERAL PARTNER (1%) - net income . . . . $ 91 $ 276
======== ========
LIMITED PARTNERS (99%) - net income . . . $ 9,049 $ 27,334
======== ========
NET INCOME PER UNIT . . . . . . . . . . . $ 2 $ 5
======== ========
UNITS OUTSTANDING . . . . . . . . . . . . 6,074 6,074
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
-4-
<PAGE>
DYCO OIL AND GAS PROGRAM 1981-2 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 . . . . . . . . . . . . . . $ 9,140 $ 27,610
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion, and amortization
of oil and gas properties . . . . . 37,751 30,448
Decrease (increase) in accrued oil and
gas sales . . . . . . . . . . . . . 16,626 ( 7,242)
Increase in accounts payable . . . . 312 20,544
Decrease in payable to General Partner - ( 11,000)
Decrease in gas imbalance payable . - ( 4,632)
Increase in accrued liability . . . - 1,286
-------- --------
Net cash provided by operating
activities . . . . . . . . . . . $ 63,829 $ 57,014
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties . ($ 11,418) ($ 11,861)
Retirements of oil and gas properties 41 -
-------- --------
Net cash used by investing activities ($ 11,377) ($ 11,861)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash used by financing activities $ - $ -
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 52,452 $ 45,153
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD . . . . . . . . . . . . . . 163,279 78,042
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD . . . . . . . . . . . . . . . $215,731 $123,195
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
-5-
<PAGE>
DYCO OIL AND GAS PROGRAM 1981-2 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 1981-2 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 $13,864 and
$13,209, respectively, of which $11,988 and $11,988 were paid to
Dyco. During the nine months ended September 30, 1995 and 1994
such expenses totaled $52,587 and $45,596, respectively, of which
$35,964 and $35,964 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
$23,878 and $65,453, respectively. During the nine months ended
September 30, 1995 and 1994 these sales totaled $140,908 and
$185,556, respectively. At September 30, 1995 accrued oil and gas
sales included $20,628 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. The Program's share of such verdict is
approximately $155,000 in actual damages and approximately $31,000
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 in the amount 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 operations
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 $41,004 $74,280
Oil and gas production
expenses $29,898 $30,391
Barrels produced 327 261
Mcf produced 25,930 47,707
Average price/Bbl $ 15.98 $ 15.11
Average price/Mcf $ 1.38 $ 1.47
As shown in the table, oil and natural gas sales decreased 44.8%
for the three months ended September 30, 1995 as compared to the
three months ended September 30, 1994. This decrease was
primarily due to the decrease in both the volumes and average
price of natural gas sold during the three months ended September
30, 1995 as compared to the three months ended September 30,
1994. Volumes of natural gas sold decreased 21,777 Mcf, while
volumes of oil sold increased by 66 barrels for the three months
ended September 30, 1995 as compared to the three months ended
September 30, 1994. The decrease in volumes of natural gas sold
-8-
<PAGE>
resulted primarily from a gas balancing adjustment on a sold well
during the three months ended September 30, 1995. Average
natural gas prices decreased to $1.38 per Mcf for the three
months ended September 30, 1995 from $1.47 per Mcf for the three
months ended September 30, 1994, while the average price of oil
sold increased to $15.98 per barrel for the three months ended
September 30, 1995 from $15.11 per barrel 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 72.9% for the three
months ended September 30, 1995 from 40.9% for the three months
ended September 30, 1994. The percentage increase resulted
primarily from the decreases in the (i) volumes sold related to
the gas balancing adjustment discussed above and (ii) the average
price of 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 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, this
expense increased to 12.6% for the three months ended September
30, 1995 from 9.4% for the three 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 three months
ended September 30, 1995 as compared to the three months ended
September 30, 1994.
General and administrative expenses 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 33.8% for the three
months ended September 30, 1995 as compared to 17.8% for the
three months ended September 30, 1994. This percentage increase
was primarily a result of the decrease in both the volumes and
average price of 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 $181,992 $212,496
Oil and gas production
expenses $ 89,298 $110,826
Barrels produced 838 1,027
Mcf produced 130,683 122,235
Average price/Bbl $ 15.84 $ 14.14
Average price/Mcf $ 1.29 $ 1.62
-9-
<PAGE>
As shown in the table, oil and natural gas sales decreased 14.4%
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 average price of
natural gas sold, partially offset by the increase in the volumes
of natural gas sold during the nine months ended September 30,
1995 as compared to the nine months ended September 30, 1994.
Volumes of oil sold decreased slightly by 189 barrels while the
volumes of natural gas sold increased by 8,448 Mcf for the nine
months ended September 30, 1995 as compared to the nine months
ended September 30, 1994. The increase in the volumes of natural
gas sold resulted primarily from positive prior period volume
adjustments from a purchaser on two of the Program's wells during
the nine months ended September 30, 1995, partially offset by a
gas balancing adjustment by a purchaser on another of the
Program's wells during the nine months ended September 30, 1995.
Average natural gas prices decreased to $1.29 per Mcf for the
nine months ended September 30, 1995 from an average of $1.62 per
Mcf for the nine months ended September 30, 1994, while the
average price of oil sold increased to $15.84 per barrel for the
nine months ended September 30, 1995 from an average of $14.14
per barrel for the nine months ended September 30, 1994.
Oil and gas production expenses (including lease operating
expenses and production taxes) decreased $21,528 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 decreased to 49.1% for the nine months ended
September 30, 1995 from 52.2% for the nine months ended September
30, 1994. The percentage decrease was primarily a result of the
dollar decrease in oil and gas production expenses as discussed
above.
Depreciation, depletion, and amortization of oil and gas
properties increased $7,303 for the nine months ended September
30, 1995 as compared to the nine months ended September 30, 1994.
This increase was primarily a result of the increase in the
volumes of natural gas sold 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, this expense
increased to 20.7% for the nine months ended September 30, 1995
from 14.3% 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.
General and administrative expenses increased $6,991 for the nine
months ended September 30, 1995 as compared to the nine months
-10-
<PAGE>
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 28.9% for the nine months ended
September 30, 1995 as compared to 21.5% for the nine months ended
September 30, 1994. This percentage increase was primarily a
result of the dollar increase as discussed above and 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.
-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 1981-2 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> 0000702403
<NAME> DYCO OIL AND GAS PROGRAM 1981-2
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 215,731
<SECURITIES> 0
<RECEIVABLES> 34,569
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 250,300
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 457,776
<CURRENT-LIABILITIES> 37,578
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 299,892
<TOTAL-LIABILITY-AND-EQUITY> 457,776
<SALES> 181,992
<TOTAL-REVENUES> 188,776
<CGS> 0
<TOTAL-COSTS> 179,636
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,140
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,140
<EPS-PRIMARY> 2.00
<EPS-DILUTED> 0
</TABLE>
