SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 14, 1996
DORCHESTER HUGOTON, LTD.
(Exact Name of registrant as specified in its charter)
TEXAS
(State or Other Jurisdiction of Incorporation)
0-10697 75-1829064
(Commission File Number) (I.R.S. Employer Identification No.)
9696 Skillman Street, Suite 320 - LB 42, Dallas, Texas 75243
(Address of principal executive office)
(214)340-3443
(Registrant's Telephone Number)
<PAGE>
Item 5. Other Events
On August 14, 1996, the Partnership closed with Parker & Parsley
Petroleum Company entities the previously announced settlement agreement
resolving all outstanding litigation. In connection with the settlement, the
Partnership paid Parker & Parsley $7.0 million. Some of the numerous issues
resolved by settlement include withdrawal by Parker & Parsley of all claims of
gas processing rights to the Partnership's Oklahoma gas production.
Additionally, all claims by Parker & Parsley regarding rights to participate in
Oklahoma gas wells and all claims of unpaid production payment amounts were
withdrawn. The Partnership will pay Parker & Parsley, prospectively only, a
production payment that was created in the 1986 acquisition by the Partnership
of 20% of the Oklahoma wells. The amount of such annual production payment is
based upon the difference between market gas prices compared to a table of
rising prices and based upon a table of declining volumes. Accruals for the
production payments will reduce net revenues. The first production payment to be
paid in 1997 is estimated to be $800,000. Additionally, the settlement will
result in a September 1, 1996 exchange of wells in Kansas by which the
Partnership will transfer to Parker & Parsley a non-operated interest in 14
wells and will receive from Parker & Parsley their interest in 18 wells operated
by the Partnership. Consequently, the Partnership will increase ownership from
80% to 100% of the working interest in 18 wells. The settlement also confirmed
the Partnership's ownership of the gas pipeline that delivers gas from the
Partnership's Oklahoma wells to the Partnership's gas compressor facilities. As
a result, the Partnership has canceled its previously announced plans to build a
new pipeline system in Oklahoma. Through June 30, 1996, approximately $420,000
in capital expenditures were made by the Partnership for electronic measuring
equipment as well as certain rights-of-way necessary to the new pipeline.
However, all new metering facilities will be installed on the existing pipeline
system serving the Partnership's wells.
The Partnership estimates that the settlement will result in a charge to
earnings of approximately $4,350,000 and will increase property and equipment
approximately $2,650,000. The settlement will be reflected in the Partnership's
third quarter and is expected to result in a net loss for that quarter.
<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 hereunto duly authorized.
DORCHESTER HUGOTON, LTD.
By:/s/Kathleen A.Rawlings
--------------------------------
Kathleen A. Rawlings, Controller
Dated: August 15, 1996
