SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996 Commission file number 0-10697
DORCHESTER HUGOTON, LTD.
(Exact name of registrant as specified in its charter)
Texas 75-1829064
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
9696 Skillman Street, Suite 320-LB 42, Dallas, Texas 75243-8200
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 340-3443
None
Former name, former address and former fiscal
year, if changed since last report
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
As of July 31, 1996, 10,744,380 Depositary Receipts for Units of Limited
Partnership Interest were outstanding.
<PAGE>
DORCHESTER HUGOTON, LTD.
(A Texas Limited Partnership)
QUARTERLY REPORT ON FORM 10-Q
June 30, 1996
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Balance Sheets as of June 30, 1996 and December 31, 1995
(Unaudited)
Condensed Statements of Earnings for the Three and Six Months Ended
June 30, 1996 and 1995 (Unaudited)
Condensed Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995 (Unaudited)
Notes to Condensed Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
<PAGE>
DORCHESTER HUGOTON, LTD.
(A Texas Limited Partnership)
PART I
Item 1
CONDENSED BALANCE SHEETS
(Unaudited)
June 30, 1996 and December 31, 1995
(In Thousands of Dollars)
June 30, Dec. 31,
1996 1995
------- -------
ASSETS
Current Assets:
Cash and temporary cash investments .............. $ 2,859 $ 183
Investments - available for sale ................. 2,346 2,190
Accounts receivable .............................. 1,738 3,197
Prepaid expenses and other current assets ........ 187 136
------- -------
Total Current Assets ........................... 7,130 5,706
Net Property and Equipment ........................... 13,878 13,895
------- -------
Total Assets ......................................... $21,008 $19,601
======= =======
LIABILITIES AND PARTNERSHIP CAPITAL
Current Liabilities:
Accounts payable and other current liabilities ... $ 1,003 $ 1,001
Production and property taxes payable ............ 245 231
Royalties payable ................................ 276 297
Distributions payable to Unitholders ............. 1,848 1,848
------ ------
Total Current Liabilities ...................... 3,372 3,377
Long-term debt ....................................... 144 1,725
------ ------
Total Liabilities .............................. 3,516 5,102
Commitments and Contingencies (Note 2) ............... - -
Partnership Capital .................................. 17,492 14,499
------ ------
Total Liabilities and Partnership Capital ............ $21,008 $19,601
======= =======
The accompanying condensed notes are an integral part of
these financial statements.
<PAGE>
DORCHESTER HUGOTON, LTD.
(A Texas Limited Partnership)
CONDENSED STATEMENT OF EARNINGS
(Unaudited)
For the Three and Six Months Ended June 30, 1996 and 1995
(In Thousands of Dollars)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
Net Operating Revenues ............. $ 4,671 $ 2,974 $ 9,368 $ 6,285
------- ------- ------- -------
Costs and Expenses:
Operating, including prod. taxes 821 825 1,635 1,597
Depletion, depreciation & amort. 353 296 734 695
General and administrative ..... 133 143 274 276
Management fees ................ 106 92 212 188
Interest ....................... 13 27 43 70
Other income, net .............. (37) (22) (58) (44)
------- ------- ------- -------
Total Costs and Expenses ........... 1,389 1,361 2,840 2,782
------- ------- ------- -------
Net Earnings ....................... $ 3,282 $ 1,613 $ 6,528 $ 3,503
======= ======= ======= =======
Net Earnings per Unit (in dollars) . $ 0.30 $ 0.15 $ 0.60 $ 0.32
======= ======= ======= =======
The accompanying condensed notes are an integral part of
these financial statements.
<PAGE>
DORCHESTER HUGOTON, LTD.
(A Texas Limited Partnership)
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, 1996 and 1995
(In Thousands of Dollars)
1996 1995
------- -------
Cash Flows Provided by Operating Activities .......... $ 8,664 $ 5,540
------- -------
Cash Flows Used in Investing Activities:
Purchases of prop. & equipment, net of retirements (717) (452)
Cash received on sale of other prop. & equipment.. 0 18
------- -------
Cash Flows Used in Investing Activities .............. (717) (434)
------- -------
Cash Flows Used in Financing Activities:
Distributions paid to Unitholders ................ (3,690) (3,708)
Additions to long-term debt ...................... 4,766 0
Reductions of long-term debt ..................... (6,347) (1,325)
Other ............................................ 0 (73)
------- -------
Cash Flows Used in Financing Activities .............. (5,271) (5,106)
------- -------
Increase in Cash and Temporary Cash Investments ...... 2,676 0
Cash and Temporary Cash Investments at January ....... 1,183 0
------- -------
Cash and Temporary Cash Investments at June 30, ...... $ 2,859 $ 0
======= =======
The accompanying condensed notes are an integral part of
these financial statements.
<PAGE>
DORCHESTER HUGOTON, LTD.
(A Texas Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The condensed financial statements reflect all adjustments (consisting only
of normal and recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of Dorchester Hugoton, Ltd.'s
(the "Partnership's") financial position and operating results for the
interim periods. Interim period results are not necessarily indicative of
the results for the calendar year. Please refer to Management's Discussion
and Analysis of Financial Condition and Results of Operations for
additional information. The weighted average number of Units outstanding
for each of the periods was 10,744,380.
2. On August 2, 1996 the Partnership announced an agreement to settle all the
outstanding litigation between the Partnership and Parker & Parsley
Petroleum Company entities (successor to Damson Oil Corporation and
Dorchester Master Limited Partnership - collectively referred to as "P&P"
or as "Parker & Parsley"). In connection with the settlement, the
Partnership will pay P&P $7.0 million subject to closing, which is
currently expected to occur on August 15, 1996. Some of the numerous issues
resolved by settlement include withdrawal by P&P of all claims of gas
processing rights to the Partnership's Oklahoma gas production.
Additionally, all claims by P&P regarding rights to participate in Oklahoma
gas wells and all claims of unpaid production payment amounts will be
withdrawn. The Partnership will pay P&P, prospectively only, a production
payment that was created in the 1986 acquisition of 20% of the Oklahoma
wells. The amount of such 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. Additionally, the settlement will result in an
exchange of wells in Kansas by which the Partnership will transfer to P&P a
non-operated interest in 14 wells and receive from P&P 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 will also confirm the Partnership's ownership of the gas
pipeline that delivers gas from the Partnership's Oklahoma wells to the
Partnership's gas compressor facilities. The Partnership estimates that the
settlement will result in a charge to earnings of approximately $4,350,000
and will increase property and equipment by approximately $2,650,000. The
settlement will be reflected in the Partnership's third quarter. All of the
outstanding litigation described in the remaining paragraphs of this Note 2
to the Condensed Financial Statements will be dismissed. All judgments and
awards will not be paid and each party will bear its own legal costs.
Prior to May 1, 1994, the Partnership's Oklahoma natural gas production was
sold under the 1946 Gas Purchase Contract, as amended, (the "Contract") to
Natural Gas Pipeline Company of America or its assigns (collectively
referred to as "NGPL"). Such gas was also subject to a June 16, 1982 Gas
Processing Agreement (the "Agreement") between the Partnership and P&P. As
a result, the Partnership's Oklahoma gas production was processed in P&P's
Hooker, Oklahoma gas processing plant where natural gas liquids were
extracted and the remaining gas ("residue gas") was delivered and sold to
NGPL at the plant outlet. The extraction of natural gas liquids requires
the consumption of some gas as fuel and the extraction itself shrinks the
gas production in both volume and heating value (referred to as "fuel and
shrinkage"). The Agreement provided, among other things, that P&P operate
the Partnership's gas gathering pipelines, that P&P retain the natural gas
liquids extracted, and that the Partnership would receive for fuel and
shrinkage incurred the value of the gas produced at the wellhead (including
severance taxes) less amounts received for residue gas sales to NGPL. The
Partnership contended the Agreement terminated upon termination of the
Partnership's Contract with NGPL on May 1, 1994, while P&P contended
termination was January 1, 1993.
On May 1, 1990, the Partnership instituted legal action in Wharton County,
Texas District Court against NGPL seeking cancellation of the Contract and
damages. In early December, 1992, the Partnership settled its litigation
against NGPL and amended the Contract. The amended Contract provided that
NGPL would pay for the residue gas from the Partnership's Oklahoma
properties at an indexed market price. The Contract was subsequently
terminated by NGPL effective May 1, 1994. The processor of the
Partnership's Oklahoma gas, P&P, previously intervened in the litigation in
Wharton County, Texas claiming certain rights under the Contract, the
Agreement and to the Partnership's gas gathering pipeline system in
Oklahoma.
In 1986, pursuant to a preferential right to purchase in an August 23, 1982
Operating Agreement between the Partnership and a predecessor to P&P, the
Partnership acquired additional interests in Texas County, Oklahoma (the
"1986 Transaction"). On November 2, 1993, the Oklahoma Court of Appeals
affirmed the decision of the Texas County, Oklahoma District Court
<PAGE>
DORCHESTER HUGOTON, LTD.
(A Texas Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
granting the Partnership quiet title to all personal and real property
interests acquired by the Partnership in the 1986 Transaction. P&P
continued to dispute the impact of that decision. Additionally, on April
20, 1994 the Partnership was granted an injunction by the Texas County,
Oklahoma District Court to enjoin P&P from interfering with the
Partnership's May 1, 1994 operation of low pressure gas pipeline gathering
facilities. On May 8, 1996 the Partnership received notice that on May 7,
1996 the Oklahoma Court of Appeals reversed the injunction previously
granted the Partnership. Such reversal did not determine ownership of the
pipelines but did reverse the earlier decision that allowed the Partnership
to operate and maintain the pipelines based upon the finding that ownership
of the pipelines had already been determined. Also on November 2, 1993, the
Court of Appeals remanded, for a new trial, a 1990 jury finding of fraud
which had awarded the Partnership $4,715,326 related to the 1986
Transaction. The Oklahoma Supreme Court granted certiorari on March 21,
1994. On June 19, 1995, the Oklahoma Supreme Court withdrew and denied
certiorari. Consequently, the issue of fraud by P&P would require retrial
in Texas County, Oklahoma. No retrial date had been set. Additionally, on
January 10, 1994 the Oklahoma Court of Appeals decision became final which
had reversed a judgment awarding the Partnership $724,082 based on P&P's
underpayment for fuel and shrinkage at the Hooker gas processing plant
during the period of November 1988 through March 1991. Subsequently, P&P
was awarded and received $91,402 in attorney's fees from the Partnership.
None of the Court of Appeals' decisions are expected to have any material
adverse affect on the Partnership's financial position or operating
results. The Partnership has not recognized any of the prior judgment
amounts in its favor in its financial statements.
On December 22, 1993 the Texas County, Oklahoma District Court issued a
partial summary judgment with respect to disputed matters between the
Partnership and P&P regarding gathering and processing the Partnership's
Oklahoma gas and the Agreement. The partial summary judgment ruled that (1)
the Partnership owns the Oklahoma gas pipeline gathering system, (2) there
are no processing rights other than the Agreement, whereby P&P gathers and
processes the Partnership's Oklahoma gas, (3) the Agreement was still in
effect, and (4) payments for fuel and shrinkage under the Agreement are to
be based upon the same price per MMBTU as paid the Partnership for its
Oklahoma gas sales plus applicable taxes. The issue of ownership of the
pipelines had also been the subject of proceedings discussed in the
previous paragraph. On August 26, 1994, P&P and the Partnership stipulated
by agreement that (among other issues) the amount of underpayment (if any)
due the Partnership for fuel and shrinkage during the period January 1993
through April 1994 to be either $4,837,046 or $6,558,036 depending upon the
Court's determination of proper severance tax applicability. A hearing
including these issues was conducted October 18, 1994. On September 21,
1995 the Texas County, Oklahoma District Court issued its Final Judgment
and Order favorably awarding the Partnership $6,588,036 plus interest for
underpayment by P&P for fuel and shrinkage. The Court's ruling also
reaffirmed its previous decisions that the Partnership owns the Oklahoma
gas pipeline gathering system and P&P had no rights to process the gas
after the May 1, 1994 expiration of the Agreement. On October 6, 1995 P&P
filed a supersedeas bond. On October 13, 1995 P&P filed an appeal
contesting all of the District Court's findings and P&P sought to reduce or
eliminate the supersedeas bond. On December 13, 1995 the Texas County,
Oklahoma District Court denied P&P's motion to reduce or eliminate the
supersedeas bond and awarded the Partnership $104,446 in attorneys' fees
and expenses. P&P has appealed all substantive decisions. The Partnership
has not recognized any of the prior judgment amounts in its favor in its
financial statements.
Through January 25, 1994, the Wharton County, Texas District Court ruled
that (1) P&P was not liable to the Partnership for excess extraction of
natural gas liquids prior to January 1, 1993 (2) the 1982 Gas Processing
Agreement expired on January 1, 1993, and (3) P&P was not a party to the
Partnership's contract covering Oklahoma gas sales. Issues of ownership of
the gas pipeline gathering system and any gas processing rights (other than
the Agreement) in Oklahoma were dismissed for various reasons including
lack of subject matter jurisdiction. All other remaining issues were
dismissed and attorney's fees in the amount of $208,000 were awarded to
P&P. Both the Partnership and P&P appealed portions of the Court's
decisions and the Partnership has provided a supersedeas bond in the amount
of $242,000 related to attorneys fees with prospective interest. On October
5, 1995 the Thirteenth Court of Appeals in Corpus Christi, Texas issued an
opinion which remanded to the Wharton County District Court for further
proceedings the issues of (1) ownership of the gas pipeline gathering
system and (2) ownership of rights to process the gas produced by the
Partnership's Oklahoma gas wells. Additionally, the
<PAGE>
DORCHESTER HUGOTON, LTD.
(A Texas Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
Appellate Court affirmed the Wharton District Court's decision terminating
on January 1, 1993, the 1982 Gas Processing Agreement whereby the
Partnership's Oklahoma gas was processed in the P&P Hooker Oklahoma Plant
until May 1, 1994. Also, the Court affirmed the Wharton County District
Court's decision that P&P was not liable to the Partnership for previous
overextraction at the Hooker, Oklahoma Plant. The Court also affirmed, but
slightly reduced, the trial court's award of attorney's fees of $200,000 to
P&P. Dorchester Hugoton was seeking further appellate court review.
On May 11, 1994 the Partnership instituted legal action in Texas County,
Oklahoma District Court against P&P for breach of the preferential right to
purchase clause in an August 23, 1982 Operating Agreement between the
Partnership and a predecessor to P&P. A production payment and a right to
participate in new wells were reserved by P&P predecessors in their June,
1986 sale of interests in Texas County, Oklahoma properties to the
Partnership, and such interests are claimed by P&P. The Partnership
contested conveyances made between P&P's predecessors (Damson and
Dorchester Master Limited Partnership) and P&P with respect to the
production payment and participation right. The Partnership requested such
production payment and participation right be subject to specific
performance enabling exercise of the Partnership's rights under the
preferential right to purchase. Generally the right to participate in new
wells was limited to a maximum working interest of 5%. The Partnership
believed no wells had been drilled which would be subject to such
participation. The Partnership believed it was reasonably possible that the
Partnership would prevail against P&P claims. A production payment may have
been owed to P&P if the Partnership was unsuccessful. However, the exact
amount of any such payment that might have been due was not known. As of
March 1, 1994, the amount that could have been owed may have ranged between
$600,000 to $1,000,000. Although not calculable, an estimated additional
range of $900,000 to $1,300,000 could have been owed for the period from
March 1, 1994 through February 29, 1996. Future projections of any annual
production payment amount utilize calculations through February based on a
table of declining volumes and the amount that unknown future gas prices
exceed a table of rising prices. P&P had asserted the production payment
amount owed to be $1,394,505 through February 28, 1994. Had the Partnership
successfully maintained the right to purchase, the determination of whether
to purchase would have depended on the purchase price which was unknown.
On May 19, 1994 P&P instituted legal action in the 116th Judicial District
of Dallas County, Texas asserting that Dorchester Hugoton owed and had not
paid a production payment, had improperly failed to allow P&P to
participate in the 1993 drilling of a replacement well in Texas County,
Oklahoma and asserting other claims of tortious interference and unfair
competition, apparently by virtue of the Partnership's operation of its low
pressure gas pipeline. On July 11, 1994 the Dallas County District Court
denied the Partnership's motion to stay or abate due to identical claims in
Oklahoma. On March 28, 1995, a motion by P&P for partial summary judgment
was denied by the Dallas Court. By agreement with P&P all litigation in the
Dallas County, Texas suit had been deferred until completion of all
identical litigation in Texas County, Oklahoma. In Oklahoma, the trial
regarding the Partnership's right to exercise the preferential right to
purchase both the production payment and right to participate in new wells
awaited rescheduling by the Court. All other matters, such as the amount to
be paid in exercising the preferential right or the amount of a production
payment, if any, were delayed until issuance of a ruling following the
pending Oklahoma trial.
Pursuant to requirements of the Dallas, Texas District Court, the
Partnership and P&P attempted settlement by mediation during August, 1995.
On August 21, 1995 the independent mediator declared an impasse.
On December 20, 1995 the Partnership began legal action in the Texas
County, Oklahoma District Court seeking to quiet the Partnership's title
and seeking a declaratory order that P&P has no participation rights
regarding an Oklahoma replacement well completed by the Partnership in
January, 1996. Such action was necessary as P&P had continued to assert
that it had the right to participate to the extent of 5% in a similar
Oklahoma replacement well completed by the Partnership in 1993. The parties
had agreed to abate this proceeding pending resolution of the same issue
regarding the 1993 replacement well.
<PAGE>
DORCHESTER HUGOTON, LTD.
(A Texas Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
3. On July 19, 1994 the Partnership entered into a $15,000,000 unsecured
revolving credit facility (the "Agreement") with Bank One, Texas, N.A.
Effective on August 12, 1996, the agreement was restated to increase the
borrowing base from $4,250,000 to $8,500,000. The Agreement will be
re-evaluated by Bank One at least semi-annually. If, on any such date, the
aggregate amount of outstanding loans and letters of credit exceed the
current borrowing base as most recently determined by Bank One, the
Partnership is required to repay the excess. This credit facility covers
both cash advances and any letters of credit that the Partnership may need,
with interest being charged at the base rate for Bank One, which was 8.25%
on August 12, 1996. All amounts borrowed under this facility will become
due and payable on July 31, 1999. As of August 12, 1996, letters of credit
totaling $267,000 were issued under the credit facility and the amount
borrowed was $100,000. The weighted average amount borrowed under the
credit facility was approximately $260,000 and $1,200,000 during the second
and first quarter, respectively.
PART I
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net cash flows from operating activities during the three and six months ended
June 30, 1996 were $5,614,000 and $8,664,000, respectively, compared to
$1,687,000 and $5,540,000 for the same periods of 1995. Net cash flows for the
three months ended June 30, 1996 were greater compared to the same period of
1995 partly as a result of increased timeliness of accounts receivable during
the second quarter of 1996. Additionally, cash flows were greatly influenced in
both the three month and the six month periods by natural gas market prices
which were significantly higher compared to the same periods last year.
The Partnership has available a $15,000,000 unsecured revolving credit facility
with a current borrowing base of $8,500,000. Please see Note 3 to the financial
statements for additional information. As of August 12, 1996, letters of credit
totaling $267,000 were issued under the credit facility and the amount borrowed
was $100,000. The Partnership's cash position was zero on January 1, 1995 as a
result of cash management practices which minimize borrowings. The weighted
average amount borrowed under the credit facility was approximately $260,000 and
$1,200,000 during the second and first quarter, respectively.
The Partnership's portion of gas sales volumes (in MMCF) and weighted average
BTU adjusted sales prices per MCF were as follows:
Three Months Ended Six Months Ended
---------------------------- ----------------
June 30, June 30,
---------------- Mar. 31 ----------------
1996 1995 1996 1996 1995
Sales Volumes: ----- ----- ----- ----- -----
Oklahoma ............. 1,578 1,397 1,723 3,301 3,125
Kansas ............... 564 556 606 1,170 1,081
----- ----- ----- ----- -----
Total ................... 2,142 1,953 2,329 4,471 4,206
===== ===== ===== ===== =====
Weighted Average BTU Adjusted Sales Prices:
Oklahoma ............... $2.19 $1.53 $2.02 $2.10 $1.50
Kansas ................. 2.11 1.47 1.95 2.03 1.44
Overall Weighted Average. $2.16 $1.51 $2.00 $2.08 $1.48
Oklahoma natural gas production volumes were lower during the second quarter
compared to the first quarter of 1996 due to routine annual state well tests but
higher during the second quarter compared to the same quarter of 1995. Kansas
natural gas production volumes were slightly lower during the second quarter
compared to the first quarter of 1996 and slightly higher compared to the second
quarter of 1995.
<PAGE>
DORCHESTER HUGOTON, LTD.
(A Texas Limited Partnership)
PART I
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
As previously announced, the Partnership has agreed to settle all outstanding
litigation with Parker & Parsley Petroleum Company entities. In connection with
the settlement, the Partnership will pay Parker & Parsley $7.0 million subject
to closing, which is currently expected to occur on August 15, 1996. 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 will be 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 an 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
will also confirm 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 meters and meter houses 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 is pleased to finally achieve resolution of the litigation and
looks forward in the near-term to reducing debt and then emphasizing the
previously announced unit repurchase program. 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. Additionally, the
Partnership believes the increase in current borrowing base from $4,250,000 to
$8,500,000 to be adequate to fund the $7.0 million due at the settlement closing
and any known scheduled capital expenditures.
<PAGE>
DORCHESTER HUGOTON, LTD.
(A Texas Limited Partnership)
OTHER INFORMATION
PART II
Item 1. Legal Proceedings: See Notes to Condensed Financial Statements.
Item 5. Other Information: None.
Item 6. Exhibits and Reports on Form 8-K:
a) Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K - None.
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.
DORCHESTER HUGOTON, LTD.
Registrant
Date: August 13, 1996 /s/ Kathleen A. Rawlings
Kathleen A. Rawlings
Controller (Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,859
<SECURITIES> 2,346
<RECEIVABLES> 1,738
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,130
<PP&E> 22,789
<DEPRECIATION> 8,911
<TOTAL-ASSETS> 21,008
<CURRENT-LIABILITIES> 3,372
<BONDS> 144
0
0
<COMMON> 0
<OTHER-SE> 17,492
<TOTAL-LIABILITY-AND-EQUITY>21,008
<SALES> 9,368
<TOTAL-REVENUES> 9,368
<CGS> 2,840
<TOTAL-COSTS> 2,840
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 6,528
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,528
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.60
</TABLE>
