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
March 31, 1999 0-13430
DYCO OIL AND GAS PROGRAM 1984-1
(A LIMITED PARTNERSHIP)
(Exact Name of Registrant as specified in its charter)
Minnesota 41-1465070
(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 1984-1 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
1999 1998
----------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 14,199 $129,747
Accrued oil and gas sales 51,634 62,071
-------- --------
Total current assets $ 65,833 $191,818
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 215,929 233,645
DEFERRED CHARGE 54,570 54,570
-------- --------
$336,332 $480,033
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 5,829 $ 4,400
-------- --------
Total current liabilities $ 5,829 $ 4,400
ACCRUED LIABILITY $ 30,598 $ 30,598
PARTNERS' CAPITAL:
General Partner, 55 general
partner units $ 2,999 $ 4,450
Limited Partners, issued and
outstanding, 5,500 Units 296,906 440,585
-------- --------
Total Partners' capital $299,905 $445,035
-------- --------
$336,332 $480,033
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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DYCO OIL AND GAS PROGRAM 1984-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
-------- --------
REVENUES:
Oil and gas sales $86,426 $133,552
Interest 1,513 1,789
------- --------
$87,939 $135,341
COSTS AND EXPENSES:
Oil and gas production $24,086 $ 24,759
Depreciation, depletion, and
amortization of oil and gas
properties 17,716 25,717
General and administrative
(Note 2) 24,617 24,909
------- --------
$66,419 $ 75,385
------- --------
NET INCOME $21,520 $ 59,956
======= ========
GENERAL PARTNER (1%) - net
income $ 215 $ 600
======= ========
LIMITED PARTNERS (99%) - net
income $21,305 $ 59,356
======= ========
NET INCOME PER UNIT $ 3.87 $ 10.79
======= ========
UNITS OUTSTANDING 5,555 5,555
======= ========
The accompanying condensed notes are an
integral part of these financial statements.
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DYCO OIL AND GAS PROGRAM 1984-1 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,520 $ 59,956
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 17,716 25,717
Decrease in accrued oil and
sales 10,437 26,001
Increase in accounts payable 1,429 8,221
-------- --------
Net cash provided by operating
activities $ 51,102 $119,895
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used by investing
activities $ - $ -
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($166,650) ($138,875)
-------- --------
Net cash used by financing
activities ($166,650) ($138,875)
-------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ($115,548) ($ 18,980)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 129,747 118,202
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 14,199 $ 99,222
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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DYCO OIL AND GAS PROGRAM 1984-1 LIMITED PARTNERSHIP
CONDENSED NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheet as of March 31, 1999, statements of operations for the
three months ended March 31, 1999 and 1998, and statements of cash flows
for the three months ended March 31, 1999 and 1998 have been prepared by
Dyco Petroleum Corporation ("Dyco"), the General Partner of the Dyco Oil
and Gas Program 1984-1 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 March 31, 1999, results of operations for the three months ended March
31, 1999 and 1998, and changes in cash flows for the three months ended
March 31, 1999 and 1998 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, 1998. The results of operations for the period
ended March 31, 1999 are not necessarily indicative of the results to be
expected for the full year.
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
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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.
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 March 31, 1999 and 1998 the
Program incurred such expenses totaling $24,617 and $24,909, respectively,
of which $15,654 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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<PAGE>
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, and 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.
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<PAGE>
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 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 most important
variable affecting the Program's revenues is the prices received for the
sale of oil and gas. Due to the volatility of oil and gas prices,
forecasting future prices is subject to great uncertainty and inaccuracy.
Substantially all of the Program's gas reserves are being sold on 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. Such spot market sales are generally short-term in nature and
are dependent upon the obtaining of transportation services provided by
pipelines. In addition, crude oil prices were recently at or near their
lowest level in the past decade due primarily to the global surplus of
crude oil. However, oil prices have rebounded slightly during the first
quarter of 1999 primarily due to a decrease in the global oil surplus and
production curtailments by several major oil producing nations. Management
is unable to predict whether future oil and gas prices will (i) stabilize,
(ii) increase, or (iii) decrease.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1998.
Three Months Ended March 31,
----------------------------
1999 1998
------- --------
Oil and gas sales $86,426 $133,552
Oil and gas production expenses $24,086 $ 24,759
Barrels produced 290 319
Mcf produced 50,055 58,270
Average price/Bbl $ 11.26 $ 15.70
Average price/Mcf $ 1.66 $ 2.21
As shown in the table above, total oil and gas sales decreased $47,126
(35.3%) for the three months ended March 31, 1999 as compared to the three
months ended March 31, 1998. Of this decrease, approximately $27,000 was
related to a decrease in the average price of gas sold and
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approximately $18,000 was related to a decrease in volumes of gas sold.
Volumes of oil and gas sold decreased 29 barrels and 8,215 Mcf,
respectively, for the three months ended March 31, 1999 as compared to the
three months ended March 31, 1998. The decrease in the volumes of gas sold
resulted primarily from positive prior period volume adjustments made by
the purchasers on two wells during the three months ended March 31, 1998
and normal declines in production. Average oil and gas prices decreased to
$11.26 per barrel and $1.66 per Mcf, respectively, for the three months
ended March 31, 1999 from $15.70 per barrel and $2.21 per Mcf,
respectively, for the three months ended March 31, 1998.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $673 (2.7%) for the three months ended March
31, 1999 as compared to the three months ended March 31, 1998. This
decrease resulted primarily from a decrease in production taxes associated
with the decrease in oil and gas sales, which decrease was partially
offset by credits received from the operator on one well during the three
months ended March 31, 1998 for prior period lease operating expenses. As
a percentage of oil and gas sales, these expenses increased to 27.9% for
the three months ended March 31, 1999 from 18.5% for the three months
ended March 31, 1998. This percentage increase was primarily due to the
decreases in the average prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $8,001 (31.1%) for the three months ended March 31, 1999 as
compared to the three months ended March 31, 1998. This decrease resulted
primarily from upward revisions in the estimates of remaining oil and gas
reserves at December 31, 1998 and the decreases in the volumes of oil and
gas sold. As a percentage of oil and gas sales, this expense increased to
20.5% for the three months ended March 31, 1999 from 19.3% for the three
months ended March 31, 1998.
General and administrative expenses decreased $292 (1.2%) for the three
months ended March 31, 1999 as compared to the three months ended March
31, 1998. As a percentage of oil and gas sales, these expenses increased
to 28.5% for the three months ended March 31, 1999 from 18.7% for the
three months ended March 31, 1998. This percentage increase was primarily
due to the decrease in oil and gas sales.
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<PAGE>
YEAR 2000 COMPUTER ISSUES
- -------------------------
IN GENERAL
The Year 2000 Issue ("Y2K") refers to the inability of computer and other
information technology systems to properly process date and time
information, stemming from the earlier programming practice of using two
digits rather than four to represent the year in a date. For example,
computer programs and imbedded chips that are date sensitive may recognize
a date using (00) as the year 1900 rather than the year 2000. The
consequence of Y2K is that computer and imbedded processing systems may be
at risk of malfunctioning, particularly during the transition from 1999 to
2000.
The effects of Y2K are exacerbated by the interdependence of computer and
telecommunication systems throughout the world. This interdependence also
exists among the Program, Samson, and their vendors, customers, and
business partners, as well as with regulators. The potential risks
associated with Y2K for an oil and gas production company fall into three
general areas: (i) financial, leasehold and administrative computer
systems, (ii) imbedded systems in field process control units, and (iii)
third party exposures. As discussed below, Dyco does not believe that
these risks will be material to the Program's operations.
The Program's business is producing oil and gas. The day-to-day production
of the Program's oil and gas is not dependent on computers or equipment
with imbedded chips. As further discussed below, management anticipates
that the Program's daily business activities will not be materially
affected by Y2K.
The Program relies on Samson to provide all of its operational and
administrative services on either a direct or indirect basis. Samson is
addressing each of the three Y2K areas discussed above through a readiness
process that seeks to:
1. increase the awareness of the issue among key employees;
2. identify areas of potential risk;
3. assess the relative impact of these risks and Samson's ability to
manage them; and
4. remediate these risks on a priority basis wherever possible.
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<PAGE>
Samson Investment Company's Chief Financial Officer is responsible for
communicating to its Board of Directors Y2K actions and for the ultimate
implementation of its Y2K plan. He has delegated to Samson Investment
Company's Senior Vice President-Technology and Administrative Services
principal responsibility for ensuring Y2K compliance within Samson.
Samson has been planning for the impact of Y2K on its information
technology systems since 1993. As of May 1, 1999, Samson is in the final
stages of implementation of a Y2K plan, as summarized below:
FINANCIAL AND ADMINISTRATIVE SYSTEMS
1. Awareness. Samson has alerted its officers, managers and supervisors of
Y2K issues and asked them to have their employees participate in the
identification of potential Y2K risks which might otherwise go unnoticed
by higher level employees and officers. As a result, awareness of the
issue is considered high.
2. Risk Identification. Samson's most significant financial and
administrative systems exposure is the Y2K status of the accounting and
land administration system used to collect and manage data for internal
management decision making and for external revenue and accounts payable
purposes. Other concerns include network hardware and software, desktop
computing hardware and software, telecommunications, and office space
readiness.
3. Risk Assessment. The failure to identify and correct a material Y2K
problem could result in inaccurate or untimely financial information for
management decision-making or cash flow and payment purposes, including
maintaining oil and gas leases.
4. Remediation. Since 1993, Samson has been upgrading its accounting and
land administration software. Substantially all of the Y2K upgrades have
been completed, with the remainder scheduled to be completed during the
2nd quarter of 1999. In addition, in 1997 and 1998 Samson replaced or
applied software patches to substantially all of its network and desktop
software applications and believes them to be generally Y2K compliant.
Additional patches or software upgrades will be applied no later than June
30, 1999 to complete this process. The costs of all such risk assessments
and remediation are not expected to be material to the Program.
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5. Contingency Planning. Notwithstanding the foregoing, should there be
significant unanticipated disruptions in Samson's financial and
administrative systems, all of the accounting processes that are currently
automated will need to be performed manually. Samson will consider in the
second half of 1999 its options with respect to contingency arrangements
for temporary staffing to accommodate such situations.
IMBEDDED SYSTEMS
1. Awareness. Samson's Y2K program has involved all levels of field
personnel from production foremen and higher. Employees at all levels of
the organization have been asked to participate in the identification of
potential Y2K risks, which might otherwise go unnoticed by higher level
employees and officers of Samson, and as a result, awareness of the issue
is considered high.
2. Risk Identification. Samson has inventoried all possible exposures to
imbedded chips and systems. Such exposures can be classified as either (i)
oil and gas production and processing equipment or (ii) office machines
such as faxes, copiers, phones, etc.
With respect to oil and gas production and processing equipment, neither
Samson nor the Program operate offshore wells, significant processing
plants, or wells with older electronic monitoring systems. As a result,
Samson's inventory identified less than 10 applications using imbedded
chips. All of these are in the process of being tested by the respective
vendors and are expected to be Y2K compliant or replaced no later than
June 30, 1999. Oil and gas production related to such equipment is very
minor with respect to the entire Samson group, and, in fact, the Program's
production may not use such equipment at all.
Office machines are currently being tested by Samson and vendors. It is
expected that such machines will be made compliant or replaced no later
than June 30, 1999.
3. Risk Assessment and Remediation. The failure to identify and correct a
material Y2K problem in an imbedded system could result in outcomes
ranging from errors in data reporting to curtailments or shutdowns in
production. As noted above, Samson has identified less than 10 imbedded
system applications that may have a Y2K problem. None of these
applications are believed to be material to Samson or the Program. Once
identified, assessed and prioritized, Samson intends to test and upgrade
imbedded components and systems in field process control units deemed to
pose the greatest risk of significant non-compliance and capable of
testing. Samson believes that sufficient manual processes
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<PAGE>
are available to minimize any such field level risk and that there will be
no material impact on the Program with respect to these applications.
4. Contingency Planning. Should material production disruptions occur as a
result of Y2K failures in field operations, Samson will utilize its
existing field personnel in an attempt to avoid any material impact on
operating cash flow. Samson is not able to quantify any potential exposure
in the event of systems failure or inadequate manual alternatives.
THIRD PARTY EXPOSURES
1. Awareness. Samson has advised management to consider Y2K implications
with its outside vendors, customers, and business partners. Management has
been asked to participate in the identification of potential third party
Y2K risks and, as a result, awareness of the issue is considered high.
2. Risk Identification. Samson's most significant third party Y2K exposure
is its dependence on third parties for the receipt of revenues from oil
and gas sales. However, virtually all of these purchasers are very large
and sophisticated companies. Other Y2K concerns include the availability
of electric power to Samson's field operations, the integrity of
telecommunication systems, and the readiness of commercial banks to
execute electronic fund transfers.
3. Risk Assessment. Because of the high awareness of the Y2K problem in
the U.S., Samson has not undertaken and does not plan to undertake a
formal company wide plan to make inquiries of third parties on the subject
of Y2K readiness. If it did so, Samson has no ability to require responses
to such inquiries or to independently verify their accuracy. Samson has,
however, received oral assurances from its significant oil and gas
purchasers of Y2K compliance. If significant disruptions from major
purchasers were to occur, however, there could be a material and adverse
impact on the Program's results of operations, liquidity, and financial
conditions.
It is important to note that third party oil and gas purchasers have
significant incentives to avoid disruptions arising from a Y2K failure.
For example, most of these parties are under contractual obligations to
purchase oil and gas or disperse revenues to Samson. The failure to do so
will result in contractual and statutory penalties. Therefore, Samson
believes that it is unlikely that there will be material third party
non-compliance with purchase and remittance obligations as a result of Y2K
issues.
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<PAGE>
4. Remediation. Where Samson perceives significant risk of Y2K
non-compliance that may have a material impact on it, and where the
relationship between Samson and a vendor, customer, or business partner
permits, joint testing may be undertaken during 1999 to further identify
these risks.
5. Contingency Planning. In the unlikely event that material production
disruptions occur as a result of Y2K failures of third parties, the
Program's operating cash flow could be impacted. This contingency will be
factored into deliberations on the level of quarterly cash distributions
paid out during any such period of cash flow disruption.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
The Program does not hold any market risk sensitive instruments.
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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
1984-1 Limited Partnership's financial statements as of
March 31, 1999 and for the three months ended March 31,
1999, 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 1984-1 LIMITED
PARTNERSHIP
(Registrant)
BY: DYCO PETROLEUM CORPORATION
General Partner
Date: May 5, 1999 By: /s/Dennis R. Neill
-------------------------------
(Signature)
Dennis R. Neill
President
Date: May 5, 1999 By: /s/Patrick M. Hall
-------------------------------
(Signature)
Patrick M. Hall
Chief Financial Officer
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<PAGE>
INDEX TO EXHIBITS
NUMBER DESCRIPTION
- ------ -----------
27.1 Financial Data Schedule containing summary financial information
extracted from the Dyco Oil and Gas Program 1984-1 Limited
Partnership's financial statements as of March 31, 1999 and for the
three months ended March 31, 1999, filed herewith.
All other exhibits are omitted as inapplicable.
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000725261
<NAME> DYCO OIL & GAS PROGRAM 1984-1 LTD PSHIP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 14,199
<SECURITIES> 0
<RECEIVABLES> 51,634
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 65,833
<PP&E> 30,209,864
<DEPRECIATION> 29,993,935
<TOTAL-ASSETS> 336,332
<CURRENT-LIABILITIES> 5,829
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 299,905
<TOTAL-LIABILITY-AND-EQUITY> 336,332
<SALES> 86,426
<TOTAL-REVENUES> 87,939
<CGS> 0
<TOTAL-COSTS> 66,419
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 21,520
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,520
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,520
<EPS-PRIMARY> 3.87
<EPS-DILUTED> 0
</TABLE>
