UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
MARK ONE
[x] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-11311
MAY DRILLING PARTNERSHIP 1983-1
MAY LIMITED PARTNERSHIP 1983-1
(Exact name of registrant as specified in its charter)
75-1896224
Texas 75-1896223
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4582 South Ulster Street Parkway
Suite 1700
Denver, Colorado 80237
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 850-7373
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Units of Participation, $1,000 Per Unit
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE:
Part of Form 10-K into
Document which it is incorporated
The General Partnership Agreement and the Limited
Partnership Agreement filed as an Exhibit to
Registration Statement No. 0-11311 Part IV
<PAGE>
PART I
ITEM 1 - BUSINESS
May Drilling Partnership 1983-1 (the "Drilling or General Partnership") and May
Limited Partnership 1983-1 (the "Limited Partnership") were organized by May
Petroleum Inc. ("May") to explore for and develop oil and gas reserves primarily
in Texas, Oklahoma and Louisiana. Funds received from the sale and production of
oil and gas reserves are used to pay the obligations of the Limited Partnership.
Funds not required by the Limited Partnership as working capital are distributed
to the participants in the Drilling Partnership and the general partner.
The general partner of the Limited Partnership is EDP Operating, Ltd., which is
one of the operating partnerships for Hallwood Energy Partners, L.P. ("HEP").
The Drilling Partnership is the sole limited partner of the Limited Partnership.
The Limited Partnership does not have any subsidiaries, nor does it engage in
any other kind of business. The Limited Partnership has no employees and is
operated by Hallwood Petroleum, Inc. ("HPI"), a subsidiary of HEP. In February
1999, HPI employed 122 full-time employees.
Pursuant to the terms of the general partnership agreement and the limited
partnership agreement, HEP is obligated, from time to time, to contribute
certain amounts, in property, cash or unreimbursed services, to the Limited
Partnership. As of December 31, 1998, all such required contributions had been
made.
The partnership agreements governing the Drilling Partnership and the Limited
Partnership provide for a fifteen-year term of existence. As a result, the term
of the Drilling Partnership and the Limited Partnership was through May 31,
1998.
Over the first nine months of 1999, the general partner will proceed to wind-up
the Drilling Partnership and the Limited Partnership. This process includes
preparing a final accounting, paying the liabilities of the Partnerships, and
making a liquidating distribution in accordance with the capital accounts of the
partners. The general partner believes that it would be in the best interests of
the partners to sell the assets of the Limited Partnership and distribute any
cash remaining after payment of liabilities. The Limited Partnership owns
minority interests in eight wells. The distribution of a pro rata direct working
interest in each property to each of the partners in the General Partnership
would not be feasible because of the large number of partners involved, the
small size of the resulting interests and, in general, the risks and
inconvenience that can be associated with being a small working interest owner.
The general partner is considering the alternatives available for the sale of
the Limited Partnership's properties. The general partner also plans to submit
to the partners for approval an amendment to the partnership agreements which
would permit the Limited Partnership to sell its oil and gas properties to the
general partner. During the first part of 1999, the partners will receive a
mailing soliciting their approval.
Participation in Expenses and Revenues
The principal expenses and revenues of the Limited Partnership are shared by the
general partner and the Drilling Partnership as set forth in the following
table. The charges and credits to participants in the Drilling Partnership are
shared among the participants in proportion to their ownership of units of
participation.
<TABLE>
<CAPTION>
Drilling General
Partnership Partner
<S> <C> <C>
Abandonment expenses (1) 99% 1%
Noncapital expenses 99% 1%
Direct expenses 99% 1%
Lease acquisition expenses 100%
Capital expenses 100%
Oil and gas revenues (2) (2)
Operating expenses (2) (2)
Special projects (2) (2)
General and administrative overhead (2) (2)
<FN>
(1) Includes expenses that would otherwise be allocated as lease acquisition
expenses and/or capital expenses but that relate to abandoned properties.
</FN>
<FN>
(2) Such items were shared 70% by the Drilling Partnership and 30% by the
general partner until December 31, 1984. As of December 31, 1984, and as
of December 31 of each year thereafter, the sharing of such items is
adjusted so the general partner's allocation equals the percentage that
the amount of Limited Partnership expenses allocated to the general
partner bears to the aggregate amount of Limited Partnership expenses
allocated to the general partner and the Drilling Partnership, plus 15
percentage points, but in no event will the general partner's allocation
exceed 50%. The sharing ratio for each of the last three years was:
1998 1997 1996
---- ---- ----
Limited Partner 57.5% 57.6% 57.7%
General Partner 42.5% 42.4% 42.3%
In 1999, the sharing ratio will be 57.4% to the limited partner and 42.6% to the
</FN>
</TABLE>
general partner.
To the extent that the characterization of any expense to the Limited
Partnership depends on its deductibility for federal income tax purposes, the
proper characterization is determined by the general partner (according to its
intended characterization on the Limited Partnership's federal income tax
return) in good faith at the time the expense is to be charged or credited. Such
characterization will control related charges and credits to the partners
regardless of any subsequent determination by the Internal Revenue Service or a
court of law that the reported expenses should be otherwise characterized for
tax purposes.
Competition
Oil and gas must compete with coal, atomic energy, hydro-electric power and
other forms of energy. See also "Marketing" for a discussion of the market
structure for oil and gas sales.
Regulation
Production and sale of oil and gas is subject to federal and state governmental
regulations in a variety of ways including environmental regulations, labor law,
interstate sales, excise taxes and federal, state and Indian lands royalty
payments. Failure to comply with these regulations may result in fines,
cancellation of licenses to do business and cancellation of federal, state or
Indian leases.
The production of oil and gas is subject to regulation by the state regulatory
agencies in the states in which the Limited Partnership does business. These
agencies make and enforce regulations to prevent waste of oil and gas and to
protect the rights of owners to produce oil and gas from a common reservoir. The
regulatory agencies regulate the amount of oil and gas produced by assigning
allowable production rates to wells capable of producing oil and gas.
Federal Income Tax Considerations
The Limited Partnership and the General Partnership are partnerships for federal
income tax purposes. Consequently, they are not taxable entities; rather, all
income, gains, losses, deductions and credits are passed through and taken into
account by the partners on their individual federal income tax returns. In
general, distributions are not subject to tax so long as such distributions do
not exceed the partner's adjusted tax basis. Any distributions in excess of the
partner's adjusted tax basis are taxed generally as capital gains.
<PAGE>
Marketing
The oil and gas produced from the properties owned by the Limited Partnership
has typically been marketed through normal channels for such products. Oil has
generally been sold to purchasers at field prices posted by the principal
purchasers of crude oil in the areas where the producing properties are located.
The majority of the Limited Partnership's gas production is sold on the spot
market and is transported in intrastate and interstate pipelines. Both oil and
natural gas are purchased by refineries, major oil companies, public utilities
and other users and processors of petroleum products.
Factors which, if they were to occur, might adversely affect the Limited
Partnership include decreases in oil and gas prices, the availability of a
market for production, rising operational costs of producing oil and gas,
compliance with and changes in environmental control statutes, and increasing
costs and difficulties of transportation.
Significant Customers
For the years ended December 31, 1998, 1997 and 1996, purchases by the following
companies exceeded 10% of the total oil and gas revenues of the Limited
Partnership:
1998 1997 1996
---- ---- ----
Conoco Inc. 76% 79% 89%
LIG Chemical Company 16%
Although the Limited Partnership sells the majority of its production to two
purchasers, there are numerous other purchasers in the area, so the loss of any
significant customer would not adversely affect the Limited Partnership's
operations.
Environmental Considerations
The exploration for, and development of, oil and gas involve the extraction,
production and transportation of materials which, under certain conditions, can
be hazardous or can cause environmental pollution problems. In light of the
present general interest in environmental problems, the general partner cannot
predict what effect possible future public or private action may have on the
business of the Limited Partnership. The Limited Partnership's historical
environmental expenditures have not been material and are not expected to be
material in the future. The general partner is continually taking all actions it
believes necessary in its operations to ensure conformity with applicable
federal, state and local environmental regulations and does not presently
anticipate that compliance with federal, state and local environmental
regulations will have a material adverse effect upon capital expenditures,
earnings or the competitive position of the Limited Partnership in the oil and
gas industry.
Insurance Coverage
The Limited Partnership is subject to all the risks inherent in the exploration
for, and development of, oil and gas, including blowouts, fires and other
casualties. The Limited Partnership maintains insurance coverage as is customary
for entities of a similar size engaged in operations similar to the Limited
Partnership's, but losses can occur from uninsurable risks or in amounts in
excess of existing insurance coverage. The occurrence of an event which is not
insured or not fully insured could have an adverse impact upon the Limited
Partnership's earnings and financial position.
Issues Related to the Year 2000
Although the Limited Partnership will most likely be liquidated prior to the
Year 2000, it is continuing to pursue its Year 2000 Plan so that it will be
prepared, if necessary, to address Year 2000 problems.
<PAGE>
General. The following Year 2000 statements constitute a Year 2000 Readiness
Disclosure within the meaning of the Year 2000 Information and Readiness
Disclosure Act of 1998. The Year 2000 problem has arisen because many existing
computer programs use only the last two digits to refer to a year. Therefore,
these computer programs do not properly recognize and process date sensitive
information beyond 1999. In general, there are two areas where Year 2000
problems may exist for the Limited Partnership: information technology such as
computers, programs and related systems ("IT") and non-information technology
systems such as embedded technology on a silicon chip ("Non IT").
The Plan. The Limited Partnership's Year 2000 Plan (the "Plan") has four phases:
(i) assessment, (ii) inventory, (iii) remediation, testing and implementation
and (iv) contingency plans. Approximately twelve months ago, the Limited
Partnership began its phase one assessment of its particular exposure to
problems that might arise as a result of the new millennium. The assessment and
inventory plans have been substantially completed and have assessed and
identified the Limited Partnership IT systems that must be updated or replaced
in order to be Year 2000 compliant. In particular, the software used by the
Limited Partnership for reservoir engineering must be updated or replaced.
Remediation, testing and implementation are scheduled to be completed by June
30, 1999, and the contingency plans phase of the Plan is scheduled to be
completed by September 30, 1999.
To date, the Limited Partnership has determined that its IT systems are either
compliant or can be made compliant without material cost. However, the effects
of the Year 2000 problem on IT systems are exacerbated because of the
interdependence of computer systems in the United States. The Limited
Partnership's assessment of the readiness of third parties whose IT systems
might have an impact on the Limited Partnership's business has thus far not
indicated any material problems; the process of inquiring of third parties and
reviewing their responses is underway but is not complete.
With regard to the Limited Partnership's Non IT systems, the Limited Partnership
believes that most of these systems can be brought into compliance on schedule.
The Limited Partnership's assessment of third party readiness is not yet
completed. Because Non IT systems are embedded chips, it is difficult to
determine with complete accuracy where all such systems are located. As part of
its Plan, the Limited Partnership is making formal and informal inquiries of its
vendors, customers and transporters in an effort to determine the third party
systems that might have embedded technology requiring remediation.
Estimated Costs. Although it is difficult to estimate the total costs of
implementing the Plan through January 1, 2000 and beyond, the Limited
Partnership's preliminary estimate is that such costs will not be material.
However, although management believes that its estimates are reasonable, there
can be no assurance, for the reasons stated in the next paragraph, that the
actual cost of implementing the Plan will not differ materially from the
estimated costs.
Potential Risks. The failure to correct a material Year 2000 problem could
result in an interruption in, or a failure of, certain normal business
activities or operations. This risk exists both as to the Limited Partnership's
IT and Non IT systems, as well as to the systems of third parties. Such failures
could materially and adversely affect the Limited Partnership's results of
operations, cash flow and financial condition. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the uncertainty of the
Year 2000 readiness of third party suppliers, vendors and transporters, the
Limited Partnership is unable to determine at this time whether the consequences
of Year 2000 failures will have a material impact on the Limited Partnership's
results of operations, cash flow or financial condition. Although the Limited
Partnership is not currently able to determine the consequences of Year 2000
failures, its current assessment is that its area of greatest potential risk is
in connection with the transporting and marketing of the oil and gas produced by
the Limited Partnership. The Limited Partnership is contacting the various
purchasers and pipelines with which it regularly does business to determine
their state of readiness for the Year 2000. The Limited Partnership's Year 2000
Plan is expected to significantly reduce the Limited Partnership's level of
uncertainty about the compliance and readiness of these material third parties.
The evaluation of third party readiness will be followed by the Limited
Partnership's development of contingency plans.
<PAGE>
Cautionary Statement Regarding Forward-Looking Statements
In the interest of providing the partners with certain information regarding the
Limited Partnership's future plans and operations, certain statements set forth
in this Form 10-K relate to management's future plans and objectives. Such
statements are forward-looking statements. Although any forward-looking
statements contained in this Form 10-K or otherwise expressed by or on behalf of
the Limited Partnership are, to the knowledge and in the judgment of the
officers and directors of the general partner, expected to prove true and come
to pass, management is not able to predict the future with absolute certainty.
Forward-looking statements involve known and unknown risks and uncertainties
which may cause the Limited Partnership's actual performance and financial
results in future periods to differ materially from any projection, estimate or
forecasted result. These risks and uncertainties include, among other things,
volatility of oil and gas prices, competition, risks inherent in the Limited
Partnership's oil and gas operations, the inexact nature of interpretation of
seismic and other geological and geophysical data, imprecision of reserve
estimates, the Limited Partnership's ability to replace and expand oil and gas
reserves, and such other risks and uncertainties described from time to time in
the Limited Partnership's periodic reports and filings with the Securities and
Exchange Commission. In addition, the dates for completion of the phases of the
Year 2000 Plan are based on the Limited Partnership's best estimates, which were
derived using numerous assumptions of future events. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-parties and the interconnection
of computer systems, the Limited Partnership cannot ensure its ability to timely
and cost-effectively resolve problems associated with the Year 2000 issue that
may affect its operations and business. Accordingly, partners are cautioned that
certain events or circumstances could cause actual results to differ materially
from those projected, estimated or predicted.
ITEM 2 - PROPERTIES
The Limited Partnership's oil and gas reserves are located on properties in
south Louisiana. The Limited Partnership's reserves are predominantly natural
gas, which accounts for 93% of estimated future gross revenues in the Limited
Partnership's reserve report as of December 31, 1998.
Significant Properties
At December 31, 1998, the following properties accounted for approximately 88%
of the Limited Partnership's proved oil and gas reserves. Reserve quantities
were obtained from the December 31, 1998 reserve report prepared by HPI's
petroleum engineers.
Boudreaux Prospect. The Boudreaux prospect is located in Lafayette Parish,
Louisiana. The Limited Partnership's interest in the prospect has remaining net
proved reserves of 6,900 bbls of oil and 344,600 mcf of gas as of December 31,
1998, all of which are developed and producing at December 31, 1998. The Limited
Partnership's working interest in this prospect ranges up to 1.1%.
Meaux Prospect. The Meaux prospect is located in Lafayette Parish, Louisiana.
The Limited Partnership's interest in the prospect has remaining net proved
reserves of 100 bbls of oil and 30,700 mcf of gas as of December 31, 1998, all
of which are developed and producing at December 31, 1998. The Limited
Partnership's working interest is 12%.
As part of the liquidation process, the general partner is considering the
alternatives available for the sale of the Limited Partnership's properties,
including a sale of the properties at public auction. The general partner also
plans to submit to the partners for approval an amendment to the partnership
agreements which would permit the Limited Partnership to sell its oil and gas
properties to the general partner, either at a public auction or in a private
sale.
ITEM 3 - LEGAL PROCEEDINGS
For a description of legal proceedings affecting the Limited Partnership, please
refer to Item 8 - Note 4.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
No matter was submitted to a vote of participants during the fourth quarter of
1998.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
a) The registrant's securities consist of partnership interests which are not
traded on any exchange and for which no established public trading market
exists.
b) As of December 31, 1998, there were approximately 734 holders of record of
partnership interests in the Drilling Partnership.
c) Distributions paid by the Limited Partnership were as follows
(in thousands):
General Limited
Partner Partner
1998 $71 $ 97
1997 42 58
1996 88 120
ITEM 6 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Limited Partnership
As of or for the Year Ended December 31,
----------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Total revenues $ 279 $ 288 $ 340 $ 227 $ 233
Oil and gas revenues 272 281 333 222 227
Net income 121 138 179 37 27
Working capital 382 214 152 155 103
Total assets 735 449 413 440 425
Partners' capital -- 429 391 420 401
Net assets in liquidation 382 -- -- -- --
</TABLE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The terms of the partnership agreements governing the General Partnership and
the Limited Partnership provide for a fifteen year term of existence which
extends through May 31, 1998. The partnerships are expected to be liquidated in
1999. As a result, the General Partnership and the Limited Partnership changed
their basis of accounting from the going concern basis to the liquidation basis
effective December 31, 1998. Accordingly, assets have been valued at estimated
realizable value, net of estimated disposition costs, and liabilities have been
adjusted to estimated settlement amounts, as follows (in thousands):
Appreciation of oil and gas properties
$ 335
Deferral of appreciated gain on oil and gas properties (335)
Liquidity and Capital Resources
Material changes in the Limited Partnership's cash position for the years ended
December 31, 1998 and 1997 are summarized as follows:
1998 1997
---- ----
(In thousands)
Cash provided by operating activities $ 182 $ 161
Distributions to partners (168) (100)
Additions to oil and gas properties (13) (13)
----- -----
Increase in cash $ 1 $ 48
======= =====
Cash provided by operating activities in 1998 was used for distributions to the
partners and additions to oil and gas properties. The Limited Partnership has
net working capital of $382,000 as of December 31, 1998. A distribution payable
to partners of record as of December 31, 1998 was declared in January 1999. The
distribution amount is $78,000, payable $44,850 to May Drilling Partnership
1983-1 partners and $33,150 to the general partner. Future distributions depend
on, among other things, continuation of current or higher oil and gas prices and
markets for production and future costs.
The Limited Partnership's proved reserves and discounted future net revenues
valued at year-end prices (discounted at 10% and before general and
administrative expenses) from proved reserves were estimated at 7,000 bbls and
430,000 mcf valued at $821,000 in 1998 and 9,000 bbls and 487,000 mcf valued at
$1,062,000 in 1997. The decrease in discounted future net revenues and the
fluctuation in the quantities resulted from a decrease in year-end oil and gas
prices, as well as current year production and changes in the estimated rates of
future production on certain wells. Estimates of discounted future net revenues
should not be construed as the current market value of the estimated oil and gas
reserves. In accordance with requirements of the Securities and Exchange
Commission, the estimated discounted future net revenues from proved reserves
are generally based on prices and costs as of the date of the estimate, whereas
actual future prices and costs may be materially higher or lower. In addition,
the 10% discount factor, which is required by the SEC for reporting purposes, is
not necessarily the most appropriate discount factor based on risks associated
with the production of the reserves or the oil and gas industry in general.
Accordingly, the price received from the sale of oil and gas reserves is not
generally the same as the estimated future net revenues for those reserves and
the amount received in liquidation of the assets.
Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general purpose financial statements. SFAS 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
The Limited Partnership adopted SFAS 130 on January 1, 1998. The Limited
Partnership does not have any items of other comprehensive income for the years
ended December 31, 1998, 1997 and 1996.
Therefore, total comprehensive income is the same as net income for those
periods.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards
for reporting selected information about operating segments and related
disclosures about products and services, geographic areas, and major customers.
SFAS 131 requires that an entity report financial and descriptive information
about its operating segments which are regularly evaluated by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. The Limited Partnership adopted SFAS 131 in 1998.
<PAGE>
The Limited Partnership engages in the development, production and sale of oil
and gas, and the acquisition, exploration, development and operation of oil and
gas properties in the continental United States. These activities exhibit
similar economic characteristics and involve the same products, production
processes, class of customers, and methods of distribution. Management of the
Limited Partnership evaluates its performance as a whole rather than by product
or geographically. As a result, the Limited Partnership's operations consist of
one reportable segment.
Results of Operations
1998 Compared to 1997
Gas Revenue
Gas revenue decreased $1,000 during 1998 compared with 1997. The decrease is due
to a decrease in the average gas price from $2.79 per mcf during 1997 to $2.32
per mcf during 1998, partially offset by a 19% increase in production as shown
below. Gas production increased because two temporarily shut-in wells were back
on line. The two wells were temporarily shut-in while workover procedures were
performed during the second quarter of 1997.
Oil Revenue
Oil revenue decreased $8,000 during 1998 compared with 1997 primarily due to a
decrease in the average oil price from $20.15 per barrel in 1997 to $13.16 per
barrel in 1998, partially offset by a 13% increase in production as shown in the
table below. Oil production increased because two temporarily shut-in wells were
back on line. The two wells were temporarily shut-in while workover procedures
were performed during the second quarter of 1997.
The following table summarizes the Limited Partnership's share of production
from the Limited Partnership's significant properties for 1998 and 1997.
<TABLE>
<CAPTION>
Net Production
1998 1997
Gas Oil Gas Oil
Parish, State and Well (Mcf) (Bbls) (Mcf) (Bbls)
Lafayette, Louisiana
<S> <C> <C> <C> <C>
Hutchinson #1 13,696 51 10,735 35
Meaux Prospect
--------------
Richard #1 15,671 175 16,510 209
Boudreaux Prospect
------------------
A.L. Boudreaux #1 74,031 1,470 60,280 1,265
G.S. Boudreaux Estate #1 1,857 37 1,088 23
Hallwood Fontenot #1 574 7 831 11
Other Properties 1,149 1 132 2
--------- --------- --------- ---------
Total Net Production 106,978 1,741 89,576 1,545
======= ===== ====== =====
</TABLE>
Lease Operating
Lease operating expense increased $5,000 during 1998 compared with 1997
primarily due to increased maintenance activity during 1998.
General and Administrative
General and administrative expenses decreased $3,000 during 1998 compared to
1997 primarily due to a decrease in performance based compensation expense.
Depletion
Depletion expense increased $11,000 during 1998 compared with 1997 due to a
higher depletion rate caused by the increase in production discussed above.
Litigation Settlement
Litigation settlement expense during 1997 represents the expense associated with
the settlement of property related claims.
Professional Services and Other
Professional services and other expense decreased $2,000 during 1998 as compared
with 1997. The decrease is comprised of a net decrease in miscellaneous other
expenses, none of which are individually significant.
1997 Compared to 1996
Gas Revenue
Gas revenue decreased $47,000 during 1997 as compared with 1996. The decrease is
due to a decrease in the average gas price from $2.92 per mcf during 1996 to
$2.79 per mcf during 1997, combined with a 12% decrease in production as shown
below. The decrease in production is primarily due to normal production
declines.
Oil Revenue
Oil revenue decreased $5,000 during 1997 as compared with 1996 primarily due to
a decrease in the average oil price from $21.67 per barrel in 1996 to $20.15 per
barrel in 1997, combined with an 8% decrease in production as shown in the table
below. The decrease in production is due to normal production declines.
The following table summarizes the Limited Partnership's share of production
from the Limited Partnership's significant properties for 1997 and 1996.
<TABLE>
<CAPTION>
Net Production
1997 1996
Gas Oil Gas Oil
Parish, State and Well (Mcf) (Bbls) (Mcf) (Bbls)
Lafayette, Louisiana
<S> <C> <C> <C> <C>
Hutchinson #1 10,735 35 14,023 45
Meaux Prospect
Richard #1 16,510 209 14,594 202
Middle Bayou Cannes
Duhon #1
Boudreaux Prospect
A.L. Boudreaux #1 60,280 1,265 70,752 1,391
G.S. Boudreaux Estate #1 1,088 23 1,201 23
Hallwood Fontenot #1 831 11 917 9
Other Properties 132 2 305 5
--------- --------- --------- ---------
Total Net Production 89,576 1,545 101,792 1,675
====== ===== ======= =====
</TABLE>
Lease Operating
Lease operating expense decreased $16,000 during 1997 as compared with 1996
primarily due to lower costs associated with salt water disposal resulting from
recompletion work performed during 1997 on the A. L. Boudreaux #1 and the G.S.
Boudreaux Estate #1 which lowered the production of saltwater.
General and Administrative
General and administrative expenses increased $5,000 during 1997 as compared to
1996 due to an increase in performance based compensation expense.
Depletion
Depletion expense decreased $4,000 during 1997 as compared with 1996 as a result
of decreased production and lower capitalized costs
during 1996.
Litigation Settlement
Litigation settlement expense during 1997 and 1996 represents the expense
associated with the settlement of property related claims.
Professional Services and Other
Professional services and other expense increased $2,000 during 1997 as compared
with 1996. The increase is comprised of an increase in legal fees relating to
the settlement of property related claims and an increase in miscellaneous other
expenses, none of which are individually significant.
<PAGE>
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Limited Partnership's primary market risk relates to changes in the prices
received from sales of oil and natural gas production. The Limited Partnership
manages its commodity price risks by using well-trained and experienced
marketing personnel to sell its production. The Limited Partnership does not use
any financial instruments or derivative commodity instruments that are subject
to price or interest rate risk.
<PAGE>
<TABLE>
<CAPTION>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Page
FINANCIAL STATEMENTS:
<S> <C>
Independent Auditors' Report 15
Statement of Net Assets in Liquidation at December 31, 1998 and Balance Sheet
at December 31, 1997 -
May Drilling Partnership 1983-1 16
Statement of Net Assets in Liquidation at December 31, 1998 and Balance Sheet
at December 31, 1997 -
May Limited Partnership 1983-1 17
Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996 -
May Limited Partnership 1983-1 18
Statement of Changes in Net Assets in Liquidation for the Year Ended December
31, 1998 and Statements of Changes in Partners' Capital for the Years Ended
December 31, 1997 and 1996 -
May Limited Partnership 1983-1 19
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 -
May Limited Partnership 1983-1 20
Notes to Financial Statements - May Drilling Partnership 1983-1
and May Limited Partnership 1983-1 21-25
SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED) 26
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of May Drilling Partnership 1983-1 and
May Limited Partnership 1983-1:
We have audited the accompanying financial statements of May Drilling
Partnership 1983-1 ("General Partnership") and May Limited Partnership 1983-1
("Limited Partnership") listed in the accompanying index at Item 8. These
financial statements are the responsibility of the Partnerships' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the financial statements, the terms of the partnership
agreements governing the General Partnership and the Limited Partnership provide
for a fifteen year term of existence which extends through May 31, 1998. The
partnerships are expected to be liquidated in 1999. As a result, the General
Partnership and the Limited Partnership have changed their basis of accounting
from the going concern basis to the liquidation basis effective December 31,
1998.
In our opinion, such financial statements present fairly, in all material
respects, (1) the net assets in liquidation of the General Partnership and the
Limited Partnership as of December 31, 1998, (2) the changes in net assets in
liquidation of the Limited Partnership for the year ended December 31, 1998, (3)
the financial position of the General Partnership and the Limited Partnership at
December 31, 1997, and (4) the results of operations and cash flows of the
Limited Partnership for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles on the bases
described in the preceding paragraph.
DELOITTE & TOUCHE LLP
Denver, Colorado
March 29, 1999
<PAGE>
<TABLE>
<CAPTION>
MAY DRILLING PARTNERSHIP 1983-1
STATEMENT OF NET ASSETS IN LIQUIDATION
AT DECEMBER 31, 1998 AND BALANCE SHEET
AT DECEMBER 31, 1997
(In thousands)
1998 1997
-------------- ---------
ASSETS
<S> <C> <C>
Investment in May Limited Partnership 1983-1 $149 $189
=== ===
PARTNERS' CAPITAL
Partners' Capital $189
NET ASSETS IN LIQUIDATION $149
<FN>
Note: The statements of operations, changes in net assets in liquidation,
changes in partners' capital and cash flows for May Drilling
Partnership 1983-1 are not presented because such information is equal
to the Limited Partners' share of such activity as presented in the May
Limited Partnership 1983-1 financial statements. The May Drilling
Partnership carries its investment in May Limited Partnership 1983-1 on
the equity method. The May Limited Partnership 1983-1 financial
statements should be read in conjunction with this balance sheet. The
May Limited Partnership 1983-1 changed its basis of accounting from the
going concern basis to the liquidation basis effective December 31,
1998 as described in Note 1 to the financial statements.
</FN>
<FN>
The accompanying notes are an integral part of
the financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
MAY LIMITED PARTNERSHIP 1983-1
STATEMENT OF NET ASSETS IN LIQUIDATION
AT DECEMBER 31, 1998 AND BALANCE SHEET
AT DECEMBER 31, 1997
(In thousands)
1998 1997
-------------- ---------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 164 $ 163
Accrued oil and gas revenues 35 51
Due from affiliate 13 20
Prepaid expenses 8
OIL AND GAS PROPERTIES:
At estimated net realizable value 515
Using the full cost method of accounting
less accumulated depletion of $7,100 215
---------- -------
TOTAL ASSETS 735 $ 449
------- =======
LIABILITIES
Accounts payable and accrued liabilities 18 $ 20
Deferred appreciated gain on oil and gas properties 335
-------
PARTNERS' CAPITAL
General partner 240
Limited partner 189
Total 429
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 449
=======
NET ASSETS IN LIQUIDATION $ 382
=======
<FN>
The accompanying notes are an integral part of
the financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
MAY LIMITED PARTNERSHIP 1983-1
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands, except for Unit and per Unit Information)
1998 1997 1996
---- ---- ----
REVENUES
<S> <C> <C> <C>
Gas revenue $ 249 $ 250 $ 297
Oil revenue 23 31 36
Interest income 7 7 7
-------- -------- --------
Total 279 288 340
------ ------ ------
COSTS AND EXPENSES
Lease operating 22 17 33
Production taxes 13 13 13
General and administrative 66 69 64
Depletion 48 37 41
Litigation settlement 3 1
Professional services and other 9 11 9
-------- -------- --------
Total 158 150 161
------ ------ ------
NET INCOME $ 121 $ 138 $ 179
====== ====== ======
ALLOCATION OF NET INCOME:
General Partner $ 64 $ 70 $ 87
======== ======== ========
Limited Partner $ 57 $ 68 $ 92
======== ======== ========
Per initial $1,000 Limited Partner investment $ 12.09 $ 14.43 $ 19.52
====== ====== ======
Weighted average initial $1,000 Limited
Partner investment units outstanding 4,713 4,713 4,713
====== ====== ======
<FN>
The accompanying notes are an integral part of
the financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
MAY LIMITED PARTNERSHIP 1983-1
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
(In thousands)
Net Assets
General Limited in
Partner Partner Liquidation Total
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995 $213 $207 $420
Net income 87 92 179
Distributions (88) (120) (208)
---- --- ---
BALANCE, December 31, 1996 212 179 391
Net income 70 68 138
Distributions (42) (58) (100)
---- ---- ---
BALANCE, December 31, 1997 240 189 429
Net income 64 57 121
Distributions (71) (97) (168)
Adjustments to liquidation basis:
Eliminate Partners' Capital (233) (149) (382)
Revaluation of assets and liabilities $ 382 382
------- ------- ----- -----
BALANCE, December 31, 1998 $ -0- $ -0- $ 382 $ 382
===== ===== ===== =====
<FN>
The accompanying notes are an integral part of
the financial statements.
</FN>
</TABLE>
<TABLE>
MAY LIMITED PARTNERSHIP 1983-1
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands)
1998 1997 1996
---- ---- ----
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 121 $ 138 $ 179
Adjustment to reconcile net income
to net cash provided by operating activities:
Depletion 48 37 41
Changes in assets and liabilities provided (used) cash:
Accrued oil and gas revenues 16 8 (7)
Due from affiliate 7 (20) 8
Prepaid expenses (8)
Accounts payable and accrued liabilities (2) 3 (3)
Payable to affiliate (5) 5
--------- -------- --------
Net cash provided by operating activities 182 161 223
------ ------ ------
INVESTING ACTIVITIES -
Additions to gas and oil properties (13) (13) (15)
------- ------- -------
FINANCING ACTIVITIES -
Distributions to partners (168) (100) (208)
------ ------ ------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 1 48
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR 163 115 115
------ ------ ------
END OF YEAR $ 164 $ 163 $ 115
====== ====== ======
<FN>
The accompanying notes are an integral part of
the financial statements.
</FN>
</TABLE>
MAY DRILLING PARTNERSHIP 1983-1
AND
MAY LIMITED PARTNERSHIP 1983-1
NOTES TO FINANCIAL STATEMENTS
(1) ACCOUNTING POLICIES AND OTHER MATTERS
General Partnership
May Drilling Partnership 1983-1, a Texas general partnership (the
"General Partnership"), was organized by May Petroleum Inc. ("May") for
the purposes of oil and gas exploration through May Limited Partnership
1983-1 (the "Limited Partnership"). The General Partnership was formed on
May 31, 1983, with investors ("Participants") subscribing an aggregate of
$4,713,000 in assessable $1,000 units. After the expenditure of the
initial contributions of the Participants, additional mandatory
assessments from each Participant are provided for under the terms of the
general partnership agreement in an amount up to 25% of the initial
contribution of the Participant. During 1984, May assessed the
Participants 13% of initial contributions. No additional assessments have
been made since 1984.
The general partnership agreement requires that the manager, Hallwood
Energy Partners, L.P. ("HEP"), offer to repurchase partnership interests
from Participants for cash at amounts to be determined by appraisal (as
set forth in the partnership agreement) of the Limited Partnership's net
assets no later than December 31, 1988, and during each succeeding year,
if such net assets are positive. The manager has made repurchase offers
in all years since 1989.
As the General Partnership is the sole limited partner of the Limited
Partnership, and there are no other revenues or expenses of the General
Partnership, its results of operations, changes in partners' capital and
cash flows are equal to the limited partner's share of the Limited
Partnership's results of operations, changes in partners' capital and
cash flows as set forth herein. Therefore, separate statements of
operations, changes in net assets in liquidation, changes in partners'
capital and cash flows are not presented for the General Partnership.
Limited Partnership
The Limited Partnership, a Texas limited partnership, was organized by
May and the General Partnership for the purpose of oil and gas
exploration and the production of crude oil, natural gas and petroleum
products. The Limited Partnership's oil and gas reserves are located in
prospects in south Louisiana. Among other things, the terms of the
limited partnership agreement (the "Agreement") give the general partner
the authority to borrow funds. The Agreement also requires that the
general partner's total capital contributions to the Limited Partnership
as of each year-end, including unrecovered general partner acreage and
equipment advances, must be compared to total Limited Partnership
expenditures from inception to date, and if such contributions are less
than 15% of such expenditures, an additional contribution in the amount
of the deficiency is required. At December 31, 1998, no additional
contributions were necessary to comply with this requirement.
On June 30, 1987, May sold to HEP all of its economic interest in the
Limited Partnership and account receivable balances due from the Limited
Partnership. HEP became the general partner of the Limited Partnership in
1988.
<PAGE>
The terms of the partnership agreements governing the General Partnership
and the Limited Partnership provide for a fifteen year term of existence
which extends through May 31, 1998. The partnerships are expected to be
liquidated in 1999. As a result, the General Partnership and the Limited
Partnership changed their basis of accounting from the going concern basis
to the liquidation basis effective December 31, 1998. Accordingly, assets
have been valued at estimated realizable value, net of estimated
disposition costs, and liabilities have been adjusted to estimated
settlement amounts, as follows (in thousands):
Appreciation of oil and gas properties $ 335
Deferral of appreciated gain on oil and gas properties (335)
The Company has received an appraisal indicating an appreciation of
$335,000 over the historical net carrying value of the Limited
Partnership's oil and gas properties. Because of the inherent uncertainty
about the timing and amount of the gain that may ultimately be realized,
such estimated gain has been deferred at December 31, 1998.
Upon completion of the liquidation process and settlement of all
liabilities, the General Partnership will distribute the remaining cash to
the General Partnership and Limited Partnership in accordance with the
terms of the partnership agreements.
The balance sheet of the General Partnership and the Limited Partnership
as of December 31, 1997 and the related statements of operations, and cash
flows of the Limited Partnership for each of the three years in the period
ended December 31, 1998, and the statements of partners' capital for the
years ended December 31, 1997 and 1996 have been prepared using the
historical cost (going concern) basis of accounting on which the General
Partnership and the Limited Partnership had previously reported their
financial condition and results of operations.
Over the first nine months of 1999, the general partner will proceed to
wind-up the Drilling Partnership and the Limited Partnership. This process
includes preparing a final accounting, paying the liabilities of the
Partnerships, and making a liquidating distribution in accordance with the
capital accounts of the partners. The general partner believes that it
would be in the best interests of the partners to sell the assets of the
Limited Partnership and distribute any cash remaining after payment of
liabilities. The Limited Partnership owns minority interests in eight
wells. The general partner is considering the alternatives available for
the sale of the Limited Partnership's properties. The general partner also
plans to submit to the partners for approval an amendment to the
partnership agreements which would permit the Limited Partnership to sell
its oil and gas properties to the general partner.
Sharing of Costs and Revenues
Capital costs, as defined by the Agreement, for commercially productive
wells and the costs related to the organization of the Limited Partnership
are borne by the general partner. Noncapital costs and direct expenses, as
defined by the Agreement, are charged 1% to the general partner and 99% to
the limited partner. Oil and gas sales, operating expenses and general and
administrative overhead are shared so that the general partner's
allocation will equal the percentage that the amount of Limited
Partnership expenses, as defined, allocated to the general partner bears
to the aggregate amount of Limited Partnership expenses allocated to the
general partner and the limited partner, plus 15 percentage points, but in
no event will the general partner's allocation exceed 50%. The sharing
ratio for each of the last three years was as follows:
1998 1997 1996
---- ---- ----
Limited Partner 57.5% 57.6% 57.7%
General Partner 42.5% 42.4% 42.3%
Significant Customers
For the years ended December 31, 1998, 1997 and 1996, purchases by the
following companies exceeded 10% of the total oil and gas revenues of the
Limited Partnership:
1998 1997 1996
---- ---- ----
Conoco Inc. 76% 79% 89%
LIG Chemical Company 16%
Although the Limited Partnership sells the majority of its production to
two purchasers, there are numerous other purchasers in the area, so the
loss of any significant customer would not adversely affect the Limited
Partnership's operations.
Income Taxes
No provision for federal income taxes is included in the financial
statements of the Limited Partnership or the General Partnership because,
as partnerships, they are not subject to federal income tax and the tax
effects of their activities accrue to the partners. The partnerships' tax
returns, the qualification of the General and Limited Partnerships as
partnerships for federal income tax purposes, and the amount of taxable
income or loss are subject to examination by federal and sate taxing
authorities. If such examinations result in changes to the partnerships'
taxable income or loss, the tax liability of the partners could change
accordingly.
Oil and Gas Properties
Prior to December 31, 1998, the Limited Partnership followed the full
cost method of accounting for oil and gas properties and, accordingly,
capitalized all costs associated with the exploration and development of
oil and gas reserves.
The capitalized costs of evaluated properties, including the estimated
future costs to develop proved reserves, are amortized on the units of
production basis. Full cost amortization per dollar of gross oil and gas
revenues was $.18 in 1998, $.13 in 1997 and $.12 in 1996.
Capitalized costs are limited to an amount not to exceed the present
value of estimated future net cash flows. No valuation adjustment was
required in 1998, 1997 or 1996.
Generally no gains or losses are recognized on the sale or disposition of
oil and gas properties. Maintenance and repairs are charged against
income when incurred.
Gas Balancing
The Limited Partnership uses the sales method of accounting for gas
balancing. Under this method, the Limited Partnership recognizes revenue
on all of its sales of production, and any over production or under
production is recovered at a future date.
As of December 31, 1998, the Limited Partnership had a net under-produced
position which was not considered material. On December 31, 1998, the
Limited Partnership adopted the liquidation basis of accounting. The net
gas imbalance at December 31, 1998 has not been assigned a value as the
Limited Partnership does not anticipate collection of these immaterial
imbalances.
Use of Estimates
The preparation of the financial statements for the Limited Partnership
and General Partnership in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
<PAGE>
Related Party Transactions
Hallwood Petroleum, Inc. ("HPI"), a subsidiary of the general partner,
pays all costs and expenses of operations and receives all revenues
associated with the Limited Partnership's properties. At month end, HPI
distributes revenues in excess of costs to the Limited Partnership.
The amounts due from HPI as of December 31, 1998 and 1997 were $13,000
and $20,000, respectively. These balances represent net revenues less
operating costs and expenses.
Cash Flows
All highly liquid investments purchased with an original maturity of
three months or less are considered to be cash equivalents.
Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general purpose financial statements.
SFAS 130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in
a financial statement that is displayed with the same prominence as other
financial statements. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. The
Limited Partnership adopted SFAS 130 on January 1, 1998. The Limited
Partnership does not have any items of other comprehensive income for the
years ended December 31, 1998, 1997 and 1996. Therefore, total
comprehensive income is the same as net income for those periods.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131 "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes
standards for reporting selected information about operating segments and
related disclosures about products and services, geographic areas, and
major customers. SFAS 131 requires that an entity report financial and
descriptive information about its operating segments which are regularly
evaluated by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Limited Partnership
adopted SFAS 131 in 1998.
The Limited Partnership engages in the development, production and sale
of oil and gas, and the acquisition, exploration, development and
operation of oil and gas properties in the continental United States.
These activities exhibit similar economic characteristics and involve the
same products, production processes, class of customers, and methods of
distribution. Management of the Limited Partnership evaluates its
performance as a whole rather than by product or geographically. As a
result, the Limited Partnership's operations consist of one reportable
segment.
(2) GENERAL AND ADMINISTRATIVE OVERHEAD
HPI conducts the day to day operations of the Limited Partnership and
other affiliated partnerships of HEP. The costs of operating the entities
are allocated to each entity based upon the time spent on that entity.
General and administrative overhead allocated by HPI to the Limited
Partnership totaled $56,000 in 1998, 1997 and 1996.
<PAGE>
(3) INCOME TAXES
As a result of differences between the accounting treatment of certain
items for income tax purposes and financial reporting purposes, primarily
depreciation, depletion and amortization of oil and gas properties and
the recognition of intangible drilling costs as an expense or capital
item, the income tax basis of oil and gas properties differs from the
basis used for financial reporting purposes. At December 31, 1998 and
1997 the income tax bases of the Limited Partnership's oil and gas
properties were approximately $85,000 and $89,000, respectively.
(4) LITIGATION SETTLEMENT
In June 1996, the Limited Partnership and the other parties to the
lawsuits styled Lamson Petroleum Corporation v. Hallwood Petroleum, Inc.
et al. settled the lawsuits. The plaintiffs in the lawsuits claimed they
had valid leases covering streets and roads in the units of the A.L.
Boudreaux #1 well, G.S. Boudreaux #1 well, Paul Castille #1 well,
Evangeline Shrine Club #1 well and Duhon #1 well, which represented
approximately 3% to 4% of the Limited Partnership's interest in these
properties, and they were entitled to a portion of the production from
the wells dating from February 1990. In the settlement, the Limited
Partnership and the plaintiffs agreed to cross-convey interests in
certain leases to one another, and the Limited Partnership agreed to pay
the plaintiffs $25,000. The Limited Partnership had not recognized
revenue attributable to the contested leases since January 1993. These
revenues, totaling $24,000, had been placed in escrow pending the
resolution of the lawsuits. The excess of the cash paid over the escrowed
amounts, is reflected as litigation settlement expense in the
accompanying financial statements. The cross-conveyance of the interests
in the leases resulted in a decrease in the Limited Partnership's
reserves of $15,000 in future net revenues, discounted at 10% based on
oil and gas prices in effect as of December 31, 1996.
<PAGE>
SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION
(Unaudited)
The following tables contain certain costs and reserve information related to
the Limited Partnership's oil and gas activities. The Limited Partnership has no
long-term supply agreements and all reserves are located within the United
States.
<TABLE>
<CAPTION>
Costs Incurred -
For the Year Ended December 31,
1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Development costs $ 13 $ 13 $ 15
=== === ===
</TABLE>
<TABLE>
<CAPTION>
Oil and Gas Reserves (valued at year-end prices discounted at 10%) -
1998 1997 1996
---- ---- ----
Mcf Bbls Mcf Bbls Mcf Bbls
(In thousands)
Total Proved Reserves:
<S> <C> <C> <C> <C> <C> <C>
Beginning of period 487 9 575 11 632 12
Revisions to previous
estimates 50 2 45 1
Production (107) (2) (90) (2) (102) (2)
---- ---- ---- ---- ---- -----
End of Period 430 7 487 9 575 11
=== === === ===== === ====
Proved Developed Reserves:
Beginning of period 487 9 575 11 632 12
=== === === === === ===
End of period 430 7 487 9 575 11
=== === === ==== === ===
</TABLE>
Certain reserve value information is provided directly to partners pursuant to
the Agreement. Accordingly, such information is not presented herein.
<PAGE>
ITEM 9 - DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Drilling Partnership and Limited Partnership are managed by
affiliates of HEP and do not have directors or executive
officers.
ITEM 11 - EXECUTIVE COMPENSATION
The partnerships pay no salaries or other direct remuneration to
officers, directors or key employees of the general partner or
HPI. The Limited Partnership reimburses the general partner for
general and administrative costs incurred on behalf of the
partnerships. See Note 2 to the Financial Statements.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the knowledge of the general partner, no person owns of
record or beneficially more than 5% of the Drilling
Partnership's outstanding units, other than HEP, the address of
which is 4582 S. Ulster Street Parkway, Denver, Colorado 80237,
and which beneficially owns approximately 42% of the outstanding
units. The general partner of HEP is HEPGP Ltd.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information with respect to the Limited Partnership and its
relationships and transactions with the general partner, see
Part I, Item 1 and Part II, Item 7.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. Financial Statements and Schedules:
See Index at Item 8.
b. Reports on Form 8-K - None.
c. Exhibits:
3.1 The General Partnership Agreement and the Limited Partnership
Agreement filed as an Exhibit to Registration Statement No.
0-11311, are incorporated herein by reference.
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Partnerships have duly caused this report to be
signed on their behalf by the undersigned, thereunto duly authorized.
MAY DRILLING PARTNERSHIP 1983-1
MAY LIMITED PARTNERSHIP 1983-1
By: EDP OPERATING, LTD.,
General Partner
By: HEPGP LTD.,
General Partner
By: HALLWOOD G. P., INC.,
General Partner
Date: March 29, 1999 By: /s/William L. Guzzetti
William L. Guzzetti
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/Thomas J. Jung Vice President March 29, 1999
Thomas J. Jung (Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-K
for the year ended December 31, 1998 for May Limited Partnership 1983-1 and is
qualified in its entirety by reference to such Form 10-K.
</LEGEND>
<CIK> 0000725650
<NAME> May Limited Partnership 1983-1
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 164
<SECURITIES> 0
<RECEIVABLES> 48
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 220
<PP&E> 515
<DEPRECIATION> 0
<TOTAL-ASSETS> 735
<CURRENT-LIABILITIES> 353
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 353
<SALES> 272
<TOTAL-REVENUES> 279
<CGS> 0
<TOTAL-COSTS> 35
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 121
<INCOME-TAX> 0
<INCOME-CONTINUING> 121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121
<EPS-PRIMARY> 12.09
<EPS-DILUTED> 12.09
</TABLE>
