UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
MARK ONE
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1999
[ ] 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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
<PAGE>
<TABLE>
<CAPTION>
MAY DRILLING PARTNERSHIP 1983-1
STATEMENTS OF NET ASSETS IN LIQUIDATION
(Unaudited)
(In thousands)
March 31, December 31,
1999 1998
ASSETS
<S> <C> <C>
Investment in May Limited Partnership 1983-1 $ 109 $ 149
==== ====
NET ASSETS IN LIQUIDATION $ 109 $ 149
==== ====
</TABLE>
NOTE: The statements of operations, changes in net assets in liquidation,
and cash flows for May Drilling Partnership 1983-1 are not presented
because such information is equal to the limited partner's 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 these statements of net assets in
liquidation. 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.
The accompanying note is an integral part of the
financial statements.
<PAGE>
<TABLE>
<CAPTION>
MAY LIMITED PARTNERSHIP 1983-1
STATEMENTS OF NET ASSETS IN LIQUIDATION
(Unaudited)
(In thousands)
March 31, December 31,
1999 1998
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 112 $ 164
Accrued oil and gas sales 32 35
Due from affiliate 8 13
Prepaid expenses 2 8
OIL AND GAS PROPERTIES
At estimated net realizable value 515 515
------ ------
TOTAL ASSETS 669 735
------ ------
LIABILITIES
Accounts payable and accrued liabilities 10 18
Deferred appreciated gain on oil and gas properties 338 335
------ ------
NET ASSETS IN LIQUIDATION $ 321 $ 382
====== ======
</TABLE>
The accompanying note is an integral part of the
financial statements.
<PAGE>
<TABLE>
<CAPTION>
MAY LIMITED PARTNERSHIP 1983-1
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR THE
THREE MONTHS ENDED MARCH 31, 1999
AND STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(In thousands, except for unit information)
1999 1998
---- ----
REVENUES
<S> <C> <C>
Gas revenue $ 48 $ 63
Oil revenue 5 6
Interest 2 2
-------- --------
Total 55 71
------- -------
COSTS AND EXPENSES
Lease operating 9 9
General and administrative 15 15
Depletion 11 11
Professional services and other 3 3
-------- --------
Total 38 38
------- -------
NET INCOME FROM OPERATIONS 17 $ 33
=======
NET ASSETS IN LIQUIDATION,
BEGINNING OF PERIOD 382
DISTRIBUTIONS TO PARTNERS (78)
NET ASSETS IN LIQUIDATION,
END OF PERIOD $ 321
======
ALLOCATION OF NET INCOME:
General Partner $ 18
=======
Limited Partner $ 15
=======
Per initial $1,000 limited partner
investment $ 3.18
======
Weighted average initial $1,000 limited
partner investment units outstanding 4,713
</TABLE>
The accompanying note is an integral part of the
financial statements.
<PAGE>
<TABLE>
<CAPTION>
MAY LIMITED PARTNERSHIP 1983-1
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(In thousands)
OPERATING ACTIVITIES:
<S> <C>
Net income $ 33
Adjustment to reconcile net income to
net cash provided by operating activities:
Depletion 11
Changes in assets and liabilities provided (used) cash:
Accrued oil and gas sales 9
Due from affiliate 7
Accounts payable and accrued liabilities (7)
-------
Net cash provided by operating activities 53
------
INVESTING ACTIVITIES -
Additions to oil and gas properties (3)
-------
FINANCING ACTIVITIES -
Distributions to partners (83)
NET DECREASE IN CASH AND CASH EQUIVALENTS
(33)
CASH AND CASH EQUIVALENTS:
Balance, beginning of period 163
Balance, end of period $ 130
======
</TABLE>
The accompanying note is an integral part of the
financial statements.
<PAGE>
MAY LIMITED PARTNERSHIP 1983-1
NOTE TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
The financial statements presented are those of May Limited Partnership 1983-1
(the "Partnership"). The interim financial data are unaudited; however, in the
opinion of the general partner, the interim data include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results for the interim periods. These financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Partnership's December 31, 1998 Annual Report on Form 10-K.
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):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Appreciation of oil and gas properties $ 338 $ 335
Deferral of appreciated gain on oil and gas properties (338) (335)
</TABLE>
The Company has received a fair market value appraisal of its properties. When
the appraised value is compared to the historical net carrying value of the
Limited Partnership's oil and gas properties, there is an appreciation of
$338,000 and $335,000 at March 31, 1999 and December 31, 1998, respectively.
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 March 31,
1999 and 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 statements of operations, and cash flows of the Limited Partnership for
three months ended March 31, 1998 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.
After giving further consideration to the alternatives available for liquidation
of the partnerships, and in accordance with the terms of the partnership
agreement, the general partner has determined to distribute to each partner a
pro rata share of the assets of the partnership. The general partner is
currently in the process of preparing a final accounting and determining the
capital accounts of the partners. As a liquidating distribution, each partner
will receive (i) an assignment of a direct working interest in the leases
associated with the eight wells in which the partnership has an interest and
(ii) a distribution of cash remaining after payment of all obligations of the
partnership. The general partner anticipates that the liquidating distribution
will be made prior to July 30, 1999. A final 1999 Schedule K-1 will be generated
within 90 days after the payment of the liquidating distribution.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership distributed $78,000 to partners during the three months ended
March 31, 1999. A distribution payable to partners of record as of March 31,
1999 was declared in April 1999. The distribution amount is $70,000 payable
$40,250 to May Drilling Partnership 1983-1 partners and $29,750 to the general
partner.
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.
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.
<PAGE>
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.
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-Q relate to management's future plans and objectives. Such
statements are forward-looking statements. Although any forward-looking
statements contained in this Form 10-Q 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.
Results of Operations
First Quarter 1999 Compared to First Quarter 1998
Gas Revenue
Gas revenue decreased $15,000 during the first quarter of 1999 compared to the
first quarter of 1998 due to a decrease in price and a decrease in production.
The average gas price decreased from $2.42 per mcf in 1998 to $1.91 per mcf in
1999. Gas production decreased 3% primarily due to normal production declines.
Oil Revenue
Oil revenue decreased $1,000 during the first quarter of 1999 compared to the
first quarter of 1998. The average oil price decreased from $16.12 per barrel in
1998 to $11.19 per barrel in 1999. The price decline was partially offset by a
19% increase in production resulting from workover procedures performed during
1998.
<PAGE>
Lease Operating
Lease operating expense remained consistent during the first quarter of 1999
compared to the first quarter of 1998 primarily due to decreased production
taxes related to the decreased oil and gas revenue discussed above, offset by
increased operating expenses.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Reference is made to Item 8 - Note 4 of Form 10-K for the year
ended December 31, 1998.
ITEM 2 - CHANGES IN SECURITIES
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, 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: May 11, 1999 By: /s/Thomas J. Jung
Thomas J. Jung, Vice President
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-Q
for the three months ended March 31, 1999 for May Limited Partnership 1983-1 and
is qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<CIK> 0000725650
<NAME> May Limited Partnership 1983-1
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 112
<SECURITIES> 0
<RECEIVABLES> 40
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 515
<DEPRECIATION> 0
<TOTAL-ASSETS> 669
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 669
<SALES> 53
<TOTAL-REVENUES> 55
<CGS> 0
<TOTAL-COSTS> 9
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17
<INCOME-TAX> 0
<INCOME-CONTINUING> 17
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
