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 September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 2-89194
MAY DRILLING PARTNERSHIP 1984-1
MAY LIMITED PARTNERSHIP 1984-1
(Exact name of registrant as specified in its charter)
75-1973664
Texas 75-1973661
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4610 South Ulster Street Parkway
Suite 200
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 1984-1
STATEMENTS OF NET ASSETS (LIABILITIES) IN LIQUIDATION
(Unaudited)
(In thousands)
September 30, December 31,
1999 1998
ASSETS
<S> <C> <C>
Investment in May Limited Partnership 1984-1 $ 40
LIABILITIES
Investment in May Limited Partnership 1984-1 $ (42)
NET ASSETS (LIABILITIES) IN LIQUIDATION $ (42) $ 40
<FN>
NOTE: The statements of operations, changes in net assets in liquidation, and
cash flows for May Drilling Partnership 1984-1 are not presented because such
information is equal to the limited partner's share of such activity as
presented in the May Limited Partnership 1984-1 financial statements. The May
Drilling Partnership carries its investment in May Limited Partnership 1984-1 on
the equity method. The May Limited Partnership 1984-1 financial statements
should be read in conjunction with these statements of net assets (liabilities)
in liquidation. The May Limited Partnership 1984-1 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 note is an integral part of the financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAY LIMITED PARTNERSHIP 1984-1
STATEMENTS OF NET ASSETS IN LIQUIDATION
(Unaudited)
(In thousands)
September 30, December 31,
1999 1998
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 52 $ 140
Accrued oil and gas sales 25 40
Due from affiliate 12 19
OIL AND GAS PROPERTIES,
At estimated net realizable value 215 61
TOTAL ASSETS 304 260
LIABILITIES
Accounts payable and accrued liabilities 57 11
Deferred appreciated gain on oil and gas properties 173 52
NET ASSETS IN LIQUIDATION $ 74 $ 197
<FN>
The accompanying note is an integral part of the financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAY LIMITED PARTNERSHIP 1984-1
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1999
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited)
(In thousands, except for unit information)
1999 1998
REVENUES
<S> <C> <C>
Gas revenue $ 27 $ 54
Oil revenue 17 28
Interest 2 3
Total 46 85
COSTS AND EXPENSES
Lease operating 4 5
Production taxes 2 6
General and administrative 8 8
Depletion 12 3
Professional services and other 2 2
Total 28 24
NET INCOME FROM OPERATIONS 18 $ 61
NET ASSETS IN LIQUIDATION,
BEGINNING OF PERIOD 111
DISTRIBUTIONS TO PARTNERS (55)
NET ASSETS IN LIQUIDATION,
END OF PERIOD $ 74
ALLOCATION OF NET INCOME:
General Partner $ 23
Limited Partner $ 38
Per initial $1,000 limited partner
investment $ 7.08
Weighted average initial $1,000 limited
partner investment units outstanding 5,371
<FN>
The accompanying note is an integral part of the financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAY LIMITED PARTNERSHIP 1984-1
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1999
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited)
(In thousands, except for unit information)
1999 1998
REVENUES
<S> <C> <C>
Gas revenue $ 91 $ 205
Oil revenue 51 102
Interest 4 9
Total 146 316
COSTS AND EXPENSES
Lease operating 13 17
Production taxes 10 22
General and administrative 22 22
Depletion 15 9
Professional services and other 9 9
Total 69 79
NET INCOME FROM OPERATIONS 77 $ 237
NET ASSETS IN LIQUIDATION,
BEGINNING OF PERIOD 197
DISTRIBUTIONS TO PARTNERS (200)
NET ASSETS IN LIQUIDATION,
END OF PERIOD $ 74
ALLOCATION OF NET INCOME:
General Partner $ 91
Limited Partner $ 146
Per initial $1,000 limited partner
investment $27.18
Weighted average initial $1,000 limited
partner investment units outstanding 5,371
<FN>
The accompanying note is an integral part of the financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAY LIMITED PARTNERSHIP 1984-1
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited)
(In thousands)
OPERATING ACTIVITIES:
<S> <C>
Net income $ 237
Adjustment to reconcile net income to net
cash provided by operating activities:
Depletion 9
Changes in assets and liabilities provided (used) cash:
Accrued oil and gas sales 83
Due from affiliate 43
Accounts payable and accrued liabilities (4)
Net cash provided by operating activities 368
FINANCING ACTIVITIES -
Distributions to partners (443)
NET DECREASE IN CASH AND
CASH EQUIVALENTS (75)
CASH AND CASH EQUIVALENTS:
Balance, beginning of period 221
Balance, end of period $ 146
<FN>
The accompanying note is an integral part of the financial
statements.
</FN>
</TABLE>
<PAGE>
MAY LIMITED PARTNERSHIP 1984-1
NOTE TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
The financial statements presented are those of May Limited Partnership 1984-1
(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 July 18, 1999. The partnerships are expected to be liquidated in
December 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>
September 30, December 31,
1999 1998
<S> <C> <C>
Appreciation of oil and gas properties $ 173 $ 52
Deferral of appreciated gain on oil and gas properties (173) (52)
</TABLE>
The Company received an appraisal of its properties as of March 1, 1999. This
fair market appraisal has been updated by the Limited Partnership's in-house
engineers to reflect the recent increase in oil and gas prices and the results
of the workover procedures performed on the Freddie Aker #1 well. 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 $173,000 and
$52,000 at September 30, 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 September 30,
1999 and December 31, 1998.
The statements of operations for the three months and the nine months ended
September 30, 1998, and cash flows of the Limited Partnership for the nine
months ended September 30, 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 July 18, 1999, the general partner began winding-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
Limited Partnership owns a minority interest in one well. The general partner
anticipates that it will distribute any cash remaining after the payment of
liabilities, and will assign working interests in the well to the partners.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership distributed $200,000 to partners during the first nine months of
1999. The Partnership did not pay a distribution for the quarter ended September
30, 1999.
<PAGE>
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 was substantially completed by September
30, 1999, and the contingency plans phase of the Plan is scheduled to be
completed by November 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.
Because Non IT systems are embedded chips, it is difficult to determine with
complete accuracy where all such systems are located. However, to the best
knowledge of the general partner, the Limited Partnership's assessment of third
party readiness is complete.
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 large 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. Primarily
because of its reliance on third party suppliers, the Limited Partnership is not
currently able to determine the consequences of Year 2000 failures, however, 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 has contacted the various purchasers and
pipelines with which it regularly does business to determine their state of
readiness for the Year 2000. While the purchasers and pipelines contacted by the
Limited Partnership will not guarantee their January 2000 readiness, to date,
none have indicated that they expect to encounter any serious problems.
<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-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, risk of mechanical failure, 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
Third Quarter 1999 Compared to Third Quarter 1998
Gas Revenue
Gas revenue decreased $27,000 during the third quarter of 1999 compared to the
third quarter of 1998 due to a 62% decrease in production partially offset by an
increase in the average gas price. The decrease in production is due to
increased rates of water production on the Freddie Aker #1 well in Louisiana.
The average gas price increased from $2.27 per mcf in 1998 to $3.03 in 1999.
Oil Revenue
Oil revenues decreased $11,000 in the third quarter of 1999 compared to the
third quarter of 1998 as a result of a decrease in production partially offset
by an increase in the average oil price. Oil production decreased 62% on the
Freddie Aker #1 well due to increased rates of water production on the well. The
average oil price increased from $12.21 per barrel in 1998 to $19.58 per barrel
in 1999.
Interest
Interest income decreased $1,000 during the third quarter of 1999 compared to
the third quarter of 1998 due to a lower average cash balance during 1999.
Lease Operating
Lease operating expense decreased $1,000 during the third quarter of 1999
compared to the third quarter of 1998 due to decreased maintenance activity on
the Freddie Aker #1 well.
Production Taxes
Production taxes decreased $4,000 during the third quarter of 1999 compared to
the third quarter of 1998 due to decreased production previously discussed.
<PAGE>
Depletion
Depletion expense increased $9,000 during the third quarter of 1999 compared to
the third quarter of 1998 due to an increase in capitalized costs during 1999
resulting from workover procedures performed on the Freddie Aker #1 well.
Nine Months Ended September 30, 1999 Compared to the Nine Months Ended September
30, 1998
The comparisons for the nine months ended September 30, 1999 and the nine months
ended September 30, 1998 are consistent with those discussed in the third
quarter 1999 compared to the third quarter of 1998 except for the following.
Gas Revenue
Gas revenue decreased $114,000 during the first nine months of 1999 as compared
to the corresponding period in 1998 due to a decrease in production. Gas
production decreased 55% due to increased rates of water production on the
Freddie Aker #1 well. The average gas price remained constant at $2.52 per mcf
in 1998 and in 1999.
Oil Revenue
Oil revenue decreased $51,000 during the first nine months of 1999 as compared
to the corresponding period in 1998 due to a decrease in production, partially
offset by an increase in the average oil price. Oil production decreased 53% due
to increased rates of water production on the Freddie Aker #1 well. The average
oil price increased from $13.46 per barrel in 1998 to $14.40 per barrel in 1999.
<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 1984-1
MAY LIMITED PARTNERSHIP 1984-1
By: HALLWOOD ENERGY PARTNERS, L.P.,
General Partner
By: HEC ACQUSITION CORP.
General Partner
Date: November 10, 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 quarter ended September 30, 1999 for May Drilling Partnership 1984-1 and
is qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<CIK> 0000739645
<NAME> May Drilling Partnership 1984-1
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 52
<SECURITIES> 0
<RECEIVABLES> 37
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 215
<DEPRECIATION> 0
<TOTAL-ASSETS> 304
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 304
<SALES> 142
<TOTAL-REVENUES> 146
<CGS> 0
<TOTAL-COSTS> 23
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 77
<INCOME-TAX> 0
<INCOME-CONTINUING> 77
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
