DYCO OIL & GAS PROGRAM 1985-1 LIMITED PARTNERSHIP, 10-K405, 1996-02-20

DYCO OIL & GAS PROGRAM 1985-1 LIMITED PARTNERSHIP
10-K405, 1996-02-20
DRILLING OIL & GAS WELLS

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FORM 10-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the fiscal year ended December 31, 1995

Commission File Number 2-92702 (1985-1 Program)
2-92702-01 (1985-2 Program)

DYCO 1985 OIL AND GAS PROGRAMS
(TWO LIMITED PARTNERSHIPS)
(Exact name of registrant as specified in its charter)
41-1498087 (1985-1 Program)
Minnesota 41-1498086 (1985-2 Program)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

Samson Plaza
Two West Second Street
Tulsa, Oklahoma 74103
(Address of principal (Zip Code)
executive offices)

Registrant's telephone number, including area code: (918) 583-1791

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act:
Units of limited partnership interest

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 the 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.
Yes X No (Disclosure is contained herein)
----- -----

The units of limited partnership are not publicly traded,
therefore, registrant cannot compute the aggregate market value of the
voting units held by non-affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE: None.
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FORM 10-K

DYCO 1985 OIL AND GAS PROGRAMS
(Two Minnesota limited partnerships)

TABLE OF CONTENTS

PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . 5
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED
PARTNERS . . . . . . . . . . . . . . . . . . . . . 12

PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP
UNITS AND RELATED LIMITED PARTNER MATTERS . . . . 12
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . 47

PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT . . . . . . . . . . . . . . . . . . . . 47
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . 49
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . 54
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . 55

PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 56
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 59
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PART I

ITEM 1. BUSINESS

General

The Dyco Oil and Gas Program 1985-1 Limited Partnership (the
"1985-1 Program") and Dyco Oil and Gas Program 1985-2 Limited
Partnership (the "1985-2 Program") (collectively, the "Programs") are
Minnesota limited partnerships engaged in the production of oil and
gas. The 1985-1 Program and 1985-2 Program commenced operations on
April 1, 1985 and August 26, 1985, respectively, with the primary
financial objective of investing their limited partners' subscriptions
in the drilling of oil and gas prospects and then distributing to
their limited partners all available cash flow from the Program's on-
going production operations. Dyco Petroleum Corporation ("Dyco")
serves as the General Partner of the Programs. See "Item 2.
Properties" for a description of the Programs' reserves and
properties.

The limited partnership agreements for each of the Programs
provide that limited partners are allocated 99% of all Program costs
and revenues and that Dyco, as General Partner, is allocated 1% of all
Program costs and revenues. Included in such costs is each Program's
reimbursement to Dyco of the Program's proportionate share of Dyco's
geological, engineering, and general and administrative expenses.

Dyco serves as General Partner of 34 limited partnerships,
including the Program. Dyco is a wholly-owned subsidiary of Samson
Natural Gas Company, which is a wholly-owned subsidiary of Samson
Investment Company. Samson Investment Company and its various
corporate subsidiaries, including Dyco, (collectively, the "Samson
Companies") are engaged in the production and development of and
exploration for oil and gas reserves and the acquisition and operation
of producing properties. At December 31, 1995, the Samson Companies
owned interests in approximately 18,000 oil and gas wells located in
19 states of the U.S. and 3 provinces of Canada. At December 31,
1995, the Samson Companies operated approximately 3,100 oil and gas
wells located in 15 states of the U.S. and 2 provinces of Canada,
Venezuela, and Russia.

As limited partnerships, the Programs have no officers,
directors, or employees. They rely instead on the personnel of Dyco
and the other Samson Companies. As of February 1, 1996, the Samson
Companies employed approximately 830 persons. No employees are
covered by collective bargaining agreements, and management believes
that the Samson Companies provide a sound employee relations
environment. For information regarding the executive officers of
Dyco, see "Item 10. Directors and Executive Officers of the
Registrant."

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Dyco's and the Programs' principal place of business is located
at Samson Plaza, Two West Second Street, Tulsa, Oklahoma 74103, and
their telephone number is (918) 583-1791 or (800) 535-1791.

Funding

Although the Programs' partnership agreements permit the Programs
to incur borrowings, each Program's operations and expenses are
currently funded out of each Program's revenues from oil and gas
sales. Dyco may, but is not required to, advance funds to each of the
Programs for the same purposes for which Program borrowings are
authorized.

Principal Products Produced and Services Rendered

The Programs' sole business is the development and production of
oil and natural gas with a concentration on natural gas. The
Programs do not hold any patents, trademarks, licenses, or concessions
and are not a party to any government contracts. The Programs have no
backlog of orders and do not participate in research and development
activities. The Programs are not presently encountering shortages of
oilfield tubular goods, compressors, production material, or other
equipment.

Oil, Gas, and Environmental Control Regulations

Regulation of Production Operations -- The production of oil and
gas is subject to extensive federal and state laws and regulations
governing a wide variety of matters, including the drilling and
spacing of wells, allowable rates of production, prevention of waste
and pollution, and protection of the environment. In addition to the
direct costs borne in complying with such regulations, operations and
revenues may be impacted to the extent that certain regulations limit
oil and gas production to below economic levels.

Regulation of Sales and Transportation of Oil and Natural Gas --
Sales of crude oil and condensate are made by the Programs at market
prices and are not subject to price controls. The sale of natural gas
may be subject to both federal and state laws and regulations,
including, but not limited to, the Natural Gas Act of 1938 (the
"NGA"), the Natural Gas Policy Act of 1978 (the "NGPA"), and
regulations promulgated by the Federal Energy Regulatory Commission
(the "FERC") under the NGA, the NGPA, and other statutes. The
provisions of the NGA and the NGPA, as well as the regulations
thereunder, are complex and affect all who produce, resell, transport,
or purchase natural gas, including the Programs. Although virtually
all of the Programs' gas production is not subject to price

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regulation, the NGA, NGPA, and FERC regulations affect the
availability of gas transportation services and the ability of gas
consumers to continue to purchase or use gas at current levels.
Accordingly, such regulations may have a material effect on the
Programs' operations and projections of future oil and gas production
and revenues.

Future Legislation -- Legislation affecting the oil and gas
industry is under constant review for amendment or expansion. Because
such laws and regulations are frequently amended or reinterpreted,
management is unable to predict what additional energy legislation may
be proposed or enacted or the future cost and impact of complying with
existing or future regulations.

Regulation of the Environment -- The Programs' operations are
subject to numerous laws and regulations governing the discharge of
materials into the environment or otherwise relating to environmental
protection. Compliance with such laws and regulations, together with
any penalties resulting from noncompliance therewith, may increase the
cost of the Programs' operations or may affect the Programs' ability
to complete, in a timely fashion, existing or future activities.
Management anticipates that various local, state, and federal
environmental control agencies will have an increasing impact on oil
and gas operations.

Significant Customers

Purchases of gas by Premier Gas Company ("Premier") accounted for
approximately 52.4% of the 1985-1 Program's oil and gas revenues
during the year ended December 31, 1995. With respect to the 1985-2
Program, purchases of gas by Premier accounted for approximately 28.6%
of the 1985-2 Program's oil and gas revenues during the year ended
December 31, 1995. Premier was an affiliate of Dyco until December 6,
1995. See "Item 11. Executive Compensation." In the event of
interruption of purchases by this significant customer or the
cessation or material change in availability of open-access
transportation by the Programs' pipeline transporters, the Programs
may encounter difficulty in marketing their gas and in maintaining
historic sales levels. Alternative purchasers or transporters may not
be readily available.

The Programs' principal customers for crude oil production are
refiners and other companies which have pipeline facilities near the
producing properties of the Programs. Purchases of oil by Flying J
Oil and Gas, Inc. accounted for approximately 24.1% of the 1985-1
Program's oil and gas revenues during the year ended December 31,
1995. With respect to the 1985-2 Program, purchases of oil by Mobil
Oil Corporation, National Cooperative Refinery, and Phibro Energy Inc.
accounted for approximately 14.5%, 14.0%, and 10.7%, respectively, of
the 1985-2 Program's oil and gas revenues during the year ended
December 31, 1995. In the event pipeline facilities are not

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conveniently available to production areas, crude oil is usually
trucked by purchasers to storage facilities.

Competition and Marketing

The oil and gas industry is highly competitive, with a large
number of companies and individuals engaged in the exploration and
development of oil and gas properties. The ability of the Programs to
produce and market oil and gas profitably depends on a number of
factors that are beyond the control of the Programs. These factors
include worldwide political instability (especially in oil-producing
regions), the supply and price of foreign imports of oil and gas, the
level of consumer product demand (which is heavily influenced by
weather patterns), government regulations and taxes, the price and
availability of alternative fuels, the overall economic environment,
and the availability and capacity of transportation and processing
facilities. The effect of these factors cannot be accurately
predicted or anticipated.

As a general rule, in recent years, worldwide oil production
capacity and gas production capacity in certain areas of the United
States exceeded demand and resulted in a decline in the average price
of oil and gas in the United States. During the later part of 1994
and 1995, however, average oil prices in the United States increased.
Oil prices increased from approximately $16.50 per barrel at Decem-
ber 31, 1994 to approximately $18.50 per barrel at December 31, 1995.
Management is unable to predict whether future oil prices will
(i) stabilize, (ii) increase, or (iii) decrease.

Gas sales contract prices have generally declined significantly
since the mid-1980s due to a number of factors, including a nationwide
surplus of gas and increased competition. Competition has increased
among United States gas marketers due to the gas surplus, the partial
deregulation of gas prices, the conversion by major pipelines to open
access transportation, and the lack of strong residential demand for
natural gas during the winter months for the last few years as a
result of warm winters in much of the United States. However, spot
gas prices in the areas where the Programs' gas is marketed increased
during the later part of 1995
compared to prices received in the later part of 1994 and the first
several months of 1995.

Substantially all of the Programs' natural gas reserves are being
sold in the "spot market." Due to the highly competitive nature of
the spot market, prices on the spot market are subject to wide
seasonal and regional pricing fluctuations. In addition, such spot
market sales are generally short-term in nature and are dependent upon
the obtaining of transportation services provided by pipelines.

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The Programs' spot gas prices increased from approximately $1.67
per Mcf at December 31, 1994 to approximately $2.00 per Mcf at
December 31, 1995. Such prices were on an MMBTU basis and differ from
the prices actually received by the Programs due to transportation and
marketing costs, BTU adjustments, and regional price and quality
differences. Future prices will likely be different from (and may be
lower than) the prices in effect on December 31, 1995. In many past
years, year-end prices have tended to be higher, and in some cases
significantly higher, than the yearly average price actually received
by the Programs for at least the year following the year-end valuation
date. Management is unable to predict whether future gas prices will
(i) stabilize, (ii) increase, or (iii) decrease.

Insurance Coverage

The Programs are subject to all of the risks inherent in the
exploration for and production of oil and gas, including blowouts,
pollution, fires, and other casualties. The Programs maintain
insurance coverage as is customary for entities of a similar size
engaged in operations similar to that of the Programs, but losses can
occur from uninsurable risks or in amounts in excess of existing
insurance coverage. The occurrence of an event which is not fully
covered by insurance could have a material adverse effect on the
Programs' financial position and results of operations.

ITEM 2. PROPERTIES

Well Statistics

The following table sets forth the numbers of gross and net
productive wells of the Programs as of December 31, 1995.

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Well Statistics(1)

As of December 31, 1995

1985-1 1985-2
Program Program
------- -------

Gross productive wells(2):
Oil 2 4
Gas 10 8
-- --
Total 12 12

Net productive wells(3):
Oil .39 1.30
Gas 1.56 1.36
---- ----
Total 1.95 2.66

- - ----------

(1) The designation of a well as an oil well or gas well is made by
Dyco based on the relative amount of oil and gas reserves for the
well. Regardless of a well's oil or gas designation, it may
produce oil, gas, or both oil and gas.
(2) As used throughout this Annual Report, "Gross Well" refers to a
well in which a working interest is owned. The number of gross
wells is the total number of wells in which a working interest is
owned.
(3) As used throughout this Annual Report, "Net Well" refers to the
sum of the fractional working interests owned in gross wells
expressed as whole numbers and fractions thereof. For example, a
15% leasehold interest in a well represents one Gross Well, but
0.15 Net Well.

Drilling Activities

The Programs participated in no drilling activities for the year
ended December 31, 1995.

Oil and Gas Production, Revenue, and Price History

The following table sets forth certain historical information
concerning the oil (including condensates) and natural gas production,
net of all royalties, overriding royalties, and other third party
interests, of the Programs, revenues attributable to such production,
and certain price and cost information.

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Net Production Data

Year Ended December 31,
----------------------------
1995 1994 1993
-------- -------- --------
1985-1 Program:
- - --------------

Production:
Oil (Bbls)(1) 6,393 6,437 4,381
Gas (Mcf)(2) 224,539 188,883 243,984

Oil and gas sales:
Oil $120,523 $112,534 $ 84,312
Gas 293,643 332,046 458,206
------- ------- -------
Total $414,166 $444,580 $542,518
======= ======= =======

Total direct operating expenses $169,295 $157,550 $167,582
======= ======= =======

Direct operating expenses as a
percentage of oil and gas sales 40.9% 35.4% 30.9%

Average sales price:
Per barrel of oil $18.85 $17.48 $19.24
Per Mcf of gas 1.31 1.76 1.88

Direct operating expenses per
equivalent Mcf of gas(3) $ .64 $ .69 $ .62

1985-2 Program:
- - --------------

Production:
Oil (Bbls)(1) 8,111 9,466 8,687
Gas (Mcf)(2) 91,345 129,797 93,256

Oil and gas sales:
Oil $140,303 $151,246 $149,453
Gas 108,931 240,621 178,202
------- ------- -------
Total $249,234 $391,867 $327,655
======= ======= =======

Total direct operating expenses $130,547 $204,143 $133,302
======= ======= =======

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Direct operating expenses as a
percentage of oil and gas sales 52.4% 52.1% 40.7%

Average sales price:
Per barrel of oil $17.30 $15.98 $17.20
Per Mcf of gas 1.19 1.85 1.91

Direct operating expenses per
equivalent Mcf of gas(3) $ .93 $ 1.09 $ .92

- - ----------

(1) As used throughout this Annual Report, "Bbls" refers to barrels
of 42 U.S. gallons and represents the basic unit for measuring
the production of crude oil and condensate oil.
(2) As used throughout this Annual Report, "Mcf" refers to volume of
1,000 cubic feet under prescribed conditions of pressure and
temperature and represents the basic unit for measuring the
production of natural gas.
(3) Oil production is converted to gas equivalents at the rate of six
Mcf per barrel, representing the estimated relative energy
content of gas and oil, which rate is not necessarily indicative
of the relationship of oil and gas prices. The respective prices
of oil and gas are affected by market and other factors in
addition to relative energy content.

Proved Reserves and Net Present Value

The following table sets forth the Programs' estimated proved oil
and gas reserves and net present value therefrom as of December 31,
1995. The schedule of quantities of proved oil and gas reserves was
prepared by Dyco in accordance with the rules prescribed by the
Securities and Exchange Commission (the "SEC"). As used throughout
this Annual Report, "proved reserves" refers to those estimated
quantities of crude oil, natural gas, and natural gas liquids which
geological and engineering data demonstrate with reasonable certainty
to be recoverable in future years from known oil and gas reservoirs
under existing economic and operating conditions.

Net present value represents estimated future gross cash flow
from the production and sale of proved reserves, net of estimated oil
and gas production costs (including production taxes, ad valorem
taxes, and operating expenses), and estimated future development costs
discounted at 10% per annum. Net present value attributable to the
Programs' proved reserves was calculated on the basis of current costs
and prices at December 31, 1995. Such prices were not escalated
except in certain circumstances where escalations were fixed and
readily determinable in accordance with applicable contract
provisions. The prices used by Dyco in calculating the net present
value attributable to the Programs' proved reserves do not necessarily

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reflect market prices for oil and gas production subsequent to
December 31, 1995. Furthermore, gas prices at December 31, 1995 were
higher than the price used for determining the Programs' net present
value of proved reserves for the year ended December 31, 1994. There
can be no assurance that the prices used in calculating the net
present value of the Programs' proved reserves at December 31, 1995
will actually be realized for such production.

The process of estimating oil and gas reserves is complex,
requiring significant subjective decisions in the evaluation of
available geological, engineering, and economic data for each
reservoir. The data for a given reservoir may change substantially
over time as a result of, among other things, additional development
activity, production history, and viability of production under
varying economic conditions; consequently, it is reasonably possible
that material revisions to existing reserve estimates may occur in the
near future. Although every reasonable effort has been made to ensure
that the reserve estimates reported herein represent the most accurate
assessment possible, the significance of the subjective decisions
required and variances in available data for various reservoirs make
these estimates generally less precise than other estimates presented
in connection with financial statement disclosures.

Proved Reserves and
Net Present Values
From Proved Reserves

As of December 31, 1995

1985-1 Program:
--------------

Estimated proved reserves:
Natural gas (Mcf) 597,729
Oil and liquids (Bbls) 35,788

Net present value
(discounted at 10% per annum) $704,192

1985-2 Program:
--------------

Estimated proved reserves:
Natural gas (Mcf) 353,387
Oil and liquids (Bbls) 19,285

Net present value
(discounted at 10% per annum) $434,528

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No estimates of the proved reserves of the Programs comparable to
those included herein have been included in reports to any federal
agency other than the SEC. Additional information relating to the
Programs' proved reserves is contained in Note 4 to the Programs'
financial statements, included in Item 8 of this Annual Report.

Significant Properties

1985-1 Program
--------------

As of December 31, 1995, the 1985-1 Program's properties
consisted of 12 gross (1.95 net) productive wells in which the 1985-1
Program owned a working interest. The 1985-1 Program owned a non-
working interest in one additional gross well. Affiliates of the
1985-1 Program operate 6 (46%) of its total wells. As of December 31,
1995, the 1985-1 Program's net interests in its properties resulted in
estimated total proved reserves of 597,729 Mcf of natural gas and
35,788 barrels of oil. A substantial majority of the 1985-1 Program's
reserves are located in the Anadarko Basin of western Oklahoma and the
Texas panhandle, which is an established oil and gas producing basin.
All of the 1985-1 Program's properties are located onshore in the
continental United States.

As of December 31, 1995, the 1985-1 Program's properties in the
Anadarko Basin consisted of 10 gross (1.56 net) wells in which the
1985-1 Program owned a working interest. The 1985-1 Program owned a
non-working interest in one additional gross well. Affiliates of the
1985-1 Program operate 5 (45%) of its total wells in the Anadarko
Basin. As of December 31, 1995, the 1985-1 Program's net interest in
such wells resulted in estimated total proved reserves of
approximately 574,871 Mcf of natural gas and approximately 1,215
barrels of crude oil, with a present value (discounted at 10% per
annum) of estimated future net cash flow of approximately $509,259.

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1985-2 Program
--------------

As of December 31, 1995, the 1985-2 Program's properties
consisted of 12 gross (2.66 net) productive wells in which the 1985-2
Program owned a working interest. The 1985-2 Program owned a non-
working interest in one additional gross well. Affiliates of the
1985-2 Program operate 6 (46%) of its total wells. As of December 31,
1995, the 1985-2 Program's net interests in its properties resulted in
estimated total proved reserves of 353,387 Mcf of natural gas and
19,285 barrels of oil. Substantially all of the 1985-2 Program's
reserves are located in the Anadarko Basin. All of the 1985-2
Program's properties are located onshore in the continental United
States.

As of December 31, 1995, the 1985-2 Program's properties in the
Anadarko Basin consisted of 11 gross (2.49 net) total wells.
Affiliates of the 1985-2 Program operate 5 (45%) of such wells. As of
December 31, 1995, the 1985-2 Program's net interest in such wells
resulted in estimated total proved reserves of approximately 348,839
Mcf of natural gas and approximately 11,556 barrels of crude oil, with
a present value (discounted at 10% per annum) of estimated future net
cash flow of approximately $399,121.

Title to Oil and Gas Properties

Management believes that the Programs have satisfactory title to
their oil and gas properties. Record title to substantially all of
the Programs' properties is held by Dyco as nominee.

Title to the Programs' properties is subject to customary
royalty, overriding royalty, carried, working, and other similar
interests and contractual arrangements customary in the oil and gas
industry, to liens for current taxes not yet due, and to other
encumbrances. Management believes that such burdens do not materially
detract from the value of such properties or from the Programs'
interest therein or materially interfere with their use in the
operation of the Programs' business.

ITEM 3. LEGAL PROCEEDINGS

To the knowledge of the management of Dyco and the Programs,
neither Dyco, the Programs, nor the Programs' properties are subject
to any litigation, the results of which would have a material effect
on the Programs' or Dyco's financial condition or operations.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS

There were no matters submitted to a vote of the limited partners
of either Program during 1995.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP UNITS AND
RELATED LIMITED PARTNER MATTERS

The Programs do not have an established trading market for their
units of limited partnership interest ("Units"). Pursuant to the
terms of the Programs' limited partnership agreements, Dyco, as
General Partner, is obligated to annually offer a repurchase offer
which is based on the estimated future net revenues from the Programs'
reserves and is calculated pursuant to the terms of the limited
partnership agreement. Such repurchase offer is recalculated monthly
in order to reflect cash distributions made to the limited partners
and other extraordinary events. The following table sets forth, for
the periods indicated, Dyco's repurchase offer per Unit and the amount
of the Programs' cash distributions per Unit for the same period. For
purposes of this Annual Report, a Unit represents an initial
subscription of $5,000 to a Program.

1985-1 PROGRAM
--------------

Repurchase Cash
Price Distributions
---------- -------------

1994:
First Quarter $134 $ -
Second Quarter 121 50
Third Quarter 101 20
Fourth Quarter 101 -

1995:
First Quarter $101 $ -
Second Quarter 146 -
Third Quarter 116 30
Fourth Quarter 116 -

1996:
First Quarter $116 (1)

- - ----------

(1) To be declared in March 1996.

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1985-2 PROGRAM
--------------

Repurchase Cash
Price Distributions
---------- -------------

1994:
First Quarter $101 $ -
Second Quarter 48 25
Third Quarter 48 -
Fourth Quarter 23 25

1995:
First Quarter $ 23 $ -
Second Quarter 65 -
Third Quarter 65 -
Fourth Quarter 65 -

1996:
First Quarter $ 65 (1)

- - ----------

(1) To be declared in March 1996.

The 1985-1 Program has 4,141 Units outstanding and approximately
1,783 limited partners of record. The 1985-2 Program has 4,374 Units
outstanding and approximately 1,744 limited partners of record.

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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Selected Financial Data

The following table presents selected financial data for the Programs. This data should
be read in conjunction with the financial statements of the Programs, and the respective notes
thereto, included elsewhere in this Annual Report. See "Item 8. Financial Statements and
Supplementary Data."
1985-1 Program
--------------
December 31,
--------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Oil and gas sales $414,166 $444,580 $542,518 $753,638 $625,341
Total revenues 416,689 446,882 544,058 756,873 632,909

Lease operating expenses 130,367 117,846 121,325 151,800 182,766
Production taxes 38,928 39,704 46,257 67,278 67,182
General and administrative
expenses 55,314 51,307 54,658 59,664 43,667
Depreciation, depletion, and
amortization of oil and gas
properties 57,994 119,316 131,014 216,044 234,759
Valuation allowance for oil
and gas properties 45,262 - - - 765,750
Interest expense - - - - 1,665

Net income (loss) 88,824 118,709 190,804 262,087 ( 662,880)
per Unit 21 29 46 63 ( 160)
Cash distributions 124,230 289,870 351,985 496,920 372,690
per Unit 30 70 85 120 90

Summary Balance Sheet Data:
Total assets 329,229 344,462 508,388 678,464 906,145
Partners' capital 290,844 326,250 497,411 658,592 893,425

</TABLE>
14
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1985-2 Program
--------------

December 31,
----------------------------------------------------
1995 1994 1993 1992 1991
---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Summary of Operations
Oil and gas sales $249,234 $391,867 $327,655 $456,585 $419,420
Total revenues 250,411 393,943 329,312 458,228 422,700

Lease operating expenses 108,975 177,582 107,068 109,688 151,890
Production taxes 21,572 26,561 26,234 38,530 47,573
General and administrative
expenses 53,755 49,022 50,984 57,022 49,265
Depreciation, depletion, and
amortization of oil and gas
properties 23,571 109,543 78,703 124,779 206,239
Valuation allowance for oil
and gas properties - - - - 364,451
Interest expense - - - - 638

Net income (loss) 42,538 31,235 66,323 128,209 ( 397,356)
per Unit 10 7 15 29 ( 91)
Cash distributions - 218,700 218,700 153,090 196,830
per Unit - 50 50 35 45

Summary Balance Sheet Data:
Total assets 306,398 254,024 442,714 597,439 621,615
Partners' capital 287,259 244,721 432,186 584,563 609,444

</TABLE>

15
<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Results of Operations

General
-------

The following general discussion should be read in conjunction
with the analysis of results of operations provided below. In
management's view, it is not possible to predict accurately either the
short-term or long-term prices for oil or gas. Specifically, due to
the oversupply of natural gas in recent years, certain of the
Programs' gas producing properties have suffered, and continue to
suffer during portions of the year, production curtailments and
seasonal reductions in the prices paid by purchasers. Additional
curtailments and seasonal or regional price reductions will adversely
affect the operations and financial condition of the Programs. Gas
sales prices, which have generally declined significantly since the
mid-1980s, increased during the fourth quarter of 1995. See "Item 1.
Business - Competition and Marketing." Actual future prices received
by the Programs will likely be different from (and may be lower than)
the prices in effect on December 31, 1995. In many past years, year-
end prices have tended to be higher, and in some cases significantly
higher, than the yearly average price actually received by the
Programs for at least the year following the year-end valuation date.
Management is unable to predict whether future gas prices will (i)
stabilize, (ii) increase further, or (iii) decrease. The amount of
the Programs' cash flow, however, is dependent on such future gas
prices.

1985-1 Program
--------------

Year Ended December 31, 1995 Compared
to Year Ended December 31, 1994
-------------------------------------

Total oil and gas sales decreased 6.8% for the year ended
December 31, 1995 as compared to the year ended December 31, 1994.
This decrease was primarily due to a decrease in the average price of
natural gas sold, partially offset by increases in the volumes of
natural gas sold and the average price of oil sold. Volumes of oil
sold decreased slightly by 44 barrels, while volumes of natural gas
sold increased 35,656 Mcf for the year ended December 31, 1995 as
compared to the year ended December 31, 1994. The increase in volumes
of natural gas sold was primarily due to the recoupment of
overpayments by a purchaser during 1994. Average oil prices increased
to $18.85 per barrel for the year ended December 31, 1995 from $17.48
per barrel for the year ended December 31, 1994, while average natural

16
<PAGE>
<PAGE>
gas prices decreased to $1.31 per Mcf for the year ended December 31,
1995 from $1.76 per Mcf for the year ended December 31, 1994.

Oil and gas production expenses (including lease operating
expenses and production taxes) increased 7.5% for the year ended
December 31, 1995 as compared to the year ended December 31, 1994
primarily due to workover expenses on several wells incurred in order
to improve the recovery of reserves. As a percentage of oil and gas
sales, these expenses increased to 40.9% for the year ended
December 31, 1995 from 35.4% for the year ended December 31, 1994.
This percentage increase was primarily due to the decrease in oil and
gas sales and the dollar increase in oil and gas production expenses.

Depreciation, depletion, and amortization of oil and gas
properties decreased $61,322 for the year ended December 31, 1995 as
compared to the year ended December 31, 1994. This decrease was
primarily due to (i) a valuation allowance for oil and gas properties
recorded during 1995 which decreased the amortizable capitalized costs
of the oil and gas properties and (ii) upward revisions of previous
reserve estimates. As a percentage of oil and gas sales, this expense
decreased to 14.0% for the year ended December 31, 1995 from 26.8% for
the year ended December 31, 1994. This percentage decrease was
primarily due to the dollar decrease in depreciation, depletion, and
amortization of oil and gas properties, partially offset by the
decrease in oil and gas sales.

As a result of declines in natural gas prices during the three
months ended September 30, 1995, the 1985-1 Program recognized a non-
cash charge against earnings of $45,262. This valuation allowance for
oil and gas properties was necessary due to the unamortized costs of
oil and gas properties exceeding the present value of estimated future
net revenues from the oil and gas properties. No similar charge was
necessary during the year ended December 31, 1994.

General and administrative expenses increased $4,007 for the year
ended December 31, 1995 as compared to the year ended December 31,
1994 primarily due to an increase in both professional fees and
printing and postage expenses. As a percentage of oil and gas sales,
these expenses increased to 13.4% for the year ended December 31, 1995
from 11.5% for the year ended December 31, 1994. This percentage
increase was primarily due to the decrease in oil and gas sales.

17
<PAGE>
<PAGE>
Year Ended December 31, 1994 Compared
to Year Ended December 31, 1993
-------------------------------------

Total oil and gas sales decreased 18.1% for the year ended Decem-
ber 31, 1994 as compared to the year ended December 31, 1993. This
decrease was due to a decrease in volumes of natural gas sold and
decreases in the average prices of oil and natural gas sold, partially
offset by an increase in volumes of oil sold. Volumes of oil sold
increased 2,056 barrels, while volumes of natural gas sold decreased
55,101 Mcf for the year ended December 31, 1994 as compared to the
year ended December 31, 1993. The decrease in volumes of natural gas
sold was primarily due to the recoupment of overpayments by a
purchaser during 1994. Oil and natural gas prices decreased to
averages of $17.48 per barrel and $1.76 per Mcf for the year ended
December 31, 1994 from averages of $19.24 per barrel and $1.88 per Mcf
for the year ended December 31, 1993.

Oil and gas production expenses (including lease operating
expenses and production taxes) decreased 6.0% for the year ended
December 31, 1994 as compared to the year ended December 31, 1993.
This percentage decrease was primarily due to workover charges on two
wells during the year ended December 31, 1993 to improve the recovery
of reserves. As a percentage of oil and gas sales, these expenses
increased to 35.4% for the year ended December 31, 1994 from 30.9% for
the year ended December 31, 1993. This percentage increase was
primarily due to the decreased volumes of natural gas sold and the
decreases in the average prices of oil and natural gas sold.

Depreciation, depletion, and amortization of oil and gas
properties decreased $11,698 for the year ended December 31, 1994 as
compared to the year ended December 31, 1993. This decrease was
primarily a result of the decrease in volumes of natural gas sold and
upward revisions in the estimates of the 1985-1 Program's remaining
oil and natural gas reserves at December 31, 1994, partially offset by
the increase in volumes of oil sold. As a percentage of oil and gas
sales, this expense increased slightly to 26.8% for the year ended
December 31, 1994 from 24.1% for the year ended December 31, 1993.
This percentage increase was primarily due to the decreases in the
average prices of oil and natural gas sold during the year ended
December 31, 1994.

General and administrative expenses decreased by $3,351 for the
year ended December 31, 1994 as compared to the year ended
December 31, 1993. This dollar decrease resulted primarily from a
decrease in professional fees during the year ended December 31, 1994
as compared to the similar period in 1993. As a percentage of oil and
gas sales, these expenses remained relatively constant at 11.5% for
the year ended December 31, 1994 compared to 10.1% for the year ended
December 31, 1993.

18
<PAGE>
<PAGE>
1985-2 Program
--------------

Year Ended December 31, 1995 Compared
to Year Ended December 31, 1994
-------------------------------------

Total oil and gas sales decreased 36.4% for the year ended
December 31, 1995 as compared to the year ended December 31, 1994.
This decrease was primarily due to decreases in both the volumes of
oil and natural gas sold and the average price of natural gas sold,
partially offset by an increase in the average price of oil sold.
Volumes of oil and natural gas sold decreased 1,355 barrels and 38,452
Mcf, respectively, for the year ended December 31, 1995 as compared to
the year ended December 31, 1994. The decrease in volumes of oil sold
was primarily due to normal declines in production. The decrease in
volumes of natural gas sold was primarily due to revenues received
during 1994 related to an underproduced gas balancing position on one
well. Average oil prices increased to $17.30 per barrel for the year
ended December 31, 1995 from $15.98 per barrel for the year ended
December 31, 1994, while average natural gas prices decreased to $1.19
per Mcf for the year ended December 31, 1995 from $1.85 per Mcf for
the year ended December 31, 1994.

Oil and gas production expenses (including lease operating
expenses and production taxes) decreased 36.1% for the year ended
December 31, 1995 as compared to the year ended December 31, 1994.
This decrease was primarily due to lease operating expenses recognized
during 1994 associated with changes in the 1985-2 Program's gas
balancing positions, which were caused by reserve revisions. As a
percentage of oil and gas sales, these expenses remained relatively
constant at 52.4% for the year ended December 31, 1995 as compared to
52.1% for the year ended December 31, 1994.

Depreciation, depletion, and amortization of oil and gas
properties decreased $85,972 for the year ended December 31, 1995 as
compared to the year ended December 31, 1994. This decrease was
primarily due to (i) the sale of several of the 1985-2 Program's wells
during 1995 which decreased the amortizable capitalized costs of the
oil and gas properties, (ii) upward revisions of previous reserve
estimates, and (iii) the decrease in the volumes of oil and natural
gas sold. As a percentage of oil and gas sales, this expense
decreased to 9.5% for the year ended December 31, 1995 from 28.0% for
the year ended December 31, 1994. This percentage decrease was
primarily due to the dollar decrease in depreciation, depletion, and
amortization of oil and gas properties, partially offset by the
decrease in oil and gas sales.

19
<PAGE>
<PAGE>
General and administrative expenses increased $4,733 for the year
ended December 31, 1995 as compared to the year ended December 31,
1994 primarily due to an increase in both professional fees and
printing and postage expenses. As a percentage of oil and gas sales,
these expenses increased to 21.6% for the year ended December 31, 1995
from 12.5% for the year ended December 31, 1994. This percentage
increase was primarily due to the decrease in oil and gas sales.

Year Ended December 31, 1994 Compared
to Year Ended December 31, 1993
-------------------------------------

Total oil and gas sales increased 19.6% for the year ended Decem-
ber 31, 1994 as compared to the year ended December 31, 1993. This
increase was due to an increase in volumes of oil and natural gas
sold, partially offset by a decrease in the average prices of oil and
natural gas sold. Volumes of oil and natural gas sold increased by
779 barrels and 36,541 Mcf, respectively, for the year ended
December 31, 1994 as compared to the year ended December 31, 1993.
The increase in volumes of natural gas sold was primarily a result of
the receipt of revenues during the year ended December 31, 1994
related to an underproduced gas balancing position on one well.
Average oil prices decreased to $15.98 per barrel for the year ended
December 31, 1994 from $17.20 per barrel for the year ended
December 31, 1993, while average natural gas prices decreased to $1.85
per Mcf during the year ended December 31, 1994 from $1.91 per Mcf for
the similar period in 1993.

Oil and gas production expenses (including lease operating
expenses and production taxes) increased 53.1% for the year ended
December 31, 1994 as compared to the year ended December 31, 1993. As
a percentage of oil and gas sales, these expenses increased to 52.1%
for the year ended December 31, 1994 from 40.7% for the year ended
December 31, 1993. These percentage increases were primarily due to
lease operating expenses recognized during the year ended December 31,
1994 associated with changes in the 1985-2 Program's gas balancing
positions, which was caused by reserve revisions.

Depreciation, depletion, and amortization of oil and gas
properties increased $30,840 for the year ended December 31, 1994 as
compared to the year ended December 31, 1993. This increase was
primarily due to the increase in volumes of oil and natural gas sold.
As a percentage of oil and gas sales, this expense increased to 28.0%
for the year ended December 31, 1994 from 24.0% for the year ended
December 31, 1993. This percentage increase was primarily a result of
the dollar increase in depreciation, depletion, and amortization
expense as discussed above and the decreases in the average prices of
oil and natural gas sold.

20
<PAGE>
<PAGE>
General and administrative expenses decreased slightly by $1,962
for the year ended December 31, 1994 as compared to the year ended
December 31, 1993. This dollar decrease resulted primarily from a
decrease in professional fees during the year ended December 31, 1994,
as compared to the similar period in 1993. As a percentage of oil and
gas sales, these expenses decreased slightly to 12.5% for the year
ended December 31, 1994 from 15.6% for the year ended December 31,
1993.

Liquidity and Capital Resources

Net proceeds from operations less necessary operating capital are
distributed to the limited partners on a quarterly basis. See "Item
5. Market for the Registrant's Limited Partnership Units and Related
Limited Partner Matters." The net proceeds from production are not
reinvested in productive assets, except to the extent that producing
wells are improved, or where methods are employed to permit more
efficient recovery of reserves, thereby resulting in a positive
economic impact. Assuming production levels for the year ended
December 31, 1995, the 1985-1 Program's and 1985-2 Program's proved
reserve quantities at December 31, 1995 would have a life of
approximately 5.6 and 2.4 years, respectively, for oil reserves and
2.7 and 3.9 years, respectively, for gas reserves.

The Programs' available capital from the limited partners'
subscriptions has been spent on oil and gas drilling activities and
there should be no further material capital resource commitments in
the future. The Programs have no debt commitments. Cash for
operational purposes will be provided by current oil and gas
production.

There can be no assurance as to the amount of the Programs'
future cash distributions. The Programs' ability to make cash
distributions depends primarily upon the level of available cash flow
generated by the Programs' operating activities, which will be
affected (either positively or negatively) by many factors beyond the
control of the Programs, including the price of and demand for oil and
natural gas and other market and economic conditions. Even if prices
and costs remain stable, the amount of cash available for
distributions will decline over time (as the volume of production from
producing properties declines) since the Programs are not replacing
production through acquisitions of producing properties and drilling.

21
<PAGE>
<PAGE>
Inflation and Changing Prices

Prices obtained for oil and gas production depend upon numerous
factors, including the extent of domestic and foreign production,
foreign imports of oil, market demand, domestic and foreign economic
conditions in general, and governmental regulations and tax laws. The
general level of inflation in the economy did not have a material
effect on the operations of the Programs in 1995. Oil and natural gas
prices have fluctuated during recent years and generally have not
followed the same pattern as inflation. See "Item 2. Properties - Oil
and Gas Production, Revenue, and Price History."

22
<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE PARTNERS

DYCO OIL AND GAS PROGRAM 1985-1 LIMITED PARTNERSHIP

We have audited the financial statements of the Dyco Oil and Gas
Program 1985-1 Limited Partnership (a Minnesota limited partnership)
as listed in Item 14(a) of this Form 10-K. These financial statements
are the responsibility of the Program's 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 dis-
closures 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.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
the Dyco Oil and Gas Program 1985-1 Limited Partnership at
December 31, 1995 and 1994, and the results of its operations and cash
flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Tulsa, Oklahoma
February 6, 1996

23
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1985-1 LIMITED PARTNERSHIP
Balance Sheets
December 31, 1995 and 1994

ASSETS
------
1995 1994
-------- --------
CURRENT ASSETS:
Cash and cash equivalents $ 58,496 $ 39,697
Accrued oil and gas sales, including
$28,938 and $18,859 due from related
parties 62,222 25,179
------- -------

Total current assets $120,718 $ 64,876

NET OIL AND GAS PROPERTIES, utilizing the
full cost method 203,770 279,586

DEFERRED CHARGE 4,741 -
------- -------

$329,229 $344,462
======= =======

LIABILITIES AND PARTNERS' CAPITAL
---------------------------------

CURRENT LIABILITIES:
Accounts payable $ 9,953 $ 8,155
------- -------
Total current liabilities $ 9,953 $ 8,155

ACCRUED LIABILITY $ 28,432 $ 10,057

PARTNERS' CAPITAL:
General Partner, issued and
outstanding, 41 Units $ 2,908 $ 3,262
Limited Partners, issued and
outstanding 4,100 Units 287,936 322,988
------- -------

Total Partners' capital $290,844 $326,250
------- -------

$329,229 $344,462
======= =======

The accompanying notes are an integral
part of these financial statements.

24
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1985-1 LIMITED PARTNERSHIP
Statements of Operations
For the Years Ended December 31, 1995, 1994, and 1993

1995 1994 1993
-------- -------- --------

REVENUES:
Oil and gas sales, including
$217,001, $332,912, and
$408,469 of sales to related
parties $414,166 $444,580 $542,518
Interest 2,523 2,302 1,540
------- ------- -------

$416,689 $446,882 $544,058

COSTS AND EXPENSES:
Lease operating $130,367 $117,846 $121,325
Production taxes 38,928 39,704 46,257
Depreciation, depletion, and
amortization of oil and gas
properties 57,994 119,316 131,014
Valuation allowance for
oil and gas properties 45,262 - -
General and administrative 55,314 51,307 54,658
------- ------- -------

$327,865 $328,173 $353,254
------- ------- -------

NET INCOME $ 88,824 $118,709 $190,804
======= ======= =======

GENERAL PARTNER (1%) - NET INCOME $ 888 $ 1,187 $ 1,908
======= ======= =======

LIMITED PARTNERS (99%) - NET INCOME $ 87,936 $117,522 $188,896
======= ======= =======

NET INCOME per Unit $ 21 $ 29 $ 46
======= ======= =======

UNITS OUTSTANDING 4,141 4,141 4,141
======= ======= =======

The accompanying notes are an integral
part of these financial statements.

25
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1985-1 LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Years Ended December 31, 1995, 1994, and 1993

General Limited
Partner Partners Total
-------- ---------- ----------

Balances at December 31, 1992 $6,586 $652,006 $658,592
Cash distributions ( 3,520) ( 348,465) ( 351,985)
Net income 1,908 188,896 190,804
----- ------- -------

Balances at December 31, 1993 $4,974 $492,437 $497,411
Cash distributions ( 2,899) ( 286,971) ( 289,870)
Net income 1,187 117,522 118,709
----- ------- -------

Balances at December 31, 1994 $3,262 $322,988 $326,250
Cash distributions ( 1,242) ( 122,988) ( 124,230)
Net income 888 87,936 88,824
----- ------- -------

Balances at December 31, 1995 $2,908 $287,936 $290,844
===== ======= =======

The accompanying notes are an integral
part of these financial statements.

26
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1985-1 LIMITED PARTNERSHIP
Statements of Cash Flows
For the Years Ended December 31, 1995, 1994, and 1993

1995 1994 1993
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 88,824 $118,709 $190,804
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 57,994 119,316 131,014
Valuation allowance for oil
and gas properties 45,262 - -
(Increase) decrease in accrued
oil and gas sales ( 37,043) 51,313 42,840
(Increase) decrease in deferred
charge ( 4,741) 9,170 ( 9,170)
Increase (decrease) in accounts
payable 1,798 ( 2,822) ( 8,895)
Increase in accrued liability 18,375 10,057 -
------- ------- -------
Net cash provided by operating
activities $170,469 $305,743 $346,593
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas
properties ($ 27,440) ($ 3,321) ($ 30,677)
Retirements of oil and gas
properties - 4,455 11,825
------- ------- -------

Net cash provided (used) by
investing activities ($ 27,440) $ 1,134 ($ 18,852)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Distributions ($124,230) ($289,870) ($351,985)
------- ------- -------
Net cash used by financing
activities ($124,230) ($289,870) ($351,985)
------- ------- -------

NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 18,799 $ 17,007 ($ 24,244)

CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 39,697 22,690 46,934
------- ------- -------

CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 58,496 $ 39,697 $ 22,690
======= ======= =======

The accompanying notes are an integral
part of these financial statements.

27
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM 1985-1 LIMITED PARTNERSHIP
Notes to Financial Statements
For the Years Ended December 31, 1995, 1994, and 1993

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations

The Dyco Oil and Gas Program 1985-1 Limited Partnership (the
"Program"), a Minnesota limited partnership, commenced operations
on April 1, 1985. Dyco Petroleum Corporation ("Dyco") is the
General Partner of the Program. Affiliates of Dyco owned
1,115.49 (26.9%) of the Program's Units at December 31, 1995.

The Program's sole business is the development and production of
oil and natural gas with a concentration on natural gas.
Substantially all of the Program's natural gas reserves are being
sold regionally in the "spot market." Due to the highly
competitive nature of the spot market, prices on the spot market
are subject to wide seasonal and regional pricing fluctuations.
In addition, such spot market sales are generally short-term in
nature and are dependent upon the obtaining of transportation
services provided by pipelines.

Cash and Cash Equivalents

The Program considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents. Cash equivalents are not insured, which cause the
Program to be subject to risk.

Credit Risk

Accrued oil and gas sales which are due from a variety of oil and
natural gas purchasers subject the Program to a concentration of
credit risk. Some of these purchasers are discussed in Note 3 -
Major Customers.

Oil and Gas Properties

Oil and gas operations are accounted for using the full cost
method of accounting. All productive and non-productive costs
associated with the acquisition, exploration, and development of
oil and gas reserves are capitalized. Capitalized costs are
depleted on the gross revenue method using estimates of proved
reserves. The full cost amortization rates per equivalent Mcf of
gas produced during the years ended December 31, 1995, 1994, and
1993 were $0.22, $0.52, and $0.48, respectively. In the event
the unamortized cost of oil and gas properties being amortized
exceeds the full cost ceiling (as defined by the Securities and
Exchange Commission) the excess is charged to expense in the year
during which such excess occurs. In addition, the Securities and
Exchange Commission rules provide that if prices decline
subsequent to year end, any excess that results from these
declines may also be charged to expense during the current year.

28
<PAGE>
<PAGE>
During the year ended December 31, 1995, the Program charged to
expense a valuation allowance of $45,262 which represents the
amount of unamortized oil and gas properties which exceeded the
full cost ceiling. No such charge was incurred in 1994 or 1993.
Sales and abandonments of properties are accounted for as
adjustments of capitalized costs with no gain or loss recognized,
unless such adjustments would significantly alter the
relationship between capitalized costs and proved oil and gas
reserves.

Deferred Charge

Accrued Liability

Accrued Liability represents charges accrued for lease operating
expenses incurred in connection with the Program's overproduced
gas imbalance position. At December 31, 1995, cumulative total
gas sales volumes for overproduced wells exceeded the Program's
pro-rata share of total gas production from these wells by 77,514
Mcf, resulting in accrued lease operating expenses of $28,432.
At December 31, 1994, cumulative total gas sales volumes for
overproduced wells exceeded the Program's pro-rata share of total
gas production from these wells by 25,256 Mcf, resulting in
accrued lease operating expenses of $10,057.

29
<PAGE>
<PAGE>
Oil and Gas Sales

The Program's oil and condensate production is sold, title
passed, and revenue recognized at or near the Program's wells
under short-term purchase contracts at prevailing prices in
accordance with arrangements which are customary in the oil
industry. Sales of natural gas applicable to the Program's
interest in producing oil and gas leases are recorded as income
when the gas is metered and title transferred pursuant to the gas
sales contracts covering the Program's interest in natural gas
reserves. During such times as the Program's sales of gas exceed
its pro rata ownership in a well, such sales are recorded as
income unless total sales from the well have exceeded the
Program's share of estimated total gas reserves underlying the
property at which time such excess is recorded as a liability.
At December 31, 1995 and 1994, no such liability was recorded.

Use of Estimates in Financial Statements

The preparation of financial statements 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 those estimates.
Further, accrued oil and gas sales, the deferred charge, the gas
imbalance payable, the accrued liability, and the valuation
allowance all involve estimates which could materially differ
from the actual amounts ultimately realized or incurred in the
near term. Oil and gas reserves (see Note 4) also involve
significant estimates which could materially differ from the
actual amounts ultimately realized.

Income Taxes

Income or loss for income tax purposes is includable in the
income tax returns of the partners. Accordingly, no recognition
has been given to income taxes in the accompanying financial
statements.

30
<PAGE>
<PAGE>
2. TRANSACTIONS WITH RELATED PARTIES

Under the terms of the Program's partnership agreement, Dyco is
entitled to receive a reimbursement for all direct expenses and
general and administrative, geological, and engineering expenses
it incurs on behalf of the Program. During the years ended
December 31, 1995, 1994, and 1993, such expenses totaled $55,314,
$51,307, and $54,658, respectively, of which $42,840, $42,840,
and $42,429, respectively, were paid to Dyco and its affiliates.

Affiliates of the Program operate certain of the Program's
properties. Their policy is to bill the Program for all
customary charges and cost reimbursements associated with these
activities, together with any compressor rentals, consulting, or
other services provided.

The Program sells gas at market prices to Premier Gas Company
("Premier") and other similar gas marketing firms. Such firms
may then resell such gas to third parties at market prices.
Premier was an affiliate of the Program until December 6, 1995.
During 1995, 1994, and 1993, these sales totaled $217,001,
$332,912, and $408,469, respectively. At December 31, 1995 and
1994, accrued oil and gas sales included $28,938 and $18,859,
respectively, due from Premier.

3. MAJOR CUSTOMERS

The following purchasers individually accounted for more than 10%
of the combined oil and gas revenues of the Program for the years
ended December 31, 1995, 1994, and 1993:

Purchaser 1995 1994 1993
--------- ----- ----- -----

Premier 52.4% 74.9% 75.3%
Flying J Oil and Gas, Inc. 24.1% 19.2% 18.0%

In the event of interruption of purchases by these significant
customers or the cessation or material change in availability of
open-access transportation by the Program's pipeline
transporters, the Program may encounter difficulty in marketing
its gas and in maintaining historic sales levels. Alternative
purchasers or transporters may not be readily available.

31
<PAGE>
<PAGE>
4. SUPPLEMENTAL OIL AND GAS INFORMATION

The following supplemental information regarding the oil and gas
activities of the Program is presented pursuant to the disclosure
requirements promulgated by the Securities and Exchange
Commission.

Capitalized Costs

The Program's capitalized costs and accumulated depreciation,
depletion, amortization, and valuation allowance were as follows:

December 31,
----------------------------
1995 1994
------------- -------------

Proved properties $20,980,051 $20,952,611

Unproved properties, not
subject to depreciation,
depletion, and amortization - -
---------- ----------

$20,980,051 $20,952,611

Less accumulated depreciation,
depletion, amortization, and
valuation allowance ( 20,776,281) ( 20,673,025)
---------- ----------

Net oil and gas properties $ 203,770 $ 279,586
========== ==========

32
<PAGE>
<PAGE>
Costs Incurred

Costs incurred by the Program in connection with its oil and gas
property acquisition, exploration, and development activities
were as follows:

December 31,
-------------------------
1995 1994 1993
------- ------- -------

Acquisition of properties $ - $ - $ -
Exploration costs - - -
Development costs 27,440 3,321 30,677
------ ------ ------

Total costs incurred $27,440 $ 3,321 $30,677
====== ====== ======

33
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Quantities of Proved Oil and Gas Reserves - Unaudited

Set forth below is a summary of the changes in the net quantities of the Program's proved
crude oil and natural gas reserves for the years ended December 31, 1995, 1994, and 1993.
Proved reserves were estimated by petroleum engineers employed by affiliates of Dyco. All
of the Program's reserves are located in the United States and there are no proved
undeveloped reserves.

1995 1994 1993
------------------- ------------------- -------------------
Oil Gas Oil Gas Oil Gas
(Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf)
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Proved reserves,
beginning of year 32,723 554,156 24,830 736,601 32,355 690,989

Revisions of previous
estimates 9,458 268,112 14,330 6,438 ( 3,144) 289,596

Sales of reserves - - - - - -

Extensions and
discoveries - - - - - -

Production ( 6,393) (224,539) ( 6,437) (188,883) ( 4,381) (243,984)
------ ------- ------ ------- ------ -------

Proved reserves,
end of year 35,788 597,729 32,723 554,156 24,830 736,601
====== ======= ====== ======= ====== =======

Proved developed reserves:
Beginning of year 14,632 546,591 8,499 729,810 14,615 683,493
------ ------- ------ ------- ------ -------
End of year 17,467 590,049 14,632 546,591 8,499 729,810
====== ======= ====== ======= ====== =======

</TABLE>

34
<PAGE>
<PAGE>
The process of estimating oil and gas reserves is complex,
requiring significant subjective decisions in the evaluation of
available geological, engineering, and economic data for each
reservoir. The data for a given reservoir may change
substantially over time as a result of, among other things,
additional development activity, production history, and
viability of production under varying economic conditions; con-
sequently, it is reasonably possible that material revisions to
existing reserve estimates may occur in the near future.
Although every reasonable effort has been made to ensure that the
reserve estimates reported herein represent the most accurate
assessment possible, the significance of the subjective decisions
required and variances in available data for various reservoirs
make these estimates generally less precise than other estimates
presented in connection with financial statement disclosures.

35
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE PARTNERS

DYCO OIL AND GAS PROGRAM 1985-2 LIMITED PARTNERSHIP

We have audited the financial statements of the Dyco Oil and Gas
Program 1985-2 Limited Partnership (a Minnesota limited partnership)
as listed in Item 14(a) of this Form 10-K. These financial statements
are the responsibility of the Program's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
the Dyco Oil and Gas Program 1985-2 Limited Partnership at
December 31, 1995 and 1994, and the results of its operations and cash
flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Tulsa, Oklahoma
February 6, 1996

36
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1985-2 LIMITED PARTNERSHIP
Balance Sheets
December 31, 1995 and 1994

ASSETS
------
1995 1994
-------- --------
CURRENT ASSETS:
Cash and cash equivalents $154,512 $ 5,733
Accrued oil and gas sales, including
$12,336 and $12,688 due from
related parties 41,489 40,509
------- -------
Total current assets $196,001 $ 46,242

NET OIL AND GAS PROPERTIES, utilizing the
full cost method 82,060 186,746

DEFERRED CHARGE 28,337 21,036
------- -------

$306,398 $254,024
======= =======

LIABILITIES AND PARTNERS' CAPITAL
---------------------------------

CURRENT LIABILITIES:
Accounts payable $ 9,025 $ 9,303
------- -------

Total current liabilities $ 9,025 $ 9,303

ACCRUED LIABILITY $ 10,114 $ -

PARTNERS' CAPITAL:
General Partner, issued and
outstanding, 44 Units $ 2,872 $ 2,447
Limited Partners, issued and
outstanding, 4,330 Units 284,387 242,274
------- -------

Total Partners' capital $287,259 $244,721
------- -------

$306,398 $254,024
======= =======

The accompanying notes are an integral
part of these financial statements.

37
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1985-2 LIMITED PARTNERSHIP
Statements of Operations
For the Years Ended December 31, 1995, 1994, and 1993

1995 1994 1993
---------- -------- --------

REVENUES:
Oil and gas sales including
$71,328, $97,973, and
$116,929 of sale to related
parties $249,234 $391,867 $327,655
Interest 1,177 2,076 1,657
------- ------- -------

$250,411 $393,943 $329,312

COSTS AND EXPENSES:
Lease operating $108,975 $177,582 $107,068
Production taxes 21,572 26,561 26,234
Depreciation, depletion, and
amortization of oil and gas
properties 23,571 109,543 78,703
General and administrative 53,755 49,022 50,984
------- ------- -------

$207,873 $362,708 $262,989
------- ------- -------

NET INCOME $ 42,538 $ 31,235 $ 66,323
======= ======= =======

GENERAL PARTNER (1%) - NET
INCOME $ 425 $ 312 $ 663
======= ======= =======

LIMITED PARTNERS (99%) - NET
INCOME $ 42,113 $ 30,923 $ 65,660
======= ======= =======

NET INCOME per Unit $ 10 $ 7 $ 15
======= ======= =======

UNITS OUTSTANDING 4,374 4,374 4,374
======= ======= =======

The accompanying notes are an integral
part of these financial statements.

38
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1985-2 LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Years Ended December 31, 1995, 1994, and 1993

General Limited
Partner Partners Total
-------- ---------- ----------

Balances at December 31, 1992 $5,846 $578,717 $584,563
Cash distributions ( 2,187) ( 216,513) ( 218,700)
Net income 663 65,660 66,323
----- ------- -------

Balances at December 31, 1993 $4,322 $427,864 $432,186
Cash distributions ( 2,187) ( 216,513) ( 218,700)
Net income 312 30,923 31,235
----- ------- -------

Balances at December 31, 1994 $2,447 $242,274 $244,721
Net income 425 42,113 42,538
----- ------- -------

Balances at December 31, 1995 $2,872 $284,387 $287,259
===== ======= =======

The accompanying notes are an integral
part of these financial statements.

39
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1985-2 LIMITED PARTNERSHIP
Statements of Cash Flows
For the Years Ended December 31, 1995, 1994, and 1993

1995 1994 1993
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 42,538 $ 31,235 $ 66,323
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 23,571 109,543 78,703
(Increase) decrease in accrued
oil and gas sales ( 980) 3,918 22,188
(Increase) decrease in deferred
charge ( 7,301) 66,202 ( 47,150)
Decrease in accounts payable ( 278) ( 1,225) ( 2,348)
Increase in accrued liability 10,114 - -
------- ------- -------
Net cash provided by operating
activities $ 67,664 $209,673 $117,716
------- ------- -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas
properties ($ 24,839) ($ 3,733) ($ 487)
Retirements of oil and gas
properties 105,954 - 4,129
------- ------- -------

Net cash provided (used) by
investing activities $ 81,115 ($ 3,733) $ 3,642
------- ------- -------

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions $ - ($218,700) ($218,700)
------- ------- -------

Net cash used by financing
activities $ - ($218,700) ($218,700)
------- ------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $148,779 ($ 12,760) ($ 97,342)

CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 5,733 18,493 115,835
------- ------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $154,512 $ 5,733 $18,493
======= ======= =======

The accompanying notes are an integral
part of these financial statements.

40
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM 1985-2 LIMITED PARTNERSHIP
Notes to Financial Statements
For the Years Ended December 31, 1995, 1994, and 1993

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations

The Dyco Oil and Gas Program 1985-2 Limited Partnership (the
"Program"), a Minnesota limited partnership, commenced operations
on August 26, 1985. Dyco Petroleum Corporation ("Dyco") is the
General Partner of the Program. Affiliates of Dyco owned
1,234.55 (28.2%) of the Program's Units at December 31, 1995.

Cash and Cash Equivalents

Credit Risk

Oil and Gas Properties

41
<PAGE>
<PAGE>
Mcf of gas produced during the years ended December 31, 1995,
1994, and 1993 were $0.17, $0.59 and $0.54, respectively. In the
event the unamortized cost of oil and gas properties being
amortized exceeds the full cost ceiling (as defined by the
Securities and Exchange Commission) the excess is charged to
expense in the year during which such excess occurs. In
addition, the Securities and Exchange Commission rules provide
that if prices decline subsequent to year end, any excess that
results from these declines may also be charged to expense during
the current year. Sales and abandonments of properties are
accounted for as adjustments of capitalized costs with no gain or
loss recognized, unless such adjustments would significantly
alter the relationship between capitalized costs and proved oil
and gas reserves.

Deferred Charge

Deferred Charge represents costs deferred for lease operating
expenses incurred in connection with the Program's underproduced
gas imbalance position. At December 31, 1995, cumulative total
gas sales volumes for underproduced wells were less than the
Program's pro-rata share of total gas production from these wells
by 55,379 Mcf, resulting in prepaid lease operating expenses of
$28,337. At December 31, 1994, cumulative total gas sales
volumes for underproduced wells were less than the Program's pro-
rata share of total gas production from these wells by 38,727
Mcf, resulting in prepaid lease operating expenses of $21,036.

Accrued Liability

Accrued Liability represents charges accrued for lease operating
expenses incurred in connection with the Program's overproduced
gas imbalance position. At December 31, 1995, cumulative total
gas sales volumes for overproduced wells exceeded the Program's
pro-rata share of total gas production from these wells by 19,766
Mcf, resulting in accrued lease operating expenses of $10,114.
No such amount was recorded at December 31, 1994.

Oil and Gas Sales

42
<PAGE>
sales contracts covering the Program's interest in natural gas
reserves. During such times as the Program's sales of gas
exceed its pro rata ownership in a well, such sales are recorded
as income unless total sales from the well have exceeded the
Program's share of estimated total gas reserves underlying the
property at which time such excess is recorded as a liability.
At December 31, 1995 and 1994, no such liability was recorded.

Use of Estimates in Financial Statements

The preparation of financial statements 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 those estimates.
Further, accrued oil and gas sales, the deferred charge, the gas
imbalance payable, and the accrued liability all involve
estimates which could materially differ from the actual amounts
ultimately realized or incurred in the near term. Oil and gas
reserves (see Note 4) also involve significant estimates which
could materially differ from the actual amounts ultimately
realized.

Income Taxes

Income or loss for income tax purposes is includable in the
income tax returns of the partners. Accordingly, no recognition
has been given to income taxes in the accompanying financial
statements.

2. TRANSACTIONS WITH RELATED PARTIES

Under the terms of the Program's partnership agreement, Dyco is
entitled to receive a reimbursement for all direct expenses and
general and administrative, geological, and engineering expenses
it incurs on behalf of the Program. During the years ended
December 31, 1995, 1994, and 1993, such expenses totaled $53,755,
$49,022, and $50,984, respectively, of which $40,272, $40,272,
and $39,882, respectively, were paid to Dyco and its affiliates.

43
<PAGE>
<PAGE>
Affiliates of the Program operate certain of the Program's
properties. Their policy is to bill the Program for all
customary charges and cost reimbursements associated with these
activities, together with any compressor rentals, consulting, or
other services provided.

The Program sells gas at market prices to Premier Gas Company
("Premier") and other similar gas marketing firms. Such firms
may then resell such gas to third parties at market prices.
Premier was an affiliate of the Program until December 6, 1995.
During 1995, 1994, and 1993, these sales totaled $71,328,
$97,973, and $116,929, respectively. At December 31, 1995 and
1994 accrued oil and gas sales included $12,336 and $12,688,
respectively, due from Premier.

3. MAJOR CUSTOMERS

The following purchasers individually accounted for more than 10%
of the combined oil and gas revenues of the Program for the years
ended December 31, 1995, 1994, and 1993:

Purchaser 1995 1994 1993
--------- ----- ----- -----

Premier 28.6% 25.0% 35.7%
Sanguine, Ltd. - % 27.9% - %
Mobil Oil Corporation 14.5% - % 11.7%
Total Petroleum, Inc. - % - % 12.6%
National Cooperative
Refinery 14.0% - % - %
Phibro Energy Inc. 10.7% - % - %

4. SUPPLEMENTAL OIL AND GAS INFORMATION

The following supplemental information regarding the oil and gas
activities of the Program is presented pursuant to the disclosure
requirements promulgated by the Securities and Exchange
Commission.

44
<PAGE>
<PAGE>
Capitalized Costs

The Program's capitalized costs and accumulated depreciation,
depletion, amortization, and valuation allowance were as follows:

December 31,
----------------------------
1995 1994
------------- -------------

Proved properties $22,443,388 $22,524,503

Unproved properties, not
subject to depreciation,
depletion, and amortization - -
---------- ----------

$22,443,388 $22,524,503

Less accumulated depreciation,
depletion, amortization, and
valuation allowance ( 22,361,328) ( 22,337,757)
---------- ----------

Net oil and gas properties $ 82,060 $ 186,746
========== ==========

Costs Incurred

Costs incurred by the Program in connection with its oil and gas
property acquisition, exploration, and development activities
were as follows:

December 31,
-----------------------
1995 1994 1993
------- ------ ------

Acquisition of properties $ - $ - $ -
Exploration costs - - -
Development costs 24,839 3,733 487
------ ----- -----

Total costs incurred $24,839 $3,733 $ 487
====== ===== =====

45
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Quantities of Proved Oil and Gas Reserves - Unaudited

Revisions of previous
estimates 9,649 206,524 2,053 ( 22,309) 2,450 123,849

Sales of reserves ( 5,314) ( 9,617) - - - -

Extensions and
discoveries - - - - - -

Production ( 8,111) ( 91,345) ( 9,466) (129,797) ( 8,687) ( 93,256)
------ ------- ------ ------- ------ -------

Proved reserves,
end of year 19,285 353,387 23,061 247,825 30,474 399,931
====== ======= ====== ======= ====== =======

Proved developed reserves:
Beginning of year 15,235 240,254 23,458 392,764 28,884 361,766
------ ------- ------ ------- ------ -------
End of year 13,898 350,694 15,235 240,254 23,458 392,764
====== ======= ====== ======= ====== =======

</TABLE>
46
<PAGE>
<PAGE>
The process of estimating oil and gas reserves is complex,
requiring significant subjective decisions in the evaluation of
available geological, engineering, and economic data for each
reservoir. The data for a given reservoir may change
substantially over time as a result of, among other things,
additional development activity, production history, and
viability of production under varying economic conditions; con-
sequently, it is reasonably possible that material revisions to
existing reserve estimates may occur in the near future.
Although every reasonable effort has been made to ensure that the
reserve estimates reported herein represent the most accurate
assessment possible, the significance of the subjective decisions
required and variances in available data for various reservoirs
make these estimates generally less precise than other estimates
presented in connection with financial statement disclosures.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Programs are limited partnerships and have no directors or
executive officers. The following individuals are directors and
executive officers of Dyco, General Partner. The business address of
such directors and executive officers is Two West Second Street,
Tulsa, Oklahoma 74103.

NAME AGE POSITION WITH DYCO
---------------- --- --------------------------------
C. Philip Tholen 47 Chief Executive Officer, Presi-
dent, and Chairman of the
Board of Directors

Dennis R. Neill 43 Senior Vice President and
Director

Jack A. Canon 46 Senior Vice President -
General Counsel and Director

Patrick M. Hall 37 Senior Vice President -
Controller

Annabel M. Jones 42 Secretary

Judy F. Hughes 49 Treasurer

47
<PAGE>
<PAGE>
The directors will hold office until the next annual meeting of
shareholders of Dyco and until their successors have been duly elected
and qualified. All executive officers serve at the discretion of the
Board of Directors.

C. Philip Tholen joined the Samson Companies in 1977 and has
served as President, Chief Executive Officer, and Director of Dyco
since June 18, 1991. Prior to joining the Samson Companies, he was an
audit manager for Arthur Andersen & Co. in Tulsa where he specialized
in oil and natural gas industry audits and contract audits. He holds
a Bachelor of Science degree in accounting from the University of
Tulsa and is a Certified Public Accountant. Mr. Tholen is also
Executive Vice President, Chief Financial Officer, Treasurer, and
Director of Samson Investment Company; President and Chairman of the
Board of Directors of Samson Natural Gas Company, Geodyne Resources,
Inc. and its subsidiaries, and Samson Resources Company; President of
two Divisions of Samson Natural Gas Company, Samson Exploration
Company and Samson Production Services Company; Senior Vice President,
Treasurer, and Director of Samson Properties Incorporated; and
Director of Circle L Drilling Company and Samson Industrial
Corporation.

Dennis R. Neill joined the Samson Companies in 1981 and was named
Senior Vice President and Director of Dyco on June 18, 1991. Prior to
joining the Samson Companies, he was associated with a Tulsa law firm,
Conner and Winters, where his principal practice was in the securities
area. He received a Bachelor of Arts degree in political science from
Oklahoma State University and a Juris Doctorate degree from the
University of Texas. Mr. Neill also serves as Senior Vice President,
Chief Operating Officer, and Director of Samson Properties
Incorporated; Senior Vice President of Samson Hydrocarbons Company;
Senior Vice President and Director of Geodyne Resources, Inc. and its
subsidiaries; and President and Chairman of the Board of Directors of
Samson Securities Company.

Jack A. Canon joined the Samson Companies in 1983 and has served
as a Vice President and Director of Dyco since June 18, 1991. Prior
to joining the Samson Companies, he served as a staff attorney for
Terra Resources, Inc. and was associated with the Tulsa law firm of
Dyer, Powers, Marsh, Turner and Armstrong. He received a Bachelor of
Science degree in accounting from Quincy College and a Juris Doctorate
degree from the University of Tulsa. Mr. Canon also serves as
Secretary of Samson Investment Company; Director of Samson Natural Gas
Company, Samson Properties Incorporated, Circle L Drilling Company,
and Samson Securities Company; Senior Vice President - General Counsel
of Samson Production Services Company, a Division of Samson Natural
Gas Company, and Geodyne Resources, Inc. and its subsidiaries; and
Vice President - General Counsel of Samson Industrial Corporation.

48
<PAGE>
<PAGE>
Patrick M. Hall joined the Samson Companies in 1983 and was named
a Vice President of Dyco on June 18, 1991. Prior to joining the
Samson Companies he was a senior accountant with Peat Marwick Main &
Co. in Tulsa. He holds a Bachelor of Science degree in accounting
from Oklahoma State University and is a Certified Public Accountant.
Mr. Hall is also a Director of Samson Natural Gas Company and Geodyne
Resources, Inc. and its subsidiaries; Senior Vice President -
Controller and Director of Samson Properties Incorporated; and Senior
Vice President - Controller of Samson Production Services Company, a
Division of Samson Natural Gas Company.

Annabel M. Jones joined the Samson Companies in 1982 and was
named Secretary of Dyco on June 18, 1991. Prior to joining the Samson
Companies she served as associate general counsel of the Oklahoma
Securities Commission. She holds Bachelor of Arts in political
science and Juris Doctorate degrees from the University of Oklahoma.
Ms. Jones serves as Assistant General Counsel - Corporate Affairs for
Samson Production Services Company, a Division of Samson Natural Gas
Company, and is also Secretary of Samson Properties Incorporated,
Samson Natural Gas Company, Geodyne Resources, Inc. and its
subsidiaries, and Samson Industrial Corporation; Vice-President,
Secretary, and Director of Samson Securities Company; and Assistant
Secretary of Samson Investment Company.

Judy F. Hughes joined the Samson Companies in 1978 and was named
Treasurer of Dyco on June 18, 1991. Prior to joining the Samson
Companies, she performed treasury functions with Reading & Bates
Corporation. She attended the University of Tulsa and also serves as
Treasurer of Samson Natural Gas Company, Geodyne Resources, Inc. and
its subsidiaries, and Samson Securities Company and Assistant
Treasurer of Samson Investment Company and Samson Industrial
Corporation.

ITEM 11. EXECUTIVE COMPENSATION

The Programs are limited partnerships and, therefore, have no
officers or directors. The following table summarizes the amounts
paid by the Programs as compensation and reimbursements to Dyco and
its affiliates for the three years ended December 31, 1995:

49
<PAGE>
<PAGE>
Compensation/Reimbursement to Dyco and its affiliates
Three Years Ended December 31, 1995

Type of Compensation/Reimbursement(1) Expense
- - ------------------------------------- -------------------------
1995 1994 1993
------- ------- -------

1985-1 Program
- - --------------

Compensation:
Operations $ (2) $ (2) $ (2)
Gas Marketing $ (3) $ (3) $ (3)

Reimbursements:
General and Administrative,
Geological, and Engineering
Expenses and Direct
Expenses(4) $42,840 $42,840 $42,429

1985-2 Program
- - --------------

Compensation:
Operations $ (2) $ (2) $ (2)
Gas Marketing $ (3) $ (3) $ (3)

Reimbursements:
General and Administrative,
Geological, and Engineering
Expenses and Direct
Expenses(4) $40,272 $40,272 $39,882

- - ----------

(1) The authority for all of such compensation and reimbursement is
the limited partnership agreements of the Programs. With respect
to the Operations activities noted in the table, management
believes that such compensation is equal to or less than that
charged by unaffiliated persons in the same geographic areas and
under the same conditions.
(2) Affiliates of the Programs serve as operator of a significant
portion of the Programs' wells. Dyco, as General Partner,
contracts with such affiliates for services as operator of the
wells. As operator, such affiliates are compensated at rates
provided in the operating agreements in effect and charged to all
parties to such agreement. The dollar amount of such compen-
sation paid by the Programs to such affiliates is impossible to
quantify as of the date of this Annual Report.

50
<PAGE>
<PAGE>
(3) Premier, an affiliate of the Programs until December 6, 1995,
purchased a portion of the Programs' gas at market prices and
resold such gas at market prices directly to end-users and local
distribution companies. For the years ended December 31, 1995,
1994, and 1993, the 1985-1 Program sold $217,001, $332,912, and
$408,469, respectively, of gas to Premier. For the years ended
December 31, 1995, 1994, and 1993, the 1985-2 Program sold
$71,328, $97,973, and $116,929, respectively, of gas to Premier.

(4) The Programs reimburse Dyco and its affiliates for reasonable and
necessary general and administrative, geological, and engineering
expenses and direct expenses incurred in connection with their
management and operation of the Programs. The directors,
officers, and employees of Dyco and its affiliates receive no
direct remuneration from the Programs for their services to the
Programs. See "Salary Reimbursement Table" below. The allocable
general and administrative, geological, and engineering expenses
are apportioned on a reasonable basis between the Programs'
business and all other oil and natural gas activities of Dyco and
its affiliates, including Dyco's management and operation of
affiliated oil and gas limited partnerships. The allocation to
the Programs of these costs is made by Dyco as General Partner.

As noted in the Compensation/Reimbursement Table above, the
directors, officers, and employees of Dyco and their affiliates
receive no direct remuneration from the Programs for their services.
However, to the extent such services represent direct involvement with
the Programs, as opposed to general corporate functions, such persons'
salaries are allocated to and reimbursed by the Programs. Such
allocation to the Programs' general and administrative, geological,
and engineering expenses of the salaries of directors, officers, and
employees of Dyco and its affiliates is based on internal records
maintained by Dyco and its affiliates, and represents investor
relations, legal, accounting, data processing, management, and other
functions directly attributable to the Programs' operations. The
following table indicates the approximate amount of general and
administrative expense reimbursement attributable to the salaries of
the directors, officers, and employees of Dyco and its affiliates for
the three years ended December 31, 1995:

51
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Salary Reimbursement

Three Years Ended December 31, 1995

1985-1 Program
--------------

Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- - --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Philip
Tholen,
President,
Chief Executive
Officer<F1> 1993 - - - - - - -
1994 - - - - - - -
1995 - - - - - - -

All Executive
Officers,
Directors,
and Employees
as a group<F2> 1993 $22,487 - - - - - -
1994 $23,348 - - - - - -
1995 $23,391 - - - - - -

- - ----------
<FN>
<F1> The general and administrative expenses paid by the 1985-1 Program and attributable to
salary reimbursements do not include any salary or other compensation attributable to Mr.
Tholen.
<F2> No officer or director of Dyco or its affiliates provides full-time services to the 1985-1
Program and no individual's salary or other compensation reimbursement from the 1985-1
Program equals or exceeds $100,000 per annum.
</FN>
</TABLE>
52
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1985-2 Program
--------------

All Executive
Officers,
Directors,
and Employees
as a group<F2> 1993 $21,137 - - - - - -
1994 $21,948 - - - - - -
1995 $21,989 - - - - - -

- - ----------
<FN>
<F1> The general and administrative expenses paid by the 1985-2 Program and attributable to
salary reimbursements do not include any salary or other compensation attributable to Mr.
Tholen.
<F2> No officer or director of Dyco or its affiliates provides full-time services to the 1985-2
Program and no individual's salary or other compensation reimbursement from the 1985-2
Program equals or exceeds $100,000 per annum.
</FN>
</TABLE>
53
<PAGE>
<PAGE>
In addition to the compensation/reimbursements noted above,
during the three years ended December 31, 1995, the Samson Companies
were in the business of supplying field and drilling equipment and
services to affiliated and unaffiliated parties in the industry. Such
companies may have provided equipment and services for wells in which
the Programs have an interest. These equipment and services were
provided at prices or rates equal to or less than those normally
charged in the same or comparable geographic area by unaffiliated
persons or companies dealing at arm's length. The operators of these
wells bill the Programs for a portion of such costs based upon the
Programs' interest in the well.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The following table provides information as to the beneficial
ownership of the Programs' Units as of December 31, 1995 by each
beneficial owner of more than 5% of the issued and outstanding Units
and by the directors, officers, and affiliates of Dyco. The address
of each of such persons is Samson Plaza, Two West Second Street,
Tulsa, Oklahoma 74103.

Number of Units
Beneficially
Owned (Percent
Beneficial Owner of Outstanding)
--------------------------------- -----------------

1985-1 Program:
--------------

Samson Properties Incorporated 1,115.49 (26.9%)

All directors, officers, and
affiliates of Dyco as a group
and Dyco (8 persons) 1,115.49 (26.9%)

1985-2 Program:
--------------

Samson Properties Incorporated 1,234.55 (28.2%)

All directors, officers, and
affiliates of Dyco as a group
and Dyco (8 persons) 1,234.55 (28.2%)

54
<PAGE>
<PAGE>
To the best knowledge of the Programs and Dyco, there were no
officers, directors, or 5% owners who were delinquent filers of
reports required under section 16 of the Securities Exchange Act of
1934.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Dyco and certain of its affiliates engage in oil and gas
activities independently of the Programs which result in conflicts of
interest that cannot be totally eliminated. The allocation of
acquisition and drilling opportunities and the nature of the
compensation arrangements between the Programs and Dyco also create
potential conflicts of interest. Dyco and its affiliates own a
significant amount of the Programs' Units and therefore have an
identity of interest with other limited partners with respect to the
operations of the Programs.

In order to attempt to assure limited liability for limited
partners as well as an orderly conduct of business, management of the
Programs is exercised solely by Dyco. The partnership agreements of
the Programs grant Dyco broad discretionary authority with respect to
the Programs' participation in drilling prospects and expenditure and
control of funds, including borrowings. These provisions are similar
to those contained in prospectuses and partnership agreements for
other public oil and gas partnerships. Broad discretion as to general
management of the Programs involves circumstances where Dyco has
conflicts of interest and where it must allocate costs and expenses,
or opportunities, among the Programs and other competing interests.

Dyco does not devote all of its time, efforts, and personnel
exclusively to the Programs. Furthermore, the Programs do not have
any employees, but instead rely on the personnel of the Samson
Companies. The Programs thus compete with the Samson Companies
(including other currently sponsored oil and gas programs) for the
time and resources of such personnel. The Samson Companies devote
such time and personnel to the management of the Programs as are
indicated by the circumstances and as are consistent with Dyco's
fiduciary duties.

Affiliates of the Program are solely responsible for the negotia-
tion, administration, and enforcement of oil and gas sales agreements
covering the Programs' leasehold interests. Until December 6, 1995,
Dyco had delegated the negotiation, administration, and enforcement of
its oil and gas sales agreements to Premier. In addition to providing
such administrative services, Premier purchased and resold gas
directly to end-users and local distribution companies. Because
affiliates of the Program who provide services to the Program have
fiduciary or other duties to other members of the Samson Companies,
contract amendments and negotiating positions taken by them in their
effort to enforce contracts with purchasers may not necessarily

55
<PAGE>
<PAGE>
represent the positions that a Program would take if it were to
administer its own contracts without involvement with other members of
the Samson Companies. On the other hand, management believes that the
Programs' negotiating strength and contractual positions have been
enhanced by virtue of its affiliation with the Samson Companies.

For a description of certain other relationships and related
transactions see "Item 11. Executive Compensation."

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K

(a) Financial Statements and Schedules. The following
financial statements and schedules for the Programs as of
December 31, 1995 and 1994 and for the years ended December 31,
1995, 1994, and 1993 are filed as part of this report.

(1) Financial Statements:
Reports of Independent Accountants
Balance Sheets
Statements of Operations
Statements of Partners' Capital
Statements of Cash Flows
Notes to Financial Statements

(2) Financial Statement Schedules:

None

All other schedules have been omitted since the required
information is presented in the Financial Statements or is not
applicable.

(b) Reports on Form 8-K for the fourth quarter of 1995:

None.

4.1 Drilling Agreement dated April 1, 1985 for Dyco
Oil and Gas Program 1985-1 by and between Dyco Oil
and Gas Program 1985-1, Dyco Petroleum
Corporation, and Jaye F. Dyer filed as Exhibit 4.1
to Annual Report on Form 10-K for the year ended
December 31, 1991 on April 8, 1992 and is hereby
incorporated by reference.

56
<PAGE>
<PAGE>
4.2 Program Agreement dated April 1, 1985 for Dyco Oil
and Gas Program 1985-1 by and between Dyco
Petroleum Corporation and the Participants filed
as Exhibit 4.2 to Annual Report on Form 10-K for
the year ended December 31, 1991 on April 8, 1992
and is hereby incorporated by reference.

4.3 Amendment to Program Agreement for Dyco Oil and
Gas Program 1985-1 dated February 9, 1989 filed as
Exhibit 4.3 to Annual Report on Form 10-K for the
year ended December 31, 1991 on April 8, 1992 and
is hereby incorporated by reference.

4.4 Certificate of Limited Partnership, as amended,
for Dyco Oil and Gas Program 1985-1 Limited
Partnership filed as Exhibit 4.4 to Annual Report
on Form 10-K for the year ended December 31, 1991
on April 8, 1992 and is hereby incorporated by
reference.

4.5 Drilling Agreement dated August 26, 1985 for Dyco
Oil and Gas Program 1985-2 by and between Dyco Oil
and Gas Program 1985-2, Dyco Petroleum
Corporation, and Jaye F. Dyer filed as Exhibit 4.5
to Annual Report on Form 10-K for the year ended
December 31, 1991 on April 8, 1992 and is hereby
incorporated by reference.

4.6 Program Agreement dated August 26, 1985 for Dyco
Oil and Gas Program 1985-2 by and between Dyco
Petroleum Corporation and the Participants filed
as Exhibit 4.6 to Annual Report on Form 10-K for
the year ended December 31, 1991 on April 8, 1992
and is hereby incorporated by reference.

4.7 Amendment to Program Agreement for Dyco Oil and
Gas Program 1985-2 dated February 9, 1989 filed as
Exhibit 4.7 to Annual Report on Form 10-K for the
year ended December 31, 1991 on April 8, 1992 and
is hereby incorporated by reference.

4.8 Certificate of Limited Partnership, as amended,
for Dyco Oil and Gas Program 1985-2 Limited
Partnership filed as Exhibit 4.8 to Annual Report
on Form 10-K for the year ended December 31, 1991
on April 8, 1992 and is hereby incorporated by
reference.

57
<PAGE>
<PAGE>
27.1 Financial Data Schedule containing summary
financial information extracted from the Dyco Oil
and Gas Program 1985-1 Limited Partnership's
financial statements as of December 31, 1995 and
for the year ended December 31, 1995.
27.2 Financial Data Schedule containing summary
financial information extracted from the Dyco Oil
and Gas Program 1985-2 Limited Partnership's
financial statements as of December 31, 1995 and
for the year ended December 31, 1995.

All other Exhibits are omitted as inapplicable.

58
<PAGE>
<PAGE>
SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly organized.
DYCO OIL AND GAS PROGRAM 1985-1
LIMITED PARTNERSHIP

By: DYCO PETROLEUM CORPORATION
General Partner
February 20, 1996

By: /s/C. Philip Tholen
------------------------------
C. Philip Tholen
Chief Executive Officer
and President

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 on the dates indicated.

By: /s/C. Philip Tholen Chief Executive Feb. 20, 1996
------------------- Officer, President,
C. Philip Tholen and Chairman of the
Board (Principal
Executive Officer)

/s/Dennis R. Neill Senior Vice Feb. 20, 1996
------------------- President and
Dennis R. Neill Director

/s/Jack A. Canon Senior Vice Feb. 20, 1996
------------------- President -
Jack A. Canon General Counsel
and Director

/s/Patrick M. Hall Senior Vice Feb. 20, 1996
------------------- President -
Patrick M. Hall Controller
(Principal
Accounting Officer)

/s/Annabel M. Jones Secretary Feb. 20, 1996
-------------------
Annabel M. Jones

/s/Judy F. Hughes Treasurer Feb. 20, 1996
-------------------
Judy F. Hughes

59
<PAGE>
<PAGE>
SIGNATURES