SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended Commission File Number
September 30, 1998 2-92702 (1985-1)
2-92702-01 (1985-2)
DYCO 1985 OIL AND GAS PROGRAM
(TWO LIMITED PARTNERSHIPS)
(Exact Name of Registrant as specified in its charter)
41-1498087 (1985-1)
Minnesota 41-1498086 (1985-2)
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or Number)
organization)
Samson Plaza, Two West Second Street, Tulsa, Oklahoma 74103
- ------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(918) 583-1791
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DYCO OIL AND GAS PROGRAM 1985-1 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1998 1997
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 98,715 $ 43,585
Accrued oil and gas sales 40,521 83,721
-------- --------
Total current assets $139,236 $127,306
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 114,542 141,913
DEFERRED CHARGE 14,434 14,434
-------- --------
$268,212 $283,653
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 6,937 $ 6,485
Gas imbalance payable 13,160 13,160
-------- --------
Total current liabilities $ 20,097 $ 19,645
ACCRUED LIABILITY $ 23,955 $ 23,955
PARTNERS' CAPITAL:
General Partner, issued and
outstanding, 41 units $ 2,241 $ 2,400
Limited Partners, issued and
outstanding, 4,100 units 221,919 237,653
-------- --------
Total Partners' capital $224,160 $240,053
-------- --------
$268,212 $283,653
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
2
<PAGE>
DYCO OIL AND GAS PROGRAM 1985-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
1998 1997
-------- --------
REVENUES:
Oil and gas sales $63,977 $80,855
Interest 832 577
------- -------
$64,809 $81,432
COSTS AND EXPENSES:
Oil and gas production $26,020 $26,729
Depreciation, depletion, and
amortization of oil and gas
properties 10,868 5,486
General and administrative
(Note 2) 12,106 12,898
------- -------
$48,994 $45,113
------- -------
NET INCOME $15,815 $36,319
======= =======
GENERAL PARTNER (1%) - net income $ 158 $ 363
======= =======
LIMITED PARTNERS (99%) - net income $15,657 $35,956
======= =======
NET INCOME PER UNIT $ 3.82 $ 8.77
======= =======
UNITS OUTSTANDING 4,141 4,141
======= =======
The accompanying condensed notes are an integral part of
these financial statements.
3
<PAGE>
DYCO OIL AND GAS PROGRAM 1985-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
1998 1997
-------- --------
REVENUES:
Oil and gas sales $232,999 $318,201
Interest 1,953 2,502
-------- --------
$234,952 $320,703
COSTS AND EXPENSES:
Oil and gas production $ 77,816 $ 65,079
Depreciation, depletion, and
amortization of oil and gas
properties 27,371 35,160
General and administrative
(Note 2) 42,133 45,590
-------- --------
$147,320 $145,829
-------- --------
NET INCOME $ 87,632 $174,874
======== ========
GENERAL PARTNER (1%) - net income $ 876 $ 1,749
======== ========
LIMITED PARTNERS (99%) - net income $ 86,756 $173,125
======== ========
NET INCOME PER UNIT $ 21.16 $ 42.23
======== ========
UNITS OUTSTANDING 4,141 4,141
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
4
<PAGE>
DYCO OIL AND GAS PROGRAM 1985-1 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
1998 1997
---------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 87,632 $174,874
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 27,371 35,160
Decrease in accrued oil and
gas sales 43,200 32,553
Increase (decrease) in accounts
payable 452 ( 452)
-------- --------
Net cash provided by operating
activities $158,655 $242,135
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of oil and
gas properties $ - $ 935
-------- --------
Net cash provided by investing
activities $ - $ 935
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($103,525) ($248,460)
-------- --------
Net cash used by financing
activities ($103,525) ($248,460)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 55,130 ($ 5,390)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 43,585 86,724
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 98,715 $ 81,334
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
5
<PAGE>
DYCO OIL AND GAS PROGRAM 1985-2 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1998 1997
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 9,107 $ 68,271
Accrued oil and gas sales 16,668 31,074
-------- --------
Total current assets $ 25,775 $ 99,345
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 40,397 53,942
DEFERRED CHARGE 48,160 48,160
-------- --------
$114,332 $201,447
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 5,279 $ 2,718
-------- --------
Total current liabilities $ 5,279 $ 2,718
ACCRUED LIABILITY $ 7,515 $ 7,515
PARTNERS' CAPITAL:
General Partner, issued and
outstanding, 44 units $ 1,015 $ 1,912
Limited Partners, issued and
outstanding, 4,330 units 100,523 189,302
-------- --------
Total Partners' capital $101,538 $191,214
-------- --------
$114,332 $201,447
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
6
<PAGE>
DYCO OIL AND GAS PROGRAM 1985-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
1998 1997
-------- --------
REVENUES:
Oil and gas sales $29,063 $47,614
Interest 26 259
------- -------
$29,089 $47,873
COSTS AND EXPENSES:
Oil and gas production $19,607 $19,667
Depreciation, depletion, and
amortization of oil and gas
properties 2,997 2,330
General and administrative
(Note 2) 11,479 12,379
------- -------
$34,083 $34,376
------- -------
NET INCOME (LOSS) ($ 4,994) $13,497
======= =======
GENERAL PARTNER (1%) - net
income (loss) ($ 50) $ 135
======= =======
LIMITED PARTNERS (99%) - net
income (loss) ($ 4,944) $13,362
======= =======
NET INCOME (LOSS) PER UNIT ($ 1.14) $ 3.09
======= =======
UNITS OUTSTANDING 4,374 4,374
======= =======
The accompanying condensed notes are an integral part of
these financial statements.
7
<PAGE>
DYCO OIL AND GAS PROGRAM 1985-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
1998 1997
-------- --------
REVENUES:
Oil and gas sales $ 99,990 $141,246
Interest 1,780 1,199
-------- --------
$101,770 $142,445
COSTS AND EXPENSES:
Oil and gas production $ 55,377 $ 42,167
Depreciation, depletion, and
amortization of oil and gas
properties 7,884 8,681
General and administrative
(Note 2) 40,705 44,397
-------- --------
$103,966 $ 95,245
-------- --------
NET INCOME (LOSS) ($ 2,196) $ 47,200
======== ========
GENERAL PARTNER (1%) - net
income (loss) ($ 22) $ 472
======== ========
LIMITED PARTNERS (99%) - net
income (loss) ($ 2,174) $ 46,728
======== ========
NET INCOME (LOSS) PER UNIT ($ .50) $ 10.79
======== ========
UNITS OUTSTANDING 4,374 4,374
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
8
<PAGE>
DYCO OIL AND GAS PROGRAM 1985-2 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
1998 1997
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 2,196) $ 47,200
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 7,884 8,681
Decrease in accrued oil and
gas sales 14,406 14,007
Increase (decrease) in accounts
payable 2,561 ( 1,554)
------- --------
Net cash provided by operating
activities $22,655 $ 68,334
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of oil and
gas properties $ 5,661 $ 1,110
------- --------
Net cash provided by investing
activities $ 5,661 $ 1,110
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($87,480) ($109,350)
------- --------
Net cash used by financing
activities ($87,480) ($109,350)
------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ($59,164) ($ 39,906)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 68,271 86,273
------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 9,107 $ 46,367
======= ========
The accompanying condensed notes are an integral part of
these financial statements.
9
<PAGE>
DYCO OIL AND GAS PROGRAM 1985-1 LIMITED PARTNERSHIP
DYCO OIL AND GAS PROGRAM 1985-2 LIMITED PARTNERSHIP
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheets as of September 30, 1998, statements of operations for
the three and nine months ended September 30, 1998 and 1997, and
statements of cash flows for the nine months ended September 30, 1998 and
1997 have been prepared by Dyco Petroleum Corporation ("Dyco"), the
General Partner of the Dyco Oil and Gas Program 1985-1 and 1985-2 Limited
Partnerships (individually, the "1985-1 Program" or the "1985-2 Program",
as the case may be, or, collectively, the "Programs"), without audit. In
the opinion of management all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position
at September 30, 1998, results of operations for the three and nine months
ended September 30, 1998 and 1997, and changes in cash flows for the nine
months ended September 30, 1998 and 1997 have been made.
Information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the financial statements
and notes thereto included in the Programs' Annual Report on Form 10-K for
the year ended December 31, 1997. The results of operations for the period
ended September 30, 1998 are not necessarily indicative of the results to
be expected for the full year.
The limited partners' net income or loss per unit is based upon each
$5,000 initial capital contribution.
OIL AND GAS PROPERTIES
----------------------
Oil and gas operations are accounted for using the full cost method of
accounting. All productive and non-productive costs associated with the
acquisition, exploration and development of oil and gas reserves are
capitalized. The Programs' calculation of depreciation, depletion, and
amortization includes estimated future expenditures to be incurred in
developing proved reserves and estimated dismantlement and abandonment
costs, net of estimated salvage values. In the event the unamortized cost
of oil and gas properties being amortized exceeds the full cost
10
<PAGE>
ceiling (as defined by the Securities and Exchange Commission), the excess
is charged to expense in the period during which such excess occurs. Sales
and abandonments of properties are accounted for as adjustments of
capitalized costs with no gain or loss recognized, unless such adjustments
would significantly alter the relationship between capitalized costs and
proved oil and gas reserves.
The provision for depreciation, depletion, and amortization of oil and gas
properties is calculated by dividing the oil and gas sales dollars during
the period by the estimated future gross income from the oil and gas
properties and applying the resulting rate to the net remaining costs of
oil and gas properties that have been capitalized, plus estimated future
development costs.
2. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
Under the terms of each Program's partnership agreement, Dyco is entitled
to receive a reimbursement for all direct expenses and general and
administrative, geological and engineering expenses it incurs on behalf of
the Program. During the three months ended September 30, 1998 and 1997 the
1985-1 Program incurred such expenses totaling $12,106 and $12,898,
respectively, of which $10,710 was paid each period to Dyco and its
affiliates. During the nine months ended September 30, 1998 and 1997 the
1985-1 Program incurred such expenses totaling $42,133 and $45,590,
respectively, of which $32,130 was paid each period to Dyco and its
affiliates. During the three months ended September 30, 1998 and 1997 the
1985-2 Program incurred such expenses totaling $11,479 and $12,379,
respectively, of which $10,068 was paid each period to Dyco and its
affiliates. During the nine months ended September 30, 1998 and 1997 the
1985-2 Program incurred such expenses totaling $40,705 and $44,397,
respectively, of which $30,204 was paid each period to Dyco and its
affiliates.
Affiliates of the Programs operate certain of the Programs' properties.
Their policy is to bill the Programs for all customary charges and cost
reimbursements associated with these activities.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
USE OF FORWARD-LOOKING STATEMENTS AND ESTIMATES
- -----------------------------------------------
This Quarterly Report contains certain forward-looking statements. The
words "anticipate", "believe", "expect", "plan", "intend", "estimate",
"project", "could", "may" and similar expressions are intended to identify
forward-looking statements. Such statements reflect management's current
views with respect to future events and financial performance. This
Quarterly Report also includes certain information, which is, or is based
upon, estimates and assumptions. Such estimates and assumptions are
management's efforts to accurately reflect the condition and operation of
the Programs.
Use of forward-looking statements and estimates and assumptions involve
risks and uncertainties which include, but are not limited to, the
volatility of oil and gas prices, the uncertainty of reserve information,
the operating risk associated with oil and gas properties (including the
risk of personal injury, death, property damage, damage to the well or
producing reservoir, environmental contamination, and other operating
risks), the prospect of changing tax and regulatory laws, the availability
and capacity of processing and transportation facilities, the general
economic climate, the supply and price of foreign imports of oil and gas,
the level of consumer product demand, and the price and availability of
alternative fuels. Should one or more of these risks or uncertainties
occur or should estimates or underlying assumptions prove incorrect,
actual conditions or results may vary materially and adversely from those
stated, anticipated, believed, estimated, and otherwise indicated.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net proceeds from the Programs' operations less necessary operating
capital are distributed to investors on a quarterly basis. The net
proceeds from production are not reinvested in productive assets, except
to the extent that producing wells are improved or where methods are
employed to permit more efficient recovery of the Programs' reserves which
would result in a positive economic impact.
12
<PAGE>
The Programs' available capital from subscriptions has been spent on oil
and gas drilling activities. 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.
The 1985-2 Program's Statement of Cash Flows for the nine months ended
September 30, 1998 includes proceeds from the sale of oil and gas
properties during the first quarter of 1998. These proceeds were included
in the 1985-2 Program's cash distributions paid in June 1998. It is
possible that the 1985-2 Program's repurchase values and future cash
distributions could decline as a result of the disposition of these
properties. On the other hand, the General Partner believes there will be
beneficial operating efficiencies related to the 1985-2 Program's
remaining properties. This is primarily due to the fact that the
properties sold generally bore a higher ratio of operating expenses as
compared to reserves than the 1985-2 Program's remaining properties.
RESULTS OF OPERATIONS
- ---------------------
GENERAL DISCUSSION
The following general discussion should be read in conjunction with the
analysis of results of operations provided below. The most important
variable affecting the Programs' revenues is the prices received for the
sale of oil and gas. Predicting future prices is very difficult.
Substantially all of the Programs' gas reserves are being sold on the
"spot market". Prices on the spot market are subject to wide seasonal and
regional pricing fluctuations due to the highly competitive nature of the
spot market. Such spot market sales are generally short-term in nature and
are dependent upon the obtaining of transportation services provided by
pipelines. In addition, crude oil prices are at or near their lowest level
in the past decade due primarily to the global surplus of crude oil.
Management is unable to predict whether future oil and gas prices will (i)
stabilize, (ii) increase, or (iii) decrease.
13
<PAGE>
1985-1 PROGRAM
THREE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997.
Three Months Ended September 30,
--------------------------------
1998 1997
------- -------
Oil and gas sales $63,977 $80,855
Oil and gas production expenses $26,020 $26,729
Barrels produced 72 73
Mcf produced 33,765 39,677
Average price/Bbl $ 12.68 $ 16.97
Average price/Mcf $ 1.87 $ 2.01
As shown in the table above, total oil and gas sales decreased $16,878
(20.9%) for the three months ended September 30, 1998 as compared to the
three months ended September 30, 1997. Of this decrease, approximately
$12,000 was related to a decrease in the volumes of gas sold and
approximately $5,000 was related to a decrease in the average price of gas
sold. Volumes of oil and gas sold decreased 1 barrel and 5,912 Mcf,
respectively, for the three months ended September 30, 1998 as compared to
the three months ended September 30, 1997. The decrease in the volumes of
gas sold was primarily due to normal declines in production due to
diminishing gas reserves on two significant wells. Average oil and gas
prices decreased to $12.68 per barrel and $1.87 per Mcf, respectively, for
the three months ended September 30, 1998 from $16.97 per barrel and $2.01
per Mcf, respectively, for the three months ended September 30, 1997.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $709 (2.7%) for the three months ended
September 30, 1998 as compared to the three months ended September 30,
1997. The decrease resulted primarily from a decrease in production taxes
associated with the decrease in oil and gas sales. This decrease was
partially offset by workover expenses incurred on one well during the
three months ended September 30, 1998 in order to improve recovery of
reserves and increases in repair and maintenance expenses on two wells for
the three months ended September 30, 1998 as compared to the three months
ended September 30, 1997. As a percentage of oil and gas sales, these
expenses increased to 40.7% for the three months ended September 30, 1998
from 33.1% for the three months ended September 30, 1997. This percentage
increase was primarily due to the decrease in the average prices of oil
and gas sold during the three months ended September 30, 1998 as compared
to the three months ended September 30, 1997.
14
<PAGE>
Depreciation, depletion, and amortization of oil and gas properties
increased $5,382 (98.1%) for the three months ended September 30, 1998 as
compared to the three months ended September 30, 1997. This increase
resulted primarily from decreases in the oil and gas prices used in the
valuation of reserves at September 30, 1998 as compared to September 30,
1997. As a percentage of oil and gas sales, this expense increased to
17.0% for the three months ended September 30, 1998 from 6.8% for the
three months ended September 30, 1997. This percentage increase was
primarily due to the dollar increase in depreciation, depletion, and
amortization.
General and administrative expenses decreased $792 (6.1%) for the three
months ended September 30, 1998 as compared to the three months ended
September 30, 1997. As a percentage of oil and gas sales, these expenses
increased to 18.9% for the three months ended September 30, 1998 from
16.0% for the three months ended September 30, 1997. This increase was
primarily due to the decrease in oil and gas sales.
NINE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1997.
Nine Months Ended September 30,
-------------------------------
1998 1997
-------- --------
Oil and gas sales $232,999 $318,201
Oil and gas production expenses $ 77,816 $ 65,079
Barrels produced 224 411
Mcf produced 119,538 159,197
Average price/Bbl $ 13.51 $ 17.50
Average price/Mcf $ 1.92 $ 2.16
As shown in the table above, total oil and gas sales decreased $85,202
(26.8%) for the nine months ended September 30, 1998 as compared to the
nine months ended September 30, 1997. Of this decrease, approximately
$86,000 was related to a decrease in the volumes of gas sold and
approximately $28,000 was related to a decrease in the average price of
gas sold, which decreases were partially offset by an increase of
approximately $32,000 related to a refund by the 1985-1 Program in 1997 of
a prior oil overpayment. Volumes of oil and gas sold decreased 187 barrels
and 39,659 Mcf, respectively, for the nine months ended September 30, 1998
as compared to the nine months ended September 30, 1997. The decrease in
the volumes of gas sold was primarily due to positive prior period volume
adjustments made by purchasers on two wells during the nine months ended
September 30, 1997 and normal declines in production due to diminishing
gas reserves on two significant wells. Average oil and gas prices
decreased to $13.51 per barrel and $1.92 per Mcf, respectively, for the
15
<PAGE>
nine months ended September 30, 1998 from $17.50 per barrel and $2.16 per
Mcf, respectively, for the nine months ended September 30, 1997.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $12,737 (19.6%) for the nine months ended
September 30, 1998 as compared to the nine months ended September 30,
1997. This increase resulted primarily from credits related to prior
period lease operating expenses received during the nine months ended
September 30, 1997 from the operators of two sold wells. This increase was
partially offset by a decrease in production taxes associated with the
decrease in oil and gas sales. As a percentage of oil and gas sales, these
expenses increased to 33.4% for the nine months ended September 30, 1998
from 20.5% for the nine months ended September 30, 1997. This percentage
increase was primarily due to the decreases in the average prices of oil
and gas sold during the nine months ended September 30, 1998 as compared
to the nine months ended September 30, 1997 and the dollar increase in the
oil and gas production expenses.
Depreciation, depletion, and amortization of oil and gas properties
decreased $7,789 (22.2%) for the nine months ended September 30, 1998 as
compared to the nine months ended September 30, 1997. This decrease
resulted primarily from the decreases in volumes of gas sold during the
nine months ended September 30, 1998 as compared to the nine months ended
September 30, 1997 and significant upward revisions in the estimates of
remaining oil and gas reserves at December 31, 1997. This decrease was
partially offset by an increase in depreciation, depletion, and
amortization which resulted primarily from decreases in the oil and gas
prices used in the valuation of reserves at September 30, 1998 as compared
to September 30, 1997. As a percentage of oil and gas sales, these
expenses remained relatively constant at 11.7% for the nine months ended
September 30, 1998 and 11.0% for the nine months ended September 30, 1997.
General and administrative expenses decreased $3,457 (7.6%) for the nine
months ended September 30, 1998 as compared to the nine months ended
September 30, 1997. As a percentage of oil and gas sales, these expenses
increased to 18.1% for the nine months ended September 30, 1998 from 14.3%
for the nine months ended September 30, 1997. This percentage increase was
primarily due to the decrease in oil and gas sales.
16
<PAGE>
1985-2 PROGRAM
THREE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997.
Three Months Ended September 30,
--------------------------------
1998 1997
------- -------
Oil and gas sales $29,063 $47,614
Oil and gas production expenses $19,607 $19,667
Barrels produced 397 789
Mcf produced 12,237 15,139
Average price/Bbl $ 12.10 $ 18.53
Average price/Mcf $ 1.98 $ 2.18
As shown in the table above, total oil and gas sales decreased $18,551
(39.0%) for the three months ended September 30, 1998 as compared to the
three months ended September 30, 1997. Of this decrease, approximately
$7,000 and $6,000, respectively, were related to decreases in volumes of
oil and gas sold and approximately $3,000 and $2,000, respectively, were
related to decreases in the average prices of oil and gas sold. Volumes of
oil and gas sold decreased 392 barrels and 2,902 Mcf, respectively, for
the three months ended September 30, 1998 as compared to the three months
ended September 30, 1997. The decrease in the volumes of oil sold resulted
primarily from the curtailment of oil sales on one significant well due to
low oil prices. The decrease in volumes of gas sold resulted primarily
from the 1985-2 Program receiving a decreased percentage of sales on one
well during the three months ended September 30, 1998 due to an
overproduced gas balancing position and normal declines in production due
to diminishing gas reserves on several wells. Average oil and gas prices
decreased to $12.10 per barrel and $1.98 per Mcf, respectively, for the
three months ended September 30, 1998 from $18.53 per barrel and $2.18 per
Mcf, respectively, for the three months ended September 30, 1997.
Oil and gas production expenses (including lease operating expenses and
production taxes) remained relatively constant for the three months ended
September 30, 1998 as compared to the three months ended September 30,
1997. Any decreases in these expenses that were consistent with the
decrease in oil and gas sales were substantially offset by a positive
prior period production tax adjustment made by the purchaser on one well
during the three months ended September 30, 1998 and a positive lease
operating expense adjustment made by the operator on one well during the
three months ended September 30, 1998. As a percentage of oil and gas
sales, these expenses increased to 67.5% for the three months ended
September 30, 1998 from 41.3% for the three months ended September 30,
1997. This percentage increase was primarily
17
<PAGE>
due to the production tax and lease operating adjustments discussed above
and the decreases in the average prices of oil and gas sold during the
three months ended September 30, 1998 as compared to the three months
ended September 30, 1997.
Depreciation, depletion, and amortization of oil and gas properties
increased $667 (28.6%) for the three months ended September 30, 1998 as
compared to the three months ended September 30, 1997. This increase
resulted primarily from the decreases in the oil and gas prices used in
the valuation of reserves at September 30, 1998 as compared to September
30, 1997. As a percentage of oil and gas sales, this expense increased to
10.3% for the three months ended September 30, 1998 from 4.9% for the
three months ended September 30, 1997. This percentage increase was
primarily due to the dollar increase in depreciation, depletion, and
amortization discussed above and the decreases in the average prices of
oil and gas sold during the three months ended September 30, 1998 as
compared to the three months ended September 30, 1997.
General and administrative expenses decreased $900 (7.3%) for the three
months ended September 30, 1998 as compared to the three months ended
September 30, 1997. As a percentage of oil and gas sales, these expenses
increased to 39.5% for the three months ended September 30, 1998 from
26.0% for the three months ended September 30, 1997. This percentage
increase was primarily due to the decrease in oil and gas sales discussed
above.
NINE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1997.
Nine Months Ended September 30,
-------------------------------
1998 1997
------- ---------
Oil and gas sales $99,990 $141,246
Oil and gas production expenses $55,377 $ 42,167
Barrels produced 1,816 2,486
Mcf produced 38,610 47,756
Average price/Bbl $ 13.10 $ 19.06
Average price/Mcf $ 1.97 $ 2.22
As shown in the table above, total oil and gas sales decreased $41,256
(29.2%) for the nine months ended September 30, 1998 as compared to the
nine months ended September 30, 1997. Of this decrease, approximately
$13,000 and $20,000, respectively, were related to decreases in volumes of
oil and gas sold and approximately $11,000 and $9,000, respectively, were
related to decreases in the average prices of oil and gas sold. These
decreases were partially offset by an increase of approximately $12,000
18
<PAGE>
related to a refund by the 1985-2 Program in 1997 of a prior oil
overpayment. Volumes of oil and gas sold decreased 670 barrels and 9,146
Mcf, respectively, for the nine months ended September 30, 1998 as
compared to the nine months ended September 30, 1997. The decrease in the
volumes of oil sold resulted primarily from the curtailment of oil sales
on one significant well due to low oil prices. The decrease in volumes of
gas sold resulted primarily from the 1985-2 Program receiving a decreased
percentage of sales on one well during the nine months ended September 30,
1998 due to an overproduced gas balancing position and positive prior
period volume adjustments made by purchasers on several wells for the nine
months ended September 30, 1997. Average oil and gas prices decreased to
$13.10 per barrel and $1.97 per Mcf, respectively, for the nine months
ended September 30, 1998 from $19.06 per barrel and $2.22 per Mcf,
respectively, for the nine months ended September 30, 1997.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $13,210 (31.3%) for the nine months ended
September 30, 1998 as compared to the nine months ended September 30,
1997. This increase resulted primarily from credits received from the
operator on one well during the nine months ended September 30, 1997 for
prior period lease operating expenses. As a percentage of oil and gas
sales, these expenses increased to 55.4% for the nine months ended
September 30, 1998 from 29.9% for the nine months ended September 30,
1997. This percentage increase was primarily due to the dollar increase in
oil and gas production expenses and the decreases in the average prices of
oil and gas sold during the nine months ended September 30, 1998 as
compared to the nine months ended September 30, 1997.
Depreciation, depletion, and amortization of oil and gas properties
decreased $797 (9.2%) for the nine months ended September 30, 1998 as
compared to the nine months ended September 30, 1997. As a percentage of
oil and gas sales, this expense increased to 7.9% for the nine months
ended September 30, 1998 from 6.1% for the nine months ended September 30,
1997.
General and administrative expenses decreased $3,692 (8.3%) for the nine
months ended September 30, 1998 as compared to the nine months ended
September 30, 1997. As a percentage of oil and gas sales, these expenses
increased to 40.7% for the nine months ended September 30, 1998 from 31.4%
for the nine months ended September 30, 1997. This percentage increase was
primarily due to the decrease in oil and gas sales discussed above.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule containing summary financial
information extracted from the 1985-1 Program's
financial statements as of September 30, 1998 and for
the nine months ended September 30, 1998, filed
herewith.
27.2 Financial Data Schedule containing summary financial
information extracted from the 1985-2 Program's
financial statements as of September 30, 1998 and for
the nine months ended September 30, 1998, filed
herewith.
All other exhibits are omitted as inapplicable.
(b) Reports on Form 8-K.
None.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DYCO OIL AND GAS PROGRAM 1985-1 LIMITED
PARTNERSHIP
DYCO OIL AND GAS PROGRAM 1985-2 LIMITED
PARTNERSHIP
(Registrant)
BY: DYCO PETROLEUM CORPORATION
General Partner
Date: November 4, 1998 By: /s/Dennis R. Neill
-------------------------------
(Signature)
Dennis R. Neill
President
Date: November 4, 1998 By: /s/Patrick M. Hall
-------------------------------
(Signature)
Patrick M. Hall
Chief Financial Officer
21
<PAGE>
INDEX TO EXHIBITS
NUMBER DESCRIPTION
- ------ -----------
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 September 30, 1998 and for
the nine
months ended September 30, 1998, filed herewith.
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 September 30, 1998 and for
the nine
months ended September 30, 1998, filed herewith.
All other exhibits are omitted as inapplicable.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000751255
<NAME> DYCO OIL & GAS PROGRAM 1985-1 LIMITED PSHIP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 98,715
<SECURITIES> 0
<RECEIVABLES> 40,521
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 139,236
<PP&E> 20,980,422
<DEPRECIATION> 20,865,880
<TOTAL-ASSETS> 268,212
<CURRENT-LIABILITIES> 20,097
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 224,160
<TOTAL-LIABILITY-AND-EQUITY> 268,212
<SALES> 232,999
<TOTAL-REVENUES> 234,952
<CGS> 0
<TOTAL-COSTS> 147,320
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 87,632
<INCOME-TAX> 0
<INCOME-CONTINUING> 87,632
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,632
<EPS-PRIMARY> 21.16
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000751256
<NAME> DYCO OIL & GAS PROGRAM 1985-2 LIMITED PSHIP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 9,107
<SECURITIES> 0
<RECEIVABLES> 16,668
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,775
<PP&E> 22,431,130
<DEPRECIATION> 22,390,733
<TOTAL-ASSETS> 114,332
<CURRENT-LIABILITIES> 5,279
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 101,538
<TOTAL-LIABILITY-AND-EQUITY> 114,332
<SALES> 99,990
<TOTAL-REVENUES> 101,770
<CGS> 0
<TOTAL-COSTS> 103,966
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,196)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,196)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,196)
<EPS-PRIMARY> (0.50)
<EPS-DILUTED> 0
</TABLE>
