UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
MARK ONE
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
__ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 2-89194
-----------------------
MAY DRILLING PARTNERSHIP 1984-1
MAY LIMITED PARTNERSHIP 1984-1
(Exact name of registrant as specified in its charter)
------------------------
75-1973664
TEXAS 75-1973661
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4582 SOUTH ULSTER STREET PARKWAY
SUITE 1700
DENVER, COLORADO 80237
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 850-7373
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- ----------------------
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Units of Participation, $1,000 Per Unit
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
DOCUMENTS INCORPORATED BY REFERENCE:
PART OF FORM
10-K INTO
WHICH IT IS
DOCUMENT INCORPORATED
-------- ------------
The General Partnership
Agreement and the Limited
Partnership Agreement filed as Part IV
an Exhibit to Registration
Statement No. 2-89194
PART I
------
ITEM 1 - BUSINESS
May Drilling Partnership 1984-1 (the "Drilling or General Partnership") and May
Limited Partnership 1984-1 (the "Limited Partnership") were organized by May
Petroleum Inc. ("May") to explore for and develop oil and gas reserves
primarily in Texas, Oklahoma and Louisiana. Funds received from the sale and
production of oil and gas reserves are used to pay the obligations of the
Limited Partnership. Funds not required by the Limited Partnership as working
capital are distributed to the participants in the Drilling Partnership and the
general partner.
The general partner of the Limited Partnership is EDP Operating, Ltd., which is
one of the operating partnerships for Hallwood Energy Partners, L. P. ("HEP").
The Drilling Partnership is the sole limited partner of the Limited Partnership.
The Limited Partnership does not have any subsidiaries, nor does it engage in
any other kind of business. The Limited Partnership has no employees and is
operated by Hallwood Petroleum, Inc. ("HPI"), a subsidiary of HEP. In February
1996, HPI employed 133 full-time employees.
Pursuant to the terms of the general partnership agreement and the limited
partnership agreement, HEP is obligated, from time to time, to contribute
certain amounts, in property, cash or unreimbursed services, to the Limited
Partnership. As of December 31, 1995, all such required contributions had been
made.
PARTICIPATION IN EXPENSES AND REVENUES
The principal expenses and revenues of the Limited Partnership are shared by the
general partner and the Drilling Partnership as shown in the following table.
The charges and credits to participants in the Drilling Partnership are shared
among the participants in proportion to their ownership of units of
participation.
<TABLE>
<CAPTION>
Drilling General
Partnership Partner
----------- -------
<S> <C> <C>
Abandonment expenses (1) 99% 1%
Noncapital expenses 99% 1%
Direct expenses 99% 1%
Lease acquisition expenses - 100%
Capital expenses - 100%
Oil and gas revenues (2) (2)
Operating expenses (2) (2)
Special projects (2) (2)
General and administrative
overhead (2) (2)
<F1>
(1) Includes expenses that would otherwise be allocated as lease
acquisition expenses and/or capital expenses but that relate to
abandoned properties.
<F2>
(2) Such items were shared 70% by the Drilling Partnership and 30% by the
general partner until December 31, 1984. As of December 31, 1984,
and as of December 31 of each year thereafter, the sharing of such
items is adjusted so the general partner's allocation equals the
percentage that the amount of Limited Partnership expenses allocated
to the general partner bears to the aggregate amount of Limited
Partnership expenses allocated to the general partner and the
Drilling Partnership, plus 15 percentage points, but in no event will
the general partner's allocation exceed 50%. The sharing ratio for
each of the last three years was:
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Limited Partner 63.1% 63.2% 63.4%
General Partner 36.9% 36.8% 36.6%
</TABLE>
In 1996, the sharing ratio will be 62.9% to the limited partner and 37.1% to the
general partner.
To the extent that the characterization of any expense of the Limited
Partnership depends on its deductibility for federal income tax purposes, the
proper characterization is determined by the general partner (according to its
intended characterization on the Limited Partnership's federal income tax
return) in good faith at the time the expense is to be charged or credited.
Such characterization will control related charges and credits to the partners
regardless of any subsequent determination by the Internal Revenue Service or a
court of law that the reported expenses should be otherwise characterized for
tax purposes.
COMPETITION
Oil and gas must compete with coal, atomic energy, hydro-electric power and
other forms of energy. See also "Marketing" for a discussion of the market
structure for oil and gas sales.
REGULATION
Production and sale of oil and gas is subject to federal and state governmental
regulations in a variety of ways including environmental regulations, labor law,
interstate sales, excise taxes and federal, state and Indian lands royalty
payments. Failure to comply with these regulations may result in fines,
cancellation of licenses to do business and cancellation of federal, state or
Indian leases.
The production of oil and gas is subject to regulation by the state regulatory
agencies in the states in which the Limited Partnership does business. These
agencies make and enforce regulations to prevent waste of oil and gas and to
protect the rights of owners to produce oil and gas from a common reservoir.
The regulatory agencies regulate the amount of oil and gas produced by assigning
allowable production rates to wells capable of producing oil and gas.
FEDERAL INCOME TAX CONSIDERATIONS
The Limited Partnership and the General Partnership are partnerships for federal
income tax purposes. Consequently, they are not taxable entities; rather, all
income, gains, losses, deductions and credits are passed through and taken into
account by the partners on their individual federal income tax returns. In
general, distributions are not subject to tax so long as such distributions do
not exceed the partner's adjusted tax basis. Any distributions in excess of the
partner's adjusted tax basis are taxed generally as capital gains.
MARKETING
The oil and gas produced from the properties owned by the Limited Partnership
has typically been marketed through normal channels for such products. Oil has
generally been sold to purchasers at field prices posted by the principal
purchasers of crude oil in the areas where the producing properties are located.
The majority of the Limited Partnership's gas production is sold on the spot
market and is transported in intrastate and interstate pipelines. Both oil and
natural gas are purchased by refineries, major oil companies, public utilities
and other users and processors of petroleum products.
Factors which, if they were to occur, might adversely affect the Limited
Partnership include decreases in oil and gas prices, the availability of a
market for production, rising operational costs of producing oil and gas,
compliance with and changes in environmental control statutes and increasing
costs and difficulties of transportation.
SIGNIFICANT CUSTOMERS
For the years ended December 31, 1995, 1994 and 1993, purchases by each of the
following companies exceeded 10% of the total oil and gas revenues of the
Limited Partnership:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Koch Oil Company 20% 38%
Louisiana Gas 52%
System
Conoco Inc. 72% 60%
</TABLE>
Although the Limited Partnership sells the majority of its production to one
purchaser, there are numerous other purchasers in the area, so the loss of its
significant customer would not adversely affect the Limited Partnership's
operations.
ENVIRONMENTAL CONSIDERATIONS
The exploration for, and development of, oil and gas involve the extraction,
production and transportation of materials which, under certain conditions, can
be hazardous or can cause environmental pollution problems. In light of the
present general interest in environmental problems, the general partner cannot
predict what effect possible future public or private action may have on the
business of the Limited Partnership. The general partner is continually taking
actions it believes necessary in its operations to ensure conformity with
applicable federal, state and local environmental regulations and does not
presently anticipate that the compliance with federal, state and local
environmental regulations will have a material adverse effect upon capital
expenditures, earnings or the competitive position of the Limited Partnership in
the oil and gas industry.<PAGE>
INSURANCE COVERAGE
The Limited Partnership is subject to all the risks inherent in the exploration
for, and development of, oil and gas, including blowouts, fires and other
casualties. The Limited Partnership maintains insurance coverage as is
customary for entities of a similar size engaged in operations similar to the
Limited Partnership's, but losses can occur from uninsurable risks or in amounts
in excess of existing insurance coverage. The occurrence of an event which is
not insured or not fully insured could have an adverse impact upon the Limited
Partnership's earnings and financial position.
ITEM 2 - PROPERTIES
The Limited Partnership's oil and gas reserves are concentrated in one prospect
in south Louisiana. Natural gas accounts for 57% of estimated future gross
revenues in the Limited Partnership's reserve report as of December 31, 1995.
SIGNIFICANT PROSPECT
At December 31, 1995, the following prospect accounted for all of the Limited
Partnership's proved oil and gas reserves. Reserve quantities were obtained
from the December 31, 1995 reserve report prepared by HPI's petroleum engineers.
MONTET PROSPECT. The Montet prospect is located in Lafayette Parish, Louisiana.
The Limited Partnership's interest in the prospect contains one productive well
and has estimated remaining net proved reserves of 23,000 bbls of oil and
221,000 mcf of gas as of December 31, 1995. The Limited Partnership's working
interest in this well is 8.7%. The prospect produces from one zone, the Bol Mex
3 formation, at approximately 15,275 feet.
ITEM 3 - LEGAL PROCEEDINGS
For a description of legal proceedings affecting the Limited Partnership, please
refer to Item 8 - Note 3.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
No matter was submitted to a vote of participants during the fourth quarter of
1995.
PART II
-------
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
a) The registrant's securities consist of partnership interests which are
not traded on any exchange and for which no established public trading
market exists.
b) As of December 31, 1995, there were approximately 488 holders of record
of partnership interests in the Drilling Partnership.
c) Distributions paid by the Limited Partnership were as follows (in
thousands):
<TABLE>
<CAPTION>
General Limited
Partner Partner
------- -------
<S> <C> <C>
1995 $236 $402
1994 306 528
1993 320 555
</TABLE>
ITEM 6 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Limited Partnership
As of or for the Year Ended December 31,
----------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Total revenues $ 774 $ 956 $ 733 $1,183 $ 821
Oil and gas
revenues 763 949 727 1,114 807
Net income 637 822 593 940 570
Working capital 393 394 406 671 552
Total assets 408 406 419 703 612
Partners'
capital 393 394 406 688 590
</TABLE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Material changes in the Limited Partnership's cash position for the years ended
December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
(In thousands)
<S> <C> <C>
Cash provided by operating activities $ 619 $ 865
Distributions to partners (638) (834)
Additions to oil and gas properties (1)
----- -----
Increase (decrease) in cash $ (20) $ 31
===== =====
</TABLE>
Cash provided by operating activities in 1995 was used primarily for
distributions to the partners. Future distributions depend on, among other
things, continuation of current or higher oil and gas prices, markets for
production and future development costs.
The Limited Partnership has net working capital of $393,000 at December 31,
1995. This working capital, together with cash flows generated from operations,
may be used to fund future distributions.
Proved reserves and discounted future net revenues (discounted at 10% and before
general and administrative expenses) from proved reserves were estimated at
23,000 bbls and 221,000 mcf valued at $821,000 in 1995, and 21,000 bbls of oil
and 185,000 mcf of gas valued at $625,000 in 1994. The Partnership's oil and
gas reserves were revised upward during 1995 based upon the continued
performance of the Freddie Aker.
RESULTS OF OPERATIONS
- ---------------------
1995 COMPARED TO 1994
- ---------------------
OIL REVENUE
Oil revenue decreased $21,000 during 1995 as compared with 1994. The decrease
is comprised of a 14% decrease in production, partially offset by an increase in
the average price from $16.18 per barrel in 1994 to $17.67 per barrel in 1995.
The decrease in production from 23,453 barrels in 1994 to 20,278 barrels in 1995
is primarily due to decreased state allowable production limits combined with
normal production declines.
GAS REVENUE
Gas revenue decreased $165,000 during 1995 as compared with 1994. The decrease
is due to a decrease in the average gas price from $2.27 per mcf during 1994 to
$1.98 per mcf during 1995 combined with a 19% decrease in production. The
decrease in production from 251,129 mcf in 1994 to 204,055 mcf in 1995 is due to
decreased state allowable production limits as well as normal production
declines.
LEASE OPERATING
Lease operating expense increased $2,000 during 1995 as compared with 1994
primarily due to increased maintenance activity during 1995.
PRODUCTION TAXES
Production taxes decreased $6,000 during 1995 as compared with 1994 as a result
of decreased oil and gas revenue during 1995.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased $3,000 during 1995 as compared
with 1994 primarily due to an increase in the allocation of overhead from the
general partner.
DEPLETION
Depletion expense increased $1,000 during 1995 as compared with 1994 due to an
increase in capitalized costs during 1995.
LITIGATION SETTLEMENT
Litigation settlement expense during 1995 represents the costs of a lawsuit
settlement which is further discussed in Item 8 - Note 3 of this Form 10-K.
1994 COMPARED TO 1993
- ---------------------
OIL REVENUE
Oil revenue increased $55,000 in 1994 as compared to 1993. Production increased
22% from 19,146 bbls in 1993 to 23,453 bbls in 1994. The average oil price
decreased from $17.44 per barrel in 1993 to $16.18 per barrel in 1994.
GAS REVENUE
Gas revenue increased $167,000 as compared to 1993. Production increased 27%
from 198,376 mcf in 1993 to 251,129 mcf in 1994. This increase is slightly
offset by a decrease in the average gas price from $2.45 per mcf in 1993 to
$2.27 per mcf in 1994.
LEASE OPERATING
Lease operating expense decreased $1,000 in 1994 as compared to 1993, due to
decreased maintenance activity.
PRODUCTION TAXES
Production taxes increased $17,000 as compared to 1993, due to increased
revenues on the Freddie Aker #1.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased $11,000 in 1994 as compared to
1993, due to a decrease in allocation of overhead from the general partner.
DEPLETION
Depletion expense decreased $18,000 as compared to 1993, because the oil and gas
properties are fully depleted.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
PAGE
----
FINANCIAL STATEMENTS:
Independent Auditors' Report 11
Balance Sheets at December 31, 1995 and 1994 -
May Drilling Partnership 1984-1 12
Balance Sheets at December 31, 1995 and 1994 -
May Limited Partnership 1984-1 13
Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 -
May Limited Partnership 1984-1 14
Statements of Changes in Partners' Capital for the
Years Ended December 31, 1995, 1994 and 1993 -
May Limited Partnership 1984-1 15
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 -
May Limited Partnership 1984-1 16
Notes to Financial Statements - May Drilling Partnership 1984-1
and May Limited Partnership 1984-1 17-20
SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED) 21
INDEPENDENT AUDITORS' REPORT
----------------------------
TO THE PARTNERS OF MAY DRILLING PARTNERSHIP 1984-1 AND
MAY LIMITED PARTNERSHIP 1984-1:
We have audited the financial statements of May Drilling Partnership 1984-1
("General Partnership") and May Limited Partnership 1984-1 ("Limited
Partnership") as of December 31, 1995 and 1994 and for each of the three years
in the period ended December 31, 1995, listed in the accompanying index at Item
8. These financial statements are the responsibility of the Partnerships'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the General Partnership and the Limited
Partnership at December 31, 1995 and 1994, and the results of operations and
cash flows of the Limited Partnership for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 27, 1996
MAY DRILLING PARTNERSHIP 1984-1
BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Investment in May Limited $177 $180
Partnership 1984-1 === ===
PARTNERS' CAPITAL
Partners' Capital $177 $180
=== ===
</TABLE>
Note: The statements of operations and cash flows for May Drilling
Partnership 1984-1 are not presented because such information is
equal to the Limited Partners' share of such activity as presented
in the May Limited Partnership 1984-1 financial statements. The
May Drilling Partnership carries its investment in May Limited
Partnership 1984-1 on the equity method. The May Limited
Partnership 1984-1 financial statements should be read in
conjunction with this balance sheet.
MAY LIMITED PARTNERSHIP 1984-1
BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 197 $ 217
Accrued oil and gas sales 162 134
Due from affiliate 49 55
------ ------
Total 408 406
------ ------
OIL AND GAS PROPERTIES, using the
full cost method of accounting 8,057 8,056
Less - Accumulated depletion (8,057) (8,056)
------ ------
Net oil and gas properties
------ -------
TOTAL ASSETS $ 408 $ 406
====== =======
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 15 $ 12
------ ------
PARTNERS' CAPITAL
General partner 216 214
Limited partner 177 180
------ ------
Total 393 394
------ ------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 408 $ 406
====== ======
MAY LIMITED PARTNERSHIP 1984-1
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In thousands, except for Units)
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Oil revenue $ 358 $ 379 $ 324
Gas revenue 405 570 403
Interest income 11 7 6
------ ------ ------
Total 774 956 733
------ ------ ------
COSTS AND EXPENSES
Lease operating 17 15 16
Production taxes 60 66 49
General and administrative 44 41 52
Depletion 1 18
Litigation settlement 5
Professional services and other 10 12 5
------ ------ ------
Total 137 134 140
------ ------ ------
NET INCOME $ 637 $ 822 $ 593
====== ====== ======
ALLOCATION OF NET INCOME:
General Partner $ 238 $ 304 $ 223
====== ====== ======
Limited Partner $ 399 $ 518 $ 370
====== ====== ======
Per initial $1,000 Limited
Partner investment $ 74.29 $ 96.44 $ 68.89
====== ====== ======
Weighted average initial $1,000
Limited Partner investment
units outstanding 5,371 5,371 5,371
====== ====== ======
</TABLE>
MAY LIMITED PARTNERSHIP 1984-1
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In thousands)
<TABLE>
<CAPTION>
General Limited
Partner Partner Total
------- ------- -----
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $ 313 $ 375 $ 688
Net income 223 370 593
Distributions (320) (555) (875)
----- ----- -----
BALANCE, DECEMBER 31, 1993 216 190 406
Net income 304 518 822
Distributions (306) (528) (834)
----- ----- -----
BALANCE, DECEMBER 31, 1994 214 180 394
Net income 238 399 637
Distributions (236) (402) (638)
----- ----- -----
BALANCE, DECEMBER 31, 1995 $ 216 $ 177 $ 393
===== ===== =====
</TABLE>
MAY LIMITED PARTNERSHIP 1984-1
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 637 $ 822 $ 593
Adjustment to reconcile net income
to net cash provided by
operating activities:
Depletion 1 18
------ ------ ------
Cash from operations before
working capital changes 638 822 611
Changes in assets and liabilities
provided (used) cash:
Accrued oil and gas sales (28) 67 131
Due from affiliate 6 (23) 104
Accounts payable and accrued
liabilities 3 (1) (2)
------ ------ ------
Net cash provided by
operating activities 619 865 844
------ ------ ------
INVESTING ACTIVITIES:
Additions to oil and gas
properties (1) (1)
------ ------ ------
Net cash used in investing (1) (1)
activities ------ ------ ------
FINANCING ACTIVITIES:
Distributions to partners (638) (834) (875)
------ ------ ------
Net cash used in financing
activities (638) (834) (875)
------ ------ ------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (20) 31 (32)
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR 217 186 218
------ ------ ------<PAGE>
END OF YEAR $ 197 $ 217 $ 186
====== ====== ======
</TABLE>
The accompanying notes are an integral part
of the financial statements.
MAY DRILLING PARTNERSHIP 1984-1
AND
MAY LIMITED PARTNERSHIP 1984-1
NOTES TO FINANCIAL STATEMENTS
(1) ACCOUNTING POLICIES AND OTHER MATTERS
GENERAL PARTNERSHIP
May Drilling Partnership 1984-1, a Texas general partnership (the "General
Partnership"), was organized by May Petroleum Inc. ("May") for the purpose of
oil and gas exploration through May Limited Partnership 1984-1 (the "Limited
Partnership"). The General Partnership was formed on July 18, 1984, with
investors ("Participants") subscribing an aggregate of $5,371,000 in assessable
$1,000 units. After the expenditure of the initial contributions of the
Participants, additional mandatory assessments from each Participant are
provided for under the terms of the general partnership agreement in an amount
up to 25% of the initial contribution of the Participant. During 1985, May
assessed the Participants 15% of initial contributions. No additional
assessments have been made since 1985.
The general partnership agreement requires that the manager, Hallwood Energy
Partners, L. P. ("HEP"), offer to repurchase partnership interests from
Participants for cash at amounts to be determined by appraisal of the Limited
Partnership's net assets no later than December 31, 1988, and during the two
succeeding years, if such net assets are positive. The manager has made
repurchase offers in each year since 1989 and intends to make a repurchase offer
in 1996.
As the General Partnership is the sole limited partner of the Limited
Partnership, its results of operations, cash flows and changes in partners'
capital are equal to the limited partner's share of the Limited Partnership's
results of operations, cash flows and changes in partners' capital as set forth
herein. Therefore, separate statements of operations, cash flows and changes in
partners' capital are not presented for the General Partnership.
LIMITED PARTNERSHIP
The Limited Partnership, a Texas limited partnership, was organized by May and
the General Partnership, for the purpose of oil and gas exploration and the
production of crude oil, natural gas and other petroleum products. The Limited
Partnership's oil and gas reserves are concentrated in one prospect in south
Louisiana. Among other things, the terms of the limited partnership agreement
(the "Agreement") give the general partner the authority to borrow funds. The
Agreement also requires that the general partner's total capital contributions
to the Limited Partnership as of each year end, including unrecovered general
partner acreage and equipment advances, must be compared to total Limited
Partnership expenditures from inception to date, and if such contributions are
less than 15% of such expenditures, an additional contribution in the amount of
the deficiency is required. At December 31, 1995, no additional contributions
were necessary to comply with this requirement.
On June 30, 1987, May sold to HEP all of its economic interest in the Limited
Partnership and account receivable balances due from the Limited Partnership.
HEP became the general partner of the Limited Partnership in 1988.
SHARING OF COSTS AND REVENUES
Capital costs, as defined by the Agreement, for commercially productive wells
and the costs related to the organization of the Limited Partnership are borne
by the general partner. Noncapital costs and direct expenses, as defined by the
Agreement, are charged 1% to the general partner and 99% to the limited partner.
Oil and gas sales, operating expenses and general and administrative overhead
are shared so that the general partner's allocation will equal the percentage
that the amount of Limited Partnership expenses, as defined, allocated to the
general partner bears to the aggregate amount of Limited Partnership expenses
allocated to the general partner and the limited partner, plus 15 percentage
points, but in no event will the general partner's allocation exceed 50%. The
sharing ratio for each of the last three years was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Drilling Partner 63.1% 63.2% 63.4%
General Partner 36.9% 36.8% 36.6%
</TABLE>
SIGNIFICANT CUSTOMERS
For the years ended December 31, 1995, 1994 and 1993, purchases by each of the
following companies exceeded 10% of the total oil and gas revenues of the
Limited Partnership:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Koch Oil Company 20% 38%
Louisiana Gas System 52%
Conoco Inc. 72% 60%
</TABLE>
Although the Limited Partnership sells the majority of its production to one
purchaser, there are numerous other purchasers in the area, so the loss of its
significant customer would not adversely affect the Limited Partnership's
operations.
INCOME TAXES
No provision for federal income taxes is included in the financial statements of
the Limited Partnership or the General Partnership because, as partnerships,
they are not subject to federal income tax and the tax effects of their
activities accrue to the partners. The partnerships' tax returns, the
qualification of the General and Limited Partnerships as partnerships for
federal income tax purposes, and the amount of taxable income or loss are
subject to examination by federal and state taxing authorities. If such
examinations result in changes to the partnerships' taxable income or loss, the
tax liability of the partners could change accordingly.
OIL AND GAS PROPERTIES
The Limited Partnership follows the full cost method of accounting for oil and
gas properties and, accordingly, capitalizes all costs associated with the
exploration and development of oil and gas reserves.
The capitalized costs of evaluated properties, including the estimated future
costs to develop proved reserves, are amortized on the units of production
basis. Full cost amortization per dollar of gross oil and gas revenues was $.01
in 1995, -0- in 1994 and $.02 in 1993.
Capitalized costs are limited to an amount not to exceed the present value of
estimated future net cash flows. No valuation adjustment was required in 1995,
1994 or 1993.
Generally no gains or losses are recognized on the sale or disposition of oil
and gas properties. Maintenance and repairs are charged against income when
incurred.
GAS BALANCING
The Limited Partnership uses the sales method for accounting for gas balancing.
Under this method, the Limited Partnership recognizes revenue on all of its
sales of production, and any over production or under production is recovered at
a future date.
As of December 31, 1995, the net imbalance to the Limited Partnership's interest
is not considered material. Current imbalances can be made up with production
from the existing well.
USE OF ESTIMATES
The preparation of the financial statements for the Limited Partnership and
General Partnership in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.
RELATED PARTY TRANSACTIONS
Hallwood Petroleum, Inc. ("HPI"), a subsidiary of the general partner, pays all
costs and expenses of operations and receives all revenues associated with the
Limited Partnership's properties. At month end, HPI distributes revenues in
excess of costs to the Limited Partnership. The amounts due from HPI were
$49,000 and $55,000 as of December 31, 1995 and 1994, respectively. These
balances represent net revenue less operating costs and expenses.
CASH FLOWS
All highly liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years' amounts to conform to
the classifications used in the current year.
(2) GENERAL AND ADMINISTRATIVE OVERHEAD
HPI conducts the day to day operations of the Limited Partnership and other
affiliated partnerships of HEP. The costs of operating the entities are
allocated to each partnership based upon the time spent on that partnership.
General and administrative overhead allocated by HPI to the Limited Partnership
totaled $43,000 in 1995, $41,000 in 1994 and $51,000 in 1993.
(3) LEGAL PROCEEDING
In the fourth quarter of 1995, the parties settled the lawsuit styled Stutes v.
Hallwood Petroleum, Inc. et al. The plaintiff alleged that as a result of
exposure to benzene in the petroleum he was hauling from various wells owned and
operated by the Limited Partnership and the approximately 80 other named
defendants, he contracted myelogenous leukemia. The Limited Partnership's
share of the settlement not covered by insurance was $5,000.
SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION
(Unaudited)
The following tables contain certain costs and reserve information related to
the Limited Partnership's oil and gas activities. The Limited Partnership has
no long-term supply agreements and all reserves are located within the United
States.
COSTS INCURRED -
<TABLE>
<CAPTION>
For the Years Ended December 31,
1995 1994 1993
------ ------ -----
(In thousands)
<S> <C> <C> <C>
Development costs $ 1 $ - $ 1
=== === ===
</TABLE>
OIL AND GAS RESERVES -
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
Bbls Mcf Bbls Mcf Bbls Mcf
---- --- ---- --- ---- ---
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Total Proved Reserves:
Beginning of period 21 185 17 150 16 173
Revisions to previous
estimates 22 240 27 286 20 175
Production (20) (204) (23) (251) (19) (198)
---- ----- ---- ----- ---- -----
End of Period 23 221 21 185 17 150
==== ===== ==== ===== ==== =====
Proved Developed
Reserves:
Beginning of period 21 185 17 150 16 173
==== ==== ==== ==== ==== ====
End of period 23 221 21 185 17 150
==== ==== ==== ==== ==== ====
</TABLE>
Certain reserve value information is provided directly to partners pursuant to
the Agreement. Accordingly, such information is not presented herein.
ITEM 9 - DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
--------
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Drilling Partnership and Limited Partnership are managed by affiliates of
HEP and do not have directors or executive officers.
ITEM 11 - EXECUTIVE COMPENSATION
The partnerships pay no salaries or other direct remuneration to officers,
directors or key employees of the general partner or HPI. The Limited
Partnership reimburses the general partner for general and administrative costs
incurred on behalf of the partnerships. See Note 2 to the Financial Statements.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the knowledge of the general partner, no person owns of record or
beneficially more than 5% of the Drilling Partnership's outstanding units, other
than HEP, the address of which is 4582 S. Ulster Street Parkway, Denver,
Colorado 80237, and which beneficially owns approximately 35.3% of the
outstanding units. The general partner of HEP is Hallwood Energy Corporation.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information with respect to the Limited Partnership and its relationships
and transactions with the general partner, see Part I, Item 1 and Part II, Item
7.
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. Financial Statements and Schedules:
See Index at Item 8.
b. Reports on Form 8-K - None.
c. Exhibits:
3.1 The General Partnership Agreement and the Limited Partnership
Agreement filed as an Exhibit to Registration Statement No. 2-
89194, are incorporated herein by reference.
SIGNATURES
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Partnerships have duly caused this report to be
signed on their behalf by the undersigned, thereunto duly authorized.
MAY DRILLING PARTNERSHIP 1984-1
MAY LIMITED PARTNERSHIP 1984-1
BY: EDP OPERATING, LTD., GENERAL
PARTNER<PAGE>
BY: HALLWOOD G.P., INC.
GENERAL PARTNER
By: /s/William L. Guzzetti
---------------------------
William L. Guzzetti
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Robert S. Pfeiffer Vice President February 29, 1996
---------------------------- (Principal -----------------
Robert S. Pfeiffer Accounting
Officer)<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-K
for the year ended December 31, 1995 for May Limited Partnership 1984-1 and is
qualified in its entirety by reference to such Form 10-K.
</LEGEND>
<CIK> 0000757525
<NAME> MAY LIMITED PARTNERSHIP 1984-1
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 197
<SECURITIES> 0
<RECEIVABLES> 211
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 408
<PP&E> 8,057
<DEPRECIATION> 8,057
<TOTAL-ASSETS> 408
<CURRENT-LIABILITIES> 15
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 393
<TOTAL-LIABILITY-AND-EQUITY> 408
<SALES> 763
<TOTAL-REVENUES> 774
<CGS> 0
<TOTAL-COSTS> 77
<OTHER-EXPENSES> 60
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 637
<INCOME-TAX> 0
<INCOME-CONTINUING> 637
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 637
<EPS-PRIMARY> 74.29
<EPS-DILUTED> 74.29
</TABLE>
