<PAGE>
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, 1995 0-16488 (1986-2)
DYCO OIL AND GAS PROGRAM 1986-2
(A LIMITED PARTNERSHIP)
(Exact Name of Registrant as specified in its charter)
Minnesota 41-1529976
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
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
---- ----
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DYCO OIL AND GAS PROGRAM 1986-2 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1995 1994
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . $ 20,807 $ 21,615
Accrued oil and gas sales, including
$26,709 and $30,011 due from
related parties (Note 2) . . . . . . 40,575 41,509
-------- --------
Total current assets . . . . . . . $ 61,382 $ 63,124
NET OIL AND GAS PROPERTIES, utilizing
the full cost method . . . . . . . . . 227,817 268,130
DEFERRED CHARGE . . . . . . . . . . . . . 40,024 40,024
-------- --------
$329,223 $371,278
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . $ 6,749 $ 5,577
Gas imbalance payable . . . . . . . . 1,060 1,060
-------- --------
Total current liabilities . . . . . $ 7,809 $ 6,637
PARTNERS' CAPITAL:
General Partner, issued and outstanding
21 units . . . . . . . . . . . . . . 3,215 3,647
Limited Partners, issued and outstanding,
2,020 units . . . . . . . . . . . . 318,199 360,994
-------- --------
Total Partners' capital . . . . . . $321,414 $364,641
-------- --------
$329,223 $371,278
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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DYCO OIL AND GAS PROGRAM 1986-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ---------
REVENUES:
Oil and gas sales, including
$45,446 and $62,530 of sales
to related parties (Note 2) . . . . $60,494 $98,553
Interest . . . . . . . . . . . . . . . 438 340
------- -------
$60,932 $98,893
------- -------
COSTS AND EXPENSES:
Oil and gas production . . . . . . . . $32,149 $25,360
Depreciation, depletion, and amortization
of oil and gas properties . . . . . . . 13,160 25,567
General and administrative (Note 2) . 7,894 8,148
------- -------
$53,203 $59,075
------- -------
NET INCOME . . . . . . . . . . . . . . . $ 7,729 $39,818
======= =======
GENERAL PARTNER (1%) - net income . . . . $ 77 $ 398
======= =======
LIMITED PARTNERS (99%) - net income . . $ 7,652 $39,420
======= =======
NET INCOME PER UNIT . . . . . . . . . . . $ 4 $ 19
======= =======
UNITS OUTSTANDING . . . . . . . . . . . . 2,041 2,041
======= =======
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1986-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ---------
REVENUES:
Oil and gas sales, including
$144,368 and $208,806 of sales
to related parties (Note 2) . . . . $219,320 $311,570
Interest . . . . . . . . . . . . . . . 942 976
-------- --------
$220,262 $312,546
-------- --------
COSTS AND EXPENSES:
Oil and gas production . . . . . . . . $ 88,567 $ 80,305
Depreciation, depletion, and amortization
of oil and gas properties . . . . . . . 45,595 91,285
General and administrative (Note 2) . 27,277 25,973
-------- --------
$161,439 $197,563
-------- --------
NET INCOME . . . . . . . . . . . . . . . $ 58,823 $114,983
======== ========
GENERAL PARTNER (1%) - net income . . . . $ 588 $ 1,150
======== ========
LIMITED PARTNERS (99%) - net income . . $ 58,235 $113,833
======== ========
NET INCOME PER UNIT . . . . . . . . . . . $ 29 $ 56
======= ========
UNITS OUTSTANDING . . . . . . . . . . . . 2,041 2,041
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
-4-
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM 1986-2 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . $ 58,823 $114,983
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation, depletion, and amortiza-
tion of oil and gas properties . . . 45,595 91,285
Decrease in accrued oil and gas sales 934 13,550
Increase in deferred charge . . . . - ( 683)
Increase (decrease) in accounts payable 1,172 (1,215)
Decrease in gas imbalance payable . - ( 3,620)
-------- --------
Net cash provided by operating
activities $106,524 $214,300
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties . ($ 5,282) $ -
Retirements of oil and gas properties - 17,633
-------- --------
Net cash (used) provided by investing
activities . . . . . . . . . . . ($ 5,282) $ 17,633
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions . . . . . . . . . . ($102,050) ($214,305)
-------- --------
Net cash used by financing activities ($102,050) ($214,305)
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . ($ 808) $ 17,628
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 21,615 14,757
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,807 $32,385
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
-5-
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM 1986-2 LIMITED PARTNERSHIP
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheet as of September 30, 1995, statements of
operations for the three and nine months ended September 30, 1995
and 1994, and statements of cash flows for the nine months ended
September 30, 1995 and 1994 have been prepared by Dyco Petroleum
Corporation ("Dyco"), the General Partner of the Dyco Oil and Gas
Program 1986-2 Limited Partnership (the "Program"), 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, 1995, results of operations for
the three and nine months ended September 30, 1995 and 1994 and
changes in cash flows for the nine months ended September 30, 1995
and 1994 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
Program's Annual Report on Form 10-K for the year ended December
31, 1994. The results of operations for the period ended September
30, 1995 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. 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 year 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
---------------------------------
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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 three months ended
September 30, 1995 and 1994 such expenses totaled $7,894 and
$8,148, respectively, of which $7,341 and $7,341 were paid to Dyco.
During the nine months ended September 30, 1995 and 1994 such
expenses totaled $27,277 and $25,973, respectively, of which
$22,023 and $22,023 were paid to Dyco.
Affiliates of the Program are the operators of certain of the
Program's properties and their policy is to bill the Program for
all customary charges and cost reimbursements associated with their
activities, together with any compressor rentals, consulting, or
other services provided.
The Program sells gas at market prices to Premier Gas Company
("Premier"), an affiliated company, and Premier may then resell
such gas to third parties at market prices. During the three
months ended September 30, 1995 and 1994 these sales totaled
$45,446 and $62,530, respectively. During the nine months ended
September 30, 1995 and 1994 these sales totaled $144,368 and
$208,806, respectively. At September 30, 1995 accrued oil and gas
sales included $26,709 due from Premier.
-7-
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net proceeds from the Program's 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 Program's reserves which would result in a
positive economic impact. Over the last several years, the
domestic energy industry and the Program have contended with
volatile, but generally low, oil and gas prices. Over the past
few years, the oil and gas market appears to have moved from
periods of relative stability in supply and demand to excess
supply or weakened demand. These trends have led to the
volatility in pricing and demand noted over the past years.
The Program's available capital from subscriptions has been spent
on oil and gas drilling activities. There should not be any
further material capital resource commitments in the future. The
Program has no bank debt commitments. Cash for operational
purposes will be provided by current oil and gas production.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED SEPTEMBER 30, 1995 AS COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1994.
Three months ended September 30,
--------------------------------
1995 1994
---- ----
Oil and gas sales $60,494 $98,553
Oil and gas production expenses $32,149 $25,360
Barrels produced 684 707
Mcf produced 41,296 60,741
Average price/Bbl $ 22.00 $ 16.05
Average price/Mcf $ 1.10 $ 1.44
As shown in the table, oil and natural gas sales decreased 38.6%
for the three months ended September 30, 1995 as compared to the
three months ended September 30, 1994. This decrease resulted
primarily from decreases in the volumes and average price of
natural gas sold, partially offset by the increase in the
average price of oil sold during the three months ended September
30, 1995 as compared to the three months ended September 30,
1994. Volumes of oil and natural gas sold decreased 23 barrels
and 19,445 Mcf, respectively, for the three months ended
September 30, 1995 as compared to the three months ended
September 30, 1994. The decrease in the volumes of natural gas
sold was primarily the result of significant positive prior
period volume adjustments from a purchaser on a certain well
during the three months ended September 30, 1994. Average
natural gas prices decreased to $1.10 per Mcf for the three
months ended September 30, 1995 from $1.44 per Mcf for the three
months ended September 30, 1994, while average oil prices
increased to $22.00 per barrel for the three months ended
September 30, 1995 from $16.05 per barrel for the three months
-8-
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<PAGE>
ended September 30, 1994.
Oil and gas production expenses (including lease operating
expenses and production taxes) increased $6,789 for the three
months ended September 30, 1995 as compared to the three months
ended September 30, 1994. This increase was primarily a result
of workover charges on one of the Program's wells during the
three months ended September 30, 1995 to improve the recovery of
reserves. As a percentage of oil and gas sales, these expenses
increased to 53.1% for the three months ended September 30, 1995
from 25.7% for the three months ended September 30, 1994. This
percentage increase was primarily due to the decrease in the
average price of natural gas sold during the three months ended
September 30, 1995 as compared to the three months ended
September 30, 1994.
Depreciation, depletion, and amortization of oil and gas
properties decreased $12,407 for the three months ended September
30, 1995 as compared to the three months ended September 30,
1994. This decrease was primarily the result of the decrease in
the volumes of oil and natural gas sold during the three months
ended September 30, 1995 as compared to the three months ended
September 30, 1994 and a significant upward revision in the
estimate of the Program's remaining oil and natural gas reserves.
As a percentage of oil and gas sales, this expense decreased to
21.8% for the three months ended September 30, 1995 as compared
to 25.9% for the three months ended September 30, 1994. This
percentage decrease was primarily the result of the dollar
decrease in depreciation, depletion, and amortization expense
related to the upward revision in the estimate of remaining oil
and natural gas reserves as discussed above.
General and administrative expenses decreased slightly by $254
for the three months ended September 30, 1995 as compared to the
three months ended September 30, 1994. As a percentage of oil
and gas sales, these expenses increased to 13.0% for the three
months ended September 30, 1995 from 8.3% for the three months
ended September 30, 1994. This percentage increase was primarily
due to the decrease in the volumes and average price of natural
gas sold during the three months ended September 30, 1995 as
compared to the three months ended September 30, 1994.
NINE MONTHS ENDED SEPTEMBER 30, 1995 AS COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1994.
Nine months ended September 30,
-------------------------------
1995 1994
---- ----
Oil and gas sales $219,320 $311,570
Oil and gas production
expenses $ 88,567 $ 80,305
Barrels produced 3,907 4,446
Mcf produced 120,102 147,339
Average price/Bbl $ 18.92 $ 16.89
Average price/Mcf $ 1.21 $ 1.60
As shown in the table, oil and natural gas sales decreased 29.6%
for the nine months ended September 30, 1995 as compared to the
nine months ended September 30, 1994. This decrease resulted
from the decreases in the volumes of oil and natural gas sold and
the decease in the average price of natural gas sold, partially
-9-
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<PAGE>
offset by an increase in the average price of oil sold during the
nine months ended September 30, 1995 as compared to the nine
months ended September 30, 1994. Volumes of oil and natural gas
sold decreased 539 barrels and 27,237 Mcf, respectively, for the
nine months ended September 30, 1995 as compared to the nine
months ended September 30, 1994. The decrease in the volumes of
natural gas sold was primarily the result of significant positive
prior period volume adjustments from a purchaser on two of the
Program's wells during the nine months ended September 30, 1994.
Average natural gas prices decreased to $1.21 per Mcf for the
nine months ended September 30, 1995 from $1.60 per Mcf for the
nine months ended September 30, 1994, while average oil prices
increased to $18.92 per barrel for the nine months ended
September 30, 1995 from $16.89 per barrel for the nine months
ended September 30, 1994.
Oil and gas production expenses (including lease operating
expenses and production taxes) increased $8,262 for the nine
months ended September 30, 1995 as compared to the nine months
ended September 30, 1994. This increase was primarily due to
workover charges on several of the Program's wells during the
nine months ended September 30, 1995 to improve the recovery of
reserves. As a percentage of oil and gas sales, these expenses
increased to 40.4% for the nine months ended September 30, 1995
from 25.8% for the nine months ended September 30, 1994. This
percentage increase was primarily due to the dollar increases in
production expenses as discussed above and the decrease in the
average price of natural gas sold during the nine months ended
September 30, 1995 as compared to the nine months ended September
30, 1994.
Depreciation, depletion, and amortization of oil and gas
properties decreased $45,690 for the nine months ended September
30, 1995 as compared to the nine months ended September 30, 1994.
This decrease was primarily the result of the decrease in the
volumes of oil and natural gas sold during the nine months ended
September 30, 1995 as compared to the nine months ended September
30, 1994 and a significant upward revision in the estimate of the
Program's remaining oil and natural gas reserves. As a
percentage of oil and gas sales, this expense decreased to 20.8%
for the nine months ended September 30, 1995 compared to 29.3%
for the nine months ended September 30, 1994. This percentage
decrease was primarily a result of the dollar decrease in
depreciation, depletion, and amortization expense related to the
upward revision in the estimate of the remaining oil and natural
gas reserves as discussed above.
General and administrative expenses increased $1,304 for the nine
months ended September 30, 1995 as compared to the nine months
ended September 30, 1994. This dollar increase resulted
primarily from an increase in the Program's professional fees
during the nine months ended September 30, 1995 as compared to
the nine months ended September 30, 1994. As a percentage of oil
and gas sales, these expenses increased to 12.4% for the nine
months ended September 30, 1995 from 8.3% for the nine months
ended September 30, 1994. This percentage increase was primarily
due to the decrease in the average price of natural gas sold
during the nine months ended September 30, 1995 as compared to
the nine months ended September 30, 1994.
-10-
<PAGE>
<PAGE>
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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<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 1986-2 LIMITED
PARTNERSHIP
(Registrant)
By: DYCO PETROLEUM CORPORATION
General Partner
Date: November 13, 1995 By: /s/Dennis R. Neill
---------------------------
(Signature)
Dennis R. Neill
Senior Vice President
Date: November 13, 1995 By: /s/Patrick M. Hall
----------------------------
(Signature)
Patrick M. Hall
Senior Vice President - Controller
Principal Accounting Officer
-12-
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000778961
<NAME> DYCO OIL AND GAS PROGRAM 1986-2
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 20,807
<SECURITIES> 0
<RECEIVABLES> 40,575
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 61,382
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 329,223
<CURRENT-LIABILITIES> 7,809
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 321,414
<TOTAL-LIABILITY-AND-EQUITY> 329,223
<SALES> 219,320
<TOTAL-REVENUES> 220,262
<CGS> 0
<TOTAL-COSTS> 161,439
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 58,823
<INCOME-TAX> 0
<INCOME-CONTINUING> 58,823
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,823
<EPS-PRIMARY> 29.00
<EPS-DILUTED> 0
</TABLE>
