<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
June 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
June 30, December 31,
1995 1994
---------- ------------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . $ 40,323 $ 21,615
Accrued oil and gas sales, including
$31,397 and $30,011 due from
related parties (Note 2) . . . . . . 64,487 41,509
-------- --------
Total current assets . . . . . . . $104,810 $ 63,124
NET OIL AND GAS PROPERTIES, utilizing
the full cost method . . . . . . . . . 237,150 268,130
DEFERRED CHARGE . . . . . . . . . . . . . 40,024 40,024
-------- --------
$381,984 $371,278
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . $ 6,009 $ 5,577
Gas imbalance payable . . . . . . . . 1,060 1,060
-------- --------
Total current liabilities . . . . . $ 7,069 $ 6,637
PARTNERS' CAPITAL:
General Partner, issued and outstanding
21 units . . . . . . . . . . . . . . 3,750 3,647
Limited Partners, issued and outstanding,
2,020 units . . . . . . . . . . . . 371,165 360,994
-------- --------
Total Partners' capital . . . . . . $374,915 $364,641
-------- --------
$381,984 $371,278
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM 1986-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ---------
REVENUES:
Oil and gas sales, including
$44,397 and $68,172 of sales
to related parties (Note 2) . . . . $76,432 $100,442
Interest . . . . . . . . . . . . . . . 239 475
------- --------
$76,671 $100,917
------- --------
COSTS AND EXPENSES:
Oil and gas production . . . . . . . . $21,463 $ 26,753
Depreciation, depletion, and amortization
of oil and gas properties . . . . . . . 15,655 34,237
General and administrative (Note 2) . 9,383 8,140
------- --------
$46,501 $ 69,130
------- --------
NET INCOME . . . . . . . . . . . . . . . $30,170 $ 31,787
======= ========
GENERAL PARTNER (1%) - net income . . . . $ 302 $ 318
======= ========
LIMITED PARTNERS (99%) - net income . . $29,868 $ 31,469
======= ========
NET INCOME PER UNIT . . . . . . . . . . . $ 15 $ 16
======= ========
UNITS OUTSTANDING . . . . . . . . . . . . 2,041 2,041
======= ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM 1986-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ---------
REVENUES:
Oil and gas sales, including
$98,922 and $146,276 of sales
to related parties (Note 2) . . . . $158,826 $213,017
Interest . . . . . . . . . . . . . . . 504 636
-------- --------
$159,330 $213,653
-------- --------
COSTS AND EXPENSES:
Oil and gas production . . . . . . . . $ 56,418 $ 54,945
Depreciation, depletion, and amortization
of oil and gas properties . . . . . 32,435 65,718
General and administrative (Note 2) . 19,383 17,825
-------- --------
$108,236 $138,488
-------- --------
NET INCOME . . . . . . . . . . . . . . . $ 51,094 $ 75,165
======== ========
GENERAL PARTNER (1%) - net income . . . . $ 511 $ 752
======== ========
LIMITED PARTNERS (99%) - net income . . $ 50,583 $ 74,413
======== ========
NET INCOME PER UNIT . . . . . . . . . . . $ 25 $ 37
======= ========
UNITS OUTSTANDING . . . . . . . . . . . . 2,041 2,041
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM 1986-2 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . $51,094 $ 75,165
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation, depletion, and amortiza-
tion of oil and gas properties . . . . 32,435 65,718
(Increase) decrease in accrued oil and
gas sales . . . . . . . . . . . . . ( 22,978) 5,968
Increase (decrease) in accounts payable 432 ( 1,042)
------- --------
Net cash provided by operating
activities $60,983 $145,809
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties . ($ 1,455) $ -
Retirements of oil and gas properties - 17,633
------- --------
Net cash (used) provided by investing
activities . . . . . . . . . . . ($ 1,455) $ 17,633
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions . . . . . . . . . . ($40,820) ($153,075)
------- --------
Net cash used by financing activities ($40,820) ($153,075)
------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS $18,708 $ 10,367
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 21,615 14,757
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $40,323 $25,124
======= ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM 1986-2 LIMITED PARTNERSHIP
CONDENSED NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheets as of June 30, 1995, statements of operations
for the three and six months ended June 30, 1995 and 1994, and
statements of cash flows for the six months ended June 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 June 30, 1995, results of operations for
the three and six months ended June 30, 1995 and 1994 and
changes in cash flows for the six months ended June 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 June 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.
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2. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
Under the terms of the Program's partnership agreement, Dyco is
entitled to receive a reimbursement for all direct expenses and
general and administrative, geological and engineering expenses
it incurs on behalf of the Program. During the six months ended
June 30, 1995 and 1994 such expenses totaled $19,382 and
$17,825, respectively, of which $14,682 and $14,682 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 six
months ended June 30, 1995 and 1994 these sales totaled $98,922
and $146,276, respectively. At June 30, 1995 accrued oil and
gas sales included $31,397 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.
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 JUNE 30, 1995 AS COMPARED TO THE THREE
MONTHS ENDED JUNE 30, 1994.
Three months ended June 30,
--------------------------
1995 1994
---- ----
Oil and gas sales $76,432 $100,442
Oil and gas production expenses $21,463 $ 26,753
Barrels produced 1,440 1,606
Mcf produced 38,836 46,688
Average price/Bbl $ 18.01 $ 17.33
Average price/Mcf $ 1.30 $ 1.56
As shown in the table, oil and natural gas sales decreased
23.9% for the three months ended June 30, 1995 as compared
to the three months ended June 30, 1994. This decrease
resulted primarily from the decreases in the volumes of oil
and natural gas sold and the decrease in the average price
of natural gas sold during the three months ended June 30,
1995 as compared to the three months ended June 30, 1994.
Volumes of oil and natural gas sold decreased 166 barrels
and 7,852 Mcf, respectively, for the three months ended June
30, 1995 as compared to the three months ended June 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 June 30, 1994. Average natural gas
prices decreased to $1.30 per Mcf for the three months ended
June 30, 1995 from $1.56 per Mcf for the three months ended
-8-
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<PAGE>
June 30, 1994, while average oil prices increased to $18.01
per barrel for the three months ended June 30, 1995 from
$17.33 per barrel for the three months ended June 30, 1994.
Oil and gas production expenses (including lease operating
expenses and production taxes) decreased $5,290 for the
three months ended June 30, 1995 as compared to the three
months ended June 30, 1994. This decrease resulted
primarily from the decreases in the volumes of oil and
natural gas sold during the three months ended June 30, 1995
as compared to the three months ended June 30, 1994. As a
percentage of oil and gas sales, these expenses increased
slightly to 28.1% for the three months ended June 30, 1995
from 26.6% for the three months ended June 30, 1994. This
percentage increase was primarily due to the decrease in the
average price of natural gas sold during the three months
ended June 30, 1995 as compared to the three months ended
June 30, 1994.
Depreciation, depletion, and amortization of oil and gas
properties decreased $18,582 for the three months ended June
30, 1995 as compared to the three months ended June 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 June 30, 1995 as compared to the
three months ended June 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 20.5% for the three months ended
June 30, 1995 from 34.1% for the three months ended June 30,
1994. This percentage decrease was primarily a result of
the dollar decrease in depreciation, depletion, and
amortization expense as discussed above.
General and administrative expenses increased $1,243 for the
three months ended June 30, 1995 as compared to the three
months ended June 30, 1994. This dollar increase resulted
primarily from an increase in the Program's professional
fees during the three months ended June 30, 1995 as compared
to the three months ended June 30, 1994. As a percentage of
oil and gas sales, these expenses increased to 12.3% for the
three months ended June 30, 1995 from 8.1% for the three
months ended June 30, 1994. This percentage increase was
primarily due to the decrease in the average price of
natural gas sold during the three months ended June 30, 1995
as compared to the three months ended June 30, 1994.
-9-
<PAGE>
<PAGE>
SIX MONTHS ENDED JUNE 30, 1995 AS COMPARED TO THE SIX MONTHS
ENDED JUNE 30, 1994.
Six months ended June 30,
-------------------------
1995 1994
---- ----
Oil and gas sales $158,826 $213,017
Oil and gas production expenses $ 56,418 $ 54,945
Barrels produced 3,223 3,739
Mcf produced 78,806 86,598
Average price/Bbl $ 18.27 $ 17.05
Average price/Mcf $ 1.27 $ 1.72
As shown in the above table, oil and natural gas sales
decreased 25.4% for the six months ended June 30, 1995 as
compared to the six months ended June 30, 1994. This
decrease resulted primarily from the decreases in the
volumes of oil and natural gas sold and the decrease in the
average price of natural gas sold during the six months
ended June 30, 1995 as compared to the six months ended June
30, 1994. Volumes of oil and natural gas sold decreased 516
barrels and 7,792 Mcf, respectively, for the six months
ended June 30, 1995 as compared to the six months ended June
30, 1994. The decrease in the volumes of natural gas sold
was primarily the result of significant positive prior
period volume adjustments from purchasers on certain wells
during the six months ended June 30, 1994. Average natural
gas prices decreased to $1.27 per Mcf for the six months
ended June 30, 1995 from $1.72 per Mcf for the six months
ended June 30, 1994, while average oil prices increased to
$18.27 per barrel for the six months ended June 30, 1995
from $17.05 per barrel for the six months ended June 30,
1994.
Oil and gas production expenses (including lease operating
expenses and production taxes) increased $1,473 for the six
months ended June 30, 1995 as compared to the six months
ended June 30, 1994. This increase was primarily due to
workover charges on one of the Program's wells during the
six months ended June 30, 1995 to improve the recovery of
reserves. As a percentage of oil and gas sales, these
expenses increased to 35.5% for the six months ended June
30, 1995 from 25.8% for the six months ended June 30, 1994.
This percentage increase was primarily due to the decrease
in the average price of natural gas sold during the six
months ended June 30, 1995 as compared to the six months
ended June 30, 1994.
Depreciation, depletion, and amortization of oil and gas
properties decreased $33,283 for the six months ended June
30, 1995 as compared to the six months ended June 30, 1994.
This decrease was primarily the result of the decrease in
the volumes of oil and natural gas sold during the six
months ended June 30, 1995 as compared to the six months
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<PAGE>
ended June 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 20.4% for the six months ended June 30,
1995 as compared to 30.9% for the six months ended June 30,
1994. This percentage decrease was primarily a result of
the dollar decrease in depreciation, depletion, and
amortization expense as discussed above.
General and administrative expenses increased $1,558 for the
six months ended June 30, 1995 as compared to the six months
ended June 30, 1994. This dollar increase resulted
primarily from an increase in the Program's professional
fees during the six months ended June 30, 1995 as compared
to the six months ended June 30, 1994. As a percentage of
oil and gas sales, these expenses increased to 12.2% for the
six months ended June 30, 1995 from 8.4% for the six months
ended June 30, 1994. This percentage increase was primarily
due to the decrease in the average price of natural gas sold
during the six months ended June 30, 1995 as compared to the
six months ended June 30, 1994.
-11-
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<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: August 10, 1995 By: /s/Dennis R. Neill
----------------------
(Signature)
Dennis R. Neill
Senior Vice President
Date: August 10, 1995 By: /s/Patrick M. Hall
----------------------
(Signature)
Patrick M. Hall
Senior Vice President -
Controller
Principal Accounting
Officer
-13-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000778961
<NAME> DYCO OIL AND GAS PROGRAM 1986-2 LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 40,323
<SECURITIES> 0
<RECEIVABLES> 64,487
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 104,810
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 381,984
<CURRENT-LIABILITIES> 7,069
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 374,915
<TOTAL-LIABILITY-AND-EQUITY> 381,984
<SALES> 158,826
<TOTAL-REVENUES> 159,330
<CGS> 0
<TOTAL-COSTS> 108,236
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 51,094
<INCOME-TAX> 0
<INCOME-CONTINUING> 51,094
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,094
<EPS-PRIMARY> 25.00
<EPS-DILUTED> 0
</TABLE>
