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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995
Commission File Number 2-65186-03 (1980-1 Program)
2-65186-04 (1980-2 Program)
DYCO 1980 OIL AND GAS PROGRAMS
(TWO LIMITED PARTNERSHIPS)
(Exact name of registrant as specified in its charter)
41-1378908 (1980-1 Program)
Minnesota 41-1385165 (1980-2 Program)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Samson Plaza
Two West Second Street
Tulsa, Oklahoma 74103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 583-1791
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Units of limited partnership interest
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to the filing requirements for the
past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
Yes X No (Disclosure is contained herein)
----- -----
The units of limited partnership are not publicly traded,
therefore, registrant cannot compute the aggregate market value of the
voting units held by non-affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE: None.
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FORM 10-K
DYCO 1980 OIL AND GAS PROGRAMS
(Two Minnesota limited partnerships)
TABLE OF CONTENTS
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . 4
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
LIMITED PARTNERS . . . . . . . . . . . . . . 11
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED
PARTNERSHIP UNITS AND RELATED LIMITED
PARTNER MATTERS . . . . . . . . . . . . . . . 11
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA . . . . . . . . . . . . . . . . . . . . 20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE . . . . . . . . . . . . . . . . . 45
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT . . . . . . . . . . . . . . . . . 45
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . 47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . 51
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS . . . . . . . . . . . . . . . . 51
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K . . . . . . . . . . . 52
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 55
ii
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PART I
ITEM 1. BUSINESS
General
The Dyco Oil and Gas Program 1980-1 Limited Partnership (the
"1980-1 Program") and Dyco Oil and Gas Program 1980-2 Limited
Partnership (the "1980-2 Program") (collectively, the "Programs") are
Minnesota limited partnerships engaged in the production of oil and
gas. The 1980-1 Program and the 1980-2 Program commenced operations
on February 15, 1980 and June 16, 1980, respectively, with the primary
financial objective of investing their limited partners' subscriptions
in the drilling of oil and gas prospects and then distributing to
their limited partners all available cash flow from the Program's on-
going production operations. Dyco Petroleum Corporation ("Dyco")
serves as the General Partner of the Programs. See "Item 2.
Properties" for a description of the Programs' reserves and
properties.
The limited partnership agreements for each of the Programs
provides that limited partners are allocated 99% of all Program costs
and revenues and that Dyco, as General Partner, is allocated 1% of all
Program costs and revenues. Included in such costs is each Program's
reimbursement to Dyco of the Program's proportionate share of Dyco's
geological, engineering, and general and administrative expenses.
Dyco serves as General Partner of 34 limited partnerships,
including the Programs. Dyco is a wholly-owned subsidiary of Samson
Natural Gas Company, which is a wholly-owned subsidiary of Samson
Investment Company. Samson Investment Company and its various
corporate subsidiaries, including Dyco, (collectively, the "Samson
Companies") are engaged in the production and development of and
exploration for oil and gas reserves and the acquisition and operation
of producing properties. At December 31, 1995, the Samson Companies
owned interests in approximately 18,000 oil and gas wells located in
19 states of the U.S. and 3 provinces of Canada. At December 31,
1995, the Samson Companies operated approximately 3,100 oil and gas
wells located in 15 states of the U. S., 2 provinces of Canada,
Venezuela, and Russia.
As limited partnerships, the Programs have no officers,
directors, or employees. They rely instead on the personnel of Dyco
and the other Samson Companies. As of February 1, 1996, the Samson
Companies employed approximately 830 persons. No employees are
covered by collective bargaining agreements, and management believes
that the Samson Companies provide a sound employee relations
environment. For information regarding the executive officers of
Dyco, see "Item 10. Directors and Executive Officers of the
Registrant."
Dyco's and the Programs' principal place of business is located
at Samson Plaza, Two West Second Street, Tulsa, Oklahoma 74103, and
their telephone number is (918) 583-1791 or (800) 535-1791.
Funding
Although the Programs' partnership agreements permit the Programs
to incur borrowings, each Program's operations and expenses are
currently funded out of each Program's revenues from oil and gas
sales. Dyco may, but is not required to, advance funds to each of the
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Programs for the same purposes for which Program borrowings are
authorized.
Principal Products Produced and Services Rendered
The Programs' sole business is the development and production of
oil and natural gas with a concentration on natural gas. The
Programs do not hold any patents, trademarks, licenses, or concessions
and are not a party to any government contracts. The Programs have no
backlog of orders and do not participate in research and development
activities. The Programs are not presently encountering shortages of
oilfield tubular goods, compressors, production material, or other
equipment.
Oil, Gas, and Environmental Control Regulations
Regulation of Production Operations -- The production of oil and
gas is subject to extensive federal and state laws and regulations
governing a wide variety of matters, including the drilling and
spacing of wells, allowable rates of production, prevention of waste
and pollution, and protection of the environment. In addition to the
direct costs borne in complying with such regulations, operations and
revenues may be impacted to the extent that certain regulations limit
oil and gas production to below economic levels.
Regulation of Sales and Transportation of Oil and Natural Gas --
Sales of crude oil and condensate are made by the Programs at market
prices and are not subject to price controls. The sale of natural gas
may be subject to both federal and state laws and regulations,
including, but not limited to, the Natural Gas Act of 1938 (the
"NGA"), the Natural Gas Policy Act of 1978 (the "NGPA"), and
regulations promulgated by the Federal Energy Regulatory Commission
(the "FERC") under the NGA, the NGPA, and other statutes. The
provisions of the NGA and the NGPA, as well as the regulations
thereunder, are complex and affect all who produce, resell, transport,
or purchase natural gas, including the Programs. Although virtually
all of the Programs' gas production is not subject to price
regulation, the NGA, NGPA, and FERC regulations affect the
availability of gas transportation services and the ability of gas
consumers to continue to purchase or use gas at current levels.
Accordingly, such regulations may have a material effect on the
Programs' operations and projections of future oil and gas production
and revenues.
Future Legislation -- Legislation affecting the oil and gas
industry is under constant review for amendment or expansion. Because
such laws and regulations are frequently amended or reinterpreted,
management is unable to predict what additional energy legislation may
be proposed or enacted or the future cost and impact of complying with
existing or future regulations.
Regulation of the Environment -- The Programs' operations are
subject to numerous laws and regulations governing the discharge of
materials into the environment or otherwise relating to environmental
protection. Compliance with such laws and regulations, together with
any penalties resulting from noncompliance therewith, may increase the
cost of the Programs' operations or may affect the Programs' ability
to complete, in a timely fashion, existing or future activities.
Management anticipates that various local, state, and federal
environmental control agencies will have an increasing impact on oil
and gas operations.
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Significant Customers
Purchases of gas by Premier Gas Company ("Premier") accounted for
approximately 86.6% of the 1980-1 Program's oil and gas sales during
the year ended December 31, 1995. With respect to the 1980-2 Program,
purchases of gas by Premier accounted for approximately 87.9% of its
oil and gas sales during the year ended December 31, 1995. Premier
was an affiliate of Dyco until December 6, 1995. See "Item
11. Executive Compensation." In the event of interruption of pur-
chases by this significant customer or the cessation or material
change in availability of open-access transportation by the Programs'
pipeline transporters, the Programs may encounter difficulty in
marketing their gas and in maintaining historic sales levels.
Alternative purchasers or transporters may not be readily available.
The Programs' principal customers for crude oil production are
refiners and other companies which have pipeline facilities near the
producing properties of the Programs. In the event pipeline
facilities are not conveniently available to production areas, crude
oil is usually trucked by purchasers to storage facilities.
Competition and Marketing
The oil and gas industry is highly competitive, with a large
number of companies and individuals engaged in the exploration and
development of oil and gas properties. The ability of the Programs to
produce and market oil and gas profitably depends on a number of
factors that are beyond the control of the Programs. These factors
include worldwide political instability (especially in oil-producing
regions), the supply and price of foreign imports of oil and gas, the
level of consumer product demand (which is heavily influenced by
weather patterns), government regulations and taxes, the price and
availability of alternative fuels, the overall economic environment,
and the availability and capacity of transportation and processing
facilities. The effect of these factors cannot be accurately
predicted or anticipated.
As a general rule, in recent years, worldwide oil production
capacity and gas production capacity in certain areas of the United
States exceeded demand and resulted in a decline in the average price
of oil and gas in the United States. During the later part of 1994
and 1995, however, average oil prices in the United States increased.
Oil prices increased from approximately $16.50 per barrel at Decem-
ber 31, 1994 to approximately $18.50 per barrel at December 31, 1995.
Management is unable to predict whether future oil prices will
(i) stabilize, (ii) increase, or (iii) decrease.
Gas sales contract prices have generally declined significantly
since the mid-1980s due to a number of factors, including a nationwide
surplus of gas and increased competition. Competition has increased
among United States gas marketers due to the gas surplus, the partial
deregulation of gas prices, the conversion by major pipelines to open
access transportation, and the lack of strong residential demand for
natural gas during the winter months for the last few years as a
result of warm winters in much of the United States. However, spot
gas prices in the areas where the Programs' gas is marketed increased
during the later part of 1995
compared to prices received in the later part of 1994 and the first
several months of 1995.
Substantially all of the Programs' natural gas reserves are being
sold in the "spot market." Due to the highly competitive nature of
the spot market, prices on the spot market are subject to wide
seasonal and regional pricing fluctuations. In addition, such spot
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market sales are generally short-term in nature and are dependent upon
the obtaining of transportation services provided by pipelines.
The Programs' spot gas prices increased from approximately $1.67
per Mcf at December 31, 1994 to approximately $2.00 per Mcf at
December 31, 1995. Such prices were on an MMBTU basis and differ from
the prices actually received by the Program due to transportation and
marketing costs, BTU adjustments, and regional price and quality
differences. Future prices will likely be different from (and may be
lower than) the prices in effect on December 31, 1995. In many past
years, year-end prices have tended to be higher, and in some cases
significantly higher, than the yearly average price actually received
by the Programs for at least the year following the year-end valuation
date. Management is unable to predict whether future gas prices will
(i) stabilize, (ii) increase, or (iii) decrease.
Insurance Coverage
The Programs are subject to all of the risks inherent in the
exploration for and production of oil and gas, including blowouts,
pollution, fires, and other casualties. The Programs maintain
insurance coverage as is customary for entities of a similar size
engaged in operations similar to that of the Programs, but losses can
occur from uninsurable risks or in amounts in excess of existing
insurance coverage. The occurrence of an event which is not fully
covered by insurance could have a material adverse effect on the
Programs' financial position and results of operations.
ITEM 2. PROPERTIES
Well Statistics
The following table sets forth the numbers of gross and net
productive wells of the Programs as of December 31, 1995.
Well Statistics(1)
As of December 31, 1995
1980-1 1980-2
Program Program
------- -------
Gross productive wells(2):
Oil 2 1
Gas 50 60
-- --
Total 52 61
Net productive wells(3):
Oil .34 .06
Gas 2.62 3.64
---- ----
Total 2.96 3.70
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(1) The designation of a well as an oil well or gas well is made
by Dyco based on the relative amount of oil and gas reserves
for the well. Regardless of a well's oil or gas
designation, it may produce oil, gas, or both oil and gas.
(2) As used throughout this Annual Report, "Gross Well" refers
to a well in which a working interest is owned. The number
of gross wells is the total number of wells in which a
working interest is owned.
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(3) As used throughout this Annual Report, "Net Well" refers to
the sum of the fractional working interests owned in gross
wells expressed as whole numbers and fractions thereof. For
example, a 15% leasehold interest in a well represents one
Gross Well, but 0.15 Net Well.
Drilling Activities
The Programs participated in no drilling activities for the year
ended December 31, 1995.
Oil and Gas Production, Revenue, and Price History
The following table sets forth certain historical information
concerning the oil (including condensates) and natural gas production,
net of all royalties, overriding royalties, and other third party
interests, of the Programs, revenues attributable to such production,
and certain price and cost information.
Net Production Data
Year Ended December 31,
----------------------------
1995 1994 1993
-------- -------- --------
1980-1 Program:
- - --------------
Production:
Oil (Bbls)(1) 2,455 3,016 2,652
Gas (Mcf)(2) 410,288 334,780 308,738
Oil and gas sales:
Oil $ 42,662 $ 50,080 $ 46,458
Gas 562,964 568,880 594,178
------- ------- -------
Total $605,626 $618,960 $640,636
======= ======= =======
Total direct operating
expenses $193,353 $208,158 $ 89,868
======= ======= =======
Direct operating expense
as a percentage of oil
and gas sales 31.9% 33.6% 14.0%
Average sales price:
Per barrel of oil $ 17.38 $ 16.60 $ 17.52
Per Mcf of gas 1.37 1.70 1.92
Direct operating expenses
per equivalent Mcf of
gas(3) $ .45 $ .59 $ .28
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1980-2 Program:
- - --------------
Production:
Oil (Bbls)(1) 2,064 2,221 1,992
Gas (Mcf)(2) 560,892 445,185 439,187
Oil and gas sales:
Oil $ 36,469 $ 36,010 $ 36,794
Gas 783,949 705,855 829,585
------- ------- -------
Total $820,418 $741,865 $866,379
======= ======= =======
Total direct operating
expenses $415,548 $206,652 $165,225
======= ======= =======
Direct operating expenses
as a percentage of oil
and gas sales 50.7% 27.9% 19.1%
Average sales price:
Per barrel of oil $ 17.67 $ 16.21 $ 18.47
Per Mcf of gas 1.40 1.59 1.89
Direct operating expenses
per equivalent Mcf of
gas(3) $ .72 $ .45 $ .37
- - ----------
(1) As used throughout this Annual Report, "Bbls" refers to barrels
of 42 U.S. gallons and represents the basic unit for measuring
the production of crude oil and condensate oil.
(2) As used throughout this Annual Report, "Mcf" refers to volume of
1,000 cubic feet under prescribed conditions of pressure and
temperature and represents the basic unit for measuring the
production of natural gas.
(3) Oil production is converted to gas equivalents at the rate of six
Mcf per barrel, representing the estimated relative energy
content of gas and oil, which rate is not necessarily indicative
of the relationship of oil and gas prices. The respective prices
of oil and gas are affected by market and other factors in
addition to relative energy content.
Proved Reserves and Net Present Value
The following table sets forth the Programs' estimated proved oil
and gas reserves and net present value therefrom as of December 31,
1995. The schedule of quantities of proved oil and gas reserves was
prepared by Dyco in accordance with the rules prescribed by the
Securities and Exchange Commission (the "SEC"). As used throughout
this Annual Report, "proved reserves" refers to those estimated
quantities of crude oil, natural gas, and natural gas liquids which
geological and engineering data demonstrate with reasonable certainty
to be recoverable in future years from known oil and gas reservoirs
under existing economic and operating conditions.
Net present value represents estimated future gross cash flow
from the production and sale of proved reserves, net of estimated oil
and gas production costs (including production taxes, ad valorem
taxes, and operating expenses), and estimated future development costs
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discounted at 10% per annum. Net present value attributable to the
Programs' proved reserves was calculated on the basis of current costs
and prices at December 31, 1995. Such prices were not escalated
except in certain circumstances where escalations were fixed and
readily determinable in accordance with applicable contract
provisions. The prices used by Dyco in calculating the net present
value attributable to the Programs' proved reserves do not necessarily
reflect market prices for oil and gas production subsequent to
December 31, 1995. Furthermore, gas prices at December 31, 1995 were
higher than the price used for determining the Programs' net present
value of proved reserves for the year ended December 31, 1994. There
can be no assurance that the prices used in calculating the net
present value of the Programs' proved reserves at December 31, 1995
will actually be realized for such production.
The process of estimating oil and gas reserves is complex,
requiring significant subjective decisions in the evaluation of
available geological, engineering, and economic data for each
reservoir. The data for a given reservoir may change substantially
over time as a result of, among other things, additional development
activity, production history, and viability of production under
varying economic conditions; consequently, it is reasonably possible
that material revisions to existing reserve estimates may occur in the
near future. Although every reasonable effort has been made to ensure
that the reserve estimates reported herein represent the most accurate
assessment possible, the significance of the subjective decisions
required and variances in available data for various reservoirs make
these estimates generally less precise than other estimates presented
in connection with financial statement disclosures.
Proved Reserves and
Net Present Value
From Proved Reserves
As of December 31, 1995
1980-1 Program:
- - --------------
Estimated proved reserves:
Natural gas (Mcf) 1,419,651
Oil and liquids (Bbls) 17,478
Net present value (discounted
at 10% per annum) $1,884,151
1980-2 Program:
- - --------------
Estimated proved reserves:
Natural gas (Mcf) 1,664,201
Oil and liquids (Bbls) 8,641
Net present value (discounted
at 10% per annum) $1,661,113
No estimates of the proved reserves of the Programs comparable to
those included herein have been included in reports to any federal
agency other than the SEC. Additional information relating to the
Programs' proved reserves is contained in Note 5 to the Programs'
financial statements, included in Item 8 of this Annual Report.
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Significant Properties
1980-1 Program
--------------
As of December 31, 1995, the 1980-1 Program's properties
consisted of 52 gross (2.96 net) productive wells in which the 1980-1
Program owned a working interest. The 1980-1 Program owned a non-
working interest in an additional 14 gross wells. Affiliates of the
1980-1 Program operate 13 (20%) of its total wells. As of
December 31, 1995, the 1980-1 Program's net interests in its
properties resulted in estimated total proved reserves of
1,419,651 Mcf of natural gas and 17,478 barrels of oil with a present
value (discounted at 10% per annum) of estimated future net cash flow
of $1,884,151. All of the 1980-1 Program's reserves are located in
the Anadarko Basin of western Oklahoma and the Texas panhandle, which
is an established oil and gas producing basin.
1980-2 Program
--------------
As of December 31, 1995, the 1980-2 Program's properties
consisted of 61 gross (3.70 net) productive wells in which the 1980-2
Program owned a working interest. The 1980-2 Program owned a non-
working interest in an additional 17 gross wells. Affiliates of the
1980-2 Program operate 16 (21%) of its total wells. As of
December 31, 1995, the 1980-2 Program's net interests in its
properties resulted in estimated total proved reserves of
1,664,201 Mcf of natural gas and 8,641 barrels of oil with a present
value (discounted at 10% per annum) of estimated future net cash flow
of $1,661,113. All of the 1980-2 Program's reserves are located in
the Anadarko Basin.
Title to Oil and Gas Properties
Management believes that the Programs have satisfactory title to
their oil and gas properties. Record title to substantially all of
the Programs' properties is held by Dyco as nominee.
Title to the Programs' properties is subject to customary
royalty, overriding royalty, carried, working, and other similar
interests and contractual arrangements customary in the oil and gas
industry, to liens for current taxes not yet due, and to other
encumbrances. Management believes that such burdens do not materially
detract from the value of such properties or from the Programs'
interest therein or materially interfere with their use in the
operation of the Programs' business.
ITEM 3. LEGAL PROCEEDINGS
On November 12, 1992, Larry and Leona Beck filed a lawsuit
against Dyco and others in which the plaintiffs alleged damages to
their land as a result of remediation operations conducted on the Paul
King #1-7 well. (Beck v. Trigg Drilling Company, Inc., et al., C-92-
227, District Court of Beckham County, Oklahoma). The 1980-1 Program
had an approximate 4.6% working interest in the Paul King #1-7 well at
the time the lawsuit was filed and the 1980-2 Program had an
approximate 4.7% working interest in the Paul King #1-7 well at the
time the lawsuit was filed. The lawsuit alleged claims based on
negligence, private nuisance, public nuisance, trespass, unjust
enrichment, constructive fraud, and permanent injunctive relief, all
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in amounts to be determined at trial. A trial was conducted in the
matter on February 22, 1994 in which the jury entered a verdict in
favor of the plaintiffs in the amount of approximately $5.5 million,
consisting of approximately $2.75 million in actual damages and
approximately $2.75 million in punitive damages. The 1980-1 and
1980-2 Programs' share of such verdict is approximately $123,000 and
$128,000, respectively, in actual damages and approximately $23,000
and $23,500, respectively, in punitive damages. See Note 4 to each
Program's financial statements included in Item 8 of this Annual
Report. Dyco is presently appealing the matter.
On March 18, 1993, a royalty owner filed a lawsuit against Dyco
in which the plaintiff alleged entitlement to a share of the proceeds
of a take-or-pay settlement with a gas purchaser which involved the
Thurmond Ranch #1-2 well. (John B. Thurmond, Trustee v. Dyco, Case
No. CS-93-10; District Court of Roger Mills County, Oklahoma). The
1980-1 Program has an approximate 15% working interest in the Thurmond
Ranch #1-2 well. Plaintiff is seeking a full accounting, unpaid
royalties, and his share of benefits from the gas purchase contract as
a third party beneficiary. The plaintiff has not quantified the
amount of his alleged damages. Dyco has filed its answer in the
matter in which it denied all of the plaintiff's allegations.
Discovery is proceeding in the matter. The plaintiffs filed a motion
for summary judgment on November 29, 1994 in the matter. Oral
arguments were heard on the motion in January 1995, however, as of the
date of this Annual Report, the district court has not ruled on the
motion. Dyco intends to vigorously defend the lawsuit. As of the
date of this Annual Report, management cannot determine the amount of
any alleged damages which would be allocable to the 1980-1 Program
from this lawsuit.
On October 15, 1993, certain royalty owners filed a class action
lawsuit against Dyco in which the plaintiffs alleged entitlement to a
share of proceeds of a take-or-pay settlement with a gas purchaser
which involved the Marshall Young No. 2-4, Mikles No. 3-4, and Hunter-
Ryan No. 1 wells (Tom Mikles, et al. v. Dyco Petroleum Corporation,
Case No. C-93-190, District Court of Beckham County, Oklahoma). The
1980-1 Program has an approximate 1.2% working interest in the
Marshall Young No. 2-4 well and an approximate 3.1% working interest
in the Mikles No. 3-4 and Hunter-Ryan No. 1 wells, while the 1980-2
Program has an approximate 1.3% working interest in the Marshall Young
No. 2-4 well and an approximate 3.2% working interest in the Mikles
No. 3-4 and Hunter-Ryan No. 1 wells. The lawsuit also alleges claims
based on unjust enrichment, breach of contract, and breach of
fiduciary obligations and seeks an accounting and declaration that the
plaintiffs are third party beneficiaries under the gas contract. The
plaintiffs have not quantified the amount of their damages, but they
are seeking exemplary damages, unpaid royalties, and interest. Dyco
has filed its answer in the matter in which it denied all of the
plaintiffs' allegations. The district court certified the matter as a
class action on January 21, 1994 and discovery is proceeding in the
matter. On November 29, 1994, the plaintiffs filed a motion for
summary judgment in the matter. Oral arguments were heard on the
motion in January 1995, however, as of the date of this Annual Report,
the district court has not ruled on the motion. Dyco intends to
vigorously defend the lawsuit. As of the date of this Annual Report,
management cannot determine the amount of any alleged damages which
would be allocable to the Programs.
On October 26, 1993, certain royalty owners filed a class action
lawsuit against Dyco in which the plaintiffs alleged entitlement to a
share of proceeds of a take-or-pay settlement with a gas purchaser
which involved the Kinney Warren No. 3-10, Fender No. 4-10, Mikles No.
1-10, and Damron No. 1-10 wells (Gene Mikles, et al. v. Dyco Petroleum
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Corporation, et al., District Court of Beckham County, Oklahoma). The
1980-1 Program has an approximate 2.3% working interest in the Kinney
Warren No. 3-10 and Fender No. 4-10 wells and an approximate 5.7%
working interest in the Mikles No. 1-10 and Damron No. 1-10 wells,
while the 1980-2 Program has an approximate 2.4% working interest in
the Kinney Warren No. 3-10 and Fender No. 4-10 wells and an
approximate 5.9% working interest in the Mikles No. 1-10 and Damron
No. 1-10 wells. The lawsuit also alleges claims based on unjust
enrichment, breach of contract, and breach of fiduciary obligations
and seeks an accounting and declaration that the plaintiffs are third
party beneficiaries. The plaintiffs have not quantified the amount of
their damages, but they are seeking exemplary damages, unpaid
royalties, and interest. Dyco has filed its answer in the matter in
which it denied all of the plaintiffs' allegations. The district
court certified the matter as a class action on January 18, 1994 and
discovery is proceeding in the matter. On November 29, 1994, the
plaintiffs filed a motion for summary judgment in the matter. Oral
arguments were heard on the motion in January 1995, however, as of the
date of this Annual Report, the district court has not ruled on the
motion. Dyco intends to vigorously defend the lawsuit. As of the
date of this Annual Report, management cannot determine the amount of
any alleged damages which would be allocable to the Programs.
On December 18, 1992, a royalty owner filed a quiet title action
alleging that the operator of certain wells in which the Programs have
an interest failed to exercise due diligence in locating the owner
while in the process of force pooling the drilling and spacing unit
(Merle McCollum, as Personal Representative of the Estate of Jack
McCollum, Deceased v. Apache Corporation, et al., District Court of
Beckham County, Oklahoma). The wells in question included the Kinney-
Warren No. 3-10, Fender No. 4-10, Mikles No. 1-10, and Damron
No. 1-10. The 1980-1 Program has an approximate 2.3% working interest
in the Kinney-Warren No. 3-10 and Fender No. 4-10 wells and an
approximate 5.7% working interest in the Mikles No. 1-10 and Damron
No. 1-10 wells, while the 1980-2 Program has an approximate 2.4%
working interest in the Kinney-Warren No. 3-10 and Fender No. 4-10
wells and an approximate 5.9% working interest in the Mikles No. 1-10
and Damron No. 1-10 wells. Plaintiff claimed a right to revenues
attributable to production from said wells in an amount in excess of
$500,000 and further alleged conversion and claimed a right to
"interest" on the proceeds from production on the four wells pursuant
to 52 O.S. Section 540. The defendants filed a counterclaim for quiet
title and asserted various defenses. A trial was held in the matter
on March 3 and 4, 1994 in which the district court ruled against all
defendants and specifically found that the operator, Apache
Corporation, did not exercise due diligence in the pooling
proceedings. Judgment was entered on June 15, 1994 in the amount of
$550,000 plus interest. See Note 4 to each Program's financial
statements included in Item 8 of this Annual Report. The defendants
have appealed the district court's ruling to the Oklahoma Supreme
Court, which appeal is currently pending, however, it has been
assigned to the Oklahoma Court of Appeals (Case No. 83,892, Supreme
Court of the State of Oklahoma, filed July 12, 1994 (consolidated with
Case No. 84-188, Supreme Court of the State of Oklahoma, filed
August 22, 1994)). Oral arguments in the case were heard by the Court
of Appeals on January 25, 1996.
On June 14, 1995, a royalty owner filed a class action lawsuit
against Dyco in which the plaintiff alleged entitlement to a share of
the proceeds of a take-or-pay settlement with a gas purchaser which
involved the Richmond No. 1-7 well. (Dolores Wynn, Trustee of the
Dolores Wynn Revocable Living Trust v. Dyco, Case No. CJ-95-31,
District Court of Dewey County, Oklahoma.) The 1980-1 Program has an
approximate 5.12% working interest in the Richmond No. 1-7 well. The
10
<PAGE>
<PAGE>
lawsuit also alleges claims based on unjust enrichment, breach of
contract and fiduciary obligation, and constructive fraud. The
plaintiff is seeking an accounting as a third party beneficiary and a
temporary restraining order, along with actual and punitive damages,
interest, and costs. Dyco intends to vigorously defend the lawsuit.
As of the date of this Annual Report, management cannot determine the
amount of any alleged damages which would be allocable to the 1980-1
Program from this lawsuit.
Except for the foregoing litigation, to the knowledge of the
management of Dyco and the Programs, neither Dyco, the Programs, nor
the Programs' properties are subject to any litigation, the results of
which would have a material effect on the Programs' or Dyco's
financial condition or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS
There were no matters submitted to a vote of the limited partners
of either Program during 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP UNITS AND
RELATED LIMITED PARTNER MATTERS
The Programs do not have an established trading market for their
units of limited partnership interest ("Units"). Pursuant to the
terms of the Programs' limited partnership agreements, Dyco, as
General Partner, is obligated to annually offer a repurchase offer
which is based on the estimated future net revenues from the Programs'
reserves and is calculated pursuant to the terms of the limited
partnership agreement. Such repurchase offer is recalculated monthly
in order to reflect cash distributions made to the limited partners
and other extraordinary events. The following table sets forth, for
the periods indicated, Dyco's repurchase offer per Unit and the amount
of the Programs' cash distributions per Unit for the same period. For
purposes of this Annual Report, a Unit represents an initial
subscription of $5,000 to a Program.
1980-1 Program
--------------
Repurchase Cash
Price Distributions
---------- -------------
1994:
First Quarter $294 $ -
Second Quarter 349 55
Third Quarter 349 -
Fourth Quarter 319 30
1995:
First Quarter $319 -
Second Quarter 319 -
Third Quarter 245 -
Fourth Quarter 245 -
1996:
First Quarter $245 (1)
--------------------
11
<PAGE>
<PAGE>
(1) To be declared in March 1996.
1980-2 Program
--------------
Repurchase Cash
Price Distributions
---------- -------------
1994:
First Quarter $245 $25
Second Quarter 302 35
Third Quarter 302 -
Fourth Quarter 277 25
1995:
First Quarter $277 -
Second Quarter 277 20
Third Quarter 244 -
Fourth Quarter 244 -
1996:
First Quarter $244 (1)
--------------------
(1) To be declared in March 1996.
The 1980-1 Program has 4,040 Units outstanding and approximately
1,402 limited partners of record. The 1980-2 Program has 5,059 Units
outstanding and approximately 1,724 limited partners of record.
12
<PAGE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Selected Financial Data
The following table presents selected financial data for the Programs. This data should
be read in conjunction with the financial statements of the Programs, and the respective notes
thereto, included elsewhere in this Annual Report. See "Item 8. Financial Statements and
Supplementary Data."
1980-1 Program
--------------
December 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
---------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Summary of Operations
Oil and gas sales $ 605,626 $618,960 $640,636 $ 815,018 $ 740,975
Total revenues 610,611 623,003 643,836 863,442 758,524
Lease operating
expenses 152,105 164,315 44,096 29,483 114,849
Production taxes 41,248 43,843 45,772 57,555 52,696
General and admini-
strative expenses 68,974 64,886 68,371 70,470 66,592
Depreciation, depletion,
and amortization of
oil and gas
properties 122,879 166,083 115,490 179,651 285,802
Valuation allowance for
oil and gas properties - - - - 856,000
Interest Expense - - - - 9,450
Net income (loss) 225,405 183,876 370,107 526,283 ( 626,865)
per Unit 56 46 92 130 ( 155)
Cash distributions - 343,400 545,400 646,400 404,000
per Unit - 85 135 160 100
Summary Balance Sheet
Data:
Total assets 1,033,855 811,045 907,646 1,072,236 1,193,614
Partners' capital 946,312 720,907 880,431 1,055,724 1,175,841
</TABLE>
13
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1980-2 Program
--------------
December 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
---------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Summary of Operations
Oil and gas sales $ 820,418 $741,865 $ 866,379 $1,086,413 $1,066,435
Total revenues 827,427 748,100 886,645 1,151,589 1,129,585
Lease operating
expenses 356,433 156,787 96,924 109,799 173,153
Production taxes 59,115 49,865 68,301 73,665 79,741
General and admini-
strative expenses 101,606 96,134 98,967 94,784 82,060
Depreciation, depletion,
and amortization of
oil and gas
properties 130,828 190,498 154,299 221,849 360,258
Valuation allowance for
oil and gas properties - - - - 1,025,895
Interest expense - - - - 9,546
Net income (loss) 179,445 254,816 468,154 651,492 ( 601,068)
per Unit 35 50 93 129 ( 119)
Cash distributions 101,180 430,015 758,850 733,555 809,439
per Unit 20 85 150 145 160
Summary Balance Sheet
Data:
Total assets 1,070,692 861,863 1,542,926 1,758,558 1,939,161
Partners' capital 824,896 746,631 921,830 1,212,526 1,294,589
</TABLE>
14
<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
General
-------
The following general discussion should be read in conjunction
with the analysis of results of operations provided below. In
management's view, it is not possible to predict accurately either the
short-term or long-term prices for oil or gas. Specifically, due to
the oversupply of natural gas in recent years, certain of the
Programs' gas producing properties have suffered, and continue to
suffer during portions of the year, production curtailments and
seasonal reductions in the prices paid by purchasers. Additional
curtailments and seasonal or regional price reductions will adversely
affect the operations and financial condition of the Programs. Gas
sales prices, which have generally declined significantly since the
mid-1980s, increased during the fourth quarter of 1995. See "Item 1.
Business - Competition and Marketing." Actual future prices received
by the Programs will likely be different from (and may be lower than)
the prices in effect on December 31, 1995. In many past years, year-
end prices have tended to be higher, and in some cases significantly
higher, than the yearly average price actually received by the
Programs for at least the year following the year-end valuation date.
Management is unable to predict whether future gas prices will (i)
stabilize, (ii) increase, or (iii) decrease. The amount of the
Programs' cash flow, however, is dependent on such future gas prices.
1980-1 Program
--------------
Year Ended December 31, 1995 Compared
to Year Ended December 31, 1994
-------------------------------------
Total oil and gas sales decreased slightly by 2.2% for the year
ended December 31, 1995 as compared to the year ended December 31,
1994. This decrease resulted primarily from a decrease in the average
price of natural gas sold, partially offset by an increase in volumes
of natural gas sold. Volumes of oil sold decreased 561 barrels for
the year ended December 31, 1995 as compared to the year ended
December 31, 1994 while volumes of natural gas sold increased 75,508
Mcf for the year ended December 31, 1995 as compared to the year ended
December 31, 1994. The increase in volumes of natural gas sold was
primarily due to increased production on two wells during the year
ended December 31, 1995 as compared to the year ended December 31,
1994 as a result of recompletion activities completed during the year
ended December 31, 1995. Average natural gas prices decreased to
$1.37 per Mcf for the year ended December 31, 1995 from $1.70 per Mcf
for the year ended December 31, 1994, while average oil prices
increased to $17.38 per barrel for the year ended December 31, 1995
from $16.60 per barrel for the year ended December 31, 1994.
Oil and gas production expenses (including lease operating
expenses and production taxes) decreased 7.1% for the year ended
December 31, 1995 as compared to the year ended December 31, 1994.
This decrease resulted primarily from an accrual for certain
litigation costs during the year ended December 31, 1994, partially
offset by workover charges incurred on two wells during the year ended
December 31, 1995 in order to improve the recovery of reserves. As a
percentage of oil and gas sales, these expenses decreased slightly to
15
<PAGE>
<PAGE>
31.9% for the year ended December 31, 1995 from 33.6% for the year
ended December 31, 1994.
Depreciation, depletion, and amortization of oil and gas
properties decreased $43,204 for the year ended December 31, 1995 as
compared to the year ended December 31, 1994. This decrease was
primarily a result of an upward revision in the estimate of the 1980-1
Program's remaining natural gas reserves during the year ended
December 31, 1995 as compared to the year ended December 31, 1994,
partially offset by an increase in oil and gas properties subject to
amortization as a result of the recompletion of an existing well
during the year ended December 31, 1995 in order to improve the
recovery of reserves. As a percentage of oil and gas sales, this
expense decreased to 20.3% for the year ended December 31, 1995 from
26.8% for the year ended December 31, 1994. This percentage decrease
resulted primarily from the dollar decrease in depreciation,
depletion, and amortization expense discussed above.
General and administrative expenses increased $4,088 for the year
ended December 31, 1995 as compared to the year ended December 31,
1994. This increase resulted primarily from increases in both
professional fees and printing and postage expenses during the year
ended December 31, 1995 as compared to the year ended December 31,
1994. As a percentage of oil and gas sales, these expenses increased
to 11.4% for the year ended December 31, 1995 from 10.5% for the year
ended December 31, 1994. This percentage increase was primarily due
to the dollar increase in general and administrative expenses
discussed above.
Year Ended December 31, 1994 Compared
to Year Ended December 31, 1993
-------------------------------------
Total oil and gas sales decreased slightly by 3.4% for the year
ended December 31, 1994 as compared to the year ended December 31,
1993. This decrease was due primarily to decreases in the average
prices of oil and natural gas sold, partially offset by increases in
volumes of oil and natural gas sold. Volumes of oil and natural gas
sold increased by 364 barrels and 26,042 Mcf for the year ended
December 31, 1994 as compared to the year ended December 31, 1993.
The increase in volumes of natural gas sold was primarily a result of
upward reserve revisions on wells thought to have produced their
remaining reserves in 1993. Average oil and natural gas prices
decreased to $16.60 per barrel and $1.70 per Mcf for the year ended
December 31, 1994 from averages of $17.52 per barrel and $1.92 per Mcf
for the year ended December 31, 1993.
Oil and gas production expenses (including lease operating
expenses and production taxes) increased 131.6% for the year ended
December 31, 1994 as compared to the year ended December 31, 1993. As
a percentage of oil and gas sales, these expenses increased to 33.6%
for the year ended December 31, 1994 from 14.0% for the year ended
December 31, 1993. These increases were primarily due to an accrual
for certain litigation costs and other non-recurring costs during the
year ended December 31, 1994.
Depreciation, depletion, and amortization of oil and gas
properties increased $50,593 for the year ended December 31, 1994 as
compared to the year ended December 31, 1993. This increase was
primarily due to (i) the increase in volumes of oil and natural gas
sold during 1994, (ii) an increase in oil and gas properties subject
to amortization as a result of 1994 redrilling and workover activities
on several existing wells which were incurred in order to improve the
recovery of reserves, and (iii) reduced year-end natural gas prices
associated with 1994 natural gas reserves. As a percentage of oil and
16
<PAGE>
<PAGE>
gas sales, this expense increased to 26.8% for the year ended
December 31, 1994 from 18.0% for the year ended December 31, 1993.
This percentage increase was primarily a result of the dollar increase
discussed above and decreases in the average prices of oil and natural
gas sold.
General and administrative expenses decreased slightly by $3,485
for the year ended December 31, 1994 as compared to the year ended
December 31, 1993. This decrease was due primarily to a decrease in
professional fees during the year ended December 31, 1994 as compared
to the similar period in 1993. As a percentage of oil and gas sales,
these expenses remained relatively constant at 10.5% for the year
ended December 31, 1994 compared to 10.7% for the year ended
December 31, 1993.
1980-2 Program
--------------
Year Ended December 31, 1995 Compared
to Year Ended December 31, 1994
-------------------------------------
Total oil and gas sales increased 10.6% for the year ended
December 31, 1995 as compared to the year ended December 31, 1994.
This increase resulted from an increase in the volumes of natural gas
sold, partially offset by a decrease in the average price of natural
gas sold during the year ended December 31, 1995 as compared to the
year ended December 31, 1994. Volumes of natural gas sold increased
115,707 Mcf for the year ended December 31, 1995 as compared to the
year ended December 31, 1994, while volumes of oil sold decreased 157
barrels for the year ended December 31, 1995 as compared to the year
ended December 31, 1994. The increase in volumes of natural gas sold
was primarily due to a significant positive prior period volume
adjustment by a purchaser on one well during the year ended
December 31, 1995. Average natural gas prices decreased to $1.40 per
Mcf for the year ended December 31, 1995 from $1.59 per Mcf for the
year ended December 31, 1994, while average oil prices increased to
$17.67 per barrel for the year ended December 31, 1995 from $16.21 per
barrel for the year ended December 31, 1994.
Oil and gas production expenses (including lease operating
expenses and production taxes) increased 101.1% for the year ended
December 31, 1995 as compared to the year ended December 31, 1994.
This increase was primarily due to workover charges on one well during
the year ended December 31, 1995 which were incurred in order to
improve the recovery of reserves. As a percentage of oil and gas
sales, these expenses increased to 50.7% for the year ended
December 31, 1995 from 27.9% for the year ended December 31, 1994.
This percentage increase resulted primarily from the dollar increase
in production expenses discussed above.
Depreciation, depletion, and amortization of oil and gas
properties decreased $59,670 for the year ended December 31, 1995 as
compared to the year ended December 31, 1994. This decrease was
primarily a result of an upward revision in the estimate of the 1980-2
Program's remaining natural gas reserves during the year ended
December 31, 1995 as compared to the year ended December 31, 1994,
partially offset by an increase in oil and gas sales for the year
ended December 31, 1995 as compared to the year ended December 31,
1994. As a percentage of oil and gas sales, this expense decreased to
15.9% for the year ended December 31, 1995 from 25.7% for the year
ended December 31, 1994. This percentage decrease was primarily due
17
<PAGE>
<PAGE>
to the upward revision in the estimate of the 1980-2 Program's
remaining natural gas reserves discussed above.
General and administrative expenses increased $5,472 for the year
ended December 31, 1995 as compared to the year ended December 31,
1994. This increase resulted primarily from increases in both
professional fees and printing and postage expenses during the year
ended December 31, 1995 as compared to the year ended December 31,
1994. As a percentage of oil and gas sales, these expenses remained
relatively constant at 12.4% for the year ended December 31, 1995
compared to 13.0% for the year ended December 31, 1994.
Year Ended December 31, 1994 Compared
to Year Ended December 31, 1993
-------------------------------------
Total oil and gas sales decreased 14.4% for the year ended
December 31, 1994 as compared to the year ended December 31, 1993.
This decrease was due to decreases in the average prices of oil and
natural gas sold, partially offset by increases in the volumes of oil
and natural gas sold. Volumes of oil and natural gas sold increased
by 229 barrels and 5,998 Mcf, respectively, for the year ended
December 31, 1994 as compared to the year ended December 31, 1993.
Average oil and natural gas prices decreased to $16.21 per barrel and
$1.59 per Mcf for the year ended December 31, 1994 from averages of
$18.47 per barrel and $1.89 per Mcf for the year ended December 31,
1993.
Oil and gas production expenses (including lease operating
expenses and production taxes) increased 25.1% for the year ended
December 31, 1994 as compared to the year ended December 31, 1993.
This increase resulted primarily from an accrual for certain
litigation costs during the year ended December 31, 1994. As a
percentage of oil and gas sales, these expenses increased to 27.9% for
the year ended December 31, 1994 from 19.1% for the year ended
December 31, 1993. This percentage increase was primarily a result of
the litigation costs discussed above and the decreases in the average
prices of oil and natural gas sold during the year ended December 31,
1994 as compared to the year ended December 31, 1993.
Depreciation, depletion, and amortization of oil and gas
properties increased $36,199 for the year ended December 31, 1994 as
compared to the year ended December 31, 1993. This increase was
primarily a result of (i) the increases in volumes of oil and natural
gas sold during 1994, (ii) an increase in oil and gas properties
subject to amortization as a result of 1994 redrilling and workover
activities on several existing wells which were incurred in order to
improve the recovery of reserves, and (iii) reduced year-end natural
gas prices associated with 1994 natural gas reserves. As a percentage
of oil and gas sales, this expense increased to 25.7% for the year
ended December 31, 1994 from 17.8% for the year ended December 31,
1993. This percentage increase was primarily a result of the dollar
increase discussed above and the decreases in the average prices of
oil and natural gas sold discussed above.
General and administrative expenses remained relatively constant
for the year ended December 31, 1994 as compared to the year ended
December 31, 1993. As a percentage of oil and gas sales, these
expenses increased to 13.0% for the year ended December 31, 1994 from
11.4% for the year ended December 31, 1993. This increase was
primarily a result of the decreases in the average prices of oil and
natural gas sold discussed above.
18
<PAGE>
<PAGE>
Liquidity and Capital Resources
Net proceeds from operations less necessary operating capital are
distributed to the limited partners on a quarterly basis. See "Item
5. Market for the Registrant's Limited Partnership Units and Related
Limited Partner Matters." The net proceeds from production are not
reinvested in productive assets, except to the extent that producing
wells are improved, or where methods are employed to permit more
efficient recovery of reserves, thereby resulting in a positive
economic impact. Assuming production levels for the year ended
December 31, 1995, the 1980-1 Program's and 1980-2 Program's proved
reserve quantities at December 31, 1995 would have a life of
approximately 3.5 and 3.0 years, respectively, for gas reserves and
7.1 and 4.2 years, respectively, for oil reserves.
The Programs' available capital from the limited partners'
subscriptions has been spent on oil and gas drilling activities and
there should be no further material capital resource commitments in
the future. The Programs have no debt commitments. Cash for
operational purposes will be provided by current oil and gas
production.
There can be no assurance as to the amount of the Programs'
future cash distributions. The Programs' ability to make cash
distributions depends primarily upon the level of available cash flow
generated by the Programs' operating activities, which will be
affected (either positively or negatively) by many factors beyond the
control of the Programs, including the price of and demand for oil and
natural gas and other market and economic conditions. Even if prices
and costs remain stable, the amount of cash available for
distributions will decline over time (as the volume of production from
producing properties declines) since the Programs are not replacing
production through acquisitions of producing properties and drilling.
The Programs are involved in certain litigation, the outcomes of
which cannot presently be determined. In the event of unfavorable
outcomes, the Programs' liquidity and capital resources could be
negatively impacted. See "Item 3. Legal Proceedings" for a further
discussion of this litigation.
Inflation and Changing Prices
Prices obtained for oil and gas production depend upon numerous
factors, including the extent of domestic and foreign production,
foreign imports of oil, market demand, domestic and foreign economic
conditions in general, and governmental regulations and tax laws. The
general level of inflation in the economy did not have a material
effect on the operations of the Programs in 1995. Oil and natural gas
prices have fluctuated during recent years and generally have not
followed the same pattern as inflation. See "Item 2. Properties - Oil
and Gas Production, Revenue, and Price History."
19
<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
We have audited the financial statements of the Dyco Oil and Gas
Program 1980-1 Limited Partnership (a Minnesota limited partnership)
as listed in Item 14(a) of this Form 10-K. These financial statements
are the responsibility of the Program's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and dis-
closures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
the Dyco Oil and Gas Program 1980-1 Limited Partnership at
December 31, 1995 and 1994, and the results of its operations and cash
flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
February 6, 1996
20
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1980-1 LIMITED PARTNERSHIP
Balance Sheets
December 31, 1995 and 1994
ASSETS
------
1995 1994
---------- --------
CURRENT ASSETS:
Cash and cash equivalents $ 106,038 $ 71,555
Accrued oil and gas sales,
including $92,090 and $66,054
due from related parties 109,691 75,516
--------- -------
Total current assets $ 215,729 $147,071
NET OIL AND GAS PROPERTIES,
utilizing the full cost method 671,070 542,055
DEFERRED CHARGE 147,056 121,919
--------- -------
$1,033,855 $811,045
========= =======
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
CURRENT LIABILITIES:
Accounts payable $ 49,013 $ 47,747
Gas imbalance payable 1,434 15,866
--------- -------
Total current liabilities $ 50,447 $ 63,613
ACCRUED LIABILITY 37,096 26,525
CONTINGENCIES (Note 4)
PARTNERS' CAPITAL:
General Partner, issued and
outstanding, 40 Units 9,463 7,209
Limited Partners, issued and
outstanding, 4,000 Units 936,849 713,698
--------- -------
Total Partners' Capital $ 946,312 $720,907
--------- -------
$1,033,855 $811,045
========= =======
The accompanying notes are an integral
part of these financial statements.
21
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1980-1 LIMITED PARTNERSHIP
Statements of Operations
For the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
------- ------- -------
REVENUES:
Oil and gas sales,
including $524,274,
$576,825, and $620,749
of sales to related
parties $605,626 $618,960 $640,636
Interest 4,985 4,043 3,200
------- ------- -------
$610,611 $623,003 $643,836
COSTS AND EXPENSES:
Lease operating $152,105 $164,315 $ 44,096
Production taxes 41,248 43,843 45,772
Depreciation, depletion,
and amortization of
oil and gas properties 122,879 166,083 115,490
General and administrative 68,974 64,886 68,371
------- ------- -------
$385,206 $439,127 $273,729
------- ------- -------
NET INCOME $225,405 $183,876 $370,107
======= ======= =======
GENERAL PARTNER (1%) -
NET INCOME $ 2,254 $ 1,839 $ 3,701
======= ======= =======
LIMITED PARTNERS (99%) -
NET INCOME $223,151 $182,037 $366,406
======= ======= =======
NET INCOME per Unit $ 56 $ 46 $ 92
======= ======= =======
UNITS OUTSTANDING 4,040 4,040 4,040
======= ======= =======
The accompanying notes are an integral
part of these financial statements.
22
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1980-1 LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Years Ended December 31, 1995, 1994, and 1993
General Limited
Partner Partners Total
--------- ------------ ------------
Balances at Dec. 31, 1992 $10,557 $1,045,167 $1,055,724
Cash distributions ( 5,454) ( 539,946) ( 545,400)
Net income 3,701 366,406 370,107
------ --------- ---------
Balances at Dec. 31, 1993 $ 8,804 $ 871,627 $ 880,431
Cash distributions ( 3,434) ( 339,966) ( 343,400)
Net income 1,839 182,037 183,876
------ --------- ---------
Balances at Dec. 31, 1994 $ 7,209 $ 713,698 $ 720,907
Cash distributions - - -
Net income 2,254 223,151 225,405
------ --------- ---------
Balances at Dec. 31, 1995 $ 9,463 $ 936,849 $ 946,312
====== ========= =========
The accompanying notes are an integral
part of these financial statements.
23
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1980-1 LIMITED PARTNERSHIP
Statements of Cash Flows
For the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
---------- ---------- ----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $225,405 $183,876 $370,107
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation, depletion,
and amortization of oil
and gas properties 122,879 166,083 115,490
(Increase) decrease in accrued
oil and gas sales ( 34,175) 19,128 35,970
Increase in deferred charge ( 25,137) ( 2,205) ( 60,643)
Increase in accounts payable 1,266 38,730 961
Increase (decrease) in
gas imbalance payable ( 14,432) ( 2,332) 9,742
Increase in accrued liability 10,571 26,525 -
------- ------- -------
Net cash provided by
operating activities $286,377 $429,805 $471,627
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to oil and gas
properties ($253,413) ($ 71,324) ($ 2,408)
Retirements of oil and
gas properties 1,519 14 8,363
------- ------- -------
Net cash provided (used)
by investing activities ($251,894) ($ 71,310) $ 5,955
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions - ($343,400) ($545,400)
------- ------- -------
Net cash used by financing
activities - ($343,400) ($545,400)
------- ------- -------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 34,483 $ 15,095 ($ 67,818)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 71,555 56,460 124,278
------- ------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $106,038 $ 71,555 $ 56,460
======= ======= =======
The accompanying notes are an integral
part of these financial statements.
24
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
Notes to Financial Statements
For the Years Ended December 31, 1995, 1994, and 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The Dyco Oil and Gas Program 1980-1 Limited Partnership (the
"Program"), a Minnesota limited partnership, commenced operations
on February 15, 1980. Dyco Petroleum Corporation ("Dyco") is the
General Partner of the Program. Affiliates of Dyco owned
1,523.66 (37.7%) of the Program's Units at December 31, 1995.
The Program's sole business is the development and production of
oil and natural gas with a concentration on natural gas.
Substantially all of the Program's natural gas reserves are being
sold regionally in the "spot market." Due to the highly
competitive nature of the spot market, prices on the spot market
are subject to wide seasonal and regional pricing fluctuations.
In addition, such spot market sales are generally short-term in
nature and are dependent upon the obtaining of transportation
services provided by pipelines.
Cash and Cash Equivalents
The Program considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents. Cash equivalents are not insured, which cause the
Program to be subject to risk.
Credit Risk
Accrued oil and gas sales which are due from a variety of oil and
natural gas purchasers subject the Program to a concentration of
credit risk. Some of these purchasers are discussed in Note 3 -
Major Customers.
Oil and Gas Properties
Oil and gas operations are accounted for using the full cost
method of accounting. All productive and non-productive costs
associated with the acquisition, exploration, and development of
oil and gas reserves are capitalized. Capitalized costs are
depleted on the gross revenue method using estimates of proved
reserves. The full cost amortization rates per equivalent Mcf of
gas produced during the years ended December 31, 1995, 1994, and
1993 were $0.29, $0.47, and $0.36, respectively. In the event
the unamortized cost of oil and gas properties being amortized
exceeds the full cost ceiling (as defined by the Securities and
Exchange Commission) the excess is charged to expense in the year
during which such excess occurs. In addition, the Securities and
Exchange Commission rules provide that if prices decline
subsequent to year end, any excess that results from these
declines may also be charged to expense during the current year.
Sales and abandonments of properties are accounted for as
adjustments of capitalized costs with no gain or loss recognized,
unless such adjustments would significantly alter the
25
<PAGE>
<PAGE>
relationship between capitalized costs and proved oil and gas
reserves.
Deferred Charge
The Deferred Charge at December 31, 1995 and 1994 represents
costs deferred for lease operating expenses incurred in
connection with the Program's underproduced gas imbalance
position. At December 31, 1995, cumulative total gas sales
volumes for underproduced wells were less than the Program's pro-
rata share of total gas production from these wells by 383,357
Mcf, resulting in prepaid lease operating expenses of $147,056.
At December 31, 1994, cumulative total gas sales volumes for
underproduced wells were less than the Program's pro-rata share
of total gas production from these wells by 430,504 Mcf,
resulting in prepaid lease operating expenses of $121,919.
Accrued Liability
Accrued Liability represents charges accrued for lease operating
expenses incurred in connection with the Program's overproduced
gas imbalance position. At December 31, 1995, cumulative total
gas sales volumes for overproduced wells exceeded the Program's
pro-rata share of total gas production from these wells by 96,706
Mcf, resulting in accrued lease operating expenses of $37,096.
At December 31, 1994, cumulative total gas sales volumes for
overproduced wells exceeded the Program's pro-rata share of total
gas production from these wells by 93,660 Mcf, resulting in
accrued lease operating expenses of $26,525.
Oil and Gas Sales and Gas Imbalance Payable
The Program's oil and condensate production is sold, title
passed, and revenue recognized at or near the Program's wells
under short-term purchase contracts at prevailing prices in
accordance with arrangements which are customary in the oil
industry. Sales of natural gas applicable to the Program's
interest in producing oil and gas leases are recorded as income
when the gas is metered and title transferred pursuant to the gas
sales contracts covering the Program's interest in natural gas
reserves. During such times as the Program's sales of gas exceed
its pro rata ownership in a well, such sales are recorded as
income unless total sales from the well have exceeded the
Program's share of estimated total gas reserves underlying the
property at which time such excess is recorded as a liability.
At December 31, 1995 total sales exceeded the Program's share of
estimated total gas reserves on two wells by $1,434 (643 Mcf).
At December 31, 1994 total sales exceeded the Program's share of
estimated total gas reserves on seven wells by $15,866 (10,438
Mcf). These amounts were recorded as gas imbalance payables at
December 31, 1995 and 1994 in accordance with the sales method.
Use of Estimates in Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
26
<PAGE>
<PAGE>
period. Actual results could differ from those estimates.
Further, accrued oil and gas sales, the deferred charge, the gas
imbalance payable, and the accrued liability all involve
estimates which could materially differ from the actual amounts
ultimately realized in the near term. Contingent liabilities
from litigation (see Note 4) and oil and gas reserves (see Note
5) also involve significant estimates which could materially
differ from the actual amounts ultimately realized.
Income Taxes
Income or loss for income tax purposes is includable in the
income tax returns of the partners. Accordingly, no recognition
has been given to income taxes in the accompanying financial
statements.
2. TRANSACTIONS WITH RELATED PARTIES
Under the terms of the Program's partnership agreement, Dyco is
entitled to receive a reimbursement for all direct expenses and
general and administrative, geological, and engineering expenses
it incurs on behalf of the Program. During the years ended
December 31, 1995, 1994, and 1993, such expenses totaled $68,974,
$64,886, and $68,371, respectively, of which $56,088, $56,088,
and $55,545, were paid to Dyco and its affiliates.
Affiliates of the Program operate certain of the Program's
properties. Their policy is to bill the Program for all
customary charges and cost reimbursements associated with these
activities, together with any compressor rentals, consulting, or
other services provided.
The Program sells gas at market prices to Premier Gas Company
("Premier") and other similar gas marketing firms. Such firms
may then resell such gas to third parties at market prices.
Premier was an affiliate of the Program until December 6, 1995.
During 1995, 1994, and 1993, these sales totaled $524,274,
$576,825, and $620,749, respectively. At December 31, 1995 and
1994 accrued oil and gas sales included $92,090 and $66,054,
respectively, due from Premier.
3. MAJOR CUSTOMERS
The following purchaser individually accounted for more than 10%
of the combined oil and gas sales of the Program for the years
ended December 31, 1995, 1994, and 1993:
Purchaser 1995 1994 1993
--------- ---- ---- ----
Premier 86.6% 93.2% 96.9%
In the event of interruption of purchases by this significant
customer or the cessation or material change in availability of
open-access transportation by the Program's pipeline
transporters, the Program may encounter difficulty in marketing
its gas and in maintaining historic sales levels. Alternative
purchasers or transporters may not be readily available.
27
<PAGE>
<PAGE>
4. CONTINGENCIES
On November 12, 1992, certain adjacent landowners filed a lawsuit
against Dyco and others in which the plaintiffs alleged damages
to their land as a result of remediation operations conducted on
one of the Program's wells. The lawsuit alleged claims based on
negligence, private nuisance, public nuisance, trespass, unjust
enrichment, constructive fraud, and permanent injunctive relief,
all in amounts to be determined at trial. A trial was conducted
in the matter on February 22, 1994 in which the jury entered a
verdict in favor of the plaintiffs in the amount of approximately
$5.5 million, consisting of approximately $2.75 million in actual
damages and approximately $2.75 million in punitive damages. The
Program's share of such verdict is approximately $123,000 in
actual damages and approximately $23,000 in punitive damages.
Dyco is presently appealing the matter.
On March 18, 1993, a royalty owner filed a lawsuit against Dyco
in which the plaintiff alleged entitlement to a share of the
proceeds of a take-or-pay settlement with a gas purchaser which
involved one of the Program's wells. Plaintiff is seeking a full
accounting, unpaid royalties, and his share of benefits from the
gas purchase contract as a third party beneficiary. The
plaintiff has not quantified the amount of his alleged damages.
Dyco has filed its answer in the matter in which it denied all of
the Plaintiff's allegations. Discovery is proceeding in the
matter. The plaintiffs filed a motion for summary judgment on
November 29, 1994 in the matter. Oral arguments were heard on
the motion in January 1995, however, as of the date of these
financial statements, the district court has not ruled on the
motion. Dyco intends to vigorously defend the lawsuit. As of
the date of these financial statements, management cannot
determine the amount of any alleged damages which would be
allocable to the Program from this lawsuit; however, it is
reasonably possible that events could change in the future
resulting in a material liability to the Program.
On October 15, 1993, certain royalty owners filed a class action
lawsuit against Dyco in which the plaintiffs alleged entitlement
to a share of the proceeds of a take-or-pay settlement with a gas
purchaser which involved three of the Program's wells. The
lawsuit also alleges claims based on unjust enrichment, breach of
contract, and breach of fiduciary obligations and seeks an
accounting and declaration that the plaintiffs are third party
beneficiaries under the gas contract. The plaintiffs have not
quantified the amount of their damages, but they are seeking
exemplary damages, unpaid royalties, and interest. Dyco has
filed its answer in the matter in which it denied all of the
plaintiffs' allegations. The district court certified the matter
as a class action on January 21, 1994 and discovery is proceeding
in the matter. On November 29, 1994, the plaintiffs filed a
motion for summary judgment in the matter. Oral arguments were
heard on the motion in January 1995, however, as of the date of
these financial statements, the district court has not ruled on
the motion. Dyco intends to vigorously defend the lawsuit. As
of the date of these financial statements, management cannot
determine the amount of any alleged damages which would be
allocable to the Program from this lawsuit; however, it is
reasonably possible that events could change in the future
resulting in a material liability to the Program.
28
<PAGE>
<PAGE>
On October 26, 1993, certain royalty owners filed a class action
lawsuit against Dyco in which the plaintiffs alleged entitlement
to a share of the proceeds of a take-or-pay settlement with a gas
purchaser which involved four of the Program's wells. The
lawsuit also alleges claims based on unjust enrichment, breach of
contract, and breach of fiduciary obligations and seeks an
accounting and declaration that the plaintiffs are third party
beneficiaries under the gas contract. The plaintiffs have not
quantified the amount of their damages, but they are seeking
exemplary damages, unpaid royalties, and interest. Dyco has
filed its answer in the matter in which it denied all of the
plaintiffs' allegations. The district court certified the matter
as a class action on January 18, 1994 and discovery is proceeding
in the matter. On November 29, 1994, the plaintiffs filed a
motion for summary judgment in the matter. Oral arguments were
heard on the motion in January 1995, however, as of the date of
these financial statements, the district court has not ruled on
the motion. Dyco intends to vigorously defend the lawsuit. As
of the date of these financial statements, management cannot
determine the amount of any alleged damages which would be
allocable to the Program from this lawsuit; however, it is
reasonably possible that events could change in the future
resulting in a material liability to the Program.
On December 18, 1992, a royalty owner filed a quiet title action
alleging that the operator of certain wells in which the Program
has an interest failed to exercise due diligence in locating the
owner while in the process of force pooling the drilling and
spacing unit. Plaintiff claimed a right to revenues attributable
to production from said wells in an amount in excess of $500,000
and further alleged conversion and claimed a right to "interest"
on the proceeds from production on the four wells pursuant to 52
O.S. Section 540. The defendants filed a counterclaim for quiet
title and asserted various defenses. A trial was held in the
matter on March 3 and 4, 1994 in which the district court ruled
against all defendants and specifically found that the operator,
Apache Corporation, did not exercise due diligence in the pooling
proceedings. Judgment was entered on June 15, 1994 in the amount
of $550,000 plus interest. The defendants have appealed the
district court's ruling, which appeal is currently pending. Oral
arguments in the case were heard by the appellate court on
January 25, 1996.
On June 14, 1995, a royalty owner filed a class action lawsuit
against Dyco in which the plaintiff alleged entitlement to a
share of the proceeds of a take-or-pay settlement with a gas
purchaser which involved one of the Program's wells. The lawsuit
also alleges claims based on unjust enrichment, breach of
contract and fiduciary obligation, and constructive fraud. The
plaintiff is seeking an accounting as a third party beneficiary
and a temporary restraining order, along with actual and punitive
damages, interest, and costs. Dyco intends to vigorously defend
the lawsuit. As of the date of these financial statements,
management cannot determine the amount of any alleged damages
which would be allocable to the Program from this lawsuit;
however, it is reasonably possible that events could change in
the future resulting in a material liability to the Program.
Included in these financial statements as of December 31, 1995
and 1994 is an accrual by the General Partner of $40,000
representing the Program's share of estimated ultimate damages
resulting from two of the above mentioned contingencies.
29
<PAGE>
<PAGE>
5. SUPPLEMENTAL OIL AND GAS INFORMATION
The following supplemental information regarding the oil and gas
activities of the Program is presented pursuant to the disclosure
requirements promulgated by the Securities and Exchange
Commission.
Capitalized Costs
The Program's capitalized costs and accumulated depreciation,
depletion, amortization, and valuation allowance were as follows:
December 31,
------------------------------
1995 1994
------------- -------------
Proved properties $29,754,686 $29,502,792
Unproved properties, not
subject to depreciation,
depletion, and amortization - -
---------- ----------
$29,754,686 $29,502,792
Less accumulated depreciation,
depletion, amortization,
and valuation allowance ( 29,083,616) ( 28,960,737)
---------- ----------
Net oil and gas properties $ 671,070 $ 542,055
========== ==========
Costs Incurred
Costs incurred by the Program in connection with its oil and gas
property acquisition, exploration, and development activities
were as follows:
December 31,
-----------------------------
1995 1994 1993
-------- ------- ------
Acquisition of properties $ - $ - $ -
Exploration costs - - -
Development costs 253,413 71,324 2,408
------- ------ -----
Total costs incurred $253,413 $71,324 $2,408
======= ====== =====
30
<PAGE>
<PAGE>
Quantities of Proved Oil and Gas Reserves - Unaudited
<TABLE>
<CAPTION>
Set forth below is a summary of the changes in the net quantities of the Program's proved
crude oil and natural gas reserves for the years ended December 31, 1995, 1994, and 1993.
Proved reserves were estimated by petroleum engineers employed by affiliates of Dyco. All
of the Program's reserves are located in the United States.
1995 1994 1993
--------------------- --------------------- ---------------------
Oil Gas Oil Gas Oil Gas
(Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf)
-------- ----------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Proved reserves,
beginning of year 15,200 1,293,223 15,637 1,602,830 14,612 1,585,007
Revisions of previous
estimates 4,733 536,716 2,579 25,173 3,677 332,625
Sales of reserves - - - - - ( 6,064)
Extensions and
discoveries - - - - - -
Production ( 2,455) ( 410,288) ( 3,016) ( 334,780) ( 2,652) ( 308,738)
------ --------- ------ --------- ------ ---------
Proved reserves,
end of year 17,478 1,419,651 15,200 1,293,223 15,637 1,602,830
====== ========= ====== ========= ====== =========
Proved developed
reserves:
Beginning of year 12,859 1,159,081 12,569 1,396,091 13,961 1,470,083
------ --------- ------ --------- ------ ---------
End of year 15,627 1,029,459 12,859 1,159,081 12,569 1,396,091
====== ========= ====== ========= ====== =========
</TABLE>
31
<PAGE>
<PAGE>
The process of estimating oil and gas reserves is complex,
requiring significant subjective decisions in the evaluation of
available geological, engineering, and economic data for each
reservoir. The data for a given reservoir may change
substantially over time as a result of, among other things,
additional development activity, production history, and
viability of production under varying economic conditions; con-
sequently, it is reasonably possible that material revisions to
existing reserve estimates may occur in the near future.
Although every reasonable effort has been made to ensure that the
reserve estimates reported herein represent the most accurate
assessment possible, the significance of the subjective decisions
required and variances in available data for various reservoirs
make these estimates generally less precise than other estimates
presented in connection with financial statement disclosures.
32
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP
We have audited the financial statements of the Dyco Oil and Gas
Program 1980-2 Limited Partnership (a Minnesota limited partnership)
as listed in Item 14(a) of this Form 10-K. These financial statements
are the responsibility of the Program's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and dis-
closures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
the Dyco Oil and Gas Program 1980-2 Limited Partnership at
December 31, 1995 and 1994, and the results of its operations and cash
flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
February 6, 1996
33
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1980-2 LIMITED PARTNERSHIP
Balance Sheets
December 31, 1995 and 1994
ASSETS
------
1995 1994
---------- --------
CURRENT ASSETS:
Cash and cash equivalents $ 273,193 $105,287
Accrued oil and gas sales,
including $93,000 and $83,013
due from related parties 117,898 90,036
--------- -------
Total current assets $ 391,091 $195,323
NET OIL AND GAS PROPERTIES,
utilizing the full cost method 488,926 571,506
DEFERRED CHARGE 190,675 95,034
--------- -------
$1,070,692 $861,863
========= =======
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
CURRENT LIABILITIES:
Accounts payable $ 52,007 $ 48,828
Gas imbalance payable 39,263 17,488
--------- -------
Total current liabilities $ 91,270 $ 66,316
ACCRUED LIABILITY 154,526 48,916
CONTINGENCIES (Note 4)
PARTNERS' CAPITAL:
General Partner, issued and
outstanding, 59 Units 8,249 7,467
Limited Partners, issued and
outstanding, 5,000 Units 816,647 739,164
--------- -------
Total Partners' Capital $ 824,896 $746,631
--------- -------
$1,070,692 $861,863
========= =======
The accompanying notes are an integral
part of these financial statements.
34
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1980-2 LIMITED PARTNERSHIP
Statements of Operations
For the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
------- ------- -------
REVENUES:
Oil and gas sales,
including $720,777,
$683,848, and $830,063
of sales to related
parties $820,418 $741,865 $866,379
Interest 7,009 6,235 20,266
------- ------- -------
$827,427 $748,100 $886,645
COSTS AND EXPENSES:
Lease operating $356,433 $156,787 $ 96,924
Production taxes 59,115 49,865 68,301
Depreciation, depletion,
and amortization of
oil and gas properties 130,828 190,498 154,299
General and administrative 101,606 96,134 98,967
------- ------- -------
$647,982 $493,284 $418,491
------- ------- -------
NET INCOME $179,445 $254,816 $468,154
======= ======= =======
GENERAL PARTNER (1%) -
NET INCOME $ 1,794 $ 2,548 $ 4,682
======= ======= =======
LIMITED PARTNERS (99%) -
NET INCOME $177,651 $252,268 $463,472
======= ======= =======
NET INCOME per Unit $ 35 $ 50 $ 93
======= ======= =======
UNITS OUTSTANDING 5,059 5,059 5,059
======= ======= =======
The accompanying notes are an integral
part of these financial statements.
35
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1980-2 LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Years Ended December 31, 1995, 1994, and 1993
General Limited
Partner Partners Total
--------- ------------ ------------
Balances at Dec. 31, 1992 $12,125 $1,200,401 $1,212,526
Cash distributions ( 7,588) ( 751,262) ( 758,850)
Net income 4,682 463,472 468,154
------ --------- ---------
Balances at Dec. 31, 1993 $ 9,219 $ 912,611 $ 921,830
Cash distributions ( 4,300) ( 425,715) ( 430,015)
Net income 2,548 252,268 254,816
------ --------- ---------
Balances at Dec. 31, 1994 $ 7,467 $ 739,164 $ 746,631
Cash distributions ( 1,012) ( 100,168) ( 101,180)
Net income 1,794 177,651 179,445
------ --------- ---------
Balances at Dec. 31, 1995 $ 8,249 $ 816,647 $ 824,896
====== ========= =========
The accompanying notes are an integral
part of these financial statements.
36
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM
1980-2 LIMITED PARTNERSHIP
Statements of Cash Flows
For the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
---------- ---------- ----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $179,445 $254,816 $468,154
Adjustments to reconcile net
income to net cash provided
(used) by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 130,828 190,498 154,299
(Increase) decrease in accrued
oil and gas sales ( 27,862) 31,365 75,749
Increase in deferred charge ( 95,641) ( 56,653) ( 38,381)
Increase in accounts payable 3,179 37,373 1,145
Increase (decrease) in gas
imbalance payable 21,775 ( 56,431) 73,919
Decrease in gas prepayments - - ( 535,722)
Increase (decrease) in related
party payable - ( 535,722) 535,722
Increase in accrued liability 105,610 48,916 -
------- ------- -------
Net cash provided (used) by
operating activities $317,334 ($ 85,838) $734,885
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to oil and gas
properties ($ 51,525) ($ 87,990) ($ 4,975)
Retirements of oil and gas
properties 3,277 379 3,953
------- ------- -------
Net cash used by
investing activities ($ 48,248) ($ 87,611) ($ 1,022)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($101,180) ($430,015) ($758,850)
------- ------- -------
Net cash used by financing
activities ($101,180) ($430,015) ($758,850)
------- ------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $167,906 ($603,464) ($ 24,987)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 105,287 $708,751 $733,738
------- ------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $273,193 $105,287 $708,751
======= ======= =======
The accompanying notes are an integral
part of these financial statements.
37
<PAGE>
<PAGE>
DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP
Notes to Financial Statements
For the Years Ended December 31, 1995, 1994, and 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The Dyco Oil and Gas Program 1980-2 Limited Partnership (the
"Program"), a Minnesota limited partnership, commenced operations
on June 16, 1980. Dyco Petroleum Corporation ("Dyco") is the
General Partner of the Program. Affiliates of Dyco owned
1,876.84 (37.1%) of the Program's Units at December 31, 1995.
The Program's sole business is the development and production of
oil and natural gas with a concentration on natural gas.
Substantially all of the Program's natural gas reserves are being
sold regionally in the "spot market." Due to the highly
competitive nature of the spot market, prices on the spot market
are subject to wide seasonal and regional pricing fluctuations.
In addition, such spot market sales are generally short-term in
nature and are dependent upon the obtaining of transportation
services provided by pipelines.
Cash and Cash Equivalents
The Program considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents. Cash equivalents are not insured, which cause the
Program to be subject to risk.
Credit Risk
Accrued oil and gas sales which are due from a variety of oil and
natural gas purchasers subject the Program to a concentration of
credit risk. Some of these purchasers are discussed in Note 3 -
Major Customers.
Oil and Gas Properties
Oil and gas operations are accounted for using the full cost
method of accounting. All productive and non-productive costs
associated with the acquisition, exploration, and development of
oil and gas reserves are capitalized. Capitalized costs are
depleted on the gross revenue method using estimates of proved
reserves. The full cost amortization rates per equivalent Mcf of
gas produced during the years ended December 31, 1995, 1994, and
1993 were $0.23, $0.42, and $0.34, respectively. In the event
the unamortized cost of oil and gas properties being amortized
exceeds the full cost ceiling (as defined by the Securities and
Exchange Commission) the excess is charged to expense in the year
during which such excess occurs. Sales and abandonments of
properties are accounted for as adjustments of capitalized costs
with no gain or loss recognized, unless such adjustments would
significantly alter the relationship between capitalized costs
and proved oil and gas reserves.
Deferred Charge
38
<PAGE>
<PAGE>
The Deferred Charge at December 31, 1995 and 1994 represents
costs deferred for lease operating expenses incurred in
connection with the Program's underproduced gas imbalance
position. At December 31, 1995, cumulative total gas sales
volumes for underproduced wells were less than the Program's pro-
rata share of total gas production from these wells by 324,277
Mcf, resulting in prepaid lease operating expenses of $190,675.
At December 31, 1994, cumulative total gas sales volumes for
underproduced wells were less than the Program's pro-rata share
of total gas production from these wells by 342,958 Mcf,
resulting in prepaid lease operating expenses of $95,034.
Accrued Liability
Accrued Liability represents charges accrued for lease operating
expenses incurred in connection with the Program's overproduced
gas imbalance position. At December 31, 1995, cumulative total
gas sales volumes for overproduced wells exceeded the Program's
pro-rata share of total gas production from these wells by
262,799 Mcf, resulting in accrued lease operating expenses of
$154,526. At December 31, 1994, cumulative total gas sales
volumes for overproduced wells exceeded the Program's pro-rata
share of total gas production from these wells by 176,528 Mcf,
resulting in accrued lease operating expenses of $48,916.
Oil and Gas Sales and Gas Imbalance Payable
The Program's oil and condensate production is sold, title passed
and revenue recognized at or near the Program's wells under
short-term purchase contracts at prevailing prices in accordance
with arrangements which are customary in the oil industry. Sales
of natural gas applicable to the Program's interest in producing
oil and gas leases are recorded as income when the gas is metered
and title transferred pursuant to the gas sales contracts
covering the Program's interest in natural gas reserves. During
such times as the Program's sales of gas exceed its pro rata
ownership in a well, such sales are recorded as income unless
total sales from the well have exceeded the Program's share of
estimated total gas reserves underlying the property at which
time such excess is recorded as a liability. At December 31,
1995 total sales exceeded the Program's share of estimated total
gas reserves on five wells by $39,263 (19,830 Mcf). At
December 31, 1994 total sales exceeded the Program's share of
estimated total gas reserves on nine wells by $17,488 (11,505
Mcf). These amounts were recorded as gas imbalance payables at
December 31, 1995 and 1994 in accordance with the sales method.
Use of Estimates in Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Further, accrued oil and gas sales, the deferred charge, the gas
imbalance payable, and the accrued liability all involve
estimates which could materially differ from the actual amounts
ultimately realized in the near term. Contingent liabilities
39
<PAGE>
<PAGE>
from litigation (see Note 4) and oil and gas reserves (see Note
5) also involve significant estimates which could materially
differ from the actual amounts ultimately realized.
Income Taxes
Income or loss for income tax purposes is includable in the
income tax returns of the partners. Accordingly, no recognition
has been given to income taxes in the accompanying financial
statements.
2. TRANSACTIONS WITH RELATED PARTIES
Under the terms of the Program's partnership agreement, Dyco is
entitled to receive a reimbursement for all direct expenses and
general and administrative, geological, and engineering expenses
it incurs on behalf of the Program. During the years ended
December 31, 1995, 1994, and 1993, such expenses totaled
$101,606, $96,134, and $98,967, respectively, of which $85,620,
$85,620, and $84,795, were paid to Dyco and its affiliates.
Affiliates of the Program operate certain of the Program's
properties. Their policy is to bill the Program for all
customary charges and cost reimbursements associated with these
activities, together with any compressor rentals, consulting, or
other services provided.
The Program has sold gas to Premier Gas Company ("Premier") and
other similar gas marketing firms. Such firms may then resell
such gas to third parties at market prices. Premier was an
affiliate of the Program until December 6, 1995. During 1995,
1994, and 1993, these sales totaled $720,777, $683,848, and
$830,063, respectively. At December 31, 1995 and 1994 accrued
oil and gas sales included $93,000 and $83,013, respectively, due
from Premier.
During 1993, a gas prepayment was refunded to a pipeline company
by a related party, resulting in a related party payable at
December 31, 1993. In January 1994, the Program repaid the
related party.
3. MAJOR CUSTOMERS
The following purchaser individually accounted for more than 10%
of the combined oil and gas sales of the Program for the years
ended December 31, 1995, 1994, and 1993:
Purchaser 1995 1994 1993
--------- ---- ---- ----
Premier 87.9% 92.2% 95.8%
In the event of interruption of purchases by this significant
customer or the cessation or material change in availability of
open-access transportation by the Program's pipeline
transporters, the Program may encounter difficulty in marketing
its gas and in maintaining historic sales levels. Alternative
purchasers or transporters may not be readily available.
4. CONTINGENCIES
40
<PAGE>
<PAGE>
On November 12, 1992, certain adjacent landowners filed a lawsuit
against Dyco and others in which the plaintiffs alleged damages
to their land as a result of remediation operations conducted on
one of the Program's wells. The lawsuit alleged claims based on
negligence, private nuisance, public nuisance, trespass, unjust
enrichment, constructive fraud, and permanent injunctive relief,
all in amounts to be determined at trial. A trial was conducted
in the matter on February 22, 1994 in which the jury entered a
verdict in favor of the plaintiffs in the amount of approximately
$5.5 million, consisting of approximately $2.75 million in actual
damages and approximately $2.75 million in punitive damages. The
Program's share of such verdict is approximately $128,000 in
actual damages and approximately $23,500 in punitive damages.
Dyco is presently appealing the matter.
On October 15, 1993, certain royalty owners filed a class action
lawsuit against Dyco in which the plaintiffs alleged entitlement
to a share of the proceeds of a take-or-pay settlement with a gas
purchaser which involved three of the Program's wells. The
lawsuit also alleges claims based on unjust enrichment, breach of
contract, and breach of fiduciary obligations and seeks an
accounting and declaration that the plaintiffs are third party
beneficiaries under the gas contract. The plaintiffs have not
quantified the amount of their damages, but they are seeking
exemplary damages, unpaid royalties, and interest. Dyco has
filed its answer in the matter in which it denied all of the
plaintiffs' allegations. The district court certified the matter
as a class action on January 21, 1994 and discovery is proceeding
in the matter. On November 29, 1994, the plaintiffs filed a
motion for summary judgment in the matter. Oral arguments were
heard on the motion in January 1995, however, as of the date of
these financial statements, the district court has not ruled on
the motion. Dyco intends to vigorously defend the lawsuit. As
of the date of these financial statements, management cannot
determine the amount of any alleged damages which would be
allocable to the Program from this lawsuit; however, it is
reasonably possible that events could change in the future
resulting in a material liability to the Program.
On October 26, 1993, certain royalty owners filed a class action
lawsuit against Dyco in which the plaintiffs alleged entitlement
to a share of the proceeds of a take-or-pay settlement with a gas
purchaser which involved four of the Program's wells. The
lawsuit also alleges claims based on unjust enrichment, breach of
contract, and breach of fiduciary obligations and seeks an
accounting and declaration that the plaintiffs are third party
beneficiaries under the gas contract. The plaintiffs have not
quantified the amount of their damages, but they are seeking
exemplary damages, unpaid royalties, and interest. Dyco has
filed its answer in the matter in which it denied all of the
plaintiffs' allegations. The district court certified the matter
as a class action on January 18, 1994 and discovery is proceeding
in the matter. On November 29, 1994, the plaintiffs filed a
motion for summary judgment in the matter. Oral arguments were
heard on the motion in January 1995, however, as of the date of
these financial statements, the district court has not ruled on
the motion. Dyco intends to vigorously defend the lawsuit. As
of the date of these financial statements, management cannot
determine the amount of any alleged damages which would be
allocable to the Program from this lawsuit; however, it is
reasonably possible that events could change in the future
resulting in a material liability to the Program.
41
<PAGE>
<PAGE>
On December 18, 1992, a royalty owner filed a quiet title action
alleging that the operator of certain wells in which the Program
has an interest failed to exercise due diligence in locating the
owner while in the process of force pooling the drilling and
spacing unit. Plaintiff claimed a right to revenues attributable
to production from said wells in an amount in excess of $500,000
and further alleged conversion and claimed a right to "interest"
on the proceeds from production on the four wells pursuant to 52
O.S. Section 540. The defendants filed a counterclaim for quiet
title and asserted various defenses. A trial was held in the
matter on March 3 and 4, 1994 in which the district court ruled
against all defendants and specifically found that the operator,
Apache Corporation, did not exercise due diligence in the pooling
proceedings. Judgment was entered on June 15, 1994 in the amount
of $550,000 plus interest. The defendants have appealed the
district court's ruling, which appeal is currently pending. Oral
arguments in the case were heard by the appellate court on
January 25, 1996.
Included in these financial statements as of December 31, 1995
and 1994 is an accrual by the General Partner of $40,000
representing the Program's share of estimated ultimate damages
resulting from two of the above mentioned contingencies.
5. SUPPLEMENTAL OIL AND GAS INFORMATION
The following supplemental information regarding the oil and gas
activities of the Program is presented pursuant to the disclosure
requirements promulgated by the Securities and Exchange
Commission.
Capitalized Costs
The Program's capitalized costs and accumulated depreciation,
depletion, amortization, and valuation allowance were as follows:
December 31,
------------------------------
1995 1994
------------- -------------
Proved properties $35,425,987 $35,377,739
Unproved properties, not
subject to depreciation,
depletion, and amortization - -
---------- ----------
$35,425,987 $35,377,739
Less accumulated depreciation,
depletion, amortization,
and valuation allowance ( 34,937,061) ( 34,806,233)
---------- ----------
Net oil and gas properties $ 488,926 $ 571,506
========== ==========
Costs Incurred
Costs incurred by the Program in connection with its oil and gas
property acquisition, exploration, and development activities
were as follows:
42
<PAGE>
<PAGE>
December 31,
-------------------------
1995 1994 1993
------- ------- -------
Acquisition of properties $ - $ - $ -
Exploration costs - - -
Development costs 51,525 87,990 4,975
------ ------ ------
Total costs incurred $51,525 $87,990 $ 4,975
====== ====== ======
43
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Quantities of Proved Oil and Gas Reserves - Unaudited
Set forth below is a summary of the changes in the net quantities of the Program's proved
crude oil and natural gas reserves for the years ended December 31, 1995, 1994, and 1993.
Proved reserves were estimated by petroleum engineers employed by affiliates of the
Program. All of the Program's reserves are located in the United States.
1995 1994 1993
--------------------- --------------------- ---------------------
Oil Gas Oil Gas Oil Gas
(Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf)
-------- ----------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Proved reserves,
beginning of year 10,013 1,553,093 11,287 1,757,288 10,257 1,901,895
Revisions of previous
estimates 692 672,000 947 241,131 3,022 298,162
Sales of reserves - - - ( 141) - ( 3,582)
Extensions and
discoveries - - - - - -
Production ( 2,064) ( 560,892) ( 2,221) ( 445,185) ( 1,992) ( 439,187)
------ --------- ------ --------- ------ ---------
Proved reserves,
end of year 8,641 1,664,201 10,013 1,553,093 11,287 1,757,288
====== ========= ====== ========= ====== =========
Proved developed
reserves:
Beginning of year 7,112 1,306,306 7,604 1,430,742 9,105 1,673,954
------ --------- ------ --------- ------ ---------
End of year 6,234 1,386,834 7,112 1,306,306 7,604 1,430,742
====== ========= ====== ========= ====== =========
</TABLE>
44
<PAGE>
<PAGE>
The process of estimating oil and gas reserves is complex,
requiring significant subjective decisions in the evaluation of
available geological, engineering, and economic data for each
reservoir. The data for a given reservoir may change
substantially over time as a result of, among other things,
additional development activity, production history, and
viability of production under varying economic conditions; con-
sequently, it is reasonably possible that material revisions to
existing reserve estimates may occur in the near future.
Although every reasonable effort has been made to ensure that the
reserve estimates reported herein represent the most accurate
assessment possible, the significance of the subjective decisions
required and variances in available data for various reservoirs
make these estimates generally less precise than other estimates
presented in connection with financial statement disclosures.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Programs are limited partnerships and have no directors or
executive officers. The following individuals are directors and
executive officers of Dyco, the General Partner. The business address
of such directors and executive officers is Two West Second Street,
Tulsa, Oklahoma 74103.
Name Age Position with Dyco
---- --- ------------------
C. Philip Tholen 47 Chief Executive Officer, President, and
Chairman of the Board of Directors
Dennis R. Neill 43 Senior Vice President and Director
Jack A. Canon 46 Senior Vice President- General Counsel and
Director
Patrick M. Hall 37 Senior Vice President - Controller
Annabel M. Jones 42 Secretary
Judy F. Hughes 49 Treasurer
The directors will hold office until the next annual meeting of
shareholders of Dyco and until their successors have been duly elected
and qualified. All executive officers serve at the discretion of the
Board of Directors.
C. Philip Tholen joined the Samson Companies in 1977 and has
served as President, Chief Executive Officer, and Director of Dyco
since June 18, 1991. Prior to joining the Samson Companies, he was an
audit manager for Arthur Andersen & Co. in Tulsa where he specialized
in oil and natural gas industry audits and contract audits. He holds
a Bachelor of Science degree in accounting from the University of
Tulsa and is a Certified Public Accountant. Mr. Tholen is also
Executive Vice President, Chief Financial Officer, Treasurer, and
45
<PAGE>
<PAGE>
Director of Samson Investment Company; President and Chairman of the
Board of Directors of Samson Natural Gas Company, Geodyne Resources,
Inc. and its subsidiaries, and Samson Resources Company; President of
two Divisions of Samson Natural Gas Company, Samson Exploration
Company and Samson Production Services Company; Senior Vice President,
Treasurer, and Director of Samson Properties Incorporated; and
Director of Circle L Drilling Company and Samson Industrial
Corporation.
Dennis R. Neill joined the Samson Companies in 1981 and was named
Senior Vice President and Director of Dyco on June 18, 1991. Prior to
joining the Samson Companies, he was associated with a Tulsa law firm,
Conner and Winters, where his principal practice was in the securities
area. He received a Bachelor of Arts degree in political science from
Oklahoma State University and a Juris Doctorate degree from the
University of Texas. Mr. Neill also serves as Senior Vice President,
Chief Operating Officer, and Director of Samson Properties
Incorporated; Senior Vice President of Samson Hydrocarbons Company;
Senior Vice President and Director of Geodyne Resources, Inc. and its
subsidiaries; and President and Chairman of the Board of Directors of
Samson Securities Company.
Jack A. Canon joined the Samson Companies in 1983 and has served
as a Vice President and Director of Dyco since June 18, 1991. Prior
to joining the Samson Companies, he served as a staff attorney for
Terra Resources, Inc. and was associated with the Tulsa law firm of
Dyer, Powers, Marsh, Turner and Armstrong. He received a Bachelor of
Science degree in accounting from Quincy College and a Juris Doctorate
degree from the University of Tulsa. Mr. Canon also serves as
Secretary of Samson Investment Company; Director of Samson Natural Gas
Company, Samson Properties Incorporated, Circle L Drilling Company,
and Samson Securities Company; Senior Vice President - General Counsel
of Samson Production Services Company, a Division of Samson Natural
Gas Company, and Geodyne Resources, Inc. and its subsidiaries; and
Vice President - General Counsel of Samson Industrial Corporation.
Patrick M. Hall joined the Samson Companies in 1983 and was named
a Vice President of Dyco on June 18, 1991. Prior to joining the
Samson Companies he was a senior accountant with Peat Marwick Main &
Co. in Tulsa. He holds a Bachelor of Science degree in accounting
from Oklahoma State University and is a Certified Public Accountant.
Mr. Hall is also a Director of Samson Natural Gas Company and Geodyne
Resources, Inc. and its subsidiaries; Senior Vice President -
Controller and Director of Samson Properties Incorporated; and Senior
Vice President - Controller of Samson Production Services Company, a
Division of Samson Natural Gas Company.
Annabel M. Jones joined the Samson Companies in 1982 and was
named Secretary of Dyco on June 18, 1991. Prior to joining the Samson
Companies she served as associate general counsel of the Oklahoma
Securities Commission. She holds Bachelor of Arts in political
science and Juris Doctorate degrees from the University of Oklahoma.
Ms. Jones serves as Assistant General Counsel - Corporate Affairs for
Samson Production Services Company, a Division of Samson Natural Gas
Company, and is also Secretary of Samson Properties Incorporated,
Samson Natural Gas Company, Geodyne Resources, Inc. and its
subsidiaries, and Samson Industrial Corporation; Vice-President,
Secretary, and Director of Samson Securities Company; and Assistant
Secretary of Samson Investment Company.
Judy F. Hughes joined the Samson Companies in 1978 and was named
Treasurer of Dyco on June 18, 1991. Prior to joining the Samson
Companies, she performed treasury functions with Reading & Bates
Corporation. She attended the University of Tulsa and also serves as
46
<PAGE>
<PAGE>
Treasurer of Samson Natural Gas Company, Geodyne Resources, Inc. and
its subsidiaries, and Samson Securities Company and Assistant
Treasurer of Samson Investment Company and Samson Industrial
Corporation.
ITEM 11. EXECUTIVE COMPENSATION
The Programs are limited partnerships and, therefore, have no
officers or directors. The following table summarizes the amounts
paid by the Programs as compensation and reimbursements to Dyco and
its affiliates for the three years ended December 31, 1995:
Compensation/Reimbursement to Dyco and its Affiliates
Three Years Ended December 31, 1995
Type of Compensation/
Reimbursement(1) Expense
---------------------- ------------------------------
1995 1994 1993
---- ---- ----
1980-1 Program
- - --------------
Compensation:
Operations $ (2) $ (2) $ (2)
Gas Marketing $ (3) $ (3) $ (3)
Reimbursements:
General and Adminis-
trative, Geological,
and Engineering
Expenses and Direct
Expenses(4) $56,088 $56,088 $55,545
1980-2 Program
- - --------------
Compensation:
Operations $ (2) $ (2) $ (2)
Gas Marketing $ (3) $ (3) $ (3)
Reimbursements:
General and Adminis-
trative, Geological,
and Engineering
Expenses and Direct
Expenses(4) $85,620 $85,620 $84,795
- - ----------
(1) The authority for all of such compensation and reimbursement is
the limited partnership agreements of the Programs. With respect
to the Operations activities noted in the table, management
believes that such compensation is equal to or less than that
charged by unaffiliated persons in the same geographic areas and
under the same conditions.
(2) Affiliates of the Programs serve as operator of some of the
Programs' wells. Dyco, as General Partner, contracts with such
affiliates for services as operator of the wells. As operator,
such affiliates are compensated at rates provided in the
operating agreements in effect and charged to all parties to such
agreement. The dollar amount of such compensation paid by the
47
<PAGE>
<PAGE>
Programs to such affiliates is impossible to quantify as of the
date of this Annual Report.
(3) Premier, an affiliate of the Programs until December 6, 1995,
purchased a portion of the Programs' gas at market prices and
resold such gas at market prices directly to end-users and local
distribution companies. For the years ended December 31, 1995,
1994, and 1993, the 1980-1 Program sold $524,274, $576,825, and
$620,749, respectively, of gas to Premier. For the years ended
December 31, 1995, 1994, and 1993, the 1980-2 Program sold
$720,777, $683,848, and $830,063, respectively, of gas to
Premier.
(4) The Programs reimburse Dyco and its affiliates for reasonable and
necessary general and administrative, geological, and engineering
expenses and direct expenses incurred in connection with their
management and operation of the Programs. The directors,
officers, and employees of Dyco and its affiliates receive no
direct remuneration from the Programs for their services to the
Programs. See "Salary Reimbursement Table" below. The allocable
general and administrative, geological, and engineering expenses
are apportioned on a reasonable basis between the Programs'
business and all other oil and natural gas activities of Dyco and
its affiliates, including Dyco's management and operation of
affiliated oil and gas limited partnerships. The allocation to
the Programs of these costs is made by Dyco as General Partner.
As noted in the Compensation/Reimbursement Table above, the
directors, officers, and employees of Dyco and their affiliates
receive no direct remuneration from the Programs for their services.
However, to the extent such services represent direct involvement with
the Programs, as opposed to general corporate functions, such persons'
salaries are allocated to and reimbursed by the Programs. Such
allocation to the Programs' general and administrative, geological,
and engineering expenses of the salaries of directors, officers, and
employees of Dyco and its affiliates is based on internal records
maintained by Dyco and its affiliates, and represents investor
relations, legal, accounting, data processing, management, and other
functions directly attributable to the Programs' operations. The
following table indicates the approximate amount of general and
administrative expense reimbursement attributable to the salaries of
the directors, officers, and employees of Dyco and its affiliates for
the three years ended December 31, 1995:
48
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1980-1 Program
--------------
Salary Reimbursement
Three Years Ended December 31, 1995
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- - --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Philip
Tholen,
President,
Chief Executive
Officer<F1> 1993 - - - - - - -
1994 - - - - - - -
1995 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group<F2> 1993 $29,439 - - - - - -
1994 $30,568 - - - - - -
1995 $30,624 - - - - - -
- - ---------------
<FN>
<F1> The general and administrative expenses paid by the 1980-1 Program and attributable to
salary reimbursements do not include any salary or other compensation attributable to Mr.
Tholen.
<F2> No officer or director of Dyco or its affiliates provides full-time services to the 1980-1
Program and no individual's salary or other compensation reimbursement from the 1980-1
Program equals or exceeds $100,000 per annum.
</FN>
</TABLE>
49
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1980-2 Program
--------------
Salary Reimbursement
Three Years Ended December 31, 1995
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- - --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
C. Philip
Tholen,
President,
Chief Executive
Officer<F1> 1993 - - - - - - -
1994 - - - - - - -
1995 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group<F2> 1993 $44,941 - - - - - -
1994 $46,663 - - - - - -
1995 $46,749 - - - - - -
- - ---------------
<FN>
<F1> The general and administrative expenses paid by the 1980-2 Program and attributable to
salary reimbursements do not include any salary or other compensation attributable to Mr.
Tholen.
<F2> No officer or director of Dyco or its affiliates provides full-time services to the 1980-2
Program and no individual's salary or other compensation reimbursement from the 1980-2
Program equals or exceeds $100,000 per annum.
</FN>
</TABLE>
50
<PAGE>
<PAGE>
In addition to the compensation/reimbursements noted above,
during the three years ended December 31, 1995, the Samson Companies
were in the business of supplying field and drilling equipment and
services to affiliated and unaffiliated parties in the industry.
These companies may have provided equipment and services for wells in
which the Programs have an interest. Such equipment and services were
provided at prices or rates equal to or less than those normally
charged in the same or comparable geographic area by unaffiliated
persons or companies dealing at arm's length. The operators of these
wells bill the Programs for a portion of such costs based upon the
Programs' interest in the well.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table provides information as to the beneficial
ownership of the Programs' Units as of December 31, 1995 by each
beneficial owner of more than 5% of the issued and outstanding Units
and by the directors, officers, and affiliates of Dyco. The address
of each of such persons is Samson Plaza, Two West Second Street,
Tulsa, Oklahoma 74103.
Number of Units
Beneficially
Owned (Percent
Beneficial Owner of Outstanding)
- - ------------------------------------------- ---------------
1980-1 Program:
- - --------------
Samson Properties Incorporated 1,523.66 (37.7%)
All directors, officers, and affiliates
of Dyco as a group and Dyco (8 persons) 1,523.66 (37.7%)
1980-2 Program:
- - --------------
Samson Properties Incorporated 1,876.84 (37.1%)
All directors, officers, and affiliates
of Dyco as a group and Dyco (8 persons) 1,876.84 (37.1%)
To the best knowledge of the Programs and Dyco, there were no
officers, directors, or 5% owners who were delinquent filers of
reports required under section 16 of the Securities Exchange Act of
1934.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dyco and certain of its affiliates engage in oil and gas
activities independently of the Programs which result in conflicts of
interest that cannot be totally eliminated. The allocation of
acquisition and drilling opportunities and the nature of the
compensation arrangements between the Programs and Dyco also create
potential conflicts of interest. Dyco and its affiliates own a
significant amount of the Programs' Units and therefore have an
identity of interest with other limited partners with respect to the
operations of the Programs.
51
<PAGE>
<PAGE>
In order to attempt to assure limited liability for limited
partners as well as an orderly conduct of business, management of the
Programs is exercised solely by Dyco. The partnership agreements of
the Programs grant Dyco broad discretionary authority with respect to
the Programs' participation in drilling prospects and expenditure and
control of funds, including borrowings. These provisions are similar
to those contained in prospectuses and partnership agreements for
other public oil and gas partnerships. Broad discretion as to general
management of the Programs involves circumstances where Dyco has
conflicts of interest and where it must allocate costs and expenses,
or opportunities, among the Programs and other competing interests.
Dyco does not devote all of its time, efforts, and personnel
exclusively to the Programs. Furthermore, the Programs do not have
any employees, but instead rely on the personnel of the Samson
Companies. The Programs thus compete with the Samson Companies
(including other currently sponsored oil and gas programs) for the
time and resources of such personnel. The Samson Companies devote
such time and personnel to the management of the Programs as are
indicated by the circumstances and as are consistent with Dyco's
fiduciary duties.
Affiliates of the Programs are solely responsible for the
negotiation, administration, and enforcement of oil and gas sales
agreements covering the Programs' leasehold interests. Until December
6, 1995, Dyco had delegated the negotiation, administration, and
enforcement of its oil and gas sales agreements to Premier. In
addition to providing such administrative services, Premier purchased
and resold gas directly to end-users and local distribution companies.
Because affiliates of the Programs who provided services to the
Programs have fiduciary or other duties to other members of the Samson
Companies, contract amendments and negotiating positions taken by them
in their effort to enforce contracts with purchasers may not
necessarily represent the positions that a Program would take if it
were to administer its own contracts without involvement with other
members of the Samson Companies. On the other hand, management
believes that the Programs' negotiating strength and contractual
positions have been enhanced by virtue of its affiliation with the
Samson Companies.
For a description of certain other relationships and related
transactions see "Item 11. Executive Compensation".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) Financial Statements and Schedules. The following
financial statements and schedules for the Programs as of
December 31, 1995 and 1994 and for the years ended December 31,
1995, 1994, and 1993 are filed as part of this report.
(1) Financial Statements:
Reports of Independent Accountants
Balance Sheets
Statements of Operations
Statements of Partners' Capital
Statements of Cash Flows
Notes to Financial Statements
(2) Financial Statement Schedules:
52
<PAGE>
<PAGE>
None
All other schedules have been omitted since the required
information is presented in the Financial Statements or is not
applicable.
(b) Reports on Form 8-K for the fourth quarter of 1995:
None.
(c) Exhibits:
4.1 Drilling Agreement dated February 15, 1980 for
Dyco Drilling Program 1980-1 by and between Dyco
Oil and Gas Program 1980-1, Dyco Petroleum Cor-
poration, and Jaye F. Dyer filed as Exhibit 4.1 to
Annual Report on Form 10-K for the year ended
December 31, 1991 on April 10, 1992 and is hereby
incorporated herein.
4.2 Form of Program Agreement for Dyco Oil and Gas
Program 1980-1 by and between Dyco Petroleum
Corporation and the Participants filed as Exhibit
4.2 to Annual Report on Form 10-K for the year
ended December 31, 1991 on April 10, 1992 and is
hereby incorporated herein.
4.3 Amendment to Program Agreement for Dyco Oil and
Gas Program 1980-1 dated February 9, 1989 filed as
Exhibit 4.3 to Annual Report on Form 10-K for the
year ended December 31, 1991 on April 10, 1992 and
is hereby incorporated herein.
4.4 Certificate of Limited Partnership (as amended)
for Dyco Oil and Gas Program 1980-1 Limited
Partnership filed as Exhibit 4.4 to Annual Report
on Form 10-K for the year ended December 31, 1991
on April 10, 1992 and is hereby incorporated
herein.
4.5 Drilling Agreement dated June 20, 1980 for Dyco
Drilling Program 1980-2 by and between Dyco Oil
and Gas Program 1980-2, Dyco Petroleum
Corporation, and Jaye F. Dyer filed as Exhibit 4.5
to Annual Report on Form 10-K for the year ended
December 31, 1991 on April 10, 1992 and is hereby
incorporated herein.
4.6 Form of Program Agreement for Dyco Oil and Gas
Program 1980-2 by and between Dyco Petroleum
Corporation and the Participants filed as Exhibit
4.6 to Annual Report on Form 10-K for the year
ended December 31, 1991 on April 10, 1992 and is
hereby incorporated herein.
4.7 Amendment to Program Agreement for Dyco Oil and
Gas Program 1980-2 dated February 9, 1989 filed as
Exhibit 4.7 to Annual Report on Form 10-K for the
year ended December 31, 1991 on April 10, 1992 and
is hereby incorporated herein.
4.8 Certificate of Limited Partnership (as amended)
for Dyco Oil and Gas Program 1980-2 Limited
Partnership filed as Exhibit 4.8 to Annual Report
53
<PAGE>
<PAGE>
on Form 10-K for the year ended December 31, 1991
on April 10, 1992 and is hereby incorporated
herein.
27.1 Financial Data Schedule containing summary
financial information extracted from the Dyco Oil
and Gas Program 1980-1 Limited Partnership's
financial statements as of December 31, 1995 and
for the year ended December 31, 1995.
27.2 Financial Data Schedule containing summary
financial information extracted from the Dyco Oil
and Gas Program 1980-2 Limited Partnership's
financial statements as of December 31, 1995 and
for the year ended December 31, 1995.
All other Exhibits are omitted as inapplicable.
54
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly organized.
DYCO OIL AND GAS PROGRAM 1980-1
LIMITED PARTNERSHIP
By: DYCO PETROLEUM CORPORATION
General Partner
February 14, 1996
By: /s/C. Philip Tholen
------------------------------
C. Philip Tholen
Chief Executive Officer
and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities on the dates indicated.
By: /s/C. Philip Tholen Chief Executive Feb. 14, 1996
------------------- Officer, President,
C. Philip Tholen and Chairman of the
Board (Principal
Executive Officer)
/s/Dennis R. Neill Senior Vice Feb. 14, 1996
------------------- President and
Dennis R. Neill Director
/s/Jack A. Canon Senior Vice Feb. 14, 1996
------------------- President -
Jack A. Canon General Counsel
and Director
/s/Patrick M. Hall Senior Vice Feb. 14, 1996
------------------- President -
Patrick M. Hall Controller
(Principal
Accounting Officer)
/s/Annabel M. Jones Secretary Feb. 14, 1996
-------------------
Annabel M. Jones
/s/Judy F. Hughes Treasurer Feb. 14, 1996
-------------------
Judy F. Hughes
55
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly organized.
DYCO OIL AND GAS PROGRAM 1980-2
LIMITED PARTNERSHIP
By: DYCO PETROLEUM CORPORATION
General Partner
February 14, 1996
By: /s/C. Philip Tholen
------------------------------
C. Philip Tholen
Chief Executive Officer
and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities on the dates indicated.
By: /s/C. Philip Tholen Chief Executive Feb. 14, 1996
------------------- Officer, President,
C. Philip Tholen and Chairman of the
Board (Principal
Executive Officer)
/s/Dennis R. Neill Senior Vice Feb. 14, 1996
------------------- President and
Dennis R. Neill Director
/s/Jack A. Canon Senior Vice Feb. 14, 1996
------------------- President -
Jack A. Canon General Counsel
and Director
/s/Patrick M. Hall Senior Vice Feb. 14, 1996
------------------- President -
Patrick M. Hall Controller
(Principal
Accounting Officer)
/s/Annabel M. Jones Secretary Feb. 14, 1996
-------------------
Annabel M. Jones
/s/Judy F. Hughes Treasurer Feb. 14, 1996
-------------------
Judy F. Hughes
56
<PAGE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- - ------- -----------
4.1 Drilling Agreement dated February 15, 1980 for Dyco Drilling
Program 1980-1 by and between Dyco Oil and Gas Program 1980-
1, Dyco Petroleum Corporation, and Jaye F. Dyer filed as
Exhibit 4.1 to Annual Report on Form 10-K for the year ended
December 31, 1991 on April 10, 1992 and is hereby
incorporated herein.
4.2 Form of Program Agreement for Dyco Oil and Gas Program 1980-
1 by and between Dyco Petroleum Corporation and the
Participants filed as Exhibit 4.2 to Annual Report on Form
10-K for the year ended December 31, 1991 on April 10, 1992
and is hereby incorporated herein.
4.3 Amendment to Program Agreement for Dyco Oil and Gas Program
1980-1 dated February 9, 1989 filed as Exhibit 4.3 to Annual
Report on Form 10-K for the year ended December 31, 1991 on
April 10, 1992 and is hereby incorporated herein.
4.4 Certificate of Limited Partnership (as amended) for Dyco Oil
and Gas Program 1980-1 Limited Partnership filed as Exhibit
4.4 to Annual Report on Form 10-K for the year ended Decem-
ber 31, 1991 on April 10, 1992 and is hereby incorporated
herein.
4.5 Drilling Agreement dated June 20, 1980 for Dyco Drilling
Program 1980-2 by and between Dyco Oil and Gas Program 1979-
2, Dyco Petroleum Corporation, and Jaye F. Dyer filed as
Exhibit 4.5 to Annual Report on Form 10-K for the year ended
December 31, 1991 on April 10, 1992 and is hereby
incorporated herein.
4.6 Form of Program Agreement for Dyco Oil and Gas Program 1980-
2 by and between Dyco Petroleum Corporation and the
Participants filed as Exhibit 4.6 to Annual Report on Form
10-K for the year ended December 31, 1991 on April 10, 1992
and is hereby incorporated herein.
4.7 Amendment to Program Agreement for Dyco Oil and Gas Program
1980-2 dated February 9, 1989 filed as Exhibit 4.7 to Annual
Report on Form 10-K for the year ended December 31, 1991 on
April 10, 1992 and is hereby incorporated herein.
4.8 Certificate of Limited Partnership (as amended) for Dyco Oil
and Gas Program 1980-2 Limited Partnership filed as Exhibit
4.8 to Annual Report on Form 10-K for the year ended Decem-
ber 31, 1991 on April 10, 1992 and is hereby incorporated
herein.
27.1 Financial Data Schedule containing summary financial
information extracted from the Dyco Oil and Gas Program
1980-1 Limited Partnership's financial statements as of
December 31, 1995 and for the year ended December 31, 1995.
27.2 Financial Data Schedule containing summary financial
information extracted from the Dyco Oil and Gas Program
1980-2 Limited Partnership's financial statements as of
December 31,1995 and for the year ended December 31, 1995.
57
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000806576
<NAME> DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 106,038
<SECURITIES> 0
<RECEIVABLES> 109,691
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 215,729
<PP&E> 29,754,686
<DEPRECIATION> 29,083,616
<TOTAL-ASSETS> 1,033,855
<CURRENT-LIABILITIES> 50,447
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 946,312
<TOTAL-LIABILITY-AND-EQUITY> 1,033,855
<SALES> 605,626
<TOTAL-REVENUES> 610,611
<CGS> 0
<TOTAL-COSTS> 385,206
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 225,405
<INCOME-TAX> 0
<INCOME-CONTINUING> 225,405
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 225,405
<EPS-PRIMARY> 56.00
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000806577
<NAME> DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 273,193
<SECURITIES> 0
<RECEIVABLES> 117,898
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 391,091
<PP&E> 35,425,987
<DEPRECIATION> 34,937,061
<TOTAL-ASSETS> 1,070,692
<CURRENT-LIABILITIES> 91,270
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 824,896
<TOTAL-LIABILITY-AND-EQUITY> 1,070,692
<SALES> 820,418
<TOTAL-REVENUES> 827,427
<CGS> 0
<TOTAL-COSTS> 647,982
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 179,445
<INCOME-TAX> 0
<INCOME-CONTINUING> 179,445
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 179,445
<EPS-PRIMARY> 35.00
<EPS-DILUTED> 0
</TABLE>
