SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended Commission File Number
September 30, 1999 33-10346-09 (1980-1)
33-10346-10 (1980-2)
DYCO 1980 OIL AND GAS PROGRAM
(TWO LIMITED PARTNERSHIPS)
(Exact Name of Registrant as specified in its charter)
41-1378908 (1980-1)
Minnesota 41-1385165 (1980-2)
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or Number)
organization)
Samson Plaza, Two West Second Street, Tulsa, Oklahoma 74103
- ------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(918) 583-1791
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1999 1998
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 83,128 $ 57,478
Accrued oil and gas sales 64,460 48,350
Accounts receivable - related
party (Note 2) - 57,688
-------- --------
Total current assets $147,588 $163,516
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 331,757 363,306
DEFERRED CHARGE 51,102 50,095
-------- --------
$530,447 $576,917
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 5,648 $ 4,902
Gas imbalance payable 12,524 12,524
-------- --------
Total current liabilities $ 18,172 $ 17,426
ACCRUED LIABILITY $ 40,440 $ 40,987
PARTNERS' CAPITAL:
General Partner, 40 general
partner units $ 4,718 $ 5,185
Limited Partners, issued and
outstanding, 4,000 Units 467,117 513,319
-------- --------
Total Partners' capital $471,835 $518,504
-------- --------
$530,447 $576,917
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
-------- -------
REVENUES:
Oil and gas sales $101,078 $87,267
Interest 524 1,315
-------- -------
$101,602 $88,582
COSTS AND EXPENSES:
Oil and gas production $ 22,672 $30,436
Depreciation, depletion, and
amortization of oil and gas
properties 8,125 27,134
General and administrative
(Note 2) 15,259 15,325
-------- -------
$ 46,056 $72,895
-------- -------
NET INCOME $ 55,546 $15,687
======== =======
GENERAL PARTNER (1%) - net income $ 555 $ 156
======== =======
LIMITED PARTNERS (99%) - net income $ 54,991 $15,531
======== =======
NET INCOME PER UNIT $ 13.75 $ 3.88
======== =======
UNITS OUTSTANDING 4,040 4,040
======== =======
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
-------- --------
REVENUES:
Oil and gas sales $240,172 $300,936
Interest 2,784 5,649
-------- --------
$242,956 $306,585
COSTS AND EXPENSES:
Oil and gas production $ 66,081 $ 78,222
Depreciation, depletion, and
amortization of oil and gas
properties 31,550 62,755
General and administrative
(Note 2) 50,594 51,764
-------- --------
$148,225 $192,741
-------- --------
NET INCOME $ 94,731 $113,844
======== ========
GENERAL PARTNER (1%) - net income $ 947 $ 1,138
======== ========
LIMITED PARTNERS (99%) - net income $ 93,784 $112,706
======== ========
NET INCOME PER UNIT $ 23.45 $ 28.18
======== ========
UNITS OUTSTANDING 4,040 4,040
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 94,731 $113,844
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 31,550 62,755
(Increase) decrease in accrued
oil and gas sales ( 16,110) 52,053
Decrease in accounts receivable -
General Partner 6,216 -
Increase in deferred charge ( 1,007) -
Increase (decrease) in accounts
payable 746 ( 27,859)
Decrease in accrued liability ( 547) -
-------- --------
Net cash provided by operating
activities $115,579 $200,793
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of oil and
gas properties $ 51,472 $ 49,889
Additions to oil and gas
properties ( 1) ( 6,395)
-------- --------
Net cash provided by investing
activities $ 51,471 $ 43,494
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($141,400) ($424,200)
-------- --------
Net cash used by financing
activities ($141,400) ($424,200)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 25,650 ($179,913)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 57,478 197,606
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 83,128 $ 17,693
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1999 1998
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 67,206 $ 62,393
Accrued oil and gas sales 111,145 88,634
-------- --------
Total current assets $178,351 $151,027
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 145,208 173,280
DEFERRED CHARGE 33,425 33,425
-------- --------
$356,984 $357,732
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 6,777 $ 5,459
Gas imbalance payable 16,840 16,840
-------- --------
Total current liabilities $ 23,617 $ 22,299
ACCRUED LIABILITY $ 79,075 $ 79,075
PARTNERS' CAPITAL:
General Partner, 59 general
partner units $ 2,543 $ 2,564
Limited Partners, issued and
outstanding, 5,000 Units 251,749 253,794
-------- --------
Total Partners' capital $254,292 $256,358
-------- --------
$356,984 $357,732
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
-------- ---------
REVENUES:
Oil and gas sales $157,536 $83,034
Interest 1,464 3,073
-------- -------
$159,000 $86,107
COSTS AND EXPENSES:
Oil and gas production $ 34,669 $26,225
Depreciation, depletion, and
amortization of oil and gas
properties 5,623 28,377
General and administrative
(Note 2) 22,953 23,037
-------- -------
$ 63,245 $77,639
-------- -------
NET INCOME $ 95,755 $ 8,468
======== =======
GENERAL PARTNER (1%) - net income $ 958 $ 84
======== =======
LIMITED PARTNERS (99%) - net income $ 94,797 $ 8,384
======== =======
NET INCOME PER UNIT $ 18.93 $ 1.67
======== =======
UNITS OUTSTANDING 5,059 5,059
======== =======
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
-------- ---------
REVENUES:
Oil and gas sales $421,401 $537,758
Interest 2,996 11,603
-------- --------
$424,397 $549,361
COSTS AND EXPENSES:
Oil and gas production $ 95,247 $ 96,187
Depreciation, depletion, and
amortization of oil and gas
properties 28,514 86,675
General and administrative
(Note 2) 75,047 76,360
-------- --------
$198,808 $259,222
-------- --------
NET INCOME $225,589 $290,139
======== ========
GENERAL PARTNER (1%) - net income $ 2,256 $ 2,901
======== ========
LIMITED PARTNERS (99%) - net income $223,333 $287,238
======== ========
NET INCOME PER UNIT $ 44.59 $ 57.35
======== ========
UNITS OUTSTANDING 5,059 5,059
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
-8-
<PAGE>
DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $225,589 $290,139
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 28,514 86,675
Increase in accrued oil and gas
sales ( 22,511) ( 41,539)
Increase in accounts payable 1,318 120,526
Decrease in gas imbalance payable - ( 64,111)
-------- --------
Net cash provided by operating
activities $232,910 $391,690
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of oil and
gas properties $ - $ 27,869
Additions to oil and gas
properties ( 442) ( 5,550)
-------- --------
Net cash provided (used) by
investing activities ($ 442) $ 22,319
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($227,655) ($632,375)
-------- --------
Net cash used by financing
activities ($227,655) ($632,375)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 4,813 ($218,366)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 62,393 268,020
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 67,206 $ 49,654
======== ========
The accompanying condensed notes are an
integral part of these financial statements.
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<PAGE>
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheets as of September 30, 1999, statements of operations for
the three and nine months ended September 30, 1999 and 1998, and
statements of cash flows for the nine months ended September 30, 1999 and
1998 have been prepared by Dyco Petroleum Corporation ("Dyco"), the
General Partner of the Dyco Oil and Gas Program 1980-1 and 1980-2 Limited
Partnerships (individually, the "1980-1 Program" or the "1980-2 Program",
as the case may be, or, collectively, the "Programs"), without audit. In
the opinion of management all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position
at September 30, 1999, results of operations for the three and nine months
ended September 30, 1999 and 1998, and changes in cash flows for the nine
months ended September 30, 1999 and 1998 have been made.
Information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the financial statements
and notes thereto included in the Programs' Annual Report on Form 10-K for
the year ended December 31, 1998. The results of operations for the period
ended September 30, 1999 are not necessarily indicative of the results to
be expected for the full year.
The limited partners' net income or loss per unit is based upon each
$5,000 initial capital contribution.
OIL AND GAS PROPERTIES
----------------------
Oil and gas operations are accounted for using the full cost method of
accounting. All productive and non-productive costs associated with the
acquisition, exploration and development of oil and gas reserves are
capitalized. The Programs' calculation of depreciation, depletion, and
amortization includes estimated future expenditures to be incurred in
developing proved reserves and estimated dismantlement and abandonment
costs, net of estimated salvage values. In the event the unamortized cost
of oil and gas properties being amortized exceeds the full cost
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<PAGE>
ceiling (as defined by the Securities and Exchange Commission), the excess
is charged to expense in the period during which such excess occurs. Sales
and abandonments of properties are accounted for as adjustments of
capitalized costs with no gain or loss recognized, unless such adjustments
would significantly alter the relationship between capitalized costs and
proved oil and gas reserves.
The provision for depreciation, depletion, and amortization of oil and gas
properties is calculated by dividing the oil and gas sales dollars during
the period by the estimated future gross income from the oil and gas
properties and applying the resulting rate to the net remaining costs of
oil and gas properties that have been capitalized, plus estimated future
development costs.
2. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
The related party receivable at December 31, 1998 represents $51,472 for a
gas imbalance settlement and $6,216 in related interest (at prime plus 1%)
due from an affiliate of the 1980-1 Program related to the sale of a well
in early 1998. Such receivable was collected in the first quarter of 1999.
Under the terms of each of the Program's partnership agreement, Dyco is
entitled to receive a reimbursement for all direct expenses and general
and administrative, geological and engineering expenses it incurs on
behalf of the Program. During the three months ended September 30, 1999
and 1998, the 1980-1 Program incurred such expenses totaling $15,259 and
$15,325, respectively, of which $14,022 was paid each period to Dyco and
its affiliates. During the nine months ended September 30, 1999 and 1998,
the 1980-1 Program incurred such expenses totaling $50,594 and $51,764,
respectively, of which $42,066 was paid each period to Dyco and its
affiliates. During the three months ended September 30, 1999 and 1998, the
1980-2 Program incurred such expenses totaling $22,953 and $23,037,
respectively, of which $21,405 was paid each period to Dyco and its
affiliates. During the nine months ended September 30, 1999 and 1998, the
1980-2 Program incurred such expenses totaling $75,047 and $76,360,
respectively, of which $64,215 was paid each period to Dyco and its
affiliates.
Affiliates of the Programs operate certain of the Programs' properties.
Their policy is to bill the Programs for all customary charges and cost
reimbursements associated with these activities.
-11-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
USE OF FORWARD-LOOKING STATEMENTS AND ESTIMATES
- -----------------------------------------------
This Quarterly Report contains certain forward-looking statements. The
words "anticipate", "believe", "expect", "plan", "intend", "estimate",
"project", "could", "may" and similar expressions are intended to identify
forward-looking statements. Such statements reflect management's current
views with respect to future events and financial performance. This
Quarterly Report also includes certain information, which is, or is based
upon, estimates and assumptions. Such estimates and assumptions are
management's efforts to accurately reflect the condition and operation of
the Programs.
Use of forward-looking statements and estimates and assumptions involve
risks and uncertainties which include, but are not limited to, the
volatility of oil and gas prices, the uncertainty of reserve information,
the operating risk associated with oil and gas properties (including the
risk of personal injury, death, property damage, damage to the well or
producing reservoir, environmental contamination, and other operating
risks), the prospect of changing tax and regulatory laws, the availability
and capacity of processing and transportation facilities, the general
economic climate, the supply and price of foreign imports of oil and gas,
the level of consumer product demand, and the price and availability of
alternative fuels. Should one or more of these risks or uncertainties
occur or should estimates or underlying assumptions prove incorrect,
actual conditions or results may vary materially and adversely from those
stated, anticipated, believed, estimated, and otherwise indicated.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net proceeds from the Programs' operations less necessary operating
capital are distributed to investors on a quarterly basis. The net
proceeds from production are not reinvested in productive assets, except
to the extent that producing wells are improved or where methods are
employed to permit more efficient recovery of the Programs' reserves which
would result in a positive economic impact.
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<PAGE>
The Programs' available capital from subscriptions has been spent on oil
and gas drilling activities. There should be no further material capital
resource commitments in the future. The Programs have no debt commitments.
Cash for operational purposes will be provided by current oil and gas
production.
The 1980-1 Program's Statement of Cash Flows for the nine months ended
September 30, 1999 includes proceeds of $51,472 from the settlement of the
gas imbalance position on one well sold during 1998. These proceeds were
included in the 1980-1 Program's cash distributions paid in June 1999.
RESULTS OF OPERATIONS
- ---------------------
GENERAL DISCUSSION
The following general discussion should be read in conjunction with the
analysis of results of operations provided below. The most important
variable affecting the Programs' revenues is the prices received for the
sale of oil and gas. Due to the volatility of oil and gas prices,
forecasting future prices is subject to great uncertainty and inaccuracy.
Substantially all of the Programs' gas reserves are being sold in the
"spot market". Prices on the spot market are subject to wide seasonal and
regional pricing fluctuations due to the highly competitive nature of the
spot market. Such spot market sales are generally short-term in nature and
are dependent upon the obtaining of transportation services provided by
pipelines. In addition, crude oil prices in 1998 and early 1999 were at
their lowest level in the past decade due primarily to the global surplus
of crude oil. Oil prices have since rebounded during 1999 primarily due to
a decrease in the global oil surplus as a result of production
curtailments by several major oil producing nations. Management is unable
to predict whether future oil and gas prices will (i) stabilize, (ii)
increase, or (iii) decrease.
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<PAGE>
1980-1 PROGRAM
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1998.
Three Months Ended September 30,
--------------------------------
1999 1998
-------- -------
Oil and gas sales $101,078 $87,267
Oil and gas production expenses $ 22,672 $30,436
Barrels produced 296 321
Mcf produced 38,265 52,278
Average price/Bbl $ 19.33 $ 11.90
Average price/Mcf $ 2.49 $ 1.60
As shown in the table above, total oil and gas sales increased $13,811
(15.8%) for the three months ended September 30, 1999 as compared to the
three months ended September 30, 1998. Of this increase, approximately
$2,000 and $34,000, respectively, were related to increases in the average
prices of oil and gas sold. These increases were partially offset by a
decrease of approximately $22,000 related to a decrease in volumes of gas
sold. Volumes of oil and gas sold decreased 25 barrels and 14,013 Mcf,
respectively, during the three months ended September 30, 1999 as compared
to the three months ended September 30, 1998. The decrease in volumes of
gas sold was primarily due to positive prior period volume adjustments
made by the purchasers on two wells during the three months ended
September 30, 1998. Average oil and gas prices increased to $19.33 per
barrel and $2.49 per Mcf, respectively, for the three months ended
September 30, 1999 from $11.90 per barrel and $1.60 per Mcf, respectively,
for the three months ended September 30, 1998.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $7,764 (25.5%) for the three months ended
September 30, 1999 as compared to the three months ended September 30,
1998. This decrease was primarily due to decreases in (i) compression
expenses on several wells during the three months ended September 30, 1999
and (ii) overhead expenses charged by the operator on one well during the
three months ended September 30, 1999. As a percentage of oil and gas
sales, these expenses decreased to 22.4% for the three months ended
September 30, 1999 from 34.9% for the three months ended September 30,
1998. This percentage decrease was primarily due to the dollar decrease in
oil and gas production expenses and the increases in the average prices of
oil and gas sold.
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<PAGE>
Depreciation, depletion, and amortization of oil and gas properties
decreased $19,009 (70.1%) for the three months ended September 30, 1999 as
compared to the three months ended September 30, 1998. This decrease was
primarily due to (i) the decrease in volumes of gas sold and (ii) an
increase in the gas price used in the valuation of reserves at September
30, 1999 as compared to September 30, 1998. As a percentage of oil and gas
sales, this expense decreased to 8.0% for the three months ended September
30, 1999 from 31.1% for the three months ended September 30, 1998. This
percentage decrease was primarily due to the dollar decrease in
depreciation, depletion, and amortization.
General and administrative expenses remained relatively constant for the
three months ended September 30, 1999 as compared to the three months
ended September 30, 1998. As a percentage of oil and gas sales, these
expenses decreased to 15.1% for the three months ended September 30, 1999
from 17.6% for the three months ended September 30, 1998. This percentage
decrease was primarily due to the increase in oil and gas sales.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998.
Nine Months Ended September 30,
-------------------------------
1999 1998
-------- --------
Oil and gas sales $240,172 $300,936
Oil and gas production expenses $ 66,081 $ 78,222
Barrels produced 1,035 1,142
Mcf produced 107,105 146,288
Average price/Bbl $ 15.04 $ 13.36
Average price/Mcf $ 2.10 $ 1.95
As shown in the table above, total oil and gas sales decreased $60,764
(20.2%) for the nine months ended September 30, 1999 as compared to the
nine months ended September 30, 1998. Of this decrease, approximately
$77,000 was related to a decrease in volumes of gas sold. This decrease
was partially offset by an increase of approximately $15,000 related to an
increase in the average price of gas sold. Volumes of oil and gas sold
decreased 107 barrels and 39,183 Mcf, respectively, for the nine months
ended September 30, 1999 as compared to the nine months ended September
30, 1998. The decrease in volumes of gas sold was primarily due to (i)
positive prior period volume adjustments made by the purchasers on two
wells during the nine months ended September 30, 1998, (ii) the 1980-1
Program receiving an increased percentage of sales on one well during the
nine months ended September 30, 1998, and (iii) normal declines in
production. Average oil and gas prices increased to $15.04
-15-
<PAGE>
per barrel and $2.10 per Mcf, respectively, for the nine months ended
September 30, 1999 from $13.36 per barrel and $1.95 per Mcf, respectively,
for the nine months ended September 30, 1998.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $12,141 (15.5%) for the nine months ended
September 30, 1999 as compared to the nine months ended September 30,
1998. This decrease was primarily due to decreases in (i) lease operating
expenses associated with the decreases in volumes of oil and gas sold and
(ii) production taxes associated with the decrease in oil and gas sales.
As a percentage of oil and gas sales, these expenses increased to 27.5%
for the nine months ended September 30, 1999 from 26.0% for the nine
months ended September 30, 1998.
Depreciation, depletion, and amortization of oil and gas properties
decreased $31,205 (49.7%) for the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998. This decrease was
primarily due to (i) the decrease in volumes of gas sold and (ii) an
increase in the gas price used in the valuation of reserves at September
30, 1999 as compared to September 30 1998. As a percentage of oil and gas
sales, this expense decreased to 13.1% for the nine months ended September
30, 1999 from 20.9% for the nine months ended September 30, 1998. This
percentage decrease was primarily due to the dollar decrease in
depreciation, depletion, and amortization.
General and administrative expenses decreased $1,170 (2.3%) for the nine
months ended September 30, 1999 as compared to the nine months ended
September 30, 1998. As a percentage of oil and gas sales, these expenses
increased to 21.1% for the nine months ended September 30, 1999 from 17.2%
for the nine months ended September 30, 1998. This percentage increase was
primarily due to the decrease in oil and gas sales.
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<PAGE>
1980-2 PROGRAM
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1998.
Three Months Ended September 30,
--------------------------------
1999 1998
-------- -------
Oil and gas sales $157,536 $83,034
Oil and gas production expenses $ 34,669 $26,225
Barrels produced 253 354
Mcf produced 59,119 58,799
Average price/Bbl $ 21.25 $ 13.51
Average price/Mcf $ 2.57 $ 1.33
As shown in the table above, total oil and gas sales increased $74,502
(89.7%) for the three months ended September 30, 1999 as compared to the
three months ended September 30, 1998. Of this increase, approximately
$73,000 was related to an increase in the average price of gas sold.
Volumes of oil sold decreased 101 barrels, while volumes of gas sold
increased 320 Mcf, respectively, for the three months ended September 30,
1999 as compared to the three months ended September 30, 1998. Average oil
and gas prices increased to $21.25 per barrel and $2.57 per Mcf,
respectively, for the three months ended September 30, 1999 from $13.51
per barrel and $1.33 per Mcf, respectively, for the three months ended
September 30, 1998.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $8,444 (32.2%) for the three months ended
September 30, 1999 as compared to the three months ended September 30,
1998. This increase was primarily due to a negative prior period
production tax adjustment on one well during the three months ended
September 30, 1998. As a percentage of oil and gas sales, these expenses
decreased to 22.0% for the three months ended September 30, 1999 from
31.6% for the three months ended September 30, 1998. This percentage
decrease was primarily due to the increases in the average prices of oil
and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $22,754 (80.2%) for the three months ended September 30, 1999 as
compared to the three months ended September 30, 1998. This decrease was
primarily due to (i) upward revisions in the estimates of remaining oil
and gas reserves at December 31, 1998 and (ii) an increase in the gas
price used in the valuation of reserves at September 30, 1999 as compared
to September 30, 1998. As a percentage of oil and gas sales, this expense
decreased to 3.6% for the three months ended September 30, 1999 from 34.2%
for the
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<PAGE>
three months ended September 30, 1998. This percentage decrease was
primarily due to the dollar decrease in depreciation, depletion, and
amortization.
General and administrative expenses remained relatively constant for the
three months ended September 30, 1999 as compared to the three months
ended September 30, 1998. As a percentage of oil and gas sales, these
expenses decreased to 14.6% for the three months ended September 30, 1999
from 27.7% for the three months ended September 30, 1998. This percentage
decrease was primarily due to the increase in oil and gas sales.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998.
Nine Months Ended September 30,
-------------------------------
1999 1998
-------- --------
Oil and gas sales $421,401 $537,758
Oil and gas production expenses $ 95,247 $ 96,187
Barrels produced 881 1,071
Mcf produced 203,055 280,990
Average price/Bbl $ 15.91 $ 14.02
Average price/Mcf $ 2.01 $ 1.86
As shown in the table above, total oil and gas sales decreased $116,357
(21.6%) for the nine months ended September 30, 1999 as compared to the
nine months ended September 30, 1998. Of this decrease, approximately
$145,000 was related to a decrease in volumes of gas sold. This decrease
was partially offset by an increase of approximately $30,000 related to an
increase in the average price of gas sold. Volumes of oil and gas sold
decreased 190 barrels and 77,935 Mcf, respectively, for the nine months
ended September 30, 1999 as compared to the nine months ended September
30, 1998. The decrease in volumes of gas sold was primarily due to
positive prior period volume adjustments made by the purchasers on several
wells during the nine months ended September 30, 1998. These decreases
were partially offset by increased production on one well during the nine
months ended September 30, 1999 due to an increase in pipeline capacity.
Average oil and gas prices increased to $15.91 per barrel and $2.01 per
Mcf, respectively, for the nine months ended September 30, 1999 from
$14.02 per barrel and $1.86 per Mcf, respectively, for the nine months
ended September 30, 1998.
-18-
<PAGE>
Oil and gas production expenses (including lease operating expenses and
production taxes) remained relatively constant for the nine months ended
September 30, 1999 as compared to the nine months ended September 30,
1998. A decrease in production taxes associated with the decrease in oil
and gas sales was significantly offset by an increase primarily due to (i)
a negative prior period production tax adjustment on one well during the
nine months ended September 30, 1998 and (ii) credits received from the
operator on two wells during the nine months ended September 30, 1998 for
prior year lease operating expenses. As a percentage of oil and gas sales,
these expenses increased to 22.6% for the nine months ended September 30,
1999 from 17.9% for the nine months ended September 30, 1998. This
percentage increase was primarily due to (i) the 1998 negative production
tax adjustment and (ii) 1998 credits received for prior year operating
expenses.
Depreciation, depletion, and amortization of oil and gas properties
decreased $58,161 (67.1%) for the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998. This decrease was
primarily due to (i) the decrease in volumes of oil and gas sold, (ii) an
increase in the gas price used in the valuation of reserves at September
30, 1999 as compared to September 30, 1998, and (iii) upward revisions in
the estimates of remaining oil and gas reserves at December 31, 1998. As a
percentage of oil and gas sales, this expense decreased to 6.8% for the
nine months ended September 30, 1999 from 16.1% for the nine months ended
September 30, 1998. This percentage decrease was primarily due to the
dollar decrease in depreciation, depletion, and amortization.
General and administrative expenses remained relatively constant for the
nine months ended September 30, 1999 as compared to the nine months ended
September 30, 1998. As a percentage of oil and gas sales, these expenses
increased to 17.8% for the nine months ended September 30, 1999 from 14.2%
for the nine months ended September 30, 1998. This percentage increase was
primarily due to the decrease in oil and gas sales.
YEAR 2000 COMPUTER ISSUES
- -------------------------
IN GENERAL
The Year 2000 Issue ("Y2K") refers to the inability of computer and other
information technology systems to properly process date and time
information, stemming from the earlier programming practice of using two
digits rather than four to represent the year in a date. For example,
computer programs and imbedded chips that are date sensitive
-19-
<PAGE>
may recognize a date using (00) as the year 1900 rather than the year
2000. The consequence of Y2K is that computer and imbedded processing
systems may be at risk of malfunctioning, particularly during the
transition from 1999 to 2000.
The effects of Y2K are exacerbated by the interdependence of computer and
telecommunication systems throughout the world. This interdependence also
exists among the Programs, Samson Investment Company and its affiliates
("Samson"), and their vendors, customers, and business partners, as well
as with regulators. The potential risks associated with Y2K for an oil and
gas production company fall into three general areas: (i) financial,
leasehold and administrative computer systems, (ii) imbedded systems in
field process control units, and (iii) third party exposures. As discussed
below, Dyco does not believe that these risks will be material to the
Programs' operations.
The Programs' business is producing oil and gas. The day-to-day production
of the Programs' oil and gas is not dependent on computers or equipment
with imbedded chips. As further discussed below, management anticipates
that the Programs' daily business activities will not be materially
affected by Y2K.
The Programs rely on Samson to provide all of its operational and
administrative services on either a direct or indirect basis. Samson has
addressed each of the three Y2K areas discussed above through a readiness
process that:
1. increased the awareness of the issue among key employees;
2. identified areas of potential risk;
3. assessed the relative impact of these risks and Samson's ability
to manage them; and
4. remediated the risks on a priority basis wherever possible.
One of Samson Investment Company's Executive Vice Presidents is
responsible for communicating to its Board of Directors Y2K actions and
for the ultimate implementation of its Y2K plan. He has delegated to
Samson Investment Company's Senior Vice President-Technology and
Administrative Services principal responsibility
for ensuring Y2K compliance within Samson.
Samson has been planning for the impact of Y2K on its information
technology systems since 1993. As of November 1, 1999, Samson is in the
final stages of implementation of a Y2K plan, as summarized below:
-20-
<PAGE>
FINANCIAL AND ADMINISTRATIVE SYSTEMS
1. Awareness. Samson has alerted its officers, managers and supervisors of
Y2K issues and asked them to have their employees participate in the
identification of potential Y2K risks which might otherwise go unnoticed
by higher level employees and officers. As a result, awareness of the
issue is considered high.
2. Risk Identification. Samson's most significant financial and
administrative systems exposure is the Y2K status of the accounting and
land administration system used to collect and manage data for internal
management decision making and for external revenue and accounts payable
purposes. Other concerns include network hardware and software, desktop
computing hardware and software, telecommunications, and office space
readiness.
3. Risk Assessment. The failure to identify and correct a material Y2K
problem could result in inaccurate or untimely financial information for
management decision-making or cash flow and payment purposes, including
maintaining oil and gas leases.
4. Remediation. Since 1993, Samson has been upgrading its accounting and
land administration software. All of the Y2K upgrades have been completed.
In addition, in 1997 and 1998 Samson replaced or applied software patches
to substantially all of its network and desktop software applications and
believes them to be currently Y2K compliant. The costs of all such risk
assessments and remediation were not expected to be material to the
Programs.
5. Contingency Planning. Notwithstanding the foregoing, should there be
significant unanticipated disruptions in Samson's financial and
administrative systems, all of the accounting processes that are currently
automated will need to be performed manually. Samson has communicated to
its management team the importance of having adequate staff available to
manually perform necessary functions to minimize disruptions.
IMBEDDED SYSTEMS
1. Awareness. Samson's Y2K program has involved all levels of field
personnel from production foremen and higher. Employees at all levels of
the organization have been asked to participate in the identification of
potential Y2K risks, which might otherwise go unnoticed by higher level
employees and officers of Samson, and as a result, awareness of the issue
is considered high.
-21-
<PAGE>
2. Risk Identification. Samson has inventoried all possible exposures to
imbedded chips and systems. Such exposures can be classified as either (i)
oil and gas production and processing equipment or (ii) office machines
such as faxes, copiers, phones, etc.
With respect to oil and gas production and processing equipment, neither
Samson nor the Programs operate offshore wells, significant processing
plants, or wells with older electronic monitoring systems. As a result,
Samson's inventory identified less than 10 applications using imbedded
chips. All of these have been tested by the respective vendors and have
been found to be Y2K compliant or have been upgraded or replaced.
Office machines have been tested by Samson and vendors and are believed to
be compliant.
3. Risk Assessment and Remediation. The failure to identify and correct a
material Y2K problem in an imbedded system could result in outcomes
ranging from errors in data reporting to curtailments or shutdowns in
production. As noted above, Samson has identified less than 10 imbedded
system applications all of which have been made compliant or replaced.
None of these applications are believed to be material to Samson or the
Programs. Samson believes that sufficient manual processes are available
to minimize any field level risk and that there will be no material impact
on the Programs with respect to these applications.
4. Contingency Planning. Should material production disruptions occur as a
result of Y2K failures in field operations, Samson will utilize its
existing field personnel in an attempt to avoid any material impact on
operating cash flow. Samson is not able to quantify any potential exposure
in the event of systems failure or inadequate manual alternatives.
THIRD PARTY EXPOSURES
1. Awareness. Samson has advised management to consider Y2K implications
with its outside vendors, customers, and business partners. Management has
been asked to participate in the identification of potential third party
Y2K risks and, as a result, awareness of the issue is considered high.
2. Risk Identification. Samson's most significant third party Y2K exposure
is its dependence on third parties for the receipt of revenues from oil
and gas sales. However, virtually all of these purchasers are very large
and sophisticated companies. Other Y2K concerns include the
-22-
<PAGE>
availability of electric power to Samson's field operations, the integrity
of telecommunication systems, and the readiness of commercial banks to
execute electronic fund transfers.
3. Risk Assessment. Because of the high awareness of the Y2K problem in
the U.S., Samson has not undertaken and does not plan to undertake a
formal company wide plan to make inquiries of third parties on the subject
of Y2K readiness. If it did so, Samson has no ability to require responses
to such inquiries or to independently verify their accuracy. Samson has,
however, received oral assurances from its significant oil and gas
purchasers of Y2K compliance. If significant disruptions from major
purchasers were to occur, however, there could be a material and adverse
impact on the Programs' results of operations, liquidity, and financial
conditions.
It is important to note that third party oil and gas purchasers have
significant incentives to avoid disruptions arising from a Y2K failure.
For example, most of these parties are under contractual obligations to
purchase oil and gas or disperse revenues to Samson. The failure to do so
will result in contractual and statutory penalties. Therefore, Samson
believes that it is unlikely that there will be material third party
non-compliance with purchase and remittance obligations as a result of Y2K
issues.
4. Remediation. Where Samson perceived a significant risk of Y2K
non-compliance by banks and other significant vendors that would have had
a material impact on Samson's business, Samson undertook joint testing
during 1999, and any identified problems have been resolved.
5. Contingency Planning. In the unlikely event that material production
disruptions occur as a result of Y2K failures of third parties, the
Programs' operating cash flow could be impacted. This contingency will be
factored into deliberations on the level of quarterly cash distributions
paid out during any such period of cash flow disruption.
-23-
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
The Programs do not hold any market risk sensitive instruments.
-24-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule containing summary financial information extracted
from the 1980-1 Program's financial statements as of September 30, 1999
and for the nine months ended September 30, 1999, filed herewith.
27.2 Financial Data Schedule containing summary financial information extracted
from the 1980-2 Program's financial statements as of September 30, 1999
and for the nine months ended September 30, 1999, filed herewith.
All other exhibits are omitted as inapplicable.
(b) Reports on Form 8-K.
None.
-25-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED
PARTNERSHIP
DYCO OIL AND GAS PROGRAM 1980-2 LIMITED
PARTNERSHIP
(Registrant)
BY: DYCO PETROLEUM CORPORATION
General Partner
Date: November 3, 1999 By: /s/Dennis R. Neill
-------------------------------
(Signature)
Dennis R. Neill
President
Date: November 3, 1999 By: /s/Patrick M. Hall
-------------------------------
(Signature)
Patrick M. Hall
Chief Financial Officer
-26-
<PAGE>
INDEX TO EXHIBITS
NUMBER DESCRIPTION
- ------ -----------
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 September 30, 1999 and for
the nine months ended September 30, 1999, filed herewith.
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 September 30, 1999 and for
the nine months ended September 30, 1999, filed herewith.
All other exhibits are omitted as inapplicable.
-27-
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<ARTICLE> 5
<CIK> 0000806576
<NAME> DYCO OIL & GAS PROGRAM 1980-1 LTD PSHIP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 83,128
<SECURITIES> 0
<RECEIVABLES> 64,460
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 147,588
<PP&E> 29,703,901
<DEPRECIATION> 29,372,144
<TOTAL-ASSETS> 530,447
<CURRENT-LIABILITIES> 18,172
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 471,835
<TOTAL-LIABILITY-AND-EQUITY> 530,447
<SALES> 240,172
<TOTAL-REVENUES> 242,956
<CGS> 0
<TOTAL-COSTS> 148,225
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 94,731
<INCOME-TAX> 0
<INCOME-CONTINUING> 94,731
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,731
<EPS-BASIC> 23.45
<EPS-DILUTED> 0
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000806577
<NAME> DYCO OIL & GAS PROGRAM 1980-2 LTD PSHIP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 67,206
<SECURITIES> 0
<RECEIVABLES> 111,145
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 178,351
<PP&E> 35,358,940
<DEPRECIATION> 35,213,732
<TOTAL-ASSETS> 356,984
<CURRENT-LIABILITIES> 23,617
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 254,292
<TOTAL-LIABILITY-AND-EQUITY> 356,984
<SALES> 421,401
<TOTAL-REVENUES> 424,397
<CGS> 0
<TOTAL-COSTS> 198,808
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 225,589
<INCOME-TAX> 0
<INCOME-CONTINUING> 225,589
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<EXTRAORDINARY> 0
<CHANGES> 0
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