SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended Commission File Number
June 30, 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
------ ------
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
June 30, December 31,
1999 1998
---------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 32,730 $ 57,478
Accrued oil and gas sales 51,631 48,350
Accounts receivable - related
party (Note 2) - 57,688
-------- --------
Total current assets $ 84,361 $163,516
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 339,882 363,306
DEFERRED CHARGE 51,176 50,095
-------- --------
$475,419 $576,917
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 5,982 $ 4,902
Gas imbalance payable 12,524 12,524
-------- --------
Total current liabilities $ 18,506 $ 17,426
ACCRUED LIABILITY $ 40,624 $ 40,987
PARTNERS' CAPITAL:
General Partner, 40 general
partner units $ 4,163 $ 5,185
Limited Partners, issued and
outstanding, 4,000 Units 412,126 513,319
-------- --------
Total Partners' capital $416,289 $518,504
-------- --------
$475,419 $576,917
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
2
<PAGE>
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
1999 1998
-------- --------
REVENUES:
Oil and gas sales $76,703 $90,841
Interest 1,511 1,865
------- -------
$78,214 $92,706
COSTS AND EXPENSES:
Oil and gas production $24,454 $24,270
Depreciation, depletion, and
amortization of oil and gas
properties 9,111 17,231
General and administrative
(Note 2) 14,819 14,799
------- -------
$48,384 $56,300
------- -------
NET INCOME $29,830 $36,406
======= =======
GENERAL PARTNER (1%) - net income $ 298 $ 364
======= =======
LIMITED PARTNERS (99%) - net income $29,532 $36,042
======= =======
NET INCOME PER UNIT $ 7.38 $ 9.01
======= =======
UNITS OUTSTANDING 4,040 4,040
======= =======
The accompanying condensed notes are an integral part of
these financial statements.
3
<PAGE>
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
1999 1998
--------- --------
REVENUES:
Oil and gas sales $139,094 $213,669
Interest 2,260 4,334
-------- --------
$141,354 $218,003
COSTS AND EXPENSES:
Oil and gas production $ 43,409 $ 47,786
Depreciation, depletion, and
amortization of oil and gas
properties 23,425 35,621
General and administrative
(Note 2) 35,335 36,439
-------- --------
$102,169 $119,846
-------- --------
NET INCOME $ 39,185 $ 98,157
======== ========
GENERAL PARTNER (1%) - net income $ 392 $ 982
======== ========
LIMITED PARTNERS (99%) - net income $ 38,793 $ 97,175
======== ========
NET INCOME PER UNIT $ 9.70 $ 24.30
======== ========
UNITS OUTSTANDING 4,040 4,040
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
4
<PAGE>
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
1999 1998
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 39,185 $ 98,157
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 23,425 35,621
(Increase) decrease in accrued
oil and gas sales ( 3,281) 33,275
Decrease in accounts receivable -
related party 6,216 -
Increase in deferred charge ( 1,081) -
Increase (decrease) in accounts
payable 1,080 ( 28,655)
Decrease in accrued liability ( 363) -
-------- --------
Net cash provided by operating
activities $ 65,181 $138,398
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of oil and
gas properties $ 51,472 $ 63,166
Additions to oil and gas
properties ( 1) ( 5,852)
-------- --------
Net cash provided by investing
activities $ 51,471 $ 57,314
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($141,400) ($303,000)
-------- --------
Net cash used by financing
activities ($141,400) ($303,000)
-------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ($ 24,748) ($107,288)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 57,478 197,606
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 32,730 $ 90,318
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
5
<PAGE>
DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
June 30, December 31,
1999 1998
----------- ------------
CURRENT ASSETS:
Cash and cash equivalents $109,123 $ 62,393
Accrued oil and gas sales 94,004 88,634
-------- --------
Total current assets $203,127 $151,027
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 150,830 173,280
DEFERRED CHARGE 33,425 33,425
-------- --------
$387,382 $357,732
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 6,455 $ 5,459
Gas imbalance payable 16,840 16,840
-------- --------
Total current liabilities $ 23,295 $ 22,299
ACCRUED LIABILITY $ 79,075 $ 79,075
PARTNERS' CAPITAL:
General Partner, 59 general
partner units $ 2,850 $ 2,564
Limited Partners, issued and
outstanding, 5,000 Units 282,162 253,794
-------- --------
Total Partners' capital $285,012 $256,358
-------- --------
$387,382 $357,732
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
6
<PAGE>
DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
1999 1998
-------- ---------
REVENUES:
Oil and gas sales $142,619 $128,038
Interest 628 5,080
-------- --------
$143,247 $133,118
COSTS AND EXPENSES:
Oil and gas production $ 30,957 $ 30,829
Depreciation, depletion, and
amortization of oil and gas
properties 8,653 19,871
General and administrative
(Note 2) 22,318 22,379
-------- --------
$ 61,928 $ 73,079
-------- --------
NET INCOME $ 81,319 $ 60,039
======== ========
GENERAL PARTNER (1%) - net income $ 813 $ 601
======== ========
LIMITED PARTNERS (99%) - net income $ 80,506 $ 59,438
======== ========
NET INCOME PER UNIT $ 16.07 $ 11.87
======== ========
UNITS OUTSTANDING 5,059 5,059
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
7
<PAGE>
DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
1999 1998
-------- ---------
REVENUES:
Oil and gas sales $263,865 $454,724
Interest 1,532 8,530
-------- --------
$265,397 $463,254
COSTS AND EXPENSES:
Oil and gas production $ 60,578 $ 69,962
Depreciation, depletion, and
amortization of oil and gas
properties 22,891 58,298
General and administrative
(Note 2) 52,094 53,323
-------- --------
$135,563 $181,583
-------- --------
NET INCOME $129,834 $281,671
======== ========
GENERAL PARTNER (1%) - net income $ 1,298 $ 2,817
======== ========
LIMITED PARTNERS (99%) - net income $128,536 $278,854
======== ========
NET INCOME PER UNIT $ 25.66 $ 55.68
======== ========
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 SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $129,834 $281,671
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 22,891 58,298
(Increase) decrease in accrued
oil and gas sales ( 5,370) 32,973
Increase (decrease) in accounts
payable 996 ( 32,830)
-------- --------
Net cash provided by operating
activities $148,351 $340,112
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of oil and
gas properties $ - $ 46,116
Additions to oil and gas
properties ( 441) ( 6,096)
-------- --------
Net cash provided (used) by
investing activities ($ 441) $ 40,020
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($101,180) ($430,015)
-------- --------
Net cash used by financing
activities ($101,180) ($430,015)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 46,730 ($ 49,883)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 62,393 268,020
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $109,123 $218,137
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
9
<PAGE>
DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP
DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP
CONDENSED NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheets as of June 30, 1999, statements of operations for the
three and six months ended June 30, 1999 and 1998, and statements of cash
flows for the six months ended June 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 June 30, 1999,
results of operations for the three and six months ended June 30, 1999 and
1998, and changes in cash flows for the six months ended June 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 June 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
10
<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 June 30, 1999 and
1998, the 1980-1 Program incurred such expenses totaling $14,819 and
$14,799, respectively, of which $14,022 was paid each period to Dyco and
its affiliates. During the six months ended June 30, 1999 and 1998, the
1980-1 Program incurred such expenses totaling $35,335 and $36,439,
respectively, of which $28,044 was paid each period to Dyco and its
affiliates. During the three months ended June 30, 1999 and 1998, the
1980-2 Program incurred such expenses totaling $22,318 and $22,379,
respectively, of which $21,405 was paid each period to Dyco and its
affiliates. During the six months ended June 30, 1999 and 1998, the 1980-2
Program incurred such expenses totaling $52,094 and $53,323, respectively,
of which $42,810 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.
12
<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 six months ended June
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 were recently at or near their
lowest level in the past decade due primarily to the global surplus of
crude oil. However, oil prices have rebounded during the first half of
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.
13
<PAGE>
1980-1 PROGRAM
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE
30, 1998.
Three Months Ended June 30,
---------------------------
1999 1998
------- -------
Oil and gas sales $76,703 $90,841
Oil and gas production expenses $24,454 $24,270
Barrels produced 438 376
Mcf produced 34,087 39,597
Average price/Bbl $ 14.34 $ 11.95
Average price/Mcf $ 2.07 $ 2.18
As shown in the table above, total oil and gas sales decreased $14,138
(15.6%) for the three months ended June 30, 1999 as compared to the three
months ended June 30, 1998. Of this decrease, approximately $12,000 was
related to a decrease in volumes of gas sold and approximately $4,000 was
related to a decrease in the average price of gas sold. Volumes of oil
sold increased 62 barrels, while volumes of gas sold decreased 5,510 Mcf
during the three months ended June 30, 1999 as compared to the three
months ended June 30, 1998. The decrease in volumes of gas sold was
primarily due to (i) the sale of several wells during 1998, (ii) a
positive prior period volume adjustment made by the purchaser on one well
during the three months ended June 30, 1998, and (iii) normal declines in
production. Average oil prices increased to $14.34 per barrel for the
three months ended June 30, 1999 from $11.95 per barrel for the three
months ended June 30, 1998. Average gas prices decreased to $2.07 per Mcf
for the three months ended June 30, 1999 from $2.18 per Mcf for the three
months ended June 30, 1998.
Oil and gas production expenses (including lease operating expenses and
production taxes) remained relatively constant for the three months ended
June 30, 1999 as compared to the three months ended June 30, 1998. An
increase primarily due to an increase in repair and maintenance expenses
incurred on two wells during the three months ended June 30, 1999 was
substantially offset by a decrease in production taxes associated with the
decrease in oil and gas sales. As a percentage of oil and gas sales, these
expenses increased to 31.9% for the three months ended June 30, 1999 from
26.7% for the three months ended June 30, 1998. This percentage increase
was primarily due to the 1999 repair and maintenance expenses and the
decrease in the average price of gas sold.
14
<PAGE>
Depreciation, depletion, and amortization of oil and gas properties
decreased $8,120 (47.1%) for the three months ended June 30, 1999 as
compared to the three months ended June 30, 1998. This decrease was
primarily due to (i) an increase in the gas price used in the valuation of
reserves at June 30, 1999 as compared to March 31, 1999 and (ii) the
decrease in volumes of gas sold. As a percentage of oil and gas sales,
this expense decreased to 11.9% for the three months ended June 30, 1999
from 19.0% for the three months ended June 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 June 30, 1999 as compared to the three months ended
June 30, 1998. As a percentage of oil and gas sales, these expenses
increased to 19.3% for the three months ended June 30, 1999 from 16.3% for
the three months ended June 30, 1998. This percentage increase was
primarily due to the decrease in oil and gas sales.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
1998.
Six Months Ended June 30,
-------------------------
1999 1998
-------- --------
Oil and gas sales $139,094 $213,669
Oil and gas production expenses $ 43,409 $ 47,786
Barrels produced 739 821
Mcf produced 68,840 94,010
Average price/Bbl $ 13.32 $ 13.93
Average price/Mcf $ 1.88 $ 2.15
As shown in the table above, total oil and gas sales decreased $74,575
(34.9%) for the six months ended June 30, 1999 as compared to the six
months ended June 30, 1998. Of this decrease, approximately $54,000 was
related to a decrease in volumes of gas sold and approximately $19,000 was
related to a decrease in the average price of gas sold. Volumes of oil and
gas sold decreased 82 barrels and 25,170 Mcf, respectively, for the six
months ended June 30, 1999 as compared to the six months ended June 30,
1998. The decrease in volumes of gas sold was primarily due to (i) the
sale of several wells during 1998 and (ii) the receipt of a reduced
percentage of sales on two wells during the six months ended June 30, 1999
due to the 1980-1 Program's overproduced positions in those wells. Average
oil and gas prices decreased to $13.32 per barrel and $1.88 per Mcf,
respectively, for the six months ended June 30, 1999 from $13.93 per
barrel and $2.15 per Mcf, respectively, for the six months ended June 30,
1998.
15
<PAGE>
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $4,377 (9.2%) for the six months ended June
30, 1999 as compared to the six months ended June 30, 1998. This decrease
was primarily due to decreases in (i) production taxes associated with the
decrease in oil and gas sales and (ii) lease operating expenses associated
with the decreases in volumes of oil and gas sold. These decreases were
partially offset by credits received from the operator on two wells during
the six months ended June 30, 1998 for prior year operating expenses. As a
percentage of oil and gas sales, these expenses increased to 31.2% for the
six months ended June 30, 1999 from 22.4% for the six months ended June
30, 1998. This percentage increase was primarily due to the credits
received in 1998 for prior year operating expenses and the decreases in
the average prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $12,196 (34.2%) for the six months ended June 30, 1999 as
compared to the six months ended June 30, 1998. This decrease was
primarily due to the decrease in volumes of gas sold. As a percentage of
oil and gas sales, this expense remained relatively constant at 16.8% for
the six months ended June 30, 1999 and 16.7% for the six months ended June
30, 1998.
General and administrative expenses decreased $1,104 (3.0%) for the six
months ended June 30, 1999 as compared to the six months ended June 30,
1998. As a percentage of oil and gas sales, these expenses increased to
25.4% for the six months ended June 30, 1999 from 17.1% for the six months
ended June 30, 1998. This percentage increase was primarily due to the
decrease in oil and gas sales.
1980-2 PROGRAM
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE
30, 1998.
Three Months Ended June 30,
---------------------------
1999 1998
-------- --------
Oil and gas sales $142,619 $128,038
Oil and gas production expenses $ 30,957 $ 30,829
Barrels produced 385 390
Mcf produced 72,695 56,115
Average price/Bbl $ 14.30 $ 13.07
Average price/Mcf $ 1.89 $ 2.19
16
<PAGE>
As shown in the table above, total oil and gas sales increased $14,581
(11.4%) for the three months ended June 30, 1999 as compared to the three
months ended June 30, 1998. Of this increase, approximately $36,000 was
related to an increase in volumes of gas sold. This increase was partially
offset by a decrease of approximately $22,000 related to a decrease in the
average price of gas sold. Volumes of oil sold decreased 5 barrels, while
volumes of gas sold increased 16,580 Mcf, respectively, for the three
months ended June 30, 1999 as compared to the three months ended June 30,
1998. The increase in volumes of gas sold was primarily due to increased
production on one well due to an increase in pipeline capacity. Average
oil prices increased to $14.30 per barrel for the three months ended June
30, 1999 from $13.07 per barrel for the three months ended June 30, 1998.
Average gas prices decreased to $1.89 per Mcf for the three months ended
June 30, 1999 from $2.19 per Mcf for the three months ended June 30, 1998.
Oil and gas production expenses (including lease operating expenses and
production taxes) remained relatively constant for the three months ended
June 30, 1999 as compared to the three months ended June 30, 1998. As a
percentage of oil and gas sales, these expenses decreased to 21.7% for the
three months ended June 30, 1999 from 24.1% for the three months ended
June 30, 1998. This percentage decrease was primarily due to the increase
in volumes of gas sold related to the increase in pipeline capacity, which
percentage decrease was partially offset by the decrease in the average
price of gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $11,218 (56.5%) for the three months ended June 30, 1999 as
compared to the three months ended June 30, 1998. This decrease was
primarily due to (i) an increase in the gas price used in the valuation of
reserves at June 30, 1999 as compared to March 31, 1999 and (ii) upward
revisions in the estimates of remaining oil and gas reserves at December
31, 1998. These decreases were partially offset by an increase primarily
due to the increase in volumes of gas sold. As a percentage of oil and gas
sales, this expense decreased to 6.1% for the three months ended June 30,
1999 from 15.5% for the three months ended June 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 June 30, 1999 as compared to the three months ended
June 30, 1998. As a percentage of oil and gas sales, these expenses
decreased to 15.6% for the three months ended June 30, 1999 from 17.5% for
the three months ended June 30, 1998. This percentage
17
<PAGE>
decrease was primarily due to the increase in oil and gas sales.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
1998.
Six Months Ended June 30,
-------------------------
1999 1998
-------- --------
Oil and gas sales $263,865 $454,724
Oil and gas production expenses $ 60,578 $ 69,962
Barrels produced 628 717
Mcf produced 143,936 222,191
Average price/Bbl $ 13.76 $ 14.27
Average price/Mcf $ 1.77 $ 2.00
As shown in the table above, total oil and gas sales decreased $190,859
(42.0%) for the six months ended June 30, 1999 as compared to the six
months ended June 30, 1998. Of this decrease, approximately $157,000 was
related to a decrease in volumes of gas sold and approximately $33,000 was
related to a decrease in the average price of gas sold. Volumes of oil and
gas sold decreased 89 barrels and 78,255 Mcf, respectively, for the six
months ended June 30, 1999 as compared to the six months ended June 30,
1998. The decrease in volumes of gas sold was primarily due to positive
prior period volume adjustments made by the purchaser on two wells during
the six months ended June 30, 1998. Average oil and gas prices decreased
to $13.76 per barrel and $1.77 per Mcf, respectively, for the six months
ended June 30, 1999 from $14.27 per barrel and $2.00 per Mcf,
respectively, for the six months ended June 30, 1998.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $9,384 (13.4%) for the six months ended June
30, 1999 as compared to the six months ended June 30, 1998. This decrease
was primarily due to a decrease in production taxes associated with the
decrease in oil and gas sales. This decrease was partially offset by
credits received from the operator on two wells during the six months
ended June 30, 1998 for prior year operating expenses. As a percentage of
oil and gas sales, these expenses increased to 23.0% for the six months
ended June 30, 1999 from 15.4% for the six months ended June 30, 1998.
This percentage increase was primarily due to the decrease in the average
price of gas sold and the credits received in 1998 for prior year
operating expenses.
18
<PAGE>
Depreciation, depletion, and amortization of oil and gas properties
decreased $35,407 (60.7%) for the six months ended June 30, 1999 as
compared to the six months ended June 30, 1998. This decrease was
primarily due to (i) a decrease in volumes of oil and gas sold and (ii)
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 8.7% for the six months ended June 30, 1999 from 12.8% for
the six months ended June 30, 1998. This percentage decrease was primarily
due to the dollar decrease in depreciation, depletion, and amortization.
General and administrative expenses decreased $1,229 (2.3%) for the six
months ended June 30, 1999 as compared to the six months ended June 30,
1998. As a percentage of oil and gas sales, these expenses increased to
19.7% for the six months ended June 30, 1999 from 11.7% for the six months
ended June 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 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.
19
<PAGE>
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 is
addressing each of the three Y2K areas discussed above through a readiness
process that seeks to:
1. increase the awareness of the issue among key employees;
2. identify areas of potential risk;
3. assess the relative impact of these risks and Samson's ability to
manage them; and
4. remediate these 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 July 15, 1999, Samson is in the final
stages of implementation of a Y2K plan, as summarized below:
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.
20
<PAGE>
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. Substantially all of the Y2K upgrades have
been completed, with the remainder scheduled to be completed during the
3rd quarter of 1999. 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 generally Y2K compliant.
Additional patches or software upgrades will be applied no later than
September 30, 1999 to complete this process. The costs of all such risk
assessments and remediation are 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.
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
21
<PAGE>
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 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,
22
<PAGE>
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 perceives significant risk of Y2K
non-compliance that may have a material impact on it, and where the
relationship between Samson and a vendor, customer, or business partner
permits, joint testing may be undertaken during the remainder of 1999 to
further identify these risks.
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 June 30, 1999 and for the six
months ended June 30, 1999, filed herewith.
27.2 Financial Data Schedule containing summary financial
information extracted from the 1980-2 Program's
financial statements as of June 30, 1999 and for the six
months ended June 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: August 3, 1999 By: /s/Dennis R. Neill
-------------------------------
(Signature)
Dennis R. Neill
President
Date: August 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 June 30, 1999 and for the
six months ended June 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 June 30, 1999 and for the
six months ended June 30, 1999, filed herewith.
All other exhibits are omitted as inapplicable.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000806576
<NAME> DYCO OIL & GAS PROGRAM 1980-1 LIMITED PTRSHP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 32,730
<SECURITIES> 0
<RECEIVABLES> 51,631
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 84,361
<PP&E> 29,703,901
<DEPRECIATION> 29,364,019
<TOTAL-ASSETS> 475,419
<CURRENT-LIABILITIES> 18,506
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 416,289
<TOTAL-LIABILITY-AND-EQUITY> 475,419
<SALES> 139,094
<TOTAL-REVENUES> 141,354
<CGS> 0
<TOTAL-COSTS> 102,169
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39,185
<INCOME-TAX> 0
<INCOME-CONTINUING> 39,185
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,185
<EPS-BASIC> 9.70
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000806577
<NAME> DYCO OIL & GAS PROGRAM 1980-2 LIMITED PTRSHP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 109,123
<SECURITIES> 0
<RECEIVABLES> 94,004
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 203,127
<PP&E> 35,358,939
<DEPRECIATION> 35,208,109
<TOTAL-ASSETS> 387,382
<CURRENT-LIABILITIES> 23,295
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 285,012
<TOTAL-LIABILITY-AND-EQUITY> 387,382
<SALES> 263,865
<TOTAL-REVENUES> 265,397
<CGS> 0
<TOTAL-COSTS> 135,563
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 129,834
<INCOME-TAX> 0
<INCOME-CONTINUING> 129,834
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129,834
<EPS-BASIC> 25.66
<EPS-DILUTED> 0
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