FORM 10-K405
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, 1998
Commission File Number:
II-A: 0-16388 II-C: 0-16981 II-E: 0-17320 II-G: 0-17802
II-B: 0-16405 II-D: 0-16980 II-F: 0-17799 II-H: 0-18305
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
----------------------------------------------
(Exact name of Registrant as specified in its Articles)
II-A 73-1295505
II-B 73-1303341
II-C 73-1308986
II-D 73-1329761
II-E 73-1324751
II-F 73-1330632
II-G 73-1336572
Oklahoma II-H 73-1342476
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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:
Depositary 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
----- -----
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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-K405 or any amendment to
this Form 10-K405.
X Disclosure is not contained herein
-----
Disclosure is contained herein
-----
The Depositary Units 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-K405
TABLE OF CONTENTS
PART I.......................................................................4
ITEM 1. BUSINESS...................................................4
ITEM 2. PROPERTIES................................................10
ITEM 3. LEGAL PROCEEDINGS.........................................26
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS.......26
PART II.....................................................................26
ITEM 5. MARKET FOR UNITS AND RELATED LIMITED PARTNER MATTERS......26
ITEM 6. SELECTED FINANCIAL DATA...................................30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.......................39
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK........................................ 71
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...............71
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.......................71
PART III....................................................................71
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL
PARTNER...................................................71
ITEM 11. EXECUTIVE COMPENSATION....................................73
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................82
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............83
PART IV.....................................................................84
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K...............................................84
SIGNATURES............................................................90
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PART I.
ITEM 1. BUSINESS
General
The Geodyne Energy Income Limited Partnership II-A (the "II-A
Partnership"), Geodyne Energy Income Limited Partnership II-B (the "II-B
Partnership"), Geodyne Energy Income Limited Partnership II-C (the "II-C
Partnership"), Geodyne Energy Income Limited Partnership II-D (the "II-D
Partnership"), Geodyne Energy Income Limited Partnership II-E (the "II-E
Partnership"), Geodyne Energy Income Limited Partnership II-F (the "II-F
Partnership"), Geodyne Energy Income Limited Partnership II-G (the "II-G
Partnership"), and Geodyne Energy Income Limited Partnership II-H (the "II-H
Partnership") (collectively, the "Partnerships") are limited partnerships formed
under the Oklahoma Revised Uniform Limited Partnership Act. Each Partnership is
composed of Geodyne Resources, Inc. ("Geodyne"), a Delaware corporation, as the
general partner, and Geodyne Depositary Company, a Delaware corporation, as the
sole initial limited partner and public investors as substitute limited partners
(the "Limited Partners"). The Partnerships commenced operations on the dates set
forth below.
Date of
Partnership Activation
----------- -----------------
II-A July 22, 1987
II-B October 14, 1987
II-C January 14, 1988
II-D May 10, 1988
II-E September 27, 1988
II-F January 5, 1989
II-G April 10, 1989
II-H May 17, 1989
Immediately following activation, each Partnership invested as a general
partner in a separate Oklahoma general partnership which actually conducts the
Partnerships' operations. Geodyne serves as managing partner of such general
partnerships. Unless the context indicates otherwise, all references to any
single Partnership or all of the Partnerships in this Annual Report on Form
10-K405 (the "Annual Report") are references to the Partnership and its related
general partnership, collectively. In addition, unless the context indicates
otherwise, all references to the "General Partner" in this Annual Report are
references to Geodyne as the general partner of the limited partnerships and as
the managing partner of the related general partnerships.
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The General Partner currently serves as general partner of 29 limited
partnerships including the Partnerships. The General Partner is a wholly-owned
subsidiary of Samson Investment Company. Samson Investment Company and its
various corporate subsidiaries, including the General Partner (collectively
"Samson"), are primarily engaged in the production and development of and
exploration for oil and gas reserves and the acquisition and operation of
producing properties. At January 31, 1999, Samson owned interests in
approximately 10,500 oil and gas wells located in 19 states of the United States
and the countries of Canada, Venezuela, and Russia. At January 31, 1999, Samson
operated approximately 2,900 oil and gas wells located in 15 states of the
United States, as well as Canada, Venezuela, and Russia.
The Partnerships are currently engaged in the business of owning interests
in producing oil and gas properties located in the continental United States.
The Partnerships may also engage to a limited extent in development drilling on
producing oil and gas properties as required for the prudent management of the
Partnerships.
As limited partnerships, the Partnerships have no officers, directors, or
employees. They rely instead on the personnel of the General Partner and Samson.
As of February 15, 1999, Samson employed approximately 850 persons. No employees
are covered by collective bargaining agreements, and management believes that
Samson provides a sound employee relations environment. For information
regarding the executive officers of the General Partner, see "Item 10. Directors
and Executive Officers of the General Partner."
The General Partner's and the Partnerships' 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 (888) 436-3963.
Pursuant to the terms of the partnership agreements for the Partnerships
(the "Partnership Agreements") the Partnerships will terminate on December 31,
2001. However, the Partnership Agreements provide that the General Partner may
extend the term of each Partnership for up to five periods of two years each. As
of the date of this Annual Report, the General Partner has not determined
whether to extend the term of any Partnership.
Funding
Although the Partnership Agreements permit the Partnerships to incur
borrowings, the Partnerships' operations and expenses are currently funded out
of each Partnership's revenues from oil and gas sales. The General Partner may,
but is not required to, advance funds to a Partnership for the same purposes for
which Partnership borrowings are authorized.
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Principal Products Produced and Services Rendered
The Partnerships' sole business is the production of, and related
incidental development of, oil and gas. The Partnerships do not refine or
otherwise process crude oil and condensate. The Partnerships do not hold any
patents, trademarks, licenses, or concessions and are not a party to any
government contracts. The Partnerships have no backlog of orders and do not
participate in research and development activities. The Partnerships are not
presently encountering shortages of oilfield tubular goods, compressors,
production material, or other equipment.
Competition and Marketing
The domestic 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 Partnerships to produce and market
oil and gas profitably depends on a number of factors that are beyond the
control of the Partnerships. These factors include worldwide political
instability (especially in oil-producing regions), United Nations export
embargoes, the supply and price of foreign imports of oil and gas, the level of
consumer product demand (which can be 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 on future
oil and gas industry trends cannot be accurately predicted or anticipated.
The most important variable affecting the Partnerships' revenues is the
prices received for the sale of oil and gas. Predicting future prices is not
possible. Concerning past trends, average yearly wellhead gas prices in the
United States have been volatile for a number of years. For the past ten years,
such average prices have generally been in the $1.40 to $2.40 per Mcf range. Gas
prices are currently in the lower half of the 10-year average range described
above.
Substantially all of the Partnerships' gas reserves are being sold on 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. In addition, such spot market sales are generally short-term in nature
and are dependent upon the obtaining of transportation services provided by
pipelines. Spot prices for the Partnerships' gas decreased from approximately
$2.32 per Mcf at December 31, 1997 to approximately $1.93 per Mcf at December
31, 1998. Such prices were on an MMBTU basis and differ from the prices actually
received by the Partnerships due to transportation and marketing costs, BTU
adjustments, and regional price and quality
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differences. Continued very low oil prices as discussed below may cause downward
pressure on gas prices due to some users of gas converting to oil as a cheaper
fuel alternative.
For the past ten years, average oil prices have generally been in the
$16.00 to $24.00 per barrel range. Due to global consumption and supply trends
over the last year as well as at least a short-term slowdown in Asian energy
demand, oil prices over the past year have reached historically low levels,
dropping to as low as approximately $9.25 per barrel. It is not known whether
this trend will continue. Prices for the Partnerships' oil decreased from
approximately $16.25 per barrel at December 31, 1997 to approximately $9.50 per
barrel at December 31, 1998.
Future prices for both oil and gas will likely be different from (and may
be lower than) the prices in effect on December 31, 1998. Management is unable
to predict whether future oil and gas prices will (i) stabilize, (ii) increase,
or (iii) decrease.
Significant Customers
The following customers accounted for ten percent or more of the
Partnerships' oil and gas sales during the year ended December 31, 1998:
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Partnership Purchaser Percentage
- ----------- ---------------------------------- ----------
II-A El Paso Energy Marketing Company
("El Paso") 32.8%
Amoco Production Company ("Amoco") 13.0%
Hallwood Petroleum, Inc. ("Hallwood") 10.1%
II-B El Paso 37.6%
Hallwood 15.6%
II-C El Paso 36.2%
II-D El Paso 28.4%
Vintage Petroleum Inc. 10.9%
II-E El Paso 47.8%
II-F El Paso 30.8%
Chevron U.S.A. Inc. ("Chevron") 13.2%
Texaco Exploration and Production,
Inc. ("Texaco") 12.7%
II-G El Paso 30.6%
Chevron 13.0%
Texaco 12.8%
II-H El Paso 30.2%
Texaco 12.8%
Chevron 12.6%
In the event of interruption of purchases by one or more of the
Partnerships' significant customers or the cessation or material change in
availability of open access transportation by the Partnerships' pipeline
transporters, the Partnerships may encounter difficulty in marketing their gas
and in maintaining historic sales levels. Management does not expect any of its
open access transporters to seek authorization to terminate their transportation
services. Even if the services were terminated, management believes that
alternatives would be available whereby the Partnerships would be able to
continue to market their gas.
The Partnerships' principal customers for crude oil production are
refiners and other companies which have pipeline facilities near the producing
properties of the Partnerships. In the event pipeline facilities are not
conveniently available to production areas, crude oil is usually trucked by
purchasers to storage facilities.
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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 Gas -- Sales of crude
oil and condensate are made by the Partnerships at market prices and are not
subject to price controls. The sale of gas may be subject to both federal and
state laws and regulations. The provisions of these laws and regulations are
complex and affect all who produce, resell, transport, or purchase gas,
including the Partnerships. Although virtually all of the Partnerships' gas
production is not subject to price regulation, other 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 Partnerships' 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 Partnerships' 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, may increase the cost of the Partnerships' operations or may
affect the Partnerships' ability to timely complete 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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Insurance Coverage
The Partnerships 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 Partnerships maintain insurance coverage as is
customary for entities of a similar size engaged in operations similar to that
of the Partnerships, 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
Partnerships' financial condition and results of operations.
ITEM 2. PROPERTIES
Well Statistics
The following table sets forth the number of productive wells of the
Partnerships as of December 31, 1998.
Well Statistics(1)
As of December 31, 1998
Number of Gross Wells(2) Number of Net Wells(3)
---------------------------- ---------------------------------
P/ship Total Oil Gas N/A(4) Total Oil Gas N/A(4)
- ------ ----- --- --- ------- ----- ----- ----- ------
II-A 1,038 751 283 4 44.31 29.50 14.68 .13
II-B 197 113 83 1 24.15 15.24 8.90 .01
II-C 268 103 162 3 8.38 2.61 5.71 .06
II-D 204 79 122 3 23.76 4.41 18.66 .69
II-E 978 721 227 30 12.06 4.92 7.12 .02
II-F 998 754 214 30 12.33 6.64 5.63 .06
II-G 998 754 214 30 26.60 14.26 12.20 .14
II-H 998 754 214 30 6.48 3.44 3.00 .04
- ---------------
(1) The designation of a well as an oil well or gas well is made by the
General Partner 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 in this Annual Report, "gross well" refers to a well in which a
working interest is owned; accordingly, the number of gross wells is the
total number of wells in which a working interest is owned.
(3) As used in this Annual Report, "net well" refers to the sum of the
fractional working interests owned in gross wells. For example, a 15%
working interest in a well represents one gross well, but 0.15 net well.
(4) Wells which have not been designated as oil or gas.
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Drilling Activities
During the year ended December 31, 1998, the Partnerships indirectly
participated in the drilling activities described below. The Partnerships do not
own working interests in any of these wells; therefore, they did not incur any
costs associated with the drilling activity.
Revenue
P/ship Well Name County St. Interest Type Status
- ------ --------- ------ ---- -------- ---- ------
II-A Graham F No. 3-30 Custer OK .0039 Gas Prod.
Eyster No. 1-20 Custer OK .0231 Gas Prod.
Beulah Switzer
No. 4-18 Blaine OK .0025 Gas Prod.
Melford No. 1-7 Grady OK .0011 Gas Unknown
Hunt 36 No. 6 Sutton TX .0014 Gas Prod.
Paul A. No. 2-34 Garvin OK .0109 Oil Unknown
II-B None
II-C Laird B-9 Rusk TX .0023 Gas Prod.
Laird C No. 8 Rusk TX .0002 Gas Prod.
II-D Laird B-9 Rusk TX .0246 Gas Prod.
Laird C No. 8 Rusk TX .0023 Gas Prod.
II-E Frances No. 1 Wheeler TX .0009 Gas Prod.
Bryant No. 2-44 Wheeler TX .0013 Gas Prod.
Coltharp No. 2-51 Wheeler TX .0003 Gas Prod.
McQuiddy No. 2-4 Hemphill TX .0197 Gas Prod.
Schoolfield No. 1 Duval TX .0010 Gas Unknown
Henshaw Deep
Unit No. 9 Eddy TX .0002 Gas Prod.
Hunt 36 No. 6 Sutton TX .0002 Gas Prod.
Red Draw No. 5 Howard TX .0017 Oil Prod.
II-F Frances No. 1 Wheeler TX .0023 Gas Prod.
Bryant No. 2-44 Wheeler TX .0030 Gas Prod.
Coltharp No. 2-51 Wheeler TX .0006 Gas Prod.
Schoolfield No. 1 Duval TX .0025 Gas Unknown
Henshaw Deep
Unit No. 9 Eddy TX .0005 Gas Prod.
Hunt 36 No. 6 Sutton TX .0004 Gas Prod.
Red Draw No. 5 Howard TX .0041 Oil Prod.
II-G Frances No. 1 Wheeler TX .0048 Gas Prod.
Bryant No. 2-44 Wheeler TX .0064 Gas Prod.
Coltharp No. 2-51 Wheeler TX .0014 Gas Prod.
Schoolfield No. 1 Duval TX .0053 Gas Unknown
Henshaw Deep
Unit No. 9 Eddy TX .0010 Gas Prod.
Hunt 36 No. 6 Sutton TX .0009 Gas Prod.
Red Draw No. 5 Howard TX .0085 Oil Prod.
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II-H Frances No. 1 Wheeler TX .0011 Gas Prod.
Bryant No. 2-44 Wheeler TX .0015 Gas Prod.
Coltharp No. 2-51 Wheeler TX .0003 Gas Prod.
Schoolfield No. 1 Duval TX .0012 Gas Unknown
Henshaw Deep
Unit No. 9 Eddy TX .0002 Gas Prod.
Hunt 36 No. 6 Sutton TX .0002 Gas Prod.
Red Draw No. 5 Howard TX .0020 Oil Prod.
Oil and Gas Production, Revenue, and Price History
The following tables set forth certain historical information concerning
the oil (including condensates) and gas production, net of all royalties,
overriding royalties, and other third party interests, of the Partnerships,
revenues attributable to such production, and certain price and cost
information. As used in the tables, direct operating expenses include lease
operating expenses and production taxes. In addition, gas production is
converted to oil 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.
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Net Production Data
II-A Partnership
----------------
Year Ended December 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
Production:
Oil (Bbls) 86,428 105,866 103,230
Gas (Mcf) 1,433,552 1,505,818 1,737,090
Oil and gas sales:
Oil $1,070,099 $1,995,185 $2,105,377
Gas 2,841,724 3,436,560 3,727,497
--------- --------- ---------
Total $3,911,823 $5,431,745 $5,832,874
========= ========= =========
Total direct operating
expenses $1,772,997 $1,888,421 $1,941,040
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 45.3% 34.8% 33.3%
Average sales price:
Per barrel of oil $12.38 $18.85 $20.40
Per Mcf of gas 1.98 2.28 2.15
Direct operating expenses per
equivalent Bbl of oil $ 5.45 $ 5.29 $ 4.94
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Net Production Data
II-B Partnership
----------------
Year Ended December 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
Production:
Oil (Bbls) 53,095 67,591 74,434
Gas (Mcf) 904,066 1,047,458 1,219,775
Oil and gas sales:
Oil $ 713,020 $1,292,911 $1,557,104
Gas 1,779,023 2,523,358 2,622,423
--------- --------- ---------
Total $2,492,043 $3,816,269 $4,179,527
========= ========= =========
Total direct operating
expenses $1,092,499 $1,314,450 $1,164,713
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 43.8% 34.4% 27.9%
Average sales price:
Per barrel of oil $13.43 $19.13 $20.92
Per Mcf of gas 1.97 2.41 2.15
Direct operating expenses per
equivalent Bbl of oil $ 5.36 $ 5.43 $ 4.19
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Net Production Data
II-C Partnership
----------------
Year Ended December 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
Production:
Oil (Bbls) 16,806 22,753 25,093
Gas (Mcf) 478,643 582,748 685,344
Oil and gas sales:
Oil $ 224,072 $ 433,286 $ 530,533
Gas 912,402 1,363,371 1,395,407
--------- --------- ---------
Total $1,136,474 $1,796,657 $1,925,940
========= ========= =========
Total direct operating
expenses $ 427,109 $ 527,821 $ 602,924
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 37.6% 29.4% 31.3%
Average sales price:
Per barrel of oil $13.33 $19.04 $21.14
Per Mcf of gas 1.91 2.34 2.04
Direct operating expenses per
equivalent Bbl of oil $ 4.42 $ 4.40 $ 4.33
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Net Production Data
II-D Partnership
----------------
Year Ended December 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
Production:
Oil (Bbls) 37,733 50,413 66,517
Gas (Mcf) 1,034,372 1,501,911 1,637,645
Oil and gas sales:
Oil $ 477,184 $ 941,767 $1,332,558
Gas 1,933,867 3,372,387 2,996,544
--------- --------- ---------
Total $2,411,051 $4,314,154 $4,329,102
========= ========= =========
Total direct operating
expenses $ 945,971 $1,657,087 $1,800,899
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 39.2% 38.4% 41.6%
Average sales price:
Per barrel of oil $12.65 $18.68 $20.03
Per Mcf of gas 1.87 2.25 1.83
Direct operating expenses per
equivalent Bbl of oil $ 4.50 $ 5.51 $ 5.31
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Net Production Data
II-E Partnership
----------------
Year Ended December 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
Production:
Oil (Bbls) 37,508 42,668 53,804
Gas (Mcf) 647,841 783,379 861,464
Oil and gas sales:
Oil $ 499,076 $ 814,761 $1,096,064
Gas 1,205,387 1,801,242 1,597,253
--------- --------- ---------
Total $1,704,463 $2,616,003 $2,693,317
========= ========= =========
Total direct operating
expenses $ 672,490 $ 909,321 $ 913,077
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 39.5% 34.8% 33.9%
Average sales price:
Per barrel of oil $13.31 $19.10 $20.37
Per Mcf of gas 1.86 2.30 1.85
Direct operating expenses per
equivalent Bbl of oil $ 4.62 $ 5.25 $ 4.63
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Net Production Data
II-F Partnership
----------------
Year Ended December 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
Production:
Oil (Bbls) 36,915 45,014 47,395
Gas (Mcf) 516,917 586,444 761,702
Oil and gas sales:
Oil $ 491,647 $ 839,925 $ 939,731
Gas 953,155 1,351,464 1,493,582
--------- --------- ---------
Total $1,444,802 $2,191,389 $2,433,313
========= ========= =========
Total direct operating
expenses $ 398,414 $ 546,465 $ 643,984
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 27.6% 24.9% 26.5%
Average sales price:
Per barrel of oil $13.32 $18.66 $19.83
Per Mcf of gas 1.84 2.30 1.96
Direct operating expenses per
equivalent Bbl of oil $ 3.24 $ 3.83 $ 3.69
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Net Production Data
II-G Partnership
----------------
Year Ended December 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
Production:
Oil (Bbls) 77,421 94,553 99,593
Gas (Mcf) 1,105,661 1,256,464 1,626,530
Oil and gas sales:
Oil $1,030,974 $1,764,599 $1,975,112
Gas 2,041,481 2,905,646 3,183,687
--------- --------- ---------
Total $3,072,455 $4,670,245 $5,158,799
========= ========= =========
Total direct operating
expenses $ 852,699 $1,185,722 $1,386,254
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 27.8% 25.4% 26.9%
Average sales price:
Per barrel of oil $13.32 $18.66 $19.83
Per Mcf of gas 1.85 2.31 1.96
Direct operating expenses per
equivalent Bbl of oil $ 3.26 $ 3.90 $ 3.74
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Net Production Data
II-H Partnership
----------------
Year Ended December 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
Production:
Oil (Bbls) 17,978 21,998 23,172
Gas (Mcf) 266,337 304,593 397,146
Oil and gas sales:
Oil $ 239,450 $ 410,718 $ 459,899
Gas 494,163 709,016 770,323
--------- --------- ---------
Total $ 733,613 $1,119,734 $1,230,222
========= ========= =========
Total direct operating
expenses $ 205,463 $ 290,042 $ 339,390
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 28.0% 25.9% 27.6%
Average sales price:
Per barrel of oil $13.32 $18.67 $19.85
Per Mcf of gas 1.86 2.33 1.94
Direct operating expenses per
equivalent Bbl of oil $ 3.29 $ 3.99 $ 3.80
Proved Reserves and Net Present Value
The following table sets forth each Partnership's estimated proved oil and
gas reserves and net present value therefrom as of December 31, 1998. The
schedule of quantities of proved oil and gas reserves was prepared by the
General Partner in accordance with the rules prescribed by the Securities and
Exchange Commission (the "SEC"). Certain reserve information was reviewed by
Ryder Scott Company Petroleum Engineers ("Ryder Scott"), an independent
petroleum engineering firm. As used throughout this Annual Report, "proved
reserves" refers to those estimated quantities of crude oil, gas, and 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
-20-
<PAGE>
taxes, ad valorem taxes, and operating expenses) and estimated future
development costs, discounted at 10% per annum. Net present value attributable
to the Partnerships' proved reserves was calculated on the basis of current
costs and prices at December 31, 1998. 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 in calculating
the net present value attributable to the Partnerships' proved reserves do not
necessarily reflect market prices for oil and gas production subsequent to
December 31, 1998. There can be no assurance that the prices used in calculating
the net present value of the Partnerships' proved reserves at December 31, 1998
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 these reserve
estimates 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 Values
From Proved Reserves
As of December 31, 1998(1)
II-A Partnership:
- ----------------
Estimated proved reserves:
Gas (Mcf) 7,732,781
Oil and liquids (Bbls) 360,463
Net present value (discounted at 10% per annum) $8,516,737
II-B Partnership:
- ----------------
Estimated proved reserves:
Gas (Mcf) 5,310,753
Oil and liquids (Bbls) 239,827
Net present value (discounted at 10% per annum) $5,733,551
-21-
<PAGE>
II-C Partnership:
- ----------------
Estimated proved reserves:
Gas (Mcf) 3,603,745
Oil and liquids (Bbls) 118,667
Net present value (discounted at 10% per annum) $3,431,372
II-D Partnership:
- ----------------
Estimated proved reserves:
Gas (Mcf) 8,224,693
Oil and liquids (Bbls) 256,982
Net present value (discounted at 10% per annum) $7,488,437
II-E Partnership:
- ----------------
Estimated proved reserves:
Gas (Mcf) 4,459,632
Oil and liquids (Bbls) 163,199
Net present value (discounted at 10% per annum) $4,574,486
II-F Partnership:
- ----------------
Estimated proved reserves:
Gas (Mcf) 3,625,312
Oil and liquids (Bbls) 240,941
Net present value (discounted at 10% per annum) $4,442,717
II-G Partnership:
- ----------------
Estimated proved reserves:
Gas (Mcf) 7,768,284
Oil and liquids (Bbls) 507,493
Net present value (discounted at 10% per annum) $9,444,366
II-H Partnership:
- ----------------
Estimated proved reserves:
Gas (Mcf) 1,882,355
Oil and liquids (Bbls) 119,166
Net present value (discounted at 10% per annum) $2,257,259
- ----------
(1) Includes certain gas balancing adjustments which cause the gas volumes and
net present values to differ from the reserve reports prepared by the
General Partner and reviewed by Ryder Scott.
-22-
<PAGE>
No estimates of the proved reserves of the Partnerships comparable to
those included herein have been included in reports to any federal agency other
than the SEC. Additional information relating to the Partnerships' proved
reserves is contained in Note 4 to the Partnerships' financial statements,
included in Item 8 of this Annual Report.
Significant Properties
The following tables set forth certain well and reserve information as of
December 31, 1998 for the basins in which the Partnerships own a significant
amount of properties. The tables contain the following information for each
significant basin: (i) the number of gross wells and net wells, (ii) the number
of wells in which only a non-working interest is owned, (iii) the Partnership's
total number of wells, (iv) the number and percentage of wells operated by the
Partnership's affiliates, (v) estimated proved oil reserves, (vi) estimated
proved gas reserves, and (vii) the present value (discounted at 10% per annum)
of estimated future net cash flow.
The Anadarko Basin is located in western Oklahoma and the Texas panhandle,
while the Southern Oklahoma Folded Belt Basin is located in southern Oklahoma.
The Gulf Coast Basin is located in southern Louisiana and southeast Texas, while
the Permian Basin straddles west Texas and southeast New Mexico. The Sacramento
Basin is located in central California.
-23-
<PAGE>
<TABLE>
<CAPTION>
Significant Properties as of December 31, 1998
----------------------------------------------
Wells
Operated by
Affiliates Oil Gas
Gross Net Other Total ------------ Reserves Reserves Present
Basin Wells Wells Wells (1) Wells Number % (Bbl) (Mcf) Value
- ------------------ ------ ------- --------- ------ ------ ---- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
II-A Partnership:
Anadarko 119 8.20 36 155 35 23% 44,942 4,067,358 $3,974,761
Gulf Coast 259 11.73 - 259 - -% 123,242 1,444,031 1,782,553
Permian 487 4.36 10 497 10 2% 48,037 1,010,820 1,102,066
Southern Okla.
Folded Belt 14 2.15 13 27 12 44% 53,879 638,763 824,420
II-B Partnership:
Anadarko 38 4.68 3 41 14 34% 18,706 2,625,865 $2,454,533
Southern Okla.
Folded Belt 13 3.50 - 13 12 92% 87,573 929,045 $1,214,366
Permian 13 1.68 - 13 10 77% 12,628 943,051 834,232
Gulf Coast 23 .71 1 24 - -% 7,696 583,946 638,717
II-C Partnership:
Anadarko 80 3.85 10 90 21 23% 16,517 1,968,276 $1,612,059
Southern Okla.
Folded Belt 16 1.60 - 16 15 94% 38,053 624,450 704,804
Permian 17 .83 1 18 10 56% 7,216 448,518 395,294
II-D Partnership:
Anadarko 51 6.72 7 58 9 16% 27,603 2,913,364 $2,582,762
Sacramento 34 5.63 - 34 - -% - 2,011,244 1,780,750
Gulf Coast 13 2.01 1 14 8 57% 61,458 875,687 834,961
Permian 11 2.17 4 15 4 27% 22,574 1,036,736 798,267
- --------------------------
(1) Wells in which only a non-working (e.g. royalty) interest is owned.
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
Significant Properties as of December 31, 1998
----------------------------------------------
Wells
Operated by
Affiliates Oil Gas
Gross Net Other Total ------------ Reserves Reserves Present
Basin Wells Wells Wells (1) Wells Number % (Bbl) (Mcf) Value
- ------------------ ------ ------- --------- ------ ------ ---- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
II-E Partnership:
Anadarko 31 2.03 17 48 15 31% 6,397 1,950,476 $1,809,667
Permian 836 4.59 1,542 2,378 7 -% 87,465 1,398,070 1,520,102
Southern Okla.
Folded Belt 10 .50 - 10 1 10% 11,369 718,954 702,641
II-F Partnership:
Permian 829 7.54 1,539 2,368 3 -% 204,918 1,292,442 $2,178,264
Anadarko 58 2.06 15 73 16 22% 8,703 1,639,531 1,669,129
Southern Okla.
Folded Belt 25 1.87 2 27 22 81% 16,423 554,076 452,268
II-G Partnership:
Permian 829 15.77 1,539 2,368 3 -% 428,072 2,701,187 $4,552,184
Anadarko 58 4.39 15 73 16 22% 18,792 3,477,012 3,537,860
Southern Okla.
Folded Belt 25 4.25 2 27 22 81% 37,216 1,255,040 $1,024,714
II-H Partnership:
Permian 829 3.65 1,539 2,368 3 -% 99,017 625,812 $1,055,043
Anadarko 58 1.04 15 73 16 22% 4,597 826,399 841,054
Southern Okla.
Folded Belt 25 1.12 2 27 22 81% 9,830 331,950 $ 271,323
- ----------------------
(1) Wells in which only a non-working (e.g. royalty) interest is owned.
</TABLE>
-25-
<PAGE>
Title to Oil and Gas Properties
Management believes that the Partnerships have satisfactory title to their
oil and gas properties. Record title to all of the Partnerships' properties is
held by either the Partnerships or Geodyne Nominee Corporation, an affiliate of
the General Partner.
Title to the Partnerships' 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 Partnerships' interest therein or materially interfere with their use in the
operation of the Partnerships' business.
ITEM 3. LEGAL PROCEEDINGS
To the knowledge of the General Partner, neither the General Partner nor
the Partnerships or their properties are subject to any litigation, the results
of which would have a material effect on the Partnerships' or the General
Partner'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 any
Partnership during 1998.
PART II.
ITEM 5. MARKET FOR UNITS AND RELATED LIMITED PARTNER MATTERS
As of February 1, 1999, the number of Units outstanding and the
approximate number of Limited Partners of record in the Partnerships were as
follows:
-26-
<PAGE>
Number of Numbers of
Partnership Units Limited Partners
----------- ---------- ----------------
II-A 484,283 4,077
II-B 361,719 2,604
II-C 154,621 1,352
II-D 314,878 2,840
II-E 228,821 2,143
II-F 171,400 1,668
II-G 372,189 2,514
II-H 91,711 1,200
Units were initially sold for a price of $100. The Units are not traded on
any exchange and there is no public trading market for them. The General Partner
is aware of certain transfers of Units between unrelated parties, some of which
are facilitated by secondary trading firms and matching services. In addition,
as further described below, the General Partner is aware of certain "4.9% tender
offers" which have been made for the Units. The General Partner believes that
the transfers between unrelated parties have been limited and sporadic in number
and volume. Other than trades facilitated by certain secondary trading firms and
matching services, no organized trading market for Units exists and none is
expected to develop. Due to the nature of these transactions, the General
Partner has no verifiable information regarding prices at which Units have been
transferred. Further, a transferee may not become a substitute Limited Partner
without the consent of the General Partner.
Pursuant to the terms of the Partnership Agreements, the General Partner
is obligated to annually issue a repurchase offer which is based on the
estimated future net revenues from the Partnerships' reserves and is calculated
pursuant to the terms of the Partnership Agreements. Such repurchase offer is
recalculated monthly in order to reflect cash distributions to the Limited
Partners and extraordinary events. The following table sets forth the General
Partner's repurchase offer per Unit as of the periods indicated. For purposes of
this Annual Report, a Unit represents an initial subscription of $100 to the
Partnership.
-27-
<PAGE>
Repurchase Offer Prices
-----------------------
1997 1998 1999
------------------------- ------------------------ ----
1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st
P/ship Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
- ------ ---- ---- ---- ---- ---- ---- ---- ---- ----
II-A $12 $16 $14 $13 $12 $18 $17 $12 $12
II-B 10 15 14 12 11 20 21 12 12
II-C 13 20 18 16 14 25 25 17 17
II-D 19 22 20 18 15 27 27 17 17
II-E 18 20 18 16 14 40 43 16 15
II-F 20 26 22 20 16 25 20 19 18
II-G 19 26 22 20 16 24 20 19 18
II-H 19 25 21 19 16 24 19 19 18
In addition to this repurchase offer, the Partnerships have been subject
to "4.9% tender offers" from several third parties during 1997 and 1998. The
General Partner does not know the terms of these offers or the prices received
by the Limited Partners who accepted these offers.
Cash Distributions
Cash distributions are primarily dependent upon a Partnership's cash
receipts from the sale of oil and gas production and cash requirements of the
Partnership. Distributable cash is determined by the General Partner at the end
of each calendar quarter and distributed to the Limited Partners within 45 days
after the end of the quarter. Distributions are restricted to cash on hand less
amounts required to be retained out of such cash as determined in the sole
judgment of the General Partner to pay costs, expenses, or other Partnership
obligations whether accrued or anticipated to accrue. In certain instances, the
General Partner may not distribute the full amount of cash receipts which might
otherwise be available for distribution in an effort to equalize or stabilize
the amounts of quarterly distributions. Any available amounts not distributed
are invested and the interest or income thereon is for the accounts of the
Limited Partners.
The following is a summary of cash distributions paid to the Limited
Partners during 1997 and 1998 and the first quarter of 1999.
-28-
<PAGE>
Cash Distributions
------------------
1997
--------------------------------------------------
1st 2nd 3rd 4th
P/ship Qtr.(1) Qtr.(2) Qtr.(2) Qtr.(2)
- ------ -------- ---------- ---------- ----------
II-A $1.58 $2.24 $1.47 $1.25
II-B 1.47 1.96 1.29 1.31
II-C 2.38 2.35 2.13 1.57
II-D 2.52 2.60 2.34 1.58
II-E 1.53 1.93 2.22 1.64
II-F 2.39 2.77 3.86 1.90
II-G 2.31 2.69 3.96 1.84
II-H 2.24 2.58 4.07 1.76
1998 1999
--------------------------------------------------- ---------
1st 2nd 3rd 4th 1st
P/ship Qtr.(2) Qtr. (2) Qtr.(3) Qtr.(4) Qtr.
- ------ -------- ---------- ---------- ---------- ---------
II-A $1.43 $2.15 $1.41 $ 4.81 $ .19
II-B 1.71 1.26 .88 8.07 .24
II-C 2.17 3.27 1.01 8.28 .21
II-D 3.33 3.41 1.16 10.19 .54
II-E 2.21 1.13 2.01 26.86 1.03
II-F 4.18 2.39 4.71 1.06 .87
II-G 4.05 2.32 4.54 1.03 .87
II-H 3.83 2.21 4.24 .98 .85
- -----------------------
(1) Amount of cash distribution for the II-C, II-E Partnerships includes
proceeds from the sale of certain oil and gas properties.
(2) Amount of cash distribution includes proceeds from the sale of certain oil
and gas properties.
(3) Amount of cash distribution for the II-A, II-E, II-F, II-G, and II-H
Partnerships includes proceeds from the sale of certain oil and gas
properties.
(4) Amount of cash distribution for the II-A, II-B, II-C, II-D, and II-E
Partnerships includes proceeds from the settlement of a lawsuit.
-29-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following tables present selected financial data for the Partnerships.
This data should be read in conjunction with the financial statements of the
Partnerships, and the respective notes thereto, included elsewhere in this
Annual Report. See "Item 8. Financial Statements and Supplementary Data."
-30-
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
II-A Partnership
----------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $3,911,823 $5,431,745 $5,832,874 $ 4,671,555 $ 6,371,949
Net Income (Loss):
Limited Partners 2,863,628 1,577,370 2,043,339 ( 715,678) 265,761
General Partner 188,400 141,030 156,483 81,747 145,993
Total 3,052,028 1,718,400 2,199,822 ( 633,931) 411,754
Limited Partners' Net
Income (Loss) per
Unit 5.91 3.26 4.22 ( 1.48) .55
Limited Partners' Cash
Distributions per
Unit 9.80(1) 6.54 5.37 3.83 5.49
Total Assets 5,530,544 7,495,013 9,068,387 9,833,188 12,673,498
Partners' Capital
(Deficit):
Limited Partners 5,469,889 7,350,261 8,937,891 9,494,552 12,065,230
General Partner ( 417,336) ( 387,587) ( 342,481) ( 311,994) ( 297,741)
Number of Units
Outstanding 484,283 484,283 484,283 484,283 484,283
- ------------------
(1) Amount of cash distribution includes proceeds from the settlement of a
lawsuit.
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
II-B Partnership
----------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $2,492,043 $3,816,269 $4,179,527 $3,204,794 $4,703,629
Net Income (Loss):
Limited Partners 3,160,422 1,095,312 1,329,755 ( 798,537) ( 574,825)
General Partner 186,085 99,884 113,834 37,441 87,118
Total 3,346,507 1,195,196 1,443,589 ( 761,096) ( 487,707)
Limited Partners' Net
Income (Loss) per
Unit 8.74 3.03 3.68 ( 2.21) ( 1.59)
Limited Partners' Cash
Distributions per
Unit 11.92(1) 6.03 4.79 3.21 5.98
Total Assets 3,185,016 4,414,695 5,579,977 6,237,427 8,302,058
Partners' Capital
(Deficit):
Limited Partners 3,309,396 4,464,974 5,552,662 5,955,907 7,914,444
General Partner ( 320,234) ( 305,223) ( 265,183) ( 246,438) ( 222,879)
Number of Units
Outstanding 361,719 361,719 361,719 361,719 361,719
- -----------------------
(1) Amount of cash distribution includes proceeds from the settlement of a
lawsuit.
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
II-C Partnership
----------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $1,136,474 $1,796,657 $1,925,940 $1,519,937 $2,289,166
Net Income (Loss):
Limited Partners 1,583,504 853,383 707,991 ( 337,547) ( 37,871)
General Partner 95,091 57,028 53,569 20,538 52,546
Total 1,678,595 910,411 761,560 ( 317,009) 14,675
Limited Partners' Net
Income (Loss) per
Unit 10.24 5.52 4.58 ( 2.18) ( .24)
Limited Partners' Cash
Distributions per
Unit 14.73(1) 8.43 5.43 4.63 7.06
Total Assets 1,759,734 2,440,315 2,941,348 3,205,943 4,291,920
Partners' Capital
(Deficit):
Limited Partners 1,765,593 2,458,089 2,907,706 3,039,715 4,092,262
General Partner ( 133,264) ( 123,277) ( 115,619) ( 99,615) ( 84,153)
Number of Units
Outstanding 154,621 154,621 154,621 154,621 154,621
- ----------------------
(1) Amount of cash distribution includes proceeds from the settlement of a
lawsuit.
</TABLE>
-33-
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
II-D Partnership
----------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $2,411,051 $4,314,154 $4,329,102 $3,901,516 $4,849,160
Net Income (Loss):
Limited Partners 3,942,172 1,796,378 1,270,858 ( 697,631) ( 193,308)
General Partner 225,825 127,204 99,743 44,055 108,234
Total 4,167,997 1,923,582 1,370,601 ( 653,576) ( 85,074)
Limited Partners' Net
Income (Loss) per
Unit 12.52 5.70 4.04 ( 2.22) ( .61)
Limited Partners' Cash
Distributions per
Unit 18.09(1) 9.04 4.85 4.69 6.25
Total Assets 3,994,909 5,780,264 6,953,850 7,291,164 9,571,883
Partners' Capital
(Deficit):
Limited Partners 3,818,294 5,572,122 6,627,744 6,884,886 9,057,517
General Partner ( 247,182) ( 224,003) ( 218,956) ( 143,473) ( 111,528)
Number of Units
Outstanding 314,878 314,878 314,878 314,878 314,878
- ------------------------
(1) Amount of cash distribution includes proceeds from the settlement of a
lawsuit.
</TABLE>
-34-
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
II-E Partnership
----------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $1,704,463 $2,616,003 $2,693,317 $2,297,409 $2,480,706
Net Income (Loss):
Limited Partners 6,442,294 ( 569) 695,738 ( 1,279,244) ( 842,191)
General Partner 356,722 66,976 66,720 9,448 43,060
Total 6,799,016 66,407 762,458 ( 1,269,796) ( 799,131)
Limited Partners' Net
Income (Loss) per
Unit 28.15 .00 3.04 ( 5.59) ( 3.68)
Limited Partners' Cash
Distributions per
Unit 32.21(1) 7.32 4.45 2.32 4.78
Total Assets 3,260,952 4,257,875 5,976,145 6,279,396 8,117,206
Partners' Capital
(Deficit):
Limited Partners 3,165,869 4,094,575 5,770,144 6,093,406 7,902,650
General Partner ( 173,306) ( 172,017) ( 147,595) ( 122,950) ( 104,398)
Number of Units
Outstanding 228,821 228,821 228,821 228,821 228,821
- ------------------------
(1) Amount of cash distribution includes proceeds from the settlement of a
lawsuit.
</TABLE>
-35-
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
II-F Partnership
----------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $1,444,802 $2,191,389 $2,433,313 $2,028,592 $2,316,564
Net Income (Loss):
Limited Partners 1,088,453 147,631 1,108,389 ( 191,631) 19,524
General Partner 71,519 81,927 79,948 46,686 54,498
Total 1,159,972 229,558 1,188,337 ( 144,945) 74,022
Limited Partners' Net
Income (Loss) per
Unit 6.35 .86 6.47 ( 1.12) .11
Limited Partners'
Cash Distributions
Per Unit 12.34 10.92 8.66 5.93 9.21
Total Assets 2,473,730 3,564,889 5,312,077 5,733,459 6,967,432
Partners' Capital
(Deficit):
Limited Partners 2,565,258 3,590,805 5,315,174 5,691,785 6,898,416
General Partner ( 144,763) ( 143,355) ( 105,914) ( 84,377) ( 80,063)
Number of Units
Outstanding 171,400 171,400 171,400 171,400 171,400
</TABLE>
-36-
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
II-G Partnership
----------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $3,072,455 $4,670,245 $ 5,158,799 $ 4,348,087 $ 5,116,776
Net Income (Loss):
Limited Partners 2,266,451 114,502 2,250,119 ( 714,189) ( 87,682)
General Partner 150,050 172,947 165,845 94,880 113,680
Total 2,416,501 287,449 2,415,964 ( 619,309) 25,998
Limited Partners' Net
Income (Loss)
per Unit 6.09 .31 6.05 ( 1.92) ( .24)
Limit Partners' Cash
Distributions per
Unit 11.94 10.80 8.30 5.80 8.72
Total Assets 5,325,802 7,635,720 11,576,732 12,519,149 15,456,785
Partners' Capital
(Deficit):
Limited Partners 5,512,443 7,690,992 11,598,490 12,439,371 15,313,560
General Partner ( 304,885) ( 312,392) ( 244,312) ( 197,620) ( 181,500)
Number of Units
Outstanding 372,189 372,189 372,189 372,189 372,189
</TABLE>
-37-
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
II-H Partnership
----------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $ 733,613 $1,119,734 $1,230,222 $1,042,735 $1,208,886
Net Income (Loss):
Limited Partners 532,166 ( 11,817) 519,143 ( 239,052) ( 47,630)
General Partner 35,089 40,425 38,792 21,532 26,955
Total 567,255 28,608 557,935 ( 217,520) ( 20,675)
Limited Partners' Net
Income (Loss)
per Unit 5.80 ( .13) 5.66 ( 2.61) ( .52)
Limited Partners' Cash
Distributions per
Unit 11.26 10.65 7.93 5.61 8.39
Total Assets 1,255,229 1,788,149 2,790,245 3,024,656 3,790,149
Partners' Capital
(Deficit):
Limited Partners 1,306,389 1,807,223 2,795,040 3,002,897 3,756,949
General Partner ( 75,631) ( 78,796) ( 58,835) ( 47,635) ( 42,167)
Number of Units
Outstanding 91,711 91,711 91,711 91,711 91,711
</TABLE>
-38-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Use of Forward-Looking Statements and Estimates
This Annual 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 Annual 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 Partnerships.
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, or otherwise indicated.
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 Partnerships' revenues is the prices received for the sale of oil
and gas. Predicting future prices is not possible. Concerning past trends,
average yearly wellhead gas prices in the United States have been volatile for a
number of years. For the past ten years, such average prices have generally been
in the $1.40 to $2.40 per Mcf range. Gas prices are currently in the lower half
of the 10-year average range described above.
Substantially all of the Partnerships' gas reserves are being sold on 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. In addition, such spot market sales are generally short-term in nature
and are dependent upon the obtaining of transportation services provided by
pipelines. Spot prices for the Partnerships' gas decreased
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from approximately $2.32 per Mcf at December 31, 1997 to approximately $1.93 per
Mcf at December 31, 1998. Such prices were on an MMBTU basis and differ from the
prices actually received by the Partnerships due to transportation and marketing
costs, BTU adjustments, and regional price and quality differences. Continued
very low oil prices as discussed below may cause downward pressure on gas prices
due to some users of gas converting to oil as a cheaper fuel alternative.
For the past ten years, average oil prices have generally been in the
$16.00 to $24.00 per barrel range. Due to global consumption and supply trends
over the last year as well as at least a short-term slowdown in Asian energy
demand, oil prices over the past year have reached historically low levels,
dropping to as low as approximately $9.25 per barrel. It is not known whether
this trend will continue. Prices for the Partnerships' oil decreased from
approximately $16.25 per barrel at December 31, 1997 to approximately $9.50 per
barrel at December 31, 1998.
Future prices for both oil and gas will likely be different from (and may
be lower than) the prices in effect on December 31, 1998. Management is unable
to predict whether future oil and gas prices will (i) stabilize, (ii) increase,
or (iii) decrease.
As discussed in the "Results of Operations" section below, volumes of oil
and gas sold also significantly affect the Partnerships' revenues. Oil and gas
wells generally produce the most oil or gas in the earlier years of their lives
and, as production continues, the rate of production naturally declines. At some
point, production physically ceases or becomes no longer economic. The
Partnerships are not acquiring additional oil and gas properties, and the
existing properties are not experiencing significant additional production
through drilling or other capital projects. Therefore, volumes of oil and gas
produced naturally decline from year to year. While it is difficult for
management to predict future production from these properties, it is likely that
this general trend of declining production will continue.
Despite this general trend of declining production, several factors can
cause the volumes of oil and gas sold to increase or decrease at an even greater
rate over a given period. These factors include, but are not limited to, (i)
geophysical conditions which cause an acceleration of the decline in production,
(ii) the shutting in of wells (or the opening of previously shut-in wells) due
to low oil and gas prices, mechanical difficulties, loss of a market or
transportation, or performance of workovers, recompletions, or other operations
in the well, (iii) prior period volume adjustments (either positive or negative)
made by purchasers of the production, (iv) ownership adjustments in accordance
with agreements governing the operation or ownership of the well (such as
adjustments that occur at payout), and (v) completion of enhanced recovery
projects which increase production for the well. Many of these factors are very
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significant as related to a single well or as related to many wells over a short
period of time. However, due to the large number of wells owned by the
Partnerships, these factors are generally not material as compared to the normal
decline in production experienced on all remaining wells.
Results of Operations
An analysis of the change in net oil and gas operations (oil and gas
sales, less lease operating expenses and production taxes), is presented in the
tables following "Results of Operations" under the heading "Average Sales
Prices, Production Volumes, and Average Production Costs." Following is a
discussion of each Partnership's results of operations for the year ended
December 31, 1998 as compared to the year ended December 31, 1997 and for the
year ended December 31, 1997 as compared to the year ended December 31, 1996.
II-A Partnership
----------------
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
--------------------------------------
Total oil and gas sales decreased $1,519,922 (28.0%) in 1998 as compared
to 1997. Of this decrease, approximately $366,000 and $165,000, respectively,
were related to decreases in volumes of oil and gas sold and approximately
$559,000 and $430,000, respectively, were related to decreases in the average
prices of oil and gas sold. Volumes of oil and gas sold decreased 19,438 barrels
and 72,266 Mcf, respectively, in 1998 as compared to 1997. The decrease in
volumes of oil sold resulted primarily from (i) normal declines in production,
(ii) the sale of several wells during 1997 and 1998, and (iii) a negative prior
period volume adjustment made by the purchaser during 1998 on one significant
well. Average oil and gas prices decreased to $12.38 per barrel and $1.98 per
Mcf, respectively, in 1998 from $18.85 per barrel and $2.28 per Mcf,
respectively, in 1997.
As discussed in "Liquidity and Capital Resources" below, the II-A
Partnership sold certain oil and gas properties during 1998 and recognized a
$685,375 gain on such sales. Sales of oil and gas properties during 1997
resulted in the II-A Partnership recognizing similar gains totaling $176,789.
The II-A Partnership recognized income from a gas contract settlement in
the amount of $1,710,190 during 1998. This settlement involved claims made for
take or pay deficiencies and gas pricing issues arising out of a gas purchase
contract. No similar settlements occurred during 1997.
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Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $115,424 (6.1%) in 1998 as compared to 1997. This
decrease resulted primarily from a decrease in production taxes associated with
the decrease in oil and gas sales and a decrease in lease operating expenses
associated with the decreases in volumes of oil and gas sold. These decreases
were partially offset by workover expenses incurred on two wells during 1998. As
a percentage of oil and gas sales, these expenses increased to 45.3% in 1998
from 34.8% in 1997. This percentage increase was primarily due to the decreases
in the average prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
increased $19,633 (2.5%) in 1998 as compared to 1997. This increase resulted
primarily from downward revisions in the estimates of remaining oil and gas
reserves at December 31, 1998 on several significant wells, which increase was
partially offset by a decrease in volumes of oil and gas sold. As a percentage
of oil and gas sales, this expense increased to 20.4% in 1998 from 14.4% in
1997. This percentage increase was primarily due to the decreases in the average
prices of oil and gas sold and the dollar increase in depreciation, depletion,
and amortization.
The II-A Partnership recognized a non-cash charge against earnings of
$164,111 during the fourth quarter of 1998. This charge was necessary due to
the unamortized costs of one field exceeding the expected undiscounted future
cash flows from that field. During the first quarter of 1997, a non-cash charge
of $684,276 was also recognized. Of this amount, $223,943 was related to the
decline in oil and gas prices used to determine the recoverability of oil and
gas reserves at March 31, 1997 and $460,333 was related to the impairment of
unproved properties. These unproved properties were written off based on the
General Partner's determination that it was unlikely that such properties would
be developed due to low oil and gas prices and provisions in the II-A
Partnership's Partnership Agreement which limit the level of permissible
drilling activity.
General and administrative expenses decreased $17,659 (3.0%) in 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 14.7% in 1998 from 10.9% in 1997. This percentage increase was primarily due
to the decrease in oil and gas sales.
The Limited Partners have received cash distributions through December 31,
1998 totaling $46,735,357 or 96.50% of the Limited Partners' capital
contributions.
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<PAGE>
Year Ended December 31, 1997 Compared
to Year Ended December 31, 1996
--------------------------------------
Total oil and gas sales decreased $401,129 (6.9%) in 1997 as compared to
1996. Of this decrease, approximately $497,000 was related to a decrease in
volumes of gas sold and approximately $164,000 was related to a decrease in the
average price of oil sold, which decreases were partially offset by increases of
approximately $196,000 related to an increase in the average price of gas sold
and approximately $54,000 related to an increase in volumes of oil sold. Volumes
of oil sold increased 2,636 barrels, while volumes of gas sold decreased 231,272
Mcf in 1997 as compared to 1996. The decrease in volumes of gas sold resulted
primarily from (i) positive prior period volume adjustments made by purchasers
on several wells in 1996, (ii) negative prior volume adjustments made by a
purchaser on one significant well in 1997, and (iii) normal declines in
production. Average oil prices decreased to $18.85 per barrel in 1997 from
$20.40 per barrel in 1996. Average gas prices increased to $2.28 per Mcf in 1997
from $2.15 per Mcf in 1996.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $52,619 (2.7%) in 1997 as compared to 1996. This
decrease resulted primarily from the decrease in volumes of gas sold in 1997,
which decrease was partially offset by an increase in workover expenses incurred
on several wells in 1997. As a percentage of oil and gas sales, these expenses
remained relatively constant at 34.8% in 1997 and 33.3% in 1996.
Depreciation, depletion, and amortization of oil and gas properties
decreased $416,359 (34.8%) in 1997 as compared to 1996. This decrease resulted
primarily from (i) an upward revision in the estimate of remaining gas reserves
at December 31, 1997, (ii) the decrease in volumes of gas sold in 1997, and
(iii) a reduction in the depletable base of oil and gas properties due to the
impairment provision recorded against proved oil and gas properties in the first
quarter of 1997 as discussed below. As a percentage of oil and gas sales, this
expense decreased to 14.4% in 1997 from 20.5% in 1996. This percentage decrease
was primarily due to the dollar decrease in depreciation, depletion, and
amortization and the increase in the average price of gas sold in 1997.
The II-A Partnership recognized a non-cash charge against earnings of
$684,276 in the first quarter of 1997. Of this amount, $223,943 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $460,333 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the II-A
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Partnership's Partnership Agreement which limit the level of permissible
drilling activity. No similar charges were necessary in 1996.
General and administrative expenses decreased $29,306 (4.7%) in 1997 as
compared to 1996. This decrease resulted primarily from a decrease in
professional fees in 1997 as compared to 1996. As a percentage of oil and gas
sales, these expenses remained relatively constant at 10.9% in 1997 and 10.6% in
1996.
II-B Partnership
----------------
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
--------------------------------------
Total oil and gas sales decreased $1,324,226 (34.7%) in 1998 as compared
to 1997. Of this decrease, approximately $277,000 and $345,000, respectively,
were related to decreases in volumes of oil and gas sold and $303,000 and
$399,000, respectively, were related to decreases in the average prices of oil
and gas sold. Volumes of oil and gas sold decreased 14,496 barrels and 143,392
Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of oil
sold resulted primarily from the sale of several wells during both years and
normal declines in production. The decrease in volumes of gas sold resulted
primarily from (i) the sale of several wells during both years, (ii) normal
declines in production, and (iii) a negative prior period volume adjustment made
by the purchaser on one significant well during 1998. Average oil and gas prices
decreased to $13.43 per barrel and $1.97 per Mcf, respectively, in 1998 from
$19.13 per barrel and $2.41 per Mcf, respectively, in 1997.
As discussed in "Liquidity and Capital Resources" below, the II-B
Partnership sold certain oil and gas properties during 1998 and recognized a
$65,551 gain on such sales. Sales of oil and gas properties during 1997 resulted
in the II-B Partnership recognizing similar gains totaling $203,247.
The II-B Partnership recognized income from a gas contract settlement in
the amount of $2,793,295 during 1998. This settlement involved claims made for
take or pay deficiencies and gas pricing issues arising out of a gas purchase
contract. No similar settlements occurred during 1997.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $221,951 (16.9%) in 1998 as compared to 1997. This
decrease resulted primarily from a decrease in lease operating expenses
associated with the decreases in volumes of oil and gas sold and a decrease in
production taxes associated with the decrease in oil and gas sales. As a
percentage of oil and gas sales, these expenses
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increased to 43.8% in 1998 from 34.4% in 1997. This percentage increase was
primarily due to the decreases in the average prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $14,916 (2.7%) in 1998 as compared to 1997. This decrease resulted
primarily from the decrease in volumes of oil and gas sold, which decrease in
depreciation, depletion, and amortization was partially offset by an increase
resulting from downward revisions in the estimates of remaining oil and gas
reserves at December 31, 1998 on several significant wells. As a percentage of
oil and gas sales, this expense increased to 21.3% in 1998 from 14.3% in 1997.
This percentage increase was primarily due to the decreases in the average
prices of oil and gas sold.
The II-B Partnership recognized a non-cash charge against earnings of
$530,988 in the first quarter 1997. Of this amount, $134,003 was related to the
decline in oil and gas prices used to determine the recoverability of oil and
gas reserves at March 31, 1997 and $396,985 was related to impairment of
unproved properties. These unproved properties were written off based on the
General Partner's determination that it was unlikely that such properties would
be developed due to low oil and gas prices and provisions in the II-B
Partnership's Partnership Agreement which limit the level of permissible
drilling activity. No similar charge was necessary in 1998.
General and administrative expenses decreased $21,297 (4.7%) in 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 17.3% in 1998 from 11.8% in 1997. This percentage increase was primarily due
to the decrease in oil and gas sales.
The Limited Partners have received cash distributions through December 31,
1998 totaling $34,132,916 or 94.36% of the Limited Partners' capital
contributions.
Year Ended December 31, 1997 Compared
to Year Ended December 31, 1996
----------------------------------------
Total oil and gas sales decreased $363,258 (8.7%) in 1997 as compared to
1996. Of this decrease, approximately $143,000 and $370,000, respectively, were
related to decreases in volumes of oil and gas sold and approximately $121,000
was related to a decrease in the average price of oil sold, which decreases were
partially offset by an increase of approximately $272,000 related to an increase
in the average price of gas sold. Volumes of oil and gas sold decreased 6,843
barrels and 172,317 Mcf, respectively, in 1997 as compared to 1996. The decrease
in volumes of gas sold resulted primarily from (i) positive prior period volume
adjustments made by purchasers on several wells in
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1996, (ii) normal declines in production, (iii) negative prior period volume
adjustments made by a purchaser on one significant well in 1997, and (iv) the
sale of one significant gas producing well in 1997. Average oil prices decreased
to $19.13 per barrel in 1997 from $20.92 per barrel in 1996. Average gas prices
increased to $2.41 per Mcf in 1997 from $2.15 per Mcf in 1996.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $149,737 (12.9%) in 1997 as compared to 1996. This
increase resulted primarily from workover expenses incurred on several wells in
1997, which increase was partially offset by decreases in volumes of oil and gas
sold in 1997. As a percentage of oil and gas sales, these expenses increased to
34.4% in 1997 from 27.9% in 1996. This percentage increase was primarily due to
the dollar increase in oil and gas production expenses and the decrease in the
average price of oil sold in 1997.
Depreciation, depletion, and amortization of oil and gas properties
decreased $515,276 (48.5%) in 1997 as compared to 1996. This decrease resulted
primarily from (i) an upward revision in the estimate of remaining gas reserves
at December 31, 1997, (ii) decreases in volumes of oil and gas sold in 1997 and
(iii) a reduction in the depletable base of oil and gas properties due to the
impairment provision recorded against proved oil and gas properties in the first
quarter of 1997 as discussed below. As a percentage of oil and gas sales, this
expense decreased to 14.3% in 1997 from 25.4% in 1996. This percentage decrease
was primarily due to the dollar decrease in depreciation, depletion, and
amortization and the increase in the average price of gas sold in 1997.
The II-B Partnership recognized a non-cash charge against earnings of
$530,988 in the first quarter of 1997. Of this amount, $134,003 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $396,985 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the II-B Partnership's Partnership Agreement which limit the level of
permissible drilling activity. No similar charges were necessary in 1996.
General and administrative expenses decreased $45,222 (9.1%) in 1997 as
compared to 1996. This decrease resulted primarily from a decrease in
professional fees in 1997 as compared to 1996. As a percentage of oil and gas
sales, these expenses remained relatively constant at 11.8% in 1997 and 11.9% in
1996.
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II-C Partnership
----------------
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
--------------------------------------
Total oil and gas sales decreased $660,183 (36.7%) in 1998 as compared to
1997. Of this decrease, approximately $113,000 and $244,000, respectively, were
due to decreases in volumes of oil and gas sold and approximately $96,000 and
$207,000, respectively, were related to decreases in the average prices of oil
and gas sold. Volumes of oil and gas sold decreased 5,947 barrels and 104,105
Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of oil
sold resulted primarily from normal declines in production and the sale of
several wells during both years. The decrease in volumes of gas sold resulted
primarily from the sale of several wells during both years and a negative prior
period volume adjustment made by the purchaser during 1998 on one significant
well. Average oil and gas prices decreased to $13.33 per barrel and $1.91 per
Mcf, respectively, in 1998 from $19.04 per barrel and $2.34 per Mcf,
respectively, in 1997.
As discussed in "Liquidity and Capital Resources" below, the II-C
Partnership sold certain oil and gas properties in 1998 and recognized a
$177,795 gain on such sales. Sales of oil and gas properties during 1997
resulted in the II-C Partnership recognizing similar gains totaling $156,919.
The II-C Partnership recognized income from a gas contract settlement in
the amount of $1,197,148 during 1998. This settlement involved claims made for
take or pay deficiencies and gas pricing issues arising out of a gas contract.
No similar settlements occurred during 1997.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $100,712 (19.1%) in 1998 as compared to 1997. This
decrease resulted primarily from a decrease in lease operating expenses
associated with the decreases in volumes of oil and gas sold and 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 37.6% in 1998 from
29.4% in 1997. This percentage increase was primarily due to the decreases in
the average prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $21,881 (8.2%) in 1998 as compared to 1997. This decrease resulted
primarily from the decreases in volumes of oil and gas sold, which decreases
were partially offset by an
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<PAGE>
increase in depreciation, depletion, and amortization resulting from downward
revisions in the estimates of remaining oil and gas reserves at December 31,
1998 on several significant wells. As a percentage of oil and gas sales, this
expense increased to 21.7% in 1998 from 14.9% in 1997. This percentage increase
was primarily due to the decreases in the average prices of oil and gas sold.
The II-C Partnership recognized a non-cash charge against earnings of
$66,617 in the first quarter of 1997. Of this amount, $36,163 was related to the
decline in oil and gas prices used to determine the recoverability of oil and
gas reserves at March 31, 1997 and $30,454 was related to the writing-off of
unproved properties. These unproved properties were written off based on the
General Partner's determination that it was unlikely that such properties would
be developed due to low oil and gas prices and provisions in the II-C
Partnership's Partnership Agreement which limit the level of permissible
drilling activity. No similar charge was necessary in 1998.
General and administrative expenses decreased $9,261 (4.8%) in 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 16.2% in 1998 from 10.8% in 1997. This percentage increase was primarily due
to the decrease in oil and gas sales.
The II-C Partnership achieved payout during the fourth quarter of 1998.
After payout, operations and revenues for the II-C Partnership have been and
will be allocated using the after payout percentages included in the II-C
Partnership's Partnership Agreement. After payout percentages allocate operating
income and expenses 10% to the General Partner and 90% to the Limited Partners.
Before payout, operating income and expenses were allocated 5% to the General
Partner and 95% to the Limited Partners.
The Limited Partners have received cash distributions through December 31,
1998 totaling $15,501,686 or 100.26% of the Limited Partners' capital
contributions.
Year Ended December 31, 1997 Compared
to Year Ended December 31, 1996
----------------------------------------
Total oil and gas sales decreased $129,283 (6.7%) in 1997 as compared to
1996. Of this decrease, approximately $49,000 and $209,000, respectively, were
related to decreases in volumes of oil and gas sold and approximately $48,000
was related to a decrease in the average price of oil sold, which decreases were
partially offset by an increase of approximately $175,000 related to an increase
in the average price of gas sold. Volumes of oil and gas sold decreased 2,340
barrels and 102,596 Mcf, respectively, in 1997 as compared to 1996. The decrease
in
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volumes of gas sold resulted primarily from (i) the sale of several gas
producing wells during 1996, (ii) positive prior period volume adjustments made
by purchasers on several wells during 1996, and (iii) normal declines in
production. Average oil prices decreased to $19.04 per barrel in 1997 from
$21.14 per barrel in 1996. Average gas prices increased to $2.34 per Mcf in 1997
from $2.04 per Mcf in 1996.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $75,103 (12.5%) in 1997 as compared to 1996. This
decrease resulted primarily from (i) decreases in volumes of oil and gas sold in
1997 and (ii) a decrease in production taxes associated with the decrease in oil
and gas sales in 1997. As a percentage of oil and gas sales, these expenses
decreased to 29.4% in 1997 from 31.3% in 1996. This percentage decrease was
primarily due to the dollar decrease in oil and gas production expenses and the
increase in the average price of gas sold in 1997.
Depreciation, depletion, and amortization of oil and gas properties
decreased $129,630 (32.6%) in 1997 as compared to 1996. This decrease resulted
primarily from (i) an upward revision in the estimate of remaining gas reserves
at December 31, 1997, (ii) the decreases in volumes of oil and gas sold in 1997,
and (iii) a reduction in the depletable base of oil and gas properties due to
the impairment provision recorded against proved oil and gas properties in the
first quarter of 1997 as discussed below. As a percentage of oil and gas sales,
this expense decreased to 14.9% in 1997 from 20.7% in 1996. This percentage
decrease was primarily due to the dollar decrease in depreciation, depletion,
and amortization and the increase in the average price of gas sold in 1997.
The II-C Partnership recognized a non-cash charge against earnings of
$66,617 in the first quarter of 1997. Of this amount, $36,163 was related to the
decline in oil and gas prices used to determine the recoverability of proved oil
and gas reserves at March 31, 1997 and $30,454 was related to the writing-off of
unproved properties. These unproved properties were written off based on the
General Partner's determination that it was unlikely that such properties would
be developed due to low oil and gas prices and provisions in the II-C
Partnership's Partnership Agreement which limit the level of permissible
drilling activity. No similar charges were necessary in 1996.
General and administrative expenses decreased $20,622 (9.6%) in 1997 as
compared to 1996. This decrease resulted primarily from a decrease in
professional fees in 1997 as compared to 1996. As a percentage of oil and gas
sales, these expenses remained relatively constant at 10.8% in 1997 and 11.1% in
1996.
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II-D Partnership
----------------
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
--------------------------------------
Total oil and gas sales decreased $1,903,103 (44.1%) in 1998 as compared
to 1997. Of this decrease, approximately $237,000 and $1,050,000, respectively,
were related to decreases in volumes of oil and gas sold and approximately
$228,000 and $389,000, respectively, were related to decreases in the average
prices of oil and gas sold. Volumes of oil and gas sold decreased 12,680 barrels
and 467,539 Mcf, respectively, in 1998 as compared to 1997. The decrease in
volumes of oil and gas sold resulted primarily from the sale of several wells in
both years and normal declines in production due to diminishing reserves on
several wells. Average oil and gas prices decreased to $12.65 per barrel and
$1.87 per Mcf, respectively, in 1998 from $18.68 per barrel and $2.25 per Mcf,
respectively, in 1997.
As discussed in "Liquidity and Capital Resources" below, the II-D
Partnership sold certain oil and gas properties during 1998 and recognized a
$496,238 gain on such sales. Sales of oil and gas properties during 1997
resulted in the II-D Partnership recognizing similar gains totaling $447,981.
The II-D Partnership recognized income from a gas contact settlement in
the amount of $3,033,646 during 1998. This settlement involved claims made for
take or pay deficiencies and gas pricing issues arising out of a gas purchase
contract. No similar settlements occurred during 1997.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $711,116 (42.9%) in 1998 as compared to 1997. This
decrease resulted primarily from a decrease in lease operating expenses
associated with the decreases in volumes of oil and gas sold and 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 39.2% in 1998 from
38.4% in 1997.
Depreciation, depletion, and amortization of oil and gas properties
decreased $170,121 (24.7%) in 1998 as compared to 1997. This decrease resulted
primarily from the decrease in volumes of oil and gas sold. As a percentage of
oil and gas sales, this expense increased to 21.5% in 1998 from 16.0% in 1997.
This
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percentage increase was primarily due to the decreases in the average prices of
oil and gas sold.
The II-D Partnership recognized a non-cash charge against earnings of
$143,957 during 1997. This impairment provision was necessary due to the decline
in oil and gas prices used to determine the recoverability of proved oil and gas
reserves at March 31, 1997. No similar charge was necessary during 1998.
General and administrative expenses decreased $22,908 (5.8%) in 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 15.5% in 1998 from 9.2% in 1997. This percentage increase was primarily due
to the decrease in oil and gas sales.
The Limited Partners have received cash distributions through December 31,
1998 totaling $31,285,903 or 99.36% of Limited Partners' capital contributions.
Year Ended December 31, 1997 Compared
to Year Ended December 31, 1996
----------------------------------------
Total oil and gas sales remained relatively constant in 1997 as compared
to 1996. Any decrease in oil and gas sales caused by decreases of approximately
$323,000 and $248,000, respectively, relating to decreases in volumes of oil and
gas sold and a decrease of approximately $68,000 related to a decrease in the
average price of oil sold was substantially offset by an increase of
approximately $631,000 related to an increase in the average price of gas sold.
Volumes of oil and gas sold decreased 16,104 barrels and 135,734 Mcf,
respectively, in 1997 as compared to 1996. The decrease in volumes of oil sold
resulted primarily from (i) the sale of one significant well in late 1996 and
(ii) a negative prior period volume adjustment made the by purchaser on a
significant well in 1997. Average oil prices decreased to $18.68 per barrel in
1997 from $20.03 per barrel in 1996. Average gas prices increased to $2.25 per
Mcf in 1997 from $1.83 per Mcf in 1996.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $143,812 (8.0%) in 1997 as compared to 1996. This
decrease resulted primarily from decreases in volumes of oil and gas sold in
1997. As a percentage of oil and gas sales, these expenses decreased to 38.4% in
1997 from 41.6% in 1996. This percentage decrease was primarily due to the
dollar decrease in oil and gas production expenses and the increase in the
average price of gas sold in 1997.
Depreciation, depletion, and amortization of oil and gas properties
decreased $111,321 (13.9%) in 1997 as compared to 1996. This decrease resulted
primarily from the decreases in
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<PAGE>
volumes of oil and gas sold in 1997 and a reduction in the depletable base of
oil and gas properties due to the impairment provision recorded against proved
oil and gas properties in the first quarter of 1997 as discussed below. As a
percentage of oil and gas sales, this expense decreased to 16.0% in 1997 from
18.5% in 1996. This percentage decrease was primarily due to the increase in the
average price of gas sold in 1997.
The II-D Partnership recognized a non-cash charge against earnings of
$143,957 in the first quarter of 1997. This impairment provision was necessary
due to the decline in oil and gas prices used to determine the recoverability of
proved oil and gas reserves at March 31, 1997. No similar charge was necessary
in 1996.
General and administrative expenses decreased $56,299 (12.4%) in 1997 as
compared to 1996. This decrease resulted primarily from a decrease in
professional fees in 1997 as compared to 1996. As a percentage of oil and gas
sales, these expenses decreased to 9.2% in 1997 from 10.5% in 1996. This
percentage decrease was primarily due to the dollar decrease in general and
administrative expenses discussed above.
II-E Partnership
----------------
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
--------------------------------------
Total oil and gas sales decreased $911,540 (34.8%) in 1998 as compared to
1997. Of this decrease, approximately $99,000 and $312,000, respectively, were
related to decreases in volumes of oil and gas sold and approximately $217,000
and $284,000, respectively, were related to decreases in the average prices of
oil and gas sold. Volumes of oil and gas sold decreased 5,160 barrels and
135,538 Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes
of oil and gas sold resulted primarily from normal declines in production and
the sale of several wells during both years. Average oil and gas prices
decreased to $13.31 per barrel and $1.86 per Mcf, respectively, in 1998 from
$19.10 per barrel and $2.30 per Mcf, respectively, in 1997.
As discussed in "Liquidity and Capital Resources" below, the II-E
Partnership sold certain oil and gas properties during 1998 and recognized a
$328,245 gain on such sales. Sales of oil and gas properties during 1997
resulted in the II-E Partnership recognizing similar gains totaling $272,654.
The II-E Partnership recognized income from a gas contract settlement in
the amount of $6,159,355 during 1998. This settlement involved claims made for
take or pay deficiencies and
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<PAGE>
gas pricing issues arising out of a gas purchase contract. No similar
settlements occurred during 1997.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $236,831 (26.0%) in 1998 as compared to 1997. This
decrease resulted primarily from (i) a decrease in lease operating expenses
associated with the decreases in volumes of oil and gas sold, (ii) a decrease in
production taxes associated with the decrease in oil and gas sales, and (iii)
workover expenses incurred on one significant well during 1997. As a percentage
of oil and gas sales, these expenses increased to 39.5% in 1998 from 34.8% in
1997. This percentage increase was primarily due to the decreases in the average
prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $82,925 (13.2%) in 1998 as compared to 1997. This decrease resulted
primarily from the decreases in volumes of oil and gas sold. As a percentage of
oil and gas sales, this expense increased to 31.9% in 1998 from 24.0% in 1997.
This percentage increase was primarily due to the decreases in the average
prices of oil and gas sold.
The II-E Partnership recognized a non-cash charge against earnings of
$992,851 in the first quarter of 1997. Of this amount, $317,979 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $674,872 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the II-E Partnership's Partnership Agreement which limit the level of
permissible drilling activity. No similar charges were necessary during 1998.
General and administrative expenses decreased $38,504 (12.2%) in 1998 as
compared to 1997. This decrease resulted primarily from a decrease in legal
expenses associated with the gas contract settlement discussed above during 1998
as compared to 1997. As a percentage of oil and gas sales, these expenses
increased to 16.2% in 1998 from 12.0% in 1997. This percentage increase was
primarily due to the decrease in oil and gas sales.
The Limited Partners have received cash distributions through December 31,
1998 totaling $22,471,574 or 98.21% of the Limited Partners' capital
contributions.
-53-
<PAGE>
Year Ended December 31, 1997 Compared
to Year Ended December 31, 1996
----------------------------------------
Total oil and gas sales decreased $77,314 (2.9%) in 1997 as compared to
1996. Of this decrease, approximately $227,000 and $144,000, respectively, were
related to decreases in volumes of oil and gas sold and approximately $54,000
was related to a decrease in the average price of oil sold, which decreases were
partially offset by an increase of approximately $353,000 related to an increase
in the average price of gas sold. Volumes of oil and gas sold decreased 11,136
barrels and 78,085 Mcf, respectively, in 1997 as compared to 1996. The decrease
in volumes of oil sold resulted primarily from the sale of one significant well
in late 1996 and a normal decline in production. Average oil prices decreased to
$19.10 per barrel in 1997 from $20.37 per barrel in 1996. Average gas prices
increased to $2.30 per Mcf in 1997 from $1.85 per Mcf in 1996.
Oil and gas production expenses (including lease operating expenses and
production taxes) remained relatively constant in 1997 as compared to 1996. As a
percentage of oil and gas sales, these expenses remained relatively constant at
34.8% in 1997 and 33.9% in 1996.
Depreciation, depletion, and amortization of oil and gas properties
decreased $101,553 (13.9%) in 1997 as compared to 1996. This decrease resulted
primarily from (i) the decreases in volumes of oil and gas sold in 1997, (ii) a
reduction in the depletable base of oil and gas properties due to the impairment
provision recorded against proved oil and gas properties in the first quarter of
1997 as discussed below, and (iii) an upward revision in the estimate of
remaining gas reserves at December 31, 1997. As a percentage of oil and gas
sales, this expense decreased to 24.0% in 1997 from 27.0% in 1996. This
percentage decrease was primarily due to the increase in the average price of
gas sold in 1997.
The II-E Partnership recognized a non-cash charge against earnings of
$992,851 in the first quarter of 1997. Of this amount, $317,979 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $674,872 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the II-E Partnership's Partnership Agreement which limit the level of
permissible drilling activity. No similar charges were necessary in 1996.
General and administrative expenses decreased $102,370 (24.5%) in 1997 as
compared to 1996. This decrease resulted primarily from a decrease in
professional fees in 1997 as
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<PAGE>
compared to 1996. As a percentage of oil and gas sales, these expenses decreased
to 12.0% in 1997 from 15.5% in 1996. This percentage decrease was primarily due
to the dollar decrease in general and administrative expenses.
II-F Partnership
----------------
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
--------------------------------------
Total oil and gas sales decreased $746,587 (34.1%) in 1998 as compared to
1997. Of this decrease, approximately $151,000 and $160,000, respectively, were
related to decreases in volumes of oil and gas sold and approximately $197,000
and $238,000, respectively, were related to decreases in the average prices of
oil and gas sold. Volumes of oil and gas sold decreased 8,099 barrels and 69,527
Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of oil
and gas sold resulted primarily from the sale of several wells during both
years. Average oil and gas prices decreased to $13.32 per barrel and $1.84 per
Mcf, respectively, in 1998 from $18.66 per barrel and $2.30 per Mcf,
respectively, in 1997.
As discussed in "Liquidity and Capital Resources" below, the II-F
Partnership sold certain oil and gas properties during 1998 and recognized a
$657,881 gain on such sales. Sales of oil and gas properties during 1997
resulted in the II-F Partnership recognizing similar gains totaling $557,746.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $148,051 (27.1%) in 1998 as compared to 1997. This
decrease resulted primarily from 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. As a percentage of
oil and gas sales, these expenses increased to 27.6% in 1998 from 24.9% in 1997.
This percentage increase was primarily due to the decreases in the average
prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $48,304 (11.8%) in 1998 as compared to 1997. This decrease resulted
primarily from the decreases in volumes of oil and gas sold. As a percentage of
oil and gas sales, this expense increased to 25.0% in 1998 from 18.7% in 1997.
This percentage increase was primarily due to the decreases in the average
prices of oil and gas sold.
-55-
<PAGE>
The II-F Partnership recognized a non-cash charge against earnings of
$1,377,160 in the first quarter of 1997. Of this amount, $208,255 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $1,168,905 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the II-F Partnership's Partnership Agreement which limit the level of
permissible drilling activity. No similar charges were necessary during 1998.
General and administrative expenses decreased $2,653 (1.3%) in 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 14.0% in 1998 from 9.3% in 1997. This percentage increase was primarily due
to the decrease in oil and gas sales.
The Limited Partners have received cash distributions through December 31,
1998 totaling $17,028,051 or 99.35% of Limited Partners' capital contributions.
Year Ended December 31, 1997 Compared
to Year Ended December 31, 1996
----------------------------------------
Total oil and gas sales decreased $241,924 (9.9%) in 1997 as compared to
1996. Of this decrease, approximately $47,000 and $344,000, respectively, were
related to decreases in volumes of oil and gas sold and approximately $53,000
was related to a decrease in the average price of oil sold, which decreases were
partially offset by an increase of approximately $199,000 related to an increase
in the average price of gas sold. Volumes of oil and gas sold decreased 2,381
barrels and 175,258 Mcf, respectively, in 1997 as compared to 1996. The decrease
in volumes of gas sold resulted primarily from (i) negative prior period volume
adjustments made by the purchasers on three significant wells in 1997, (ii)
positive prior period volume adjustments made by the purchasers on several wells
in 1996, (iii) normal declines in production, and (iv) the sale of one
significant well in early 1997. Average oil prices decreased to $18.66 per
barrel in 1997 from $19.83 per barrel in 1996. Average gas prices increased to
$2.30 per Mcf in 1997 from $1.96 per Mcf in 1996.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $97,519 (15.1%) in 1997 as compared to 1996. This
decrease resulted primarily from decreases in (i) volumes of oil and gas sold in
1997 and (ii) production taxes associated with the decrease in oil and gas
sales. As a percentage of oil and gas sales, these expenses decreased to 24.9%
in 1997 from 26.5% in 1996. This percentage
-56-
<PAGE>
decrease was primarily due to the dollar decrease in oil and gas production
expenses and the increase in the average price of gas sold in 1997.
Depreciation, depletion, and amortization of oil and gas properties
decreased $122,039 (23.0%) in 1997 as compared to 1996. This decrease resulted
primarily from decreases in volumes of oil and gas sold in 1997 and a reduction
in the depletable base of oil and gas properties due to the impairment provision
recorded against proved oil and gas properties in the first quarter of 1997 as
discussed below. As a percentage of oil and gas sales, this expense decreased to
18.7% in 1997 from 21.8% in 1996. This percentage decrease was primarily due to
the increase in the average price of gas sold in 1997.
The II-F Partnership recognized a non-cash charge against earnings of
$1,377,160 in the first quarter of 1997. Of this amount, $208,255 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $1,168,905 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the II-F Partnership's Partnership Agreement which limit the level of
permissible drilling activity. No similar charges were necessary in 1996.
General and administrative expenses decreased $2,351 (1.1%) in 1997 as
compared to 1996. As a percentage of oil and gas sales, these expenses remained
relatively constant at 9.3% in 1997 and 8.5% in 1996.
II-G Partnership
----------------
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
--------------------------------------
Total oil and gas sales decreased $1,597,790 (34.2%) in 1998 as compared
to 1997. Of this decrease, approximately $320,000 and $349,000, respectively,
were related to decreases in volumes of oil and gas sold and approximately
$414,000 and $515,000, respectively, were related to decreases in the average
prices of oil and gas sold. Volumes of oil and gas sold decreased 17,132 barrels
and 150,803 Mcf, respectively, in 1998 as compared to 1997. The decreases in
volumes of oil and gas sold resulted primarily from the sale of several wells
during both years. Average oil and gas prices decreased to $13.32 per barrel and
$1.85 per Mcf, respectively, in 1998 from $18.66 per barrel and $2.31 per Mcf,
respectively, in 1997.
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<PAGE>
As discussed in "Liquidity and Capital Resources" below, the II-G
Partnership sold certain oil and gas properties during 1998 and recognized a
$1,374,966 gain on such sales. Sales of oil and gas properties during 1997
resulted in the II-G Partnership recognizing similar gains totaling $1,226,822.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $333,023 (28.1%) in 1998 as compared to 1997. This
decrease resulted primarily from 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. As a percentage of
oil and gas sales, these expenses increased to 27.8% in 1998 from 25.4% in 1997.
This percentage increase was primarily due to the decreases in the average
prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $137,614 (15.0%) in 1998 as compared to 1997. This decrease resulted
primarily from the decreases in volumes of oil and gas sold during 1998 as
compared to 1997. As a percentage of oil and gas sales, this expense increased
to 25.3% in 1998 from 19.6% in 1997. This percentage increase was primarily due
to the decreases in the average prices of oil and gas sold.
The II-G Partnership recognized a non-cash charge against earnings of
$3,101,656 in the first quarter of 1997. Of this amount, $489,672 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $2,611,984 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the II-G Partnership's Partnership Agreement which limit the level of
permissible drilling activity. No similar charges were necessary during 1998.
General and administrative expenses decreased $5,627 (1.3%) in 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 14.3% in 1998 from 9.5% in 1997. This percentage increase was primarily due
to the decrease in oil and gas sales.
The Limited Partners have received cash distributions through December 31,
1998 totaling $35,105,371 or 94.32% of Limited Partners' capital contributions.
-58-
<PAGE>
Year Ended December 31, 1997 Compared
to Year Ended December 31, 1996
----------------------------------------
Total oil and gas sales decreased $488,554 (9.5%) in 1997 as compared to
1996. Of this decrease, approximately $100,000 and $725,000, respectively, were
related to decreases in volumes of oil and gas sold and approximately $111,000
was related to a decrease in the average price of oil sold, which decreases were
partially offset by an increase of approximately $440,000 related to an increase
in the average price of gas sold. Volumes of oil and gas sold decreased 5,040
barrels and 370,066 Mcf, respectively, in 1997 as compared to 1996. The decrease
in volumes of gas sold resulted primarily from (i) negative prior period volume
adjustments made by the purchasers on three significant wells in 1997, (ii)
positive prior period volume adjustments made by the purchasers on several wells
in 1996, and (iii) normal declines in production. Average oil prices decreased
to $18.66 per barrel in 1997 from $19.83 per barrel in 1996. Average gas prices
increased to $2.31 per Mcf in 1997 from $1.96 per Mcf in 1996.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $200,532 (14.5%) in 1997 as compared to 1996. This
decrease resulted primarily from a decrease in production taxes associated with
the decrease in oil and gas sales and decreases in volumes of oil and gas sold
in 1997. As a percentage of oil and gas sales, these expenses decreased to 25.4%
in 1997 from 26.9% in 1996. This percentage decrease was primarily due to the
dollar decrease in oil and gas production expenses and the increase in the
average prices of gas sold in 1997.
Depreciation, depletion, and amortization of oil and gas properties
decreased $246,840 (21.2%) in 1997 as compared to 1996. This decrease resulted
primarily from both the decreases in volumes of oil and gas sold in 1997 and a
reduction in the depletable base of oil and gas properties due to the impairment
provision recorded against proved oil and gas properties in the first quarter of
1997 as discussed below. As a percentage of oil and gas sales, this expense
decreased to 19.6% in 1997 from 22.5% in 1996. This percentage decrease was
primarily due to the dollar decrease in depreciation, depletion, and
amortization and the increase in the average price of gas sold in 1997.
The II-G Partnership recognized a non-cash charge against earnings of
$3,101,656 in the first quarter of 1997. Of this amount, $489,672 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $2,611,984 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the II-G
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<PAGE>
Partnership's Partnership Agreement which limit the level of permissible
drilling activity. No similar charges were necessary in 1996.
General and administrative expenses decreased $4,755 (1.1%) in 1997 as
compared to 1996. As a percentage of oil and gas sales, these expenses remained
relatively constant at 9.5% in 1997 and 8.7% in 1996.
II-H Partnership
----------------
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
--------------------------------------
Total oil and gas sales decreased $386,121 (34.5%) in 1998 as compared to
1997. Of this decrease, approximately $75,000 and $89,000, respectively, were
related to decreases in the volumes of oil and gas sold and approximately
$96,000 and $126,000, respectively, were related to decreases in the average
prices of oil and gas sold. Volumes of oil and gas sold decreased 4,020 barrels
and 38,256 Mcf, respectively, in 1998 as compared to 1997. The decreases in
volumes of oil and gas sold resulted primarily from the sale of several wells
during both years. Average oil and gas prices decreased to $13.32 per barrel and
$1.86 per Mcf, respectively, in 1998 from $18.67 per barrel and $2.33 per Mcf,
respectively, in 1997.
As discussed in "Liquidity and Capital Resources" below, the II-H
Partnership sold certain oil and gas properties during 1998 and recognized a
$317,342 gain on such sales. Sales of oil and gas properties during 1997
resulted in the II-H Partnership recognizing similar gains totaling $286,788.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $84,579 (29.2%) in 1998 as compared to 1997. This
decrease resulted primarily from 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. As a percentage of
oil and gas sales, these expenses increased to 28.0% in 1998 from 25.9% in 1997.
This percentage increase was primarily due to the decreases in the average
prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $23,121 (11.4%) in 1998 as compared to 1997. This decrease resulted
primarily from the decreases in volumes of
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<PAGE>
oil and gas sold. As a percentage of oil and gas sales, this expense increased
to 24.4% in 1998 from 18.1% in 1997. This percentage increase was primarily due
to the decreases in the average prices of oil and gas sold.
The II-H Partnership recognized a non-cash charge against earnings of
$785,220 in the first quarter of 1997. Of this amount, $125,223 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $659,997 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the II-H Partnership's Partnership Agreement which limit the level of
permissible drilling activity. No similar charges were necessary during 1998.
General and administrative expenses decreased $1,389 (1.3%) in 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 14.7% in 1998 from 9.8% in 1997. This percentage increase was primarily due
to the decrease in oil and gas sales.
The Limited Partners have received cash distributions through December 31,
1998 totaling $8,172,364 or 89.11% of Limited Partners' capital contributions.
Year Ended December 31, 1997 Compared
to Year Ended December 31, 1996
----------------------------------------
Total oil and gas sales decreased $110,488 (9.0%) in 1997 as compared to
1996. Of this decrease, approximately $23,000 and $180,000, respectively, were
related to decreases in volumes of oil and gas sold and approximately $26,000
was related to a decrease in the average price of oil sold, which decreases were
partially offset by an increase of approximately $119,000 related to an increase
in the average price of gas sold. Volumes of oil and gas sold decreased 1,174
barrels and 92,553 Mcf in 1997 as compared to 1996. The decrease in volumes of
gas sold resulted primarily from (i) negative prior period volume adjustments
made by the purchasers on three significant wells in 1997, (ii) positive prior
period volume adjustments made by the purchasers on several wells in 1996, and
(iii) normal declines in production. Average oil prices decreased to $18.67 per
barrel in 1997 from $19.85 per barrel in 1996. Average gas prices increased to
$2.33 per Mcf in 1997 from $1.94 per Mcf in 1996.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $49,348 (14.5%) in 1997 as compared to 1996. This
decrease resulted primarily from a decrease in production taxes associated with
the decrease in oil
-61-
<PAGE>
and gas sales and the decreases in volumes of oil and gas sold in 1997. As a
percentage of oil and gas sales, these expenses decreased to 25.9% in 1997 from
27.6% in 1996. This percentage decrease was primarily due to the dollar decrease
in oil and gas production expenses and the increase in the average price of gas
sold in 1997.
Depreciation, depletion, and amortization of oil and gas properties
decreased $78,681 (28.0%) in 1997 as compared to 1996. This decrease resulted
primarily from the decreases in volumes of oil and gas sold in 1997 and a
reduction in the depletable base of oil and gas properties due to the impairment
provision recorded against proved oil and gas properties in the first quarter of
1997 as discussed below. As a percentage of oil and gas sales, this expense
decreased to 18.1% in 1997 from 22.8% in 1996. This percentage decrease was
primarily due to the dollar decrease in depreciation, depletion, and
amortization.
The II-H Partnership recognized a non-cash charge against earnings of
$785,220 in the first quarter of 1997. Of this amount, $125,223 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $659,997 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to the low oil and gas prices and provisions
in the II-H Partnership's Partnership Agreement which limit the level of
permissible drilling activity. No similar charges were necessary in 1996.
General and administrative expenses decreased $1,437 (1.3%) in 1997 as
compared to 1996. As a percentage of oil and gas sales, these expenses remained
relatively constant at 9.8% in 1997 and 9.0% in 1996.
Average Sales Prices, Production Volumes, and Average Production Costs
The following tables are comparisons of the annual average oil and gas
sales prices, production volumes, and average production costs (lease operating
expenses and production taxes) per equivalent unit (one barrel of oil or six Mcf
of gas) for 1998, 1997, and 1996. These factors comprise the change in net oil
and gas operations discussed in the "Results of Operations" section above.
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<PAGE>
1998 Compared to 1997
---------------------
Average Sales Prices
- ----------------------------------------------------------------------------
P/ship 1998 1997 % Change
- ------ ------------------ ------------------ --------------
Oil Gas Oil Gas
($/Bbl) ($/Mcf) ($/Bbl) ($/Mcf) Oil Gas
------- ------- ------- ------- ----- -----
II-A 12.38 1.98 $18.85 $2.28 (34%) (13%)
II-B 13.43 1.97 19.13 2.41 (30%) (18%)
II-C 13.33 1.91 19.04 2.34 (30%) (18%)
II-D 12.65 1.87 18.68 2.25 (32%) (17%)
II-E 13.31 1.86 19.10 2.30 (30%) (19%)
II-F 13.32 1.84 18.66 2.30 (29%) (20%)
II-G 13.32 1.85 18.66 2.31 (29%) (20%)
II-H 13.32 1.86 18.67 2.33 (29%) (20%)
Production Volumes
- ---------------------------------------------------------------------------
P/ship 1998 1997 % Change
- ------ ------------------ ------------------ ------------
Oil Gas Oil Gas Oil Gas
(Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf)
------- --------- ------- --------- ------ -----
II-A 86,428 1,433,552 105,866 1,505,818 (18%) ( 5%)
II-B 53,095 904,066 67,591 1,047,458 (21%) (14%)
II-C 16,806 478,643 22,753 582,748 (26%) (18%)
II-D 37,733 1,034,372 50,413 1,501,911 (25%) (31%)
II-E 37,508 647,841 42,668 783,379 (12%) (17%)
II-F 36,915 516,917 45,014 586,444 (18%) (12%)
II-G 77,421 1,105,661 94,553 1,256,464 (18%) (12%)
II-H 17,978 266,337 21,998 304,593 (18%) (13%)
Average Production Costs
per Equivalent Barrel of Oil
-------------------------------------
P/ship 1998 1997 % Change
------ ----- ----- --------
II-A $5.45 $5.29 2%
II-B 5.36 5.43 ( 1%)
II-C 4.42 4.40 -
II-D 4.50 5.51 (18%)
II-E 4.62 5.25 (12%)
II-F 3.24 3.83 (15%)
II-G 3.26 3.90 (16%)
II-H 3.29 3.99 (18%)
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<PAGE>
1997 Compared to 1996
---------------------
Average Sales Prices
- --------------------------------------------------------------------------
P/ship 1997 1996 % Change
- ------ ---------------- ---------------- ------------
Oil Gas Oil Gas
($/Bbl) ($/Mcf) ($/Bbl) ($/Mcf) Oil Gas
------- ------- ------- ------- ----- ---
II-A $18.85 $2.28 $20.40 $2.15 ( 8%) 6%
II-B 19.13 2.41 20.92 2.15 ( 9%) 12%
II-C 19.04 2.34 21.14 2.04 (10%) 15%
II-D 18.68 2.25 20.03 1.83 ( 7%) 23%
II-E 19.10 2.30 20.37 1.85 ( 6%) 24%
II-F 18.66 2.30 19.83 1.96 ( 6%) 17%
II-G 18.66 2.31 19.83 1.96 ( 6%) 18%
II-H 18.67 2.33 19.85 1.94 ( 6%) 20%
Production Volumes
- -----------------------------------------------------------------------------
P/ship 1997 1996 % Change
- ------ ------------------ ------------------ --------------
Oil Gas Oil Gas Oil Gas
(Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf)
------- --------- ------ --------- ------ -----
II-A 105,866 1,505,818 103,230 1,737,090 3% (13%)
II-B 67,591 1,047,458 74,434 1,219,775 ( 9%) (14%)
II-C 22,753 582,748 25,093 685,344 ( 9%) (15%)
II-D 50,413 1,501,911 66,517 1,637,645 (24%) ( 8%)
II-E 42,668 783,379 53,804 861,464 (21%) ( 9%)
II-F 45,014 586,444 47,395 761,702 ( 5%) (23%)
II-G 94,553 1,256,464 99,593 1,626,530 ( 5%) (23%)
II-H 21,998 304,593 23,172 397,146 ( 5%) (23%)
Average Production Costs
per Equivalent Barrel of Oil
-------------------------------------
P/ship 1997 1996 % Change
------ ----- ----- --------
II-A $5.29 $4.94 7%
II-B 5.43 4.19 30%
II-C 4.40 4.33 2%
II-D 5.51 5.31 4%
II-E 5.25 4.63 13%
II-F 3.83 3.69 4%
II-G 3.90 3.74 4%
II-H 3.99 3.80 5%
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<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 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
1998 production levels for future years, the Partnerships proved reserve
quantities at December 31, 1998 would have the following remaining lives:
Partnership Gas-Years Oil-Years
----------- --------- ---------
II-A 5.4 4.2
II-B 5.9 4.5
II-C 7.5 7.1
II-D 8.0 6.8
II-E 6.9 4.4
II-F 7.0 6.5
II-G 7.0 6.6
II-H 7.1 6.6
The Partnerships' available capital from the Limited Partners'
subscriptions has been spent on oil and gas properties and there should be no
further material capital resource commitments in the future. Occasional
expenditures for new wells or well recompletions or workovers, however, may
reduce or eliminate cash available for a particular quarterly cash distribution.
The Partnerships have no debt commitments. Cash for operational purposes will be
provided by current oil and gas production.
The Partnerships sold certain oil and gas properties during 1997 and 1998.
The sale of the Partnerships' properties were made by the General Partner after
giving due consideration to both the offer price and the General Partner's
estimate of the property's remaining proved reserves and future operating costs.
Net proceeds from the sale of any such properties were distributed to the
Partnerships and included in the calculation of the Partnerships' cash
distributions for the quarter immediately following the Partnerships' receipt of
the proceeds. The amount of such proceeds from the sale of oil and gas
properties during 1998 and 1997 were as follows:
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<PAGE>
Partnership 1998 1997
----------- ---------- ----------
II-A $ 787,854 $ 225,375
II-B 82,454 251,335
II-C 250,629 208,805
II-D 669,933 629,832
II-E 357,625 431,541
II-F 717,792 758,534
II-G 1,503,817 1,658,135
II-H 345,716 414,950
The General Partner believes that the sale of these properties will be
beneficial to the Partnerships in the long-term since the properties sold
generally had a higher ratio of future operating expenses as compared to
reserves than the properties not sold.
On July 30, 1998 the II-A, II-B, II-C, II-D, and II-E Partnerships and
certain other related parties reached a settlement with a gas purchaser
involving claims for take or pay deficiencies and gas pricing issues arising out
of a gas purchase contract. As a result of this settlement, such Partnerships
received the following settlement amounts:
SETTLEMENT PER
PARTNERSHIP AMOUNT UNIT
----------- --------- ------
II-A $1,710,190 $ 3.53
II-B 2,793,295 7.72
II-C 1,197,148 7.74
II-D 3,033,646 9.63
II-E 6,159,355 26.92
The settlement amounts were included in the Partnerships' November 1998 cash
distributions.
There can be no assurance as to the amount of the Partnerships' future
cash distributions. The Partnerships' ability to make cash distributions depends
primarily upon the level of available cash flow generated by the Partnerships'
operating activities, which will be affected (either positively or negatively)
by many factors beyond the control of the Partnerships, including the price of
and demand for oil and 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 Partnerships are not replacing production through
acquisitions of producing properties and drilling. The Partnerships' quantity of
proved reserves has been reduced by the sale of oil and gas properties as
described above; therefore, it is possible that the
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<PAGE>
Partnerships' future cash distributions will decline as a result of a reduction
of the Partnerships' reserve base.
The Partnerships will terminate on December 31, 2001 in accordance with
the Partnership Agreements. However, the Partnership Agreements provide that the
General Partner may extend the term of each Partnership for up to five periods
of two years each. As of the date of this Annual Report, the General Partner has
not determined whether to extend the term of any Partnership.
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 Partnerships in
1998. Oil and 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."
Year 2000
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 Partnerships, 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, the General Partner does not believe that these risks will be material to
the Partnerships' operations.
The Partnerships' business is producing oil and gas. The day-to-day
production of the Partnerships' oil and gas is not
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<PAGE>
dependent on computers or equipment with imbedded chips. As further discussed
below, management anticipates that the Partnerships' daily business activities
will not be materially affected by Y2K.
The Partnerships 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.
Samson Investment Company's Chief Financial Officer 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 February 1, 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.
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.
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<PAGE>
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 1st 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 March 31, 1999 to complete this process.
The costs of all such risk assessments and remediation are not expected to be
material to the Partnerships.
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 will consider in the second half of 1999 its
options with respect to contingency arrangements for temporary staffing to
accommodate such situations.
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 Partnerships 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 are in the process of being tested by the respective vendors and are
expected to be Y2K compliant or replaced no later than May 30, 1999. Oil and gas
production related to such equipment is very minor with respect to the entire
Samson group, and, in fact, the Partnerships' production may not use such
equipment at all.
Office machines are currently being tested by Samson and vendors. It is
expected that such machines will be made compliant or replaced no later than
March 31, 1999.
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<PAGE>
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 that may
have a Y2K problem. None of these applications are believed to be material to
Samson or the Partnerships. Once identified, assessed and prioritized, Samson
intends to test and upgrade imbedded components and systems in field process
control units deemed to pose the greatest risk of significant non-compliance and
capable of testing. Samson believes that sufficient manual processes are
available to minimize any such field level risk and that there will be no
material impact on the Partnerships 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,
however, there could be a material and adverse impact on the Partnerships'
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
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<PAGE>
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, the General Partner 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 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
Partnerships' 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
The Partnerships do not hold any market risk sensitive instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are indexed in Item 14
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER
The Partnerships have no directors or executive officers. The following
individuals are directors and executive officers of the General Partner. The
business address of such director and executive officers is Two West Second
Street, Tulsa, Oklahoma 74103.
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<PAGE>
Name Age Position with General Partner
---------------- --- --------------------------------
Dennis R. Neill 46 President and Director
Judy K. Fox 47 Secretary
The director will hold office until the next annual meeting of shareholders of
Geodyne and until his successor has been duly elected and qualified. All
executive officers serve at the discretion of the Board of Directors.
Dennis R. Neill joined Samson in 1981, was named Senior Vice President and
Director of Geodyne on March 3, 1993, and was named President of Geodyne and its
subsidiaries on June 30, 1996. Prior to joining Samson, 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 of Samson Investment
Company and as President and Director of Samson Properties Incorporated, Samson
Hydrocarbons Company, Dyco Petroleum Corporation, Berry Gas Company, Circle L
Drilling Company, Snyder Exploration Company, and Compression, Inc.
Judy K. Fox joined Samson in 1990 and was named Secretary of Geodyne and
its subsidiaries on June 30, 1996. Prior to joining Samson, she served as Gas
Contract Manager for Ely Energy Company. Ms. Fox is also Secretary of Berry Gas
Company, Circle L Drilling Company, Compression, Inc., Dyco Petroleum
Corporation, Samson Hydrocarbons Company, Snyder Exploration Company, and Samson
Properties Incorporated.
Section 16(a) Beneficial Ownership Reporting Compliance
To the best knowledge of the Partnerships and the General Partner, there
were no officers, directors, or ten percent owners who were delinquent filers
during 1998 of reports required under Section 16 of the Securities Exchange Act
of 1934.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The General Partner and its affiliates are reimbursed for actual general
and administrative costs and operating costs incurred and attributable to the
conduct of the business affairs and operations of the Partnerships, computed on
a cost basis, determined in accordance with generally accepted accounting
principles. Such reimbursed costs and expenses allocated to the Partnerships
include office rent, secretarial, employee compensation and benefits, travel and
communication costs, fees for professional services, and other items generally
classified as general or administrative expense. The amount of general and
administrative expense allocated to the General Partner and its affiliates which
was charged to each Partnership during 1998, 1997, and 1996 is set forth in the
table below. Although the actual costs incurred by the General Partner and its
affiliates have fluctuated during the three years presented, the amounts charged
to the Partnerships have not fluctuated due to expense limitations imposed by
the Partnership Agreements.
Partnership 1998 1997 1996
----------- -------- -------- --------
II-A $509,772 $509,772 $509,772
II-B 380,760 380,760 380,760
II-C 162,756 162,756 162,756
II-D 331,452 331,452 331,452
II-E 240,864 240,864 240,864
II-F 180,420 180,420 180,420
II-G 391,776 391,776 391,776
II-H 96,540 96,540 96,540
None of the officers or directors of the General Partner receive
compensation directly from the Partnerships. The Partnerships reimburse the
General Partner or its affiliates for that portion of such officers' and
directors' salaries and expenses attributable to time devoted by such
individuals to the Partnerships' activities. The following tables indicate the
approximate amount of general and administrative expense reimbursement
attributable to the salaries of the directors, officers, and employees of the
General Partner and its affiliates during 1998, 1997, and 1996:
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<PAGE>
<TABLE>
<CAPTION>
Salary Reimbursements
II-A Partnership
----------------
Three Years Ended December 31, 1998
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Philip
Tholen,
President,
Chief Executive
Officer(1)(2) 1996 - - - - - - -
Dennis R. Neill,
President(2)(3) 1996 - - - - - - -
1997 - - - - - - -
1998 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(4) 1996 $298,217 - - - - - -
1997 $304,538 - - - - - -
1998 $301,683 - - - - - -
- ----------
(1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until
July 1, 1996.
(2) The general and administrative expenses paid by the II-A Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Tholen or Mr. Neill.
(3) Mr. Neill became President of Geodyne on July 1, 1996.
(4) No officer or director of Geodyne or its affiliates provides full-time
services to the II-A Partnership and no individual's salary or other
compensation reimbursement from the II-A Partnership equals or exceeds
$100,000 per annum.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Salary Reimbursements
II-B Partnership
----------------
Three Years Ended December 31, 1998
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
------------------------- ----------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Philip
Tholen,
President,
Chief Executive
Officer(1)(2) 1996 - - - - - - -
Dennis R. Neill,
President(2)(3) 1996 - - - - - - -
1997 - - - - - - -
1998 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(4) 1996 $222,745 - - - - - -
1997 $227,466 - - - - - -
1998 $225,334 - - - - - -
- ----------
(1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until
July 1, 1996.
(2) The general and administrative expenses paid by the II-B Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Tholen or Mr. Neill.
(3) Mr. Neill became President of Geodyne on July 1, 1996.
(4) No officer or director of Geodyne or its affiliates provides full-time
services to the II-B Partnership and no individual's salary or other
compensation reimbursement from the II-B Partnership equals or exceeds
$100,000 per annum.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Salary Reimbursements
II-C Partnership
----------------
Three Years Ended December 31, 1998
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Philip
Tholen,
President,
Chief Executive
Officer(1)(2) 1996 - - - - - - -
Dennis R. Neill,
President(2)(3) 1996 - - - - - - -
1997 - - - - - - -
1998 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(4) 1996 $95,212 - - - - - -
1997 $97,230 - - - - - -
1998 $96,319 - - - - - -
- ----------
(1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until
July 1, 1996.
(2) The general and administrative expenses paid by the II-C Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Tholen or Mr. Neill.
(3) Mr. Neill became President of Geodyne on July 1, 1996.
(4) No officer or director of Geodyne or its affiliates provides full-time
services to the II-C Partnership and no individual's salary or other
compensation reimbursement from the II-C Partnership equals or exceeds
$100,000 per annum.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Salary Reimbursements
II-D Partnership
----------------
Three Years Ended December 31, 1998
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Philip
Tholen,
President,
Chief Executive
Officer(1)(2) 1996 - - - - - - -
Dennis R. Neill,
President(2)(3) 1996 - - - - - - -
1997 - - - - - - -
1998 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(4) 1996 $193,899 - - - - - -
1997 $198,009 - - - - - -
1998 $196,153 - - - - - -
- ----------
(1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until
July 1, 1996.
(2) The general and administrative expenses paid by the II-D Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Tholen or Mr. Neill.
(3) Mr. Neill became President of Geodyne on July 1, 1996.
(4) No officer or director of Geodyne or its affiliates provides full-time
services to the II-D Partnership and no individual's salary or other
compensation reimbursement from the II-D Partnership equals or exceeds
$100,000 per annum.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Salary Reimbursements
II-E Partnership
----------------
Three Years Ended December 31, 1998
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Philip
Tholen,
President,
Chief Executive
Officer(1)(2) 1996 - - - - - - -
Dennis R. Neill,
President(2)(3) 1996 - - - - - - -
1997 - - - - - - -
1998 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(4) 1996 $140,905 - - - - - -
1997 $143,892 - - - - - -
1998 $142,543 - - - - - -
- ----------
(1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until
July 1, 1996.
(2) The general and administrative expenses paid by the II-E Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Tholen or Mr. Neill.
(3) Mr. Neill became President of Geodyne on July 1, 1996.
(4) No officer or director of Geodyne or its affiliates provides full-time
services to the II-E Partnership and no individual's salary or other
compensation reimbursement from the II-E Partnership equals or exceeds
$100,000 per annum.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Salary Reimbursements
II-F Partnership
----------------
Three Years Ended December 31, 1998
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Philip
Tholen,
President,
Chief Executive
Officer(1)(2) 1996 - - - - - - -
Dennis R. Neill,
President(2)(3) 1996 - - - - - - -
1997 - - - - - - -
1998 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(4) 1996 $105,546 - - - - - -
1997 $107,783 - - - - - -
1998 $106,773 - - - - - -
- ----------
(1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until
July 1, 1996.
(2) The general and administrative expenses paid by the II-F Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Tholen or Mr. Neill.
(3) Mr. Neill became President of Geodyne on July 1, 1996.
(4) No officer or director of Geodyne or its affiliates provides full-time
services to the II-F Partnership and no individual's salary or other
compensation reimbursement from the II-F Partnership equals or exceeds
$100,000 per annum.
</TABLE>
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<TABLE>
<CAPTION>
Salary Reimbursements
II-G Partnership
----------------
Three Years Ended December 31, 1998
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Philip
Tholen,
President,
Chief Executive
Officer(1)(2) 1996 - - - - - - -
Dennis R. Neill,
President(2)(3) 1996 - - - - - - -
1997 - - - - - - -
1998 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(4) 1996 $229,189 - - - - - -
1997 $234,047 - - - - - -
1998 $231,853 - - - - - -
- ----------
(1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until
July 1, 1996.
(2) The general and administrative expenses paid by the II-G Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Tholen or Mr. Neill.
(3) Mr. Neill became President of Geodyne on July 1, 1996.
(4) No officer or director of Geodyne or its affiliates provides full-time
services to the II-G Partnership and no individual's salary or other
compensation reimbursement from the II-G Partnership equals or exceeds
$100,000 per annum.
</TABLE>
-80-
<PAGE>
<TABLE>
<CAPTION>
Salary Reimbursements
II-H Partnership
----------------
Three Years Ended December 31, 1998
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
------------------------- ------------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Philip
Tholen,
President,
Chief Executive
Officer(1)(2) 1996 - - - - - - -
Dennis R. Neill,
President(2)(3) 1996 - - - - - - -
1997 - - - - - - -
1998 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(4) 1996 $56,476 - - - - - -
1997 $57,673 - - - - - -
1998 $57,132 - - - - - -
- ----------
(1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until
July 1, 1996.
(2) The general and administrative expenses paid by the II-H Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Tholen or Mr. Neill.
(3) Mr. Neill became President of Geodyne on July 1, 1996.
(4) No officer or director of Geodyne or its affiliates provides full-time
services to the II-H Partnership and no individual's salary or other
compensation reimbursement from the II-H Partnership equals or exceeds
$100,000 per annum.
</TABLE>
-81-
<PAGE>
Affiliates of the Partnerships serve as operator of some of the
Partnerships' wells. The 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. Such compensation may occur both prior and subsequent
to the commencement of commercial marketing of production of oil or gas. The
dollar amount of such compensation paid by the Partnerships to the affiliates is
impossible to quantify as of the date of this Annual Report.
Samson maintains necessary inventories of new and used field equipment.
Samson may have provided some of this equipment for wells in which the
Partnerships have an interest. This equipment was 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 billed the Partnerships for a portion of such costs
based upon the Partnerships' 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 Units as of February 1, 1999 by (i) each beneficial owner of more than five
percent of the issued and outstanding Units, (ii) the directors and officers of
the General Partner, and (iii) the General Partner and its affiliates. 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)
- ------------------------------------ ------------------
II-A Partnership:
- ----------------
Samson Resources Company 73,940 (15.3%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 73,940 (15.3%)
II-B Partnership:
- ----------------
Samson Resources Company 58,240 (16.1%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 58,240 (16.1%)
-82-
<PAGE>
II-C Partnership:
- ----------------
Samson Resources Company 33,567 (21.7%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 33,567 (21.7%)
II-D Partnership:
- ----------------
Samson Resources Company 42,520 (13.5%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 42,520 (13.5%)
II-E Partnership:
- ----------------
Samson Resources Company 39,864 (17.4%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 39,864 (17.4%)
II-F Partnership:
- ----------------
Samson Resources Company 24,864 (14.5%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 24,864 (14.5%)
II-G Partnership:
- ----------------
Samson Resources Company 41,224 (11.1%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 41,224 (11.1%)
II-H Partnership:
- ----------------
Samson Resources Company 14,759 (16.1%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 14,759 (16.1%)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner and certain of its affiliates engage in oil and gas
activities independently of the Partnerships which result in conflicts of
interest that cannot be totally eliminated. The
-83-
<PAGE>
allocation of acquisition and drilling opportunities and the nature of the
compensation arrangements between the Partnerships and the General Partner also
create potential conflicts of interest. An affiliate of the Partnerships owns
some of the Partnerships' Units and therefore has an identity of interest with
other Limited Partners with respect to the operations of the Partnerships.
In order to attempt to assure limited liability for Limited Partners as
well as an orderly conduct of business, management of the Partnerships is
exercised solely by the General Partner. The Partnership Agreements grant the
General Partner broad discretionary authority with respect to the Partnerships'
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 Partnerships
involves circumstances where the General Partner has conflicts of interest and
where it must allocate costs and expenses, or opportunities, among the
Partnerships and other competing interests.
The General Partner does not devote all of its time, efforts, and
personnel exclusively to the Partnerships. Furthermore, the Partnerships do not
have any employees, but instead rely on the personnel of Samson. The
Partnerships thus compete with Samson (including other oil and gas partnerships)
for the time and resources of such personnel. Samson devotes such time and
personnel to the management of the Partnerships as are indicated by the
circumstances and as are consistent with the General Partner's fiduciary duties.
Affiliates of the Partnerships are solely responsible for the negotiation,
administration, and enforcement of oil and gas sales agreements covering the
Partnerships' leasehold interests. Because affiliates of the Partnership who
provide services to the Partnership have fiduciary or other duties to other
members of Samson, contract amendments and negotiating positions taken by them
in their effort to enforce contracts with purchasers may not necessarily
represent the positions that the Partnerships would take if they were to
administer their own contracts without involvement with other members of Samson.
On the other hand, management believes that the Partnerships' negotiating
strength and contractual positions have been enhanced by virtue of their
affiliation with Samson.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules, and Exhibits.
-84-
<PAGE>
(1) Financial Statements: The following financial statements for the
Geodyne Energy Income Limited Partnership II-A
Geodyne Energy Income Limited Partnership II-B
Geodyne Energy Income Limited Partnership II-C
Geodyne Energy Income Limited Partnership II-D
Geodyne Energy Income Limited Partnership II-E
Geodyne Energy Income Limited Partnership II-F
Geodyne Energy Income Limited Partnership II-G
Geodyne Energy Income Limited Partnership II-H
as of December 31, 1998 and 1997 and for each of the three years
in the period ended December 31, 1998 are filed as part of this
report:
Report of Independent Accountants
Combined Balance Sheets
Combined Statements of Operations
Combined Statements of Changes in
Partners' Capital (Deficit)
Combined Statements of Cash Flows
Notes to Combined Financial Statements
(2) Financial Statement Schedules:
None.
(3) Exhibits:
4.1 The Certificate and Agreements of Limited Partnership for
the following Partnerships have been previously filed with
the Securities and Exchange Commission as Exhibit 2.1 to
Form 8-A filed by each Partnership on the dates shown below
and are hereby incorporated by reference.
Partnership Filing Date File No.
----------- ------------ --------
II-A November 18, 1987 0-16388
II-B November 19, 1987 0-16405
II-C August 5, 1988 0-16981
II-D August 5, 1988 0-16980
II-E November 17, 1988 0-17320
II-F June 5, 1989 0-17799
II-G June 5, 1989 0-17802
II-H February 20, 1990 0-18305
-85-
<PAGE>
4.2 The Agreements of Partnership for the following Production
Partnerships have been previously filed with the Securities
and Exchange Commission as Exhibit 2.2 to Form 8-A filed by
the related Partnerships on the dates shown below and are
hereby incorporated by reference.
Partnership Filing Date
----------- -----------
II-A November 18, 1987
II-B November 19, 1987
II-C August 5, 1988
II-D August 5, 1988
II-E November 17, 1988
II-F June 5, 1989
II-G June 5, 1989
II-H February 20, 1990
4.3 Second Amendment to Amended and Restated Agreement and
Certificate of Limited Partnership of Geodyne Energy Income
Limited Partnership II-A, filed as Exhibit 4.1 to
Registrant's Current Report on Form 8-K dated August 2, 1993
filed with the SEC on August 10, 1993 and is hereby
incorporated by reference.
4.4 Second Amendment to Amended and Restated Agreement and
Certificate of Limited Partnership of Geodyne Energy Income
Limited Partnership II-B, filed as Exhibit 4.2 to
Registrant's Current Report on Form 8-K dated August 2, 1993
filed with the SEC on August 10, 1993 and is hereby
incorporated by reference.
4.5 Second Amendment to Amended and Restated Agreement and
Certificate of Limited Partnership of Geodyne Energy Income
Limited Partnership II-C, filed as Exhibit 4.3 to
Registrant's Current Report on Form 8-K dated August 2, 1993
filed with the SEC on August 10, 1993 and is hereby
incorporated by reference.
4.6 Second Amendment to Amended and Restated Agreement and
Certificate of Limited Partnership of Geodyne Energy Income
Limited Partnership II-D, filed as Exhibit 4.4 to
Registrant's Current Report on Form 8-K dated August 2, 1993
filed with the SEC on August 10, 1993 and is hereby
incorporated by reference.
-86-
<PAGE>
4.7 Second Amendment to Amended and Restated Agreement and
Certificate of Limited Partnership of Geodyne Energy Income
Limited Partnership II-E, filed as Exhibit 4.5 to
Registrant's Current Report on Form 8-K dated August 2, 1993
filed with the SEC on August 10, 1993 and is hereby
incorporated by reference.
4.8 Second Amendment to Amended and Restated Agreement and
Certificate of Limited Partnership of Geodyne Energy Income
Limited Partnership II-F, filed as Exhibit 4.6 to
Registrant's Current Report on Form 8-K dated August 2, 1993
filed with the SEC on August 10, 1993 and is hereby
incorporated by reference.
4.9 Second Amendment to Amended and Restated Agreement and
Certificate of Limited Partnership of Geodyne Energy Income
Limited Partnership II-G, filed as Exhibit 4.7 to
Registrant's Current Report on Form 8-K dated August 2, 1993
filed with the SEC on August 10, 1993 and is hereby
incorporated by reference.
4.10 Second Amendment to Amended and Restated Agreement and
Certificate of Limited Partnership of Geodyne Energy Income
Limited Partnership II-H, filed as Exhibit 4.8 to
Registrant's Current Report on Form 8-K dated August 2, 1993
filed with the SEC on August 10, 1993 and is hereby
incorporated by reference.
4.11 Third Amendment to Agreement and Certificate of Limited
Partnership of Geodyne Energy Income Limited Partnership
II-E, filed as Exhibit 4.12 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995
filed with the SEC on April 4, 1996 and is hereby
incorporated by reference.
4.12 Third Amendment to Agreement and Certificate of Limited
Partnership of Geodyne Energy Income Limited Partnership
II-F, filed as Exhibit 4.13 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995
filed with the SEC on April 4, 1996 and is hereby
incorporated by reference.
-87-
<PAGE>
4.13 Third Amendment to Agreement and Certificate of Limited
Partnership of Geodyne Energy Income Limited Partnership
II-G, filed as Exhibit 4.14 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995
filed with the SEC on April 4, 1996 and is hereby
incorporated by reference.
4.14 Third Amendment to Agreement and Certificate of Limited
Partnership of Geodyne Energy Income Limited Partnership
II-H, filed as Exhibit 4.15 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995
filed with the SEC on April 4, 1996 and is hereby
incorporated by reference.
* 23.1 Consent of Ryder Scott Company Petroleum Engineers for
Geodyne Energy Income Limited Partnership II-A.
* 23.2 Consent of Ryder Scott Company Petroleum Engineers for
Geodyne Energy Income Limited Partnership II-B.
* 23.3 Consent of Ryder Scott Company Petroleum Engineers for
Geodyne Energy Income Limited Partnership II-C.
* 23.4 Consent of Ryder Scott Company Petroleum Engineers for
Geodyne Energy Income Limited Partnership II-D.
* 23.5 Consent of Ryder Scott Company Petroleum Engineers for
Geodyne Energy Income Limited Partnership II-E.
* 23.6 Consent of Ryder Scott Company Petroleum Engineers for
Geodyne Energy Income Limited Partnership II-F.
* 23.7 Consent of Ryder Scott Company Petroleum Engineers for
Geodyne Energy Income Limited Partnership II-G.
* 23.8 Consent of Ryder Scott Company Petroleum Engineers for
Geodyne Energy Income Limited Partnership II-H.
* 27.1 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income
Limited Partnership II-A's financial statements as of
December 31, 1998 and for the year ended December 31, 1998.
-88-
<PAGE>
* 27.2 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income Limited
Partnership II-B's financial statements as of December 31,
1998 and for the year ended December 31, 1998.
* 27.3 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income Limited
Partnership II-C's financial statements as of December 31,
1998 and for the year ended December 31, 1998.
* 27.4 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income Limited
Partnership II-D's financial statements as of December 31,
1998 and for the year ended December 31, 1998.
* 27.5 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income Limited
Partnership II-E's financial statements as of December 31,
1998 and for the year ended December 31, 1998.
* 27.6 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income Limited
Partnership II-F's financial statements as of December 31,
1998 and for the year ended December 31, 1998.
* 27.7 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income Limited
Partnership II-G's financial statements as of December 31,
1998 and for the year ended December 31, 1998.
* 27.8 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income Limited
Partnership II-H's financial statements as of December 31,
1998 and for the year ended December 31, 1998.
All other Exhibits are omitted as inapplicable.
----------
*Filed herewith.
(b) Reports on Form 8-K filed during the fourth quarter of 1998:
None.
-89-
<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.
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
By: GEODYNE RESOURCES, INC.
General Partner
February 23, 1999
By: /s/Dennis R. Neill
------------------------------
Dennis R. Neill
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/Dennis R. Neill President and February 23, 1999
------------------- Director (Principal
Dennis R. Neill Executive Officer)
/s/Patrick M. Hall (Principal February 23, 1999
------------------- Financial and
Patrick M. Hall Accounting Officer)
/s/Judy K. Fox Secretary February 23, 1999
-------------------
Judy K. Fox
-90-
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A
GEODYNE PRODUCTION PARTNERSHIP II-A
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, changes in partners' capital (deficit) and
cash flows present fairly, in all material respects, the combined financial
position of the Geodyne Energy Income Limited Partnership II-A, an Oklahoma
limited partnership, and Geodyne Production Partnership II-A, an Oklahoma
general partnership, at December 31, 1998 and 1997, and the combined results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnerships' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
January 29, 1999
F-1
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-A
Combined Balance Sheets
December 31, 1998 and 1997
ASSETS
------
1998 1997
----------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 213,480 $ 830,584
Accounts receivable:
Oil and gas sales 506,282 837,560
Other - 20,975
--------- ---------
Total current assets $ 719,762 $1,689,119
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 4,109,296 4,894,853
DEFERRED CHARGE 701,486 911,041
--------- ---------
$5,530,544 $7,495,013
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 171,762 $ 233,246
Gas imbalance payable 125,904 142,043
--------- ---------
Total current liabilities $ 297,666 $ 375,289
ACCRUED LIABILITY $ 180,325 $ 157,050
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 417,336) ($ 387,587)
Limited Partners, issued and
outstanding, 484,283 Units 5,469,889 7,350,261
--------- ---------
Total Partners' capital $5,052,553 $6,962,674
--------- ---------
$5,530,544 $7,495,013
========= =========
The accompanying notes are an integral part of these
combined financial statements.
F-2
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-A
Combined Statements of Operations
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
---------- ---------- ----------
REVENUES:
Oil and gas sales $3,911,823 $5,431,745 $5,832,874
Interest income 55,219 33,085 28,323
Gain on sale of oil and
gas properties 685,375 176,789 96,827
Gas contract settlement
income 1,710,190 - -
Other income - 20,975 -
--------- --------- ---------
$6,362,607 $5,662,594 $5,958,024
COSTS AND EXPENSES:
Lease operating $1,532,475 $1,538,814 $1,601,063
Production tax 240,522 349,607 339,977
Depreciation, depletion,
and amortization of oil
and gas properties 799,874 780,241 1,196,600
Impairment provision 164,111 684,276 -
General and administrative 573,597 591,256 620,562
--------- --------- ---------
$3,310,579 $3,944,194 $3,758,202
--------- --------- ---------
NET INCOME $3,052,028 $1,718,400 $2,199,822
========= ========= =========
GENERAL PARTNER -
NET INCOME $ 188,400 $ 141,030 $ 156,483
========= ========= =========
LIMITED PARTNERS -
NET INCOME $2,863,628 $1,577,370 $2,043,339
========= ========= =========
NET INCOME per Unit $ 5.91 $ 3.26 $ 4.22
========= ========= =========
UNITS OUTSTANDING 484,283 484,283 484,283
========= ========= =========
The accompanying notes are an integral part of these
combined financial statements.
F-3
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-A
Combined Statements of Changes in Partners' Capital (Deficit)
For the Years Ended December 31, 1998, 1997, and 1996
Limited General
Partners Partner Total
------------- ---------- -------------
Balance, Dec. 31, 1995 $ 9,494,552 ($311,994) $ 9,182,558
Net income 2,043,339 156,483 2,199,822
Cash distributions ( 2,600,000) ( 186,970) ( 2,786,970)
---------- ------- ----------
Balance, Dec. 31, 1996 $ 8,937,891 ($342,481) $ 8,595,410
Net income 1,577,370 141,030 1,718,400
Cash distributions ( 3,165,000) ( 186,136) ( 3,351,136)
---------- ------- ----------
Balance, Dec. 31, 1997 $ 7,350,261 ($387,587) $ 6,962,674
Net income 2,863,628 188,400 3,052,028
Cash distributions ( 4,744,000) ( 218,149) ( 4,962,149)
---------- ------- ----------
Balance, Dec. 31, 1998 $ 5,469,889 ($417,336) $ 5,052,553
========== ======= ==========
The accompanying notes are an integral part of these
combined financial statements.
F-4
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-A
Combined Statements of Cash Flows
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $3,052,028 $1,718,400 $2,199,822
Adjustments to reconcile
net income to net
cash provided by
operating activities:
Depreciation, depletion,
and amortization of oil
and gas properties 799,874 780,241 1,196,600
Impairment provision 164,111 684,276 -
Gain on sale of oil and
gas properties ( 685,375) ( 176,789) ( 96,827)
(Increase) decrease in
accounts receivable-
oil and gas sales 331,278 235,899 ( 308,384)
(Increase) decrease in
accounts receivable
- other 20,975 ( 20,975) -
Decrease in
deferred charge 209,555 37,176 221,060
Increase (decrease) in
accounts payable ( 61,484) 20,445 ( 325)
Increase (decrease) in
gas imbalance payable ( 16,139) 40,550 ( 63,344)
Increase (decrease) in
accrued Liability 23,275 ( 1,633) ( 113,984)
--------- --------- ---------
Net cash provided by
operating activities $3,838,098 $3,317,590 $3,034,618
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 280,907) ($ 237,163) ($ 98,540)
Proceeds from sale of
oil and gas properties 787,854 225,375 218,786
--------- --------- ---------
Net cash provided (used)
by investing activities $ 506,947 ($ 11,788) $ 120,246
--------- --------- ---------
F-5
<PAGE>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($4,962,149) ($3,351,136) ($2,786,970)
--------- --------- ---------
Net cash used by financing
activities ($4,962,149) ($3,351,136) ($2,786,970)
--------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS ($ 617,104) ($ 45,334) $ 367,894
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 830,584 875,918 508,024
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 213,480 $ 830,584 $ 875,918
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE PRODUCTION PARTNERSHIP II-B
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, changes in partners' capital (deficit) and
cash flows present fairly, in all material respects, the combined financial
position of the Geodyne Energy Income Limited Partnership II-B, an Oklahoma
limited partnership, and Geodyne Production Partnership II-B, an Oklahoma
general partnership, at December 31, 1998 and 1997, and the combined results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnerships' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
January 29, 1999
F-7
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-B
Combined Balance Sheets
December 31, 1998 and 1997
ASSETS
------
1998 1997
----------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 107,021 $ 644,574
Accounts receivable:
Oil and gas sales 328,334 565,152
--------- ---------
Total current assets $ 435,355 $1,209,726
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 2,569,828 3,035,158
DEFERRED CHARGE 179,833 169,811
--------- ---------
$3,185,016 $4,414,695
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 77,383 $ 141,754
Gas imbalance payable 19,790 24,671
--------- ---------
Total current liabilities $ 97,173 $ 166,425
ACCRUED LIABILITY $ 98,681 $ 88,519
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 320,234) ($ 305,223)
Limited Partners, issued and
outstanding, 361,719 Units 3,309,396 4,464,974
--------- ---------
Total Partners' capital $2,989,162 $4,159,751
--------- ---------
$3,185,016 $4,414,695
========= =========
The accompanying notes are an integral part of these
combined financial statements.
F-8
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-B
Combined Statements of Operations
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
---------- --------- ----------
REVENUES:
Oil and gas sales $2,492,043 $3,816,269 $4,179,527
Interest income 50,430 19,644 16,689
Gain (loss) on sale of
oil and gas
properties 65,551 203,247 ( 28,890)
Gas contract settlement
income 2,793,295 - -
--------- --------- ---------
$5,401,319 $4,039,160 $4,167,326
COSTS AND EXPENSES:
Lease operating $ 938,926 $1,062,972 $ 912,347
Production tax 153,573 251,478 252,366
Depreciation, depletion,
and amortization of oil
and gas properties 532,041 546,957 1,062,233
Impairment provision - 530,988 -
General and
administrative 430,272 451,569 496,791
--------- --------- ---------
$2,054,812 $2,843,964 $2,723,737
--------- --------- ---------
NET INCOME $3,346,507 $1,195,196 $1,443,589
========= ========= =========
GENERAL PARTNER -
NET INCOME $ 186,085 $ 99,884 $ 113,834
========= ========= =========
LIMITED PARTNERS -
NET INCOME $3,160,422 $1,095,312 $1,329,755
========= ========= =========
NET INCOME
per Unit $ 8.74 $ 3.03 $ 3.68
========= ========= =========
UNITS OUTSTANDING 361,719 361,719 361,719
========= ========= =========
The accompanying notes are an integral part of these
combined financial statements.
F-9
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-B
Combined Statements of Changes in Partners' Capital (Deficit)
For the Years Ended December 31, 1998, 1997, and 1996
Limited General
Partners Partner Total
------------- ---------- ------------
Balance, Dec. 31, 1995 $5,955,907 ($246,438) $5,709,469
Net income 1,329,755 113,834 1,443,589
Cash distributions ( 1,733,000) ( 132,579) ( 1,865,579)
--------- ------- ---------
Balance, Dec. 31, 1996 $5,552,662 ($265,183) $5,287,479
Net income 1,095,312 99,884 1,195,196
Cash distributions ( 2,183,000) ( 139,924) ( 2,322,924)
--------- ------- ---------
Balance, Dec. 31, 1997 $4,464,974 ($305,223) $4,159,751
Net income 3,160,422 186,085 3,346,507
Cash distributions ( 4,316,000) ( 201,096) ( 4,517,096)
--------- ------- ---------
Balance, Dec. 31, 1998 $3,309,396 ($320,234) $2,989,162
========= ======= =========
The accompanying notes are an integral part of these
combined financial statements.
F-10
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-B
Combined Statements of Cash Flows
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
----------- ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $3,346,507 $1,195,196 $1,443,589
Adjustments to reconcile
net income to net
cash provided by
operating activities:
Depreciation, depletion,
and amortization of oil
and gas properties 532,041 546,957 1,062,233
Impairment provision - 530,988 -
(Gain) loss on sale of
oil and gas properties ( 65,551) ( 203,247) 28,890
(Increase) decrease in
accounts receivable 236,818 145,056 ( 126,075)
(Increase) decrease in
deferred charge ( 10,022) ( 9,708) 66,200
Decrease in
accounts payable ( 64,371) ( 47,491) ( 21,981)
Increase (decrease) in
gas imbalance payable ( 4,881) 7,616 2,007
Increase (decrease) in
accrued liability 10,162 2,321 ( 215,486)
--------- --------- ---------
Net cash provided by
operating activities $3,980,703 $2,167,688 $2,239,377
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 83,614) ($ 20,782) ($ 89,173)
Proceeds from sale of
oil and gas properties 82,454 251,335 116,393
--------- --------- ---------
Net cash provided (used) by
investing activities ($ 1,160) $ 230,553 $ 27,220
--------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($4,517,096) ($2,322,924) ($1,865,579)
--------- --------- ---------
Net cash used by financing
activities ($4,517,096) ($2,322,924) ($1,865,579)
--------- --------- ---------
F-11
<PAGE>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS ($ 537,553) $ 75,317 $ 401,018
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 644,574 569,257 168,239
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 107,021 $ 644,574 $ 569,257
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE PRODUCTION PARTNERSHIP II-C
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, changes in partners' capital (deficit) and
cash flows present fairly, in all material respects, the combined financial
position of the Geodyne Energy Income Limited Partnership II-C, an Oklahoma
limited partnership, and Geodyne Production Partnership II-C, an Oklahoma
general partnership, at December 31, 1998 and 1997, and the combined results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnerships' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
January 29, 1999
F-13
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-C
Combined Balance Sheets
December 31, 1998 and 1997
ASSETS
------
1998 1997
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 66,617 $ 358,095
Accounts receivable:
Oil and gas sales 157,275 273,399
Other - 1,931
--------- ---------
Total current assets $ 223,892 $ 633,425
NET OIL AND GAS PROPERTIES,
utilizing the successful efforts
method 1,382,430 1,667,269
DEFERRED CHARGE 153,412 139,621
--------- ---------
$1,759,734 $2,440,315
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 29,848 $ 33,293
Gas imbalance payable 38,249 22,563
--------- ---------
Total current liabilities $ 68,097 $ 55,856
ACCRUED LIABILITY $ 59,308 $ 49,647
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 133,264) ($ 123,277)
Limited Partners, issued and
outstanding, 154,621 Units 1,765,593 2,458,089
--------- ---------
Total Partners' capital $1,632,329 $2,334,812
--------- ---------
$1,759,734 $2,440,315
========= =========
The accompanying notes are an integral part of these
combined financial statements.
F-14
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-C
Combined Statements of Operations
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
---------- ---------- -----------
REVENUES:
Oil and gas sales $1,136,474 $1,796,657 $1,925,940
Interest income 25,163 11,360 8,460
Gain on sale of oil
and gas properties 177,795 156,919 42,354
Gas contract settlement
income 1,197,148 - -
Other income - 1,931 -
--------- --------- ---------
$2,536,580 $1,966,867 $1,976,754
COSTS AND EXPENSES:
Lease operating $ 351,162 $ 397,402 $ 477,750
Production tax 75,947 130,419 125,174
Depreciation, depletion,
and amortization of oil
and gas properties 246,338 268,219 397,849
Impairment provision - 66,617 -
General and administrative 184,538 193,799 214,421
--------- --------- ---------
$ 857,985 $1,056,456 $1,215,194
--------- --------- ---------
NET INCOME $1,678,595 $ 910,411 $ 761,560
========= ========= =========
GENERAL PARTNER - NET INCOME $ 95,091 $ 57,028 $ 53,569
========= ========= =========
LIMITED PARTNERS - NET
INCOME $1,583,504 $ 853,383 $ 707,991
========= ========= =========
NET INCOME per Unit $ 10.24 $ 5.52 $ 4.58
========= ========= =========
UNITS OUTSTANDING 154,621 154,621 154,621
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-15
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-C
Combined Statements of Changes in Partners' Capital (Deficit)
For the Years Ended December 31, 1998, 1997, and 1996
Limited General
Partners Partner Total
------------ ---------- ------------
Balance, Dec. 31, 1995 $3,039,715 ($ 99,615) $2,940,100
Net income 707,991 53,569 761,560
Cash distributions ( 840,000) ( 69,573) ( 909,573)
--------- ------- ---------
Balance, Dec. 31, 1996 $2,907,706 ($115,619) $2,792,087
Net income 853,383 57,028 910,411
Cash distributions ( 1,303,000) ( 64,686) ( 1,367,686)
--------- ------- ---------
Balance, Dec. 31, 1997 $2,458,089 ($123,277) $2,334,812
Net income 1,583,504 95,091 1,678,595
Cash distributions ( 2,276,000) ($105,078) ($2,381,078)
--------- ------- ---------
Balance, Dec. 31, 1998 $1,765,593 ($133,264) $1,632,329
========= ======= =========
The accompanying notes are an integral part of these
combined financial statements.
F-16
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-C
Combined Statements of Cash Flows
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------ ------------ ----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $1,678,595 $ 910,411 $ 761,560
Adjustments to reconcile
net income to
net cash provided by
operating activities:
Depreciation, depletion,
and amortization of oil
and gas properties 246,338 268,219 397,849
Impairment provision - 66,617 -
Gain on sale of oil
and gas properties ( 177,795) ( 156,919) ( 42,354)
(Increase) decrease in
accounts receivable -
oil and gas sales 116,124 66,783 ( 48,817)
(Increase) decrease in
accounts receivable -
other 1,931 ( 1,931) -
(Increase) decrease in
deferred charge ( 13,791) 25,332 94,988
Increase (decrease) in
accounts payable ( 3,445) ( 36,434) 2,434
Increase (decrease) in
gas imbalance payable 15,686 12,177 ( 49,506)
Increase (decrease) in
accrued liability 9,661 ( 19,501) ( 69,510)
--------- --------- ---------
Net cash provided by
operating activities $1,873,304 $1,134,754 $1,046,644
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 34,333) ($ 5,112) ($ 5,076)
Proceeds from sale of
oil and gas properties 250,629 208,805 172,986
--------- --------- ---------
Net cash provided
by investing activities $ 216,296 $ 203,693 $ 167,910
--------- --------- ---------
F-17
<PAGE>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($2,381,078) ($1,367,686) ($ 909,573)
--------- --------- ---------
Net cash used by financing
activities ($2,381,078) ($1,367,686) ($ 909,573)
--------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS ($ 291,478) ($ 29,239) $ 304,981
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 358,095 387,334 82,353
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 66,617 $ 358,095 $ 387,334
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE PRODUCTION PARTNERSHIP II-D
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, changes in partners' capital (deficit) and
cash flows present fairly, in all material respects, the combined financial
position of the Geodyne Energy Income Limited Partnership II-D, an Oklahoma
limited partnership, and Geodyne Production Partnership II-D, an Oklahoma
general partnership, at December 31, 1998 and 1997, and the combined results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnerships' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
January 29, 1999
F-19
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-D
Combined Balance Sheets
December 31, 1998 and 1997
ASSETS
------
1998 1997
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 311,556 $1,151,142
Accounts receivable:
Oil and gas sales 342,433 646,750
Other - 20,267
--------- ---------
Total current assets $ 653,989 $1,818,159
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 2,726,713 3,417,760
DEFERRED CHARGE 614,207 544,345
--------- ---------
$3,994,909 $5,780,264
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 67,934 $ 86,058
Gas imbalance payable 149,648 107,004
--------- ---------
Total current liabilities $ 217,582 $ 193,062
ACCRUED LIABILITY $ 206,215 $ 239,083
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 247,182) ($ 224,003)
Limited Partners, issued and
outstanding, 314,878 Units 3,818,294 5,572,122
--------- ---------
Total Partners' capital $3,571,112 $5,348,119
--------- ---------
$3,994,909 $5,780,264
========= =========
The accompanying notes are an integral part of these
combined financial statements.
F-20
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-D
Combined Statements of Operations
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------ ------------ -----------
REVENUES:
Oil and gas sales $2,411,051 $4,314,154 $4,329,102
Interest income 66,699 28,919 16,083
Gain on sale of oil
and gas properties 496,238 447,981 80,630
Gas contract settlement
income 3,033,646 - -
Other - 20,267 -
--------- --------- ---------
$6,007,634 $4,811,321 $4,425,815
COSTS AND EXPENSES:
Lease operating $ 777,607 $1,331,185 $1,492,375
Production tax 168,364 325,902 308,524
Depreciation, depletion,
and amortization of oil
and gas properties 518,991 689,112 800,433
Impairment provision - 143,957 -
General and administrative 374,675 397,583 453,882
--------- --------- ---------
$1,839,637 $2,887,739 $3,055,214
--------- --------- ---------
NET INCOME $4,167,997 $1,923,582 $1,370,601
========= ========= =========
GENERAL PARTNER - NET INCOME $ 225,825 $ 127,204 $ 99,743
========= ========= =========
LIMITED PARTNERS -
NET INCOME $3,942,172 $1,796,378 $1,270,858
========= ========= =========
NET INCOME per Unit $ 12.52 $ 5.70 $ 4.04
========= ========= =========
UNITS OUTSTANDING 314,878 314,878 314,878
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-21
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-D
Combined Statements of Changes in Partners' Capital (Deficit)
For the Years Ended December 31, 1998, 1997, and 1996
Limited General
Partners Partner Total
------------ ---------- ------------
Balance, Dec. 31, 1995 $6,884,886 ($143,473) $6,741,413
Net income 1,270,858 99,743 1,370,601
Cash distributions ( 1,528,000) ( 175,226) ( 1,703,226)
--------- ------- ---------
Balance, Dec. 31, 1996 $6,627,744 ($218,956) $6,408,788
Net income 1,796,378 127,204 1,923,582
Cash distributions ( 2,852,000) ( 132,251) ( 2,984,251)
--------- ------- ---------
Balance, Dec. 31, 1997 $5,572,122 ($224,003) $5,348,119
Net income 3,942,172 225,825 4,167,997
Cash distributions ( 5,696,000) ( 249,004) ( 5,945,004)
--------- ------- ---------
Balance, Dec. 31, 1998 $3,818,294 ($247,182) $3,571,112
========= ======= =========
The accompanying notes are an integral part of these
combined financial statements.
F-22
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-D
Combined Statements of Cash Flows
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $4,167,997 $1,923,582 $1,370,601
Adjustments to reconcile
net income to net
cash provided by operating
activities:
Depreciation, depletion,
and amortization of oil
and gas properties 518,991 689,112 800,433
Impairment provision - 143,957 -
Gain on sale of oil
and gas properties ( 496,238) ( 447,981) ( 80,630)
(Increase) decrease in
accounts receivable -
oil and gas sales 304,317 146,433 ( 162,813)
(Increase) decrease in
accounts receivable -
other 20,267 ( 20,267) -
(Increase) decrease in
deferred Charge ( 69,862) 318,794 86,088
Increase (decrease) in
accounts payable ( 18,124) ( 73,909) 13,159
Increase (decrease) in
gas imbalance payable 42,644 ( 11,309) 790
Decrease in
accrued liability ( 32,868) ( 27,699) ( 18,638)
--------- --------- ---------
Net cash provided by
operating activities $4,437,124 $2,640,713 $2,008,990
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 1,639) ($ 41,889) ($ 22,210)
Proceeds from sale of
oil and gas properties 669,933 629,832 305,815
--------- --------- ---------
Net cash provided
by investing activities $ 668,294 $ 587,943 $ 283,605
--------- --------- ---------
F-23
<PAGE>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($5,945,004) ($2,984,251) ($1,703,226)
--------- --------- ---------
Net cash used by financing
activities ($5,945,004) ($2,984,251) ($1,703,226)
--------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS ($ 839,586) $ 244,405 $ 589,369
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 1,151,142 906,737 317,368
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 311,556 $1,151,142 $ 906,737
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE PRODUCTION PARTNERSHIP II-E
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, changes in partners' capital (deficit) and
cash flows present fairly, in all material respects, the combined financial
position of the Geodyne Energy Income Limited Partnership II-E, an Oklahoma
limited partnership, and Geodyne Production Partnership II-E, an Oklahoma
general partnership, at December 31, 1998 and 1997, and the combined results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnerships' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
January 29, 1999
F-25
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-E
Combined Balance Sheets
December 31, 1998 and 1997
ASSETS
------
1998 1997
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 376,779 $ 670,777
Accounts receivable:
Oil and gas sales 220,028 415,377
Other - 110
--------- ---------
Total current assets $ 596,807 $1,086,264
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 2,388,613 2,841,080
DEFERRED CHARGE 275,532 330,531
--------- ---------
$3,260,952 $4,257,875
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 38,881 $ 100,603
Gas imbalance payable 148,458 171,089
--------- ---------
Total current liabilities $ 187,339 $ 271,692
ACCRUED LIABILITY $ 81,050 $ 63,625
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 173,306) ($ 172,017)
Limited Partners, issued and
outstanding, 228,821 Units 3,165,869 4,094,575
--------- ---------
Total Partners' capital $2,992,563 $3,922,558
--------- ---------
$3,260,952 $4,257,875
========= =========
The accompanying notes are an integral part of these
combined financial statements.
F-26
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-E
Combined Statements of Operations
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------ ------------ -----------
REVENUES:
Oil and gas sales $1,704,463 $2,616,003 $2,693,317
Interest income 99,814 21,722 10,863
Gain on sale of oil
and gas properties 328,245 272,654 117,078
Gas contract settlement
income 6,159,355 - -
--------- --------- ---------
$8,291,877 $2,910,379 $2,821,258
COSTS AND EXPENSES:
Lease operating $ 550,014 $ 700,409 $ 710,012
Production tax 122,476 208,912 203,065
Depreciation, depletion,
and amortization of oil
and gas properties 544,040 626,965 728,518
Impairment provision - 992,851 -
General and administrative 276,331 314,835 417,205
--------- --------- ---------
$1,492,861 $2,843,972 $2,058,800
--------- --------- ---------
NET INCOME $6,799,016 $ 66,407 $ 762,458
========= ========= =========
GENERAL PARTNER - NET INCOME $ 356,722 $ 66,976 $ 66,720
========= ========= =========
LIMITED PARTNERS -
NET INCOME (LOSS) $6,442,294 ($ 569) $ 695,738
========= ========= =========
NET INCOME per Unit $ 28.15 $ .00 $ 3.04
========= ========= =========
UNITS OUTSTANDING 228,821 228,821 228,821
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-27
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-E
Combined Statements of Changes in Partners' Capital (Deficit)
For the Years Ended December 31, 1998, 1997, and 1996
Limited General
Partners Partner Total
------------- ---------- -------------
Balance, Dec. 31, 1995 $6,093,406 ($122,950) $5,970,456
Net income 695,738 66,720 762,458
Cash distributions ( 1,019,000) ( 91,365) ( 1,110,365)
--------- ------- ---------
Balance, Dec. 31, 1996 $5,770,144 ($147,595) $5,622,549
Net income ( 569) 66,976 66,407
Cash distributions ( 1,675,000) ( 91,398) ( 1,766,398)
--------- ------- ---------
Balance, Dec. 31, 1997 $4,094,575 ($172,017) $3,922,558
Net income 6,442,294 356,722 6,799,016
Cash distributions ( 7,371,000) ( 358,011) ( 7,729,011)
--------- ------- ---------
Balance, Dec. 31, 1998 $3,165,869 ($173,306) $2,992,563
========= ======= =========
The accompanying notes are an integral part of these
combined financial statements.
F-28
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-E
Combined Statements of Cash Flows
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $6,799,016 $ 66,407 $ 762,458
Adjustments to reconcile
net income to net
cash provided by operating
activities:
Depreciation, depletion,
and amortization of oil
and gas properties 544,040 626,965 728,518
Impairment provision - 992,851 -
Gain on sale of oil
and gas properties ( 328,245) ( 272,654) ( 117,078)
(Increase) decrease in
accounts receivable -
oil and gas sales 195,349 97,196 ( 102,943)
(Increase) decrease in
accounts receivable -
other 110 ( 110) -
Decrease in deferred
charge 54,999 25,116 19,098
Increase (decrease) in
accounts payable ( 61,722) ( 32,578) 42,789
Increase (decrease) in
gas imbalance payable ( 22,631) 9,908 76,916
Increase (decrease) in
accrued liability 17,425 4,391 ( 75,049)
--------- --------- ---------
Net cash provided by
operating activities $7,198,341 $1,517,492 $1,334,709
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 120,953) ($ 40,623) ($ 70,806)
Proceeds from sale of
oil and gas properties 357,625 431,541 174,185
--------- --------- ---------
Net cash provided by
investing activities $ 236,672 $ 390,918 $ 103,379
--------- --------- ---------
F-29
<PAGE>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($7,729,011) ($1,766,398) ($1,110,365)
--------- --------- ---------
Net cash used by financing
activities ($7,729,011) ($1,766,398) ($1,110,365)
--------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS ($ 293,998) $ 142,012 $ 327,723
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 670,777 528,765 201,042
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 376,779 $ 670,777 $ 528,765
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE PRODUCTION PARTNERSHIP II-F
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, changes in partners' capital (deficit) and
cash flows present fairly, in all material respects, the combined financial
position of the Geodyne Energy Income Limited Partnership II-F, an Oklahoma
limited partnership, and Geodyne Production Partnership II-F, an Oklahoma
general partnership, at December 31, 1998 and 1997, and the combined results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnerships' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
January 29, 1999
F-31
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-F
Combined Balance Sheets
December 31, 1998 and 1997
ASSETS
------
1998 1997
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 153,240 $ 741,852
Accounts receivable:
Oil and gas sales 187,525 334,094
Other - 43
--------- ---------
Total current assets $ 340,765 $1,075,989
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 2,086,592 2,432,033
DEFERRED CHARGE 46,373 56,867
--------- ---------
$2,473,730 $3,564,889
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 24,007 $ 64,348
Gas imbalance payable 4,233 25,184
--------- ---------
Total current liabilities $ 28,240 $ 89,532
ACCRUED LIABILITY $ 24,995 $ 27,907
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 144,763) ($ 143,355)
Limited Partners, issued and
outstanding, 171,400 Units 2,565,258 3,590,805
--------- ---------
Total Partners' capital $2,420,495 $3,447,450
--------- ---------
$2,473,730 $3,564,889
========= =========
The accompanying notes are an integral part of these
combined financial statements.
F-32
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-F
Combined Statements of Operations
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------ ---------- -----------
REVENUES:
Oil and gas sales $1,444,802 $2,191,389 $2,433,313
Interest income 18,145 17,447 14,218
Gain on sale of oil
and gas properties 657,881 557,746 122,579
--------- --------- ---------
$2,120,828 $2,766,582 $2,570,110
COSTS AND EXPENSES:
Lease operating $ 301,416 $ 396,093 $ 485,892
Production tax 96,998 150,372 158,092
Depreciation, depletion,
and amortization of oil
and gas properties 360,697 409,001 531,040
Impairment provision - 1,377,160 -
General and administrative 201,745 204,398 206,749
--------- --------- ---------
$ 960,856 $2,537,024 $1,381,773
--------- --------- ---------
NET INCOME $1,159,972 $ 229,558 $1,188,337
========= ========= =========
GENERAL PARTNER - NET INCOME $ 71,519 $ 81,927 $ 79,948
========= ========= =========
LIMITED PARTNERS - NET INCOME $1,088,453 $ 147,631 $1,108,389
========= ========= =========
NET INCOME per Unit $ 6.35 $ .86 $ 6.47
========= ========= =========
UNITS OUTSTANDING 171,400 171,400 171,400
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-33
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-F
Combined Statements of Changes in Partners' Capital (Deficit)
For the Years Ended December 31, 1998, 1997, and 1996
Limited General
Partners Partner Total
------------ --------- ------------
Balance, Dec. 31, 1995 $5,691,785 ($ 84,377) $5,607,408
Net income 1,108,389 79,948 1,188,337
Cash distributions ( 1,485,000) ( 101,485) ( 1,586,485)
--------- ------- ---------
Balance, Dec. 31, 1996 $5,315,174 ($105,914) $5,209,260
Net income 147,631 81,927 229,558
Cash distributions ( 1,872,000) ( 119,368) ( 1,991,368)
--------- ------- ---------
Balance, Dec. 31, 1997 $3,590,805 ($143,355) $3,447,450
Net income 1,088,453 71,519 1,159,972
Cash distributions ( 2,114,000) ( 72,927) ( 2,186,927)
--------- ------- ---------
Balance, Dec. 31, 1998 $2,565,258 ($144,763) $2,420,495
========= ======= =========
The accompanying notes are an integral part of these
combined financial statements.
F-34
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-F
Combined Statements of Cash Flows
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $1,159,972 $ 229,558 $1,188,337
Adjustments to reconcile
net income to
net cash provided by
operating activities:
Depreciation, depletion,
and amortization of oil
and gas properties 360,697 409,001 531,040
Impairment provision - 1,377,160 -
Gain on sale of oil
and gas properties ( 657,881) ( 557,746) ( 122,579)
(Increase) decrease in
accounts receivable -
oil and gas sales 146,569 95,745 ( 77,366)
(Increase) decrease in
accounts receivable
- general partner - 15,285 ( 15,285)
(Increase) decrease in
accounts receivable -
other 43 ( 43) -
Decrease in deferred
charge 10,494 14,836 47,412
Increase (decrease) in
accounts payable ( 40,341) 21,430 ( 36,430)
Increase (decrease) in
gas imbalance payable ( 20,951) ( 6,393) 8,204
Increase (decrease) in
accrued liability ( 2,912) ( 415) 4,992
--------- --------- ---------
Net cash provided by
operating activities $ 955,690 $1,598,418 $1,528,325
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 75,167) ($ 65,635) ($ 11,332)
Proceeds from sale of
oil and gas properties 717,792 758,534 185,579
--------- --------- ---------
Net cash provided by
investing activities $ 642,625 $ 692,899 $ 174,247
--------- --------- ---------
F-35
<PAGE>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($2,186,927) ($1,991,368) ($1,586,485)
--------- --------- ---------
Net cash used by financing
activities ($2,186,927) ($1,991,368) ($1,586,485)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ($ 588,612) $ 299,949 $ 116,087
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 741,852 441,903 325,816
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 153,240 $ 741,852 $ 441,903
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE PRODUCTION PARTNERSHIP II-G
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, changes in partners' capital (deficit) and
cash flows present fairly, in all material respects, the combined financial
position of the Geodyne Energy Income Limited Partnership II-G, an Oklahoma
limited partnership, and Geodyne Production Partnership II-G, an Oklahoma
general partnership, at December 31, 1998 and 1997, and the combined results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnerships' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
January 29, 1999
F-37
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-G
Combined Balance Sheets
December 31, 1998 and 1997
ASSETS
------
1998 1997
------------ -------------
CURRENT ASSETS:
Cash and cash equivalents $ 333,168 $1,564,325
Accounts receivable:
Oil and gas sales 398,538 710,336
--------- ---------
Total current assets $ 731,706 $2,274,661
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 4,492,141 5,237,082
DEFERRED CHARGE 101,955 123,977
--------- ---------
$5,325,802 $7,635,720
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 51,385 $ 135,761
Gas imbalance payable 9,029 57,250
--------- ---------
Total current liabilities $ 60,414 $ 193,011
ACCRUED LIABILITY $ 57,830 $ 64,109
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 304,885) ($ 312,392)
Limited Partners, issued and
outstanding, 372,189 Units 5,512,443 7,690,992
--------- ---------
Total Partners' capital $5,207,558 $7,378,600
--------- ---------
$5,325,802 $7,635,720
========= =========
The accompanying notes are an integral part of these
combined financial statements.
F-38
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-G
Combined Statements of Operations
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
---------- ---------- ----------
REVENUES:
Oil and gas sales $3,072,455 $4,670,245 $5,158,799
Interest income 38,524 37,746 29,659
Gain on sale of oil
and gas properties 1,374,966 1,226,822 225,341
--------- --------- ---------
$4,485,945 $5,934,813 $5,413,799
COSTS AND EXPENSES:
Lease operating $ 643,300 $ 859,059 $1,048,439
Production tax 209,399 326,663 337,815
Depreciation, depletion,
and amortization of oil
and gas properties 778,782 916,396 1,163,236
Impairment provision - 3,101,656 -
General and administrative 437,963 443,590 448,345
--------- --------- ---------
$2,069,444 $5,647,364 $2,997,835
--------- --------- ---------
NET INCOME $2,416,501 $ 287,449 $2,415,964
========= ========= =========
GENERAL PARTNER - NET INCOME $ 150,050 $ 172,947 $ 165,845
========= ========= =========
LIMITED PARTNERS - NET INCOME $2,266,451 $ 114,502 $2,250,119
========= ========= =========
NET INCOME per Unit $ 6.09 $ .31 $ 6.05
========= ========= =========
UNITS OUTSTANDING 372,189 372,189 372,189
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-39
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-G
Combined Statements of Changes in Partners' Capital (Deficit)
For the Years Ended December 31, 1998, 1997, and 1996
Limited General
Partners Partner Total
------------ ---------- -------------
Balance, Dec. 31, 1995 $12,439,371 ($197,620) $12,241,751
Net income 2,250,119 165,845 2,415,964
Cash distributions ( 3,091,000) ( 212,537) ( 3,303,537)
---------- ------- ----------
Balance, Dec. 31, 1996 $11,598,490 ($244,312) $11,354,178
Net income 114,502 172,947 287,449
Cash distributions ( 4,022,000) ( 241,027) ( 4,263,027)
---------- ------- ----------
Balance, Dec. 31, 1997 $ 7,690,992 ($312,392) $ 7,378,600
Net income 2,266,451 150,050 2,416,501
Cash distributions ( 4,445,000) ( 142,543) ( 4,587,543)
---------- ------- ----------
Balance, Dec. 31, 1998 $ 5,512,443 ($304,885) ($ 5,207,558)
========== ======= ==========
The accompanying notes are an integral part of these
combined financial statements.
F-40
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-G
Combined Statements of Cash Flows
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $2,416,501 $ 287,449 $2,415,964
Adjustments to reconcile
net income to
net cash provided by
operating activities:
Depreciation, depletion,
and amortization of oil
and gas properties 778,782 916,396 1,163,236
Impairment provision - 3,101,656 -
Gain on sale of oil
and gas properties ( 1,374,966) ( 1,226,822) ( 225,341)
(Increase) decrease in
accounts receivable -
general partner - 34,620 ( 34,620)
(Increase) decrease in
accounts receivable -
oil and gas sales 311,798 201,103 ( 162,982)
Decrease in
deferred charge 22,022 31,741 101,656
Increase (decrease) in
accounts payable ( 84,376) 42,114 ( 82,448)
Increase (decrease) in
gas imbalance payable ( 48,221) ( 14,745) 21,494
Increase (decrease) in
accrued liability ( 6,279) 7,197 6,110
--------- --------- ---------
Net cash provided by
operating activities $2,015,261 $3,380,709 $3,203,069
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 162,692) ($ 143,657) ($ 27,441)
Proceeds from sale of
oil and gas properties 1,503,817 1,658,135 398,153
--------- --------- ---------
Net cash provided by
investing activities $1,341,125 $1,514,478 $ 370,712
--------- --------- ---------
F-41
<PAGE>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($4,587,543) ($4,263,027) ($3,303,537)
--------- --------- ---------
Net cash used by financing
activities ($4,587,543) ($4,263,027) ($3,303,537)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ($1,231,157) $ 632,160 $ 270,244
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 1,564,325 932,165 661,921
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 333,168 $1,564,325 $ 932,165
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-42
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
GEODYNE PRODUCTION PARTNERSHIP II-H
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, changes in partners' capital (deficit) and
cash flows present fairly, in all material respects, the combined financial
position of the Geodyne Energy Income Limited Partnership II-H, an Oklahoma
limited partnership, and Geodyne Production Partnership II-H, an Oklahoma
general partnership, at December 31, 1998 and 1997, and the combined results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnerships' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
January 29, 1999
F-43
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-H
Combined Balance Sheets
December 31, 1998 and 1997
ASSETS
------
1998 1997
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 78,275 $ 364,502
Accounts receivable:
Oil and gas sales 95,260 168,833
--------- ---------
Total current assets $ 173,535 $ 533,335
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 1,057,945 1,225,295
DEFERRED CHARGE 23,749 29,519
--------- ---------
$1,255,229 $1,788,149
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 12,408 $ 31,925
Gas imbalance payable - 13,149
--------- ---------
Total current liabilities $ 12,408 $ 45,074
ACCRUED LIABILITY $ 12,063 $ 14,648
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 75,631) ($ 78,796)
Limited Partners, issued and
outstanding, 91,711 Units 1,306,389 1,807,223
--------- ---------
Total Partners' capital $1,230,758 $1,728,427
--------- ---------
$1,255,229 $1,788,149
========= =========
The accompanying notes are an integral part of these
combined financial statements.
F-44
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-H
Combined Statements of Operations
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
---------- ------------ ------------
REVENUES:
Oil and gas sales $ 733,613 $1,119,734 $1,230,222
Interest income 8,669 8,764 6,728
Gain on sale of
oil and gas properties 317,342 286,788 51,909
--------- --------- ---------
$1,059,624 $1,415,286 $1,288,859
COSTS AND EXPENSES:
Lease operating $ 154,123 $ 209,123 $ 257,850
Production tax 51,340 80,919 81,540
Depreciation, depletion,
and amortization of oil
and gas properties 178,994 202,115 280,796
Impairment provision - 785,220 -
General and administrative 107,912 109,301 110,738
--------- --------- ---------
$ 492,369 $1,386,678 $ 730,924
--------- --------- ---------
NET INCOME $ 567,255 $ 28,608 $ 557,935
========= ========= =========
GENERAL PARTNER - NET INCOME $ 35,089 $ 40,425 $ 38,792
========= ========= =========
LIMITED PARTNERS - NET INCOME
(LOSS) $ 532,166 ($ 11,817) $ 519,143
========= ========= =========
NET INCOME (LOSS) per Unit $ 5.80 ($ .13) $ 5.66
========= ========= =========
UNITS OUTSTANDING 91,711 91,711 91,711
========= ========= =========
The accompanying notes are an integral
part of these combined financial statements.
F-45
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-H
Combined Statements of Changes in Partners' Capital (Deficit)
For the Years Ended December 31, 1998, 1997, and 1996
Limited General
Partners Partner Total
------------ --------- ------------
Balance, Dec. 31, 1995 $3,002,897 ($47,635) $2,955,262
Net income 519,143 38,792 557,935
Cash distributions ( 727,000) ( 49,992) ( 776,992)
--------- ------ ---------
Balance, Dec. 31, 1996 $2,795,040 ($58,835) $2,736,205
Net income (loss) ( 11,817) 40,425 28,608
Cash distributions ( 976,000) ( 60,386) ( 1,036,386)
--------- ------ ---------
Balance, Dec. 31, 1997 $1,807,223 ($78,796) $1,728,427
Net income 532,166 35,089 567,255
Cash distributions ( 1,033,000) ( 31,924) ( 1,064,924)
--------- ------ ---------
Balance, Dec. 31, 1998 $1,306,389 ($75,631) $1,230,758
========= ====== =========
The accompanying notes are an integral part of these
combined financial statements.
F-46
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-H
Combined Statements of Cash Flows
For the Years Ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------ ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $567,255 $ 28,608 $557,935
Adjustments to reconcile
net income to net
cash provided by operating
activities:
Depreciation, depletion,
and amortization of oil
and gas properties 178,994 202,115 280,796
Impairment provision - 785,220 -
Gain on sale of oil
and gas properties ( 317,342) ( 286,788) ( 51,909)
(Increase) decrease in
accounts receivable -
oil and gas sales 73,573 47,741 ( 37,069)
(Increase) decrease in
accounts receivable -
general partner - 9,151 ( 9,151)
Decrease in
deferred charge 5,770 8,703 23,840
Increase (decrease) in
accounts payable ( 19,517) 8,571 ( 22,050)
Increase (decrease) in gas
imbalance payable ( 13,149) ( 3,398) 5,336
Increase (decrease) in
accrued liability ( 2,585) 509 1,360
------- ------- -------
Net cash provided by
operating activities $472,999 $800,432 $749,088
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ($ 40,018) ($ 35,978) ($ 6,306)
Proceeds from sale of
oil and gas properties 345,716 414,950 96,882
------- ------- ------
Net cash provided by
investing activities $305,698 $378,972 $ 90,576
------- ------- ------
F-47
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions ($1,064,924) ($1,036,386) ($776,992)
--------- --------- -------
Net cash used by financing
activities ($1,064,924) ($1,036,386) ($776,992)
--------- --------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ($ 286,227) $ 143,018 $ 62,672
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 364,502 $ 221,484 158,812
--------- --------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 78,275 $ 364,502 $221,484
========= ========= =======
The accompanying notes are an integral
part of these combined financial statements.
F-48
<PAGE>
GEODYNE ENERGY INCOME PROGRAM II
Notes to Combined Financial Statements
For the Years Ended December 31, 1998, 1997, and 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The Geodyne Energy Income Limited Partnerships (the "Partnerships") were
formed pursuant to a public offering of depositary units ("Units"). Upon
formation, investors became limited partners (the "Limited Partners") and held
Units issued by each Partnership. Geodyne Resources, Inc. is the general partner
of each Partnership. Each Partnership is a general partner in the related
Geodyne Production Partnership (the "Production Partnership") in which Geodyne
Resources, Inc. serves as the managing partner. Limited Partner capital
contributions were contributed to the related Production Partnerships for
investment in producing oil and gas properties. The Partnerships were activated
on the following dates with the following Limited Partner capital contributions.
Limited
Date of Partner Capital
Partnership Activation Contributions
----------- ------------------ ---------------
II-A July 22, 1987 $48,428,300
II-B October 14,1987 36,171,900
II-C January 14, 1988 15,462,100
II-D May 10, 1988 31,487,800
II-E September 27, 1988 22,882,100
II-F January 5, 1989 17,140,000
II-G April 10, 1989 37,218,900
II-H May 17, 1989 9,171,100
The Partnerships will terminate on December 31, 2001 in accordance with
the partnership agreements for the Partnerships. However, such partnership
agreements provide that the General Partner may extend the term of each
Partnership for up to five periods of two years each. As of the date of these
financial statements, the General Partner has not determined whether to extend
the term of any Partnership.
For purposes of these financial statements, the Partnerships and
Production Partnerships are collectively referred to as the "Partnerships" and
the general partner and managing partner are collectively referred to as the
"General Partner".
An affiliate of the General Partner owned the following Units at December
31, 1998:
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<PAGE>
Number of Percent of
Partnership Units Owned Outstanding Units
----------- ----------- -----------------
II-A 73,819 15.2%
II-B 58,211 16.1%
II-C 33,567 21.7%
II-D 42,319 13.4%
II-E 39,764 17.4%
II-F 24,863 14.5%
II-G 41,224 11.1%
II-H 14,059 15.3%
The Partnerships' sole business is the development and production of oil
and gas. Substantially all of the Partnerships' gas reserves are being sold
regionally on 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. The Partnerships' oil is sold at or near the
Partnerships' wells under short-term purchase contracts at prevailing
arrangements which are customary in the oil industry. The prices received for
the Partnerships' oil and gas are subject to influences such as global
consumption and supply trends. In 1998, the price of oil decreased to
historically low levels. If the price of oil remains low, or if it decreases
further, there may be a significant impact on the Partnerships' near term
results of operations and cash flows.
Allocation of Costs and Revenues
The combination of the allocation provisions in each Partnership's limited
partnership agreement and each Production Partnership's partnership agreement
(collectively, the "Partnership Agreement") results in allocations of costs and
income between the Limited Partners and General Partner as follows:
Before Payout(1) After Payout(1)
------------------ ------------------
General Limited General Limited
Partner Partners Partner Partners
-------- -------- -------- --------
Costs(2)
- ------------------------
Sales commissions, pay-
ment for organization
and offering costs
and management fee 1% 99% - -
Property acquisition
costs 1% 99% 1% 99%
F-50
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Identified development
drilling 1% 99% 1% 99%
Development drilling(3) 5% 95% 15% 85%
General and administra-
tive costs, direct
administrative costs
and operating costs(3) 5% 95% 15% 85%
Income(2)
- -----------------------
Temporary investments of
Limited Partners'
subscriptions 1% 99% 1% 99%
Income from oil and gas
production(3) 5% 95% 15% 85%
Gain on sale of produc-
ing properties(3) 5% 95% 15% 85%
All other income(3) 5% 95% 15% 85%
- ----------
(1) Payout occurs when total distributions to Limited Partners equal total
original Limited Partner subscriptions.
(2) The allocations in the table result generally from the combined effect of
the allocation provisions in the Partnership Agreements. For example, the
costs incurred in development drilling are allocated 95.9596% to the
limited partnership and 4.0404% to the managing partner. The 95.9596%
portion of these costs allocated to the limited partnership, when passed
through the limited partnership, is further allocated 99% to the limited
partners and 1% to the general partner. In this manner the Limited
Partners are allocated 95% of such costs and the General Partner is
allocated 5% of such costs.
(3) If at payout, the Limited Partners have received distributions at an
annual rate less than 12% of their subscriptions, the percentage of income
and costs allocated to the general partner and managing partner will
increase to only 10% and the percentage allocated to the Limited Partners
will decrease to only 90%. Thereafter, if the distribution to Limited
Partners reaches an average annual rate of 12% the allocation will change
to 15% to the general partner and managing partner and 85% to the Limited
Partners.
The II-C Partnership achieved payout during the fourth quarter of 1998 and
the II-F Partnership achieved payout in the first quarter of 1999. After payout,
operations and revenues for the II-C and II-F Partnerships have been and will be
allocated using the 10%/90% after payout percentages as described in Footnote 3
to the table above.
F-51
<PAGE>
Basis of Presentation
These financial statements reflect the combined accounts of each
Partnership after the elimination of all inter-partnership transactions and
balances.
Cash and Cash Equivalents
The Partnerships consider 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 Partnerships to be subject to risk.
Credit Risks
Accrued oil and gas sales which are due from a variety of oil and gas
purchasers subject the Partnerships to a concentration of credit risk. Some of
these purchasers are discussed in Note 3 - Major Customers.
Oil and Gas Properties
The Partnerships follow the successful efforts method of accounting for
their oil and gas properties. Under the successful efforts method, the
Partnerships capitalize all property acquisition costs and development costs
incurred in connection with the further development of oil and gas reserves.
Property acquisition costs include costs incurred by the Partnerships or the
General Partner to acquire producing properties, including related title
insurance or examination costs, commissions, engineering, legal and accounting
fees, and similar costs directly related to the acquisitions, plus an allocated
portion of the General Partners' property screening costs. The acquisition cost
to the Partnership of properties acquired by the General Partner is adjusted to
reflect the net cash results of operations, including interest incurred to
finance the acquisition, for the period of time the properties are held by the
General Partner. Leasehold impairment for unproved properties is based upon an
individual property assessment and exploratory experience. Upon discovery of
commercial reserves, leasehold costs are transferred to producing properties.
F-52
<PAGE>
Depletion of the cost of producing oil and gas properties, amortization of
related intangible drilling and development costs, and depreciation of tangible
lease and well equipment are computed on the units-of-production method. The
Partnerships' calculation of depreciation, depletion, and amortization includes
estimated dismantlement and abandonment costs, net of estimated salvage values.
The depreciation, depletion, and amortization rates per equivalent barrel of oil
produced during the years ended December 31, 1998, 1997, and 1996 were as
follows:
Partnership 1998 1997 1996
----------- ----- ----- -----
II-A $2.46 $2.19 $3.05
II-B 2.61 2.26 3.82
II-C 2.55 2.24 2.86
II-D 2.47 2.29 2.36
II-E 3.74 3.62 3.69
II-F 2.93 2.87 3.05
II-G 2.98 3.01 3.14
II-H 2.87 2.78 3.14
When complete units of depreciable property are retired or sold, the asset
cost and related accumulated depreciation are eliminated with any gain or loss
reflected in income. When less than complete units of depreciable property are
retired or sold, the proceeds are credited to oil and gas properties.
The Partnerships evaluate the recoverability of the carrying costs of
their proved oil and gas properties at the field level. If the unamortized costs
of oil and gas properties within a field exceed the expected undiscounted future
cash flows from such properties, the cost of the properties is written down to
fair value, which is determined by using the discounted future cash flows from
the properties. During 1998, 1997, and 1996, the Partnerships recorded the
following non-cash charges against earnings (impairment provisions):
Partnership 1998 1997 1996
----------- -------- -------- --------
II-A $164,111 $223,943 $ -
II-B - 134,003 -
II-C - 36,163 -
II-D - 143,957 -
II-E - 317,979 -
II-F - 208,255 -
II-G - 489,672 -
II-H - 125,223 -
The risk that the Partnerships will be required to record similar
impairment provisions in the future increases as oil and gas prices decrease.
F-53
<PAGE>
In addition, during 1997 the General Partner determined that the
Partnerships' unproved properties would be uneconomic to develop and, therefore,
of little or no value. This determination was based on an evaluation by the
General Partner that it was unlikely that these unproved properties would be
developed due to low oil and gas prices and provisions in the Partnership
Agreements which limit the level of permissible drilling activity. As a result
of this determination, the Partnerships recorded the following non-cash charges
against earnings at March 31, 1997 in order to reflect the writing-off of the
Partnerships' unproved properties:
Partnership Amount
----------- ----------
II-A $ 460,333
II-B 396,985
II-C 30,454
II-D -
II-E 674,872
II-F 1,168,905
II-G 2,611,984
II-H 659,997
Deferred Charge
The Deferred Charge represents costs deferred for lease operating expenses
incurred in connection with the Partnerships' underproduced gas imbalance
positions. The rate used in calculating the deferred charge is the average of
the annual production costs per Mcf. At December 31, 1998 and 1997, cumulative
total gas sales volumes for underproduced wells were less than the Partnerships'
pro-rata share of total gas production from these wells by the following
amounts:
1998 1997
---------------------- ----------------------
Partnership Mcf Amount Mcf Amount
----------- -------- -------- --------- ---------
II-A 775,894 $701,486 980,457 $911,041
II-B 173,183 179,833 174,919 169,811
II-C 206,671 153,412 207,801 139,621
II-D 721,663 614,207 783,455 544,345
II-E 373,755 275,532 393,724 330,531
II-F 81,585 46,373 97,126 56,867
II-G 179,624 101,955 210,451 123,977
II-H 41,907 23,749 49,537 29,519
Accrued Liability
The Accrued Liability represents charges accrued for lease operating
expenses incurred in connection with the Partnerships' overproduced gas
imbalance positions. The rate used in calculating the accrued liability is the
average of the annual
F-54
<PAGE>
production costs per Mcf. At December 31, 1998 and 1997, cumulative total gas
sales volumes for overproduced wells exceeded the Partnerships' pro-rata share
of total gas production from these wells by the following amounts:
1998 1997
-------------------- -------------------
Partnership Mcf Amount Mcf Amount
----------- ------- -------- ------- --------
II-A 199,453 $180,325 169,016 $157,050
II-B 95,032 98,681 91,182 88,519
II-C 79,897 59,308 73,891 49,647
II-D 242,292 206,215 344,104 239,083
II-E 109,943 81,050 75,789 63,625
II-F 43,974 24,995 47,663 27,907
II-G 101,886 57,830 108,825 64,109
II-H 21,287 12,063 24,581 14,648
Oil and Gas Sales and Gas Imbalance Payable
The Partnerships' oil and condensate production is sold, title passed, and
revenue recognized at or near the Partnerships' wells under short-term purchase
contracts at prevailing prices in accordance with arrangements which are
customary in the oil industry. Sales of gas applicable to the Partnerships'
interest in producing oil and gas leases are recorded as revenue when the gas is
metered and title transferred pursuant to the gas sales contracts covering the
Partnerships' interest in gas reserves. During such times as a Partnership's
sales of gas exceed its pro rata ownership in a well, such sales are recorded as
revenues unless total sales from the well have exceeded the Partnership's share
of estimated total gas reserves underlying the property, at which time such
excess is recorded as a liability. The rates per Mcf used to calculate this
liability are based on the average gas prices received for the volumes at the
time the overproduction occurred. This also approximates the price for which the
Partnerships are currently settling this liability. At December 31, 1998 and
1997 total sales exceeded the Partnerships' share of estimated total gas
reserves as follows:
F-55
<PAGE>
1998 1997
-------------------- ---------------------
Partnership Mcf Amount Mcf Amount
----------- ------- -------- ------- ---------
II-A 83,936 $125,904 94,694 $142,043
II-B 13,193 19,790 16,447 24,671
II-C 25,499 38,249 15,042 22,563
II-D 99,765 149,648 71,336 107,004
II-E 98,972 148,458 114,059 171,089
II-F 2,822 4,233 16,789 25,184
II-G 6,019 9,029 38,167 57,250
II-H - - 8,766 13,149
These amounts were recorded as gas imbalance payables in accordance with the
sales method. These gas imbalance payables will be settled by either gas
production by the underproduced party in excess of current estimates of total
gas reserves for the well or by a negotiated or contractual payment to the
underproduced party.
General and Administrative Overhead
The General Partner and its affiliates are reimbursed for actual general
and administrative costs incurred and attributable to the conduct of the
business affairs and operations of the Partnerships.
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, the
deferred charge, the gas imbalance payable, and the accrued liability all
involve estimates which could materially differ from the actual amounts
ultimately realized or incurred in the near term. Oil and gas reserves (see Note
4) 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 these financial statements.
F-56
<PAGE>
2. TRANSACTIONS WITH RELATED PARTIES
The Partnerships reimburse the General Partner for the general and
administrative overhead applicable to the Partnerships, based on an allocation
of actual costs incurred by the General Partner. When actual costs incurred
benefit other partnerships and affiliates, the allocation of costs is based on
the relationship of the Partnerships' reserves to the total reserves owned by
all partnerships and affiliates. The General Partner believes this allocation
method is reasonable. Although the actual costs incurred by the General Partner
and its affiliates have fluctuated during the three years presented, the amounts
charged to the Partnerships have not fluctuated due to expense limitations
imposed by the Partnership Agreements. The following is a summary of payments
made to the General Partner or its affiliates by the Partnerships for general
and administrative overhead costs for the years ended December 31, 1998, 1997,
and 1996:
Partnership 1998 1997 1996
----------- -------- -------- --------
II-A $509,772 $509,772 $509,772
II-B 380,760 380,760 380,760
II-C 162,756 162,756 162,756
II-D 331,452 331,452 331,452
II-E 240,864 240,864 240,864
II-F 180,420 180,420 180,420
II-G 391,776 391,776 391,776
II-H 96,540 96,540 96,540
Affiliates of the Partnerships operate certain of the Partnerships'
properties and their policy is to bill the Partnerships for all customary
charges and cost reimbursements associated with these activities, together with
any compressor rentals, consulting, or other services provided. Such charges are
comparable to third party charges in the area where the wells are located and
are the same as charged to other working interest owners in the wells.
3. MAJOR CUSTOMERS
The following table sets forth purchasers who individually accounted for
ten percent or more of each Partnership's combined oil and gas sales for the
years ended December 31, 1998, 1997, and 1996:
F-57
<PAGE>
Partnership Purchaser Percentage
- ----------- ------------------------ ------------------------
1998 1997 1996
----- ----- -----
II-A El Paso Energy Marketing
Company ("El Paso") 32.8% 29.7% 23.5%
Amoco Production Company
("Amoco") 13.0% 14.8% 14.7%
Hallwood Petroleum, Inc.
("Hallwood') 10.1% 12.1% 13.9%
J-O'B Operating ("J-O'B") - - 10.6%
II-B El Paso 37.6% 31.8% 22.5%
Hallwood 15.6% 16.3% 18.1%
Amoco - - 11.0%
J-O'B - - 11.0%
II-C El Paso 36.2% 29.3% 24.5%
Amoco - - 10.5%
II-D El Paso 28.4% 22.8% 19.1%
Vintage Petroleum Inc. 10.9% - -
II-E El Paso 47.8% 41.3% 30.8%
II-F El Paso 30.8% 24.5% 22.4%
Chevron U.S.A. Inc.
(Chevron) 13.2% - -
Texaco Exploration and
Production, Inc.
("Texaco") 12.7% 11.1% 12.5%
II-G El Paso 30.6% 24.3% 22.4%
Chevron 13.0% - -
Texaco 12.8% 11.1% 12.6%
II-H El Paso 30.2% 23.9% 22.1%
Texaco 12.8% 11.1% 12.7%
Chevron 12.6% - -
In the event of interruption of purchases by one or more of these
significant customers or the cessation or material change in availability of
open access transportation by the Partnerships' pipeline transporters, the
Partnerships may encounter difficulty in marketing their gas and in maintaining
historic sales levels. Alternative purchasers or transporters may not be readily
available.
F-58
<PAGE>
4. SUPPLEMENTAL OIL AND GAS INFORMATION
The following supplemental information regarding the oil and gas
activities of the Partnerships is presented pursuant to the disclosure
requirements promulgated by the SEC.
Capitalized Costs
The capitalized costs and accumulated depreciation, depletion,
amortization, and valuation allowance at December 31, 1998 and 1997 were as
follows:
II-A Partnership
---------------
1998 1997
------------- -------------
Proved properties $31,003,185 $31,785,611
Less accumulated deprecia-
tion, depletion, amorti-
zation, and valuation
allowance ( 26,893,889) ( 26,890,758)
---------- ----------
Net oil and gas
Properties $ 4,109,296 $ 4,894,853
========== ==========
II-B Partnership
---------------
1998 1997
------------- -------------
Proved properties $21,466,096 $21,746,216
Less accumulated deprecia-
tion, depletion, amorti-
zation, and valuation
allowance ( 18,896,268) ( 18,711,058)
---------- ----------
Net oil and gas
Properties $ 2,569,828 $ 3,035,158
========== ==========
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II-C Partnership
----------------
1998 1997
------------- -------------
Proved properties $ 9,312,977 $ 9,809,210
Less accumulated deprecia-
tion, depletion, amorti-
zation, and valuation
allowance ( 7,930,547) ( 8,141,941)
---------- ----------
Net oil and gas
Properties $ 1,382,430 $ 1,667,269
========== ==========
II-D Partnership
----------------
1998 1997
------------- -------------
Proved properties $16,994,856 $18,171,159
Less accumulated deprecia-
tion, depletion, amorti-
zation, and valuation
allowance ( 14,268,143) ( 14,753,399)
---------- ----------
Net oil and gas
Properties $ 2,726,713 $ 3,417,760
========== ==========
II-E Partnership
----------------
1998 1997
------------- -------------
Proved properties $15,313,160 $15,543,068
Less accumulated deprecia-
tion, depletion, amorti-
zation, and valuation
allowance ( 12,924,547) ( 12,701,988)
---------- ----------
Net oil and gas
Properties $ 2,388,613 $ 2,841,080
========== ==========
F-60
<PAGE>
II-F Partnership
----------------
1998 1997
------------- -------------
Proved properties $11,240,487 $11,773,778
Less accumulated deprecia-
tion, depletion, amorti-
zation, and valuation
allowance ( 9,153,895) ( 9,341,745)
---------- ----------
Net oil and gas
Properties $ 2,086,592 $ 2,432,033
========== ==========
II-G Partnership
----------------
1998 1997
------------- -------------
Proved properties $24,013,074 $25,132,939
Less accumulated deprecia-
tion, depletion, amorti-
zation, and valuation
allowance ( 19,520,933) ( 19,895,857)
---------- ----------
Net oil and gas
Properties $ 4,492,141 $ 5,237,082
========== ==========
II-H Partnership
----------------
1998 1997
------------- -------------
Proved properties $5,770,764 $6,025,649
Less accumulated deprecia-
tion, depletion, amorti-
zation, and valuation
allowance ( 4,712,819) ( 4,800,354)
--------- ---------
Net oil and gas
Properties $1,057,945 $1,225,295
========= =========
F-61
<PAGE>
Costs Incurred
The Partnerships incurred no costs in connection with oil and gas
acquisition or exploration activities during 1998, 1997, or 1996. Costs incurred
by the Partnerships in connection with oil and gas property development
activities during 1998, 1997, and 1996 were as follows:
Partnership 1998 1997 1996
----------- -------- -------- --------
II-A $280,907 $237,163 $98,540
II-B 83,614 20,782 89,173
II-C 34,333 5,112 5,076
II-D 1,639 41,889 22,210
II-E 120,953 40,623 70,806
II-F 75,167 65,635 11,332
II-G 162,692 143,657 27,441
II-H 40,018 35,978 6,306
Quantities of Proved Oil and Gas Reserves - Unaudited
The following tables summarize changes in net quantities of the
Partnerships' proved reserves, all of which are located in the United States,
for the periods indicated. The proved reserves at December 31, 1998, 1997, and
1996 were estimated by petroleum engineers employed by affiliates of the
Partnerships. Certain reserve information was reviewed by Ryder Scott Company
Petroleum Engineers, an independent petroleum engineering firm. The following
information includes certain gas balancing adjustments which cause the gas
volumes to differ from the reserve reports prepared by the General Partner and
reviewed by Ryder Scott.
F-62
<PAGE>
II-A Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 1995 700,254 9,603,075
Production (103,230) (1,737,090)
Sales of minerals in
place ( 21,601) ( 122,449)
Extensions and discoveries - 40,117
Revision of previous
estimates 119,967 1,471,676
------- ---------
Proved reserves, Dec. 31, 1996 695,390 9,255,329
Production (105,866) (1,505,818)
Sales of minerals in
place ( 34,321) ( 45,413)
Extensions and discoveries 34,300 52,013
Revision of previous
estimates ( 50,160) 600,326
------- ---------
Proved reserves, Dec. 31, 1997 539,343 8,356,437
Production ( 86,428) (1,433,552)
Sales of minerals in
place ( 7,026) ( 512,403)
Extensions and discoveries 14,823 335,915
Revision of previous
estimates (100,249) 986,384
------- ---------
Proved reserves, Dec. 31, 1998 360,463 7,732,781
======= =========
PROVED DEVELOPED RESERVES:
December 31, 1996 694,531 9,208,297
======= =========
December 31, 1997 539,105 8,330,114
======= =========
December 31, 1998 360,463 7,732,781
======= =========
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II-B Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 1995 495,525 5,729,103
Production ( 74,434) (1,219,775)
Sales of minerals in
place ( 14,484) ( 77,335)
Revision of previous
estimates 96,787 1,157,710
------- ---------
Proved reserves, Dec. 31, 1996 503,394 5,589,703
Production ( 67,591) (1,047,458)
Sales of minerals in
place ( 21,955) ( 29,512)
Extensions and discoveries 418 50,003
Revision of previous
estimates ( 26,401) 666,361
------- ---------
Proved reserves, Dec. 31, 1997 387,865 5,229,097
Production ( 53,095) ( 904,066)
Sales of minerals in
place ( 218) ( 70,834)
Extensions and discoveries 14 93,326
Revision of previous
estimates ( 94,739) 963,230
------- ---------
Proved reserves, Dec. 31, 1998 239,827 5,310,753
======= =========
PROVED DEVELOPED RESERVES:
December 31, 1996 503,394 5,589,703
======= =========
December 31, 1997 387,865 5,229,097
======= =========
December 31, 1998 239,827 5,310,753
======= =========
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II-C Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 1995 205,669 3,983,315
Production ( 25,093) ( 685,344)
Sales of minerals in
place ( 5,591) ( 221,501)
Revision of previous
estimates 28,924 1,182,174
------- ---------
Proved reserves, Dec. 31, 1996 203,909 4,258,644
Production ( 22,753) ( 582,748)
Sales of minerals in
place ( 10,618) ( 149,343)
Extensions and discoveries 179 21,431
Revision of previous
estimates ( 8,570) 341,899
------- ---------
Proved reserves, Dec. 31, 1997 162,147 3,889,883
Production ( 16,806) ( 478,643)
Sales of minerals in
place ( 7,580) ( 252,950)
Extensions and discoveries - 33,756
Revision of previous
estimates ( 19,094) 411,699
------- ---------
Proved reserves, Dec. 31, 1998 118,667 3,603,745
======= =========
PROVED DEVELOPED RESERVES:
December 31, 1996 203,909 4,258,644
======= =========
December 31, 1997 162,147 3,889,883
======= =========
December 31, 1998 118,667 3,603,745
======= =========
F-65
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II-D Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 1995 553,578 10,910,460
Production ( 66,517) ( 1,637,645)
Sales of minerals in
place ( 60,464) ( 270,629)
Extensions and discoveries 232 30,340
Revision of previous
estimates 68,250 1,979,648
------- ----------
Proved reserves, Dec. 31, 1996 495,079 11,012,174
Production ( 50,413) ( 1,501,911)
Sales of minerals in
place ( 42,059) ( 517,136)
Revision of previous
estimates ( 19,568) 262,802
------- ----------
Proved reserves, Dec. 31, 1997 383,039 9,255,929
Production ( 37,733) ( 1,034,372)
Sales of minerals in
place ( 13,129) ( 478,907)
Revision of previous
estimates ( 75,195) 482,043
------- ----------
Proved reserves, Dec. 31, 1998 256,982 8,224,693
======= ==========
PROVED DEVELOPED RESERVES:
December 31, 1996 495,079 11,012,174
======= ==========
December 31, 1997 383,039 9,225,929
======= ==========
December 31, 1998 256,982 8,224,693
======= ==========
F-66
<PAGE>
II-E Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 1995 297,934 6,401,259
Production ( 53,804) ( 861,464)
Sales of minerals in
place ( 16,347) ( 109,007)
Extensions and discoveries 1,327 31,347
Revision of previous
estimates 74,262 234,339
------- ---------
Proved reserves, Dec. 31, 1996 303,372 5,696,474
Production ( 42,668) ( 783,379)
Sales of minerals in
place ( 14,134) ( 349,468)
Extensions and discoveries 2,502 30,709
Revision of previous
estimates ( 11,878) 479,666
------- ---------
Proved reserves, Dec. 31, 1997 237,194 5,074,002
Production ( 37,508) ( 647,841)
Sales of minerals in
place ( 12,363) ( 95,923)
Extensions and discoveries 4,016 25,354
Revision of previous
estimates ( 28,140) 104,040
------- ---------
Proved reserves, Dec. 31, 1998 163,199 4,459,632
======= =========
PROVED DEVELOPED RESERVES:
December 31, 1996 303,372 5,696,474
======= =========
December 31, 1997 237,194 5,074,002
======= =========
December 31, 1998 163,199 4,459,632
======= =========
F-67
<PAGE>
II-F Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 1995 355,007 4,738,716
Production ( 47,395) ( 761,702)
Sales of minerals in
place ( 7,620) ( 149,077)
Extensions and discoveries 13,192 250,188
Revision of previous
estimates 51,954 593,360
------- ---------
Proved reserves, Dec. 31, 1996 365,138 4,671,485
Production ( 45,014) ( 586,444)
Sales of minerals in
place ( 31,639) ( 403,487)
Extensions and discoveries 3,045 75,566
Revision of previous
estimates 24,289 186,939
------- ---------
Proved reserves, Dec. 31, 1997 315,819 3,944,059
Production ( 36,915) ( 516,917)
Sales of minerals in
place ( 30,197) ( 195,711)
Extensions and discoveries 15,660 204,591
Revision of previous
estimates ( 23,426) 189,290
------- ---------
Proved reserves, Dec. 31, 1998 240,941 3,625,312
======= =========
PROVED DEVELOPED RESERVES:
December 31, 1996 360,605 4,614,831
======= =========
December 31, 1997 311,286 3,887,405
======= =========
December 31, 1998 240,941 3,625,312
======= =========
F-68
<PAGE>
II-G Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
----------- ------------
Proved reserves, Dec. 31, 1995 746,479 10,303,283
Production ( 99,593) ( 1,626,530)
Sales of minerals in
place ( 16,084) ( 335,696)
Revision of previous
estimates 138,340 1,781,501
------- ----------
Proved reserves, Dec. 31, 1996 769,142 10,122,558
Production ( 94,553) ( 1,256,464)
Sales of minerals in
place ( 66,947) ( 957,722)
Extensions and discoveries 6,399 158,060
Revision of previous
estimates 50,299 382,356
------- ----------
Proved reserves, Dec. 31, 1997 664,340 8,448,788
Production ( 77,421) ( 1,105,661)
Sales of minerals in
place ( 63,148) ( 412,018)
Extensions and discoveries 33,192 439,223
Revision of previous
estimates ( 49,470) 397,952
------- ----------
Proved reserves, Dec. 31, 1998 507,493 7,768,284
======= ==========
PROVED DEVELOPED RESERVES:
December 31, 1996 759,316 9,999,722
======= ==========
December 31, 1997 654,514 8,325,952
======= ==========
December 31, 1998 507,493 7,768,284
======= ==========
F-69
<PAGE>
II-H Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 1995 173,521 2,553,664
Production ( 23,172) ( 397,146)
Sales of minerals in
place ( 3,802) ( 90,433)
Extensions and discoveries 6,428 193,480
Revision of previous
estimates 27,027 233,675
------- ---------
Proved reserves, Dec. 31, 1996 180,002 2,493,240
Production ( 21,998) ( 304,593)
Sales of minerals in
place ( 15,766) ( 267,732)
Extensions and discoveries 1,500 36,590
Revision of previous
estimates 11,702 87,477
------- ---------
Proved reserves, Dec. 31, 1997 155,440 2,044,982
Production ( 17,978) ( 266,337)
Sales of minerals in
place ( 14,518) ( 96,575)
Extensions and discoveries 7,874 106,568
Revision of previous
estimates ( 11,652) 93,717
------- ---------
Proved reserves, Dec. 31, 1998 119,166 1,882,355
======= =========
PROVED DEVELOPED RESERVES:
December 31, 1996 177,577 2,462,919
======= =========
December 31, 1997 153,015 2,014,661
======= =========
December 31, 1998 119,166 1,882,355
======= =========
F-70
<PAGE>
Standardized Measure of Discounted Future Net Cash Flows of Proved Oil and
Gas Reserves - Unaudited
The following tables set forth each of the Partnerships' estimated future
net cash flows as of December 31, 1998 relating to proved oil and gas reserves
based on the standardized measure as prescribed in SFAS No. 69:
Partnership
----------------------------------
II-A II-B
------------- -------------
Future cash inflows $19,359,497 $13,074,683
Future production and
development costs ( 6,682,205) ( 4,450,517)
---------- ----------
Future net cash
flows $12,677,292 $ 8,624,166
10% discount to
reflect timing of
cash flows ( 4,160,555) ( 2,890,615)
---------- ----------
Standardized measure
of discounted
future net cash
flows $ 8,516,737 $ 5,733,551
========== ==========
F-71
<PAGE>
Partnership
----------------------------------
II-C II-D
------------- -------------
Future cash inflows $ 8,454,800 $18,290,375
Future production and
development costs ( 2,810,913) ( 6,171,646)
---------- ----------
Future net cash
flows $ 5,643,887 $12,118,729
10% discount to
reflect timing of
cash flows ( 2,212,515) ( 4,630,292)
---------- ----------
Standardized measure
of discounted
future net cash
flows $ 3,431,372 $ 7,488,437
========== ==========
Partnership
----------------------------------
II-E II-F
------------- -------------
Future cash inflows $10,459,092 $ 9,939,769
Future production and
development costs ( 2,990,145) ( 2,706,745)
---------- ----------
Future net cash
flows $ 7,468,947 $ 7,233,024
10% discount to
reflect timing of
cash flows ( 2,894,461) ( 2,790,307)
---------- ----------
Standardized measure
of discounted
future net cash
flows $ 4,574,486 $ 4,442,717
========== ==========
F-72
<PAGE>
Partnership
----------------------------------
II-G II-H
------------- -------------
Future cash inflows $21,221,902 $ 5,108,647
Future production and
development costs ( 5,834,639) ( 1,425,031)
---------- ----------
Future net cash
flows $15,387,263 $ 3,683,616
10% discount to
reflect timing of
cash flows ( 5,942,897) ( 1,426,357)
---------- ----------
Standardized measure
of discounted
future net cash
flows $ 9,444,366 $ 2,257,259
========== ==========
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.
The Partnerships' reserves were determined at December 31, 1998 using oil and
gas prices of approximately $9.50 per barrel and $2.03 per Mcf, respectively.
F-73
<PAGE>
INDEX TO EXHIBITS
-----------------
Number Description
- ------ -----------
4.1 The Certificate and Agreements of Limited Partnership for the
following Partnerships have been previously filed with the SEC as
Exhibit 2.1 to Form 8-A filed by each Partnership on the dates shown
below and are hereby incorporated by reference.
Partnership Filing Date File No.
----------- ------------ --------
II-A November 18, 1987 0-16388
II-B November 19, 1987 0-16405
II-C August 5, 1988 0-16981
II-D August 5, 1988 0-16980
II-E November 17, 1988 0-17320
II-F June 5, 1989 0-17799
II-G June 5, 1989 0-17802
II-H February 20, 1990 0-18305
4.2 The Agreements of Partnership for the following Production
Partnerships have been previously filed with the SEC as Exhibit 2.2
to Form 8-A filed by the related Partnerships on the dates shown
below and are hereby incorporated by reference.
Partnership Filing Date
----------- -----------
II-A November 18, 1987
II-B November 19, 1987
II-C August 5, 1988
II-D August 5, 1988
II-E November 17, 1988
II-F June 5, 1989
II-G June 5, 1989
II-H February 20, 1990
4.3 Second Amendment to Amended and Restated Agreement and Certificate
of Limited Partnership of Geodyne Energy Income Limited Partnership
II-A, filed as Exhibit 4.1 to Registrant's Current Report on Form
8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and
is hereby incorporated by reference.
F-74
<PAGE>
4.4 Second Amendment to Amended and Restated Agreement and Certificate
of Limited Partnership of Geodyne Energy Income Limited Partnership
II-B, filed as Exhibit 4.2 to Registrant's Current Report on Form
8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and
is hereby incorporated by reference.
4.5 Second Amendment to Amended and Restated Agreement and Certificate
of Limited Partnership of Geodyne Energy Income Limited Partnership
II-C, filed as Exhibit 4.3 to Registrant's Current Report on Form
8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and
is hereby incorporated by reference.
4.6 Second Amendment to Amended and Restated Agreement and Certificate
of Limited Partnership of Geodyne Energy Income Limited Partnership
II-D, filed as Exhibit 4.4 to Registrant's Current Report on Form
8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and
is hereby incorporated by reference.
4.7 Second Amendment to Amended and Restated Agreement and Certificate
of Limited Partnership of Geodyne Energy Income Limited Partnership
II-E, filed as Exhibit 4.5 to Registrant's Current Report on Form
8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and
is hereby incorporated by reference.
4.8 Second Amendment to Amended and Restated Agreement and Certificate
of Limited Partnership of Geodyne Energy Income Limited Partnership
II-F, filed as Exhibit 4.6 to Registrant's Current Report on Form
8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and
is hereby incorporated by reference.
4.9 Second Amendment to Amended and Restated Agreement and Certificate
of Limited Partnership of Geodyne Energy Income Limited Partnership
II-G, filed as Exhibit 4.7 to Registrant's Current Report on Form
8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and
is hereby incorporated by reference.
4.10 Second Amendment to Amended and Restated Agreement and Certificate
of Limited Partnership of Geodyne Energy Income Limited Partnership
II-H, filed as Exhibit 4.8 to Registrant's Current Report on Form
8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and
is hereby incorporated by reference.
F-75
<PAGE>
4.11 Third Amendment to Agreement and Certificate of Limited Partnership
of Geodyne Energy Income Limited Partnership II-E, filed as Exhibit
4.12 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995 filed with the SEC on April 4, 1996 and is
hereby incorporated by reference.
4.12 Third Amendment to Agreement and Certificate of Limited Partnership
of Geodyne Energy Income Limited Partnership II-F, filed as Exhibit
4.13 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995 filed with the SEC on April 4, 1996 and is
hereby incorporated by reference.
4.13 Third Amendment to Agreement and Certificate of Limited Partnership
of Geodyne Energy Income Limited Partnership II-G, filed as Exhibit
4.14 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995 filed with the SEC on April 4, 1996 and is
hereby incorporated by reference.
4.14 Third Amendment to Agreement and Certificate of Limited Partnership
of Geodyne Energy Income Limited Partnership II-H, filed as Exhibit
4.15 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995 filed with the SEC on April 4, 1996 and is
hereby incorporated by reference.
*23.1 Consent of Ryder Scott Company Petroleum Engineers for Geodyne
Energy Income Limited Partnership II-A.
*23.2 Consent of Ryder Scott Company Petroleum Engineers for Geodyne
Energy Income Limited Partnership II-B.
*23.3 Consent of Ryder Scott Company Petroleum Engineers for Geodyne
Energy Income Limited Partnership II-C.
*23.4 Consent of Ryder Scott Company Petroleum Engineers for Geodyne
Energy Income Limited Partnership II-D.
*23.5 Consent of Ryder Scott Company Petroleum Engineers for Geodyne
Energy Income Limited Partnership II-E.
*23.6 Consent of Ryder Scott Company Petroleum Engineers for Geodyne
Energy Income Limited Partnership II-F.
*23.7 Consent of Ryder Scott Company Petroleum Engineers for Geodyne
Energy Income Limited Partnership II-G.
*23.8 Consent of Ryder Scott Company Petroleum Engineers for Geodyne
Energy Income Limited Partnership II-H.
F-76
<PAGE>
*27.1 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership II-A's
financial statements as of December 31, 1998 and for the year ended
December 31, 1998.
*27.2 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership II-B's
financial statements as of December 31, 1998 and for the year ended
December 31, 1998.
*27.3 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership II-C's
financial statements as of December 31, 1998 and for the year ended
December 31, 1998.
*27.4 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership II-D's
financial statements as of December 31, 1998 and for the year ended
December 31, 1998.
*27.5 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership II-E's
financial statements as of December 31, 1998 and for the year ended
December 31, 1998.
*27.6 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership II-F's
financial statements as of December 31, 1998 and for the year ended
December 31, 1998.
*27.7 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership II-G's
financial statements as of December 31, 1998 and for the year ended
December 31, 1998.
*27.8 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership II-H's
financial statements as of December 31, 1998 and for the year ended
December 31, 1998.
All other Exhibits are omitted as inapplicable.
----------
* Filed herewith.
F-77
RYDER SCOTT COMPANY Fax (713) 651-0849
PETROLEUM ENGINEERS
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited
Partnership II-A.
//s// Ryder Scott Company
Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
January 19, 1999
RYDER SCOTT COMPANY Fax (713) 651-0849
PETROLEUM ENGINEERS
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited
Partnership II-B.
//s// Ryder Scott Company
Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
January 19, 1999
RYDER SCOTT COMPANY Fax (713) 651-0849
PETROLEUM ENGINEERS
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited
Partnership II-C.
//s// Ryder Scott Company
Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
January 19, 1999
RYDER SCOTT COMPANY Fax (713) 651-0849
PETROLEUM ENGINEERS
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited
Partnership II-D.
//s// Ryder Scott Company
Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
January 19, 1999
RYDER SCOTT COMPANY Fax (713) 651-0849
PETROLEUM ENGINEERS
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited
Partnership II-E.
//s// Ryder Scott Company
Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
January 19, 1999
RYDER SCOTT COMPANY Fax (713) 651-0849
PETROLEUM ENGINEERS
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited
Partnership II-F.
//s// Ryder Scott Company
Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
January 19, 1999
RYDER SCOTT COMPANY Fax (713) 651-0849
PETROLEUM ENGINEERS
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited
Partnership II-G.
//s// Ryder Scott Company
Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
January 19, 1999
RYDER SCOTT COMPANY Fax (713) 651-0849
PETROLEUM ENGINEERS
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited
Partnership II-H.
//s// Ryder Scott Company
Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
January 19, 1999
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<TABLE> <S> <C>
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<PERIOD-END> DEC-31-1998
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<RECEIVABLES> 157,275
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<PP&E> 9,312,977
<DEPRECIATION> 7,930,547
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0
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<NET-INCOME> 1,678,595
<EPS-PRIMARY> 10.24
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
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<TOTAL-ASSETS> 3,994,909
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0
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<TABLE> <S> <C>
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<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
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<INVENTORY> 0
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<PP&E> 15,313,160
<DEPRECIATION> 12,924,547
<TOTAL-ASSETS> 3,260,952
<CURRENT-LIABILITIES> 187,339
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0
0
<COMMON> 0
<OTHER-SE> 2,992,563
<TOTAL-LIABILITY-AND-EQUITY> 3,260,952
<SALES> 1,704,463
<TOTAL-REVENUES> 8,291,877
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<TOTAL-COSTS> 1,492,861
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,799,016
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,799,016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,799,016
<EPS-PRIMARY> 28.15
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
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<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 340,765
<PP&E> 11,240,487
<DEPRECIATION> 9,153,895
<TOTAL-ASSETS> 2,473,730
<CURRENT-LIABILITIES> 28,240
<BONDS> 0
0
0
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