SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1999
Commission File Number: P-7: 0-20265 P-8: 0-20264
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-7
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-8
---------------------------------------------------------------------
(Exact name of Registrant as specified in its Articles)
P-7 73-1367186
Oklahoma P-8 73-1378683
---------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or Number)
organization)
Two West Second Street, Tulsa, Oklahoma 74103
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(918) 583-1791
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-7
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
1999 1998
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 40,306 $ 222,925
Accounts receivable:
Net Profits 316,978 270,901
---------- ----------
Total current assets $ 357,284 $ 493,826
NET PROFITS INTERESTS, net, utilizing
the successful efforts method 2,284,251 2,383,851
---------- ----------
$2,641,535 $2,877,677
========== ==========
PARTNERS' CAPITAL (DEFICIT)
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 128,121) ($ 129,429)
Limited Partners, issued and
outstanding, 188,702 units 2,769,656 3,007,106
---------- ----------
Total Partners' capital $2,641,535 $2,877,677
---------- ----------
$2,641,535 $2,877,677
========== ==========
The accompanying condensed notes are an integral
part of these financial statements.
2
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-7
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
-------- --------
REVENUES:
Net Profits $161,616 $275,772
Interest income 1,150 4,422
Gain on sale of Net Profits
Interests - 109,265
-------- --------
$162,766 $389,459
COSTS AND EXPENSES:
Depletion of Net Profits
Interests $111,028 $170,489
General and administrative
(Note 2) 66,545 65,135
-------- --------
$177,573 $235,624
-------- --------
NET INCOME (LOSS) ($ 14,807) $153,835
======== ========
GENERAL PARTNER - NET INCOME $ 3,643 $ 14,290
======== ========
LIMITED PARTNERS - NET
INCOME (LOSS) ($ 18,450) $139,545
======== ========
NET INCOME (LOSS) per unit ($ .10) $ .74
======== ========
UNITS OUTSTANDING 188,702 188,702
======== ========
The accompanying condensed notes are an integral
part of these financial statements.
3
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-7
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 14,807) $153,835
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depletion of Net Profits
Interests 111,028 170,489
Gain on sale of Net Profits
Interests - ( 109,265)
Increase in accounts receivable -
Net Profits ( 46,077) -
Increase in accounts receivable -
General Partner - ( 141,793)
Increase in accounts payable -
Net Profits - 27,585
-------- --------
Net cash provided by operating
activities $ 50,144 $100,851
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 11,428) ($ 77,942)
Proceeds from sale of Net Profits
Interests - 141,793
-------- --------
Net cash provided (used) by
investing activities ($ 11,428) $ 63,851
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($221,335) ($527,132)
-------- --------
Net cash used by financing activities ($221,335) ($527,132)
-------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ($182,619) ($362,430)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 222,925 517,144
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 40,306 $154,714
======== ========
The accompanying condensed notes are an integral
part of these financial statements.
4
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-8
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
1999 1998
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 93,711 $ 180,865
Accounts receivable:
Net Profits 139,605 116,632
---------- ----------
Total current assets $ 233,316 $ 297,497
NET PROFITS INTERESTS, net, utilizing
the successful efforts method 1,321,690 1,377,939
---------- ----------
$1,555,006 $1,675,436
========== ==========
PARTNERS' CAPITAL (DEFICIT)
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 64,266) ($ 64,852)
Limited Partners, issued and
outstanding, 90,094 units 1,619,272 1,740,288
---------- ----------
Total Partners' capital $1,555,006 $1,675,436
---------- ----------
$1,555,006 $1,675,436
========== ==========
The accompanying condensed notes are an integral
part of these financial statements.
5
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-8
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
---------- ---------
REVENUES:
Net Profits $114,921 $191,821
Interest income 1,258 3,563
Gain on sale of Net Profits
Interests - 60,795
-------- --------
$116,179 $256,179
COSTS AND EXPENSES:
Depletion of Net Profits
Interests $ 62,108 $ 90,781
General and administrative
(Note 2) 41,013 40,101
-------- --------
$103,121 $130,882
-------- --------
NET INCOME $ 13,058 $125,297
======== ========
GENERAL PARTNER - NET INCOME $ 3,074 $ 9,718
======== ========
LIMITED PARTNERS - NET INCOME $ 9,984 $115,579
======== ========
NET INCOME per unit $ .09 $ .99
======== ========
UNITS OUTSTANDING 116,168 116,168
======== ========
The accompanying condensed notes are an integral
part of these financial statements.
6
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-8
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,058 $125,297
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depletion of Net Profits
Interests 62,108 90,781
Gain on sale of Net Profits
Interests - ( 60,795)
Decrease (increase) in accounts
receivable - Net Profits ( 22,973) 25,713
Increase in accounts receivable -
General Partner - ( 76,024)
-------- --------
Net cash provided by operating
activities $ 52,193 $104,972
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 5,859) ($ 46,309)
Proceeds from sale of Net Profits
Interests - 76,252
-------- --------
Net cash provided (used) by
investing activities ($ 5,859) $ 29,943
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($133,488) ($339,420)
-------- ---------
Net cash used by financing activities ($133,488) ($339,420)
-------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ($ 87,154) ($204,505)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 180,865 382,448
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 93,711 $177,943
======== ========
The accompanying condensed notes are an integral
part of these financial statements.
7
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME PROGRAM II LIMITED PARTNERSHIPS
CONDENSED NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheets as of March 31, 1999, statements of operations for the
three months ended March 31, 1999 and 1998, and statements of cash flows
for the three months ended March 31, 1999 and 1998 have been prepared by
Geodyne Resources, Inc., the General Partner (the "General Partner") of
the Geodyne Institutional/Pension Energy Income Program II Limited
Partnerships (individually, the "P-7 Partnership" or the "P-8
Partnership", as the case may be, or, collectively, the "Partnerships"),
without audit. In the opinion of management the financial statements
referred to above include all necessary adjustments, consisting of normal
recurring adjustments, to present fairly the financial position at March
31, 1999, the results of operations for the three months ended March 31,
1999 and 1998, and the cash flows for the three months ended March 31,
1999 and 1998.
Information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The accompanying interim
financial statements should be read in conjunction with the Partnerships'
Annual Report on Form 10-K filed for the year ended December 31, 1998. The
results of operations for the period ended March 31, 1999 are not
necessarily indicative of the results to be expected for the full year.
As used in these financial statements, the Partnerships' net profits and
royalty interests in oil and gas sales are referred to as "Net Profits"
and the Partnerships' net profits and royalty interests in oil and gas
properties are referred to as "Net Profits Interests". The working
interests from which Partnerships' Net Profits Interests are carved are
referred to as "Working Interests".
The Limited Partners' net income or loss per unit is based upon each $100
initial capital contribution.
8
NET PROFITS INTERESTS
---------------------
The Partnerships follow the successful efforts method of accounting for
their Net Profits Interests. Under the successful efforts method, the
Partnerships capitalize all acquisition costs. Property acquisition costs
include costs incurred by the Partnerships or the General Partner to
acquire a net profits interest or other non-operating interest in
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 Partner's property screening costs. The acquisition cost to
the Partnerships of Net Profits Interests 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 prior to their transfer to the
Partnerships. Impairment of Net Profits Interests is recognized based upon
an individual property assessment.
Depletion of the costs of Net Profits Interests is computed on the
unit-of-production method. The Partnerships' calculation of depletion of
its Net Profits Interests includes estimated dismantlement and abandonment
costs, net of estimated salvage value.
The Partnerships do not directly bear capital costs. However, the
Partnerships indirectly bear certain capital costs incurred by the owners
of the Working Interests to the extent such capital costs are charged
against the applicable oil and gas revenues in calculating the Net Profits
payable to the Partnerships. For financial reporting purposes only, such
capital costs are reported as capital expenditures in the Partnerships'
Statements of Cash Flows.
2. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
The Partnerships' partnership agreements provide for reimbursement to the
General Partner for all direct general and administrative expenses and for
the general and administrative overhead applicable to the Partnerships
based on an allocation of actual costs incurred. During the three months
ended March 31, 1999 the following payments were made to the General
Partner or its affiliates by the Partnerships:
9
Direct General Administrative
Partnership and Administrative Overhead
----------- ------------------- ---------------
P-7 $16,886 $49,659
P-8 10,443 30,570
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 their activities.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
USE OF FORWARD-LOOKING STATEMENTS AND ESTIMATES
- -----------------------------------------------
This Quarterly Report contains certain forward-looking statements. The
words "anticipate", "believe", "expect", "plan", "intend", "estimate",
"project", "could", "may" and similar expressions are intended to identify
forward-looking statements. Such statements reflect management's current
views with respect to future events and financial performance. This
Quarterly Report also includes certain information, which is, or is based
upon, estimates and assumptions. Such estimates and assumptions are
management's efforts to accurately reflect the condition and operation of
the 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, and otherwise indicated.
GENERAL
- -------
The Partnerships were formed for the purpose of acquiring Net Profits
Interests located in the continental United States. In general, each
Partnership acquired passive interests in producing properties and does
not directly engage in development drilling or enhanced recovery projects.
Therefore, the economic life of each Partnership is limited to the period
of time required to fully produce its acquired oil and gas reserves. A Net
Profits Interest entitles the Partnerships to a portion of the oil and gas
sales less operating and production expenses and development costs
generated by the owner of the underlying Working Interests. The net
proceeds from the oil and gas operations
11
are distributed to the Limited Partners and General Partner in accordance
with the terms of the Partnerships' Partnership Agreements.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnerships began operations and investors were assigned their rights
as Limited Partners, having made capital contributions in the amounts and
on the dates set forth below:
Limited
Date of Partner Capital
Partnership Activation Contributions
----------- ------------------ ---------------
P-7 February 28, 1992 $18,870,200
P-8 February 28, 1992 $11,616,800
In general, the amount of funds available for acquisition of producing
properties was equal to the capital contributions of the Limited Partners,
less 15% for sales commissions and organization and management fees. All
of the Partnerships have fully invested their capital contributions.
Net proceeds from the Partnerships' Net Profits Interests less necessary
operating capital are distributed to the Limited Partners on a quarterly
basis. Revenues and net proceeds of a Partnership are largely dependent
upon the volumes of oil and gas sold and the prices received for such oil
and gas. While the General Partner cannot predict future pricing trends,
it believes the working capital available as of March 31, 1999 and the net
revenue generated from future operations will provide sufficient working
capital to meet current and future obligations.
During the three months ended March 31, 1999 capital expenditures
indirectly incurred by the P-7 and P-8 Partnerships totaled $11,428 and
$5,859, respectively. These expenditures resulted primarily from the
Partnerships' indirect participation in (i) developmental drilling in the
North Riley Unit located in Gaines County, Texas and the Bradley SE A
Springer Unit located in Garvin County, Oklahoma and (ii) equipment
purchased for a workover on the Oakes #1-14 Well located in Dewey County,
Oklahoma. These drilling and workover activities were conducted in order
to improve the recovery of reserves.
12
RESULTS OF OPERATIONS
- ---------------------
GENERAL DISCUSSION
The following general discussion should be read in conjunction with the
analysis of results of operations provided below. The most important
variable affecting the Partnerships' revenues is the prices received for
the sale of oil and gas. Due to the volatility of oil and gas prices,
forecasting future prices is subject to great uncertainty and inaccuracy.
Substantially all of the Partnerships' gas reserves are being sold in the
"spot market". Prices on the spot market are subject to wide seasonal and
regional pricing fluctuations due to the highly competitive nature of the
spot market. Such spot market sales are generally short-term in nature and
are dependent upon the obtaining of transportation services provided by
pipelines. In addition, crude oil prices were recently at or near their
lowest level in the past decade due primarily to the global surplus of
crude oil. However, as of the date of this Quarterly Report oil prices
have rebounded primarily due to a decrease in the global oil surplus as a
result of production curtailments by several major oil producing nations.
Management is unable to predict whether future oil and gas prices will (i)
stabilize, (ii) increase, or (iii) decrease.
P-7 PARTNERSHIP
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1998.
Three Months Ended March 31,
----------------------------
1999 1998
-------- --------
Net Profits $161,616 $275,772
Barrels produced 27,300 24,263
Mcf produced 123,343 139,361
Average price/Bbl $ 10.91 $ 14.44
Average price/Mcf $ 1.34 $ 2.06
As shown in the table above, Net Profits decreased $114,156 (41.4%) for
the three months ended March 31, 1999 as compared to the three months
ended March 31, 1998. Of this decrease, approximately $96,000 and $88,000,
respectively, were related to decreases in the average prices of oil and
gas sold and approximately $33,000 was related to a decrease in the
volumes of gas sold. These decreases were partially offset by an increase
of approximately $43,000 related to an increase in volumes of oil sold and
an increase of approximately $60,000 related to decreases in production
expenses incurred by the owners of the Working Interests.
13
Volumes of oil sold increased 3,037 barrels, while volumes of gas sold
decreased 16,018 Mcf for the three months ended March 31, 1999 as compared
to the three months ended March 31, 1998. The increase in volumes of oil
sold resulted primarily from positive prior period volume adjustments made
by the purchaser on one significant well during the three months ended
March 31, 1999. The decrease in volumes of gas sold resulted primarily
from (i) the sale of several wells during 1998 and (ii) the P-7
Partnership's receipt of a reduced percentage of sales during the three
months ended March 31, 1999 on one well due to its overproduced gas
balancing position in that well. The decrease in production expenses
resulted primarily from (i) a decrease in production taxes associated with
the decrease in Net Profits, (ii) workover expenses incurred on several
wells during the three months ended March 31, 1998, and (iii) the sale of
one significant well during 1998, which decreases were partially offset by
workover expenses incurred on another significant well during the three
months ended March 31, 1999. Average oil and gas prices decreased to
$10.91 per barrel and $1.34 per Mcf, respectively, for the three months
ended March 31, 1999 from $14.44 per barrel and $2.06 per Mcf,
respectively, for the three months ended March 31, 1998.
Depletion of Net Profits Interests decreased $59,461 (34.9%) for the three
months ended March 31, 1999 as compared to the three months ended March
31, 1998. This decrease resulted primarily from a reduction in the
depletable base of oil and gas properties due to an impairment provision
recorded during the fourth quarter of 1998. The impairment provision was
related to the decline in oil and gas prices used to determine the
recoverability of oil and gas reserves at December 31, 1998. As a
percentage of Net Profits, this expense increased to 68.7% for the three
months ended March 31, 1999 from 61.8% for the three months ended March
31, 1998. This percentage increase was primarily due to the decrease in
the average prices of oil and gas sold, which decrease was partially
offset by the dollar decrease in depletion of Net Profits Interests.
General and administrative expenses increased $1,410 (2.2%) for the three
months ended March 31, 1999 as compared to the three months ended March
31, 1998. As a percentage of Net Profits, these expenses increased to
41.2% for the three months ended March 31, 1999 from 23.6% for the three
months ended March 31, 1998. This percentage increase was primarily due to
the decrease in Net Profits.
Cumulative cash distributions to the Limited Partners through March 31,
1999 were $11,064,916 or 58.64% of the Limited Partners' capital
contributions.
14
P-8 PARTNERSHIP
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1998.
Three Months Ended March 31,
----------------------------
1999 1998
-------- --------
Net Profits $114,921 $191,821
Barrels produced 16,241 14,701
Mcf produced 89,813 103,586
Average price/Bbl $ 10.93 $ 14.33
Average price/Mcf $ 1.39 $ 2.01
As shown in the table above, Net Profits decreased $76,900 (40.1%) for the
three months ended March 31, 1999 as compared to the three months ended
March 31, 1998. Of this decrease, approximately $55,000 and $55,000,
respectively, were related to decreases in the average prices of oil and
gas sold and approximately $28,000 was related to a decrease in volumes of
gas sold. These decreases were partially offset by an increase of
approximately $22,000 related to an increase in volumes of oil sold and an
increase of approximately $39,000 related to decreases in production
expenses incurred by the owners of the Working Interests. Volumes of oil
sold increased 1,540 barrels, while volumes of gas sold decreased 13,773
Mcf for the three months ended March 31, 1999 as compared to the three
months ended March 31, 1998. The increase in volumes of oil sold resulted
primarily from positive prior period volume adjustments made by the
purchaser on one significant well during the three months ended March 31,
1999. The decrease in volumes of gas sold resulted primarily from (i) the
sale of several wells during 1998, (ii) the P-8 Partnership's receipt of a
reduced percentage of sales during the three months ended March 31, 1999
on one well due to its overproduced gas balancing position in that well,
and (iii) the shutting-in of another significant well during the three
months ended March 31, 1999 by the operator in order to perform a workover
to improve the recovery of reserves. The decrease in production expenses
resulted primarily from (i) a decrease in production taxes associated with
the decrease in Net Profits, (ii) workover expenses incurred on several
wells during the three months ended March 31, 1998, and (iii) the sale of
one significant well during 1998, which decreases were partially offset by
workover expenses incurred on another significant well during the three
months ended March 31, 1999. Average oil and gas prices decreased to
$10.93 per barrel and $1.39 per Mcf, respectively, for the three months
ended March 31, 1999 from $14.33 per barrel and $2.01 per Mcf,
respectively, for the three months ended March 31, 1998.
15
Depletion of Net Profits Interests decreased $28,673 (31.6%) for the three
months ended March 31, 1999 as compared to the three months ended March
31, 1998. This decrease resulted primarily from a reduction in the
depletable base of oil and gas properties due to an impairment provision
recorded during the fourth quarter of 1998. The impairment provision was
related to the decline in oil and gas prices used to determine the
recoverability of oil and gas reserves at December 31, 1998. As a
percentage of Net Profits, this expense increased to 54.0% for the three
months ended March 31, 1999 from 47.3% for the three months ended March
31, 1998. This percentage increase was primarily due to the decreases in
the average prices of oil and gas sold, which decrease was partially
offset by the dollar decrease in depletion of Net Profits Interests.
General and administrative expenses increased $912 (2.3%) for the three
months ended March 31, 1999 as compared to the three months ended March
31, 1998. As a percentage of Net Profits, these expenses increased to
35.7% for the three months ended March 31, 1999 from 20.9% for the three
months ended March 31, 1998. This percentage increase was primarily due to
the decrease in Net Profits.
Cumulative cash distributions to the Limited Partners through March 31,
1999 were $6,893,583 or 59.34% of the Limited Partners' capital
contributions.
YEAR 2000 COMPUTER ISSUES
- -------------------------
IN GENERAL
The Year 2000 Issue ("Y2K") refers to the inability of computer and other
information technology systems to properly process date and time
information, stemming from the earlier programming practice of using two
digits rather than four to represent the year in a date. For example,
computer programs and imbedded chips that are date sensitive may recognize
a date using (00) as the year 1900 rather than the year 2000. The
consequence of Y2K is that computer and imbedded processing systems may be
at risk of malfunctioning, particularly during the transition from 1999 to
2000.
The effects of Y2K are exacerbated by the interdependence of computer and
telecommunication systems throughout the world. This interdependence also
exists among the 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
16
field process control units, and (iii) third party exposures. As discussed
below, 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 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 their 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 May 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
17
software, desktop computing hardware and software, telecommunications, and
office space readiness.
3. Risk Assessment. The failure to identify and correct a material Y2K
problem could result in inaccurate or untimely financial information for
management decision-making or cash flow and payment purposes, including
maintaining oil and gas leases.
4. Remediation. Since 1993, Samson has been upgrading its accounting and
land administration software. Substantially all of the Y2K upgrades have
been completed, with the remainder scheduled to be completed during the
2nd 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 June
30, 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
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tested by the respective vendors and are expected to be Y2K compliant or
replaced no later than June 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 June 30, 1999.
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.
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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 arising from a Y2K failure.
For example, most of these parties are under contractual obligations to
purchase oil and gas or disperse revenues to Samson. The failure to do so
will result in contractual and statutory penalties. Therefore, Samson
believes that it is unlikely that there will be material third party
non-compliance with purchase and remittance obligations as a result of Y2K
issues.
4. Remediation. Where Samson perceives significant risk of Y2K
non-compliance that may have a material impact on it, and where the
relationship between Samson and a vendor, customer, or business partner
permits, joint testing may be undertaken during 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.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
The Partnerships do not hold any market risk sensitive instruments.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule containing summary financial
information extracted from the P-7 Partnership's
financial statements as of March 31, 1999 and for the
three months ended March 31, 1999, filed herewith.
27.2 Financial Data Schedule containing summary financial
information extracted from the P-8 Partnership's
financial statements as of March 31, 1999 and for the
three months ended March 31, 1999, filed herewith.
All other exhibits are omitted as inapplicable.
(b) Reports on Form 8-K.
Current Report on Form 8-K filed during the first quarter of 1999:
Date of Event: January 29, 1999
Date filed with the SEC: January 29, 1999
Items Included: Item 5. Other Events
Item 7. Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GEODYNE INSTITUTIONAL/PENSION ENERGY
INCOME LIMITED PARTNERSHIP P-7
GEODYNE INSTITUTIONAL/PENSION ENERGY
INCOME LIMITED PARTNERSHIP P-8
(Registrant)
BY: GEODYNE RESOURCES, INC.
General Partner
Date: May 11, 1999 By: /s/Dennis R. Neill
--------------------------------
(Signature)
Dennis R. Neill
President
Date: May 11, 1999 By: /s/Patrick M. Hall
--------------------------------
(Signature)
Patrick M. Hall
Principal Accounting Officer
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INDEX TO EXHIBITS
NUMBER DESCRIPTION
- ------ -----------
27.1 Financial Data Schedule containing summary financial information
extracted from the Geodyne Institutional/Pension Energy Income
Limited Partnership P-7's financial statements as of March 31, 1999
and for the three months ended March 31, 1999,
filed herewith.
27.2 Financial Data Schedule containing summary financial information
extracted from the Geodyne Institutional/Pension Energy Income
Limited Partnership P-8's financial statements as of March 31, 1999
and for the three months ended March 31, 1999,
filed herewith.
All other exhibits are omitted as inapplicable.
24