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 September 30, 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
September 30, December 31,
1999 1998
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 350,462 $ 222,925
Accounts receivable:
Net Profits 509,422 270,901
---------- ----------
Total current assets $ 859,884 $ 493,826
NET PROFITS INTERESTS, net, utilizing
the successful efforts method 2,122,706 2,383,851
---------- ----------
$2,982,590 $2,877,677
========== ==========
PARTNERS' CAPITAL (DEFICIT)
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 116,453) ($ 129,429)
Limited Partners, issued and
outstanding, 188,702 units 3,099,043 3,007,106
---------- ----------
Total Partners' capital $2,982,590 $2,877,677
---------- ----------
$2,982,590 $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 SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
-------- --------
REVENUES:
Net Profits $534,506 $254,174
Interest income 1,903 2,123
Gain on sale of Net Profits
Interests - 7,359
-------- --------
$536,409 $263,656
COSTS AND EXPENSES:
Depletion of Net Profits
Interests $116,389 $154,223
General and administrative
(Note 2) 52,211 53,954
-------- --------
$168,600 $208,177
-------- --------
NET INCOME $367,809 $ 55,479
======== ========
GENERAL PARTNER - NET INCOME $ 22,951 $ 8,837
======== ========
LIMITED PARTNERS - NET INCOME $344,858 $ 46,642
======== ========
NET INCOME per unit $ 1.83 $ .24
======== ========
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 OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
---------- --------
REVENUES:
Net Profits $1,037,969 $777,354
Interest income 3,673 9,080
Gain on sale of Net Profits
Interests 1,263 145,741
---------- --------
$1,042,905 $932,175
COSTS AND EXPENSES:
Depletion of Net Profits
Interests $ 328,565 $485,871
General and administrative
(Note 2) 172,344 171,364
---------- --------
$ 500,909 $657,235
---------- --------
NET INCOME $ 541,996 $274,940
========== ========
GENERAL PARTNER - NET INCOME $ 40,059 $ 32,728
========== ========
LIMITED PARTNERS - NET INCOME $ 501,937 $242,212
========== ========
NET INCOME per unit $ 2.66 $ 1.28
========== ========
UNITS OUTSTANDING 188,702 188,702
========== ========
The accompanying condensed notes are an integral
part of these financial statements.
-4-
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-7
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $541,996 $ 274,940
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depletion of Net Profits
Interests 328,565 485,871
Gain on sale of Net Profits
Interests ( 1,263) ( 145,741)
Increase in accounts receivable -
Net Profits ( 238,521) -
Increase in accounts payable -
Net Profits - 92,836
-------- ----------
Net cash provided by operating
activities $630,777 $ 707,906
-------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 67,420) ($ 181,194)
Proceeds from sale of Net Profits
Interests 1,263 179,017
-------- ----------
Net cash used by investing
activities ($ 66,157) ($ 2,177)
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($437,083) ($1,036,975)
-------- ----------
Net cash used by financing activities ($437,083) ($1,036,975)
-------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $127,537 ($ 331,246)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 222,925 517,144
-------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $350,462 $ 185,898
======== ==========
The accompanying condensed notes are an integral
part of these financial statements.
-5-
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-8
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1999 1998
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 275,172 $ 180,865
Accounts receivable:
Net Profits 269,747 116,632
---------- ----------
Total current assets $ 544,919 $ 297,497
NET PROFITS INTERESTS, net, utilizing
the successful efforts method 1,243,883 1,377,939
---------- ----------
$1,788,802 $1,675,436
========== ==========
PARTNERS' CAPITAL (DEFICIT)
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 55,143) ($ 64,852)
Limited Partners, issued and
outstanding, 90,094 units 1,843,945 1,740,288
---------- ----------
Total Partners' capital $1,788,802 $1,675,436
---------- ----------
$1,788,802 $1,675,436
========== ==========
The accompanying condensed notes are an integral
part of these financial statements.
-6-
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-8
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
--------- ---------
REVENUES:
Net Profits $342,490 $156,825
Interest income 1,843 1,965
Gain on sale of Net Profits
Interests - 4,042
-------- --------
$344,333 $162,832
COSTS AND EXPENSES:
Depletion of Net Profits
Interests $ 64,170 $ 79,140
General and administrative
(Note 2) 32,146 33,223
-------- --------
$ 96,316 $112,363
-------- --------
NET INCOME $248,017 $ 50,469
======== ========
GENERAL PARTNER - NET INCOME $ 14,875 $ 5,591
======== ========
LIMITED PARTNERS - NET INCOME $233,142 $ 44,878
======== ========
NET INCOME per unit $ 2.00 $ .39
======== ========
UNITS OUTSTANDING 116,168 116,168
======== ========
The accompanying condensed notes are an integral
part of these financial statements.
-7-
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-8
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
--------- ---------
REVENUES:
Net Profits $698,140 $527,126
Interest income 4,100 7,860
Gain on sale of Net Profits
Interests 678 100,765
-------- --------
$702,918 $635,751
COSTS AND EXPENSES:
Depletion of Net Profits
Interests $185,291 $252,550
General and administrative
(Note 2) 106,192 105,505
-------- --------
$291,483 $358,055
-------- --------
NET INCOME $411,435 $277,696
======== ========
GENERAL PARTNER - NET INCOME $ 27,778 $ 23,594
======== ========
LIMITED PARTNERS - NET INCOME $383,657 $254,102
======== ========
NET INCOME per unit $ 3.30 $ 2.19
======== ========
UNITS OUTSTANDING 116,168 116,168
======== ========
The accompanying condensed notes are an integral
part of these financial statements.
-8-
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-8
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $411,435 $277,696
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depletion of Net Profits
Interests 185,291 252,550
Gain on sale of Net Profits
Interests ( 678) ( 100,765)
(Increase) decrease in accounts
receivable - Net Profits ( 153,115) 57,019
Increase in accounts payable -
Net Profits - 8,514
-------- --------
Net cash provided by operating
activities $442,933 $495,014
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 51,235) ($104,457)
Proceeds from sale of Net Profits
Interests 678 118,169
-------- --------
Net cash provided (used) by
investing activities ($ 50,557) $ 13,712
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($298,069) ($718,183)
-------- ---------
Net cash used by financing activities ($298,069) ($718,183)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 94,307 ($209,457)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 180,865 382,448
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $275,172 $172,991
======== ========
The accompanying condensed notes are an integral
part of these financial statements.
-9-
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME PROGRAM II LIMITED PARTNERSHIPS
CONDENSED NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheets as of September 30, 1999, statements of operations for
the three and nine months ended September 30, 1999 and 1998, and
statements of cash flows for the nine months ended September 30, 1999 and
1998 have been prepared by 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 September 30, 1999, the results of operations for the three and nine
months ended September 30, 1999 and 1998, and the cash flows for the nine
months ended September 30, 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 September 30, 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.
-10-
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 September 30, 1999 the following payments were made to the General
Partner or its affiliates by the Partnerships:
-11-
Direct General Administrative
Partnership and Administrative Overhead
----------- ------------------- ---------------
P-7 $2,552 $49,659
P-8 1,576 30,570
During the nine months ended September 30, 1999 the following payments
were made to the General Partner or its affiliates by the Partnerships:
Direct General Administrative
Partnership and Administrative Overhead
----------- ------------------- ---------------
P-7 $23,367 $148,977
P-8 14,482 91,710
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.
-12-
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
-13-
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 September 30, 1999 and the
net revenue generated from future operations will provide sufficient
working capital to meet current and future obligations.
During the nine months ended September 30, 1999 capital expenditures
indirectly incurred by the P-7 and P-8 Partnerships totaled $67,420 and
$51,235, respectively. These expenditures resulted primarily from the
Partnerships' indirect participation in developmental drilling in the
North Riley Unit located in Gaines County, Texas and the Bradley SE A
Springer Unit located in Garvin County, Oklahoma. These activities were
conducted in order to improve the recovery of reserves.
-14-
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 in 1998 and early 1999 were at or
near their lowest level in the past decade due primarily to the global
surplus of crude oil. Oil prices have since 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 SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1998.
Three Months Ended September 30,
--------------------------------
1999 1998
-------- --------
Net Profits $534,506 $254,174
Barrels produced 28,999 22,089
Mcf produced 127,013 125,220
Average price/Bbl $ 17.45 $ 12.00
Average price/Mcf $ 2.22 $ 1.56
As shown in the table above, total Net Profits increased $280,332 (110.3%)
for the three months ended September 30, 1999 as compared to the three
months ended September 30, 1998. Of this increase, approximately $158,000
and $84,000, respectively, were related to increases in the average prices
of oil and gas sold and approximately $83,000 was related to an increase
in volumes of oil sold. These increases were partially offset by a
decrease of approximately $48,000 related to an increase in production
expenses incurred by the owners of the Working Interests. Volumes of oil
and gas sold increased 6,910 barrels and
-15-
1,793 Mcf, respectively, for the three months ended September 30, 1999 as
compared to the three months ended September 30, 1998. The increase in
volumes of oil sold was primarily due to (i) negative prior period volume
adjustments made by the purchasers on two significant wells during the
three months ended September 30, 1998 and (ii) a positive prior period
volume adjustment made by the purchaser on one significant well during the
three months ended September 30, 1999. Average oil and gas prices
increased to $17.45 per barrel and $2.22 per Mcf, respectively, for the
three months ended September 30, 1999 from $12.00 per barrel and $1.56 per
Mcf, respectively, for the three months ended September 30, 1998.
Depletion of Net Profits Interests decreased $37,834 (24.5%) for the three
months ended September 30, 1999 as compared to the three months ended
September 30, 1998. This decrease was primarily due to 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 decreased to 21.8% for the three
months ended September 30, 1999 from 60.7% for the three months ended
September 30, 1998. This percentage decrease was primarily due to the
dollar decrease in depletion of Net Profits Interests and the increases in
the average prices of oil and gas sold.
General and administrative expenses decreased $1,743 (3.2%) for the three
months ended September 30, 1999 as compared to the three months ended
September 30, 1998. As a percentage of Net Profits, these expenses
decreased to 9.8% for the three months ended September 30, 1999 from 21.2%
for the three months ended September 30, 1998. This percentage decrease
was primarily due to the increase in Net Profits.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998.
Nine Months Ended September 30,
-------------------------------
1999 1998
---------- --------
Net Profits $1,037,969 $777,354
Barrels produced 80,679 71,092
Mcf produced 365,662 385,490
Average price/Bbl $ 14.57 $ 13.09
Average price/Mcf $ 1.85 $ 1.82
As shown in the table above, total Net Profits increased $260,615 (33.5%)
for the nine months ended September 30, 1999 as compared to the nine
months ended September 30,
-16-
1998. Of this increase, approximately $125,000 was related to an increase
in volumes of oil sold, approximately $120,000 was related to an increase
in the average price of oil sold, and approximately $43,000 was related to
a decrease in production expenses incurred by the owners of the Working
Interests. These increases were partially offset by a decrease of
approximately $36,000 related to an decrease in volumes of gas sold.
Volumes of oil sold increased 9,587 barrels, while volumes of gas sold
decreased 19,828 Mcf for the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998. The increase in
volumes of oil sold was primarily due to a positive prior period volume
adjustment made by the purchaser on one significant well during the nine
months ended September 30, 1999. The decrease in production expenses was
primarily due to workover expenses incurred on several wells during the
nine months ended September 30, 1998 in order to improve the recovery of
reserves, which decreases were partially offset by workover expenses
incurred on another significant well during the nine months ended
September 30, 1999 in order to improve the recovery of reserves. Average
oil and gas prices increased to $14.57 per barrel and $1.85 per Mcf,
respectively, for the nine months ended September 30, 1999 from $13.09 per
barrel and $1.82 per Mcf, respectively, for the nine months ended
September 30, 1998.
The P-7 Partnership sold certain Net Profits Interests during the nine
months ended September 30, 1999 and recognized a $1,263 gain on such
sales. Sales of Net Profits Interests during the nine months ended
September 30, 1998 resulted in the P-7 Partnership recognizing similar
gains totaling $145,741.
Depletion of Net Profits Interests decreased $157,306 (32.4%) for the nine
months ended September 30, 1999 as compared to the nine months ended
September 30, 1998. This decrease was primarily due to 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 decreased to 31.7% for the nine
months ended September 30, 1999 from 62.5% for the nine months ended
September 30, 1998. This percentage decrease was primarily due to the
dollar decrease in depletion of Net Profits Interests.
-17-
General and administrative expenses remained relatively constant for the
nine months ended September 30, 1999 as compared to the nine months ended
September 30, 1998. As a percentage of Net Profits, these expenses
decreased to 16.6% for the nine months ended September 30, 1999 from 22.0%
for the nine months ended September 30, 1998. This percentage decrease was
primarily due to the increase in Net Profits.
Cumulative cash distributions to the Limited Partners through September
30, 1999 were $11,255,916 or 59.65% of the Limited Partners' capital
contributions.
P-8 PARTNERSHIP
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1998.
Three Months Ended September 30,
--------------------------------
1999 1998
-------- --------
Net Profits $342,490 $156,825
Barrels produced 16,963 13,118
Mcf produced 91,695 88,489
Average price/Bbl $ 17.57 $ 11.97
Average price/Mcf $ 2.20 $ 1.52
As shown in the table above, total Net Profits increased $185,665 (118.4%)
for the three months ended September 30, 1999 as compared to the three
months ended September 30, 1998. Of this increase, approximately $95,000
and $62,000, respectively, were related to increases in the average prices
of oil and gas sold and approximately $46,000 was related to an increase
in volumes of oil sold. These increases were partially offset by a
decrease of approximately $23,000 related to an increase in production
expenses incurred by the owners of the Working Interests. Volumes of oil
and gas sold increased 3,845 barrels and 3,206 Mcf, respectively, for the
three months ended September 30, 1999 as compared to the three months
ended September 30, 1998. The increase in volumes of oil sold was
primarily due to (i) negative prior period volume adjustments made by the
purchasers on two significant wells during the three months ended
September 30, 1998 and (ii) a positive prior period volume adjustment made
by the purchaser on one significant well during the three months ended
September 30, 1999. Average oil and gas prices increased to $17.57 per
barrel and $2.20 per Mcf, respectively, for the three months ended
September 30, 1999 from $11.97 per barrel and $1.52 per Mcf, respectively,
for the three months ended September 30, 1998.
-18-
Depletion of Net Profits Interests decreased $14,970 (18.9%) for the three
months ended September 30, 1999 as compared to the three months ended
September 30, 1998. This decrease was primarily due to 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 decreased to 18.7% for the three
months ended September 30, 1999 from 50.5% for the three months ended
September 30, 1998. This percentage decrease was primarily due to the
dollar decrease in depletion of Net Profits Interests and the increases in
the average prices of oil and gas sold.
General and administrative expenses decreased $1,077 (3.2%) for the three
months ended September 30, 1999 as compared to the three months ended
September 30, 1998. As a percentage of Net Profits, these expenses
decreased to 9.4% for the three months ended September 30, 1999 from 21.2%
for the three months ended September 30, 1998. This percentage decrease
was primarily due to the increase in Net Profits.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998.
Nine Months Ended September 30,
-------------------------------
1999 1998
-------- --------
Net Profits $698,140 $527,126
Barrels produced 47,767 42,444
Mcf produced 272,062 278,894
Average price/Bbl $ 14.57 $ 13.01
Average price/Mcf $ 1.87 $ 1.81
As shown in the table above, total Net Profits increased $171,014 (32.4%)
for the nine months ended September 30, 1999 as compared to the nine
months ended September 30, 1998. Of this increase, approximately $74,000
was related to an increase in the average price of oil sold, approximately
$69,000 was related to an increase in volumes of oil sold, and
approximately $24,000 was related to a decrease in production expenses
incurred by the owners of the Working Interests. Volumes of oil sold
increased 5,323 barrels, while volumes of gas sold decreased 6,832 Mcf for
the nine months ended September 30, 1999 as compared to the nine months
ended September 30, 1998. The increase in volumes of oil sold was
primarily due to a positive prior period volume adjustment made by the
purchaser on one significant well during the nine months ended September
30, 1999. The decrease in production expenses was primarily due
-19-
to workover expenses incurred on several wells during the nine months
ended September 30, 1998 in order to improve the recovery of reserves,
which decreases were partially offset by workover expenses incurred on
another significant well during the nine months ended September 30, 1999
in order to improve the recovery of reserves. Average oil and gas prices
increased to $14.57 per barrel and $1.87 per Mcf, respectively, for the
nine months ended September 30, 1999 from $13.01 per barrel and $1.81 per
Mcf, respectively, for the nine months ended September 30, 1998.
The P-8 Partnership sold certain Net Profits Interests during the nine
months ended September 30, 1999 and recognized a $678 gain on such sales.
Sales of Net Profits Interests during the nine months ended September 30,
1998 resulted in the P-8 Partnership recognizing similar gains totaling
$100,765.
Depletion of Net Profits Interests decreased $67,259 (26.6%) for the nine
months ended September 30, 1999 as compared to the nine months ended
September 30, 1998. This decrease was primarily due to 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 decreased to 26.5% for the nine
months ended September 30, 1999 from 47.9% for the nine months ended
September 30, 1998. This percentage decrease was primarily due to the
dollar decrease in depletion of Net Profits Interests.
General and administrative expenses remained relatively constant for the
nine months ended September 30, 1999 as compared to the nine months ended
September 30, 1998. As a percentage of Net Profits, these expenses
decreased to 15.2% for the nine months ended September 30, 1999 from 20.0%
for the nine months ended September 30, 1998. This percentage decrease was
primarily due to the increase in Net Profits.
Cumulative cash distributions to the Limited Partners through September
30, 1999 were $7,042,583 or 60.62% of the Limited Partners' capital
contributions.
-20-
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 Investment Company and its
affiliates ("Samson"), and their vendors, customers, and business
partners, as well as with regulators. The potential risks associated with
Y2K for an oil and gas production company fall into three general areas:
(i) financial, leasehold and administrative computer systems, (ii)
imbedded systems in field process control units, and (iii) third party
exposures. As discussed below, 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 has
addressed each of the three Y2K areas discussed above through a readiness
process that:
1. increased the awareness of the issue among key employees;
2. identified areas of potential risk;
3. assessed the relative impact of these risks and Samson's ability
to manage them; and
4. remediated the risks on a priority basis wherever possible.
-21-
One of Samson Investment Company's Executive Vice Presidents is
responsible for communicating to its Board of Directors Y2K actions and
for the ultimate implementation of its Y2K plan. He has delegated to
Samson Investment Company's Senior Vice President-Technology and
Administrative Services principal responsibility
for ensuring Y2K compliance within Samson.
Samson has been planning for the impact of Y2K on its information
technology systems since 1993. As of November 1, 1999, Samson is in the
final stages of implementation of a Y2K plan, as summarized below:
FINANCIAL AND ADMINISTRATIVE SYSTEMS
1. Awareness. Samson has alerted its officers, managers and supervisors of
Y2K issues and asked them to have their employees participate in the
identification of potential Y2K risks which might otherwise go unnoticed
by higher level employees and officers. As a result, awareness of the
issue is considered high.
2. Risk Identification. Samson's most significant financial and
administrative systems exposure is the Y2K status of the accounting and
land administration system used to collect and manage data for internal
management decision making and for external revenue and accounts payable
purposes. Other concerns include network hardware and software, desktop
computing hardware and software, telecommunications, and office space
readiness.
3. Risk Assessment. The failure to identify and correct a material Y2K
problem could result in inaccurate or untimely financial information for
management decision-making or cash flow and payment purposes, including
maintaining oil and gas leases.
4. Remediation. Since 1993, Samson has been upgrading its accounting and
land administration software. All of the Y2K upgrades have been completed.
In addition, in 1997 and 1998 Samson replaced or applied software patches
to substantially all of its network and desktop software applications and
believes them to be currently Y2K compliant. The costs of all such risk
assessments and remediation were not material to the Partnerships.
-22-
5. Contingency Planning. Notwithstanding the foregoing, should there be
significant unanticipated disruptions in Samson's financial and
administrative systems, all of the accounting processes that are currently
automated will need to be performed manually. Samson has communicated to
its management team the importance of having adequate staff available to
manually perform necessary functions to minimize disruptions.
IMBEDDED SYSTEMS
1. Awareness. Samson's Y2K program has involved all levels of field
personnel from production foremen and higher. Employees at all levels of
the organization have been asked to participate in the identification of
potential Y2K risks, which might otherwise go unnoticed by higher level
employees and officers of Samson, and as a result, awareness of the issue
is considered high.
2. Risk Identification. Samson has inventoried all possible exposures to
imbedded chips and systems. Such exposures can be classified as either (i)
oil and gas production and processing equipment or (ii) office machines
such as faxes, copiers, phones, etc.
With respect to oil and gas production and processing equipment, neither
Samson nor the 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 have been tested by the respective vendors and have
been found to be Y2K compliant or have been upgraded or replaced.
Office machines have been tested by Samson and vendors and are believed to
be compliant.
3. Risk Assessment and Remediation. The failure to identify and correct a
material Y2K problem in an imbedded system could result in outcomes
ranging from errors in data reporting to curtailments or shutdowns in
production. As noted above, Samson has identified less than 10 imbedded
system applications all of which have been made compliant or replaced.
None of these applications are believed to be material to Samson or the
Partnerships. Samson believes that sufficient manual processes are
available to minimize any field level risk and that there will be no
material impact on the Partnerships with respect to these applications.
-23-
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 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.
-24-
4. Remediation. Where Samson perceived a significant risk of Y2K
non-compliance by banks and other significant vendors that would have had
a material impact on Samson's business, Samson undertook joint testing
during 1999, and any identified problems have been resolved.
5. Contingency Planning. In the unlikely event that material production
disruptions occur as a result of Y2K failures of third parties, the
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.
-25-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
The Partnerships do not hold any market risk sensitive instruments.
-26-
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 September 30, 1999
and for the nine months ended September 30, 1999, filed herewith.
27.2 Financial Data Schedule containing summary financial information extracted
from the P-8 Partnership's financial statements as of September 30, 1999
and for the nine months ended September 30, 1999, filed herewith.
All other exhibits are omitted as inapplicable.
(b) Reports on Form 8-K.
None.
-27-
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: November 10, 1999 By: /s/Dennis R. Neill
--------------------------------
(Signature)
Dennis R. Neill
President
Date: November 10, 1999 By: /s/Patrick M. Hall
--------------------------------
(Signature)
Patrick M. Hall
Principal Accounting Officer
-28-
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 September 30,
1999 and for the nine months ended September 30,
1999, filed herewith.
27.2 Financial Data Schedule containing summary financial information
extracted from the Geodyne Institutional/Pension Energy Income
Limited Partnership P-8's financial statements as of September 30,
1999 and for the nine months ended September 30,
1999, filed herewith.
All other exhibits are omitted as inapplicable.
-29-