SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended Commission File Number
March 31, 2001 33-10346-07 (1979-1)
33-10346-08 (1979-2)
DYCO 1979 OIL AND GAS PROGRAM
(TWO LIMITED PARTNERSHIPS)
(Exact Name of Registrant as specified in its charter)
41-1358013 (1979-1)
Minnesota 41-1358015 (1979-2)
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or Number)
organization)
Samson Plaza, Two West Second Street, Tulsa, Oklahoma 74103
- ------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(918) 583-1791
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
-1-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DYCO OIL AND GAS PROGRAM 1979-1 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
2001 2000
---------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 77,585 $ 50,340
Accrued oil and gas sales 94,359 88,493
Accounts receivable - related
party (Note 2) - 13,487
-------- --------
Total current assets $171,944 $152,320
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 85,875 90,294
DEFERRED CHARGE 36,656 36,656
-------- --------
$294,475 $279,270
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 2,617 $ 2,474
-------- --------
Total current liabilities $ 2,617 $ 2,474
ACCRUED LIABILITY $ 33,877 $ 33,877
PARTNERS' CAPITAL:
General Partner, 32 general
partner units $ 2,580 $ 2,430
Limited Partners, issued and
outstanding, 3,140 Units 255,401 240,489
-------- --------
Total Partners' capital $257,981 $242,919
-------- --------
$294,475 $279,270
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
-2-
DYCO OIL AND GAS PROGRAM 1979-1 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(Unaudited)
2001 2000
-------- --------
REVENUES:
Oil and gas sales $192,037 $62,259
Interest 1,102 190
-------- -------
$193,139 $62,449
COSTS AND EXPENSES:
Oil and gas production $ 23,007 $ 9,058
Depreciation, depletion, and
amortization of oil and gas
properties 4,372 3,008
General and administrative
(Note 2) 23,818 22,613
-------- -------
$ 51,197 $34,679
-------- -------
NET INCOME $141,942 $27,770
======== =======
GENERAL PARTNER (1%) - net income $ 1,419 $ 278
======== =======
LIMITED PARTNERS (99%) - net income $140,523 $27,492
======== =======
NET INCOME PER UNIT $ 44.75 $ 8.75
======== =======
UNITS OUTSTANDING 3,172 3,172
======== =======
The accompanying condensed notes are an integral part of
these financial statements.
-3-
DYCO OIL AND GAS PROGRAM 1979-1 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(Unaudited)
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $141,942 $27,770
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 4,372 3,008
(Increase) decrease in accrued oil
and gas sales ( 5,866) 2,283
Decrease in accounts receivable -
General Partner 13,487 -
Increase (decrease) in accounts
payable 143 ( 5,680)
Increase in payable to General
Partner - 2,000
-------- -------
Net cash provided by operating
activities $154,078 $29,381
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties $ - ($ 2,022)
Proceeds from the sale of oil and
gas properties 47 -
-------- -------
Net cash provided (used) by
Investing activities $ 47 ($ 2,022)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($126,880) $ -
-------- -------
Net cash used by financing
activities ($126,880) $ -
-------- -------
NET INCREASE IN CASH AND CASH
EQUIVALENTS $ 27,245 $27,359
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 50,340 8,884
-------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 77,585 $36,243
======== =======
The accompanying condensed notes are an integral part of
these financial statements.
-4-
DYCO OIL AND GAS PROGRAM 1979-2 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
2001 2000
---------- ------------
CURRENT ASSETS:
Cash and cash equivalents $118,293 $103,150
Accrued oil and gas sales 91,434 79,812
-------- --------
Total current assets $209,727 $182,962
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 210,112 216,386
DEFERRED CHARGE 65,520 65,520
-------- --------
$485,359 $464,868
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 4,049 $ 7,027
Gas imbalance payable 60,849 60,849
-------- --------
Total current liabilities $ 64,898 $ 67,876
ACCRUED LIABILITY $ 19,076 $ 19,076
PARTNERS' CAPITAL:
General Partner, 29 general
partner units $ 4,015 $ 3,780
Limited Partners, issued and
outstanding, 2,860 Units 397,370 374,136
-------- --------
Total Partners' capital $401,385 $377,916
-------- --------
$485,359 $464,868
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
-5-
DYCO OIL AND GAS PROGRAM 1979-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(Unaudited)
2001 2000
-------- --------
REVENUES:
Oil and gas sales $177,877 $93,753
Interest 1,626 1,526
-------- -------
$179,503 $95,279
COSTS AND EXPENSES:
Oil and gas production $ 26,342 $17,909
Depreciation, depletion, and
amortization of oil and gas
properties 7,222 5,774
General and administrative
(Note 2) 21,355 20,202
-------- -------
$ 54,919 $43,885
-------- -------
NET INCOME $124,584 $51,394
======== =======
GENERAL PARTNER (1%) - net income $ 1,246 $ 514
======== =======
LIMITED PARTNERS (99%) - net income $123,338 $50,880
======== =======
NET INCOME PER UNIT $ 43.12 $ 17.79
======== =======
UNITS OUTSTANDING 2,889 2,889
======== =======
The accompanying condensed notes are an integral part of
these financial statements.
-6-
DYCO OIL AND GAS PROGRAM 1979-2 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(Unaudited)
2001 2000
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $124,584 $51,394
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 7,222 5,774
Increase in accrued oil and
gas sales ( 11,622) ( 1,758)
Decrease in accounts payable ( 2,978) ( 359)
Decrease in payable to General
Partner - 2,000
-------- -------
Net cash provided by operating
activities $117,206 $57,051
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties ($ 948) $ -
-------- -------
Net cash used by investing
activities ($ 948) $ -
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($101,115) ($72,225)
-------- -------
Net cash used by financing
activities ($101,115) ($72,225)
-------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 15,143 ($15,174)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 103,150 97,905
-------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $118,293 $82,731
======== =======
The accompanying condensed notes are an integral part of
these financial statements.
-7-
DYCO OIL AND GAS PROGRAM 1979-1 LIMITED PARTNERSHIP
DYCO OIL AND GAS PROGRAM 1979-2 LIMITED PARTNERSHIP
CONDENSED NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheets as of March 31, 2001, statements of operations for the
three months ended March 31, 2001 and 2000, and statements of cash flows
for the three months ended March 31, 2001 and 2000 have been prepared by
Dyco Petroleum Corporation ("Dyco"), the General Partner of the Dyco Oil
and Gas Program 1979-1 and 1979-2 Limited Partnerships (individually, the
"1979-1 Program" or the "1979-2 Program", as the case may be, or,
collectively, the "Programs"), without audit. In the opinion of management
all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position at March 31, 2001,
results of operations for the three months ended March 31, 2001 and 2000,
and changes in cash flows for the three months ended March 31, 2001 and
2000 have been made.
Information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the financial statements
and notes thereto included in the Programs' Annual Report on Form 10-K for
the year ended December 31, 2000. The results of operations for the period
ended March 31, 2001 are not necessarily indicative of the results to be
expected for the full year.
The limited partners' net income or loss per unit is based upon each
$5,000 initial capital contribution.
OIL AND GAS PROPERTIES
----------------------
Oil and gas operations are accounted for using the full cost method of
accounting. All productive and non-productive costs associated with the
acquisition, exploration and development of oil and gas reserves are
capitalized. The Programs' calculation of depreciation, depletion, and
amortization includes estimated future expenditures to be incurred in
developing proved reserves and estimated dismantlement and abandonment
costs, net of estimated salvage values. In the event the unamortized cost
of oil and gas properties being amortized exceeds the full cost ceiling
(as defined by the Securities and Exchange
-8-
Commission), the excess is charged to expense in the period during which
such excess occurs. Sales and abandonments of properties are accounted for
as adjustments of capitalized costs with no gain or loss recognized,
unless such adjustments would significantly alter the relationship between
capitalized costs and proved oil and gas reserves.
The provision for depreciation, depletion, and amortization of oil and gas
properties is calculated by dividing the oil and gas sales dollars during
the period by the estimated future gross income from the oil and gas
properties and applying the resulting rate to the net remaining costs of
oil and gas properties that have been capitalized, plus estimated future
development costs.
2. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
The 1979-1 Program's related party receivable at December 31, 2000
represents $13,424 for well sale proceeds and $63 in related interest (at
prime plus 1%) due from an affiliate of the 1979-1 Program related to the
sale of three wells in late 2000. Such receivable was collected in the
first quarter of 2001.
Under the terms of each of the Program's partnership agreement, Dyco is
entitled to receive a reimbursement for all direct expenses and general
and administrative, geological and engineering expenses it incurs on
behalf of the Program. During the three months ended March 31, 2001 and
2000, the 1979-1 Program incurred such expenses totaling $23,818 and
$22,613, respectively, of which $14,490 was paid each period to Dyco and
its affiliates. During the three months ended March 31, 2001 and 2000, the
1979-2 Program incurred such expenses totaling $21,355 and $20,202,
respectively, of which $12,144 was paid each period to Dyco and its
affiliates.
Affiliates of the Programs operate certain of the Programs' properties.
Their policy is to bill the Programs for all customary charges and cost
reimbursements associated with these activities.
-9-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
USE OF FORWARD-LOOKING STATEMENTS AND ESTIMATES
- -----------------------------------------------
This Quarterly Report contains certain forward-looking statements. The
words "anticipate", "believe", "expect", "plan", "intend", "estimate",
"project", "could", "may" and similar expressions are intended to identify
forward-looking statements. Such statements reflect management's current
views with respect to future events and financial performance. This
Quarterly Report also includes certain information, which is, or is based
upon, estimates and assumptions. Such estimates and assumptions are
management's efforts to accurately reflect the condition and operation of
the Programs.
Use of forward-looking statements and estimates and assumptions involve
risks and uncertainties which include, but are not limited to, the
volatility of oil and gas prices, the uncertainty of reserve information,
the operating risk associated with oil and gas properties (including the
risk of personal injury, death, property damage, damage to the well or
producing reservoir, environmental contamination, and other operating
risks), the prospect of changing tax and regulatory laws, the availability
and capacity of processing and transportation facilities, the general
economic climate, the supply and price of foreign imports of oil and gas,
the level of consumer product demand, and the price and availability of
alternative fuels. Should one or more of these risks or uncertainties
occur or should estimates or underlying assumptions prove incorrect,
actual conditions or results may vary materially and adversely from those
stated, anticipated, believed, estimated, and otherwise indicated.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net proceeds from the Programs' operations less necessary operating
capital are distributed to investors on a quarterly basis. The net
proceeds from production are not reinvested in productive assets, except
to the extent that producing wells are improved or where methods are
employed to permit more efficient recovery of the Programs' reserves which
would result in a positive economic impact.
-10-
The Programs' available capital from subscriptions has been spent on oil
and gas drilling activities. There should be no further material capital
resource commitments in the future. The Programs have no debt commitments.
Management believes that cash for ordinary operational purposes will be
provided by current oil and gas production.
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
variables affecting the Programs' revenues are the prices received for the
sale of oil and gas and the volumes of oil and gas produced. The Program's
production is mainly natural gas, so such pricing and volumes are the most
significant factors.
Due to the volatility of oil and gas prices, forecasting future prices is
subject to great uncertainty and inaccuracy. Substantially all of the
Programs' gas reserves are being sold 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. Such spot market
sales are generally short-term in nature and are dependent upon the
obtaining of transportation services provided by pipelines. It is likewise
difficult to predict production volumes. However, oil and gas are
depleting assets, so it can be expected that production levels will
decline over time. Recent gas prices have been significantly higher than
the Program's historical average. This is attributable to the higher
prices for crude oil, a substitute fuel in some markets, and reduced
production due to lower capital investments in 1998 and 1999.
-11-
1979-1 PROGRAM
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 2000.
Three Months Ended March 31,
----------------------------
2001 2000
-------- -------
Oil and gas sales $192,037 $62,259
Oil and gas production expenses $ 23,007 $ 9,058
Barrels produced 20 35
Mcf produced 28,004 26,648
Average price/Bbl $ 28.90 $ 26.89
Average price/Mcf $ 6.84 $ 2.30
As shown in the table above, total oil and gas sales increased $129,778
(208.4%) for the three months ended March 31, 2001 as compared to the
three months ended March 31, 2000. Of this increase, approximately
$127,000 was related to an increase in the average price of gas sold.
Volumes of oil sold decreased 15 barrels, while volumes of gas sold
increased 1,356 Mcf for the three months ended March 31, 2001 as compared
to the three months ended March 31, 2000. Average oil and gas prices
increased to $28.90 per barrel and $6.84 per Mcf, respectively, for the
three months ended March 31, 2001 from $26.89 per barrel and $2.30 per
Mcf, respectively, for the three months ended March 31, 2000.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $13,949 (154.0%) for the three months ended
March 31, 2001 as compared to the three months ended March 31, 2000. This
increase was primarily due to an increase in production taxes associated
with the increase in oil and gas sales. As a percentage of oil and gas
sales, these expenses decreased to 12.0% for the three months ended March
31, 2001 from 14.5% for the three months ended March 31, 2000. This
percentage decrease was primarily due to the increase in the average price
of gas sold.
Depreciation, depletion, and amortization of oil and gas properties
increased $1,364 (45.3%) for the three months ended March 31, 2001 as
compared to the three months ended March 31, 2000. This increase was
primarily due to an increase in the average price of gas sold. This
increase was partially offset by a decrease in depreciation, depletion,
and amortization due to an increase in the gas price used in the valuation
of reserves at March 31, 2001 as compared to March 31, 2000. As a
percentage of oil and gas sales, this expense decreased to 2.3% for the
three months ended March 31, 2001 from 4.8% for the three months ended
March 31, 2000. This percentage decrease was primarily due
-12-
to the increase in the gas price used in the valuation of reserves.
General and administrative expenses increased $1,205 (5.3%) for the three
months ended March 31, 2001 as compared to the three months ended March
31, 2000. As a percentage of oil and gas sales, these expenses decreased
to 12.4% for the three months ended March 31, 2001 from 36.3% for the
three months ended March 31, 2000. This percentage decrease was primarily
due to the increase in oil and gas sales.
1979-2 PROGRAM
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 2000.
Three Months Ended March 31,
----------------------------
2001 2000
-------- -------
Oil and gas sales $177,877 $93,753
Oil and gas production expenses $ 26,342 $17,909
Barrels produced 101 244
Mcf produced 25,885 33,257
Average price/Bbl $ 27.68 $ 26.61
Average price/Mcf $ 6.76 $ 2.61
As shown in the table above, total oil and gas sales increased $84,124
(89.7%) for the three months ended March 31, 2001 as compared to the three
months ended March 31, 2000. Of this increase, approximately $107,000 was
related to an increase in the average price of gas sold, which increase
was partially offset by a decrease of approximately $19,000 related to a
decrease in volumes of gas sold. Volumes of oil and gas sold decreased 143
barrels and 7,372 Mcf, respectively, for the three months ended March 31,
2001 as compared to the three months ended March 31, 2000. The decrease in
volumes of gas sold was primarily due to (i) the 1979-2 Program's receipt
of an increased percentage of sales on one well during the three months
ended March 31, 2000 due to gas balancing and (ii) normal declines in
production. Average oil and gas prices increased to $27.68 per barrel and
$6.76 per Mcf, respectively, for the three months ended March 31, 2001
from $26.61 per barrel and $2.62 per Mcf, respectively, for the three
months ended March 31, 2000.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $8,433 (47.1%) for the three months ended
March 31, 2001 as compared to the three months ended March 31, 2000. This
increase was primarily due to (i) an increase in production taxes
associated with the increase in oil and gas sales and (ii) a positive
prior period lease operating expense adjustment made by the operator on
one well during the three months
-13-
ended March 31, 2001. As a percentage of oil and gas sales, these expenses
decreased to 14.8% for the three months ended March 31, 2001 from 19.1%
for the three months ended March 31, 2000. This percentage decrease was
primarily due to the increase in the average price of gas sold.
Depreciation, depletion, and amortization of oil and gas properties
increased $1,448 (25.1%) for the three months ended March 31, 2001 as
compared to the three months ended March 31, 2000. This increase was
primarily due to an increase in the average price of gas sold. This
increase was partially offset by a decrease in depreciation, depletion,
and amortization due to (i) an increase in the gas price used in the
valuation of reserves at March 31, 2001 as compared to March 31, 2000 and
(ii) the decreases in volumes of oil and gas sold. As a percentage of oil
and gas sales, this expense decreased to 4.1% for the three months ended
March 31, 2001 from 6.2% for the three months ended March 31, 2000. This
percentage decrease was primarily due to the increase in the gas price
used in the valuation of reserves.
General and administrative expenses increased $1,153 (5.7%) for the three
months ended March 31, 2001 as compared to the three months ended March
31, 2000. As a percentage of oil and gas sales, these expenses decreased
to 12.0% for the three months ended March 31, 2001 from 21.5% for the
three months ended March 31, 2000. This percentage decrease was primarily
due to the increase in oil and gas sales.
-14-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
The Programs do not hold any market risk sensitive instruments.
-15-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K.
None.
-16-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DYCO OIL AND GAS PROGRAM 1979-1 LIMITED
PARTNERSHIP
DYCO OIL AND GAS PROGRAM 1979-2 LIMITED
PARTNERSHIP
(Registrant)
BY: DYCO PETROLEUM CORPORATION
General Partner
Date: May 7, 2001 By: /s/Dennis R. Neill
-------------------------------
(Signature)
Dennis R. Neill
President
Date: May 7, 2001 By: /s/Patrick M. Hall
-------------------------------
(Signature)
Patrick M. Hall
Chief Financial Officer