SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended Commission File Number
June 30, 2002 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
June 30, December 31,
2002 2001
----------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 78,597 $ 52,398
Accrued oil and gas sales 45,722 30,304
-------- --------
Total current assets $124,319 $ 82,702
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 68,273 72,581
DEFERRED CHARGE 34,226 34,226
-------- --------
$226,818 $189,509
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 5,220 $ 6,013
-------- --------
Total current liabilities $ 5,220 $ 6,013
ACCRUED LIABILITY $ 33,280 $ 33,280
PARTNERS' CAPITAL:
General Partner, 32 general
partner units $ 1,884 $ 1,503
Limited Partners, issued and
outstanding, 3,140 Units 186,434 148,713
-------- --------
Total Partners' capital $188,318 $150,216
-------- --------
$226,818 $189,509
======== ========
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 JUNE 30, 2002 AND 2001
(Unaudited)
2002 2001
------- --------
REVENUES:
Oil and gas sales $70,757 $120,193
Interest 169 1,057
------- --------
$70,926 $121,250
COSTS AND EXPENSES:
Oil and gas production $14,842 $ 16,855
Depreciation, depletion, and
amortization of oil and gas
properties 2,374 6,848
General and administrative
(Note 2) 15,246 15,670
------- --------
$32,462 $ 39,373
------- --------
NET INCOME $38,464 $ 81,877
======= ========
GENERAL PARTNER (1%) - net income $ 385 $ 819
======= ========
LIMITED PARTNERS (99%) - net income $38,079 $ 81,058
======= ========
NET INCOME PER UNIT $ 12.12 $ 25.81
======= ========
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 OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
2002 2001
-------- --------
REVENUES:
Oil and gas sales $123,574 $312,230
Interest 360 2,159
-------- --------
$123,934 $314,389
COSTS AND EXPENSES:
Oil and gas production $ 43,485 $ 39,862
Depreciation, depletion, and
amortization of oil and gas
properties 4,166 11,220
General and administrative
(Note 2) 38,181 39,488
-------- --------
$ 85,832 $ 90,570
-------- --------
NET INCOME $ 38,102 $223,819
======== ========
GENERAL PARTNER (1%) - net income $ 381 $ 2,238
======== ========
LIMITED PARTNERS (99%) - net income $ 37,721 $221,581
======== ========
NET INCOME PER UNIT $ 12.01 $ 70.56
======== ========
UNITS OUTSTANDING 3,172 3,172
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
-4-
DYCO OIL AND GAS PROGRAM 1979-1 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
2002 2001
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $38,102 $223,819
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 4,166 11,220
(Increase) decrease in accrued oil
and gas sales ( 15,418) 23,846
Decrease in accounts receivable -
General Partner - 13,487
Increase (decrease) in accounts
payable ( 793) 362
------- --------
Net cash provided by operating
activities $26,057 $272,734
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of oil and
gas properties $ 142 $ 101
------- --------
Net cash provided by investing
activities $ 142 $ 101
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions $ - ($269,620)
------- --------
Net cash used by financing
activities $ - ($269,620)
------- --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS $26,199 $ 3,215
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 52,398 50,340
------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $78,597 $ 53,555
======= ========
The accompanying condensed notes are an integral part of
these financial statements.
-5-
DYCO OIL AND GAS PROGRAM 1979-2 LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
ASSETS
June 30, December 31,
2002 2001
---------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 94,489 $ 95,915
Accrued oil and gas sales 44,697 32,442
-------- --------
Total current assets $139,186 $128,357
NET OIL AND GAS PROPERTIES, utilizing
the full cost method 181,828 181,313
DEFERRED CHARGE 59,389 60,941
-------- --------
$380,403 $370,611
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 11,082 $ 28,378
Gas imbalance payable 61,317 61,317
-------- --------
Total current liabilities $ 72,399 $ 89,695
ACCRUED LIABILITY $ 13,911 $ 13,911
PARTNERS' CAPITAL:
General Partner, 29 general
partner units $ 2,942 $ 2,671
Limited Partners, issued and
outstanding, 2,860 Units 291,151 264,334
-------- --------
Total Partners' capital $294,093 $267,005
-------- --------
$380,403 $370,611
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
-6-
DYCO OIL AND GAS PROGRAM 1979-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
2002 2001
------- --------
REVENUES:
Oil and gas sales $77,534 $108,222
Interest 248 1,506
------- --------
$77,782 $109,728
COSTS AND EXPENSES:
Oil and gas production $28,452 $ 22,166
Depreciation, depletion, and
amortization of oil and gas
properties 6,031 11,144
General and administrative
(Note 2) 12,833 13,295
------- --------
$47,316 $ 46,605
------- --------
NET INCOME $30,466 $ 63,123
======= ========
GENERAL PARTNER (1%) - net income $ 305 $ 631
======= ========
LIMITED PARTNERS (99%) - net income $30,161 $ 62,492
======= ========
NET INCOME PER UNIT $ 10.55 $ 21.85
======= ========
UNITS OUTSTANDING 2,889 2,889
======= ========
The accompanying condensed notes are an integral part of
these financial statements.
-7-
DYCO OIL AND GAS PROGRAM 1979-2 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
2002 2001
-------- --------
REVENUES:
Oil and gas sales $133,809 $286,099
Interest 563 3,132
-------- --------
$134,372 $289,231
COSTS AND EXPENSES:
Oil and gas production $ 63,411 $ 48,508
Depreciation, depletion, and
amortization of oil and gas
properties 10,470 18,366
General and administrative
(Note 2) 33,403 34,650
-------- --------
$107,284 $101,524
-------- --------
NET INCOME $ 27,088 $187,707
======== ========
GENERAL PARTNER (1%) - net income $ 271 $ 1,877
======== ========
LIMITED PARTNERS (99%) - net income $ 26,817 $185,830
======== ========
NET INCOME PER UNIT $ 9.38 $ 64.97
======== ========
UNITS OUTSTANDING 2,889 2,889
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
-8-
DYCO OIL AND GAS PROGRAM 1979-2 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
2002 2001
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $27,088 $187,707
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 10,470 18,366
(Increase) decrease in accrued
oil and gas sales ( 12,255) 14,472
Decrease in deferred charge 1,552 -
Decrease in accounts payable ( 17,296) ( 2,785)
------- --------
Net cash provided by operating
activities $ 9,559 $217,760
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties ($10,985) ($ 948)
------- --------
Net cash used by investing
activities ($10,985) ($ 948)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions $ - ($216,675)
------- --------
Net cash used by financing
activities $ - ($216,675)
------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($ 1,426) $ 137
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 95,915 103,150
------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $94,489 $103,287
======= ========
The accompanying condensed notes are an integral part of
these financial statements.
-9-
DYCO OIL AND GAS PROGRAM 1979-1 LIMITED PARTNERSHIP
DYCO OIL AND GAS PROGRAM 1979-2 LIMITED PARTNERSHIP
CONDENSED NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheets as of June 30, 2002, statements of operations for the
three and six months ended June 30, 2002 and 2001, and statements of cash
flows for the six months ended June 30, 2002 and 2001 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 June 30, 2002,
results of operations for the three and six months ended June 30, 2002 and
2001, and changes in cash flows for the six months ended June 30, 2002 and
2001 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, 2001. The results of operations for the period
ended June 30, 2002 are not necessarily indicative of the results to be
expected for the full year.
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 Commission), the excess is
charged to expense in the period during which such excess occurs. Sales
and abandonments of
-10-
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
---------------------------------
Under the terms of each of the Program's partnership agreement, Dyco is
entitled to receive a reimbursement for all direct expenses and general
and administrative, geological and engineering expenses it incurs on
behalf of the Program. During the three months ended June 30, 2002 and
2001, the 1979-1 Program incurred such expenses totaling $15,246 and
$15,670, respectively, of which $14,490 was paid each period to Dyco and
its affiliates. During the six months ended June 30, 2002 and 2001, the
1979-1 Program incurred such expenses totaling $38,181 and $39,488,
respectively, of which $28,980 was paid each period to Dyco and its
affiliates. During the three months ended June 30, 2002 and 2001, the
1979-2 Program incurred such expenses totaling $12,833 and $13,295,
respectively, of which $12,144 was paid each period to Dyco and its
affiliates. During the six months ended June 30, 2002 and 2001, the 1979-2
Program incurred such expenses totaling $33,403 and $34,650, respectively,
of which $24,288 as 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.
3. TERMINATION
-----------
On July 31, 2002, Dyco mailed notice letters (the "Notices") to the
limited partners of its election to terminate the Programs effective
October 31, 2002 pursuant to the terms of the Partnership Agreements
governing the Programs (the "Agreements") and the Minnesota Revised
Limited Partnership Act (the "Act").
-11-
As provided in the Agreements and under the Act, the Notices will cause
dissolution of the Programs ninety (90) days from July 31, 2002, PROVIDED,
HOWEVER, that the limited partners of the Programs may elect to
reconstitute the Programs with new general partners as further described
below. Due to this uncertainty these financial statements have been
prepared on a going concern basis rather than a liquidation basis. It is
expected that Dyco as general partner will file a certificate dissolving
the partnerships with the Minnesota Secretary of State on or about October
31, 2002 and, immediately thereafter, deregister the Programs with the
Securities & Exchange Commission ("SEC").
Upon dissolution, Dyco and its affiliates may, pursuant to the Agreements,
withdraw their limited partner interests in any or all of the Programs'
properties by taking their share of the Programs' properties in-kind. Dyco
and its affiliates intend to avail themselves of this provision upon
dissolution.
As part of the dissolution process, Dyco will actively negotiate for the
sale of the producing properties attributable to the remaining limited
partners' interests. These properties will be offered to all interested
parties through normal oil and gas property auction processes as well as
appropriate negotiated transactions. It is possible that Dyco or its
affiliates may participate in any public auction of the remaining
properties and may be the successful high bidder on some or all of the
properties.
Following the sale of the remaining properties and the calculation of
other assets and liabilities of the Programs, any net cash will be paid as
a final liquidating distribution to all of the remaining partners in the
Programs. It is expected that any such distribution will be made no later
than December 31, 2002.
As provided by the Act and the Agreements, a majority in interest of the
limited partners may vote to reconstitute the Programs and continue its
activities as a partnership with newly appointed general partners. Such a
proposal will be presented to the limited partners upon the written
request of limited partners representing at least ten (10%) percent of the
Program's total units. Consideration of such a proposal would require that
a proxy statement be filed with the SEC. Dyco and its affiliates own
approximately 48% and 49%, respectively, of the units in the 1979-1
Program and 1979-2 Program. It is expected that they would vote "no" on
any vote to reconstitute the Programs.
-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 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.
TERMINATION
- -----------
On July 31, 2002 Dyco notified the limited partners of its election to
terminate the Programs effective October 31, 2002. See Item 5 - Other
Information for more information regarding termination of the Programs.
However, as described in Item 5 there is a possibility that the Programs
will be reconstituted. Due to this uncertainty the financial statements
and management's discussion and analysis contained in this Quarterly
Report on Form 10-Q have been prepared on a going concern basis rather
than a liquidation basis. In the event the Programs are terminated as
expected, then all statements in this Quarterly Report regarding future
income, expenses, or other items will not be applicable.
-13-
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.
The Programs' available capital from subscriptions has been spent on oil
and gas drilling activities. However, during the six months ended June 30,
2002, capital expenditures for the 1979-2 Program totaled $10,985. These
expenditures were primarily due to a successful workover of the Loula Unit
#1-A well located in Caddo County, Oklahoma, in which the 1979-2 Program
owns an interest of approximately 25.3%. 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.
NEW ACCOUNTING PRONOUNCEMENTS
Below is a brief description of a Financial Accounting Standard ("FAS")
recently issued by the Financial Accounting Standards Board ("FASB") which
may have an impact on the Programs' future results of operations and
financial position.
In July 2001, the FASB issued FAS No. 143, "Accounting for Asset
Retirement Obligations", which is effective for fiscal years beginning
after June 15, 2002 (January 1, 2003 for the Programs). FAS No. 143 will
require the recording of the fair value of liabilities associated with the
retirement of long-lived assets (mainly plugging and abandonment costs for
the Programs' depleted wells), in the period in which the liabilities are
incurred (at the time the wells are drilled). Management has not yet
determined the effect of adopting this statement on the Programs'
financial condition or results of operations.
-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
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.
Historically, oil and gas prices have been volatile and are likely to
continue to be volatile. As a result, 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. Gas prices in early 2001 were significantly higher than
the Program's historical average. This was 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. However,
prices for both oil and gas soon declined and were relatively lower in
late 2001 and early 2002 as a result of the declining economy and
relatively mild winter weather. Recently, prices of oil and gas have
improved, to some extent due to unrest in the Middle East. It is not
possible to accurately predict future trends.
-15-
1979-1 PROGRAM
THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THE THREE MONTHS ENDED JUNE
30, 2001.
Three Months Ended June 30,
---------------------------
2002 2001
------- --------
Oil and gas sales $70,757 $120,193
Oil and gas production expenses $14,842 $ 16,855
Barrels produced - 6
Mcf produced 23,459 30,457
Average price/Bbl $ - $ 24.00
Average price/Mcf $ 3.02 $ 3.94
As shown in the table above, total oil and gas sales decreased $49,436
(41.1%) for the three months ended June 30, 2002 as compared to the three
months ended June 30, 2001. Of this decrease, approximately (i) $28,000
was related to a decrease in volumes of gas sold and (ii) $22,000 was
related to a decrease in the average price of gas sold. Volumes of oil and
gas sold decreased 6 barrels and 6,998 Mcf, respectively, for the three
months ended June 30, 2002 as compared to the three months ended June 30,
2001. The decrease in volumes of gas sold was primarily due to (i) a
positive prior period volume adjustment made by the operator on one well
during the three months ended June 30, 2001 and (ii) normal declines in
production. The average oil price was $24.00 per barrel during the three
months ended June 30, 2001. Average gas prices decreased to $3.02 per Mcf
for the three months ended June 30, 2002 from $3.94 per Mcf for the three
months ended June 30, 2001.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $2,013 (11.9%) for the three months ended June
30, 2002 as compared to the three months ended June 30, 2001. This
decrease was primarily due to a decrease in production taxes associated
with the decrease in oil and gas sales. This decrease was partially offset
by workover expenses incurred on one well during the three months ended
June 30, 2002. As a percentage of oil and gas sales, these expenses
increased to 21.0% for the three months ended June 30, 2002 from 14.0% for
the three months ended June 30, 2001. This percentage increase was
primarily due to the decrease in the average price of gas sold.
-16-
Depreciation, depletion, and amortization of oil and gas properties
decreased $4,474 (65.3%) for the three months ended June 30, 2002 as
compared to the three months ended June 30, 2001. This decrease was
primarily due to (i) the decrease in the average price of gas sold and
(ii) the decreases in volumes of oil and gas sold. As a percentage of oil
and gas sales, this expense decreased to 3.4% for the three months ended
June 30, 2002 from 5.7% for the three months ended June 30, 2001. This
percentage decrease was primarily due to the dollar decrease in
depreciation, depletion, and amortization.
General and administrative expenses decreased $424 (2.7%) for the three
months ended June 30, 2002 as compared to the three months ended June 30,
2001. As a percentage of oil and gas sales, these expenses increased to
21.5% for the three months ended June 30, 2002 from 13.0% for the three
months ended June 30, 2001. This percentage increase was primarily due to
the decrease in oil and gas sales.
SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
2001.
Six Months Ended June 30,
---------------------------
2002 2001
-------- --------
Oil and gas sales $123,574 $312,230
Oil and gas production expenses $ 43,485 $ 39,862
Barrels produced 9 26
Mcf produced 48,466 58,461
Average price/Bbl $ 18.00 $ 27.77
Average price/Mcf $ 2.55 $ 5.33
As shown in the table above, total oil and gas sales decreased $188,656
(60.4%) for the six months ended June 30, 2002 as compared to the six
months ended June 30, 2001. Of this decrease, approximately (i) $135,000
was related to a decrease in the average price of gas sold and (ii)
$53,000 was related to a decrease in volumes of gas sold. Volumes of oil
and gas sold decreased 17 barrels and 9,995 Mcf, respectively, for the six
months ended June 30, 2002 as compared to the six months ended June 30,
2001. The decrease in volumes of gas sold was primarily due to (i)
positive prior period volume adjustments on two wells during the six
months ended June 30, 2001 and (ii) normal declines in production. Average
oil and gas prices decreased to $18.00 per barrel and $2.55 per Mcf,
respectively, for the six months ended June 30, 2002 from $27.77 per
barrel and $5.33 per Mcf, respectively, for the six months ended June 30,
2001.
-17-
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $3,623 (9.1%) for the six months ended June
30, 2002 as compared to the six months ended June 30, 2001. This increase
was primarily due to workover expenses incurred on one well during the six
months ended June 30, 2002. This increase was partially offset by a
decrease in production taxes associated with the decrease in oil and gas
sales. As a percentage of oil and gas sales, these expenses increased to
35.2% for the six months ended June 30, 2002 from 12.8% for the six months
ended June 30, 2001. This percentage increase was primarily due to the
decreases in the average prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $7,054 (62.9%) for the six months ended June 30, 2002 as
compared to the six months ended June 30, 2001. This decrease was
primarily due to (i) the decreases in the average prices of oil and gas
sold and (ii) the decreases in volumes of oil and gas sold. As a
percentage of oil and gas sales, this expense decreased to 3.4% for the
six months ended June 30, 2002 from 3.6% for the six months ended June 30,
2001.
General and administrative expenses decreased $1,307 (3.3%) for the six
months ended June 30, 2002 as compared to the six months ended June 30,
2001. As a percentage of oil and gas sales, these expenses increased to
30.9% for the six months ended June 30, 2002 from 12.6% for the six months
ended June 30, 2001. This percentage increase was primarily due to the
decrease in oil and gas sales.
1979-2 PROGRAM
THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THE THREE MONTHS ENDED JUNE
30, 2001.
Three Months Ended June 30,
---------------------------
2002 2001
------- --------
Oil and gas sales $77,534 $108,222
Oil and gas production expenses $28,452 $ 22,166
Barrels produced 86 274
Mcf produced 22,616 21,775
Average price/Bbl $ 25.73 $ 26.92
Average price/Mcf $ 3.33 $ 4.63
As shown in the table above, total oil and gas sales decreased $30,688
(28.4%) for the three months ended June 30, 2002 as compared to the three
months ended June 30, 2001. Of this decrease, approximately (i) $29,000
was related to a decrease in the average price of gas sold and (ii) $5,000
was related to a decrease in volumes of oil
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sold. These decreases were partially offset by an increase of
approximately $4,000 related to an increase in volumes of gas sold.
Volumes of oil sold decreased 188 barrels, while volumes of gas sold
increased 841 Mcf for the three months ended June 30, 2002 as compared to
the three months ended June 30, 2001. The increase 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 June 30,
2002 due to gas balancing and (ii) increased production on another well
due to the successful workover of that well during late 2001. These
increases were partially offset by normal declines in production. As of
the date of this Quarterly Report, management expects the gas balancing
adjustment to continue for the foreseeable future, thereby continuing to
contribute to an increase in volumes of gas sold for the 1979-2 Program.
Average oil and gas prices decreased to $25.73 per barrel and $3.33 per
Mcf, respectively, for the three months ended June 30, 2002 from $26.92
per barrel and $4.63 per Mcf, respectively, for the three months ended
June 30, 2001.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $6,286 (28.4%) for the three months ended June
30, 2002 as compared to the three months ended June 30, 2001. This
increase was primarily due to workover expenses incurred on one well
during the three months ended June 30, 2002. This increase was partially
offset by a decrease in production taxes associated with the decrease in
oil and gas sales. As a percentage of oil and gas sales, these expenses
increased to 36.7% for the three months ended June 30, 2002 from 20.5% for
the three months ended June 30, 2001. This percentage increase was
primarily due to the decreases in the average prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $5,113 (45.9%) for the three months ended June 30, 2002 as
compared to the three months ended June 30, 2001. This decrease was
primarily due to the decreases in the average prices of oil and gas sold.
As a percentage of oil and gas sales, this expense decreased to 7.8% for
the three months ended June 30, 2002 from 10.3% for the three months ended
June 30, 2001. This percentage decrease was primarily due to the dollar
decrease in depreciation, depletion, and amortization.
General and administrative expenses decreased $462 (3.5%) for the three
months ended June 30, 2002 as compared to the three months ended June 30,
2001. As a percentage of oil and gas sales, these expenses increased to
16.6% for the three months ended June 30, 2002 from 12.3% for the three
months ended June 30, 2001. This percentage increase was primarily due to
the decrease in oil and gas sales.
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SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
2001.
Six Months Ended June 30,
--------------------------
2002 2001
-------- --------
Oil and gas sales $133,809 $286,099
Oil and gas production expenses $ 63,411 $ 48,508
Barrels produced 199 375
Mcf produced 44,957 47,660
Average price/Bbl $ 21.89 $ 27.12
Average price/Mcf $ 2.88 $ 5.79
As shown in the table above, total oil and gas sales decreased $152,290
(53.2%) for the six months ended June 30, 2002 as compared to the six
months ended June 30, 2001. Of this decrease, approximately (i) $131,000
was related to a decrease in the average price of gas sold and (ii)
$16,000 was related to a decrease in volumes of gas sold. Volumes of oil
and gas sold decreased 176 barrels and 2,703 Mcf, respectively, for the
six months ended June 30, 2002 as compared to the six months ended June
30, 2001. The decrease in volumes of gas sold was primarily due to normal
declines in production. This decrease was partially offset by (i) the
1979-2 Program's receipt of an increased percentage of sales on one well
during the six months ended June 30, 2002 due to gas balancing and (ii)
increased production on another well due to the successful workover of
that well during late 2001. As of the date of this Quarterly Report,
management expects the gas balancing adjustment to continue for the
foreseeable future, thereby continuing to contribute to an increase in
volumes of gas sold for the 1979-2 Program. Average oil and gas prices
decreased to $21.89 per barrel and $2.88 per Mcf, respectively, for the
six months ended June 30, 2002 from $27.12 per barrel and $5.79 per Mcf,
respectively, for the six months ended June 30, 2001.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $14,903 (30.7%) for the six months ended June
30, 2002 as compared to the six months ended June 30, 2001. This increase
was primarily due to workover expenses incurred on two wells during the
six months ended June 30, 2002. This increase wasf partially offset by (i)
a negative prior period lease operating expense adjustment on one well
during the six months ended June 30, 2002 and (ii) a decrease in
production taxes associated with the decrease in oil and gas sales. As a
percentage of oil and gas sales, these expenses increased to 47.4% for the
six months ended June 30, 2002 from 17.0% for the six months ended June
30, 2001. This percentage increase was primarily due to the decreases in
the average prices of oil and gas sold.
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Depreciation, depletion, and amortization of oil and gas properties
decreased $7,896 (43.0%) for the six months ended June 30, 2002 as
compared to the six months ended June 30, 2001. This decrease was
primarily due to the decreases in the average prices of oil and gas sold.
As a percentage of oil and gas sales, this expense increased to 7.8% for
the six months ended June 30, 2002 from 6.4% for the six months ended June
30, 2001. This percentage increase was primarily due to the decreases in
the average prices of oil and gas sold.
General and administrative expenses decreased $1,247 (3.6%) for the six
months ended June 30, 2002 as compared to the six months ended June 30,
2001. As a percentage of oil and gas sales, these expenses increased to
25.0% for the six months ended June 30, 2002 from 12.1% for the six months
ended June 30, 2001. This percentage increase was primarily due to the
decrease in oil and gas sales.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
The Programs do not hold any market risk sensitive instruments.
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PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On July 31, 2002, Dyco mailed notice letters (the "Notices") to the
limited partners of its election to terminate the Programs effective
October 31, 2002 pursuant to the terms of the Partnership Agreements
governing the Programs (the "Agreements") and the Minnesota Revised
Limited Partnership Act (the "Act"). Copies of the Notices are attached to
this Quarterly Report on Form 10-Q as Exhibits.
As provided in the Agreements and under the Act, the Notices will cause
dissolution of the Programs ninety (90) days from July 31, 2002, PROVIDED,
HOWEVER, that the limited partners of the Programs may elect to
reconstitute the Programs with new general partners as further described
below. It is expected that Dyco as general partner will file a certificate
dissolving the partnerships with the Minnesota Secretary of State on or
about October 31, 2002 and, immediately thereafter, deregister the
Programs with the Securities & Exchange Commission ("SEC").
Upon dissolution, Dyco and its affiliates may, pursuant to the Agreements,
withdraw their limited partner interests in any or all of the Programs'
properties by taking their share of the Programs' properties in-kind. Dyco
and its affiliates intend to avail themselves of this provision upon
dissolution.
As part of the dissolution process, Dyco will actively negotiate for the
sale of the producing properties attributable to the remaining limited
partners' interests. These properties will be offered to all interested
parties through normal oil and gas property auction processes as well as
appropriate negotiated transactions. It is possible that Dyco or its
affiliates may participate in any public auction of the remaining
properties and may be the successful high bidder on some or all of the
properties.
Following the sale of the remaining properties and the calculation of
other assets and liabilities of the Programs, any net cash will be paid as
a final liquidating distribution to all of the remaining partners in the
Programs. It is expected that any such distribution will be made no later
than December 31, 2002.
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As provided by the Act and the Agreements, a majority in interest of the
limited partners may vote to reconstitute the Programs and continue its
activities as a partnership with newly appointed general partners. Such a
proposal will be presented to the limited partners upon the written
request of limited partners representing at least ten (10%) percent of the
Program's total units. Consideration of such a proposal would require that
a proxy statement be filed with the SEC. As noted in the attached letter,
Dyco and its affiliates own approximately 48% and 49%, respectively, of
the units in the 1979-1 Program and 1979-2 Program. It is expected that
they would vote "no" on any vote to reconstitute the Programs.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
20.1 Letter to the 1979-1 Program's limited partners dated July
31, 2002.
20.2 Letter to the 1979-2 Program's limited partners dated July
31, 2002.
99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
for the 1979-1 Program.
99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
for the 1979-2 Program.
(b) Reports on Form 8-K.
None.
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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.
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: August 5, 2002 By: /s/Dennis R. Neill
-------------------------------
(Signature)
Dennis R. Neill
President
Date: August 5, 2002 By: /s/Craig D. Loseke
-------------------------------
(Signature)
Craig D. Loseke
Chief Financial Officer
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