SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2003
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
------ ------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes No X
------ ------
-1-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-7
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
2003 2002
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 627,932 $ 857,086
Accounts receivable:
Net Profits 191,651 188,969
---------- ----------
Total current assets $ 819,583 $1,046,055
NET PROFITS INTERESTS, net, utilizing
the successful efforts method 3,010,890 2,611,743
---------- ----------
$3,830,473 $3,657,798
========== ==========
PARTNERS' CAPITAL (DEFICIT)
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 89,004) ($ 102,748)
Limited Partners, issued and
outstanding, 188,702 units 3,919,477 3,760,546
---------- ----------
Total Partners' capital $3,830,473 $3,657,798
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-2-
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-7
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(Unaudited)
2003 2002
-------- --------
REVENUES:
Net Profits $775,948 $125,277
Interest income 1,271 820
-------- --------
$777,219 $126,097
COSTS AND EXPENSES:
Depletion of Net Profits
Interests $ 74,414 $ 60,534
General and administrative
(Note 2) 62,333 67,906
-------- --------
$136,747 $128,440
-------- --------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $640,472 ($ 2,343)
Cumulative effect of change in
accounting for asset retirement
obligations (Note 1) 400 -
-------- --------
NET INCOME $640,872 ($ 2,343)
======== ========
GENERAL PARTNER - NET INCOME $ 34,941 $ 2,263
======== ========
LIMITED PARTNERS - NET INCOME $605,931 ($ 4,606)
======== ========
NET INCOME per unit $ 3.21 ($ .02)
======== ========
UNITS OUTSTANDING 188,702 188,702
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
-3-
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-7
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(Unaudited)
2003 2002
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $640,872 ($ 2,343)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Cumulative effect of change in
accounting for asset retirement
obligations (Note 1) ( 400) -
Depletion of Net Profits
Interests 74,414 60,534
(Increase) decrease in accounts
receivable - Net Profits ( 317,540) 36,494
-------- --------
Net cash provided by operating
activities $397,346 $ 94,685
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($158,303) ($ 51,282)
-------- --------
Net cash used by investing activities ($158,303) ($ 51,282)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($468,197) ($264,589)
-------- --------
Net cash used by financing
activities ($468,197) ($264,589)
-------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ($229,154) ($221,186)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 857,086 349,737
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $627,932 $128,551
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
-4-
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-8
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
2003 2002
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 464,778 $ 611,298
Accounts receivable:
Net Profits 120,267 137,849
---------- ----------
Total current assets $ 585,045 $ 749,147
NET PROFITS INTERESTS, net, utilizing
the successful efforts method 1,818,666 1,529,804
---------- ----------
$2,403,711 $2,278,951
========== ==========
PARTNERS' CAPITAL (DEFICIT)
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 33,631) ($ 43,633)
Limited Partners, issued and
outstanding, 116,168 units 2,437,342 2,322,584
---------- ----------
Total Partners' capital $2,403,711 $2,278,951
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-5-
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-8
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(Unaudited)
2003 2002
---------- --------
REVENUES:
Net Profits $541,387 $114,119
Interest income 948 763
-------- --------
$542,335 $114,882
COSTS AND EXPENSES:
Depletion of Net Profits
Interests $ 43,702 $ 38,314
General and administrative
(Note 2) 42,164 46,455
-------- --------
$ 85,866 $ 84,769
-------- --------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $456,469 $ 30,113
Cumulative effect of change in
accounting for asset retirement
obligations (Note 1) 4,862 -
-------- --------
NET INCOME $461,331 $ 30,113
======== ========
GENERAL PARTNER - NET INCOME $ 24,573 $ 3,000
======== ========
LIMITED PARTNERS - NET INCOME $436,758 $ 27,113
======== ========
NET INCOME per unit $ 3.76 $ .23
======== ========
UNITS OUTSTANDING 116,168 116,168
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
-6-
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME LIMITED PARTNERSHIP P-8
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(Unaudited)
2003 2002
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $461,331 $ 30,113
Adjustments to reconcile net income
to net cash provided by operating
activities:
Cumulative effect of change in
accounting for asset retirement
obligations (Note 1) ( 4,862) -
Depletion of Net Profits
Interests 43,702 38,314
Increase in accounts receivable -
Net Profits ( 213,616) -
Decrease in accounts receivable -
General Partner - 29,143
-------- --------
Net cash provided by operating
activities $286,555 $ 97,570
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 96,504) ($ 32,436)
-------- --------
Net cash used by investing activities ($ 96,504) ($ 32,436)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($336,571) ($188,029)
-------- --------
Net cash used by financing activities ($336,571) ($188,029)
-------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ($146,520) ($122,895)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 611,298 280,416
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $464,778 $157,521
======== ========
The accompanying condensed notes are an integral part of
these financial statements.
-7-
GEODYNE INSTITUTIONAL/PENSION ENERGY INCOME PROGRAM II LIMITED PARTNERSHIPS
CONDENSED NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheets as of March 31, 2003, statements of operations for
the three months ended March 31, 2003 and 2002, and statements of cash
flows for the three months ended March 31, 2003 and 2002 have been
prepared by Geodyne Resources, Inc., the General Partner (the "General
Partner") of the Geodyne Institutional/Pension Energy Income Program II
Limited Partnerships (individually, the "P-7 Partnership" or the "P-8
Partnership", as the case may be, or, collectively, the
"Partnerships"), without audit. In the opinion of management the
financial statements referred to above include all necessary
adjustments, consisting of normal recurring adjustments, to present
fairly the financial position at March 31, 2003, the results of
operations for the three months ended March 31, 2003 and 2002, and the
cash flows for the three months ended March 31, 2003 and 2002.
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, 2002. The results of operations for the period ended
March 31, 2003 are not necessarily indicative of the results to be
expected for the full year.
As used in these financial statements, the Partnerships' net profits
and royalty interests in oil and gas sales are referred to as "Net
Profits" and the Partnerships' net profits and royalty interests in oil
and gas properties are referred to as "Net Profits Interests". The
working interests from which Partnerships' Net Profits Interests are
carved are referred to as "Working Interests".
The Limited Partners' net income or loss per unit is based upon each
$100 initial capital contribution.
-8-
NET PROFITS INTERESTS
---------------------
The Partnerships follow the successful efforts method of accounting for
their Net Profits Interests. Under the successful efforts method, the
Partnerships capitalize all acquisition costs. Property acquisition
costs include costs incurred by the Partnerships or the General Partner
to acquire a net profits interest or other non-operating interest in
producing properties, including related title insurance or examination
costs, commissions, engineering, legal and accounting fees, and similar
costs directly related to the acquisitions, plus an allocated portion
of the General Partner's property screening costs. The acquisition
cost to the Partnerships of Net Profits Interests acquired by the
General Partner is adjusted to reflect the net cash results of
operations, including interest incurred to finance the acquisition, for
the period of time the properties are held by the General Partner prior
to their transfer to the Partnerships.
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.
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.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
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 Partnerships). On January
1, 2003, the Partnerships adopted FAS No. 143 and recorded an increase
in Net Profits Interests cost of oil and gas properties, an increase in
net income for the cumulative effect of the change in accounting
principle, and an asset retirement obligation, included in accounts
receivable - net profits, in the following approximate amounts for each
Partnership:
-9-
Increase in
Net Income
for the
Change in Change in Asset
Net Profits Accounting Retirement
Partnerships Interests Principle Obligation
------------ ----------- ---------- ----------
P-7 $311,000 $ 400 $311,000
P-8 234,000 5,000 229,000
These amounts differ significantly from the estimates disclosed in the
Annual Report on Form 10-K for the year ended December 31, 2002 due to
a revision of the methodology used in calculating the change in Net
Profits Interests.
The asset retirement obligation will be adjusted upwards each quarter
in order to recognize accretion of the time-related discount factor.
For the three months ended March 31, 2003, the P-7 and P-8 Partnerships
recognized approximately $6,000 and $4,000, respectively, of an
increase in depreciation, depletion, and amortization expense, which
was comprised of accretion of the asset retirement obligation and
depletion of the increase in Net Profits Interests.
If this accounting policy had been in effect on January 1, 2002, the
proforma impact for the P-7 and P-8 Partnerships during the three months
ended March 31, 2002 would have been an increase in depreciation,
depletion, and amortization expense of approximately $7,000 and $4,000,
respectively, respectively.
2. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
The Partnerships' partnership agreements provide for reimbursement to
the General Partner for all direct general and administrative expenses
and for the general and administrative overhead applicable to the
Partnerships based on an allocation of actual costs incurred. During
the three months ended March 31, 2003, the following payments were made
to the General Partner or its affiliates by the Partnerships:
Direct General Administrative
Partnership and Administrative Overhead
----------- ------------------- ---------------
P-7 $12,674 $49,659
P-8 11,594 30,570
Affiliates of the Partnerships operate certain of the Partnerships'
properties and their policy is to bill the Partnerships for all
customary charges and cost reimbursements associated with their
activities.
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
USE OF FORWARD-LOOKING STATEMENTS AND ESTIMATES
- -----------------------------------------------
This Quarterly Report contains certain forward-looking statements. The
words "anticipate", "believe", "expect", "plan", "intend", "estimate",
"project", "could", "may" and similar expressions are intended to
identify forward-looking statements. Such statements reflect
management's current views with respect to future events and financial
performance. This Quarterly Report also includes certain information,
which is, or is based upon, estimates and assumptions. Such estimates
and assumptions are management's efforts to accurately reflect the
condition and operation of the Partnerships.
Use of forward-looking statements and estimates and assumptions involve
risks and uncertainties which include, but are not limited to, the
volatility of oil and gas prices, the uncertainty of reserve
information, the operating risk associated with oil and gas properties
(including the risk of personal injury, death, property damage, damage
to the well or producing reservoir, environmental contamination, and
other operating risks), the prospect of changing tax and regulatory
laws, the availability and capacity of processing and transportation
facilities, the general economic climate, the supply and price of
foreign imports of oil and gas, the level of consumer product demand,
and the price and availability of alternative fuels. Should one or
more of these risks or uncertainties occur or should estimates or
underlying assumptions prove incorrect, actual conditions or results
may vary materially and adversely from those stated, anticipated,
believed, estimated, and otherwise indicated.
GENERAL
- -------
The Partnerships were formed for the purpose of acquiring Net Profits
Interests located in the continental United States. In general, each
Partnership acquired passive interests in producing properties and does
not directly engage in development drilling or enhanced recovery
projects. Therefore, the economic life of each Partnership is limited
to the period of time required to fully produce its acquired oil and
gas reserves. A Net Profits Interest entitles the Partnerships to a
portion of the oil and gas sales less operating and production expenses
and development costs generated by the owner of the underlying Working
Interests. The net proceeds from the oil and gas operations
-11-
are distributed to the Limited Partners and General Partner in
accordance with the terms of the Partnerships' Partnership Agreements.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnerships began operations and investors were assigned their
rights as Limited Partners, having made capital contributions in the
amounts and on the dates set forth below:
Limited
Date of Partner Capital
Partnership Activation Contributions
----------- ------------------ ---------------
P-7 February 28, 1992 $18,870,200
P-8 February 28, 1992 11,616,800
In general, the amount of funds available for acquisition of producing
properties was equal to the capital contributions of the Limited
Partners, less 15% for sales commissions and organization and
management fees. All of the Partnerships have fully invested their
capital contributions.
Net proceeds from the Partnerships' Net Profits Interests less
necessary operating capital are distributed to the Limited Partners on
a quarterly basis. Revenues and net proceeds of a Partnership are
largely dependent upon the volumes of oil and gas sold and the prices
received for such oil and gas. While the General Partner cannot
predict future pricing trends, it believes the working capital
available as of March 31, 2003 and the net revenue generated from
future operations will provide sufficient working capital to meet
current and future obligations.
Occasional expenditures by the Affiliated Programs for new wells or
well recompletions or workovers, however, may reduce or eliminate cash
available for a particular quarterly cash distribution. During the
three months ended March 31, 2003, capital expenditures affecting the
P-7 and P-8 Partnerships' Net Profits Interests totaled $158,303 and
$96,504, respectively. These costs were indirectly incurred as a
result of drilling activities on one large unitized property, the
Robertson North Unit in Gaines County, Texas. In addition, during the
three months ended March 31, 2002, capital expenditures affecting the
P-7 and P-8 Partnerships' Net Profits Interests totaled $51,282 and
$32,436, respectively. These costs were indirectly incurred as a result
of drilling and recompletion activities on one large unitized property,
the Pecos Valley Unit in Pecos County, Texas.
-12-
Pursuant to the terms of the Partnerships' partnership agreements (the
"Partnership Agreements"), the Partnerships were scheduled to terminate
on February 28, 2002. However, the Partnership Agreements provide that
the General Partner may extend the term of each Partnership for up to
five periods of two years each. The General Partner has extended the
terms of the Partnerships for their first two year extension period to
February 28, 2004.
CRITICAL ACCOUNTING POLICIES
- ----------------------------
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. Such acquisition costs
include costs incurred by the Partnerships or the General Partner to
acquire a Net Profits Interest, 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 net acquisition cost to the Partnerships of the Net Profits
Interests in properties acquired by the General Partner consists of the
cost of acquiring the underlying properties adjusted for the net cash
results of operations, including any interest incurred to finance the
acquisition, for the period of time the properties are held by the
General Partner.
Depletion of the cost of Net Profits Interests is computed on the
units-of-production method. The Partnerships' calculation of depletion
of its Net Profits Interests includes estimated dismantlement and
abandonment costs.
The Partnerships evaluate the recoverability of the carrying costs of
their Net Profits Interests in proved oil and gas properties for each
oil and gas field (rather than separately for each well). If the
unamortized costs of a Net Profits Interest within a field exceeds the
expected undiscounted future cash flows from such Net Profits Interest,
the cost of the Net Profits Interest is written down to fair value,
which is determined by using the discounted future cash flows from the
Net Profits Interest.
Accounts Receivable (Accounts Payable) - Net Profits
Revenues from a Net Profits Interest consist of a share of the oil and
gas sales of the property, less operating and production expenses. The
partnerships accrue for oil and gas revenues less expenses from the Net
Profits Interests. Sales of gas applicable to the Net Profits
Interests are
-13-
recorded as revenue when the gas is metered and title transferred
pursuant to the gas sales contracts. During such times as sales of gas
exceed a Partnership's pro rata share of estimated total gas reserves
attributable to the underlying property, such excess is recorded as a
liability. The rates per Mcf used to calculate this liability are
based on the average gas price received for the volumes at the time the
overproduction occurred. This also approximates the price for which
the Partnerships are currently settling this liability. This liability
is recorded as a reduction of accounts receivable.
Included in accounts receivable (payable) - Net Profits are amounts
which represent costs deferred or accrued for Net Profits relating to
lease operating expenses incurred in connection with the net
underproduced or overproduced gas imbalance positions. The rate used
in calculating the deferred charge or accrued liability is the annual
average production costs per Mcf. Also included in accounts receivable
(payable) - Net Profits is the asset retirement obligation.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
Below is a brief description of Financial Accounting Standards ("FAS")
recently issued by the Financial Accounting Standards Board ("FASB")
which may have an impact on the Partnerships' 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 Partnerships). On
January 1, 2003, the Partnerships adopted FAS No. 143 and recorded an
increase in Net Profits Interests, an increase in net income for the
cumulative effect of the change in accounting principle, and an asset
retirement obligation, included in accounts receivable - Net Profits,
in the following approximate amounts for each Partnership:
Increase in
Net Income
for the
Change in Change in Asset
Net Profits Accounting Retirement
Partnerships Interests Principle Obligation
------------ ----------- ---------- ----------
P-7 $311,000 $ 400 $311,000
P-8 234,000 5,000 229,000
-14-
These amounts differ significantly from the estimates disclosed in the
Annual Report on Form 10-K for the year ended December 31, 2002 due to
a revision of the methodology used in calculating the change in Net
Profits Interests.
The asset retirement obligation will be adjusted upwards each quarter
in order to recognize accretion of the time-related discount factor.
For the three months ended March 31, 2003, the P-7 and P-8 Partnerships
recognized approximately $6,000 and $4,000, respectively, of an
increase in depreciation, depletion, and amortization expense, which
was comprised of accretion of the asset retirement obligation and
depletion of the increase in capitalized cost of oil and gas properties.
PROVED RESERVES AND NET PRESENT VALUE
- -------------------------------------
The process of estimating oil and gas reserves is complex, requiring
significant subjective decisions in the evaluation of available
geological, engineering, and economic data for each reservoir. The
data for a given reservoir may change substantially over time as a
result of, among other things, additional development activity,
production history, and viability of production under varying economic
conditions; consequently, it is reasonably possible that material
revisions to existing reserve estimates may occur in the future.
Although every reasonable effort has been made to ensure that these
reserve estimates represent the most accurate assessment possible, the
significance of the subjective decisions required and variances in
available data for various reservoirs make these estimates generally
less precise than other estimates presented in connection with
financial statement disclosures.
The following tables summarize changes in net quantities of the
Partnerships' proved reserves, all of which are located in the United
States, for the periods indicated. The proved reserves were estimated
by petroleum engineers employed by affiliates of the Partnerships, and
are annually reviewed by an independent engineering firm. "Proved
reserves" refers to those estimated quantities of crude oil, gas, and
gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known oil
and gas reservoirs under existing economic and operating conditions.
The following information includes certain gas balancing adjustments
which cause the gas volume to differ from the reserve reports prepared
by the General Partner.
-15-
P-7 Partnership
---------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2002 947,225 4,419,130
Production ( 20,060) ( 107,886)
Extensions and discoveries 947 367
Revisions of previous
estimates 24,012 345,103
------- ---------
Proved reserves, March 31, 2003 952,124 4,656,714
======= =========
P-8 Partnership
---------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2002 556,658 3,047,476
Production ( 12,300) ( 77,700)
Extensions and discoveries 569 209
Revisions of previous
estimates 13,809 192,809
------- ---------
Proved reserves, March 31, 2003 558,736 3,162,794
======= =========
In addition to the volume changes, the net present value of the
Partnerships' reserves may change dramatically as oil and gas prices
change or as volumes change for the reasons described above. Net
present value represents estimated future gross cash flow from the
production and sale of proved reserves, net of estimated oil and gas
production costs (including production taxes, ad valorem taxes, and
operating expenses) and estimated future development costs, discounted
at 10% per annum.
-16-
The following table indicates the estimated net present value of the
Partnerships' proved reserves as of March 31, 2003 and December 31, 2002.
Net present value attributable to the Partnerships' proved reserves was
calculated on the basis of current costs and prices as of the date of
estimation. Such prices were not escalated except in certain circumstances
where escalations were fixed and readily determinable in accordance with
applicable contract provisions. Oil prices at March 31, 2003 ($27.75 per
barrel) were lower than the prices in effect on December 31, 2002 ($28.00
per barrel). Gas prices at March 31, 2003 ($5.06 per Mcf) were higher than
the prices in effect on December 31, 2002 ($4.74 per Mcf). The decrease in
oil prices and the increase in gas prices have caused the estimates of
remaining economically recoverable reserves, as well as the values placed
on said reserves, at March 31, 2003 to fluctuate from such estimates and
values at December 31, 2002. The prices used in calculating the net present
value attributable to the Partnerships' proved reserves do not necessarily
reflect market prices for oil and gas production subsequent to March 31,
2003. There can be no assurance that the prices used in calculating the net
present value of the Partnerships' proved reserves at March 31, 2003 will
actually be realized for such production.
Net Present Value of Reserves
---------------------------------
Partnership 3/31/03 12/31/02
----------- ----------- -----------
P-7 $12,730,947 $12,899,551
P-8 8,591,655 8,722,482
RESULTS OF OPERATIONS
- ---------------------
GENERAL DISCUSSION
The following general discussion should be read in conjunction with the
analysis of results of operations provided below.
The primary source of liquidity and Partnership cash distributions comes
from the net revenues generated from the sale of oil and gas produced from
the Partnerships' oil and gas properties. The level of net revenues is
highly dependent upon the total volumes of oil and natural gas sold. Oil
and gas reserves are depleting assets and will experience production
declines over time, thereby likely resulting in reduced net revenues. The
level of net revenues is also highly dependent upon the prices received
-17-
for oil and gas sales, which prices have historically been very
volatile and may continue to be so.
Additionally, lower oil and natural gas prices may reduce the amount of
oil and gas that is economic to produce and reduce the Partnerships'
revenues and cash flow. Various factors beyond the Partnerships'
control will affect prices for oil and natural gas, such as:
* Worldwide and domestic supplies of oil and natural gas;
* The ability of the members of the Organization of Petroleum
Exporting Countries ("OPEC") to agree to and maintain oil prices
and production quotas;
* Political instability or armed conflict in oil-producing regions
or around major shipping areas;
* The level of consumer demand and overall economic activity;
* The competitiveness of alternative fuels;
* Weather conditions;
* The availability of pipelines for transportation; and
* Domestic and foreign government regulations and taxes.
Recently, while economic factors have been relatively unfavorable for
oil and natural gas demand, oil prices have benefited from the
political uncertainty associated with the increase in terrorist
activities in parts of the world. In the last few years, natural gas
prices have varied significantly, from very high prices in late 2000
and early 2001, to low prices in late 2001 and early 2002, to rising
prices in the later part of 2002 and early 2003. The high natural gas
prices were associated with cold winter weather and decreased supply
from reduced capital investment for new drilling, while the low prices
were associated with warm winter weather and reduced economic
activity. The more recent increase in prices is the result of
increased demand from weather patterns, the pricing effect of
relatively high oil prices and increased concern about the ability of
the industry to meet any longer-term demand increases based upon
current drilling activity.
It is not possible to predict the future direction of oil or natural
gas prices or whether the above discussed trends will remain.
Operating costs, including General and Administrative Expenses, may not
decline over time or may experience only a gradual decline, thus
adversely affecting net revenues as either production or oil and
natural gas prices decline. In any particular period, net revenues may
also be affected by either the receipt of proceeds from property sales
or the incursion of additional costs as a result of well workovers,
recompletions, new well drilling, and other events.
-18-
P-7 PARTNERSHIP
THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 2002.
Three Months Ended March 31,
----------------------------
2003 2002
-------- --------
Net Profits $775,948 $125,277
Barrels produced 20,060 16,964
Mcf produced 107,886 84,476
Average price/Bbl $ 32.22 $ 18.62
Average price/Mcf $ 4.50 $ 1.96
Total Net Profits increased $650,671 (519.4%) for the three months
ended March 31, 2003 as compared to the three months ended March 31,
2002. Of this increase, approximately $273,000 and $274,000,
respectively, were related to increases in the average prices of oil
and gas sold. Volumes of oil and gas sold increased 3,096 barrels
and 23,410 Mcf, respectively, for the three months ended March 31, 2003
as compared to the three months ended March 31, 2002. The increase in
volumes of oil sold was primarily due to the timing of oil deliveries
in 2003 on several wells in one unit. The increase in volumes of gas
sold was primarily due to a positive prior period volume adjustment on
one significant well during the three months ended March 31, 2003. A
decrease in production expenses primarily due to a decrease in workover
expenses on several wells within one unit during the three months ended
March 31, 2003 as compared to the three months ended March 31, 2002 was
substantially offset by an increase in production taxes associated with
the increase in oil and gas sales. Average oil and gas prices
increased to $32.22 per barrel and $4.50 per Mcf, respectively, for the
three months ended March 31, 2003 from $18.62 per barrel and $1.96 per
Mcf, respectively, for the three months ended March 31, 2002.
Depletion of Net Profits Interests increased $13,880 (22.9%) for the
three months ended March 31, 2003 as compared to the three months ended
March 31, 2002. This increase was primarily due to the increases in
volumes of oil and gas sold. This increase was partially offset by
upward revisions in the estimates of remaining oil and gas reserves at
March 31, 2003. As a percentage of Net Profits, this expense decreased
to 9.6% for the three months ended March 31, 2003 from 48.3% for the
three months ended March 31, 2002. This percentage decrease was
primarily due to the increases in the average prices of oil and gas
sold.
-19-
General and administrative expenses decreased $5,573 (8.2%) for the
three months ended March 31, 2003 as compared to the three months ended
March 31, 2002. As a percentage of Net Profits, these expenses
decreased to 8.0% for the three months ended March 31, 2003 from 54.2%
for the three months ended March 31, 2002. This percentage decrease
was primarily due to the increase in Net Profits.
Cumulative cash distributions to the Limited Partners through March 31,
2003 were $17,017,916 or 90.18% of Limited Partners' capital
contributions.
P-8 PARTNERSHIP
THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 2002.
Three Months Ended March 31,
----------------------------
2003 2002
-------- --------
Net Profits $541,387 $114,119
Barrels produced 12,300 10,591
Mcf produced 77,700 73,290
Average price/Bbl $ 32.27 $ 18.74
Average price/Mcf $ 4.73 $ 2.03
Total Net Profits increased $427,268 (374.4%) for the three months
ended March 31, 2003 as compared to the three months ended March 31,
2002. Of this increase, approximately $166,000 and $209,000,
respectively, were related to increases in the average prices of oil
and gas sold. Volumes of oil and gas sold increased 1,709 barrels and
4,410 Mcf, respectively, for the three months ended March 31, 2003 as
compared to the three months ended March 31, 2002. The increase in
volumes of oil sold was primarily due to the timing of oil deliveries
in 2003 on several wells in one unit. A decrease in production
expenses primarily due to a decrease in workover expenses on several
wells within two units during the three months ended March 31, 2003 as
compared to the three months ended March 31, 2002 was substantially
offset by an increase in production taxes associated with the increase
in oil and gas sales. Average oil and gas prices increased to $32.27
per barrel and $4.73 per Mcf, respectively, for the three months ended
March 31, 2003 from $18.74 per barrel and $2.03 per Mcf, respectively,
for the three months ended March 31, 2002.
Depletion of Net Profits Interests increased $5,388 (14.1%) for the
three months ended March 31, 2003 as compared to the three months ended
March 31, 2002. This increase was primarily due to the increases in
volumes of oil and gas sold. As a percentage of Net Profits, this
expense
-20-
decreased to 8.1% for the three months ended March 31, 2003 from 33.6%
for the three months ended March 31, 2002. This percentage decrease
was primarily due to the increases in the average prices of oil and gas
sold.
General and administrative expenses decreased $4,291 (9.2%) for the
three months ended March 31, 2003 as compared to the three months ended
March 31, 2002. As a percentage of Net Profits, these expenses
decreased to 7.8% for the three months ended March 31, 2003 from 40.7%
for the three months ended March 31, 2002. This percentage decrease
was primarily due to the increase in Net Profits.
Cumulative cash distributions to the Limited Partners through March 31,
2003 were $11,053,583 or 95.15% of Limited Partners' capital
contributions.
-21-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
The Partnerships do not hold any market risk sensitive
instruments.
ITEM 4. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the
Partnerships carried out an evaluation under the supervision and
with the participation of the Partnerships' management, including
their chief executive officer and chief financial officer, of the
effectiveness of the design and operation of the Partnerships'
disclosure controls and procedures pursuant to Rule 13a-14 of the
Securities Exchange Act of 1934. Based upon that evaluation, the
Partnerships' chief executive officer and chief financial officer
concluded that the Partnerships' disclosure controls and
procedures are effective in timely alerting them to material
information relating to the Partnerships required to be included
in the Partnerships' periodic filings with the SEC. There have
been no significant changes in the Partnerships' internal
controls or in other factors which could significantly affect the
Partnerships' internal controls subsequent to the date the
Partnerships carried out this evaluation.
-22-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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 P-7 Partnership.
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 P-8 Partnership.
(b) Reports on Form 8-K.
Current Report on Form 8-K filed during the first quarter of 2003:
Date of Event: January 28, 2003
Date Filed with SEC: January 28, 2003
Items Included: Item 5 - Other Events
Item 7 - Exhibits
-23-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GEODYNE INSTITUTIONAL/PENSION ENERGY
INCOME LIMITED PARTNERSHIP P-7
GEODYNE INSTITUTIONAL/PENSION ENERGY
INCOME LIMITED PARTNERSHIP P-8
(Registrant)
BY: GEODYNE RESOURCES, INC.
General Partner
Date: May 14, 2003 By: /s/Dennis R. Neill
--------------------------------
(Signature)
Dennis R. Neill
President
Date: May 14, 2003 By: /s/Craig D. Loseke
--------------------------------
(Signature)
Craig D. Loseke
Chief Accounting Officer
-24-
CERTIFICATION
-------------
I, Dennis R. Neill, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Geodyne
Institutional/Pension Energy Income Limited Partnership P-7;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
-25-
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Dated this 14th day of May, 2003.
//s// Dennis R. Neill
- ----------------------------------
Dennis R. Neill
President (Chief Executive Officer)
-26-
CERTIFICATION
-------------
I, Craig D. Loseke, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Geodyne
Institutional/Pension Energy Income Limited Partnership P-7;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
-27-
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Dated this 14th day of May, 2003.
//s// Craig D. Loseke
- ----------------------------------
Craig D. Loseke
Chief Accounting Officer
(Principal Financial Officer)
-28-
CERTIFICATION
-------------
I, Dennis R. Neill, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Geodyne
Institutional/Pension Energy Income Limited Partnership P-8;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
-29-
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Dated this 14th day of May, 2003.
//s// Dennis R. Neill
- ----------------------------------
Dennis R. Neill
President (Chief Executive Officer)
-30-
CERTIFICATION
-------------
I, Craig D. Loseke, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Geodyne
Institutional/Pension Energy Income Limited Partnership P-8;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
-31-
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Dated this 14th day of May, 2003.
//s// Craig D. Loseke
- ----------------------------------
Craig D. Loseke
Chief Accounting Officer
(Principal Financial Officer)
-32-
INDEX TO EXHIBITS
-----------------
Exh.
No. Exhibit
- ---- -------
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
Geodyne Institutional/Pension Energy Income Limited Partnership
P-7.
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
Geodyne Institutional/Pension Energy Income Limited Partnership
P-8.
-33-