SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2006
Commission File Number:
I-D: 0-15831 I-E: 0-15832 I-F: 0-15833
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
--------------------------------------------------------
(Exact name of Registrant as specified in its Articles)
I-D 73-1265223
I-E 73-1270110
Oklahoma I-F 73-1292669
- ---------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or Number)
organization)
Two West Second Street, Tulsa, Oklahoma 74103
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(918) 583-1791
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
-1-
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (check
one):
Large accelerated filer
--------
Accelerated filer
--------
X Non-accelerated filer
--------
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes No X
------ ------
The Depositary Units are not publicly traded; therefore, Registrant cannot
compute the aggregate market value of the voting units held by non-affiliates of
the Registrant.
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-D
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 265,602 $ 311,844
Accounts receivable:
Oil and gas sales 107,157 310,780
Assets held for sale (Note 3) 277,083 -
---------- ----------
Total current assets $ 649,842 $ 622,624
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 211,077 392,810
DEFERRED CHARGE 71,634 77,179
---------- ----------
$ 932,553 $1,092,613
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 14,733 $ 33,313
Gas imbalance payable 32,097 32,967
Asset retirement obligation -
current (Note 1) 1,506 1,556
Asset retirement obligation -
assets held for sale 26,396 -
Accounts payable of assets held
for sale 7,677 -
---------- ----------
Total current liabilities $ 82,409 $ 67,836
LONG-TERM LIABILITIES:
Accrued liability $ 24,254 $ 25,062
Asset retirement obligation
(Note 1) 31,833 56,812
---------- ----------
Total long-term liabilities $ 56,087 $ 81,874
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 11,384) $ 6,023
Limited Partners, issued and
outstanding, 7,195 units 805,441 936,880
---------- ----------
Total Partners' capital $ 794,057 $ 942,903
---------- ----------
$ 932,553 $1,092,613
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-3-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-D
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
-------- --------
REVENUES:
Oil and gas sales $163,339 $184,815
Interest income 2,232 1,352
-------- --------
$165,571 $186,167
COSTS AND EXPENSES:
Lease operating $ 17,114 $ 14,020
Production tax 10,250 12,112
Depreciation, depletion, and
amortization of oil and gas
properties 4,722 7,574
Impairment provision 2,535 -
General and administrative
(Note 2) 21,584 22,023
-------- --------
$ 56,205 $ 55,729
-------- --------
INCOME FROM CONTINUING OPERATIONS $109,366 $130,438
Income from discontinued operations
(Note 3) 105,211 101,625
-------- --------
NET INCOME $214,577 $232,063
======== ========
GENERAL PARTNER:
Net income from continuing operations $ 17,086 $ 20,424
Net income from discontinued
operations 16,066 16,474
Net income 33,152 36,898
LIMITED PARTNERS:
Net income from continuing operations $ 92,280 $110,014
Net income from discontinued
operations 89,145 85,151
Net income 181,425 195,165
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 12.83 $ 15.29
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 12.39 11.83
NET INCOME PER UNIT 25.22 27.12
UNITS OUTSTANDING 7,195 7,195
The accompanying condensed notes are an integral part of these
combined financial statements.
-4-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-D
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
-------- --------
REVENUES:
Oil and gas sales $462,130 $517,603
Interest income 7,535 3,325
-------- --------
$469,665 $520,928
COSTS AND EXPENSES:
Lease operating $ 49,562 $ 50,017
Production tax 31,510 35,879
Depreciation, depletion, and
amortization of oil and gas
properties 12,063 15,000
Impairment provision 2,535 -
General and administrative
(Note 2) 89,051 87,762
-------- --------
$184,721 $188,658
-------- --------
INCOME FROM CONTINUING OPERATIONS $284,944 $332,270
Income from discontinued operations
(Note 3) 292,049 273,421
-------- --------
NET INCOME $576,993 $605,691
======== ========
GENERAL PARTNER:
Net income from continuing operations $ 43,655 $ 51,442
Net income from discontinued
operations 44,777 43,680
Net income 88,432 95,122
LIMITED PARTNERS:
Net income from continuing operations $241,289 $280,828
Net income from discontinued
operations 247,272 229,741
Net income 488,561 510,569
NET INCOME FROM CONTINUING OPERATIONS $ 33.54 $ 39.03
PER UNIT
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 34.37 31.93
NET INCOME PER UNIT 67.91 70.96
UNITS OUTSTANDING 7,195 7,195
The accompanying condensed notes are an integral part of these
combined financial statements.
-5-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-D
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $576,993 $605,691
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 17,250 34,052
Impairment provision 4,272 -
Settlement of asset retirement
obligation ( 545) ( 36)
(Increase) decrease in accounts
receivable - oil and gas sales 103,751 ( 109,320)
Decrease in deferred charge 5,545 4,442
Increase (decrease) in accounts
payable ( 10,645) 8,497
Increase in accounts payable -
related party (Note 2) - 1,642
Increase (decrease) in gas
imbalance payable ( 870) 18
Decrease in accrued liability ( 808) ( 4,997)
-------- --------
Net cash provided by operating
activities $694,943 $539,989
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 17,382) ($ 23,944)
Proceeds from sale of oil and
gas properties 2,036 2,798
-------- --------
Net cash used by investing
activities ($ 15,346) ($ 21,146)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($725,839) ($506,367)
-------- --------
Net cash used by financing
activities ($725,839) ($506,367)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($ 46,242) $ 12,476
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 311,844 250,839
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $265,602 $263,315
======== ========
The accompanying condensed notes are an integral part of these
combined financial statements.
-6-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $1,860,898 $1,838,920
Accounts receivable:
Oil and gas sales 682,219 1,921,870
Assets held for sale
(Note 3) 1,526,190 -
---------- ----------
Total current assets $4,069,307 $3,760,790
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 1,486,834 2,469,064
DEFERRED CHARGE 371,475 394,160
---------- ----------
$5,927,616 $6,624,014
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 289,004 $ 350,149
Gas imbalance payable 109,226 112,023
Asset retirement obligation -
current (Note 1) 14,220 96,761
Assets retirement obligation -
assets held for sale 213,055 -
Accounts payable of assets held
for sale 83,838 -
---------- ----------
Total current liabilities $ 709,343 $ 558,933
LONG-TERM LIABILITIES:
Accrued liability $ 118,444 $ 122,896
Asset retirement obligation
(Note 1) 541,632 744,174
---------- ----------
Total long-term liabilities $ 660,076 $ 867,070
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 10,361) $ 89,828
Limited Partners, issued and
outstanding, 41,839 units 4,568,558 5,108,183
---------- ----------
Total Partners' capital $4,558,197 $5,198,011
---------- ----------
$5,927,616 $6,624,014
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-7-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $1,096,141 $1,204,729
Interest income 14,574 8,356
Other income 2,775 -
---------- ----------
$1,113,490 $1,213,085
COSTS AND EXPENSES:
Lease operating $ 27,313 $ 166,622
Production tax 62,315 71,557
Depreciation, depletion, and
amortization of oil and gas
properties 48,702 80,679
Impairment provision 42,554 -
General and administrative
(Note 2) 120,352 121,651
---------- ----------
$ 301,236 $ 440,509
---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 812,254 $ 772,576
Income from discontinued operations
(Note 3) 615,010 656,921
---------- ----------
NET INCOME $1,427,264 $1,429,497
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 132,428 $ 125,928
Net income from discontinued
operations 93,594 106,567
Net income 226,022 232,495
LIMITED PARTNERS:
Net income from continuing operations $ 679,826 $ 646,648
Net income from discontinued
operations 521,416 550,354
Net income 1,201,242 1,197,002
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 16.24 $ 15.46
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 12.46 13.16
NET INCOME PER UNIT 28.70 28.62
UNITS OUTSTANDING 41,839 41,839
The accompanying condensed notes are an integral part of these
combined financial statements.
-8-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $3,172,574 $3,276,077
Interest income 46,046 21,244
Other income 2,775 -
---------- ----------
$3,221,395 $3,297,321
COSTS AND EXPENSES:
Lease operating $ 459,862 $ 421,920
Production tax 193,117 203,659
Depreciation, depletion, and
amortization of oil and gas
properties 126,362 129,239
Impairment provision 42,554 -
General and administrative
(Note 2) 388,581 387,898
---------- ----------
$1,210,476 $1,142,716
---------- ----------
INCOME FROM CONTINUING OPERATIONS $2,010,919 $2,154,605
Income from discontinued operations
(Note 3) 1,733,253 1,776,673
---------- ----------
NET INCOME $3,744,172 $3,931,278
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 318,379 $ 338,098
Net income from discontinued
operations 265,418 280,581
Net income 583,797 618,679
LIMITED PARTNERS:
Net income from continuing operations $1,692,540 $1,816,507
Net income from discontinued
operations 1,467,835 1,496,092
Net income 3,160,375 3,312,599
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 40.45 $ 43.42
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 35.08 35.76
NET INCOME PER UNIT 75.53 79.18
UNITS OUTSTANDING 41,839 41,839
The accompanying condensed notes are an integral part of these
combined financial statements.
-9-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,744,172 $3,931,278
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 157,819 229,811
Impairment provision 49,880 -
Settlement of asset retirement
obligation ( 94,354) ( 272)
(Increase) decrease in accounts
receivable - oil and gas sales 616,967 ( 733,201)
Decrease in accounts receivable -
related party (Note 2) - ( 1,490)
Decrease in deferred charge 22,685 26,442
Increase (decrease) in accounts
payable 13,484 ( 5,437)
Decrease in accrued liability -
other - ( 88,892)
Decrease in gas imbalance
payable ( 2,797) ( 4,196)
Decrease in accrued liability ( 4,452) ( 28,846)
---------- ----------
Net cash provided by operating
activities $4,503,404 $3,325,197
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 97,440) ($ 123,387)
Proceeds from the sale of oil and
gas properties - 8,993
---------- ----------
Net cash used by investing
activities ($ 97,440) ($ 114,394)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($4,383,986) ($3,260,118)
---------- ----------
Net cash used by financing
activities ($4,383,986) ($3,260,118)
---------- ----------
-10-
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 21,978 ($ 49,135)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,838,920 1,579,268
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $1,860,898 $1,529,953
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-11-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 665,677 $ 684,976
Accounts receivable:
Oil and gas sales 289,564 544,225
Assets held for sale (Note 3) 463,017 -
---------- ----------
Total current assets $1,418,258 $1,229,201
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 593,465 967,086
DEFERRED CHARGE 287,766 302,265
---------- ----------
$2,299,489 $2,498,552
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 162,137 $ 118,863
Gas imbalance payable 35,181 36,173
Asset retirement obligation -
current (Note 1) 5,603 65,890
Asset retirement obligation -
assets held for sale 114,761 -
Accounts payable of assets held
for sale 47,816 -
---------- ----------
Total current liabilities $ 365,498 $ 220,926
LONG-TERM LIABILITIES:
Accrued liability $ 110,257 $ 114,225
Asset retirement obligation
(Note 1) 217,018 328,418
---------- ----------
Total long-term liabilities $ 327,275 $ 442,643
PARTNERS' CAPITAL:
General Partner $ 13,904 $ 46,741
Limited Partners, issued and
outstanding, 14,321 units 1,592,812 1,788,242
---------- ----------
Total Partners' capital $1,606,716 $1,834,983
---------- ----------
$2,299,489 $2,498,552
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-12-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
-------- --------
REVENUES:
Oil and gas sales $474,453 $534,840
Interest income 4,996 2,894
Other income 1,942 -
-------- --------
$481,391 $537,734
COSTS AND EXPENSES:
Lease operating $ 53,345 $ 73,241
Production tax 28,099 32,404
Depreciation, depletion, and
amortization of oil and gas
properties 20,727 38,641
Impairment provision 20,617 -
General and administrative
(Note 2) 41,899 42,517
-------- --------
$164,687 $186,803
-------- --------
INCOME FROM CONTINUING OPERATIONS $316,704 $350,931
Income from discontinued operations
(Note 3) 113,473 131,578
-------- --------
NET INCOME $430,177 $482,509
======== ========
GENERAL PARTNER:
Net income from continuing operations $ 52,545 $ 57,615
Net income from discontinued
operations 17,680 23,146
Net income 70,225 80,761
LIMITED PARTNERS:
Net income from continuing operations $264,159 $293,316
Net income from discontinued
operations 95,793 108,432
Net income 359,952 401,748
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 18.45 $ 20.48
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 6.69 7.58
NET INCOME PER UNIT 25.14 28.06
UNITS OUTSTANDING 14,321 14,321
The accompanying condensed notes are an integral part of these
combined financial statements.
-13-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $1,362,870 $1,396,681
Interest income 15,640 7,377
Other income 1,942 -
---------- ----------
$1,380,452 $1,404,058
COSTS AND EXPENSES:
Lease operating $ 251,157 $ 168,651
Production tax 85,123 88,668
Depreciation, depletion, and
amortization of oil and gas
properties 50,273 58,785
Impairment provision 20,617 -
General and administrative
(Note 2) 150,667 149,502
---------- ----------
$ 557,837 $ 465,606
---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 822,615 $ 938,452
Income from discontinued operations
(Note 3) 318,943 349,077
---------- ----------
NET INCOME $1,141,558 $1,287,529
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 130,971 $ 147,891
Net income from discontinued
operations 50,017 57,712
Net income 180,988 205,603
LIMITED PARTNERS:
Net income from continuing operations $ 691,644 $ 790,561
Net income from discontinued
operations 268,926 291,365
Net income 960,570 1,081,926
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 48.30 $ 55.20
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 18.78 20.35
NET INCOME PER UNIT 67.08 75.55
UNITS OUTSTANDING 14,321 14,321
The accompanying condensed notes are an integral part of these
combined financial statements.
-14-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,141,558 $1,287,529
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 62,296 97,004
Impairment provision 24,131 -
Settlement of asset retirement
obligation ( 64,368) ( 136)
(Increase) decrease in accounts
receivable - oil and gas sale 139,918 ( 218,206)
Decrease in deferred charge 14,499 22,204
Increase in accounts payable 84,824 7,599
Decrease in accrued liability -
other - ( 62,225)
Increase (decrease) in gas
imbalance payable ( 992) 276
Decrease in accrued liability ( 3,968) ( 21,229)
---------- ----------
Net cash provided by operating
activities $1,397,898 $1,112,816
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 47,372) ($ 57,613)
Proceeds from sale of oil and
gas properties - 3,093
---------- ----------
Net cash used by investing
activities ($ 47,372) ($ 54,520)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($1,369,825) ($1,067,140)
---------- ----------
Net cash used by financing
activities ($1,369,825) ($1,067,140)
---------- ----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ($ 19,299) ($ 8,844)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 684,976 552,399
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 665,677 $ 543,555
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-15-
GEODYNE ENERGY INCOME PROGRAM I LIMITED PARTNERSHIPS
CONDENSED NOTES TO THE COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The combined balance sheets as of September 30, 2006, combined statements
of operations for the three and nine months ended September 30, 2006 and
2005, and combined statements of cash flows for the nine months ended
September 30, 2006 and 2005 have been prepared by Geodyne Resources, Inc.,
the General Partner of the limited partnerships, without audit. Each
limited partnership is a general partner in the related Geodyne Energy
Income Production Partnership in which Geodyne Resources, Inc. serves as
the managing partner. Unless the context indicates otherwise, all
references to a "Partnership" or the "Partnerships" are references to the
limited partnership and its related production partnership, collectively,
and all references to the "General Partner" are references to the general
partner of the limited partnerships and the managing partner of the
production partnerships, collectively. In the opinion of management the
financial statements referred to above include all necessary adjustments,
consisting of normal recurring adjustments, to present fairly the combined
financial position at September 30, 2006, the combined results of
operations for the three and nine months ended September 30, 2006 and
2005, and the combined cash flows for the nine months ended September 30,
2006 and 2005.
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, 2005. The
results of operations for the period ended September 30, 2006 are not
necessarily indicative of the results to be expected for the full year.
The Limited Partners' net income or loss per unit is based upon each
$1,000 initial capital contribution.
STATEMENTS OF CASH FLOWS
-----------------------
Cash flows from operating, investing and financing activities presented in
the Statements of Cash Flows include cash flows attributable to
discontinued operations and assets held for sale for all periods
presented.
-16-
NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
In September 2006, the FASB issued FAS No. 157, "Fair Value Measurements"
(FAS No. 157). FAS No. 157 establishes a common definition for fair value
to be applied to US GAAP guidance requiring use of fair value, establishes
a framework for measuring fair value, and expands the disclosure about
such fair value measurements. FAS No. 157 is effective for fiscal years
beginning after November 5, 2007. The Partnerships are currently assessing
the impact of FAS No.157 on its results of operations, financial condition
and cash flows.
In September 2006, the SEC staff issued Staff Accounting Bulletin (SAB)
Topic 108, "Financial Statements - Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements" (SAB 108). The SEC staff is providing guidance on how prior
year misstatements should be taken into consideration when quantifying
misstatements in current year financial statements for purposes of
determining whether the current year's financial statements are materially
misstated and should be restated. SAB 108 is effective for fiscal years
ending after November 18, 2006, and early application is encouraged. The
Partnerships do not believe SAB 108 will have a material impact on its
results of operations, financial condition and cash flows.
DISCONTINUED OPERATIONS
-----------------------
As further discussed in Note 3, the Partnerships sold their interests in a
number of producing properties to independent third parties at the Oil and
Gas Clearinghouse auction in Houston, Texas on October 11, 2006. It is
anticipated that additional properties will be sold at auction in December
2006 and February 2007. The following chart shows the number of properties
anticipated to be sold under the plan and their associated proved reserves
as of September 30, 2006.
Number of Proved
Partnership Properties Reserves
----------- --------------- --------------
I-D 41 $1,680,000
I-E 58 9,414,000
I-F 44 2,769,000
RECLASSIFICATION
----------------
Certain prior year balances have been reclassified to conform with current
year presentation.
-17-
OIL AND GAS PROPERTIES
----------------------
The Partnerships follow the successful efforts method of accounting for
their oil and gas properties. Under the successful efforts method, the
Partnerships capitalize all property acquisition costs and development
costs incurred in connection with the further development of oil and gas
reserves. Property acquisition costs include costs incurred by the
Partnerships or the General Partner to acquire 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
properties 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.
Depletion of the costs of producing oil and gas properties, amortization
of related intangible drilling and development costs, and depreciation of
tangible lease and well equipment are computed on the unit-of-production
method. The Partnerships' depletion, depreciation, and amortization
includes estimated dismantlement and abandonment costs and estimated
salvage value of the equipment.
When complete units of depreciable property are retired or sold, the asset
cost and related accumulated depreciation are eliminated with any gain or
loss (including the elimination of the asset retirement obligation)
reflected in income. When less than complete units of depreciable property
are retired or sold, the proceeds are credited to oil and gas properties.
The Partnerships evaluate the recoverability of the carrying costs of
their proved oil and gas properties for each well. If the unamortized
costs, net of salvage value, of oil and gas properties exceeds the
expected undiscounted future cash flows for such properties, the cost of
the properties is written down to fair value, which is determined by using
the estimated discounted future cash flows from the properties. In the
third quarter of 2006, natural gas prices declined significantly.
Consequently, the partnerships incurred impairments utilizing the natural
gas spot prices that existed on September 30, 2006. The impairments
recognized in the third quarter totaled $3,000, $43,000 and $21,000 for
the I-D, I-E and I-F Partnerships, respectively. Since oil and natural gas
prices remain volatile, the partnerships may be required to write down the
carrying value of its oil and natural gas properties at the end of future
reporting periods. If an impairment is required, it would result in a
charge to earnings but would not impact cash flow from operating
activities. Once incurred, an impairment of oil and natural gas properties
is not reversible.
-18-
ASSET RETIREMENT OBLIGATIONS
----------------------------
The Partnerships' wells must be properly plugged and abandoned after their
oil and gas reserves are exhausted. The Partnerships follow FAS No. 143,
"Accounting for Asset Retirement Obligations" in accounting for the future
expenditures that will be necessary to plug and abandon these wells. FAS
No. 143 requires the estimated plugging and abandonment obligations to be
(i) recognized in the period in which they are incurred (i.e. when the
well is drilled or acquired) if a reasonable estimate of fair value can be
made and (ii) capitalized as part of the carrying amount of the well.
Estimated abandonment dates will be revised based on changes to related
economic lives, which vary with product prices and production costs.
Estimated plugging costs may also be adjusted to reflect changing industry
experience. During the year ended December 31, 2005, the Partnerships'
asset retirement obligations were revised upward due to increases in both
labor and rig costs associated with plugging wells. Cash flows will not be
affected until wells are actually plugged and abandoned.
The asset retirement obligation is adjusted upwards each quarter in order
to recognize accretion of the time-related discount factor. For the nine
months ended September 30, 2006, the I-D, I-E, and I-F Partnerships
recognized $3,000, $58,000, and $25,000, 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.
-19-
The components of the change in asset retirement obligations for the three
and nine months ended September 30, 2006 and 2005 are as shown below.
I-D Partnership
---------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $ 59,844 $ 31,481
Additions and revisions - 29,540
Settlements and disposals ( 760) -
Accretion expense 651 1,543
Discontinued operations ( 26,396) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $ 33,339 $ 62,564
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, January 1 $ 58,368 $ 31,101
Additions and revisions - 29,685
Settlements and disposals ( 760) ( 448)
Accretion expense 2,127 2,226
Discontinued operations ( 26,396) -
-------- --------
Total Asset Retirement
Obligation, End of Period $ 33,339 $ 62,564
======== ========
Asset Retirement Obligation -
Current $ 1,506 $ 2,337
Asset Retirement Obligation -
Long-Term 31,833 60,227
-20-
I-E Partnership
---------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $763,975 $349,377
Additions and revisions - 365,183
Settlements and disposals ( 3,280) -
Accretion expense 8,212 17,830
Discontinued operations ( 213,055) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $555,852 $732,390
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
----------- -----------
Total Asset Retirement
Obligation, January 1 $840,935 $345,509
Additions and revisions - 365,977
Settlements and disposals ( 98,303) ( 2,922)
Accretion expense 26,275 23,826
Discontinued operations ( 213,055) -
-------- --------
Total Asset Retirement
Obligation, End of Period $555,852 $732,390
======== ========
Asset Retirement Obligation -
Current $ 14,220 $ 13,433
Asset Retirement Obligation -
Long-Term 541,632 718,957
-21-
I-F Partnership
---------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $335,950 $166,508
Additions and revisions ( 599) 158,373
Settlements and disposals ( 1,529) -
Accretion expense 3,560 7,915
Discontinued operations ( 114,761) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $222,621 $332,796
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
----------- -----------
Total Asset Retirement
Obligation, January 1 $394,308 $164,771
Additions and revisions ( 1,799) 158,751
Settlements and disposals ( 66,847) ( 1,533)
Accretion expense 11,720 10,807
Discontinued operations ( 114,761) -
-------- --------
Total Asset Retirement
Obligation, End of Period $222,621 $332,796
======== ========
Asset Retirement Obligation -
Current $ 5,603 $ 5,664
Asset Retirement Obligation -
Long-Term 217,018 327,132
-22-
2. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
The Partnerships' partnership agreements (the "Partnership Agreements")
provide for reimbursement to the General Partner for all direct general
and administrative expenses and for the general and administrative
overhead applicable to the Partnerships based on an allocation of actual
costs incurred. During the three months ended September 30, 2006, the
following payments were made to the General Partner or its affiliates by
the Partnerships:
Direct General Administrative
Partnership and Administrative Overhead
----------- ------------------- ---------------
I-D $ 1,598 $ 19,986
I-E 4,132 116,220
I-F 2,119 39,780
During the nine months ended September 30, 2006, the following payments
were made to the General Partner or its affiliates by the Partnerships:
Direct General Administrative
Partnership and Administrative Overhead
----------- ------------------- ---------------
I-D $29,093 $ 59,958
I-E 39,921 348,660
I-F 31,327 119,340
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.
3. DISCONTINUED OPERATIONS
-----------------------
During August 2006, the General Partner approved a plan to sell an
increased amount of the Partnerships' properties as a result of the
generally favorable current environment for oil and gas properties. On
October 11, 2006, the Partnerships sold their interests in a number of
producing properties at a large public oil and gas auction which resulted
in proceeds of approximately $5,000, $134,000, and $88,000 (net of fees),
respectively to the I-D, I-E, and I-F Partnerships. The sale resulted in a
gain on disposal of discontinued operations of approximately $11,000,
$158,000, and $103,000, respectively, for the I-D, I-E, and I-F
Partnerships. The gain for the Partnerships consisted of the proceeds
received from the sale and the extinguishment of net liabilities of
approximately $6,000, $24,000, and $15,000, respectively, for the I-D,
I-E, and I-F Partnerships. It is anticipated that additional properties
will be sold at auction in December 2006 and February 2007. The properties
sold in the October auction and those scheduled to be sold in the December
2006 and February 2007 auction represent a disposal of a business segment
under Statement of Financial Accounting Standards No. 144, "Accounting for
the Impairment or Disposal of Long-Lived
-23-
Assts" (FAS 144). Accordingly, current year results of these properties
have been classified as discontinued, and prior periods have been
restated. In conjunction with the planned sales, the Partnerships will
retain all assets and liabilities through the effective date of the sale
and the buyers will assume the asset retirement obligations associated
with the sold interests.
Net income from discontinued operations are as follows:
I-D Partnership
---------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $116,263 $140,071
Lease operating ( 4,541) ( 8,375)
Production tax ( 4,480) ( 21,278)
Depreciation, depletion, and
amortization of oil and gas
properties ( 294) ( 8,793)
Impairment provision ( 1,737) -
-------- --------
Income from discontinued
operations $105,211 $101,625
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $339,931 $364,940
Lease operating ( 18,693) ( 22,148)
Production tax ( 22,265) ( 50,319)
Depreciation, depletion, and
amortization of oil and gas
properties ( 5,187) ( 19,052)
Impairment provision ( 1,737) -
-------- --------
Income from discontinued
operations $292,049 $273,421
======== ========
-24-
I-E Partnership
---------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $713,534 $887,490
Lease operating ( 29,626) ( 52,082)
Production tax ( 59,314) ( 121,135)
Depreciation, depletion, and
amortization of oil and gas
properties ( 2,258) ( 57,352)
Impairment provision ( 7,326) -
-------- --------
Income from discontinued
operations $615,010 $656,921
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $2,068,769 $2,352,700
Lease operating ( 119,315) ( 146,841)
Production tax ( 177,418) ( 328,614)
Depreciation, depletion, and
amortization of oil and gas
properties ( 31,457) ( 100,572)
Impairment provision ( 7,326) -
---------- ----------
Income from discontinued
operations $1,733,253 $1,776,673
========== ==========
I-F Partnership
---------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $158,755 $226,609
Lease operating ( 8,505) ( 11,151)
Production tax ( 32,071) ( 59,526)
Depreciation, depletion, and
amortization of oil and gas
properties ( 1,192) ( 24,354)
Impairment provision ( 3,514) -
-------- --------
Income from discontinued
operations $113,473 $131,578
======== ========
-25-
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $460,321 $549,733
Lease operating ( 23,744) ( 29,256)
Production tax ( 102,097) ( 133,181)
Depreciation, depletion, and
amortization of oil and gas
properties ( 12,023) ( 38,219)
Impairment provision ( 3,514) -
-------- --------
Income from discontinued
operations $318,943 $349,077
======== ========
Assets of the discontinued operations for the nine months ended September 30,
2006 were as follows:
I-D
Partnership
-----------
Accounts receivable - oil and gas sales $ 99,872
Oil and gas properties 1,741,230
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 1,564,019)
-----------
Net assets held for sale $ 277,083
===========
I-E
Partnership
-----------
Accounts receivable - oil and gas sales $ 622,684
Oil and gas properties 11,259,579
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 10,356,073)
-----------
Net assets held for sale $ 1,526,190
===========
-26-
I-F
Partnership
------------
Accounts receivable - oil and gas sales $ 114,743
Oil and gas properties 2,092,528
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 1,744,254)
-----------
Net assets held for sale $ 463,017
===========
-27-
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.
DISCONTINUED OPERATIONS
- -----------------------
In October 2006, the Partnerships sold their interests in a number of
producing properties. This disposal was treated as a discontinued
operation. The sales proceeds consisting of approximately $5,000,
$134,000, and $88,000, respectively, were included in the November 15,
2006 cash distributions paid by the I-D, I-E, and I-F Partnerships. The
sale of these producing properties will impact the continuing future
operations of the Partnerships. It is anticipated that these Partnerships
will have lower lease operating costs, lower oil and gas sales, and a
reduction in their asset retirement obligations. The reader should refer
to Note 3 - Discontinued Operations to the consolidated financial
statements included in Part I, Item 1 of this Quarterly Report on Form
10-Q for additional information regarding this matter.
-28-
GENERAL
- -------
The Partnerships are engaged in the business of acquiring and operating
producing oil and gas properties located in the continental United States.
In general, a Partnership acquired producing properties and did not engage
in development drilling or enhanced recovery projects, except as an
incidental part of the management of the producing properties acquired.
Therefore, the economic life of each Partnership, and its related
Production Partnership, is limited to the period of time required to fully
produce its acquired oil and gas reserves. The net proceeds from the oil
and gas operations are distributed to the Limited Partners and the General
Partner in accordance with the terms of the 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
----------- ------------------ ---------------
I-D March 4, 1986 $ 7,194,700
I-E September 10, 1986 41,839,400
I-F December 16, 1986 14,320,900
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 operations less necessary operating capital are
distributed to the Limited Partners on a quarterly basis. Revenues and net
proceeds of a Partnership are largely dependent upon the volumes of oil
and gas sold and the prices received for such oil and gas. While the
General Partner cannot predict future pricing trends, it believes the
working capital available as of September 30, 2006 and the net revenue
generated from future operations will provide sufficient working capital
to meet current and future obligations.
-29-
Occasional expenditures for new wells or well recompletions, or workovers
may reduce or eliminate cash available for a particular quarterly cash
distribution. During the nine months ended September 30, 2006, capital
expenditures for the I-F Partnership totaled $54,000. These expenditures
were primarily due to drilling activities in a large unitized property,
the Jo-Mill Unit in Borden County, Texas. The I-F Partnership owns a
working interest of approximately 0.28% in this unitized property. The
Jo-Mill Unit is included in discontinued operations and is anticipated to
be sold in the next twelve months. The reader should refer to Note 3 -
Discontinued Operations to the consolidated financial statements included
in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional
information regarding this matter. Other capital expenditures incurred by
the Partnerships during the nine months ended September 30, 2006 and 2005
were not material to the Partnerships' cash flow.
Pursuant to the terms of the Partnership Agreements, the Partnerships
would have terminated on December 31, 1999. 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 fourth two year
extension period to December 31, 2007. As of the date of this Quarterly
Report, the General Partner has not determined whether to further extend
the term of any Partnership.
CRITICAL ACCOUNTING POLICIES
- ----------------------------
The Partnerships follow the successful efforts method of accounting for
their oil and gas properties. Under the successful efforts method, the
Partnerships capitalize all property acquisition costs and development
costs incurred in connection with the further development of oil and gas
reserves. Property acquisition costs include costs incurred by the
Partnerships or the General Partner to acquire 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 the
properties 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.
-30-
Depletion of the cost of producing oil and gas properties, amortization of
related intangible drilling and development costs, and depreciation of
tangible lease and well equipment are computed on the unit-of-production
method. The Partnerships' calculation of depreciation, depletion, and
amortization includes estimated dismantlement and abandonment costs and
estimated salvage value of the equipment. When complete units of
depreciable property are retired or sold, the asset cost and related
accumulated depreciation are eliminated with any gain or loss (including
the elimination of the asset retirement obligation) reflected in income.
When less than complete units of depreciable property are retired or sold,
the proceeds are credited to oil and gas properties.
The Partnerships evaluate the recoverability of the carrying costs of
their proved oil and gas properties for each well. If the unamortized
costs, net of salvage value, of oil and gas properties exceeds the
expected undiscounted future cash flows from such properties, the cost of
the properties is written down to fair value, which is determined by using
the estimated discounted future cash flows from the properties. In the
third quarter of 2006, natural gas prices declined significantly.
Consequently, the partnerships incurred impairments utilizing the natural
gas spot prices that existed on September 30, 2006. The impairments
recognized in the third quarter totaled $3,000, $43,000, and $21,000 for
the I-D, I-E and I-F Partnerships, respectively. Since oil and natural gas
prices remain volatile, the partnerships may be required to write down the
carrying value of its oil and natural gas properties at the end of future
reporting periods. If an impairment is required, it would result in a
charge to earnings but would not impact cash flow from operating
activities. Once incurred, an impairment of oil and natural gas properties
is not reversible.
The Deferred Charge on the Balance Sheets represents costs deferred for
lease operating expenses incurred in connection with the Partnerships'
underproduced gas imbalance positions. Conversely, the Accrued Liability
represents charges accrued for lease operating expenses incurred in
connection with the Partnerships' overproduced gas imbalance positions.
The rate used in calculating the Deferred Charge and Accrued Liability is
the annual average production costs per Mcf.
The Partnerships' oil and condensate production is sold, title passed, and
revenue recognized at or near the Partnerships' wells under short-term
purchase contracts at prevailing prices in accordance with arrangements
which are customary in the oil and gas industry. Sales of gas applicable
to the Partnerships' interest in producing oil and gas leases are recorded
as revenue when the gas is metered and title transferred pursuant to the
gas sales contracts covering the Partnerships' interest in gas reserves.
During such times as a Partnership's sales of gas
-31-
exceed its pro rata ownership in a well, such sales are recorded as
revenues unless total sales from the well have exceeded the Partnership's
share of estimated total gas reserves underlying the property, at which
time such excess is recorded as a liability. The rates per Mcf used to
calculate this liability are based on the average gas price for which the
Partnerships are currently settling this liability. These amounts were
recorded as gas imbalance payables in accordance with the sales method.
These gas imbalance payables will be settled by either gas production by
the underproduced party in excess of current estimates of total gas
reserves for the well or by negotiated or contractual payment to the
underproduced party.
ASSET RETIREMENT OBLIGATIONS
- ----------------------------
The Partnerships' wells must be properly plugged and abandoned after their
oil and gas reserves are exhausted. The Partnerships follow FAS No. 143,
"Accounting for Asset Retirement Obligations" in accounting for the future
expenditures that will be necessary to plug and abandon these wells. FAS
No. 143 requires the estimated plugging and abandonment obligations to be
(i) recognized in the period in which they are incurred (i.e. when the
well is drilled or acquired) if a reasonable estimate of fair value can be
made and (ii) capitalized as part of the carrying amount of the well.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
In September 2006, the FASB issued FAS No. 157, "Fair Value Measurements"
(FAS No. 157). FAS No. 157 establishes a common definition for fair value
to be applied to US GAAP guidance requiring use of fair value, establishes
a framework for measuring fair value, and expands the disclosure about
such fair value measurements. FAS No. 157 is effective for fiscal years
beginning after November 5, 2007. The Partnerships are currently assessing
the impact of FAS No. 157 on its results of operations, financial
condition and cash flows.
In September 2006, the SEC staff issued Staff Accounting Bulletin (SAB)
Topic 108, "Financial Statements - Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements" (SAB 108). The SEC staff is providing guidance on how prior
year misstatements should be taken into consideration when quantifying
misstatements in current year financial statements for purposes of
determining whether the current year's financial statements are materially
misstated and should be restated. SAB 108 is effective for fiscal years
ending after November 18, 2006, and early application is encouraged. The
Partnerships do not believe SAB 108 will
-32-
have a material impact on its results of operations, financial
condition and cash flows.
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
volumes to differ from the reserve reports prepared by the General
Partner.
-33-
I-D Partnership
---------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 71,529 1,559,316
Production ( 813) ( 31,170)
Extensions and discoveries 8 361
Revisions of previous ( 69) ( 22,575)
estimates ------ ---------
Proved reserves, March 31, 2006 70,655 1,505,932
Production ( 764) ( 33,812)
Extensions and discoveries 13,636 235
Revisions of previous
estimates 439 124,859
------ ---------
Proved reserves, June 30, 2006 83,966 1,597,214
Production of continuing
operations ( 210) ( 21,098)
Production of discontinued
operations ( 607) ( 13,116)
Extensions and discoveries - 13,604
Discontinued operations (70,248) ( 565,096)
Revisions of previous ( 2,782) ( 83,305)
estimates ------ ---------
Proved reserves, Sept. 30, 2006 10,119 928,203
====== =========
-34-
I-E Partnership
---------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 531,483 8,258,668
Production ( 9,312) ( 168,785)
Extensions and discoveries 31 1,712
Revisions of previous
estimates 2,178 ( 128,367)
------- ---------
Proved reserves, March 31, 2006 524,380 7,963,228
Production ( 9,677) ( 184,416)
Extensions and discoveries 58,854 2,213
Revisions of previous
estimates 40,213 727,941
------- ---------
Proved reserves, June 30, 2006 613,770 8,508,966
Production of continuing
operations ( 5,643) ( 100,542)
Production of discontinued
operations ( 3,487) ( 83,076)
Extensions and discoveries - 41,891
Discontinued operations (386,306) (3,578,641)
Revisions of previous
estimates ( 30,922) ( 486,480)
------- ---------
Proved reserves, Sept. 30, 2006 187,412 4,302,118
======= =========
-35-
I-F Partnership
---------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 250,616 2,453,345
Production ( 4,260) ( 47,679)
Extensions and discoveries 15 799
Revisions of previous
estimates 1,190 ( 54,758)
------- ---------
Proved reserves, March 31, 2006 247,561 2,351,707
Production ( 4,495) ( 49,593)
Extensions and discoveries 27,439 1,034
Revisions of previous
estimates 26,346 47,565
------- ---------
Proved reserves, June 30, 2006 296,851 2,350,713
Production of continuing
operations ( 2,438) ( 43,406)
Production of discontinued
operations ( 1,810) ( 6,453)
Extensions and discoveries - 16,908
Discontinued operations (198,953) ( 310,271)
Revisions of previous
estimates ( 14,730) ( 181,181)
------- ---------
Proved reserves, Sept. 30, 2006 78,920 1,826,310
======= =========
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.
The following table indicates the estimated net present value of the
Partnerships' proved reserves as of September 30, 2006, June 30, 2006,
March 31, 2006, and December 31, 2005. 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.
The table also indicates the oil and gas prices in effect on the dates
corresponding to the reserve valuations. Changes in oil and gas prices
cause the estimates of remaining economically
-36-
recoverable reserves, as well as the values placed on said reserves, to
fluctuate. 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 September
30, 2006. There can be no assurance that the prices used in calculating
the net present value of the Partnerships' proved reserves at September
30, 2006 will actually be realized for such production.
Net Present Value of Reserves (In 000's)
----------------------------------------------
Partnership 9/30/06 6/30/06 3/31/06 12/31/05
----------- ------- ------- ------- --------
I-D $ 1,751 $ 5,091 $ 5,343 $ 7,249
I-E 10,871 30,612 31,294 41,189
I-F 4,592 10,891 11,083 13,400
Oil and Gas Prices
---------------------------------------------
Pricing 9/30/06 6/30/06 3/31/06 12/31/05
----------- ------- ------- ------- --------
Oil (Bbl) $ 62.90 $ 73.94 $ 66.25 $ 61.06
Gas (Mcf) 4.18 6.09 7.18 10.08
The Partnerships had decreases in estimated oil and gas reserves and the
related estimated net present value of reserves at September 30, 2006 as
compared to June 30, 2006 due to the decreases in the oil and gas prices
used to run the reserves and the removal of the reserves related to
discontinued operations.
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. 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 for oil and gas sales, which are very volatile.
-37-
Additionally, lower 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 and the impact of weather- related
events;
* The availability of pipelines for transportation
* Domestic and foreign government regulations and taxes; and
* Market expectations.
It is not possible to predict the future direction of oil or natural gas
prices or whether the above discussed trends will continue. Operating
costs, including General and Administrative Expenses, may not decline over
time, may increase, or may experience only a gradual decline, thus
adversely affecting net revenues. Net revenues may also be affected by
proceeds from property sales or additional costs resulting from well
workovers, recompletions, new well drilling, and other events.
In addition to pricing, 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. Despite this general
trend of declining production, several factors can cause volumes sold to
increase, remain relatively constant, or decrease at an even greater rate
over a given period. These factors include, but are not limited to:
* Geophysical conditions which cause an acceleration of the
decline in production;
* The shutting-in of wells due to low oil and gas prices (or the
opening of previously shut-in wells due to high oil and gas
prices), mechanical difficulties, loss of a
market/transportation, or performance of workovers,
recompletions, or other operations in the well;
* Prior period volume adjustments made by the operators of
the properties;
* Adjustments in ownership or rights to production (such as
adjustments that occur at payout or due to gas balancing);
and
-38-
* Completion of enhanced recovery projects which increase
production for the well.
Many of these factors can be very significant for a single well or for
many wells over a short period of time. Due to the large number of wells
owned by the Partnerships, these factors are generally not material as
compared to the normal declines in production experienced on all remaining
wells.
I-D PARTNERSHIP
THREE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2005.
Three Months Ended September 30,
--------------------------------
2006 2005(a)
-------- --------
Oil and gas sales $163,339 $184,815
Oil and gas production expenses $ 27,364 $ 26,132
Barrels produced 210 268
Mcf produced 21,098 20,870
Average price/Bbl $ 66.30 $ 58.85
Average price/Mcf $ 7.08 $ 8.10
(a) The foregoing chart and the following discussion contain amounts for
the year 2005 which have been restated to reflect the Partnership's assets
held for sale as discontinued operations. See Part I, Item 2 -
Discontinued Operations for more information about these discontinued
operations.
As shown in the table above, total oil and gas sales decreased $21,000
(11.6%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease $21,000 was
related to a decrease in the average price of gas sold.
Volumes of oil sold decreased 58 barrels, while volumes of gas sold
increased 228 Mcf for the three months ended September 30, 2006 as
compared to the three months ended September 30, 2005. The decrease in
volumes of oil sold was primarily due to normal declines in production.
The increase in volumes of gas sold was primarily due to the successful
completion of two wells during mid 2006 and an increase in the I-D
Partnership's revenue interest on another well during the three months
ended September 30, 2006. These increases were partially offset by normal
declines in production.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $1,000 (4.7%) for the three months ended
September 30, 2006 as compared to the three months ended September 30,
2005. This increase was primarily due to (i) workover expenses incurred on
several wells during the three months ended September 30, 2006 and (ii)
repair and maintenance expenses incurred on another
-39-
significant well during the three months ended September 30, 2006. These
increases were partially offset by (i) the receipt of a $2,000 lease
operating expense credit resulting from the settlement of a class action
lawsuit on several wells during the three months ended September 30, 2006
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 16.8% for the three months ended September 30, 2006 from
14.1% for the three months ended September 30, 2005, primarily due to the
decrease in oil and gas sales and the dollar increase in production
expenses.
Depreciation, depletion, and amortization ("DD&A") of oil and gas
properties decreased $3,000 (37.7%) for the three months ended September
30, 2006 as compared to the three months ended September 30, 2005. This
decrease was primarily due to several wells being fully depleted during
2005 due to their lack of remaining reserves. As a percentage of oil and
gas sales, this expense decreased to 2.9% for the three months ended
September 30, 2006 from 4.1% for the three months ended September 30,
2005, primarily due to the dollar decrease in DD&A.
The I-D Partnership recognized a non-cash charge against earnings of
$3,000 during the three months ended September 30, 2006. This charge was
related to the decline in oil and gas prices used to determine
recoverability of oil and gas reserves at September 30, 2006. No such
charge was incurred during the three months ended September 30, 2005.
General and administrative expenses remained relatively constant for the
three months ended September 30, 2006 and 2005. As a percentage of oil and
gas sales, these expenses increased to 13.2% for the three months ended
September 30, 2006 from 11.9% for the three months ended September 30,
2005, primarily due to the decrease in oil and gas sales.
As further discussed in Part I, Item 2 - Discontinued Operations, the I-D
Partnership is in the process of selling an increased amount of the
Partnership's properties as a result of the generally favorable current
environment for oil and gas dispositions. It is anticipated that the
Partnership will have a lower oil and gas sales and lower production
expenses with the sale of these properties.
-40-
NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2005.
Nine Months Ended September 30,
-------------------------------
2006 2005(a)
-------- --------
Oil and gas sales $462,130 $517,603
Oil and gas production expenses $ 81,072 $ 85,896
Barrels produced 601 825
Mcf produced 60,967 68,430
Average price/Bbl $ 64.83 $ 52.17
Average price/Mcf $ 6.94 $ 6.94
(a) The foregoing chart and the following discussion contain amounts for
the year 2005 which have been restated to reflect the Partnership's assets
held for sale as discontinued operations. See Part I, Item 2 -
Discontinued Operations for more information about these discontinued
operations.
As shown in the table above, total oil and gas sales decreased $55,000
(10.7%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this decrease $12,000 and $52,000
were related to decreases in volumes of oil and gas sold. These decreases
were partially offset by an increase of $8,000 related to an increase in
the average price of oil sold.
Volumes of oil and gas sold decreased 224 barrels and 7,463 Mcf for the
nine months ended September 30, 2006 as compared to the nine months ended
September 30, 2005. The decrease in volumes of oil sold was primarily due
to normal declines in production. The decrease in volumes of gas sold was
primarily due to (i) normal declines in production and (ii) positive prior
period volume adjustments made by the operators on several wells during
the nine months ended September 30, 2005. These decreases were partially
offset by (i) the successful completion of two wells during mid 2006 and
(ii) an increase in the I-D Partnership's revenue interest on another well
during the nine months ended September 30, 2006.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $5,000 (5.6%) for the nine months ended
September 30, 2006 as compared to the nine months ended September 30,
2005. This decrease was primarily due to (i) a reduction in workover
expenses for the nine months ended September 30, 2006 when compared to the
same period in 2005, (ii) the receipt of a $2,000 lease operating expense
credit resulting from the settlement of a class action lawsuit on several
wells during the nine months ended September 30, 2006, and (iii) 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
-41-
to 17.5% for the nine months ended September 30, 2006 from 16.6% for the
nine months ended September 30, 2005.
DD&A of oil and gas properties decreased $3,000 (19.6%) for the nine
months ended September 30, 2006 as compared to the nine months ended
September 30, 2005. This decrease was primarily due to (i) several wells
being fully depleted during 2005 due to their lack of remaining reserves
and (ii) the decreases in volumes of oil and gas sold. These decreases in
DD&A were partially offset by downward revisions in the estimates of
remaining oil and gas reserves since September 30, 2005. As a percentage
of oil and gas sales, this expense decreased to 2.6% for the nine months
ended September 30, 2006 from 2.9% for the nine months ended September 30,
2005, primarily due to the dollar decrease in DD&A.
The I-D Partnership recognized a non-cash charge against earnings of
$3,000 during the nine months ended September 30, 2006. This charge was
related to the decline in oil and gas prices used to determine
recoverability of oil and gas reserves at September 30, 2006. No such
charge was incurred during the nine months ended September 30, 2005.
General and administrative expenses increased $1,000 (1.5%) for the nine
months ended September 30, 2006 as compared to the nine months ended
September 30, 2005. As a percentage of oil and gas sales, these expenses
increased to 19.3% for the nine months ended September 30, 2006 from 17.0%
for the nine months ended September 30, 2005, primarily due to the
decrease in oil and gas sales.
As further discussed in Part I, Item 2 - Discontinued Operations, the I-D
Partnership is in the process of selling an increased amount of the
Partnership's properties as a result of the generally favorable current
environment for oil and gas dispositions. It is anticipated that the
Partnership will have lower oil and gas sales and lower production
expenses with the sale of these properties.
The Limited Partners have received cash distributions through September
30, 2006 totaling $18,463,175 or 256.62% of Limited Partners' capital
contributions.
-42-
I-E PARTNERSHIP
THREE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2005.
Three Months Ended September 30,
--------------------------------
2006 2005(a)
---------- ----------
Oil and gas sales $1,096,141 $1,204,729
Oil and gas production expenses $ 89,628 $ 238,179
Barrels produced 5,643 6,761
Mcf produced 100,542 98,061
Average price/Bbl $ 67.40 $ 57.94
Average price/Mcf $ 7.12 $ 8.29
(a) The foregoing chart and the following discussion contain amounts for
the year 2005 which have been restated to reflect the Partnership's assets
held for sale as discontinued operations. See Part I, Item 2 -
Discontinued Operations for more information about these discontinued
operations.
As shown in the table above, total oil and gas sales decreased $109,000
(9.0%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease (i) $118,000 was
related to a decrease in the average price of gas sold and (ii) $65,000
was related to a decrease in volumes of oil sold. These decreases were
partially offset by (i) $53,000 attributable to an increase in the average
price of oil sold and (ii) $21,000 increase associated with an increase in
volumes of gas sold.
Volumes of oil sold decreased 1,118 barrels, while volumes of gas sold
increased 2,481 Mcf for the three months ended September 30, 2006 as
compared to the three months ended September 30, 2005. The decrease in
volumes of oil sold was primarily due to normal declines in production.
The increase in volumes of gas sold was primarily due (i) the successful
completion of two wells during mid 2006 and (ii) an increase in the I-E
Partnership's revenue interest on another well during the three months
ended September 30, 2006. These increases were partially offset by normal
declines in production.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $149,000 (62.4%) for the three months ended
September 30, 2006 as compared to the three months ended September 30,
2005. This decrease was primarily due to (i) the receipt of a $231,000
lease operating expense credit resulting from the settlement of a class
action lawsuit on several wells during the three months ended September
30, 2006 and (ii) a decrease in production taxes associated with the
decrease in oil and gas sales. These decreases were partially offset by
workover expenses incurred on several wells during the three months
-43-
ended September 30, 2006. As of the date of this Quarterly Report,
management anticipates workover costs remaining at or increasing above
2006 levels due to the increased cost to perform a workover and the age of
the wellbores. As a percentage of oil and gas sales, these expenses
decreased to 8.2% for the three months ended September 30, 2006 from 19.8%
for the three months ended September 30, 2005, primarily due to the dollar
decrease in production expenses.
DD&A of oil and gas properties decreased $32,000 (39.6%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. This decrease was primarily due to several wells being
fully depleted during 2005 due to their lack of remaining reserves. As a
percentage of oil and gas sales, this expense decreased to 4.4% for the
three months ended September 30, 2006 from 6.7% for the three months ended
September 30, 2005, primarily due to the dollar decrease in DD&A.
The I-E Partnership recognized a non-cash charge against earnings of
$43,000 during the three months ended September 30, 2006. This charge was
related to the decline in oil and gas prices used to determine
recoverability of oil and gas reserves at September 30, 2006. No such
charge was incurred during the three months ended September 30, 2005.
General and administrative expenses decreased $1,000 (1.1%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. As a percentage of oil and gas sales, these expenses
increased to 11.0% for the three months ended September 30, 2006 from
10.1% for the three months ended September 30, 2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the I-E
Partnership is in the process of selling an increased amount of the
Partnership's properties as a result of the generally favorable current
environment for oil and gas dispositions. It is anticipated that the
Partnership will have lower oil and gas sales and lower production
expenses with the sale of these properties.
NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2005.
Nine Months Ended September 30,
-------------------------------
2006 2005(a)
---------- ----------
Oil and gas sales $3,172,574 $3,276,077
Oil and gas production expenses $ 652,979 $ 625,579
Barrels produced 17,791 18,744
Mcf produced 292,011 327,098
Average price/Bbl $ 64.33 $ 52.59
Average price/Mcf $ 6.95 $ 7.00
(a) The foregoing chart and the following discussion contain amounts for
the year 2005 which have been restated to
-44-
reflect the Partnership's assets held for sale as discontinued operations.
See Part I, Item 2 - Discontinued Operations for more information about
these discontinued operations.
As shown in the table above, total oil and gas sales decreased $104,000
(3.2%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this decrease (i) $50,000 and
$246,000 were related to decreases in volumes of oil and gas sold and (ii)
$17,000 was related to a decrease in the average price of gas sold. These
decreases were partially offset by an increase of $209,000 related to an
increase in the average price of oil sold.
Volumes of oil and gas sold decreased 953 barrels and 35,087 Mcf for the
nine months ended September 30, 2006 as compared to the nine months ended
September 30, 2005. The decrease in volumes of oil sold was primarily due
to normal declines in production. This decrease was partially offset by
(i) a negative prior period volume adjustment made by the operator on one
significant well during the nine months ended September 30, 2005 and (ii)
increases in production on two significant wells following their
successful workovers during late 2005. The decrease in volumes of gas sold
was primarily due to (i) normal declines in production and (ii) positive
prior period volume adjustments made by the operators on several wells
during the nine months ended September 30, 2005. These decreases were
partially offset by (i) the successful completion of two wells and (ii) an
increase in the I-E Partnership's revenue interest on another well during
the nine months ended September 30, 2006.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $27,000 (4.4%) for the nine months ended
September 30, 2006 as compared to the nine months ended September 30,
2005. This increase was primarily due to (i) abandonment expenses incurred
on two significant wells during the nine months ended September 30, 2006,
(ii) a reversal during the nine months ended September 30, 2005 of $89,000
of a charge previously accrued for a judgment, and (iii) workover expenses
incurred on several wells during the nine months ended September 30, 2006.
As of the date of this Quarterly Report, management anticipates workover
costs remaining at or increasing above 2006 levels due to the increased
cost to perform a workover and the age of the wellbores. These increases
were partially offset by the receipt of a $231,000 lease operating expense
credit resulting from the settlement of a class action lawsuit on several
other wells during the nine months ended September 30, 2006. As a
percentage of oil and gas sales, these expenses increased to 20.6% for the
nine months ended September 30, 2006 from 19.1% for the nine months ended
September 30, 2005.
-45-
DD&A of oil and gas properties decreased $3,000 (2.2%) for the nine months
ended September 30, 2006 as compared to the nine months ended September
30, 2005. This decrease was primarily due to (i) several wells being fully
depleted during 2005 due to their lack of remaining reserves and (ii) the
decreases in volumes of oil and gas sold. The decreases in DD&A were
partially offset by downward revisions in the estimates of remaining oil
and gas reserves since September 30, 2005. As a percentage of oil and gas
sales, this expense increased to 4.0% for the nine months ended September
30, 2006 from 3.9% for the nine months ended September 30, 2005.
The I-E Partnership recognized a non-cash charge against earnings of
$43,000 during the nine months ended September 30, 2006. This charge was
related to the decline in oil and gas prices used to determine
recoverability of oil and gas reserves at September 30, 2006. No such
charge was incurred during the nine months ended September 30, 2005.
General and administrative expenses remained relatively constant for the
nine months ended September 30, 2006 and 2005. As a percentage of oil and
gas sales, these expenses increased to 12.2% for the nine months ended
September 30, 2006 from 11.8% for the nine months ended September 30,
2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the I-E
Partnership is in the process of selling an increased amount of the
Partnership's properties as a result of the generally favorable current
environment for oil and gas dispositions. It is anticipated that the
Partnership will have lower oil and gas sales and lower production
expenses with the sale of these properties.
The Limited Partners have received cash distributions through September
30, 2006 totaling $78,642,552 or 187.96% of Limited Partners' capital
contributions.
I-F PARTNERSHIP
THREE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2005.
Three Months Ended September 30,
--------------------------------
2006 2005(a)
-------- --------
Oil and gas sales $474,453 $534,840
Oil and gas production expenses $ 81,444 $105,645
Barrels produced 2,438 2,864
Mcf produced 43,406 44,763
Average price/Bbl $ 68.09 $ 58.38
Average price/Mcf $ 7.11 $ 8.21
(a) The foregoing chart and the following discussion contain amounts for
the year 2005 which have been restated to
-46-
reflect the Partnership's assets held for sale as discontinued operations.
See Part I, Item 2 - Discontinued Operations for more information about
these discontinued operations.
As shown in the table above, total oil and gas sales decreased $60,000
(11.3%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease (i) $25,000 and
$11,000 were related to decreases in volumes of oil and gas sold and (ii)
$48,000 was related to a decrease in the average price of gas sold. These
decreases were partially offset by an increase of $24,000 related to an
increase in the average price of oil sold.
Volumes of oil and gas sold decreased 426 barrels and 1,357 Mcf for the
three months ended September 30, 2006 as compared to the three months
ended September 30, 2005. The decreases in volumes of oil and gas sold
were primarily due to normal declines in production. The decreases in
volumes of gas sold was partially offset by (i) the successful completion
of two wells during mid 2006 and (ii) an increase in the I-F Partnership's
revenue interest on another well during the three months ended September
30, 2006.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $24,000 (22.9%) for the three months ended
September 30, 2006 as compared to the three months ended September 30,
2005. This decrease was primarily due to (i) the receipt of an $81,000
lease operating expense credit resulting from the settlement of a class
action lawsuit on several wells during the three months ended September
30, 2006 and (ii) a decrease in production taxes associated with the
decrease in oil and gas sales. These decreases were partially offset by
workover expenses incurred on several wells during the three months ended
September 30, 2006. As of the date of this Quarterly Report, management
anticipates workover costs remaining at or increasing above 2006 levels
due to the increased cost to perform a workover and the age of the
wellbores. As a percentage of oil and gas sales, these expenses decreased
to 17.2% for the three months ended September 30, 2006 from 19.8% for the
three months ended September 30, 2005, primarily due to the dollar
decrease in production expenses.
DD&A of oil and gas properties decreased $18,000 (46.4%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. This decrease was primarily due to (i) several wells
being fully depleted during 2005 due to their lack of remaining reserves
and (ii) the decreases in volumes of oil and gas sold. As a percentage of
oil and gas sales, this expense decreased to 4.4% for the three months
ended September 30, 2006 from 7.2% for the three months ended September
30, 2005, primarily due to the dollar decrease in DD&A.
-47-
The I-F Partnership recognized a non-cash charge against earnings of
$21,000 during the three months ended September 30, 2006. This charge was
related to the decline in oil and gas prices used to determine
recoverability of oil and gas reserves at September 30, 2006. No such
charge was incurred during the three months ended September 30, 2005.
General and administrative expenses decreased $1,000 (1.5%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. As a percentage of oil and gas sales, these expenses
increased to 8.8% for the three months ended September 30, 2006 from 7.9%
for the three months ended September 30, 2005, primarily due to the
decrease in oil and gas sales.
As further discussed in Part I, Item 2 - Discontinued Operations, the I-F
Partnership is in the process of selling an increased amount of the
Partnership's properties as a result of the generally favorable current
environment for oil and gas dispositions. It is anticipated that the
Partnership will have lower oil and gas sales and lower production
expenses with the sale of these properties.
NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2005.
Nine Months Ended September 30,
-------------------------------
2006 2005(a)
---------- ----------
Oil and gas sales $1,362,870 $1,396,681
Oil and gas production expenses $ 336,280 $ 257,319
Barrels produced 7,651 8,071
Mcf produced 125,652 140,037
Average price/Bbl $ 64.39 $ 52.38
Average price/Mcf $ 6.93 $ 6.95
(a) The foregoing chart and the following discussion contain amounts for
the year 2005 which have been restated to reflect the Partnership's assets
held for sale as discontinued operations. See Part I, Item 2 -
Discontinued Operations for more information about these discontinued
operations.
As shown in the table above, total oil and gas sales decreased $34,000
(2.4%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this decrease (i) $22,000 and
$100,000 were related to decreases in volumes of oil and gas sold and (ii)
$4,000 was related to a decrease in the average price of gas sold. These
decreases were partially offset by an increase of $92,000 related to an
increase in the average price of oil sold.
-48-
Volumes of oil and gas sold decreased 420 barrels and 14,385 Mcf for the
nine months ended September 30, 2006 as compared to the nine months ended
September 30, 2005. The decrease in volumes of oil sold was primarily due
to normal declines in production. This decrease was partially offset by
(i) a negative prior period volume adjustment made by the operator on one
significant well during the nine months ended September 30, 2005 and (ii)
increases in production on two significant wells following their
successful workovers during late 2005. The decrease in volumes of gas sold
was primarily due to (i) normal declines in production and (ii) positive
prior period volume adjustments made by the operators on several wells
during the nine months ended September 30, 2005. These decreases were
partially offset by (i) the successful completion of two significant wells
during mid 2006 and (ii) an increase in the I-F Partnership's revenue
interest on another well during the nine months ended September 30, 2006.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $79,000 (30.7%) for the nine months ended
September 30, 2006 as compared to the nine months ended September 30,
2005. This increase was primarily due to (i) abandonment expenses incurred
on two significant wells during the nine months ended September 30, 2006,
(ii) a reversal during the nine months ended September 30, 2005 of $62,000
of a charge previously accrued for a judgment, and (iii) workover expenses
incurred on several wells during the nine months ended September 30, 2006.
As of the date of this Quarterly Report, management anticipates workover
costs remaining at or increasing above 2006 levels due to the increased
cost to perform a workover and the age of the wellbores. These increases
were partially offset by the receipt of an $81,000 lease operating expense
credit resulting from the settlement of a class action lawsuit on several
wells during the nine months ended September 30, 2006. As a percentage of
oil and gas sales, these expenses increased to 24.7% for the nine months
ended September 30, 2006 from 18.4% for the nine months ended September
30, 2005, primarily due to the dollar increase in production expenses.
DD&A of oil and gas properties decreased $9,000 (14.5%) for the nine
months ended September 30, 2006 as compared to the nine months ended
September 30, 2005. This decrease was primarily due to (i) several wells
being fully depleted during 2005 due to their lack of remaining reserves
and (ii) the decreases in volumes of oil and gas sold. The decreases in
DD&A were partially offset by downward revisions in the estimates of
remaining oil and gas reserves since September 30, 2005. As a percentage
of oil and gas sales, this expense decreased to 3.7% for the nine months
ended September 30, 2006 from 4.2% for the nine months ended September 30,
2005, primarily due to the dollar decrease in DD&A.
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The I-F Partnership recognized a non-cash charge against earnings of
$21,000 during the nine months ended September 30, 2006. This charge was
related to the decline in oil and gas prices used to determine
recoverability of oil and gas reserves at September 30, 2006. No such
charge was incurred during the nine months ended September 30, 2005.
General and administrative expenses remained relatively constant for the
nine months ended September 30, 2006 and 2005. As a percentage of oil and
gas sales, these expenses increased to 11.1% for the nine months ended
September 30, 2006 from 10.7% for the nine months ended September 30,
2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the I-F
Partnership is in the process of selling an increased amount of the
Partnership's properties as a result of the generally favorable current
environment for oil and gas dispositions. It is anticipated that the
Partnership will have lower oil and gas sales and lower production
expenses with the sale of these properties.
The Limited Partners have received cash distributions through September
30, 2006 totaling $24,770,664 or 172.97% of Limited Partners' capital
contributions.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Partnerships do not hold any market risk sensitive instruments.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of this period covered by this report, the principal
executive officer and principal financial officer conducted an
evaluation of the Partnerships' disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
and Exchange Act of 1934). Based on this evaluation, such officers
concluded that the Partnerships' disclosure controls and procedures
are effective to ensure that information required to be disclosed by
the Partnerships in reports filed under the Exchange Act is
recorded, processed, summarized, and reported accurately and within
the time periods specified in the Securities and Exchange Commission
rules and forms.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
31.1 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the I-D Partnership.
31.2 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the I-D Partnership.
31.3 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the I-E Partnership.
31.4 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the I-E Partnership.
31.5 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the I-F Partnership.
31.6 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the I-F Partnership.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for
the I-D Partnership.
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for
the I-E Partnership.
32.3 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for
the I-F Partnership.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
(Registrant)
BY: GEODYNE RESOURCES, INC.
General Partner
Date: November 20, 2006 By: /s/Dennis R. Neill
--------------------------------
(Signature)
Dennis R. Neill
President
Date: November 20, 2006 By: /s/Craig D. Loseke
--------------------------------
(Signature)
Craig D. Loseke
Chief Accounting Officer
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INDEX TO EXHIBITS
-----------------
Exh.
No. Exhibit
- ---- -------
31.1 Certification by Dennis R. Neill required by Rule 13a-14(a)/15d-14(a) for
the Geodyne Energy Income Limited Partnership I-D.
31.2 Certification by Craig D. Loseke required by Rule 13a-14(a)/15d-14(a) for
the Geodyne Energy Income Limited Partnership I-D.
31.3 Certification by Dennis R. Neill required by Rule 13a-14(a)/15d-14(a) for
the Geodyne Energy Income Limited Partnership I-E.
31.4 Certification by Craig D. Loseke required by Rule 13a-14(a)/15d-14(a) for
the Geodyne Energy Income Limited Partnership I-E.
31.5 Certification by Dennis R. Neill required by Rule 13a-14(a)/15d-14(a) for
the Geodyne Energy Income Limited Partnership I-F.
31.6 Certification by Craig D. Loseke required by Rule 13a-14(a)/15d-14(a) for
the Geodyne Energy Income Limited Partnership I-F.
32.1 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 Energy
Income Limited Partnership I-D.
32.2 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 Energy
Income Limited Partnership I-E.
32.3 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 Energy
Income Limited Partnership I-F.
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