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:
III-A: 0-18302 III-B: 0-18636 III-C: 0-18634
III-D: 0-18936 III-E: 0-19010 III-F: 0-19102
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-A
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-F
---------------------------------------------------------
(Exact name of Registrant as specified in its Articles)
III-A 73-1352993
III-B 73-1358666
III-C 73-1356542
III-D 73-1357374
III-E 73-1367188
Oklahoma III-F 73-1377737
- ---------------------------- -------------------------------
(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 III-A
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 979,821 $1,209,317
Accounts receivable:
Oil and gas sales 567,664 831,772
Assets held for sale (Note 3) 59,462 -
---------- ----------
Total current assets $1,606,947 $2,041,089
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 598,667 775,391
DEFERRED CHARGE 186,254 190,240
---------- ----------
$2,391,868 $3,006,720
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 77,917 $ 126,411
Gas imbalance payable 21,315 17,660
Asset retirement obligation -
current (Note 1) 20,931 14,606
Asset retirement obligation -
assets held for sale 17,833 -
Accounts payable of assets held
for sale 4,457 -
---------- ----------
Total current liabilities $ 142,453 $ 158,677
LONG-TERM LIABILITIES:
Accrued liability $ 26,965 $ 27,120
Asset retirement obligation
(Note 1) 256,728 270,650
---------- ----------
Total long-term liabilities $ 283,693 $ 297,770
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 95,738) ($ 59,217)
Limited Partners, issued and
outstanding, 263,976 units 2,061,460 2,609,490
---------- ----------
Total Partners' capital $1,965,722 $2,550,273
---------- ----------
$2,391,868 $3,006,720
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-3-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-A
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $1,048,000 $1,165,541
Interest income 7,724 5,169
---------- ----------
$1,055,724 $1,170,710
COSTS AND EXPENSES:
Lease operating $ 124,418 $ 187,218
Production tax 95,611 101,815
Depreciation, depletion, and
amortization of oil and gas
properties 61,491 57,883
Impairment provision 5,577 -
General and administrative
(Note 2) 72,472 74,220
---------- ----------
$ 359,569 $ 421,136
---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 696,155 $ 749,574
Income from discontinued operations
(Note 3) 30,385 31,429
---------- ----------
NET INCOME $ 726,540 $ 781,003
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 74,879 $ 79,650
Net income from discontinued
operations 3,056 3,323
Net income 77,935 82,973
LIMITED PARTNERS:
Net income from continuing operations $ 621,276 $ 669,924
Net income from discontinued
operations 27,329 28,106
Net income 648,605 698,030
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 2.35 $ 2.53
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.11 0.10
NET INCOME PER UNIT 2.46 2.63
UNITS OUTSTANDING 263,976 263,976
The accompanying condensed notes are an integral part of
these financial statements.
-4-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-A
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $3,133,003 $3,252,450
Interest income 25,738 13,159
---------- ----------
$3,158,741 $3,265,609
COSTS AND EXPENSES:
Lease operating $ 414,887 $ 555,810
Production tax 269,022 292,644
Depreciation, depletion, and
amortization of oil and gas
properties 143,459 102,589
Impairment provision 5,577 -
General and administrative
(Note 2) 243,347 242,607
---------- ----------
$1,076,292 $1,193,650
---------- ----------
INCOME FROM CONTINUING OPERATIONS $2,082,449 $2,071,959
Income from discontinued operations
(Note 3) 80,883 95,615
---------- ----------
NET INCOME $2,163,332 $2,167,574
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 219,084 $ 215,113
Net income from discontinued
operations 8,278 9,931
Net income 227,362 225,044
LIMITED PARTNERS:
Net income from continuing operations $1,863,365 $1,856,846
Net income from discontinued
operations 72,605 85,684
Net income 1,935,970 1,942,530
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 7.06 $ 7.03
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.28 0.32
NET INCOME PER UNIT 7.34 7.35
UNITS OUTSTANDING 263,976 263,976
The accompanying condensed notes are an integral part of
these financial statements.
-5-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-A
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,163,332 $2,167,574
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 145,569 106,691
Impairment provision 5,577 -
(Increase) decrease in accounts
receivable - oil and gas sales 241,288 ( 209,040)
(Increase) decrease in deferred
charge 3,986 ( 3,728)
Increase (decrease) in accounts
payable ( 35,841) 101,448
Increase (decrease) in gas
imbalance payable 3,655 ( 3,636)
Decrease in accrued liability ( 155) ( 3,934)
---------- ----------
Net cash provided by operating
activities $2,527,411 $2,155,375
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 9,024) ($ 18,341)
---------- ----------
Net cash used by investing
activities ($ 9,024) ($ 18,341)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($2,747,883) ($2,159,751)
---------- ----------
Net cash used by financing
activities ($2,747,883) ($2,159,751)
---------- ----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ($ 229,496) ($ 22,717)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,209,317 1,038,719
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 979,821 $1,016,002
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-6-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 510,796 $ 604,086
Accounts receivable:
Oil and gas sales 314,849 433,785
Assets held for sale (Note 3) 19,148 -
---------- ----------
Total current assets $ 844,793 $1,037,871
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 347,632 414,293
DEFERRED CHARGE 123,122 125,644
---------- ----------
$1,315,547 $1,577,808
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 49,259 $ 76,295
Gas imbalance payable 13,133 9,707
Asset retirement obligation -
current (Note 1) 11,607 9,255
Asset retirement obligation -
assets held for sale 5,909 -
Accounts payable of assets held
for sale 1,019 -
---------- ----------
Total current liabilities $ 80,927 $ 95,257
LONG-TERM LIABILITIES:
Accrued liability $ 8,001 $ 9,664
Asset retirement obligation
(Note 1) 173,600 175,358
---------- ----------
Total long-term liabilities $ 181,601 $ 185,022
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 59,630) ($ 35,041)
Limited Partners, issued and
outstanding, 138,336 units 1,112,649 1,332,570
---------- ----------
Total Partners' capital $1,053,019 $1,297,529
---------- ----------
$1,315,547 $1,577,808
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-7-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
--------- ---------
REVENUES:
Oil and gas sales $578,250 $627,462
Interest income 3,739 2,603
-------- --------
$581,989 $630,065
COSTS AND EXPENSES:
Lease operating $ 78,695 $124,996
Production tax 56,051 57,315
Depreciation, depletion, and
amortization of oil and gas
properties 11,754 48,823
Impairment provision 3,798 -
General and administrative
(Note 2) 38,489 39,997
-------- --------
$188,787 $271,131
-------- --------
INCOME FROM CONTINUING OPERATIONS $393,202 $358,934
Income from discontinued operations
(Note 3) 7,566 7,192
-------- --------
NET INCOME $400,768 $366,126
======== ========
GENERAL PARTNER:
Net income from continuing operations $ 60,597 $ 60,284
Net income from discontinued
operations 1,145 1,172
Net income 61,742 61,456
LIMITED PARTNERS:
Net income from continuing operations $332,605 $298,650
Net income from discontinued
operations 6,421 6,020
Net income 339,026 304,670
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 2.41 $ 2.16
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.04 0.04
NET INCOME PER UNIT 2.45 2.20
UNITS OUTSTANDING 138,336 138,336
The accompanying condensed notes are an integral part of
these financial statements.
-8-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
----------- -----------
REVENUES:
Oil and gas sales $1,715,656 $1,736,038
Interest income 12,351 6,537
---------- ----------
$1,728,007 $1,742,575
COSTS AND EXPENSES:
Lease operating $ 268,327 $ 345,685
Production tax 156,784 166,907
Depreciation, depletion, and
amortization of oil and gas
properties 60,626 65,003
Impairment provision 3,798 -
General and administrative
(Note 2) 139,963 139,370
---------- ----------
$ 629,498 $ 716,965
---------- ----------
INCOME FROM CONTINUING OPERATIONS $1,098,509 $1,025,610
Income from discontinued operations
(Note 3) 18,388 23,314
---------- ----------
NET INCOME $1,116,897 $1,048,924
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 171,943 $ 161,961
Net income from discontinued
operations 2,875 3,699
Net income 174,818 165,660
LIMITED PARTNERS:
Net income from continuing operations $ 926,566 $ 863,649
Net income from discontinued
operations 15,513 19,615
Net income 942,079 883,264
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 6.70 $ 6.24
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.11 0.14
NET INCOME PER UNIT 6.81 6.38
UNITS OUTSTANDING 138,336 138,336
The accompanying condensed notes are an integral part of
these financial statements.
-9-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,116,897 $1,048,924
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 61,460 66,447
Impairment provision 3,798 -
(Increase) decrease in accounts
receivable - oil and gas sales 112,676 ( 108,390)
(Increase) decrease in deferred
charge 2,522 ( 2,938)
Increase (decrease) in accounts
payable ( 20,541) 61,208
Increase (decrease) in gas imbalance
payable 3,426 ( 1,425)
Decrease in accrued liability ( 1,663) ( 2,526)
---------- ----------
Net cash provided by operating
activities $1,278,575 $1,061,300
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 10,458) ($ 3,115)
---------- ----------
Net cash used by investing
activities ($ 10,458) ($ 3,115)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($1,361,407) ($1,099,266)
---------- ----------
Net cash used by financing
activities ($1,361,407) ($1,099,266)
---------- ----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ($ 93,290) ($ 41,081)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 604,086 556,249
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 510,796 $ 515,168
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-10-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 768,443 $1,013,378
Accounts receivable:
Oil and gas sales 865,408 884,091
Assets held for sale (Note 3) 7,848 -
---------- ----------
Total current assets $1,641,699 $1,897,469
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 1,908,304 1,544,711
DEFERRED CHARGE 59,090 62,603
---------- ----------
$3,609,093 $3,504,783
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 164,974 $ 263,892
Gas imbalance payable 66,546 76,928
Asset retirement obligation -
current (Note 1) 37,701 19,679
Asset retirement obligation -
assets held for sale 2,462 -
Accounts payable of assets held
for sale 257 -
---------- ----------
Total current liabilities $ 271,940 $ 360,499
LONG-TERM LIABILITIES:
Accrued liability $ 115,012 $ 124,681
Asset retirement obligation
(Note 1) 348,076 355,551
---------- ----------
Total long-term liabilities $ 463,088 $ 480,232
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 105,107) ($ 105,515)
Limited Partners, issued and
outstanding, 244,536 units 2,979,172 2,769,567
---------- ----------
Total Partners' capital $2,874,065 $2,664,052
---------- ----------
$3,609,093 $3,504,783
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-11-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $1,195,284 $1,116,005
Interest income 6,480 5,084
Other income 8,287 -
---------- ----------
$1,210,051 $1,121,089
COSTS AND EXPENSES:
Lease operating $ 180,088 $ 162,036
Production tax 68,890 75,340
Depreciation, depletion, and
amortization of oil and gas
properties 70,125 107,062
Impairment provision 77,806 -
General and administrative
(Note 2) 67,214 68,276
---------- ----------
$ 464,123 $ 412,714
---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 745,928 $ 708,375
Income from discontinued operations
(Note 3) 4,639 5,669
---------- ----------
NET INCOME $ 750,567 $ 714,044
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 87,259 $ 79,964
Net income from discontinued
operations 466 592
Net income 87,725 80,556
LIMITED PARTNERS:
Net income from continuing operations $ 658,669 $ 628,411
Net income from discontinued
operations 4,173 5,077
Net income 662,842 633,488
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 2.70 $ 2.57
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.02 0.02
NET INCOME PER UNIT 2.72 2.59
UNITS OUTSTANDING 244,536 244,536
The accompanying condensed notes are an integral part of
these financial statements.
-12-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $3,421,287 $3,042,346
Interest income 21,748 11,425
Other income 8,287 2,541
---------- ----------
$3,451,322 $3,056,312
COSTS AND EXPENSES:
Lease operating $ 548,368 $ 400,303
Production tax 231,798 208,615
Depreciation, depletion, and
amortization of oil and gas
properties 198,193 200,525
Impairment provision 77,806 -
General and administrative
(Note 2) 227,271 225,907
---------- ----------
$1,283,436 $1,035,350
---------- ----------
INCOME FROM CONTINUING OPERATIONS $2,167,886 $2,020,962
Income from discontinued operations
(Note 3) 10,227 13,673
---------- ----------
NET INCOME $2,178,113 $2,034,635
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 239,454 $ 218,772
Net income from discontinued
operations 1,054 1,422
Net income 240,508 220,194
LIMITED PARTNERS:
Net income from continuing operations $1,928,432 $1,802,190
Net income from discontinued
operations 9,173 12,251
Net income 1,937,605 1,814,441
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 7.89 $ 7.37
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.04 0.05
NET INCOME PER UNIT 7.93 7.42
UNITS OUTSTANDING 244,536 244,536
The accompanying condensed notes are an integral part of
these financial statements.
-13-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,178,113 $2,034,635
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 198,543 201,128
Impairment provision 77,806 -
Settlement of asset retirement
obligation ( 109) -
(Increase) decrease in accounts
receivable - oil and gas sales 16,173 ( 199,269)
(Increase) decrease in deferred
charge 3,513 ( 6,029)
Increase (decrease) in accounts
payable ( 85,772) 20,673
Decrease in gas imbalance
payable ( 10,382) ( 7,201)
Decrease in accrued liability ( 9,669) ( 43,918)
---------- ----------
Net cash provided by operating
activities $2,368,216 $2,000,019
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 645,051) ($ 101,749)
---------- ----------
Net cash used by investing
activities ($ 645,051) ($ 101,749)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($1,968,100) ($1,632,727)
---------- ----------
Net cash used by financing
activities ($1,968,100) ($1,632,727)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($ 244,935) $ 265,543
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,013,378 682,792
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 768,443 $ 948,335
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-14-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 423,909 $ 547,247
Accounts receivable:
Oil and gas sales 406,867 527,187
Assets held for sale (Note 3) 2,449 -
---------- ----------
Total current assets $ 833,225 $1,074,434
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 1,023,568 651,461
DEFERRED CHARGE 14,691 15,342
---------- ----------
$1,871,484 $1,741,237
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 107,376 $ 155,178
Gas imbalance payable 41,622 42,943
Asset retirement obligation -
current (Note 1) 29,814 17,420
Accounts payable of assets held
for sale 1 -
---------- ----------
Total current liabilities $ 178,813 $ 215,541
LONG-TERM LIABILITIES:
Accrued liability $ 140,185 $ 153,747
Asset retirement obligation
(Note 1) 178,549 186,678
---------- ----------
Total long-term liabilities $ 318,734 $ 340,425
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 38,311) ($ 29,279)
Limited Partners, issued and
outstanding, 131,008 units 1,412,248 1,214,550
---------- ----------
Total Partners' capital $1,373,937 $1,185,271
---------- ----------
$1,871,484 $1,741,237
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-15-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
-------- --------
REVENUES:
Oil and gas sales $604,694 $643,733
Interest income 3,314 2,755
Other income 1,187 -
-------- --------
$609,195 $646,488
COSTS AND EXPENSES:
Lease operating $109,854 $ 96,960
Production tax 38,483 44,360
Depreciation, depletion, and
amortization of oil and gas
properties 43,945 37,605
Impairment provision 13,437 -
General and administrative
(Note 2) 36,504 37,365
-------- --------
$242,223 $216,290
-------- --------
INCOME FROM CONTINUING OPERATIONS $336,972 $430,198
Income from discontinued operations
(Note 3) 2,960 3,784
-------- --------
NET INCOME $369,932 $433,982
======== ========
GENERAL PARTNER:
Net income from continuing operations $ 41,530 $ 46,128
Net income from discontinued
operations 296 378
Net income 41,826 46,506
LIMITED PARTNERS:
Net income from continuing operations $325,442 $384,070
Net income from discontinued
operations 2,664 3,406
Net income 328,106 387,476
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 2.49 $ 2.93
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.02 0.02
NET INCOME PER UNIT 2.51 2.95
UNITS OUTSTANDING 131,008 131,008
The accompanying condensed notes are an integral part of
these financial statements.
-16-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $1,903,882 $1,726,635
Interest income 11,184 6,341
Other income 1,187 364
---------- ----------
$1,916,253 $1,733,340
COSTS AND EXPENSES:
Lease operating $ 322,721 $ 235,844
Production tax 132,195 118,678
Depreciation, depletion, and
amortization of oil and gas
properties 114,590 77,488
Impairment provision 13,437 -
General and administrative
(Note 2) 134,520 132,868
---------- ----------
$ 717,463 $ 564,878
---------- ----------
INCOME FROM CONTINUING OPERATIONS $1,198,790 $1,168,462
Income from discontinued operations
(Note 3) 4,657 12,243
---------- ----------
NET INCOME $1,203,447 $1,180,705
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 130,283 $ 123,153
Net income from discontinued
operations 466 1,224
Net income 130,749 124,377
LIMITED PARTNERS:
Net income from continuing operations $1,068,507 $1,045,309
Net income from discontinued
operations 4,191 11,019
Net income 1,072,698 1,056,328
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 8.16 $ 7.98
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.03 0.08
NET INCOME PER UNIT 8.19 8.06
UNITS OUTSTANDING 131,008 131,008
The accompanying condensed notes are an integral part of
these financial statements.
-17-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,203,447 $1,180,705
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 114,590 77,488
Impairment provision 13,437 -
Settlement of asset retirement
obligation ( 1,152) -
(Increase) decrease in accounts
receivable - oil and gas sales 117,871 ( 98,510)
(Increase) decrease in deferred
charge 651 ( 4,296)
Decrease in accounts payable ( 32,972) ( 61,449)
Decrease in gas imbalance
payable ( 1,321) -
Decrease in accrued liability ( 13,562) ( 29,445)
---------- ----------
Net cash provided by operating
activities $1,400,989 $1,064,493
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 509,546) ($ 44,583)
---------- ----------
Net cash used by investing
activities ($ 509,546) ($ 44,583)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($1,014,781) ($ 918,393)
---------- ----------
Net cash used by financing
activities ($1,014,781) ($ 918,393)
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ($ 123,338) $ 101,517
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 547,247 432,834
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 423,909 $ 534,351
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-18-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $1,109,808 $1,460,559
Accounts receivable:
Oil and gas sales 772,275 1,272,925
Assets held for sale (Note 3) 54,258 -
---------- ----------
Total current assets $1,936,341 $2,733,484
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 1,614,128 1,981,508
DEFERRED CHARGE 34,802 40,254
---------- ----------
$3,585,271 $4,755,246
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 286,098 $ 324,885
Accrued liability - other (Note 1) 11,880 -
Gas imbalance payable 17,735 16,538
Asset retirement obligation -
current (Note 1) 69,434 23,971
Asset retirement obligation -
assets held for sale 33,885 -
Accounts payable of assets
held for sale 11,536 -
---------- ----------
Total current liabilities $ 430,568 $ 365,394
LONG-TERM LIABILITIES:
Accrued liability $ 172,765 $ 254,420
Asset retirement obligation
(Note 1) 349,581 413,791
---------- ----------
Total long-term liabilities $ 522,346 $ 668,211
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 270,857) ($ 197,010)
Limited Partners, issued and
outstanding, 418,266 units 2,903,214 3,918,651
---------- ----------
Total Partners' capital $2,632,357 $3,721,641
---------- ----------
$3,585,271 $4,755,246
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-19-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ -----------
REVENUES:
Oil and gas sales $1,010,328 $1,460,272
Interest income 8,361 6,320
---------- ----------
$1,018,689 $1,466,592
COSTS AND EXPENSES:
Lease operating $ 250,935 $ 240,534
Production tax 72,256 100,676
Depreciation, depletion, and
amortization of oil and gas
properties 81,242 113,622
Impairment provision 61,448 -
General and administrative
(Note 2) 114,203 116,113
---------- ----------
$ 580,084 $ 570,945
---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 438,605 $ 895,647
Income (loss) from discontinued
operations (Note 3) ( 130,842) 6,906
---------- ----------
NET INCOME $ 307,763 $ 902,553
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 55,866 $ 99,159
Net income from discontinued
operations 1,562 4,166
Net income 57,428 103,325
LIMITED PARTNERS:
Net income from continuing operations $ 382,739 $ 796,488
Net income (loss) from discontinued
operations ( 132,404) 2,740
Net income 250,335 799,228
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 0.92 $ 1.91
NET LOSS FROM DISCONTINUED OPERATIONS
PER UNIT ( 0.32) 0.00
NET INCOME PER UNIT 0.60
1.91
UNITS OUTSTANDING 418,226 418,226
The accompanying condensed notes are an integral part of
these financial statements.
-20-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
----------- -----------
REVENUES:
Oil and gas sales $3,265,162 $3,868,450
Interest income 30,987 16,821
Other income 10,740 -
---------- ----------
$3,306,889 $3,885,271
COSTS AND EXPENSES:
Lease operating $ 620,810 $ 698,364
Production tax 224,485 268,457
Depreciation, depletion, and
amortization of oil and gas
properties 194,450 197,958
Impairment provision 61,448 -
General and administrative
(Note 2) 372,716 370,657
---------- ----------
$1,473,909 $1,535,436
---------- ----------
INCOME FROM CONTINUING OPERATIONS $1,832,980 $2,349,835
Income (loss) from discontinued
operations (Note 3) ( 22,020) 126,691
---------- ----------
NET INCOME $1,810,960 $2,476,526
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 203,230 $ 251,118
Net income from discontinued
operations 14,167 16,267
Net income 217,397 267,385
LIMITED PARTNERS:
Net income from continuing operations $1,629,750 $2,098,717
Net income (loss) from discontinued
operations ( 36,187) 110,424
Net income 1,593,563 2,209,141
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 3.90 $ 5.02
NET INCOME (LOSS) FROM DISCONTINUED
OPERATIONS PER UNIT ( 0.09) 0.26
NET INCOME PER UNIT 3.81 5.28
UNITS OUTSTANDING 418,266 418,266
The accompanying condensed notes are an integral part of
these financial statements.
-21-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,810,960 $2,476,526
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 213,986 237,932
Impairment provision 223,793 -
Settlement of asset retirement
obligation - ( 345)
(Increase) decrease in accounts
receivable - oil and gas sales 451,438 ( 209,136)
Decrease in deferred charge 5,452 9,335
Increase (decrease) in accounts
payable 39,666 ( 549,992)
Increase in accrued liability -
other 11,880 -
Increase in gas imbalance
payable 1,197 486
Decrease in accrued liability ( 81,655) ( 22,401)
---------- ----------
Net cash provided by operating
activities $2,676,717 $1,942,405
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 127,224) ($ 27,202)
Proceeds from sale of oil and
gas properties - 2,009
---------- ----------
Net cash used by investing
activities ($ 127,224) ($ 25,193)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($2,900,244) ($2,132,378)
---------- ----------
Net cash used by financing
activities ($2,900,244) ($2,132,378)
---------- ----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS ($ 350,751) ($ 215,166)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,460,559 1,413,497
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $1,109,808 $1,198,331
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-22-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-F
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 705,185 $1,062,866
Accounts receivable:
Oil and gas sales 482,612 797,469
Assets held for sale (Note 3) 227,219 -
---------- ----------
Total current assets $1,415,016 $1,860,335
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 1,397,905 1,680,470
DEFERRED CHARGE 14,579 17,132
---------- ----------
$2,827,500 $3,557,937
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 179,314 $ 176,398
Gas imbalance payable 14,861 13,857
Asset retirement obligation -
current (Note 1) 17,203 1,948
Asset retirement obligation -
assets held for sale 36,058 -
Accounts payable of assets held
for sale 15,532 -
---------- ----------
Total current liabilities $ 262,968 $ 192,203
LONG-TERM LIABILITIES:
Accrued liability $ 71,465 $ 84,584
Asset retirement obligation
(Note 1) 235,292 276,256
---------- ----------
Total long-term liabilities $ 306,757 $ 360,840
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 122,589) ($ 126,897)
Limited Partners, issued and
outstanding, 221,484 units 2,380,364 3,131,791
---------- ----------
Total Partners' capital $2,257,775 $3,004,894
---------- ----------
$2,827,500 $3,557,937
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-23-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-F
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
--------- ---------
REVENUES:
Oil and gas sales $612,382 $853,031
Interest income 5,280 4,016
-------- --------
$617,662 $857,047
COSTS AND EXPENSES:
Lease operating $152,145 $130,704
Production tax 38,828 51,338
Depreciation, depletion, and
amortization of oil and gas
properties 57,708 50,936
Impairment provision 55,288 -
General and administrative
(Note 2) 60,974 62,266
-------- --------
$364,943 $295,244
-------- --------
INCOME FROM CONTINUING OPERATIONS $252,719 $561,803
Income from discontinued operations
(Note 3) 122,202 137,263
-------- --------
NET INCOME $374,921 $699,066
======== ========
GENERAL PARTNER:
Net income from continuing operations $ 34,913 $ 29,927
Net income from discontinued
operations 13,248 7,009
Net income 48,161 36,936
LIMITED PARTNERS:
Net income from continuing operations $217,806 $531,876
Net income from discontinued
operations 108,954 130,254
Net income 326,760 662,130
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 0.98 $ 2.40
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.50 0.59
NET INCOME PER UNIT 1.48 2.99
UNITS OUTSTANDING 221,484 221,484
The accompanying condensed notes are an integral part of
these financial statements.
-24-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-F
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- -----------
REVENUES:
Oil and gas sales $1,872,620 $2,211,634
Interest income 20,612 10,027
Other income 9,018 -
---------- ----------
$1,902,250 $2,221,661
COSTS AND EXPENSES:
Lease operating $ 419,654 $ 369,854
Production tax 118,663 134,198
Depreciation, depletion, and
amortization of oil and gas
properties 141,896 123,534
Impairment provision 55,288 -
General and administrative
(Note 2) 208,570 207,533
---------- ----------
$ 944,071 $ 835,119
---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 958,179 $1,386,542
Income from discontinued operations
(Note 3) 377,554 356,031
---------- ----------
NET INCOME $1,335,733 $1,742,573
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 111,503 $ 73,767
Net income from discontinued
operations 39,657 18,140
Net income 151,160 91,907
LIMITED PARTNERS:
Net income from continuing operations $ 846,676 $1,312,775
Net income from discontinued
operations 337,897 337,891
Net income 1,184,573 1,650,666
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 3.82 $ 5.93
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 1.53 1.53
NET INCOME PER UNIT 5.35 7.46
UNITS OUTSTANDING 221,484 221,484
The accompanying condensed notes are an integral part of
these financial statements.
-25-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-F
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,335,733 $1,742,573
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 152,054 132,003
Impairment provision 66,259 -
(Increase) decrease in accounts
receivable - oil and gas sales 210,314 ( 172,404)
Decrease in deferred charge 2,553 4,610
Increase in accounts payable 16,894 16,646
Increase in gas imbalance
payable 1,004 399
Decrease in accrued liability ( 13,119) ( 10,770)
---------- ----------
Net cash provided by operating
activities $1,771,692 $1,713,057
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 46,521) ($ 22,735)
Proceeds from sale of oil
and gas properties - 2,318
---------- ----------
Net cash used by investing
activities ($ 46,521) ($ 20,417)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($2,082,852) ($1,594,870)
---------- ----------
Net cash used by financing
activities ($2,082,852) ($1,594,870)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($ 357,681) $ 97,770
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,062,866 696,460
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 705,185 $ 794,230
========== ==========
The accompanying condensed notes are an integral part of
these financial statements.
-26-
GEODYNE ENERGY INCOME PROGRAM III LIMITED PARTNERSHIPS
CONDENSED NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The balance sheets as of September 30, 2006, statements of operations for
the three and nine months ended September 30, 2006 and 2005, and
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 Partnerships (the "General Partner"), without audit. In the opinion of
management the financial statements referred to above include all
necessary adjustments, consisting of normal recurring adjustments, to
present fairly the financial position at September 30, 2006, the results
of operations for the three and nine months ended September 30, 2006 and
2005, and the 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 $100
initial capital contribution.
NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
In September 2006, the FASB issued FAS No. 157, "Fair Value Measurements"
(FAS No. 157), which 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 15, 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
-27-
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.
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.
DISCONTINUED OPERATIONS
-----------------------
As further discussed in Note 3, the Partnerships anticipate selling a
number of properties 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
----------- --------------- --------------
III-A 8 $ 336,000
III-B 6 66,000
III-C 10 34,000
III-D 7 4,000
III-E 11 202,000
III-F 6 3,350,000
RECLASSIFICATION
----------------
Certain prior year balances have been reclassified to conform with current
year presentation.
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
-28-
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 $6,000, $4,000, $78,000, $13,000,
$61,000 and $55,000 for the III-A, III-B, III-C, III-D, III-E and III-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.
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
-29-
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 III-A, III-B, III-C, III-D, III-E,
and III-F Partnerships recognized $30,000, $19,000, $33,000, $18,000,
$48,000, and $22,000, 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.
-30-
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.
III-A Partnership
-----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $292,111 $117,256
Additions and revisions - 115,243
Accretion expense 3,381 5,775
Discontinued operations ( 17,833) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $277,659 $238,274
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, January 1 $285,256 $114,955
Additions and revisions - 115,243
Accretion expense 10,236 8,076
Discontinued operations ( 17,833) -
-------- --------
Total Asset Retirement
Obligation, End of Period $277,659 $238,274
======== ========
Asset Retirement Obligation -
Current $ 20,931 $ 5,357
Asset Retirement Obligation -
Long-Term 256,728 232,917
-31-
III-B Partnership
-----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $188,976 $ 81,447
Additions and revisions - 80,508
Accretion expense 2,140 3,973
Discontinued operations ( 5,909) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $185,207 $165,928
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
----------- -----------
Total Asset Retirement
Obligation, January 1 $184,613 $ 79,865
Additions and revisions - 80,508
Accretion expense 6,503 5,555
Discontinued operations ( 5,909) -
-------- --------
Total Asset Retirement
Obligation, End of Period $185,207 $165,928
======== ========
Asset Retirement Obligation -
Current $ 11,607 $ 49,771
Asset Retirement Obligation -
Long-Term 173,600 116,157
-32-
III-C Partnership
-----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $383,917 $209,962
Additions and revisions 13 206,049
Accretion expense 4,309 10,390
Discontinued operations ( 2,462) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $385,777 $426,401
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, January 1 $375,230 $204,672
Additions and revisions 13 207,132
Settlements and disposals ( 109) -
Accretion expense 13,105 14,597
Discontinued operations ( 2,462) -
-------- --------
Total Asset Retirement
Obligation, End of Period $385,777 $426,401
======== ========
Asset Retirement Obligation -
Current $ 37,701 $ 54,470
Asset Retirement Obligation -
Long-Term 348,076 371,931
-33-
III-D Partnership
-----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $206,065 $111,537
Additions and revisions 2 69,849
Accretion expense 2,296 3,893
-------- --------
Total Asset Retirement
Obligation, End of Quarter $208,363 $185,279
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
----------- ------------
Total Asset Retirement
Obligation, January 1 $204,098 $109,182
Additions and revisions 2 70,004
Settlements and disposals ( 2,732) -
Accretion expense 6,995 6,093
-------- --------
Total Asset Retirement
Obligation, End of Period $208,363 $185,279
======== ========
Asset Retirement Obligation -
Current $ 29,814 $ 5,857
Asset Retirement Obligation -
Long-Term 178,549 179,422
-34-
III-E Partnership
-----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $447,890 $216,248
Additions and revisions - 228,882
Accretion expense 5,010 11,257
Discontinued operations ( 33,885) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $419,015 $456,387
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
----------- -----------
Total Asset Retirement
Obligation, January 1 $437,762 $217,175
Additions and revisions - 228,882
Settlements and disposals - ( 5,091)
Accretion expense 15,138 15,421
Discontinued operations ( 33,885) -
-------- --------
Total Asset Retirement
Obligation, End of Period $419,015 $456,387
======== ========
Asset Retirement Obligation -
Current $ 69,434 $ 13,427
Asset Retirement Obligation -
Long-Term 349,581 442,960
-35-
III-F Partnership
-----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $285,125 $153,610
Additions and revisions - 105,768
Accretion expense 3,428 6,089
Discontinued operations ( 36,058) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $252,495 $265,467
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, January 1 $278,204 $150,199
Additions and revisions - 105,768
Accretion expense 10,349 9,500
Discontinued operations ( 36,058) -
-------- --------
Total Asset Retirement
Obligation, End of Period $252,495 $265,467
======== ========
Asset Retirement Obligation -
Current $ 17,203 $ 4,332
Asset Retirement Obligation -
Long-Term 235,292 261,135
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:
-36-
Direct General Administrative
Partnership and Administrative Overhead
----------- ------------------- ---------------
III-A $ 3,004 $ 69,468
III-B 2,084 36,405
III-C 2,861 64,353
III-D 2,028 34,476
III-E 4,133 110,070
III-F 2,690 58,284
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
----------- ------------------- ---------------
III-A $34,943 $208,404
III-B 30,748 109,215
III-C 34,212 193,059
III-D 31,092 103,428
III-E 42,506 330,210
III-F 33,718 174,852
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.
ACCRUED LIABILITY - OTHER
-------------------------
The Accrued Liability - Other at September 30, 2006 for the III-E
Partnership represents a charge accrued for the settlement of a lawsuit
brought by a royalty owner in the Karon Unit located in Live Oak County,
Texas.
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. It is
anticipated these properties will be sold at auction in December 2006 and
February 2007. These properties represent a disposal of a business segment
under Statement of Financial Accounting Standards No. 144, "Accounting for
the Impairment or Disposal of Long-Lived 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.
-37-
Net income (loss) from discontinued operations are as follows:
III-A Partnership
-----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $ 39,453 $ 42,641
Lease operating ( 5,454) ( 5,508)
Production tax ( 3,420) ( 3,704)
Depreciation, depletion, and
amortization of oil and gas
properties ( 194) ( 2,000)
-------- --------
Income from discontinued
operations $ 30,385 $ 31,429
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $109,463 $125,830
Lease operating ( 17,079) ( 15,410)
Production tax ( 9,391) ( 10,703)
Depreciation, depletion, and
amortization of oil and gas
properties ( 2,110) ( 4,102)
-------- --------
Income from discontinued
operations $ 80,883 $ 95,615
======== ========
III-B Partnership
-----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $ 9,528 $ 10,544
Lease operating ( 957) ( 1,667)
Production tax ( 935) ( 1,016)
Depreciation, depletion, and
amortization of oil and gas
properties ( 70) ( 669)
-------- --------
Income from discontinued
operations $ 7,566 $ 7,192
======== ========
-38-
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $ 25,758 $ 32,414
Lease operating ( 4,046) ( 4,626)
Production tax ( 2,490) ( 3,030)
Depreciation, depletion, and
amortization of oil and gas
properties ( 834) ( 1,444)
-------- --------
Income from discontinued
operations $ 18,388 $ 23,314
======== ========
III-C Partnership
-----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $ 5,343 $ 7,250
Lease operating ( 232) ( 705)
Production tax ( 441) ( 597)
Depreciation, depletion, and
amortization of oil and gas
properties ( 31) ( 279)
-------- --------
Income from discontinued
operations $ 4,639 $ 5,669
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $ 13,282 $ 17,733
Lease operating ( 1,528) ( 1,964)
Production tax ( 1,177) ( 1,493)
Depreciation, depletion, and
amortization of oil and gas
properties ( 350) ( 603)
-------- --------
Income from discontinued
operations $ 10,227 $ 13,673
======== ========
-39-
III-D Partnership
-----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $ 3,136 $ 4,068
Lease operating ( 233) ( 10)
Production tax 57 ( 274)
-------- --------
Income from discontinued
operations $ 2,960 $ 3,784
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $ 4,888 $ 13,272
Lease operating ( 242) ( 85)
Production tax 11 ( 944)
-------- --------
Income from discontinued
operations $ 4,657 $ 12,243
======== ========
III-E Partnership
-----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $ 51,319 $ 76,456
Lease operating ( 18,193) ( 26,193)
Production tax ( 1,233) ( 4,742)
Depreciation, depletion, and
amortization of oil and gas
properties ( 390) ( 38,615)
Impairment provision ( 162,345) -
-------- --------
Income (loss) from discontinued
operations ($130,842) $ 6,906
======== ========
-40-
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $221,369 $238,905
Lease operating ( 50,804) ( 57,093)
Production tax ( 10,704) ( 15,147)
Depreciation, depletion, and
amortization of oil and gas
properties ( 19,536) ( 39,974)
Impairment provision ( 162,345) -
-------- --------
Income (loss) from discontinued
operations ($ 22,020) $126,691
======== ========
III-F Partnership
-----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $154,463 $167,508
Lease operating ( 18,804) ( 23,235)
Production tax ( 2,033) ( 3,348)
Depreciation, depletion, and
amortization of oil and gas
properties ( 453) ( 3,662)
Impairment provision ( 10,971) -
-------- --------
Income from discontinued
operations $122,202 $137,263
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $489,123 $439,994
Lease operating ( 70,595) ( 67,720)
Production tax ( 19,845) ( 7,774)
Depreciation, depletion, and
amortization of oil and gas
properties ( 10,158) ( 8,469)
Impairment provision ( 10,971) -
-------- --------
Income from discontinued
operations $377,554 $356,031
======== ========
-41-
Assets of the discontinued operations for the nine months ended September
30, 2006 were as follows:
III-A
Partnership
-----------
Accounts receivable - oil and gas sales $ 22,820
Oil and gas properties 521,052
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 484,410)
--------
Net assets held for sale $ 59,462
========
III-B
Partnership
-----------
Accounts receivable - oil and gas sales $ 6,260
Oil and gas properties 187,146
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 174,258)
---------
Net assets held for sale $ 19,148
=========
III-C
Partnership
------------
Accounts receivable - oil and gas sales $ 2,510
Oil and gas properties 82,424
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 77,086)
---------
Net assets held for sale $ 7,848
=========
III-D
Partnership
------------
Accounts receivable - oil and gas sales $ 2,449
---------
Net assets held for sale $ 2,449
=========
-42-
III-E
Partnership
------------
Accounts receivable - oil and gas sales $ 49,212
Oil and gas properties 667,650
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 662,604)
---------
Net assets held for sale $ 54,258
=========
III-F
Partnership
------------
Accounts receivable - oil and gas sales $ 104,543
Oil and gas properties 1,245,677
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 1,123,001)
----------
Net assets held for sale $ 227,219
==========
-43-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
USE OF FORWARD-LOOKING STATEMENTS AND ESTIMATES
- -----------------------------------------------
This Quarterly Report contains certain forward-looking statements. The
words "anticipate", "believe", "expect", "plan", "intend", "estimate",
"project", "could", "may" and similar expressions are intended to identify
forward-looking statements. Such statements reflect management's current
views with respect to future events and financial performance. This
Quarterly Report also includes certain information, which is, or is based
upon, estimates and assumptions. Such estimates and assumptions are
management's efforts to accurately reflect the condition and operation of
the Partnerships.
Use of forward-looking statements and estimates and assumptions involve
risks and uncertainties which include, but are not limited to, the
volatility of oil and gas prices, the uncertainty of reserve information,
the operating risk associated with oil and gas properties (including the
risk of personal injury, death, property damage, damage to the well or
producing reservoir, environmental contamination, and other operating
risks), the prospect of changing tax and regulatory laws, the availability
and capacity of processing and transportation facilities, the general
economic climate, the supply and price of foreign imports of oil and gas,
the level of consumer product demand, and the price and availability of
alternative fuels. Should one or more of these risks or uncertainties
occur or should estimates or underlying assumptions prove incorrect,
actual conditions or results may vary materially and adversely from those
stated, anticipated, believed, estimated, and otherwise indicated.
GENERAL
- -------
The Partnerships 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 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 Partnerships' partnership agreements.
-44-
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
----------- ------------------ ---------------
III-A November 22, 1989 $26,397,600
III-B January 24, 1990 13,833,600
III-C February 27, 1990 24,453,600
III-D September 5, 1990 13,100,800
III-E December 26, 1990 41,826,600
III-F March 7, 1991 22,148,400
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.
Occasional expenditures for new wells, well recompletions, or workovers
may reduce or eliminate cash available for a particular quarterly
distribution. During the nine months ended September 30, 2006, capital
expenditures for the III-C and III-D Partnerships totaled $632,000 and
$495,000, respectively. These expenditures were primarily due to
recompletions of the Sugg AA 3 #1 and Sugg AA 3067 #1 wells located in
Irion County, Texas and the Loving 1 State #1 and Loving 1 State #2 wells
located in Eddy County, New Mexico. The III-C and III-D Partnerships own
working interests in these wells as follows:
Property III-C III-D
----------------- ----- -----
Sugg AA 3 #1 29.9% 25.0%
Sugg AA 2067 #1 34.2 28.6
Loving 1 State #1 17.8 14.9
Loving 1 State #2 20.5 17.2
-45-
Other capital expenditures incurred by the Partnerships during the nine
months ended September 30, 2006 and 2005 were not material to the
Partnerships' cash flows.
Pursuant to the terms of the Partnership Agreements, the Partnerships were
initially scheduled to terminate on the dates indicated in the "Initial
Termination Date" column of the following chart. 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. As of the date of
this Quarterly Report, the General Partner has extended the terms of the
Partnerships for their fourth extension period. Therefore, the
Partnerships are currently scheduled to terminate on the dates indicated
in the "Current Termination Date" column of the following chart.
Initial Extensions Current
Partnership Termination Date Exercised Termination Date
----------- ----------------- --------- -----------------
III-A November 22, 1999 4 November 22, 2007
III-B January 24, 2000 4 December 31, 2007
III-C February 28, 2000 4 December 31, 2007
III-D September 5, 2000 4 December 31, 2007
III-E December 26, 2000 4 December 31, 2007
III-F March 7, 2001 4 December 31, 2007
As of the date of this Quarterly Report, the General Partner has not yet
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.
-46-
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 $6,000, $4,000, $78,000, $13,000,
$61,000 and $55,000 for the III-A, III-B, III-C, III-D, III-E and III-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
-47-
reserves. During such times as a Partnership's sales of gas 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 prices 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), which 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 15, 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
-48-
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.
-49-
III-A Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 96,735 3,483,848
Production ( 6,820) ( 97,516)
Extensions and discoveries 2 3,176
Revisions of previous
estimates ( 215) ( 53,212)
------ ---------
Proved reserves, March 31, 2006 89,702 3,336,296
Production ( 6,894) ( 84,764)
Extensions and discoveries 11 1,953
Revisions of previous
estimates 6,071 96,052
------ ---------
Proved reserves, June 30, 2006 88,890 3,349,537
Production of continuing
operations ( 7,016) ( 87,046)
Production of discontinued
operations ( 142) ( 4,404)
Extensions and discoveries 31 7,750
Discontinued operations ( 5,391) ( 149,029)
Revisions of previous
estimates ( 6,456) ( 252,478)
------ ---------
Proved reserves, Sept. 30, 2006 69,916 2,864,330
====== =========
-50-
III-B Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 60,591 1,408,960
Production ( 4,850) ( 42,417)
Extensions and discoveries 1 1,341
Revisions of previous
estimates 1,364 ( 18,779)
------ ---------
Proved reserves, March 31, 2006 57,106 1,349,105
Production ( 4,739) ( 34,124)
Extensions and discoveries 3 497
Revisions of previous
estimates ( 581) ( 95,999)
------ ---------
Proved reserves, June 30, 2006 51,789 1,219,479
Production of continuing
operations ( 4,953) ( 35,487)
Production of discontinued
operations ( 14) ( 1,388)
Extensions and discoveries 17 2,632
Discontinued operations ( 379) ( 49,389)
Revisions of previous
estimates ( 561) 20,503
------ ---------
Proved reserves, Sept. 30, 2006 45,899 1,156,350
====== =========
-51-
III-C Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 89,290 4,704,441
Production ( 2,712) ( 158,163)
Extensions and discoveries 1,473 119,936
Revisions of previous
estimates 2,456 ( 109,182)
------- ---------
Proved reserves, March 31, 2006 90,507 4,557,032
Production ( 2,778) ( 133,924)
Extensions and discoveries 10,600 122,051
Revisions of previous
estimates ( 988) ( 321,340)
------- ---------
Proved reserves, June 30, 2006 97,341 4,223,819
Production of continuing
operations ( 2,644) ( 127,774)
Production of discontinued
operations ( 25) ( 590)
Extensions and discoveries 12,828 75,263
Discontinued operations ( 364) ( 20,863)
Revisions of previous
estimates 2,553 79,732
------- ---------
Proved reserves, Sept. 30, 2006 109,689 4,229,587
======= =========
-52-
III-D Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 83,877 2,407,268
Production ( 2,291) ( 84,478)
Extensions and discoveries 1,215 96,460
Revisions of previous
estimates 658 ( 70,812)
------- ---------
Proved reserves, March 31, 2006 83,459 2,348,438
Production ( 2,407) ( 75,153)
Extensions and discoveries 8,815 78,491
Revisions of previous
estimates 1,200 ( 173,003)
------- ---------
Proved reserves, June 30, 2006 91,067 2,178,773
Production of continuing
operations ( 2,200) ( 70,754)
Production of discontinued
operations ( 8) ( 436)
Extensions and discoveries 10,720 43,214
Discontinued operations ( 34) ( 943)
Revisions of previous
estimates ( 314) 23,946
------- ---------
Proved reserves, Sept. 30, 2006 99,231 2,173,800
======= =========
III-E Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 2005 150,195 5,309,709
Production ( 4,192) ( 154,777)
Extensions and discoveries 11 143,125
Revisions of previous
estimates ( 3,993) ( 83,964)
------- ---------
Proved reserves, March 31, 2006 142,021 5,214,093
Production ( 4,871) ( 147,749)
Revisions of previous
estimates ( 8,624) ( 286,325)
------- ---------
Proved reserves, June 30, 2006 128,526 4,780,019
Production of continuing
operations ( 3,855) ( 102,280)
Production of discontinued
operations ( 58) ( 7,175)
Extensions and discoveries 94 17,605
Discontinued operations ( 731) ( 177,764)
Revisions of previous
estimates 1,400 26,265
------- ---------
Proved reserves, Sept. 30, 2006 125,376 4,536,670
======= =========
-53-
III-F Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 337,230 3,504,393
Production ( 5,130) ( 79,364)
Extensions and discoveries 7 20
Revisions of previous
estimates 13,117 ( 102,547)
------- ---------
Proved reserves, March 31, 2006 345,224 3,322,502
Production ( 4,562) ( 78,746)
Extensions and discoveries - 187
Revisions of previous
estimates 3,434 ( 312,390)
------- ---------
Proved reserves, June 30, 2006 344,096 2,931,553
Production of continuing
operations ( 2,409) ( 53,156)
Production of discontinued
operations ( 2,015) ( 2,448)
Extensions and discoveries 80 32,307
Discontinued operations (198,657) ( 52,686)
Revisions of previous
estimates 26,237 38,349
------- ---------
Proved reserves, Sept. 30, 2006 167,332 2,893,919
======= =========
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 gas prices in effect on the dates
corresponding to the reserve valuations. Changes in oil and gas prices
cause the estimates of remaining economically
-54-
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
----------- ------- ------- ------- --------
III-A $ 7,011 $11,753 $13,164 $ 18,173
III-B 3,478 5,368 6,084 8,094
III-C 7,239 12,911 13,479 19,744
III-D 4,094 7,741 7,505 10,572
III-E 8,025 16,004 18,021 25,351
III-F 6,448 14,967 15,792 20,516
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.
-55-
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 oil and gas 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;
-56-
* Adjustments in ownership or rights to production (such as
adjustments that occur at payout or due to gas balancing);
and
* 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.
III-A 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 $1,048,000 $1,165,541
Oil and gas production expenses $ 220,029 $ 289,033
Barrels produced 7,016 8,059
Mcf produced 87,046 85,018
Average price/Bbl $ 69.63 $ 59.85
Average price/Mcf $ 6.43 $ 8.04
(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 $118,000
(10.1%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease (i) $140,000 was
related to a decrease in the average price of gas sold and (ii) $62,000
was related to a decrease in volumes of oil sold. These decreases were
partially offset by increases of (i) $68,000 related to an increase in the
average price of oil sold and (ii) $16,000 related to an increase in
volumes of gas sold.
Volumes of oil sold decreased 1,043 barrels, while volumes of gas sold
increased 2,028 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 (i) the shutting-in of one
significant well in order to perform an unsuccessful workover and (ii)
normal declines in production. As of the date of this Quarterly Report,
the operator has not yet determined when or if the shut-in well will
return to production and, if returned to production, at what rate. The
increase in volumes of gas sold was primarily due to (i) an increase in
production on
-57-
one significant well following its successful workover during late 2005
and (ii) the successful completion of several new wells.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $69,000 (23.9%) 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) workover expenses incurred on
several wells during the three months ended September 30, 2005, (ii) a
decrease in production taxes associated with the decrease in oil and gas
sales, and (iii) a decrease in saltwater disposal expenses incurred on
several wells during the three months ended September 30, 2006 as compared
to the same period in 2005. As of the date of this Quarterly Report,
management anticipates that these saltwater disposal expenses will remain
at 2006 levels. As a percentage of oil and gas sales, these expenses
decreased to 21.0% for the three months ended September 30, 2006 from
24.8% for the three months ended September 30, 2005, primarily due to the
dollar decrease in production expenses.
Depreciation, depletion, and amortization ("DD&A") of oil and gas
properties increased $4,000 (6.2%) for the three months ended September
30, 2006 as compared to the three months ended September 30, 2005. This
increase was primarily due to one significant well being fully depleted
during the three months ended September 30, 2006 due to its lack of
remaining reserves. This increase in DD&A was partially offset by several
wells being fully depleted during 2005 due to their lack of remaining
reserves. As a percentage of oil and gas sales, this expense increased to
5.9% for the three months ended September 30, 2006 from 5.0% for the three
months ended September 30, 2005, primarily due to the decrease in oil and
gas sales and the dollar increase in DD&A.
The III-A Partnership recognized a non-cash charge against earnings of
$6,000 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 $2,000 (2.4%) 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 6.9% for the three months ended September 30, 2006 from 6.4%
for the three months ended September 30, 2005.
-58-
As further discussed in Part I, Item 2 - Discontinued Operations, the
III-A 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 $3,133,003 $3,252,450
Oil and gas production expenses $ 683,909 $ 848,454
Barrels produced 20,675 23,942
Mcf produced 261,665 288,315
Average price/Bbl $ 66.37 $ 52.63
Average price/Mcf $ 6.73 $ 6.91
(a) The foregoing chart and 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 $119,000
(3.7%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this decrease (i) $172,000 and
$184,000 were related to decreases in volumes of oil and gas sold and (ii)
$47,000 was related to a decrease in the average price of gas sold. These
decreases were partially offset by an increase of $284,000 related to an
increase in the average price of oil sold.
Volumes of oil and gas sold decreased 3,267 barrels and 26,650 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 (i) the shutting-in of one significant well during late 2005 through
late 2006 in order to perform an unsuccessful workover and (ii) normal
declines in production. As of the date of this Quarterly Report, the
operator has not yet determined when or if the shut-in well will return to
production and, if returned to production, at what rate. The decrease in
volumes of gas sold was primarily due to (i) normal declines in
production, (ii) the shutting-in of several wells during late 2005 through
late 2006 in order to perform workovers, and (iii) positive prior period
volume adjustments made by the operators on several other wells during the
nine months ended September 30, 2005. As of the date of this Quarterly
Report, the operators have not yet determined when or if the shut-in wells
will return to production and, if returned to
-59-
production, at what rate. These decreases were partially offset by a
positive prior period volume adjustment made by the operator on another
significant well during the nine months ended September 30, 2006.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $165,000 (19.4%) 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 decrease in workover
expenses, (ii) a positive prior period production tax adjustment made by
the operator on one significant well during the nine months ended
September 30, 2005, and (iii) a decrease in saltwater disposal expenses
incurred on several wells during the nine months ended September 30, 2006
as compared to the same period in 2005. As of the date of this Quarterly
Report, management anticipates that these saltwater disposal expenses will
remain at 2006 levels. As a percentage of oil and gas sales, these
expenses decreased to 21.8% for the nine months ended September 30, 2006
from 26.1% for the nine months ended September 30, 2005, primarily due to
the dollar decrease in production expenses.
DD&A of oil and gas properties increased $41,000 (39.8%) 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) several wells
being fully depleted during the nine months ended September 30, 2006 due
to their lack of remaining reserves and (ii) downward revisions in the
estimates of remaining oil and gas reserves since September 30, 2005. The
increases in DD&A were partially offset by (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 increased to 4.6% for the nine months ended September
30, 2006 from 3.2% for the nine months ended September 30, 2005, primarily
due to the dollar increase in DD&A.
The III-A Partnership recognized a non-cash charge against earnings of
$6,000 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 7.8% for the nine months ended
September 30, 2006 from 7.5% for the nine months ended September 30, 2005.
-60-
As further discussed in Part I, Item 2 - Discontinued Operations, the
III-A 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 $44,008,701 or 166.71% of Limited Partners' capital
contributions.
III-B 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 $578,250 $627,462
Oil and gas production expenses $134,746 $182,311
Barrels produced 4,953 5,619
Mcf produced 35,487 36,639
Average price/Bbl $ 69.61 $ 59.79
Average price/Mcf $ 6.58 $ 7.96
(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 $49,000
(7.8%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease (i) $40,000 and
$9,000 were related to decreases in volumes of oil and gas sold and (ii)
$49,000 was related to a decrease in the average price of gas sold. These
decreases were partially offset by an increase of $49,000 related to an
increase in the average price of oil sold.
Volumes of oil and gas sold decreased 666 barrels and 1,152 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 (i) the shutting-in of one significant well in order to
perform an unsuccessful workover and (ii) normal declines in production.
As of the date of this Quarterly Report, the operator has not yet
determined when or if the shut-in well will return to production and, if
returned to production, at what rate. The decrease in volumes of gas sold
was primarily due to normal declines in production. This decrease was
partially offset by (i) an increase in production on one
-61-
significant well following its successful workover during late 2005 and
(ii) the successful completion of several wells.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $48,000 (26.1%) 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) workover expenses incurred on
several wells during the three months ended September 30, 2005, (ii) a
decrease in production taxes associated with the decrease in oil and gas
sales, and (iii) a decrease in saltwater disposal expenses incurred on
several wells during the three months ended September 30, 2006 as compared
to the same period in 2005. As of the date of this Quarterly Report,
management anticipates that these saltwater disposal expenses will remain
at 2006 levels. As a percentage of oil and gas sales, these expenses
decreased to 23.3% for the three months ended September 30, 2006 from
29.1% 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 $37,000 (75.9%) 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) several wells
being fully depleted during 2005 due to their lack of remaining reserves,
(ii) one significant well being substantially depleted during 2005 due to
its lack of remaining reserves, and (iii) the decreases in the volumes of
oil and gas sold. As a percentage of oil and gas sales, this expense
decreased to 2.0% for the three months ended September 30, 2006 from 7.8%
for the three months ended September 30, 2005, primarily due to the dollar
decrease in DD&A.
The III-B Partnership recognized a non-cash charge against earnings of
$4,000 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 $2,000 (3.8%) 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 6.7% for the three months ended September 30, 2006 from 6.4%
for the three months ended September 30, 2005.
-62-
As further discussed in Part I, Item 2 - Discontinued Operations, the
III-B 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 $1,715,656 $1,736,038
Oil and gas production expenses $ 425,111 $ 512,592
Barrels produced 14,619 16,707
Mcf produced 109,597 123,797
Average price/Bbl $ 66.39 $ 52.68
Average price/Mcf $ 6.80 $ 6.91
(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 $20,000
(1.2%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this decrease (i) $110,000 and
$98,000 were related to decreases in volumes of oil and gas sold and (ii)
$13,000 was related to a decrease in the average price of gas sold. These
decreases were partially offset by an increase of $201,000 related to an
increase in the average price of oil sold.
Volumes of oil and gas sold decreased 2,088 barrels and 14,200 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 (i) the shutting-in of one significant well in order to perform an
unsuccessful workover and (ii) normal declines in production. As of the
date of this Quarterly Report, the operator has not yet determined when or
if the shut-in well will return to production and, if returned to
production, at what rate. The decrease in volumes of gas sold was
primarily due to (i) normal declines in production, (ii) the shutting-in
of several wells in order to perform workovers, and (iii) a positive prior
period volume adjustment made by the operator on one significant well
during the nine months ended September 30, 2005. As of the date of this
Quarterly Report, the operators have not yet determined when or if the
shut-in wells will return to production and, if returned to production, at
what rate. These decreases were partially
-63-
offset by a positive prior period volume adjustment made by the operator
on another significant well during the nine months ended September 30,
2006.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $87,000 (17.1%) 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 decrease in workover
expenses, (ii) a positive prior period production tax adjustment made by
the operator on one significant well during the nine months ended
September 30, 2005, and (iii) a decrease in saltwater disposal expenses
incurred on several wells during the nine months ended September 30, 2006
as compared to the same period in 2005. As of the date of this Quarterly
Report, management anticipates that these saltwater disposal expenses will
remain at 2006 levels. As a percentage of oil and gas sales, these
expenses decreased to 24.8% for the nine months ended September 30, 2006
from 29.5% for the nine months ended September 30, 2005, primarily due to
the dollar decrease in production expenses.
DD&A of oil and gas properties decreased $4,000 (6.7%) 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, (ii) one
significant well being substantially depleted during 2005 due to its lack
of remaining reserves, and (iii) the decreases in volumes of oil and gas
sold. The decreases in DD&A were partially offset by (i) two significant
wells being fully depleted during the nine months ended September 30, 2006
due to their lack of remaining reserves and (ii) 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 3.5% for the
nine months ended September 30, 2006 from 3.7% for the nine months ended
September 30, 2005.
The III-B Partnership recognized a non-cash charge against earnings of
$4,000 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 8.2% for the nine months ended
September 30, 2006 from 8.0% for the nine months ended September 30, 2005.
-64-
As further discussed in Part I, Item 2 - Discontinued Operations, the
III-B 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 $24,258,353 or 175.36% of Limited Partners' capital
contributions.
III-C 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 $1,195,284 $1,116,005
Oil and gas production expenses $ 248,978 $ 237,376
Barrels produced 2,644 2,491
Mcf produced 127,774 136,075
Average price/Bbl $ 69.23 $ 59.45
Average price/Mcf $ 7.92 $ 7.11
(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 increased $79,000
(7.1%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this increase (i) $26,000 and
$103,000 were related to increases in the average prices of oil and gas
sold and (ii) $9,000 was related to an increase in volumes of oil sold.
These increases were partially offset by a decrease of $59,000 related to
a decrease in volumes of gas sold.
Volumes of oil sold increased 153 barrels, while volumes of gas sold
decreased 8,301 Mcf for the three months ended September 30, 2006 as
compared to the three months ended September 30, 2005. The increase in
volumes of oil sold was primarily due to (i) an increase in production on
two significant wells following their successful recompletion during early
and mid 2006 and (ii) the successful completion of several new wells.
These increases were partially offset by 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 operator on two significant wells during the
-65-
three months ended September 30, 2005. These decreases were partially
offset by (i) the successful completion of several wells and (ii)
increases in production on two significant wells following their
successful recompletions during early and mid 2006.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $12,000 (4.9%) 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, (ii)
subsurface repair and maintenance expenses incurred on two significant
wells during the three months ended September 30, 2006, and (iii) an
increase in production taxes associated with the increase in oil and gas
sales. 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 (i) workover expenses incurred on
several other wells during the three months ended September 30, 2005 and
(ii) a decrease in production taxes on one significant well due to a
negative prior period production tax adjustment during the three months
ended September 30, 2006. As a percentage of oil and gas sales, these
expenses decreased to 20.8% for the three months ended September 30, 2006
from 21.3% for the three months ended September 30, 2005.
DD&A of oil and gas properties decreased $37,000 (34.5%) 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 the three months ended September 30, 2005 due to
their lack of remaining reserves. The decrease in DD&A was partially
offset by an increase in depletable oil and gas properties during the
three months ended September 30, 2006 primarily due to the recompletion of
one significant well. As a percentage of oil and gas sales, this expense
decreased to 5.9% for the three months ended September 30, 2006 from 9.6%
for the three months ended September 30, 2005, primarily due to the dollar
decrease in DD&A.
The III-C Partnership recognized a non-cash charge against earnings of
$78,000 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 (1.6%) 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
decreased to 5.6% for the three months ended September 30, 2006 from 6.1%
for the three months ended September 30, 2005.
-66-
As further discussed in Part I, Item 2 - Discontinued Operations, the
III-C 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 $3,421,287 $3,042,346
Oil and gas production expenses $ 780,166 $ 608,918
Barrels produced 8,145 7,201
Mcf produced 418,830 412,287
Average price/Bbl $ 65.94 $ 52.50
Average price/Mcf $ 6.89 $ 6.46
(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 increased $379,000
(12.5%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this increase (i) $109,000 and
$178,000 were related to increases in the average prices of oil and gas
sold and (ii) $50,000 and $42,000 were related to increases in volumes of
oil and gas sold.
Volumes of oil and gas sold increased 944 barrels and 6,543 Mcf for the
nine months ended September 30, 2006 as compared to the nine months ended
September 30, 2005. The increase in volumes of oil sold was primarily due
to (i) an increase in production on two significant wells following their
successful recompletion during early and mid 2006 and (ii) the successful
completion of several new wells. These increases were partially offset by
normal declines in production. The increase in volumes of gas sold was
primarily due to (i) the successful completion of several wells and (ii)
increases in production on several other wells following their successful
recompletions during early 2006. These increases were partially offset by
normal declines in production.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $171,000 (28.1%) 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) workover expenses incurred on
several
-67-
wells during the nine months ended September 30, 2006, (ii) a $50,000
decrease in lease operating expenses during the nine months ended
September 30, 2005 resulting from a decrease in the III-C Partnership's
gas balancing position on several wells, and (iii) repair and maintenance
expenses incurred on several other 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 workover expenses
incurred on several wells during the nine months ended September 30, 2005.
As a percentage of oil and gas sales, these expenses increased to 22.8%
for the nine months ended September 30, 2006 from 20.0% 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 $2,000 (1.2%) 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 the nine months ended September 30, 2005 due to their lack
of remaining reserves. The decrease in DD&A was partially offset by (i) an
increase in depletable oil and gas properties during the nine months ended
September 30, 2006 primarily due to the recompletion of two significant
wells and (ii) one significant well being fully depleted during the nine
months ended September 30, 2006. As a percentage of oil and gas sales,
this expense decreased to 5.8% for the nine months ended September 30,
2006 from 6.6% for the nine months ended September 30, 2005, primarily due
to the increase in the average price of oil sold.
The III-C Partnership recognized a non-cash charge against earnings of
$78,000 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 decreased to 6.6% for the nine months ended
September 30, 2006 from 7.4% for the nine months ended September 30, 2005,
primarily due to the increase in oil and gas sales.
As further discussed in Part I, Item 2 - Discontinued Operations, the
III-C 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.
-68-
The Limited Partners have received cash distributions through September
30, 2006 totaling $33,165,795 or 135.63% of Limited Partners' capital
contributions.
III-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 $604,694 $643,733
Oil and gas production expenses $148,337 $141,320
Barrels produced 2,200 2,056
Mcf produced 70,754 70,981
Average price/Bbl $ 67.86 $ 61.14
Average price/Mcf $ 6.44 $ 7.30
(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 $39,000
(6.1%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease $61,000 was
related to a decrease in the average price of gas sold. These decreases
were partially offset by increases of (i) $15,000 related to an increase
in the average price of oil sold and (ii) $9,000 related to an increase in
the volumes of oil sold.
Volumes of oil sold increased 144 barrels, while volumes of gas sold
decreased 227 Mcf for the three months ended September 30, 2006 as
compared to the three months ended September 30, 2005. The increase in
volumes of oil sold was primarily due to (i) an increase in production on
two significant wells following their successful recompletion during early
and mid 2006 and (ii) the successful completion of several new wells.
These increases were partially offset by normal declines in production.
The decrease in volumes of gas sold was primarily due to normal declines
in production. This decrease was partially offset by (i) the successful
completion of several new wells and (ii) increases in production on two
significant wells following their successful recompletions during early
and mid 2006.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $7,000 (5.0%) 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
-69-
wells during the three months ended September 30, 2006 and (ii) subsurface
repair and maintenance expenses incurred on two significant 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. These increases were partially
offset by (i) workover expenses incurred on several other wells during the
three months ended September 30, 2005 and (ii) a decrease in production
taxes on one significant well due to a negative prior period production
tax adjustment during the three months ended September 30, 2006. As a
percentage of oil and gas sales, these expenses increased to 24.5% for the
three months ended September 30, 2006 from 22.0% 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.
DD&A of oil and gas properties increased $6,000 (16.9%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. This increase was primarily due to an increase in
depletable oil and gas properties during the three months ended September
30, 2006 primarily due to the recompletion of one significant well. The
increase in DD&A was partially offset by several wells being fully
depleted during the three months ended September 30, 2005 due to their
lack of remaining reserves. As a percentage of oil and gas sales, this
expense increased to 7.3% for the three months ended September 30, 2006
from 5.8% for the three months ended September 30, 2005, primarily due to
the dollar increase in DD&A.
The III-D Partnership recognized a non-cash charge against earnings of
$13,000 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 (2.3%) 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 6.0% for the three months ended September 30, 2006 from 5.8%
for the three months ended September 30, 2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the
III-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.
-70-
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 $1,903,882 $1,726,635
Oil and gas production expenses $ 454,916 $ 354,522
Barrels produced 6,894 6,534
Mcf produced 230,058 221,902
Average price/Bbl $ 65.00 $ 51.88
Average price/Mcf $ 6.33 $ 6.25
(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 increased $177,000
(10.3%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this increase (i) $90,000 and
$17,000 were related to increases in the average prices of oil and gas
sold and (ii) $19,000 and $51,000 were related to increases in volumes of
oil and gas sold.
Volumes of oil and gas sold increased 360 barrels and 8,156 Mcf for the
nine months ended September 30, 2006 as compared to the nine months ended
September 30, 2005. The increase in volumes of oil sold was primarily due
to (i) an increase in production on two significant wells following their
successful recompletion during early and mid 2006 and (ii) the successful
completion of several new wells. These increases were partially offset by
normal declines in production. The increase in volumes of gas sold was
primarily due to (i) the successful completion of several new wells and
(ii) increases in production on several other wells following their
successful recompletions during early 2006. These increases were partially
offset by normal declines in production.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $100,000 (28.3%) 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) a $34,000 decrease in lease
operating expenses during the nine months ended September 30, 2005
resulting from a decrease in the III-D Partnership's gas balancing
position on several wells, (ii) workover expenses incurred on several
wells during the nine months ended September 30, 2006, and (iii) repair
and maintenance expenses incurred on several other wells during the nine
months ended September 30, 2006. As of the date of this Quarterly Report,
management anticipates workover costs
-71-
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 workover expenses incurred on several wells during the
nine months ended September 30, 2005. As a percentage of oil and gas
sales, these expenses increased to 23.9% for the nine months ended
September 30, 2006 from 20.5% for the nine months ended September 30,
2005, primarily due to the dollar increase in production expenses.
DD&A of oil and gas properties increased $37,000 (47.9%) 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) an increase in
depletable oil and gas properties during the nine months ended September
30, 2006 primarily due to the recompletion of two significant wells and
(ii) one significant well being fully depleted during the nine months
ended September 30, 2006. The increase in DD&A was partially offset by (i)
several wells being fully depleted during the nine months ended September
30, 2005 due to their lack of remaining reserves. As a percentage of oil
and gas sales, this expense increased to 6.0% for the nine months ended
September 30, 2006 from 4.5% for the nine months ended September 30, 2005,
primarily due to the dollar increase DD&A.
The III-D Partnership recognized a non-cash charge against earnings of
$13,000 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 $2,000 (1.2%) 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
decreased to 7.1% for the nine months ended September 30, 2006 from 7.7%
for the nine months ended September 30, 2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the
III-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 $18,459,669 or 140.90% of Limited Partners' capital
contributions.
-72-
III-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 $1,010,328 $1,460,272
Oil and gas production expenses $ 323,191 $ 341,210
Barrels produced 3,855 5,367
Mcf produced 102,280 160,390
Average price/Bbl $ 65.40 $ 60.60
Average price/Mcf $ 7.41 $ 7.08
(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 $450,000
(30.8%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease $92,000 and
$411,000 were related to decreases in volumes of oil and gas sold.
Volumes of oil and gas sold decreased 1,512 barrels and 58,110 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 (i) normal declines in production and (ii) a substantial
decline in production during the three months ended September 30, 2006 on
one significant well following a recompletion of that well during mid
2005. This well is not expected to return to its previously high levels of
production. The decrease in volumes of gas sold was primarily due to (i) a
negative prior period volume adjustment during the three months ended
September 30, 2006 and (ii) normal declines in production.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $18,000 (5.3%) 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 $46,000
lease operating expense credit resulting from the settlement of a class
action lawsuit on one significant well during the nine 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 other 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
-73-
increased cost to perform a workover and the age of the wellbores. As a
percentage of oil and gas sales, these expenses increased to 32.0% for the
three months ended September 30, 2006 from 23.4% for the three months
ended September 30, 2005, primarily due to the decrease in oil and gas
sales.
DD&A of oil and gas properties decreased $32,000 (28.5%) 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 the three months ended September 30, 2005 due
to their lack of remaining reserves and (ii) the decreases in volumes of
oil and gas sold. These decreases were partially offset by (i) downward
revisions in the estimates of remaining oil and gas reserves since
September 30, 2005 and (ii) several other wells being fully depleted
during the three months ended September 30, 2006 due to their lack of
remaining reserves. As a percentage of oil and gas sales, this expense
increased to 8.0% for the three months ended September 30, 2006 from 7.8%
for the three months ended September 30, 2005.
The III-E Partnership recognized a non-cash charge against earnings of
$61,000 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 $2,000 (1.6%) 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 11.3% for the three months ended September 30, 2006 from 8.0%
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
III-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.
-74-
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 $3,265,162 $3,868,450
Oil and gas production expenses $ 845,295 $ 966,821
Barrels produced 12,852 17,485
Mcf produced 378,907 477,667
Average price/Bbl $ 61.60 $ 50.05
Average price/Mcf $ 6.53 $ 6.27
(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 $603,000
(15.6%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this decrease $232,000 and
$619,000 were related to decreases in volumes of oil and gas sold. These
decreases were partially offset by increases of $149,000 and $99,000
related to increases in the average prices of oil and gas sold.
Volumes of oil and gas sold decreased 4,633 barrels and 98,760 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 (i) normal declines in production and (ii) a positive prior period
volume adjustment made by the operator on one significant well during the
nine months ended September 30, 2005. The decrease in volumes of gas sold
was primarily due to (i) normal declines in production and (ii) a negative
prior period volume adjustment during the nine months ended September 30,
2006.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $122,000 (12.6%) 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 $76,000 decrease in lease
operating expenses during the nine months ended September 30, 2006
resulting from a decrease in the III-E Partnership's gas balancing
position on several wells, (ii) the receipt of a $46,000 lease operating
expense credit resulting from the settlement of a class action lawsuit on
one significant well during the nine months ended September 30, 2006, and
(iii) 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 other wells during the nine months ended September 30,
2006. As of the date of
-75-
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 increased to 25.9% for the nine months ended
September 30, 2006 from 25.0% for the nine months ended September 30,
2005.
DD&A of oil and gas properties decreased $4,000 (1.8%) 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 the nine months ended September 30, 2005 due to their lack
of remaining reserves and (ii) the decreases in volumes of oil and gas
sold. These decreases were partially offset by (i) downward revisions in
the estimates of remaining oil and gas reserves since September 30, 2005
and (ii) several other wells being fully depleted during the nine months
ended September 30, 2006 due to their lack of remaining reserves. As a
percentage of oil and gas sales, this expense increased to 6.0% for the
nine months ended September 30, 2006 from 5.1% for the nine months ended
September 30, 2005, primarily due to the decrease in oil and gas sales.
The III-E Partnership recognized a non-cash charge against earnings of
$61,000 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 11.4% for the nine months ended
September 30, 2006 from 9.6% 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
III-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 $54,568,016 or 130.46% of Limited Partners' capital
contributions.
-76-
III-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 $612,382 $853,031
Oil and gas production expenses $190,973 $182,042
Barrels produced 2,409 2,771
Mcf produced 53,156 95,139
Average price/Bbl $ 68.55 $ 61.46
Average price/Mcf $ 8.41 $ 7.18
(a) The foregoing chart and the following discussion contain amounts for
the year 2005 which have been restated to reflect the III-F 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 $241,000
(28.2%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease $301,000 was
related to a decrease in volumes of gas sold, which decrease was partially
offset by an increase of $66,000 related to an increase in the average
price of gas sold.
Volumes of oil and gas sold decreased 362 barrels and 41,983 Mcf for the
three months ended September 30, 2006 as compared the three months ended
September 30, 2005. The decrease in volumes of oil sold was primarily due
to (i) normal declines in production and (ii) a substantial decline in
production during the three months ended September 30, 2006 on one
significant well following the recompletion of that well during mid 2005.
This well is not expected to return to its previously high levels of
production. The decrease in volumes of gas sold was primarily due to a
negative prior period volume adjustment during the three months ended
September 30, 2006.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $9,000 (4.9%) for the three months ended
September 30, 2006 as compared to the three months ended September 30,
2005. This increase was primarily due to workover expenses incurred on one
significant well 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. This increase was
partially offset by (i) a decrease in production taxes associated with the
decrease in oil and gas sales, (ii) workover expenses incurred on two
significant wells during the three months
-77-
ended September 30, 2005, and (iii) repair and maintenance expenses
incurred on another significant well during the three months ended
September 30, 2005. As a percentage of oil and gas sales, these expenses
increased to 31.2% for the three months ended September 30, 2006 from
21.3% for the three months ended September 30, 2005, primarily due to the
decrease in oil and gas sales.
DD&A of oil and gas properties increased $7,000 (13.3%) 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) downward
revisions in the estimates of remaining gas reserves since September 30,
2005 and (ii) several wells being fully depleted during the three months
ended September 30, 2006 due to their lack of remaining reserves. The
increases in DD&A were partially offset by (i) the decreases in volumes of
oil and gas sold and (ii) several other wells being fully depleted during
the three months ended September 30, 2005 due to their lack of remaining
reserves. As a percentage of oil and gas sales, this expense increased to
9.4% for the three months ended September 30, 2006 from 6.0% for the three
months ended September 30, 2005, primarily due to the decrease in oil and
gas sales.
The III-F Partnership recognized a non-cash charge against earnings of
$55,000 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 (2.1%) 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 10.0% for the three months ended September 30, 2006 from 7.3%
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
III-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.
-78-
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 $1,872,620 $2,211,634
Oil and gas production expenses $ 538,317 $ 504,052
Barrels produced 7,038 8,492
Mcf produced 206,503 278,324
Average price/Bbl $ 66.12 $ 53.30
Average price/Mcf $ 6.81 $ 6.32
(a) The foregoing chart and the following discussion contain amounts for
the year 2005 which have been restated to reflect the III-F 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 $339,000
(15.3%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this decrease $77,000 and
$454,000 were related to decreases in volumes of oil and gas sold. These
decreases were partially offset by increases of $90,000 and $102,000
related to increases in the average prices of oil and gas sold.
Volumes of oil and gas sold decreased 1,454 barrels and 71,821 Mcf for the
nine months ended September 30, 2006 as compared the nine months ended
September 30, 2005. The decrease in volumes of oil sold was primarily due
to (i) normal declines in production and (ii) the shutting-in of several
wells during early to mid 2006 in order to perform workovers. As of the
date of this Quarterly Report, two of the shut-in wells have returned to
production at a lower rate than previously experienced and the third
shut-in well has returned to production at a higher rate than previously
experienced. The decrease in volumes of gas sold was primarily due to (i)
a negative prior period volume adjustment during the nine months ended
September 30, 2006 and (ii) normal declines in production.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $34,000 (6.8%) 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) workover expenses incurred on
several wells during the nine months ended September 30, 2006 and (ii)
repair and maintenance expenses incurred on one significant well 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
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partially offset by (i) a decrease in production taxes associated with the
decrease in oil and gas sales, (ii) workover expenses incurred on two
significant wells during the nine months ended September 30, 2005, and
(iii) repair and maintenance expenses incurred on another significant well
during the nine months ended September 30, 2005. As a percentage of oil
and gas sales, these expenses increased to 28.7% for the nine months ended
September 30, 2006 from 22.8% for the nine months ended September 30,
2005, primarily due to the decrease in oil and gas sales.
DD&A of oil and gas properties increased $18,000 (14.9%) 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) downward
revisions in the estimates of remaining gas reserves since September 30,
2005 and (ii) several wells being fully depleted during the nine months
ended September 30, 2006 due to their lack of remaining reserves. The
increases in DD&A were partially offset by (i) the decreases in volumes of
oil and gas sold and (ii) several other wells being fully depleted during
the nine months ended September 30, 2005 due to their lack of remaining
reserves. As a percentage of oil and gas sales, this expense increased to
7.6% for the nine months ended September 30, 2006 from 5.6% for the nine
months ended September 30, 2005, primarily due to the decrease in oil and
gas sales and the dollar increase in DD&A.
The III-F Partnership recognized a non-cash charge against earnings of
$55,000 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 9.4% 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
III-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 $23,688,904 or 106.96% 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 the 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 1. LEGAL PROCEEDINGS
On September 27, 2006, Geodyne Nominee Corporation filed a lawsuit on
behalf of Geodyne Energy Income Limited Partnership III-D and Geodyne
Energy Income Limited Partnership III-E styled Geodyne Nominee Corporation
v. DeSoto Oil & Gas, Inc. in the U.S. District Court for the Southern
District of Texas, case number 04-06-CV-03040. The lawsuit seeks to
recover from DeSoto $244,855 plus costs and interest related to erroneous
post-closing accounting adjustments arising from the sale of such
Partnerships' interests in the Jay-Little Escambia Creek Field Unit to
DeSoto in May 2004. Any recovery obtained from this lawsuit would be
allocated approximately 11% to the III-D Partnership and 89% to the III-E
Partnership. The lawsuit is currently in the early stages and management
intends to vigorously prosecute this matter.
ITEM 6. EXHIBITS
31.1 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the III-A Partnership.
31.2 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the III-A Partnership.
31.3 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the III-B Partnership.
31.4 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the III-B Partnership.
31.5 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the III-C Partnership.
31.6 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the III-C Partnership.
31.7 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the III-D Partnership.
31.8 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the III-D Partnership.
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31.9 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the III-E Partnership.
31.10 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the III-E Partnership.
31.11 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the III-F Partnership.
31.12 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the III-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 III-A 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 III-B 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 III-C Partnership.
32.4 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for
the III-D Partnership.
32.5 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for
the III-E Partnership.
32.6 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for
the III-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 III-A
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-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 III-A.
31.2 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership III-A.
31.3 Certification Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership III-B.
31.4 Certification Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership III-B.
31.5 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership III-C.
31.6 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership III-C.
31.7 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership III-D.
31.8 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership III-D.
31.9 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership III-E.
31.10 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership III-E.
31.11 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership III-F.
31.12 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership III-F.
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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 III-A.
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 III-B.
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 III-C.
32.4 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 III-D.
32.5 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 III-E.
32.6 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 III-F.
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