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:
II-A: 0-16388 II-D: 0-16980 II-G: 0-17802
II-B: 0-16405 II-E: 0-17320 II-H: 0-18305
II-C: 0-16981 II-F: 0-17799
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
---------------------------------------------------------
(Exact name of Registrant as specified in its Articles)
II-A 73-1295505
II-B 73-1303341
II-C 73-1308986
II-D 73-1329761
II-E 73-1324751
II-F 73-1330632
II-G 73-1336572
Oklahoma II-H 73-1342476
- ---------------------------- -------------------------------
(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 II-A
GEODYNE PRODUCTION PARTNERSHIP II-A
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $2,008,246 $2,121,512
Accounts receivable:
Oil and gas sales 1,064,043 1,539,562
Asset held for sale (Note 3) 570,040 -
---------- ----------
Total current assets $3,642,329 $3,661,074
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 1,883,333 2,469,366
DEFERRED CHARGE 556,575 601,624
---------- ----------
$6,082,237 $6,732,064
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 269,005 $ 347,424
Gas imbalance payable 94,752 96,957
Asset retirement obligation -
current (Note 1) 19,696 41,485
Asset retirement obligation -
assets held for sale 262,281 -
Accounts payable of assets held
for sale 64,602 -
---------- ----------
Total current liabilities $ 710,336 $ 485,866
LONG-TERM LIABILITIES:
Accrued liability $ 167,303 $ 155,405
Asset retirement obligation
(Note 1) 621,577 863,302
---------- ----------
Total long-term liabilities $ 788,880 $1,018,707
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 186,540) ($ 132,231)
Limited Partners, issued and
outstanding, 484,283 units 4,769,561 5,359,722
---------- ----------
Total Partners' capital $4,583,021 $5,227,491
---------- ----------
$6,082,237 $6,732,064
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-3-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A
GEODYNE PRODUCTION PARTNERSHIP II-A
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $1,430,163 $1,654,121
Interest income 14,469 8,398
Other income 833 -
---------- ----------
$1,445,465 $1,662,519
COSTS AND EXPENSES:
Lease operating $ 33,341 $ 243,271
Production tax 78,370 91,493
Depreciation, depletion, and
amortization of oil and gas
properties 75,207 115,711
Impairment provision 12,869 -
General and administrative
(Note 2) 132,058 133,844
---------- ----------
$ 331,845 $ 584,319
---------- ----------
INCOME FROM CONTINUING OPERATIONS $1,113,620 $1,078,200
Income from discontinued operations
(Note 3) 275,758 241,404
---------- ----------
NET INCOME $1,389,378 $1,319,604
========== ==========
GENERAL PARTNER:
Net Income from continuing operations $ 117,842 $ 117,394
Net income from discontinued
operations 28,149 29,088
Net income 145,991 146,482
LIMITED PARTNERS:
Net Income from continuing operations $ 995,778 $ 960,806
Net income from discontinued
operations 247,609 212,316
Net income 1,243,387 1,173,122
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 2.06 $ 1.99
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.52 0.44
NET INCOME PER UNIT 2.58 2.43
UNITS OUTSTANDING 484,283 484,283
The accompanying condensed notes are an integral part of these
combined financial statements.
-4-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A
GEODYNE PRODUCTION PARTNERSHIP II-A
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $4,482,265 $4,561,548
Interest income 46,127 21,283
Other income 833 -
---------- ----------
$4,529,225 $4,582,831
COSTS AND EXPENSES:
Lease operating $ 673,958 $ 633,574
Production tax 255,601 273,722
Depreciation, depletion, and
amortization of oil and gas
properties 178,508 229,583
Impairment provision 12,869 -
General and administrative
(Note 2) 425,455 424,079
---------- ----------
$1,546,391 $1,560,958
---------- ----------
INCOME FROM CONTINUING OPERATIONS $2,982,834 $3,021,873
Net income from discontinued operations
(Note 3) 688,824 589,695
---------- ----------
NET INCOME $3,671,658 $3,611,568
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 310,895 $ 320,721
Net income from discontinued
operations 70,924 65,155
Net income 381,819 385,876
LIMITED PARTNERS:
Net income from continuing operations $2,671,939 $2,701,152
Net income from discontinued
operations 617,900 524,540
Net income 3,289,839 3,225,692
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 5.52 $ 5.58
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 1.28 1.08
NET INCOME PER UNIT 6.80 6.66
UNITS OUTSTANDING 484,283 484,283
The accompanying condensed notes are an integral part of these
combined financial statements.
-5-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A
GEODYNE PRODUCTION PARTNERSHIP II-A
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,671,658 $3,611,568
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 197,636 298,306
Impairment provision 16,429 -
Settlement of asset retirement
obligation ( 31,311) ( 188)
(Increase) decrease in accounts
receivable - oil and gas sales 362,540 ( 512,784)
Increase in accounts receivable -
related party (Note 2) - ( 152)
Decrease in deferred charge 45,049 18,807
Decrease in accounts payable ( 15,881) ( 63,721)
Decrease in accrued liability -
other - ( 26,672)
Decrease in gas imbalance
payable ( 2,205) ( 699)
Increase (decrease) in accrued
liability 11,898 ( 25,980)
---------- ----------
Net cash provided by operating
activities $4,255,813 $3,298,485
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 52,951) ($ 125,035)
Proceeds from sale of oil and
gas properties - 27,282
---------- ----------
Net cash used by investing
activities ($ 52,951) ($ 97,753)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($4,316,128) ($3,123,520)
---------- ----------
Net cash used by financing
activities ($4,316,128) ($3,123,520)
---------- ----------
-6-
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($ 113,266) $ 77,212
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,121,512 1,557,473
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $2,008,246 $1,634,685
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-7-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE PRODUCTION PARTNERSHIP II-B
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $1,234,017 $1,604,547
Accounts receivable:
Oil and gas sales 778,910 1,127,488
Assets held for sale (Note 3) 226,155 -
---------- ----------
Total current assets $2,239,082 $2,732,035
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 1,308,507 1,544,218
DEFERRED CHARGE 248,928 271,456
---------- ----------
$3,796,517 $4,547,709
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 192,342 $ 229,602
Gas imbalance payable 38,679 35,564
Asset retirement obligation -
current (Note 1) 11,980 11,476
Asset retirement obligation -
assets held for sale 146,136 -
Accounts payable of assets held
for sale 29,785 -
---------- ----------
Total current liabilities $ 418,922 $ 276,642
LONG-TERM LIABILITIES:
Accrued liability $ 95,318 $ 72,442
Asset retirement obligation
(Note 1) 239,141 372,410
---------- ----------
Total long-term liabilities $ 334,459 $ 444,852
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 223,917) ($ 178,888)
Limited Partners, issued and
outstanding, 361,719 units 3,267,053 4,005,103
---------- ----------
Total Partners' capital $3,043,136 $3,826,215
---------- ----------
$3,796,517 $4,547,709
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-8-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE PRODUCTION PARTNERSHIP II-B
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $1,121,924 $1,328,591
Interest income 9,955 5,544
---------- ----------
$1,131,879 $1,334,135
COSTS AND EXPENSES:
Lease operating $ 246,601 $ 207,933
Production tax 65,881 75,134
Depreciation, depletion, and
amortization of oil and gas
properties 64,534 80,385
Impairment provision 6,569 -
General and administrative
(Note 2) 98,906 100,305
---------- ----------
$ 482,491 $ 463,757
---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 649,388 $ 870,378
Income from discontinued operations
(Note 3) 123,090 152,387
---------- ----------
NET INCOME $ 772,478 $1,022,765
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 70,342 $ 93,718
Net income from discontinued
operations 12,493 16,855
Net income 82,835 110,573
LIMITED PARTNERS:
Net income from continuing operations $ 579,046 $ 776,660
Net income from discontinued
operations 110,597 135,532
Net income 689,643 912,192
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 1.60 $ 2.15
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.30 0.37
NET INCOME PER UNIT 1.90 2.52
UNITS OUTSTANDING 361,719 361,719
The accompanying condensed notes are an integral part of these
combined financial statements.
-9-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE PRODUCTION PARTNERSHIP II-B
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $3,580,179 $3,522,701
Interest income 33,046 14,425
---------- ----------
$3,613,225 $3,537,126
COSTS AND EXPENSES:
Lease operating $ 730,903 $ 543,610
Production tax 207,127 218,973
Depreciation, depletion, and
amortization of oil and gas
properties 130,018 199,731
Impairment provision 6,569 -
General and administrative
(Note 2) 324,567 323,180
---------- ----------
$1,399,184 $1,285,494
---------- ----------
INCOME FROM CONTINUING OPERATIONS $2,214,041 $2,251,632
Income from discontinued operations
(Note 3) 352,229 364,415
---------- ----------
NET INCOME $2,566,270 $2,616,047
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 230,392 $ 241,696
Net income from discontinued
operations 35,928 38,302
Net income 266,320 279,998
LIMITED PARTNERS:
Net income from continuing operations $1,983,649 $2,009,936
Net income from discontinued
operations 316,301 326,113
Net income 2,299,950 2,336,049
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 5.48 $ 5.56
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.87 0.90
NET INCOME PER UNIT 6.35 6.46
UNITS OUTSTANDING 361,719 361,719
The accompanying condensed notes are an integral part of these
combined financial statements.
-10-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE PRODUCTION PARTNERSHIP II-B
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,566,270 $2,616,047
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 137,379 220,406
Impairment provision 7,044 -
Settlement of asset retirement
obligations - ( 58)
(Increase) decrease in accounts
receivable - oil and gas sales 240,262 ( 415,768)
(Increase) decrease in deferred
charge 22,528 ( 13,585)
Decrease in accounts payable ( 4,243) ( 64,927)
Increase (decrease) in gas
imbalance payable 3,115 ( 3,188)
Increase in accrued liability 22,876 12,812
---------- ----------
Net cash provided by operating
activities $2,995,231 $2,351,739
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 16,412) ($ 111,834)
Proceeds from sale of oil and gas
properties - 32,405
---------- ----------
Net cash used by investing
activities ($ 16,412) ($ 79,429)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($3,349,349) ($2,206,575)
---------- ----------
Net cash used by financing
activities ($3,349,349) ($2,206,575)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($ 370,530) $ 65,735
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,604,547 1,079,057
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $1,234,017 $1,144,792
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-11-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE PRODUCTION PARTNERSHIP II-C
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 584,598 $ 812,768
Accounts receivable:
Oil and gas sales 438,658 643,141
Assets held for sale (Note 3) 21,720 -
---------- ----------
Total current assets $1,044,976 $1,455,909
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 653,076 728,242
DEFERRED CHARGE 142,787 155,926
---------- ----------
$1,840,839 $2,340,077
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 88,735 $ 127,265
Gas imbalance payable 13,080 13,454
Asset retirement obligation -
current (Note 1) 17,079 9,569
Asset retirement obligation -
assets held for sale 4,660 -
Accounts payable of assets held
for sale 2,239 -
---------- ----------
Total current liabilities $ 125,793 $ 150,288
LONG-TERM LIABILITIES:
Accrued liability $ 51,634 $ 44,603
Asset retirement obligation
(Note 1) 124,226 131,222
---------- ----------
Total long-term liabilities $ 175,860 $ 175,825
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 85,958) ($ 57,416)
Limited Partners, issued and
outstanding, 154,621 units 1,625,144 2,071,380
---------- ----------
Total Partners' capital $1,539,186 $2,013,964
---------- ----------
$1,840,839 $2,340,077
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-12-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE PRODUCTION PARTNERSHIP II-C
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
-------- --------
REVENUES:
Oil and gas sales $635,539 $713,887
Interest income 4,681 2,741
-------- --------
$640,220 $716,628
COSTS AND EXPENSES:
Lease operating $118,531 $ 97,384
Production tax 38,794 45,185
Depreciation, depletion, and
amortization of oil and gas
properties 47,553 40,835
Impairment provision 5,336 -
General and administrative
(Note 2) 42,892 43,640
-------- --------
$253,106 $227,044
-------- --------
INCOME FROM CONTINUING OPERATIONS $387,114 $489,584
Income from discontinued operations
(Note 3) 13,566 30,798
-------- --------
NET INCOME $400,680 $520,382
======== ========
GENERAL PARTNER:
Net income from continuing operations $ 43,004 $ 52,360
Net income from discontinued
operations 1,361 3,163
Net income 44,365 55,523
LIMITED PARTNERS:
Net income from continuing operations $344,110 $437,224
Net income from discontinued
operations 12,205 27,635
Net income 356,315 464,859
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 2.22 $ 2.83
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.08 0.18
NET INCOME PER UNIT 2.30 3.01
UNITS OUTSTANDING 154,621 154,621
The accompanying condensed notes are an integral part of these
combined financial statements.
-13-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE PRODUCTION PARTNERSHIP II-C
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $1,962,501 $1,975,481
Interest income 16,374 6,959
---------- ----------
$1,978,875 $1,982,440
COSTS AND EXPENSES:
Lease operating $ 356,122 $ 226,819
Production tax 120,388 134,129
Depreciation, depletion, and
amortization of oil and gas
properties 81,154 89,466
Impairment provision 5,336 -
General and administrative
(Note 2) 154,114 152,710
---------- ----------
$ 717,114 $ 603,124
---------- ----------
INCOME FROM CONTINUING OPERATIONS $1,261,761 $1,379,316
Income from discontinued operations
(Note 3) 44,852 58,661
---------- ----------
$1,306,613 $1,437,977
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 132,323 $ 145,288
Net income from discontinued
operations 4,526 5,986
Net income 136,849 151,274
LIMITED PARTNERS:
Net income from continuing operations $1,129,438 $1,234,028
Net income from discontinued
operations 40,326 52,675
Net income 1,169,764 1,286,703
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 7.30 $ 7.98
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.26 0.34
NET INCOME PER UNIT 7.56 8.32
UNITS OUTSTANDING 154,621 154,621
The accompanying condensed notes are an integral part of these
combined financial statements.
-14-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE PRODUCTION PARTNERSHIP II-C
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,306,613 $1,437,977
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 81,606 90,801
Impairment provision 5,336 -
Settlement of asset retirement
obligations - ( 40)
(Increase) decrease in accounts
receivable - oil and gas sales 189,404 ( 212,124)
(Increase) decrease in deferred
charge 13,139 ( 27,439)
Decrease in accounts payable ( 35,134) ( 21,833)
Decrease in gas imbalance payable ( 374) ( 1,803)
Increase in accrued liability 7,031 1,694
---------- ----------
Net cash provided by operating
activities $1,567,621 $1,267,233
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 14,400) ($ 58,239)
Proceeds from sale of oil and gas
properties - 13,888
---------- ----------
Net cash used by investing
activities ($ 14,400) ($ 44,351)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($1,781,391) ($1,154,849)
---------- ----------
Net cash used by financing
activities ($1,781,391) ($1,154,849)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($ 228,170) $ 68,033
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 812,768 506,061
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 584,598 $ 574,094
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-15-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE PRODUCTION PARTNERSHIP II-D
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $1,042,302 $1,661,561
Accounts receivable:
Oil and gas sales 1,031,901 1,544,131
Assets held for sale (Note 3) 152,214 -
---------- ----------
Total current assets $2,226,417 $3,205,692
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 1,273,463 1,559,585
DEFERRED CHARGE 359,815 371,875
---------- ----------
$3,859,695 $5,137,152
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 143,449 $ 181,287
Gas imbalance payable 16,395 17,598
Asset retirement obligation -
current (Note 1) 68,099 45,216
Asset retirement obligation -
assets held for sale (Note 3) 43,125 -
Accounts payable of assets held
for sale 20,607 -
---------- ----------
Total current liabilities $ 291,675 $ 244,101
LONG-TERM LIABILITIES:
Accrued liability $ 126,350 $ 102,928
Asset retirement obligation
(Note 1) 351,429 403,397
---------- ----------
Total long-term liabilities $ 477,779 $ 506,325
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 136,424) ($ 65,352)
Limited Partners, issued and
outstanding, 314,878 units 3,226,665 4,452,078
---------- ----------
Total Partners' capital $3,090,241 $4,386,726
---------- ----------
$3,859,695 $5,137,152
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-16-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE PRODUCTION PARTNERSHIP II-D
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $1,245,970 $1,382,526
Interest income 8,853 5,067
---------- ----------
$1,254,823 $1,387,593
COSTS AND EXPENSES:
Lease operating $ 196,664 $ 171,598
Production tax 81,043 98,568
Depreciation, depletion, and
amortization of oil and gas
properties 228,372 73,388
Impairment provision 3,250 -
General and administrative
(Note 2) 86,239 87,490
---------- ----------
$ 595,568 $ 431,044
---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 659,255 $ 956,549
Income from discontinued operations
(Note 3) 49,176 94,371
---------- ----------
NET INCOME $ 708,431 $1,050,920
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 85,886 $ 101,753
Net income from discontinued
operations 4,944 10,093
Net income 90,830 111,846
LIMITED PARTNERS:
Net income from continuing operations $ 573,369 $ 854,796
Net income from discontinued
operations 44,232 84,278
Net income 617,601 939,074
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 1.82 $ 2.72
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.14 0.27
NET INCOME PER UNIT 1.96 2.99
UNITS OUTSTANDING 314,878 314,878
The accompanying condensed notes are an integral part of these
combined financial statements.
-17-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE PRODUCTION PARTNERSHIP II-D
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $3,690,710 $3,896,469
Interest income 35,495 13,300
Other income - 8,411
---------- ----------
$3,726,205 $3,918,180
COSTS AND EXPENSES:
Lease operating $ 561,127 $ 456,532
Production tax 234,394 274,551
Depreciation, depletion, and
amortization of oil and gas
properties 320,169 112,274
Impairment provision 3,250 -
General and administrative
(Note 2) 286,000 284,610
---------- ----------
$1,404,940 $1,127,967
---------- ----------
INCOME FROM CONTINUING OPERATIONS $2,321,265 $2,790,213
Income from discontinued operations
(Note 3) 199,157 200,280
---------- ----------
NET INCOME $2,520,422 $2,990,493
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 257,685 $ 287,039
Net income from discontinued
operations 20,150 20,847
Net income 277,835 307,886
LIMITED PARTNERS:
Net income from continuing operations $2,063,580 $2,503,174
Net income from discontinued
operations 179,007 179,433
Net income 2,242,587 2,682,607
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 6.55 $ 7.95
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 0.57 0.57
NET INCOME PER UNIT 7.12 8.52
UNITS OUTSTANDING 314,878 314,878
The accompanying condensed notes are an integral part of
these combined financial statements.
-18-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE PRODUCTION PARTNERSHIP II-D
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,520,422 $2,990,493
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 322,773 121,370
Impairment provision 3,250 -
(Increase) decrease in accounts
receivable - oil and gas sales 417,203 ( 459,335)
(Increase) decrease in deferred
charge 12,060 ( 26,364)
Decrease in accounts payable ( 18,204) ( 5,137)
Decrease in gas imbalance
payable ( 1,203) ( 1,536)
Increase (decrease) in accrued
liability 23,422 ( 6,341)
---------- ----------
Net cash provided by operating
activities $3,279,723 $2,613,150
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 85,218) ($ 163,161)
Proceeds from sale of oil and gas
properties 3,143 14,995
---------- ----------
Net cash used by investing
activities ($ 82,075) ($ 148,166)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($3,816,907) ($2,261,216)
---------- ----------
Net cash used by financing
activities ($3,816,907) ($2,261,216)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($ 619,259) $ 203,768
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,661,561 967,251
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $1,042,302 $1,171,019
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-19-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE PRODUCTION PARTNERSHIP II-E
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 791,807 $1,290,961
Accounts receivable:
Oil and gas sales 347,272 822,197
Assets held for sale (Note 3) 449,947
---------- ----------
Total current assets $1,589,026 $2,113,158
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 849,630 1,209,059
DEFERRED CHARGE 208,171 209,941
---------- ----------
$2,646,827 $3,532,158
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 111,025 $ 128,602
Gas imbalance payable 43,424 43,424
Asset retirement obligation -
current (Note 1) 9,017 6,501
Asset retirement obligation -
assets held for sale (Note 3) 107,875 -
Accounts payable of assets held
for sale 26,133 -
---------- ----------
Total current liabilities $ 297,474 $ 178,527
LONG-TERM LIABILITIES:
Accrued liability $ 69,372 $ 25,448
Asset retirement obligation
(Note 1) 128,871 230,556
---------- ----------
Total long-term liabilities $ 198,243 $ 256,004
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 119,181) ($ 67,016)
Limited Partners, issued and
outstanding, 228,821 units 2,270,291 3,164,643
---------- ----------
Total Partners' capital $2,151,110 $3,097,627
---------- ----------
$2,646,827 $3,532,158
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-20-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE PRODUCTION PARTNERSHIP II-E
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
-------- --------
REVENUES:
Oil and gas sales $547,648 $630,124
Interest income 6,984 3,637
Gain on sale of oil and gas
properties 11 -
Other income 7,493 -
-------- --------
$562,136 $633,761
COSTS AND EXPENSES:
Lease operating $167,396 $ 83,726
Production tax 33,460 45,164
Depreciation, depletion, and
amortization of oil and gas
properties 29,458 36,596
Impairment provision 20,278 -
General and administrative
(Note 2) 62,961 63,943
-------- --------
$313,553 $229,429
-------- --------
INCOME FROM CONTINUING OPERATIONS $248,583 $404,332
Income from discontinued operations
(Note 3) 278,793 254,525
-------- --------
NET INCOME $527,376 $658,857
======== ========
GENERAL PARTNER:
Net income from continuing operations $ 28,636 $ 43,363
Net income from discontinued
operations 29,361 27,267
Net income 57,997 70,630
LIMITED PARTNERS:
Net income from continuing operations $219,947 $360,969
Net income from discontinued
operations 249,432 227,258
Net income 469,379 588,227
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 0.96 $ 1.58
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 1.09 0.99
NET INCOME PER UNIT 2.05 2.57
UNITS OUTSTANDING 228,821 228,821
The accompanying condensed notes are an integral part of
these combined financial statements.
-21-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE PRODUCTION PARTNERSHIP II-E
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $1,804,494 $1,647,850
Interest income 25,781 9,128
Gain on sale of oil and gas
properties 11 -
Other income 7,493 5,177
---------- ----------
$1,837,779 $1,662,155
COSTS AND EXPENSES:
Lease operating $ 393,628 $ 219,047
Production tax 120,395 114,225
Depreciation, depletion, and
amortization of oil and gas
properties 74,318 75,235
Impairment provision 20,278 -
General and administrative
(Note 2) 215,186 213,789
---------- ----------
$ 823,805 $ 622,296
---------- ----------
INCOME FROM CONTINUING OPERATIONS $1,013,974 $1,039,859
Income from discontinued operations
(Note 3) 727,064 634,268
---------- ----------
NET INCOME $1,741,038 $1,674,127
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 107,333 $ 109,378
Net income from discontinued
operations 77,057 68,933
Net income 184,390 178,311
LMIITED PARTNERS:
Net income from continuing operations $ 906,641 $ 930,481
Net income from discontinued
operations 650,007 565,335
Net income 1,556,648 1,495,816
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 3.96 $ 4.07
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 2.84 2.47
NET INCOME PER UNIT 6.80 6.54
UNITS OUTSTANDING 228,821 228,821
The accompanying condensed notes are an integral part of these
combined financial statements.
-22-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE PRODUCTION PARTNERSHIP II-E
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,741,038 $1,674,127
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 107,484 136,410
Impairment provision 35,449 -
Gain on sale of oil and gas
properties ( 11) -
Settlement of asset retirement
obligation ( 127) -
(Increase) decrease in accounts
receivable - oil and gas sales 274,101 ( 333,378)
(Increase) decrease in deferred
charge 1,770 ( 3,668)
Increase (decrease) in accounts
payable 9,953 ( 77,841)
Increase (decrease) in accrued
liability 43,924 ( 449)
---------- ----------
Net cash provided by operating
activities $2,213,581 $1,395,201
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 25,180) ($ 31,572)
---------- ----------
Net cash used by investing
activities ($ 25,180) ($ 31,572)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($2,687,555) ($1,323,143)
---------- ----------
Net cash used by financing
activities ($2,687,555) ($1,323,143)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($ 499,154) $ 40,486
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,290,961 680,844
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 791,807 $ 721,330
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-23-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE PRODUCTION PARTNERSHIP II-F
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 869,065 $ 921,812
Accounts receivable:
Oil and gas sales 245,058 819,472
Assets held for sale (Note 3) 831,984 -
---------- ----------
Total current assets $1,946,107 $1,741,284
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 625,822 1,169,138
DEFERRED CHARGE 30,448 30,727
---------- ----------
$2,602,377 $2,941,149
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 34,003 $ 148,786
Gas imbalance payable 2,024 2,312
Asset retirement obligation -
current (Note 1) 3,358 1,909
Asset retirement obligation -
assets held for sale 82,764 -
Accounts payable for assets held
for sale 38,189 -
---------- ----------
Total current liabilities $ 160,338 $ 153,007
LONG-TERM LIABILITIES:
Accrued liability $ 25,662 $ 26,676
Asset retirement obligation
(Note 1) 118,930 195,940
---------- ----------
Total long-term liabilities $ 144,592 $ 222,616
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 58,000) ($ 46,261)
Limited Partners, issued and
outstanding, 171,400 Units 2,355,447 2,611,787
---------- ----------
Total Partners' capital $2,297,447 $2,565,526
---------- ----------
$2,602,377 $2,941,149
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-24-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE PRODUCTION PARTNERSHIP II-F
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
-------- --------
REVENUES:
Oil and gas sales $403,881 $457,409
Interest income 6,969 3,885
Gain on sale of oil and gas
Properties 28 -
Other income 18,316 -
-------- --------
$429,194 $461,294
COSTS AND EXPENSES:
Lease operating $ 68,605 $ 48,166
Production tax 24,515 31,719
Depreciation, depletion, and
amortization of oil and gas
properties 58,598 29,843
Impairment provision 24,473 -
General and administrative
(Note 2) 47,431 47,920
-------- --------
$223,622 $157,648
-------- --------
INCOME FROM CONTINUING OPERATIONS $205,572 $303,646
Income from discontinued operations
(Note 3) 551,957 478,851
-------- --------
NET INCOME $757,529 $782,497
======== ========
GENERAL PARTNER:
Net income from continuing operations $ 27,337 $ 32,662
Net income from discontinued
operations 55,290 49,196
Net income 82,627 81,858
LIMITED PARTNERS:
Net income from continuing operations $178,235 $270,984
Net income from discontinued
operations 496,667 429,655
Net income 674,902 700,639
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 1.04 $ 1.58
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 2.90 2.50
NET INCOME PER UNIT 3.94 4.08
UNITS OUTSTANDING 171,400 171,400
The accompanying condensed notes are an integral part of
these combined financial statements.
-25-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE PRODUCTION PARTNERSHIP II-F
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $1,198,064 $1,270,105
Interest income 21,183 9,271
Gain on sale of oil and gas
properties 28 -
Other income 18,316 -
---------- ----------
$1,237,591 $1,279,376
COSTS AND EXPENSES:
Lease operating $ 197,659 $ 139,107
Production tax 77,135 79,565
Depreciation, depletion, and
amortization of oil and gas
properties 99,575 68,970
Impairment provision 24,473 -
General and administrative
(Note 2) 167,072 165,358
---------- ----------
$ 565,914 $ 453,000
---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 671,677 $ 826,376
Income from discontinued operations
(Note 3) 1,482,519 1,341,338
---------- ----------
$2,154,196 $2,167,714
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 76,214 $ 87,918
Net income from discontinued
operations 150,322 137,261
Net income 226,536 225,179
LIMITED PARTNERS:
Net income from continuing operations $ 595,463 $ 738,458
Net income from discontinued
operations 1,332,197 1,204,077
Net income 1,927,660 1,942,535
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 3.47 $ 4.31
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 7.77 7.02
NET INCOME PER UNIT 11.24 11.33
UNITS OUTSTANDING 171,400 171,400
The accompanying condensed notes are an integral part of
these combined financial statements.
-26-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE PRODUCTION PARTNERSHIP II-F
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,154,196 $2,167,714
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 122,525 103,718
Impairment provision 24,523 -
Gain on sale of oil and gas
properties ( 28) -
Settlement of asset retirement
obligation ( 307) -
(Increase) decrease in accounts
receivable - oil and gas sales 192,023 ( 366,897)
Decrease in deferred charge 279 2,899
Decrease in accounts payable ( 73,579) ( 145,094)
Decrease in gas imbalance payable ( 288) ( 1,157)
Increase (decrease) in accrued
liability ( 1,014) 521
---------- ----------
Net cash provided by operating
activities $2,418,330 $1,761,704
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 48,802) ($ 25,527)
---------- ----------
Net cash used by investing activities ($ 48,802) ($ 25,527)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($2,422,275) ($1,617,426)
---------- ----------
Net cash used by financing
activities ($2,422,275) ($1,617,426)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($ 52,747) $ 118,751
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 921,812 657,406
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 869,065 $ 776,157
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-27-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE PRODUCTION PARTNERSHIP II-G
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $1,854,706 $1,970,349
Accounts receivable:
Oil and gas sales 815,881 1,749,695
Assets held for sale (Note 3) 1,468,557 -
---------- ----------
Total current assets $4,139,144 $3,720,044
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 1,368,474 2,514,404
DEFERRED CHARGE 65,048 65,542
---------- ----------
$5,572,666 $6,299,990
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 78,801 $ 314,015
Gas imbalance payable 10,572 15,317
Asset retirement obligation -
current (Note 1) 7,015 3,988
Asset retirement obligation -
assets held for sale 175,724 -
Accounts payable of assets held
for sale 75,065 -
---------- ----------
Total current liabilities $ 347,177 $ 333,320
LONG-TERM LIABILITIES:
Accrued liability $ 45,042 $ 45,118
Asset retirement obligation
(Note 1) 256,672 420,055
---------- ----------
Total long-term liabilities $ 301,714 $ 465,173
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 15,463) $ 9,830
Limited Partners, issued and
outstanding, 372,189 Units 4,939,238 5,491,667
---------- ----------
Total Partners' capital $4,923,775 $5,501,497
---------- ----------
$5,572,666 $6,299,990
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-28-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE PRODUCTION PARTNERSHIP II-G
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $ 869,824 $1,042,268
Interest income 15,020 8,397
Gain on sale of oil and gas
properties 53 -
Other income 38,302 -
---------- ----------
$ 923,199 $1,050,665
COSTS AND EXPENSES:
Lease operating $ 145,709 $ 108,013
Production tax 52,858 72,465
Depreciation, depletion, and
amortization of oil and gas
properties 125,970 63,881
Impairment provision 54,129 -
General and administrative
(Note 2) 101,740 102,861
---------- ----------
$ 480,406 $ 347,220
---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 442,793 $ 703,445
Income from discontinued operations
(Note 3) 1,161,092 1,086,099
---------- ----------
NET INCOME $1,603,885 $1,789,544
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 58,987 $ 75,254
Net income from discontinued
operations 116,309 111,392
Net income 175,296 186,646
LIMITED PARTNERS:
Net income from continuing operations $ 383,806 $ 628,191
Net income from discontinued
operations 1,044,783 974,707
Net income 1,428,589 1,602,898
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 1.03 $ 1.69
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 2.81 2.62
NET INCOME PER UNIT 3.84 4.31
UNITS OUTSTANDING 372,189 372,189
The accompanying condensed notes are an integral part of
these combined financial statements.
-29-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE PRODUCTION PARTNERSHIP II-G
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $2,584,373 $2,733,911
Interest income 45,729 20,062
Gain on sale of oil and gas
properties 53 -
Other income 38,302 -
---------- ----------
$2,668,457 $2,753,973
COSTS AND EXPENSES:
Lease operating $ 426,971 $ 306,639
Production tax 167,319 172,738
Depreciation, depletion, and
amortization of oil and gas
properties 213,029 149,054
Impairment provision 54,129 -
General and administrative
(Note 2) 332,336 330,639
---------- ----------
$1,193,784 $ 959,070
---------- ----------
INCOME FROM CONTINUING OPERATIONS $1,474,673 $1,794,903
Income from discontinued operations
(Note 3) 3,109,686 2,816,887
---------- ----------
NET INCOME $4,584,359 $4,611,790
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 166,939 $ 190,899
Net income from discontinued
operations 315,849 288,536
Net income 482,788 479,435
LIMITED PARTNERS:
Net income from continuing operations $1,307,734 $1,604,004
Net income from discontinued
operations 2,793,837 2,528,351
Net income 4,101,571 4,132,355
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 3.51 $ 4.31
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 7.51 6.79
NET INCOME PER UNIT 11.02 11.10
UNITS OUTSTANDING 372,189 372,189
The accompanying condensed notes are an integral part of
these combined financial statements.
-30-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE PRODUCTION PARTNERSHIP II-G
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $4,584,359 $4,611,790
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 267,149 225,137
Impairment provision 54,235 -
Gain on sale of oil and gas
properties ( 53) -
Settlement of asset retirement
obligation ( 641) -
(Increase) decrease in accounts
receivable - oil and gas sales 401,422 ( 781,310)
Decrease in deferred charge 494 6,331
Decrease in accounts payable ( 153,889) ( 305,682)
Decrease in gas imbalance payable ( 4,745) ( 2,327)
Increase (decrease) in accrued
liability ( 76) 6,618
---------- ----------
Net cash provided by operating
activities $5,148,255 $3,760,557
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 101,817) ($ 54,376)
---------- ----------
Net cash used by investing
activities ($ 101,817) ($ 54,376)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($5,162,081) ($3,452,903)
---------- ----------
Net cash used by financing
activities ($5,162,081) ($3,452,903)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($ 115,643) $ 253,278
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,970,349 1,401,928
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $1,854,706 $1,655,206
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-31-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
GEODYNE PRODUCTION PARTNERSHIP II-H
COMBINED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 437,417 $ 465,378
Accounts receivable:
Oil and gas sales 125,802 409,173
Assets held for sale (Note 3) 401,351 -
---------- ----------
Total current assets $ 964,570 $ 874,551
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 333,775 597,072
DEFERRED CHARGE 16,716 16,952
---------- ----------
$1,315,061 $1,488,575
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 18,002 $ 73,876
Asset retirement obligation -
current (Note 1) 1,623 922
Asset retirement obligation -
assets held for sale 42,158 -
Accounts payable of assets held
for sale 18,741 -
---------- ----------
Total current liabilities $ 80,524 $ 74,798
LONG-TERM LIABILITIES:
Accrued liability $ 14,524 $ 15,003
Asset retirement obligation
(Note 1) 63,359 102,427
---------- ----------
Total long-term liabilities $ 77,883 $ 117,430
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 35,271) ($ 28,897)
Limited Partners, issued and
outstanding, 91,711 Units 1,191,925 1,325,244
---------- ----------
Total Partners' capital $1,156,654 $1,296,347
---------- ----------
$1,315,061 $1,488,575
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-32-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
GEODYNE PRODUCTION PARTNERSHIP II-H
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
-------- --------
REVENUES:
Oil and gas sales $211,788 $252,643
Interest income 3,442 1,922
Gain on sale of oil and gas
properties 12 -
Other income 8,859 -
-------- --------
$224,101 $254,565
COSTS AND EXPENSES:
Lease operating $ 34,478 $ 26,645
Production tax 13,179 17,803
Depreciation, depletion, and
amortization of oil and gas
properties 30,190 15,480
Impairment provision 6,935 -
General and administrative
(Note 2) 25,875 26,113
-------- --------
$110,657 $ 86,041
-------- --------
INCOME FROM CONTINUING OPERATIONS $113,444 $168,524
Income from discontinued operations
(Note 3) 269,635 252,130
-------- --------
NET INCOME $383,079 $420,654
======== ========
GENERAL PARTNER:
Net income from continuing operations $ 14,342 $ 18,054
Net income from discontinued
operations 27,009 25,869
Net income 41,351 43,923
LIMITED PARTNERS:
Net income from continuing operations $ 99,102 $150,470
Net income from discontinued
operations 242,626 226,261
Net income 341,728 376,731
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 1.08 $ 1.64
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 2.64 2.46
NET INCOME PER UNIT 3.72 4.10
UNITS OUTSTANDING 91,711 91,711
The accompanying condensed notes are an integral part of
these combined financial statements.
-33-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
GEODYNE PRODUCTION PARTNERSHIP II-H
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ----------
REVENUES:
Oil and gas sales $ 626,607 $ 663,526
Interest income 10,458 4,524
Gain on sale of oil and gas
properties 12 -
Other income 8,859 -
---------- ----------
$ 645,936 $ 668,050
COSTS AND EXPENSES:
Lease operating $ 103,193 $ 74,837
Production tax 41,356 42,773
Depreciation, depletion, and
amortization of oil and gas
properties 50,669 35,793
Impairment provision 6,935 -
General and administrative
(Note 2) 101,472 99,751
---------- ----------
$ 303,625 $ 253,154
---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 342,311 $ 414,896
Income from discontinued operations
(Note 3) 719,907 654,333
---------- ----------
NET INCOME $1,062,218 $1,069,229
========== ==========
GENERAL PARTNER:
Net income from continuing operations $ 38,370 $ 44,259
Net income from discontinued
operations 73,167 67,058
Net income 111,537 111,317
LIMITED PARTNERS:
Net income from continuing operations $ 303,941 $ 370,637
Net income from discontinued
operations 646,740 587,275
Net income 950,681 957,912
NET INCOME FROM CONTINUING OPERATIONS
PER UNIT $ 3.31 $ 4.04
NET INCOME FROM DISCONTINUED OPERATIONS
PER UNIT 7.05 6.40
NET INCOME PER UNIT 10.36 10.44
UNITS OUTSTANDING 91,711 91,711
The accompanying condensed notes are an integral part of these
combined financial statements.
-34-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
GEODYNE PRODUCTION PARTNERSHIP II-H
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(Unaudited)
2006 2005
---------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,062,218 $1,069,229
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization of oil and gas
properties 63,728 53,845
Impairment provision 6,947 -
Gain on sale of oil and gas
properties ( 12) -
Settlement of asset retirement
obligation ( 147) -
(Increase) decrease in accounts
receivable - oil and gas sales 100,603 ( 180,927)
Decrease in deferred charge 236 2,717
Decrease in accounts payable ( 35,704) ( 71,762)
Decrease in accrued liability ( 479) ( 23)
---------- ----------
Net cash provided by operating
activities $1,197,390 $ 873,079
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 23,440) ($ 13,003)
---------- ----------
Net cash used by investing
activities ($ 23,440) ($ 13,003)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($1,201,911) ($ 796,751)
---------- ----------
Net cash used by financing
activities ($1,201,911) ($ 796,751)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ($ 27,961) $ 63,325
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 465,378 329,148
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 437,417 $ 392,473
========== ==========
The accompanying condensed notes are an integral part of these
combined financial statements.
-35-
GEODYNE ENERGY INCOME PROGRAM II LIMITED PARTNERSHIPS
CONDENSED NOTES TO THE COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
1. ACCOUNTING POLICIES
-------------------
The combined balance sheets as of September 30, 2006, combined statements
of operations for the three and nine months ended September 30, 2006 and
2005, and combined statements of cash flows for the nine months ended
September 30, 2006 and 2005 have been prepared by Geodyne Resources, Inc.,
the General Partner of the limited partnerships, without audit. Each
limited partnership is a general partner in the related Geodyne Production
Partnership in which Geodyne Resources, Inc. serves as the managing
partner. Unless the context indicates otherwise, all references to a
"Partnership" or the "Partnerships" are references to the limited
partnership and its related production partnership, collectively, and all
references to the "General Partner" are references to the general partner
of the limited partnerships and the managing partner of the production
partnerships, collectively. In the opinion of management the financial
statements referred to above include all necessary adjustments, consisting
of normal recurring adjustments, to present fairly the combined financial
position at September 30, 2006, the combined results of operations for the
three and nine months ended September 30, 2006 and 2005, and the combined
cash flows for the nine months ended September 30, 2006 and 2005.
Information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The accompanying interim
financial statements should be read in conjunction with the Partnerships'
Annual Report on Form 10-K filed for the year ended December 31, 2005. The
results of operations for the period ended September 30, 2006 are not
necessarily indicative of the results to be expected for the full year.
The Limited Partners' net income or loss per unit is based upon each $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.
-36-
The Partnerships are currently assessing the impact of FAS No. 157 on its
results of operations, financial condition and cash flows.
In September 2006, the SEC staff issued Staff Accounting Bulletin (SAB)
Topic 108, "Financial Statements - Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements" (SAB 108). The SEC staff is providing guidance on how prior
year misstatements should be taken into consideration when quantifying
misstatements in current year financial statements for purposes of
determining whether the current year's financial statements are materially
misstated and should be restated. SAB 108 is effective for fiscal years
ending after November 18, 2006, and early application is encouraged. The
Partnerships do not believe SAB 108 will have a material impact on its
results of operations, financial condition and cash flows.
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 II-A, II-D, II-E, II-F, II-G, and II-H
Partnerships sold their interests in a number of producing properties to
independent third parties at a large public oil and gas auction on October
11, 2006. It is anticipated that additional properties for all of the
Partnerships will be sold at auction in December 2006 and February 2007.
The following chart shows the number of properties anticipated to be sold
under the plan and their associated proved reserves as of September 30,
2006.
Number of Proved
Partnership Properties Reserves
----------- --------------- --------------
II-A 57 $ 5,214,000
II-B 41 2,133,000
II-C 14 182,000
II-D 8 1,476,000
II-E 260 3,485,000
II-F 258 7,916,000
II-G 258 16,583,000
II-H 258 3,853,000
-37-
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 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 $13,000, $7,000, $5,000, $3,000,
$20,000, $24,000, $54,000, and
-38-
$7,000 for the II-A, II-B, II-C, II-D, II-E, II-F, II-G, and II-H
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 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 II-A, II-B, II-C, II-D, II-E, II-F,
II-G, and II-H Partnerships recognized $72,000, $23,000, $10,000, $37,000,
$21,000, $14,000, $30,000 and $7,000 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.
-39-
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.
II-A Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $894,681 $400,259
Additions and revisions - 455,395
Settlements and disposals ( 1,343) -
Accretion expense 10,216 22,249
Discontinued operations ( 262,281) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $641,273 $877,903
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, January 1 $904,787 $393,670
Additions and revisions - 455,751
Settlements and disposals ( 32,600) ( 1,820)
Accretion expense 31,367 30,302
Discontinued operations ( 262,281) -
-------- --------
Total Asset Retirement
Obligation, End of Period $641,273 $877,903
======== ========
Asset Retirement Obligation -
Current $ 19,696 $ 16,851
Asset Retirement Obligation -
Long-Term 621,577 861,052
-40-
II-B Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $392,841 $213,451
Additions and revisions - 151,673
Accretion expense 4,416 8,229
Discontinued operations ( 146,136) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $251,121 $373,353
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, January 1 $383,886 $210,198
Additions and revisions - 151,673
Settlements and disposals - ( 987)
Accretion expense 13,371 12,469
Discontinued operations ( 146,136) -
-------- --------
Total Asset Retirement
Obligation, End of Period $251,121 $373,353
======== ========
Asset Retirement Obligation -
Current $ 11,980 $ 10,432
Asset Retirement Obligation -
Long-Term 239,141 362,921
-41-
II-C Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $144,300 $ 74,697
Additions and revisions - 78,750
Accretion expense 1,665 4,010
Discontinued operations ( 4,660) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $141,305 $157,457
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, January 1 $140,791 $ 73,574
Additions and revisions - 78,918
Settlements and disposals - ( 673)
Accretion expense 5,174 5,638
Discontinued operations ( 4,660) -
-------- --------
Total Asset Retirement
Obligation, End of Period $141,305 $157,457
======== ========
Asset Retirement Obligation -
Current $ 17,079 $ 11,137
Asset Retirement Obligation -
Long-Term 124,226 146,320
-42-
II-D Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $459,806 $192,966
Additions and revisions - 204,930
Accretion expense 2,847 10,394
Discontinued operations ( 43,125) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $419,528 $408,290
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, January 1 $448,613 $187,060
Additions and revisions - 206,692
Accretion expense 14,040 14,538
Discontinued operations ( 43,125) -
-------- --------
Total Asset Retirement
Obligation, End of Period $419,528 $408,290
======== ========
Asset Retirement Obligation -
Current $ 68,099 $ 24,499
Asset Retirement Obligation -
Long-Term 351,429 383,791
-43-
II-E Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $242,891 $104,945
Additions and revisions 9 102,471
Settlements and disposals ( 20) -
Accretion expense 2,883 5,289
Discontinued operations ( 107,875) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $137,888 $212,705
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, January 1 $237,057 $102,444
Additions and revisions 124 102,712
Settlements and disposals ( 225) -
Accretion expense 8,807 7,549
Discontinued operations ( 107,875) -
-------- --------
Total Asset Retirement
Obligation, End of Period $137,888 $212,705
======== ========
Asset Retirement Obligation -
Current $ 9,017 $ 1,198
Asset Retirement Obligation -
Long-Term 128,871 211,507
-44-
II-F Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $202,647 $105,266
Additions and revisions 20 101,329
Settlements and disposals ( 49) -
Accretion expense 2,434 5,325
Discontinued operations ( 82,764) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $122,288 $211,920
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ -----------
Total Asset Retirement
Obligation, January 1 $197,849 $102,318
Additions and revisions 300 101,914
Settlements and disposals ( 546) -
Accretion expense 7,449 7,688
Discontinued operations ( 82,764) -
-------- --------
Total Asset Retirement
Obligation, End of Period $122,288 $211,920
======== ========
Asset Retirement Obligation -
Current $ 3,358 $ 4,090
Asset Retirement Obligation -
Long-Term 118,930 207,830
-45-
II-G Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $434,243 $224,865
Additions and revisions 43 218,530
Settlements and disposals ( 98) -
Accretion expense 5,223 11,454
Discontinued operations ( 175,724) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $263,687 $454,849
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ -----------
Total Asset Retirement
Obligation, January 1 $424,043 $218,637
Additions and revisions 627 219,756
Settlements and disposals ( 1,134) -
Accretion expense 15,875 16,456
Discontinued operations ( 175,724) -
-------- --------
Total Asset Retirement
Obligation, End of Period $263,687 $454,849
======== ========
Asset Retirement Obligation -
Current $ 7,015 $ 8,752
Asset Retirement Obligation -
Long-Term 256,672 446,097
-46-
II-H Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Total Asset Retirement
Obligation, July 1 $105,899 $ 55,098
Additions and revisions 10 53,424
Settlements and disposals ( 22) -
Accretion expense 1,253 2,823
Discontinued operations ( 42,158) -
-------- --------
Total Asset Retirement
Obligation, End of Quarter $ 64,982 $111,345
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
----------- -----------
Total Asset Retirement
Obligation, January 1 $103,349 $ 53,561
Additions and revisions 145 53,708
Settlements and disposals ( 261) -
Accretion expense 3,907 4,076
Discontinued operations ( 42,158) -
-------- --------
Total Asset Retirement
Obligation, End of Period $ 64,982 $111,345
======== ========
Asset Retirement Obligation -
Current $ 1,623 $ 2,113
Asset Retirement Obligation -
Long-Term 63,359 109,232
-47-
2. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
The Partnerships' Partnership Agreements (the "Partnership Agreements")
provide for reimbursement to the General Partner for all direct general
and administrative expenses and for the general and administrative
overhead applicable to the Partnerships based on an allocation of actual
costs incurred. During the three months ended September 30, 2006, the
following payments were made to the General Partner or its affiliates by
the Partnerships:
Direct General Administrative
Partnership and Administrative Overhead
----------- ------------------ --------------
II-A $ 4,615 $127,443
II-B 3,716 95,190
II-C 2,203 40,689
II-D 3,376 82,863
II-E 2,745 60,216
II-F 2,326 45,105
II-G 3,796 97,944
II-H 1,740 24,135
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
----------- ------------------ --------------
II-A $43,126 $382,329
II-B 38,997 285,570
II-C 32,047 122,067
II-D 37,411 248,589
II-E 34,538 180,648
II-F 31,757 135,315
II-G 38,504 293,832
II-H 29,067 72,405
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.
-48-
3. DISCONTINUED OPERATIONS
-----------------------
During August 2006, the General Partner approved a plan to sell an
increased amount of the Partnerships' properties as a result of the
generally favorable current environment for oil and gas properties. On
October 11, 2006, the II-A, II-D, II-E, II-F, II-G, and II-H Partnerships
sold their interests in a number of producing properties at a large public
oil and gas auction which resulted in proceeds of approximately $43,000,
$49,000, $1,960,000, $4,449,000, $9,291,000, and $2,152,000 (net of fees),
respectively to these Partnerships. The sale resulted in a gain on
disposal of discontinued operations of approximately $52,000, $38,000,
$1,892,000, $4,283,000, $8,937,000 and $2,071,000, respectively, for these
Partnerships. It is anticipated that additional properties for all of the
Partnerships will be sold at auction in December 2006 and February 2007.
The properties sold in the October auction and those scheduled to be sold
in the December 2006 and February 2007 auction represent a disposal of a
business segment under Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assts" (FAS
144). Accordingly, current year results of these properties have been
classified as discontinued, and prior periods have been restated. In
conjunction with the planned sales, the Partnerships will retain all
assets and liabilities through the effective date of the sale and the
buyers will assume the asset retirement obligations associated with the
sold interests.
Net income from discontinued operations are as follows:
II-A Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $362,320 $393,950
Lease operating ( 66,963) ( 82,740)
Production tax ( 13,225) ( 14,832)
Depreciation, depletion, and
amortization of oil and gas
properties ( 2,814) ( 54,974)
Impairment provision ( 3,560) -
-------- --------
Income from discontinued
operations $275,758 $241,404
======== ========
-49-
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $976,615 $921,869
Lease operating ( 231,719) ( 230,895)
Production tax ( 33,384) ( 32,556)
Depreciation, depletion, and
amortization of oil and gas
properties ( 19,128) ( 68,723)
Impairment provision ( 3,560) -
-------- --------
Income from discontinued
operations $688,824 $589,695
======== ========
II-B Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $168,686 $212,198
Lease operating ( 38,041) ( 33,671)
Production tax ( 5,506) ( 8,180)
Depreciation, depletion, and
amortization of oil and gas
properties ( 1,574) ( 17,960)
Impairment provision ( 475) -
-------- --------
Income from discontinued
operations $123,090 $152,387
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $504,459 $507,897
Lease operating ( 130,920) ( 106,752)
Production tax ( 13,474) ( 16,055)
Depreciation, depletion, and
amortization of oil and gas
properties ( 7,361) ( 20,675)
Impairment provision ( 475) -
-------- --------
Income from discontinued
operations $352,229 $364,415
======== ========
-50-
II-C Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $ 23,015 $ 38,291
Lease operating ( 7,572) ( 3,144)
Production tax ( 1,827) ( 3,419)
Depreciation, depletion, and
amortization of oil and gas
properties ( 50) ( 930)
-------- --------
Income from discontinued
operations $ 13,566 $ 30,798
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $ 64,648 $ 78,971
Lease operating ( 14,099) ( 12,168)
Production tax ( 5,245) ( 6,807)
Depreciation, depletion, and
amortization of oil and gas
properties ( 452) ( 1,335)
-------- --------
Income from discontinued
operations $ 44,852 $ 58,661
======== ========
II-D Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $136,602 $140,736
Lease operating ( 75,226) ( 25,833)
Production tax ( 11,905) ( 13,243)
Depreciation, depletion, and
amortization of oil and gas
properties ( 295) ( 7,289)
-------- --------
Income from discontinued
operations $ 49,176 $ 94,371
======== ========
-51-
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $368,320 $346,158
Lease operating ( 133,216) ( 104,491)
Production tax ( 33,343) ( 32,291)
Depreciation, depletion, and
amortization of oil and gas
properties ( 2,604) ( 9,096)
-------- --------
Income from discontinued
operations $199,157 $200,280
======== ========
II-E Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $347,962 $336,832
Lease operating ( 24,378) ( 38,407)
Production tax ( 28,328) ( 23,746)
Depreciation, depletion, and
amortization of oil and gas
properties ( 1,292) ( 20,154)
Impairment provision ( 15,171) -
-------- --------
Income from discontinued
operations $278,793 $254,525
======== ========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $947,426 $ 862,409
Lease operating ( 103,214) ( 101,721)
Production tax ( 68,811) ( 65,245)
Depreciation, depletion, and
amortization of oil and gas
properties ( 33,166) ( 61,175)
Impairment provision ( 15,171) -
-------- ----------
Income from discontinued
operations $727,064 $ 634,268
======== ==========
-52-
II-F Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $ 631,946 $ 562,753
Lease operating ( 35,465) ( 40,316)
Production tax ( 43,473) ( 29,014)
Depreciation, depletion, and
amortization of oil and gas
properties ( 1,001) ( 14,572)
Impairment provision ( 50) -
-------- ----------
Income from discontinued
operations $ 551,957 $ 478,851
======== ==========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $1,723,757 $1,567,132
Lease operating ( 119,036) ( 94,959)
Production tax ( 99,202) ( 96,087)
Depreciation, depletion, and
amortization of oil and gas
properties ( 22,950) ( 34,748)
Impairment provision ( 50) -
---------- ----------
Income from discontinued
operations $1,482,519 $1,341,338
========== ==========
-53-
II-G Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $1,328,815 $1,265,147
Lease operating ( 74,585) ( 81,653)
Production tax ( 90,914) ( 66,479)
Depreciation, depletion, and
amortization of oil and gas
properties ( 2,118) ( 30,916)
Impairment provision ( 106) -
---------- ----------
Income from discontinued
operations $1,161,092 $1,086,099
========== ==========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $3,622,954 $3,307,345
Lease operating ( 250,477) ( 212,659)
Production tax ( 208,565) ( 201,716)
Depreciation, depletion, and
amortization of oil and gas
properties ( 54,120) ( 76,083)
Impairment provision ( 106) -
---------- ----------
Income from discontinued
operations $3,109,686 $2,816,887
========== ==========
-54-
II-H Partnership
----------------
Three Months Three Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $ 308,930 $ 294,120
Lease operating ( 17,421) ( 19,136)
Production tax ( 21,366) ( 15,567)
Depreciation, depletion, and
amortization of oil and gas
properties ( 496) ( 7,287)
Impairment provision ( 12) -
---------- ----------
Income from discontinued
operations $ 269,635 $ 252,130
========== ==========
Nine Months Nine Months
Ended Ended
9/30/2006 9/30/2005
------------ ------------
Oil and gas sales $840,476 $768,160
Lease operating ( 58,792) ( 48,535)
Production tax ( 48,706) ( 47,240)
Depreciation, depletion, and
amortization of oil and gas
properties ( 13,059) ( 18,052)
Impairment provision ( 12) -
-------- --------
Income from discontinued
operations $719,907 $654,333
======== ========
Assets of the discontinued operations for the nine months ended September 30,
2006 were as follows:
II-A
Partnership
-----------
Accounts receivable - oil and gas sales $ 112,979
Oil and gas properties 3,758,843
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 3,301,782)
----------
Net assets held for sale $ 570,040
==========
-55-
II-B
Partnership
-----------
Accounts receivable - oil and gas sales $ 108,316
Oil and gas properties 1,187,146
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 1,069,307)
----------
Net assets held for sale $ 226,155
==========
II-C
Partnership
------------
Accounts receivable - oil and gas sales $ 15,079
Oil and gas properties 490,856
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 484,215)
----------
Net assets held for sale $ 21,710
==========
II-D
Partnership
------------
Accounts receivable - oil and gas sales $ 95,027
Oil and gas properties 1,591,514
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 1,534,327)
----------
Net assets held for sale $ 152,214
==========
II-E
Partnership
------------
Accounts receivable - oil and gas sales $ 200,824
Oil and gas properties 3,359,030
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 3,109,907)
----------
Net assets held for sale $ 449,947
==========
-56-
II-F
Partnership
------------
Accounts receivable - oil and gas sales $ 382,391
Oil and gas properties 4,050,287
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 3,600,694)
----------
Net assets held for sale $ 831,984
==========
II-G
Partnership
------------
Accounts receivable - oil and gas sales $ 532,392
Oil and gas properties 8,522,222
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 7,586,057)
----------
Net assets held for sale $1,468,557
==========
II-H
Partnership
------------
Accounts receivable - oil and gas sales $ 182,768
Oil and gas properties 1,982,194
Accumulated depreciation, depletion,
and amortization of oil and
gas properties ( 1,763,611)
----------
Net assets held for sale $ 401,351
==========
-57-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
USE OF FORWARD-LOOKING STATEMENTS AND ESTIMATES
- -----------------------------------------------
This Quarterly Report contains certain forward-looking statements. The
words "anticipate", "believe", "expect", "plan", "intend", "estimate",
"project", "could", "may" and similar expressions are intended to identify
forward-looking statements. Such statements reflect management's current
views with respect to future events and financial performance. This
Quarterly Report also includes certain information, which is, or is based
upon, estimates and assumptions. Such estimates and assumptions are
management's efforts to accurately reflect the condition and operation of
the Partnerships.
Use of forward-looking statements and estimates and assumptions involve
risks and uncertainties which include, but are not limited to, the
volatility of oil and gas prices, the uncertainty of reserve information,
the operating risk associated with oil and gas properties (including the
risk of personal injury, death, property damage, damage to the well or
producing reservoir, environmental contamination, and other operating
risks), the prospect of changing tax and regulatory laws, the availability
and capacity of processing and transportation facilities, the general
economic climate, the supply and price of foreign imports of oil and gas,
the level of consumer product demand, and the price and availability of
alternative fuels. Should one or more of these risks or uncertainties
occur or should estimates or underlying assumptions prove incorrect,
actual conditions or results may vary materially and adversely from those
stated, anticipated, believed, estimated, and otherwise indicated.
DISCONTINUED OPERATIONS
- -----------------------
In October 2006, the II-A, II-D, II-E, II-F, II-G, and II-H Partnerships
sold their interests in a number of producing properties. This disposal
was treated as a discontinued operation. The sales proceeds consisting of
approximately $43,000, $49,000, $1,960,000, $4,449,000, $9,291,000 and
$2,152,000, respectively, were included in the November 15, 2006 cash
distributions paid by the Partnerships. The sale of these properties will
impact the continuing future operations of these Partnerships. The sale
resulted in a gain on disposal of discontinued operations of approximately
$52,000, $38,000, $1,892,000, $4,283,000, $8,937,000, and $2,071,000,
respectively, for these Partnerships. It is anticipated that these
Partnerships will have lower lease operating costs, lower oil and gas
sales, and a reduction in their asset retirement obligations. The reader
should refer to Note 3 - Discontinued Operations to the consolidated
-58-
financial statements included in Part I, Item 1 of this Quarterly Report
on Form 10-Q for additional information regarding this matter. 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.
GENERAL
- -------
The Partnerships are engaged in the business of acquiring and operating
producing oil and gas properties located in the continental United States.
In general, a Partnership acquired producing properties and did not engage
in development drilling or enhanced recovery projects, except as an
incidental part of the management of the producing properties acquired.
Therefore, the economic life of each Partnership, and its related
Production Partnership, is limited to the period of time required to fully
produce its acquired oil and gas reserves. The net proceeds from the oil
and gas operations are distributed to the Limited Partners and the General
Partner in accordance with the terms of the Partnership Agreements.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnerships began operations and investors were assigned their rights
as Limited Partners, having made capital contributions in the amounts and
on the dates set forth below:
Limited
Date of Partner Capital
Partnership Activation Contributions
----------- ------------------ ---------------
II-A July 22, 1987 $48,428,300
II-B October 14, 1987 36,171,900
II-C January 14, 1988 15,462,100
II-D May 10, 1988 31,487,800
II-E September 27, 1988 22,882,100
II-F January 5, 1989 17,140,000
II-G April 10, 1989 37,218,900
II-H May 17, 1989 9,171,100
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.
-59-
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, 2005, capital
expenditures for the II-B and II-C Partnerships totaled $91,000 and
$50,000, respectively. These expenditures were primarily due to the
recompletion of the Berniece #1 well located in Grayson County, Texas. The
II-B and II-C Partnerships own working interests of 35.2% and 15.1% in
this well. 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 Partnerships Agreements, the Partnerships
would have terminated on December 31, 2001. However, the Partnership
Agreements provide that the General Partner may extend the term of each
Partnership for up to five periods of two years each. The General Partner
has extended the terms of the Partnerships for their third two-year
extension thereby extending their termination date to 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.
-60-
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 $13,000, $7,000, $5,000, $3,000,
$20,000, $24,000, $54,000, and $7,000 for the II-A, II-B, II-C, II-D,
II-E, II-F, II-G, and II-H 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
-61-
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
-62-
will 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.
-63-
II-A Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 687,366 6,367,741
Production ( 13,534) ( 149,109)
Extensions and discoveries 13 697
Revisions of previous
estimates 4,507 ( 86,846)
------- ---------
Proved reserves, March 31, 2006 678,352 6,132,483
Production ( 13,707) ( 144,712)
Extensions and discoveries 24,114 1,085
Revisions of previous
estimates 44,825 401,616
------- ---------
Proved reserves, June 30, 2006 733,584 6,390,472
Production of continuing
operations ( 8,139) ( 130,312)
Production of discontinued
operations ( 4,285) ( 14,220)
Extensions and discoveries - 35,080
Discontinued operations (306,893) ( 528,897)
Revisions of previous
estimates ( 36,696) ( 378,158)
------- ---------
Proved reserves, Sept. 30, 2006 377,571 5,373,965
======= =========
-64-
II-B Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 489,229 4,776,281
Production ( 8,876) ( 133,571)
Revisions of previous
estimates 2,559 ( 54,105)
------- ---------
Proved reserves, March 31, 2006 482,912 4,588,605
Production ( 9,202) ( 119,069)
Extensions and discoveries - 334
Revisions of previous
estimates 31,353 458,982
------- ---------
Proved reserves, June 30, 2006 505,063 4,928,852
Production of continuing
operations ( 5,817) ( 113,458)
Production of discontinued
operations ( 2,147) ( 6,694)
Discontinued operations (119,276) ( 75,300)
Revisions of previous
estimates ( 19,876) ( 276,522)
------- ---------
Proved reserves, Sept. 30, 2006 357,947 4,456,878
======= =========
-65-
II-C Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 173,409 3,545,913
Production ( 2,967) ( 77,245)
Extension and discoveries 5 209
Revisions of previous
estimates 211 ( 52,254)
------- ---------
Proved reserves, March 31, 2006 170,658 3,416,623
Production ( 3,346) ( 72,804)
Extension and discoveries 752 873
Revisions of previous
estimates 7,469 225,734
------- ---------
Proved reserves, June 30, 2006 175,533 3,570,426
Production of continuing
operations ( 2,703) ( 71,424)
Production of discontinued
operations ( 145) ( 2,669)
Extension and discoveries - 81
Discontinued operations ( 6,854) ( 36,003)
Revisions of previous
estimates ( 6,862) ( 196,581)
------- ---------
Proved reserves, Sept. 30, 2006 158,969 3,263,830
======= =========
-66-
II-D Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 172,825 9,645,488
Production ( 4,603) ( 171,389)
Extensions and discoveries 46 2,722
Revisions of previous
estimates 55 ( 229,517)
------- ---------
Proved reserves, March 31, 2006 168,323 9,247,304
Production ( 4,638) ( 163,108)
Extensions and discoveries 7,906 20,010
Revisions of previous
estimates 17,160 35,647
------- ---------
Proved reserves, June 30, 2006 188,751 9,139,853
Production of continuing
operations ( 3,380) ( 166,259)
Production of discontinued
operations ( 1,508) ( 7,433)
Extensions and discoveries - 19,823
Discontinued operations ( 73,121) ( 374,600)
Revisions of previous
estimates ( 11,101) ( 543,965)
------- ---------
Proved reserves, Sept. 30, 2006 99,641 8,067,419
======= =========
-67-
II-E Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 177,992 5,039,155
Production ( 4,094) ( 109,081)
Extensions and discoveries 155 2,107
Revisions of previous
estimates 768 ( 94,600)
------- ---------
Proved reserves, March 31, 2006 174,821 4,837,581
Production ( 4,484) ( 102,804)
Extensions and discoveries 1,832 19,116
Revisions of previous
estimates 32,236 124,812
------- ---------
Proved reserves, June 30, 2006 204,405 4,878,705
Production of continuing
operations ( 1,074) ( 78,777)
Production of discontinued
operations ( 3,666) ( 18,026)
Extensions and discoveries 353 2,119
Discontinued operations (140,973) ( 684,445)
Revisions of previous
estimates ( 10,101) ( 381,981)
------- ---------
Proved reserves, Sept. 30, 2006 48,944 3,717,595
======= =========
-68-
II-F Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 337,510 3,552,595
Production ( 6,255) ( 91,668)
Extension and discoveries 374 2,153
Revisions of previous
estimates 1,015 ( 55,887)
------- ---------
Proved reserves, March 31, 2006 332,644 3,407,193
Production ( 6,293) ( 91,531)
Extension and discoveries 2,288 27,225
Revisions of previous
estimates 60,592 245,938
------- ---------
Proved reserves, June 30, 2006 389,231 3,588,825
Production of continuing
operations ( 852) ( 57,145)
Production of discontinued
operations ( 6,173) ( 37,918)
Discontinued operations (327,363) (1,136,121)
Revisions of previous
estimates ( 15,197) ( 289,912)
------- ---------
Proved reserves, Sept. 30, 2006 39,646 2,067,729
======= =========
-69-
II-G Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 707,731 7,611,607
Production ( 13,106) ( 195,575)
Extension and discoveries 776 3,823
Revisions of previous
estimates 2,121 ( 121,814)
------- ---------
Proved reserves, March 31, 2006 697,522 7,298,041
Production ( 13,211) ( 198,058)
Extension and discoveries 4,780 57,036
Revisions of previous
estimates 126,560 527,181
------- ---------
Proved reserves, June 30, 2006 815,651 7,684,200
Production of continuing
operations ( 1,789) ( 122,980)
Production of discontinued
operations ( 12,943) ( 79,944)
Discontinued operations (684,306) (2,397,259)
Revisions of previous
estimates ( 31,839) ( 622,129)
------- ---------
Proved reserves, June 30, 2006 84,774 4,461,888
======= =========
-70-
II-H Partnership
----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 2005 164,943 1,840,781
Production ( 2,980) ( 46,838)
Extension and discoveries 182 1,168
Revisions of previous
estimates 421 ( 30,108)
------- ---------
Proved reserves, March 31, 2006 162,566 1,765,003
Production ( 3,053) ( 46,733)
Extension and discoveries 1,105 13,216
Revisions of previous
estimates 29,293 124,372
------- ---------
Proved reserves, June 30, 2006 189,911 1,855,858
Production of continuing
operations ( 423) ( 29,946)
Production of discontinued
operations ( 2,991) ( 18,762)
Discontinued operations (158,603) ( 564,537)
Revisions of previous
estimates ( 7,371) ( 150,918)
------- ---------
Proved reserves, Sept. 30, 2006 20,523 1,091,695
======= =========
The net present value of the Partnerships' reserves may change
dramatically as oil and gas prices change or as volumes change for the
reasons described above. Net present value represents estimated future
gross cash flow from the production and sale of proved reserves, net of
estimated oil and gas production costs (including production taxes, ad
valorem taxes, and operating expenses) and estimated future development
costs, discounted at 10% per annum.
The following table indicates the estimated net present value of the
Partnerships' proved reserves as of September 30, 2006, June 30, 2006,
March 31, 2006, and December 31, 2005. Net present value attributable to
the Partnerships' proved reserves was calculated on the basis of current
costs and prices as of the date of estimation. Such prices were not
escalated except in certain circumstances where escalations were fixed and
readily determinable in accordance with applicable contract provisions.
The table also indicates the oil and gas prices in effect on the dates
corresponding to the reserve valuations. Changes in oil and gas prices
cause the estimates of remaining economically recoverable reserves, as
well as the values placed on said
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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
----------- ------- ------- ------- --------
II-A $15,334 $30,013 $29,645 $ 36,701
II-B 12,545 21,453 20,510 25,757
II-C 7,643 11,891 12,442 16,799
II-D 15,008 26,128 29,594 41,793
II-E 6,603 15,191 15,738 21,072
II-F 3,482 16,784 15,861 19,777
II-G 7,505 35,516 33,654 42,092
II-H 1,832 8,402 8,002 10,059
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.
-72-
Additionally, lower prices may reduce the amount of oil and gas that is
economic to produce and reduce the Partnerships' revenues and cash flow.
Various factors beyond the Partnerships' control will affect prices for
oil and natural gas, such as:
* Worldwide and domestic supplies of oil and natural gas;
* The ability of the members of the Organization of Petroleum
Exporting Countries ("OPEC") to agree to and maintain oil
prices and production quotas;
* Political instability or armed conflict in oil-producing
regions or around major shipping areas;
* The level of consumer demand and overall economic activity;
* The competitiveness of alternative fuels;
* Weather conditions and the impact of weather-related events;
* The availability of pipelines for transportation;
* Domestic and foreign government regulations and taxes; and
* Market expectations.
It is not possible to predict the future direction of oil or natural gas
prices or whether the above discussed trends will continue. Operating
costs, including General and Administrative Expenses, may not decline over
time, may increase, or may experience only a gradual decline, thus
adversely affecting net revenues. Net revenues may also be affected by
proceeds from property sales or additional costs resulting from well
workovers, recompletions, new well drilling, and other events.
In addition to pricing, the level of net revenues is highly dependent upon
the total volumes of oil and natural gas sold. Oil and gas reserves are
depleting assets and will experience production declines over time,
thereby likely resulting in reduced net revenues. Despite this general
trend of declining production, several factors can cause volumes sold to
increase, remain relatively constant, or decrease at an even greater rate
over a given period. These factors include, but are not limited to:
* Geophysical conditions which cause an acceleration of the
decline in production;
* The shutting in of wells due to low oil and gas prices (or the
opening of previously shut-in wells due to high oil and gas
prices), mechanical difficulties, loss of a
market/transportation, or performance of workovers,
recompletions, or other operations in the well;
* Prior period volume adjustments made by the operators of
the properties;
* Adjustments in ownership or rights to production (such as
adjustments that occur at payout or due to gas balancing);
and
-73-
* 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.
II-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 $1,430,163 $1,654,121
Oil and gas production expenses $ 111,711 $ 334,764
Barrels produced 8,139 10,257
Mcf produced 130,312 129,401
Average price/Bbl $ 67.62 $ 61.02
Average price/Mcf $ 6.75 $ 7.95
(a) The foregoing chart and the following discussion contain amounts for
the year 2005 which have been restated to reflect the Partnership's assets
held for sale as discontinued operations. See Part I, Item 2 -
Discontinued Operations for more information about these discontinued
operations.
As shown in the table above, total oil and gas sales decreased $224,000
(13.5%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease (i) $156,000 was
related to a decrease in the average price of gas sold and (ii) $129,000
was related to a decrease in volumes of oil sold. These decreases were
partially offset by an increase of $54,000 related to an increase in the
average price of oil sold.
Volumes of oil sold decreased 2,118 barrels, while volumes of gas sold
increased 911 Mcf for the three months ended September 30, 2006 as
compared to the three months ended September 30, 2005. The decrease in
volumes of oil sold was primarily due to normal declines in production.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $223,000 (66.6%) for the three months ended
September 30, 2006 as compared to the three months ended September 30,
2005. This decrease was primarily due to (i) the receipt of a $263,000
lease operating expense credit resulting from the settlement of a class
action lawsuit on several wells during the three months ended September
30, 2006 and (ii) a decrease in production taxes associated with the
decrease in oil and gas
-74-
sales. These decreases were partially offset by an increase in workover
expenses. As of the date of this Quarterly Report, management anticipates
workover costs remaining at or increasing above 2006 levels due to the
increased cost to perform a workover and the age of the wellbores. As a
percentage of oil and gas sales, these expenses decreased to 7.8% for the
three months ended September 30, 2006 from 20.2% 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 decreased $41,000 (35.0%) for the three months ended September
30, 2006 as compared to the three months ended September 30, 2005. This
decrease was primarily due to (i) several wells being fully depleted
during 2005 due to their lack of remaining reserves and (ii) the decrease
in volumes of oil sold. The decreases in DD&A were partially offset by one
significant well being fully depleted during the three months ended
September 30, 2006 due to its lack of remaining reserves. As a percentage
of oil and gas sales, this expense decreased to 5.3% for the three months
ended September 30, 2006 from 7.0% for the three months ended September
30, 2005, primarily due to the dollar decrease in DD&A.
The II-A 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 $2,000 (1.3%) 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 9.2% for the three months ended September 30, 2006 from 8.1%
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 II-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.
-75-
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 $4,482,265 $4,561,548
Oil and gas production expenses $ 929,559 $ 907,296
Barrels produced 27,919 32,094
Mcf produced 397,527 426,611
Average price/Bbl $ 65.30 $ 53.33
Average price/Mcf $ 6.69 $ 6.68
(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 $79,000
(1.7%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this decrease $223,000 and
$194,000 were related to decreases in volumes of oil and gas sold. These
decreases were partially offset by an increase of $334,000 related to an
increase in the average price of oil sold.
Volumes of oil and gas sold decreased 4,175 barrels and 29,084 Mcf for the
nine months ended September 30, 2006 as compared to the nine months ended
September 30, 2005. The decrease in volumes of oil sold was primarily due
to normal declines in production. This decrease was partially offset by
(i) a negative prior period volume adjustment made by the operator on one
significant well during the nine months ended September 30, 2005 and (ii)
increases in production on two significant wells following their
successful workovers during late 2005. The decrease in volumes of gas sold
was primarily due to (i) normal declines in production and (ii) positive
prior period volume adjustments made by the operators on several wells
during the nine months ended September 30, 2005. The decreases in volumes
of gas sold were partially offset by (i) increases in production on
several wells following their successful workovers during mid to late 2005
and early 2006, (ii) the successful completion of two significant wells
during mid 2006, and (iii) another well returning to production during mid
2005 following the resolution of transportation problems associated with
line pressure.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $22,000 (2.5%) 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 workover
expenses, (ii) a $57,000 increase in lease operating expenses during the
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nine months ended September 30, 2006 resulting from an increase in the
II-A Partnership's gas balancing position on several wells, and (iii) a
reversal during the nine months ended September 30, 2005 of $27,000 of a
charge previously accrued for a judgment. As of the date of this Quarterly
Report, management anticipates workover costs remaining at or increasing
above 2006 levels due to the increased cost to perform a workover and the
age of the wellbores. These increases were partially offset by the receipt
of a $263,000 lease operating expense credit resulting from the settlement
of a class action lawsuit on several other wells during the nine months
ended September 30, 2006. As a percentage of oil and gas sales, these
expenses increased to 20.7% for the nine months ended September 30, 2006
from 19.9% for the nine months ended September 30, 2005.
DD&A of oil and gas properties decreased $51,000 (22.2%) for the nine
months ended September 30, 2006 as compared to the nine months ended
September 30, 2005. This decrease was primarily due to (i) several wells
being fully depleted during 2005 due to their lack of remaining reserves,
(ii) the decreases in volumes of oil and gas sold, and (iii) an increase
in depletable oil and gas properties during 2005 primarily due to the
recompletion of one significant well. The decreases in DD&A were partially
offset by downward revisions in the estimates of remaining gas reserves
since September 30, 2005. As a percentage of oil and gas sales, this
expense decreased to 4.0% for the nine months ended September 30, 2006
from 5.0% for the nine months ended September 30, 2005, primarily due to
the dollar decrease in DD&A.
The II-A 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 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 9.5% for the nine months ended
September 30, 2006 from 9.3% for the nine months ended September 30, 2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the II-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 $68,788,357 or 142.04% of Limited Partners' capital
contributions.
-77-
II-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 $1,121,924 $1,328,591
Oil and gas production expenses $ 312,482 $ 283,067
Barrels produced 5,817 6,880
Mcf produced 113,458 119,485
Average price/Bbl $ 69.39 $ 61.23
Average price/Mcf $ 6.33 $ 7.59
(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 $207,000
(15.6%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease (i) $143,000 was
related to a decrease in the average price of gas sold and (ii) $65,000
and $46,000 were related to decreases in volumes of oil and gas sold.
These decreases were partially offset by an increase of $47,000 related to
an increase in volumes of oil sold.
Volumes of oil and gas sold decreased 1,063 barrels and 6,027 Mcf for the
three months ended September 30, 2006 as compared to the three months
ended September 30, 2005, primarily due to normal declines in production.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $29,000 (10.4%) 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) an increase in workover
expenses and (ii) an increase in saltwater disposal expenses incurred on
two significant wells during the three months ended September 30, 2006 as
compared to the same period 2005. As of the date of this Quarterly Report,
management anticipates (i) workover costs remaining at or increasing above
2006 levels due to the increased cost to perform a workover and the age of
the wellbores and (ii) the saltwater disposal expenses to remain at 2006
levels. These increases were partially offset by a decrease in production
taxes associated with the decrease in oil and gas sales. As a percentage
of oil and gas sales, these expenses increased to 27.9% for the three
months ended September 30, 2006 from 21.3% for the three months ended
September 30, 2005. This percentage increase was primarily due to (i) the
decrease in
-78-
oil and gas sales and (ii) the dollar increase in oil and gas
production expenses.
DD&A of oil and gas properties decreased $16,000 (19.7%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. This decrease was primarily due to (i) several wells
being fully depleted during 2005 due to their lack of remaining reserves
and (ii) the decreases in volumes of oil and gas sold. The decreases in
DD&A were partially offset by one significant well being fully depleted
during the three months ended September 30, 2006 due to its lack of
remaining reserves. As a percentage of oil and gas sales, this expense
decreased to 5.8% for the three months ended September 30, 2006 from 6.1%
for the three months ended September 30, 2005.
The II-B Partnership recognized a non-cash charge against earnings of
$7,000 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 (1.4%) 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 8.8% for the three months ended September 30, 2006 from 7.5%
for the three 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 II-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 $3,580,179 $3,522,701
Oil and gas production expenses $ 938,030 $ 762,583
Barrels produced 19,448 23,628
Mcf produced 356,669 353,586
Average price/Bbl $ 65.99 $ 52.29
Average price/Mcf $ 6.44 $ 6.47
(a) The forgoing 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
-79-
Operations for more information about these discontinued operations.
As shown in the table above, total oil and gas sales increased $57,000
(1.6%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this increase (i) $266,000 were
related to an increase in the average price of oil sold and (ii) $20,000
was related to an increase in volumes of gas sold. These increases were
partially offset by (i) $219,000 related to a decrease in volumes of oil
sold and (ii) $10,000 related to a decrease in the average price of gas
sold.
Volumes of oil sold decreased 4,180 barrels, while volumes of gas sold
increased 3,083 Mcf for the nine months ended September 30, 2006 as
compared to the nine months ended September 30, 2005. The decrease in
volumes of oil sold was primarily due to normal declines in production.
The increase in volumes of gas sold was primarily due to (i) one
significant well returning to production during mid 2005 following the
resolution of transportation problems associated with line pressure and
(ii) an increase in production on two significant wells following the
successful workovers of those wells during mid 2005 and early 2006. These
increases in volumes of gas sold were partially offset by normal declines
in production.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $175,000 (23.0%) 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 workover
expenses, (ii) a $45,000 increase in lease operating expense during the
nine months ended September 30, 2006 resulting from an increase in the
II-B Partnership's gas balancing position on several wells, and (iii) an
increase in saltwater disposal expenses incurred on two significant wells
during the nine months ended September 30, 2006. As of the date of this
Quarterly Report, management anticipates (i) workover costs remaining at
or increasing above 2006 levels due to the increased cost to perform a
workover and the age of the wellbores and (ii) the saltwater disposal
expenses to remain at 2006 levels. As a percentage of oil and gas sales,
these expenses increased to 26.2% for the nine months ended September 30,
2006 from 21.6% 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 $70,000 (34.9%) 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) an increase in
depletable oil and gas properties during 2005 primarily due to the
recompletion of one significant well, (ii) several wells being fully
depleted during 2005 due to their lack of remaining reserves, and (iii)
the decrease in volumes of oil sold. As a percentage of oil and gas sales,
this expense decreased to
-80-
3.6% for the nine months ended September 30, 2006 from 5.7% for the nine
months ended September 30, 2005 primarily due to the dollar decrease in
DD&A.
The II-B Partnership recognized a non-cash charge against earnings of
$7,000 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 9.1% for the nine months ended
September 30, 2006 from 9.2% for the nine months ended September 30, 2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the II-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 $49,710,916 or 137.43% of Limited Partners' capital
contributions.
II-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 $635,539 $713,887
Oil and gas production expenses $157,325 $142,569
Barrels produced 2,703 3,130
Mcf produced 71,424 69,717
Average price/Bbl $ 68.97 $ 61.26
Average price/Mcf $ 6.29 $ 7.49
(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 $78,000
(11.0%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease (i) $26,000
related to a decrease in the volumes of oil sold and (ii) $86,000
-81-
related to a decrease in the average price of gas sold. These decreases
were partially offset by increases of (i) $21,000 related to an increase
in the volumes of gas sold and (ii) $13,000 related to an increase in the
average price of oil sold.
Volumes of oil sold decreased 427 barrels, while volumes of gas sold
increased 1,707 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 workover of that
well during late 2005. This well is not expected to return to its
previously high levels of production. The increase in volumes of gas sold
was primarily due to (i) increases in production on several wells
following their successful workovers during 2005 and early 2006 and (ii) a
positive prior period volume adjustment made by the operator on one
significant well during the three months ended September 30, 2006. These
increases were partially offset by normal declines in production.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $15,000 (10.4%) 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) an increase in workover
expenses and (ii) an increase in saltwater disposal expenses incurred on
two significant wells during the three months ended September 30, 2006. As
of the date of this Quarterly Report, management anticipates (i) workover
costs remaining at or increasing above 2006 levels due to the increased
cost to perform a workover and the age of the wellbores and (ii) the
saltwater disposal expenses to remain at 2006 levels. As a percentage of
oil and gas sales, these expenses increased to 24.8% for the three months
ended September 30, 2006 from 20.0% for the three months ended September
30, 2005, primarily due to the decrease in oil and gas sales and the
dollar increase in oil and gas production expenses.
DD&A of oil and gas properties increased $7,000 (16.5%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. This increase was primarily due to two significant
wells being fully depleted during the three months ended September 30,
2006 due to their lack of remaining reserves. The 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 7.5% for the three months ended September 30,
2006 from 5.7% for the three months ended September 30, 2005, primarily
due to the dollar increase in DD&A and the decrease in oil and gas sales.
-82-
The II-C Partnership recognized a non-cash charge against earnings of
$5,000 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 (1.7%) 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 6.1%
for the three months ended September 30, 2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the II-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
---------- ----------
Oil and gas sales $1,962,501 $1,975,481
Oil and gas production expenses $ 476,510 $ 360,948
Barrels produced 8,771 10,795
Mcf produced 217,049 221,031
Average price/Bbl $ 65.95 $ 51.92
Average price/Mcf $ 6.38 $ 6.40
(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 remained relatively
constant for the nine months ended September 30, 2006 and 2005. Decreases
of (i) $105,000 and $25,000 related to decreases in the volumes of oil and
gas sold and (ii) $5,000 related to a decrease in the average price of gas
sold were substantially offset by an increase of $123,000 related to an
increase in the average price of oil sold.
Volumes of oil and gas sold decreased 2,024 barrels and 3,982 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, (ii) a positive prior period
-83-
volume adjustment made by the operator on one significant well during the
nine months ended September 30, 2005, and (iii) the shutting-in of two
significant wells during the nine months ended September 30, 2006 in order
to perform repairs and maintenance. As of the date of this Quarterly
Report, the shut-in wells are producing at a lower rate than previously
experienced. The decrease in volumes of gas sold was primarily due to
normal declines in production. This decrease was partially offset by (i)
increases in production on several wells following their successful
workovers during 2005 and early 2006 and (ii) a positive prior period
volume adjustment made by the operator on one significant well during the
nine months ended September 30, 2006.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $116,000 (32.0%) 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 workover
expenses, (ii) a $26,000 decrease in lease operating expenses during the
nine months ended September 30, 2005 resulting from a decrease in the II-C
Partnership's gas balancing position on several wells, and (iii) a $20,000
increase in lease operating expenses during the nine months ended
September 30, 2006 resulting from an increase in the II-C Partnership's
gas balancing position on several other wells. As of the date of this
Quarterly Report, management anticipates workover costs remaining at or
increasing above 2006 levels due to the increased cost to perform a
workover and the age of the wellbores. As a percentage of oil and gas
sales, these expenses increased to 24.3% for the nine months ended
September 30, 2006 from 18.3% 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 $8,000 (9.3%) for the nine months
ended September 30, 2006 as compared to the nine months ended September
30, 2005. This decrease resulted from (i) several wells being fully
depleted during 2005 due to their lack of remaining reserves and (ii) an
increase in depletable oil and gas properties during 2005 primarily due to
the recompletion of one significant well. As a percentage of oil and gas
sales, this expense decreased to 4.1% for the nine months ended September
30, 2006 from 4.5% for the nine months ended September 30, 2005.
The II-C Partnership recognized a non-cash charge against earnings of
$5,000 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
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increased to 7.9% 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 II-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.
The Limited Partners have received cash distributions through September
30, 2006 totaling $23,706,686 or 153.32% of Limited Partners' capital
contributions.
II-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 $1,245,970 $1,382,526
Oil and gas production expenses $ 277,707 $ 270,166
Barrels produced 3,380 3,539
Mcf produced 166,259 163,567
Average price/Bbl $ 65.37 $ 55.83
Average price/Mcf $ 6.17 $ 7.24
(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 $137,000
(9.9%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease $179,000 was
related to a decrease in the average price of gas sold. This decrease was
partially offset by increases of (i) $32,000 related to an increase in the
average price of oil sold and (ii) $20,000 related to an increase in
volumes of gas sold.
Volumes of oil and gas sold decreased 159 barrels while volumes of gas
sold increased 2,692 Mcf for the three months ended September 30, 2006 as
compared to the three months ended September 30, 2005. The decrease in
volumes of oil sold was primarily due to normal declines in production.
The increase in volumes of gas sold was primarily due to (i) an increase
in production on two significant wells following their successful
recompletions during mid 2006 and (ii) the successful completion of
several new wells during the three months ended September 30, 2006.
-85-
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $8,000 (2.8%) 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 workover expenses.
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) the receipt of a $17,000 lease operating expense
credit resulting from the settlement of a class action lawsuit on one
significant well during the three months ended September 30, 2006 and (ii)
a decrease in production taxes associated with the decrease in oil and gas
sales. As a percentage of oil and gas sales, these expenses increased to
22.3% for the three months ended September 30, 2006 from 19.5% for the
three months ended September 30, 2005. This percentage increase was
primarily due to the increase in oil and gas sales.
DD&A of oil and gas properties increased $155,000 (211.2%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. This increase was primarily due to two significant
wells being fully depleted during the three months ended September 30,
2006 due to their lack of remaining reserves. This increase 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 18.3% for the three months ended September 30, 2006 from 5.3%
for the three months ended September 30, 2005, primarily due to the dollar
increase in DD&A.
The II-D Partnership recognized a non-cash charge against earnings of
$3,000 during the three months ended September 30, 2006. This charge was
related to the decline in oil and gas prices used to determine
recoverability of oil and gas reserves at September 30, 2006. No such
charge was incurred during the three months ended September 30, 2005.
General and administrative expenses decreased $1,000 (1.4%) 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 6.3%
for the three months ended September 30, 2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the II-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.
-86-
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 $3,690,710 $3,896,469
Oil and gas production expenses $ 795,521 $ 731,083
Barrels produced 10,065 12,125
Mcf produced 487,474 510,943
Average price/Bbl $ 61.23 $ 49.05
Average price/Mcf $ 6.31 $ 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 decreased $206,000
(5.3%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this decrease (i) $101,000 and
$152,000 were related to decreases in volumes of oil and gas sold and (ii)
$76,000 was related to a decrease in the average price of gas sold. These
decreases were partially offset by increases of $123,000 related to an
increase in the average price of oil sold.
Volumes of oil and gas sold decreased 2,060 barrels and 23,469 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) positive prior period volume
adjustments made by the operators on several wells during the nine months
ended September 30, 2005. The decrease in volumes of gas sold was
primarily due to (i) normal declines in production, (ii) the shutting-in
of one significant well due to production difficulties, and (iii) a
substantial decline in production on one significant well following a
workover of that well during early 2005. 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 well with a substantial decline in production is not expected to
return to its previously high levels of production. The decreases in
volumes of gas sold were partially offset by (i) increases in production
on several wells following their successful recompletion during 2005 and
mid 2006 and (ii) the successful completion of several new wells during
the nine months ended September 30, 2006.
-87-
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $64,000 (8.8%) 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) an increase in workover
expenses, (ii) a $35,000 increase in lease operating expenses during the
nine months ended September 30, 2006 resulting from an increase in the
II-D Partnership's gas balancing position on several wells, and (iii) a
$33,000 decrease in lease operating expenses during the nine months ended
September 30, 2005 resulting from a decrease in the II-D Partnership's gas
balancing position on several other wells. 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) the receipt of a $17,000 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. As
a percentage of oil and gas sales, these expenses increased to 21.6% for
the nine months ended September 30, 2006 from 18.8% for the nine months
ended September 30, 2005, primarily due to the dollar increase in oil and
gas production expenses and the decrease in oil and gas sales
DD&A of oil and gas properties increased $208,000 (185.2%) 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) two significant
wells being fully depleted during the nine months ended September 30, 2006
due to their lack of remaining reserves and (ii) the receipt of equipment
credits on an abandoned well during the nine months ended September 30,
2005. These increases were 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 8.7% for the
nine months ended September 30, 2006 from 2.9% for the nine months ended
September 30, 2005, primarily due to the dollar increase in DD&A.
The II-D Partnership recognized a non-cash charge against earnings of
$3,000 during the nine months ended September 30, 2006. This charge was
related to the decline in oil and gas prices used to determine
recoverability of oil and gas reserves at September 30, 2006. No such
charge was incurred during the nine months ended September 30, 2005.
General and administrative expenses 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 7.7% for the nine months ended
September 30, 2006 from 7.3% for the nine months ended September 30, 2005.
-88-
As further discussed in Part I, Item 2 - Discontinued Operations, the II-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 $49,518,903 or 157.26% of Limited Partners' capital
contributions.
II-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 $547,648 $630,124
Oil and gas production expenses $200,856 $128,890
Barrels produced 1,074 932
Mcf produced 78,777 74,925
Average price/Bbl $ 67.12 $ 63.16
Average price/Mcf $ 6.04 $ 7.62
(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 $82,000
(13.1%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease $125,000 was
related to a decrease in the average price of gas sold. This decrease was
partially offset by increases of $9,000 and $29,000 related to increases
in volumes of oil and gas sold.
Volumes of oil and gas sold increased 142 barrels and 3,852 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) the successful completion of several new wells during
late 2005 and (ii) an increase in production on one significant well
following its successful recompletion during early 2006. These increases
were partially offset by normal declines in production. The increase in
volumes of gas sold was primarily due to (i) an increase in production on
two significant wells following their successful recompletions during
early 2006, (ii) the successful completion of several new wells during
early 2006, and (iii) an increase in production on one significant well
following its successful
-89-
workover 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 $72,000 (55.8%) 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 workover expenses.
As of the date of this Quarterly Report, management anticipates workover
costs remaining at or increasing above 2006 levels due to the increased
cost to perform a workover and the age of the wellbores. As a percentage
of oil and gas sales, these expenses increased to 36.7% for the three
months ended September 30, 2006 from 20.5% for the three months ended
September 30, 2005, primarily due to the dollar increase in production
expenses.
DD&A of oil and gas properties decreased $7,000 (19.5%) 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) an increase in depletable oil
and gas properties during 2005 primarily due to the recompletion of one
significant well. These decreases were partially offset by the increases
in volumes of oil and gas sold. As a percentage of oil and gas sales, this
expense decreased to 5.4% for the three months ended September 30, 2006
from 5.8% for the three months ended September 30, 2005.
The II-E Partnership recognized a non-cash charge against earnings of
$20,000 during the three months ended September 30, 2006. This charge was
related to the decline in oil and gas prices used to determine
recoverability of oil and gas reserves at September 30, 2006. No such
charge was incurred during the three months ended September 30, 2005.
General and administrative expenses decreased $1,000 (1.5%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. As a percentage of oil and gas sales, these expenses
increased to 11.5% for the three months ended September 30, 2006 from
10.1% 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 II-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.
-90-
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 $1,804,494 $1,647,850
Oil and gas production expenses $ 514,023 $ 333,272
Barrels produced 3,316 3,469
Mcf produced 255,968 221,571
Average price/Bbl $ 64.35 $ 51.79
Average price/Mcf $ 6.22 $ 6.63
(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 $157,000
(9.5%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this increase (i) $228,000 was
related to an increase in volumes of gas sold and (ii) $42,000 was related
to an increase in the average price of oil sold. These increases were
partially offset by a decrease of $105,000 related to a decrease in the
average price of gas sold.
Volumes of oil sold decreased 153 barrels, while volumes of gas sold
increased 34,397 Mcf for the nine months ended September 30, 2006 as
compared to the nine months ended September 30, 2005. The increase in
volumes of gas sold was primarily due to (i) one significant well
returning to production during mid 2005 following the resolution of
transportation problems associated with line pressure, (ii) an increase in
production on two significant wells following their successful
recompletions during early 2006, and (iii) the successful completion of
several new wells 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 $181,000 (54.2%) 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 workover
expenses, (ii) a $46,000 increase in lease operating expenses during the
nine months ended September 30, 2006 resulting from an increase in the
II-E Partnership's gas balancing position on several wells, 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
-91-
of the wellbores. As a percentage of oil and gas sales, these expenses
increased to 28.5% for the nine months ended September 30, 2006 from 20.2%
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 $1,000 (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 and (ii) an increase in depletable oil and gas
properties during 2005 primarily due to the recompletion of one
significant well. These decreases were partially offset by the increases
in volumes of oil and gas sold. As a percentage of oil and gas sales, this
expense decreased to 4.1% for the nine months ended September 30, 2006
from 4.6% for the nine months ended September 30, 2005, primarily due to
the increase in the average price of oil sold.
The II-E Partnership recognized a non-cash charge against earnings of
$20,000 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 11.9% for the nine months ended
September 30, 2006 from 13.0% for the nine months ended September 30,
2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the II-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 $34,382,574 or 150.26% of Limited Partners' capital
contributions.
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II-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 $403,881 $457,409
Oil and gas production expenses $ 93,120 $ 79,885
Barrels produced 852 775
Mcf produced 57,145 55,248
Average price/Bbl $ 64.72 $ 61.84
Average price/Mcf $ 6.10 $ 7.41
(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 $54,000
(11.7%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease $75,000 was
related to the decrease in the average price of gas sold. This decrease
was partially offset by an increase of $14,000 related to an increase in
volumes of gas sold.
Volumes of oil and gas sold increased 77 barrels and 1,897 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 the successful completion of several new wells during
late 2005. This increase was partially offset by (i) a substantial decline
in production during the three months ended September 30, 2006 on one
significant well following a 2005 workover of that well and (ii) normal
declines in production. The well with a substantial decline in production
is not expected to return to its previously high levels of production.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $13,000 (16.6%) 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 workover expenses.
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 a decrease in production taxes associated with the
decrease in oil and gas sales. As a percentage of oil and gas sales, these
expenses increased to 23.1% for the three months ended September 30, 2006
from 17.5% for the three months ended
-93-
September 30, 2005, primarily due to the dollar increase in production
expenses.
DD&A of oil and gas properties increased $29,000 (96.4%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. This increase was primarily due to several wells being
fully depleted during the three months ended September 30, 2006 due to
their lack of remaining reserves. This increase was partially offset by
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 14.5% for the
three months ended September 30, 2006 from 6.5% for the three months ended
September 30, 2005, primarily due to the dollar increase in DD&A.
The II-F Partnership recognized a non-cash charge against earnings of
$24,000 during the three months ended September 30, 2006. This charge was
related to the decline in oil and gas prices used to determine
recoverability of oil and gas reserves at September 30, 2006. No such
charge was incurred during the three months ended September 30, 2005.
General and administrative expenses remained relatively constant for the
three months ended September 30, 2006 and 2005. As a percentage of oil and
gas sales, these expenses increased to 11.7% for the three months ended
September 30, 2006 from 10.5% for the three months ended September 30,
2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the II-F
Partnership is in the process of selling an increased amount of the
Partnership's properties as a result of the generally favorable current
environment for oil and gas dispositions. It is anticipated that the
Partnership will have lower oil and gas sales and lower production
expenses with the sale of these properties.
NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2005.
Nine Months Ended September 30,
-------------------------------
2006 2005(a)
---------- ----------
Oil and gas sales $1,198,064 $1,270,105
Oil and gas production expenses $ 274,794 $ 218,672
Barrels produced 2,417 2,505
Mcf produced 167,836 175,431
Average price/Bbl $ 61.94 $ 52.14
Average price/Mcf $ 6.25 $ 6.50
(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
-94-
Operations for more information about these discontinued operations.
As shown in the table above, total oil and gas sales decreased $72,000
(5.7%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this decrease (i) $49,000 was
related to a decrease in the volumes of gas sold and (ii) $42,000 was
related to a decrease in the average price of gas sold. These decreases
were partially offset by an increase of $24,000 related to the increase in
the average price of oil sold.
Volumes of oil and gas sold decreased 88 barrels and 7,595 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) a substantial decline in production during the nine months ended
September 30, 2006 on one significant well following a 2005 workover of
that well and (ii) normal declines in production. These decreases were
partially offset by the successful completion of several new wells during
late 2005. The well with a substantial decline in production is not
expected to return to its previously high levels of production.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $56,000 (25.7%) for the nine months ended
September 30, 2006 as compared to the nine months ended September 30,
2005. This increase was primarily due to an increase in workover expenses.
As of the date of this Quarterly Report, management anticipates workover
costs remaining at or increasing above 2006 levels due to the increased
cost to perform a workover and the age of the wellbores. As a percentage
of oil and gas sales, these expenses increased to 22.9% for the nine
months ended September 30, 2006 from 17.2% 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 $31,000 (44.4%) for the nine
months ended September 30, 2006 as compared to the nine months ended
September 30, 2005. This increase was primarily due to (i) several wells
being fully depleted during the nine months ended September 30, 2006 due
to their lack of remaining reserves and (ii) the abandonment of another
significant well during the nine months ended September 30, 2006 due to
its lack of remaining reserves. These increases were partially offset by
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 8.3% for the
nine months ended September 30, 2006 from 5.4% for the nine months ended
September 30, 2005, primarily due to the dollar increase in DD&A.
-95-
The II-F Partnership recognized a non-cash charge against earnings of
$24,000 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 (1.0%) for the nine
months ended September 30, 2006 as compared to the nine months ended
September 30, 2005. As a percentage of oil and gas sales, these expenses
increased to 13.9% for the nine months ended September 30, 2006 from 13.0%
for the nine months ended September 30, 2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the II-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.
Cumulative cash distributions to the Limited Partners through September
30, 2006 were $29,346,051 or 171.21% of Limited Partners' capital
contributions.
II-G 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 $869,824 $1,042,268
Oil and gas production expenses $198,567 $ 180,478
Barrels produced 1,789 1,619
Mcf produced 122,980 128,295
Average price/Bbl $ 64.84 $ 62.37
Average price/Mcf $ 6.13 $ 7.34
(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 $172,000
(16.5%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease $148,000 was
related to the decrease in the average price of gas sold and $39,000 was
related to a decrease in volumes of gas sold.
-96-
Volumes of oil sold increased 170 barrels, while volumes of gas sold
decreased 5,315 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 the successful completion of
several new wells during late 2005. This increase was partially offset by
(i) a substantial decline in production during the three months ended
September 30, 2006 on one significant well following a 2005 workover of
that well and (ii) normal declines in production. The well with a
substantial decline in production is not expected to return to its
previously high levels of production.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $18,000 (10.0%) for the three months ended
September 30, 2006 as compared to the three months ended September 30,
2005. This increase was primarily due to an increase in workover expenses,
which was partially offset by a decrease in production taxes associated
with the decrease 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. As a percentage of oil and gas sales, these expenses
increased to 22.8% for the three months ended September 30, 2006 from
17.3% for the three months ended September 30, 2005, primarily due to the
dollar increase in production expenses.
DD&A of oil and gas properties increased $62,000 (97.2%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. This increase was primarily due to several wells being
fully depleted during the three months ended September 30, 2006 due to
their lack of remaining reserves. This increase was partially offset by
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 14.5% for the
three months ended September 30, 2006 from 6.1% for the three months ended
September 30, 2005, primarily due to the dollar increase in DD&A.
The II-G Partnership recognized a non-cash charge against earnings of
$54,000 during the three months ended September 30, 2006. This charge was
related to the decline in oil and gas prices used to determine
recoverability of oil and gas reserves at September 30, 2006. No such
charge was incurred during the three months ended September 30, 2005.
General and administrative expenses decreased $1,000 (1.1%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. As a percentage of oil and gas sales, these expenses
increased to 11.7% for the three months ended September 30, 2006 from 9.9%
for the three months ended September 30, 2005, primarily due to the
decrease in oil and gas sales.
-97-
As further discussed in Part I, Item 2 - Discontinued Operations, the II-G
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 $2,584,373 $2,733,911
Oil and gas production expenses $ 594,290 $ 479,377
Barrels produced 5,118 5,333
Mcf produced 363,914 377,372
Average price/Bbl $ 62.07 $ 52.22
Average price/Mcf $ 6.23 $ 6.51
(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 $150,000
(5.5%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this decrease (i) $101,000 was
related to a decrease in the average price of gas sold and (ii) $88,000
was related to a decrease in volumes of gas sold. These decreases were
partially offset by an increase of $50,000 related to the increase in the
average price of oil sold.
Volumes of oil and gas sold decreased 215 barrels and 13,458 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) a substantial decline in production during the nine months ended
September 30, 2006 on one significant well following a 2005 workover of
that well and (ii) normal declines in production. These decreases were
partially offset by the successful completion of several new wells during
late 2005. The well with a substantial decline in production is not
expected to return to its previously high levels of production.
-98-
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $115,000 (24.0%) for the nine months ended
September 30, 2006 as compared to the nine months ended September 30,
2005. This increase was primarily due to an increase in workover expenses.
As of the date of this Quarterly Report, management anticipates workover
costs remaining at or increasing above 2006 levels due to the increased
cost to perform a workover and the age of the wellbores. As a percentage
of oil and gas sales, these expenses increased to 23.0% for the nine
months ended September 30, 2006 from 17.5% 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 $64,000 (42.9%) 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) several wells
being fully depleted during the nine months ended September 30, 2006 due
to their lack of remaining reserves and (ii) the abandonment of another
significant well during the nine months ended September 30, 2006 due to
its lack of remaining reserves. These increases were partially offset by
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 8.2% for the
nine months ended September 30, 2006 from 5.5% for the nine months ended
September 30, 2005, primarily due to the dollar increase in DD&A.
The II-G Partnership recognized a non-cash charge against earnings of
$54,000 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 three months ended September 30, 2005.
General and administrative expenses remained relatively constant for the
nine months ended September 30, 2006 and 2005. As a percentage of oil and
gas sales, these expenses increased to 12.9% for the nine months ended
September 30, 2006 from 12.1% for the nine months ended September 30,
2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the II-G
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.
Cumulative cash distributions to the Limited Partners through September
30, 2006 were $61,492,371 or 165.22% of Limited Partners' capital
contributions.
-99-
II-H 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 $211,788 $252,643
Oil and gas production expenses $ 47,657 $ 44,448
Barrels produced 423 380
Mcf produced 29,946 31,161
Average price/Bbl $ 64.62 $ 61.70
Average price/Mcf $ 6.16 $ 7.36
(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 $41,000
(16.2%) for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005. Of this decrease (i) $36,000 was
related to the decrease in the average price of gas sold and (ii) $9,000
was related to a decrease in volumes of gas sold.
Volumes of oil sold increased 43 barrels, while volumes of gas sold
decreased 1,215 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 the successful completion of
several new wells during late 2005. This increase was partially offset by
(i) a substantial decline in production during the three months ended
September 30, 2006 on one significant well following a 2005 workover of
that well and (ii) normal declines in production. The well with a
substantial decline in production is not expected to return to its
previously high levels of production.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $3,000 (7.2%) for the three months ended
September 30, 2006 as compared to the three months ended September 30,
2005. This increase was primarily due to an increase in workover expenses.
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 a decrease in production taxes associated with the
decrease in oil and gas sales. As a percentage of oil and gas sales, these
expenses increased to 22.5% for the three months ended September 30, 2006
from 17.6% for the three months ended
-100-
September 30, 2005, primarily due to the dollar increase in production
expenses.
DD&A of oil and gas properties increased $15,000 (95.0%) for the three
months ended September 30, 2006 as compared to the three months ended
September 30, 2005. This increase was primarily due to several wells being
fully depleted during the three months ended September 30, 2006 due to
their lack of remaining reserves. This increase was partially offset by
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 14.3% for the
three months ended September 30, 2006 from 6.1% for the three months ended
September 30, 2005, primarily due to the dollar increase in DD&A.
The II-H Partnership recognized a non-cash charge against earnings of
$7,000 during the three months ended September 30, 2006. This charge was
related to the decline in oil and gas prices used to determine
recoverability of oil and gas reserves at September 30, 2006. No such
charge was incurred during the three months ended September 30, 2005.
General and administrative expenses remained relatively constant for the
three months ended September 30, 2006 and 2005. As a percentage of oil and
gas sales, these expenses increased to 12.2% for the three months ended
September 30, 2006 from 10.3% for the three months ended September 30,
2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the II-H
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.
-101-
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 $626,607 $663,526
Oil and gas production expenses $144,549 $117,610
Barrels produced 1,186 1,235
Mcf produced 87,750 91,595
Average price/Bbl $ 61.88 $ 52.07
Average price/Mcf $ 6.30 $ 6.54
(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 $37,000
(5.6%) for the nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005. Of this decrease $25,000 was related
to a decrease in volumes of gas sold and $21,000 was related to a decrease
in the average price of gas sold. These decreases were partially offset by
an increase of $12,000 related to the increase in the average price of oil
sold.
Volumes of oil and gas sold decreased 49 barrels and 3,845 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) a substantial decline in production on one significant well
following a 2005 workover of that well and (ii) normal declines in
production. These decreases were partially offset by the successful
completion of several new wells during late 2005. The well with a
substantial decline in production is not expected to return to its
previously high levels of production.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $27,000 (22.9%) for the nine months ended
September 30, 2006 as compared to the nine months ended September 30,
2005. This increase was primarily due to an increase in workover expenses.
As of the date of this Quarterly Report, management anticipates workover
costs remaining at or increasing above 2006 levels due to the increased
cost to perform a workover and the age of the wellbores. As a percentage
of oil and gas sales, these expenses increased to 23.1% for the nine
months ended September 30, 2006 from 17.7% for the nine months ended
September 30, 2005, primarily due to the dollar increase in production
expenses.
-102-
DD&A of oil and gas properties increased $15,000 (41.6%) 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) the abandonment of another
significant well during the nine months ended September 30, 2006 due to
its lack of remaining reserves. These increases were partially offset by
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 8.1% for the
nine months ended September 30, 2006 from 5.4% for the nine months ended
September 30, 2005, primarily due to the dollar increase in DD&A.
The II-H Partnership recognized a non-cash charge against earnings of
$7,000 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 increased $2,000 (1.7%) for the nine months
ended September 30, 2006 as compared to the nine months ended September
30, 2005. As a percentage of oil and gas sales, these expenses increased
to 16.2% for the nine months ended September 30, 2006 from 15.0% for the
nine months ended September 30, 2005.
As further discussed in Part I, Item 2 - Discontinued Operations, the II-H
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.
Cumulative cash distributions to the Limited Partners through September
30, 2006 were $14,293,364 or 155.85% of Limited Partners' capital
contributions.
-103-
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.
-104-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
31.1 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the II-A Partnership.
31.2 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the II-A Partnership.
31.3 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the II-B Partnership.
31.4 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the II-B Partnership.
31.5 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the II-C Partnership.
31.6 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the II-C Partnership.
31.7 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the II-D Partnership.
31.8 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the II-D Partnership.
31.9 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the II-E Partnership.
31.10 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the II-E Partnership.
31.11 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the II-F Partnership.
31.12 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the II-F Partnership.
31.13 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the II-G Partnership.
-105-
31.14 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the II-G Partnership.
31.15 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the II-H Partnership.
31.16 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the II-H 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 II-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 II-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 II-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 II-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 II-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 II-F Partnership.
32.7 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for
the II-G Partnership.
32.8 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for
the II-H Partnership.
-106-
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 II-A
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H
(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
-107-
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 II-A.
31.2 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-A.
31.3 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-B.
31.4 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-B.
31.5 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-C.
31.6 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-C.
31.7 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-D.
31.8 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-D.
31.9 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-E.
31.10 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-E.
31.11 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-F.
31.12 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-F.
-108-
31.13 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-G.
31.14 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-G.
31.15 Certification by Dennis R. Neill required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-H.
31.16 Certification by Craig D. Loseke required by Rule
13a-14(a)/15d-14(a) for the Geodyne Energy Income Limited
Partnership II-H.
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 II-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 II-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 II-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 II-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 II-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 II-F.
32.7 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 II-G.
32.8 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 II-H.
-109-