FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
Commission File Number:
I-E: 0-15832 I-F: 0-15833
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
--------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
I-E 73-1270110
Oklahoma I-F 73-1292669
- ---------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or No.)
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
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E
COMBINED STATEMENT OF NET ASSETS OF PARTNERSHIP IN LIQUIDATION
(Unaudited)
SEPTEMBER 30,
2007
-------------
NET ASSETS OF PARTNERSHIP IN LIQUIDATION,
at fair value $23,627,341
===========
PARTNERS' CAPITAL:
General Partner $ 2,043,107
Limited Partners, issued and
outstanding, 41,839 units 21,584,234
-----------
Total Partners' capital $23,627,341
===========
The accompanying condensed notes are an integral part of these
combined unaudited financial statements.
-3-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E
COMBINED STATEMENT OF CHANGES IN NET ASSETS OF PARTNERSHIP
IN LIQUIDATION
(Unaudited)
PERIOD FROM
FEBRUARY 5,
TO
SEPTEMBER 30,
2007
-------------
Total Partners' capital at February 4, 2007 $ 6,645,192
Adjust assets to fair value, net of
estimated selling costs 22,516,934
Partners' distributions from February 5, 2007
to March 31, 2007 ( 3,135,803)
Revenues from February 5, 2007 to March 31, 2007 1,008,421
Operating expenses incurred from
February 5, 2007 to March 31, 2007 ( 384,948)
-----------
Net assets of partnership in liquidation
at March 31, 2007 $26,649,796
Change in fair value of assets, net of
estimated selling costs 1,041,770
Partners' distributions from April 1, 2007
to June 30, 2007 ( 803,627)
Revenues from April 1, 2007 to June 30, 2007 1,572,395
Operating expenses incurred from April 1, 2007
to June 30, 2007 ( 539,361)
-----------
Net assets of partnership in liquidation
at June 30, 2007 $27,920,973
Change in fair value of assets, net of
estimated selling costs 590,602
Partners' distributions from July 1, 2007
to September 30, 2007 ( 5,567,955)
Revenues from July 1, 2007 to September 30, 2007 1,110,263
Operating expenses incurred from July 1, 2007
to September 30, 2007 ( 426,542)
-----------
Net assets of partnership in liquidation
at September 30, 2007 $23,627,341
===========
The accompanying condensed notes are an integral part of these
combined unaudited financial statements.
-4-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E
COMBINED BALANCE SHEET
(GOING CONCERN BASIS)
(Unaudited)
ASSETS
DECEMBER 31,
2006
------------
CURRENT ASSETS:
Cash and cash equivalents $1,437,732
Accounts receivable:
Oil and gas sales 754,652
Assets held for sale (Note 3) 1,412,266
----------
Total current assets $3,604,650
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 1,616,226
DEFERRED CHARGE 355,077
----------
$5,575,953
==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 323,640
Gas imbalance payable 114,821
Asset retirement obligation -
current (Note 1) 7,544
Asset retirement obligation -
assets held for sale 92,200
Liabilities - held for sale 141,644
----------
Total current liabilities $ 679,849
LONG-TERM LIABILITIES:
Accrued liability $ 111,454
Asset retirement obligation (Note 1) 623,781
----------
Total long-term liabilities $ 735,235
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 22,027)
Limited Partners, issued and
outstanding, 41,839 units 4,182,896
----------
Total Partners' capital $4,160,869
----------
$5,575,953
==========
The accompanying condensed notes are an integral part of these
combined unaudited financial statements.
-5-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E
COMBINED STATEMENTS OF OPERATIONS
(GOING CONCERN BASIS)
(Unaudited)
THREE MONTHS
ENDED
SEPTEMBER 30,
2006
-------------
REVENUES:
Oil and gas sales $1,087,871
Interest income 14,574
Other income 2,775
----------
$1,105,220
COSTS AND EXPENSES:
Lease operating $ 59,530
Production tax 62,208
Depreciation, depletion, and
amortization of oil and gas
properties 49,269
Impairment provision 42,554
General and administrative
(Note 2) 120,352
----------
$ 333,913
----------
INCOME FROM CONTINUING OPERATIONS $ 771,307
DISCONTINUED OPERATIONS:
Income from discontinued operations
(Note 3) 655,957
----------
NET INCOME $1,427,264
==========
GENERAL PARTNER:
Net income from continuing
operations $ 126,365
Net income from discontinued
operations 99,656
----------
NET INCOME $ 226,021
==========
-6-
LIMITED PARTNERS:
Net income from continuing
operations $ 644,942
Net income from discontinued
operations 556,301
----------
NET INCOME $1,201,243
==========
NET INCOME FROM CONTINUING
OPERATIONS PER UNIT $ 15.42
NET INCOME FROM DISCONTINUED
OPERATIONS PER UNIT 13.30
----------
NET INCOME PER UNIT $ 28.72
==========
UNITS OUTSTANDING 41,839
The accompanying condensed notes are an integral part of these
combined unaudited financial statements.
-7-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E
COMBINED STATEMENTS OF OPERATIONS
(GOING CONCERN BASIS)
(Unaudited)
PERIOD FROM NINE MONTHS
JANUARY 1, TO ENDED
FEBRUARY 4, SEPTEMBER 30,
2007 2006
------------- -------------
REVENUES:
Oil and gas sales $ 293,549 $3,148,259
Interest income 3,868 46,046
Other income - 2,775
---------- ----------
$ 297,417 $3,197,080
COSTS AND EXPENSES:
Lease operating $ 78,360 $ 503,729
Production tax 19,899 190,647
Depreciation, depletion, and
amortization of oil and gas
properties 11,549 131,430
Impairment provision - 42,554
General and administrative
(Note 2) 42,989 388,581
---------- ----------
$ 152,797 $1,256,941
---------- ----------
INCOME FROM CONTINUING OPERATIONS $ 144,620 $1,940,139
DISCONTINUED OPERATIONS:
Income from discontinued operations
(Note 3) 172,407 1,804,033
Gain on disposal of discontinued
operations 2,211,545 -
---------- ----------
NET INCOME $2,528,572 $3,744,172
========== ==========
GENERAL PARTNER:
Net income from continuing
operations $ 22,730 $ 308,472
Net income from discontinued
operations 357,651 275,325
---------- ----------
NET INCOME $ 380,381 $ 583,797
========== ==========
-8-
LIMITED PARTNERS:
Net income from continuing
operations $ 121,890 $1,631,667
Net income from discontinued
operations 2,026,301 1,528,708
---------- ----------
NET INCOME $2,148,191 $3,160,375
========== ==========
NET INCOME FROM CONTINUING
OPERATIONS PER UNIT $ 2.91 $ 39.00
NET INCOME FROM DISCONTINUED
OPERATIONS PER UNIT 48.43 36.54
---------- ----------
NET INCOME PER UNIT $ 51.34 $ 75.54
========== ==========
UNITS OUTSTANDING 41,839 41,839
The accompanying condensed notes are an integral part of these
combined unaudited financial statements.
-9-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E
COMBINED STATEMENTS OF CASH FLOWS
(GOING CONCERN BASIS)
(Unaudited)
PERIOD FROM NINE MONTHS
JANUARY 1, TO ENDED
FEBRUARY 4, SEPTEMBER 30,
2007 2006
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,528,572 $3,744,172
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 11,964 157,819
Impairment provision - 49,880
Gain on disposal of discontinued
operations ( 2,211,545) -
Settlement of asset retirement
obligation - ( 94,354)
Decrease in accounts receivable -
oil and gas sales 19,832 616,967
Decrease in deferred charge - 22,685
Increase (decrease) in accounts
payable ( 30,493) 13,484
Decrease in gas imbalance
payable - ( 2,797)
Decrease in accrued liability - ( 4,452)
---------- ----------
Net cash provided by operating
activities $ 318,330 $4,503,404
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 18,325) ($ 97,440)
---------- ----------
Net cash used by investing
activities ($ 18,325) ($ 97,440)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($ 44,249) ($4,383,986)
---------- ----------
Net cash used by financing
activities ($ 44,249) ($4,383,986)
---------- ----------
-10-
NET INCREASE IN CASH AND CASH
EQUIVALENTS $ 255,756 $ 21,978
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,437,732 1,838,920
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $1,693,488 $1,860,898
========== ==========
The accompanying condensed notes are an integral part of these
combined unaudited financial statements.
-11-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F
COMBINED STATEMENT OF NET ASSETS OF PARTNERSHIP IN LIQUIDATION
(Unaudited)
SEPTEMBER 30,
2007
-------------
NET ASSETS OF PARTNERSHIP IN LIQUIDATION,
at fair value $ 8,693,424
===========
PARTNERS' CAPITAL:
General Partner $ 862,375
Limited Partners, issued and
outstanding, 14,321 units 7,831,049
-----------
Total Partners' capital $ 8,693,424
===========
The accompanying condensed notes are an integral part of these
combined unaudited financial statements.
-12-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F
COMBINED STATEMENT OF CHANGES IN NET ASSETS OF PARTNERSHIP
IN LIQUIDATION
(Unaudited)
PERIOD FROM
FEBRUARY 5,
TO
SEPTEMBER 30,
2007
-------------
Total Partners' capital at February 4, 2007 $1,591,898
Adjust assets to fair value, net of
estimated selling costs 7,726,108
Partners' distributions from February 5, 2007
to March 31, 2007 ( 271,125)
Revenues from February 5, 2007 to March 31, 2007 377,965
Operating expenses incurred from
February 5, 2007 to March 31, 2007 ( 179,362)
----------
Net assets of partnership in liquidation
at March 31, 2007 $9,245,484
Change in fair value of assets, net of
estimated selling costs 245,420
Partners' distributions from April 1, 2007
to June 30, 2007 ( 236,860)
Revenues from April 1, 2007 to June 30, 2007 617,855
Operating expenses incurred from April 1, 2007
to June 30, 2007 ( 231,795)
----------
Net assets of partnership in liquidation
at June 30, 2007 $9,640,104
Change in fair value of assets, net of
estimated selling costs 284,645
Partners' distributions from July 1, 2007
to September 30, 2007 ( 1,511,414)
Revenues from July 1, 2007 to September 30, 2007 478,246
Operating expenses incurred from July 1, 2007
to September 30, 2007 ( 198,157)
----------
Net assets of partnership in liquidation
at September 30, 2007 $8,693,424
==========
The accompanying condensed notes are an integral part of these
combined unaudited financial statements.
-13-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F
COMBINED BALANCE SHEET
(GOING CONCERN BASIS)
(Unaudited)
ASSETS
DECEMBER 31,
2006
------------
CURRENT ASSETS:
Cash and cash equivalents $ 463,623
Accounts receivable:
Oil and gas sales 329,655
Assets held for sale (Note 3) 420,274
----------
Total current assets $1,213,552
NET OIL AND GAS PROPERTIES, utilizing
the successful efforts method 679,023
DEFERRED CHARGE 275,721
----------
$2,168,296
==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 171,433
Gas imbalance payable 35,618
Asset retirement obligation -
current (Note 1) 3,610
Asset retirement obligation -
assets held for sale 41,923
Liabilities - held for sale 34,776
----------
Total current liabilities $ 287,360
LONG-TERM LIABILITIES:
Accrued liability $ 104,680
Asset retirement obligation (Note 1) 269,022
----------
Total long-term liabilities $ 373,702
PARTNERS' CAPITAL:
General Partner $ 22,109
Limited Partners, issued and
outstanding, 14,321 units 1,485,125
----------
Total Partners' capital $1,507,234
----------
$2,168,296
==========
The accompanying condensed notes are an integral part of these
combined unaudited financial statements.
-14-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F
COMBINED STATEMENTS OF OPERATIONS
(GOING CONCERN BASIS)
(Unaudited)
THREE MONTHS
ENDED
SEPTEMBER 30,
2006
-------------
REVENUES:
Oil and gas sales $471,289
Interest income 4,996
Other income 1,942
--------
$478,227
COSTS AND EXPENSES:
Lease operating $ 75,990
Production tax 28,025
Depreciation, depletion, and
amortization of oil and gas
properties 21,124
Impairment provision 20,617
General and administrative
(Note 2) 41,899
--------
$187,655
--------
INCOME FROM CONTINUING OPERATIONS $290,572
DISCONTINUED OPERATIONS:
Income from discontinued operations
(Note 3) 139,605
--------
NET INCOME $430,177
========
GENERAL PARTNER:
Net income from continuing
operations $ 48,681
Net income from discontinued
operations 21,544
--------
NET INCOME $ 70,225
========
-15-
LIMITED PARTNERS:
Net income from continuing
operations $241,891
Net income from discontinued
operations 118,061
--------
NET INCOME $359,952
========
NET INCOME FROM CONTINUING
OPERATIONS PER UNIT $ 16.89
NET INCOME FROM DISCONTINUED
OPERATIONS PER UNIT 8.24
--------
NET INCOME PER UNIT $ 25.13
========
UNITS OUTSTANDING 14,321
The accompanying condensed notes are an integral part of these
combined unaudited financial statements.
-16-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F
COMBINED STATEMENTS OF OPERATIONS
(GOING CONCERN BASIS)
(Unaudited)
PERIOD FROM NINE MONTHS
JANUARY 1, TO ENDED
FEBRUARY 4, SEPTEMBER 30,
2007 2006
------------- -------------
REVENUES:
Oil and gas sales $131,905 $1,355,975
Interest income 1,193 15,640
Other income - 1,942
-------- ----------
$133,098 $1,373,557
COSTS AND EXPENSES:
Lease operating $ 33,316 $ 280,795
Production tax 9,327 83,980
Depreciation, depletion, and
amortization of oil and gas
properties 4,937 53,752
Impairment provision - 20,617
General and administrative
(Note 2) 16,108 150,667
-------- ----------
$ 63,688 $ 589,811
-------- ----------
INCOME FROM CONTINUING OPERATIONS $ 69,410 $ 783,746
DISCONTINUED OPERATIONS:
Income from discontinued operations
(Note 3) 28,425 357,812
-------- ----------
NET INCOME $ 97,835 $1,141,558
======== ==========
GENERAL PARTNER:
Net income from continuing
operations $ 10,924 $ 125,628
Net income from discontinued
operations 4,289 55,360
-------- ----------
NET INCOME $ 15,213 $ 180,988
======== ==========
-17-
LIMITED PARTNERS:
Net income from continuing
operations $ 58,486 $ 658,118
Net income from discontinued
operations 24,136 302,452
-------- ----------
NET INCOME $ 82,622 $ 960,570
======== ==========
NET INCOME FROM CONTINUING
OPERATIONS PER UNIT $ 4.08 $ 45.95
NET INCOME FROM DISCONTINUED
OPERATIONS PER UNIT 1.69 21.12
-------- ----------
NET INCOME PER UNIT $ 5.77 $ 67.07
======== ==========
UNITS OUTSTANDING 14,321 14,321
The accompanying condensed notes are an integral part of these
combined unaudited financial statements.
-18-
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F
COMBINED STATEMENTS OF CASH FLOWS
(GOING CONCERN BASIS)
(Unaudited)
PERIOD FROM NINE MONTHS
JANUARY 1, TO ENDED
FEBRUARY 4, SEPTEMBER 30,
2007 2006
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 97,835 $1,141,558
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion, and
amortization of oil and gas
properties 5,118 62,296
Impairment provision - 24,131
Settlement of asset retirement
obligation - ( 64,368)
Decrease in accounts receivable -
oil and gas sales 19,300 139,918
Decrease in deferred charge - 14,499
Increase (decrease) in accounts
payable ( 20,103) 84,824
Decrease in gas imbalance
payable - ( 992)
Decrease in accrued liability - ( 3,968)
-------- ----------
Net cash provided by operating
activities $102,150 $1,397,898
-------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 9,879) ($ 47,372)
-------- ----------
Net cash used by investing
activities ($ 9,879) ($ 47,372)
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions ($ 13,171) ($1,369,825)
-------- ----------
Net cash used by financing
activities ($ 13,171) ($1,369,825)
-------- ----------
-19-
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 79,100 ($ 19,299)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 463,623 684,976
-------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $542,723 $ 665,677
======== ==========
The accompanying condensed notes are an integral part of these
combined unaudited financial statements.
-20-
GEODYNE ENERGY INCOME PROGRAM I LIMITED PARTNERSHIPS
CONDENSED NOTES TO THE COMBINED UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007
(Unaudited)
1. BASIS OF PRESENTATION
---------------------
These unaudited financial statements reflect the combined accounts of each
Geodyne Energy Income Limited Partnership and the related Geodyne Energy
Income Production Partnership after the elimination of all
inter-partnership transactions and balances. Each limited partnership is a
general partner in the related Geodyne Energy Income Production
Partnership in which Geodyne Resources, Inc. serves as the managing
partner. Unless the context indicates otherwise, all references to a
"Partnership" or the "Partnerships" are references to the limited
partnership and its related production partnership, collectively, and all
references to the "General Partner" are references to the general partner
of the limited partnerships (Geodyne Resources, Inc.) and the managing
partner of the production partnerships, collectively. These unaudited
financial statements are presented on a going concern basis as of December
31, 2006 and for the period January 1, 2007 through February 4, 2007 and
the three and nine months ended September 30, 2006. On February 5, 2007,
the General Partner mailed a notice to the limited partners announcing
that the Partnerships will terminate at the end of their current term,
December 31, 2007. Consequently, the Partnerships adopted the liquidation
basis of accounting effective February 5, 2007. The liquidation basis of
accounting reports the net assets of the Partnerships at their net
realizable value. Adjustments were made to reduce all balance sheet
categories into one line, net assets of Partnership in liquidation, which
is an estimate of the net fair value of all Partnership assets and
liabilities. Cash, accounts receivable, and accounts payable were valued
at their historical cost, which approximates fair value. Oil and gas
properties were valued at their estimated net sales price, which was
estimated utilizing discounted cash flows based on strip pricing as of
September 30, 2007 at a discount rate of 10% for proved developed
producing reserves, 18% for proved developed non-producing reserves and
20% for proved undeveloped reserves. An adjustment was made to the
discounted cash flows for the effects of gas balancing and asset
retirement obligations. A provision was also made to account for expenses
that will be incurred directly related to the sale of the oil and gas
properties. The allocation of the net assets of Partnership in liquidation
to the General Partner and limited partners was calculated using the
current allocation of income and expenses.
-21-
The value of net assets in liquidation of the Partnerships is
substantially dependent on prices of crude oil, natural gas, and natural
gas liquids. Declines in commodity prices will adversely affect the amount
of cash that will be received from the sale of the Partnerships' oil and
gas properties in liquidation, and thus ultimately affect the amount of
cash that will be available for distribution to the partners.
The following table presents the estimated change in fair value of the net
assets of Partnership in liquidation assuming a decrease of 10% in
forecasted natural gas and crude oil prices. These estimated decreases in
liquidation values are in comparison to the estimated liquidation value
calculated using strip pricing for the Combined Unaudited Statements of
Changes in Net Assets of Partnership in Liquidation at September 30, 2007.
General Limited
Partnership Partner Partners Total
----------- --------- ---------- ----------
I-E $263,000 $1,493,000 $1,756,000
I-F 113,000 643,000 756,000
ACCOUNTING POLICIES
-------------------
The Combined Unaudited Statements of Net Assets of Partnership in
Liquidation as of September 30, 2007, Combined Unaudited Statements of
Changes in Net Assets of Partnership in Liquidation as of September 30,
2007, Combined Unaudited Statements of Operations for the period from
January 1, 2007 to February 4, 2007 and the three and nine months ended
September 30, 2006, and Combined Unaudited Statements of Cash Flows for
the period from January 1, 2007 to February 4, 2007 and the nine months
ended September 30, 2006 were prepared by the General Partner. 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 fair value of net assets of Partnership in
liquidation at September 30, 2007, the combined unaudited results of
operations for the period from January 1, 2007 to February 4, 2007 and the
three and nine months ended September 30, 2006, the combined unaudited
results of changes in net assets of Partnership in liquidation from
February 5, 2007 to September 30, 2007, and the combined unaudited cash
flows for the period from January 1, 2007 to February 4, 2007 and the nine
months ended September 30, 2006.
-22-
Information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles were condensed or omitted. The accompanying unaudited interim
financial statements should be read in conjunction with the Partnerships'
Annual Report on Form 10-K filed for the year ended December 31, 2006. The
results of operations for the period ending February 4, 2007 and the
changes in fair value of net assets of Partnership in liquidation for the
period ending September 30, 2007 are not necessarily indicative of the
results to be expected for the full year.
The Limited Partners' net income or loss per unit is based upon each
$1,000 initial capital contribution.
STATEMENTS OF CASH FLOWS
------------------------
Cash flows from operating, investing and financing activities presented in
the combined unaudited statements of cash flows include cash flows
attributable to discontinued operations and assets held for sale for all
periods presented.
NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
In September 2006, the FASB issued FAS No. 157, "Fair Value
Measurements" (FAS No. 157). FAS No. 157 establishes a common
definition for fair value to be applied to US GAAP guidance requiring
use of fair value, establishes a framework for measuring fair value,
and expands the disclosure about such fair value measurements. FAS No.
157 is effective for fiscal years beginning after November 15, 2007.
The Partnerships are currently assessing the impact of FAS No. 157 on
their fair value of net assets of Partnership in liquidation and their
changes in net assets of Partnership in liquidation.
PARTNERSHIP TERMINATION
-----------------------
Pursuant to the terms of the partnership agreements for the Partnerships
(the "Partnership Agreements"), the Partnerships would have terminated on
December 31, 1999. However, the Partnership Agreements provide that the
General Partner may extend the term of each Partnership for up to five
periods of two years each. The General Partner has extended the terms of
the Partnerships for their fourth two-year extension period to December
31, 2007. On February 5, 2007, the General Partner mailed a notice to the
limited partners announcing that the Partnerships will terminate at the
end of their current term, December 31, 2007. The
-23-
reader should refer to Note 4 - Partnership Termination to the combined
unaudited financial statements for additional information regarding this
matter.
RECLASSIFICATION
----------------
Certain prior year balances were reclassified to conform with current year
presentation.
OIL AND GAS PROPERTIES
----------------------
Before implementation of the liquidation basis of accounting, the
Partnerships followed the successful efforts method of accounting for
their oil and gas properties. Under the successful efforts method, the
Partnerships capitalized all property acquisition costs and development
costs incurred in connection with the further development of oil and gas
reserves. Property acquisition costs included 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 was adjusted to reflect the net
cash results of operations, including interest incurred to finance the
acquisition, for the period of time the properties were held by the
General Partner.
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 was computed on the unit-of-production
method through February 4, 2007. The Partnerships' calculation of
depreciation, depletion, and amortization included estimated dismantlement
and abandonment costs and estimated salvage value of the equipment. When
complete units of depreciable property were retired or sold, the asset
cost and related accumulated depreciation were eliminated with any gain or
loss (including the elimination of the asset retirement obligation)
reflected in income. On February 5, 2007, the Partnerships adopted the
liquidation basis of accounting and no longer calculate depreciation,
depletion, and amortization.
-24-
The Partnerships evaluated 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 exceeded the
expected undiscounted future cash flows for such properties, the cost of
the properties was written down to fair value, which was determined by
using the estimated discounted future cash flows from the properties.
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. 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.
2. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
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. The general and administrative
expenses are included as a component of the net assets of Partnership in
liquidation. The reader should refer to Note 1 - Basis of Presentation to
the combined unaudited financial statements included in Part I, Item 1 of
this Quarterly Report on Form 10-Q for additional information regarding
this matter. During the three months ended September 30, 2007, the
following payments were made to the General Partner or its affiliates by
the Partnerships:
Direct General Administrative
Partnership and Administrative Overhead
----------- ------------------- ---------------
I-E $39,308 $116,220
I-F 15,845 39,780
-25-
During the nine months ended September 30, 2007, the following payments
were made to the General Partner or its affiliates by the Partnerships:
Direct General Administrative
Partnership and Administrative Overhead
----------- ------------------- ---------------
I-E $110,529 $348,660
I-F 60,520 119,340
Affiliates of the Partnerships serve as operator of some of the
Partnerships' wells. The General Partner contracts with such affiliates
for services as operator of the wells. As operator, such affiliates are
compensated at rates provided in the operating agreements in effect and
charged to all parties to such agreement. Such compensation may occur both
prior and subsequent to the commencement of commercial marketing of
production of oil or gas. The following approximate dollar amounts of
compensation were paid by the Partnerships to the affiliates:
Three Months Ended Nine Months Ended
Partnership September 30, 2007 September 30, 2007
----------- ------------------- -------------------
I-E $15,000 $46,000
I-F 8,000 23,000
In connection with the liquidation process involving some of the
Partnerships' properties, the General Partner and Samson Resources
Company, an affiliate of the General Partner, elected to receive an
"in-kind" distribution of their proportionate interest in the partnership
in lieu of a cash distribution of their partnership interest. For the nine
months ended September 30, 2007 and based on the valuation of net assets
in liquidation at June 30, 2007, the General Partner and Samson Resources
Company received the following approximate property values in lieu of a
cash distribution on these properties:
Property
Partnership Distribution
----------- -------------
I-E $4,168,000
I-F 1,055,000
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 environment for oil and gas properties. These
properties were classified as assets held for sale. On February 1, 2007
the I-E Partnership sold its interests in a number of producing properties
at a large public oil and gas auction
-26-
which resulted in proceeds of approximately $2,214,000 (net of fees). The
sale resulted in a gain on disposal of discontinued operations of
approximately $2,212,000 for the I-E Partnership. The properties sold in
the February 2007 auction and remaining properties classified as assets
held for sale represent a "disposal of a component" under Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (FAS 144). Accordingly, current year
results for the period of January 1, 2007 through February 4, 2007 for
these properties were classified as discontinued operations, and prior
periods were restated. Once properties are classified as assets held for
sale, they no longer incur any depreciation, depletion, and amortization
expense. In conjunction with the sales planned in August 2006, the
Partnerships will retain all assets and liabilities through the effective
date of the sale and purchasers will assume the asset retirement
obligations associated with the sold interests.
On February 5, 2007, the Partnerships adopted the liquidation basis of
accounting. The reader should refer to Note 1 - Basis of Presentation to
the combined unaudited financial statements for additional information
regarding this matter.
Net income from discontinued operations is as follows:
I-E Partnership
---------------
Three Months
Ended
September 30,
2006
-------------
Oil and gas sales $ 721,804
Lease operating ( 27,097)
Production tax ( 29,733)
Accretion and depreciation,
depletion, and amortization
of oil and gas properties ( 1,691)
Impairment provision ( 7,326)
----------
Income from discontinued
operations $ 655,957
==========
-27-
Period from Nine Months
January 1, to Ended
February 4, September 30,
2007 2006
------------- -------------
Oil and gas sales $198,296 $2,093,084
Lease operating ( 12,177) ( 133,551)
Production tax ( 13,297) ( 121,785)
Accretion and depreciation,
depletion, and amortization
of oil and gas properties ( 415) ( 26,389)
Impairment provision - ( 7,326)
-------- ----------
Income from discontinued
operations $172,407 $1,804,033
======== ==========
I-F Partnership
---------------
Three Months
Ended
September 30,
2006
-------------
Oil and gas sales $161,919
Lease operating ( 9,426)
Production tax ( 8,579)
Accretion and depreciation,
depletion, and amortization
of oil and gas properties ( 795)
Impairment provision ( 3,514)
--------
Income from discontinued
operations $139,605
========
-28-
Period from Nine Months
January 1, to Ended
February 4, September 30,
2007 2006
------------- -------------
Oil and gas sales $36,245 $467,216
Lease operating ( 5,447) ( 72,459)
Production tax ( 2,192) ( 24,887)
Accretion and depreciation,
depletion, and amortization
of oil and gas properties ( 181) ( 8,544)
Impairment provision - ( 3,514)
------- --------
Income from discontinued
operations $28,425 $357,812
======= ========
Assets of the discontinued operations as of December 31, 2006 were as follows:
I-E
Partnership
-----------
Accounts receivable - oil and gas sales $ 547,487
Oil and gas properties 9,511,410
Accumulated depreciation, depletion,
and amortization and valuation
allowance ( 8,652,389)
Deferred charge 5,758
----------
Net assets held for sale $1,412,266
==========
I-F
Partnership
-----------
Accounts receivable - oil and gas sales $ 96,612
Oil and gas properties 1,064,289
Accumulated depreciation, depletion,
and amortization and valuation
allowance ( 741,470)
Deferred charge 843
----------
Net assets held for sale $ 420,274
==========
-29-
Liabilities of the discontinued operations as of December 31, 2006 were as
follows:
I-E
Partnership
-----------
Accounts payable $ 138,927
Accrued liability 2,717
----------
Liabilities - held for sale $ 141,644
==========
I-F
Partnership
-----------
Accounts payable $ 31,645
Accrued liability 3,131
----------
Liabilities - held for sale $ 34,776
==========
4. PARTNERSHIP TERMINATION
-----------------------
The Partnerships would have terminated on December 31, 1999 in accordance
with the Partnership Agreements. However, the Partnership Agreements
provide that the General Partner may extend the term of each Partnership
for up to five periods of two years each. The General Partner has extended
the terms of the Partnerships for their fourth two-year extension, thereby
extending the termination date to December 31, 2007. On February 5, 2007
the General Partner mailed a notice to the limited partners announcing
that (i) the Partnerships will terminate on December 31, 2007 and (ii) the
General Partner will liquidate the Partnerships' assets and satisfy their
liabilities as part of the winding-up process required by the Partnership
Agreements and state law.
The General Partner commenced liquidating the Partnerships' properties in
the second half of 2007, and hopes to have all or substantially all of the
properties sold prior to March 31, 2008. As part of the liquidation
process, the General Partner will actively negotiate for the sale of the
properties. These properties will be offered to all interested parties
through normal oil and gas property auction processes as well as
appropriate negotiated transactions. It is possible that affiliates of the
General Partner may participate in any public auction of these properties
and may be the successful high bidder on some or all of the properties.
-30-
The Partnerships will make routine cash distributions throughout the
remainder of 2007. Proceeds from the sale of Partnership properties may be
included in these normal cash distributions, or may be distributed to the
partners by way of special cash distributions. The General Partner will
analyze the level of cash held by the Partnerships throughout the
liquidation process and will retain sufficient cash to cover all final
expenses and liabilities of the Partnerships. After final settlement from
the sale of all properties, satisfaction of Partnership expenses and
liabilities, and calculation of any remaining assets and liabilities of
the Partnerships, any net cash will be paid as a final liquidating
distribution to all of the remaining partners in each Partnership. It is
expected that the final distribution will be made no later than December
31, 2008.
In order to ensure that the General Partner makes all liquidation
distributions to the correct parties based on the most accurate
information possible, the General Partner terminated the outstanding
repurchase offer and right of presentment as of March 9, 2007. In
addition, the General Partner ceased processing transfers among third
parties which were not postmarked on or before June 30, 2007 and received
by the General Partner on or before July 13, 2007. The General Partner
will not impose these deadlines on transfers between family members, their
trusts, IRA accounts, or similar related entities and transfers due to
death or divorce.
5. SUBSEQUENT EVENT
----------------
On October 10, 2007, the Partnerships sold their interests in a number of
producing properties to independent third parties and Samson Resources
Company, an affiliate of the General Partner, at a large public oil and
gas auction which resulted in proceeds of the following approximate dollar
amounts:
Proceeds (net of fees)
Independent Samson
Third Resources
Partnership Parties Company Total
----------- ------------ --------------- ----------
I-E $1,628,000 $4,307,000 $5,935,000
I-F 625,000 1,694,000 2,319,000
The sale resulted in increases in net assets of Partnership in liquidation
of approximately $245,000 and $27,000, respectively, to the I-E and I-F
Partnerships.
-31-
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.
PARTNERSHIP TERMINATION
- -----------------------
Pursuant to the terms of the partnership agreements for the Partnerships
(the "Partnership Agreements"), the Partnerships would have terminated on
December 31, 1999. However, the Partnership Agreements provide that the
General Partner may extend the term of each Partnership for up to five
periods of two years each. The General Partner has extended the terms of
the Partnerships for their fourth two-year extension period to December
31, 2007. On February 5, 2007, the General Partner mailed a notice to the
limited partners announcing that the Partnerships will terminate at the
end of their current term, December 31, 2007. The reader should refer to
Note 4 - Partnership Termination to the combined unaudited financial
statements included in Part I, Item 1 of this Quarterly Report on Form
10-Q for additional information regarding this matter.
-32-
GENERAL
- -------
The Partnerships are engaged in the business of owning interests in
producing oil and gas properties located in the continental United States.
The Partnerships may also engage to a limited extent in development
drilling on producing oil and gas properties as required for the prudent
management of the Partnerships.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnerships began operations and investors were assigned their rights
as limited partners, having made capital contributions in the amounts and
on the dates set forth below:
Limited
Date of Partner Capital
Partnership Activation Contributions
----------- ------------------ ---------------
I-E September 10, 1986 $41,839,400
I-F December 16, 1986 14,320,900
In general, the amount of funds available for acquisition of producing
properties was equal to the capital contributions of the limited partners,
less 15% for sales commissions and organization and management fees. All
of the Partnerships have fully invested their capital contributions.
No property sales occurred during the nine months ended September 30, 2006
for the Partnerships. On February 1, 2007 the I-E Partnership sold its
interests in a number of producing properties at a large public oil and
gas auction which resulted in proceeds of approximately $2,214,000 (net of
fees).
On July 11, 2007, the Partnerships sold their interests in a number of
producing properties to independent third parties at a large public oil
and gas auction which resulted in proceeds of the following approximate
dollar amounts:
Proceeds Increases in net assets
Partnership (net of fees) of Partnership in liquidation
----------- ------------- -----------------------------
I-E $2,799,000 $1,004,000
I-F 1,061,000 382,000
-33-
On August 8, 2007, the Partnerships sold their interests in a number of
producing properties to independent third parties, Samson Lone Star, LLC
and Samson Resources Company, affiliates of the General Partner, at a
large public oil and gas auction which resulted in proceeds of the
following approximate dollar amounts:
Proceeds (net of fees)
Independent Affiliates
Third of the
Partnership Parties General Partner Total
----------- ------------ --------------- ----------
I-E $2,721,000 $3,483,000 $6,204,000
I-F 1,111,000 267,000 1,378,000
The sale resulted in a decrease in net assets of Partnership in
liquidation of approximately $246,000 for the I-E Partnership and an
increase in net assets of Partnership in liquidation of approximately
$21,000 for the I-F Partnership.
On September 12, 2007, the I-F Partnership sold its interests in a number
of producing properties to independent third parties and Samson Resources
Company, an affiliate of the General Partner, at a large public oil and
gas auction which resulted in proceeds of approximately $281,000 (net of
fees) and a decrease in net assets of Partnership in liquidation of
approximately $179,000. Sales to independent third parties resulted in
proceeds of approximately $184,000 (net of fees) and sales to Samson
Resources Company resulted in proceeds of approximately $97,000 (net of
fees).
Net proceeds from operations less necessary operating capital are
distributed to the limited partners on a quarterly basis. The
Partnerships' ability to make cash distributions depends primarily upon
the level of available cash flow generated by the Partnerships' operating
activities and sale of oil and gas properties, which will be affected
(either positively or negatively) by many factors beyond the control of
the Partnerships, including the price of and demand for oil and gas and
other market and economic conditions. While the General Partner cannot
predict future pricing trends, it believes the working capital available
as of September 30, 2007 and the net revenue generated from future
operations and property sales will provide sufficient working capital to
meet current and future obligations.
Occasional expenditures for new wells or well recompletions, or workovers
may reduce or eliminate cash available for a particular quarterly cash
distribution.
The reader should refer to the discussion above under the heading
"Partnership Termination" for information regarding termination of the
Partnerships as of December 31, 2007.
-34-
CRITICAL ACCOUNTING POLICIES
- ----------------------------
The unaudited financial statements included in this Quarterly Report on
Form 10-Q reflect the combined accounts of each Geodyne Energy Income
Limited Partnership and the related Geodyne Energy Income Production
Partnership after the elimination of all inter-partnership transactions
and balances. These unaudited financial statements are presented on a
going concern basis as of December 31, 2006 and for the period January 1,
2007 through February 4, 2007 and the three and nine months ended
September 30, 2006. On February 5, 2007, the General Partner mailed a
notice to the limited partners announcing that the Partnerships will
terminate at the end of their current term, December 31, 2007.
Consequently, the Partnerships adopted the liquidation basis of accounting
effective February 5, 2007. The liquidation basis of accounting reports
the net assets of the Partnerships at their net realizable value.
Adjustments were made to reduce all balance sheet categories into one
line, net assets of Partnership in liquidation, which is an estimate of
the net fair value of all Partnership assets and liabilities. Cash,
accounts receivable, and accounts payable were valued at their historical
cost, which approximates fair value. Oil and gas properties were valued at
their estimated net sales price, which was estimated utilizing discounted
cash flows based on strip pricing as of September 30, 2007 at a discount
rate of 10% for proved developed producing reserves, 18% for proved
developed non-producing reserves and 20% for proved undeveloped reserves.
An adjustment was made to the discounted cash flows for the effects of gas
balancing and asset retirement obligations. A provision was also made to
account for expenses that will be incurred directly related to the sale of
the oil and gas properties. The allocation of the net assets of
Partnership in liquidation to the General Partner and limited partners was
calculated using the current allocation of income and expenses.
Prior to the adoption of the liquidation basis of accounting, the
Partnerships followed the successful efforts method of accounting for
their oil and gas properties. Under the successful efforts method, the
Partnerships capitalized all property acquisition costs and development
costs incurred in connection with the further development of oil and gas
reserves. Property acquisition costs included 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 was adjusted to reflect the net
cash results of operations, including interest incurred to finance the
acquisition, for the period of time the properties were held by the
General Partner.
-35-
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 was computed on the unit-of-production
method through February 4, 2007. The Partnerships' calculation of
depreciation, depletion, and amortization included estimated dismantlement
and abandonment costs and estimated salvage value of the equipment. When
complete units of depreciable property were retired or sold, the asset
cost and related accumulated depreciation were eliminated with any gain or
loss (including the elimination of the asset retirement obligation)
reflected in income. On February 5, 2007, the Partnerships adopted the
liquidation basis of accounting and no longer calculate depreciation,
depletion, and amortization.
The Deferred Charge on the Combined Unaudited 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 Deferred
Charge and Accrued Liability are included as a component of the net assets
of Partnership in liquidation. The reader should refer to Note 1 - Basis
of Presentation to the combined unaudited financial statements included in
Part I, Item 1 of this Quarterly Report on Form 10-Q for additional
information regarding this matter.
The Partnerships' oil and condensate production is sold, title passed, and
revenue recognized at or near the Partnerships' wells under short-term
purchase contracts at prevailing prices in accordance with arrangements
which are customary in the oil and gas industry. Sales of gas applicable
to the Partnerships' interest in producing oil and gas leases are recorded
as revenue when the gas is metered and title transferred pursuant to the
gas sales contracts covering the Partnerships' interest in gas reserves.
During such times as a Partnership's sales of gas exceed its pro rata
ownership in a well, such sales are recorded as revenues unless total
sales from the well have exceeded the Partnership's share of estimated
total gas reserves underlying the property, at which time such excess is
recorded as a liability. The rates per Mcf used to calculate this
liability are based on the average gas price for which the Partnerships
are currently settling this liability. These amounts were recorded as gas
imbalance payables in accordance with the sales method. These gas
imbalance payables will be settled by either gas production by the
underproduced party in excess of current estimates of total gas reserves
for the well or by negotiated or contractual payment to the underproduced
party. The gas imbalance payables are included as a component of the net
-36-
assets of Partnership in liquidation. The reader should refer to Note 1 -
Basis of Presentation to the combined unaudited financial statements
included in Part I, Item 1 of this Quarterly Report on Form 10-Q for
additional information regarding this matter.
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. The
asset retirement obligations are included as a component of the net assets
of Partnership in liquidation. The reader should refer to Note 1 - Basis
of Presentation to the combined unaudited financial statements included in
Part I, Item 1 of this Quarterly Report on Form 10-Q for additional
information regarding this matter.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
In September 2006, the FASB issued FAS No. 157, "Fair Value
Measurements" (FAS No. 157). FAS No. 157 establishes a common
definition for fair value to be applied to US GAAP guidance requiring
use of fair value, establishes a framework for measuring fair value,
and expands the disclosure about such fair value measurements. FAS No.
157 is effective for fiscal years beginning after November 15, 2007.
The Partnerships are currently assessing the impact of FAS No. 157 on
their fair value of net assets of Partnership in liquidation and their
changes in net assets of Partnership in liquidation.
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
-37-
future. Although every reasonable effort is 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 net present values of the Partnerships'
reserves are included as a component of the net assets of Partnership in
liquidation. The reader should refer to Note 1 - Basis of Presentation to
the combined unaudited financial statements included in Part I, Item 1 of
this Quarterly Report on Form 10-Q for additional information regarding
this matter.
The net present value of the Partnerships' reserves was estimated
utilizing discounted cash flows based on strip pricing as of September 30,
2007 at a discount rate of 10% for proved developed producing reserves,
18% for proved developed non-producing reserves and 20% for proved
undeveloped reserves. An adjustment was made to the discounted cash flows
for the effects of gas balancing and asset retirement obligations. A
provision was also made to account for expenses that will be incurred
directly related to the sale of the oil and gas properties.
RESULTS OF OPERATIONS
- ---------------------
GENERAL DISCUSSION
The following general discussion should be read in conjunction with the
analysis of results of operations provided below.
As a result of the pending liquidation of the Partnerships, the primary
source of liquidity and Partnership cash distributions currently comes
from the sale of oil and gas properties. The net revenues generated from
the sale of oil and gas produced from the Partnerships' oil and gas
properties is also a significant source of net revenues. The level of net
revenues is highly dependent upon the prices received for oil and gas
sales, which prices have historically been very volatile and may continue
to be so. Additionally, lower oil and natural gas prices may reduce the
amount of oil and gas that is economic to produce and reduce the
Partnerships' revenues and cash flow. Various factors beyond the
Partnerships' control will affect prices for oil and natural gas, such as:
* Worldwide and domestic supplies of oil and natural gas;
* The ability of the members of the Organization of Petroleum
Exporting Countries ("OPEC") to agree to and maintain oil
prices and production quotas;
* Political instability or armed conflict in oil-producing
regions or around major shipping areas;
-38-
* 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;
* Market expectations; and
* The effect of worldwide energy conservation.
It is not possible to predict the future direction of oil or natural gas
prices. 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 as either the receipt of
proceeds from property sales or the incursion of additional costs as a
result of well workovers, recompletions, new well drilling, and other
events.
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 (either positive or negative)
made by the operators of the properties;
* Adjustments in ownership or rights to production in accordance
with agreements governing the operation or ownership of the
well (such as adjustments that occur at payout or due to gas
balancing);
* Completion of enhanced recovery projects which increase
production for the well; and
* Sales of properties.
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.
-39-
I-E PARTNERSHIP
THE PERIOD FROM JANUARY 1, 2007 TO FEBRUARY 4, 2007
Period from
January 1, to
February 4,
2007
-------------
Oil and gas sales $293,549
Oil and gas production expenses $ 98,259
Barrels produced 1,903
Mcf produced 36,270
Average price/Bbl $ 49.02
Average price/Mcf $ 5.52
Income and expenses for the I-E Partnership for the period from January 1
to February 4, 2007 are not comparable to the three and nine months ended
September 30, 2006.
THE PERIOD FROM FEBRUARY 5, 2007 TO MARCH 31, 2007
Barrels produced 5,690
Mcf produced 108,901
Average price/Bbl $ 53.17
Average price/Mcf $ 6.39
Revenues from February 5, 2007 to March 31, 2007 were as follows:
Oil and gas sales $ 998,851
Interest income 9,570
----------
$1,008,421
==========
Operating expenses from February 5, 2007 to March 31, 2007 were as
follows:
Lease operating $ 197,117
Production tax 62,644
Accretion expense 5,373
General and administrative 119,814
----------
$ 384,948
==========
THE PERIOD FROM APRIL 1, 2007 TO JUNE 30, 2007
Barrels produced 9,137
Mcf produced 150,991
Average price/Bbl $ 62.64
Average price/Mcf $ 6.54
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Revenues from April 1, 2007 to June 30, 2007 were as follows:
Oil and gas sales $1,559,880
Interest income 12,515
----------
$1,572,395
==========
Operating expenses from April 1, 2007 to June 30, 2007 were as follows:
Lease operating $ 292,333
Production tax 98,133
Accretion expense 8,037
General and administrative 140,858
----------
$ 539,361
==========
THE PERIOD FROM JULY 1, 2007 TO SEPTEMBER 30, 2007
Barrels produced 5,756
Mcf produced 113,167
Average price/Bbl $ 67.79
Average price/Mcf $ 6.24
Revenues from July 1, 2007 to September 30, 2007 were as follows:
Oil and gas sales $1,096,287
Interest income 13,000
Other income 976
----------
$1,110,263
==========
Operating expenses from July 1, 2007 to September 30, 2007 were as
follows:
Lease operating $ 197,633
Production tax 68,887
Accretion expense 4,494
General and administrative 155,528
----------
$ 426,542
==========
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I-F PARTNERSHIP
THE PERIOD FROM JANUARY 1, 2007 TO FEBRUARY 4, 2007
Period from
January 1, to
February 4,
2007
-------------
Oil and gas sales $131,905
Oil and gas production expenses $ 42,643
Barrels produced 797
Mcf produced 16,420
Average price/Bbl $ 47.89
Average price/Mcf $ 5.71
Income and expenses for the I-F Partnership for the period from January 1
to February 4, 2007 are not comparable to the three and nine months ended
September 30, 2006.
THE PERIOD FROM FEBRUARY 5, 2007 TO MARCH 31, 2007
Barrels produced 2,701
Mcf produced 35,159
Average price/Bbl $ 51.61
Average price/Mcf $ 6.71
Revenues from February 5, 2007 to March 31, 2007 were as follows:
Oil and gas sales $375,299
Interest income 2,666
--------
$377,965
========
Operating expenses from February 5, 2007 to March 31, 2007 were as
follows:
Lease operating $ 97,379
Production tax 23,189
Accretion expense 2,352
General and administrative 56,442
--------
$179,362
========
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THE PERIOD FROM APRIL 1, 2007 TO JUNE 30, 2007
Barrels produced 4,253
Mcf produced 51,202
Average price/Bbl $ 63.28
Average price/Mcf $ 6.74
Revenues from April 1, 2007 to June 30, 2007 were as follows:
Oil and gas sales $614,448
Interest income 3,407
--------
$617,855
========
Operating expenses from April 1, 2007 to June 30, 2007 were as follows:
Lease operating $139,216
Production tax 37,369
Accretion expense 3,525
General and administrative 51,685
--------
$231,795
========
THE PERIOD FROM JULY 1, 2007 TO SEPTEMBER 30, 2007
Barrels produced 2,910
Mcf produced 43,668
Average price/Bbl $ 66.17
Average price/Mcf $ 6.44
Revenues from July 1, 2007 to September 30, 2007 were as follows:
Oil and gas sales $ 473,837
Interest income 4,073
Other income 336
----------
$ 478,246
==========
Operating expenses from July 1, 2007 to September 30, 2007 were as
follows:
Lease operating $ 110,029
Production tax 30,511
Accretion expense 1,992
General and administrative 55,625
----------
$ 198,157
==========
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Partnerships do not hold any market risk sensitive instruments.
ITEM 4T. CONTROLS AND PROCEDURES
As of the end of this period covered by this report, the principal
executive officer and principal financial officer conducted an
evaluation of the Partnerships' disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
and Exchange Act of 1934). Based on this evaluation, such officers
concluded that the Partnerships' disclosure controls and procedures
are effective to ensure that information required to be disclosed by
the Partnerships in reports filed under the Exchange Act is
recorded, processed, summarized, and reported accurately and within
the time periods specified in the Securities and Exchange Commission
rules and forms.
During the period covered by this Form 10-Q, there were no changes
in our internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A lawsuit styled Robert W. Scott, individually and as Managing Member of
R.W. Scott Investments, LLC v. Samson Resources Company, Case No.
C-01-385, was filed in the District Court of Sweetwater County, Wyoming on
June 29, 2001. The lawsuit seeks class action certification and alleges
that Samson deducted from its payments to royalty and overriding royalty
owners certain charges which were improper under the Wyoming royalty
payment statutes. A number of these royalty and overriding royalty
payments burden the interests of the I-E and I-F Partnerships. In February
2003, Samson made a supplemental payment to the royalty and overriding
royalty interest owners who were potential class members of amounts which
were then thought to have been improperly deducted plus statutory interest
thereon. The lawsuit also alleges that Samson's check stubs did not fully
comply with the Wyoming Royalty Payment Act.
On May 13, 2005 the trial court certified this lawsuit as a class action
and denied Samson's motion for summary judgment. On June 25, 2005 the
Wyoming Supreme Court denied Samson's request for it to review these
decisions. On April 20, 2007 Samson executed a formal Settlement Agreement
with plaintiffs which calls for an additional royalty payment of
$1,000,000. The Court granted final approval of the Settlement Agreement
on September 17, 2007. Plaintiffs' counsel, with Court approval, allocated
the $1,000,000 among the various class members after deduction of
litigation costs and attorneys' fees. Following is the I-E and I-F
Partnerships' share of this total settlement amount:
Partnership Amount
----------- ---------
I-E $31,003
I-F 14,454
These amounts were accrued for the period February 5 through September 30,
2007 and were paid by the I-E and I-F Partnerships in October 2007.
ITEM 6. EXHIBITS
31.1 Certification by Dennis R. Neill required by Rule 13a-14(a)/15d-14(a) for
the I-E Partnership.
31.2 Certification by Craig D. Loseke required by Rule 13a-14(a)/15d-14(a) for
the I-E Partnership.
-45-
31.3 Certification by Dennis R. Neill required by Rule 13a-14(a)/15d-14(a) for
the I-F Partnership.
31.4 Certification by Craig D. Loseke required by Rule 13a-14(a)/15d-14(a) for
the I-F Partnership.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 for the I-E Partnership.
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 for the I-F Partnership.
-46-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F
(Registrant)
BY: GEODYNE RESOURCES, INC.
General Partner
Date: November 13, 2007 By: /s/Dennis R. Neill
--------------------------------
(Signature)
Dennis R. Neill
President
Date: November 13, 2007 By: /s/Craig D. Loseke
--------------------------------
(Signature)
Craig D. Loseke
Chief Accounting Officer
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INDEX TO EXHIBITS
-----------------
Exh.
No. Exhibit
- ---- -------
31.1 Certification by Dennis R. Neill required by Rule 13a-14(a)/15d-14(a) for
the Geodyne Energy Income Limited Partnership I-E.
31.2 Certification by Craig D. Loseke required by Rule 13a-14(a)/15d-14(a) for
the Geodyne Energy Income Limited Partnership I-E.
31.3 Certification by Dennis R. Neill required by Rule 13a-14(a)/15d-14(a) for
the Geodyne Energy Income Limited Partnership I-F.
31.4 Certification by Craig D. Loseke required by Rule 13a-14(a)/15d-14(a) for
the Geodyne Energy Income Limited Partnership I-F.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 for the Geodyne Energy
Income Limited Partnership I-E.
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 for the Geodyne Energy
Income Limited Partnership I-F.
-48-