ITEM 1. BUSINESS
General
The Dyco Oil and Gas Program 1982-1 Limited Partnership (the "1982-1 Program") and Dyco Oil and Gas Program 1982-2 Limited Partnership (the "1982-2 Program") (collectively, the "Programs") are Minnesota limited partnerships engaged in the production of oil and gas. The 1982-1 Program and 1982-2 Program commenced operations on June 14, 1982 and March 1, 1983, respectively, with the primary financial objective of investing their limited partners' subscriptions in the drilling of oil and gas prospects and then distributing to their limited partners all available cash flow from the Program's on- going production operations. Dyco Petroleum Corporation ("Dyco") serves as the General Partner of the Programs. See "Item 2.

ITEM 2. PROPERTIES
Well Statistics
The following table sets forth the numbers of gross and net productive wells of the Programs as of December 31, 1996.
Well Statistics(1) As of December 31, 1996
1982-1 1982-2 Program Program ------- ------- Gross productive wells(2): Oil 2 - Gas 18 22 -- -- Total 20 22
Net productive wells(3): Oil .79 - Gas 1.95 2.19 ---- ---- Total 2.74 2.19
- ----------
(1) The designation of a well as an oil well or gas well is made by Dyco based on the relative amount of oil and gas reserves for the well. Regardless of a well's oil or gas designation, it may produce oil, gas, or both oil and gas. (2) As used throughout this Annual Report on Form 10-K ("Annual Report"), "Gross Well" refers to a well in which a working interest is owned. The number of gross wells is the total number of wells in which a working interest is owned. (3) As used throughout this Annual Report, "Net Well" refers to the sum of the fractional working interests owned in gross wells expressed as whole numbers and fractions thereof. For example, a 15% leasehold interest in a well represents one Gross Well, but 0.15 Net Well.
Drilling Activities
The Programs participated in no drilling activities for the year ended December 31, 1996.
Oil and Gas Production, Revenue, and Price History
The following table sets forth certain historical information concerning the oil (including condensates) and gas production, net of all royalties, overriding royalties, and other third party interests, of the Programs, revenues attributable to such production, and certain price and cost information.
Net Production Data
Year Ended December 31, ---------------------------- 1996 1995 1994 -------- -------- -------- 1982-1 Program: - --------------
Production: Oil (Bbls)(1) 1,868 2,308 2,615 Gas (Mcf)(2) 135,616 170,795 168,203
Oil and gas sales: Oil $ 38,939 $ 39,156 $ 40,017 Gas 278,328 224,175 270,556 ------- ------- ------- Total $317,267 $263,331 $310,573 ======= ======= ======= Total direct operating expenses $109,514 $134,081 $ 90,531 ======= ======= =======
Direct operating expenses as a percentage of oil and gas sales 34.5% 50.9% 29.1%
Average sales price: Per barrel of oil $20.85 $16.97 $15.30 Per Mcf of gas 2.05 1.31 1.61
Direct operating expenses per equivalent Mcf of gas(3) $ .75 $ .73 $ .49
1982-2 Program: - --------------
Production: Oil (Bbls)(1) 180 704 1,938 Gas (Mcf)(2) 337,092 437,387 475,083
Oil and gas sales: Oil $ 3,936 $ 9,554 $ 21,248 Gas 681,503 573,087 742,072 ------- ------- ------- Total $685,439 $582,641 $763,320 ======= ======= ======= Total direct operating expenses $161,570 $168,278 $178,821 ======= ======= =======
Direct operating expenses as a percentage of oil and gas sales 23.6% 28.9% 23.4%
Average sales price: Per barrel of oil $21.87 $13.57 $10.96 Per Mcf of gas 2.02 1.31 1.56
Direct operating expenses per equivalent Mcf of gas(3) $ .48 $ .38 $ .37
- ----------
(1) As used throughout this Annual Report, "Bbls" refers to barrels of 42 U.S. gallons and represents the basic unit for measuring the production of crude oil and condensate oil. (2) As used throughout this Annual Report, "Mcf" refers to volume of 1,000 cubic feet under prescribed conditions of pressure and temperature and represents the basic unit for measuring the production of gas. (3) Oil production is converted to gas equivalents at the rate of six Mcf per barrel, representing the estimated relative energy content of gas and oil, which rate is not necessarily indicative of the relationship of oil and gas prices. The respective prices of oil and gas are affected by market and other factors in addition to relative energy content.
Proved Reserves and Net Present Value
The following table sets forth the Programs' estimated proved oil and gas reserves and net present value therefrom as of December 31, 1996. The schedule of quantities of proved oil and gas reserves was prepared by Dyco in accordance with the rules prescribed by the Securities and Exchange Commission (the "SEC"). As used throughout this Annual Report, "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.
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. Net present value attributable to the Programs' proved reserves was calculated on the basis of current costs and prices at December 31, 1996. Such prices were not escalated except in certain circumstances where escalations were fixed and readily determinable in accordance with applicable contract provisions. The prices used by Dyco in calculating the net present value attributable to the Programs' proved reserves do not necessarily reflect market prices for oil and gas production subsequent to December 31, 1996. Furthermore, gas prices at December 31, 1996 were much higher than the price used for determining the Programs' net present value of proved reserves for the year ended December 31, 1995 and substantially higher than the average prices received by the Programs in each of the last several years. There can be no assurance that the prices used in calculating the net present value of the Programs' proved reserves at December 31, 1996 will actually be realized for such production.
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 near future. Although every reasonable effort has been made to ensure that the reserve estimates reported herein 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.
Proved Reserves and Net Present Values From Proved Reserves As of December 31, 1996
1982-1 Program: --------------
Estimated proved reserves: Gas (Mcf) 832,137 Oil and liquids (Bbls) 20,761
Net present value (discounted at 10% per annum) $1,571,198
1982-2 Program: --------------
Estimated proved reserves: Gas (Mcf) 1,026,533 Oil and liquids (Bbls) 608
Net present value (discounted at 10% per annum) $1,815,230
No estimates of the proved reserves of the Programs comparable to those included herein have been included in reports to any federal agency other than the SEC. Additional information relating to the Programs' proved reserves is contained in Note 4 to the Programs' financial statements, included in Item 8 of this Annual Report.
Significant Properties
1982-1 Program --------------
As of December 31, 1996, the 1982-1 Program's properties consisted of 20 gross (2.74 net) productive wells. The 1982-1 Program also owned a non-working interest in an additional 6 wells. Affiliates of the 1982-1 Program operate 14 (54%) of its total wells. As of December 31, 1996, the 1982-1 Program had estimated total proved reserves of 832,137 Mcf of gas and 20,761 barrels of oil, with a present value (discounted at 10% per annum) of estimated future net cash flow of approximately $1,571,198. Substantially all of the 1982-1 Program's reserves are located in the Anadarko Basin of western Oklahoma and the Texas panhandle, which is an established oil and gas producing basin. All of the 1982-1 Program's properties are located onshore in the continental United States.
As of December 31, 1996, the 1982-1 Program's properties in the Anadarko Basin consisted of 19 gross (2.22 net) productive wells. The 1982-1 Program also owned a non-working interest in an additional 6 wells. Affiliates of the 1982-1 Program operate 13 (52%) of its total Anadarko Basin wells. As of December 31, 1996, the 1982-1 Program had estimated total proved reserves in the Anadarko Basin of approximately 746,052 Mcf of gas and approximately 20,761 barrels of crude oil, with a present value (discounted at 10% per annum) of estimated future net cash flow of approximately $1,439,980.
1982-2 Program --------------
As of December 31, 1996, the 1982-2 Program's properties consisted of 22 gross (2.19 net) productive wells. The 1982-2 Program also owned a non-working interest in an additional 5 wells. Affiliates of the 1982-2 Program operate 11 (41%) of its total wells. As of December 31, 1996, the 1982-2 Program had estimated total proved reserves of 1,026,533 Mcf of gas and 608 barrels of oil, with a present value (discounted at 10% per annum) of estimated future net cash flow of approximately $1,815,230. All of the 1982-2 Program's reserves are located in the Anadarko Basin.
Title to Oil and Gas Properties
Management believes that the Programs have satisfactory title to their oil and gas properties. Record title to substantially all of the Programs' properties is held by Dyco as nominee.
Title to the Programs' properties is subject to customary royalty, overriding royalty, carried, working, and other similar interests and contractual arrangements customary in the oil and gas industry, to liens for current taxes not yet due, and to other encumbrances. Management believes that such burdens do not materially detract from the value of such properties or from the Programs' interest therein or materially interfere with their use in the operation of the Programs' business.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
On November 12, 1992 Larry and Leona Beck filed a lawsuit against Dyco and others in which the plaintiffs alleged damages to their land as a result of remediation operations conducted on the Paul King #1-7 well (Beck v. Trigg Drilling Company, Inc., et al., C-92-227, District Court of Beckham County, Oklahoma). The 1982-2 Program had an approximate 1.6% working interest in the Paul King #1-7 well at the time the lawsuit was filed. The lawsuit alleged claims based on negligence, private nuisance, public nuisance, trespass, unjust enrichment, constructive fraud, and permanent injunctive relief, all in amounts to be determined at trial. A trial was conducted in the matter on February 22, 1994 in which the jury entered a verdict in favor of the plaintiffs in the amount of approximately $5.5 million, consisting of approximately $2.75 million in actual damages and approximately $2.75 million in punitive damages. The 1982-2 Program's share of such verdict was approximately $43,000 in actual damages and approximately $8,800 in punitive damages. Following appeal, the case was remanded for a new trial in order to redetermine damages. On December 23, 1996, prior to such new trial, the case was settled at no cost to the 1982-2 Program.
To the knowledge of the management of Dyco and the Programs, neither Dyco, the Programs, nor the Programs' properties are subject to any litigation, the results of which would have a material effect on the Programs' or Dyco's financial condition or operations.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS
There were no matters submitted to a vote of the limited partners of either Program during 1996.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP UNITS AND RELATED LIMITED PARTNER MATTERS
The Programs do not have an established trading market for their units of limited partnership interest ("Units"). Pursuant to the terms of the Program Agreements, Dyco, as General Partner, is obligated to annually issue a repurchase offer which is based on the estimated future net revenues from the Programs' reserves and is calculated pursuant to the terms of the Program Agreements. Such repurchase offer is recalculated monthly in order to reflect cash distributions made to the limited partners and extraordinary events. The following table sets forth, for the periods indicated, Dyco's repurchase offer per Unit and the amount of the Programs' cash distributions per Unit for the same period. For purposes of this Annual Report, a Unit represents an initial subscription of $5,000 to a Program.
1982-1 PROGRAM --------------
Repurchase Cash Price Distributions ---------- ------------- 1995: First Quarter $56 $ - Second Quarter 54 - Third Quarter 54 - Fourth Quarter 54 -
1996: First Quarter $54 $ - Second Quarter 54 - Third Quarter 65 - Fourth Quarter 65 -
1997: First Quarter $65 (1)
- ---------- (1) To be declared in March 1997.
1982-2 PROGRAM --------------
Repurchase Cash Price Distributions ---------- ------------- 1995: First Quarter $114 $ - Second Quarter 129 - Third Quarter 99 30 Fourth Quarter 99 -
1996: First Quarter $ 99 $ - Second Quarter 69 30 Third Quarter 79 20 Fourth Quarter 79 -
1997: First Quarter $ 79 (1)
- ---------- (1) To be declared in March 1997.
The 1982-1 Program has 10,100 Units outstanding and approximately 3,249 limited partners of record. The 1982-2 Program has 8,080 Units outstanding and approximately 2,551 limited partners of record.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Use of Forward-Looking Statements and Estimates
This Annual 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 Annual 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 Programs.
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, or otherwise indicated.
General Discussion
The following general discussion should be read in conjunction with the analysis of results of operations provided below. The most important variable affecting the Programs' revenues is the prices received for the sale of oil and gas. Predicting future prices is very difficult. Concerning past trends, average yearly wellhead gas prices in the United States have been relatively volatile for a number of years. For the past ten years, such prices have generally been in the $1.40 to $2.00 per Mcf range, significantly below prices received in the early 1980s. Average gas prices in the last several months have, however, been somewhat higher than those yearly averages. It is not known whether this is a short-term trend or will lead to higher average gas prices on a longer-term basis.
Substantially all of the Programs' gas reserves are being sold in the "spot market." Prices on the spot market are subject to wide seasonal and regional pricing fluctuations due to the highly competitive nature of the spot market. In addition, such spot market sales are generally short-term in nature and are dependent upon the obtaining of transportation services provided by pipelines. Spot prices for the Programs' gas increased from approximately $2.00 per Mcf at December 31, 1995 to approximately $3.57 per Mcf at December 31, 1996. Such prices were on an MMBTU basis and differ from the prices actually received by the Programs due to transportation and marketing costs, BTU adjustments, and regional price and quality differences.
Due to global consumption and supply trends over the last several months, oil prices have recently been higher than the yearly average prices of the late to mid-1980s and early 1990s. It is not known whether this trend will continue. Prices for the Programs' oil increased from approximately $18.50 per barrel at December 31, 1995 to approximately $23.75 per barrel at December 31, 1996.
Future prices for both oil and gas will likely be different from (and may be lower than) the prices in effect on December 31, 1996. Primarily due to heating season demand, year-end prices in many past years have tended to be higher, and in some cases significantly higher, than the yearly average price actually received by the Programs for at least the following year. In particular, it should be noted that December 31, 1996 prices were much higher than year-end prices for the last several years and substantially higher than the average prices received in each of the last several years. It is not possible to predict whether the December 1996 pricing level is indicative of a new trend toward higher energy prices or a short-term deviation from the recent history of low to moderate prices; therefore, management is unable to predict whether future oil and gas prices will (i) stabilize, (ii) increase, or (iii) decrease.
Results of Operations
1982-1 Program --------------
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 -------------------------------------
Total oil and gas sales increased $53,936 (20.5%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Of this increase, approximately $9,000 and $126,000, respectively, were related to increases in the average prices of oil and gas sold, partially offset by decreases of approximately $9,000 and $72,000, respectively, related to decreases in the volumes of oil and gas sold. Volumes of oil and gas sold decreased 440 barrels and 35,179 Mcf, respectively, for the year ended December 31, 1996 as compared to the year ended December 31, 1995. The decrease in volumes of oil sold resulted primarily from (i) a positive prior period volume adjustment made by the purchaser on one well during the year ended December 31, 1995 and (ii) normal declines in production due to diminished reserves on another well. The decrease in volumes of gas sold resulted primarily from (i) positive prior period volume adjustments made by the purchaser on several wells during the year ended December 31, 1995, (ii) normal declines in production due to diminished gas reserves on several wells, and (iii) the sale of one gas producing well during the year ended December 31, 1996, partially offset by a negative gas balancing adjustment on another well during the year ended December 31, 1995. Average oil and gas prices increased to $20.85 per barrel and $2.05 per Mcf, respectively, for the year ended December 31, 1996 from $16.97 per barrel and $1.31 per Mcf, respectively, for the year ended December 31, 1995.
Oil and gas production expenses (including lease operating expenses and production taxes) decreased $24,567 (18.3%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) workover expenses incurred on two wells during the year ended December 31, 1995 in order to improve the recovery of reserves, (ii) the sale of one well during the year ended December 31, 1996, (iii) a decrease in general repair and maintenance expenses on two wells during the year ended December 31, 1996 as compared to the year ended December 31, 1995, and (iv) decreases in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 34.5% for the year ended December 31, 1996 from 50.9% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in production expenses discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995.
Depreciation, depletion, and amortization of oil and gas properties decreased $19,051 (47.1%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from an upward revision in the estimates of remaining oil and gas reserves at December 31, 1996. As a percentage of oil and gas sales, this expense decreased to 6.7% for the year ended December 31, 1996 from 15.3% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995.
General and administrative expenses remained relatively constant for the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 32.3% for the year ended December 31, 1996 from 39.5% for the year ended December 31, 1995. This percentage decrease was primarily due to the increase in oil and gas sales during the year ended December 31, 1996 as compared to the year ended December 31, 1995 discussed above.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 -------------------------------------
Total oil and gas sales decreased $47,242 (15.2%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Of this decrease, approximately $50,000 was related to a decrease in the average price of gas sold and approximately $5,000 was related to a decrease in volumes of oil sold, partially offset by an increase of approximately $4,000 related to an increase in the average price of oil sold and an increase of approximately $3,000 related to an increase in volumes of gas sold. Volumes of oil sold decreased 307 barrels, while volumes of gas sold increased 2,592 Mcf for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Average gas prices decreased to $1.31 per Mcf for the year ended December 31, 1995 from $1.61 per Mcf for the year ended December 31, 1994, while average oil prices increased to $16.97 per barrel for the year ended December 31, 1995 from $15.30 per barrel for the year ended December 31, 1994.
Oil and gas production expenses (including lease operating expenses and production taxes) increased $43,550 (48.1%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This increase was primarily due to workover charges on several wells during the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses increased to 50.9% for the year ended December 31, 1995 from 29.1% for the year ended December 31, 1994. This increase was primarily a result of the workover charges incurred during the year ended December 31, 1995 and the decrease in oil and gas sales discussed above.
Depreciation, depletion, and amortization of oil and gas properties decreased $26,059 (39.2%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily a result of an increase in the estimate of remaining gas reserves at December 31, 1995. As a percentage of oil and gas sales, this expense decreased to 15.3% for the year ended December 31, 1995 from 21.4% for the year ended December 31, 1994. This percentage decrease was primarily a result of the dollar decrease in deprecia- tion, depletion, and amortization as discussed above.
General and administrative expenses increased $11,998 (13.0%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This increase resulted primarily from an increase in both professional fees and printing and postage expenses during the year ended December 31, 1995 as compared to the year ended December 31, 1994. As a percentage of oil and gas sales, these expenses increased to 39.5% for the year ended December 31, 1995 from 29.7% for the year ended December 31, 1994. This percentage increase was primarily a result of the dollar increase in general and adminis- trative expenses discussed above and the decrease in oil and gas sales discussed above.
1982-2 Program -------------
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 -------------------------------------
Total oil and gas sales increased $102,798 (17.6%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Of this increase, approximately $311,000 was related to an increase in the average price of gas sold, partially offset by decreases of approximately $11,000 and $203,000, respectively, related to decreases in volumes of oil and gas sold. Volumes of oil and gas sold decreased 524 barrels and 100,295 Mcf, respectively, for the year ended December 31, 1996 as compared to the year ended December 31, 1995. The decrease in volumes of oil sold resulted primarily from the sale of one well during the year ended December 31, 1995. The decrease in volumes of gas sold resulted primarily from (i) the shutting-in of one well during a portion of the year ended December 31, 1996 due to a state imposed allowable restriction, (ii) a positive gas balancing adjustment on the same well during the year ended December 31, 1995, and (iii) normal declines in production due to diminished gas reserves on two wells during the year ended December 31, 1996 as compared to the year ended December 31, 1995. Average oil and gas prices increased to $21.87 per barrel and $2.02 per Mcf, respectively, for the year ended December 31, 1996 from $13.57 per barrel and $1.31 per Mcf, respectively, for the year ended December 31, 1995.
Oil and gas production expenses (including lease operating expenses and production taxes) decreased $6,708 (4.0%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from the reversal of a $20,000 accrual during the year ended December 31, 1996 due to the conclusion of a certain legal contingency in favor of the 1982-2 Program (see "Item 3 - Legal Proceedings"), partially offset by an increase in production taxes associated with the increase in oil and gas sales as discussed above during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 23.6% for the year ended December 31, 1996 from 28.9% for the year ended December 31, 1995. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995.
Depreciation, depletion, and amortization of oil and gas properties decreased $48,909 (45.7%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) the decrease in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995 and (ii) an upward revision in the estimate of remaining gas reserves at December 31, 1996. As a percentage of oil and gas sales, this expense decreased to 8.5% for the year ended December 31, 1996 from 18.4% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995.
As a result of a decline in gas prices during the first part of 1995, the 1982-2 Program recognized a non-cash charge against earnings of $14,169 during the year ended December 31, 1995. This impairment provision for oil and gas properties at December 31, 1995 was necessary due to the unamortized costs of oil and gas properties exceeding the present value of the estimated future net revenues from such oil and gas properties. No similar charge was necessary during the year ended December 31, 1996.
General and administrative expenses remained relatively constant for the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 11.8% for the year ended December 31, 1996 from 14.3% for the year ended December 31, 1995. This percentage decrease was primarily due to the increase in oil and gas sales during the year ended December 31, 1996 as compared to the year ended December 31, 1995 as discussed above.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 -------------------------------------
Total oil and gas sales decreased $180,679 (23.7%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Of this decrease, approximately $119,000 was related to a decrease in the average price of gas sold and approximately $49,000 was related to a decrease in volumes of gas sold. Volumes of oil and gas sold decreased 1,234 barrels and 37,696 Mcf, respectively, for the year ended December 31, 1995 as compared to the year ended December 31, 1994. The decrease in volumes of oil sold resulted primarily from positive prior period volume adjustments from a purchaser on one well during the year ended December 31, 1994 and negative prior period volume adjustments on another well during the year ended December 31, 1995. The decrease in volumes of gas sold resulted primarily from (i) higher production on one well during 1994 which was recompleted in early 1994 and (ii) positive prior period volume adjustments from purchasers on several wells during the year ended December 31, 1994, partially offset by positive prior period volume adjustments on several wells during the year ended December 31, 1995. Average gas prices decreased to $1.31 per Mcf for the year ended December 31, 1995 from $1.56 per Mcf for the year ended December 31, 1994, while the average price of oil sold increased to $13.57 per barrel for the year ended December 31, 1995 from $10.96 per barrel for the year ended December 31, 1994.
Oil and gas production expenses (including lease operating expenses and production taxes) decreased $10,543 (5.9%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease resulted primarily from (i) an accrual for certain litigation costs during the year ended December 31, 1994 and (ii) workover charges on several wells during the year ended December 31, 1994 which were incurred in order to improve the recovery of reserves, partially offset by workover charges on several wells during the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses increased to 28.9% for the year ended December 31, 1995 from 23.4% for the year ended December 31, 1994. This percentage increase was primarily a result of the decrease in oil and gas sales discussed above.
Depreciation, depletion, and amortization of oil and gas properties decreased $93,773 (46.7%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily a result of (i) the decrease in volumes of oil and gas sold during the year ended December 31, 1995 as compared to the year ended December 31, 1994 and (ii) an upward revision in the estimate of remaining gas reserves at December 31, 1995. As a percentage of oil and gas sales, this expense decreased to 18.4% for the year ended December 31, 1995 from 26.3% for the year ended December 31, 1994. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization discussed above, partially offset by the decrease in oil and gas sales discussed above.
As a result of a decline in gas prices during the first part of 1995, the 1982-2 Program recognized a non-cash charge against earnings of $14,169 during the year ended December 31, 1995. This impairment provision for oil and gas properties at December 31, 1995 was necessary due to the unamortized costs of oil and gas properties exceeding the present value of the estimated future net revenues from such oil and gas properties. No similar charge was necessary during the year ended December 31, 1994.
General and administrative expenses increased $9,532 (12.9%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This increase resulted from an increase in both professional fees and printing and postage expenses during the year ended December 31, 1995 as compared to the year ended December 31, 1994. As a percentage of oil and gas sales, these expenses increased to 14.3% for the year ended December 31, 1995 from 9.7% for the year ended December 31, 1994. This increase was primarily a result of the dollar increase in general and administrative expenses discussed above and the decrease in oil and gas sales during the year ended December 31, 1995 as compared to the year ended December 31, 1994.
Liquidity and Capital Resources
Net proceeds from operations less necessary operating capital are distributed to the limited partners on a quarterly basis. See "Item 5. Market for the Registrant's Limited Partnership Units and Related Limited Partner Matters." The net proceeds from production are not reinvested in productive assets, except to the extent that producing wells are improved, or where methods are employed to permit more efficient recovery of reserves, thereby resulting in a positive economic impact. Assuming production levels for the year ended December 31, 1996, the 1982-1 Program's and 1982-2 Program's proved reserve quantities at December 31, 1996 would have a life of approximately 6.1 and 3.0 years, respectively, for gas reserves and 11.1 and 3.4 years, respectively, for oil reserves. However, since the Programs' reserve estimates are based on oil and gas prices at December 31, 1996, it is possible that a significant decrease in oil and gas prices from December 31, 1996 levels will reduce such reserves and their corresponding life-span.
The Programs' available capital from the limited partners' subscriptions has been spent on oil and gas drilling activities and there should be no further material capital resource commitments in the future. The Programs have no debt commitments. Cash for operational purposes will be provided by current oil and gas production.
The Samson Companies are currently in the process of evaluating certain oil and gas properties owned by the Programs and other entities of the Samson Companies. As a result of such evaluation, it is expected that certain of these properties will be placed in bid packages and offered for sale during the first half of 1997. It is likely that the Programs will have an interest in some of the properties being sold. It is currently estimated that the value of such sales, as a percentage of total proved reserves of either Program, will range from 1% to 10%.
The decision to accept any offer for the purchase of a property owned by one or both of the Programs will be made by Dyco after giving due consideration to the offer price and Dyco's estimate of both the property's remaining proved reserves and future operating costs. Net proceeds from the sale of any such properties will be distributed to the Programs and will be included in the calculation of the Programs' cash distributions for the quarter immediately following the Programs' receipt of the proceeds.
Following completion of any sale, the Programs' quantity of proved reserves will be reduced. It is also possible that the Programs' repurchase values and future cash distributions could decline as a result of a reduction of the Programs' reserve base. On the other hand, Dyco believes there will be beneficial operating efficiencies related to the Programs' remaining properties. This is primarily due to the fact that the properties being considered for sale are more likely to bear a higher ratio of operating expenses as compared to reserves than the properties not being considered for sale. The net effect of such property sales is difficult to predict as of the date of this Annual Report.
There can be no assurance as to the amount of the Programs' future cash distributions. The Programs' ability to make cash distributions depends primarily upon the level of available cash flow generated by the Programs' operating activities, which will be affected (either positively or negatively) by many factors beyond the control of the Programs, including the price of and demand for oil and gas and other market and economic conditions. Even if prices and costs remain stable, the amount of cash available for distributions will decline over time (as the volume of production from producing properties declines) since the Programs are not replacing production through acquisitions of producing properties and drilling. If the Programs sell any of their properties as discussed above, the Programs' quantity of proved reserves will be reduced; therefore, it is possible that the Programs' future cash distributions could decline as a result of a reduction of the Programs' reserve base.
Inflation and Changing Prices
Prices obtained for oil and gas production depend upon numerous factors, including the extent of domestic and foreign production, foreign imports of oil, market demand, domestic and foreign economic conditions in general, and governmental regulations and tax laws. The general level of inflation in the economy did not have a material effect on the operations of the Programs in 1996. Oil and gas prices have fluctuated during recent years and generally have not followed the same pattern as inflation. See "Item 2. Properties - Oil and Gas Production, Revenue, and Price History."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
DYCO OIL AND GAS PROGRAM 1982-1 LIMITED PARTNERSHIP
We have audited the financial statements of the Dyco Oil and Gas Program 1982-1 Limited Partnership (a Minnesota limited partnership) as listed in Item 14(a) of this Annual Report. These financial statements are the responsibility of the Program's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and dis- closures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Dyco Oil and Gas Program 1982-1 Limited Partnership at December 31, 1996 and 1995, and the results of its operations and cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P. Tulsa, Oklahoma February 10, 1997
DYCO OIL AND GAS PROGRAM 1982-1 LIMITED PARTNERSHIP Balance Sheets December 31, 1996 and 1995
ASSETS ------ 1996 1995 -------- -------- CURRENT ASSETS: Cash and cash equivalents $135,676 $ 29,087 Accrued oil and gas sales, including $33,654 due from related parties at 1995 (Note 2) 64,236 46,151 ------- ------- Total current assets $199,912 $ 75,238
NET OIL AND GAS PROPERTIES, utilizing the full cost method 176,741 216,077
DEFERRED CHARGE 59,347 59,970 ------- -------
$436,000 $351,285 ======= =======
LIABILITIES AND PARTNERS' CAPITAL ---------------------------------
CURRENT LIABILITIES: Accounts payable $ 7,000 $ 6,648 ------- ------- Total current liabilities $ 7,000 $ 6,648
ACCRUED LIABILITY 53,236 55,380
PARTNERS CAPITAL: General Partner, issued and outstanding, 100 Units 3,757 2,892 Limited Partners, issued and outstanding, 10,000 Units 372,007 286,365 ------- ------- Total Partners' Capital $375,764 $289,257 ------- -------
$436,000 $351,285 ======= =======
The accompanying notes are an integral part of these financial statements.
DYCO OIL AND GAS PROGRAM 1982-1 LIMITED PARTNERSHIP Statements of Operations For the Years Ended December 31, 1996, 1995, and 1994
1996 1995 1994 ---------- --------- --------
REVENUES: Oil and gas sales, including $195,118 and $252,043 of sales to related parties in 1995 and 1994 (Note 2) $317,267 $263,331 $310,573 Interest 2,656 207 3,610 ------- ------- -------
$319,923 $263,538 $314,183
COSTS AND EXPENSES: Lease operating $ 86,759 $115,436 $ 73,341 Production taxes 22,755 18,645 17,190 Depreciation, depletion and amortization of oil and gas properties 21,362 40,413 66,472 General and administrative 102,540 104,106 92,108 ------- ------- -------
$233,416 $278,600 $249,111 ------- ------- -------
NET INCOME (LOSS) $ 86,507 ($ 15,062) $ 65,072 ======= ======= =======
GENERAL PARTNER (1%) - NET INCOME (LOSS) $ 865 ($ 151) $ 651 ======= ======= =======
LIMITED PARTNERS (99%) - NET INCOME (LOSS) $ 85,642 ($ 14,911) $ 64,421 ======= ======= =======
NET INCOME (LOSS) per Unit $ 9 ($ 1) $ 6 ======= ======= =======
UNITS OUTSTANDING 10,100 10,100 10,100 ======= ======= =======
The accompanying notes are an integral part of these financial statements.
DYCO OIL AND GAS PROGRAM 1982-1 LIMITED PARTNERSHIP Statements of Partners' Capital For the Years Ended December 31, 1996, 1995, and 1994
General Limited Partner Partners Total --------- ---------- ----------
Balances at Dec. 31, 1993 $4,412 $436,835 $441,247 Cash distributions ( 2,020) ( 199,980) ( 202,000) Net income 651 64,421 65,072 ---- ------- -------
Balances at Dec. 31, 1994 $3,043 $301,276 $304,319 Net income (loss) ( 151) ( 14,911) ( 15,062) ----- ------- -------
Balances at Dec. 31, 1995 $2,892 $286,365 $289,257 Net income 865 85,642 86,507 ----- ------- -------
Balances at Dec. 31, 1996 $3,757 $372,007 $375,764 ===== ======= =======
The accompanying notes are an integral part of these financial statements.
DYCO OIL AND GAS PROGRAM 1982-1 LIMITED PARTNERSHIP Statements of Cash Flows For the Years Ended December 31, 1996, 1995, and 1994
1996 1995 1994 --------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 86,507 ($15,062) $ 65,072 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion, and amorti- zation of oil and gas properties 21,362 40,413 66,472 (Increase) decrease in accrued oil and gas sales ( 18,085) ( 31,280) 57,721 (Increase) decrease in deferred charge 623 42,299 ( 99,973) Increase (decrease) in accounts payable 352 ( 489) 790 Decrease in gas imbalance payable - - ( 74,559) Decrease in related party payable - - ( 58,249) Increase (decrease) in accrued liability ( 2,144) ( 23,522) 78,902 ------- ------ ------- Net cash provided by operating activities $ 88,615 $12,359 $ 36,176 ------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of oil and gas properties $ 20,005 $ 26 $ 10,290 Additions to oil and gas properties ( 2,031) ( 88)( 767) ------- ------ ------- Net cash provided (used) by investing activities $ 17,974 ($ 62) $ 9,523 ------- ------ ------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions $ - $ - ($202,000) ------- ------ ------- Net cash used by financing activities $ - $ - ($202,000) ------- ------ ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $106,589 $12,297 ($156,301)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 29,087 16,790 173,091 ------- ------ ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $135,676 $29,087 $ 16,790 ======= ====== ======
The accompanying notes are an integral part of these financial statements.
DYCO OIL AND GAS PROGRAM 1982-1 LIMITED PARTNERSHIP Notes to Financial Statements For the Years Ended December 31, 1996, 1995, and 1994
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The Dyco Oil and Gas Program 1982-1 Limited Partnership (the "Program"), a Minnesota limited partnership, commenced operations on June 14, 1982. Dyco Petroleum Corporation ("Dyco") is the general partner of the Program. Affiliates of Dyco owned 4,172.16 (41.3%) of the Program's Units at December 31, 1996.
The Program's sole business is the development and production of oil and gas with a concentration on gas. Substantially all of the Program's gas reserves are being sold regionally in the "spot market." Due to the highly competitive nature of the spot market, prices on the spot market are subject to wide seasonal and regional pricing fluctuations. In addition, such spot market sales are generally short-term in nature and are dependent upon the obtaining of transportation services provided by pipelines.
Cash and Cash Equivalents
The Program considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are not insured, which cause the Program to be subject to risk.
Credit Risk
Accrued oil and gas sales which are due from a variety of oil and gas purchasers subject the Program to a concentration of credit risk. Some of these purchasers are discussed in Note 3 - Major Customers.
Oil and Gas Properties
Oil and gas operations are accounted for using the full cost method of accounting. All productive and non-productive costs associated with the acquisition, exploration, and development of oil and gas reserves are capitalized. Capitalized costs are depleted on the gross revenue method using estimates of proved reserves. The full cost amortization rates per equivalent Mcf of gas produced during the years ended December 31, 1996, 1995, and 1994 were $0.15, $0.22, and $0.36, respectively. The Program's calculation of depreci-ation, depletion, and amortization includes estimated future expenditures to be incurred in developing proved reserves and estimated dismantlement and abandonment costs, net of estimated salvage values. In the event the unamortized cost of oil and gas properties being amortized exceeds the full cost ceiling (as defined by the Securities and Exchange Commission("SEC")) the excess is charged to expense in the year during which such excess occurs. In addition, SEC rules provide that if prices decline subsequent to year end, any excess that results from these declines may also be charged to expense during the current year. Sales and abandonments of properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved oil and gas reserves.
Deferred Charge
The Deferred Charge at December 31, 1996 and 1995 represents costs deferred for lease operating expenses incurred in connection with the Program's underproduced gas imbalance position. At December 31, 1996, cumulative total gas sales volumes for underproduced wells were less than the Program's pro- rata share of total gas production from these wells by 103,392 Mcf, resulting in prepaid lease operating expenses of $59,347. At December 31, 1995, cumulative total gas sales volumes for underproduced wells were less than the Program's pro-rata share of total gas production from these wells by 123,727 Mcf, resulting in prepaid lease operating expenses of $59,970.
Accrued Liability
The Accrued Liability at December 31, 1996 and 1995 represents charges accrued for lease operating expenses incurred in connection with the Program's overproduced gas imbalance position. At December 31, 1996, cumulative total gas sales volumes for overproduced wells exceeded the Program's pro-rata share of total gas production from these wells by 92,745 Mcf, resulting in accrued lease operating expenses of $53,236. At December 31, 1995, cumulative total gas sales volumes for overproduced wells exceeded the Program's pro-rata share of total gas production from these wells by 114,257 Mcf, resulting in accrued lease operating expenses of $55,380.
Oil and Gas Sales
The Program's oil and condensate production is sold, title passed, and revenue recognized at or near the Program's wells under short-term purchase contracts at prevailing prices in accordance with arrangements which are customary in the oil industry. Sales of gas applicable to the Program's interest in producing oil and gas leases are recorded as income when the gas is metered and title transferred pursuant to the gas sales contracts covering the Program's interest in gas reserves. During such times as the Program's sales of gas exceed its pro rata ownership in a well, such sales are recorded as income unless total sales from the well have exceeded the Program's share of estimated total gas reserves underlying the property at which time such excess is recorded as a liability. At December 31, 1996 and 1995 no such liability was recorded.
Use of Estimates in Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Further, accrued oil and gas sales, the deferred charge, and the accrued liability all involve estimates which could materially differ from the actual amounts ultimately realized or incurred in the near term. Oil and gas reserves (see Note 4) also involve significant estimates which could materially differ from the actual amounts ultimately realized.
Income Taxes
Income or loss for income tax purposes is includable in the income tax returns of the partners. Accordingly, no recognition has been given to income taxes in the accompanying financial statements.
2. TRANSACTIONS WITH RELATED PARTIES
Under the terms of the Program Agreement, Dyco is entitled to receive a reimbursement for all direct expenses and general and administrative, geological, and engineering expenses it incurs on behalf of the Program. During the years ended December 31, 1996, 1995, and 1994, such expenses totaled $102,540, $104,106, and $92,108, respectively, of which $74,460 was paid each year to Dyco and its affiliates.
Affiliates of the Program operate certain of the Program's properties. Their policy is to bill the Program for all customary charges and cost reimbursements associated with these activities, together with any compressor rentals, consulting, or other services provided.
During 1994 and 1995 the Program sold gas at market prices to El Paso Energy Marketing Company, formerly known as Premier Gas Company ("El Paso"). El Paso, like and other similar gas marketing firms, then resold such gas to third parties at market prices. El Paso was an affiliate of the Program until December 6, 1995. During 1995 and 1994, these sales totaled $195,118 and $252,043, respectively. At December 31, 1995, accrued oil and gas sales included $33,654 due from El Paso.
3. MAJOR CUSTOMERS
The following purchasers individually accounted for more than 10% of the combined oil and gas sales of the Program for the years ended December 31, 1996, 1995, and 1994:
Purchaser 1996 1995 1994 --------- ----- ----- -----
El Paso 86.0% 74.1% 81.2% National Cooperative Refinery - % 20.4% - %
In the event of interruption of purchases by these significant customers or the cessation or material change in availability of open-access transportation by the Program's pipeline transporters, the Program may encounter difficulty in marketing its gas and in maintaining historic sales levels. Alternative purchasers or transporters may not be readily available.
4. SUPPLEMENTAL OIL AND GAS INFORMATION
The following supplemental information regarding the oil and gas activities of the Program is presented pursuant to the disclosure requirements promulgated by the SEC.
Capitalized Costs
The Program's capitalized costs and accumulated depreciation, depletion, amortization, and valuation allowance were as follows:
December 31, ---------------------------- 1996 1995 ------------- -------------
Proved properties $52,550,911 $52,568,885
Unproved properties, not subject to depreciation, depletion, and amortization - - ---------- ----------
$52,550,911 $52,568,885
Less accumulated depreciation, depletion, amortization, and valuation allowance ( 52,374,170) ( 52,352,808) ---------- ----------
Net oil and gas properties $ 176,741 $ 216,077 ========== ==========
Costs Incurred
Costs incurred by the Program in connection with its oil and gas property acquisition, exploration, and development activities were as follows:
December 31, ------------------------- 1996 1995 1994 ------ ---- ----
Acquisition of properties $ - $ - $ - Exploration costs - - - Development costs 2,031 88 767 ----- ---- ----
Total costs incurred $2,031 $ 88 $ 767 ===== ==== ====
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; con- sequently, it is reasonably possible that material revisions to existing reserve estimates may occur in the near future. Although every reasonable effort has been made to ensure that the reserve estimates reported herein 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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Programs are limited partnerships and have no directors or executive officers. The following individuals are directors and executive officers of Dyco, General Partner. The business address of such directors and executive officers is Two West Second Street, Tulsa, Oklahoma 74103.
NAME AGE POSITION WITH DYCO ---------------- --- -------------------------------- Dennis R. Neill 44 President and Director
Patrick M. Hall 38 Chief Financial Officer
Judy K. Fox 45 Secretary
The director will hold office until the next annual meeting of shareholders of Dyco and until his successor has been duly elected and qualified. All executive officers serve at the discretion of the Board of Directors.
Dennis R. Neill joined the Samson Companies in 1981, was named Senior Vice President and Director of Dyco on June 18, 1991, and was named President of Dyco on June 30, 1996. Prior to joining the Samson Companies, he was associated with a Tulsa law firm, Conner and Winters, where his principal practice was in the securities area. He received a Bachelor of Arts degree in political science from Oklahoma State University and a Juris Doctorate degree from the University of Texas. Mr. Neill also serves as Senior Vice President of Samson Investment Company; President and Director of Samson Properties Incorporated, Samson Hydrocarbons Company, Geodyne Resources, Inc. and its subsidiaries, Berry Gas Company, Circle L Drilling Company, and Compression, Inc.; and President and Chairman of the Board of Directors of Samson Securities Company.
Patrick M. Hall joined the Samson Companies in 1983, was named a Vice President of Dyco on June 18, 1991, and was named Chief Financial Officer of Dyco on June 30, 1996. Prior to joining the Samson Companies he was a senior accountant with Peat Marwick Main & Co. in Tulsa. He holds a Bachelor of Science degree in accounting from Oklahoma State University and is a Certified Public Accountant. Mr. Hall also serves as Senior Vice President - Controller of Samson Investment Company.
Judy K. Fox joined the Samson Companies in 1990 and was named Secretary of Dyco on June 30, 1996. Prior to joining the Samson Companies, she served as Gas Contract Manager for Ely Energy Company. Ms. Fox is also Secretary of Berry Gas Company, Circle L Drilling Company, Compression, Inc., Geodyne Resources, Inc. and its subsidiaries, Samson Hydrocarbons Company, and Samson Properties Incorporated.
ITEM 11. EXECUTIVE COMPENSATION
The Programs are limited partnerships and, therefore, have no officers or directors. The following table summarizes the amounts paid by the Programs as compensation and reimbursements to Dyco and its affiliates for the three years ended December 31, 1996:
Compensation/Reimbursement to Dyco and its affiliates Three Years Ended December 31, 1996
Type of Compensation/Reimbursement(1) Expense - ------------------------------------- ------------------------- 1996 1995 1994 ------- ------- ------- 1982-1 Program - --------------
Compensation: Operations $ (2) $ (2) $ (2) Gas Marketing $ (3) $ (3) $ (3)
Reimbursements: General and Administrative, Geological, and Engineering Expenses and Direct Expenses(4) $74,460 $74,460 $74,460
1982-2 Program - --------------
Compensation: Operations $ (2) $ (2) $ (2) Gas Marketing $ (3) $ (3) $ (3)
Reimbursements: General and Administrative, Geological, and Engineering Expenses and Direct Expenses(4) $58,440 $58,440 $58,440
- ----------
(1) The authority for all of such compensation and reimbursement is the Program Agreements. With respect to the Operations activities noted in the table, management believes that such compensation is equal to or less than that charged by unaffiliated persons in the same geographic areas and under the same conditions. (2) Affiliates of the Programs serve as operator of a significant portion of the Programs' wells. Dyco, as 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. The dollar amount of such compen- sation paid by the Programs to such affiliates is impossible to quantify as of the date of this Annual Report.
(3) During 1994 and 1995 El Paso, an affiliate of the Programs until December 6, 1995, purchased a portion of the Programs' gas at market prices and resold such gas at market prices directly to end-users and local distribution companies. For the years ended December 31, 1995 and 1994, the 1982-1 Program sold $195,118 and $252,043, respectively, of gas to El Paso. For the years ended December 31, 1995 and 1994, the 1982-2 Program sold $471,392 and $626,073, respectively, of gas to El Paso. After December 6, 1995, the Programs' gas was marketed by Dyco and its affiliates, who were reimbursed for such activities as general and administrative expenses. (4) The Programs reimburse Dyco and its affiliates for reasonable and necessary general and administrative, geological, and engineering expenses and direct expenses incurred in connection with their management and operation of the Programs. The directors, officers, and employees of Dyco and its affiliates receive no direct remuneration from the Programs for their services to the Programs. See "Salary Reimbursement Table" below. The allocable general and administrative, geological, and engineering expenses are apportioned on a reasonable basis between the Programs' business and all other oil and gas activities of Dyco and its affiliates, including Dyco's management and operation of affiliated oil and gas limited partnerships. The allocation to the Programs of these costs is made by Dyco as General Partner.
As noted in the Compensation/Reimbursement Table above, the directors, officers, and employees of Dyco and their affiliates receive no direct remuneration from the Programs for their services. However, to the extent such services represent direct involvement with the Programs, as opposed to general corporate functions, such persons' salaries are allocated to and reimbursed by the Programs. Such allocation to the Programs' general and administrative, geological, and engineering expenses of the salaries of directors, officers, and employees of Dyco and its affiliates is based on internal records maintained by Dyco and its affiliates, and represents investor relations, legal, accounting, data processing, management, gas marketing, and other functions directly attributable to the Programs' operations. The following tables indicate the approximate amount of general and administrative expense reimbursement attributable to the salaries of the directors, officers, and employees of Dyco and its affiliates for the three years ended December 31, 1996:
In addition to the compensation/reimbursements noted above, during the three years ended December 31, 1996, the Samson Companies were in the business of supplying field and drilling equipment and services to affiliated and unaffiliated parties in the industry. Such companies may have provided equipment and services for wells in which the Programs have an interest. These equipment and services were provided at prices or rates equal to or less than those normally charged in the same or comparable geographic area by unaffiliated persons or companies dealing at arm's length. The operators of these wells bill the Programs for a portion of such costs based upon the Programs' interest in the well.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information as to the beneficial ownership of the Programs' Units as of January 31, 1997 by each beneficial owner of more than 5% of the issued and outstanding Units and by the directors, officers, and affiliates of Dyco. The address of each of such persons is Samson Plaza, Two West Second Street, Tulsa, Oklahoma 74103. Number of Units Beneficially Owned (Percent Beneficial Owner of Outstanding) --------------------------------- -----------------
1982-1 Program: --------------
Samson Resources Company 4,172.16 (41.3%)
All directors, officers, and affiliates of Dyco as a group and Dyco (5 persons) 4,172.16 (41.3%)
1982-2 Program: --------------
Samson Resources Company 3,056.56 (37.8%)
All directors, officers, and affiliates of Dyco as a group and Dyco (5 persons) 3,056.56 (37.8%)
To the best knowledge of the Programs and Dyco, there were no officers, directors, or 5% owners who were delinquent filers of reports required under section 16 of the Securities Exchange Act of 1934.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain affiliates of Dyco engage in oil and gas activities independently of the Programs which result in conflicts of interest that cannot be totally eliminated. The allocation of acquisition and drilling opportunities and the nature of the compensation arrangements between the Programs and such affiliates also create potential conflicts of interest. An affiliate of the Program owns a significant amount of the Programs' Units and therefore has an identity of interest with other limited partners with respect to the operations of the Programs.
In order to attempt to assure limited liability for limited partners as well as an orderly conduct of business, management of the Programs is exercised solely by Dyco. The Program Agreements grant Dyco broad discretionary authority with respect to the Programs' participation in drilling prospects and expenditure and control of funds, including borrowings. These provisions are similar to those contained in prospectuses and partnership agreements for other public oil and gas partnerships. Broad discretion as to general management of the Programs involves circumstances where Dyco has conflicts of interest and where it must allocate costs and expenses, or opportunities, among the Programs and other competing interests.
Dyco does not devote all of its time, efforts, and personnel exclusively to the Programs. Furthermore, the Programs do not have any employees, but instead rely on the personnel of the Samson Companies. The Programs thus compete with the Samson Companies (including other currently sponsored oil and gas programs) for the time and resources of such personnel. The Samson Companies devote such time and personnel to the management of the Programs as are indicated by the circumstances and as are consistent with Dyco's fiduciary duties.
Affiliates of the Programs are solely responsible for the negotiation, administration, and enforcement of oil and gas sales agreements covering the Programs' leasehold interests. Because affiliates of the Programs who provide services to the Programs have fiduciary or other duties to other members of the Samson Companies, contract amendments and negotiating positions taken by them in their effort to enforce contracts with purchasers may not necessarily repre- sent the positions that a Program would take if it were to administer its own contracts without involvement with other members of the Samson Companies. On the other hand, management believes that the Programs' negotiating strength and contractual positions have been enhanced by virtue of its affiliation with the Samson Companies.
For a description of certain other relationships and related transactions see "Item 11. Executive Compensation".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules, and Exhibits.
(1) Financial Statements: The following financial statements for the Programs as of December 31, 1996 and 1995 and for the years ended December 31, 1996, 1995, and 1994 are filed as part of this report:
Reports of Independent Accountants Balance Sheets Statements of Operations Statements of Partners' Capital Statements of Cash Flows Notes to Financial Statements
(2) Financial Statement Schedules:
None.
(3) Exhibits:
4.1 Drilling Agreement dated February 16, 1982 for Dyco Drilling Program 1982-1 by and between Dyco Oil and Gas Program 1982-1, Dyco Petroleum Corporation, and Jaye F. Dyer filed as Exhibit 4.1 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.2 Program Agreement dated February 16, 1992 for Dyco Oil and Gas Program 1982-1 by and between Dyco Petroleum Corporation and Participants filed as Exhibit 4.2 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.3 Amendment to Program Agreement for Dyco Oil and Gas Program 1982-1 dated February 9, 1991 filed as Exhibit 4.3 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.4 Certificate of Limited Partnership, as amended, for Dyco Oil and Gas Program 1982-1 Limited Partnership filed as Exhibit 4.3 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.5 Drilling Agreement dated June 14, 1982 for Dyco Drilling Program 1982-2 by and between Dyco Oil and Gas Program 1982-2, Dyco Petroleum Corporation, and Jaye F. Dyer filed as Exhibit 4.4 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.6 Form of Program Agreement for Dyco Oil and Gas Program 1982-2 by and between Dyco Petroleum Corporation and the Participants filed as Exhibit 4.6 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.7 Amendment to Program Agreement for Dyco Oil and Gas Program 1982-2 dated February 9, 1989 filed as Exhibit 4.7 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.8 Certificate of Limited Partnership, as amended, for Dyco Oil and Gas Program 1982-2 Limited Partnership filed as Exhibit 4.8 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
*27.1 Financial Data Schedule containing summary finan- cial information extracted from the Dyco Oil and Gas Program 1982-1 Limited Partnership's financial statements as of December 31, 1996 and for the year ended December 31, 1996.
*27.2 Financial Data Schedule containing summary finan- cial information extracted from the Dyco Oil and Gas Program 1982-2 Limited Partnership's financial statements as of December 31, 1996 and for the year ended December 31, 1996.
All other Exhibits are omitted as inapplicable.
------------------ * Filed herewith.
(b) Reports on Form 8-K for the fourth quarter of 1996:
None.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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 organized.
DYCO OIL AND GAS PROGRAM 1982-1 LIMITED PARTNERSHIP
By: DYCO PETROLEUM CORPORATION General Partner February 20, 1997
By: /s/Dennis R. Neill ------------------------------ Dennis R. Neill President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated.
By: /s/Dennis R. Neill President and Feb. 20, 1997 ------------------- Director (Principal Dennis R. Neill Executive Officer)
/s/Patrick M. Hall Chief Financial Feb. 20, 1997 ------------------- Officer (Principal Patrick M. Hall Financial and Accounting Officer)
/s/Judy K. Fox Secretary Feb. 20, 1997 ------------------- Judy K. Fox
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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 organized.
DYCO OIL AND GAS PROGRAM 1982-2 LIMITED PARTNERSHIP
By: DYCO PETROLEUM CORPORATION General Partner February 20, 1997
By: /s/Dennis R. Neill ------------------------------ Dennis R. Neill President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated.
By: /s/Dennis R. Neill President and Feb. 20, 1997 ------------------- Director (Principal Dennis R. Neill Executive Officer)
/s/Patrick M. Hall Chief Financial Feb. 20, 1997 ------------------- Officer (Principal Patrick M. Hall Financial and Accounting Officer)
/s/Judy K. Fox Secretary Feb. 20, 1997 ------------------- Judy K. Fox
INDEX TO EXHIBITS
Exhibit Number Description - ------- -----------
4.1 Drilling Agreement dated February 16, 1982 for Dyco Drilling Program 1982-1 by and between Dyco Oil and Gas Program 1982-1, Dyco Petroleum Corporation, and Jaye F. Dyer filed as Exhibit 4.1 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.2 Program Agreement dated February 16, 1992 for Dyco Oil and Gas Program 1982-1 by and between Dyco Petroleum Corporation and Participants filed as Exhibit 4.2 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.3 Amendment to Program Agreement for Dyco Oil and Gas Program 1982-1 dated February 9, 1991 filed as Exhibit 4.3 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.4 Certificate of Limited Partnership, as amended, for Dyco Oil and Gas Program 1982-1 Limited Partnership filed as Exhibit 4.3 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.5 Drilling Agreement dated June 14, 1982 for Dyco Drilling Program 1982-2 by and between Dyco Oil and Gas Program 1982-2, Dyco Petroleum Corporation, and Jaye F. Dyer filed as Exhibit 4.4 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.6 Form of Program Agreement for Dyco Oil and Gas Program 1982-2 by and between Dyco Petroleum Corporation and the Participants filed as Exhibit 4.6 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.7 Amendment to Program Agreement for Dyco Oil and Gas Program 1982-2 dated February 9, 1989 filed as Exhibit 4.7 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
4.8 Certificate of Limited Partnership, as amended, for Dyco Oil and Gas Program 1982-2 Limited Partnership filed as Exhibit 4.8 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 13, 1992 and is hereby incorporated by reference.
*27.1 Financial Data Schedule containing summary financial information extracted from the Dyco Oil and Gas Program 1982-1 Limited Partnership's financial statements as of December 31, 1996 and for the year ended December 31, 1996.
*27.2 Financial Data Schedule containing summary financial information extracted from the Dyco Oil and Gas Program 1982-2 Limited Partnership's financial statements as of December 31, 1996 and for the year ended December 31, 1996.
- ------------------ * Filed herewith.