10-K405 1 d80.txt ANNUAL REPORT FORM 10-K405 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2001 Commission File Number 33-10346-09 (1980-1 Program) 33-10346-10 (1980-2 Program) DYCO 1980 OIL AND GAS PROGRAMS (TWO LIMITED PARTNERSHIPS) (Exact name of registrant as specified in its charter) 41-1378908 (1980-1 Program) Minnesota 41-1385165 (1980-2 Program) (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) Samson Plaza Two West Second Street Tulsa, Oklahoma 74103 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (918) 583-1791 Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: Units of limited partnership interest 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 the filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K405 or any amendment to this Form 10-K405. [X] The units of limited partnership are not publicly traded, therefore, registrant cannot compute the aggregate market value of the voting units held by non-affiliates of the registrant. DOCUMENTS INCORPORATED BY REFERENCE: None. -1- FORM 10-K405 DYCO 1980 OIL AND GAS PROGRAMS (Two Minnesota limited partnerships) TABLE OF CONTENTS PART I.......................................................................3 ITEM 1. BUSINESS...................................................3 ITEM 2. PROPERTIES.................................................7 ITEM 3. LEGAL PROCEEDINGS.........................................13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS.......13 PART II.....................................................................14 ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP UNITS AND RELATED LIMITED PARTNER MATTERS.................14 ITEM 6. SELECTED FINANCIAL DATA...................................15 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............18 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........................................26 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...............27 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.......................57 PART III....................................................................57 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........57 ITEM 11. EXECUTIVE COMPENSATION....................................58 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................................63 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............64 PART IV.....................................................................66 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K...............................................66 SIGNATURES............................................................68 -2- PART I. ITEM 1. BUSINESS General The Dyco Oil and Gas Program 1980-1 Limited Partnership (the "1980-1 Program") and Dyco Oil and Gas Program 1980-2 Limited Partnership (the "1980-2 Program") (collectively, the "Programs") are Minnesota limited partnerships engaged in the production of oil and gas. The 1980-1 Program and the 1980-2 Program commenced operations on February 15, 1980 and June 16, 1980, 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. Samson Resources Company, an affiliate of Dyco, currently owns more than one-half of the 1980-1 Program's Units of limited partnership interest, making the 1980-1 Program a 50% subsidiary of Samson Resources Company. See "Item 2. Properties" for a description of the Programs' reserves and properties. The limited partnership agreements for each of the Programs (the "Program Agreements") provides that limited partners are allocated 99% of all Program costs and revenues and Dyco, as General Partner, is allocated 1% of all Program costs and revenues. Included in such costs is each Program's reimbursement to Dyco of the Program's proportionate share of Dyco's geological, engineering, and general and administrative expenses. Dyco currently serves as General Partner of 31 limited partnerships, including the Programs. Dyco is a wholly-owned subsidiary of Samson Investment Company. Samson Investment Company and its various corporate subsidiaries, including Dyco, (collectively, "Samson") are primarily engaged in the production and development of and exploration for oil and gas reserves and the acquisition and operation of producing properties. At December 31, 2001, Samson owned interests in approximately 14,000 oil and gas wells located in 19 states of the United States and the countries of Canada, Venezuela, and Russia. At December 31, 2001, Samson operated approximately 3,000 oil and gas wells located in 14 states of the United States, as well as Canada, Venezuela, and Russia. As limited partnerships, the Programs have no officers, directors, or employees. They rely instead on the personnel of Dyco and Samson. As of February 15, 2002, Samson employed approximately 1,000 persons. No employees are covered by collective bargaining agreements, and management believes that Samson provides a sound employee relations environment. For information regarding the executive officers of Dyco, see "Item 10. Directors and Executive Officers of the Registrant." -3- Dyco's and the Programs' principal place of business is located at Samson Plaza, Two West Second Street, Tulsa, Oklahoma 74103, and their telephone number is (918) 583-1791 or (800) 283-1791. Funding Although the Program Agreements permit the Programs to incur borrowings, each Program's operations and expenses are currently funded out of each Program's revenues from oil and gas sales. Dyco may, but is not required to, advance funds to each of the Programs for the same purposes for which Program borrowings are authorized. Principal Products Produced and Services Rendered The Programs' sole business is the development and production of oil and gas with a concentration on gas. The Programs do not hold any patents, trademarks, licenses, or concessions and are not a party to any government contracts. The Programs have no backlog of orders and do not participate in research and development activities. The Programs are not presently encountering shortages of oilfield tubular goods, compressors, production material, or other equipment. Oil, Gas, and Environmental Control Regulations Regulation of Production Operations -- The production of oil and gas is subject to extensive federal and state laws and regulations governing a wide variety of matters, including the drilling and spacing of wells, allowable rates of production, prevention of waste and pollution, and protection of the environment. In addition to the direct costs borne in complying with such regulations, operations and revenues may be impacted to the extent that certain regulations limit oil and gas production to below economic levels. Regulation of Sales and Transportation of Oil and Gas -- Sales of crude oil and condensate are made by the Programs at market prices and are not subject to price controls. The sale of gas may be subject to both federal and state laws and regulations. The provisions of these laws and regulations, are complex and affect all who produce, resell, transport, or purchase gas, including the Programs. Although virtually all of the Programs' gas production is not subject to price regulation, other regulations affect the availability of gas transportation services and the ability of gas consumers to continue to purchase or use gas at current levels. Accordingly, such regulations may -4- have a material effect on the Programs' operations and projections of future oil and gas production and revenues. Future Legislation -- Legislation affecting the oil and gas industry is under constant review for amendment or expansion. Because such laws and regulations are frequently amended or reinterpreted, management is unable to predict what additional energy legislation may be proposed or enacted or the future cost and impact of complying with existing or future regulations. Regulation of the Environment -- The Programs' operations are subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Compliance with such laws and regulations, together with any penalties resulting from noncompliance, may increase the cost of the Programs' operations or may affect the Programs' ability to timely complete existing or future activities. Management anticipates that various local, state, and federal environmental control agencies will have an increasing impact on oil and gas operations. Significant Customers Purchases of gas by El Paso Energy Marketing Company ("El Paso") accounted for approximately 96.9% of the 1980-1 Program's oil and gas sales during the year ended December 31, 2001. During the year ended December 31, 2001 El Paso accounted for approximately 52.0% and Lumen Energy Corporation accounted for approximately 41.9% of the 1980-2 Program's oil and gas sales. 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 Programs' pipeline transporters, the Programs may encounter difficulty in marketing their gas and in maintaining historic sales levels. Alternative purchasers or transporters may not be readily available. The Programs' principal customers for crude oil production are refiners and other companies which have pipeline facilities near the producing properties of the Programs. In the event pipeline facilities are not conveniently available to production areas, crude oil is usually trucked by purchasers to storage facilities. Competition and Marketing The Programs' revenues, net income or loss, cash flows, carrying value of oil and gas properties, and amount of oil and gas which can be economically produced depend substantially upon the prevailing prices for oil and gas. Oil and gas prices (and consequently the Programs' profitability) depend on a number of factors which are beyond the control of the Partnerships. These -5- factors include worldwide political instability and terrorist activities (especially in oil-producing regions), United Nations export embargoes, the supply and price of foreign imports of oil and gas, the level of consumer product demand (which can be heavily influenced by weather patterns), the level of domestic oil and gas production, government regulations and taxes, the price and availability of alternative fuels, the overall economic environment, and the availability and capacity of transportation and processing facilities. The effect of these factors on future oil and gas industry trends cannot be accurately predicted or anticipated. In addition, the domestic oil and gas industry is highly competitive, with a large number of companies and individuals engaged in the exploration and development of oil and gas properties. Predicting future prices is not possible. Concerning past trends, oil and gas prices in the United States have been highly volatile for many years. Over the past ten years average yearly wellhead gas prices have generally been in the $1.50 to $2.50 per Mcf range. Due to unusual supply and demand circumstances gas prices in late 2000 and early 2001 rose to a level not seen since the early 1980s. Recent economic trends and the supply/demand ratio have caused natural gas prices to decline significantly. Substantially all of the Programs' gas reserves are being sold on 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 production decreased from approximately $9.23 per Mcf at December 31, 2000 to approximately $2.65 per Mcf at December 31, 2001. Such prices were on an MMBTU basis and differ from the prices actually received by the Partnerships due to transportation and marketing costs, BTU adjustments, and regional price and quality differences. For the past ten years, average oil prices have generally been in the $16.00 to $24.00 per barrel range, but have been extremely volatile over the past three years. Due to global consumption and supply trends as well as a slowdown in Asian energy demand, oil prices in late 1997 and early 1998 reached historically low levels, dropping to as low as approximately $9.25 per barrel. The current oil price range between the mid teens and low twenties is somewhat dependent on production curtailment agreements among major oil producing nations. Prices for the Programs' oil production decreased from approximately $23.75 per barrel at December 31, 2000 to approximately $16.75 per barrel at December 31, 2001. Future prices for both oil and gas will likely be different from the prices in effect on December 31, 2001. Due to the many factors and uncertainties discussed above, it is impossible to accurately predict whether future oil and gas prices will (i) -6- stabilize, (ii) increase, or (iii) decrease. Insurance Coverage The Programs are subject to all of the risks inherent in the exploration for and production of oil and gas, including blowouts, pollution, fires, and other casualties. The Programs maintain insurance coverage as is customary for entities of a similar size engaged in operations similar to that of the Programs, but losses can occur from uninsurable risks or in amounts in excess of existing insurance coverage. In particular, many types of pollution and contamination can exist, undiscovered, for long periods of time and can result in substantial environmental liabilities which are not insured. The occurrence of an event which is not fully covered by insurance could have a material adverse effect on the Programs' financial condition and results of operations. 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, 2001. Well Statistics(1) As of December 31, 2001 1980-1 1980-2 Program Program ------- ------- Gross productive wells(2): Oil 2 1 Gas 30 41 -- -- Total 32 42 Net productive wells(3): Oil .34 .06 Gas 1.67 2.75 ---- ---- Total 2.01 2.81 ----------------- (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 -7- interest is owned. The number of gross wells is the total number of 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. For example, a 15% working interest in a well represents one Gross Well, but 0.15 Net Well. Drilling Activities During the year ended December 31, 2001 the Programs indirectly participated in drilling the following wells. The Programs do not own a working interest in these producing gas wells; therefore they did not incur any costs associated with these developmental drilling activities. Well Revenue P/ship Name County State Interest ------ ---- ------ ----- -------- 1980-1 Green No. 4-1A Washita OK .00118 1980-2 McKinney No. 1-24 Grady OK .01009 Good No. 1-25 Grady OK .00626 Green No. 4-1A Washita OK .00123 Shockey No. 4-25 Grady OK .00626 McKinney No.2-24 Grady OK .01009 Good No. 3-24 Grady OK .01009 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. -8- Net Production Data Year Ended December 31, ------------------------------------- 2001 2000 1999 -------- -------- -------- 1980-1 Program: -------------- Production: Oil (Bbls)(1) 1,064 1,435 1,171 Gas (Mcf)(2) 132,221 199,350 146,511 Oil and gas sales: Oil $ 26,142 $ 40,178 $ 19,198 Gas 562,612 646,505 323,006 ------- ------- ------- Total $588,754 $686,683 $342,204 ======= ======= ======= Total direct operating expenses(3) $ 71,911 $140,328 $ 81,060 ======= ======= ======= Direct operating expense as a percentage of oil and gas sales 12.2% 20.4% 23.7% Average sales price: Per barrel of oil $24.57 $28.00 $16.39 Per Mcf of gas 4.26 3.24 2.20 Direct operating expenses per equivalent Mcf of gas(4) $ .52 $ .67 $ .53 -9- Year Ended December 31, ------------------------------------ 2001 2000 1999 -------- --------- --------- 1980-2 Program: -------------- Production: Oil (Bbls)(1) 870 866 910 Gas (Mcf)(2) 181,684 276,520 249,181 Oil and gas sales: Oil $ 22,185 $ 23,714 $ 15,086 Gas 787,056 908,512 521,466 ------- ------- ------- Total $809,241 $932,226 $536,552 ======= ======= ======= Total direct operating expenses(3) $128,878 $182,330 $150,187 ======= ======= ======= Direct operating expenses as a percentage of oil and gas sales 15.9% 19.6% 28.0% Average sales price: Per barrel of oil $25.50 $27.38 $16.58 Per Mcf of gas 4.33 3.29 2.09 Direct operating expenses per equivalent Mcf of gas(4) $ .69 $ .65 $ .59 ---------- (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) Includes lease operating expenses and production taxes. (4) 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. -10- 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, 2001. 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"). Certain reserve information was reviewed by Ryder Scott Company, L.P. ("Ryder Scott"), an independent petroleum engineering firm. 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, 2001. Such prices were not escalated except in certain circumstances where escalations were fixed and readily determinable in accordance with applicable contract provisions. Oil and gas prices at December 31, 2001 were substantially lower than the very high prices in effect on December 31, 2000. This decrease in oil and gas prices has caused the estimates of remaining economically recoverable reserves, as well as the values placed on said reserves, at December 31, 2001 to be significantly lower than what such estimates and values would have been if oil and gas prices remained unchanged from December 31, 2000 to December 31, 2001. The prices used 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, 2001. There can be no assurance that the prices used in calculating the net present value of the Programs' proved reserves at December 31, 2001 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 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 -11- estimates generally less precise than other estimates presented in connection with financial statement disclosures. Proved Reserves and Net Present Value From Proved Reserves As of December 31, 2001(1) 1980-1 Program: -------------- Estimated proved reserves: Gas (Mcf) 1,118,157 Oil and liquids (Bbls) 7,624 Net present value (discounted at 10% per annum) $1,347,083 1980-2 Program: -------------- Estimated proved reserves: Gas (Mcf) 1,585,633 Oil and liquids (Bbls) 6,826 Net present value (discounted at 10% per annum) $1,416,872 (1) Includes certain gas balancing adjustments which cause the gas volumes and net present value to differ from the reserve reports prepared by Dyco and reviewed by Ryder Scott. 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 1980-1 Program -------------- As of December 31, 2001, the 1980-1 Program's properties consist of 32 gross (2.01 net) productive wells. The 1980-1 Program also owns a non-working interest in 29 additional wells. Affiliates of the 1980-1 Program operate 18 (30%) of its total wells. All of the 1980-1 Program's reserves are located in the -12- Anadarko Basin of western Oklahoma and the Texas panhandle, which is an established oil and gas producing basin. 1980-2 Program -------------- As of December 31, 2001, the 1980-2 Program's properties consist of 42 gross (2.81 net) productive wells. The 1980-2 Program also owns a non-working interest in 25 additional wells. Affiliates of the 1980-2 Program operate 29 (43%) of its total wells. All of the 1980-2 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. LEGAL PROCEEDINGS 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. 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 2001. -13- PART II 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 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. 1980-1 Program -------------- Repurchase Cash Price Distributions ---------- ------------- 2000: First Quarter $219 $ - Second Quarter 219 35 Third Quarter 244 20 Fourth Quarter 224 50 2001: First Quarter $174 $35 Second Quarter 139 45 Third Quarter 261 25 Fourth Quarter 236 - 2002: First Quarter $236 $55 -14- 1980-2 Program -------------- Repurchase Cash Price Distributions ---------- ------------- 2000: First Quarter $243 $ - Second Quarter 243 30 Third Quarter 234 20 Fourth Quarter 214 55 2001: First Quarter $159 $40 Second Quarter 119 55 Third Quarter 270 30 Fourth Quarter 240 - 2002: First Quarter $240 $45 As of March 1, 2002 the 1980-1 Program has 4,000 Units outstanding and approximately 1,100 Limited Partners of record. The 1980-2 Program has 5,000 Units outstanding and approximately 1,400 Limited Partners of record. ITEM 6. SELECTED FINANCIAL DATA The following tables present selected financial data for the Programs. This data should be read in conjunction with the financial statements of the Programs, and the respective notes thereto, included elsewhere in this Annual Report. See "Item 8. Financial Statements and Supplementary Data." -15-
1980-1 Program -------------- December 31, ------------------------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- Summary of Operations Oil and gas sales $588,754 $686,683 $342,204 $372,541 $682,669 Total revenues 698,019 692,259 346,168 384,702 689,913 Lease operating expenses 32,299 93,388 57,375 87,871 115,306 Production taxes 39,612 46,940 23,685 26,285 49,551 General and admini- strative expenses 82,534 81,436 65,397 66,362 70,286 Depreciation, depletion, and amortization of oil and gas properties 52,770 25,645 53,478 65,273 103,658 Net income 490,804 444,850 146,233 138,911 351,112 per Unit 121.49 110.11 36.20 34.38 86.91 Cash distributions 424,200 424,200 242,400 424,200 565,600 per Unit 105 105 60 105 140 Summary Balance Sheet Data: Total assets 554,470 491,398 476,056 576,917 894,174 Partners' capital 509,591 442,987 422,337 518,504 803,793
-16-
1980-2 Program -------------- December 31, ------------------------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- Summary of Operations Oil and gas sales $809,241 $932,226 $536,552 $668,146 $830,581 Total revenues 935,700 939,846 540,625 680,153 845,202 Lease operating expenses 73,869 118,753 111,734 80,586 168,469 Production taxes 55,009 63,577 38,453 44,176 59,893 General and admini- strative expenses 102,797 101,522 97,389 98,310 103,189 Depreciation, depletion, and amortization of oil and gas properties 39,804 15,172 40,533 60,659 99,067 Net income 664,221 640,822 252,516 396,422 414,584 per Unit 131.29 126.67 49.91 78.36 81.95 Cash distributions 632,375 531,195 328,835 632,375 758,850 per Unit 125 105 65 125 150 Summary Balance Sheet Data: Total assets 445,639 422,286 326,825 357,732 736,604 Partners' capital 321,512 289,666 180,039 256,358 492,311
-17- 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 Programs' revenues, net income or loss, cash flows, carrying value of oil and gas properties, and amount of oil and gas which can be economically produced depend substantially upon the prevailing prices for oil and gas. Oil and gas prices (and consequently the Programs' profitability) depend on a number of factors which are beyond the control of the Partnerships. These factors include worldwide political instability and terrorist activities (especially in oil-producing regions), United Nations export embargoes, the supply and price of foreign imports of oil and gas, the level of consumer product demand (which can be heavily influenced by weather patterns), the level of domestic oil and gas production, government regulations and taxes, the price and availability of alternative fuels, the overall economic environment, and the availability and capacity of transportation -18- and processing facilities. The effect of these factors on future oil and gas industry trends cannot be accurately predicted or anticipated. In addition, the domestic oil and gas industry is highly competitive, with a large number of companies and individuals engaged in the exploration and development of oil and gas properties. Predicting future prices is not possible. Concerning past trends, oil and gas prices in the United States have been highly volatile for many years. Over the past ten years average yearly wellhead gas prices have generally been in the $1.50 to $2.50 per Mcf range. Due to unusual supply and demand circumstances gas prices in late 2000 and early 2001 rose to a level not seen since the early 1980s. Recent economic trends and the supply/demand ratio have caused natural gas prices to decline significantly. Substantially all of the Programs' gas reserves are being sold on 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 production decreased from approximately $9.23 per Mcf at December 31, 2000 to approximately $2.65 per Mcf at December 31, 2001. Such prices were on an MMBTU basis and differ from the prices actually received by the Partnerships due to transportation and marketing costs, BTU adjustments, and regional price and quality differences. For the past ten years, average oil prices have generally been in the $16.00 to $24.00 per barrel range, but have been extremely volatile over the past three years. Due to global consumption and supply trends as well as a slowdown in Asian energy demand, oil prices in late 1997 and early 1998 reached historically low levels, dropping to as low as approximately $9.25 per barrel. The current oil price range between the mid teens and low twenties is somewhat dependent on production curtailment agreements among major oil producing nations. Prices for the Programs' oil production decreased from approximately $23.75 per barrel at December 31, 2000 to approximately $16.75 per barrel at December 31, 2001. Future prices for both oil and gas will likely be different from the prices in effect on December 31, 2001. Due to the many factors and uncertainties discussed above, it is impossible to accurately predict whether future oil and gas prices will (i) stabilize, (ii) increase, or (iii) decrease. -19- Results of Operations 1980-1 Program -------------- Year Ended December 31, 2001 Compared to Year Ended December 31, 2000 -------------------------------------- Total oil and gas sales decreased $97,929 (14.3%) in 2001 as compared to 2000. Of this decrease, approximately $10,000 and $218,000, respectively, were related to decreases in volumes of oil and gas sold. These decreases were partially offset by an increase of approximately $134,000 related to an increase in the average price of gas sold. Volumes of oil and gas sold decreased 371 barrels and 67,129 Mcf, respectively, in 2001 as compared to 2000. The decrease in volumes of oil sold was primarily due to (i) the shutting-in of one well during 2001 in order to perform repairs and maintenance and (ii) normal declines in production. The decrease in volumes of gas sold was primarily due to (i) positive prior period volume adjustments made during 2000 by the operators on three wells and (ii) a negative prior period volume adjustment made during 2001 on one well. Average oil prices decreased to $24.57 per barrel in 2001 from $28.00 per barrel in 2000. Average gas prices increased to $4.26 per Mcf in 2001 from $3.24 per Mcf in 2000. During 2001, the 1980-1 Program sold several wells for $127,072 representing approximately 5% of its total reserves. The proceeds from these sales would have reduced the net book value of the oil and gas properties by 48%, significantly altering the capitalized cost/proved reserves relationship. Accordingly, capitalized costs were reduced by approximately 5% with the remainder recorded as a gain on sale of oil and gas properties. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $68,417 (48.8%) in 2001 as compared to 2000. This decrease was primarily due to a decrease in lease operating expenses associated with the decreases in volumes of oil and gas sold. As a percentage of oil and gas sales, these expenses decreased to 12.2% in 2001 from 20.4% in 2000. This percentage decrease was primarily due to the increase in the average price of gas sold. Depreciation, depletion, and amortization of oil and gas properties increased $27,125 (105.8%) in 2001 as compared to 2000. This increase was primarily due to decreases in the oil and gas prices used in the valuation of reserves at December 31, 2001 as compared to December 31, 2000. This increase was partially offset by (i) upward revisions in the estimates of remaining oil and gas reserves at December 31, 2001 and (ii) the decreases in volumes of oil and gas sold. As a percentage of oil and gas sales, this -20- expense increased to 9.0% in 2001 from 3.7% in 2000. This percentage increase was primarily due to the dollar increase in depreciation, depletion and amortization. General and administrative expenses increased $1,098 (1.3%) in 2001 as compared to 2000. As a percentage of oil and gas sales, these expenses increased to 14.0% in 2001 from 11.9% in 2000. This percentage increase was primarily due to the decrease in oil and gas sales. Year Ended December 31, 2000 Compared to Year Ended December 31, 1999 -------------------------------------- Total oil and gas sales increased $344,479 (100.7%) in 2000 as compared to 1999. Of this increase, approximately $207,000 was related to an increase in the average price of gas sold and approximately $116,000 was related to an increase in volumes of gas sold. Volumes of oil and gas sold increased 264 barrels and 52,839 Mcf, respectively, in 2000 as compared to 1999. The increase in volumes of gas sold was primarily due to positive prior period volume adjustments made during 2000 by the operators on three wells. Oil and gas prices increased to $28.00 per barrel and $3.24 per Mcf, respectively, in 2000 from $16.39 per barrel and $2.20 per Mcf, respectively, in 1999. Oil and gas production expenses (including lease operating expenses and production taxes) increased $59,268 (73.1%) in 2000 as compared to 1999. This increase was primarily due to (i) an increase in production taxes associated with the increase in oil and gas sales and (ii) an increase in lease operating expenses associated with the increases in volumes of oil and gas sold. As a percentage of oil and gas sales, these expenses decreased to 20.4% in 2000 from 23.7% in 1999. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold and the dollar decrease in depreciation, depletion, and amortization. Depreciation, depletion, and amortization of oil and gas properties decreased $27,833 (52.0%) in 2000 as compared to 1999. This decrease was primarily due to (i) an increase in the oil and gas prices used in the valuation of reserves at December 31, 2000 as compared to December 31, 1999 and (ii) upward revisions in the estimates of remaining oil and gas reserves at December 31, 2000. These decreases were partially offset by the increases in volumes of oil and gas sold. As a percentage of oil and gas sales, this expense decreased to 3.7% in 2000 from 15.6% in 1999. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold. -21- General and administrative expenses increased $16,039 (24.5%) in 2000 as compared to 1999. This increase was primarily due to a change in allocation among the 1980-1 Program and other affiliated programs of indirect general and administrative expenses reimbursed to the General Partner. As a percentage of oil and gas sales, these expenses decreased to 11.9% in 2000 from 19.1% in 1999. This percentage decrease was primarily due to the increase in oil and gas sales and the dollar decrease in depreciation, depletion, and amortization. 1980-2 Program -------------- Year Ended December 31, 2001 Compared to Year Ended December 31, 2000 -------------------------------------- Total oil and gas sales decreased $122,985 (13.2%) in 2001 as compared to 2000. Of this decrease, approximately $312,000 was related to a decrease in volumes of gas sold. This decrease was partially offset by an increase of approximately $190,000 related to an increase in the average price of gas sold. Volumes of oil sold increased 4 barrels, while volumes of gas sold decreased 94,836 Mcf in 2001 as compared to 2000. The decrease in volumes of gas sold was primarily due to (i) positive prior period volume adjustments made during 2000 by the operators on three wells and (ii) production difficulties incurred on one well during 2001. Management expects the production difficulties to continue for the foreseeable future. Average oil prices decreased to $25.50 per barrel in 2001 from $27.38 per barrel in 2000. Average gas prices increased to $4.33 per Mcf in 2001 from $3.29 per Mcf in 2000. During 2001, the 1980-2 Program sold several wells for $133,554 representing approximately 3% of its total reserves. The proceeds from these sales would have reduced the net book value of the oil and gas properties by 114%, significantly altering the capitalized cost/proved reserves relationship. Accordingly, capitalized costs were reduced by approximately 3% with the remainder recorded as a gain on sale of oil and gas properties. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $53,452 (29.3%) in 2001 as compared to 2000. This decrease was primarily due to (i) a decrease in lease operating expenses associated with the decrease in volumes of gas sold and (ii) a decrease in production taxes associated with the decrease in oil and gas sales. As a percentage of oil and gas sales, these expenses decreased to 15.9% in 2001 from 19.6% in 2000. This percentage decrease was primarily due to the increase in the average price of gas sold. -22- Depreciation, depletion, and amortization of oil and gas properties increased $24,632 (162.4%) in 2001 as compared to 2000. This increase was primarily due to decreases in the oil and gas prices used in the valuation of reserves at December 31, 2001 as compared to December 31, 2000. This increase was partially offset by (i) upward revisions in the estimates of remaining oil and gas reserves at December 31, 2001 and (ii) the decrease in volumes of gas sold. As a percentage of oil and gas sales, this expense increased to 4.9% in 2001 from 1.6% in 2000. This percentage increase was primarily due to the dollar increase in depreciation, depletion, and amortization. General and administrative expenses increased $1,275 (1.3%) in 2001 as compared to 2000. As a percentage of oil and gas sales, these expenses increased to 12.7% in 2001 from 10.9% in 2000. This percentage increase was primarily due to the decrease in oil and gas sales. Year Ended December 31, 2000 Compared to Year Ended December 31, 1999 -------------------------------------- Total oil and gas sales increased $395,674 (73.7%) in 2000 as compared to 1999. Of this increase, approximately $330,000 was related to an increase in the average price of gas sold and approximately $57,000 was related to an increase in volumes of gas sold. Volumes of oil sold decreased 44 barrels, while volumes of gas sold increased 27,339 Mcf in 2000 as compared to 1999. The increase in volumes of gas sold was primarily due to positive prior period volume adjustments made during 2000 by the operators on three wells. This increase was partially offset by normal declines in production. Average oil and gas prices increased to $27.38 per barrel and $3.29 per Mcf, respectively, in 2000 from $16.58 per barrel and $2.09 per Mcf, respectively, in 1999. Oil and gas production expenses (including lease operating expenses and production taxes) increased $32,143 (21.4%) in 2000 as compared to 1999. This increase was primarily due to (i) an increase in production taxes associated with the increase in oil and gas sales and (ii) an increase in lease operating expenses associated with the increase in volumes of gas sold. These increases were partially offset by positive prior period lease operating expense adjustments made during 1999 by the operators on several wells. As a percentage of oil and gas sales, these expenses decreased to 19.6% in 2000 from 28.0% in 1999. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold. -23- Depreciation, depletion, and amortization of oil and gas properties decreased $25,361 (62.6%) in 2000 as compared to 1999. This decrease was primarily due to (i) an increase in the oil and gas prices used in the valuation of reserves at December 31, 2000 as compared to December 31, 1999 and (ii) upward revisions in the estimates of remaining gas reserves at December 31, 2000. As a percentage of oil and gas sales, this expense decreased to 1.6% in 2000 from 7.6% in 1999. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold and the dollar decrease in depreciation, depletion, and amortization. General and administrative expenses increased $4,133 (4.2%) in 2000 as compared to 1999. As a percentage of oil and gas sales, these expenses decreased to 10.9% in 2000 from 18.2% in 1999. This percentage decrease was primarily due to the increase in oil and gas sales. 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, where methods are employed to permit more efficient recovery of reserves, or where identified developmental drilling or recompletion opportunities are pursued, thereby resulting in a positive economic impact. Assuming 2001 production levels for future years, the 1980-1 and 1980-2 Program's proved reserve quantities at December 31, 2001 would have remaining lives of approximately 8.5 and 8.7 years, respectively, for gas reserves and approximately 7.2 and 7.8 years, respectively, for oil reserves. These life of reserves estimates are based on the current estimates of remaining oil and gas reserves. See "Item 2. Properties" for a discussion of these reserve estimates. Any decrease from the high oil and gas prices at December 31, 2001 may cause a decrease in the estimated life of said reserves. The 1980-1 Program's Statements of Cash Flows for the years ended December 31, 2000 and 1999, include proceeds from the sale of oil and gas properties of $22,284 and $51,540, respectively. It is possible that the 1980-1 Program's future repurchase values and the likelihood or amount of future cash distributions could decline as a result of the disposition of these properties. On the other hand, the General Partner believes there will be beneficial operating efficiencies related to the 1980-1 Program's remaining properties. This is primarily due to the fact that the properties sold generally bore a higher ratio of operating expenses as compared to reserves than the 1980-1 Program's remaining properties. The proceeds distributed during 1999 were -24- primarily related to the settlement of the gas imbalance position on one well which was sold during 1998. In addition, during December 2001 the 1980-1 and 1980-2 Programs sold certain oil and gas properties for $127,072 and $133,554, respectively. Proceeds from these sales were included in the March 2002 distribution to partners. 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. Occasional expenditures by the Programs for well completions or workovers, however, may reduce or eliminate cash available for a particular quarterly cash distribution. Cash for operational purposes has generally been provided by current oil and gas production. Management believes that cash for ordinary operational purposes will be provided by current oil and gas production. 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. New Accounting Pronouncements Below is a brief description of a Financial Accounting Standard ("FAS") recently issued by the Financial Accounting Standards Board ("FASB") which may have an impact on the Programs' future results of operations and financial position. In July 2001, the FASB issued FAS No. 143, "Accounting for Asset Retirement Obligations", which is effective for fiscal years beginning after June 15, 2002 (January 1, 2003 for the Programs). FAS No. 143 will require the recording of the fair value of liabilities associated with the retirement of long-lived assets (mainly plugging and abandonment costs for the Programs' depleted wells), in the period in which the liabilities are incurred (at the time the wells are drilled). Management has not yet determined the effect of adopting this statement on the Programs' financial condition or results of operations. -25- 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 2001. 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Programs do not hold any market risk sensitive instruments. -26- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP In our opinion, the accompanying balance sheets and the related statements of operations, changes in partners' capital and cash flows present fairly, in all material respects, the financial position of the Dyco Oil and Gas Program 1980-1 Limited Partnership, a Minnesota limited partnership, at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. 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 of these financial statements in accordance with auditing standards generally accepted in the United States of America, which 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 disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Tulsa, Oklahoma March 27, 2002 -27- DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP Balance Sheets December 31, 2001 and 2000 ASSETS ------ 2001 2000 -------- -------- CURRENT ASSETS: Cash and cash equivalents $ 83,227 $ 77,843 Accrued oil and gas sales 65,125 116,350 Accounts receivable - General Partner (Note 2) 127,072 - ------- ------- Total current assets $275,424 $194,193 NET OIL AND GAS PROPERTIES, utilizing the full cost method 232,423 262,743 DEFERRED CHARGE 46,623 34,462 ------- ------- $554,470 $491,398 ======= ======= LIABILITIES AND PARTNERS' CAPITAL --------------------------------- CURRENT LIABILITIES: Accounts payable $ 5,013 $ 4,685 Gas imbalance payable 10,118 5,384 ------- ------- Total current liabilities $ 15,131 $ 10,069 ACCRUED LIABILITY $ 29,748 $ 38,342 PARTNERS' CAPITAL: General Partner, 40 general partner units $ 5,096 $ 4,430 Limited Partners, issued and outstanding, 4,000 Units 504,495 438,557 ------- ------- Total Partners' Capital $509,591 $442,987 ------- ------- $554,470 $491,398 ======= ======= The accompanying notes are an integral part of these financial statements. -28- DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP Statements of Operations For the Years Ended December 31, 2001, 2000, and 1999 2001 2000 1999 -------- -------- -------- REVENUES: Oil and gas sales $588,754 $686,683 $342,204 Interest 3,509 5,576 3,964 Gain on sale of oil and gas properties 105,756 - - ------- ------- ------- $698,019 $692,259 $346,168 COSTS AND EXPENSES: Lease operating $ 32,299 $ 93,388 $ 57,375 Production taxes 39,612 46,940 23,685 Depreciation, depletion, and amortization of oil and gas properties 52,770 25,645 53,478 General and administrative 82,534 81,436 65,397 ------- ------- ------- $207,215 $247,409 $199,935 ------- ------- ------- NET INCOME $490,804 $444,850 $146,233 ======= ======= ======= GENERAL PARTNER (1%) - NET INCOME $ 4,908 $ 4,449 $ 1,462 ======= ======= ======= LIMITED PARTNERS (99%) - NET INCOME $485,896 $440,401 $144,771 ======= ======= ======= NET INCOME per Unit $ 121.49 $ 110.11 $ 36.20 ======= ======= ======= UNITS OUTSTANDING 4,040 4,040 4,040 ======= ======= ======= The accompanying notes are an integral part of these financial statements. -29- DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP Statements of Changes in Partners' Capital For the Years Ended December 31, 2001, 2000, and 1999 General Limited Partner Partners Total -------- ---------- ---------- Balances at Dec. 31, 1998 $5,185 $513,319 $518,504 Cash distributions ( 2,424) ( 239,976) ( 242,400) Net income 1,462 144,771 146,233 ----- ------- ------- Balances at Dec. 31, 1999 $4,223 $418,114 $422,337 Cash distributions ( 4,242) ( 419,958) ( 424,200) Net income 4,449 440,401 444,850 ----- ------- ------- Balances at Dec. 31, 2000 $4,430 $438,557 $442,987 Cash distributions ( 4,242) ( 419,958) ( 424,200) Net income 4,908 485,896 490,804 ----- ------- ------- Balances at Dec. 31, 2001 $5,096 $504,495 $509,591 ===== ======= ======= The accompanying notes are an integral part of these financial statements. -30- DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP Statements of Cash Flows For the Years Ended December 31, 2001, 2000, and 1999 2001 2000 1999 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $490,804 $444,850 $146,233 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 52,770 25,645 53,478 Gain on sale of oil and and gas properties ( 105,756) - - (Increase) decrease in accrued oil and gas sales 51,225 ( 50,176) ( 17,824) Decrease in accounts receivable - related party - - 6,216 (Increase) decrease in deferred charge ( 21,096) 21,040 ( 5,407) Increase (decrease) in accounts payable 328 ( 1,027) 810 Increase (decrease) in gas imbalance payable 4,734 ( 3,313) ( 3,827) Decrease in accrued liability ( 8,594) ( 968) ( 1,677) ------- ------- ------- Net cash provided by operating activities $464,415 $436,051 $178,002 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of oil and gas properties $ - $ 22,284 $ 51,540 Additions to oil and gas properties ( 34,831) ( 912) - ------- ------- ------- Net cash provided (used) by investing activities ($ 34,831) $ 21,372 $ 51,540 ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($424,200) ($424,200) ($242,400) ------- ------- ------- Net cash used by financing activities ($424,200) ($424,200) ($242,400) ------- ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 5,384 $ 33,223 ($ 12,858) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 77,843 44,620 57,478 ------- ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 83,227 $ 77,843 $ 44,620 ======= ======= ======= -31- SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES: In connection with the sale of an oil and gas property in 1998, the 1980-1 Program settled a gas balancing position of $51,472 which was due from a related party at December 31, 1998 and collected during 1999. The accompanying notes are an integral part of these financial statements. -32- DYCO OIL AND GAS PROGRAM 1980-1 LIMITED PARTNERSHIP Notes to Financial Statements For the Years Ended December 31, 2001, 2000, and 1999 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations The Dyco Oil and Gas Program 1980-1 Limited Partnership (the "Program"), a Minnesota limited partnership, commenced operations on February 15, 1980. Dyco Petroleum Corporation ("Dyco") is the General Partner of the Program. Affiliates of Dyco owned 2,043 (51.1%) of the Program's Units at December 31, 2001. 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 obtaining transportation services provided by pipelines. The prices received for the Program's oil and gas are subject to influences such as global consumption and supply trends. 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 -33- revenue method using estimates of proved reserves. The full cost amortization rates per equivalent Mcf of gas produced during the years ended December 31, 2001, 2000, and 1999, were $0.38, $0.12, and $0.35, respectively. The Program's calculation of depreciation, 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. 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, 2001 and 2000 represents costs deferred for lease operating expenses incurred in connection with the Program's underproduced gas imbalance positions. The rate used in calculating the deferred charge is the average production costs per Mcf during the period the underproduction occurred. At December 31, 2001, 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 109,944 Mcf, resulting in prepaid lease operating expenses of $46,623. At December 31, 2000, 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 83,993 Mcf, resulting in prepaid lease operating expenses of $34,462. Accrued Liability The Accrued Liability at December 31, 2001 and 2000 represents charges accrued for lease operating expenses incurred in connection with the Program's overproduced gas imbalance positions. The rate used in calculating the accrued liability is the average production costs per Mcf during the period the overproduction occurred. At December 31, 2001, cumulative total gas sales volumes for overproduced wells exceeded the Program's pro-rata share of total gas production from these wells by 72,503 Mcf, resulting in accrued lease operating expenses of $29,748. At December 31, 2000, cumulative total gas sales volumes for overproduced wells exceeded the Program's pro-rata share of -34- total gas production from these wells by 93,448 Mcf, resulting in accrued lease operating expenses of $38,342. Oil and Gas Sales and Gas Imbalance Payable 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 revenue 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 revenue 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. The rates per Mcf used to calculate this liability are based on the average gas prices received for the volumes at the time the overproduction occurred. At December 31, 2001 total sales exceeded the Program's share of estimated total gas reserves on three wells by $10,118 (6,745 Mcf). At December 31, 2000 total sales exceeded the Program's share of estimated total gas reserves on two wells by $5,384 (3,589 Mcf). These amounts were recorded as gas imbalance payables at December 31, 2001 and 2000 in accordance with the sales method. 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, the deferred charge, the gas imbalance payable, and the accrued liability all involve estimates which could materially differ from the actual amounts ultimately realized 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. -35- New Accounting Pronouncements Below is a brief description of a Financial Accounting Standard ("FAS") recently issued by the Financial Accounting Standards Board ("FASB") which may have an impact on the Program's future results of operations and financial position. In July 2001, the FASB issued FAS No. 143, "Accounting for Asset Retirement Obligations", which is effective for fiscal years beginning after June 15, 2002 (January 1, 2003 for the Program). FAS No. 143 will require the recording of the fair value of liabilities associated with the retirement of long-lived assets (mainly plugging and abandonment costs for the Program's depleted wells), in the period in which the liabilities are incurred (at the time the wells are drilled). Management has not yet determined the effect of adopting this statement on the Program's financial condition or results of operations. 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. During 2000, upon Samson Resources Company's ownership of Units first exceeding 50% and as required by IRS Regulations, the Program's tax year was changed from January 1/December 31 in order to coincide with Samson's tax year of July 1/June 30. 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, 2001, 2000, and 1999, such expenses totaled $82,534, $81,436, and $65,397, of which $68,196, $68,196, and $56,088, respectively, were 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. Such charges are comparable to third party charges in the area where the wells are located and are the same as charged to other working interest owners in the wells. -36- Accounts Receivable - General Partner The Accounts Receivable - General Partner at December 31, 2001 represents accrued proceeds from a related party for the sale of certain oil and gas properties during December 2001. Such amount was received in January 2002. 3. MAJOR CUSTOMERS The following purchaser individually accounted for 10% or more of the combined oil and gas sales of the Program for the years ended December 31, 2001, 2000, and 1999: Purchaser 2001 2000 1999 --------- ----- ----- ----- El Paso Energy Marketing Company 96.9% 90.6% 94.6% In the event of interruption of purchases by this significant customer 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 at December 31, 2001 and 2000 were as follows: -37- December 31, -------------------------------- 2001 2000 ------------- ------------- Proved properties $29,704,910 $29,682,460 Less accumulated depreciation, depletion, amortization, and valuation allowance ( 29,472,487) ( 29,419,717) ---------- ---------- Net oil and gas properties $ 232,423 $ 262,743 ========== ========== Costs Incurred The Program incurred no oil and gas property acquisition or exploration costs during 2001, 2000, and 1999. Costs incurred by the Program in connection with its oil and gas property development activities during 2001, 2000, and 1999 were as follows: December 31, --------------------------------- 2001 2000 1999 ------- ------ ------ Development costs $34,831 $912 $ - Quantities of Proved Oil and Gas Reserves - Unaudited Set forth below is a summary of the changes in the net quantities of the Program's proved crude oil and gas reserves for the years ended December 31, 2001, 2000, and 1999. Proved reserves were estimated by petroleum engineers employed by affiliates of Dyco. Certain reserve information was reviewed by Ryder Scott Company, L.P., an independent petroleum engineering firm. All of the Program's reserves are located in the United States. The following information includes certain gas balancing adjustments which cause the gas volumes to differ from the reserve information prepared by Dyco and reviewed by Ryder Scott. -38-
2001 2000 1999 ---------------------- ----------------------- ----------------------- Oil Gas Oil Gas Oil Gas (Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf) -------- ----------- -------- ----------- -------- ----------- Proved reserves, beginning of year 8,241 904,486 10,325 950,226 5,009 1,110,887 Revisions of previous estimates 577 380,186 273 155,772 6,487 ( 14,150) Sale of reserves ( 130) ( 34,294) ( 922) ( 2,544) - - Extensions and discoveries - - - 382 - - Production (1,064) ( 132,221) ( 1,435) (199,350) ( 1,171) ( 146,511) ----- --------- ------ ------- ------ --------- Proved reserves, end of year 7,624 1,118,157 8,241 904,486 10,325 950,226 ===== ========= ====== ======= ====== ========= Proved developed reserves: Beginning of year 8,241 904,486 10,325 950,226 5,009 1,110,887 ----- --------- ------ ------- ------ --------- End of year 7,624 1,118,157 8,241 904,486 10,325 950,226 ===== ========= ====== ======= ====== =========
-39- 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. The Program's reserves were determined at December 31, 2001 using oil and gas prices of $16.24 per barrel and $2.56 per Mcf, respectively. 5. QUARTERLY FINANCIAL DATA (Unaudited) Summarized unaudited quarterly financial data for 2001 and 2000 are as follows: -40- Dyco 1980-1 Program ------------------- 2001 ---------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter(2) --------- --------- --------- --------- Total Revenues $242,402 $156,064 $107,161 $192,392 Gross Profit (1) 213,438 127,336 84,705 200,629 Net Income 171,290 85,415 29,161 204,938 Limited Partners' Net Income Per Unit 42.40 21.14 7.22 50.73 2000 --------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter --------- --------- --------- --------- Total Revenues $101,087 $135,772 $181,813 $273,587 Gross Profit (1) 78,643 113,597 144,793 214,898 Net Income 40,360 90,575 113,097 200,818 Limited Partners' Net Income Per Unit 9.99 22.42 27.99 49.71 -------------------- (1) Total revenues less oil and gas production expenses. (2) Gross profit as a percentage of total revenues increased during the fourth quarter due to (i) the sale of certain oil and gas properties and (ii) the adjustment in the accrual/deferral of lease operating expense associated with gas imbalances. -41- REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP In our opinion, the accompanying balance sheets and the related statements of operations, changes in partners' capital and cash flows present fairly, in all material respects, the financial position of the Dyco Oil and Gas Program 1980-2 Limited Partnership, a Minnesota limited partnership, at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. 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 of these financial statements in accordance with auditing standards generally accepted in the United States of America, which 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 disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Tulsa, Oklahoma March 27, 2002 -42- DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP Balance Sheets December 31, 2001 and 2000 ASSETS ------ 2001 2000 -------- -------- CURRENT ASSETS: Cash and cash equivalents $100,664 $109,205 Accrued oil and gas sales 66,003 158,747 Accounts receivable - General Partner (Note 2) 133,554 - ------- ------- Total current assets $300,221 $267,952 NET OIL AND GAS PROPERTIES, utilizing the full cost method 105,693 117,346 DEFERRED CHARGE 39,725 36,988 ------- ------- $445,639 $422,286 ======= ======= LIABILITIES AND PARTNERS' CAPITAL --------------------------------- CURRENT LIABILITIES: Accounts payable $ 7,453 $ 6,105 Gas imbalance payable 7,239 2,429 ------- ------- Total current liabilities $ 14,692 $ 8,534 ACCRUED LIABILITY $109,435 $124,086 PARTNERS' CAPITAL: General Partner, 59 general partner units $ 3,215 $ 2,897 Limited Partners, issued and outstanding, 5,000 Units 318,297 286,769 ------- ------- Total Partners' Capital $321,512 $289,666 ------- ------- $445,639 $422,286 ======= ======= The accompanying notes are an integral part of these financial statements. -43- DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP Statements of Operations For the Years Ended December 31, 2001, 2000, and 1999 2001 2000 1999 -------- -------- -------- REVENUES: Oil and gas sales $809,241 $932,226 $536,552 Interest 5,170 7,620 4,073 Gain on sale of oil and gas properties 121,289 - - ------- ------- ------- $935,700 $939,846 $540,625 COSTS AND EXPENSES: Lease operating $ 73,869 $118,753 $111,734 Production taxes 55,009 63,577 38,453 Depreciation, depletion, and amortization of oil and gas properties 39,804 15,172 40,533 General and administrative 102,797 101,522 97,389 ------- ------- ------- $271,479 $299,024 $288,109 ------- ------- ------- NET INCOME $664,221 $640,822 $252,516 ======= ======= ======= GENERAL PARTNER (1%) - NET INCOME $ 6,642 $ 6,408 $ 2,525 ======= ======= ======= LIMITED PARTNERS (99%) - NET INCOME $657,579 $634,414 $249,991 ======= ======= ======= NET INCOME per Unit $ 131.29 $ 126.67 $ 49.91 ======= ======= ======= UNITS OUTSTANDING 5,059 5,059 5,059 ======= ======= ======= The accompanying notes are an integral part of these financial statements. -44- DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP Statements of Changes in Partners' Capital For the Years Ended December 31, 2001, 2000, and 1999 General Limited Partner Partners Total --------- ---------- ---------- Balances at Dec. 31, 1998 $2,564 $253,794 $256,358 Cash distributions ( 3,288) ( 325,547) ( 328,835) Net income 2,525 249,991 252,516 ----- ------- ------- Balances at Dec. 31, 1999 $1,801 $178,238 $180,039 Cash distributions ( 5,312) ( 525,883) ( 531,195) Net income 6,408 634,414 640,822 ----- ------- ------- Balances at Dec. 31, 2000 $2,897 $286,769 $289,666 Cash distributions ( 6,324) ( 626,051) ( 632,375) Net income 6,642 657,579 664,221 ----- ------- ------- Balances at Dec. 31, 2001 $3,215 $318,297 $321,512 ===== ======= ======= The accompanying notes are an integral part of these financial statements. -45- DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP Statements of Cash Flows For the Years Ended December 31, 2001, 2000, and 1999 2001 2000 1999 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $664,221 $640,822 $252,516 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 39,804 15,172 40,533 Gain on sale of oil and gas properties ( 121,289) - - (Increase) decrease in accrued oil and gas sales 92,744 ( 66,965) ( 3,148) (Increase) decrease in deferred charge ( 11,252) 11,112 ( 14,675) Increase (decrease) in accounts payable 1,348 ( 2,737) 3,383 Increase (decrease) in gas imbalance payable 4,810 ( 17,707) 3,296 Increase (decrease) in accrued liability ( 14,651) 6,278 38,733 -------- ------- ------- Net cash provided by operating activities $655,735 $585,975 $320,638 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of oil and gas properties $ 1,339 $ 3,837 $ 72 Additions to oil and gas properties ( 33,240) ( 1,669) ( 2,011) ------- ------- ------- Net cash provided (used) by investing activities ($ 31,901) $ 2,168 ($ 1,939) CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($632,375) ($531,195) ($328,835) ------- ------- ------- Net cash used by financing activities ($632,375) ($531,195) ($328,835) ------- ------- ------- -46- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($ 8,541) $ 56,948 ($ 10,136) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 109,205 $ 52,257 $ 62,393 ------- ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $100,664 $109,205 $ 52,257 ======= ======= ======= The accompanying notes are an integral part of these financial statements. -47- DYCO OIL AND GAS PROGRAM 1980-2 LIMITED PARTNERSHIP Notes to Financial Statements For the Years Ended December 31, 2001, 2000, and 1999 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations The Dyco Oil and Gas Program 1980-2 Limited Partnership (the "Program"), a Minnesota limited partnership, commenced operations on June 16, 1980. Dyco Petroleum Corporation ("Dyco") is the General Partner of the Program. Affiliates of Dyco owned 2,420 (48.4%) of the Program's Units at December 31, 2001. 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 obtaining transportation services provided by pipelines. The prices received for the Program's oil and gas are subject to influences such as global consumption and supply trends. 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 -48- revenue method using estimates of proved reserves. The full cost amortization rates per equivalent Mcf of gas produced during the years ended December 31, 2001, 2000, and 1999, were $0.21, $0.05, and $0.16, respectively. The Program's calculation of depreciation, 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. 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, 2001 and 2000 represents costs deferred for lease operating expenses incurred in connection with the Program's underproduced gas imbalance positions. The rate used in calculating the deferred charge is the average production costs per Mcf during the period the underproduction occurred. At December 31, 2001, 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 107,938 resulting in prepaid lease operating expenses of $39,725. At December 31, 2000, 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 102,206 Mcf, resulting in prepaid lease operating expenses of $36,988. Accrued Liability The Accrued Liability at December 31, 2001 and 2000 represents charges accrued for lease operating expenses incurred in connection with the Program's overproduced gas imbalance positions. The rate used in calculating the accrued liability is the average production costs per Mcf during the period the overproduction occurred. At December 31, 2001, cumulative total gas sales volumes for overproduced wells exceeded the Program's pro-rata share of total gas production from these wells by 302,389 Mcf, resulting in accrued lease operating expenses of $109,435. At December 31, 2000, cumulative total gas sales volumes for overproduced wells exceeded the Program's pro-rata share of -49- total gas production from these wells by 342,873 Mcf, resulting in accrued lease operating expenses of $124,086. Oil and Gas Sales and Gas Imbalance Payable 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 revenue 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 revenue 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. The rates per Mcf used to calculate this liability are based on the average gas prices received for the volumes at the time the overproduction occurred. At December 31, 2001 total sales exceeded the Program's share of estimated total gas reserves on two wells by $7,239 (4,826 Mcf). At December 31, 2000 total sales exceeded the Program's share of estimated total gas reserves on three wells by $2,429 (1,619 Mcf). These amounts were recorded as gas imbalance payables at December 31, 2001 and 2000 in accordance with the sales method. 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, the deferred charge, the gas imbalance payable, and the accrued liability all involve estimates which could materially differ from the actual amounts ultimately realized 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. -50- New Accounting Pronouncements Below is a brief description of a Financial Accounting Standard ("FAS") recently issued by the Financial Accounting Standards Board ("FASB") which may have an impact on the Program's future results of operations and financial position. In July 2001, the FASB issued FAS No. 143, "Accounting for Asset Retirement Obligations", which is effective for fiscal years beginning after June 15, 2002 (January 1, 2003 for the Program). FAS No. 143 will require the recording of the fair value of liabilities associated with the retirement of long-lived assets (mainly plugging and abandonment costs for the Program's depleted wells), in the period in which the liabilities are incurred (at the time the wells are drilled). Management has not yet determined the effect of adopting this statement on the Program's financial condition or results of operations. 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, 2001, 2000, and 1999, such expenses totaled $102,797, $101,522, and $97,389, respectively, of which $87,360, $87,360, and $85,620, respectively, were 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. Such charges are comparable to third party charges in the area where the wells are located and are the same as charged to other working interest owners in the wells. -51- Accounts Receivable - General Partner The Accounts Receivable - General Partner at December 31, 2001 represents accrued proceeds from a related party for the sale of certain oil and gas properties during December 2001. Such amount was received in January 2002. 3. MAJOR CUSTOMERS The following purchaser individually accounted for 10% or more of the combined oil and gas sales of the Program for the years ended December 31, 2001, 2000, and 1999: Purchaser 2001 2000 1999 --------- ----- ----- ----- El Paso Energy Marketing Company 52.0% 60.7% 89.1% Lumen Energy Corp. 41.9% 24.0% - 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 at December 31, 2001 and 2000 were as follows: -52- December 31, ------------------------------- 2001 2000 ------------- ------------- Proved properties $35,386,420 $35,358,269 Less accumulated depreciation, depletion, amortization, and valuation allowance ( 35,280,727) ( 35,240,923) ---------- ---------- Net oil and gas properties $ 105,693 $ 117,346 ========== ========== Costs Incurred The Program incurred no oil and gas property acquisition or exploration costs during 2001, 2000, and 1999. Costs incurred by the Program in connection with its oil and gas property development activities during 2001, 2000, and 1999 were as follows: December 31, --------------------------- 2001 2000 1999 ------- ------ ------ Development costs $33,240 $1,669 $2,011 Quantities of Proved Oil and Gas Reserves - Unaudited Set forth below is a summary of the changes in the net quantities of the Program's proved oil and gas reserves for the years ended December 31, 2001, 2000, and 1999. Proved reserves were estimated by petroleum engineers employed by affiliates of the Program. Certain reserve information was reviewed by Ryder Scott Company, L.P., an independent petroleum engineering firm. All of the Program's reserves are located in the United States. The following information includes certain gas balancing adjustments which cause the gas volumes to differ from the reserve information prepared by Dyco and reviewed by Ryder Scott. -53-
2001 2000 1999 ----------------------- ---------------------- ----------------------- Oil Gas Oil Gas Oil Gas (Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf) ------- ----------- ------- ----------- -------- ----------- Proved reserves, beginning of year 6,463 1,453,305 7,429 1,373,300 8,854 1,478,948 Revisions of previous estimates 1,371 350,583 ( 98) 355,534 ( 515) 143,533 Sales of reserves ( 138) ( 36,571) ( 12) - - - Extensions and discoveries - - 10 991 - - Production ( 870) ( 181,684) ( 866) ( 276,520) ( 910) ( 249,181) ----- --------- ----- --------- ----- --------- Proved reserves, end of year 6,826 1,585,633 6,463 1,453,305 7,429 1,373,300 ===== ========= ===== ========= ===== ========= Proved developed reserves: Beginning of year 6,463 1,453,305 7,429 1,373,300 8,854 1,478,948 ----- --------- ----- --------- ----- --------- End of year 6,826 1,585,633 6,463 1,453,305 7,429 1,373,300 ===== ========= ===== ========= ===== =========
-54- 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. The Program's reserves were determined at December 31, 2001 using oil and gas prices of $16.50 per barrel and $2.42 per Mcf, respectively. 6. QUARTERLY FINANCIAL DATA (Unaudited) Summarized unaudited quarterly financial data for 2001 and 2000 are as follows: -55- Dyco 1980-2 Program ------------------- 2001 --------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter(2) --------- --------- --------- --------- Total Revenues $384,919 $193,399 $126,912 $230,470 Gross Profit (1) 337,187 155,700 91,392 222,543 Net Income 294,439 118,130 45,143 206,509 Limited Partners' Net Income Per Unit 58.20 23.35 8.92 40.82 2000 --------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter --------- --------- --------- --------- Total Revenues $144,834 $212,074 $221,559 $361,379 Gross Profit (1) 103,701 180,512 179,522 293,781 Net Income 64,337 152,976 147,712 275,797 Limited Partners' Net Income Per Unit 12.72 30.24 29.19 54.52 ------------------------ (1) Total revenues less oil and gas production expenses. (2) Gross profit as a percentage of total revenues increased during the fourth quarter due to the sale of certain oil and gas properties. -56- 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, the 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 50 President and Director Craig D. Loseke 33 Chief Financial Officer Judy K. Fox 51 Secretary The director will hold office until the next annual meeting of shareholders of Dyco or 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 Samson 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 Samson, 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 and as President and Director of Samson Properties Incorporated, Samson Hydrocarbons Company, Berry Gas Company, Circle L Drilling Company, Compression, Inc., and Geodyne Resources, Inc. and its subsidiaries. Craig D. Loseke joined Samson in 1990 and was named Chief Financial Officer of Dyco on November 15, 2001. He received a Bachelor of Science in Accounting and a Master of Business Administration from the University of Tulsa. He is a Certified Public Accountant and Certified Management Accountant. Mr. Loseke also serves as Vice President of Financial and Operational Reporting of Samson Investment Company. -57- Judy K. Fox joined Samson in 1990 and was named Secretary of Dyco on June 30, 1996. Prior to joining Samson, 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., Samson Hydrocarbons Company, Samson Properties Incorporated, and Geodyne Resources, Inc. and its subsidiaries. Section 16(a) Beneficial Ownership Reporting Compliance To the best knowledge of the Programs and Dyco, there were no officers, directors, or ten percent owners who were delinquent filers during 2001 of reports required under Section 16(a) of the Securities and Exchange Act of 1934. 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, 2001: -58- Compensation/Reimbursement to Dyco and its Affiliates Three Years Ended December 31, 2001 Type of Compensation/ Reimbursement(1) Expense ---------------------- ------------------------------- 2001 2000 1999 ------- ------- ------- 1980-1 Program -------------- Compensation: Operations (2) (2) (2) Reimbursements: General and Adminis- trative, Geological, and Engineering Expenses and Direct Expenses(3) $68,196 $68,196 $56,088 1980-2 Program -------------- Compensation: Operations (2) (2) (2) Reimbursements: General and Adminis- trative, Geological, and Engineering Expenses and Direct Expenses(3) $87,360 $87,360 $85,620 ---------- (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 some 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 compensation paid by the Programs to such affiliates is impossible to quantify as of the date of this Annual Report. (3) The Programs reimburse Dyco and its affiliates for reasonable and necessary general and administrative, -59- 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. When actual costs incurred benefit other partnerships and affiliates, the allocation of costs is based on the relationship of the Program's reserves to the total reserves owned by all partnerships and affiliates. The following table indicates 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, 2001: -60-
1980-1 Program -------------- Salary Reimbursements Three Years Ended December 31, 2001 Long Term Compensation ---------------------------------- Annual Compensation Awards Payouts ---------------------------- ----------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) --------------- ---- ------- ------- ------- ---------- -------- ------- ------- Dennis R. Neill, President(1)(2) 1999 - - - - - - - 2000 - - - - - - - 2001 - - - - - - - All Executive Officers, Directors, and Employees as a group(2) 1999 $34,259 - - - - - - 2000 $40,474 - - - - - - 2001 $37,862 - - - - - - --------------- (1) The general and administrative expenses paid by the Program and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Neill. (2) No officer or director of Dyco or its affiliates provides full-time services to the Program and no individual's salary or other compensation reimbursement from the Program equals or exceeds $100,000 per annum.
-61-
1980-2 Program -------------- Salary Reimbursement Three Years Ended December 31, 2001 Long Term Compensation ---------------------------------- Annual Compensation Awards Payouts ---------------------------- ----------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) --------------- ---- ------- ------- ------- ---------- -------- ------- ------- Dennis R. Neill, President(1)(2) 1999 - - - - - - - 2000 - - - - - - - 2001 - - - - - - - All Executive Officers, Directors, and Employees as a group(2) 1999 $52,297 - - - - - - 2000 $51,848 - - - - - - 2001 $48,502 - - - - - - --------------- (1) The general and administrative expenses paid by the Program and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Neill. (2) No officer or director of Dyco or its affiliates provides full-time services to the Program and no individual's salary or other compensation reimbursement from the Program equals or exceeds $100,000 per annum.
-62- Samson maintains necessary inventories of new and used field equipment. Samson may have provided some of this equipment for wells in which the Programs have an interest. This equipment was 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 March 1, 2002 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) ------------------------------------------- --------------- 1980-1 Program: -------------- Samson Resources Company 2,043 (51.1%) All directors, officers, and affiliates of Dyco as a group and Dyco (5 persons) 2,043 (51.1%) 1980-2 Program: -------------- Samson Resources Company 2,422 (48.4%) All directors, officers, and affiliates of Dyco as a group and Dyco (5 persons) 2,422 (48.4%) -63- 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 Programs 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 Samson. The Programs thus compete with Samson (including other oil and gas programs) for the time and resources of such personnel. Samson devotes 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 provided services to the Programs have fiduciary or other duties to other members of Samson, contract amendments and negotiating positions taken by them in their effort to enforce contracts with purchasers may not necessarily represent the positions that a Program would take if it were to administer its own contracts without involvement with other members of Samson. On the other hand, management believes that the Programs' negotiating strength and contractual positions have been enhanced by virtue of its affiliation with Samson. During early 1998 the 1980-1 Program sold an oil and gas property which had an underproduced gas imbalance position. This imbalance was settled with an affiliate of the 1980-1 Program -64- during the first quarter of 1999. In connection with this settlement, the 1980-1 Program received $6,216 in interest from the affiliate (at prime plus one percent). Samson Resources Company, an affiliate of Dyco, ("Resources") owns approximately 51% of the 1980-1 Program's outstanding Units as of March 1, 2002, making the Program a 50% subsidiary of Resources. The Program Agreement permits Resources to independently vote its Units. Resources' majority Unit ownership will determine the outcome of any matter submitted for a vote of the Limited Partners. -65- 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, 2001 and 2000 and for the years ended December 31, 2001, 2000, and 1999 are filed as part of this report: Reports of Independent Accountants Balance Sheets Statements of Operations Statements of Changes in Partners' Capital Statements of Cash Flows Notes to Financial Statements (2) Financial Statement Schedules: None. (3) Exhibits: 4.1 Drilling Agreement dated February 15, 1980 for Dyco Drilling Program 1980-1 by and between Dyco Oil and Gas Program 1980-1, 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 10, 1992 and is hereby incorporated herein. 4.2 Form of Program Agreement for Dyco Oil and Gas Program 1980-1 by and between Dyco Petroleum Corporation and the Participants filed as Exhibit 4.2 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 10, 1992 and is hereby incorporated herein. 4.3 Amendment to Program Agreement for Dyco Oil and Gas Program 1980-1 dated February 9, 1989 filed as Exhibit 4.3 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 10, 1992 and is hereby incorporated herein. -66- 4.4 Certificate of Limited Partnership (as amended) for Dyco Oil and Gas Program 1980-1 Limited Partnership filed as Exhibit 4.4 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 10, 1992 and is hereby incorporated herein. 4.5 Drilling Agreement dated June 20, 1980 for Dyco Drilling Program 1980-2 by and between Dyco Oil and Gas Program 1980-2, Dyco Petroleum Corporation, and Jaye F. Dyer filed as Exhibit 4.5 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 10, 1992 and is hereby incorporated herein. 4.6 Form of Program Agreement for Dyco Oil and Gas Program 1980-2 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 10, 1992 and is hereby incorporated herein. 4.7 Amendment to Program Agreement for Dyco Oil and Gas Program 1980-2 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 10, 1992 and is hereby incorporated herein. 4.8 Certificate of Limited Partnership (as amended) for Dyco Oil and Gas Program 1980-2 Limited Partnership filed as Exhibit 4.8 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 10, 1992 and is hereby incorporated herein. *23.1 Consent of Ryder Scott Company, L.P. for Dyco Oil and Gas Program 1980-1 Limited Partnership. *23.2 Consent of Ryder Scott Company, L.P. for Dyco Oil and Gas Program 1980-2 Limited Partnership. All other Exhibits are omitted as inapplicable. ------------------ * Filed herewith. (b) Reports on Form 8-K filed during the fourth quarter of 2001. None. -67- 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 1980-1 LIMITED PARTNERSHIP By: DYCO PETROLEUM CORPORATION General Partner March 28, 2002 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 March 28, 2002 ------------------- Director (Principal Dennis R. Neill Executive Officer) //s//Craig D. Loseke Chief Financial March 28, 2002 ------------------- Officer (Principal Craig D. Loseke Financial and Accounting Officer) //s//Judy K. Fox Secretary March 28, 2002 ------------------- Judy K. Fox -68- 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 1980-2 LIMITED PARTNERSHIP By: DYCO PETROLEUM CORPORATION General Partner March 28, 2002 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 March 28, 2002 ------------------- Director (Principal Dennis R. Neill Executive Officer) /s/ Craig D. Loseke Chief Financial March 28, 2002 ------------------- Officer (Principal Craig D. Loseke Financial and Accounting Officer) /s/ Judy K. Fox Secretary March 28, 2002 ------------------- Judy K. Fox -69- INDEX TO EXHIBITS Exhibit Number Description ------- ----------- 4.1 Drilling Agreement dated February 15, 1980 for Dyco Drilling Program 1980-1 by and between Dyco Oil and Gas Program 1980-1, 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 10, 1992 and is hereby incorporated herein. 4.2 Form of Program Agreement for Dyco Oil and Gas Program 1980-1 by and between Dyco Petroleum Corporation and the Participants filed as Exhibit 4.2 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 10, 1992 and is hereby incorporated herein. 4.3 Amendment to Program Agreement for Dyco Oil and Gas Program 1980-1 dated February 9, 1989 filed as Exhibit 4.3 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 10, 1992 and is hereby incorporated herein. 4.4 Certificate of Limited Partnership (as amended) for Dyco Oil and Gas Program 1980-1 Limited Partnership filed as Exhibit 4.4 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 10, 1992 and is hereby incorporated herein. 4.5 Drilling Agreement dated June 20, 1980 for Dyco Drilling Program 1980-2 by and between Dyco Oil and Gas Program 1979-2, Dyco Petroleum Corporation, and Jaye F. Dyer filed as Exhibit 4.5 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 10, 1992 and is hereby incorporated herein. 4.6 Form of Program Agreement for Dyco Oil and Gas Program 1980-2 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 10, 1992 and is hereby incorporated herein. 4.7 Amendment to Program Agreement for Dyco Oil and Gas Program 1980-2 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 10, 1992 and is hereby incorporated herein. 4.8 Certificate of Limited Partnership (as amended) for Dyco Oil and Gas Program 1980-2 Limited Partnership -70- filed as Exhibit 4.8 to Annual Report on Form 10-K for the year ended December 31, 1991 on April 10, 1992 and is hereby incorporated herein. *23.1 Consent of Ryder Scott Company, L.P. for Dyco Oil and Gas Program 1980-1 Limited Partnership. *23.2 Consent of Ryder Scott Company, L.P. for Dyco Oil and Gas Program 1980-2 Limited Partnership. ------------------ * Filed herewith. -71-