-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IHVSNdYLYLJt+8JQsu30naA/mx6wvydl+KMU2N4jvXeT3XKg1e7N5dFd48iaHEer kN75oRlkDWzywCyPuVcmig== 0000854062-99-000002.txt : 19990224 0000854062-99-000002.hdr.sgml : 19990224 ACCESSION NUMBER: 0000854062-99-000002 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEODYNE ENERGY INCOME LTD PARTNERSHIP II A CENTRAL INDEX KEY: 0000824894 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731295505 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-16388 FILM NUMBER: 99547611 BUSINESS ADDRESS: STREET 1: TWO WEST SECOND STREET CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9185831791 MAIL ADDRESS: STREET 1: SAMSON PLAZA STREET 2: TWO WEST SECOND ST CITY: TULSA STATE: OK ZIP: 74103 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LTD PARTNERSHIP II A DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II A DATE OF NAME CHANGE: 19900620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEODYNE ENERGY INCOME LTD PARTNERSHIP II-B CENTRAL INDEX KEY: 0000826345 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731303341 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-16405 FILM NUMBER: 99547612 BUSINESS ADDRESS: STREET 1: TWO WEST SECOND STREET STREET 2: SAMSON PLAZA CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9185831791 MAIL ADDRESS: STREET 1: SAMSON PLAZA STREET 2: TWO WEST SECOND ST CITY: TULSA STATE: OK ZIP: 74103 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LTD PARTNERSHIP II-B DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B DATE OF NAME CHANGE: 19900620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEODYNE ENERGY INCOME LTD PARTNERSHIP II-C CENTRAL INDEX KEY: 0000833054 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731308986 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-16981 FILM NUMBER: 99547613 BUSINESS ADDRESS: STREET 1: TWO WEST SECOND STREET CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9185831791 MAIL ADDRESS: STREET 1: SAMSON PLAZA STREET 2: TWO WEST SECOND ST CITY: TULSA STATE: OK ZIP: 74103 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LTD PARTNERSHIP II-C DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C DATE OF NAME CHANGE: 19900620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEODYNE ENERGY INCOME LTD PARTNERSHIP II-D CENTRAL INDEX KEY: 0000833526 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731329761 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-16980 FILM NUMBER: 99547614 BUSINESS ADDRESS: STREET 1: TWO WEST SECOND STREET CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9185831791 MAIL ADDRESS: STREET 1: SAMSON PLAZA STREET 2: TWO WEST SECOND ST CITY: TULSA STATE: OK ZIP: 74103 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LTD PARTNERSHIP II-D DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D DATE OF NAME CHANGE: 19900620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEODYNE ENERGY INCOME LTD PARTNERSHIP II-E CENTRAL INDEX KEY: 0000842881 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 731324751 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-17320 FILM NUMBER: 99547615 BUSINESS ADDRESS: STREET 1: TWO WEST SECOND STREET CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9185831791 MAIL ADDRESS: STREET 1: SAMSON PLAZA STREET 2: TWO WEST SECOND ST CITY: TULSA STATE: OK ZIP: 74103 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LTD PARTNERSHIP II-E DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E DATE OF NAME CHANGE: 19900620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F CENTRAL INDEX KEY: 0000850506 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731330632 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-17799 FILM NUMBER: 99547616 BUSINESS ADDRESS: STREET 1: TWO W SECOND ST STREET 2: SAMSON PLAZA CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9185831791 MAIL ADDRESS: STREET 1: SAMSON PLZ STREET 2: TWO WEST SECOND STREET CITY: TULSA STATE: OK ZIP: 74103 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F DATE OF NAME CHANGE: 19900620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEODYNE ENERGY INCOME LTD PARTNERSHIP II-G CENTRAL INDEX KEY: 0000851724 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731336572 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-17802 FILM NUMBER: 99547617 BUSINESS ADDRESS: STREET 1: TWO WEST SECOND STREET CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9185831791 MAIL ADDRESS: STREET 1: SAMSON PLAZA STREET 2: TWO W SECOND ST CITY: TULSA STATE: OK ZIP: 74103 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LTD PARTNERSHIP II-G DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G DATE OF NAME CHANGE: 19900620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEODYNE ENERGY INCOME LTD PARTNERSHIP II-H CENTRAL INDEX KEY: 0000854062 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731342476 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-18305 FILM NUMBER: 99547618 BUSINESS ADDRESS: STREET 1: TWO W SECOND ST CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9195831791 MAIL ADDRESS: STREET 1: SAMSON PLAZA STREET 2: TWO W SECOND ST CITY: TULSA STATE: OK ZIP: 74103 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LTD PARTNERSHIP II-H DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H DATE OF NAME CHANGE: 19900620 10-K405 1 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, 1998 Commission File Number: II-A: 0-16388 II-C: 0-16981 II-E: 0-17320 II-G: 0-17802 II-B: 0-16405 II-D: 0-16980 II-F: 0-17799 II-H: 0-18305 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H ---------------------------------------------- (Exact name of Registrant as specified in its Articles) II-A 73-1295505 II-B 73-1303341 II-C 73-1308986 II-D 73-1329761 II-E 73-1324751 II-F 73-1330632 II-G 73-1336572 Oklahoma II-H 73-1342476 - ------------------------------- -------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 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: Depositary 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 ----- ----- -1- 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 Disclosure is not contained herein ----- Disclosure is contained herein ----- The Depositary Units are not publicly traded, therefore, Registrant cannot compute the aggregate market value of the voting units held by non-affiliates of the Registrant. DOCUMENTS INCORPORATED BY REFERENCE: None -2- FORM 10-K405 TABLE OF CONTENTS PART I.......................................................................4 ITEM 1. BUSINESS...................................................4 ITEM 2. PROPERTIES................................................10 ITEM 3. LEGAL PROCEEDINGS.........................................26 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS.......26 PART II.....................................................................26 ITEM 5. MARKET FOR UNITS AND RELATED LIMITED PARTNER MATTERS......26 ITEM 6. SELECTED FINANCIAL DATA...................................30 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................39 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................................ 71 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...............71 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.......................71 PART III....................................................................71 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER...................................................71 ITEM 11. EXECUTIVE COMPENSATION....................................73 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................................82 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............83 PART IV.....................................................................84 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K...............................................84 SIGNATURES............................................................90 -3- PART I. ITEM 1. BUSINESS General The Geodyne Energy Income Limited Partnership II-A (the "II-A Partnership"), Geodyne Energy Income Limited Partnership II-B (the "II-B Partnership"), Geodyne Energy Income Limited Partnership II-C (the "II-C Partnership"), Geodyne Energy Income Limited Partnership II-D (the "II-D Partnership"), Geodyne Energy Income Limited Partnership II-E (the "II-E Partnership"), Geodyne Energy Income Limited Partnership II-F (the "II-F Partnership"), Geodyne Energy Income Limited Partnership II-G (the "II-G Partnership"), and Geodyne Energy Income Limited Partnership II-H (the "II-H Partnership") (collectively, the "Partnerships") are limited partnerships formed under the Oklahoma Revised Uniform Limited Partnership Act. Each Partnership is composed of Geodyne Resources, Inc. ("Geodyne"), a Delaware corporation, as the general partner, and Geodyne Depositary Company, a Delaware corporation, as the sole initial limited partner and public investors as substitute limited partners (the "Limited Partners"). The Partnerships commenced operations on the dates set forth below. Date of Partnership Activation ----------- ----------------- II-A July 22, 1987 II-B October 14, 1987 II-C January 14, 1988 II-D May 10, 1988 II-E September 27, 1988 II-F January 5, 1989 II-G April 10, 1989 II-H May 17, 1989 Immediately following activation, each Partnership invested as a general partner in a separate Oklahoma general partnership which actually conducts the Partnerships' operations. Geodyne serves as managing partner of such general partnerships. Unless the context indicates otherwise, all references to any single Partnership or all of the Partnerships in this Annual Report on Form 10-K405 (the "Annual Report") are references to the Partnership and its related general partnership, collectively. In addition, unless the context indicates otherwise, all references to the "General Partner" in this Annual Report are references to Geodyne as the general partner of the limited partnerships and as the managing partner of the related general partnerships. -4- The General Partner currently serves as general partner of 29 limited partnerships including the Partnerships. The General Partner is a wholly-owned subsidiary of Samson Investment Company. Samson Investment Company and its various corporate subsidiaries, including the General Partner (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 January 31, 1999, Samson owned interests in approximately 10,500 oil and gas wells located in 19 states of the United States and the countries of Canada, Venezuela, and Russia. At January 31, 1999, Samson operated approximately 2,900 oil and gas wells located in 15 states of the United States, as well as Canada, Venezuela, and Russia. The Partnerships are currently engaged in the business of owning interests in producing oil and gas properties located in the continental United States. The Partnerships may also engage to a limited extent in development drilling on producing oil and gas properties as required for the prudent management of the Partnerships. As limited partnerships, the Partnerships have no officers, directors, or employees. They rely instead on the personnel of the General Partner and Samson. As of February 15, 1999, Samson employed approximately 850 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 the General Partner, see "Item 10. Directors and Executive Officers of the General Partner." The General Partner's and the Partnerships' 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 (888) 436-3963. Pursuant to the terms of the partnership agreements for the Partnerships (the "Partnership Agreements") the Partnerships will terminate on December 31, 2001. However, the Partnership Agreements provide that the General Partner may extend the term of each Partnership for up to five periods of two years each. As of the date of this Annual Report, the General Partner has not determined whether to extend the term of any Partnership. Funding Although the Partnership Agreements permit the Partnerships to incur borrowings, the Partnerships' operations and expenses are currently funded out of each Partnership's revenues from oil and gas sales. The General Partner may, but is not required to, advance funds to a Partnership for the same purposes for which Partnership borrowings are authorized. -5- Principal Products Produced and Services Rendered The Partnerships' sole business is the production of, and related incidental development of, oil and gas. The Partnerships do not refine or otherwise process crude oil and condensate. The Partnerships do not hold any patents, trademarks, licenses, or concessions and are not a party to any government contracts. The Partnerships have no backlog of orders and do not participate in research and development activities. The Partnerships are not presently encountering shortages of oilfield tubular goods, compressors, production material, or other equipment. Competition and Marketing 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. The ability of the Partnerships to produce and market oil and gas profitably depends on a number of factors that are beyond the control of the Partnerships. These factors include worldwide political instability (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), 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. The most important variable affecting the Partnerships' revenues is the prices received for the sale of oil and gas. Predicting future prices is not possible. Concerning past trends, average yearly wellhead gas prices in the United States have been volatile for a number of years. For the past ten years, such average prices have generally been in the $1.40 to $2.40 per Mcf range. Gas prices are currently in the lower half of the 10-year average range described above. Substantially all of the Partnerships' 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 Partnerships' gas decreased from approximately $2.32 per Mcf at December 31, 1997 to approximately $1.93 per Mcf at December 31, 1998. 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 -6- differences. Continued very low oil prices as discussed below may cause downward pressure on gas prices due to some users of gas converting to oil as a cheaper fuel alternative. For the past ten years, average oil prices have generally been in the $16.00 to $24.00 per barrel range. Due to global consumption and supply trends over the last year as well as at least a short-term slowdown in Asian energy demand, oil prices over the past year have reached historically low levels, dropping to as low as approximately $9.25 per barrel. It is not known whether this trend will continue. Prices for the Partnerships' oil decreased from approximately $16.25 per barrel at December 31, 1997 to approximately $9.50 per barrel at December 31, 1998. Future prices for both oil and gas will likely be different from (and may be lower than) the prices in effect on December 31, 1998. Management is unable to predict whether future oil and gas prices will (i) stabilize, (ii) increase, or (iii) decrease. Significant Customers The following customers accounted for ten percent or more of the Partnerships' oil and gas sales during the year ended December 31, 1998: -7- Partnership Purchaser Percentage - ----------- ---------------------------------- ---------- II-A El Paso Energy Marketing Company ("El Paso") 32.8% Amoco Production Company ("Amoco") 13.0% Hallwood Petroleum, Inc. ("Hallwood") 10.1% II-B El Paso 37.6% Hallwood 15.6% II-C El Paso 36.2% II-D El Paso 28.4% Vintage Petroleum Inc. 10.9% II-E El Paso 47.8% II-F El Paso 30.8% Chevron U.S.A. Inc. ("Chevron") 13.2% Texaco Exploration and Production, Inc. ("Texaco") 12.7% II-G El Paso 30.6% Chevron 13.0% Texaco 12.8% II-H El Paso 30.2% Texaco 12.8% Chevron 12.6% In the event of interruption of purchases by one or more of the Partnerships' significant customers or the cessation or material change in availability of open access transportation by the Partnerships' pipeline transporters, the Partnerships may encounter difficulty in marketing their gas and in maintaining historic sales levels. Management does not expect any of its open access transporters to seek authorization to terminate their transportation services. Even if the services were terminated, management believes that alternatives would be available whereby the Partnerships would be able to continue to market their gas. The Partnerships' principal customers for crude oil production are refiners and other companies which have pipeline facilities near the producing properties of the Partnerships. In the event pipeline facilities are not conveniently available to production areas, crude oil is usually trucked by purchasers to storage facilities. -8- 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 Partnerships 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 Partnerships. Although virtually all of the Partnerships' 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 have a material effect on the Partnerships' 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 Partnerships' 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 Partnerships' operations or may affect the Partnerships' 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. -9- Insurance Coverage The Partnerships 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 Partnerships maintain insurance coverage as is customary for entities of a similar size engaged in operations similar to that of the Partnerships, but losses can occur from uninsurable risks or in amounts in excess of existing insurance coverage. The occurrence of an event which is not fully covered by insurance could have a material adverse effect on the Partnerships' financial condition and results of operations. ITEM 2. PROPERTIES Well Statistics The following table sets forth the number of productive wells of the Partnerships as of December 31, 1998. Well Statistics(1) As of December 31, 1998 Number of Gross Wells(2) Number of Net Wells(3) ---------------------------- --------------------------------- P/ship Total Oil Gas N/A(4) Total Oil Gas N/A(4) - ------ ----- --- --- ------- ----- ----- ----- ------ II-A 1,038 751 283 4 44.31 29.50 14.68 .13 II-B 197 113 83 1 24.15 15.24 8.90 .01 II-C 268 103 162 3 8.38 2.61 5.71 .06 II-D 204 79 122 3 23.76 4.41 18.66 .69 II-E 978 721 227 30 12.06 4.92 7.12 .02 II-F 998 754 214 30 12.33 6.64 5.63 .06 II-G 998 754 214 30 26.60 14.26 12.20 .14 II-H 998 754 214 30 6.48 3.44 3.00 .04 - --------------- (1) The designation of a well as an oil well or gas well is made by the General Partner 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 in this Annual Report, "gross well" refers to a well in which a working interest is owned; accordingly, the number of gross wells is the total number of wells in which a working interest is owned. (3) As used in 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. (4) Wells which have not been designated as oil or gas. -10- Drilling Activities During the year ended December 31, 1998, the Partnerships indirectly participated in the drilling activities described below. The Partnerships do not own working interests in any of these wells; therefore, they did not incur any costs associated with the drilling activity. Revenue P/ship Well Name County St. Interest Type Status - ------ --------- ------ ---- -------- ---- ------ II-A Graham F No. 3-30 Custer OK .0039 Gas Prod. Eyster No. 1-20 Custer OK .0231 Gas Prod. Beulah Switzer No. 4-18 Blaine OK .0025 Gas Prod. Melford No. 1-7 Grady OK .0011 Gas Unknown Hunt 36 No. 6 Sutton TX .0014 Gas Prod. Paul A. No. 2-34 Garvin OK .0109 Oil Unknown II-B None II-C Laird B-9 Rusk TX .0023 Gas Prod. Laird C No. 8 Rusk TX .0002 Gas Prod. II-D Laird B-9 Rusk TX .0246 Gas Prod. Laird C No. 8 Rusk TX .0023 Gas Prod. II-E Frances No. 1 Wheeler TX .0009 Gas Prod. Bryant No. 2-44 Wheeler TX .0013 Gas Prod. Coltharp No. 2-51 Wheeler TX .0003 Gas Prod. McQuiddy No. 2-4 Hemphill TX .0197 Gas Prod. Schoolfield No. 1 Duval TX .0010 Gas Unknown Henshaw Deep Unit No. 9 Eddy TX .0002 Gas Prod. Hunt 36 No. 6 Sutton TX .0002 Gas Prod. Red Draw No. 5 Howard TX .0017 Oil Prod. II-F Frances No. 1 Wheeler TX .0023 Gas Prod. Bryant No. 2-44 Wheeler TX .0030 Gas Prod. Coltharp No. 2-51 Wheeler TX .0006 Gas Prod. Schoolfield No. 1 Duval TX .0025 Gas Unknown Henshaw Deep Unit No. 9 Eddy TX .0005 Gas Prod. Hunt 36 No. 6 Sutton TX .0004 Gas Prod. Red Draw No. 5 Howard TX .0041 Oil Prod. II-G Frances No. 1 Wheeler TX .0048 Gas Prod. Bryant No. 2-44 Wheeler TX .0064 Gas Prod. Coltharp No. 2-51 Wheeler TX .0014 Gas Prod. Schoolfield No. 1 Duval TX .0053 Gas Unknown Henshaw Deep Unit No. 9 Eddy TX .0010 Gas Prod. Hunt 36 No. 6 Sutton TX .0009 Gas Prod. Red Draw No. 5 Howard TX .0085 Oil Prod. -11- II-H Frances No. 1 Wheeler TX .0011 Gas Prod. Bryant No. 2-44 Wheeler TX .0015 Gas Prod. Coltharp No. 2-51 Wheeler TX .0003 Gas Prod. Schoolfield No. 1 Duval TX .0012 Gas Unknown Henshaw Deep Unit No. 9 Eddy TX .0002 Gas Prod. Hunt 36 No. 6 Sutton TX .0002 Gas Prod. Red Draw No. 5 Howard TX .0020 Oil Prod. Oil and Gas Production, Revenue, and Price History The following tables set 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 Partnerships, revenues attributable to such production, and certain price and cost information. As used in the tables, direct operating expenses include lease operating expenses and production taxes. In addition, gas production is converted to oil 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. -12- Net Production Data II-A Partnership ---------------- Year Ended December 31, ---------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Production: Oil (Bbls) 86,428 105,866 103,230 Gas (Mcf) 1,433,552 1,505,818 1,737,090 Oil and gas sales: Oil $1,070,099 $1,995,185 $2,105,377 Gas 2,841,724 3,436,560 3,727,497 --------- --------- --------- Total $3,911,823 $5,431,745 $5,832,874 ========= ========= ========= Total direct operating expenses $1,772,997 $1,888,421 $1,941,040 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 45.3% 34.8% 33.3% Average sales price: Per barrel of oil $12.38 $18.85 $20.40 Per Mcf of gas 1.98 2.28 2.15 Direct operating expenses per equivalent Bbl of oil $ 5.45 $ 5.29 $ 4.94 -13- Net Production Data II-B Partnership ---------------- Year Ended December 31, ---------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Production: Oil (Bbls) 53,095 67,591 74,434 Gas (Mcf) 904,066 1,047,458 1,219,775 Oil and gas sales: Oil $ 713,020 $1,292,911 $1,557,104 Gas 1,779,023 2,523,358 2,622,423 --------- --------- --------- Total $2,492,043 $3,816,269 $4,179,527 ========= ========= ========= Total direct operating expenses $1,092,499 $1,314,450 $1,164,713 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 43.8% 34.4% 27.9% Average sales price: Per barrel of oil $13.43 $19.13 $20.92 Per Mcf of gas 1.97 2.41 2.15 Direct operating expenses per equivalent Bbl of oil $ 5.36 $ 5.43 $ 4.19 -14- Net Production Data II-C Partnership ---------------- Year Ended December 31, ---------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Production: Oil (Bbls) 16,806 22,753 25,093 Gas (Mcf) 478,643 582,748 685,344 Oil and gas sales: Oil $ 224,072 $ 433,286 $ 530,533 Gas 912,402 1,363,371 1,395,407 --------- --------- --------- Total $1,136,474 $1,796,657 $1,925,940 ========= ========= ========= Total direct operating expenses $ 427,109 $ 527,821 $ 602,924 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 37.6% 29.4% 31.3% Average sales price: Per barrel of oil $13.33 $19.04 $21.14 Per Mcf of gas 1.91 2.34 2.04 Direct operating expenses per equivalent Bbl of oil $ 4.42 $ 4.40 $ 4.33 -15- Net Production Data II-D Partnership ---------------- Year Ended December 31, ---------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Production: Oil (Bbls) 37,733 50,413 66,517 Gas (Mcf) 1,034,372 1,501,911 1,637,645 Oil and gas sales: Oil $ 477,184 $ 941,767 $1,332,558 Gas 1,933,867 3,372,387 2,996,544 --------- --------- --------- Total $2,411,051 $4,314,154 $4,329,102 ========= ========= ========= Total direct operating expenses $ 945,971 $1,657,087 $1,800,899 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 39.2% 38.4% 41.6% Average sales price: Per barrel of oil $12.65 $18.68 $20.03 Per Mcf of gas 1.87 2.25 1.83 Direct operating expenses per equivalent Bbl of oil $ 4.50 $ 5.51 $ 5.31 -16- Net Production Data II-E Partnership ---------------- Year Ended December 31, ---------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Production: Oil (Bbls) 37,508 42,668 53,804 Gas (Mcf) 647,841 783,379 861,464 Oil and gas sales: Oil $ 499,076 $ 814,761 $1,096,064 Gas 1,205,387 1,801,242 1,597,253 --------- --------- --------- Total $1,704,463 $2,616,003 $2,693,317 ========= ========= ========= Total direct operating expenses $ 672,490 $ 909,321 $ 913,077 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 39.5% 34.8% 33.9% Average sales price: Per barrel of oil $13.31 $19.10 $20.37 Per Mcf of gas 1.86 2.30 1.85 Direct operating expenses per equivalent Bbl of oil $ 4.62 $ 5.25 $ 4.63 -17- Net Production Data II-F Partnership ---------------- Year Ended December 31, ---------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Production: Oil (Bbls) 36,915 45,014 47,395 Gas (Mcf) 516,917 586,444 761,702 Oil and gas sales: Oil $ 491,647 $ 839,925 $ 939,731 Gas 953,155 1,351,464 1,493,582 --------- --------- --------- Total $1,444,802 $2,191,389 $2,433,313 ========= ========= ========= Total direct operating expenses $ 398,414 $ 546,465 $ 643,984 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 27.6% 24.9% 26.5% Average sales price: Per barrel of oil $13.32 $18.66 $19.83 Per Mcf of gas 1.84 2.30 1.96 Direct operating expenses per equivalent Bbl of oil $ 3.24 $ 3.83 $ 3.69 -18- Net Production Data II-G Partnership ---------------- Year Ended December 31, ---------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Production: Oil (Bbls) 77,421 94,553 99,593 Gas (Mcf) 1,105,661 1,256,464 1,626,530 Oil and gas sales: Oil $1,030,974 $1,764,599 $1,975,112 Gas 2,041,481 2,905,646 3,183,687 --------- --------- --------- Total $3,072,455 $4,670,245 $5,158,799 ========= ========= ========= Total direct operating expenses $ 852,699 $1,185,722 $1,386,254 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 27.8% 25.4% 26.9% Average sales price: Per barrel of oil $13.32 $18.66 $19.83 Per Mcf of gas 1.85 2.31 1.96 Direct operating expenses per equivalent Bbl of oil $ 3.26 $ 3.90 $ 3.74 -19- Net Production Data II-H Partnership ---------------- Year Ended December 31, ---------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Production: Oil (Bbls) 17,978 21,998 23,172 Gas (Mcf) 266,337 304,593 397,146 Oil and gas sales: Oil $ 239,450 $ 410,718 $ 459,899 Gas 494,163 709,016 770,323 --------- --------- --------- Total $ 733,613 $1,119,734 $1,230,222 ========= ========= ========= Total direct operating expenses $ 205,463 $ 290,042 $ 339,390 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 28.0% 25.9% 27.6% Average sales price: Per barrel of oil $13.32 $18.67 $19.85 Per Mcf of gas 1.86 2.33 1.94 Direct operating expenses per equivalent Bbl of oil $ 3.29 $ 3.99 $ 3.80 Proved Reserves and Net Present Value The following table sets forth each Partnership's estimated proved oil and gas reserves and net present value therefrom as of December 31, 1998. The schedule of quantities of proved oil and gas reserves was prepared by the General Partner in accordance with the rules prescribed by the Securities and Exchange Commission (the "SEC"). Certain reserve information was reviewed by Ryder Scott Company Petroleum Engineers ("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 -20- taxes, ad valorem taxes, and operating expenses) and estimated future development costs, discounted at 10% per annum. Net present value attributable to the Partnerships' proved reserves was calculated on the basis of current costs and prices at December 31, 1998. Such prices were not escalated except in certain circumstances where escalations were fixed and readily determinable in accordance with applicable contract provisions. The prices used in calculating the net present value attributable to the Partnerships' proved reserves do not necessarily reflect market prices for oil and gas production subsequent to December 31, 1998. There can be no assurance that the prices used in calculating the net present value of the Partnerships' proved reserves at December 31, 1998 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 estimates generally less precise than other estimates presented in connection with financial statement disclosures. Proved Reserves and Net Present Values From Proved Reserves As of December 31, 1998(1) II-A Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 7,732,781 Oil and liquids (Bbls) 360,463 Net present value (discounted at 10% per annum) $8,516,737 II-B Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 5,310,753 Oil and liquids (Bbls) 239,827 Net present value (discounted at 10% per annum) $5,733,551 -21- II-C Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 3,603,745 Oil and liquids (Bbls) 118,667 Net present value (discounted at 10% per annum) $3,431,372 II-D Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 8,224,693 Oil and liquids (Bbls) 256,982 Net present value (discounted at 10% per annum) $7,488,437 II-E Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 4,459,632 Oil and liquids (Bbls) 163,199 Net present value (discounted at 10% per annum) $4,574,486 II-F Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 3,625,312 Oil and liquids (Bbls) 240,941 Net present value (discounted at 10% per annum) $4,442,717 II-G Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 7,768,284 Oil and liquids (Bbls) 507,493 Net present value (discounted at 10% per annum) $9,444,366 II-H Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 1,882,355 Oil and liquids (Bbls) 119,166 Net present value (discounted at 10% per annum) $2,257,259 - ---------- (1) Includes certain gas balancing adjustments which cause the gas volumes and net present values to differ from the reserve reports prepared by the General Partner and reviewed by Ryder Scott. -22- No estimates of the proved reserves of the Partnerships comparable to those included herein have been included in reports to any federal agency other than the SEC. Additional information relating to the Partnerships' proved reserves is contained in Note 4 to the Partnerships' financial statements, included in Item 8 of this Annual Report. Significant Properties The following tables set forth certain well and reserve information as of December 31, 1998 for the basins in which the Partnerships own a significant amount of properties. The tables contain the following information for each significant basin: (i) the number of gross wells and net wells, (ii) the number of wells in which only a non-working interest is owned, (iii) the Partnership's total number of wells, (iv) the number and percentage of wells operated by the Partnership's affiliates, (v) estimated proved oil reserves, (vi) estimated proved gas reserves, and (vii) the present value (discounted at 10% per annum) of estimated future net cash flow. The Anadarko Basin is located in western Oklahoma and the Texas panhandle, while the Southern Oklahoma Folded Belt Basin is located in southern Oklahoma. The Gulf Coast Basin is located in southern Louisiana and southeast Texas, while the Permian Basin straddles west Texas and southeast New Mexico. The Sacramento Basin is located in central California. -23-
Significant Properties as of December 31, 1998 ---------------------------------------------- Wells Operated by Affiliates Oil Gas Gross Net Other Total ------------ Reserves Reserves Present Basin Wells Wells Wells (1) Wells Number % (Bbl) (Mcf) Value - ------------------ ------ ------- --------- ------ ------ ---- -------- ---------- ---------- II-A Partnership: Anadarko 119 8.20 36 155 35 23% 44,942 4,067,358 $3,974,761 Gulf Coast 259 11.73 - 259 - -% 123,242 1,444,031 1,782,553 Permian 487 4.36 10 497 10 2% 48,037 1,010,820 1,102,066 Southern Okla. Folded Belt 14 2.15 13 27 12 44% 53,879 638,763 824,420 II-B Partnership: Anadarko 38 4.68 3 41 14 34% 18,706 2,625,865 $2,454,533 Southern Okla. Folded Belt 13 3.50 - 13 12 92% 87,573 929,045 $1,214,366 Permian 13 1.68 - 13 10 77% 12,628 943,051 834,232 Gulf Coast 23 .71 1 24 - -% 7,696 583,946 638,717 II-C Partnership: Anadarko 80 3.85 10 90 21 23% 16,517 1,968,276 $1,612,059 Southern Okla. Folded Belt 16 1.60 - 16 15 94% 38,053 624,450 704,804 Permian 17 .83 1 18 10 56% 7,216 448,518 395,294 II-D Partnership: Anadarko 51 6.72 7 58 9 16% 27,603 2,913,364 $2,582,762 Sacramento 34 5.63 - 34 - -% - 2,011,244 1,780,750 Gulf Coast 13 2.01 1 14 8 57% 61,458 875,687 834,961 Permian 11 2.17 4 15 4 27% 22,574 1,036,736 798,267 - -------------------------- (1) Wells in which only a non-working (e.g. royalty) interest is owned.
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Significant Properties as of December 31, 1998 ---------------------------------------------- Wells Operated by Affiliates Oil Gas Gross Net Other Total ------------ Reserves Reserves Present Basin Wells Wells Wells (1) Wells Number % (Bbl) (Mcf) Value - ------------------ ------ ------- --------- ------ ------ ---- -------- ---------- ---------- II-E Partnership: Anadarko 31 2.03 17 48 15 31% 6,397 1,950,476 $1,809,667 Permian 836 4.59 1,542 2,378 7 -% 87,465 1,398,070 1,520,102 Southern Okla. Folded Belt 10 .50 - 10 1 10% 11,369 718,954 702,641 II-F Partnership: Permian 829 7.54 1,539 2,368 3 -% 204,918 1,292,442 $2,178,264 Anadarko 58 2.06 15 73 16 22% 8,703 1,639,531 1,669,129 Southern Okla. Folded Belt 25 1.87 2 27 22 81% 16,423 554,076 452,268 II-G Partnership: Permian 829 15.77 1,539 2,368 3 -% 428,072 2,701,187 $4,552,184 Anadarko 58 4.39 15 73 16 22% 18,792 3,477,012 3,537,860 Southern Okla. Folded Belt 25 4.25 2 27 22 81% 37,216 1,255,040 $1,024,714 II-H Partnership: Permian 829 3.65 1,539 2,368 3 -% 99,017 625,812 $1,055,043 Anadarko 58 1.04 15 73 16 22% 4,597 826,399 841,054 Southern Okla. Folded Belt 25 1.12 2 27 22 81% 9,830 331,950 $ 271,323 - ---------------------- (1) Wells in which only a non-working (e.g. royalty) interest is owned.
-25- Title to Oil and Gas Properties Management believes that the Partnerships have satisfactory title to their oil and gas properties. Record title to all of the Partnerships' properties is held by either the Partnerships or Geodyne Nominee Corporation, an affiliate of the General Partner. Title to the Partnerships' 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 Partnerships' interest therein or materially interfere with their use in the operation of the Partnerships' business. ITEM 3. LEGAL PROCEEDINGS To the knowledge of the General Partner, neither the General Partner nor the Partnerships or their properties are subject to any litigation, the results of which would have a material effect on the Partnerships' or the General Partner'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 any Partnership during 1998. PART II. ITEM 5. MARKET FOR UNITS AND RELATED LIMITED PARTNER MATTERS As of February 1, 1999, the number of Units outstanding and the approximate number of Limited Partners of record in the Partnerships were as follows: -26- Number of Numbers of Partnership Units Limited Partners ----------- ---------- ---------------- II-A 484,283 4,077 II-B 361,719 2,604 II-C 154,621 1,352 II-D 314,878 2,840 II-E 228,821 2,143 II-F 171,400 1,668 II-G 372,189 2,514 II-H 91,711 1,200 Units were initially sold for a price of $100. The Units are not traded on any exchange and there is no public trading market for them. The General Partner is aware of certain transfers of Units between unrelated parties, some of which are facilitated by secondary trading firms and matching services. In addition, as further described below, the General Partner is aware of certain "4.9% tender offers" which have been made for the Units. The General Partner believes that the transfers between unrelated parties have been limited and sporadic in number and volume. Other than trades facilitated by certain secondary trading firms and matching services, no organized trading market for Units exists and none is expected to develop. Due to the nature of these transactions, the General Partner has no verifiable information regarding prices at which Units have been transferred. Further, a transferee may not become a substitute Limited Partner without the consent of the General Partner. Pursuant to the terms of the Partnership Agreements, the General Partner is obligated to annually issue a repurchase offer which is based on the estimated future net revenues from the Partnerships' reserves and is calculated pursuant to the terms of the Partnership Agreements. Such repurchase offer is recalculated monthly in order to reflect cash distributions to the Limited Partners and extraordinary events. The following table sets forth the General Partner's repurchase offer per Unit as of the periods indicated. For purposes of this Annual Report, a Unit represents an initial subscription of $100 to the Partnership. -27- Repurchase Offer Prices ----------------------- 1997 1998 1999 ------------------------- ------------------------ ---- 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st P/ship Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. - ------ ---- ---- ---- ---- ---- ---- ---- ---- ---- II-A $12 $16 $14 $13 $12 $18 $17 $12 $12 II-B 10 15 14 12 11 20 21 12 12 II-C 13 20 18 16 14 25 25 17 17 II-D 19 22 20 18 15 27 27 17 17 II-E 18 20 18 16 14 40 43 16 15 II-F 20 26 22 20 16 25 20 19 18 II-G 19 26 22 20 16 24 20 19 18 II-H 19 25 21 19 16 24 19 19 18 In addition to this repurchase offer, the Partnerships have been subject to "4.9% tender offers" from several third parties during 1997 and 1998. The General Partner does not know the terms of these offers or the prices received by the Limited Partners who accepted these offers. Cash Distributions Cash distributions are primarily dependent upon a Partnership's cash receipts from the sale of oil and gas production and cash requirements of the Partnership. Distributable cash is determined by the General Partner at the end of each calendar quarter and distributed to the Limited Partners within 45 days after the end of the quarter. Distributions are restricted to cash on hand less amounts required to be retained out of such cash as determined in the sole judgment of the General Partner to pay costs, expenses, or other Partnership obligations whether accrued or anticipated to accrue. In certain instances, the General Partner may not distribute the full amount of cash receipts which might otherwise be available for distribution in an effort to equalize or stabilize the amounts of quarterly distributions. Any available amounts not distributed are invested and the interest or income thereon is for the accounts of the Limited Partners. The following is a summary of cash distributions paid to the Limited Partners during 1997 and 1998 and the first quarter of 1999. -28- Cash Distributions ------------------ 1997 -------------------------------------------------- 1st 2nd 3rd 4th P/ship Qtr.(1) Qtr.(2) Qtr.(2) Qtr.(2) - ------ -------- ---------- ---------- ---------- II-A $1.58 $2.24 $1.47 $1.25 II-B 1.47 1.96 1.29 1.31 II-C 2.38 2.35 2.13 1.57 II-D 2.52 2.60 2.34 1.58 II-E 1.53 1.93 2.22 1.64 II-F 2.39 2.77 3.86 1.90 II-G 2.31 2.69 3.96 1.84 II-H 2.24 2.58 4.07 1.76 1998 1999 --------------------------------------------------- --------- 1st 2nd 3rd 4th 1st P/ship Qtr.(2) Qtr. (2) Qtr.(3) Qtr.(4) Qtr. - ------ -------- ---------- ---------- ---------- --------- II-A $1.43 $2.15 $1.41 $ 4.81 $ .19 II-B 1.71 1.26 .88 8.07 .24 II-C 2.17 3.27 1.01 8.28 .21 II-D 3.33 3.41 1.16 10.19 .54 II-E 2.21 1.13 2.01 26.86 1.03 II-F 4.18 2.39 4.71 1.06 .87 II-G 4.05 2.32 4.54 1.03 .87 II-H 3.83 2.21 4.24 .98 .85 - ----------------------- (1) Amount of cash distribution for the II-C, II-E Partnerships includes proceeds from the sale of certain oil and gas properties. (2) Amount of cash distribution includes proceeds from the sale of certain oil and gas properties. (3) Amount of cash distribution for the II-A, II-E, II-F, II-G, and II-H Partnerships includes proceeds from the sale of certain oil and gas properties. (4) Amount of cash distribution for the II-A, II-B, II-C, II-D, and II-E Partnerships includes proceeds from the settlement of a lawsuit. -29- ITEM 6. SELECTED FINANCIAL DATA The following tables present selected financial data for the Partnerships. This data should be read in conjunction with the financial statements of the Partnerships, and the respective notes thereto, included elsewhere in this Annual Report. See "Item 8. Financial Statements and Supplementary Data." -30-
Selected Financial Data II-A Partnership ---------------- 1998 1997 1996 1995 1994 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $3,911,823 $5,431,745 $5,832,874 $ 4,671,555 $ 6,371,949 Net Income (Loss): Limited Partners 2,863,628 1,577,370 2,043,339 ( 715,678) 265,761 General Partner 188,400 141,030 156,483 81,747 145,993 Total 3,052,028 1,718,400 2,199,822 ( 633,931) 411,754 Limited Partners' Net Income (Loss) per Unit 5.91 3.26 4.22 ( 1.48) .55 Limited Partners' Cash Distributions per Unit 9.80(1) 6.54 5.37 3.83 5.49 Total Assets 5,530,544 7,495,013 9,068,387 9,833,188 12,673,498 Partners' Capital (Deficit): Limited Partners 5,469,889 7,350,261 8,937,891 9,494,552 12,065,230 General Partner ( 417,336) ( 387,587) ( 342,481) ( 311,994) ( 297,741) Number of Units Outstanding 484,283 484,283 484,283 484,283 484,283 - ------------------ (1) Amount of cash distribution includes proceeds from the settlement of a lawsuit.
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Selected Financial Data II-B Partnership ---------------- 1998 1997 1996 1995 1994 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $2,492,043 $3,816,269 $4,179,527 $3,204,794 $4,703,629 Net Income (Loss): Limited Partners 3,160,422 1,095,312 1,329,755 ( 798,537) ( 574,825) General Partner 186,085 99,884 113,834 37,441 87,118 Total 3,346,507 1,195,196 1,443,589 ( 761,096) ( 487,707) Limited Partners' Net Income (Loss) per Unit 8.74 3.03 3.68 ( 2.21) ( 1.59) Limited Partners' Cash Distributions per Unit 11.92(1) 6.03 4.79 3.21 5.98 Total Assets 3,185,016 4,414,695 5,579,977 6,237,427 8,302,058 Partners' Capital (Deficit): Limited Partners 3,309,396 4,464,974 5,552,662 5,955,907 7,914,444 General Partner ( 320,234) ( 305,223) ( 265,183) ( 246,438) ( 222,879) Number of Units Outstanding 361,719 361,719 361,719 361,719 361,719 - ----------------------- (1) Amount of cash distribution includes proceeds from the settlement of a lawsuit.
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Selected Financial Data II-C Partnership ---------------- 1998 1997 1996 1995 1994 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $1,136,474 $1,796,657 $1,925,940 $1,519,937 $2,289,166 Net Income (Loss): Limited Partners 1,583,504 853,383 707,991 ( 337,547) ( 37,871) General Partner 95,091 57,028 53,569 20,538 52,546 Total 1,678,595 910,411 761,560 ( 317,009) 14,675 Limited Partners' Net Income (Loss) per Unit 10.24 5.52 4.58 ( 2.18) ( .24) Limited Partners' Cash Distributions per Unit 14.73(1) 8.43 5.43 4.63 7.06 Total Assets 1,759,734 2,440,315 2,941,348 3,205,943 4,291,920 Partners' Capital (Deficit): Limited Partners 1,765,593 2,458,089 2,907,706 3,039,715 4,092,262 General Partner ( 133,264) ( 123,277) ( 115,619) ( 99,615) ( 84,153) Number of Units Outstanding 154,621 154,621 154,621 154,621 154,621 - ---------------------- (1) Amount of cash distribution includes proceeds from the settlement of a lawsuit.
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Selected Financial Data II-D Partnership ---------------- 1998 1997 1996 1995 1994 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $2,411,051 $4,314,154 $4,329,102 $3,901,516 $4,849,160 Net Income (Loss): Limited Partners 3,942,172 1,796,378 1,270,858 ( 697,631) ( 193,308) General Partner 225,825 127,204 99,743 44,055 108,234 Total 4,167,997 1,923,582 1,370,601 ( 653,576) ( 85,074) Limited Partners' Net Income (Loss) per Unit 12.52 5.70 4.04 ( 2.22) ( .61) Limited Partners' Cash Distributions per Unit 18.09(1) 9.04 4.85 4.69 6.25 Total Assets 3,994,909 5,780,264 6,953,850 7,291,164 9,571,883 Partners' Capital (Deficit): Limited Partners 3,818,294 5,572,122 6,627,744 6,884,886 9,057,517 General Partner ( 247,182) ( 224,003) ( 218,956) ( 143,473) ( 111,528) Number of Units Outstanding 314,878 314,878 314,878 314,878 314,878 - ------------------------ (1) Amount of cash distribution includes proceeds from the settlement of a lawsuit.
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Selected Financial Data II-E Partnership ---------------- 1998 1997 1996 1995 1994 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $1,704,463 $2,616,003 $2,693,317 $2,297,409 $2,480,706 Net Income (Loss): Limited Partners 6,442,294 ( 569) 695,738 ( 1,279,244) ( 842,191) General Partner 356,722 66,976 66,720 9,448 43,060 Total 6,799,016 66,407 762,458 ( 1,269,796) ( 799,131) Limited Partners' Net Income (Loss) per Unit 28.15 .00 3.04 ( 5.59) ( 3.68) Limited Partners' Cash Distributions per Unit 32.21(1) 7.32 4.45 2.32 4.78 Total Assets 3,260,952 4,257,875 5,976,145 6,279,396 8,117,206 Partners' Capital (Deficit): Limited Partners 3,165,869 4,094,575 5,770,144 6,093,406 7,902,650 General Partner ( 173,306) ( 172,017) ( 147,595) ( 122,950) ( 104,398) Number of Units Outstanding 228,821 228,821 228,821 228,821 228,821 - ------------------------ (1) Amount of cash distribution includes proceeds from the settlement of a lawsuit.
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Selected Financial Data II-F Partnership ---------------- 1998 1997 1996 1995 1994 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $1,444,802 $2,191,389 $2,433,313 $2,028,592 $2,316,564 Net Income (Loss): Limited Partners 1,088,453 147,631 1,108,389 ( 191,631) 19,524 General Partner 71,519 81,927 79,948 46,686 54,498 Total 1,159,972 229,558 1,188,337 ( 144,945) 74,022 Limited Partners' Net Income (Loss) per Unit 6.35 .86 6.47 ( 1.12) .11 Limited Partners' Cash Distributions Per Unit 12.34 10.92 8.66 5.93 9.21 Total Assets 2,473,730 3,564,889 5,312,077 5,733,459 6,967,432 Partners' Capital (Deficit): Limited Partners 2,565,258 3,590,805 5,315,174 5,691,785 6,898,416 General Partner ( 144,763) ( 143,355) ( 105,914) ( 84,377) ( 80,063) Number of Units Outstanding 171,400 171,400 171,400 171,400 171,400
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Selected Financial Data II-G Partnership ---------------- 1998 1997 1996 1995 1994 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $3,072,455 $4,670,245 $ 5,158,799 $ 4,348,087 $ 5,116,776 Net Income (Loss): Limited Partners 2,266,451 114,502 2,250,119 ( 714,189) ( 87,682) General Partner 150,050 172,947 165,845 94,880 113,680 Total 2,416,501 287,449 2,415,964 ( 619,309) 25,998 Limited Partners' Net Income (Loss) per Unit 6.09 .31 6.05 ( 1.92) ( .24) Limit Partners' Cash Distributions per Unit 11.94 10.80 8.30 5.80 8.72 Total Assets 5,325,802 7,635,720 11,576,732 12,519,149 15,456,785 Partners' Capital (Deficit): Limited Partners 5,512,443 7,690,992 11,598,490 12,439,371 15,313,560 General Partner ( 304,885) ( 312,392) ( 244,312) ( 197,620) ( 181,500) Number of Units Outstanding 372,189 372,189 372,189 372,189 372,189
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Selected Financial Data II-H Partnership ---------------- 1998 1997 1996 1995 1994 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $ 733,613 $1,119,734 $1,230,222 $1,042,735 $1,208,886 Net Income (Loss): Limited Partners 532,166 ( 11,817) 519,143 ( 239,052) ( 47,630) General Partner 35,089 40,425 38,792 21,532 26,955 Total 567,255 28,608 557,935 ( 217,520) ( 20,675) Limited Partners' Net Income (Loss) per Unit 5.80 ( .13) 5.66 ( 2.61) ( .52) Limited Partners' Cash Distributions per Unit 11.26 10.65 7.93 5.61 8.39 Total Assets 1,255,229 1,788,149 2,790,245 3,024,656 3,790,149 Partners' Capital (Deficit): Limited Partners 1,306,389 1,807,223 2,795,040 3,002,897 3,756,949 General Partner ( 75,631) ( 78,796) ( 58,835) ( 47,635) ( 42,167) Number of Units Outstanding 91,711 91,711 91,711 91,711 91,711
-38- 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 Partnerships. Use of forward-looking statements and estimates and assumptions involve risks and uncertainties which include, but are not limited to, the volatility of oil and gas prices, the uncertainty of reserve information, the operating risk associated with oil and gas properties (including the risk of personal injury, death, property damage, damage to the well or producing reservoir, environmental contamination, and other operating risks), the prospect of changing tax and regulatory laws, the availability and capacity of processing and transportation facilities, the general economic climate, the supply and price of foreign imports of oil and gas, the level of consumer product demand, and the price and availability of alternative fuels. Should one or more of these risks or uncertainties occur or should estimates or underlying assumptions prove incorrect, actual conditions or results may vary materially and adversely from those stated, anticipated, believed, estimated, or otherwise indicated. General Discussion The following general discussion should be read in conjunction with the analysis of results of operations provided below. The most important variable affecting the Partnerships' revenues is the prices received for the sale of oil and gas. Predicting future prices is not possible. Concerning past trends, average yearly wellhead gas prices in the United States have been volatile for a number of years. For the past ten years, such average prices have generally been in the $1.40 to $2.40 per Mcf range. Gas prices are currently in the lower half of the 10-year average range described above. Substantially all of the Partnerships' 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 Partnerships' gas decreased -39- from approximately $2.32 per Mcf at December 31, 1997 to approximately $1.93 per Mcf at December 31, 1998. 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. Continued very low oil prices as discussed below may cause downward pressure on gas prices due to some users of gas converting to oil as a cheaper fuel alternative. For the past ten years, average oil prices have generally been in the $16.00 to $24.00 per barrel range. Due to global consumption and supply trends over the last year as well as at least a short-term slowdown in Asian energy demand, oil prices over the past year have reached historically low levels, dropping to as low as approximately $9.25 per barrel. It is not known whether this trend will continue. Prices for the Partnerships' oil decreased from approximately $16.25 per barrel at December 31, 1997 to approximately $9.50 per barrel at December 31, 1998. Future prices for both oil and gas will likely be different from (and may be lower than) the prices in effect on December 31, 1998. Management is unable to predict whether future oil and gas prices will (i) stabilize, (ii) increase, or (iii) decrease. As discussed in the "Results of Operations" section below, volumes of oil and gas sold also significantly affect the Partnerships' revenues. Oil and gas wells generally produce the most oil or gas in the earlier years of their lives and, as production continues, the rate of production naturally declines. At some point, production physically ceases or becomes no longer economic. The Partnerships are not acquiring additional oil and gas properties, and the existing properties are not experiencing significant additional production through drilling or other capital projects. Therefore, volumes of oil and gas produced naturally decline from year to year. While it is difficult for management to predict future production from these properties, it is likely that this general trend of declining production will continue. Despite this general trend of declining production, several factors can cause the volumes of oil and gas sold to increase or decrease at an even greater rate over a given period. These factors include, but are not limited to, (i) geophysical conditions which cause an acceleration of the decline in production, (ii) the shutting in of wells (or the opening of previously shut-in wells) due to low oil and gas prices, mechanical difficulties, loss of a market or transportation, or performance of workovers, recompletions, or other operations in the well, (iii) prior period volume adjustments (either positive or negative) made by purchasers of the production, (iv) ownership adjustments in accordance with agreements governing the operation or ownership of the well (such as adjustments that occur at payout), and (v) completion of enhanced recovery projects which increase production for the well. Many of these factors are very -40- significant as related to a single well or as related to many wells over a short period of time. However, due to the large number of wells owned by the Partnerships, these factors are generally not material as compared to the normal decline in production experienced on all remaining wells. Results of Operations An analysis of the change in net oil and gas operations (oil and gas sales, less lease operating expenses and production taxes), is presented in the tables following "Results of Operations" under the heading "Average Sales Prices, Production Volumes, and Average Production Costs." Following is a discussion of each Partnership's results of operations for the year ended December 31, 1998 as compared to the year ended December 31, 1997 and for the year ended December 31, 1997 as compared to the year ended December 31, 1996. II-A Partnership ---------------- Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 -------------------------------------- Total oil and gas sales decreased $1,519,922 (28.0%) in 1998 as compared to 1997. Of this decrease, approximately $366,000 and $165,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $559,000 and $430,000, respectively, were related to decreases in the average prices of oil and gas sold. Volumes of oil and gas sold decreased 19,438 barrels and 72,266 Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of oil sold resulted primarily from (i) normal declines in production, (ii) the sale of several wells during 1997 and 1998, and (iii) a negative prior period volume adjustment made by the purchaser during 1998 on one significant well. Average oil and gas prices decreased to $12.38 per barrel and $1.98 per Mcf, respectively, in 1998 from $18.85 per barrel and $2.28 per Mcf, respectively, in 1997. As discussed in "Liquidity and Capital Resources" below, the II-A Partnership sold certain oil and gas properties during 1998 and recognized a $685,375 gain on such sales. Sales of oil and gas properties during 1997 resulted in the II-A Partnership recognizing similar gains totaling $176,789. The II-A Partnership recognized income from a gas contract settlement in the amount of $1,710,190 during 1998. This settlement involved claims made for take or pay deficiencies and gas pricing issues arising out of a gas purchase contract. No similar settlements occurred during 1997. -41- Oil and gas production expenses (including lease operating expenses and production taxes) decreased $115,424 (6.1%) in 1998 as compared to 1997. This decrease resulted primarily from a decrease in production taxes associated with the decrease in oil and gas sales and a decrease in lease operating expenses associated with the decreases in volumes of oil and gas sold. These decreases were partially offset by workover expenses incurred on two wells during 1998. As a percentage of oil and gas sales, these expenses increased to 45.3% in 1998 from 34.8% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. Depreciation, depletion, and amortization of oil and gas properties increased $19,633 (2.5%) in 1998 as compared to 1997. This increase resulted primarily from downward revisions in the estimates of remaining oil and gas reserves at December 31, 1998 on several significant wells, which increase was partially offset by a decrease in volumes of oil and gas sold. As a percentage of oil and gas sales, this expense increased to 20.4% in 1998 from 14.4% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold and the dollar increase in depreciation, depletion, and amortization. The II-A Partnership recognized a non-cash charge against earnings of $164,111 during the fourth quarter of 1998. This charge was necessary due to the unamortized costs of one field exceeding the expected undiscounted future cash flows from that field. During the first quarter of 1997, a non-cash charge of $684,276 was also recognized. Of this amount, $223,943 was related to the decline in oil and gas prices used to determine the recoverability of oil and gas reserves at March 31, 1997 and $460,333 was related to the impairment of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-A Partnership's Partnership Agreement which limit the level of permissible drilling activity. General and administrative expenses decreased $17,659 (3.0%) in 1998 as compared to 1997. As a percentage of oil and gas sales, these expenses increased to 14.7% in 1998 from 10.9% in 1997. This percentage increase was primarily due to the decrease in oil and gas sales. The Limited Partners have received cash distributions through December 31, 1998 totaling $46,735,357 or 96.50% of the Limited Partners' capital contributions. -42- Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 -------------------------------------- Total oil and gas sales decreased $401,129 (6.9%) in 1997 as compared to 1996. Of this decrease, approximately $497,000 was related to a decrease in volumes of gas sold and approximately $164,000 was related to a decrease in the average price of oil sold, which decreases were partially offset by increases of approximately $196,000 related to an increase in the average price of gas sold and approximately $54,000 related to an increase in volumes of oil sold. Volumes of oil sold increased 2,636 barrels, while volumes of gas sold decreased 231,272 Mcf in 1997 as compared to 1996. The decrease in volumes of gas sold resulted primarily from (i) positive prior period volume adjustments made by purchasers on several wells in 1996, (ii) negative prior volume adjustments made by a purchaser on one significant well in 1997, and (iii) normal declines in production. Average oil prices decreased to $18.85 per barrel in 1997 from $20.40 per barrel in 1996. Average gas prices increased to $2.28 per Mcf in 1997 from $2.15 per Mcf in 1996. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $52,619 (2.7%) in 1997 as compared to 1996. This decrease resulted primarily from the decrease in volumes of gas sold in 1997, which decrease was partially offset by an increase in workover expenses incurred on several wells in 1997. As a percentage of oil and gas sales, these expenses remained relatively constant at 34.8% in 1997 and 33.3% in 1996. Depreciation, depletion, and amortization of oil and gas properties decreased $416,359 (34.8%) in 1997 as compared to 1996. This decrease resulted primarily from (i) an upward revision in the estimate of remaining gas reserves at December 31, 1997, (ii) the decrease in volumes of gas sold in 1997, and (iii) a reduction in the depletable base of oil and gas properties due to the impairment provision recorded against proved oil and gas properties in the first quarter of 1997 as discussed below. As a percentage of oil and gas sales, this expense decreased to 14.4% in 1997 from 20.5% in 1996. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization and the increase in the average price of gas sold in 1997. The II-A Partnership recognized a non-cash charge against earnings of $684,276 in the first quarter of 1997. Of this amount, $223,943 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $460,333 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-A -43- Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charges were necessary in 1996. General and administrative expenses decreased $29,306 (4.7%) in 1997 as compared to 1996. This decrease resulted primarily from a decrease in professional fees in 1997 as compared to 1996. As a percentage of oil and gas sales, these expenses remained relatively constant at 10.9% in 1997 and 10.6% in 1996. II-B Partnership ---------------- Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 -------------------------------------- Total oil and gas sales decreased $1,324,226 (34.7%) in 1998 as compared to 1997. Of this decrease, approximately $277,000 and $345,000, respectively, were related to decreases in volumes of oil and gas sold and $303,000 and $399,000, respectively, were related to decreases in the average prices of oil and gas sold. Volumes of oil and gas sold decreased 14,496 barrels and 143,392 Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of oil sold resulted primarily from the sale of several wells during both years and normal declines in production. The decrease in volumes of gas sold resulted primarily from (i) the sale of several wells during both years, (ii) normal declines in production, and (iii) a negative prior period volume adjustment made by the purchaser on one significant well during 1998. Average oil and gas prices decreased to $13.43 per barrel and $1.97 per Mcf, respectively, in 1998 from $19.13 per barrel and $2.41 per Mcf, respectively, in 1997. As discussed in "Liquidity and Capital Resources" below, the II-B Partnership sold certain oil and gas properties during 1998 and recognized a $65,551 gain on such sales. Sales of oil and gas properties during 1997 resulted in the II-B Partnership recognizing similar gains totaling $203,247. The II-B Partnership recognized income from a gas contract settlement in the amount of $2,793,295 during 1998. This settlement involved claims made for take or pay deficiencies and gas pricing issues arising out of a gas purchase contract. No similar settlements occurred during 1997. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $221,951 (16.9%) in 1998 as compared to 1997. This decrease resulted primarily from a decrease in lease operating expenses associated with the decreases in volumes of oil and gas sold and a decrease in production taxes associated with the decrease in oil and gas sales. As a percentage of oil and gas sales, these expenses -44- increased to 43.8% in 1998 from 34.4% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. Depreciation, depletion, and amortization of oil and gas properties decreased $14,916 (2.7%) in 1998 as compared to 1997. This decrease resulted primarily from the decrease in volumes of oil and gas sold, which decrease in depreciation, depletion, and amortization was partially offset by an increase resulting from downward revisions in the estimates of remaining oil and gas reserves at December 31, 1998 on several significant wells. As a percentage of oil and gas sales, this expense increased to 21.3% in 1998 from 14.3% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. The II-B Partnership recognized a non-cash charge against earnings of $530,988 in the first quarter 1997. Of this amount, $134,003 was related to the decline in oil and gas prices used to determine the recoverability of oil and gas reserves at March 31, 1997 and $396,985 was related to impairment of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-B Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charge was necessary in 1998. General and administrative expenses decreased $21,297 (4.7%) in 1998 as compared to 1997. As a percentage of oil and gas sales, these expenses increased to 17.3% in 1998 from 11.8% in 1997. This percentage increase was primarily due to the decrease in oil and gas sales. The Limited Partners have received cash distributions through December 31, 1998 totaling $34,132,916 or 94.36% of the Limited Partners' capital contributions. Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 ---------------------------------------- Total oil and gas sales decreased $363,258 (8.7%) in 1997 as compared to 1996. Of this decrease, approximately $143,000 and $370,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $121,000 was related to a decrease in the average price of oil sold, which decreases were partially offset by an increase of approximately $272,000 related to an increase in the average price of gas sold. Volumes of oil and gas sold decreased 6,843 barrels and 172,317 Mcf, respectively, in 1997 as compared to 1996. The decrease in volumes of gas sold resulted primarily from (i) positive prior period volume adjustments made by purchasers on several wells in -45- 1996, (ii) normal declines in production, (iii) negative prior period volume adjustments made by a purchaser on one significant well in 1997, and (iv) the sale of one significant gas producing well in 1997. Average oil prices decreased to $19.13 per barrel in 1997 from $20.92 per barrel in 1996. Average gas prices increased to $2.41 per Mcf in 1997 from $2.15 per Mcf in 1996. Oil and gas production expenses (including lease operating expenses and production taxes) increased $149,737 (12.9%) in 1997 as compared to 1996. This increase resulted primarily from workover expenses incurred on several wells in 1997, which increase was partially offset by decreases in volumes of oil and gas sold in 1997. As a percentage of oil and gas sales, these expenses increased to 34.4% in 1997 from 27.9% in 1996. This percentage increase was primarily due to the dollar increase in oil and gas production expenses and the decrease in the average price of oil sold in 1997. Depreciation, depletion, and amortization of oil and gas properties decreased $515,276 (48.5%) in 1997 as compared to 1996. This decrease resulted primarily from (i) an upward revision in the estimate of remaining gas reserves at December 31, 1997, (ii) decreases in volumes of oil and gas sold in 1997 and (iii) a reduction in the depletable base of oil and gas properties due to the impairment provision recorded against proved oil and gas properties in the first quarter of 1997 as discussed below. As a percentage of oil and gas sales, this expense decreased to 14.3% in 1997 from 25.4% in 1996. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization and the increase in the average price of gas sold in 1997. The II-B Partnership recognized a non-cash charge against earnings of $530,988 in the first quarter of 1997. Of this amount, $134,003 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $396,985 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-B Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charges were necessary in 1996. General and administrative expenses decreased $45,222 (9.1%) in 1997 as compared to 1996. This decrease resulted primarily from a decrease in professional fees in 1997 as compared to 1996. As a percentage of oil and gas sales, these expenses remained relatively constant at 11.8% in 1997 and 11.9% in 1996. -46- II-C Partnership ---------------- Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 -------------------------------------- Total oil and gas sales decreased $660,183 (36.7%) in 1998 as compared to 1997. Of this decrease, approximately $113,000 and $244,000, respectively, were due to decreases in volumes of oil and gas sold and approximately $96,000 and $207,000, respectively, were related to decreases in the average prices of oil and gas sold. Volumes of oil and gas sold decreased 5,947 barrels and 104,105 Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of oil sold resulted primarily from normal declines in production and the sale of several wells during both years. The decrease in volumes of gas sold resulted primarily from the sale of several wells during both years and a negative prior period volume adjustment made by the purchaser during 1998 on one significant well. Average oil and gas prices decreased to $13.33 per barrel and $1.91 per Mcf, respectively, in 1998 from $19.04 per barrel and $2.34 per Mcf, respectively, in 1997. As discussed in "Liquidity and Capital Resources" below, the II-C Partnership sold certain oil and gas properties in 1998 and recognized a $177,795 gain on such sales. Sales of oil and gas properties during 1997 resulted in the II-C Partnership recognizing similar gains totaling $156,919. The II-C Partnership recognized income from a gas contract settlement in the amount of $1,197,148 during 1998. This settlement involved claims made for take or pay deficiencies and gas pricing issues arising out of a gas contract. No similar settlements occurred during 1997. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $100,712 (19.1%) in 1998 as compared to 1997. This decrease resulted primarily from a decrease in lease operating expenses associated with the decreases in volumes of oil and gas sold and a decrease in production taxes associated with the decrease in oil and gas sales. As a percentage of oil and gas sales, these expenses increased to 37.6% in 1998 from 29.4% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. Depreciation, depletion, and amortization of oil and gas properties decreased $21,881 (8.2%) in 1998 as compared to 1997. This decrease resulted primarily from the decreases in volumes of oil and gas sold, which decreases were partially offset by an -47- increase in depreciation, depletion, and amortization resulting from downward revisions in the estimates of remaining oil and gas reserves at December 31, 1998 on several significant wells. As a percentage of oil and gas sales, this expense increased to 21.7% in 1998 from 14.9% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. The II-C Partnership recognized a non-cash charge against earnings of $66,617 in the first quarter of 1997. Of this amount, $36,163 was related to the decline in oil and gas prices used to determine the recoverability of oil and gas reserves at March 31, 1997 and $30,454 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-C Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charge was necessary in 1998. General and administrative expenses decreased $9,261 (4.8%) in 1998 as compared to 1997. As a percentage of oil and gas sales, these expenses increased to 16.2% in 1998 from 10.8% in 1997. This percentage increase was primarily due to the decrease in oil and gas sales. The II-C Partnership achieved payout during the fourth quarter of 1998. After payout, operations and revenues for the II-C Partnership have been and will be allocated using the after payout percentages included in the II-C Partnership's Partnership Agreement. After payout percentages allocate operating income and expenses 10% to the General Partner and 90% to the Limited Partners. Before payout, operating income and expenses were allocated 5% to the General Partner and 95% to the Limited Partners. The Limited Partners have received cash distributions through December 31, 1998 totaling $15,501,686 or 100.26% of the Limited Partners' capital contributions. Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 ---------------------------------------- Total oil and gas sales decreased $129,283 (6.7%) in 1997 as compared to 1996. Of this decrease, approximately $49,000 and $209,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $48,000 was related to a decrease in the average price of oil sold, which decreases were partially offset by an increase of approximately $175,000 related to an increase in the average price of gas sold. Volumes of oil and gas sold decreased 2,340 barrels and 102,596 Mcf, respectively, in 1997 as compared to 1996. The decrease in -48- volumes of gas sold resulted primarily from (i) the sale of several gas producing wells during 1996, (ii) positive prior period volume adjustments made by purchasers on several wells during 1996, and (iii) normal declines in production. Average oil prices decreased to $19.04 per barrel in 1997 from $21.14 per barrel in 1996. Average gas prices increased to $2.34 per Mcf in 1997 from $2.04 per Mcf in 1996. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $75,103 (12.5%) in 1997 as compared to 1996. This decrease resulted primarily from (i) decreases in volumes of oil and gas sold in 1997 and (ii) a decrease in production taxes associated with the decrease in oil and gas sales in 1997. As a percentage of oil and gas sales, these expenses decreased to 29.4% in 1997 from 31.3% in 1996. This percentage decrease was primarily due to the dollar decrease in oil and gas production expenses and the increase in the average price of gas sold in 1997. Depreciation, depletion, and amortization of oil and gas properties decreased $129,630 (32.6%) in 1997 as compared to 1996. This decrease resulted primarily from (i) an upward revision in the estimate of remaining gas reserves at December 31, 1997, (ii) the decreases in volumes of oil and gas sold in 1997, and (iii) a reduction in the depletable base of oil and gas properties due to the impairment provision recorded against proved oil and gas properties in the first quarter of 1997 as discussed below. As a percentage of oil and gas sales, this expense decreased to 14.9% in 1997 from 20.7% in 1996. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization and the increase in the average price of gas sold in 1997. The II-C Partnership recognized a non-cash charge against earnings of $66,617 in the first quarter of 1997. Of this amount, $36,163 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $30,454 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-C Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charges were necessary in 1996. General and administrative expenses decreased $20,622 (9.6%) in 1997 as compared to 1996. This decrease resulted primarily from a decrease in professional fees in 1997 as compared to 1996. As a percentage of oil and gas sales, these expenses remained relatively constant at 10.8% in 1997 and 11.1% in 1996. -49- II-D Partnership ---------------- Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 -------------------------------------- Total oil and gas sales decreased $1,903,103 (44.1%) in 1998 as compared to 1997. Of this decrease, approximately $237,000 and $1,050,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $228,000 and $389,000, respectively, were related to decreases in the average prices of oil and gas sold. Volumes of oil and gas sold decreased 12,680 barrels and 467,539 Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of oil and gas sold resulted primarily from the sale of several wells in both years and normal declines in production due to diminishing reserves on several wells. Average oil and gas prices decreased to $12.65 per barrel and $1.87 per Mcf, respectively, in 1998 from $18.68 per barrel and $2.25 per Mcf, respectively, in 1997. As discussed in "Liquidity and Capital Resources" below, the II-D Partnership sold certain oil and gas properties during 1998 and recognized a $496,238 gain on such sales. Sales of oil and gas properties during 1997 resulted in the II-D Partnership recognizing similar gains totaling $447,981. The II-D Partnership recognized income from a gas contact settlement in the amount of $3,033,646 during 1998. This settlement involved claims made for take or pay deficiencies and gas pricing issues arising out of a gas purchase contract. No similar settlements occurred during 1997. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $711,116 (42.9%) in 1998 as compared to 1997. This decrease resulted primarily from a decrease in lease operating expenses associated with the decreases in volumes of oil and gas sold and a decrease in production taxes associated with the decrease in oil and gas sales. As a percentage of oil and gas sales, these expenses increased to 39.2% in 1998 from 38.4% in 1997. Depreciation, depletion, and amortization of oil and gas properties decreased $170,121 (24.7%) in 1998 as compared to 1997. This decrease resulted primarily from the decrease in volumes of oil and gas sold. As a percentage of oil and gas sales, this expense increased to 21.5% in 1998 from 16.0% in 1997. This -50- percentage increase was primarily due to the decreases in the average prices of oil and gas sold. The II-D Partnership recognized a non-cash charge against earnings of $143,957 during 1997. This impairment provision was necessary due to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997. No similar charge was necessary during 1998. General and administrative expenses decreased $22,908 (5.8%) in 1998 as compared to 1997. As a percentage of oil and gas sales, these expenses increased to 15.5% in 1998 from 9.2% in 1997. This percentage increase was primarily due to the decrease in oil and gas sales. The Limited Partners have received cash distributions through December 31, 1998 totaling $31,285,903 or 99.36% of Limited Partners' capital contributions. Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 ---------------------------------------- Total oil and gas sales remained relatively constant in 1997 as compared to 1996. Any decrease in oil and gas sales caused by decreases of approximately $323,000 and $248,000, respectively, relating to decreases in volumes of oil and gas sold and a decrease of approximately $68,000 related to a decrease in the average price of oil sold was substantially offset by an increase of approximately $631,000 related to an increase in the average price of gas sold. Volumes of oil and gas sold decreased 16,104 barrels and 135,734 Mcf, respectively, in 1997 as compared to 1996. The decrease in volumes of oil sold resulted primarily from (i) the sale of one significant well in late 1996 and (ii) a negative prior period volume adjustment made the by purchaser on a significant well in 1997. Average oil prices decreased to $18.68 per barrel in 1997 from $20.03 per barrel in 1996. Average gas prices increased to $2.25 per Mcf in 1997 from $1.83 per Mcf in 1996. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $143,812 (8.0%) in 1997 as compared to 1996. This decrease resulted primarily from decreases in volumes of oil and gas sold in 1997. As a percentage of oil and gas sales, these expenses decreased to 38.4% in 1997 from 41.6% in 1996. This percentage decrease was primarily due to the dollar decrease in oil and gas production expenses and the increase in the average price of gas sold in 1997. Depreciation, depletion, and amortization of oil and gas properties decreased $111,321 (13.9%) in 1997 as compared to 1996. This decrease resulted primarily from the decreases in -51- volumes of oil and gas sold in 1997 and a reduction in the depletable base of oil and gas properties due to the impairment provision recorded against proved oil and gas properties in the first quarter of 1997 as discussed below. As a percentage of oil and gas sales, this expense decreased to 16.0% in 1997 from 18.5% in 1996. This percentage decrease was primarily due to the increase in the average price of gas sold in 1997. The II-D Partnership recognized a non-cash charge against earnings of $143,957 in the first quarter of 1997. This impairment provision was necessary due to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997. No similar charge was necessary in 1996. General and administrative expenses decreased $56,299 (12.4%) in 1997 as compared to 1996. This decrease resulted primarily from a decrease in professional fees in 1997 as compared to 1996. As a percentage of oil and gas sales, these expenses decreased to 9.2% in 1997 from 10.5% in 1996. This percentage decrease was primarily due to the dollar decrease in general and administrative expenses discussed above. II-E Partnership ---------------- Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 -------------------------------------- Total oil and gas sales decreased $911,540 (34.8%) in 1998 as compared to 1997. Of this decrease, approximately $99,000 and $312,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $217,000 and $284,000, respectively, were related to decreases in the average prices of oil and gas sold. Volumes of oil and gas sold decreased 5,160 barrels and 135,538 Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of oil and gas sold resulted primarily from normal declines in production and the sale of several wells during both years. Average oil and gas prices decreased to $13.31 per barrel and $1.86 per Mcf, respectively, in 1998 from $19.10 per barrel and $2.30 per Mcf, respectively, in 1997. As discussed in "Liquidity and Capital Resources" below, the II-E Partnership sold certain oil and gas properties during 1998 and recognized a $328,245 gain on such sales. Sales of oil and gas properties during 1997 resulted in the II-E Partnership recognizing similar gains totaling $272,654. The II-E Partnership recognized income from a gas contract settlement in the amount of $6,159,355 during 1998. This settlement involved claims made for take or pay deficiencies and -52- gas pricing issues arising out of a gas purchase contract. No similar settlements occurred during 1997. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $236,831 (26.0%) in 1998 as compared to 1997. This decrease resulted primarily from (i) a decrease in lease operating expenses associated with the decreases in volumes of oil and gas sold, (ii) a decrease in production taxes associated with the decrease in oil and gas sales, and (iii) workover expenses incurred on one significant well during 1997. As a percentage of oil and gas sales, these expenses increased to 39.5% in 1998 from 34.8% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. Depreciation, depletion, and amortization of oil and gas properties decreased $82,925 (13.2%) in 1998 as compared to 1997. This decrease resulted primarily from the decreases in volumes of oil and gas sold. As a percentage of oil and gas sales, this expense increased to 31.9% in 1998 from 24.0% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. The II-E Partnership recognized a non-cash charge against earnings of $992,851 in the first quarter of 1997. Of this amount, $317,979 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $674,872 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-E Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charges were necessary during 1998. General and administrative expenses decreased $38,504 (12.2%) in 1998 as compared to 1997. This decrease resulted primarily from a decrease in legal expenses associated with the gas contract settlement discussed above during 1998 as compared to 1997. As a percentage of oil and gas sales, these expenses increased to 16.2% in 1998 from 12.0% in 1997. This percentage increase was primarily due to the decrease in oil and gas sales. The Limited Partners have received cash distributions through December 31, 1998 totaling $22,471,574 or 98.21% of the Limited Partners' capital contributions. -53- Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 ---------------------------------------- Total oil and gas sales decreased $77,314 (2.9%) in 1997 as compared to 1996. Of this decrease, approximately $227,000 and $144,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $54,000 was related to a decrease in the average price of oil sold, which decreases were partially offset by an increase of approximately $353,000 related to an increase in the average price of gas sold. Volumes of oil and gas sold decreased 11,136 barrels and 78,085 Mcf, respectively, in 1997 as compared to 1996. The decrease in volumes of oil sold resulted primarily from the sale of one significant well in late 1996 and a normal decline in production. Average oil prices decreased to $19.10 per barrel in 1997 from $20.37 per barrel in 1996. Average gas prices increased to $2.30 per Mcf in 1997 from $1.85 per Mcf in 1996. Oil and gas production expenses (including lease operating expenses and production taxes) remained relatively constant in 1997 as compared to 1996. As a percentage of oil and gas sales, these expenses remained relatively constant at 34.8% in 1997 and 33.9% in 1996. Depreciation, depletion, and amortization of oil and gas properties decreased $101,553 (13.9%) in 1997 as compared to 1996. This decrease resulted primarily from (i) the decreases in volumes of oil and gas sold in 1997, (ii) a reduction in the depletable base of oil and gas properties due to the impairment provision recorded against proved oil and gas properties in the first quarter of 1997 as discussed below, and (iii) an upward revision in the estimate of remaining gas reserves at December 31, 1997. As a percentage of oil and gas sales, this expense decreased to 24.0% in 1997 from 27.0% in 1996. This percentage decrease was primarily due to the increase in the average price of gas sold in 1997. The II-E Partnership recognized a non-cash charge against earnings of $992,851 in the first quarter of 1997. Of this amount, $317,979 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $674,872 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-E Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charges were necessary in 1996. General and administrative expenses decreased $102,370 (24.5%) in 1997 as compared to 1996. This decrease resulted primarily from a decrease in professional fees in 1997 as -54- compared to 1996. As a percentage of oil and gas sales, these expenses decreased to 12.0% in 1997 from 15.5% in 1996. This percentage decrease was primarily due to the dollar decrease in general and administrative expenses. II-F Partnership ---------------- Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 -------------------------------------- Total oil and gas sales decreased $746,587 (34.1%) in 1998 as compared to 1997. Of this decrease, approximately $151,000 and $160,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $197,000 and $238,000, respectively, were related to decreases in the average prices of oil and gas sold. Volumes of oil and gas sold decreased 8,099 barrels and 69,527 Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of oil and gas sold resulted primarily from the sale of several wells during both years. Average oil and gas prices decreased to $13.32 per barrel and $1.84 per Mcf, respectively, in 1998 from $18.66 per barrel and $2.30 per Mcf, respectively, in 1997. As discussed in "Liquidity and Capital Resources" below, the II-F Partnership sold certain oil and gas properties during 1998 and recognized a $657,881 gain on such sales. Sales of oil and gas properties during 1997 resulted in the II-F Partnership recognizing similar gains totaling $557,746. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $148,051 (27.1%) in 1998 as compared to 1997. This decrease resulted primarily from decreases in (i) production taxes associated with the decrease in oil and gas sales and (ii) lease operating expenses associated with the decreases in volumes of oil and gas sold. As a percentage of oil and gas sales, these expenses increased to 27.6% in 1998 from 24.9% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. Depreciation, depletion, and amortization of oil and gas properties decreased $48,304 (11.8%) in 1998 as compared to 1997. This decrease resulted primarily from the decreases in volumes of oil and gas sold. As a percentage of oil and gas sales, this expense increased to 25.0% in 1998 from 18.7% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. -55- The II-F Partnership recognized a non-cash charge against earnings of $1,377,160 in the first quarter of 1997. Of this amount, $208,255 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $1,168,905 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-F Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charges were necessary during 1998. General and administrative expenses decreased $2,653 (1.3%) in 1998 as compared to 1997. As a percentage of oil and gas sales, these expenses increased to 14.0% in 1998 from 9.3% in 1997. This percentage increase was primarily due to the decrease in oil and gas sales. The Limited Partners have received cash distributions through December 31, 1998 totaling $17,028,051 or 99.35% of Limited Partners' capital contributions. Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 ---------------------------------------- Total oil and gas sales decreased $241,924 (9.9%) in 1997 as compared to 1996. Of this decrease, approximately $47,000 and $344,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $53,000 was related to a decrease in the average price of oil sold, which decreases were partially offset by an increase of approximately $199,000 related to an increase in the average price of gas sold. Volumes of oil and gas sold decreased 2,381 barrels and 175,258 Mcf, respectively, in 1997 as compared to 1996. The decrease in volumes of gas sold resulted primarily from (i) negative prior period volume adjustments made by the purchasers on three significant wells in 1997, (ii) positive prior period volume adjustments made by the purchasers on several wells in 1996, (iii) normal declines in production, and (iv) the sale of one significant well in early 1997. Average oil prices decreased to $18.66 per barrel in 1997 from $19.83 per barrel in 1996. Average gas prices increased to $2.30 per Mcf in 1997 from $1.96 per Mcf in 1996. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $97,519 (15.1%) in 1997 as compared to 1996. This decrease resulted primarily from decreases in (i) volumes of oil and gas sold in 1997 and (ii) production taxes associated with the decrease in oil and gas sales. As a percentage of oil and gas sales, these expenses decreased to 24.9% in 1997 from 26.5% in 1996. This percentage -56- decrease was primarily due to the dollar decrease in oil and gas production expenses and the increase in the average price of gas sold in 1997. Depreciation, depletion, and amortization of oil and gas properties decreased $122,039 (23.0%) in 1997 as compared to 1996. This decrease resulted primarily from decreases in volumes of oil and gas sold in 1997 and a reduction in the depletable base of oil and gas properties due to the impairment provision recorded against proved oil and gas properties in the first quarter of 1997 as discussed below. As a percentage of oil and gas sales, this expense decreased to 18.7% in 1997 from 21.8% in 1996. This percentage decrease was primarily due to the increase in the average price of gas sold in 1997. The II-F Partnership recognized a non-cash charge against earnings of $1,377,160 in the first quarter of 1997. Of this amount, $208,255 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $1,168,905 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-F Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charges were necessary in 1996. General and administrative expenses decreased $2,351 (1.1%) in 1997 as compared to 1996. As a percentage of oil and gas sales, these expenses remained relatively constant at 9.3% in 1997 and 8.5% in 1996. II-G Partnership ---------------- Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 -------------------------------------- Total oil and gas sales decreased $1,597,790 (34.2%) in 1998 as compared to 1997. Of this decrease, approximately $320,000 and $349,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $414,000 and $515,000, respectively, were related to decreases in the average prices of oil and gas sold. Volumes of oil and gas sold decreased 17,132 barrels and 150,803 Mcf, respectively, in 1998 as compared to 1997. The decreases in volumes of oil and gas sold resulted primarily from the sale of several wells during both years. Average oil and gas prices decreased to $13.32 per barrel and $1.85 per Mcf, respectively, in 1998 from $18.66 per barrel and $2.31 per Mcf, respectively, in 1997. -57- As discussed in "Liquidity and Capital Resources" below, the II-G Partnership sold certain oil and gas properties during 1998 and recognized a $1,374,966 gain on such sales. Sales of oil and gas properties during 1997 resulted in the II-G Partnership recognizing similar gains totaling $1,226,822. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $333,023 (28.1%) in 1998 as compared to 1997. This decrease resulted primarily from decreases in (i) production taxes associated with the decrease in oil and gas sales and (ii) lease operating expenses associated with the decreases in volumes of oil and gas sold. As a percentage of oil and gas sales, these expenses increased to 27.8% in 1998 from 25.4% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. Depreciation, depletion, and amortization of oil and gas properties decreased $137,614 (15.0%) in 1998 as compared to 1997. This decrease resulted primarily from the decreases in volumes of oil and gas sold during 1998 as compared to 1997. As a percentage of oil and gas sales, this expense increased to 25.3% in 1998 from 19.6% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. The II-G Partnership recognized a non-cash charge against earnings of $3,101,656 in the first quarter of 1997. Of this amount, $489,672 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $2,611,984 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-G Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charges were necessary during 1998. General and administrative expenses decreased $5,627 (1.3%) in 1998 as compared to 1997. As a percentage of oil and gas sales, these expenses increased to 14.3% in 1998 from 9.5% in 1997. This percentage increase was primarily due to the decrease in oil and gas sales. The Limited Partners have received cash distributions through December 31, 1998 totaling $35,105,371 or 94.32% of Limited Partners' capital contributions. -58- Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 ---------------------------------------- Total oil and gas sales decreased $488,554 (9.5%) in 1997 as compared to 1996. Of this decrease, approximately $100,000 and $725,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $111,000 was related to a decrease in the average price of oil sold, which decreases were partially offset by an increase of approximately $440,000 related to an increase in the average price of gas sold. Volumes of oil and gas sold decreased 5,040 barrels and 370,066 Mcf, respectively, in 1997 as compared to 1996. The decrease in volumes of gas sold resulted primarily from (i) negative prior period volume adjustments made by the purchasers on three significant wells in 1997, (ii) positive prior period volume adjustments made by the purchasers on several wells in 1996, and (iii) normal declines in production. Average oil prices decreased to $18.66 per barrel in 1997 from $19.83 per barrel in 1996. Average gas prices increased to $2.31 per Mcf in 1997 from $1.96 per Mcf in 1996. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $200,532 (14.5%) in 1997 as compared to 1996. This decrease resulted primarily from a decrease in production taxes associated with the decrease in oil and gas sales and decreases in volumes of oil and gas sold in 1997. As a percentage of oil and gas sales, these expenses decreased to 25.4% in 1997 from 26.9% in 1996. This percentage decrease was primarily due to the dollar decrease in oil and gas production expenses and the increase in the average prices of gas sold in 1997. Depreciation, depletion, and amortization of oil and gas properties decreased $246,840 (21.2%) in 1997 as compared to 1996. This decrease resulted primarily from both the decreases in volumes of oil and gas sold in 1997 and a reduction in the depletable base of oil and gas properties due to the impairment provision recorded against proved oil and gas properties in the first quarter of 1997 as discussed below. As a percentage of oil and gas sales, this expense decreased to 19.6% in 1997 from 22.5% in 1996. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization and the increase in the average price of gas sold in 1997. The II-G Partnership recognized a non-cash charge against earnings of $3,101,656 in the first quarter of 1997. Of this amount, $489,672 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $2,611,984 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-G -59- Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charges were necessary in 1996. General and administrative expenses decreased $4,755 (1.1%) in 1997 as compared to 1996. As a percentage of oil and gas sales, these expenses remained relatively constant at 9.5% in 1997 and 8.7% in 1996. II-H Partnership ---------------- Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 -------------------------------------- Total oil and gas sales decreased $386,121 (34.5%) in 1998 as compared to 1997. Of this decrease, approximately $75,000 and $89,000, respectively, were related to decreases in the volumes of oil and gas sold and approximately $96,000 and $126,000, respectively, were related to decreases in the average prices of oil and gas sold. Volumes of oil and gas sold decreased 4,020 barrels and 38,256 Mcf, respectively, in 1998 as compared to 1997. The decreases in volumes of oil and gas sold resulted primarily from the sale of several wells during both years. Average oil and gas prices decreased to $13.32 per barrel and $1.86 per Mcf, respectively, in 1998 from $18.67 per barrel and $2.33 per Mcf, respectively, in 1997. As discussed in "Liquidity and Capital Resources" below, the II-H Partnership sold certain oil and gas properties during 1998 and recognized a $317,342 gain on such sales. Sales of oil and gas properties during 1997 resulted in the II-H Partnership recognizing similar gains totaling $286,788. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $84,579 (29.2%) in 1998 as compared to 1997. This decrease resulted primarily from decreases in (i) production taxes associated with the decrease in oil and gas sales and (ii) lease operating expenses associated with the decreases in volumes of oil and gas sold. As a percentage of oil and gas sales, these expenses increased to 28.0% in 1998 from 25.9% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. Depreciation, depletion, and amortization of oil and gas properties decreased $23,121 (11.4%) in 1998 as compared to 1997. This decrease resulted primarily from the decreases in volumes of -60- oil and gas sold. As a percentage of oil and gas sales, this expense increased to 24.4% in 1998 from 18.1% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. The II-H Partnership recognized a non-cash charge against earnings of $785,220 in the first quarter of 1997. Of this amount, $125,223 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $659,997 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the II-H Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charges were necessary during 1998. General and administrative expenses decreased $1,389 (1.3%) in 1998 as compared to 1997. As a percentage of oil and gas sales, these expenses increased to 14.7% in 1998 from 9.8% in 1997. This percentage increase was primarily due to the decrease in oil and gas sales. The Limited Partners have received cash distributions through December 31, 1998 totaling $8,172,364 or 89.11% of Limited Partners' capital contributions. Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 ---------------------------------------- Total oil and gas sales decreased $110,488 (9.0%) in 1997 as compared to 1996. Of this decrease, approximately $23,000 and $180,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $26,000 was related to a decrease in the average price of oil sold, which decreases were partially offset by an increase of approximately $119,000 related to an increase in the average price of gas sold. Volumes of oil and gas sold decreased 1,174 barrels and 92,553 Mcf in 1997 as compared to 1996. The decrease in volumes of gas sold resulted primarily from (i) negative prior period volume adjustments made by the purchasers on three significant wells in 1997, (ii) positive prior period volume adjustments made by the purchasers on several wells in 1996, and (iii) normal declines in production. Average oil prices decreased to $18.67 per barrel in 1997 from $19.85 per barrel in 1996. Average gas prices increased to $2.33 per Mcf in 1997 from $1.94 per Mcf in 1996. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $49,348 (14.5%) in 1997 as compared to 1996. This decrease resulted primarily from a decrease in production taxes associated with the decrease in oil -61- and gas sales and the decreases in volumes of oil and gas sold in 1997. As a percentage of oil and gas sales, these expenses decreased to 25.9% in 1997 from 27.6% in 1996. This percentage decrease was primarily due to the dollar decrease in oil and gas production expenses and the increase in the average price of gas sold in 1997. Depreciation, depletion, and amortization of oil and gas properties decreased $78,681 (28.0%) in 1997 as compared to 1996. This decrease resulted primarily from the decreases in volumes of oil and gas sold in 1997 and a reduction in the depletable base of oil and gas properties due to the impairment provision recorded against proved oil and gas properties in the first quarter of 1997 as discussed below. As a percentage of oil and gas sales, this expense decreased to 18.1% in 1997 from 22.8% in 1996. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization. The II-H Partnership recognized a non-cash charge against earnings of $785,220 in the first quarter of 1997. Of this amount, $125,223 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $659,997 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to the low oil and gas prices and provisions in the II-H Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charges were necessary in 1996. General and administrative expenses decreased $1,437 (1.3%) in 1997 as compared to 1996. As a percentage of oil and gas sales, these expenses remained relatively constant at 9.8% in 1997 and 9.0% in 1996. Average Sales Prices, Production Volumes, and Average Production Costs The following tables are comparisons of the annual average oil and gas sales prices, production volumes, and average production costs (lease operating expenses and production taxes) per equivalent unit (one barrel of oil or six Mcf of gas) for 1998, 1997, and 1996. These factors comprise the change in net oil and gas operations discussed in the "Results of Operations" section above. -62- 1998 Compared to 1997 --------------------- Average Sales Prices - ---------------------------------------------------------------------------- P/ship 1998 1997 % Change - ------ ------------------ ------------------ -------------- Oil Gas Oil Gas ($/Bbl) ($/Mcf) ($/Bbl) ($/Mcf) Oil Gas ------- ------- ------- ------- ----- ----- II-A 12.38 1.98 $18.85 $2.28 (34%) (13%) II-B 13.43 1.97 19.13 2.41 (30%) (18%) II-C 13.33 1.91 19.04 2.34 (30%) (18%) II-D 12.65 1.87 18.68 2.25 (32%) (17%) II-E 13.31 1.86 19.10 2.30 (30%) (19%) II-F 13.32 1.84 18.66 2.30 (29%) (20%) II-G 13.32 1.85 18.66 2.31 (29%) (20%) II-H 13.32 1.86 18.67 2.33 (29%) (20%) Production Volumes - --------------------------------------------------------------------------- P/ship 1998 1997 % Change - ------ ------------------ ------------------ ------------ Oil Gas Oil Gas Oil Gas (Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf) ------- --------- ------- --------- ------ ----- II-A 86,428 1,433,552 105,866 1,505,818 (18%) ( 5%) II-B 53,095 904,066 67,591 1,047,458 (21%) (14%) II-C 16,806 478,643 22,753 582,748 (26%) (18%) II-D 37,733 1,034,372 50,413 1,501,911 (25%) (31%) II-E 37,508 647,841 42,668 783,379 (12%) (17%) II-F 36,915 516,917 45,014 586,444 (18%) (12%) II-G 77,421 1,105,661 94,553 1,256,464 (18%) (12%) II-H 17,978 266,337 21,998 304,593 (18%) (13%) Average Production Costs per Equivalent Barrel of Oil ------------------------------------- P/ship 1998 1997 % Change ------ ----- ----- -------- II-A $5.45 $5.29 2% II-B 5.36 5.43 ( 1%) II-C 4.42 4.40 - II-D 4.50 5.51 (18%) II-E 4.62 5.25 (12%) II-F 3.24 3.83 (15%) II-G 3.26 3.90 (16%) II-H 3.29 3.99 (18%) -63- 1997 Compared to 1996 --------------------- Average Sales Prices - -------------------------------------------------------------------------- P/ship 1997 1996 % Change - ------ ---------------- ---------------- ------------ Oil Gas Oil Gas ($/Bbl) ($/Mcf) ($/Bbl) ($/Mcf) Oil Gas ------- ------- ------- ------- ----- --- II-A $18.85 $2.28 $20.40 $2.15 ( 8%) 6% II-B 19.13 2.41 20.92 2.15 ( 9%) 12% II-C 19.04 2.34 21.14 2.04 (10%) 15% II-D 18.68 2.25 20.03 1.83 ( 7%) 23% II-E 19.10 2.30 20.37 1.85 ( 6%) 24% II-F 18.66 2.30 19.83 1.96 ( 6%) 17% II-G 18.66 2.31 19.83 1.96 ( 6%) 18% II-H 18.67 2.33 19.85 1.94 ( 6%) 20% Production Volumes - ----------------------------------------------------------------------------- P/ship 1997 1996 % Change - ------ ------------------ ------------------ -------------- Oil Gas Oil Gas Oil Gas (Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf) ------- --------- ------ --------- ------ ----- II-A 105,866 1,505,818 103,230 1,737,090 3% (13%) II-B 67,591 1,047,458 74,434 1,219,775 ( 9%) (14%) II-C 22,753 582,748 25,093 685,344 ( 9%) (15%) II-D 50,413 1,501,911 66,517 1,637,645 (24%) ( 8%) II-E 42,668 783,379 53,804 861,464 (21%) ( 9%) II-F 45,014 586,444 47,395 761,702 ( 5%) (23%) II-G 94,553 1,256,464 99,593 1,626,530 ( 5%) (23%) II-H 21,998 304,593 23,172 397,146 ( 5%) (23%) Average Production Costs per Equivalent Barrel of Oil ------------------------------------- P/ship 1997 1996 % Change ------ ----- ----- -------- II-A $5.29 $4.94 7% II-B 5.43 4.19 30% II-C 4.40 4.33 2% II-D 5.51 5.31 4% II-E 5.25 4.63 13% II-F 3.83 3.69 4% II-G 3.90 3.74 4% II-H 3.99 3.80 5% -64- 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 Units and Related Limited Partner Matters." The net proceeds from production are not reinvested in productive assets, except to the extent that producing wells are improved, or where methods are employed to permit more efficient recovery of reserves, thereby resulting in a positive economic impact. Assuming 1998 production levels for future years, the Partnerships proved reserve quantities at December 31, 1998 would have the following remaining lives: Partnership Gas-Years Oil-Years ----------- --------- --------- II-A 5.4 4.2 II-B 5.9 4.5 II-C 7.5 7.1 II-D 8.0 6.8 II-E 6.9 4.4 II-F 7.0 6.5 II-G 7.0 6.6 II-H 7.1 6.6 The Partnerships' available capital from the Limited Partners' subscriptions has been spent on oil and gas properties and there should be no further material capital resource commitments in the future. Occasional expenditures for new wells or well recompletions or workovers, however, may reduce or eliminate cash available for a particular quarterly cash distribution. The Partnerships have no debt commitments. Cash for operational purposes will be provided by current oil and gas production. The Partnerships sold certain oil and gas properties during 1997 and 1998. The sale of the Partnerships' properties were made by the General Partner after giving due consideration to both the offer price and the General Partner's estimate of the property's remaining proved reserves and future operating costs. Net proceeds from the sale of any such properties were distributed to the Partnerships and included in the calculation of the Partnerships' cash distributions for the quarter immediately following the Partnerships' receipt of the proceeds. The amount of such proceeds from the sale of oil and gas properties during 1998 and 1997 were as follows: -65- Partnership 1998 1997 ----------- ---------- ---------- II-A $ 787,854 $ 225,375 II-B 82,454 251,335 II-C 250,629 208,805 II-D 669,933 629,832 II-E 357,625 431,541 II-F 717,792 758,534 II-G 1,503,817 1,658,135 II-H 345,716 414,950 The General Partner believes that the sale of these properties will be beneficial to the Partnerships in the long-term since the properties sold generally had a higher ratio of future operating expenses as compared to reserves than the properties not sold. On July 30, 1998 the II-A, II-B, II-C, II-D, and II-E Partnerships and certain other related parties reached a settlement with a gas purchaser involving claims for take or pay deficiencies and gas pricing issues arising out of a gas purchase contract. As a result of this settlement, such Partnerships received the following settlement amounts: SETTLEMENT PER PARTNERSHIP AMOUNT UNIT ----------- --------- ------ II-A $1,710,190 $ 3.53 II-B 2,793,295 7.72 II-C 1,197,148 7.74 II-D 3,033,646 9.63 II-E 6,159,355 26.92 The settlement amounts were included in the Partnerships' November 1998 cash distributions. There can be no assurance as to the amount of the Partnerships' future cash distributions. The Partnerships' ability to make cash distributions depends primarily upon the level of available cash flow generated by the Partnerships' operating activities, which will be affected (either positively or negatively) by many factors beyond the control of the Partnerships, including the price of and demand for oil and gas and other market and economic conditions. 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 Partnerships are not replacing production through acquisitions of producing properties and drilling. The Partnerships' quantity of proved reserves has been reduced by the sale of oil and gas properties as described above; therefore, it is possible that the -66- Partnerships' future cash distributions will decline as a result of a reduction of the Partnerships' reserve base. The Partnerships will terminate on December 31, 2001 in accordance with the Partnership Agreements. However, the Partnership Agreements provide that the General Partner may extend the term of each Partnership for up to five periods of two years each. As of the date of this Annual Report, the General Partner has not determined whether to extend the term of any Partnership. 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 Partnerships in 1998. 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." Year 2000 In General The Year 2000 Issue ("Y2K") refers to the inability of computer and other information technology systems to properly process date and time information, stemming from the earlier programming practice of using two digits rather than four to represent the year in a date. For example, computer programs and imbedded chips that are date sensitive may recognize a date using (00) as the year 1900 rather than the year 2000. The consequence of Y2K is that computer and imbedded processing systems may be at risk of malfunctioning, particularly during the transition from 1999 to 2000. The effects of Y2K are exacerbated by the interdependence of computer and telecommunication systems throughout the world. This interdependence also exists among the Partnerships, Samson, and their vendors, customers, and business partners, as well as with regulators. The potential risks associated with Y2K for an oil and gas production company fall into three general areas: (i) financial, leasehold and administrative computer systems, (ii) imbedded systems in field process control units, and (iii) third party exposures. As discussed below, the General Partner does not believe that these risks will be material to the Partnerships' operations. The Partnerships' business is producing oil and gas. The day-to-day production of the Partnerships' oil and gas is not -67- dependent on computers or equipment with imbedded chips. As further discussed below, management anticipates that the Partnerships' daily business activities will not be materially affected by Y2K. The Partnerships rely on Samson to provide all of its operational and administrative services on either a direct or indirect basis. Samson is addressing each of the three Y2K areas discussed above through a readiness process that seeks to: 1. increase the awareness of the issue among key employees; 2. identify areas of potential risk; 3. assess the relative impact of these risks and Samson's ability to manage them; and 4. remediate these risks on a priority basis wherever possible. Samson Investment Company's Chief Financial Officer is responsible for communicating to its Board of Directors Y2K actions and for the ultimate implementation of its Y2K plan. He has delegated to Samson Investment Company's Senior Vice President-Technology and Administrative Services principal responsibility for ensuring Y2K compliance within Samson. Samson has been planning for the impact of Y2K on its information technology systems since 1993. As of February 1, 1999, Samson is in the final stages of implementation of a Y2K plan, as summarized below: Financial and Administrative Systems 1. Awareness. Samson has alerted its officers, managers and supervisors of Y2K issues and asked them to have their employees participate in the identification of potential Y2K risks which might otherwise go unnoticed by higher level employees and officers. As a result, awareness of the issue is considered high. 2. Risk Identification. Samson's most significant financial and administrative systems exposure is the Y2K status of the accounting and land administration system used to collect and manage data for internal management decision making and for external revenue and accounts payable purposes. Other concerns include network hardware and software, desktop computing hardware and software, telecommunications, and office space readiness. 3. Risk Assessment. The failure to identify and correct a material Y2K problem could result in inaccurate or untimely financial information for management decision-making or cash flow and payment purposes, including maintaining oil and gas leases. -68- 4. Remediation. Since 1993, Samson has been upgrading its accounting and land administration software. Substantially all of the Y2K upgrades have been completed, with the remainder scheduled to be completed during the 1st quarter of 1999. In addition, in 1997 and 1998 Samson replaced or applied software patches to substantially all of its network and desktop software applications and believes them to be generally Y2K compliant. Additional patches or software upgrades will be applied no later than March 31, 1999 to complete this process. The costs of all such risk assessments and remediation are not expected to be material to the Partnerships. 5. Contingency Planning. Notwithstanding the foregoing, should there be significant unanticipated disruptions in Samson's financial and administrative systems, all of the accounting processes that are currently automated will need to be performed manually. Samson will consider in the second half of 1999 its options with respect to contingency arrangements for temporary staffing to accommodate such situations. Imbedded Systems 1. Awareness. Samson's Y2K program has involved all levels of field personnel from production foremen and higher. Employees at all levels of the organization have been asked to participate in the identification of potential Y2K risks, which might otherwise go unnoticed by higher level employees and officers of Samson, and as a result, awareness of the issue is considered high. 2. Risk Identification. Samson has inventoried all possible exposures to imbedded chips and systems. Such exposures can be classified as either (i) oil and gas production and processing equipment or (ii) office machines such as faxes, copiers, phones, etc. With respect to oil and gas production and processing equipment, neither Samson nor the Partnerships operate offshore wells, significant processing plants, or wells with older electronic monitoring systems. As a result, Samson's inventory identified less than 10 applications using imbedded chips. All of these are in the process of being tested by the respective vendors and are expected to be Y2K compliant or replaced no later than May 30, 1999. Oil and gas production related to such equipment is very minor with respect to the entire Samson group, and, in fact, the Partnerships' production may not use such equipment at all. Office machines are currently being tested by Samson and vendors. It is expected that such machines will be made compliant or replaced no later than March 31, 1999. -69- 3. Risk Assessment and Remediation. The failure to identify and correct a material Y2K problem in an imbedded system could result in outcomes ranging from errors in data reporting to curtailments or shutdowns in production. As noted above, Samson has identified less than 10 imbedded system applications that may have a Y2K problem. None of these applications are believed to be material to Samson or the Partnerships. Once identified, assessed and prioritized, Samson intends to test and upgrade imbedded components and systems in field process control units deemed to pose the greatest risk of significant non-compliance and capable of testing. Samson believes that sufficient manual processes are available to minimize any such field level risk and that there will be no material impact on the Partnerships with respect to these applications. 4. Contingency Planning. Should material production disruptions occur as a result of Y2K failures in field operations, Samson will utilize its existing field personnel in an attempt to avoid any material impact on operating cash flow. Samson is not able to quantify any potential exposure in the event of systems failure or inadequate manual alternatives. Third Party Exposures 1. Awareness. Samson has advised management to consider Y2K implications with its outside vendors, customers, and business partners. Management has been asked to participate in the identification of potential third party Y2K risks and, as a result, awareness of the issue is considered high. 2. Risk Identification. Samson's most significant third party Y2K exposure is its dependence on third parties for the receipt of revenues from oil and gas sales. However, virtually all of these purchasers are very large and sophisticated companies. Other Y2K concerns include the availability of electric power to Samson's field operations, the integrity of telecommunication systems, and the readiness of commercial banks to execute electronic fund transfers. 3. Risk Assessment. Because of the high awareness of the Y2K problem in the U.S., Samson has not undertaken and does not plan to undertake a formal company wide plan to make inquiries of third parties on the subject of Y2K readiness. If it did so, Samson has no ability to require responses to such inquiries or to independently verify their accuracy. Samson has, however, received oral assurances from its significant oil and gas purchasers of Y2K compliance. If significant disruptions from major purchasers were to occur, however, there could be a material and adverse impact on the Partnerships' results of operations, liquidity, and financial conditions. It is important to note that third party oil and gas purchasers have significant incentives to avoid disruptions -70- arising from a Y2K failure. For example, most of these parties are under contractual obligations to purchase oil and gas or disperse revenues to Samson. The failure to do so will result in contractual and statutory penalties. Therefore, the General Partner believes that it is unlikely that there will be material third party non-compliance with purchase and remittance obligations as a result of Y2K issues. 4. Remediation. Where Samson perceives significant risk of Y2K non-compliance that may have a material impact on it, and where the relationship between Samson and a vendor, customer, or business partner permits, joint testing may be undertaken during 1999 to further identify these risks. 5. Contingency Planning. In the unlikely event that material production disruptions occur as a result of Y2K failures of third parties, the Partnerships' operating cash flow could be impacted. This contingency will be factored into deliberations on the level of quarterly cash distributions paid out during any such period of cash flow disruption. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Partnerships do not hold any market risk sensitive instruments. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data are indexed in Item 14 hereof. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER The Partnerships have no directors or executive officers. The following individuals are directors and executive officers of the General Partner. The business address of such director and executive officers is Two West Second Street, Tulsa, Oklahoma 74103. -71- Name Age Position with General Partner ---------------- --- -------------------------------- Dennis R. Neill 46 President and Director Judy K. Fox 47 Secretary The director will hold office until the next annual meeting of shareholders of Geodyne and until his successor has been duly elected and qualified. All executive officers serve at the discretion of the Board of Directors. Dennis R. Neill joined Samson in 1981, was named Senior Vice President and Director of Geodyne on March 3, 1993, and was named President of Geodyne and its subsidiaries 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, Dyco Petroleum Corporation, Berry Gas Company, Circle L Drilling Company, Snyder Exploration Company, and Compression, Inc. Judy K. Fox joined Samson in 1990 and was named Secretary of Geodyne and its subsidiaries 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., Dyco Petroleum Corporation, Samson Hydrocarbons Company, Snyder Exploration Company, and Samson Properties Incorporated. Section 16(a) Beneficial Ownership Reporting Compliance To the best knowledge of the Partnerships and the General Partner, there were no officers, directors, or ten percent owners who were delinquent filers during 1998 of reports required under Section 16 of the Securities Exchange Act of 1934. -72- ITEM 11. EXECUTIVE COMPENSATION The General Partner and its affiliates are reimbursed for actual general and administrative costs and operating costs incurred and attributable to the conduct of the business affairs and operations of the Partnerships, computed on a cost basis, determined in accordance with generally accepted accounting principles. Such reimbursed costs and expenses allocated to the Partnerships include office rent, secretarial, employee compensation and benefits, travel and communication costs, fees for professional services, and other items generally classified as general or administrative expense. The amount of general and administrative expense allocated to the General Partner and its affiliates which was charged to each Partnership during 1998, 1997, and 1996 is set forth in the table below. Although the actual costs incurred by the General Partner and its affiliates have fluctuated during the three years presented, the amounts charged to the Partnerships have not fluctuated due to expense limitations imposed by the Partnership Agreements. Partnership 1998 1997 1996 ----------- -------- -------- -------- II-A $509,772 $509,772 $509,772 II-B 380,760 380,760 380,760 II-C 162,756 162,756 162,756 II-D 331,452 331,452 331,452 II-E 240,864 240,864 240,864 II-F 180,420 180,420 180,420 II-G 391,776 391,776 391,776 II-H 96,540 96,540 96,540 None of the officers or directors of the General Partner receive compensation directly from the Partnerships. The Partnerships reimburse the General Partner or its affiliates for that portion of such officers' and directors' salaries and expenses attributable to time devoted by such individuals to the Partnerships' activities. The following tables indicate the approximate amount of general and administrative expense reimbursement attributable to the salaries of the directors, officers, and employees of the General Partner and its affiliates during 1998, 1997, and 1996: -73-
Salary Reimbursements II-A Partnership ---------------- Three Years Ended December 31, 1998 Long Term Compensation ---------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - 1997 - - - - - - - 1998 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1996 $298,217 - - - - - - 1997 $304,538 - - - - - - 1998 $301,683 - - - - - - - ---------- (1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until July 1, 1996. (2) The general and administrative expenses paid by the II-A Partnership and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Tholen or Mr. Neill. (3) Mr. Neill became President of Geodyne on July 1, 1996. (4) No officer or director of Geodyne or its affiliates provides full-time services to the II-A Partnership and no individual's salary or other compensation reimbursement from the II-A Partnership equals or exceeds $100,000 per annum.
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Salary Reimbursements II-B Partnership ---------------- Three Years Ended December 31, 1998 Long Term Compensation ------------------------------------ Annual Compensation Awards Payouts ------------------------- ----------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - 1997 - - - - - - - 1998 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1996 $222,745 - - - - - - 1997 $227,466 - - - - - - 1998 $225,334 - - - - - - - ---------- (1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until July 1, 1996. (2) The general and administrative expenses paid by the II-B Partnership and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Tholen or Mr. Neill. (3) Mr. Neill became President of Geodyne on July 1, 1996. (4) No officer or director of Geodyne or its affiliates provides full-time services to the II-B Partnership and no individual's salary or other compensation reimbursement from the II-B Partnership equals or exceeds $100,000 per annum.
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Salary Reimbursements II-C Partnership ---------------- Three Years Ended December 31, 1998 Long Term Compensation ----------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - 1997 - - - - - - - 1998 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1996 $95,212 - - - - - - 1997 $97,230 - - - - - - 1998 $96,319 - - - - - - - ---------- (1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until July 1, 1996. (2) The general and administrative expenses paid by the II-C Partnership and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Tholen or Mr. Neill. (3) Mr. Neill became President of Geodyne on July 1, 1996. (4) No officer or director of Geodyne or its affiliates provides full-time services to the II-C Partnership and no individual's salary or other compensation reimbursement from the II-C Partnership equals or exceeds $100,000 per annum.
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Salary Reimbursements II-D Partnership ---------------- Three Years Ended December 31, 1998 Long Term Compensation ---------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - 1997 - - - - - - - 1998 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1996 $193,899 - - - - - - 1997 $198,009 - - - - - - 1998 $196,153 - - - - - - - ---------- (1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until July 1, 1996. (2) The general and administrative expenses paid by the II-D Partnership and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Tholen or Mr. Neill. (3) Mr. Neill became President of Geodyne on July 1, 1996. (4) No officer or director of Geodyne or its affiliates provides full-time services to the II-D Partnership and no individual's salary or other compensation reimbursement from the II-D Partnership equals or exceeds $100,000 per annum.
-77-
Salary Reimbursements II-E Partnership ---------------- Three Years Ended December 31, 1998 Long Term Compensation ----------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - 1997 - - - - - - - 1998 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1996 $140,905 - - - - - - 1997 $143,892 - - - - - - 1998 $142,543 - - - - - - - ---------- (1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until July 1, 1996. (2) The general and administrative expenses paid by the II-E Partnership and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Tholen or Mr. Neill. (3) Mr. Neill became President of Geodyne on July 1, 1996. (4) No officer or director of Geodyne or its affiliates provides full-time services to the II-E Partnership and no individual's salary or other compensation reimbursement from the II-E Partnership equals or exceeds $100,000 per annum.
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Salary Reimbursements II-F Partnership ---------------- Three Years Ended December 31, 1998 Long Term Compensation ---------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - 1997 - - - - - - - 1998 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1996 $105,546 - - - - - - 1997 $107,783 - - - - - - 1998 $106,773 - - - - - - - ---------- (1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until July 1, 1996. (2) The general and administrative expenses paid by the II-F Partnership and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Tholen or Mr. Neill. (3) Mr. Neill became President of Geodyne on July 1, 1996. (4) No officer or director of Geodyne or its affiliates provides full-time services to the II-F Partnership and no individual's salary or other compensation reimbursement from the II-F Partnership equals or exceeds $100,000 per annum.
-79-
Salary Reimbursements II-G Partnership ---------------- Three Years Ended December 31, 1998 Long Term Compensation ------------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - 1997 - - - - - - - 1998 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1996 $229,189 - - - - - - 1997 $234,047 - - - - - - 1998 $231,853 - - - - - - - ---------- (1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until July 1, 1996. (2) The general and administrative expenses paid by the II-G Partnership and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Tholen or Mr. Neill. (3) Mr. Neill became President of Geodyne on July 1, 1996. (4) No officer or director of Geodyne or its affiliates provides full-time services to the II-G Partnership and no individual's salary or other compensation reimbursement from the II-G Partnership equals or exceeds $100,000 per annum.
-80-
Salary Reimbursements II-H Partnership ---------------- Three Years Ended December 31, 1998 Long Term Compensation ------------------------------------- Annual Compensation Awards Payouts ------------------------- ------------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - 1997 - - - - - - - 1998 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1996 $56,476 - - - - - - 1997 $57,673 - - - - - - 1998 $57,132 - - - - - - - ---------- (1) Mr. Tholen served as President and Chief Executive Officer of Geodyne until July 1, 1996. (2) The general and administrative expenses paid by the II-H Partnership and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Tholen or Mr. Neill. (3) Mr. Neill became President of Geodyne on July 1, 1996. (4) No officer or director of Geodyne or its affiliates provides full-time services to the II-H Partnership and no individual's salary or other compensation reimbursement from the II-H Partnership equals or exceeds $100,000 per annum.
-81- Affiliates of the Partnerships serve as operator of some of the Partnerships' wells. The General Partner contracts with such affiliates for services as operator of the wells. As operator, such affiliates are compensated at rates provided in the operating agreements in effect and charged to all parties to such agreement. Such compensation may occur both prior and subsequent to the commencement of commercial marketing of production of oil or gas. The dollar amount of such compensation paid by the Partnerships to the affiliates is impossible to quantify as of the date of this Annual Report. Samson maintains necessary inventories of new and used field equipment. Samson may have provided some of this equipment for wells in which the Partnerships 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 billed the Partnerships for a portion of such costs based upon the Partnerships' 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 Units as of February 1, 1999 by (i) each beneficial owner of more than five percent of the issued and outstanding Units, (ii) the directors and officers of the General Partner, and (iii) the General Partner and its affiliates. 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) - ------------------------------------ ------------------ II-A Partnership: - ---------------- Samson Resources Company 73,940 (15.3%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 73,940 (15.3%) II-B Partnership: - ---------------- Samson Resources Company 58,240 (16.1%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 58,240 (16.1%) -82- II-C Partnership: - ---------------- Samson Resources Company 33,567 (21.7%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 33,567 (21.7%) II-D Partnership: - ---------------- Samson Resources Company 42,520 (13.5%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 42,520 (13.5%) II-E Partnership: - ---------------- Samson Resources Company 39,864 (17.4%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 39,864 (17.4%) II-F Partnership: - ---------------- Samson Resources Company 24,864 (14.5%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 24,864 (14.5%) II-G Partnership: - ---------------- Samson Resources Company 41,224 (11.1%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 41,224 (11.1%) II-H Partnership: - ---------------- Samson Resources Company 14,759 (16.1%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 14,759 (16.1%) ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The General Partner and certain of its affiliates engage in oil and gas activities independently of the Partnerships which result in conflicts of interest that cannot be totally eliminated. The -83- allocation of acquisition and drilling opportunities and the nature of the compensation arrangements between the Partnerships and the General Partner also create potential conflicts of interest. An affiliate of the Partnerships owns some of the Partnerships' Units and therefore has an identity of interest with other Limited Partners with respect to the operations of the Partnerships. In order to attempt to assure limited liability for Limited Partners as well as an orderly conduct of business, management of the Partnerships is exercised solely by the General Partner. The Partnership Agreements grant the General Partner broad discretionary authority with respect to the Partnerships' 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 Partnerships involves circumstances where the General Partner has conflicts of interest and where it must allocate costs and expenses, or opportunities, among the Partnerships and other competing interests. The General Partner does not devote all of its time, efforts, and personnel exclusively to the Partnerships. Furthermore, the Partnerships do not have any employees, but instead rely on the personnel of Samson. The Partnerships thus compete with Samson (including other oil and gas partnerships) for the time and resources of such personnel. Samson devotes such time and personnel to the management of the Partnerships as are indicated by the circumstances and as are consistent with the General Partner's fiduciary duties. Affiliates of the Partnerships are solely responsible for the negotiation, administration, and enforcement of oil and gas sales agreements covering the Partnerships' leasehold interests. Because affiliates of the Partnership who provide services to the Partnership 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 the Partnerships would take if they were to administer their own contracts without involvement with other members of Samson. On the other hand, management believes that the Partnerships' negotiating strength and contractual positions have been enhanced by virtue of their affiliation with Samson. PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial Statements, Financial Statement Schedules, and Exhibits. -84- (1) Financial Statements: The following financial statements for the Geodyne Energy Income Limited Partnership II-A Geodyne Energy Income Limited Partnership II-B Geodyne Energy Income Limited Partnership II-C Geodyne Energy Income Limited Partnership II-D Geodyne Energy Income Limited Partnership II-E Geodyne Energy Income Limited Partnership II-F Geodyne Energy Income Limited Partnership II-G Geodyne Energy Income Limited Partnership II-H as of December 31, 1998 and 1997 and for each of the three years in the period ended December 31, 1998 are filed as part of this report: Report of Independent Accountants Combined Balance Sheets Combined Statements of Operations Combined Statements of Changes in Partners' Capital (Deficit) Combined Statements of Cash Flows Notes to Combined Financial Statements (2) Financial Statement Schedules: None. (3) Exhibits: 4.1 The Certificate and Agreements of Limited Partnership for the following Partnerships have been previously filed with the Securities and Exchange Commission as Exhibit 2.1 to Form 8-A filed by each Partnership on the dates shown below and are hereby incorporated by reference. Partnership Filing Date File No. ----------- ------------ -------- II-A November 18, 1987 0-16388 II-B November 19, 1987 0-16405 II-C August 5, 1988 0-16981 II-D August 5, 1988 0-16980 II-E November 17, 1988 0-17320 II-F June 5, 1989 0-17799 II-G June 5, 1989 0-17802 II-H February 20, 1990 0-18305 -85- 4.2 The Agreements of Partnership for the following Production Partnerships have been previously filed with the Securities and Exchange Commission as Exhibit 2.2 to Form 8-A filed by the related Partnerships on the dates shown below and are hereby incorporated by reference. Partnership Filing Date ----------- ----------- II-A November 18, 1987 II-B November 19, 1987 II-C August 5, 1988 II-D August 5, 1988 II-E November 17, 1988 II-F June 5, 1989 II-G June 5, 1989 II-H February 20, 1990 4.3 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-A, filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.4 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-B, filed as Exhibit 4.2 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.5 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-C, filed as Exhibit 4.3 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.6 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-D, filed as Exhibit 4.4 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. -86- 4.7 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-E, filed as Exhibit 4.5 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.8 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-F, filed as Exhibit 4.6 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.9 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-G, filed as Exhibit 4.7 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.10 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-H, filed as Exhibit 4.8 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.11 Third Amendment to Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-E, filed as Exhibit 4.12 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 filed with the SEC on April 4, 1996 and is hereby incorporated by reference. 4.12 Third Amendment to Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-F, filed as Exhibit 4.13 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 filed with the SEC on April 4, 1996 and is hereby incorporated by reference. -87- 4.13 Third Amendment to Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-G, filed as Exhibit 4.14 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 filed with the SEC on April 4, 1996 and is hereby incorporated by reference. 4.14 Third Amendment to Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-H, filed as Exhibit 4.15 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 filed with the SEC on April 4, 1996 and is hereby incorporated by reference. * 23.1 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-A. * 23.2 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-B. * 23.3 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-C. * 23.4 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-D. * 23.5 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-E. * 23.6 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-F. * 23.7 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-G. * 23.8 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-H. * 27.1 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-A's financial statements as of December 31, 1998 and for the year ended December 31, 1998. -88- * 27.2 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-B's financial statements as of December 31, 1998 and for the year ended December 31, 1998. * 27.3 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-C's financial statements as of December 31, 1998 and for the year ended December 31, 1998. * 27.4 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-D's financial statements as of December 31, 1998 and for the year ended December 31, 1998. * 27.5 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-E's financial statements as of December 31, 1998 and for the year ended December 31, 1998. * 27.6 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-F's financial statements as of December 31, 1998 and for the year ended December 31, 1998. * 27.7 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-G's financial statements as of December 31, 1998 and for the year ended December 31, 1998. * 27.8 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-H's financial statements as of December 31, 1998 and for the year ended December 31, 1998. All other Exhibits are omitted as inapplicable. ---------- *Filed herewith. (b) Reports on Form 8-K filed during the fourth quarter of 1998: None. -89- 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. GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H By: GEODYNE RESOURCES, INC. General Partner February 23, 1999 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 February 23, 1999 ------------------- Director (Principal Dennis R. Neill Executive Officer) /s/Patrick M. Hall (Principal February 23, 1999 ------------------- Financial and Patrick M. Hall Accounting Officer) /s/Judy K. Fox Secretary February 23, 1999 ------------------- Judy K. Fox -90- ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A GEODYNE PRODUCTION PARTNERSHIP II-A In our opinion, the accompanying combined balance sheets and the related combined statements of operations, changes in partners' capital (deficit) and cash flows present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-A, an Oklahoma limited partnership, and Geodyne Production Partnership II-A, an Oklahoma general partnership, at December 31, 1998 and 1997, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnerships' 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 generally accepted auditing standards 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 the opinion expressed above. PricewaterhouseCoopers LLP Tulsa, Oklahoma January 29, 1999 F-1 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-A Combined Balance Sheets December 31, 1998 and 1997 ASSETS ------ 1998 1997 ----------- ---------- CURRENT ASSETS: Cash and cash equivalents $ 213,480 $ 830,584 Accounts receivable: Oil and gas sales 506,282 837,560 Other - 20,975 --------- --------- Total current assets $ 719,762 $1,689,119 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 4,109,296 4,894,853 DEFERRED CHARGE 701,486 911,041 --------- --------- $5,530,544 $7,495,013 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 171,762 $ 233,246 Gas imbalance payable 125,904 142,043 --------- --------- Total current liabilities $ 297,666 $ 375,289 ACCRUED LIABILITY $ 180,325 $ 157,050 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 417,336) ($ 387,587) Limited Partners, issued and outstanding, 484,283 Units 5,469,889 7,350,261 --------- --------- Total Partners' capital $5,052,553 $6,962,674 --------- --------- $5,530,544 $7,495,013 ========= ========= The accompanying notes are an integral part of these combined financial statements. F-2 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-A Combined Statements of Operations For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ---------- ---------- ---------- REVENUES: Oil and gas sales $3,911,823 $5,431,745 $5,832,874 Interest income 55,219 33,085 28,323 Gain on sale of oil and gas properties 685,375 176,789 96,827 Gas contract settlement income 1,710,190 - - Other income - 20,975 - --------- --------- --------- $6,362,607 $5,662,594 $5,958,024 COSTS AND EXPENSES: Lease operating $1,532,475 $1,538,814 $1,601,063 Production tax 240,522 349,607 339,977 Depreciation, depletion, and amortization of oil and gas properties 799,874 780,241 1,196,600 Impairment provision 164,111 684,276 - General and administrative 573,597 591,256 620,562 --------- --------- --------- $3,310,579 $3,944,194 $3,758,202 --------- --------- --------- NET INCOME $3,052,028 $1,718,400 $2,199,822 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 188,400 $ 141,030 $ 156,483 ========= ========= ========= LIMITED PARTNERS - NET INCOME $2,863,628 $1,577,370 $2,043,339 ========= ========= ========= NET INCOME per Unit $ 5.91 $ 3.26 $ 4.22 ========= ========= ========= UNITS OUTSTANDING 484,283 484,283 484,283 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-3 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-A Combined Statements of Changes in Partners' Capital (Deficit) For the Years Ended December 31, 1998, 1997, and 1996 Limited General Partners Partner Total ------------- ---------- ------------- Balance, Dec. 31, 1995 $ 9,494,552 ($311,994) $ 9,182,558 Net income 2,043,339 156,483 2,199,822 Cash distributions ( 2,600,000) ( 186,970) ( 2,786,970) ---------- ------- ---------- Balance, Dec. 31, 1996 $ 8,937,891 ($342,481) $ 8,595,410 Net income 1,577,370 141,030 1,718,400 Cash distributions ( 3,165,000) ( 186,136) ( 3,351,136) ---------- ------- ---------- Balance, Dec. 31, 1997 $ 7,350,261 ($387,587) $ 6,962,674 Net income 2,863,628 188,400 3,052,028 Cash distributions ( 4,744,000) ( 218,149) ( 4,962,149) ---------- ------- ---------- Balance, Dec. 31, 1998 $ 5,469,889 ($417,336) $ 5,052,553 ========== ======= ========== The accompanying notes are an integral part of these combined financial statements. F-4 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-A Combined Statements of Cash Flows For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $3,052,028 $1,718,400 $2,199,822 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 799,874 780,241 1,196,600 Impairment provision 164,111 684,276 - Gain on sale of oil and gas properties ( 685,375) ( 176,789) ( 96,827) (Increase) decrease in accounts receivable- oil and gas sales 331,278 235,899 ( 308,384) (Increase) decrease in accounts receivable - other 20,975 ( 20,975) - Decrease in deferred charge 209,555 37,176 221,060 Increase (decrease) in accounts payable ( 61,484) 20,445 ( 325) Increase (decrease) in gas imbalance payable ( 16,139) 40,550 ( 63,344) Increase (decrease) in accrued Liability 23,275 ( 1,633) ( 113,984) --------- --------- --------- Net cash provided by operating activities $3,838,098 $3,317,590 $3,034,618 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 280,907) ($ 237,163) ($ 98,540) Proceeds from sale of oil and gas properties 787,854 225,375 218,786 --------- --------- --------- Net cash provided (used) by investing activities $ 506,947 ($ 11,788) $ 120,246 --------- --------- --------- F-5 CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($4,962,149) ($3,351,136) ($2,786,970) --------- --------- --------- Net cash used by financing activities ($4,962,149) ($3,351,136) ($2,786,970) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($ 617,104) ($ 45,334) $ 367,894 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 830,584 875,918 508,024 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 213,480 $ 830,584 $ 875,918 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-6 REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B GEODYNE PRODUCTION PARTNERSHIP II-B In our opinion, the accompanying combined balance sheets and the related combined statements of operations, changes in partners' capital (deficit) and cash flows present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-B, an Oklahoma limited partnership, and Geodyne Production Partnership II-B, an Oklahoma general partnership, at December 31, 1998 and 1997, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnerships' 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 generally accepted auditing standards 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 the opinion expressed above. PricewaterhouseCoopers LLP Tulsa, Oklahoma January 29, 1999 F-7 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-B Combined Balance Sheets December 31, 1998 and 1997 ASSETS ------ 1998 1997 ----------- ------------ CURRENT ASSETS: Cash and cash equivalents $ 107,021 $ 644,574 Accounts receivable: Oil and gas sales 328,334 565,152 --------- --------- Total current assets $ 435,355 $1,209,726 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 2,569,828 3,035,158 DEFERRED CHARGE 179,833 169,811 --------- --------- $3,185,016 $4,414,695 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 77,383 $ 141,754 Gas imbalance payable 19,790 24,671 --------- --------- Total current liabilities $ 97,173 $ 166,425 ACCRUED LIABILITY $ 98,681 $ 88,519 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 320,234) ($ 305,223) Limited Partners, issued and outstanding, 361,719 Units 3,309,396 4,464,974 --------- --------- Total Partners' capital $2,989,162 $4,159,751 --------- --------- $3,185,016 $4,414,695 ========= ========= The accompanying notes are an integral part of these combined financial statements. F-8 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-B Combined Statements of Operations For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ---------- --------- ---------- REVENUES: Oil and gas sales $2,492,043 $3,816,269 $4,179,527 Interest income 50,430 19,644 16,689 Gain (loss) on sale of oil and gas properties 65,551 203,247 ( 28,890) Gas contract settlement income 2,793,295 - - --------- --------- --------- $5,401,319 $4,039,160 $4,167,326 COSTS AND EXPENSES: Lease operating $ 938,926 $1,062,972 $ 912,347 Production tax 153,573 251,478 252,366 Depreciation, depletion, and amortization of oil and gas properties 532,041 546,957 1,062,233 Impairment provision - 530,988 - General and administrative 430,272 451,569 496,791 --------- --------- --------- $2,054,812 $2,843,964 $2,723,737 --------- --------- --------- NET INCOME $3,346,507 $1,195,196 $1,443,589 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 186,085 $ 99,884 $ 113,834 ========= ========= ========= LIMITED PARTNERS - NET INCOME $3,160,422 $1,095,312 $1,329,755 ========= ========= ========= NET INCOME per Unit $ 8.74 $ 3.03 $ 3.68 ========= ========= ========= UNITS OUTSTANDING 361,719 361,719 361,719 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-9 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-B Combined Statements of Changes in Partners' Capital (Deficit) For the Years Ended December 31, 1998, 1997, and 1996 Limited General Partners Partner Total ------------- ---------- ------------ Balance, Dec. 31, 1995 $5,955,907 ($246,438) $5,709,469 Net income 1,329,755 113,834 1,443,589 Cash distributions ( 1,733,000) ( 132,579) ( 1,865,579) --------- ------- --------- Balance, Dec. 31, 1996 $5,552,662 ($265,183) $5,287,479 Net income 1,095,312 99,884 1,195,196 Cash distributions ( 2,183,000) ( 139,924) ( 2,322,924) --------- ------- --------- Balance, Dec. 31, 1997 $4,464,974 ($305,223) $4,159,751 Net income 3,160,422 186,085 3,346,507 Cash distributions ( 4,316,000) ( 201,096) ( 4,517,096) --------- ------- --------- Balance, Dec. 31, 1998 $3,309,396 ($320,234) $2,989,162 ========= ======= ========= The accompanying notes are an integral part of these combined financial statements. F-10 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-B Combined Statements of Cash Flows For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ----------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $3,346,507 $1,195,196 $1,443,589 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 532,041 546,957 1,062,233 Impairment provision - 530,988 - (Gain) loss on sale of oil and gas properties ( 65,551) ( 203,247) 28,890 (Increase) decrease in accounts receivable 236,818 145,056 ( 126,075) (Increase) decrease in deferred charge ( 10,022) ( 9,708) 66,200 Decrease in accounts payable ( 64,371) ( 47,491) ( 21,981) Increase (decrease) in gas imbalance payable ( 4,881) 7,616 2,007 Increase (decrease) in accrued liability 10,162 2,321 ( 215,486) --------- --------- --------- Net cash provided by operating activities $3,980,703 $2,167,688 $2,239,377 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 83,614) ($ 20,782) ($ 89,173) Proceeds from sale of oil and gas properties 82,454 251,335 116,393 --------- --------- --------- Net cash provided (used) by investing activities ($ 1,160) $ 230,553 $ 27,220 --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($4,517,096) ($2,322,924) ($1,865,579) --------- --------- --------- Net cash used by financing activities ($4,517,096) ($2,322,924) ($1,865,579) --------- --------- --------- F-11 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($ 537,553) $ 75,317 $ 401,018 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 644,574 569,257 168,239 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 107,021 $ 644,574 $ 569,257 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-12 REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C GEODYNE PRODUCTION PARTNERSHIP II-C In our opinion, the accompanying combined balance sheets and the related combined statements of operations, changes in partners' capital (deficit) and cash flows present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-C, an Oklahoma limited partnership, and Geodyne Production Partnership II-C, an Oklahoma general partnership, at December 31, 1998 and 1997, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnerships' 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 generally accepted auditing standards 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 the opinion expressed above. PricewaterhouseCoopers LLP Tulsa, Oklahoma January 29, 1999 F-13 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-C Combined Balance Sheets December 31, 1998 and 1997 ASSETS ------ 1998 1997 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 66,617 $ 358,095 Accounts receivable: Oil and gas sales 157,275 273,399 Other - 1,931 --------- --------- Total current assets $ 223,892 $ 633,425 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 1,382,430 1,667,269 DEFERRED CHARGE 153,412 139,621 --------- --------- $1,759,734 $2,440,315 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 29,848 $ 33,293 Gas imbalance payable 38,249 22,563 --------- --------- Total current liabilities $ 68,097 $ 55,856 ACCRUED LIABILITY $ 59,308 $ 49,647 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 133,264) ($ 123,277) Limited Partners, issued and outstanding, 154,621 Units 1,765,593 2,458,089 --------- --------- Total Partners' capital $1,632,329 $2,334,812 --------- --------- $1,759,734 $2,440,315 ========= ========= The accompanying notes are an integral part of these combined financial statements. F-14 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-C Combined Statements of Operations For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ---------- ---------- ----------- REVENUES: Oil and gas sales $1,136,474 $1,796,657 $1,925,940 Interest income 25,163 11,360 8,460 Gain on sale of oil and gas properties 177,795 156,919 42,354 Gas contract settlement income 1,197,148 - - Other income - 1,931 - --------- --------- --------- $2,536,580 $1,966,867 $1,976,754 COSTS AND EXPENSES: Lease operating $ 351,162 $ 397,402 $ 477,750 Production tax 75,947 130,419 125,174 Depreciation, depletion, and amortization of oil and gas properties 246,338 268,219 397,849 Impairment provision - 66,617 - General and administrative 184,538 193,799 214,421 --------- --------- --------- $ 857,985 $1,056,456 $1,215,194 --------- --------- --------- NET INCOME $1,678,595 $ 910,411 $ 761,560 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 95,091 $ 57,028 $ 53,569 ========= ========= ========= LIMITED PARTNERS - NET INCOME $1,583,504 $ 853,383 $ 707,991 ========= ========= ========= NET INCOME per Unit $ 10.24 $ 5.52 $ 4.58 ========= ========= ========= UNITS OUTSTANDING 154,621 154,621 154,621 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-15 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-C Combined Statements of Changes in Partners' Capital (Deficit) For the Years Ended December 31, 1998, 1997, and 1996 Limited General Partners Partner Total ------------ ---------- ------------ Balance, Dec. 31, 1995 $3,039,715 ($ 99,615) $2,940,100 Net income 707,991 53,569 761,560 Cash distributions ( 840,000) ( 69,573) ( 909,573) --------- ------- --------- Balance, Dec. 31, 1996 $2,907,706 ($115,619) $2,792,087 Net income 853,383 57,028 910,411 Cash distributions ( 1,303,000) ( 64,686) ( 1,367,686) --------- ------- --------- Balance, Dec. 31, 1997 $2,458,089 ($123,277) $2,334,812 Net income 1,583,504 95,091 1,678,595 Cash distributions ( 2,276,000) ($105,078) ($2,381,078) --------- ------- --------- Balance, Dec. 31, 1998 $1,765,593 ($133,264) $1,632,329 ========= ======= ========= The accompanying notes are an integral part of these combined financial statements. F-16 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-C Combined Statements of Cash Flows For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ------------ ------------ ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,678,595 $ 910,411 $ 761,560 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 246,338 268,219 397,849 Impairment provision - 66,617 - Gain on sale of oil and gas properties ( 177,795) ( 156,919) ( 42,354) (Increase) decrease in accounts receivable - oil and gas sales 116,124 66,783 ( 48,817) (Increase) decrease in accounts receivable - other 1,931 ( 1,931) - (Increase) decrease in deferred charge ( 13,791) 25,332 94,988 Increase (decrease) in accounts payable ( 3,445) ( 36,434) 2,434 Increase (decrease) in gas imbalance payable 15,686 12,177 ( 49,506) Increase (decrease) in accrued liability 9,661 ( 19,501) ( 69,510) --------- --------- --------- Net cash provided by operating activities $1,873,304 $1,134,754 $1,046,644 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 34,333) ($ 5,112) ($ 5,076) Proceeds from sale of oil and gas properties 250,629 208,805 172,986 --------- --------- --------- Net cash provided by investing activities $ 216,296 $ 203,693 $ 167,910 --------- --------- --------- F-17 CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($2,381,078) ($1,367,686) ($ 909,573) --------- --------- --------- Net cash used by financing activities ($2,381,078) ($1,367,686) ($ 909,573) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($ 291,478) ($ 29,239) $ 304,981 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 358,095 387,334 82,353 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 66,617 $ 358,095 $ 387,334 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-18 REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D GEODYNE PRODUCTION PARTNERSHIP II-D In our opinion, the accompanying combined balance sheets and the related combined statements of operations, changes in partners' capital (deficit) and cash flows present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-D, an Oklahoma limited partnership, and Geodyne Production Partnership II-D, an Oklahoma general partnership, at December 31, 1998 and 1997, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnerships' 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 generally accepted auditing standards 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 the opinion expressed above. PricewaterhouseCoopers LLP Tulsa, Oklahoma January 29, 1999 F-19 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-D Combined Balance Sheets December 31, 1998 and 1997 ASSETS ------ 1998 1997 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 311,556 $1,151,142 Accounts receivable: Oil and gas sales 342,433 646,750 Other - 20,267 --------- --------- Total current assets $ 653,989 $1,818,159 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 2,726,713 3,417,760 DEFERRED CHARGE 614,207 544,345 --------- --------- $3,994,909 $5,780,264 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 67,934 $ 86,058 Gas imbalance payable 149,648 107,004 --------- --------- Total current liabilities $ 217,582 $ 193,062 ACCRUED LIABILITY $ 206,215 $ 239,083 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 247,182) ($ 224,003) Limited Partners, issued and outstanding, 314,878 Units 3,818,294 5,572,122 --------- --------- Total Partners' capital $3,571,112 $5,348,119 --------- --------- $3,994,909 $5,780,264 ========= ========= The accompanying notes are an integral part of these combined financial statements. F-20 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-D Combined Statements of Operations For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ------------ ------------ ----------- REVENUES: Oil and gas sales $2,411,051 $4,314,154 $4,329,102 Interest income 66,699 28,919 16,083 Gain on sale of oil and gas properties 496,238 447,981 80,630 Gas contract settlement income 3,033,646 - - Other - 20,267 - --------- --------- --------- $6,007,634 $4,811,321 $4,425,815 COSTS AND EXPENSES: Lease operating $ 777,607 $1,331,185 $1,492,375 Production tax 168,364 325,902 308,524 Depreciation, depletion, and amortization of oil and gas properties 518,991 689,112 800,433 Impairment provision - 143,957 - General and administrative 374,675 397,583 453,882 --------- --------- --------- $1,839,637 $2,887,739 $3,055,214 --------- --------- --------- NET INCOME $4,167,997 $1,923,582 $1,370,601 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 225,825 $ 127,204 $ 99,743 ========= ========= ========= LIMITED PARTNERS - NET INCOME $3,942,172 $1,796,378 $1,270,858 ========= ========= ========= NET INCOME per Unit $ 12.52 $ 5.70 $ 4.04 ========= ========= ========= UNITS OUTSTANDING 314,878 314,878 314,878 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-21 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-D Combined Statements of Changes in Partners' Capital (Deficit) For the Years Ended December 31, 1998, 1997, and 1996 Limited General Partners Partner Total ------------ ---------- ------------ Balance, Dec. 31, 1995 $6,884,886 ($143,473) $6,741,413 Net income 1,270,858 99,743 1,370,601 Cash distributions ( 1,528,000) ( 175,226) ( 1,703,226) --------- ------- --------- Balance, Dec. 31, 1996 $6,627,744 ($218,956) $6,408,788 Net income 1,796,378 127,204 1,923,582 Cash distributions ( 2,852,000) ( 132,251) ( 2,984,251) --------- ------- --------- Balance, Dec. 31, 1997 $5,572,122 ($224,003) $5,348,119 Net income 3,942,172 225,825 4,167,997 Cash distributions ( 5,696,000) ( 249,004) ( 5,945,004) --------- ------- --------- Balance, Dec. 31, 1998 $3,818,294 ($247,182) $3,571,112 ========= ======= ========= The accompanying notes are an integral part of these combined financial statements. F-22 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-D Combined Statements of Cash Flows For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $4,167,997 $1,923,582 $1,370,601 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 518,991 689,112 800,433 Impairment provision - 143,957 - Gain on sale of oil and gas properties ( 496,238) ( 447,981) ( 80,630) (Increase) decrease in accounts receivable - oil and gas sales 304,317 146,433 ( 162,813) (Increase) decrease in accounts receivable - other 20,267 ( 20,267) - (Increase) decrease in deferred Charge ( 69,862) 318,794 86,088 Increase (decrease) in accounts payable ( 18,124) ( 73,909) 13,159 Increase (decrease) in gas imbalance payable 42,644 ( 11,309) 790 Decrease in accrued liability ( 32,868) ( 27,699) ( 18,638) --------- --------- --------- Net cash provided by operating activities $4,437,124 $2,640,713 $2,008,990 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 1,639) ($ 41,889) ($ 22,210) Proceeds from sale of oil and gas properties 669,933 629,832 305,815 --------- --------- --------- Net cash provided by investing activities $ 668,294 $ 587,943 $ 283,605 --------- --------- --------- F-23 CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($5,945,004) ($2,984,251) ($1,703,226) --------- --------- --------- Net cash used by financing activities ($5,945,004) ($2,984,251) ($1,703,226) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($ 839,586) $ 244,405 $ 589,369 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,151,142 906,737 317,368 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 311,556 $1,151,142 $ 906,737 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-24 REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E GEODYNE PRODUCTION PARTNERSHIP II-E In our opinion, the accompanying combined balance sheets and the related combined statements of operations, changes in partners' capital (deficit) and cash flows present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-E, an Oklahoma limited partnership, and Geodyne Production Partnership II-E, an Oklahoma general partnership, at December 31, 1998 and 1997, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnerships' 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 generally accepted auditing standards 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 the opinion expressed above. PricewaterhouseCoopers LLP Tulsa, Oklahoma January 29, 1999 F-25 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-E Combined Balance Sheets December 31, 1998 and 1997 ASSETS ------ 1998 1997 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 376,779 $ 670,777 Accounts receivable: Oil and gas sales 220,028 415,377 Other - 110 --------- --------- Total current assets $ 596,807 $1,086,264 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 2,388,613 2,841,080 DEFERRED CHARGE 275,532 330,531 --------- --------- $3,260,952 $4,257,875 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 38,881 $ 100,603 Gas imbalance payable 148,458 171,089 --------- --------- Total current liabilities $ 187,339 $ 271,692 ACCRUED LIABILITY $ 81,050 $ 63,625 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 173,306) ($ 172,017) Limited Partners, issued and outstanding, 228,821 Units 3,165,869 4,094,575 --------- --------- Total Partners' capital $2,992,563 $3,922,558 --------- --------- $3,260,952 $4,257,875 ========= ========= The accompanying notes are an integral part of these combined financial statements. F-26 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-E Combined Statements of Operations For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ------------ ------------ ----------- REVENUES: Oil and gas sales $1,704,463 $2,616,003 $2,693,317 Interest income 99,814 21,722 10,863 Gain on sale of oil and gas properties 328,245 272,654 117,078 Gas contract settlement income 6,159,355 - - --------- --------- --------- $8,291,877 $2,910,379 $2,821,258 COSTS AND EXPENSES: Lease operating $ 550,014 $ 700,409 $ 710,012 Production tax 122,476 208,912 203,065 Depreciation, depletion, and amortization of oil and gas properties 544,040 626,965 728,518 Impairment provision - 992,851 - General and administrative 276,331 314,835 417,205 --------- --------- --------- $1,492,861 $2,843,972 $2,058,800 --------- --------- --------- NET INCOME $6,799,016 $ 66,407 $ 762,458 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 356,722 $ 66,976 $ 66,720 ========= ========= ========= LIMITED PARTNERS - NET INCOME (LOSS) $6,442,294 ($ 569) $ 695,738 ========= ========= ========= NET INCOME per Unit $ 28.15 $ .00 $ 3.04 ========= ========= ========= UNITS OUTSTANDING 228,821 228,821 228,821 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-27 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-E Combined Statements of Changes in Partners' Capital (Deficit) For the Years Ended December 31, 1998, 1997, and 1996 Limited General Partners Partner Total ------------- ---------- ------------- Balance, Dec. 31, 1995 $6,093,406 ($122,950) $5,970,456 Net income 695,738 66,720 762,458 Cash distributions ( 1,019,000) ( 91,365) ( 1,110,365) --------- ------- --------- Balance, Dec. 31, 1996 $5,770,144 ($147,595) $5,622,549 Net income ( 569) 66,976 66,407 Cash distributions ( 1,675,000) ( 91,398) ( 1,766,398) --------- ------- --------- Balance, Dec. 31, 1997 $4,094,575 ($172,017) $3,922,558 Net income 6,442,294 356,722 6,799,016 Cash distributions ( 7,371,000) ( 358,011) ( 7,729,011) --------- ------- --------- Balance, Dec. 31, 1998 $3,165,869 ($173,306) $2,992,563 ========= ======= ========= The accompanying notes are an integral part of these combined financial statements. F-28 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-E Combined Statements of Cash Flows For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $6,799,016 $ 66,407 $ 762,458 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 544,040 626,965 728,518 Impairment provision - 992,851 - Gain on sale of oil and gas properties ( 328,245) ( 272,654) ( 117,078) (Increase) decrease in accounts receivable - oil and gas sales 195,349 97,196 ( 102,943) (Increase) decrease in accounts receivable - other 110 ( 110) - Decrease in deferred charge 54,999 25,116 19,098 Increase (decrease) in accounts payable ( 61,722) ( 32,578) 42,789 Increase (decrease) in gas imbalance payable ( 22,631) 9,908 76,916 Increase (decrease) in accrued liability 17,425 4,391 ( 75,049) --------- --------- --------- Net cash provided by operating activities $7,198,341 $1,517,492 $1,334,709 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 120,953) ($ 40,623) ($ 70,806) Proceeds from sale of oil and gas properties 357,625 431,541 174,185 --------- --------- --------- Net cash provided by investing activities $ 236,672 $ 390,918 $ 103,379 --------- --------- --------- F-29 CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($7,729,011) ($1,766,398) ($1,110,365) --------- --------- --------- Net cash used by financing activities ($7,729,011) ($1,766,398) ($1,110,365) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($ 293,998) $ 142,012 $ 327,723 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 670,777 528,765 201,042 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 376,779 $ 670,777 $ 528,765 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-30 REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F GEODYNE PRODUCTION PARTNERSHIP II-F In our opinion, the accompanying combined balance sheets and the related combined statements of operations, changes in partners' capital (deficit) and cash flows present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-F, an Oklahoma limited partnership, and Geodyne Production Partnership II-F, an Oklahoma general partnership, at December 31, 1998 and 1997, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnerships' 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 generally accepted auditing standards 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 the opinion expressed above. PricewaterhouseCoopers LLP Tulsa, Oklahoma January 29, 1999 F-31 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-F Combined Balance Sheets December 31, 1998 and 1997 ASSETS ------ 1998 1997 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 153,240 $ 741,852 Accounts receivable: Oil and gas sales 187,525 334,094 Other - 43 --------- --------- Total current assets $ 340,765 $1,075,989 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 2,086,592 2,432,033 DEFERRED CHARGE 46,373 56,867 --------- --------- $2,473,730 $3,564,889 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 24,007 $ 64,348 Gas imbalance payable 4,233 25,184 --------- --------- Total current liabilities $ 28,240 $ 89,532 ACCRUED LIABILITY $ 24,995 $ 27,907 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 144,763) ($ 143,355) Limited Partners, issued and outstanding, 171,400 Units 2,565,258 3,590,805 --------- --------- Total Partners' capital $2,420,495 $3,447,450 --------- --------- $2,473,730 $3,564,889 ========= ========= The accompanying notes are an integral part of these combined financial statements. F-32 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-F Combined Statements of Operations For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ------------ ---------- ----------- REVENUES: Oil and gas sales $1,444,802 $2,191,389 $2,433,313 Interest income 18,145 17,447 14,218 Gain on sale of oil and gas properties 657,881 557,746 122,579 --------- --------- --------- $2,120,828 $2,766,582 $2,570,110 COSTS AND EXPENSES: Lease operating $ 301,416 $ 396,093 $ 485,892 Production tax 96,998 150,372 158,092 Depreciation, depletion, and amortization of oil and gas properties 360,697 409,001 531,040 Impairment provision - 1,377,160 - General and administrative 201,745 204,398 206,749 --------- --------- --------- $ 960,856 $2,537,024 $1,381,773 --------- --------- --------- NET INCOME $1,159,972 $ 229,558 $1,188,337 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 71,519 $ 81,927 $ 79,948 ========= ========= ========= LIMITED PARTNERS - NET INCOME $1,088,453 $ 147,631 $1,108,389 ========= ========= ========= NET INCOME per Unit $ 6.35 $ .86 $ 6.47 ========= ========= ========= UNITS OUTSTANDING 171,400 171,400 171,400 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-33 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-F Combined Statements of Changes in Partners' Capital (Deficit) For the Years Ended December 31, 1998, 1997, and 1996 Limited General Partners Partner Total ------------ --------- ------------ Balance, Dec. 31, 1995 $5,691,785 ($ 84,377) $5,607,408 Net income 1,108,389 79,948 1,188,337 Cash distributions ( 1,485,000) ( 101,485) ( 1,586,485) --------- ------- --------- Balance, Dec. 31, 1996 $5,315,174 ($105,914) $5,209,260 Net income 147,631 81,927 229,558 Cash distributions ( 1,872,000) ( 119,368) ( 1,991,368) --------- ------- --------- Balance, Dec. 31, 1997 $3,590,805 ($143,355) $3,447,450 Net income 1,088,453 71,519 1,159,972 Cash distributions ( 2,114,000) ( 72,927) ( 2,186,927) --------- ------- --------- Balance, Dec. 31, 1998 $2,565,258 ($144,763) $2,420,495 ========= ======= ========= The accompanying notes are an integral part of these combined financial statements. F-34 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-F Combined Statements of Cash Flows For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,159,972 $ 229,558 $1,188,337 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 360,697 409,001 531,040 Impairment provision - 1,377,160 - Gain on sale of oil and gas properties ( 657,881) ( 557,746) ( 122,579) (Increase) decrease in accounts receivable - oil and gas sales 146,569 95,745 ( 77,366) (Increase) decrease in accounts receivable - general partner - 15,285 ( 15,285) (Increase) decrease in accounts receivable - other 43 ( 43) - Decrease in deferred charge 10,494 14,836 47,412 Increase (decrease) in accounts payable ( 40,341) 21,430 ( 36,430) Increase (decrease) in gas imbalance payable ( 20,951) ( 6,393) 8,204 Increase (decrease) in accrued liability ( 2,912) ( 415) 4,992 --------- --------- --------- Net cash provided by operating activities $ 955,690 $1,598,418 $1,528,325 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 75,167) ($ 65,635) ($ 11,332) Proceeds from sale of oil and gas properties 717,792 758,534 185,579 --------- --------- --------- Net cash provided by investing activities $ 642,625 $ 692,899 $ 174,247 --------- --------- --------- F-35 CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($2,186,927) ($1,991,368) ($1,586,485) --------- --------- --------- Net cash used by financing activities ($2,186,927) ($1,991,368) ($1,586,485) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($ 588,612) $ 299,949 $ 116,087 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 741,852 441,903 325,816 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 153,240 $ 741,852 $ 441,903 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-36 REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G GEODYNE PRODUCTION PARTNERSHIP II-G In our opinion, the accompanying combined balance sheets and the related combined statements of operations, changes in partners' capital (deficit) and cash flows present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-G, an Oklahoma limited partnership, and Geodyne Production Partnership II-G, an Oklahoma general partnership, at December 31, 1998 and 1997, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnerships' 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 generally accepted auditing standards 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 the opinion expressed above. PricewaterhouseCoopers LLP Tulsa, Oklahoma January 29, 1999 F-37 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-G Combined Balance Sheets December 31, 1998 and 1997 ASSETS ------ 1998 1997 ------------ ------------- CURRENT ASSETS: Cash and cash equivalents $ 333,168 $1,564,325 Accounts receivable: Oil and gas sales 398,538 710,336 --------- --------- Total current assets $ 731,706 $2,274,661 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 4,492,141 5,237,082 DEFERRED CHARGE 101,955 123,977 --------- --------- $5,325,802 $7,635,720 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 51,385 $ 135,761 Gas imbalance payable 9,029 57,250 --------- --------- Total current liabilities $ 60,414 $ 193,011 ACCRUED LIABILITY $ 57,830 $ 64,109 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 304,885) ($ 312,392) Limited Partners, issued and outstanding, 372,189 Units 5,512,443 7,690,992 --------- --------- Total Partners' capital $5,207,558 $7,378,600 --------- --------- $5,325,802 $7,635,720 ========= ========= The accompanying notes are an integral part of these combined financial statements. F-38 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-G Combined Statements of Operations For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ---------- ---------- ---------- REVENUES: Oil and gas sales $3,072,455 $4,670,245 $5,158,799 Interest income 38,524 37,746 29,659 Gain on sale of oil and gas properties 1,374,966 1,226,822 225,341 --------- --------- --------- $4,485,945 $5,934,813 $5,413,799 COSTS AND EXPENSES: Lease operating $ 643,300 $ 859,059 $1,048,439 Production tax 209,399 326,663 337,815 Depreciation, depletion, and amortization of oil and gas properties 778,782 916,396 1,163,236 Impairment provision - 3,101,656 - General and administrative 437,963 443,590 448,345 --------- --------- --------- $2,069,444 $5,647,364 $2,997,835 --------- --------- --------- NET INCOME $2,416,501 $ 287,449 $2,415,964 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 150,050 $ 172,947 $ 165,845 ========= ========= ========= LIMITED PARTNERS - NET INCOME $2,266,451 $ 114,502 $2,250,119 ========= ========= ========= NET INCOME per Unit $ 6.09 $ .31 $ 6.05 ========= ========= ========= UNITS OUTSTANDING 372,189 372,189 372,189 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-39 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-G Combined Statements of Changes in Partners' Capital (Deficit) For the Years Ended December 31, 1998, 1997, and 1996 Limited General Partners Partner Total ------------ ---------- ------------- Balance, Dec. 31, 1995 $12,439,371 ($197,620) $12,241,751 Net income 2,250,119 165,845 2,415,964 Cash distributions ( 3,091,000) ( 212,537) ( 3,303,537) ---------- ------- ---------- Balance, Dec. 31, 1996 $11,598,490 ($244,312) $11,354,178 Net income 114,502 172,947 287,449 Cash distributions ( 4,022,000) ( 241,027) ( 4,263,027) ---------- ------- ---------- Balance, Dec. 31, 1997 $ 7,690,992 ($312,392) $ 7,378,600 Net income 2,266,451 150,050 2,416,501 Cash distributions ( 4,445,000) ( 142,543) ( 4,587,543) ---------- ------- ---------- Balance, Dec. 31, 1998 $ 5,512,443 ($304,885) ($ 5,207,558) ========== ======= ========== The accompanying notes are an integral part of these combined financial statements. F-40 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-G Combined Statements of Cash Flows For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $2,416,501 $ 287,449 $2,415,964 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 778,782 916,396 1,163,236 Impairment provision - 3,101,656 - Gain on sale of oil and gas properties ( 1,374,966) ( 1,226,822) ( 225,341) (Increase) decrease in accounts receivable - general partner - 34,620 ( 34,620) (Increase) decrease in accounts receivable - oil and gas sales 311,798 201,103 ( 162,982) Decrease in deferred charge 22,022 31,741 101,656 Increase (decrease) in accounts payable ( 84,376) 42,114 ( 82,448) Increase (decrease) in gas imbalance payable ( 48,221) ( 14,745) 21,494 Increase (decrease) in accrued liability ( 6,279) 7,197 6,110 --------- --------- --------- Net cash provided by operating activities $2,015,261 $3,380,709 $3,203,069 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 162,692) ($ 143,657) ($ 27,441) Proceeds from sale of oil and gas properties 1,503,817 1,658,135 398,153 --------- --------- --------- Net cash provided by investing activities $1,341,125 $1,514,478 $ 370,712 --------- --------- --------- F-41 CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($4,587,543) ($4,263,027) ($3,303,537) --------- --------- --------- Net cash used by financing activities ($4,587,543) ($4,263,027) ($3,303,537) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($1,231,157) $ 632,160 $ 270,244 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,564,325 932,165 661,921 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 333,168 $1,564,325 $ 932,165 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-42 REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H GEODYNE PRODUCTION PARTNERSHIP II-H In our opinion, the accompanying combined balance sheets and the related combined statements of operations, changes in partners' capital (deficit) and cash flows present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-H, an Oklahoma limited partnership, and Geodyne Production Partnership II-H, an Oklahoma general partnership, at December 31, 1998 and 1997, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnerships' 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 generally accepted auditing standards 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 the opinion expressed above. PricewaterhouseCoopers LLP Tulsa, Oklahoma January 29, 1999 F-43 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-H Combined Balance Sheets December 31, 1998 and 1997 ASSETS ------ 1998 1997 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 78,275 $ 364,502 Accounts receivable: Oil and gas sales 95,260 168,833 --------- --------- Total current assets $ 173,535 $ 533,335 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 1,057,945 1,225,295 DEFERRED CHARGE 23,749 29,519 --------- --------- $1,255,229 $1,788,149 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 12,408 $ 31,925 Gas imbalance payable - 13,149 --------- --------- Total current liabilities $ 12,408 $ 45,074 ACCRUED LIABILITY $ 12,063 $ 14,648 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 75,631) ($ 78,796) Limited Partners, issued and outstanding, 91,711 Units 1,306,389 1,807,223 --------- --------- Total Partners' capital $1,230,758 $1,728,427 --------- --------- $1,255,229 $1,788,149 ========= ========= The accompanying notes are an integral part of these combined financial statements. F-44 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-H Combined Statements of Operations For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ---------- ------------ ------------ REVENUES: Oil and gas sales $ 733,613 $1,119,734 $1,230,222 Interest income 8,669 8,764 6,728 Gain on sale of oil and gas properties 317,342 286,788 51,909 --------- --------- --------- $1,059,624 $1,415,286 $1,288,859 COSTS AND EXPENSES: Lease operating $ 154,123 $ 209,123 $ 257,850 Production tax 51,340 80,919 81,540 Depreciation, depletion, and amortization of oil and gas properties 178,994 202,115 280,796 Impairment provision - 785,220 - General and administrative 107,912 109,301 110,738 --------- --------- --------- $ 492,369 $1,386,678 $ 730,924 --------- --------- --------- NET INCOME $ 567,255 $ 28,608 $ 557,935 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 35,089 $ 40,425 $ 38,792 ========= ========= ========= LIMITED PARTNERS - NET INCOME (LOSS) $ 532,166 ($ 11,817) $ 519,143 ========= ========= ========= NET INCOME (LOSS) per Unit $ 5.80 ($ .13) $ 5.66 ========= ========= ========= UNITS OUTSTANDING 91,711 91,711 91,711 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-45 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-H Combined Statements of Changes in Partners' Capital (Deficit) For the Years Ended December 31, 1998, 1997, and 1996 Limited General Partners Partner Total ------------ --------- ------------ Balance, Dec. 31, 1995 $3,002,897 ($47,635) $2,955,262 Net income 519,143 38,792 557,935 Cash distributions ( 727,000) ( 49,992) ( 776,992) --------- ------ --------- Balance, Dec. 31, 1996 $2,795,040 ($58,835) $2,736,205 Net income (loss) ( 11,817) 40,425 28,608 Cash distributions ( 976,000) ( 60,386) ( 1,036,386) --------- ------ --------- Balance, Dec. 31, 1997 $1,807,223 ($78,796) $1,728,427 Net income 532,166 35,089 567,255 Cash distributions ( 1,033,000) ( 31,924) ( 1,064,924) --------- ------ --------- Balance, Dec. 31, 1998 $1,306,389 ($75,631) $1,230,758 ========= ====== ========= The accompanying notes are an integral part of these combined financial statements. F-46 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-H Combined Statements of Cash Flows For the Years Ended December 31, 1998, 1997, and 1996 1998 1997 1996 ------------ ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $567,255 $ 28,608 $557,935 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 178,994 202,115 280,796 Impairment provision - 785,220 - Gain on sale of oil and gas properties ( 317,342) ( 286,788) ( 51,909) (Increase) decrease in accounts receivable - oil and gas sales 73,573 47,741 ( 37,069) (Increase) decrease in accounts receivable - general partner - 9,151 ( 9,151) Decrease in deferred charge 5,770 8,703 23,840 Increase (decrease) in accounts payable ( 19,517) 8,571 ( 22,050) Increase (decrease) in gas imbalance payable ( 13,149) ( 3,398) 5,336 Increase (decrease) in accrued liability ( 2,585) 509 1,360 ------- ------- ------- Net cash provided by operating activities $472,999 $800,432 $749,088 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ($ 40,018) ($ 35,978) ($ 6,306) Proceeds from sale of oil and gas properties 345,716 414,950 96,882 ------- ------- ------ Net cash provided by investing activities $305,698 $378,972 $ 90,576 ------- ------- ------ F-47 CASH FLOWS FROM FINANCING ACTIVITIES Cash distributions ($1,064,924) ($1,036,386) ($776,992) --------- --------- ------- Net cash used by financing activities ($1,064,924) ($1,036,386) ($776,992) --------- --------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($ 286,227) $ 143,018 $ 62,672 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 364,502 $ 221,484 158,812 --------- --------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 78,275 $ 364,502 $221,484 ========= ========= ======= The accompanying notes are an integral part of these combined financial statements. F-48 GEODYNE ENERGY INCOME PROGRAM II Notes to Combined Financial Statements For the Years Ended December 31, 1998, 1997, and 1996 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations The Geodyne Energy Income Limited Partnerships (the "Partnerships") were formed pursuant to a public offering of depositary units ("Units"). Upon formation, investors became limited partners (the "Limited Partners") and held Units issued by each Partnership. Geodyne Resources, Inc. is the general partner of each Partnership. Each Partnership is a general partner in the related Geodyne Production Partnership (the "Production Partnership") in which Geodyne Resources, Inc. serves as the managing partner. Limited Partner capital contributions were contributed to the related Production Partnerships for investment in producing oil and gas properties. The Partnerships were activated on the following dates with the following Limited Partner capital contributions. Limited Date of Partner Capital Partnership Activation Contributions ----------- ------------------ --------------- II-A July 22, 1987 $48,428,300 II-B October 14,1987 36,171,900 II-C January 14, 1988 15,462,100 II-D May 10, 1988 31,487,800 II-E September 27, 1988 22,882,100 II-F January 5, 1989 17,140,000 II-G April 10, 1989 37,218,900 II-H May 17, 1989 9,171,100 The Partnerships will terminate on December 31, 2001 in accordance with the partnership agreements for the Partnerships. However, such partnership agreements provide that the General Partner may extend the term of each Partnership for up to five periods of two years each. As of the date of these financial statements, the General Partner has not determined whether to extend the term of any Partnership. For purposes of these financial statements, the Partnerships and Production Partnerships are collectively referred to as the "Partnerships" and the general partner and managing partner are collectively referred to as the "General Partner". An affiliate of the General Partner owned the following Units at December 31, 1998: F-49 Number of Percent of Partnership Units Owned Outstanding Units ----------- ----------- ----------------- II-A 73,819 15.2% II-B 58,211 16.1% II-C 33,567 21.7% II-D 42,319 13.4% II-E 39,764 17.4% II-F 24,863 14.5% II-G 41,224 11.1% II-H 14,059 15.3% The Partnerships' sole business is the development and production of oil and gas. Substantially all of the Partnerships' gas reserves are being sold regionally on the "spot market." Due to the highly competitive nature of the spot market, prices on the spot market are subject to wide seasonal and regional pricing fluctuations. In addition, such spot market sales are generally short-term in nature and are dependent upon the obtaining of transportation services provided by pipelines. The Partnerships' oil is sold at or near the Partnerships' wells under short-term purchase contracts at prevailing arrangements which are customary in the oil industry. The prices received for the Partnerships' oil and gas are subject to influences such as global consumption and supply trends. In 1998, the price of oil decreased to historically low levels. If the price of oil remains low, or if it decreases further, there may be a significant impact on the Partnerships' near term results of operations and cash flows. Allocation of Costs and Revenues The combination of the allocation provisions in each Partnership's limited partnership agreement and each Production Partnership's partnership agreement (collectively, the "Partnership Agreement") results in allocations of costs and income between the Limited Partners and General Partner as follows: Before Payout(1) After Payout(1) ------------------ ------------------ General Limited General Limited Partner Partners Partner Partners -------- -------- -------- -------- Costs(2) - ------------------------ Sales commissions, pay- ment for organization and offering costs and management fee 1% 99% - - Property acquisition costs 1% 99% 1% 99% F-50 Identified development drilling 1% 99% 1% 99% Development drilling(3) 5% 95% 15% 85% General and administra- tive costs, direct administrative costs and operating costs(3) 5% 95% 15% 85% Income(2) - ----------------------- Temporary investments of Limited Partners' subscriptions 1% 99% 1% 99% Income from oil and gas production(3) 5% 95% 15% 85% Gain on sale of produc- ing properties(3) 5% 95% 15% 85% All other income(3) 5% 95% 15% 85% - ---------- (1) Payout occurs when total distributions to Limited Partners equal total original Limited Partner subscriptions. (2) The allocations in the table result generally from the combined effect of the allocation provisions in the Partnership Agreements. For example, the costs incurred in development drilling are allocated 95.9596% to the limited partnership and 4.0404% to the managing partner. The 95.9596% portion of these costs allocated to the limited partnership, when passed through the limited partnership, is further allocated 99% to the limited partners and 1% to the general partner. In this manner the Limited Partners are allocated 95% of such costs and the General Partner is allocated 5% of such costs. (3) If at payout, the Limited Partners have received distributions at an annual rate less than 12% of their subscriptions, the percentage of income and costs allocated to the general partner and managing partner will increase to only 10% and the percentage allocated to the Limited Partners will decrease to only 90%. Thereafter, if the distribution to Limited Partners reaches an average annual rate of 12% the allocation will change to 15% to the general partner and managing partner and 85% to the Limited Partners. The II-C Partnership achieved payout during the fourth quarter of 1998 and the II-F Partnership achieved payout in the first quarter of 1999. After payout, operations and revenues for the II-C and II-F Partnerships have been and will be allocated using the 10%/90% after payout percentages as described in Footnote 3 to the table above. F-51 Basis of Presentation These financial statements reflect the combined accounts of each Partnership after the elimination of all inter-partnership transactions and balances. Cash and Cash Equivalents The Partnerships consider 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 Partnerships to be subject to risk. Credit Risks Accrued oil and gas sales which are due from a variety of oil and gas purchasers subject the Partnerships to a concentration of credit risk. Some of these purchasers are discussed in Note 3 - Major Customers. Oil and Gas Properties The Partnerships follow the successful efforts method of accounting for their oil and gas properties. Under the successful efforts method, the Partnerships capitalize all property acquisition costs and development costs incurred in connection with the further development of oil and gas reserves. Property acquisition costs include costs incurred by the Partnerships or the General Partner to acquire producing properties, including related title insurance or examination costs, commissions, engineering, legal and accounting fees, and similar costs directly related to the acquisitions, plus an allocated portion of the General Partners' property screening costs. The acquisition cost to the Partnership of properties acquired by the General Partner is adjusted to reflect the net cash results of operations, including interest incurred to finance the acquisition, for the period of time the properties are held by the General Partner. Leasehold impairment for unproved properties is based upon an individual property assessment and exploratory experience. Upon discovery of commercial reserves, leasehold costs are transferred to producing properties. F-52 Depletion of the cost of producing oil and gas properties, amortization of related intangible drilling and development costs, and depreciation of tangible lease and well equipment are computed on the units-of-production method. The Partnerships' calculation of depreciation, depletion, and amortization includes estimated dismantlement and abandonment costs, net of estimated salvage values. The depreciation, depletion, and amortization rates per equivalent barrel of oil produced during the years ended December 31, 1998, 1997, and 1996 were as follows: Partnership 1998 1997 1996 ----------- ----- ----- ----- II-A $2.46 $2.19 $3.05 II-B 2.61 2.26 3.82 II-C 2.55 2.24 2.86 II-D 2.47 2.29 2.36 II-E 3.74 3.62 3.69 II-F 2.93 2.87 3.05 II-G 2.98 3.01 3.14 II-H 2.87 2.78 3.14 When complete units of depreciable property are retired or sold, the asset cost and related accumulated depreciation are eliminated with any gain or loss reflected in income. When less than complete units of depreciable property are retired or sold, the proceeds are credited to oil and gas properties. The Partnerships evaluate the recoverability of the carrying costs of their proved oil and gas properties at the field level. If the unamortized costs of oil and gas properties within a field exceed the expected undiscounted future cash flows from such properties, the cost of the properties is written down to fair value, which is determined by using the discounted future cash flows from the properties. During 1998, 1997, and 1996, the Partnerships recorded the following non-cash charges against earnings (impairment provisions): Partnership 1998 1997 1996 ----------- -------- -------- -------- II-A $164,111 $223,943 $ - II-B - 134,003 - II-C - 36,163 - II-D - 143,957 - II-E - 317,979 - II-F - 208,255 - II-G - 489,672 - II-H - 125,223 - The risk that the Partnerships will be required to record similar impairment provisions in the future increases as oil and gas prices decrease. F-53 In addition, during 1997 the General Partner determined that the Partnerships' unproved properties would be uneconomic to develop and, therefore, of little or no value. This determination was based on an evaluation by the General Partner that it was unlikely that these unproved properties would be developed due to low oil and gas prices and provisions in the Partnership Agreements which limit the level of permissible drilling activity. As a result of this determination, the Partnerships recorded the following non-cash charges against earnings at March 31, 1997 in order to reflect the writing-off of the Partnerships' unproved properties: Partnership Amount ----------- ---------- II-A $ 460,333 II-B 396,985 II-C 30,454 II-D - II-E 674,872 II-F 1,168,905 II-G 2,611,984 II-H 659,997 Deferred Charge The Deferred Charge represents costs deferred for lease operating expenses incurred in connection with the Partnerships' underproduced gas imbalance positions. The rate used in calculating the deferred charge is the average of the annual production costs per Mcf. At December 31, 1998 and 1997, cumulative total gas sales volumes for underproduced wells were less than the Partnerships' pro-rata share of total gas production from these wells by the following amounts: 1998 1997 ---------------------- ---------------------- Partnership Mcf Amount Mcf Amount ----------- -------- -------- --------- --------- II-A 775,894 $701,486 980,457 $911,041 II-B 173,183 179,833 174,919 169,811 II-C 206,671 153,412 207,801 139,621 II-D 721,663 614,207 783,455 544,345 II-E 373,755 275,532 393,724 330,531 II-F 81,585 46,373 97,126 56,867 II-G 179,624 101,955 210,451 123,977 II-H 41,907 23,749 49,537 29,519 Accrued Liability The Accrued Liability represents charges accrued for lease operating expenses incurred in connection with the Partnerships' overproduced gas imbalance positions. The rate used in calculating the accrued liability is the average of the annual F-54 production costs per Mcf. At December 31, 1998 and 1997, cumulative total gas sales volumes for overproduced wells exceeded the Partnerships' pro-rata share of total gas production from these wells by the following amounts: 1998 1997 -------------------- ------------------- Partnership Mcf Amount Mcf Amount ----------- ------- -------- ------- -------- II-A 199,453 $180,325 169,016 $157,050 II-B 95,032 98,681 91,182 88,519 II-C 79,897 59,308 73,891 49,647 II-D 242,292 206,215 344,104 239,083 II-E 109,943 81,050 75,789 63,625 II-F 43,974 24,995 47,663 27,907 II-G 101,886 57,830 108,825 64,109 II-H 21,287 12,063 24,581 14,648 Oil and Gas Sales and Gas Imbalance Payable The Partnerships' oil and condensate production is sold, title passed, and revenue recognized at or near the Partnerships' wells under short-term purchase contracts at prevailing prices in accordance with arrangements which are customary in the oil industry. Sales of gas applicable to the Partnerships' interest in producing oil and gas leases are recorded as revenue when the gas is metered and title transferred pursuant to the gas sales contracts covering the Partnerships' interest in gas reserves. During such times as a Partnership's sales of gas exceed its pro rata ownership in a well, such sales are recorded as revenues unless total sales from the well have exceeded the Partnership's share of estimated total gas reserves underlying the property, at which time such excess is recorded as a liability. The rates per Mcf used to calculate this liability are based on the average gas prices received for the volumes at the time the overproduction occurred. This also approximates the price for which the Partnerships are currently settling this liability. At December 31, 1998 and 1997 total sales exceeded the Partnerships' share of estimated total gas reserves as follows: F-55 1998 1997 -------------------- --------------------- Partnership Mcf Amount Mcf Amount ----------- ------- -------- ------- --------- II-A 83,936 $125,904 94,694 $142,043 II-B 13,193 19,790 16,447 24,671 II-C 25,499 38,249 15,042 22,563 II-D 99,765 149,648 71,336 107,004 II-E 98,972 148,458 114,059 171,089 II-F 2,822 4,233 16,789 25,184 II-G 6,019 9,029 38,167 57,250 II-H - - 8,766 13,149 These amounts were recorded as gas imbalance payables in accordance with the sales method. These gas imbalance payables will be settled by either gas production by the underproduced party in excess of current estimates of total gas reserves for the well or by a negotiated or contractual payment to the underproduced party. General and Administrative Overhead The General Partner and its affiliates are reimbursed for actual general and administrative costs incurred and attributable to the conduct of the business affairs and operations of the Partnerships. 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 or incurred in the near term. Oil and gas reserves (see Note 4) also involve significant estimates which could materially differ from the actual amounts ultimately realized. Income Taxes Income or loss for income tax purposes is includable in the income tax returns of the partners. Accordingly, no recognition has been given to income taxes in these financial statements. F-56 2. TRANSACTIONS WITH RELATED PARTIES The Partnerships reimburse the General Partner for the general and administrative overhead applicable to the Partnerships, based on an allocation of actual costs incurred by the General Partner. When actual costs incurred benefit other partnerships and affiliates, the allocation of costs is based on the relationship of the Partnerships' reserves to the total reserves owned by all partnerships and affiliates. The General Partner believes this allocation method is reasonable. Although the actual costs incurred by the General Partner and its affiliates have fluctuated during the three years presented, the amounts charged to the Partnerships have not fluctuated due to expense limitations imposed by the Partnership Agreements. The following is a summary of payments made to the General Partner or its affiliates by the Partnerships for general and administrative overhead costs for the years ended December 31, 1998, 1997, and 1996: Partnership 1998 1997 1996 ----------- -------- -------- -------- II-A $509,772 $509,772 $509,772 II-B 380,760 380,760 380,760 II-C 162,756 162,756 162,756 II-D 331,452 331,452 331,452 II-E 240,864 240,864 240,864 II-F 180,420 180,420 180,420 II-G 391,776 391,776 391,776 II-H 96,540 96,540 96,540 Affiliates of the Partnerships operate certain of the Partnerships' properties and their policy is to bill the Partnerships for all customary charges and cost reimbursements associated with 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. 3. MAJOR CUSTOMERS The following table sets forth purchasers who individually accounted for ten percent or more of each Partnership's combined oil and gas sales for the years ended December 31, 1998, 1997, and 1996: F-57 Partnership Purchaser Percentage - ----------- ------------------------ ------------------------ 1998 1997 1996 ----- ----- ----- II-A El Paso Energy Marketing Company ("El Paso") 32.8% 29.7% 23.5% Amoco Production Company ("Amoco") 13.0% 14.8% 14.7% Hallwood Petroleum, Inc. ("Hallwood') 10.1% 12.1% 13.9% J-O'B Operating ("J-O'B") - - 10.6% II-B El Paso 37.6% 31.8% 22.5% Hallwood 15.6% 16.3% 18.1% Amoco - - 11.0% J-O'B - - 11.0% II-C El Paso 36.2% 29.3% 24.5% Amoco - - 10.5% II-D El Paso 28.4% 22.8% 19.1% Vintage Petroleum Inc. 10.9% - - II-E El Paso 47.8% 41.3% 30.8% II-F El Paso 30.8% 24.5% 22.4% Chevron U.S.A. Inc. (Chevron) 13.2% - - Texaco Exploration and Production, Inc. ("Texaco") 12.7% 11.1% 12.5% II-G El Paso 30.6% 24.3% 22.4% Chevron 13.0% - - Texaco 12.8% 11.1% 12.6% II-H El Paso 30.2% 23.9% 22.1% Texaco 12.8% 11.1% 12.7% Chevron 12.6% - - In the event of interruption of purchases by one or more of these significant customers or the cessation or material change in availability of open access transportation by the Partnerships' pipeline transporters, the Partnerships may encounter difficulty in marketing their gas and in maintaining historic sales levels. Alternative purchasers or transporters may not be readily available. F-58 4. SUPPLEMENTAL OIL AND GAS INFORMATION The following supplemental information regarding the oil and gas activities of the Partnerships is presented pursuant to the disclosure requirements promulgated by the SEC. Capitalized Costs The capitalized costs and accumulated depreciation, depletion, amortization, and valuation allowance at December 31, 1998 and 1997 were as follows: II-A Partnership --------------- 1998 1997 ------------- ------------- Proved properties $31,003,185 $31,785,611 Less accumulated deprecia- tion, depletion, amorti- zation, and valuation allowance ( 26,893,889) ( 26,890,758) ---------- ---------- Net oil and gas Properties $ 4,109,296 $ 4,894,853 ========== ========== II-B Partnership --------------- 1998 1997 ------------- ------------- Proved properties $21,466,096 $21,746,216 Less accumulated deprecia- tion, depletion, amorti- zation, and valuation allowance ( 18,896,268) ( 18,711,058) ---------- ---------- Net oil and gas Properties $ 2,569,828 $ 3,035,158 ========== ========== F-59 II-C Partnership ---------------- 1998 1997 ------------- ------------- Proved properties $ 9,312,977 $ 9,809,210 Less accumulated deprecia- tion, depletion, amorti- zation, and valuation allowance ( 7,930,547) ( 8,141,941) ---------- ---------- Net oil and gas Properties $ 1,382,430 $ 1,667,269 ========== ========== II-D Partnership ---------------- 1998 1997 ------------- ------------- Proved properties $16,994,856 $18,171,159 Less accumulated deprecia- tion, depletion, amorti- zation, and valuation allowance ( 14,268,143) ( 14,753,399) ---------- ---------- Net oil and gas Properties $ 2,726,713 $ 3,417,760 ========== ========== II-E Partnership ---------------- 1998 1997 ------------- ------------- Proved properties $15,313,160 $15,543,068 Less accumulated deprecia- tion, depletion, amorti- zation, and valuation allowance ( 12,924,547) ( 12,701,988) ---------- ---------- Net oil and gas Properties $ 2,388,613 $ 2,841,080 ========== ========== F-60 II-F Partnership ---------------- 1998 1997 ------------- ------------- Proved properties $11,240,487 $11,773,778 Less accumulated deprecia- tion, depletion, amorti- zation, and valuation allowance ( 9,153,895) ( 9,341,745) ---------- ---------- Net oil and gas Properties $ 2,086,592 $ 2,432,033 ========== ========== II-G Partnership ---------------- 1998 1997 ------------- ------------- Proved properties $24,013,074 $25,132,939 Less accumulated deprecia- tion, depletion, amorti- zation, and valuation allowance ( 19,520,933) ( 19,895,857) ---------- ---------- Net oil and gas Properties $ 4,492,141 $ 5,237,082 ========== ========== II-H Partnership ---------------- 1998 1997 ------------- ------------- Proved properties $5,770,764 $6,025,649 Less accumulated deprecia- tion, depletion, amorti- zation, and valuation allowance ( 4,712,819) ( 4,800,354) --------- --------- Net oil and gas Properties $1,057,945 $1,225,295 ========= ========= F-61 Costs Incurred The Partnerships incurred no costs in connection with oil and gas acquisition or exploration activities during 1998, 1997, or 1996. Costs incurred by the Partnerships in connection with oil and gas property development activities during 1998, 1997, and 1996 were as follows: Partnership 1998 1997 1996 ----------- -------- -------- -------- II-A $280,907 $237,163 $98,540 II-B 83,614 20,782 89,173 II-C 34,333 5,112 5,076 II-D 1,639 41,889 22,210 II-E 120,953 40,623 70,806 II-F 75,167 65,635 11,332 II-G 162,692 143,657 27,441 II-H 40,018 35,978 6,306 Quantities of Proved Oil and Gas Reserves - Unaudited The following tables summarize changes in net quantities of the Partnerships' proved reserves, all of which are located in the United States, for the periods indicated. The proved reserves at December 31, 1998, 1997, and 1996 were estimated by petroleum engineers employed by affiliates of the Partnerships. Certain reserve information was reviewed by Ryder Scott Company Petroleum Engineers, an independent petroleum engineering firm. The following information includes certain gas balancing adjustments which cause the gas volumes to differ from the reserve reports prepared by the General Partner and reviewed by Ryder Scott. F-62 II-A Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1995 700,254 9,603,075 Production (103,230) (1,737,090) Sales of minerals in place ( 21,601) ( 122,449) Extensions and discoveries - 40,117 Revision of previous estimates 119,967 1,471,676 ------- --------- Proved reserves, Dec. 31, 1996 695,390 9,255,329 Production (105,866) (1,505,818) Sales of minerals in place ( 34,321) ( 45,413) Extensions and discoveries 34,300 52,013 Revision of previous estimates ( 50,160) 600,326 ------- --------- Proved reserves, Dec. 31, 1997 539,343 8,356,437 Production ( 86,428) (1,433,552) Sales of minerals in place ( 7,026) ( 512,403) Extensions and discoveries 14,823 335,915 Revision of previous estimates (100,249) 986,384 ------- --------- Proved reserves, Dec. 31, 1998 360,463 7,732,781 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1996 694,531 9,208,297 ======= ========= December 31, 1997 539,105 8,330,114 ======= ========= December 31, 1998 360,463 7,732,781 ======= ========= F-63 II-B Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1995 495,525 5,729,103 Production ( 74,434) (1,219,775) Sales of minerals in place ( 14,484) ( 77,335) Revision of previous estimates 96,787 1,157,710 ------- --------- Proved reserves, Dec. 31, 1996 503,394 5,589,703 Production ( 67,591) (1,047,458) Sales of minerals in place ( 21,955) ( 29,512) Extensions and discoveries 418 50,003 Revision of previous estimates ( 26,401) 666,361 ------- --------- Proved reserves, Dec. 31, 1997 387,865 5,229,097 Production ( 53,095) ( 904,066) Sales of minerals in place ( 218) ( 70,834) Extensions and discoveries 14 93,326 Revision of previous estimates ( 94,739) 963,230 ------- --------- Proved reserves, Dec. 31, 1998 239,827 5,310,753 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1996 503,394 5,589,703 ======= ========= December 31, 1997 387,865 5,229,097 ======= ========= December 31, 1998 239,827 5,310,753 ======= ========= F-64 II-C Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1995 205,669 3,983,315 Production ( 25,093) ( 685,344) Sales of minerals in place ( 5,591) ( 221,501) Revision of previous estimates 28,924 1,182,174 ------- --------- Proved reserves, Dec. 31, 1996 203,909 4,258,644 Production ( 22,753) ( 582,748) Sales of minerals in place ( 10,618) ( 149,343) Extensions and discoveries 179 21,431 Revision of previous estimates ( 8,570) 341,899 ------- --------- Proved reserves, Dec. 31, 1997 162,147 3,889,883 Production ( 16,806) ( 478,643) Sales of minerals in place ( 7,580) ( 252,950) Extensions and discoveries - 33,756 Revision of previous estimates ( 19,094) 411,699 ------- --------- Proved reserves, Dec. 31, 1998 118,667 3,603,745 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1996 203,909 4,258,644 ======= ========= December 31, 1997 162,147 3,889,883 ======= ========= December 31, 1998 118,667 3,603,745 ======= ========= F-65 II-D Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1995 553,578 10,910,460 Production ( 66,517) ( 1,637,645) Sales of minerals in place ( 60,464) ( 270,629) Extensions and discoveries 232 30,340 Revision of previous estimates 68,250 1,979,648 ------- ---------- Proved reserves, Dec. 31, 1996 495,079 11,012,174 Production ( 50,413) ( 1,501,911) Sales of minerals in place ( 42,059) ( 517,136) Revision of previous estimates ( 19,568) 262,802 ------- ---------- Proved reserves, Dec. 31, 1997 383,039 9,255,929 Production ( 37,733) ( 1,034,372) Sales of minerals in place ( 13,129) ( 478,907) Revision of previous estimates ( 75,195) 482,043 ------- ---------- Proved reserves, Dec. 31, 1998 256,982 8,224,693 ======= ========== PROVED DEVELOPED RESERVES: December 31, 1996 495,079 11,012,174 ======= ========== December 31, 1997 383,039 9,225,929 ======= ========== December 31, 1998 256,982 8,224,693 ======= ========== F-66 II-E Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1995 297,934 6,401,259 Production ( 53,804) ( 861,464) Sales of minerals in place ( 16,347) ( 109,007) Extensions and discoveries 1,327 31,347 Revision of previous estimates 74,262 234,339 ------- --------- Proved reserves, Dec. 31, 1996 303,372 5,696,474 Production ( 42,668) ( 783,379) Sales of minerals in place ( 14,134) ( 349,468) Extensions and discoveries 2,502 30,709 Revision of previous estimates ( 11,878) 479,666 ------- --------- Proved reserves, Dec. 31, 1997 237,194 5,074,002 Production ( 37,508) ( 647,841) Sales of minerals in place ( 12,363) ( 95,923) Extensions and discoveries 4,016 25,354 Revision of previous estimates ( 28,140) 104,040 ------- --------- Proved reserves, Dec. 31, 1998 163,199 4,459,632 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1996 303,372 5,696,474 ======= ========= December 31, 1997 237,194 5,074,002 ======= ========= December 31, 1998 163,199 4,459,632 ======= ========= F-67 II-F Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1995 355,007 4,738,716 Production ( 47,395) ( 761,702) Sales of minerals in place ( 7,620) ( 149,077) Extensions and discoveries 13,192 250,188 Revision of previous estimates 51,954 593,360 ------- --------- Proved reserves, Dec. 31, 1996 365,138 4,671,485 Production ( 45,014) ( 586,444) Sales of minerals in place ( 31,639) ( 403,487) Extensions and discoveries 3,045 75,566 Revision of previous estimates 24,289 186,939 ------- --------- Proved reserves, Dec. 31, 1997 315,819 3,944,059 Production ( 36,915) ( 516,917) Sales of minerals in place ( 30,197) ( 195,711) Extensions and discoveries 15,660 204,591 Revision of previous estimates ( 23,426) 189,290 ------- --------- Proved reserves, Dec. 31, 1998 240,941 3,625,312 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1996 360,605 4,614,831 ======= ========= December 31, 1997 311,286 3,887,405 ======= ========= December 31, 1998 240,941 3,625,312 ======= ========= F-68 II-G Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) ----------- ------------ Proved reserves, Dec. 31, 1995 746,479 10,303,283 Production ( 99,593) ( 1,626,530) Sales of minerals in place ( 16,084) ( 335,696) Revision of previous estimates 138,340 1,781,501 ------- ---------- Proved reserves, Dec. 31, 1996 769,142 10,122,558 Production ( 94,553) ( 1,256,464) Sales of minerals in place ( 66,947) ( 957,722) Extensions and discoveries 6,399 158,060 Revision of previous estimates 50,299 382,356 ------- ---------- Proved reserves, Dec. 31, 1997 664,340 8,448,788 Production ( 77,421) ( 1,105,661) Sales of minerals in place ( 63,148) ( 412,018) Extensions and discoveries 33,192 439,223 Revision of previous estimates ( 49,470) 397,952 ------- ---------- Proved reserves, Dec. 31, 1998 507,493 7,768,284 ======= ========== PROVED DEVELOPED RESERVES: December 31, 1996 759,316 9,999,722 ======= ========== December 31, 1997 654,514 8,325,952 ======= ========== December 31, 1998 507,493 7,768,284 ======= ========== F-69 II-H Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1995 173,521 2,553,664 Production ( 23,172) ( 397,146) Sales of minerals in place ( 3,802) ( 90,433) Extensions and discoveries 6,428 193,480 Revision of previous estimates 27,027 233,675 ------- --------- Proved reserves, Dec. 31, 1996 180,002 2,493,240 Production ( 21,998) ( 304,593) Sales of minerals in place ( 15,766) ( 267,732) Extensions and discoveries 1,500 36,590 Revision of previous estimates 11,702 87,477 ------- --------- Proved reserves, Dec. 31, 1997 155,440 2,044,982 Production ( 17,978) ( 266,337) Sales of minerals in place ( 14,518) ( 96,575) Extensions and discoveries 7,874 106,568 Revision of previous estimates ( 11,652) 93,717 ------- --------- Proved reserves, Dec. 31, 1998 119,166 1,882,355 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1996 177,577 2,462,919 ======= ========= December 31, 1997 153,015 2,014,661 ======= ========= December 31, 1998 119,166 1,882,355 ======= ========= F-70 Standardized Measure of Discounted Future Net Cash Flows of Proved Oil and Gas Reserves - Unaudited The following tables set forth each of the Partnerships' estimated future net cash flows as of December 31, 1998 relating to proved oil and gas reserves based on the standardized measure as prescribed in SFAS No. 69: Partnership ---------------------------------- II-A II-B ------------- ------------- Future cash inflows $19,359,497 $13,074,683 Future production and development costs ( 6,682,205) ( 4,450,517) ---------- ---------- Future net cash flows $12,677,292 $ 8,624,166 10% discount to reflect timing of cash flows ( 4,160,555) ( 2,890,615) ---------- ---------- Standardized measure of discounted future net cash flows $ 8,516,737 $ 5,733,551 ========== ========== F-71 Partnership ---------------------------------- II-C II-D ------------- ------------- Future cash inflows $ 8,454,800 $18,290,375 Future production and development costs ( 2,810,913) ( 6,171,646) ---------- ---------- Future net cash flows $ 5,643,887 $12,118,729 10% discount to reflect timing of cash flows ( 2,212,515) ( 4,630,292) ---------- ---------- Standardized measure of discounted future net cash flows $ 3,431,372 $ 7,488,437 ========== ========== Partnership ---------------------------------- II-E II-F ------------- ------------- Future cash inflows $10,459,092 $ 9,939,769 Future production and development costs ( 2,990,145) ( 2,706,745) ---------- ---------- Future net cash flows $ 7,468,947 $ 7,233,024 10% discount to reflect timing of cash flows ( 2,894,461) ( 2,790,307) ---------- ---------- Standardized measure of discounted future net cash flows $ 4,574,486 $ 4,442,717 ========== ========== F-72 Partnership ---------------------------------- II-G II-H ------------- ------------- Future cash inflows $21,221,902 $ 5,108,647 Future production and development costs ( 5,834,639) ( 1,425,031) ---------- ---------- Future net cash flows $15,387,263 $ 3,683,616 10% discount to reflect timing of cash flows ( 5,942,897) ( 1,426,357) ---------- ---------- Standardized measure of discounted future net cash flows $ 9,444,366 $ 2,257,259 ========== ========== 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 Partnerships' reserves were determined at December 31, 1998 using oil and gas prices of approximately $9.50 per barrel and $2.03 per Mcf, respectively. F-73 INDEX TO EXHIBITS ----------------- Number Description - ------ ----------- 4.1 The Certificate and Agreements of Limited Partnership for the following Partnerships have been previously filed with the SEC as Exhibit 2.1 to Form 8-A filed by each Partnership on the dates shown below and are hereby incorporated by reference. Partnership Filing Date File No. ----------- ------------ -------- II-A November 18, 1987 0-16388 II-B November 19, 1987 0-16405 II-C August 5, 1988 0-16981 II-D August 5, 1988 0-16980 II-E November 17, 1988 0-17320 II-F June 5, 1989 0-17799 II-G June 5, 1989 0-17802 II-H February 20, 1990 0-18305 4.2 The Agreements of Partnership for the following Production Partnerships have been previously filed with the SEC as Exhibit 2.2 to Form 8-A filed by the related Partnerships on the dates shown below and are hereby incorporated by reference. Partnership Filing Date ----------- ----------- II-A November 18, 1987 II-B November 19, 1987 II-C August 5, 1988 II-D August 5, 1988 II-E November 17, 1988 II-F June 5, 1989 II-G June 5, 1989 II-H February 20, 1990 4.3 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-A, filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. F-74 4.4 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-B, filed as Exhibit 4.2 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.5 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-C, filed as Exhibit 4.3 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.6 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-D, filed as Exhibit 4.4 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.7 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-E, filed as Exhibit 4.5 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.8 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-F, filed as Exhibit 4.6 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.9 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-G, filed as Exhibit 4.7 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. 4.10 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-H, filed as Exhibit 4.8 to Registrant's Current Report on Form 8-K dated August 2, 1993 filed with the SEC on August 10, 1993 and is hereby incorporated by reference. F-75 4.11 Third Amendment to Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-E, filed as Exhibit 4.12 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 filed with the SEC on April 4, 1996 and is hereby incorporated by reference. 4.12 Third Amendment to Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-F, filed as Exhibit 4.13 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 filed with the SEC on April 4, 1996 and is hereby incorporated by reference. 4.13 Third Amendment to Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-G, filed as Exhibit 4.14 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 filed with the SEC on April 4, 1996 and is hereby incorporated by reference. 4.14 Third Amendment to Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership II-H, filed as Exhibit 4.15 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 filed with the SEC on April 4, 1996 and is hereby incorporated by reference. *23.1 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-A. *23.2 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-B. *23.3 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-C. *23.4 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-D. *23.5 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-E. *23.6 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-F. *23.7 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-G. *23.8 Consent of Ryder Scott Company Petroleum Engineers for Geodyne Energy Income Limited Partnership II-H. F-76 *27.1 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-A's financial statements as of December 31, 1998 and for the year ended December 31, 1998. *27.2 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-B's financial statements as of December 31, 1998 and for the year ended December 31, 1998. *27.3 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-C's financial statements as of December 31, 1998 and for the year ended December 31, 1998. *27.4 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-D's financial statements as of December 31, 1998 and for the year ended December 31, 1998. *27.5 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-E's financial statements as of December 31, 1998 and for the year ended December 31, 1998. *27.6 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-F's financial statements as of December 31, 1998 and for the year ended December 31, 1998. *27.7 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-G's financial statements as of December 31, 1998 and for the year ended December 31, 1998. *27.8 Financial Data Schedule containing summary financial information extracted from the Geodyne Energy Income Limited Partnership II-H's financial statements as of December 31, 1998 and for the year ended December 31, 1998. All other Exhibits are omitted as inapplicable. ---------- * Filed herewith. F-77 EX-23.1 2 RYDER SCOTT CONSENT FOR GEODYNE II-A RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191 CONSENT OF PETROLEUM ENGINEERING FIRM We consent to the reference to our name included in this Annual Report on Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited Partnership II-A. //s// Ryder Scott Company Petroleum Engineers RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas January 19, 1999 EX-23.2 3 RYDER SCOTT CONSENT FOR GEODYNE II-B RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191 CONSENT OF PETROLEUM ENGINEERING FIRM We consent to the reference to our name included in this Annual Report on Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited Partnership II-B. //s// Ryder Scott Company Petroleum Engineers RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas January 19, 1999 EX-23.3 4 RYDER SCOTT CONSENT FOR GEODYNE II-C RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191 CONSENT OF PETROLEUM ENGINEERING FIRM We consent to the reference to our name included in this Annual Report on Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited Partnership II-C. //s// Ryder Scott Company Petroleum Engineers RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas January 19, 1999 EX-23.4 5 RYDER SCOTT CONSENT FOR GEODYNE II-D RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191 CONSENT OF PETROLEUM ENGINEERING FIRM We consent to the reference to our name included in this Annual Report on Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited Partnership II-D. //s// Ryder Scott Company Petroleum Engineers RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas January 19, 1999 EX-23.5 6 RYDER SCOTT CONSENT FOR GEODYNE II-E RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191 CONSENT OF PETROLEUM ENGINEERING FIRM We consent to the reference to our name included in this Annual Report on Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited Partnership II-E. //s// Ryder Scott Company Petroleum Engineers RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas January 19, 1999 EX-23.6 7 RYDER SCOTT CONSENT FOR GEODYNE II-F RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191 CONSENT OF PETROLEUM ENGINEERING FIRM We consent to the reference to our name included in this Annual Report on Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited Partnership II-F. //s// Ryder Scott Company Petroleum Engineers RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas January 19, 1999 EX-23.7 8 RYDER SCOTT CONSENT FOR GEODYNE II-G RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191 CONSENT OF PETROLEUM ENGINEERING FIRM We consent to the reference to our name included in this Annual Report on Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited Partnership II-G. //s// Ryder Scott Company Petroleum Engineers RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas January 19, 1999 EX-23.8 9 RYDER SCOTT CONSENT FOR GEODYNE II-H RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191 CONSENT OF PETROLEUM ENGINEERING FIRM We consent to the reference to our name included in this Annual Report on Form 10-K for the year ended December 31, 1998 for Geodyne Energy Income Limited Partnership II-H. //s// Ryder Scott Company Petroleum Engineers RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas January 19, 1999 EX-27.1 10 FDS --
5 0000824894 GEODYNE ENERGY INCOME LTD PARTNERSHIP II-A 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 213,480 0 506,282 0 0 719,762 31,003,185 26,893,889 5,530,544 297,666 0 0 0 0 5,052,553 5,530,544 3,911,823 6,362,607 0 3,310,579 0 0 0 3,052,028 0 3,052,028 0 0 0 3,052,028 5.91 0
EX-27.2 11 FDS --
5 0000826345 GEODYNE ENERGY INCOME LTD PARTNERSHIP II-B 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 107,021 0 328,334 0 0 435,355 21,466,096 18,896,268 3,185,016 97,173 0 0 0 0 2,989,162 3,185,016 2,492,043 5,401,319 0 2,054,812 0 0 0 3,346,507 0 3,346,507 0 0 0 3,346,507 8.74 0
EX-27.3 12 FDS --
5 0000833054 GEODYNE ENERGY INCOME LTD PARTNERSHIP II-C 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 66,617 0 157,275 0 0 223,892 9,312,977 7,930,547 1,759,734 68,097 0 0 0 0 1,632,329 1,759,734 1,136,474 2,536,580 0 857,985 0 0 0 1,678,595 0 1,678,595 0 0 0 1,678,595 10.24 0
EX-27.4 13 FDS --
5 0000833526 GEODYNE ENERGY INCOME LTD PARTNERSHIP II-D 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 311,556 0 342,433 0 0 653,989 16,994,856 14,268,143 3,994,909 217,582 0 0 0 0 3,571,112 3,994,909 2,411,051 6,007,634 0 1,839,637 0 0 0 4,167,997 0 4,167,997 0 0 0 4,167,997 12.52 0
EX-27.5 14 FDS --
5 0000842881 GEODYNE ENERGY INCOME LTD PARTNERSHIP II-E 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 376,779 0 220,028 0 0 596,807 15,313,160 12,924,547 3,260,952 187,339 0 0 0 0 2,992,563 3,260,952 1,704,463 8,291,877 0 1,492,861 0 0 0 6,799,016 0 6,799,016 0 0 0 6,799,016 28.15 0
EX-27.6 15 FDS --
5 0000850506 GEODYNE ENERGY INCOME LTD PARTNERSHIP II-F 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 153,240 0 187,525 0 0 340,765 11,240,487 9,153,895 2,473,730 28,240 0 0 0 0 2,420,495 2,473,730 1,444,802 2,120,828 0 960,856 0 0 0 1,159,972 0 1,159,972 0 0 0 1,159,972 6.35 0
EX-27.7 16 FDS --
5 0000851724 GEODYNE ENERGY INCOME LTD PARTNERSHIP II-G 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 333,168 0 398,538 0 0 731,706 24,013,074 19,520,933 5,325,802 60,414 0 0 0 0 5,207,558 5,325,802 3,072,455 4,485,945 0 2,069,444 0 0 0 2,416,501 0 2,416,501 0 0 0 2,416,501 6.09 0
EX-27.8 17 FDS --
5 0000854062 GEODYNE ENERGY INCOME LTD PARTNERSHIP II-H 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 78,275 0 95,260 0 0 173,535 5,770,764 4,712,819 1,255,229 12,408 0 0 0 0 1,230,758 1,255,229 733,613 1,059,624 0 492,369 0 0 0 567,255 0 567,255 0 0 0 567,255 5.80 0
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