-----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, OBpwNmmR3+CYVbA1MQjXq5Mv+USbFRMANNmRWWGz2J6RtofVMrvL5Osu1yKvolcr 7Yu0SBbzbAFrF2cwzJDAxA== 0000824894-97-000002.txt : 19970319 0000824894-97-000002.hdr.sgml : 19970319 ACCESSION NUMBER: 0000824894-97-000002 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970318 SROS: NONE 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: 1934 Act SEC FILE NUMBER: 000-16388 FILM NUMBER: 97558581 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: 1934 Act SEC FILE NUMBER: 000-16405 FILM NUMBER: 97558582 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-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: 1934 Act SEC FILE NUMBER: 000-16981 FILM NUMBER: 97558583 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: 1934 Act SEC FILE NUMBER: 000-16980 FILM NUMBER: 97558584 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: 1934 Act SEC FILE NUMBER: 000-17320 FILM NUMBER: 97558585 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: 1934 Act SEC FILE NUMBER: 000-17799 FILM NUMBER: 97558586 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: 1934 Act SEC FILE NUMBER: 000-17802 FILM NUMBER: 97558587 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: 1934 Act SEC FILE NUMBER: 000-18305 FILM NUMBER: 97558588 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 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, 1996 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 No X (See explanation below). ----- ----- Quarterly Report on Form 10-Q for the three months ended March 31, 1996 was filed on May 21, 1996, one day after the required due date. 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 ii FORM 10-K405 TABLE OF CONTENTS PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . 1 ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . 7 ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . 22 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS . . . . . . . . . . . . . . . . . . . . . 26 PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 ITEM 5. MARKET FOR UNITS AND RELATED LIMITED PARTNER MATTERS . . . . . . . . . . . . . . . . . . . . . 27 ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . 29 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . 38 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . 71 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . 72 PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER . . . . . . . . . . . . . . . . . . . . . 72 ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . 73 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . 83 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . 85 PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 88 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 94 i 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-K (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. 1 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, the "Samson Companies"), are engaged in the production and development of and exploration for oil and gas reserves and the acquisition and operation of producing properties. At December 31, 1996, the Samson Companies owned interests in approximately 16,000 oil and gas wells located in 19 states of the United States and Canada, Venezuela, and Russia. At December 31, 1996, the Samson Companies operated approximately 2,600 oil and gas wells located in 15 states of the United States and 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 the other Samson Companies. As of March 15, 1997, the Samson Companies employed approximately 780 persons. No employees are covered by collective bargaining agreements, and management believes that the Samson Companies provide 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 (800) 283-1791. Funding Although the partnership agreements for the Partnerships (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. 2 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 very difficult. Concerning past trends, average yearly wellhead gas prices in the United States have been relatively volatile for a number of years. For the past ten years, such prices have generally been in the $1.40 to $2.00 per Mcf range, significantly below prices received in the early 1980s. Average gas prices in the latter part of 1996 and January 1997, however, were somewhat higher than those yearly averages. It is not known whether this was a short- term trend or an indicator of potentially higher average gas prices on a longer-term basis. 3 Substantially all of the Partnerships' gas reserves are being sold in the "spot market." Prices on the spot market are subject to wide seasonal and regional pricing fluctuations due to the highly competitive nature of the spot market. In addition, such spot market sales are generally short-term in nature and are dependent upon the obtaining of transportation services provided by pipelines. Spot prices for the Partnerships' gas increased from approximately $2.00 per Mcf at December 31, 1995 to approximately $3.57 per Mcf at December 31, 1996. Such prices were on an MMBTU basis and differ from the prices actually received by the Partnerships due to transportation and marketing costs, BTU adjustments, and regional price and quality differences. Due to global consumption and supply trends over the last several months, oil prices have recently been higher than the yearly average prices of the late to mid-1980s and early 1990s. It is not known whether this trend will continue. Prices for the Partnerships' oil increased from approximately $18.50 per barrel at December 31, 1995 to approximately $23.75 per barrel at December 31, 1996. Future prices for both oil and gas will likely be different from (and may be lower than) the prices in effect on December 31, 1996. Primarily due to heating season demand, year-end prices in many past years have tended to be higher, and in some cases significantly higher, than the yearly average price actually received by the Partnerships for at least the following year. In particular, it should be noted that December 31, 1996 prices were much higher than year-end prices for the last several years and substantially higher than the average prices received in each of the last several years. It is not possible to predict whether the December 1996 pricing level is indicative of a new trend toward higher energy prices or a short- term deviation from the recent history of low to moderate prices; therefore, management is unable to predict whether future oil and gas prices will (i) stabilize, (ii) increase, or (iii) decrease. Significant Customers The following customers accounted for ten percent or more of the Partnerships' oil and gas sales during the year ended December 31, 1996: 4 Partnership Purchaser Percentage - ----------- ---------------------------------- ---------- II-A El Paso Energy Marketing Company ("El Paso") 23.5% Hallwood Petroleum, Inc. ("Hallwood") 13.9% Amoco Production Company ("Amoco") 14.7% J-O'B Operating ("J-O'B") 10.6% II-B Hallwood 18.1% El Paso 22.5% Amoco 11.0% J-O'B 11.0% II-C El Paso 24.5% Amoco 10.5% II-D El Paso 19.1% II-E El Paso 30.8% II-F El Paso 22.4% Texaco Exploration & Producing, Inc. ("Texaco") 12.5% II-G El Paso 22.4% Texaco 12.6% II-H El Paso 22.1% Texaco 12.7% 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. 5 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, including, but not limited to, the Natural Gas Act of 1938 (the "NGA"), the Natural Gas Policy Act of 1978 (the "NGPA"), and regulations promulgated by the Federal Energy Regulatory Commission (the "FERC") under the NGA, the NGPA, and other statutes. The provisions of the NGA and the NGPA, as well as the regulations thereunder, are complex and affect all who produce, resell, transport, or purchase gas, including the Partner- ships. Although virtually all of the Partnerships' gas production is not subject to price regulation, the NGA, NGPA, and FERC 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 therewith, may increase the cost of the Partnerships' operations or may affect the Partnerships' ability to complete, in a timely fashion, 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. 6 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 position 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, 1996. Well Statistics(1) As of December 31, 1996 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 1,140 342 733 65 54.05 30.34 18.51 5.20 II-B 278 142 91 45 34.00 19.16 10.67 4.17 II-C 352 122 203 27 13.52 4.05 9.00 .47 II-D 308 134 166 8 54.46 25.99 26.86 1.61 II-E 1,178 709 393 76 29.14 15.87 12.04 1.23 II-F 1,151 703 374 74 15.66 5.49 8.62 1.55 II-G 1,151 703 374 74 34.80 11.88 19.67 3.25 II-H 1,151 703 374 74 9.02 2.94 5.30 .78 - --------------- (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 expressed as whole numbers and fractions thereof. For example, a 15% leasehold interest in a well represents one gross well, but 0.15 net well. (4) Wells which have not been designated as oil or gas. 7 Drilling Activities The Partnerships did not participate in any drilling activities during the year ended December 31, 1996. 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 indica- tive 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. 8 Net Production Data II-A Partnership ---------------- Year Ended December 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Production: Oil (Bbls) 103,230 120,420 150,281 Gas (Mcf) 1,737,090 1,768,316 2,226,658 Oil and gas sales: Oil $2,105,377 $2,030,710 $2,272,594 Gas 3,727,497 2,640,845 4,099,355 --------- --------- --------- Total $5,832,874 $4,671,555 $6,371,949 ========= ========= ========= Total direct operating expenses $1,941,040 $1,846,264 $2,383,367 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 33.3% 39.5% 37.4% Average sales price: Per barrel of oil $20.40 $16.86 $15.12 Per Mcf of gas 2.15 1.49 1.84 Direct operating expenses per equivalent Bbl of oil $ 4.94 $ 4.45 $ 4.57 9 Net Production Data II-B Partnership ---------------- Year Ended December 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Production: Oil (Bbls) 74,434 81,304 111,099 Gas (Mcf) 1,219,775 1,205,296 1,649,869 Oil and gas sales: Oil $1,557,104 $1,351,079 $1,683,529 Gas 2,622,423 1,853,715 3,020,100 --------- --------- --------- Total $4,179,527 $3,204,794 $4,703,629 ========= ========= ========= Total direct operating expenses $1,164,713 $1,524,778 $2,014,972 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 27.9% 47.6% 42.8% Average sales price: Per barrel of oil $20.92 $16.62 $15.15 Per Mcf of gas 2.15 1.54 1.83 Direct operating expenses per equivalent Bbl of oil $ 4.19 $ 5.40 $ 5.22 10 Net Production Data II-C Partnership ---------------- Year Ended December 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Production: Oil (Bbls) 25,093 26,383 34,074 Gas (Mcf) 685,344 737,277 975,652 Oil and gas sales: Oil $ 530,533 $ 446,522 $ 533,966 Gas 1,395,407 1,073,415 1,755,200 --------- --------- --------- Total $1,925,940 $1,519,937 $2,289,166 ========= ========= ========= Total direct operating expenses $ 602,924 $ 698,645 $ 819,854 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 31.3% 46.0% 35.8% Average sales price: Per barrel of oil $21.14 $16.92 $15.67 Per Mcf of gas 2.04 1.46 1.80 Direct operating expenses per equivalent Bbl of oil $ 4.33 $ 4.68 $ 4.17 11 Net Production Data II-D Partnership ---------------- Year Ended December 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Production: Oil (Bbls) 66,517 88,913 93,610 Gas (Mcf) 1,637,645 1,906,303 2,000,016 Oil and gas sales: Oil $1,332,558 $1,457,580 $1,415,937 Gas 2,996,544 2,443,936 3,433,223 --------- --------- --------- Total $4,329,102 $3,901,516 $4,849,160 ========= ========= ========= Total direct operating expenses $1,800,899 $2,136,244 $1,735,761 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 41.6% 54.8% 35.8% Average sales price: Per barrel of oil $20.03 $16.39 $15.13 Per Mcf of gas 1.83 1.28 1.72 Direct operating expenses per equivalent Bbl of oil $ 5.31 $ 5.25 $ 4.07 12 Net Production Data II-E Partnership ---------------- Year Ended December 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Production: Oil (Bbls) 53,804 63,680 66,656 Gas (Mcf) 861,464 937,469 853,317 Oil and gas sales: Oil $1,096,064 $1,070,217 $1,029,794 Gas 1,597,253 1,227,192 1,450,912 --------- --------- --------- Total $2,693,317 $2,297,409 $2,480,706 ========= ========= ========= Total direct operating expenses $ 913,077 $1,148,507 $ 943,898 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 33.9% 50.0% 38.0% Average sales price: Per barrel of oil $20.37 $16.81 $15.45 Per Mcf of gas 1.85 1.31 1.70 Direct operating expenses per equivalent Bbl of oil $ 4.63 $ 5.22 $ 4.52 13 Net Production Data II-F Partnership ---------------- Year Ended December 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Production: Oil (Bbls) 47,395 54,773 63,723 Gas (Mcf) 761,702 845,804 833,628 Oil and gas sales: Oil $ 939,731 $ 882,021 $ 946,186 Gas 1,493,582 1,146,571 1,370,378 --------- --------- --------- Total $2,433,313 $2,028,592 $2,316,564 ========= ========= ========= Total direct operating expenses $ 643,984 $ 661,659 $ 777,636 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 26.5% 32.6% 33.6% Average sales price: Per barrel of oil $19.83 $16.10 $14.85 Per Mcf of gas 1.96 1.36 1.64 Direct operating expenses per equivalent Bbl of oil $ 3.69 $ 3.38 $ 3.84 14 Net Production Data II-G Partnership ---------------- Year Ended December 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Production: Oil (Bbls) 99,593 115,206 134,034 Gas (Mcf) 1,626,530 1,832,915 1,921,696 Oil and gas sales: Oil $1,975,112 $1,855,886 $1,991,144 Gas 3,183,687 2,492,201 3,125,632 --------- --------- --------- Total $5,158,799 $4,348,087 $5,116,776 ========= ========= ========= Total direct operating expenses $1,386,254 $1,455,357 $1,827,558 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 26.9% 33.5% 35.7% Average sales price: Per barrel of oil $19.83 $16.11 $14.86 Per Mcf of gas 1.96 1.36 1.63 Direct operating expenses per equivalent Bbl of oil $ 3.74 $ 3.46 $ 4.02 15 Net Production Data II-H Partnership ---------------- Year Ended December 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Production: Oil (Bbls) 23,172 26,870 31,241 Gas (Mcf) 397,146 449,854 452,661 Oil and gas sales: Oil $ 459,899 $ 433,226 $ 464,290 Gas 770,323 609,509 744,596 --------- --------- --------- Total $1,230,222 $1,042,735 $1,208,886 ========= ========= ========= Total direct operating expenses $ 339,390 $ 358,984 $ 427,693 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 27.6% 34.4% 35.4% Average sales price: Per barrel of oil $19.85 $16.12 $14.86 Per Mcf of gas 1.94 1.35 1.64 Direct operating expenses per equivalent Bbl of oil $ 3.80 $ 3.52 $ 4.01 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, 1996. 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. 16 Net present value represents estimated future gross cash flow from the production and sale of proved reserves, net of estimated oil and gas production costs (including production taxes, ad valorem taxes, and operating expenses) and estimated future development costs, discounted at 10% per annum. Net present value attributable to the Partnerships' proved reserves was calculated on the basis of current costs and prices at December 31, 1996. Such prices were not escalated except in certain circumstances where escalations were fixed and readily determinable in accordance with applicable contract provisions. The prices used 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, 1996. Furthermore, gas prices at December 31, 1996 were much higher than the price used for determining the Partnerships' net present value of proved reserves for the year ended December 31, 1995 and substantially higher than the average prices received by the Partnerships in each of the last several years. There can be no assurance that the prices used in calculating the net present value of the Partnerships' proved reserves at December 31, 1996 will actually be realized for such production. The process of estimating oil and gas reserves is complex, requiring significant subjective decisions in the evaluation of available geological, engineering, and economic data for each reservoir. The data for a given reservoir may change substantially over time as a result of, among other things, additional development activity, production history, and viability of production under varying economic conditions; consequently, it is reasonably possible that material revisions to existing reserve estimates may occur in the near future. Although every reasonable effort has been made to ensure that the reserve estimates reported herein represent the most accurate assessment possible, the significance of the subjective decisions required and variances in available data for various reservoirs make these estimates generally less precise than other estimates presented in connection with financial statement disclosures. Proved Reserves and Net Present Values From Proved Reserves As of December 31, 1996(1) II-A Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 9,255,329 Oil and liquids (Bbls) 695,390 Net present value (discounted at 10% per annum) $23,454,758 17 II-B Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 5,589,703 Oil and liquids (Bbls) 503,394 Net present value (discounted at 10% per annum) $15,249,542 II-C Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 4,258,644 Oil and liquids (Bbls) 203,909 Net present value (discounted at 10% per annum) $ 9,845,066 II-D Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 11,012,174 Oil and liquids (Bbls) 495,079 Net present value (discounted at 10% per annum) $23,069,097 II-E Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 5,696,474 Oil and liquids (Bbls) 303,372 Net present value (discounted at 10% per annum) $12,754,193 II-F Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 4,671,485 Oil and liquids (Bbls) 365,138 Net present value (discounted at 10% per annum) $12,025,692 II-G Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 10,122,558 Oil and liquids (Bbls) 769,142 Net present value (discounted at 10% per annum) $25,771,957 18 II-H Partnership: - ---------------- Estimated proved reserves: Gas (Mcf) 2,493,240 Oil and liquids (Bbls) 180,002 Net present value (discounted at 10% per annum) $ 6,222,904 - ---------- (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. No estimates of the proved reserves of the Partnerships compara- ble 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 reserves information 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. Northeast Utah contains the Uinta Basin, while the Sacramento Basin is located in central California. The Williston Basin is located in North Dakota, South Dakota, and Eastern Montana. 19
Significant Properties ---------------------- 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 172 10.12 67 239 30 13% 56,591 4,583,335 9,605,291 Gulf Coast 233 9.70 3 236 1 - 186,870 1,855,107 4,833,677 Permian 498 5.23 11 509 16 3% 91,382 1,258,092 2,982,511 II-B Partnership: Anadarko 37 5.45 11 48 8 9% 18,455 2,332,446 4,904,421 Gulf Coast 46 1.37 3 49 1 2% 43,234 1,076,201 2,409,972 Permian 20 2.69 7 27 16 59% 58,220 1,025,990 2,196,687 Southern Okla. Folded Belt 15 4.22 2 17 15 88% 118,212 821,542 2,982,728 Uinta 15 1.44 - 15 - - 133,223 219,144 1,749,631 II-C Partnership: Anadarko 108 6.70 22 130 16 12% 22,981 2,261,901 4,760,983 Permian 26 1.28 7 33 16 48% 27,118 503,265 1,061,868 Southern Okla. Folded Belt 19 1.95 2 21 18 86% 51,405 602,381 1,654,265 II-D Partnership: Anadarko 79 12.01 12 91 9 10% 43,174 4,120,739 8,337,726 Permian 14 2.67 3 17 5 29% 28,068 1,461,239 2,521,323 Sacramento 39 6.52 2 41 - - - 2,183,556 3,091,151 Williston 74 2.67 - 74 - - 245,581 246,136 2,317,923 - -------------------------- (1) Wells in which only a non-working interest is owned.
20
Significant Properties ---------------------- 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 39 2.24 28 67 14 21% 5,898 2,362,873 4,049,813 Permian 873 5.63 3,460 4,333 9 - 132,526 1,962,531 4,565,985 Southern Okla. Folded Belt 10 .50 - 10 1 10% 38,593 771,679 1,893,563 II-F Partnership: Anadarko 66 2.39 33 99 17 17% 11,624 1,860,844 3,437,641 Permian 865 9.04 3,457 4,322 4 - 311,615 1,857,783 6,583,662 Southern Okla. Folded Belt 29 2.12 - 29 23 79% 19,370 654,710 1,327,324 II-G Partnership: Anadarko 66 5.08 33 99 17 17% 25,094 3,939,371 7,288,404 Permian 865 18.86 3,457 4,322 4 - 651,290 3,886,548 13,768,604 Southern Okla. Folded Belt 29 4.80 - 29 23 79% 43,905 1,484,410 3,008,441 II-H Partnership: Anadarko 66 1.21 28 94 17 18% 5,839 931,949 1,722,779 Permian 865 4.37 3,454 4,319 4 - 150,607 899,328 3,183,754 Southern Okla. Folded Belt 29 1.27 - 29 23 79% 11,594 392,317 794,946 - ---------------------- (1) Wells in which only a non-working interest is owned.
21 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 On September 12, 1988 Wolverine Exploration Company and certain other parties filed a lawsuit against Natural Gas Pipeline Company of America, Inc. and certain other parties in which the plaintiffs sought to recover damages as a result of an alleged breach of a gas contract. (Wolverine Exploration Company et al. v. Natural Gas Pipeline Company of America, et al., Case No. CJ-88-5522, District Court, Tulsa County, Oklahoma). The II-A, II-B, II-C, II-D, and II-E Partnerships own an interest in certain oil and gas properties which are subject to said lawsuit, and there is a possibility that said Partnerships may recover damages as a result of the alleged breach of the gas contract. The lawsuit involves legal and factual issues concerning alleged (i) take- or-pay deficiencies and (ii) gas pricing claims. In June 1995, a hearing was conducted before a three person arbitration panel and on September 6, 1995 the panel issued its determination and awarded damages to the plaintiffs in the matter. The Partnerships' estimated share of the awarded damages would increase the following Partnerships' assets by the following approximate amounts: Partnership Total Per Unit ----------- ---------- -------- II-A $1,300,000 $ 2.50 II-B 2,100,000 5.50 II-C 900,000 5.50 II-D 2,300,000 7.00 II-E 4,700,000 19.50 22 The above estimates may change for a number of reasons, including, but not limited to, an appeal of the award by the one remaining defendant, Texaco Inc. ("Texaco"), and any final award of expenses and post- judgment interest. Geodyne filed a petition with the Tulsa County District Court seeking confirmation of the arbitration award. A hearing on such petition was held on May 1 and 2, 1996. As of the date of this Annual Report, no ruling has been issued in the matter. Texaco, on the other hand, has sought to reopen its Chapter 11 bankruptcy proceedings in an effort to avoid enforcement of the arbitration award through the bankruptcy court. Texaco's motion to reopen the bankruptcy proceedings was granted and Texaco has filed an adversary proceeding seeking to void the arbitration. Geodyne and other parties have moved to dismiss the adversary complaint. In addition, both parties have moved for summary judgment in the bankruptcy proceedings. A hearing on the motions for summary judgment was heard in January 1997 and the parties are currently awaiting a ruling from the bankruptcy court on such motions. In the event the Partnerships ultimately receive any or all of the damages awarded, the funds will be included in the Partnerships' revenues for the quarter in which they are received. Limited Partners who hold Units at the time any related cash distribution is made, then, will benefit from any recovery associated with the litigation. On October 26, 1994 Geodyne and the Partnerships, among other parties, were named as defendants in a lawsuit alleging causes of action based on fraud, negligent misrepresentation, breach of fiduciary duty, breach of implied covenant, and breach of contract in connection with the offer and sale of limited partnership interests ("Units") in the Partnerships (Sidney Neidick et al. v. Geodyne Resources, Inc., et al., Case No. 94-052860, District Court of Harris County, Texas). The plaintiffs' petition alleged that the lawsuit was being brought as a class action on behalf of investors who purchased Units in the Partnerships. On June 7, 1995, Geodyne and the Partnerships were dismissed without prejudice as defendants in the matter. In addition, on June 7, 1995, the matter was certified as a class action. A class action notice was mailed on June 7, 1995 to all Limited Partners who are members of the class. 23 On November 23 and 25, 1994, Geodyne, PaineWebber Incorporated ("PaineWebber"), and certain other parties were named as defendants in two related lawsuits alleging misrepresentations made to induce investments in the Partnerships and asserting causes of action for common law fraud and deceit and unjust enrichment (Romine v. PaineWebber, Inc., et al, Case No. 94-CIV-8558, U. S. District Court, Southern District of New York and Romine v. PaineWebber, Inc., et al, Case No. 94-132844, Supreme Court of the State of New York, County of New York). The federal court case was later consolidated with other similar actions (to which Geodyne is not a party) under the title In Re: PaineWebber Limited Partnerships' Litigation and was certified as a class action on May 30, 1995 (the "Federal Partnership Class Action"). A class action notice was mailed on June 7, 1995 to all members of the class. The Federal Partnership Class Action also alleges violations of 18 U.S.C. Section 1962(c) and the Securities Exchange Act of 1934. Compensatory and punitive damages, interest, and costs have been requested in both matters. The amended complaint in the Federal Partnership Class Action no longer asserts any claim directly against Geodyne. On January 18, 1996, PaineWebber issued a press release indicating that it had reached an agreement to settle the pending Federal Partnership Class Action along with the Neidick matter referred to above (collectively, the "PaineWebber Partnership Class Actions"), along with a settlement with the SEC and an agreement to settle with various state securities regulators. On that date, PaineWebber paid $125 million into an interest bearing account as part of a memorandum of understanding in connection with the proposed settlement (the "Settlement Fund"). The Settlement Fund applies to claims related to both the Partnerships and certain other investment programs sold by PaineWebber. In addition, PaineWebber agreed to a SEC administrative order creating a capped $40 million fund (the "SEC Claims Fund"), which is to be distributed to eligible Limited Partners by an independent administrator (the "Claims Administrator"); a civil penalty of $5 million leveled by the SEC; and payments aggregating $5 million to state securities administrators. Such settlement is not an obligation of either the Partnerships or Geodyne and, accordingly, would not affect the financial statements of the Partnerships. In connection with the PaineWebber Partnership Class Actions, on July 17, 1996 the federal court entered a preliminary order regarding the settlement proceedings referred to above. Pursuant to that order, plaintiffs' counsel mailed to class members the Class Settlement Notice (the "Notice") and Proof of Claim. Eligible class members are generally those who purchased their Units through PaineWebber on or before December 31, 1992 and who have not (i) previously opted out of the Class, (ii) previously released PaineWebber, or (iii) finally adjudicated their claims against PaineWebber. 24 Plaintiffs' counsel will be responsible for allocating payments from the $125 million Settlement Fund previously funded by PaineWebber among eligible Limited Partners and investors in other unrelated PaineWebber partnerships in accordance with the settlement. The amount and date of any payment will vary depending upon many factors set forth in the Notice. It is currently expected that payments from the Settlement Fund will be made some time in 1997. In addition, eligible Limited Partners in the Partnerships who held their Units on June 3, 1996 may be entitled to certain additional payments from an escrow fund to which PaineWebber will make payments through May 30, 2001 if spot market oil and natural gas prices as reported by the New York Mercantile Exchange fall below certain thresholds set forth in the Notice (the "Pricing Guarantee"). The threshold prices used in the Pricing Guarantee are $18.00 per barrel of oil and $1.80 per Mcf of gas. Under the Notice, PaineWebber payments, if any, made pursuant to the Pricing Guarantee will be paid to Limited Partners of record on June 30, 1996 irrespective of whether they subsequently sell/dispose of their Units to third parties. The Pricing Guarantee does NOT attach to the Units as an attribute of ownership in the Partnerships and is not an obligation of either Geodyne or the Partnerships. A look back provision is also included in the settlement which may provide additional funds as of January 1, 2001 for eligible Limited Partners. Class members who sold their Units prior to June 30, 1996 will not be eligible for payments, if any, under the Pricing Guarantee or the look back provision. Eligible Limited Partners were required to timely execute and return a proof of claim by January 17, 1997 in order to participate in the settlement. 25 In connection with the SEC Claims Fund, on April 17, 1996, PaineWebber mailed a Notice and Claim Form to each Limited Partner who purchased Units in the Partnerships through PaineWebber from January 1, 1986 to December 31, 1992. Limited Partners are not eligible to participate in the claims process if they (i) previously reached a settlement with PaineWebber or (ii) had their direct investment claim resolved by a court or in arbitration. Participation in the claims process is optional, and does not prevent a Limited Partner from pursuing any other remedy against PaineWebber that may be available. Limited Partners had until October 22, 1996 to complete the claim form and return it to the Claims Administrator. The determination of whether a Limited Partner is entitled to a recovery under the SEC Claims Fund will be based on whether or not the Claims Administrator determines that the Limited Partner's investment in the Partnerships was suitable for him at the time of purchase. In addition, if the Limited Partner has opted out of the PaineWebber Partnership Class Action and has not already settled with PaineWebber or has had a claim resolved by a court or in arbitration, the Claims Administrator will also consider allegations that misrepresentations were made in connection with the sale of the Units. The General Partner has been advised that PaineWebber is awaiting confirmation of the settlement described above by the federal court judge. The deadline for such confirmation is currently scheduled for March 28, 1997, subject to an additional thirty day extension. 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 1996. 26 PART II ITEM 5. MARKET FOR UNITS AND RELATED LIMITED PARTNER MATTERS As of February 28, 1997, the number of Units outstanding and the approximate number of Limited Partners of record in the Partnerships were as follows: Numbers of Numbers of Partnership Units Limited Partners ----------- ---------- ---------------- II-A 484,283 4,423 II-B 361,719 2,817 II-C 154,621 1,450 II-D 314,878 3,077 II-E 228,821 2,333 II-F 171,400 1,745 II-G 372,189 2,685 II-H 91,711 1,277 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. However, the General Partner believes that these transfers 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 repur- chase 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 ----------------------- 1995 1996 1997 ------------------- ------------------ ---- 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st P/ship Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. - ------ ---- ---- ---- ---- ---- ---- ---- ---- ---- II-A $14 $15 $14 $13 $12 $11 $15 $13 $12 II-B 14 14 13 13 12 12 14 11 10 II-C 16 18 17 17 16 15 18 16 13 II-D 17 22 21 20 19 18 23 22 19 II-E 17 18 18 17 17 15 21 20 18 II-F 26 24 23 21 19 18 25 22 20 II-G 27 24 22 21 19 18 24 22 19 II-H 27 23 22 21 19 17 24 21 19 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 for the years ended December 31, 1995 and 1996 and for the first quarter of 1997: 28 Cash Distributions ------------------ 1995 ---------------------------------- 1st 2nd 3rd 4th P/ship Quarter Quarter Quarter Quarter ------ ------- ------- ------- ------- II-A $1.35 $1.03 $ .64 $ .81 II-B 1.37 1.09 .47 .28 II-C 2.10 1.33 .81 .39 II-D 1.62 1.41 .64 1.02 II-E 1.07 .57 .33 .35 II-F 1.52 1.31 1.52 1.58 II-G 1.48 1.33 1.54 1.45 II-H 1.47 1.31 1.47 1.36 1996 1997 ---------------------------------- ------- 1st 2nd 3rd 4th 1st P/ship Quarter Quarter Quarter Quarter Quarter ------ ------- ------- ------- ------- ------- II-A $ .97 $ .97 $1.27 $2.16(1) $1.58 II-B .46 .85 1.27 2.21(1) 1.47 II-C .60 1.40 1.39 2.05(1) 2.38(1) II-D 1.08 1.15 1.06 1.56(1) 2.52(1) II-E .80 1.24 1.02 1.39(1) 1.53(1) II-F 1.72 1.76 2.33 2.85(1) 2.39 II-G 1.64 1.68 2.20 2.78(1) 2.31 II-H 1.60 1.59 2.07 2.66(1) 2.24 - ---------------------- (1) Includes proceeds from the sale of oil and gas properties. 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." 29
Selected Financial Data II-A Partnership ---------------- 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $5,832,874 $ 4,671,555 $ 6,371,949 $ 5,445,632 $ 7,296,183 Net Income (Loss): Limited Partners 2,043,339 ( 715,678) 265,761 ( 723,059) 611,081 General Partner 156,483 81,747 145,993 84,771 173,679 Total 2,199,822 ( 633,931) 411,754 ( 638,288) 784,760 Limited Partners' Net Income (Loss) per Unit 4.22 ( 1.48) .55 ( 1.49) 1.26 Limited Partners' Cash Distributions per Unit 5.37 3.83 5.49 5.72 6.75 Total Assets 9,068,387 9,833,188 12,673,498 15,773,152 18,228,191 Partners' Capital (Deficit): Limited Partners 8,937,891 9,494,552 12,065,230 14,459,469 17,956,097 General Partner ( 342,481) ( 311,994) ( 297,741) ( 303,734) ( 240,427) Number of Units Outstanding 484,283 484,283 484,283 484,283 484,283
30
Selected Financial Data II-B Partnership ---------------- 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $4,179,527 $3,204,794 $4,703,629 $ 4,615,384 $ 5,974,270 Net Income (Loss): Limited Partners 1,329,755 ( 798,537) ( 574,825) ( 330,130) 1,083,345 General Partner 113,834 37,441 87,118 90,840 160,869 Total 1,443,589 ( 761,096) ( 487,707) ( 239,290) 1,244,214 Limited Partners' Net Income (Loss) per Unit 3.68 ( 2.21) ( 1.59) ( .91) 2.99 Limited Partners' Cash Distributions per Unit 4.79 3.21 5.98 6.64 8.76 Total Assets 5,579,977 6,237,427 8,302,058 11,063,368 13,629,059 Partners' Capital (Deficit): Limited Partners 5,552,662 5,955,907 7,914,444 10,654,269 13,387,529 General Partner ( 265,183) ( 246,438) ( 222,879) ( 196,997) ( 179,762) Number of Units Outstanding 361,719 361,719 361,719 361,719 361,719
31
Selected Financial Data II-C Partnership ---------------- 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $1,925,940 $1,519,937 $2,289,166 $1,896,565 $2,509,914 Net Income (Loss): Limited Partners 707,991 ( 337,547) ( 37,871) ( 36,537) 394,335 General Partner 53,569 20,538 52,546 39,050 68,653 Total 761,560 ( 317,009) 14,675 2,513 462,988 Limited Partners' Net Income (Loss) per Unit 4.58 ( 2.18) ( .24) ( .24) 2.55 Limited Partners' Cash Distributions per Unit 5.43 4.63 7.06 7.44 8.75 Total Assets 2,941,348 3,205,943 4,291,920 5,486,394 6,379,426 Partners' Capital (Deficit): Limited Partners 2,907,706 3,039,715 4,092,262 5,220,133 6,407,337 General Partner ( 115,619) ( 99,615) ( 84,153) ( 80,199) ( 64,354) Number of Units Outstanding 154,621 154,621 154,621 154,621 154,621 32
Selected Financial Data II-D Partnership ---------------- 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $4,329,102 $3,901,516 $4,849,160 $ 4,353,624 $ 5,816,604 Net Income (Loss): Limited Partners 1,270,858 ( 697,631) ( 193,308) ( 138,556) 471,887 General Partner 99,743 44,055 108,234 85,418 148,256 Total 1,370,601 ( 653,576) ( 85,074) ( 53,138) 620,143 Limited Partners' Net Income (Loss) per Unit 4.04 ( 2.22) ( .61) ( .44) 1.50 Limited Partners' Cash Distributions per Unit 4.85 4.69 6.25 9.29 9.75 Total Assets 6,953,850 7,291,164 9,571,883 11,687,932 14,528,961 Partners' Capital (Deficit): Limited Partners 6,627,744 6,884,886 9,057,517 11,215,825 14,278,065 General Partner ( 218,956) ( 143,473) ( 111,528) ( 135,262) ( 107,460) Number of Units Outstanding 314,878 314,878 314,878 314,878 314,878
33
Selected Financial Data II-E Partnership ---------------- 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $2,693,317 $2,297,409 $2,480,706 $ 2,572,564 $ 3,474,833 Net Income (Loss): Limited Partners 695,738 ( 1,279,244) ( 842,191) ( 523,678) ( 1,036,685) General Partner 66,720 9,448 43,060 49,510 64,978 Total 762,458 ( 1,269,796) ( 799,131) ( 474,168) ( 971,707) Limited Partners' Net Income (Loss) per Unit 3.04 ( 5.59) ( 3.68) ( 2.29) ( 4.53) Limited Partners' Cash Distributions per Unit 4.45 2.32 4.78 7.81 8.75 Total Assets 5,976,145 6,279,396 8,117,206 10,020,423 12,193,708 Partners' Capital (Deficit): Limited Partners 5,770,144 6,093,406 7,902,650 9,839,841 12,151,338 General Partner ( 147,595) ( 122,950) ( 104,398) ( 94,958) ( 80,783) Number of Units Outstanding 228,821 228,821 228,821 228,821 228,821 34
Selected Financial Data II-F Partnership ---------------- 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $2,433,313 $2,028,592 $2,316,564 $2,636,304 $3,244,904 Net Income (Loss): Limited Partners 1,108,389 ( 191,631) 19,524 122,048 223,113 General Partner 79,948 46,686 54,498 73,431 76,429 Total 1,188,337 ( 144,945) 74,022 195,479 299,542 Limited Partners' Net Income (Loss) per Unit 6.47 ( 1.12) .11 .71 1.30 Limited Partners' Cash Distributions Per Unit 8.66 5.93 9.21 8.87 11.25 Total Assets 5,312,077 5,733,459 6,967,432 8,544,148 9,973,253 Partners' Capital (Deficit): Limited Partners 5,315,174 5,691,785 6,898,416 8,458,892 9,857,985 General Partner ( 105,914) ( 84,377) ( 80,063) ( 52,561) ( 49,422) Number of Units Outstanding 171,400 171,400 171,400 171,400 171,400
35
Selected Financial Data II-G Partnership ---------------- 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $ 5,158,799 $ 4,348,087 $ 5,116,776 $ 5,581,221 $ 6,940,143 Net Income (Loss): Limited Partners 2,250,119 ( 714,189) ( 87,682) 130,828 434,796 General Partner 165,845 94,880 113,680 153,901 161,329 Total 2,415,964 ( 619,309) 25,998 284,729 596,125 Limited Partners' Net Income (Loss) per Unit 6.05 ( 1.92) ( .24) .35 1.17 Limit Partners' Cash Distributions per Unit 8.30 5.80 8.72 8.74 10.50 Total Assets 11,576,732 12,519,149 15,456,785 18,825,582 22,002,703 Partners' Capital (Deficit): Limited Partners 11,598,490 12,439,371 15,313,560 18,646,242 21,770,067 General Partner ( 244,312) ( 197,620) ( 181,500) ( 122,180) ( 104,626) Number of Units Outstanding 372,189 372,189 372,189 372,189 372,189
36
Selected Financial Data II-H Partnership ---------------- 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $1,230,222 $1,042,735 $1,208,886 $1,367,514 $1,653,431 Net Income (Loss): Limited Partners 519,143 ( 239,052) ( 47,630) 20,790 19,504 General Partner 38,792 21,532 26,955 36,610 37,211 Total 557,935 ( 217,520) ( 20,675) 57,400 56,715 Limited Partners' Net Income (Loss) per Unit 5.66 ( 2.61) ( .52) .23 .21 Limited Partners' Cash Distributions per Unit 7.93 5.61 8.39 8.67 9.75 Total Assets 2,790,245 3,024,656 3,790,149 4,618,128 5,416,166 Partners' Capital (Deficit): Limited Partners 2,795,040 3,002,897 3,756,949 4,574,579 5,349,318 General Partner ( 58,835) ( 47,635) ( 42,167) ( 29,122) ( 26,477) Number of Units Outstanding 91,711 91,711 91,711 91,711 91,711
37 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 very difficult. Concerning past trends, average yearly wellhead gas prices in the United States have been relatively volatile for a number of years. For the past ten years, such prices have generally been in the $1.40 to $2.00 per Mcf range, significantly below prices received in the early 1980s. Average gas prices in the latter part of 1996 and January 1997, however, were somewhat higher than those yearly averages. It is not known whether this was a short-term trend or an indicator of potentially higher average gas prices on a longer-term basis. 38 Substantially all of the Partnerships' gas reserves are being sold in the "spot market." Prices on the spot market are subject to wide seasonal and regional pricing fluctuations due to the highly competitive nature of the spot market. In addition, such spot market sales are generally short-term in nature and are dependent upon the obtaining of transportation services provided by pipelines. Spot prices for the Partnerships' gas increased from approximately $2.00 per Mcf at December 31, 1995 to approximately $3.57 per Mcf at December 31, 1996. Such prices were on an MMBTU basis and differ from the prices actually received by the Partnerships due to transportation and marketing costs, BTU adjustments, and regional price and quality differences. Due to global consumption and supply trends over the last several months, oil prices have recently been higher than the yearly average prices of the late to mid-1980s and early 1990s. It is not known whether this trend will continue. Prices for the Partnerships' oil increased from approximately $18.50 per barrel at December 31, 1995 to approximately $23.75 per barrel at December 31, 1996. Future prices for both oil and gas will likely be different from (and may be lower than) the prices in effect on December 31, 1996. Primarily due to heating season demand, year-end prices in many past years have tended to be higher, and in some cases significantly higher, than the yearly average price actually received by the Partnerships for at least the following year. In particular, it should be noted that December 31, 1996 prices were much higher than year-end prices for the last several years and substantially higher than the average prices received in each of the last several years. It is not possible to predict whether the December 1996 pricing level is indicative of a new trend toward higher energy prices or a short- term deviation from the recent history of low to moderate prices; therefore, management is unable to predict whether future oil and gas prices will (i) stabilize, (ii) increase, or (iii) decrease. Results of Operations 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." 39 Effective October 1, 1995, the Partnerships adopted the requirements of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long Lived Assets and Assets Held for Disposal", which is intended to establish more consistent accounting standards for measuring the recoverability of long-lived assets. SFAS No. 121 requires successful efforts companies, like the Partnerships, to evaluate the recoverability of the carrying costs of their proved oil and gas properties for each field, rather than for the Partnerships' properties as a whole as previously allowed by the SEC. See Note 1 to the Partnerships' financial statements, included in Item 8 of this Annual Report for a further description of this impairment policy. As a result of the Partnerships' adoption of SFAS No. 121, the Partnerships recorded a non-cash charge against earnings (impairment provision) during the fourth quarter of 1995 as follows: Partnership Amount ----------- -------- II-A $994,919 II-B 450,601 II-C 245,324 II-D 370,172 II-E 465,045 II-F 312,270 II-G 839,228 II-H 259,808 No such charge was recorded for any Partnership for the year ended December 31, 1996 under SFAS No. 121 or during the year ended December 31, 1994 pursuant to the Partnerships' prior impairment policy. 40 Subsequent to December 31, 1996, the oil and gas industry has seen a drop in oil and gas prices. This drop is a function of the cyclical nature of oil and gas prices as discussed under the heading "Competition and Marketing" in Item 1 of this Annual Report. The Partnerships' reserves were determined at December 31, 1996 using oil and gas prices of approximately $23.75 per barrel and $3.57 per Mcf, respectively. As of the date of this Annual Report, oil and gas prices received by the Partnerships have decreased to approximately $19.00 per barrel and $1.60 per Mcf, respectively (the "Filing Date Prices"). If the Filing Date Prices, as opposed to December 31, 1996 prices, were used in calculating the standardized measure of discounted future net cash flows of the Partnerships' proved oil and gas reserves as of December 31, 1996, as contained in Note 4 to the Partnerships' financial statements included in Item 8 of this Annual Report, the value assigned to the Partnerships' oil and gas reserves would have been significantly lower. In addition, using the Filing Date Prices to determine the recoverability of the of oil and gas reserves would have required impairment provisions of the following approximate amounts at December 31, 1996: Partnership Amount ----------- -------- II-A $224,000 II-B 135,000 II-C 37,000 II-D 144,000 II-E 318,000 II-F 209,000 II-G 490,000 II-H 126,000 If the Filing Date Prices are in effect on March 31, 1997, the above impairment provisions will be reflected in the Partnerships' financial statements as of March 31, 1997. Impairment provisions do not impact the Partnerships cash flows from operating activities; however, they do impact the amount of General Partner and Limited Partner capital. The risk that the Partnerships will be required to record further impairment provisions in the future, beyond those noted above, increases when oil and gas prices are depressed. Accordingly, the II- A Partnership has six fields, the II-B Partnership has three fields, the II-C and II-H Partnerships have four fields, the II-D Partnership has five fields, the II-E Partnership has seven fields, the II-F Partnership has two fields, and the II-G Partnership has one field in which it is reasonably possible that additional impairment provisions will be recorded in the near term if oil and gas prices decrease below the Filing Date Prices. 41 II-A Partnership ---------------- Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 ------------------------------------- Total oil and gas sales increased $1,161,319 (24.9%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Of this increase, approximately $365,000 and $1,146,000, respectively, were related to increases in the average prices of oil and gas sold, partially offset by a decrease of approximately $290,000 related to a decrease in volumes of oil sold. Volumes of oil and gas sold decreased 17,190 barrels and 31,226 Mcf, respectively, for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Average oil and gas prices increased to $20.40 per barrel and $2.15 per Mcf, respectively, for the year ended December 31, 1996 from $16.86 per barrel and $1.49 per Mcf, respectively, for the year ended December 31, 1995. Oil and gas production expenses (including lease operating expenses and production taxes) increased $94,776 (5.1%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This increase resulted primarily from an increase in production taxes associated with the increase in oil and gas sales discussed above. As a percentage of oil and gas sales, these expenses decreased to 33.3% for the year ended December 31, 1996 from 39.5% for the year ended December 31, 1995. This percentage decrease was primarily due to the increase in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995, partially offset by the dollar increase in production expenses discussed above. Depreciation, depletion, and amortization of oil and gas properties decreased $644,559 (35.0%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) an upward revision in the estimate of remaining gas reserves at December 31, 1996, (ii) the decrease in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995, and (iii) a reduction in the depletable base of oil and gas properties due to the impairment provision recorded in 1995 as discussed below. As a percentage of oil and gas sales, this expense decreased to 20.5% for the year ended December 31, 1996 from 39.4% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. 42 As set forth under "Results of Operations" above, the II-A Partnership recognized a non-cash charge against earnings of $994,919 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-A Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1996. General and administrative expenses decreased $34,887 (5.3%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from a decrease in legal fees during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 10.6% for the year ended December 31, 1996 from 14.0% for the year ended December 31, 1995. This percentage decrease was primarily due to the increase in oil and gas sales discussed above. The Limited Partners in the II-A Partnership have received cash distributions through December 31, 1996 of $38,826,357 or 80.2% of Limited Partner capital contributions. Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 ------------------------------------- Total oil and gas sales decreased $1,700,394 (26.7%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Of this decrease, approximately $451,000 and $843,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $619,000 was related to a decrease in the average price of gas sold, partially offset by an increase of approximately $210,000 related to an increase in the average price of oil sold. Volumes of oil and gas sold decreased 29,861 barrels and 458,342 Mcf, respectively, for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Volumes of oil sold decreased primarily due to (i) adjustments made by a purchaser in 1994 related to oil sold in prior periods, (ii) repairs resulting in the shutting-in of certain wells during the year ended December 31, 1995, and (iii) normal declines in production on several wells during the year ended December 31, 1995. Volumes of gas sold decreased primarily due to (i) several wells being shut-in during the year ended December 31, 1995 and (ii) normal declines in production on several wells. Average oil prices increased to $16.86 per barrel for the year ended December 31, 1995 from $15.12 per barrel for the year ended December 31, 1994. Average gas prices decreased to $1.49 per Mcf for the year ended December 31, 1995 from $1.84 per Mcf for the year ended December 31, 1994. 43 Oil and gas production expenses (including lease operating expenses and production taxes) decreased $537,103 (22.5%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily due to the decrease in volumes of oil and gas sold. As a percentage of oil and gas sales, these expenses increased slightly to 39.5% for the year ended December 31, 1995 from 37.4% for the year ended December 31, 1994. This percentage increase was primarily due to the decrease in the average price of gas sold during the year ended December 31, 1995 as compared to the year ended December 31, 1994. Depreciation, depletion, and amortization of oil and gas properties decreased $1,293,969 (41.3%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily a result of the decrease in volumes of oil and gas sold during the year ended December 31, 1995 as compared to the year ended December 31, 1994 and upward revisions of previous reserve estimates at December 31, 1995. As a percentage of oil and gas sales, this expense decreased to 39.4% for the year ended December 31, 1995 from 49.2% for the year ended December 31, 1994. This percentage decrease was primarily due to the increase in the estimate of remaining reserves at December 31, 1995. As set forth under "Results of Operations" above, the II-A Partnership recognized a non-cash charge against earnings of $994,919 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-A Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1994 under the II-A Partnership's prior impairment policy. General and administrative expenses increased $87,983 (15.5%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This dollar increase resulted primarily from an increase in legal fees associated with a gas contract arbitration matter the II-A Partnership is pursuing against Texaco. See "Item 3. Legal Proceedings." As a percentage of oil and gas sales, this expense increased to 14.0% for the year ended December 31, 1995 from 8.9% for the year ended December 31, 1994. This percentage increase was primarily due to the decrease in oil and gas sales discussed above. 44 II-B Partnership ---------------- Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 ------------------------------------- Total oil and gas sales increased $974,733 (30.4%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Of this increase, approximately $320,000 and $744,000, respectively, were related to increases in the average prices of oil and gas sold, partially offset by a decrease of approximately $114,000 related to a decrease in volumes of oil sold. Volumes of oil sold decreased 6,870 barrels, while volumes of gas sold increased 14,479 Mcf for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Average oil and gas prices increased to $20.92 per barrel and $2.15 per Mcf, respectively, for the year ended December 31, 1996 from $16.62 per barrel and $1.54 per Mcf, respectively, for the year ended December 31, 1995. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $360,065 (23.6%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) workover expenses incurred on two wells during the year ended December 31, 1995 in order to improve the recovery of reserves, (ii) the sale of one well during the year ended December 31, 1995, and (iii) a decrease in general repair and maintenance expenses incurred on several wells during the year ended December 31, 1996 as compared to the year ended December 31, 1995, partially offset by an increase in production taxes due to higher oil and gas sales in 1996. As a percentage of oil and gas sales, these expenses decreased to 27.9% for the year ended December 31, 1996 from 47.6% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in production expenses discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. 45 Depreciation, depletion, and amortization of oil and gas properties decreased $374,555 (26.1%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) an upward revision in the estimate of remaining gas reserves at December 31, 1996 and (ii) a reduction in the depletable base of oil and gas properties due to the impairment provision recorded in 1995 as discussed below. As a percentage of oil and gas sales, this expense decreased to 25.4% for the year ended December 31, 1996 from 44.8% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As set forth under "Results of Operations" above, the II-B Partnership recognized a non-cash charge against earnings of $450,601 for the year ended December 31, 1995. This impairment provision was necessary due to unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-B Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1996. General and administrative expenses decreased $77,761 (13.5%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from a decrease in legal fees during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 11.9% for the year ended December 31, 1996 from 17.9% for the year ended December 31, 1995. This percentage decrease was primarily due to the increase in oil and gas sales discussed above. The Limited Partners in the II-B Partnership have received cash distributions through December 31, 1996 of $27,633,916 or 76.4% of Limited Partner capital contributions. 46 Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 ------------------------------------- Total oil and gas sales decreased $1,498,835 (31.9%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Of this decrease, approximately $451,000 and $814,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $350,000 was related to a decrease in the average price of gas sold. Volumes of oil and gas sold decreased 29,795 barrels and 444,573 Mcf, respectively, for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Volumes of oil sold decreased primarily due to (i) repairs resulting in the shutting- in of certain wells, (ii) the abandonment of one significant well, and (iii) normal declines in production on several wells during the year ended December 31, 1995. Volumes of gas sold decreased primarily due to (i) several wells being shut-in and (ii) normal declines in production on several wells during the year ended December 31, 1995. Average oil prices increased to $16.62 per barrel for the year ended December 31, 1995 from $15.15 per barrel for the year ended December 31, 1994. Average gas prices decreased to $1.54 per Mcf for the year ended December 31, 1995 from $1.83 per Mcf for the year ended December 31, 1994. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $490,194 (24.3%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily due to the decrease in volumes of oil and gas sold for the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses increased to 47.6% for the year ended December 31, 1995 from 42.8% for the year ended December 31, 1994. This percentage increase was primarily due to the decrease in the average price of gas sold for the year ended December 31, 1995. Depreciation, depletion, and amortization of oil and gas properties decreased $1,350,803 (48.5%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily a result of the decrease in volumes of oil and gas sold during the year ended December 31, 1995 and upward revisions of previous reserve estimates at December 31, 1995. As a percentage of oil and gas sales, this expense decreased to 44.8% for the year ended December 31, 1995 from 59.3% for the year ended December 31, 1994. This percentage decrease was primarily due to the increase in the estimate of remaining reserves at December 31, 1995. 47 As set forth under "Results of Operations" above, the II-B Partnership recognized a non-cash charge against earnings of $450,601 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-B Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1994 under the II-B Partnership's prior impairment policy. General and administrative expenses increased $150,179 (35.4%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This dollar increase resulted primarily from an increase in legal fees associated with a gas contract arbitration matter the II-B Partnership is pursuing against Texaco. See "Item 3. Legal Proceedings." As a percentage of oil and gas sales, this expense increased to 17.9% for the year ended December 31, 1995 from 9.0% for the year ended December 31, 1994. This percentage increase was primarily due to the decrease in oil and gas sales during the year ended December 31, 1995. II-C Partnership ---------------- Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 ------------------------------------- Total oil and gas sales increased $406,003 (26.7%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Of this increase, approximately $106,000 and $398,000, respectively, were related to increases in the average prices of oil and gas sold, partially offset by a decrease of approximately $76,000 related to a decrease in volumes of gas sold. Volumes of oil and gas sold decreased 1,290 barrels and 51,933 Mcf, respectively, for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Average oil and gas prices increased to $21.14 per barrel and $2.04 per Mcf, respectively, for the year ended December 31, 1996 from $16.92 per barrel and $1.46 per Mcf, respectively, for the year ended December 31, 1995. 48 Oil and gas production expenses (including lease operating expenses and production taxes) decreased $95,721 (13.7%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) workover expenses incurred on two wells during the year ended December 31, 1995 in order to improve the recovery of reserves and (ii) a decrease in general repair and maintenance expenses incurred on several wells during the year ended December 31, 1996 as compared to the year ended December 31, 1995, partially offset by an increase in production taxes associated with higher oil and gas sales in 1996. As a percentage of oil and gas sales, these expenses decreased to 31.3% for the year ended December 31, 1996 from 46.0% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in production expenses discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. Depreciation, depletion, and amortization of oil and gas properties decreased $266,527 (40.1%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) an upward revision in the estimate of remaining gas reserves at December 31, 1996, (ii) the decrease in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995, and (iii) a reduction in the depletable base of oil and gas properties due to the impairment provision recorded in 1995 as discussed below. As a percentage of oil and gas sales, this expense decreased to 20.7% for the year ended December 31, 1996 from 43.7% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As set forth under "Results of Operations" above, the II-C Partnership recognized a non-cash charge against earnings of $245,324 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-C Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1996. 49 General and administrative expenses decreased $34,462 (13.8%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from a decrease in legal fees during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 11.1% for the year ended December 31, 1996 from 16.4% for the year ended December 31, 1995. This percentage decrease was primarily due to the increase in oil and gas sales discussed above. The Limited Partners in the II-C Partnership have received cash distributions through December 31, 1996 of $11,922,686 or 77.1% of Limited Partner capital contributions. Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 ------------------------------------- Total oil and gas sales decreased $769,229 (33.6%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Of this decrease, approximately $121,000 and $429,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $251,000 was related to a decrease in the average price of gas sold. Volumes of oil and gas sold decreased 7,691 barrels and 238,375 Mcf, respectively, for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Volumes of oil sold decreased primarily due to (i) repairs resulting in the shutting- in of certain wells, (ii) the sale of several significant wells, and (iii) normal declines in production on several wells during the year ended December 31, 1995. Volumes of gas sold decreased primarily due to (i) several wells being shut-in during the year ended December 31, 1995 and (ii) normal declines in production on several wells during the year ended December 31, 1995. Average oil prices increased to $16.92 per barrel for the year ended December 31, 1995 from $15.67 per barrel for the year ended December 31, 1994. Average gas prices decreased to $1.46 per Mcf for the year ended December 31, 1995 from $1.80 per Mcf for the year ended December 31, 1994. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $121,209 (14.8%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily due to the decrease in volumes of oil and gas sold during the year ended December 31, 1995, partially offset by an increase in expenses related to workovers, production facilities, and salt water disposal incurred during the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses increased to 46.0% for the year ended December 31, 1995 from 35.8% for the year ended December 31, 1994. This percentage increase was primarily due to the decrease in the average price of gas sold during the year ended December 31, 1995. 50 Depreciation, depletion, and amortization of oil and gas properties decreased $630,923 (48.7%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily a result of the decrease in volumes of oil and gas sold during the year ended December 31, 1995 and upward revisions of previous reserve estimates at December 31, 1995. As a percentage of oil and gas sales, this expense decreased to 43.7% for the year ended December 31, 1995 from 56.6% for the year ended December 31, 1994. This percentage decrease was primarily due to the increase in the estimate of remaining reserves at December 31, 1995, partially offset by the decrease in the average price of gas sold during the year ended December 31, 1995. As set forth under "Results of Operations" above, the II-C Partnership recognized a non-cash charge against earnings of $245,324 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-C Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1994 under the II-C Partnership's prior impairment policy. General and administrative expenses increased $65,190 (35.5%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This dollar increase resulted primarily from an increase in legal fees associated with a gas contract arbitration matter the II-C Partnership is pursuing against Texaco. See "Item 3. Legal Proceedings." As a percentage of oil and gas sales, this expense increased to 16.4% for the year ended December 31, 1995 from 8.0% for the year ended December 31, 1994. This percentage increase was primarily due to the dollar increase in general and administrative expenses and the decrease in oil and gas sales, both of which occurred during the year ended December 31, 1995. 51 II-D Partnership ---------------- Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 ------------------------------------- Total oil and gas sales increased $427,586 (11.0%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Of this increase, approximately $242,000 and $901,000, respectively, were related to increases in the average prices of oil and gas sold, partially offset by decreases of approximately $367,000 and $344,000, respectively, related to decreases in volumes of oil and gas sold and a $35,000 adjustment due to a net profits interest settlement. Volumes of oil and gas sold decreased 22,396 barrels and 268,658 Mcf, respectively, for the year ended December 31, 1996 as compared to the year ended December 31, 1995. The decrease in volumes of oil sold resulted primarily from (i) the sale of four significant oil producing wells during the year ended December 31, 1996, (ii) the shutting-in of one well during the year ended December 31, 1996 in order to perform a workover to improve the recovery of reserves, and (iii) normal declines in production due to diminished oil reserves on two wells during the year ended December 31, 1996 as compared to the year ended December 31, 1995. Average oil and gas prices increased to $20.03 per barrel and $1.83 per Mcf, respectively, for the year ended December 31, 1996 from $16.39 per barrel and $1.28 per Mcf, respectively, for the year ended December 31, 1995. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $335,345 (15.7%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from decreases in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 41.6% for the year ended December 31, 1996 from 54.8% for the year ended December 31, 1995. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. 52 Depreciation, depletion, and amortization of oil and gas properties decreased $747,734 (48.3%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) an upward revision in the estimate of remaining gas reserves at December 31, 1996, (ii) the decrease in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995, and (iii) a reduction in the depletable base of oil and gas properties due to the impairment provision recorded in 1995 as discussed below. As a percentage of oil and gas sales, this expense decreased to 18.5% for the year ended December 31, 1996 from 39.7% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As set forth under "Results of Operations" above, the II-D Partnership recognized a non-cash charge against earnings of $370,172 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-D Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1996. General and administrative expenses decreased $89,014 (16.4%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from a decrease in legal fees during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 10.5% for the year ended December 31, 1996 from 13.9% for the year ended December 31, 1995. This percentage decrease was primarily due to the increase in oil and gas sales discussed above. The Limited Partners in the II-D Partnership have received cash distributions through December 31, 1996 of $22,737,903 or 72.2% of Limited Partner capital contributions. 53 Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 ------------------------------------- Total oil and gas sales decreased $947,644 (19.5%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Of this decrease, approximately $161,000 was related to a decrease in volumes of gas sold and approximately $839,000 was related to a decrease in the average price of gas sold, partially offset by an increase of approximately $112,000 related to an increase in the average price of oil sold. Volumes of oil and gas sold decreased 4,697 barrels and 93,713 Mcf, respectively, for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Average oil prices increased to $16.39 per barrel for the year ended December 31, 1995 from $15.13 per barrel for the year ended December 31, 1994. Average gas prices decreased to $1.28 per Mcf for the year December 31, 1995 from $1.72 per Mcf for the year ended December 31, 1994. Oil and gas production expenses (including lease operating expenses and production taxes) increased $400,483 (23.1%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This increase was primarily due to lease operating expense adjustments recognized during the year ended December 31, 1994 associated with changes in estimates by third party operators of gas balancing positions on certain wells, partially offset by the decrease in volumes of oil and gas sold during the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses increased to 54.8% for the year ended December 31, 1995 from 35.8% for the year ended December 31, 1994. This percentage increase was primarily a result of the dollar increase in oil and gas production expenses, partially offset by the decrease in the average price of gas sold during the year ended December 31, 1995. Depreciation, depletion, and amortization of oil and gas properties decreased $1,264,015 (44.9%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily a result of the decrease in volumes of oil and gas sold and upward revisions of previous reserve estimates at December 31, 1995. As a percentage of oil and gas sales, this expense decreased to 39.7% for the year ended December 31, 1995 from 58.0% for the year ended December 31, 1994. This percentage decrease was primarily due to the increase in the estimate of remaining reserves at December 31, 1995, partially offset by the decrease in the average price of gas sold during the year ended December 31, 1995. 54 As set forth under "Results of Operations" above, the II-D Partnership recognized a non-cash charge against earnings of $370,172 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-D Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1994 under the II-D Partnership's prior impairment policy. General and administrative expenses increased $144,656 (36.3%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This dollar increase resulted primarily from an increase in legal fees associated with a gas contract arbitration matter the II-D Partnership is pursuing against Texaco. See "Item 3. Legal Proceedings." As a percentage of oil and gas sales, this expense increased to 13.9% for the year ended December 31, 1995 from 8.2% for the year ended December 31, 1994. This percentage increase was primarily due to the dollar increase in general and administrative expenses and the decrease in oil and gas sales, both of which occurred during the year ended December 31, 1995. II-E Partnership ---------------- Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 ------------------------------------- Total oil and gas sales increased $395,908 (17.2%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Of this increase, approximately $192,000 and $465,000, respectively, were related to increases in the average prices of oil and gas sold, partially offset by decreases of approximately $166,000 and $100,000, respectively, related to decreases in volumes of oil and gas sold. Volumes of oil and gas sold decreased 9,876 barrels and 76,005 Mcf, respectively, for the year ended December 31, 1996 as compared to the year ended December 31, 1995. The decrease in volumes of oil sold resulted primarily from (i) the sale of one significant oil producing well during the year ended December 31, 1996 and (ii) normal declines in production due to diminished oil reserves on several wells during the year ended December 31, 1996 as compared to the year ended December 31, 1995. Average oil and gas prices increased to $20.37 per barrel and $1.85 per Mcf, respectively, for the year ended December 31, 1996 from $16.81 per barrel and $1.31 per Mcf, respectively, for the year ended December 31, 1995. 55 Oil and gas production expenses (including lease operating expenses and production taxes) decreased $235,430 (20.5%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) a decrease in production expenses due to the sale of one well during the year ended December 31, 1996, (ii) abandonment expenses incurred on one well during the year ended December 31, 1995, (iii) workover expenses incurred on two wells during the year ended December 31, 1995 in order to improve the recovery of reserves, and (iv) a decrease in general repair and maintenance expenses incurred on several wells during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 33.9% for the year ended December 31, 1996 from 50.0% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in production expenses discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. Depreciation, depletion, and amortization of oil and gas properties decreased $629,892 (46.4%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) an upward revision in the estimate of remaining gas reserves at December 31, 1996, (ii) the decrease in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995, and (iii) a reduction in the depletable base of oil and gas properties due to the impairment provision recorded in 1995 as discussed below. As a percentage of oil and gas sales, this expense decreased to 29.3% for the year ended December 31, 1996 from 59.1% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As set forth under "Results of Operations" above, the II-E Partnership recognized a non-cash charge against earnings of $465,045 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-E Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1996. 56 General and administrative expenses decreased $199,100 (32.3%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from a decrease in legal fees during the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 15.5% for the year ended December 31, 1996 from 26.8% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in general and administrative expenses and the increase in oil and gas sales discussed above. The Limited Partners in the II-E Partnership have received cash distributions through December 31, 1996 of $13,425,574 or 58.7% of Limited Partner capital contributions. Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 ------------------------------------- Total oil and gas sales decreased $183,297 (7.4%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Of this decrease, approximately $46,000 and $366,000, respectively, were related to a decrease in volumes of oil sold and a decrease in the average price of gas sold, partially offset by increases of approximately $143,000 and $87,000, respectively, related to an increase in volumes of gas sold and an increase in the average price of oil sold. Volumes of oil sold decreased 2,976 barrels and volumes of gas sold increased 84,152 Mcf for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Average oil prices increased to $16.81 per barrel for the year ended December 31, 1995 from $15.45 per barrel for the year ended December 31, 1994. Average gas prices decreased to $1.31 per Mcf for the year ended December 31, 1995 from $1.70 per Mcf for the year ended December 31, 1994. 57 Oil and gas production expenses (including lease operating expenses and production taxes) increased $204,609 (21.7%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This increase was primarily due to (i) a lease operating expense adjustment recognized during the year ended December 31, 1994 associated with changes in estimates by the third party operator of gas balancing positions on certain wells, (ii) an increase in volumes of gas sold during the year ended December 31, 1995, (iii) abandonment expenses incurred on one well during the year ended December 31, 1995, and (iv) workover expenses incurred on two wells during the year ended December 31, 1995 in order to improve the recovery of reserves. As a percentage of oil and gas sales, these expenses increased to 50.0% for the year ended December 31, 1995 from 38.0% for the year ended December 31, 1994. This percentage increase was primarily a result of the decrease in the average price of gas sold during the year ended December 31, 1995. Depreciation, depletion, and amortization of oil and gas properties decreased $717,013 (34.5%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily a result of the decrease in volumes of oil sold and upward revisions of previous reserve estimates at December 31, 1995, partially offset by the increase in volumes of gas sold during the same period. As a percentage of oil and gas sales, this expense decreased to 59.1% for the year ended December 31, 1995 from 83.7% for the year ended December 31, 1994. This percentage decrease was primarily due to the increase in the estimate of remaining reserves discussed above. As set forth under "Results of Operations" above, the II-E Partnership recognized a non-cash charge against earnings of $465,045 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-E Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1994 under the II-E Partnership's prior impairment policy. General and administrative expenses increased $344,472 (126.7%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This dollar increase resulted primarily from an increase in legal fees associated with a gas contract arbitration matter the II-E Partnership is pursuing against Texaco. See "Item 3. Legal Proceedings." As a percentage of oil and gas sales, this expense increased to 26.8% for the year ended December 31, 1995 from 11.0% for the year ended December 31, 1994. This percentage increase was primarily due to the dollar increase in general and administrative expenses and the decrease in oil and gas sales discussed above. 58 II-F Partnership ---------------- Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 ------------------------------------- Total oil and gas sales increased $404,721 (20.0%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Of this increase, approximately $177,000 and $457,000, respectively, were related to increases in the average prices of oil and gas sold, partially offset by decreases of approximately $119,000 and $114,000, respectively, related to decreases in volumes of oil and gas sold. Volumes of oil and gas sold decreased 7,378 barrels and 84,102 Mcf, respectively, for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Average oil and gas prices increased to $19.83 per barrel and $1.96 per Mcf, respectively, for the year ended December 31, 1996 from $16.10 per barrel and $1.36 per Mcf, respectively, for the year ended December 31, 1995. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $17,675 (2.7%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from decreases in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995, partially offset by an increase in production taxes associated with the increase in oil and gas sales discussed above. As a percentage of oil and gas sales, these expenses decreased to 26.5% for the year ended December 31, 1996 from 32.6% for the year ended December 31, 1995. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. Depreciation, depletion, and amortization of oil and gas properties decreased $505,018 (48.7%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) an upward revision in the estimate of remaining gas reserves at December 31, 1996, (ii) the decrease in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995, and (iii) a reduction in the depletable base of oil and gas properties due to the impairment provision recorded in 1995 as discussed below. As a percentage of oil and gas sales, this expense decreased to 21.8% for the year ended December 31, 1996 from 51.1% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. 59 As set forth under "Results of Operations" above, the II-F Partnership recognized a non-cash charge against earnings of $312,270 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-F Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1996. General and administrative expenses remained relatively constant for the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 8.5% for the year ended December 31, 1996 from 9.9% for the year ended December 31, 1995. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. The Limited Partners in the II-F Partnership have received cash distributions through December 31, 1996 of $13,042,051 or 76.1% of Limited Partner capital contributions. Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 ------------------------------------- Total oil and gas sales decreased $287,972 (12.4%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Of this decrease, approximately $133,000 was related to a decrease in volumes of oil sold and approximately $237,000 was related to a decrease in the average price of gas sold, partially offset by an increase of approximately $68,000 related to an increase in the average price of oil sold. Volumes of oil sold decreased 8,950 barrels and volumes of gas sold increased 12,176 Mcf for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Average oil prices increased to $16.10 per barrel for the year ended December 31, 1995 from $14.85 per barrel for the year ended December 31, 1994. Average gas prices decreased to $1.36 per Mcf for the year ended December 31, 1995 from $1.64 per Mcf for the year ended December 31, 1994. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $115,977 (14.9%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily due to the decrease in volumes of oil sold coupled with a decrease in expenses related to workovers, repairs, and power and fuel during the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses remained relatively constant at 32.6% for the year ended December 31, 1995 as compared to 33.6% for the year ended December 31, 1994. 60 Depreciation, depletion, and amortization of oil and gas properties decreased $233,854 (18.4%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily a result of the decrease in volumes of oil sold during the year ended December 31, 1995 and upward revisions of previous reserve estimates at December 31, 1995. As a percentage of oil and gas sales, this expense decreased to 51.1% for the year ended December 31, 1995 from 54.8% for the year ended December 31, 1994. This percentage decrease was primarily due to the increase in the estimate of remaining reserves discussed above, partially offset by the decrease in the average price of gas sold during the year ended December 31, 1995. As set forth under "Results of Operations" above, the II-F Partnership recognized a non-cash charge against earnings of $312,270 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-F Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1994 under the II-F Partnership's prior impairment policy. General and administrative expenses remained relatively constant for the year ended December 31, 1995 as compared to the similar period in 1994. As a percentage of oil and gas sales, these expenses increased slightly to 9.9% for the year ended December 31, 1995 from 8.8% for the year ended December 31, 1994. This percentage increase was primarily due to the decrease in oil and gas sales during the year ended December 31, 1995 as compared to the year ended December 31, 1994. 61 II-G Partnership ---------------- Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 ------------------------------------- Total oil and gas sales increased $810,712 (18.6%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Of this increase, approximately $370,000 and $976,000, respectively, were related to increases in the average prices of oil and gas sold, partially offset by decreases of approximately $252,000 and $281,000, respectively, related to decreases in volumes of oil and gas sold. Volumes of oil and gas sold decreased 15,613 barrels and 206,385 Mcf, respectively, for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Average oil and gas prices increased to $19.83 per barrel and $1.96 per Mcf, respectively, for the year ended December 31, 1996 from $16.11 per barrel and $1.36 per Mcf, respectively, for the year ended December 31, 1995. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $69,103 (4.7%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from decreases in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995, partially offset by an increase in production taxes associated with the increase in oil and gas sales discussed above. As a percentage of oil and gas sales, these expenses decreased to 26.9% for the year ended December 31, 1996 from 33.5% for the year ended December 31, 1995. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. Depreciation, depletion, and amortization of oil and gas properties decreased $1,143,679 (49.6%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) an upward revision in the estimate of remaining gas reserves at December 31, 1996, (ii) the decrease in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995, and (iii) a reduction in the depletable base of oil and gas properties due to the impairment provision recorded in 1995 as discussed below. As a percentage of oil and gas sales, this expense decreased to 22.5% for the year ended December 31, 1996 from 53.1% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. 62 As set forth under "Results of Operations" above, the II-G Partnership recognized a non-cash charge against earnings of $839,228 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-G Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1996. General and administrative expenses remained relatively constant for the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses remained relatively constant at 8.7% for the year ended December 31, 1996 as compared to 10.1% for the year ended December 31, 1995. The Limited Partners in the II-G Partnership have received cash distributions through December 31, 1996 of $26,638,371 or 71.6% of Limited Partner capital contributions. Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 ------------------------------------- Total oil and gas sales decreased $768,689 (15.0%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Of this decrease, approximately $280,000 and $145,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $495,000 was related to a decrease in the average price of gas sold, partially offset by an increase of approximately $144,000 related to an increase in the average price of oil sold. Volumes of oil and gas sold decreased 18,828 barrels and 88,781 Mcf, respectively, for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Average oil prices increased to $16.11 per barrel for the year ended December 31, 1995 from $14.86 per barrel for the year ended December 31, 1994. Average gas prices decreased to $1.36 per Mcf for the year ended December 31, 1995 from $1.63 per Mcf for the year ended December 31, 1994. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $372,201 (20.4%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily due to the decrease in volumes of oil and gas sold coupled with a decrease in expenses related to workovers and production facilities during the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 33.5% for the year ended December 31, 1995 from 35.7% for the year ended December 31, 1994. This percentage decrease was primarily due to the decrease in workover expenses during the year ended December 31, 1995 as compared to the year ended December 31, 1994. 63 Depreciation, depletion, and amortization of oil and gas properties decreased $502,587 (17.9%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily a result of the decrease in volumes of oil and gas sold during the year ended December 31, 1995 and upward revisions of previous reserve estimates at December 31, 1995. As a percentage of oil and gas sales, this expense decreased to 53.1% for the year ended December 31, 1995 from 54.9% for the year ended December 31, 1994. This percentage decrease was primarily due to the upward revision in reserve estimates discussed above, partially offset by the decrease in the average price of gas sold during the year ended December 31, 1995 as compared to the year ended December 31, 1994. As set forth under "Results of Operations" above, the II-G Partnership recognized a non-cash charge against earnings of $839,228 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-G Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1994 under the II-G Partnership's prior impairment policy. General and administrative expenses remained relatively constant for the year ended December 31, 1995 as compared to the similar period in 1994. As a percentage of oil and gas sales, these expenses increased to 10.1% for the year ended December 31, 1995 from 8.6% for the year ended December 31, 1994 due to the decrease in oil and gas sales during the year ended December 31, 1995 as compared to the year ended December 31, 1994. 64 II-H Partnership ---------------- Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 ------------------------------------- Total oil and gas sales increased $187,487 (18.0%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Of this increase, approximately $86,000 and $234,000, respectively, were related to increases in the average prices of oil and gas sold, partially offset by decreases of approximately $60,000 and $71,000, respectively, related to decreases in volumes of oil and gas sold. Volumes of oil and gas sold decreased 3,698 barrels and 52,708 Mcf, respectively, for the year ended December 31, 1996 as compared to the year ended December 31, 1995. Average oil and gas prices increased to $19.85 per barrel and $1.94 per Mcf, respectively, for the year ended December 31, 1996 from $16.12 per barrel and $1.35 per Mcf, respectively, for the year ended December 31, 1995. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $19,594 (5.5%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from the decreases in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995, partially offset by an increase in production taxes associated with the increase in oil and gas sales discussed above. As a percentage of oil and gas sales, these expenses decreased to 27.6% for the year ended December 31, 1996 from 34.4% for the year ended December 31, 1995. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. Depreciation, depletion, and amortization of oil and gas properties decreased $269,588 (49.0%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. This decrease resulted primarily from (i) an upward revision in the estimate of remaining gas reserves at December 31, 1996, (ii) the decrease in volumes of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995, and (iii) a reduction in the depletable base of oil and gas properties due to the impairment provision recorded in 1995 as discussed below. As a percentage of oil and gas sales, this expense decreased to 22.8% for the year ended December 31, 1996 from 52.8% for the year ended December 31, 1995. This percentage decrease was primarily due to the dollar decrease in depreciation, depletion, and amortization discussed above and the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. 65 As set forth under "Results of Operations" above, the II-H Partnership recognized a non-cash charge against earnings of $259,808 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-H Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1996. General and administrative expenses remained relatively constant for the year ended December 31, 1996 as compared to the year ended December 31, 1995. As a percentage of oil and gas sales, these expenses decreased to 9.0% for the year ended December 31, 1996 from 10.3% for the year ended December 31, 1995. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold during the year ended December 31, 1996 as compared to the year ended December 31, 1995. The Limited Partners in the II-H Partnership have received cash distributions through December 31, 1996 of $6,163,364 or 67.2% of Limited Partner capital contributions. Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 ------------------------------------- Total oil and gas sales decreased $166,151 (13.7%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Of this decrease, approximately $65,000 was related to a decrease in volumes of oil sold and approximately $130,000 was related to a decrease in the average price of gas sold, partially offset by an increase of approximately $34,000 related to an increase in the average price of oil sold. Volumes of oil and gas sold decreased 4,371 barrels and 2,807 Mcf, respectively, for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Average oil prices increased to $16.12 per barrel for the year ended December 31, 1995 from $14.86 per barrel for the year ended December 31, 1994. Average gas prices decreased to $1.35 per Mcf for the year ended December 31, 1995 from $1.64 per Mcf for the year ended December 31, 1994. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $68,709 (16.1%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily due to the decrease in volumes of oil and gas sold and a decrease in expenses related to workovers during the year ended December 31, 1995 as compared to the year ended December 31, 1994. As a percentage of oil and gas sales, these expenses remained relatively constant at 34.4% for the year ended December 31, 1995 compared to 35.4% for the year ended December 31, 1994. 66 Depreciation, depletion, and amortization of oil and gas properties decreased $149,340 (21.3%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This decrease was primarily a result of the decrease in volumes of oil and gas sold during the year ended December 31, 1995 and upward revisions of previous reserve estimates at December 31, 1995. As a percentage of oil and gas sales, this expense decreased to 52.8% for the year ended December 31, 1995 from 57.9% for the year ended December 31, 1994. This percentage decrease was primarily due to the increase in the estimate of remaining reserves discussed above, partially offset by the decrease in the average price of gas sold during the year ended December 31, 1995. As set forth under "Results of Operations" above, the II-H Partnership recognized a non-cash charge against earnings of $259,808 for the year ended December 31, 1995. This impairment provision was necessary due to the unamortized costs of oil and gas properties exceeding the undiscounted future net revenues from such oil and gas properties, in accordance with the II-H Partnership's adoption of SFAS No. 121. No similar charge was necessary during the year ended December 31, 1994 under the II-H Partnership's prior impairment policy. General and administrative expenses decreased $3,398 (3.1%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. This dollar decrease resulted primarily from a decrease in professional and filing fees. As a percentage of oil and gas sales, these expenses increased to 10.3% for the year ended December 31, 1995 from 9.2% for the year ended December 31, 1994. This percentage increase resulted primarily from the decrease in oil and gas sales during the year ended December 31, 1995 as compared to the year ended December 31, 1994. Average Sales Prices, Production Volumes, and Average Production Costs The following is a comparison of the annual average oil and gas sales prices, production volumes, and average production costs (lease operating expenses and production taxes) per equivalent unit (one barrel of oil or six Mcf of gas) for the years ended December 31, 1996, 1995, and 1994. These factors comprise the change in net oil and gas operations discussed in the "Results of Operations" section above. 67 1996 Compared to 1995 --------------------- Average Sales Prices ------------------------------------------------------------ P/ship 1996 1995 % Change ------ ---------------- ---------------- ---------- Oil Gas Oil Gas ($/Bbl) ($/Mcf) ($/Bbl) ($/Mcf) Oil Gas ------- ------- ------- ------- --- ---- II-A $20.40 $2.15 $16.86 $1.49 21% 44% II-B 20.92 2.15 16.62 1.54 26% 40% II-C 21.14 2.04 16.92 1.46 25% 40% II-D 20.03 1.83 16.39 1.28 22% 43% II-E 20.37 1.85 16.81 1.31 21% 41% II-F 19.83 1.96 16.10 1.36 23% 44% II-G 19.83 1.96 16.11 1.36 23% 44% II-H 19.85 1.94 16.12 1.35 23% 44% Production Volumes - ------------------------------------------------------------------ P/ship 1996 1995 % Change - ------ ------------------ ------------------ ---------------- Oil Gas Oil Gas Oil Gas (Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf) ------- --------- ------ --------- ------ ----- II-A 103,230 1,737,090 120,420 1,768,316 (14%) ( 2%) II-B 74,434 1,219,775 81,304 1,205,296 ( 8%) 1% II-C 25,093 685,344 26,383 737,277 ( 5%) ( 7%) II-D 66,517 1,637,645 88,913 1,906,303 (25%) (14%) II-E 53,804 861,464 63,680 937,469 (16%) ( 8%) II-F 47,395 761,702 54,773 845,804 (13%) (10%) II-G 99,593 1,626,530 115,206 1,832,915 (14%) (11%) II-H 23,172 397,146 26,870 449,854 (14%) (12%) Average Production Costs per Equivalent Barrel of Oil -------------------------------- P/ship 1996 1995 % Change ------ ----- ----- -------- II-A $4.94 $4.45 11% II-B 4.19 5.40 (22%) II-C 4.33 4.68 ( 7%) II-D 5.31 5.25 1% II-E 4.63 5.22 (11%) II-F 3.69 3.38 9% II-G 3.74 3.46 8% II-H 3.80 3.52 8% 68 1995 Compared to 1994 --------------------- Average Sales Prices ------------------------------------------------------------ P/ship 1995 1994 % Change ------ ---------------- ---------------- ---------- Oil Gas Oil Gas ($/Bbl) ($/Mcf) ($/Bbl) ($/Mcf) Oil Gas ------- ------- ------- ------- --- ----- II-A $16.86 $1.49 $15.12 $1.84 12% (19%) II-B 16.62 1.54 15.15 1.83 10% (16%) II-C 16.92 1.46 15.67 1.80 8% (19%) II-D 16.39 1.28 15.13 1.72 8% (26%) II-E 16.81 1.31 15.45 1.70 9% (23%) II-F 16.10 1.36 14.85 1.64 8% (17%) II-G 16.11 1.36 14.86 1.63 8% (17%) II-H 16.12 1.35 14.86 1.64 8% (18%) Production Volumes - ---------------------------------------------------------------- P/ship 1995 1994 % Change - ------ ------------------ ------------------ ------------- Oil Gas Oil Gas Oil Gas (Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf) ------- --------- ------ --------- ------ ----- II-A 120,420 1,768,316 150,281 2,226,658 (20%) (21%) II-B 81,304 1,205,296 111,099 1,649,869 (27%) (27%) II-C 26,383 737,277 34,074 975,652 (23%) (24%) II-D 88,913 1,906,303 93,610 2,000,016 ( 5%) ( 5%) II-E 63,680 937,469 66,656 853,317 ( 4%) 10% II-F 54,773 845,804 63,723 833,628 (14%) 1% II-G 115,206 1,832,915 134,034 1,921,696 (14%) ( 5%) II-H 26,870 449,854 31,241 452,661 (14%) ( 1%) Average Production Costs per Equivalent Barrel of Oil -------------------------------- P/ship 1995 1994 % Change ------ ----- ----- -------- II-A $4.45 $4.57 ( 2.6%) II-B 5.40 5.22 3.4% II-C 4.68 4.17 12.2% II-D 5.25 4.07 29.0% II-E 5.22 4.52 15.5% II-F 3.38 3.84 (12.0%) II-G 3.46 4.02 (13.9%) II-H 3.52 4.01 (12.2%) 69 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 production levels for the year ended December 31, 1996, the Partnerships proved reserve quantities at December 31, 1996 would have the following lives: Partnership Gas-Years Oil-Years ----------- --------- --------- II-A 5.3 6.7 II-B 4.6 6.8 II-C 6.2 8.1 II-D 6.7 7.4 II-E 6.6 5.6 II-F 6.1 7.7 II-G 6.2 7.7 II-H 6.3 7.7 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. The Partnerships have no debt commitments. Cash for operational purposes will be provided by current oil and gas production. The Samson Companies are currently in the process of evaluating certain oil and gas properties owned by the Partnerships and other entities of the Samson Companies. As a result of such evaluation, it is expected that certain of these properties will be placed in bid packages and offered for sale during the first half of 1997. It is likely that the Partnerships will have an interest in some of the properties being sold. It is currently estimated that the value of such sales, as a percentage of total proved reserves of any Partnership, will range from 1% to 20%. The decision to accept any offer for the purchase of a property owned by one or more Partnerships will be made by the General Partner after giving due consideration to the offer price and the General Partner's estimate of both the property's remaining proved reserves and future operating costs. Net proceeds from the sale of any such properties will be distributed to the Partnerships and will be included in the calculation of the Partnerships' cash distributions for the quarter immediately following the Partnerships' receipt of the proceeds. 70 Following completion of any sale, the Partnerships' quantity of proved reserves will be reduced. It is also possible that the Partnerships' repurchase values and future cash distributions could decline as a result of a reduction of the Partnerships' reserve base. On the other hand, the General Partner believes there will be beneficial operating efficiencies related to the Partnerships' remaining properties. This is primarily due to the fact that the properties being considered for sale are more likely to bear a higher ratio of operating expenses as compared to reserves than the properties not being considered for sale. The net effect of such property sales is difficult to predict as of the date of this Annual Report. There can be no assurance as to the amount of the 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. If the Partnerships sell any of their properties as discussed above, the Partnerships' quantity of proved reserves will be reduced; therefore, it is possible that the Partnerships' future cash distributions could decline as a result of a reduction of the Partnerships' reserve base. Inflation and Changing Prices Prices obtained for oil and gas production depend upon numerous factors, including the extent of domestic and foreign production, foreign imports of oil, market demand, domestic and foreign economic conditions in general, and governmental regulations and tax laws. The general level of inflation in the economy did not have a material effect on the operations of the Partnerships in 1996. Oil and gas prices have fluctuated during recent years and generally have not followed the same pattern as inflation. See "Item 2. Properties - Oil and Gas Production, Revenue, and Price History." ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data are indexed in Item 14 hereof. 71 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. Name Age Position with General Partner ---------------- --- -------------------------------- Dennis R. Neill 44 President and Director Judy K. Fox 45 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 the Samson Companies in 1981, was named Senior Vice President and Director of Geodyne on March 3, 1993, and was named President of Geodyne on June 30, 1996. Prior to joining the Samson Companies, he was associated with a Tulsa law firm, Conner and Winters, where his principal practice was in the securities area. He received a Bachelor of Arts degree in political science from Oklahoma State University and a Juris Doctorate degree from the University of Texas. Mr. Neill also serves as Senior Vice President of Samson Investment Company; President and Director of Samson Properties Incorporated, Samson Hydrocarbons Company, Dyco Petroleum Corporation, Geodyne Depositary Company, Geodyne Institutional Depositary Company, Geodyne Nominee Corporation, Berry Gas Company, Circle L Drilling Company, and Compression, Inc.; and President and Chairman of the Board of Directors of Samson Securities Company. Judy K. Fox joined the Samson Companies in 1990 and was named Secretary of Geodyne on June 30, 1996. Prior to joining the Samson Companies, she served as Gas Contract Manager for Ely Energy Company. Ms. Fox is also Secretary of Berry Gas Company, Circle L Drilling Company, Compression, Inc., Dyco Petroleum Corporation, Geodyne Depositary Company, Geodyne Institutional Depositary Company, Geodyne Nominee Corporation, Samson Hydrocarbons Company, and Samson Properties Incorporated. 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 for the years ended December 31, 1996, 1995, and 1994 is set forth in the table below. Partnership 1996 1995 1994 ----------- -------- -------- -------- II-A $509,772 $509,772 $509,772 II-B 380,760 380,760 380,757 II-C 162,756 162,756 162,759 II-D 331,452 331,452 331,451 II-E 240,864 240,864 240,864 II-F 180,420 180,420 180,421 II-G 391,776 391,776 391,778 II-H 96,540 96,540 96,358 None of the officers or directors of the General Partner receive compensation directly from the Partnerships. The Partnerships reimburse the General Partner or its affiliates for that portion of such officers' and directors' salaries and expenses attributable to time devoted by such individuals to the Partnerships' activities. The following tables indicate the approximate amount of general and administrative expense reimbursement attributable to the salaries of the directors, officers, and employees of the General Partner and its affiliates for the years ended December 31, 1996, 1995, and 1994: 73
Salary Reimbursements II-A Partnership ---------------- Three Years Ended December 31, 1996 Long Term Compensation ------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1994 - - - - - - - 1995 - - - - - - - 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1994 $270,179 - - - - - - 1995 $278,336 - - - - - - 1996 $298,217 - - - - - - - ---------- (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 $100,000 per annum.
74
Salary Reimbursements II-B Partnership ---------------- Three Years Ended December 31, 1996 Long Term Compensation ------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1994 - - - - - - - 1995 - - - - - - - 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1994 $201,801 - - - - - - 1995 $207,895 - - - - - - 1996 $222,745 - - - - - - - ---------- (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 $100,000 per annum.
75
Salary Reimbursements II-C Partnership ---------------- Three Years Ended December 31, 1996 Long Term Compensation ------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1994 - - - - - - - 1995 - - - - - - - 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1994 $86,262 - - - - - - 1995 $88,865 - - - - - - 1996 $95,212 - - - - - - - ---------- (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 $100,000 per annum.
76
Salary Reimbursements II-D Partnership ---------------- Three Years Ended December 31, 1996 Long Term Compensation ------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1994 - - - - - - - 1995 - - - - - - - 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1994 $175,669 - - - - - - 1995 $180,973 - - - - - - 1996 $193,899 - - - - - - - ---------- (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 $100,000 per annum.
77
Salary Reimbursements II-E Partnership ---------------- Three Years Ended December 31, 1996 Long Term Compensation ------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1994 - - - - - - - 1995 - - - - - - - 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1994 $127,658 - - - - - - 1995 $131,512 - - - - - - 1996 $140,905 - - - - - - - ---------- (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 $100,000 per annum.
78
Salary Reimbursements II-F Partnership ---------------- Three Years Ended December 31, 1996 Long Term Compensation ------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1994 - - - - - - - 1995 - - - - - - - 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1994 $ 95,623 - - - - - - 1995 $ 98,509 - - - - - - 1996 $105,546 - - - - - - - ---------- (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 $100,000 per annum.
79
Salary Reimbursements II-G Partnership ---------------- Three Years Ended December 31, 1996 Long Term Compensation ------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1994 - - - - - - - 1995 - - - - - - - 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1994 $207,643 - - - - - - 1995 $213,910 - - - - - - 1996 $229,189 - - - - - - - ---------- (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 $100,000 per annum.
80
Salary Reimbursements II-H Partnership ---------------- Three Years Ended December 31, 1996 Long Term Compensation ------------------------------- Annual Compensation Awards Payouts ------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- C. Philip Tholen, President, Chief Executive Officer(1)(2) 1994 - - - - - - - 1995 - - - - - - - 1996 - - - - - - - Dennis R. Neill, President(2)(3) 1996 - - - - - - - All Executive Officers, Directors, and Employees as a group(4) 1994 $51,070 - - - - - - 1995 $52,711 - - - - - - 1996 $56,476 - - - - - - - ---------- (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 During 1994 and 1995 El Paso, an affiliate of the Partnerships until December 6, 1995, purchased a portion of the Partnerships' gas at market prices and resold such gas at market prices directly to end users and local distribution companies. The table below summarizes the dollar amount of gas sold by the Partnerships to Premier for the years ended December 31, 1995 and 1994. Partnership 1995 1994 ----------- -------- ---------- II-A $825,515 $1,085,911 II-B 374,717 595,951 II-C 225,948 365,980 II-D 682,346 909,348 II-E 593,218 618,067 II-F 367,527 543,786 II-G 776,211 1,150,665 II-H 182,878 272,053 After December 6, 1995 the Partnerships' gas was marketed by the General Partner and its affiliates, who were reimbursed for such activities as general and administrative expenses. See "Item 13. Certain Relationships and Related Transactions." 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. In addition to the compensation/reimbursements noted above, during the three years ended December 31, 1996, the Samson Companies were in the business of supplying field and drilling equipment and services to affiliated and unaffiliated parties in the industry. These companies may have provided equipment and services for wells in which the Partnerships have an interest. These equipment and services were provided at prices or rates equal to or less than those normally charged in the same or comparable geographic area by unaffiliated persons or companies dealing at arm's length. The operators of these wells billed the Partnerships for a portion of such costs based upon the Partnerships' interest in the well. 82 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 28, 1997 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 56,064.00 (11.6%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 56,064.00 (11.6%) II-B Partnership: - ---------------- Samson Resources Company 48,360.00 (13.4%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 48,360.00 (13.4%) II-C Partnership: - ---------------- Samson Resources Company 22,210.50 (14.4%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 22,210.50 (14.4%) II-D Partnership: - ---------------- Samson Resources Company 35,703.00 (11.3%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 35,703.00 (11.3%) 83 II-E Partnership: - ---------------- Samson Resources Company 30,413.67 (13.3%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 30,413.67 (13.3%) II-F Partnership: - ---------------- Samson Resources Company 21,917.75 (12.8%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 21,917.75 (12.8%) II-G Partnership: - ---------------- Samson Resources Company 35,452.00 ( 9.5%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 35,452.00 ( 9.5%) II-H Partnership: - ---------------- Samson Resources Company 12,082.00 (13.2%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 12,082.00 (13.2%) 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 of reports required under Section 16 of the Securities Exchange Act of 1934. 84 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 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 the Samson Companies. The Partnerships thus compete with the Samson Companies (including other currently sponsored oil and gas partnerships) for the time and resources of such personnel. The Samson Companies devote such time and personnel to the management of the Partnerships as are indicated by the circumstances and as are con- sistent with the General Partner's fiduciary duties. 85 As a result of Samson Investment Company's ("Samson") acquisition of the General Partner and its affiliates, Samson, PaineWebber, and the General Partner and certain of its affiliates entered into an advisory agreement which relates primarily to the Partnerships. PaineWebber served as the dealer manager of the original offering of Units. The Advisory Agreement became effective on March 3, 1993 and will expire on March 3, 1998. The Advisory Agreement provides that: (i) Samson and the General Partner will comply, and will cause the Partnerships to comply, with provisions of the Partnership Agreements (including all restrictions, prohibitions, and other provisions of such agreements concerning transactions in which Samson or its affiliates purchase or sell properties from or to, or render services to, the Partnerships and the terms of such agreements relating to farmouts of oil and gas properties), and Samson will cause the General Partner to comply with all applicable fiduciary duties; (ii) Samson will review periodically with PaineWebber on a retrospective basis the general operations and performance of the Partnerships and the terms of any material transaction by a Partnership, including any transaction that involves participation by the Samson Companies; and (iii) Samson will review with PaineWebber on a prospective basis, and will allow PaineWebber to advise Samson and to comment on, (A) any General Partner-initiated amendment to a Partnership Agreement which requires a vote of the Limited Partners of such Partnership and (B) any proposal initiated by the General Partner or any of its affiliates that would involve a reorganization, merger, or consolidation of a Partnership, a sale of all or substantially all of the assets of a Partnership (including a roll-up or corporate stock exchange), the liquidation or dissolution of a Partnership, or the exchange of cash, securities, or other assets for all or any outstanding Units. 86 In addition, the Advisory Agreement provides, among other things, that: (i) Samson will cause the General Partner to offer to repurchase Units at a price to be calculated in accordance with certain guidelines and to be paid in cash or a combination of cash and certain securities, all subject to certain limitations and restrictions; (ii) Samson will provide PaineWebber certain information relating to the Partnerships and the Limited Partners; (iii) Samson and the General Partner will maintain an "800" investor services telephone number; (iv) Samson and the General Partner will take certain actions with respect to oil and gas properties held by nominees, insurance maintained by the Partnerships, approval as to transfers of interests in the Partnerships, and the selection of independent reserve engineers; (v) Samson and the General Partner acknowledge the standing of PaineWebber to institute actions, subject to certain limitations, in connection with the Advisory Agreement on behalf of the Limited Partners; and (vi) if Samson proposes a consolidation, merger, or exchange offer involving any limited partnership managed by Samson, it will propose to include all of the Partnerships in such transaction or provide a statement to PaineWebber as to the reasons why some or all of the Partnerships are not included in such transaction. Pursuant to the Advisory Agreement, the General Partner has agreed to reimburse PaineWebber for all reasonable expenses incurred by it in connection with the matters contemplated by the Advisory Agreement, and Samson has agreed to indemnify PaineWebber and certain related parties from certain liabilities incurred in connection with the Advisory Agreement. 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 the Samson Companies, 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 the Samson Companies. On the other hand, management believes that the Partnerships' negotiating strength and contractual positions have been enhanced by virtue of their affiliation with the Samson Companies. For a description of certain of the relationships and related transactions see "Item 11. Executive Compensation." 87 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial Statements, Financial Statement Schedules, and Exhibits. (1) Financial Statements: The following financial statements for the 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, 1996 and 1995 and for each of the three years in the period ended December 31, 1996 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. 88 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 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 Advisory Agreement dated as of November 24, 1992 between Samson, PaineWebber, Geodyne Resources, Geodyne Properties, Inc., Geodyne Production Company, and Geodyne Energy Company filed as Exhibit 28.3 to Registrant's Current Report on Form 8-K on December 24, 1992 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-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. 89 4.5 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. 4.6 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. 4.7 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. 4.8 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. 4.9 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. 90 4.10 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. 4.11 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. 4.12 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. 4.13 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. 4.14 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. 4.15 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. 91 * 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, 1996 and for the year ended December 31, 1996. * 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, 1996 and for the year ended December 31, 1996. * 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, 1996 and for the year ended December 31, 1996. 92 * 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, 1996 and for the year ended December 31, 1996. * 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, 1996 and for the year ended December 31, 1996. * 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, 1996 and for the year ended December 31, 1996. * 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, 1996 and for the year ended December 31, 1996. * 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, 1996 and for the year ended December 31, 1996. All other Exhibits are omitted as inapplicable. ---------- *Filed herewith. (b) Reports on Form 8-K for the fourth quarter of 1996: None. 93 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 By: GEODYNE RESOURCES, INC. General Partner March 18, 1997 By: /s/Dennis R. Neill ------------------------------ Dennis R. Neill President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. By: /s/Dennis R. Neill President and March 18, 1997 ------------------- Director (Principal Dennis R. Neill Executive Officer) /s/Patrick M. Hall (Principal March 18, 1997 ------------------- Financial and Patrick M. Hall Accounting Officer) /s/Judy K. Fox Secretary March 18, 1997 ------------------- Judy K. Fox 94 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-B By: GEODYNE RESOURCES, INC. General Partner March 18, 1997 By: /s/Dennis R. Neill ------------------------------ Dennis R. Neill President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. By: /s/Dennis R. Neill President and March 18, 1997 ------------------- Director (Principal Dennis R. Neill Executive Officer) /s/Patrick M. Hall (Principal March 18, 1997 ------------------- Financial and Patrick M. Hall Accounting Officer) /s/Judy K. Fox Secretary March 18, 1997 ------------------- Judy K. Fox 95 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-C By: GEODYNE RESOURCES, INC. General Partner March 18, 1997 By: /s/Dennis R. Neill ------------------------------ Dennis R. Neill President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. By: /s/Dennis R. Neill President and March 18, 1997 ------------------- Director (Principal Dennis R. Neill Executive Officer) /s/Patrick M. Hall (Principal March 18, 1997 ------------------- Financial and Patrick M. Hall Accounting Officer) /s/Judy K. Fox Secretary March 18, 1997 ------------------- Judy K. Fox 96 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-D By: GEODYNE RESOURCES, INC. General Partner March 18, 1997 By: /s/Dennis R. Neill ------------------------------ Dennis R. Neill President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. By: /s/Dennis R. Neill President and March 18, 1997 ------------------- Director (Principal Dennis R. Neill Executive Officer) /s/Patrick M. Hall (Principal March 18, 1997 ------------------- Financial and Patrick M. Hall Accounting Officer) /s/Judy K. Fox Secretary March 18, 1997 ------------------- Judy K. Fox 97 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-E By: GEODYNE RESOURCES, INC. General Partner March 18, 1997 By: /s/Dennis R. Neill ------------------------------ Dennis R. Neill President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. By: /s/Dennis R. Neill President and March 18, 1997 ------------------- Director (Principal Dennis R. Neill Executive Officer) /s/Patrick M. Hall (Principal March 18, 1997 ------------------- Financial and Patrick M. Hall Accounting Officer) /s/Judy K. Fox Secretary March 18, 1997 ------------------- Judy K. Fox 98 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-F By: GEODYNE RESOURCES, INC. General Partner March 18, 1997 By: /s/Dennis R. Neill ------------------------------ Dennis R. Neill President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. By: /s/Dennis R. Neill President and March 18, 1997 ------------------- Director (Principal Dennis R. Neill Executive Officer) /s/Patrick M. Hall (Principal March 18, 1997 ------------------- Financial and Patrick M. Hall Accounting Officer) /s/Judy K. Fox Secretary March 18, 1997 ------------------- Judy K. Fox 99 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-G By: GEODYNE RESOURCES, INC. General Partner March 18, 1997 By: /s/Dennis R. Neill ------------------------------ Dennis R. Neill President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. By: /s/Dennis R. Neill President and March 18, 1997 ------------------- Director (Principal Dennis R. Neill Executive Officer) /s/Patrick M. Hall (Principal March 18, 1997 ------------------- Financial and Patrick M. Hall Accounting Officer) /s/Judy K. Fox Secretary March 18, 1997 ------------------- Judy K. Fox 100 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-H By: GEODYNE RESOURCES, INC. General Partner March 18, 1997 By: /s/Dennis R. Neill ------------------------------ Dennis R. Neill President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. By: /s/Dennis R. Neill President and March 18, 1997 ------------------- Director (Principal Dennis R. Neill Executive Officer) /s/Patrick M. Hall (Principal March 18, 1997 ------------------- Financial and Patrick M. Hall Accounting Officer) /s/Judy K. Fox Secretary March 18, 1997 ------------------- Judy K. Fox 101 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 We have audited the combined balance sheets of the Geodyne Energy Income Limited Partnership II-A, an Oklahoma limited partnership, and Geodyne Production Partnership II-A, an Oklahoma general partnership, as of December 31, 1996 and 1995 and the related combined statements of operations, changes in partners' capital (deficit), and cash flows for the years ended December 31, 1996, 1995, and 1994. 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 in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-A and Geodyne Production Partnership II-A at December 31, 1996 and 1995 and the combined results of their operations and cash flows for the years ended December 31, 1996, 1995, and 1994, in conformity with generally accepted accounting principles. As disclosed in Note 1 to the combined financial statements, the Geodyne Energy Income Limited Partnership II-A and Geodyne Production Partnership II-A changed their method of accounting for impairment of their oil and gas properties as of October 1, 1995. COOPERS & LYBRAND L.L.P. Tulsa, Oklahoma March 14, 1997 F-1 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-A Combined Balance Sheets December 31, 1996 and 1995 ASSETS ------ 1996 1995 ------------- ------------- CURRENT ASSETS: Cash and cash equivalents $ 875,918 $ 508,024 Accounts receivable: Oil and gas sales, including $153,461 due from related parties at 1995 1,073,459 765,075 --------- --------- Total current assets $1,949,377 $1,273,099 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 6,170,793 7,390,812 DEFERRED CHARGE 948,217 1,169,277 --------- --------- $9,068,387 $9,833,188 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 212,801 $ 213,126 Gas imbalance payable 101,493 164,837 --------- ---------- Total current liabilities $ 314,294 $ 377,963 ACCRUED LIABILITY $ 158,683 $ 272,667 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 342,481) ($ 311,994) Limited Partners, issued and outstanding, 484,283 Units 8,937,891 9,494,552 --------- ---------- Total Partners' capital $8,595,410 $9,182,558 --------- ---------- $9,068,387 $9,833,188 ========= ========= 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, 1996, 1995, and 1994 1996 1995 1994 ---------- ---------- ---------- REVENUES: Oil and gas sales, including $825,515 and $1,085,911 of sales to related parties in 1995 and 1994 $5,832,874 $4,671,555 $6,371,949 Interest income 28,323 20,126 31,747 Gain on sale of oil and gas properties 96,827 12,179 21,991 Other income - - 72,028 --------- --------- --------- $5,958,024 $4,703,860 $6,497,715 COSTS AND EXPENSES: Lease operating $1,601,063 $1,564,012 $2,023,881 Production tax 339,977 282,252 359,486 Depreciation, depletion, and amortization of oil and gas properties 1,196,600 1,841,159 3,135,128 Impairment provision - 994,919 - General and administrative 620,562 655,449 567,466 --------- --------- --------- $3,758,202 $5,337,791 $6,085,961 --------- --------- --------- NET INCOME (LOSS) $2,199,822 ($ 633,931) $ 411,754 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 156,483 $ 81,747 $ 145,993 ========= ========= ========= LIMITED PARTNERS - NET INCOME (LOSS) $2,043,339 ($ 715,678) $ 265,761 ========= ========= ========= NET INCOME (LOSS) per Unit $ 4.22 ($ 1.48) $ .55 ========= ========= ========= 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, 1996, 1995, and 1994 Limited General Partners Partner Total ------------- ---------- ------------- Balance, Dec. 31, 1993 $14,459,469 ($303,734) $14,155,735 Net income 265,761 145,993 411,754 Cash distributions ( 2,660,000) ( 140,000) ( 2,800,000) ---------- ------- ---------- Balance, Dec. 31, 1994 $12,065,230 ($297,741) $11,767,489 Net income (loss) ( 715,678) 81,747 ( 633,931) Cash Distributions ( 1,855,000) ( 96,000) ( 1,951,000) ---------- ------- ---------- 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 ========== ======= ========== 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $2,199,822 ($ 633,931) $ 411,754 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 1,196,600 1,841,159 3,135,128 Impairment provision - 994,919 - Gain on sale of oil and gas properties ( 96,827) ( 12,179) ( 21,991) (Increase) decrease in accounts receivable ( 308,384) 63,981 163,316 (Increase) decrease in deferred charge 221,060 ( 188,505) ( 159,357) Decrease in accounts payable ( 325) ( 76,265) ( 9,190) Decrease in gas imbalance payable ( 63,344) ( 53,112) ( 755,225) Increase (decrease) in accrued liability ( 113,984) ( 126,002) 53,007 --------- --------- --------- Net cash provided by operating activities $3,034,618 $1,810,065 $2,817,442 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 98,540) ($ 168,118) ($ 305,300) Proceeds from sale of oil and gas properties 218,786 23,383 34,826 --------- --------- --------- Net cash provided (used) by investing activities $ 120,246 ($ 144,735) ($ 270,474) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($2,786,970) ($1,951,000) ($2,800,000) --------- --------- --------- Net cash used by financing activities ($2,786,970) ($1,951,000) ($2,800,000) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 367,894 ($ 285,670) ($ 253,032) F-5 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 508,024 793,694 1,046,726 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 875,918 $ 508,024 $ 793,694 ========= ========= ========= 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 We have audited the combined balance sheets of the Geodyne Energy Income Limited Partnership II-B, an Oklahoma limited partnership, and Geodyne Production Partnership II-B, an Oklahoma general partnership, as of December 31, 1996 and 1995 and the related combined statements of operations, changes in partners' capital (deficit), and cash flows for the years ended December 31, 1996, 1995, and 1994. 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 in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-B and Geodyne Production Partnership II-B at December 31, 1996 and 1995 and the combined results of their operations and cash flows for the years ended December 31, 1996, 1995, and 1994 in conformity with generally accepted accounting principles. As disclosed in Note 1 to the combined financial statements, the Geodyne Energy Income Limited Partnership II-B and Geodyne Production Partnership II-B changed their method of accounting for impairment of their oil and gas properties as of October 1, 1995. COOPERS & LYBRAND L.L.P. Tulsa, Oklahoma March 14, 1997 F-7 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-B Combined Balance Sheets December 31, 1996 and 1995 ASSETS ------ 1996 1995 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 569,257 $ 168,239 Accounts receivable: Oil and gas sales, including $81,240 due from related parties at 1995 710,208 584,133 --------- --------- Total current assets $1,279,465 $ 752,372 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 4,140,409 5,258,752 DEFERRED CHARGE 160,103 226,303 --------- --------- $5,579,977 $6,237,427 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 189,245 $ 211,226 Gas imbalance payable 17,055 15,048 --------- --------- Total current liabilities $ 206,300 $ 226,274 ACCRUED LIABILITY $ 86,198 $ 301,684 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 265,183) ($ 246,438) Limited Partners, issued and outstanding, 361,719 Units 5,552,662 5,955,907 --------- --------- Total Partners' capital $5,287,479 $5,709,469 --------- --------- $5,579,977 $6,237,427 ========= ========= 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ------------ ------------ REVENUES: Oil and gas sales, including $374,717 and $595,951 of sales to related parties in 1995 and 1994 $4,179,527 $3,204,794 $4,703,629 Interest income 16,689 9,960 20,907 Gain (loss) on sale of oil and gas properties ( 28,890) 10,869 14,693 --------- --------- --------- $4,167,326 $3,225,623 $4,739,229 COSTS AND EXPENSES: Lease operating $ 912,347 $1,315,780 $1,720,223 Production tax 252,366 208,998 294,749 Depreciation, depletion, and amortization of oil and gas properties 1,062,233 1,436,788 2,787,591 Impairment provision - 450,601 - General and administrative 496,791 574,552 424,373 --------- --------- --------- $2,723,737 $3,986,719 $5,226,936 --------- --------- --------- NET INCOME (LOSS) $1,443,589 ($ 761,096) ($ 487,707) ========= ========= ========= GENERAL PARTNER - NET INCOME $ 113,834 $ 37,441 $ 87,118 ========= ========= ========= LIMITED PARTNERS - NET INCOME (LOSS) $1,329,755 ($ 798,537) ($ 574,825) ========= ========= ========= NET INCOME (LOSS) per Unit $ 3.68 ($ 2.21) ($ 1.59) ========= ========= ========= 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, 1996, 1995, and 1994 Limited General Partners Partner Total ------------- ---------- ------------- Balance, Dec. 31, 1993 $10,654,269 ($196,997) $10,457,272 Net income (loss) ( 574,825) 87,118 ( 487,707) Cash distributions ( 2,165,000) ( 113,000) ( 2,278,000) ---------- ------- ---------- Balance, Dec. 31, 1994 $ 7,914,444 ($222,879) $ 7,691,565 Net income (loss) ( 798,537) 37,441 ( 761,096) Cash distributions ( 1,160,000) ( 61,000) ( 1,221,000) ---------- ------- ---------- 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 ========== ======= ========== 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $1,443,589 ($ 761,096) ($ 487,707) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 1,062,233 1,436,788 2,787,591 Impairment provision - 450,601 - (Gain) loss on sale of oil and gas properties 28,890 ( 10,869) ( 14,693) (Increase) decrease in accounts receivable ( 126,075) ( 11,586) 233,588 (Increase) decrease in deferred charge 66,200 ( 53,003) ( 48,827) Increase (decrease) in accounts payable ( 21,981) ( 11,178) 22,788 Increase (decrease) in gas imbalance payable 2,007 ( 3,745) ( 184,769) Increase (decrease) in accrued liability ( 215,486) ( 67,612) 166,378 --------- --------- --------- Net cash provided by operating activities $2,239,377 $ 968,300 $2,474,349 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 89,173) ($ 217,765) ($ 203,350) Proceeds from sale of oil and gas properties 116,393 15,254 33,230 --------- --------- --------- Net cash provided (used) by investing activities $ 27,220 ($ 202,511) ($ 170,120) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($1,865,579) ($1,221,000) ($2,278,000) --------- --------- --------- Net cash used by financing activities ($1,865,579) ($1,221,000) ($2,278,000) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 401,018 ($ 455,211) $ 26,229 F-11 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 168,239 623,450 597,221 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 569,257 $ 168,239 $ 623,450 ========= ========= ========= 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 We have audited the combined balance sheets of the Geodyne Energy Income Limited Partnership II-C, an Oklahoma limited partnership, and Geodyne Production Partnership II-C, an Oklahoma general partnership, as of December 31, 1996 and 1995 and the related combined statements of operations, changes in partners' capital (deficit), and cash flows for the years ended December 31, 1996, 1995, and 1994. 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 in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-C and Geodyne Production Partnership II-C at December 31, 1996 and 1995 and the combined results of their operations and cash flows for the years ended December 31, 1996, 1995, and 1994, in conformity with generally accepted accounting principles. As disclosed in Note 1 to the combined financial statements, the Geodyne Energy Income Limited Partnership II-C and Geodyne Production Partnership II-C changed their method of accounting for impairment of their oil and gas properties as of October 1, 1995. COOPERS & LYBRAND L.L.P. Tulsa, Oklahoma March 14, 1997 F-13 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-C Combined Balance Sheets December 31, 1996 and 1995 ASSETS ------ 1996 1995 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 387,334 $ 82,353 Accounts receivable: Oil and gas sales, including $46,202 due from related parties at 1995 340,182 291,365 --------- --------- Total current assets $ 727,516 $ 373,718 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 2,048,879 2,572,284 DEFERRED CHARGE 164,953 259,941 --------- --------- $2,941,348 $3,205,943 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 69,727 $ 67,293 Gas imbalance payable 10,386 59,892 --------- --------- Total current liabilities $ 80,113 $ 127,185 ACCRUED LIABILITY $ 69,148 $ 138,658 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 115,619) ($ 99,615) Limited Partners, issued and outstanding, 154,621 Units 2,907,706 3,039,715 --------- --------- Total Partners' capital $2,792,087 $2,940,100 --------- --------- $2,941,348 $3,205,943 ========= ========= 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ------------ ------------ REVENUES: Oil and gas sales, including $225,948 and $365,980 of sales to related parties in 1995 and 1994 $1,925,940 $1,519,937 $2,289,166 Interest income 8,460 6,475 13,099 Gain on sale of oil and gas properties 42,354 13,807 11,076 Other income - - 180 --------- --------- --------- $1,976,754 $1,540,219 $2,313,521 COSTS AND EXPENSES: Lease operating $ 477,750 $ 594,932 $ 663,437 Production tax 125,174 103,713 156,417 Depreciation, depletion, and amortization of oil and gas properties 397,849 664,376 1,295,299 Impairment provision - 245,324 - General and administrative 214,421 248,883 183,693 --------- --------- --------- $1,215,194 $1,857,228 $2,298,846 --------- --------- --------- NET INCOME (LOSS) $ 761,560 ($ 317,009) $ 14,675 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 53,569 $ 20,538 $ 52,546 ========= ========= ========= LIMITED PARTNERS - NET INCOME (LOSS) $ 707,991 ($ 337,547) ($ 37,871) ========= ========= ========= NET INCOME (LOSS) per Unit $ 4.58 ($ 2.18) ($ .24) ========= ========= ========= 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, 1996, 1995, and 1994 Limited General Partners Partner Total ------------ ---------- ------------ Balance, Dec. 31, 1993 $5,220,133 ($ 80,199) $5,139,934 Net income (loss) ( 37,871) 52,546 14,675 Cash distributions ( 1,090,000) ( 56,500) ( 1,146,500) --------- ------- --------- Balance, Dec. 31, 1994 $4,092,262 ($ 84,153) $4,008,109 Net income (loss) ( 337,547) 20,538 ( 317,009) Cash distributions ( 715,000) ( 36,000) ( 751,000) --------- ------- --------- 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 ========= ======= ========= 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ---------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 761,560 ($317,009) $ 14,675 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 397,849 664,376 1,295,299 Impairment provision - 245,324 - (Gain) loss on sale of oil and gas properties ( 42,354) ( 13,807) ( 11,076) (Increase) decrease in accounts receivable ( 48,817) ( 3,127) 72,543 (Increase) decrease in deferred charge 94,988 ( 49,148) ( 27,159) Increase (decrease) in accounts payable 2,434 10,952 ( 8,557) Increase (decrease) in gas imbalance payable ( 49,506) ( 45,047) ( 104,745) Increase (decrease) in accrued liability ( 69,510) 16,127 50,653 --------- ------- --------- Net cash provided by operating activities $1,046,644 $508,641 $1,281,633 --------- ------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 5,076) ($ 77,297) ($ 58,552) Proceeds from sale of oil and gas properties 172,986 21,108 4,143 --------- ------- --------- Net cash provided (used) by investing activities $ 167,910 ($ 56,189) ($ 54,409) --------- ------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($ 909,573) ($751,000) ($1,146,500) --------- ------- --------- Net cash used by financing activities ($ 909,573) ($751,000) ($1,146,500) --------- ------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 304,981 ($298,548) $ 80,724 F-17 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 82,353 380,901 300,177 --------- ------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 387,334 $ 82,353 $ 380,901 ========= ======= ========= 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 We have audited the combined balance sheets of the Geodyne Energy Income Limited Partnership II-D, an Oklahoma limited partnership, and Geodyne Production Partnership II-D, an Oklahoma general partnership, as of December 31, 1996 and 1995 and the related combined statements of operations, changes in partners' capital (deficit), and cash flows for the years ended December 31, 1996, 1995, and 1994. 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 in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-D and Geodyne Production Partnership II-D at December 31, 1996 and 1995 and the combined results of their operations and cash flows for the years ended December 31, 1996, 1995, and 1994, in conformity with generally accepted accounting principles. As disclosed in Note 1 to the combined financial statements, the Geodyne Energy Income Limited Partnership II-D and Geodyne Production Partnership II-D changed their method of accounting for impairment of their oil and gas properties as of October 1, 1995. COOPERS & LYBRAND L.L.P. Tulsa, Oklahoma March 14, 1997 F-19 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-D Combined Balance Sheets December 31, 1996 and 1995 ASSETS ------ 1996 1995 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 906,737 $ 317,368 Accounts receivable: Oil and gas sales, including $124,908 due from related parties at 1995 793,183 630,370 --------- --------- Total current assets $1,699,920 $ 947,738 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 4,390,791 5,394,199 DEFERRED CHARGE 863,139 949,227 --------- --------- $6,953,850 $7,291,164 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 159,967 $ 146,808 Gas imbalance payable 118,313 117,523 --------- --------- Total current liabilities $ 278,280 $ 264,331 ACCRUED LIABILITY $ 266,782 $ 285,420 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 218,956) ($ 143,473) Limited Partners, issued and outstanding, 314,878 Units 6,627,744 6,884,886 --------- --------- Total Partners' capital $6,408,788 $6,741,413 --------- --------- $6,953,850 $7,291,164 ========= ========= 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ------------ ------------ REVENUES: Oil and gas sales, including $682,346 and $909,348 of sales to related parties in 1995 and 1994 $4,329,102 $3,901,516 $4,849,160 Interest income 16,083 14,424 9,816 Gain on sale of oil and gas properties 80,630 27,963 2,133 --------- --------- --------- $4,425,815 $3,943,903 $4,861,109 COSTS AND EXPENSES: Lease operating $1,492,375 $1,854,632 $1,296,072 Production tax 308,524 281,612 439,689 Depreciation, depletion, and amortization of oil and gas properties 800,433 1,548,167 2,812,182 Impairment provision - 370,172 - General and administrative 453,882 542,896 398,240 --------- --------- --------- $3,055,214 $4,597,479 $4,946,183 --------- --------- --------- NET INCOME (LOSS) $1,370,601 ($ 653,576) ($ 85,074) ========= ========= ========= GENERAL PARTNER - NET INCOME $ 99,743 $ 44,055 $ 108,234 ========= ========= ========= LIMITED PARTNERS - NET INCOME (LOSS) $1,270,858 ($ 697,631) ($ 193,308) ========= ========= ========= NET INCOME (LOSS) per Unit $ 4.04 ($ 2.22) ($ .61) ========= ========= ========= 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, 1996, 1995, and 1994 Limited General Partners Partner Total ------------- ---------- ------------- Balance, Dec. 31, 1993 $11,215,825 ($135,262) $11,080,563 Net income (loss) ( 193,308) 108,234 ( 85,074) Cash distributions ( 1,965,000) ( 84,500) ( 2,049,500) ---------- ------- ---------- Balance, Dec. 31, 1994 $ 9,057,517 ($111,528) $ 8,945,989 Net income (loss) ( 697,631) 44,055 ( 653,576) Cash distributions ( 1,475,000) ( 76,000) ( 1,551,000) ---------- ------- ---------- 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 ========== ======= ========== 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $1,370,601 ($ 653,576) ($ 85,074) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 800,433 1,548,167 2,812,182 Impairment provision - 370,172 - Gain on sale of oil and gas properties ( 80,630) ( 27,963) ( 2,133) (Increase) decrease in accounts receivable ( 162,813) 66,975 321,203 (Increase) decrease in deferred charge 86,088 99,720 ( 506,260) Increase (decrease) in accounts payable 13,159 ( 48,428) 31,666 Increase (decrease) in gas imbalance payable 790 ( 90,500) ( 54,864) Increase (decrease) in accrued liability ( 18,638) 62,785 41,723 --------- --------- --------- Net cash provided by operating activities $2,008,990 $1,327,352 $2,558,443 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 22,210) ($ 58,694) ($ 100,082) Proceeds from sale of oil and gas properties 305,815 36,097 7,537 --------- --------- --------- Net cash provided (used) by investing activities $ 283,605 ($ 22,597) ($ 92,545) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($1,703,226) ($1,551,000) ($2,049,500) --------- --------- --------- Net cash used by financing activities ($1,703,226) ($1,551,000) ($2,049,500) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 589,369 ($ 246,245) $ 416,398 F-23 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 317,368 563,613 147,215 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 906,737 $ 317,368 $ 563,613 ========= ========= ========= 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 We have audited the combined balance sheets of the Geodyne Energy Income Limited Partnership II-E, an Oklahoma limited partnership, and Geodyne Production Partnership II-E, an Oklahoma general partnership, as of December 31, 1996 and 1995 and the related combined statements of operations, changes in partners' capital (deficit), and cash flows for the years ended December 31, 1996, 1995, and 1994. 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 in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-E and Geodyne Production Partnership II-E at December 31, 1996 and 1995 and the combined results of their operations and cash flows for the years ended December 31, 1996, 1995, and 1994, in conformity with generally accepted accounting principles. As disclosed in Note 1 to the combined financial statements, the Geodyne Energy Income Limited Partnership II-E and Geodyne Production Partnership II-E changed their method of accounting for impairment of their oil and gas properties as of October 1, 1995. COOPERS & LYBRAND L.L.P. Tulsa, Oklahoma March 14, 1997 F-25 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-E Combined Balance Sheets December 31, 1996 and 1995 ASSETS ------ 1996 1995 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 528,765 $ 201,042 Accounts receivable: Oil and gas sales, including $122,758 due from related parties at 1995 512,573 409,630 --------- --------- Total current assets $1,041,338 $ 610,672 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 4,579,160 5,293,979 DEFERRED CHARGE 355,647 374,745 --------- --------- $5,976,145 $6,279,396 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 133,181 $ 90,392 Gas imbalance payable 161,181 84,265 --------- --------- Total current liabilities $ 294,362 $ 174,657 ACCRUED LIABILITY $ 59,234 $ 134,283 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 147,595) ($ 122,950) Limited Partners, issued and outstanding, 228,821 Units 5,770,144 6,093,406 --------- --------- Total Partners' capital $5,622,549 $5,970,456 --------- --------- $5,976,145 $6,279,396 ========= ========= 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ------------ ------------ REVENUES: Oil and gas sales, including $593,218 and $618,067 sales to related parties in 1995 and 1994 $2,693,317 $2,297,409 $2,480,706 Interest income 10,863 5,942 5,481 Gain on sale of oil and gas properties 117,078 15,120 1,475 Other income - - 4,361 --------- --------- --------- $2,821,258 $2,318,471 $2,492,023 COSTS AND EXPENSES: Lease operating $ 710,012 $ 965,824 $ 725,707 Production tax 203,065 182,683 218,191 Depreciation, depletion, and amortization of oil and gas properties 728,518 1,358,410 2,075,423 Impairment provision - 465,045 - General and administrative 417,205 616,305 271,833 --------- --------- --------- $2,058,800 $3,588,267 $3,291,154 --------- --------- --------- NET INCOME (LOSS) $ 762,458 ($1,269,796) ($ 799,131) ========= ========= ========= GENERAL PARTNER - NET INCOME $ 66,720 $ 9,448 $ 43,060 ========= ========= ========= LIMITED PARTNERS - NET INCOME (LOSS) $ 695,738 ($1,279,244) ($ 842,191) ========= ========= ========= NET INCOME (LOSS) per Unit $ 3.04 ($ 5.59) ($ 3.68) ========= ========= ========= 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, 1996, 1995, and 1994 Limited General Partners Partner Total ------------- ---------- ------------- Balance, Dec. 31, 1993 $9,839,841 ($ 94,958) $9,744,883 Net income (loss) ( 842,191) 43,060 ( 799,131) Cash distributions ( 1,095,000) ( 52,500) ( 1,147,500) --------- ------- --------- Balance, Dec. 31, 1994 $7,902,650 ($104,398) $7,798,252 Net income (loss) ( 1,279,244) 9,448 ( 1,269,796) Cash distributions ( 530,000) ( 28,000) ( 558,000) --------- ------- --------- 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 ========= ======= ========= 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 762,458 ($1,269,796) ($ 799,131) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 728,518 1,358,410 2,075,423 Impairment provision - 465,045 - Gain on sale of oil and gas properties ( 117,078) ( 15,120) ( 1,475) (Increase) decrease in accounts receivable ( 102,943) ( 54,265) 223,408 (Increase) decrease in deferred charge 19,098 64,136 ( 322,362) Increase (decrease) in accounts payable 42,789 ( 6,685) ( 13,503) Increase (decrease) in gas imbalance payable 76,916 42,485 ( 3,938) Increase (decrease) in accrued liability ( 75,049) ( 45,814) 60,855 --------- --------- --------- Net cash provided by operating activities $1,334,709 $ 538,396 $1,219,277 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 70,806) ($ 82,764) ($ 44,274) Proceeds from sale of oil and gas properties 174,185 43,062 2,308 --------- --------- --------- Net cash provided (used) by investing activities $ 103,379 ($ 39,702) ($ 41,966) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($1,110,365) ($ 558,000) ($1,147,500) --------- --------- --------- Net cash used by financing activities ($1,110,365) ($ 558,000) ($1,147,500) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 327,723 ($ 59,306) $ 29,811 F-29 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 201,042 260,348 230,537 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 528,765 $ 201,042 $ 260,348 ========= ========= ========= 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 We have audited the combined balance sheets of the Geodyne Energy Income Limited Partnership II-F, an Oklahoma limited partnership, and Geodyne Production Partnership II-F, an Oklahoma general partnership, as of December 31, 1996 and 1995 and the related combined statements of operations, changes in partners' capital (deficit), and cash flows for the years ended December 31, 1996, 1995, and 1994. 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 in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-F and Geodyne Production Partnership II-F at December 31, 1996 and 1995 and the combined results of their operations and cash flows for the years ended December 31, 1996, 1995, and 1994, in conformity with generally accepted accounting principles. As disclosed in Note 1 to the combined financial statements, the Geodyne Energy Income Limited Partnership II-F and Geodyne Production Partnership II-F changed their method of accounting for impairment of their oil and gas properties as of October 1, 1995. COOPERS & LYBRAND L.L.P. Tulsa, Oklahoma March 14, 1997 F-31 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-F Combined Balance Sheets December 31, 1996 and 1995 ASSETS ------ 1996 1995 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 441,903 $ 325,816 Accounts receivable: General Partner $ 15,285 - Oil and gas sales, including $66,788 due from related parties at 1995 429,839 352,473 --------- --------- Total current assets $ 887,027 $ 678,289 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 4,353,347 4,936,055 DEFERRED CHARGE 71,703 119,115 --------- --------- $5,312,077 $5,733,459 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 42,918 $ 79,348 Gas imbalance payable 31,577 23,373 --------- --------- Total current liabilities $ 74,495 $ 102,721 ACCRUED LIABILITY $ 28,322 $ 23,330 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 105,914) ($ 84,377) Limited Partners, issued and outstanding, 171,400 Units 5,315,174 5,691,785 --------- --------- Total Partners' capital $5,209,260 $5,607,408 --------- --------- $5,312,077 $5,733,459 ========= ========= 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ---------- ---------- REVENUES: Oil and gas sales, including $367,527 and $543,786 of sales to related parties in 1995 and 1994 $2,433,313 $2,028,592 $2,316,564 Interest income 14,218 9,818 8,634 Gain on sale of oil and gas properties 122,579 27,433 1,130 --------- --------- --------- $2,570,110 $2,065,843 $2,326,328 COSTS AND EXPENSES: Lease operating $ 485,892 $ 522,525 $ 582,556 Production tax 158,092 139,134 195,080 Depreciation, depletion, and amortization of oil and gas properties 531,040 1,036,058 1,269,912 Impairment provision - 312,270 - General and administrative 206,749 200,801 204,758 --------- --------- --------- $1,381,773 $2,210,788 $2,252,306 --------- --------- --------- NET INCOME (LOSS) $1,188,337 ($ 144,945) $ 74,022 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 79,948 $ 46,686 $ 54,498 ========= ========= ========= LIMITED PARTNERS - NET INCOME (LOSS) $1,108,389 ($ 191,631) $ 19,524 ========= ========= ========= NET INCOME (LOSS) per Unit $ 6.47 ($ 1.12) $ .11 ========= ========= ========= 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, 1996, 1995, and 1994 Limited General Partners Partner Total ------------ --------- ------------ Balance, Dec. 31, 1993 $8,458,892 ($ 52,561) $8,406,331 Net income 19,524 54,498 74,022 Cash distributions ( 1,580,000) ( 82,000) ( 1,662,000) --------- ------- --------- Balance, Dec. 31, 1994 $6,898,416 ($ 80,063) $6,818,353 Net income (loss) ( 191,631) 46,686 ( 144,945) Cash distributions ( 1,015,000) ( 51,000) ( 1,066,000) --------- ------- --------- 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 ========= ======= ========= 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $1,188,337 ($ 144,945) $ 74,022 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 531,040 1,036,058 1,269,912 Impairment provision - 312,270 - Gain on sale of oil and gas properties ( 122,579) ( 27,433) ( 1,130) Increase in accounts receivable - general partner ( 15,285) - - (Increase) decrease in accounts receivable - oil and gas sales ( 77,366) ( 30,509) 89,992 (Increase) decrease in deferred charge 47,412 ( 20,864) ( 52,880) Increase (decrease) in accounts payable ( 36,430) 13,954 4,291 Increase (decrease) in gas imbalance payable 8,204 ( 20,210) 2,965 Increase (decrease) in accrued liability 4,992 ( 16,772) 4,006 --------- --------- --------- Net cash provided by operating activities $1,528,325 $1,101,549 $1,391,178 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 11,332) ($ 18,171) ($ 38,920) Proceeds from sale of oil and gas properties 185,579 71,041 2,412 --------- --------- --------- Net cash provided (used) by investing activities $ 174,247 $ 52,870 ($ 36,508) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($1,586,485) ($1,066,000) ($1,662,000) --------- --------- --------- Net cash used by financing activities ($1,586,485) ($1,066,000) ($1,662,000) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 116,087 $ 88,419 ($ 307,330) F-35 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 325,816 237,397 544,727 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 441,903 $ 325,816 $ 237,397 ========= ========= ========= 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 We have audited the combined balance sheets of the Geodyne Energy Income Limited Partnership II-G, an Oklahoma limited partnership, and Geodyne Production Partnership II-G, an Oklahoma general partnership, as of December 31, 1996 and 1995 and the related combined statements of operations, changes in partners' capital (deficit), and cash flows for the years ended December 31, 1996, 1995, and 1994. 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 in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-G and Geodyne Production Partnership II-G at December 31, 1996 and 1995 and the combined results of their operations and cash flows for the years ended December 31, 1996, 1995, and 1994, in conformity with generally accepted accounting principles. As disclosed in Note 1 to the combined financial statements, the Geodyne Energy Income Limited Partnership II-G and Geodyne Production Partnership II-G changed their method of accounting for impairment of their oil and gas properties as of October 1, 1995. COOPERS & LYBRAND L.L.P. Tulsa, Oklahoma March 14, 1997 F-37 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-G Combined Balance Sheets December 31, 1996 and 1995 ASSETS ------ 1996 1995 ------------- ------------- CURRENT ASSETS: Cash and cash equivalents $ 932,165 $ 661,921 Accounts receivable: General Partner 34,620 - Oil and gas sales, including $141,036 due from related parties at 1995 911,439 748,457 ---------- ---------- Total current assets $ 1,878,224 $ 1,410,378 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 9,542,790 10,851,397 DEFERRED CHARGE 155,718 257,374 ---------- ---------- $11,576,732 $12,519,149 ========== ========== LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 93,647 $ 176,095 Gas imbalance payable 71,995 50,501 ---------- ---------- Total current liabilities $ 165,642 $ 226,596 ACCRUED LIABILITY $ 56,912 $ 50,802 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 244,312) ($ 197,620) Limited Partners, issued and outstanding, 372,189 Units 11,598,490 12,439,371 ---------- ---------- Total Partners' capital $11,354,178 $12,241,751 ---------- ---------- $11,576,732 $12,519,149 ========== ========== 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ------------ ---------- REVENUES: Oil and gas sales, including $776,211 and $1,150,665 of sales to related parties in 1995 and 1994 $5,158,799 $4,348,087 $5,116,776 Interest income 29,659 20,378 19,121 Gain on sale of oil and gas properties 225,341 51,339 1,377 --------- --------- ---------- $5,413,799 $4,419,804 $5,137,274 COSTS AND EXPENSES: Lease operating $1,048,439 $1,152,908 $1,396,694 Production tax 337,815 302,449 430,864 Depreciation, depletion, and amortization of oil and gas properties 1,163,236 2,306,915 2,809,502 Impairment provision - 839,228 - General and administrative 448,345 437,613 441,568 Other - - 32,648 --------- --------- --------- $2,997,835 $5,039,113 $5,111,276 --------- --------- --------- NET INCOME (LOSS) $2,415,964 ($ 619,309) $ 25,998 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 165,845 $ 94,880 $ 113,680 ========= ========= ========= LIMITED PARTNERS - NET INCOME (LOSS) $2,250,119 ($ 714,189) ($ 87,682) ========= ========= ========= NET INCOME (LOSS) per Unit $ 6.05 ($ 1.92) ($ .24) ========= ========= ========= 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, 1996, 1995, and 1994 Limited General Partners Partner Total ------------- ---------- ------------- Balance, Dec. 31, 1993 $18,646,242 ($122,180) $18,524,062 Net income (loss) ( 87,682) 113,680 25,998 Cash distributions ( 3,245,000) ( 173,000) ( 3,418,000) ---------- ------- ---------- Balance, Dec. 31, 1994 $15,313,560 ($181,500) $15,132,060 Net income (loss) ( 714,189) 94,880 ( 619,309) Cash distributions ( 2,160,000) ( 111,000) ( 2,271,000) ---------- ------- ---------- 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 ========== ======= ========== 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 2,415,964 ($ 619,309) $ 25,998 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 1,163,236 2,306,915 2,809,502 Impairment provision - 839,228 - Gain on sale of oil and gas properties ( 225,341) ( 51,339) ( 1,377) Increase in accounts receivable - general partner ( 34,620) - - (Increase) decrease in accounts receivable - oil and gas sales ( 162,982) ( 60,518) 217,929 (Increase) decrease in deferred charge 101,656 ( 38,296) ( 122,766) Increase (decrease) in accounts payable ( 82,448) 36,125 9,959 Increase (decrease) in gas imbalance payable 21,494 ( 43,913) 2,370 Increase (decrease) in accrued liability 6,110 ( 39,539) 10,876 --------- --------- --------- Net cash provided by operating activities $3,203,069 $2,329,354 $2,952,491 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 27,441) ($ 40,899) ($ 114,454) Proceeds from sale of oil and gas properties 398,153 152,349 5,546 --------- --------- --------- Net cash provided (used) by investing activities $ 370,712 $ 111,450 ($ 108,908) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($3,303,537) ($2,271,000) ($3,418,000) --------- --------- --------- Net cash used by financing activities ($3,303,537) ($2,271,000) ($3,418,000) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 270,244 $ 169,804 ($ 574,417) F-41 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 661,921 492,117 1,066,534 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 932,165 $ 661,921 $ 492,117 ========= ========= ========= 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 We have audited the combined balance sheets of the Geodyne Energy Income Limited Partnership II-H, an Oklahoma limited partnership, and Geodyne Production Partnership II-H, an Oklahoma general partnership, as of December 31, 1996 and 1995 and the related combined statements of operations, changes in partners' capital (deficit), and cash flows for the years ended December 31, 1996, 1995, and 1994. 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 in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership II-H and Geodyne Production Partnership II-H at December 31, 1996 and 1995 and the combined results of their operations and cash flows for the years ended December 31, 1996, 1995, and 1994, in conformity with generally accepted accounting principles. As disclosed in Note 1 to the combined financial statements, the Geodyne Energy Income Limited Partnership II-H and Geodyne Production Partnership II-H changed their method of accounting for impairment of their oil and gas properties as of October 1, 1995. COOPERS & LYBRAND L.L.P. Tulsa, Oklahoma March 14, 1997 F-43 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP II-H Combined Balance Sheets December 31, 1996 and 1995 ASSETS ------ 1996 1995 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 221,484 $ 158,812 Accounts receivable: General Partner 9,151 - Oil and gas sales, including $33,220 due from related parties at 1995 216,574 179,505 --------- --------- Total current assets $ 447,209 $ 338,317 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 2,304,814 2,624,277 DEFERRED CHARGE 38,222 62,062 --------- --------- $2,790,245 $3,024,656 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 23,354 $ 45,404 Gas imbalance payable 16,547 11,211 --------- --------- Total current liabilities $ 39,901 $ 56,615 ACCRUED LIABILITY $ 14,139 $ 12,779 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 58,835) ($ 47,635) Limited Partners, issued and outstanding, 91,711 Units 2,795,040 3,002,897 --------- --------- Total Partners' capital $2,736,205 $2,955,262 --------- --------- $2,790,245 $3,024,656 ========= ========= 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, 1996, 1995, and 1994 1996 1995 1994 ------------ ------------ ------------ REVENUES: Oil and gas sales, including $182,878 and $272,053 of sales to related parties in 1995 and 1994 $1,230,222 $1,042,735 $1,208,886 Interest income 6,728 4,721 4,315 Gain on sale of oil and gas properties 51,909 11,436 4,175 --------- --------- --------- $1,288,859 $1,058,892 $1,217,376 COSTS AND EXPENSES: Lease operating $ 257,850 $ 284,635 $ 322,897 Production tax 81,540 74,349 104,796 Depreciation, depletion, and amortization of oil and gas properties 280,796 550,384 699,724 Impairment provision - 259,808 - General and administrative 110,738 107,236 110,634 --------- --------- --------- $ 730,924 $1,276,412 $1,238,051 --------- --------- --------- NET INCOME (LOSS) $ 557,935 ($ 217,520) ($ 20,675) ========= ========= ========= GENERAL PARTNER - NET INCOME $ 38,792 $ 21,532 $ 26,955 ========= ========= ========= LIMITED PARTNERS - NET INCOME (LOSS) $ 519,143 ($ 239,052) ($ 47,630) ========= ========= ========= NET INCOME (LOSS) per Unit $ 5.66 ($ 2.61) ($ .52) ========= ========= ========= 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, 1996, 1995, and 1994 Limited General Partners Partner Total ------------ --------- ------------ Balance, Dec. 31, 1993 $4,574,579 ($29,122) $4,545,457 Net income (loss) ( 47,630) 26,955 ( 20,675) Cash distributions ( 770,000) ( 40,000) ( 810,000) --------- ------ --------- Balance, Dec. 31, 1994 $3,756,949 ($42,167) $3,714,782 Net income (loss) ( 239,052) $21,532 ( 217,520) Cash distributions ( 515,000) ( 27,000) ( 542,000) --------- ------ --------- 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 ========= ====== ========= 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, 1996, 1995, and 1994 1996 1995 1994 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $557,935 ($217,520) ($ 20,675) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 280,796 550,384 699,724 Impairment provision - 259,808 - Gain on sale of oil and gas properties ( 51,909) ( 11,436) ( 4,175) Increase in accounts receivable - general partner ( 9,151) - - (Increase) decrease in accounts receivable - oil and gas sales ( 37,069) ( 12,671) 46,724 (Increase) decrease in deferred charge 23,840 ( 12,223) ( 25,782) Increase (decrease) in accounts payable ( 22,050) 11,408 1,874 Increase (decrease) in gas imbalance payable 5,336 ( 7,479) ( 1,905) Increase (decrease) in accrued liability 1,360 ( 9,902) 2,727 ------- ------- ------- Net cash provided by operating activities $749,088 $550,369 $698,512 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 6,306) ($ 10,563) ($ 21,559) Proceeds from sale of oil and gas properties 96,882 36,904 1,585 ------- ------- ------- Net cash provided (used) by investing activities $ 90,576 $ 26,341 ($ 19,974) ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($776,992) ($542,000) ($810,000) ------- ------- ------- Net cash used by financing activities ($776,992) ($542,000) ($810,000) ------- ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 62,672 $ 34,710 ($131,462) F-47 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 158,812 124,102 255,564 ------- ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $221,484 $158,812 $124,102 ======= ======= ======= 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, 1996, 1995, and 1994 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations The Geodyne Energy Income Limited Partnerships (the "Partner- ships") 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 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, 1996: F-49 Number of Percent of Partnership Units Owned Outstanding Units ----------- ----------- ----------------- II-A 55,866.00 11.5% II-B 48,304.00 13.4% II-C 22,201.50 14.4% II-D 35,495.00 11.3% II-E 30,267.67 13.2% II-F 21,700.75 12.7% II-G 35,414.00 9.5% II-H 12,070.00 13.2% The Partnerships' sole business is the development and production of oil and gas. Substantially all of the Partnerships' gas reserves are being sold regionally in the "spot market." Due to the highly competitive nature of the spot market, prices on the spot market are subject to wide seasonal and regional pricing fluctuations. In addition, such spot market sales are generally short-term in nature and are dependent upon the obtaining of transportation services provided by pipelines. Allocation of Costs and Revenues The combination of the allocation provisions in each Partner- ship'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 After Payout ------------------ ------------------ General Limited General Limited Partner Partners Partner Partners -------- -------- -------- -------- Costs(1) - ------------------------ Sales commissions, pay- ment for organization and offering costs and management fee 1% 99% - - Property acquisition costs 1% 99% 1% 99% Identified development drilling 1% 99% 1% 99% Development drilling(2) 5% 95% 15% 85% General and administra- tive costs, direct administrative costs and operating costs(2) 5% 95% 15% 85% F-50 Income(1) - ----------------------- Temporary investments of Limited Partners' subscriptions 1% 99% 1% 99% Income from oil and gas production(2) 5% 95% 15% 85% Gain on sale of produc- ing properties(2) 5% 95% 15% 85% All other income(2) 5% 95% 15% 85% - ---------- (1) 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. (2) 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 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. 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. F-51 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. Subsequent to year-end, all oil and gas sales accrued as of December 31, 1996 have been collected. Receivable from General Partner The receivable from the General Partner at December 31, 1996 for the II-F, II-G, and II-H Partnerships represents proceeds due to such Partnerships for the sale of oil and gas properties. Subsequent to December 31, 1996 such receivable was paid to the II-F, II-G, and II-H Partnerships. 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. 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, 1996, 1995, and 1994 were as follows: F-52 Partnership 1996 1995 1994 ----------- ----- ----- ----- II-A $3.05 $4.44 $6.01 II-B 3.82 5.09 7.22 II-C 2.86 4.45 6.59 II-D 2.36 3.81 6.59 II-E 3.69 6.18 9.94 II-F 3.05 5.29 6.27 II-G 3.14 5.48 6.18 II-H 3.14 5.40 6.56 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 difference between asset cost and salvage value is charged or credited to accumulated depreciation. Effective October 1, 1995, the Partnerships adopted the requirements of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long Lived Assets and Assets Held for Disposal," which is intended to establish more consistent accounting standards for measuring the recoverability of long-lived assets. SFAS No. 121 requires successful efforts companies, like the Partnerships, to evaluate the recoverability of the carrying costs of their proved oil and gas properties at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of oil and gas properties. With respect to the Partnerships' oil and gas properties, this evaluation was performed for each field, rather than for the Partnership's properties as a whole as previously allowed by the Securities and Exchange Commission ("SEC"). SFAS No. 121 provides that if the unamortized costs of oil and gas properties 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. As a result of the Partnerships' adoption of SFAS No. 121, the Partnerships recorded a non-cash charge against earnings (impairment provision) during the fourth quarter of 1995 as follows: Partnership Amount ----------- -------- II-A $994,919 II-B 450,601 II-C 245,324 II-D 370,172 II-E 465,045 II-F 312,270 II-G 839,228 II-H 259,808 F-53 No such charge was recorded for any Partnership for the year ended December 31, 1996 under SFAS No. 121 or during the year ended December 31, 1994 pursuant to the Partnerships' prior impairment policy. Subsequent to December 31, 1996, the oil and gas industry has seen a drop in oil and gas prices. The Partnerships' reserves were determined at December 31, 1996 using oil and gas prices of approximately $23.75 per barrel and $3.57 per Mcf, respectively. As of the date of this Annual Report on Form 10-K, oil and gas prices received by the Partnerships have decreased to approximately $19.00 per barrel and $1.60 per Mcf, respectively (the "Filing Date Prices"). If the Filing Date Prices, as opposed to December 31, 1996 prices, were used to determine the recoverability of the Partnerships' oil and gas reserves, impairment provisions of the following approximate amounts would have been required at December 31, 1996: Partnership Amount ----------- -------- II-A $224,000 II-B 135,000 II-C 37,000 II-D 144,000 II-E 318,000 II-F 209,000 II-G 490,000 II-H 126,000 If the Filing Date Prices are in effect on March 31, 1997, the above impairment provisions will be reflected in the Partnerships' financial statements as of March 31, 1997. Impairment provisions do not impact the Partnerships' cash flows from operating activities; however, they do impact the amount of General Partner and Limited Partner capital. The risk that the Partnerships will be required to record further impairment provisions in the future, beyond those noted above, increases when oil and gas prices are depressed. Accordingly, II-A Partnership has six fields, the II-B Partnership has three fields, the II-C and II-H Partnerships have four fields, the II-D Partnership has five fields, the II-E Partnership has seven fields, the II-F Partnership has two fields, and the II-G Partnership has one field in which it is reasonably possible that additional impairment provisions will be recorded in the near term if oil and gas prices decrease below the Filing Date Prices. F-54 Deferred Charge The Deferred Charge represents costs deferred for lease operating expenses incurred in connection with the Partnerships' underproduced gas imbalance positions. At December 31, 1996 and 1995, 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: 1996 1995 ------------------- --------------------- Partnership Mcf Amount Mcf Amount ----------- --------- -------- --------- ---------- II-A 1,102,450 $948,217 1,100,703 $1,169,277 II-B 183,942 160,103 189,899 226,303 II-C 249,967 164,953 305,202 259,941 II-D 987,573 863,139 1,069,431 949,227 II-E 393,284 355,647 370,778 374,745 II-F 125,994 71,703 179,850 119,115 II-G 269,269 155,718 383,282 257,374 II-H 65,248 38,222 91,013 62,062 Accrued Liability The Accrued Liability represents charges accrued for lease operating expenses incurred in connection with the Partnerships' overproduced gas imbalance positions. At December 31, 1996 and 1995, 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: 1996 1995 ----------------- ----------------- Partnership Mcf Amount Mcf Amount ----------- ------- -------- ------- -------- II-A 184,494 $158,683 342,978 $272,667 II-B 99,033 86,198 261,201 301,684 II-C 104,786 69,148 194,491 138,658 II-D 305,243 266,782 382,457 285,420 II-E 65,503 59,234 176,074 134,283 II-F 49,767 28,322 47,211 23,330 II-G 98,412 56,912 101,552 50,802 II-H 24,136 14,139 24,489 12,779 F-55 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. At December 31, 1996 and 1995 total sales exceeded the Partnerships' share of estimated total gas reserves as follows: 1996 1995 ----------------- ------------------- Partnership Mcf Amount Mcf Amount ----------- ------- -------- ------- ---------- II-A 67,662 $101,493 86,302 $164,837 II-B 11,370 17,055 8,047 15,048 II-C 6,924 10,386 31,689 59,892 II-D 78,875 118,313 60,893 117,523 II-E 107,454 161,181 43,213 84,265 II-F 21,051 31,577 11,986 23,373 II-G 47,997 71,995 25,898 50,501 II-H 11,031 16,547 5,749 11,211 These amounts were recorded as gas imbalance payables in accordance with the sales method. 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. F-56 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. 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. The following is a summary of payments made to the General Partner or its affiliates by the Partnerships for general and administrative costs for the years ended December 31, 1996, 1995, and 1994: Partnership 1996 1995 1994 ----------- -------- -------- -------- II-A $509,772 $509,772 $509,772 II-B 380,760 380,760 380,757 II-C 162,756 162,756 162,759 II-D 331,452 331,452 331,451 II-E 240,864 240,864 240,864 II-F 180,420 180,420 180,421 II-G 391,776 391,776 391,778 II-H 96,540 96,540 96,358 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. F-57 During 1994 and 1995 the Partnerships sold gas at market prices to El Paso Energy Marketing Company, formerly known as Premier Gas Company ("El Paso"). El Paso, like other similar gas marketing firms, then resold such gas to third parties at market prices. El Paso was an affiliate of the Partnerships until December 6, 1995. The following table summarizes the total amount of the Partnerships' sales to El Paso during the years ended December 31, 1995 and 1994: Partnership 1995 1994 ----------- -------- ---------- II-A $825,515 $1,085,911 II-B 374,717 595,951 II-C 225,948 365,980 II-D 682,346 909,348 II-E 593,218 618,067 II-F 367,527 543,786 II-G 776,211 1,150,665 II-H 182,878 272,053 The following table summarizes the amount of the Partnerships' accrued oil and gas sales due from El Paso at December 31, 1995: Partnership 1995 ----------- -------- II-A $153,461 II-B 81,240 II-C 46,202 II-D 124,908 II-E 122,758 II-F 66,788 II-G 141,036 II-H 33,220 3. MAJOR CUSTOMERS The following table sets forth purchasers who individually accounted for more than ten percent of the Partnerships' combined oil and gas sales for the years ended December 31, 1996, 1995, and 1994: F-58 Partnership Purchaser Percentage - ----------- ------------------------ --------------------- 1996 1995 1994 ----- ----- ----- II-A El Paso 23.5% 17.7% 17.0% Hallwood Petroleum, Inc. ("Hallwood") 13.9% 15.5% 14.4% Amoco Production Company ("Amoco") 14.7% 14.3% 12.9% J-O'B Operating ("J-O'B") 10.6% - - II-B Hallwood 18.1% 21.0% 18.0% El Paso 22.5% 11.7% 12.7% Amoco 11.0% - - J-O'B 11.0% - - II-C El Paso 24.5% 14.9% 16.0% Amoco 10.5% - - II-D El Paso 19.1% 17.5% 18.8% II-E El Paso 30.8% 25.8% 24.9% II-F El Paso 22.4% 18.1% 23.5% Texaco Exploration and Production, Inc. ("Texaco") 12.5% 14.1% - % II-G El Paso 22.4% 17.9% 22.5% Texaco 12.6% 13.9% - % II-H El Paso 22.1% 17.5% 22.5% Texaco 12.7% 13.7% - % 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. 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. F-59 Capitalized Costs The capitalized costs and accumulated depreciation, depletion, amortization, and valuation allowance at December 31, 1996 and 1995 were as follows: II-A Partnership --------------- 1996 1995 ------------- ------------- Proved properties $31,896,851 $36,017,026 Unproved properties, not subject to depreciation, depletion, and amortization 461,419 461,419 ---------- ---------- $32,358,270 $36,478,445 Less accumulated depreciation, depletion, amorti- zation, and valua- tion allowance ( 26,187,477) ( 29,087,633) ---------- ---------- Net oil and gas properties $ 6,170,793 $ 7,390,812 ========== ========== F-60 II-B Partnership --------------- 1996 1995 ------------- ------------- Proved properties $21,846,398 $26,611,424 Unproved properties, not subject to depreciation, depletion, and amortization 396,985 396,985 ---------- ---------- $22,243,383 $27,008,409 Less accumulated depreciation, depletion, amorti- zation, and valua- tion allowance ( 18,102,974) ( 21,749,657) ---------- ---------- Net oil and gas properties $ 4,140,409 $ 5,258,752 ========== ========== II-C Partnership ---------------- 1996 1995 ------------- ------------- Proved properties $10,268,834 $11,807,787 Unproved properties, not subject to depreciation, depletion, and amortization 30,441 30,441 ---------- ---------- $10,299,275 $11,838,228 Less accumulated depreciation, depletion, amorti- zation, and valua- tion allowance ( 8,250,396) ( 9,265,944) ---------- ---------- Net oil and gas properties $ 2,048,879 $ 2,572,284 ========== ========== F-61 II-D Partnership ---------------- 1996 1995 ------------- ------------- Proved properties $20,297,277 $22,632,078 Unproved properties, not subject to depreciation, depletion, and amortization 16 16 ---------- ---------- $20,297,293 $22,632,094 Less accumulated depreciation, depletion, amorti- zation, and valua- tion allowance ( 15,906,502) ( 17,237,895) ---------- ---------- Net oil and gas properties $ 4,390,791 $ 5,394,199 ========== ========== II-E Partnership ---------------- 1996 1995 ------------- ------------- Proved properties $16,396,307 $17,520,680 Unproved properties, not subject to depreciation, depletion, and amortization 680,978 680,978 ---------- ---------- $17,077,285 $18,201,658 Less accumulated depreciation, depletion, amorti- zation, and valua- tion allowance ( 12,498,125) ( 12,907,679) ---------- ---------- Net oil and gas properties $ 4,579,160 $ 5,293,979 ========== ========== F-62 II-F Partnership ---------------- 1996 1995 ------------- ------------- Proved properties $11,884,071 $13,331,175 Unproved properties, not subject to depreciation, depletion, and amortization 1,168,905 1,168,905 ---------- ---------- $13,052,976 $14,500,080 Less accumulated depreciation, depletion, amorti- zation, and valua- tion allowance ( 8,699,629) ( 9,564,025) ---------- ---------- Net oil and gas properties $ 4,353,347 $ 4,936,055 ========== ========== II-G Partnership ---------------- 1996 1995 ------------- ------------- Proved properties $25,536,919 $28,899,424 Unproved properties, not subject to depreciation, depletion, and amortization 2,612,125 2,612,125 ---------- ---------- $28,149,044 $31,511,549 Less accumulated depreciation, depletion, amorti- zation, and valua- tion allowance ( 18,606,254) ( 20,660,152) ---------- ---------- Net oil and gas properties $ 9,542,790 $10,851,397 ========== ========== F-63 II-H Partnership ---------------- 1996 1995 ------------- ------------- Proved properties $6,239,240 $ 7,097,729 Unproved properties, not subject to depreciation, depletion, and amortization 660,832 660,832 --------- ---------- $6,900,072 $ 7,758,561 Less accumulated depreciation, depletion, amorti- zation, and valua- tion allowance ( 4,595,258) ( 5,134,284) --------- ---------- Net oil and gas properties $2,304,814 $ 2,624,277 ========= ========== Costs Incurred The Partnerships incurred no costs in connection with oil and gas acquisition or exploration activities during the years ended December 31, 1996, 1995, or 1994. Costs incurred by the Partnerships in connection with their oil and gas property development activities for the years ended December 31, 1996, 1995, and 1994 were as follows: Partnership 1996 1995 1994 ----------- -------- -------- -------- II-A $98,540 $168,118 $305,300 II-B 89,173 217,765 203,350 II-C 5,076 77,297 58,552 II-D 22,210 58,694 100,082 II-E 70,806 82,764 44,274 II-F 11,332 18,171 38,920 II-G 27,441 40,899 114,454 II-H 6,306 10,563 21,559 F-64 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, 1996, 1995, and 1994 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. F-65 II-A Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1993 695,009 10,501,238 Production (150,281) ( 2,226,658) Sales of minerals in place ( 2,147) ( 3,261) Revision of previous estimates 133,406 1,715,644 ------- ---------- Proved reserves, Dec. 31, 1994 675,987 9,986,963 Production (120,420) ( 1,768,316) Sales of minerals in place ( 422) ( 19,550) Extensions and discoveries 11,099 42,427 Revisions of previous estimates 134,010 1,361,551 ------- ---------- 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 ======= ========== PROVED DEVELOPED RESERVES: December 31, 1994 675,948 9,816,017 ======= ========== December 31, 1995 700,254 9,603,075 ======= ========== December 31, 1996 695,390 9,255,329 ======= ========== F-66 II-B Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1993 558,681 6,464,095 Production (111,099) (1,649,869) Sales of minerals in place ( 1,745) ( 19,087) Revision of previous estimates 39,239 1,321,885 ------- --------- Proved reserves, Dec. 31, 1994 485,076 6,117,024 Production ( 81,304) (1,205,296) Sales of minerals in place ( 756) ( 61,925) Extensions and discoveries 13,810 18,726 Revisions of previous estimates 78,699 860,574 ------- --------- 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 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1994 485,076 5,884,070 ======= ========= December 31, 1995 495,525 5,729,103 ======= ========= December 31, 1996 503,394 5,589,703 ======= ========= F-67 II-C Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1993 252,090 4,263,435 Production ( 34,074) ( 975,652) Sales of minerals in place ( 73) ( 3,673) Revision of previous estimates 2,314 751,118 ------- --------- Proved reserves, Dec. 31, 1994 220,257 4,035,228 Production ( 26,383) ( 737,277) Sales of minerals in place ( 1,141) ( 5,265) Extensions and discoveries 2,810 9,289 Revisions of previous estimates 10,126 681,340 ------- --------- 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 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1994 220,257 3,935,386 ======= ========= December 31, 1995 205,669 3,983,315 ======= ========= December 31, 1996 203,909 4,258,644 ======= ========= F-68 II-D Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1993 396,479 11,952,132 Production ( 93,610) ( 2,000,016) Sales of minerals in place ( 20) ( 13,563) Revision of previous estimates 137,228 1,588,157 ------- ---------- Proved reserves, Dec. 31, 1994 440,077 11,526,710 Production ( 88,913) ( 1,906,303) Sales of minerals in place ( 1,286) ( 13,896) Extensions and discoveries 292 28,447 Revisions of previous estimates 203,408 1,275,502 ------- ---------- 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 ======= ========== PROVED DEVELOPED RESERVES: December 31, 1994 440,077 11,526,710 ======= ========== December 31, 1995 553,578 10,910,460 ======= ========== December 31, 1996 495,079 11,012,174 ======= ========== F-69 II-E Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1993 303,174 6,163,139 Production ( 66,656) ( 853,317) Sales of minerals in place ( 94) ( 748) Revision of previous estimates 7,232 559,970 ------- --------- Proved reserves, Dec. 31, 1994 243,656 5,869,044 Production ( 63,680) ( 937,469) Sales of minerals in place ( 1,574) ( 23,318) Extensions and discoveries 10,194 48,960 Revisions of previous estimates 109,338 1,444,042 ------- --------- 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 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1994 243,656 5,856,457 ======= ========= December 31, 1995 297,934 6,401,259 ======= ========= December 31, 1996 303,372 5,696,474 ======= ========= F-70 II-F Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1993 403,206 5,556,737 Production ( 63,723) ( 833,628) Sales of minerals in place ( 264) ( 741) Revision of previous estimates 13,322 ( 33,656) ------- --------- Proved reserves, Dec. 31, 1994 352,541 4,688,712 Production ( 54,773) ( 845,804) Sales of minerals in place ( 4,031) ( 28,284) Extensions and discoveries 829 108,943 Revisions of previous estimates 60,441 815,149 ------- --------- 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 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1994 352,541 4,657,944 ======= ========= December 31, 1995 355,007 4,738,716 ======= ========= December 31, 1996 365,138 4,671,485 ======= ========= F-71 II-G Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) ----------- ------------ Proved reserves, Dec. 31, 1993 862,055 12,213,776 Production (134,034) ( 1,921,696) Sales of minerals in place ( 562) ( 2,026) Revision of previous estimates 14,538 ( 30,956) ------- ---------- Proved reserves, Dec. 31, 1994 741,997 10,259,098 Production (115,206) ( 1,832,915) Sales of minerals in place ( 8,413) ( 66,454) Extensions and discoveries 1,737 227,933 Revisions of previous estimates 126,364 1,715,621 ------- ---------- 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 ======= ========== PROVED DEVELOPED RESERVES: December 31, 1994 741,997 10,194,757 ======= ========== December 31, 1995 746,479 10,303,283 ======= ========== December 31, 1996 769,142 10,122,558 ======= ========== F-72 II-H Partnership ---------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1993 198,685 3,080,514 Production ( 31,241) ( 452,661) Sales of minerals in place ( 142) ( 512) Revision of previous estimates 6,580 ( 59,390) ------- --------- Proved reserves, Dec. 31, 1994 173,882 2,567,951 Production ( 26,870) ( 449,854) Sales of minerals in place ( 2,006) ( 18,719) Extensions and discoveries 401 52,767 Revisions of previous estimates 28,114 401,519 ------- --------- 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 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1994 173,882 2,555,068 ======= ========= December 31, 1995 173,521 2,553,664 ======= ========= December 31, 1996 180,002 2,493,240 ======= ========= F-73 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, 1996 relating to proved oil and gas reserves based on the standardized measure as pre- scribed in SFAS No. 69: Partnership ------------------------------ II-A II-B ------------- ------------- Future cash inflows $49,443,483 $31,624,260 Future production and development costs ( 14,580,094) ( 9,063,180) ---------- ---------- Future net cash flows $34,863,389 $22,561,080 10% discount to reflect timing of cash flows ( 11,408,631) ( 7,311,538) ---------- ---------- Standardized measure of discounted future net cash flows $23,454,758 $15,249,542 ========== ========== F-74 Partnership ------------------------------ II-C II-D ------------- ------------- Future cash inflows $19,935,048 $49,961,714 Future production and development costs ( 5,140,243) ( 14,525,533) ---------- ---------- Future net cash flows $14,794,805 $35,436,181 10% discount to reflect timing of cash flows ( 4,949,739) ( 12,367,084) ---------- ---------- Standardized measure of discounted future net cash flows $ 9,845,066 $23,069,097 ========== ========== Partnership ------------------------------ II-E II-F ------------- ------------- Future cash inflows $27,529,378 $25,975,545 Future production and development costs ( 6,682,314) ( 5,525,443) ---------- ---------- Future net cash flows $20,847,064 $20,450,102 10% discount to reflect timing of cash flows ( 8,092,871) ( 8,424,410) ---------- ---------- Standardized measure of discounted future net cash flows $12,754,193 $12,025,692 ========== ========== F-75 Partnership ------------------------------ II-G II-H ------------- ------------- Future cash inflows $55,808,867 $13,542,727 Future production and development costs ( 12,011,514) ( 2,975,312) ---------- ---------- Future net cash flows $43,797,353 $10,567,415 10% discount to reflect timing of cash flows ( 18,025,396) ( 4,344,511) ---------- ---------- Standardized measure of discounted future net cash flows $25,771,957 $ 6,222,904 ========== ========== 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, 1996 using oil and gas prices of approximately $24.00 per barrel and $3.60 per Mcf, respectively. As of the date of this Annual Report on Form 10-K, oil and gas prices received by the Partnerships had decreased to approximately $19.00 per barrel and $1.60 per Mcf, respectively. If such prices, as opposed to December 31, 1996 prices, were used in calculating the standardized measure of discounted future net cash flows of the Partnerships' proved oil and gas reserves as of December 31, 1996, such decrease would have had a significant effect on the value of the reserves disclosed herein. F-76 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 Advisory Agreement dated as of November 24, 1992 between Samson, PaineWebber, Geodyne Resources, Geodyne Properties, Inc., Geodyne Production Company, and Geodyne Energy Company filed as Exhibit 28.3 to Registrant's Current Report on Form 8-K on December 24, 1992 and is hereby incorporated by reference. F-77 4.4 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. 4.5 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. 4.6 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. 4.7 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. 4.8 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. 4.9 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. 4.10 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. F-78 4.11 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. 4.12 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. 4.13 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. 4.14 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. 4.15 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. F-79 *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, 1996 and for the year ended December 31, 1996. *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, 1996 and for the year ended December 31, 1996. *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, 1996 and for the year ended December 31, 1996. *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, 1996 and for the year ended December 31, 1996. *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, 1996 and for the year ended December 31, 1996. *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, 1996 and for the year ended December 31, 1996. *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, 1996 and for the year ended December 31, 1996. F-80 *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, 1996 and for the year ended December 31, 1996. All other Exhibits are omitted as inapplicable. ---------- * Filed herewith. F-81 EX-23.1 2 RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS Phone (713) 651-9191 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 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, 1996, for Geodyne Energy Income Limited Partnership II-A. RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas February 7, 1997 EX-23.2 3 RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS Phone (713) 651-9191 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 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, 1996, for Geodyne Energy Income Limited Partnership II-B. RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas February 7, 1997 EX-23.3 4 RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS Phone (713) 651-9191 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 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, 1996, for Geodyne Energy Income Limited Partnership II-C. RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas February 7, 1997 EX-23.4 5 RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS Phone (713) 651-9191 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 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, 1996, for Geodyne Energy Income Limited Partnership II-D. RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas February 7, 1997 EX-23.5 6 RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS Phone (713) 651-9191 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 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, 1996, for Geodyne Energy Income Limited Partnership II-E. RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas February 7, 1997 EX-23.6 7 RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS Phone (713) 651-9191 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 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, 1996, for Geodyne Energy Income Limited Partnership II-F. RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas February 7, 1997 EX-23.7 8 RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS Phone (713) 651-9191 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 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, 1996, for Geodyne Energy Income Limited Partnership II-G. RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas February 7, 1997 EX-23.8 9 RYDER SCOTT COMPANY Fax (713) 651-0849 PETROLEUM ENGINEERS Phone (713) 651-9191 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 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, 1996, for Geodyne Energy Income Limited Partnership II-H. RYDER SCOTT COMPANY PETROLEUM ENGINEERS Houston, Texas February 7, 1997 EX-27.1 10
5 0000824894 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-A 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 875,918 0 1,073,459 0 0 1,949,377 32,358,270 26,187,477 9,068,387 314,294 0 0 0 0 8,595,410 9,068,387 5,832,874 5,958,024 0 3,758,202 0 0 0 2,199,822 0 2,199,822 0 0 0 2,199,822 4.22 0
EX-27.2 11
5 0000826345 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 569,257 0 710,208 0 0 1,279,465 22,243,383 18,102,974 5,579,977 206,300 0 0 0 0 5,287,479 5,579,977 4,179,527 4,167,326 0 2,723,737 0 0 0 1,443,589 0 1,443,589 0 0 0 1,443,589 3.68 0
EX-27.3 12
5 0000833054 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-C 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 387,334 0 340,182 0 0 727,516 10,299,275 8,250,396 2,941,348 80,113 0 0 0 0 2,792,087 2,941,348 1,925,940 1,976,754 0 1,215,194 0 0 0 761,560 0 761,560 0 0 0 761,560 4.58 0
EX-27.4 13
5 0000833526 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-D 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 906,737 0 793,183 0 0 1,699,920 20,297,293 15,906,502 6,953,850 278,280 0 0 0 0 6,408,788 6,953,850 4,329,102 4,425,815 0 3,055,214 0 0 0 1,370,601 0 1,370,601 0 0 0 1,370,601 4.04 0
EX-27.5 14
5 0000842881 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-E 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 528,765 0 512,573 0 0 1,041,338 17,077,285 12,498,125 5,976,145 294,362 0 0 0 0 5,622,549 5,976,145 2,693,317 2,821,258 0 2,058,800 0 0 0 762,458 0 762,458 0 0 0 762,458 3.04 0
EX-27.6 15
5 0000850506 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-F 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 441,903 0 445,124 0 0 887,027 13,052,976 8,699,629 5,312,077 74,495 0 0 0 0 5,209,260 5,312,077 2,433,313 2,570,110 0 1,381,773 0 0 0 1,188,337 0 1,188,337 0 0 0 1,188,337 6.47 0
EX-27.7 16
5 0000851724 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-G 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 932,165 0 946,059 0 0 1,878,224 28,149,044 18,606,254 11,576,732 165,642 0 0 0 0 11,354,178 11,576,732 5,158,799 5,413,799 0 2,997,835 0 0 0 2,415,964 0 2,415,964 0 0 0 2,415,964 6.05 0
EX-27.8 17
5 0000854062 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-H 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 221,484 0 225,725 0 0 447,209 6,900,072 4,595,258 2,790,245 39,901 0 0 0 0 2,736,205 2,790,245 1,230,222 1,288,859 0 730,924 0 0 0 557,935 0 557,935 0 0 0 557,935 5.66 0
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