10-Q 1 d10q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter ended June 30, 2002 Commission File Number 2-71865 ----------------------- -------------------------------- TEXLAND DRILLING PROGRAM-1981, LTD. ----------------------------------- (Name of Registrant) TEXAS 75-1791491 ------------------------ ---------------------------------------- (State of Organization) (I.R.S. Employer Identification No.) 777 Main Street, Suite 3200 Fort Worth, Texas 76102 ------------------------------------- ------------ (Address of Executive Offices) Zip Code Registrant's Telephone Number (817) 336-2751 -------------- Securities registered pursuant to Section 12(b) of the Act: Units of Limited Partnership Interest None ------------------------------------- ---------------- (Title of Class) (Voting Units) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES __X___ NO _____ This report contains a total of 10 pages. 1 Texland Drilling Program-1981, Ltd. Index To Financial Statements Reference Page -------------- Balance Sheets at June 30, 2002 and 3 December 31, 2001. Statements of Operations for the Three Months 4 and Six Months Ended June 30, 2002 and 2001. Statement of Partners' Capital at June 30, 2002. 5 Statements of Cash Flows for Six Months Ended June 30, 2002 and 2001. 6 Notes to Financial Statements. 7-8 2 Texland Drilling Program-1981, Ltd. (A Limited Partnership) Balance Sheets June 30, 2002 and December 31, 2001 (Unaudited)

0906/30/0102 12/31/~~2000~~2001 ------------------ ------------------ ASSETS Current Assets Cash $ 208,~~270~~965 $ 582,~~887~~599 Accounts receivable - trade ~~(Note~~140,417 6)91,976 ~~136~~Accounts receivable - managing general partner 6,~~585~~281 ~~145~~18,~~346~~844 ------------------ ------------------ ~~156~~155,~~855~~663 ~~204~~113,~~233~~419 ------------------ ------------------ Property and Equipment, at Cost (Successful Efforts Method) (Notes 2,1 ~~3, 4,~~ and 52) Intangible development costs 7,~~243~~295,~~520~~465 7,~~107~~244,~~019~~553 Lease and well equipment 4,~~212~~220,~~822~~835 4,~~170~~202,~~251~~099 Producing leaseholds 161,495 161,495 ------------------ ------------------ 11,~~617~~677,~~837~~795 11,~~438~~608,~~765~~147 Accumulated depreciation, depletion and amortization (10,~~178~~349,~~093~~838) (10,~~072~~264,~~876~~228) ------------------ ------------------ 1,~~439~~327,~~744~~957 1,~~365~~343,~~889~~919 ------------------ ------------------ $ 1,~~596~~483,~~599~~620 $ 1,~~570~~457,~~122~~338 ================== ================== LIABILITIES AND PARTNERS' CAPITAL Current Liabilities Accounts payable: Managing general partner (Note 53) $ 7361,~~902~~720 $ 4855,~~398~~102 ------------------ ------------------ Partners' Capital (Notes 42 and 73) Limited partners - 2,425 units outstanding 1,~~340~~239,~~298~~099 1,~~318~~241,~~957~~922 General partners 182,~~399~~801 ~~202~~160,~~767~~314 ------------------ ------------------ 1,~~522~~421,~~697~~900 1,~~521~~402,~~724~~236 ------------------ ------------------ $ 1,~~596~~483,~~599~~620 $ 1,~~570~~457,~~122~~338 ================== ==================

See accompanying notes to financial statements. 3 Texland Drilling Program-1981, Ltd. (A Limited Partnership) Statements of Operations June 30, 2002 and 2001 (Unaudited)

Three Months Ended ~~Nine~~Six Months Ended ~~September~~June 30, ~~September~~June 30, 2002 2001 ~~2000~~2002 2001 ~~2000~~ --------------- -------------- -------------- -------------- Revenue Oil and gas sales ~~(Note 6)~~ $ ~~323~~320,~~582~~204 $ ~~386~~315,~~999~~269 $ 1564,~~089,513~~338 $ 1765,~~105,914~~931 Interest income ~~201~~86 ~~688~~407 ~~1,140~~128 ~~1,768~~939 Miscellaneous Income - - - ~~2,066~~- Gain on sale of assets -229 - -7,155 - --------------- -------------- -------------- -------------- ~~323~~320,~~783~~519 ~~387~~315,~~687~~676 1571,~~090,653~~621 1766,~~109,748~~870 --------------- -------------- -------------- -------------- Expense ~~(Note 5)~~ Fees to managing general partner 2123,~~975~~250 21,975 6546,~~925~~500 6543,~~925~~950 Production expense ~~132~~133,~~979~~380 ~~106~~116,~~389~~876 ~~355~~252,~~703~~554 ~~304~~222,~~974~~724 Severance tax 1516,~~869~~160 1915,~~628~~906 5728,~~645~~794 5541,~~963~~776 Depreciation, depletion and amortization 3949,~~450~~159 3534,~~333~~014 ~~105~~92,~~217~~765 ~~111~~65,~~292~~767 Other 117,~~684~~637 211,~~215~~632 1318,~~792~~681 1512,~~321~~108 --------------- -------------- -------------- -------------- ~~211~~239,~~957~~586 ~~185~~200,~~540~~403 ~~598~~439,~~282~~294 ~~553~~386,~~475~~325 --------------- -------------- -------------- -------------- Net Income (Loss) $ ~~111~~80,~~826~~933 $ ~~202~~115,~~147~~273 $ ~~492~~132,~~371~~327 $ ~~556~~380,~~273~~545 =============== ============== ============== ============== Allocation of Net Income (Loss) ~~(Note 7)~~ Limited partners $ 5725,~~031~~913 $ ~~102~~58,~~964~~789 $ ~~251~~45,~~109~~677 $ ~~264~~194,~~570~~078 General partners 5455,~~795~~020 9956,~~183~~484 ~~241~~86,~~262~~650 ~~291~~186,~~703~~467 --------------- -------------- -------------- -------------- $ ~~111~~80,~~826~~933 $ ~~202~~115,~~147~~273 $ ~~492~~132,~~371~~327 $ ~~556~~380,~~273~~545 =============== ============== ============== ============== Net Income (Loss) per $5,000 Limited Partner (2,425 Units Outstanding) $ 2411 $ 4224 $ ~~104~~19 $ ~~109~~80 =============== ============== ============== ==============

See accompanying notes to financial statements. 4 Texand Drilling Program-1981, Ltd. (A Limited Partnership) Statements of Partners' Capital Six Months Ended June 30, 2002 (Unaudited) --------------------------------------------------------------------------------

Limited General Partners Partners Total ------------ ----------- ------------ Balance at December 31, ~~2000~~2001 $ 1,~~318~~241,~~957~~922 $ ~~202~~160,~~767~~314 $ 1,~~521~~402,~~724~~236 Partners' distributions (~~229~~48,~~768~~500) (~~304~~82,~~200~~900) (~~533~~131,~~968~~400) Partners' contributions - 4218,~~570~~737 4218,~~570~~737 Net income ~~251~~45,~~109~~677 ~~241~~86,~~262~~650 ~~492~~132,~~371~~327 ------------ ----------- ------------ Balance at ~~September~~June 30, ~~2001~~2002 $ 1,~~340~~239,~~298~~099 $ 182,~~399~~801 $ 1,~~522~~421,~~697~~900 ============ =========== ============

-------------------------------------------------------------------------------- See accompanying notes to financial statements. 5 Texland Drilling Program-1981, Ltd. (A Limited Partnership) Statements of Cash Flow Six Months Ended June 30, 2002 and 2001 (Unaudited)

2002 2001 ~~2000~~ ---------- ---------- Operating Activities Net income (loss) $ ~~492~~132,~~371~~327 $ ~~556~~380,~~274~~545 ---------- ---------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization ~~105~~92,~~217~~765 ~~111~~65,~~292~~767 Gain on sale of assets -(7,155) - (Increase) decrease in accounts receivable ~~8,761~~ (935,~~151~~878) 1,113 (Decrease) increase in accounts payable 256,~~504~~618 1722,~~215~~511 Other - - ---------- ---------- ~~139~~56,~~482~~350 ~~119~~89,~~356~~391 ---------- ---------- Net cash provided by operating activities ~~631~~188,~~853~~677 ~~675~~469,~~630~~936 ---------- ---------- Investing Activities Acquisition of property and equipment (~~179~~76,~~072~~803) (18104,~~140~~189) Proceeds from sale of assets -7,155 - ---------- ---------- Net cash used in investing activities (~~179~~69,~~072~~648) (18104,~~140~~189) ---------- ---------- Financing Activities Partners' contributions 4218,~~570~~737 420,~~749~~979 Partners' distributions (~~533~~131,~~968~~400) (~~625~~387,~~638~~381) ---------- ---------- Net cash used in financing activities (~~491~~112,~~398~~663) (~~620~~366,~~889~~402) ---------- ---------- Net Increase in Cash ~~(38~~6,~~617~~366 (655) ~~36,601~~ Cash - beginning of year 2,599 58,887 ~~67,072~~ ---------- ---------- Cash - End of Quarter $ 208,~~270~~965 $ ~~103~~58,~~673~~232 ========== ==========

-------------------------------------------------------------------------------- See accompanying notes to financial statements. 6 Texland Drilling Program-1981, Ltd. (A Limited Partnership) Notes To Financial Statements June 30, 2002 (Unaudited) 1. Summary Of Significant Accounting Policies The Partnership was organized as a limited partnership on July 20, 1981 for the purpose of engaging in oil and gas exploration and production. Texland Properties-1981, a general partnership, and Texland Petroleum, Inc. are the General Partners. The Managing General Partner is Texland Petroleum, Inc. The Partnership's accounting policies are summarized below: Basis Of Accounting The Partnership follows generally accepted accounting principles applicable to established enterprises in the extractive industries under a method which is generally known as the successful method of accounting. Property And Equipment Costs incurred for the acquisition of producing and nonproducing leaseholds are capitalized. Costs of intangible development and lease and well equipment incurred to drill and equip successful exploratory and development wells are capitalized. Costs to drill and equip unsuccessful exploratory wells are charged to operations while costs of unsuccessful development wells remain capitalized. Costs associated with uncompleted wells are capitalized as wells-in-progress. Abandoned Leaseholds Costs of nonproducing properties are charged to expense at such time as they are deemed to be impaired, based upon periodic assessments of such costs. Depletion Leasehold costs of producing properties are amortized on the unit of production method based on proved oil and gas reserves. Intangible development costs of producing properties are amortized on the unit of production method based on estimated proved developed oil and gas reserves. Depreciation Depreciation of equipment is provided by using the unit of production method based on estimated proved developed oil and gas reserves. Organization Costs These costs are amortized by the straight-line method over ten years, the life of the Partnership. Federal Income Tax The Partnership files its federal income tax return on the accrual basis. 2. Contributions By General Partner (Texland Properties-1981) Under terms of the Partnership Agreement, the General Partner is charged for certain costs related to drilling and production operations which are required to be capitalized for federal income tax purposes. These costs are treated as capital contributions by the General Partner. In addition, Texland Properties-1981 and Texland Petroleum, Inc. have invested in limited partnership units in the amount of $95,000 and $30,000 respectively. 7 Texland Drilling Program-1981, Ltd. (A Limited Partnership) Notes To Financial Statements (Continued) June 30, 2002 (Unaudited) 3. Fees To Managing General Partner (Texland Petroleum, Inc.) In consideration of its management services rendered, the Managing General Partner is entitled to charge management fees to the Partnership. In addition, for the six months ended June 30, 2002 and June 30, 2001, the Partnership was charged $83,179 and $83,064 respectively for technical services, accounting services, and supervisory services performed by the employees of the Managing General Partner and such charges are included in intangible development costs, production expenses and fees to Managing General Partner. These charges are allocated between the General and Limited Partners based upon applicable revenue and expense sharing rates. 8 Texland Drilling Program-1981, Ltd. (A Limited Partnership) Management's Discussion And Analysis Of Financial Condition And Results Of Operations June 30, 2002 The Partnership's average price per barrel of oil for the second quarter of 2002 was $18.16 as compared to $19.92 for the second quarter of 2001. The decreased revenue and related severance tax expense result primarily from the decrease in average oil prices. Certain normal expected declines in production were also experienced over the past twelve months. Depreciation, depletion and amortization for the second quarter of 2002 was $49,159 as compared to $34,014 for the second quarter of 2001. Changes in depreciation and depletion for 2002 through 2001, are due primarily to the effect that changes in oil and gas prices have on the calculation of estimated future economically recoverable oil and gas reserves. The Partnership was formed with cash contributions from the Limited and General Partners. Management does not intend to incur any substantial indebtedness and any developmental drilling which is necessary will be processed by farmout to other parties or by reinvestment of internally generated funds. Management, therefore, anticipates no liquidity problems during the life of the Partnership. 9 Part II Items 1 through 5 ----------------- Omitted - Not applicable to Registrant. Item 6 ------ (a) Exhibits: 99.1. Certification by CEO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002. 99.2. Certification by CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K: None. Signature --------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Texland Drilling Program-1981, Ltd. By: /s/ Michael E. Chapman ----------------------------------- Michael E. Chapman, Vice President of Texland Petroleum, Inc., General Partner - Texland Properties-1981 Date: August 14, 2002

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