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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
  September 30, 2002
  
Commission File Number 2-71865
 
TEXLAND DRILLING PROGRAM–1981, LTD.
(Name of Registrant)
 
TEXAS
(State of Organization)
  
75-1791491
(I.R.S. Employer Identification No.)
 
777 Main Street, Suite 3200
Fort Worth, Texas
(Address of Executive Offices)
  
76102
Zip Code
 
Registrant’s Telephone Number    (817) 336-2751
 
Securities registered pursuant to Section 12(b) of the Act:
 
Units of Limited Partnership Interest
(Title of Class)
  
None
(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 11 pages.

1

Table of Contents
 
Texland Drilling Program–1981, Ltd.
 
Index To Financial Statements
 
Reference Page
 
  
3
      
  
4
      
  
5
      
  
6
      
  
7
 
 
 
 

2

Table of Contents

Texland Drilling Program–1981, Ltd.
(A Limited Partnership)

Balance Sheets
September 30, 2002 and December 31, 2001
(Unaudited)
    
09/30/02
     
12/31/01
  
ASSETS
                  
Current Assets
                  
Cash
   
$
50,535
 
   
$
2,599
 
Accounts receivable—trade
   
 
147,525
 
   
 
91,976
 
Accounts receivable—managing general partner
            
 
18,844
 
    
  
    
 
198,060
 
   
 
113,419
 
    
  
Property and Equipment, at Cost (Successful Efforts Method)
                  
Intangible development costs
   
 
7,309,040
 
   
 
7,244,553
 
Lease and well equipment
   
 
4,229,599
 
   
 
4,202,099
 
Producing leaseholds
   
 
161,495
 
   
 
161,495
 
    
  
    
 
11,700,133
 
   
 
11,608,147
 
Accumulated depreciation, depletion and amortization
   
 
(10,395,615
)
   
 
(10,264,228
)
    
  
    
 
1,304,518
 
   
 
1,343,919
 
    
  
    
$
1,502,579
 
   
$
1,457,338
 
    
  
LIABILITIES AND PARTNERS’ CAPITAL
                  
Current Liabilities
                  
Accounts payable:
                  
Managing general partner
   
$
73,340
 
   
$
55,102
 
    
  
Partners’ Capital
                  
Limited partners—2,425 units outstanding
   
 
1,271,309
 
   
 
1,241,922
 
General partners
   
 
157,930
 
   
 
160,314
 
    
  
    
 
1,429,239
 
   
 
1,402,236
 
    
  
    
$
1,502,579
 
   
$
1,457,338
 
    
  
 
See accompanying notes to financial statements.

3

Table of Contents

Texland Drilling Program–1981, Ltd.
(A Limited Partnership)

 
Statements of Operations
September 30, 2002 and 2001
(Unaudited)
 
    
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
    
2002
   
2001
   
2002
   
2001
Revenue
                            
Oil and gas sales
   
$
345,259
   
$
323,582
   
$
909,597
   
$
1,089,513
Interest income
   
 
59
   
 
201
   
 
187
   
 
1,140
Miscellaneous Income
   
 
—  
   
 
—  
   
 
—  
   
 
—  
Gain on sale of assets
   
 
3,100
   
 
—  
   
 
10,255
   
 
—  
    
  
  
  
    
 
348,418
   
 
323,783
   
 
920,039
   
 
1,090,653
    
  
  
  
Expense
                            
Fees to managing general partner
   
 
23,250
   
 
21,975
   
 
69,750
   
 
65,925
Production expense
   
 
144,012
   
 
132,979
   
 
396,566
   
 
355,703
Severance tax
   
 
17,293
   
 
15,869
   
 
46,087
   
 
57,645
Depreciation, depletion and amortization
   
 
48,877
   
 
39,450
   
 
141,642
   
 
105,217
Other
   
 
2,023
   
 
1,684
   
 
20,704
   
 
13,792
    
  
  
  
    
 
235,455
   
 
211,957
   
 
674,749
   
 
598,282
    
  
  
  
Net Income (Loss)
   
$
112,963
   
$
111,826
   
$
245,290
   
$
492,371
    
  
  
  
Allocation of Net Income (Loss)
                            
Limited partners
   
$
50,399
   
$
57,031
   
$
96,075
   
$
251,109
General partners
   
 
62,564
   
 
54,795
   
 
149,215
   
 
241,262
    
  
  
  
    
$
112,963
   
$
111,826
   
$
245,290
   
$
492,371
    
  
  
  
                             
Net Income (Loss) per $5,000 Limited Partner (2,425 Units Outstanding)
   
$
21
   
$
24
   
$
40
   
$
104
    
  
  
  
 
See accompanying notes to financial statements.

4

Table of Contents

Texland Drilling Program–1981, Ltd.
(A Limited Partnership)

 
Statements of Partners’ Capital
Nine Months Ended September 30, 2001
(Unaudited)
    
Limited Partners
     
General Partners
     
Total
  
Balance at December 31, 2001
   
$
1,241,922
 
   
$
160,314
 
   
$
1,402,236
 
Partners’ distributions
   
 
(66,688
)
   
 
(179,100
)
   
 
(245,788
)
Partners’ contributions
   
 
—  
 
   
 
27,501
 
   
 
27,501
 
Net income
   
 
96,075
 
   
 
149,215
 
   
 
245,290
 
    
  
  
Balance at September 30, 2002
   
$
1,271,309
 
   
$
157,930
 
   
$
1,429,239
 
    
  
  
 
See accompanying notes to financial statements

5

Table of Contents

Texland Drilling Program–1981, Ltd.
(A Limited Partnership)

 
Statements of Cash Flow
Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Net income (loss)
   
$
245,290
 
   
$
492,371
 
    
  
Adjustments to reconcile net income to net cash provided by operating activities:
                  
Depreciation, depletion and amortization
   
 
141,642
 
   
 
105,217
 
Gain on sale of assets
   
 
(10,255
)
   
 
—  
 
(Increase) decrease in accounts receivable
   
 
(36,705
)
   
 
8,761
 
(Decrease) increase in accounts payable
   
 
18,238
 
   
 
25,504
 
Other
   
 
—  
 
   
 
—  
 
    
  
    
 
112,920
 
   
 
139,482
 
    
  
Net cash provided by operating activities
   
 
358,210
 
   
 
631,853
 
    
  
Investing Activities
                  
Acquisition of property and equipment
   
 
(102,242
)
   
 
(179,072
)
Proceeds from sale of assets
   
 
10,255
 
   
 
—  
 
    
  
Net cash used in investing activities
   
 
(91,987
)
   
 
(179,072
)
    
  
Financing Activities
                  
Partners’ contributions
   
 
27,501
 
   
 
42,570
 
Partners’ distributions
   
 
(245,788
)
   
 
(533,968
)
    
  
Net cash used in financing activities
   
 
(218,287
)
   
 
(491,398
)
    
  
                   
Net Increase in Cash
   
 
47,936
 
   
 
(38,617
)
Cash—beginning of year
   
 
2,599
 
   
 
58,887
 
    
  
Cash—End of Quarter
   
$
50,535
 
   
$
20,270
 
    
  
 
See accompanying notes to financial statements.
 

6

Table of Contents

Texland Drilling Program–1981, Ltd.
(A Limited Partnership)

 
Notes to Financial Statements
September 30, 2002
Unaudited
 
1.    Basis of Presentation
 
In the opinion of management, the accompanying balance sheets and related interim statements of operations, cash flows, and partners’ capital include all adjustments, consisting only of normal recurring items necessary for their fair presentation in conformity with U.S. generally accepted accounting principals. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results may differ from these estimates. Interim results are not necessarily indicative of results for a full year. The information included in this From 10-Q should be read in conjunction with Management’s Discussion and Analysis and financial statements and notes thereto included in the Texland Drilling Program–1981, Ltd. 2001 Form 10-K.
 
2.    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.

7

Table of Contents

Texland Drilling Program–1981, Ltd.
(A Limited Partnership)

 
Management’s Discussion And Analysis Of Financial
Condition And Results Of Operations
September 30, 2002
(Unaudited)
 
The Partnership’s average price per barrel of oil for the third quarter of 2002 was $20.16 as compared to $18.71 for the third quarter of 2001. The decreased revenue and related severance tax expense result primarily from normal expected declines in production.
 
Depreciation, depletion and amortization for the third quarter of 2002 was $48,877 as compared to $39,450 for the third 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.
 
Quantitative and Qualitative Disclosures
About Market Risk
 
The Partnership is exposed to oil and gas price risks. The Partnership sells all of its oil and gas under short-term contracts. None of these risks are hedged.

8

Table of Contents
 
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
   
M. E. Chapman, Vice President
of Texland Petroleum, Inc.,
General Partner—Texland
Properties–1981
 
Date: November 14, 2002

9