FORM 10-K405

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

               Annual Report Pursuant to Section 13 or 15(d) of
                      the Securities Exchange Act of 1934

For the fiscal year ended December 31, 1998

Commission File Number 0-10478

                        DYCO OIL AND GAS PROGRAM 1981-2
                            (A LIMITED PARTNERSHIP)
            (Exact name of registrant as specified in its charter)

           Minnesota                         41-1411952
(State or other jurisdiction of          (I.R.S. Employer
incorporation or organization)        Identification Number)

         Samson Plaza
   Two West Second Street
        Tulsa, Oklahoma                      74103
     (Address of principal                (Zip Code)
      executive offices)

Registrant's telephone number, including area code: (918) 583-1791

Securities registered pursuant to Section 12(b) of the Act:  None.

Securities registered pursuant to Section 12(g) of the Act:
      Units of limited partnership interest

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such  reports),  and (2) has been subject to the
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference in Part III of this Form 10-K405 or any  amendment to
this Form 10-K405. [X]

      The units of  limited  partnership  are not  publicly  traded,  therefore,
registrant cannot compute the aggregate market value of the voting units held by
non-affiliates of the registrant.

      DOCUMENTS INCORPORATED BY REFERENCE:  None.




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<PAGE>





                                 FORM 10-K405

                        DYCO OIL AND GAS PROGRAM 1981-2
                       (a Minnesota limited partnership)


                               TABLE OF CONTENTS

PART I.......................................................................3
      ITEM 1.     BUSINESS...................................................3
      ITEM 2.     PROPERTIES.................................................7
      ITEM 3.     LEGAL PROCEEDINGS.........................................11
      ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS.......11
PART II.....................................................................11
      ITEM 5.     MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP UNITS AND 
                  RELATED LIMITED PARTNER MATTERS...........................11
      ITEM 6.     SELECTED FINANCIAL DATA...................................13
      ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS.................................14
      ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES
                  ABOUT MARKET RISK.........................................22
      ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...............23
      ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE..................................34
PART III....................................................................34
      ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........34
      ITEM 11.    EXECUTIVE COMPENSATION....................................35
      ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 
                  MANAGEMENT................................................39
      ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............39
PART IV.....................................................................41
      ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON 
                  FORM 8-K .................................................41
      SIGNATURES............................................................43




                                      -2-
<PAGE>



PART I


ITEM 1.     BUSINESS

      General

      The Dyco Oil and Gas Program 1981-2 Limited Partnership (the "Program") is
a Minnesota  limited  partnership  engaged in the production of oil and gas. The
Program  commenced  operations  on June  1,  1981  with  the  primary  financial
objective of investing its limited  partners'  subscriptions  in the drilling of
oil  and gas  prospects  and  then  distributing  to its  limited  partners  all
available  cash flow from the Program's  on-going  production  operations.  Dyco
Petroleum Corporation ("Dyco") serves as the General Partner of the Program. See
"Item 2. Properties" for a description of the Program's reserves and properties.

      The  limited   partnership   agreement   for  the  Program  (the  "Program
Agreement")  provides  that limited  partners are  allocated  99% of all Program
costs and revenues and Dyco, as General Partner,  is allocated 1% of all Program
costs and  revenues.  Included in such costs is the Program's  reimbursement  to
Dyco of the Program's proportionate share of Dyco's geological, engineering, and
general and administrative expenses.

      Dyco  currently  serves as General  Partner  of 31  limited  partnerships,
including the Program.  Dyco is a wholly-owned  subsidiary of Samson  Investment
Company.  Samson  Investment  Company  and its various  corporate  subsidiaries,
including Dyco, (collectively, "Samson") are primarily engaged in the production
and  development of and exploration for oil and gas reserves and the acquisition
and  operation  of  producing  properties.  At January 31,  1999,  Samson  owned
interests in approximately  10,500 oil and gas wells located in 19 states of the
United States and the countries of Canada, Venezuela, and Russia. At January 31,
1999, Samson operated approximately 2,900 oil and gas wells located in 15 states
of the United States, as well as Canada, Venezuela, and Russia.

      As a limited  partnership,  the Program  has no  officers,  directors,  or
employees. It relies instead on the personnel of Dyco and Samson. As of March 1,
1999,  Samson employed  approximately  900 persons.  No employees are covered by
collective bargaining agreements, and management believes that Samson provides a
sound employee relations  environment.  For information  regarding the executive
officers  of Dyco,  see "Item 10. -  Directors  and  Executive  Officers  of the
Registrant."

      Dyco's and the Program's  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.




                                      -3-
<PAGE>




      Funding

      Although the Program  Agreement  permits the Program to incur  borrowings,
the Program's  operations and expenses are currently funded out of the Program's
revenues from oil and gas sales. Dyco may, but is not required to, advance funds
to  the  Program  for  the  same  purposes  for  which  Program  borrowings  are
authorized.


      Principal Products Produced and Services Rendered

      The Program's sole business is the  development  and production of oil and
gas with a  concentration  on gas.  The  Program  does  not  hold  any  patents,
trademarks,  licenses,  or  concessions  and is not a  party  to any  government
contracts.  The  Program  has no backlog of orders and does not  participate  in
research and development  activities.  The Program is not presently encountering
shortages of oilfield tubular goods, compressors,  production material, or other
equipment.


      Oil, Gas, and Environmental Control Regulations

      Regulation  of Production  Operations -- The  production of oil and gas is
subject to  extensive  federal and state laws and  regulations  governing a wide
variety of matters, including the drilling and spacing of wells, allowable rates
of  production,  prevention  of  waste  and  pollution,  and  protection  of the
environment.  In  addition  to the direct  costs  borne in  complying  with such
regulations,  operations and revenues may be impacted to the extent that certain
regulations limit oil and gas production to below economic levels.

      Regulation  of Sales and  Transportation  of Oil and Gas -- Sales of crude
oil and  condensate are made by the Program at market prices and are not subject
to price controls. The sale of gas may be subject to both federal and state laws
and  regulations.  The provisions of these laws and  regulations are complex and
affect all who  produce,  resell,  transport,  or purchase  gas,  including  the
Program.  Although  virtually all of the Program's gas production is not subject
to  price  regulation,   other  regulations   affect  the  availability  of  gas
transportation services and the ability of gas consumers to continue to purchase
or use gas at current levels. Accordingly,  such regulations may have a material
effect  on the  Program's  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.



                                      -4-
<PAGE>




      Regulation of the  Environment -- The Program's  operations are subject to
numerous laws and  regulations  governing  the  discharge of materials  into the
environment or otherwise relating to environmental  protection.  Compliance with
such  laws  and  regulations,   together  with  any  penalties   resulting  from
noncompliance,  may increase the cost of the Program's  operations or may affect
the  Program's  ability  to  timely  complete  existing  or  future  activities.
Management  anticipates  that various local,  state,  and federal  environmental
control agencies will have an increasing impact on oil and gas operations.


      Significant Customers

      Purchases of gas by El Paso Energy Marketing Company ("El Paso") accounted
for approximately 93.0% of the Program's oil and gas sales during the year ended
December 31, 1998. In the event of interruption of purchases by this significant
customer or the  cessation or material  change in  availability  of  open-access
transportation by the Program's pipeline transporters, the Program may encounter
difficulty  in  marketing  its gas and in  maintaining  historic  sales  levels.
Alternative purchasers or transporters may not be readily available.

      The Program's  principal  customers for crude oil  production are refiners
and other companies which have pipeline facilities near the producing properties
of the Program. In the event pipeline facilities are not conveniently  available
to  production  areas,  crude oil is usually  trucked by  purchasers  to storage
facilities.


      Competition and Marketing

      The  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 Program to produce and market oil
and gas profitably depends on a number of factors that are beyond the control of
the Program.  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.  In addition,  on March 12, 1999 several major oil producing nations
agreed to curtail oil exports in an effort to increase worldwide oil prices. The
effect  of these  factors  on  future  oil and gas  industry  trends  cannot  be
accurately predicted or anticipated.



                                      -5-
<PAGE>



      The most important variable affecting the Program's revenues is the prices
received for the sale of oil and gas.  Predicting future prices is not possible.
Concerning past trends,  average yearly wellhead gas prices in the United States
have been volatile for a number of years.  For the past ten years,  such average
prices have generally been in the $1.40 to $2.40 per Mcf range.

      Substantially  all of the  Program's  gas  reserves  are being sold on the
"spot  market."  Prices on the spot  market  are  subject to wide  seasonal  and
regional pricing  fluctuations due to the highly  competitive nature of the spot
market. In addition,  such spot market sales are generally  short-term in nature
and are dependent  upon the  obtaining of  transportation  services  provided by
pipelines.  Spot prices for the Program's gas decreased from approximately $2.32
per Mcf at December  31,  1997 to  approximately  $1.93 per Mcf at December  31,
1998.  Such prices  were on an MMBTU  basis and differ from the prices  actually
received  by  the  Program  due  to  transportation  and  marketing  costs,  BTU
adjustments, and regional price and quality differences.  Continued very low oil
prices as discussed below may cause downward  pressure on gas prices due to some
users of gas converting to oil as a cheaper fuel alternative.

      For the past ten years,  average  oil prices  have  generally  been in the
$16.00 to $24.00 per barrel range.  Due to global  consumption and supply trends
over the last year as well as at least a  short-term  slowdown  in Asian  energy
demand,  oil prices  over the past year have  reached  historically  low levels,
dropping to as low as  approximately  $9.00 per barrel.  It is not known whether
this  trend  will  continue.   Prices  for  the  Program's  oil  decreased  from
approximately  $16.25 per barrel at December 31, 1997 to approximately $9.50 per
barrel at December 31, 1998.

      As of February  28, 1999 oil and gas prices were  approximately  $9.50 per
barrel  and $1.55  Mcf,  respectively.  Future  prices for both oil and gas will
likely  be  different  from  (and may be lower  than)  the  prices  in effect on
December 31, 1998 and February 28, 1999.  As of the date of this Annual  Report,
oil prices have increased  slightly over the February 28, 1999 price,  primarily
due to the March 1999  announcement that several oil producing nations intend to
curtail oil exports.  Management is unable to predict whether future oil and gas
prices will (i) stabilize, (ii) increase, or (iii) decrease.


      Insurance Coverage

      The Program is 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  Program  maintains  insurance  coverage  as is  customary  for
entities of a similar size engaged in operations similar to that of the Program,
but losses can occur from uninsurable risks or in



                                      -6-
<PAGE>



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 financial condition and results of operations.


ITEM 2.     PROPERTIES

      Well Statistics

      The  following  table sets forth the  numbers of gross and net  productive
wells of the Program as of December 31, 1998.

                              Well Statistics(1)
                            As of December 31, 1998

                  Gross productive wells(2):
                     Oil                                 1
                     Gas                                16
                                                        --
                        Total                           17

                  Net productive wells(3):
                     Oil                               .27
                     Gas                              1.93
                                                      ----
                        Total                         2.20

----------
(1)   The designation of a well as an oil well or gas well is made by Dyco based
      on the relative amount of oil and gas reserves for the well. Regardless of
      a well's oil or gas designation,  it may produce oil, gas, or both oil and
      gas.
(2)   As used  throughout  this Annual  Report on Form 10-K  ("Annual  Report"),
      "Gross  Well" refers to a well in which a working  interest is owned.  The
      number  of gross  wells is the  total  number  of wells in which a working
      interest is owned.
(3)   As used throughout this Annual Report, "Net Well" refers to the sum of the
      fractional  working  interests  owned in gross wells.  For example,  a 15%
      working interest in a well represents one Gross Well, but 0.15 Net Well.


      Drilling Activities

      During the year ended  December  31,  1998,  the Program  participated  in
drilling the Lemasters No. 1-9 well in Washita County, Oklahoma. The Program has
a .0167 working (.0115 revenue) interest in this producing gas well.

      Oil and Gas Production, Revenue, and Price History

     The following table sets forth certain  historical  information  concerning
the oil (including condensates) and gas




                                      -7-
<PAGE>




production,  net of all royalties,  overriding royalties,  and other third party
interests, of the Program, revenues attributable to such production, and certain
price and cost information.



                              Net Production Data

                                                Year Ended December 31,
                                         -----------------------------------
                                           1998         1997          1996
                                         --------     --------      --------
Production:
   Oil (Bbls)(1)                              814        1,129           838
   Gas (Mcf)(2)                           147,505      197,003       212,647

Oil and gas sales:
   Oil                                   $  8,525     $ 20,190      $ 16,721
   Gas                                    277,276      454,796       442,081
                                          -------      -------       -------
      Total                              $285,801     $474,986      $458,802
                                          =======      =======       =======
Total direct operating
  expenses (3)                           $167,970     $183,139      $109,871
                                          =======      =======       =======

Direct operating expenses as a
   percentage of oil and gas sales          58.8%        38.6%         23.9%

Average sales price:
   Per barrel of oil                       $10.47       $17.88        $19.95
   Per Mcf of gas                            1.88         2.31          2.08

Direct operating expenses per
   equivalent Mcf of gas(4)                $ 1.10       $  .90        $  .50

----------
(1)   As used throughout this Annual Report, "Bbls" refers to barrels of 42 U.S.
      gallons and  represents  the basic unit for  measuring  the  production of
      crude oil and condensate oil.
(2)   As used  throughout  this Annual  Report,  "Mcf" refers to volume of 1,000
      cubic feet under  prescribed  conditions of pressure and  temperature  and
      represents the basic unit for measuring the production of gas.
(3)   Includes lease operating expenses and production taxes.
(4)   Oil production is converted to gas  equivalents at the rate of six Mcf per
      barrel, representing the estimated relative energy content of gas and oil,
      which rate is not  necessarily  indicative of the  relationship of oil and
      gas prices.  The  respective  prices of oil and gas are affected by market
      and other factors in addition to relative energy content.




                                      -8-
<PAGE>



      Proved Reserves and Net Present Value

      The following table sets forth the Program's  estimated proved oil and gas
reserves and net present value  therefrom as of December 31, 1998.  The schedule
of  quantities of proved oil and gas reserves was prepared by Dyco in accordance
with the rules prescribed by the Securities and Exchange Commission (the "SEC").
As used  throughout  this  Annual  Report,  "proved  reserves"  refers  to those
estimated  quantities of crude oil, gas, and gas liquids  which  geological  and
engineering  data  demonstrate  with  reasonable  certainty to be recoverable in
future  years from known oil and gas  reservoirs  under  existing  economic  and
operating conditions.

      Net present  value  represents  estimated  future gross cash flow from the
production and sale of proved reserves,  net of estimated oil and gas production
costs (including  production  taxes, ad valorem taxes, and operating  expenses),
and estimated future development costs, discounted at 10% per annum. Net present
value  attributable to the Program's proved reserves was calculated on the basis
of current costs and prices at December 31, 1998. Such prices were not escalated
except in  certain  circumstances  where  escalations  were  fixed  and  readily
determinable in accordance with applicable contract provisions.  The prices used
by Dyco in  calculating  the net present  value  attributable  to the  Program's
proved  reserves  do not  necessarily  reflect  market  prices  for  oil and gas
production  subsequent to December 31, 1998.  There can be no assurance that the
prices  used in  calculating  the net  present  value  of the  Program's  proved
reserves at December 31, 1998 will actually be realized for such production.

      The process of  estimating  oil and gas  reserves  is  complex,  requiring
significant  subjective  decisions in the  evaluation  of available  geological,
engineering,  and  economic  data  for  each  reservoir.  The  data  for a given
reservoir may change substantially over time as a result of, among other things,
additional development activity, production history, and viability of production
under varying economic conditions;  consequently, it is reasonably possible that
material  revisions to existing reserve  estimates may occur in the near future.
Although  every  reasonable  effort has been made to ensure  that these  reserve
estimates represent the most accurate assessment  possible,  the significance of
the  subjective  decisions  required and variances in available data for various
reservoirs  make these  estimates  generally  less precise than other  estimates
presented in connection with financial statement disclosures.




                                      -9-
<PAGE>



                               Proved Reserves and
                               Net Present Values
                              From Proved Reserves

                            As of December 31, 1998

            Estimated proved reserves:
               Gas (Mcf)                               943,531
               Oil and liquids (Bbls)                    3,145

            Net present value
               (discounted at 10% per annum)          $685,394


      No estimates  of the proved  reserves of the Program  comparable  to those
included  herein have been included in reports to any federal  agency other than
the SEC.  Additional  information  relating to the Program's  proved reserves is
contained in Note 4 to the Program's financial statements, included in Item 8 of
this Annual Report.


      Significant Properties

      As of December 31, 1998,  the Program's  properties  consisted of 17 gross
(2.2 net) productive wells. The Program also owned a non-working  interest in an
additional  8 wells.  Affiliates  of the  Program  operate 12 (48%) of its total
wells.  All of the Program's  properties are located  onshore in the continental
United States.  Substantially  all of the Program's  reserves are located in the
Anadarko  Basin  of  western  Oklahoma  and the  Texas  panhandle,  which  is an
established oil and gas producing basin.

      As of December 31, 1998,  the Program's  properties in the Anadarko  Basin
consisted  of 16 gross (1.93 net) wells.  The Program  also owned a  non-working
interest in an  additional  8 wells in the  Anadarko  Basin.  Affiliates  of the
Program  operate  11  (46%) of its  total  wells in the  Anadarko  Basin.  As of
December  31,  1998,  the Program had  estimated  total  proved  reserves in the
Anadarko  Basin of  approximately  884,912  Mcf of gas and  approximately  2,461
barrels  of crude oil,  with a present  value  (discounted  at 10% per annum) of
estimated future net cash flow of approximately $651,124.


      Title to Oil and Gas Properties

      Management believes that the Program has satisfactory title to its oil and
gas properties. Record title to substantially all of the Program's properties is
held by Dyco as nominee.

      Title  to the  Program's  properties  is  subject  to  customary  royalty,
overriding  royalty,   carried,   working,   and  other  similar  interests  and
contractual arrangements customary in the oil and



                                      -10-
<PAGE>



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  Program's  interest  therein  or  materially
interfere with their use in the operation of the Program's business.


ITEM 3.     LEGAL PROCEEDINGS

      To the knowledge of the management of Dyco and the Program,  neither Dyco,
the Program,  nor the Program's  properties are subject to any  litigation,  the
results  of which  would  have a  material  effect  on the  Program's  or Dyco's
financial condition or operations.


ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS

      There were no matters  submitted to a vote of the limited  partners during
1998.


PART II

ITEM 5.     MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP UNITS AND RELATED
            LIMITED PARTNER MATTERS

      The Program does not have an  established  trading market for its units of
limited  partnership  interest  ("Units").  Pursuant to the terms of the Program
Agreement, Dyco, as General Partner, is obligated to annually issue a repurchase
offer which is based on the  estimated  future net revenues  from the  Program's
reserves and is calculated pursuant to the terms of the Program Agreement.  Such
repurchase offer is recalculated  monthly in order to reflect cash distributions
made to the limited partners and extraordinary  events. The following table sets
forth,  for the  periods  indicated,  Dyco's  repurchase  offer per Unit and the
amount of the Program's  cash  distributions  per Unit for the same period.  For
purposes of this Annual Report,  a Unit  represents an initial  subscription  of
$5,000 to the Program.



                                      -11-
<PAGE>





                                    Repurchase            Cash
                                       Price          Distributions
                                    ----------        -------------

            1997:
               First Quarter           $105                $50
               Second Quarter            55                  -
               Third Quarter            104                 25
               Fourth Quarter            79                  -

            1998:
               First Quarter           $ 79                $ -
               Second Quarter            79                  20(1)
               Third Quarter            101                  -
               Fourth Quarter           101                  -

            1999:
               First Quarter           $101                $ -

-----------------------
(1) Includes proceeds from the sale of oil and gas properties.


      As of  March  1,  1999,  the  Program  has  6,000  Units  outstanding  and
approximately 1,750 Limited Partners of record.





                                      -12-
<PAGE>



ITEM 6.     SELECTED FINANCIAL DATA

                             Selected Financial Data

     The following table presents selected financial data for the Program.  This
data should be read in conjunction with the financial statements of the Program,
and the respective notes thereto,  included elsewhere in this Annual Report. See
"Item 8. Financial Statements and Supplementary Data."
<TABLE>
<CAPTION>

                                                                   December 31,
                                          ------------------------------------------------------------
                                            1998          1997         1996          1995       1994
                                          --------      --------     --------      --------   --------
<S>                                       <C>           <C>          <C>           <C>        <C>     
Summary of Operations:
     Oil and gas sales                    $285,801      $474,986     $458,802      $309,330   $302,379
     Total revenues                        290,756       482,230      472,730       319,042    305,850

     Lease operating expenses              148,997       147,127       77,241       124,768    101,276
     Production taxes                       18,973        36,012       32,630        21,027     25,157
     General and administrative
        expenses                            63,410        68,991       65,425        66,349     59,918
     Depreciation, depletion, and
        amortization of oil and gas
        properties                          27,523        50,901       28,657        31,503     65,664

     Net income                             31,853       179,199      268,777        75,395     53,835
        per Unit                              5.24         29.50        44.25         12.41       8.86
     Cash distributions                    121,480       455,550      182,220          -          -
        per Unit                                20            75           30          -          -

Summary Balance Sheet Data:
     Total assets                          269,656       363,453      586,573       523,826    448,324
     Partners' capital                      86,726       176,353      452,704       366,147    290,752

</TABLE>


                                      -13-
<PAGE>



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 Program.

      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 Program's  revenues is the prices received for the sale of oil and
gas. Predicting future prices is not possible.  Concerning past trends,  average
yearly  wellhead gas prices in the United States have been volatile for a number
of years. For the past ten years, such average prices have generally been in the
$1.40 to $2.40 per Mcf range.

      Substantially  all of the  Program's  gas  reserves  are being sold on the
"spot  market."  Prices on the spot  market  are  subject to wide  seasonal  and
regional pricing  fluctuations due to the highly  competitive nature of the spot
market. In addition,  such spot market sales are generally  short-term in nature
and are dependent  upon the  obtaining of  transportation  services  provided by
pipelines. Spot prices for the Program's gas decreased from



                                      -14-
<PAGE>



approximately  $2.32 per Mcf at December 31, 1997 to approximately $1.93 per Mcf
at  December  31,  1998.  Such prices were on an MMBTU basis and differ from the
prices  actually  received by the Program due to  transportation  and  marketing
costs, BTU adjustments,  and regional price and quality  differences.  Continued
very low oil prices as discussed below may cause downward pressure on gas prices
due to some users of gas converting to oil as a cheaper fuel alternative.

      For the past ten years,  average  oil prices  have  generally  been in the
$16.00 to $24.00 per barrel range.  Due to global  consumption and supply trends
over the last year as well as at least a  short-term  slowdown  in Asian  energy
demand,  oil prices  over the past year have  reached  historically  low levels,
dropping to as low as  approximately  $9.00 per barrel.  It is not known whether
this  trend  will  continue.   Prices  for  the  Program's  oil  decreased  from
approximately  $16.25 per barrel at December 31, 1997 to approximately $9.50 per
barrel at December 31, 1998.

      As of February  28, 1999 oil and gas prices were  approximately  $9.50 per
barrel  and $1.55  Mcf,  respectively.  Future  prices for both oil and gas will
likely  be  different  from  (and may be lower  than)  the  prices  in effect on
December 31, 1998 and February 28, 1999.  As of the date of this Annual  Report,
oil prices have increased  slightly over the February 28, 1999 price,  primarily
due to the March 1999  announcement that several oil producing nations intend to
curtail oil exports.  Management is unable to predict whether future oil and gas
prices will (i) stabilize, (ii) increase, or (iii) decrease.


      Results of Operations

                     Year Ended December 31, 1998 Compared
                         to Year Ended December, 1997
                     -------------------------------------

      Total oil and gas sales decreased  $189,185 (39.8%) in 1998 as compared to
1997.  Of this  decrease,  approximately  $114,000  was related to a decrease in
volumes of gas sold and  approximately  $63,000 was related to a decrease in the
average price of gas sold. Volumes of oil and gas sold decreased 315 barrels and
49,498 Mcf,  respectively,  in 1998 as compared to 1997. The decrease in volumes
of gas  sold  resulted  primarily  from  (i) the  Program  receiving  a  reduced
percentage  of sales during 1998 on one well due to the  Program's  overproduced
gas  balancing  position in that well and (ii) a positive  prior  period  volume
adjustment  made by the purchaser  during 1997 on another well.  Average oil and
gas prices  decreased to $10.47 per barrel and $1.88 per Mcf,  respectively,  in
1998 from $17.88 per barrel and $2.31 per Mcf, respectively, in 1997.

      Oil and gas production  expenses  (including lease operating  expenses and
production taxes) decreased $15,169 (8.3%) in 1998



                                      -15-
<PAGE>



as compared to 1997.  This decrease  resulted  primarily  from (i) a decrease in
legal  fees  billed  by the  operator  on one well in 1998 as  compared  to 1997
related  to a  collections  matter  and  (ii) a  decrease  in  production  taxes
associated  with  the  decrease  in oil  and gas  sales.  These  decreases  were
partially offset by an increase in workover expenses incurred on one well during
1998 in order to improve the recovery of reserves and an increase in  subsurface
repair and  maintenance  expenses  incurred on another  well during  1998.  As a
percentage of oil and gas sales,  these expenses increased to 58.8% in 1998 from
38.6% in 1997. This  percentage  increase was primarily due to (i) the decreases
in the average  prices of oil and gas sold and (ii) the  workover  expenses  and
repair and maintenance expenses incurred during 1998.

      Depreciation,  depletion,  and  amortization  of oil  and  gas  properties
decreased  $23,378 (45.9%) in 1998 as compared to 1997.  This decrease  resulted
primarily from the decrease in volumes of oil and gas sold and upward  revisions
in the  estimates of remaining  oil and gas reserves at December 31, 1998.  As a
percentage  of oil and gas sales,  this  expense  decreased to 9.6% in 1998 from
10.7% in 1997. This percentage decrease was primarily due to the dollar decrease
in depreciation, depletion and amortization.

      General and  administrative  expenses  decreased  $5,581 (8.1%) in 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 22.2% in 1998 from 14.5% in 1997. This percentage  increase was primarily due
to the decrease in oil and gas sales.


                     Year Ended December 31, 1997 Compared
                         to Year Ended December, 1996
                     -------------------------------------

      Total oil and gas sales  increased  $16,184  (3.5%) in 1997 as compared to
1996. Of this increase,  approximately  $6,000 and $45,000,  respectively,  were
related to increases  in both  volumes of oil sold and the average  price of gas
sold, which amounts were partially offset by decreases of approximately  $33,000
and $2,000,  respectively,  related to  decreases in volumes of gas sold and the
average  price of oil sold.  Volumes of oil sold  increased  291 barrels,  while
volumes  of gas sold  decreased  15,644  Mcf in 1997 as  compared  to 1996.  The
decrease in the volumes of gas sold resulted  primarily from a normal decline in
production of the Program's  wells.  Average oil prices  decreased to $17.88 per
barrel in 1997 from $19.95 per barrel in 1996.  Average gas prices  increased to
$2.31 per Mcf in 1997 from $2.08 per Mcf in 1996.

      Oil and gas production  expenses  (including lease operating  expenses and
production  taxes)  increased  $73,268 (66.7%) in 1997 as compared to 1996. This
increase resulted primarily from (i) an increase in 1997 in legal fees billed by
the operator on one



                                      -16-
<PAGE>



significant  well  related to a  collections  matter and (ii) the  reversal of a
$20,000 accrual in 1996 due to the conclusion of a certain legal  contingency in
favor of the  Program.  As a  percentage  of oil and gas sales,  these  expenses
increased  to 38.6% in 1997 from 23.9% in 1996.  This  percentage  increase  was
primarily due to the dollar increase in oil and gas production expenses.

      Depreciation,  depletion,  and  amortization  of oil  and  gas  properties
increased  $22,244 (77.6%) in 1997 as compared to 1996.  This increase  resulted
primarily  from a decrease  in the oil and gas prices used in the  valuation  of
reserves in 1997 as compared to 1996 and additions to oil and gas  properties in
1997. As a percentage of oil and gas sales,  this expense  increased to 10.7% in
1997 from 6.2% in 1996. This percentage increase was primarily due to the dollar
increase in depreciation, depletion, and amortization.

      General and  administrative  expenses  increased  $3,566 (5.5%) in 1997 as
compared to 1996. As a percentage of oil and gas sales,  these expenses remained
relatively constant at 14.5% in 1997 as compared to 14.3% in 1996.


      Liquidity and Capital Resources

      Net  proceeds  from  operations  less  necessary   operating  capital  are
distributed to the limited  partners on a quarterly  basis.  See "Item 5. Market
for the  Registrant's  Limited  Partnership  Units and Related  Limited  Partner
Matters."  The net proceeds  from  production  are not  reinvested in productive
assets, except to the extent that producing wells are improved, or where methods
are employed to permit more efficient recovery of reserves, thereby resulting in
a positive  economic impact.  Assuming 1998 production  levels for future years,
the  Program's  proved  reserve  quantities  at  December  31,  1998  would have
remaining  lives of  approximately  6.4 years for gas reserves and 3.9 years for
oil reserves.  However,  since the Program's  reserve estimates are based on oil
and gas prices at December 31, 1998, it is possible that a significant  decrease
in oil and gas prices from  December  31, 1998 levels will reduce such  reserves
and their corresponding life-span.

      The Program's  available capital from the limited partners'  subscriptions
has been spent on oil and gas drilling activities and there should be no further
material capital resource  commitments in the future.  However,  during 1998 the
Program  participated in  successfully  drilling the Lemasters No. 1-19 well, as
further  described in "Item 2. Properties"  above, and incurred capital costs of
$26,182  relating to this  drilling  activity.  In addition,  during  1997,  the
Program  purchased  gas  reserves in the amount of $34,681  related to a well in
which  the  Program  had  produced  significantly  more  than its  share of gas.
Occasional expenditures by the Program for well completions or



                                      -17-
<PAGE>



workovers,  however,  may reduce or eliminate  cash  available  for a particular
quarterly  cash  distribution.  The  Program has no debt  commitments.  Cash for
operational purposes will be provided by current oil and gas production.

      The Program's Statement of Cash Flows for the year ended December 31, 1998
includes  proceeds  from the sale of oil and gas  properties  during  the  first
quarter of 1998. These proceeds were included in the Program's cash distribution
paid in the second quarter of 1998. It is possible that the Program's repurchase
values  and  future  cash  distributions  could  decline  as  a  result  of  the
disposition of these properties. On the other hand, the General Partner believes
there  will  be  beneficial  operating  efficiencies  related  to the  Program's
remaining properties. This is primarily due to the fact that the properties sold
generally bore a higher ratio of operating expenses as compared to reserves than
the Program's remaining properties.

      There can be no  assurance as to the amount of the  Program's  future cash
distributions.   The  Program's  ability  to  make  cash  distributions  depends
primarily  upon the level of  available  cash flow  generated  by the  Program's
operating  activities,  which will be affected (either positively or negatively)
by many factors  beyond the control of the Program,  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 Program is not replacing  production through acquisitions of
producing properties and drilling.


      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 Program in 1998.
Oil and gas prices have  fluctuated  during recent years and generally  have not
followed  the same pattern as  inflation.  See "Item 2.  Properties  Oil and Gas
Production, Revenue, and Price History."


      Year 2000 Computer Issues

                                   In General

      The Year 2000 Issue ("Y2K")  refers to the inability of computer and other
information  technology  systems to properly process date and time  information,
stemming from the earlier  programming  practice of using two digits rather than
four to



                                      -18-
<PAGE>



represent the year in a date. For example,  computer programs and imbedded chips
that are date  sensitive may recognize a date using (00) as the year 1900 rather
than the  year  2000.  The  consequence  of Y2K is that  computer  and  imbedded
processing  systems may be at risk of  malfunctioning,  particularly  during the
transition from 1999 to 2000.

      The effects of Y2K are exacerbated by the  interdependence of computer and
telecommunication systems throughout the world. This interdependence also exists
among the Program, Samson, and their vendors,  customers, and business partners,
as well as with  regulators.  The potential risks associated with Y2K for an oil
and gas  production  company  fall into  three  general  areas:  (i)  financial,
leasehold and  administrative  computer systems,  (ii) imbedded systems in field
process control units, and (iii) third party exposures. As discussed below, Dyco
does not believe that these risks will be material to the Program's operations.

      The Program's business is producing oil and gas. The day-to-day production
of the  Program's  oil and gas is not  dependent on computers or equipment  with
imbedded chips. As further  discussed  below,  management  anticipates  that the
Program's daily business activities will not be materially affected by Y2K.

      The  Program  relies on  Samson  to  provide  all of its  operational  and
administrative  services  on  either a  direct  or  indirect  basis.  Samson  is
addressing  each of the three  Y2K areas  discussed  above  through a  readiness
process that seeks to:

      1.    increase the awareness of the issue among key employees;
      2.    identify areas of potential risk;
      3.    assess the relative  impact of these risks and Samson's  ability to 
            manage them; and
      4.    remediate these risks on a priority basis wherever possible.

      Samson  Investment  Company's Chief  Financial  Officer is responsible for
communicating  to its  Board  of  Directors  Y2K  actions  and for the  ultimate
implementation of its Y2K plan. He has delegated to Samson Investment  Company's
Senior  Vice   President-Technology   and   Administrative   Services  principal
responsibility for ensuring Y2K compliance within Samson.

      Samson  has  been  planning  for  the  impact  of Y2K  on its  information
technology  systems  since  1993.  As of  March 1, 1999,  Samson is in the final
stages of implementation of a Y2K plan, as summarized below:


                      Financial and Administrative Systems

     1.  Awareness. Samson has alerted its officers, managers and supervisors of
Y2K issues and asked them to have their




                                      -19-
<PAGE>




employees  participate in the  identification of potential Y2K risks which might
otherwise  go unnoticed by higher level  employees  and  officers.  As a result,
awareness of the issue is considered high.

      2.  Risk   Identification.   Samson's  most   significant   financial  and
administrative  systems  exposure is the Y2K status of the  accounting  and land
administration  system used to collect and manage data for  internal  management
decision making and for external  revenue and accounts payable  purposes.  Other
concerns include network hardware and software,  desktop computing  hardware and
software, telecommunications, and office space readiness.

      3.  Risk Assessment.  The failure to identify  and correct a material  Y2K
problem  could  result in  inaccurate  or  untimely  financial  information  for
management  decision-making  or  cash  flow  and  payment  purposes,   including
maintaining oil and gas leases.

      4.  Remediation.  Since 1993, Samson has been upgrading its accounting and
land  administration  software.  Substantially all of the Y2K upgrades have been
completed,  with the remainder  scheduled to be completed during the 2nd quarter
of 1999.  In  addition,  in 1997 and 1998 Samson  replaced  or applied  software
patches to substantially  all of its network and desktop  software  applications
and believes them to be generally Y2K compliant.  Additional patches or software
upgrades  will be applied no later  than May 15,  1999 to complete this process.
The costs of all such risk  assessments  and  remediation are not expected to be
material to the Program.

      5.  Contingency Planning.  Notwithstanding the foregoing,  should there be
significant  unanticipated  disruptions in Samson's financial and administrative
systems,  all of the accounting processes that are currently automated will need
to be performed  manually.  Samson will  consider in the second half of 1999 its
options with  respect to  contingency  arrangements  for  temporary  staffing to
accommodate such situations.


                                Imbedded Systems

      1.  Awareness.  Samson's  Y2K  program  has  involved  all levels of field
personnel  from  production  foremen and higher.  Employees at all levels of the
organization  have been asked to participate in the  identification of potential
Y2K risks,  which might  otherwise go unnoticed  by higher level  employees  and
officers of Samson, and as a result, awareness of the issue is considered high.

      2.  Risk Identification.  Samson has inventoried all possible exposures to
imbedded  chips and systems.  Such exposures can be classified as either (i) oil
and gas  production  and  processing  equipment or (ii) office  machines such as
faxes, copiers, phones, etc.




                                      -20-
<PAGE>





      With respect to oil and gas production and processing  equipment,  neither
Samson nor the Program operate offshore wells, significant processing plants, or
wells with older electronic monitoring systems. As a result,  Samson's inventory
identified less than 10 applications  using imbedded chips.  All of these are in
the process of being tested by the respective vendors and are expected to be Y2K
compliant or replaced no later than May 30, 1999. Oil and gas production related
to such equipment is very minor with respect to the entire Samson group, and, in
fact, the Program's production may not use such equipment at all.

      Office  machines are currently  being tested by Samson and vendors.  It is
expected  that such  machines  will be made  compliant or replaced no later than
May 15, 1999.

      3.  Risk Assessment and Remediation. The failure to identify and correct a
material Y2K problem in an imbedded system could result in outcomes ranging from
errors in data reporting to  curtailments  or shutdowns in production.  As noted
above,  Samson has identified less than 10 imbedded system applications that may
have a Y2K problem.  None of these  applications  are believed to be material to
Samson or the Program. Once identified, assessed and prioritized, Samson intends
to test and upgrade  imbedded  components  and systems in field process  control
units deemed to pose the greatest risk of significant non-compliance and capable
of testing.  Samson believes that sufficient  manual  processes are available to
minimize any such field level risk and that there will be no material  impact on
the Program with respect to these applications.

      4.  Contingency Planning. Should material production disruptions occur  as
a result of Y2K failures in field operations,  Samson will  utilize its existing
field  personnel  in an attempt to avoid any material  impact on operating  cash
flow.  Samson is not able to  quantify  any  potential  exposure in the event of
systems failure or inadequate manual alternatives.


                              Third Party Exposures

      1.  Awareness. Samson has advised  management to consider Y2K implications
with its outside vendors, customers, and business partners.  Management has been
asked to participate in the  identification  of potential  third party Y2K risks
and, as a result, awareness of the issue is considered high.

     2.  Risk  Identification.   Samson's  most  significant  third   party  Y2K
exposure is its dependence on third parties for the receipt of revenues from oil
and gas sales.  However, virtually  all  of  these  purchasers  are  very  large
and sophisticated companies.  Other Y2K concerns  include  the  availability  of
electric power to Samson's field operations, the integrity of



                                      -21-
<PAGE>



telecommunication  systems,  and the  readiness of  commercial  banks to execute
electronic fund transfers.

      3.  Risk  Assessment. Because of the high  awareness of the Y2K problem in
the U.S.,  Samson has not  undertaken  and does not plan to  undertake  a formal
company  wide plan to make  inquiries  of third  parties  on the  subject of Y2K
readiness.  If it did so,  Samson has no ability  to require  responses  to such
inquiries  or to  independently  verify  their  accuracy.  Samson has,  however,
received oral  assurances  from its  significant  oil and gas  purchasers of Y2K
compliance.  If significant  disruptions  from major  purchasers  were to occur,
however,  there could be a material and adverse impact on the Program's  results
of operations, liquidity, and financial conditions.

      It is  important  to note that  third  party oil and gas  purchasers  have
significant  incentives  to avoid  disruptions  arising from a Y2K failure.  For
example, most of these parties are under contractual obligations to purchase oil
and gas or  disperse  revenues  to Samson.  The  failure to do so will result in
contractual  and  statutory  penalties.  Therefore,  Dyco  believes  that  it is
unlikely that there will be material  third party  non-compliance  with purchase
and remittance obligations as a result of Y2K issues.

      4.  Remediation.   Where   Samson   perceives   significant  risk  of  Y2K
non-compliance that may have a material impact on it, and where the relationship
between  Samson and a vendor,  customer,  or  business  partner  permits,  joint
testing may be undertaken during 1999 to further identify these risks.

      5.  Contingency Planning.  In the unlikely event that material  production
disruptions  occur as a result of Y2K failures of third  parties,  the Program's
operating cash flow could be impacted.  This  contingency  will be factored into
deliberations on the level of quarterly cash  distributions  paid out during any
such period of cash flow disruption.


ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
            RISK.

      The Program does not hold any market risk sensitive instruments.





                                      -22-
<PAGE>



ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                       REPORT OF INDEPENDENT ACCOUNTANTS



TO THE PARTNERS

DYCO OIL AND GAS PROGRAM 1981-2 LIMITED PARTNERSHIP


In our opinion,  the accompanying  balance sheets and the related  statements of
operations,  changes in partners'  capital and cash flows present fairly, in all
material respects, the financial position of the Dyco Oil and Gas Program 1981-2
Limited Partnership,  a Minnesota limited partnership,  at December 31, 1998 and
1997, and the results of its operations and its cash flows for each of the three
years in the period ended  December  31,  1998,  in  conformity  with  generally
accepted   accounting   principles.   These   financial   statements   are   the
responsibility of the Program's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  financial  statements in  accordance  with  generally  accepted
auditing  standards  which  require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.







                                    PricewaterhouseCoopers LLP










Tulsa, Oklahoma
March 12, 1999



                                      -23-
<PAGE>



                           DYCO OIL AND GAS PROGRAM
                          1981-2 LIMITED PARTNERSHIP
                                Balance Sheets
                          December 31, 1998 and 1997


                                    ASSETS
                                    ------
                                                       1998           1997
                                                     --------       --------
CURRENT ASSETS:
   Cash and cash equivalents                         $ 61,066       $116,852
   Accrued oil and gas sales                           49,791         71,787
                                                      -------        -------
   Total current assets                              $110,857       $188,639

NET OIL AND GAS PROPERTIES, utilizing the
   full cost method                                   111,301        135,634

DEFERRED CHARGE                                        47,498         39,180
                                                      -------        -------
                                                     $269,656       $363,453
                                                      =======        =======

                       LIABILITIES AND PARTNERS' CAPITAL
                       ---------------------------------

CURRENT LIABILITIES:
   Accounts payable                                  $  9,681       $ 40,290
   Gas imbalance payable                                2,685         20,591
                                                      -------        -------
      Total current liabilities                      $ 12,366       $ 60,881

ACCRUED LIABILITY                                    $170,564       $126,219

PARTNERS' CAPITAL:
   General Partner, 74 general
      partner units                                  $    868       $  1,764
   Limited Partners, issued and
      outstanding, 6,000 Units                         85,858        174,589
                                                      -------        -------
      Total Partners' Capital                        $ 86,726       $176,353
                                                      -------        -------
                                                     $269,656       $363,453
                                                      =======        =======



              The accompanying notes are an integral part of these
                              financial statements.



                                      -24-
<PAGE>



                           DYCO OIL AND GAS PROGRAM
                          1981-2 LIMITED PARTNERSHIP
                           Statements of Operations
             For the Years Ended December 31, 1998, 1997, and 1996


                                              1998        1997        1996
                                            --------    --------    --------
REVENUES:
   Oil and gas sales                        $285,801    $474,986    $458,802
   Interest                                    4,955       7,244      13,928
                                             -------     -------     -------

                                            $290,756    $482,230    $472,730

COSTS AND EXPENSES:
   Lease operating                          $148,997    $147,127    $ 77,241
   Production taxes                           18,973      36,012      32,630
   Depreciation, depletion, and
      amortization of oil and
      gas properties                          27,523      50,901      28,657
   General and administrative                 63,410      68,991      65,425
                                             -------     -------     -------

                                            $258,903    $303,031    $203,953
                                             -------     -------     -------

NET INCOME                                  $ 31,853    $179,199    $268,777
                                             =======     =======     =======

GENERAL PARTNER (1%) - NET INCOME           $    319    $  1,792    $  2,688
                                             =======     =======     =======

LIMITED PARTNERS (99%) - NET INCOME         $ 31,534    $177,407    $266,089
                                             =======     =======     =======

NET INCOME per Unit                         $   5.24    $  29.50    $  44.25
                                             =======     =======     =======

UNITS OUTSTANDING                              6,074       6,074       6,074
                                             =======     =======     =======


                    The accompanying notes are an integral
                      part of these financial statements



                                      -25-
<PAGE>



                           DYCO OIL AND GAS PROGRAM
                          1981-2 LIMITED PARTNERSHIP
                  Statements of Changes in Partners' Capital 
             For the Years Ended December 31, 1998, 1997, and 1996


                                          General      Limited
                                          Partner     Partners       Total
                                         --------    ----------   ---------

Balances at Dec. 31, 1995                 $3,661      $362,486     $366,147
   Cash distributions                    ( 1,822)    ( 180,398)   ( 182,220)
   Net income                              2,688       266,089      268,777
                                           -----       -------      -------

Balances at Dec. 31, 1996                 $4,527      $448,177     $452,704
   Cash distributions                    ( 4,555)    ( 450,995)   ( 455,550)
   Net income                              1,792       177,407      179,199
                                           -----       -------      -------

Balances at Dec. 31, 1997                 $1,764      $174,589     $176,353
   Cash distributions                    ( 1,215)    ( 120,265)   ( 121,480)
   Net income                                319        31,534       31,853
                                           -----       -------      -------

Balances at Dec. 31, 1998                 $  868      $ 85,858     $ 86,726
                                           =====       =======      =======



                    The accompanying notes are an integral
                      part of these financial statements




                                      -26-
<PAGE>




                            DYCO OIL AND GAS PROGRAM
                           1981-2 LIMITED PARTNERSHIP
                            Statements of Cash Flows
              For the Years Ended December 31, 1998, 1997, and 1996

                                           1998          1997         1996
                                        ----------    ----------   ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                            $ 31,853      $179,199     $268,777
   Adjustments to reconcile net
      income to net cash provided
      by operating activities:
      Depreciation, depletion,
        and amortization of oil
        and gas properties                 27,523        50,901       28,657
      (Increase) decrease in
        accrued oil and gas sales          21,996        44,259    (  53,228)
      (Increase) decrease in
        deferred charge                 (   8,318)        4,093        7,953
      Increase (decrease) in
        accounts payable                (  30,609)       30,394    (  19,495)
      Increase (decrease) in gas
        imbalance payable               (  17,906)       20,591         -
      Increase (decrease) in
        accrued liability                  44,345         2,246    (   4,315)
                                          -------       -------      -------
   Net cash provided by operating
      activities                         $ 68,884      $331,683     $228,349
                                          -------       -------      -------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from the sale of oil
      and gas properties                 $ 22,992      $  5,089     $  1,354
   Additions to oil and gas
      properties                        (  26,182)    (  36,436)   (  20,501)
                                          -------       -------      -------
   Net cash used by
      investing activities              ($  3,190)    ($ 31,347)   ($ 19,147)
                                          -------       -------      -------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash distributions                   ($121,480)    ($455,550)   ($182,220)
                                          -------       -------      -------
   Net cash used by financing
     activities                         ($121,480)    ($455,550)   ($182,220)
                                          -------       -------      -------
NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                 ($ 55,786)    ($155,214)    $ 26,982

CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                    116,852       272,066      245,084
                                          -------       -------      -------
CASH AND CASH EQUIVALENTS AT
   END OF PERIOD                         $ 61,066      $116,852     $272,066
                                          =======       =======      =======




                     The accompanying notes are an integral
                       part of these financial statements




                                      -27-
<PAGE>




              DYCO OIL AND GAS PROGRAM 1981-2 LIMITED PARTNERSHIP
                         Notes to Financial Statements
             For the Years Ended December 31, 1998, 1997, and 1996


1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Organization and Nature of Operations

            The  Dyco  Oil and  Gas  Program  1981-2  Limited  Partnership  (the
      "Program"), a Minnesota limited partnership,  commenced operations on June
      1, 1981. Dyco Petroleum Corporation ("Dyco") is the General Partner of the
      Program.  Affiliates of Dyco owned 2,778 (46.3%) of the Program's Units at
      December 31, 1998.

            The Program's sole business is the development and production of oil
      and gas with a concentration  on gas.  Substantially  all of the Program's
      gas reserves are being sold  regionally  in the "spot  market." Due to the
      highly  competitive  nature of the spot market,  prices on the spot market
      are  subject  to wide  seasonal  and  regional  pricing  fluctuations.  In
      addition,  such spot market sales are  generally  short-term in nature and
      are dependent upon the obtaining of  transportation  services  provided by
      pipelines.  The prices  received for the Program's oil and gas are subject
      to influences such as global consumption and supply trends.


      Cash and Cash Equivalents

            The Program considers all highly liquid  investments with a maturity
      of three  months  or less  when  purchased  to be cash  equivalents.  Cash
      equivalents  are not  insured,  which  cause the  Program to be subject to
      risk.


      Credit Risk

            Accrued  oil and gas sales  which are due from a variety  of oil and
      gas purchasers subject the Program to a concentration of credit risk. Some
      of these purchasers are discussed in Note 3 - Major Customers.


      Oil and Gas Properties

            Oil and gas  operations are accounted for using the full cost method
      of accounting. All productive and non-productive costs associated with the
      acquisition,  exploration,  and  development  of oil and gas  reserves are
      capitalized.  During 1997, the Program purchased reserves in the amount of
      $34,681 (28,413 Mcf) on a well in which the




                                      -28-
<PAGE>




      Program  was  overproduced.  Capitalized  costs are  depleted on the gross
      revenue  method  using  estimates  of  proved  reserves.   The  full  cost
      amortization  rates per  equivalent  Mcf of gas produced  during the years
      ended  December 31, 1998,  1997,  and 1996 were $0.18,  $0.25,  and $0.13,
      respectively.  The Program's calculation of depreciation,  depletion,  and
      amortization  includes  estimated  future  expenditures  to be incurred in
      developing  proved  reserves and estimated  dismantlement  and abandonment
      costs, net of estimated  salvage values. In the event the unamortized cost
      of oil and gas properties  being  amortized  exceeds the full cost ceiling
      (as defined by the Securities and Exchange  Commission ("SEC")) the excess
      is charged to expense in the year during which such excess  occurs.  Sales
      and  abandonments  of  properties  are  accounted  for as  adjustments  of
      capitalized costs with no gain or loss recognized, unless such adjustments
      would significantly  alter the relationship  between capitalized costs and
      proved oil and gas reserves.


      Deferred Charge

            The Deferred Charge at December 31, 1998 and 1997  represents  costs
      deferred for lease  operating  expenses  incurred in  connection  with the
      Program's  underproduced  gas  imbalance  positions.   The  rate  used  in
      calculating  the deferred  charge is the average of the annual  production
      costs per Mcf. At December 31, 1998,  cumulative  total gas sales  volumes
      for  underproduced  wells were less than the Program's  pro-rata  share of
      total gas production from these wells by 81,500 Mcf,  resulting in prepaid
      lease  operating  expenses of $47,498.  At December 31,  1997,  cumulative
      total  gas  sales  volumes  for  underproduced  wells  were  less than the
      Program's  pro-rata  share of total gas  production  from  these  wells by
      94,229 Mcf, resulting in prepaid lease operating expenses of $39,180.


      Accrued Liability

            The  Accrued  Liability  at December  31,  1998 and 1997  represents
      charges accrued for lease operating  expenses  incurred in connection with
      the  Program's  overproduced  gas  imbalance  positions.  The rate used in
      calculating the accrued  liability is the average of the annual production
      costs per Mcf. At December 31, 1998,  cumulative  total gas sales  volumes
      for overproduced  wells exceeded the Program's pro-rata share of total gas
      production  from these wells by 292,663 Mcf,  resulting  in accrued  lease
      operating expenses of $170,564. At December 31, 1997, cumulative total gas
      sales volumes for overproduced wells exceeded the Program's pro-rata share
      of total gas  production  from these wells by 303,556  Mcf,  resulting  in
      accrued lease operating expenses of $126,219.




                                      -29-
<PAGE>




      Oil and Gas Sales and Gas Imbalance Payable

            The Program's oil and condensate  production is sold,  title passed,
      and revenue  recognized  at or near the Program's  wells under  short-term
      purchase  contracts at prevailing  prices in accordance with  arrangements
      which are  customary in the oil industry.  Sales of gas  applicable to the
      Program's  interest in producing oil and gas leases are recorded as income
      when the gas is metered  and title  transferred  pursuant to the gas sales
      contracts  covering the Program's  interest in gas  reserves.  During such
      times as the  Program's  sales of gas exceed its pro rata  ownership  in a
      well,  such sales are recorded as income  unless total sales from the well
      have  exceeded  the  Program's  share  of  estimated  total  gas  reserves
      underlying  the  property  at which  time  such  excess is  recorded  as a
      liability. The rates per Mcf used to calculate this liability are based on
      the  average  gas  prices  received  for  the  volumes  at  the  time  the
      overproduction  occurred.  At December 31, 1998,  total sales exceeded the
      Program's  share of  estimated  total gas  reserves on two wells by $2,685
      (1,790  Mcf).  At December 31, 1997,  total sales  exceeded the  Program's
      share of estimated total gas reserves on one well by $20,591 (13,727 Mcf).


      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 the accompanying financial statements.






                                      -30-
<PAGE>




2.    TRANSACTIONS WITH RELATED PARTIES

            Under  the  terms of the  Program  Agreement,  Dyco is  entitled  to
      receive  a   reimbursement   for  all  direct  expenses  and  general  and
      administrative,  geological,  and engineering expenses it incurs on behalf
      of the Program.  During the years ended December 31, 1998, 1997, and 1996,
      such expenses  totaled $63,410,  $68,991,  and $65,425,  respectively,  of
      which $47,952 was paid each year to Dyco and its affiliates.

            Affiliates  of  the  Program   operate   certain  of  the  Program's
      properties.  Their policy is to bill the Program for all customary charges
      and cost  reimbursements  associated with these activities,  together with
      any compressor rentals, consulting, or other services provided.



3.    MAJOR CUSTOMERS

            The following purchaser  individually accounted for more than 10% of
      the combined oil and gas sales of the Program for the years ended December
      31, 1998, 1997, and 1996:

            Purchaser                     1998        1997        1996
            ---------                     -----       -----       -----

            El Paso Energy
              Marketing Company           93.0%       94.8%       94.4%

            In the  event  of  interruption  of  purchases  by this  significant
      customer  or  the  cessation  or  material   change  in   availability  of
      open-access  transportation by the Program's  pipeline  transporters,  the
      Program may encounter  difficulty in marketing its gas and in  maintaining
      historic sales levels.  Alternative  purchasers or transporters may not be
      readily available.


4.    SUPPLEMENTAL OIL AND GAS INFORMATION

            The  following  supplemental  information  regarding the oil and gas
      activities  of  the  Program  is  presented  pursuant  to  the  disclosure
      requirements promulgated by the SEC.


      Capitalized Costs

            The  Program's  capitalized  costs  and  accumulated   depreciation,
      depletion,  amortization, and valuation allowance at December 31, 1998 and
      1997 were as follows:






                                      -31-
<PAGE>





                                                    December 31,
                                            ----------------------------
                                                 1998               1997
                                            -------------     -------------
      Proved properties                      $39,773,489       $39,770,299


      Less accumulated depreciation,
      depletion, amortization, and
      valuation allowance                   ( 39,662,188)     ( 39,634,665)
                                              ----------        ----------

      Net oil and gas properties             $   111,301       $   135,634
                                              ==========        ==========


      Costs Incurred

            The  Program  incurred  no  oil  and  gas  property  acquisition  or
      exploration  costs  during 1998,  1997,  and 1996.  Costs  incurred by the
      Program in connection with its oil and gas property development activities
      during 1998, 1997, and 1996 were as follows:

                                                   December 31,
                                             -------------------------------
                                              1998        1997        1996
                                             -------     -------     -------

      Development costs                      $26,182     $36,436     $20,501
                                              ======      ======      ======






                                      -32-
<PAGE>




Quantities of Proved Oil and Gas Reserves - Unaudited

      Set forth below is a summary of the changes in the net  quantities  of the
Program's  proved oil and gas  reserves  for the years ended  December 31, 1998,
1997, and 1996. Proved reserves were estimated by petroleum  engineers  employed
by affiliates of Dyco.  All of the Program's  reserves are located in the United
States.  The following  information  includes certain gas balancing  adjustments
which cause the gas volumes to differ from the reserve  information  prepared by
Dyco.
<TABLE>
<CAPTION>

                                     1998                      1997                    1996
                             --------------------       --------------------    ------------------
                               Oil         Gas            Oil         Gas         Oil       Gas
                             (Bbls)       (Mcf)         (Bbls)       (Mcf)      (Bbls)     (Mcf)
                             -------   ----------       ------     ---------    -------   ----------
<S>                          <C>       <C>            <C>        <C>             <C>     <C>      
Proved reserves,
   beginning of year          3,443     836,740        4,644      1,002,691      4,029    1,222,493

Revisions of previous
   estimates                    389     237,927       (   30)         6,244      1,337   (    9,251)

Sales of reserves               -      ( 16,025)      (   42)    (    3,605)        -         -

Purchase of reserves            -           -            -           28,413         -         -

Extensions and
   discoveries                  127      32,394          -             -           116        2,096

Production                   (  814)   (147,505)      (1,129)    (  197,003)      (838)  (  212,647)
                              -----     -------        -----      ---------      -----    ---------
Proved reserves,
   end of year                3,145     943,531        3,443        836,740      4,644    1,002,691
                              =====     =======        =====      =========      =====    =========
Proved developed reserves:
   Beginning of year          3,443     836,740        4,644      1,002,691      4,029    1,222,493
                              -----     -------        -----      ---------      -----    ---------
   End of year                3,145     943,531        3,443        836,740      4,644    1,002,691
                              =====     =======        =====      =========      =====    =========
</TABLE>




                                      -33-
<PAGE>




            The process of estimating oil and gas reserves is complex, requiring
      significant   subjective   decisions  in  the   evaluation   of  available
      geological,  engineering,  and economic data for each reservoir.  The data
      for a given reservoir may change  substantially  over time as a result of,
      among other things,  additional development activity,  production history,
      and  viability  of   production   under   varying   economic   conditions;
      consequently,  it  is  reasonably  possible  that  material  revisions  to
      existing  reserve  estimates may occur in the near future.  Although every
      reasonable  effort  has been made to  ensure  that the  reserve  estimates
      reported  herein  represent the most  accurate  assessment  possible,  the
      significance  of  the  subjective  decisions  required  and  variances  in
      available data for various reservoirs make these estimates  generally less
      precise  than other  estimates  presented  in  connection  with  financial
      statement disclosures.  The Program's reserves were determined at December
      31,  1998  using oil and gas prices of $9.50 per barrel and $2.03 per Mcf,
      respectively.


ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

      None.


PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The Program is a limited  partnership  and has no  directors  or executive
officers.  The following  individuals  are  directors and executive  officers of
Dyco, the General Partner.  The business address of such directors and executive
officers is Two West Second Street, Tulsa, Oklahoma 74103.


            NAME              AGE             POSITION WITH DYCO
      ----------------        ---      --------------------------------
      Dennis R. Neill          47      President and Director

      Patrick M. Hall          40      Chief Financial Officer

      Judy K. Fox              48      Secretary

      The  director   will  hold  office  until  the  next  annual   meeting  of
shareholders  of Dyco  and  until  his  successor  has  been  duly  elected  and
qualified.  All  executive  officers  serve at the  discretion  of the  Board of
Directors.

      Dennis R. Neill joined Samson in 1981, was named Senior Vice President and
Director of Dyco on June 18, 1991,  and was named  President of Dyco on June 30,
1996. Prior to joining Samson, he



                                      -34-
<PAGE>



was associated  with a Tulsa law firm,  Conner and Winters,  where his principal
practice was in the  securities  area.  He received a Bachelor of Arts degree in
political  science from Oklahoma State  University and a Juris Doctorate  degree
from the University of Texas.  Mr. Neill also serves as Senior Vice President of
Samson  Investment  Company and as President  and Director of Samson  Properties
Incorporated,  Samson Hydrocarbons Company, Berry Gas Company, Circle L Drilling
Company, Compression, Inc., and Geodyne Resources, Inc. and its subsidiaries.

      Patrick M. Hall joined Samson in 1983,  was named a Vice President of Dyco
on June 18,  1991,  and was named  Chief  Financial  Officer of Dyco on June 30,
1996. Prior to joining Samson he was a senior  accountant with Peat Marwick Main
& Co. in Tulsa.  He holds a  Bachelor  of  Science  degree  in  accounting  from
Oklahoma State  University and is a Certified Public  Accountant.  Mr. Hall also
serves as Senior Vice President - Controller of Samson Investment Company.

      Judy K. Fox joined Samson in 1990 and was named  Secretary of Dyco on June
30, 1996.  Prior to joining Samson,  she served as Gas Contract  Manager for Ely
Energy  Company.  Ms.  Fox is also  Secretary  of Berry  Gas  Company,  Circle L
Drilling  Company,  Compression,   Inc.,  Samson  Hydrocarbons  Company,  Samson
Properties Incorporated, and Geodyne Resources, Inc.
and its subsidiaries.


      Section 16(a) Beneficial Ownership Reporting Compliance

      To the best  knowledge  of the Program and Dyco,  there were no  officers,
directors,  or ten  percent  owners who were  delinquent  filers  during 1998 of
reports required under Section 16(a) of the Securities and Exchange Act of 1934.


ITEM 11.    EXECUTIVE COMPENSATION

      The Program is a limited  partnership and,  therefore,  has no officers or
directors.  The following  table  summarizes  the amounts paid by the Program as
compensation and  reimbursements  to Dyco and its affiliates for the three years
ended December 31, 1998:




                                      -35-
<PAGE>



             Compensation/Reimbursement to Dyco and its affiliates
                      Three Years Ended December 31, 1998


   Type of Compensation/Reimbursement(1)                  Expense
   -------------------------------------        ----------------------------
                                                 1998       1997      1996
                                                -------    -------   -------
   Compensation:
      Operations                                  (2)        (2)       (2)


   Reimbursements:
      General and Administrative,
         Geological, and Engineering
         Expenses and Direct
         Expenses(3)                            $47,952    $47,952   $47,952

----------

(1)   The  authority  for  all of such  compensation  and  reimbursement  is the
      Program Agreement.  With respect to the Operations activities noted in the
      table, management believes that such compensation is equal to or less than
      that  charged by  unaffiliated  persons in the same  geographic  areas and
      under the same conditions.
(2)   Affiliates of the Program serve as operator of a majority of the Program's
      wells.  Dyco,  as General  Partner,  contracts  with such  affiliates  for
      services  as operator  of the wells.  As  operator,  such  affiliates  are
      compensated  at rates  provided in the operating  agreements in effect and
      charged  to all  parties  to such  agreement.  The  dollar  amount of such
      compensation  paid by the  Program to such  affiliates  is  impossible  to
      quantify as of the date of this Annual Report.
(3)   The  Program  reimburses  Dyco  and  its  affiliates  for  reasonable  and
      necessary general and administrative, geological, and engineering expenses
      and direct  expenses  incurred in  connection  with their  management  and
      operation of the Program. The directors,  officers,  and employees of Dyco
      and its  affiliates  receive no direct  remuneration  from the Program for
      their services to the Program. See "Salary Reimbursement Table" below. The
      allocable general and administrative, geological, and engineering expenses
      are apportioned on a reasonable  basis between the Program's  business and
      all other oil and gas  activities  of Dyco and its  affiliates,  including
      Dyco's  management  and  operation  of  affiliated  oil  and  gas  limited
      partnerships. The allocation to the Program of these costs is made by Dyco
      as General Partner.


      As noted in the  Compensation/Reimbursement  Table above,  the  directors,
officers,  and  employees  of  Dyco  and  their  affiliates  receive  no  direct
remuneration from the Program for their




                                      -36-
<PAGE>




services. However, to the extent such services represent direct involvement with
the Program, as opposed to general corporate  functions,  such persons' salaries
are allocated to and reimbursed by the Program. Such allocation to the Program's
general and administrative, geological, and engineering expenses of the salaries
of directors,  officers,  and  employees of Dyco and its  affiliates is based on
internal records maintained by Dyco and its affiliates,  and represents investor
relations,  legal, accounting,  data processing,  management, gas marketing, and
other functions directly attributable to the Program's operations. The following
table indicates the  approximate  amount of general and  administrative  expense
reimbursement  attributable  to the  salaries of the  directors,  officers,  and
employees  of Dyco and its  affiliates  for the three years ended  December  31,
1998:



                                      -37-
<PAGE>
<TABLE>
<CAPTION>



                                                  Salary Reimbursement
                                           Three Years Ended December 31, 1998


                                                                           Long Term Compensation
                                                                       ------------------------------
                                        Annual Compensation                   Awards          Payouts
                                 ---------------------------------     ---------------------  -------

                                                                                     Securi-
                                                           Other                       ties                All
    Name                                                   Annual      Restricted     Under-              Other
    and                                                    Compen-       Stock        lying     LTIP      Compen-
 Principal                       Salary         Bonus      sation       Award(s)     Options/  Payouts    sation
  Position              Year       ($)           ($)         ($)          ($)        SARs(#)     ($)        ($)
---------------         ----     -------       -------     -------     ----------    --------  -------    -------
<S>                     <C>     <C>           <C>         <C>         <C>            <C>       <C>        <C>

C. Philip
Tholen,
President,
Chief Executive
Officer(1)(2)           1996      -           -           -           -              -         -          -

Dennis R. Neill,
President(2)(3)         1996      -           -           -           -              -         -          -
                        1997      -           -           -           -              -         -          -
                        1998      -           -           -           -              -         -          -

All Executive
Officers,
Directors,
and Employees
as a group(4)           1996    $28,052       -           -           -              -        -          -
                        1997    $28,647       -           -           -              -        -          -
                        1998    $28,378       -           -           -              -        -          -
---------------

(1)   Mr. Tholen served as President and Chief  Executive  Officer of Dyco until
      June 30, 1996.
(2)   The general and  administrative  expenses  paid by the  Program  and  attributable  to
      salary reimbursements do not include any salary or other compensation  attributable to
      Mr. Tholen or Mr. Neill.
(3)   Mr. Neill became President of Dyco on June 30, 1996.
(4)   No  officer  or  director  of Dyco or its  affiliates  provides  full-time
      services to the Program and no individual's  salary or other  compensation
      reimbursement from the Program equals or exceeds $100,000 per annum.
</TABLE>




                                      -38-
<PAGE>




      Samson  maintains  necessary  inventories of new and used field equipment.
Samson may have provided  some of this  equipment for wells in which the Program
has an interest. This equipment was provided at prices or rates equal to or less
than  those  normally  charged  in the  same or  comparable  geographic  area by
unaffiliated  persons or companies  dealing at arm's  length.  The  operators of
these  wells  bill the  Program  for a  portion  of such  costs  based  upon the
Program's interest in the well.


ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table provides information as to the beneficial ownership of
the Program's Units as of March 1, 1999 by each beneficial owner of more than 5%
of  the  issued  and  outstanding  Units  and by the  directors,  officers,  and
affiliates  of Dyco.  The address of each of such persons is Samson  Plaza,  Two
West Second Street, Tulsa, Oklahoma 74103.


                                                        Number of
                                                          Units
                                                       Beneficially
                                                     Owned (Percent
             Beneficial Owner                        of Outstanding)
      --------------------------------             ----------------------

      Samson Resources Company                     2,780          (46.3%)

      All directors, officers, and
         affiliates of Dyco as a group
         and Dyco (5 persons)                      2,780          (46.3%)


ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Certain affiliates of Dyco engage in oil and gas activities  independently
of the Program  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 Program and such affiliates
also create potential conflicts of interest.  An affiliate of the Program owns a
significant  amount of the  Program's  Units and  therefore  has an  identity of
interest  with other  limited  partners  with respect to the  operations  of the
Program.

      In order to attempt to assure  limited  liability for limited  partners as
well as an orderly  conduct of business,  management of the Program is exercised
solely by Dyco. The Program Agreement grants Dyco broad discretionary  authority
with  respect  to  the  Program's   participation  in  drilling   prospects  and
expenditure and control of funds,  including  borrowings.  These  provisions are
similar to those contained in prospectuses and partnership




                                      -39-
<PAGE>




agreements  for other public oil and gas  partnerships.  Broad  discretion as to
general  management  of  the  Program  involves  circumstances  where  Dyco  has
conflicts  of  interest  and  where it must  allocate  costs  and  expenses,  or
opportunities, among the Program and other competing interests.

      Dyco does not devote all of its time, efforts,  and personnel  exclusively
to the  Program.  Furthermore,  the  Program  does not have any  employees,  but
instead relies on the personnel of Samson. The Program thus competes with Samson
(including  other  oil and gas  programs)  for the  time and  resources  of such
personnel.  Samson  devotes  such time and  personnel to the  management  of the
Program as are indicated by the  circumstances and as are consistent with Dyco's
fiduciary duties.

      Affiliates  of the Program  are solely  responsible  for the  negotiation,
administration,  and  enforcement of oil and gas sales  agreements  covering the
Program's  leasehold  interests.  Because  affiliates of the Program who provide
services to the  Program  have  fiduciary  or other  duties to other  members of
Samson,  contract  amendments and  negotiating  positions taken by them in their
effort to enforce  contracts with purchasers may not  necessarily  represent the
positions that the Program would take if it were to administer its own contracts
without involvement with other members of Samson. On the other hand,  management
believes that the Program's  negotiating strength and contractual positions have
been enhanced by virtue of its  affiliation  with Samson.  These  provisions are
similar to those contained in prospectuses and partnership  agreements for other
public oil and gas partnerships.

      Samson  Resources  Company,  an  affiliate  of  Dyco,  ("Resources")  owns
approximately  46% of the Program's  outstanding  Units as of March 1, 1999. The
Program Agreement permits Resources to independently vote its Units.  Resources'
significant  Unit ownership will therefore  likely  determine the outcome of any
matter submitted for a vote of the Limited Partners.




                                      -40-
<PAGE>



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 Program as of December 31, 1998 and 1997 and for the years
                  ended  December 31, 1998,  1997, and 1996 are filed as part of
                  this report:

                        Report of Independent Accountants
                        Balance Sheets
                        Statements of Operations
                        Statements of Changes in Partners' Capital
                        Statements of Cash Flows
                        Notes to Financial Statements

            (2)   Financial Statement Schedules:

                        None.

            (3)   Exhibits:

                  4.1   Drilling  Agreement dated June 5, 1981 for Dyco Drilling
                        Program  1981-2 by and between  Dyco Oil and Gas Program
                        1981-2,  Dyco  Petroleum  Corporation,  and Jaye F. Dyer
                        filed as Exhibit  4.1 to Annual  Report on Form 10-K for
                        the year ended  December  31, 1991 on April 13, 1992 and
                        is hereby incorporated by reference.

                  4.2   Program  Agreement  dated  June 5, 1981 for Dyco Oil and
                        Gas  Program   1981-2  by  and  between  Dyco  Petroleum
                        Corporation and the Participants filed as Exhibit 4.2 to
                        Annual  Report on Form 10-K for the year ended  December
                        31, 1991 on April 13, 1992 and is hereby incorporated by
                        reference.

                  4.3   Amendment  to  Program  Agreement  for  Dyco Oil and Gas
                        Program  1981-2 dated  February 9, 1989 filed as Exhibit
                        4.3 to Annual  Report  on Form  10-K for the year  ended
                        December  31,  1991 on  April  13,  1992  and is  hereby
                        incorporated by reference.

                  4.4   Certificate of Limited Partnership, as amended, for Dyco
                        Oil and Gas Program 1981-2 Limited  Partnership filed as
                        Exhibit 4.4 to



                                      -41-
<PAGE>



                        Annual  Report on Form 10-K for the year ended  December
                        31, 1991 on April 13, 1992 and is hereby incorporated by
                        reference.

                *27.1   Financial  Data Schedule  containing  summary  financial
                        information  extracted from the Dyco Oil and Gas Program
                        1981-2 Limited Partnership's  financial statements as of
                        December  31, 1998 and for the year ended  December  31,
                        1998.

                  All other Exhibits are omitted as inapplicable.


                  ------------------
                  *  Filed herewith.


      (b) Reports on Form 8-K filed during the fourth quarter of 1998.

            None.




                                      -42-
<PAGE>



                                   SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly organized.

                                    DYCO OIL AND GAS PROGRAM 1981-2
                                    LIMITED PARTNERSHIP

                                    By:   DYCO PETROLEUM CORPORATION
                                          General Partner

                                          March 25, 1999


                                    By:   /s/Dennis R. Neill
                                          ------------------------------
                                          Dennis R. Neill
                                          President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities on the dates indicated.

By:  /s/Dennis R. Neill          President and              March 25, 1999
     -------------------         Director (Principal
        Dennis R. Neill          Executive Officer)

     /s/Patrick M. Hall          Chief Financial            March 25, 1999
     -------------------         Officer (Principal
        Patrick M. Hall          Financial and
                                 Accounting Officer)

     /s/Judy K. Fox              Secretary                  March 25, 1999
     -------------------
        Judy K. Fox



                                      -43-
<PAGE>



                               INDEX TO EXHIBITS


Exhibit
Number            Description
-------           -----------

4.1               Drilling  Agreement  dated  June 5,  1981  for  Dyco  Drilling
                  Program 1981-2 by and between Dyco Oil and Gas Program 1981-2,
                  Dyco Petroleum Corporation,  and Jaye F. Dyer filed as Exhibit
                  4.1 to Annual Report on Form 10-K for the year ended  December
                  31,  1991 on April  13,  1992 and is  hereby  incorporated  by
                  reference.

4.2               Program  Agreement  dated  June 5,  1981  for Dyco Oil and Gas
                  Program 1981-2 by and between Dyco Petroleum  Corporation  and
                  the Participants filed as Exhibit 4.2 to Annual Report on Form
                  10-K for the year ended  December  31,  1991 on April 13, 1992
                  and is hereby incorporated by reference.

4.3               Amendment  to Program  Agreement  for Dyco Oil and Gas Program
                  1981-2  dated  February 9, 1989 filed as Exhibit 4.3 to Annual
                  Report on Form 10-K for the year ended  December  31,  1991 on
                  April 13, 1992 and is hereby incorporated by reference.

4.4               Certificate  of Limited  Partnership, as amended, for Dyco Oil
                  and Gas  Program 1981-2 Limited  Partnership filed  as Exhibit
                  4.4 to Annual Report on Form  10-K for the year ended December
                  31,   1991  on  April  13,  1992  and  is  hereby incorporated
                  by reference.

*27.1             Financial   Data   Schedule   containing   summary   financial
                  information extracted from the Dyco Oil and Gas Program 1981-2
                  Limited Partnership's  financial statements as of December 31,
                  1998 and for the year ended December 31,
                  1998.


------------------
*  Filed herewith.


                                      -44-