SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549



                                  FORM 10-Q


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


For the quarter ended                     Commission File Number
   March 31, 1998                                 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    (I.R.S. Employer Identification
   of incorporation or                       Number)
     organization)



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



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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                        Yes     X               No
                            ------                    ------




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<PAGE>



                        PART I. FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

             DYCO OIL AND GAS PROGRAM 1981-2 LIMITED PARTNERSHIP
                                BALANCE SHEETS
                                 (Unaudited)

                                    ASSETS

                                              March 31,        December 31,
                                                1998              1997
                                             -----------       ------------

CURRENT ASSETS:
   Cash and cash equivalents                    $142,351          $116,852
   Accrued oil and gas sales                      49,008            71,787
   Accounts receivable - General
      Partner (Note 2)                            22,548                 -
                                                --------          --------
      Total current assets                      $213,907          $188,639

NET OIL AND GAS PROPERTIES, utilizing
   the full cost method                          105,201           135,634

DEFERRED CHARGE                                   39,180            39,180
                                                --------          --------
                                                $358,288          $363,453
                                                ========          ========

                      LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
   Accounts payable                             $ 19,886          $ 40,290
   Gas imbalance payable                          20,591            20,591
                                                --------          --------
      Total current liabilities                 $ 40,477          $ 60,881

ACCRUED LIABILITY                                126,219           126,219

PARTNERS' CAPITAL:
   General Partner, issued and
      outstanding, 74 units                        1,916             1,764
   Limited Partners, issued and
      outstanding, 6,000 units                   189,676           174,589
                                                --------          --------
      Total Partners' capital                   $191,592          $176,353
                                                --------          --------
                                                $358,288          $363,453
                                                ========          ========



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



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<PAGE>



             DYCO OIL AND GAS PROGRAM 1981-2 LIMITED PARTNERSHIP
                           STATEMENTS OF OPERATIONS
              FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                                 (Unaudited)

                                                  1998              1997
                                                --------          --------

REVENUES:
   Oil and gas sales                             $75,712          $172,694
   Interest                                        1,438             2,824
                                                 -------          --------
                                                 $77,150          $175,518
                                                 -------          --------

COST AND EXPENSES:
   Oil and gas production                        $30,583          $ 38,837
   Depreciation, depletion, and
      amortization of oil and gas
      properties                                   7,885            22,828
   General and administrative
      (Note 2)                                    23,443            25,279
                                                 -------          --------
                                                 $61,911          $ 86,944
                                                 -------          --------

NET INCOME                                       $15,239          $ 88,574
                                                 =======          ========
GENERAL PARTNER (1%) - net income                $   152          $    886
                                                 =======          ========
LIMITED PARTNERS (99%) - net income              $15,087          $ 87,688
                                                 =======          ========
NET INCOME PER UNIT                              $  2.51          $  14.58
                                                 =======          ========
UNITS OUTSTANDING                                  6,074             6,074
                                                 =======          ========




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



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<PAGE>


             DYCO OIL AND GAS PROGRAM 1981-2 LIMITED PARTNERSHIP
                           STATEMENTS OF CASH FLOWS
              FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                                 (Unaudited)

                                                  1998             1997
                                                ---------       ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                   $ 15,239          $ 88,574
   Adjustments to reconcile net
      income to net cash provided
      by operating activities:
      Depreciation, depletion, and
        amortization of oil and gas
        properties                                 7,885            22,828
      Decrease in accrued oil and
        gas sales                                 22,779            32,309
      Increase in accounts receivable -
        General Partner                        (  22,548)                -
      Decrease in accounts payable             (  20,404)        (     962)
                                                --------          --------
      Net cash provided by operating
        activities                              $  2,951          $142,749
                                                --------          --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from sale of oil and gas
      properties                                $ 22,548          $      -
   Additions to oil and gas
      properties                                       -         (   1,064)
                                                --------          --------
   Net cash provided (used) by
      investing activities                      $ 22,548         ($  1,064)
                                                --------          --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash distributions                           $      -         ($303,700)
                                                --------          --------
   Net cash used by financing
      activities                                $      -         ($303,700)
                                                --------          --------

NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                             $ 25,499         ($162,015)

CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                           116,852           272,066
                                                --------          --------
CASH AND CASH EQUIVALENTS AT
   END OF PERIOD                                $142,351          $110,051
                                                ========          ========
            The accompanying condensed notes are an integral part of
                           these financial statements.

<

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<PAGE>


             DYCO OIL AND GAS PROGRAM 1981-2 LIMITED PARTNERSHIP
                   CONDENSED NOTES TO FINANCIAL STATEMENTS
                                MARCH 31, 1998
                                  (Unaudited)


1.    ACCOUNTING POLICIES
      -------------------

      The balance sheet as of March 31, 1998,  statements of operations  for the
      three months ended March 31, 1998 and 1997,  and  statements of cash flows
      for the three months  ended March 31, 1998 and 1997 have been  prepared by
      Dyco Petroleum Corporation  ("Dyco"),  the General Partner of the Dyco Oil
      and Gas Program 1981-2 Limited Partnership (the "Program"), without audit.
      In the opinion of management  all  adjustments  (which include only normal
      recurring  adjustments) necessary to present fairly the financial position
      at March 31, 1998,  results of operations for the three months ended March
      31, 1998 and 1997,  and changes in cash flows for the three  months  ended
      March 31, 1998 and 1997 have been made.

      Information  and  footnote  disclosures  normally  included  in  financial
      statements  prepared in  accordance  with  generally  accepted  accounting
      principles  have been  condensed or omitted.  It is  suggested  that these
      financial  statements be read in conjunction with the financial statements
      and notes thereto included in the Program's Annual Report on Form 10-K for
      the year ended December 31, 1997. The results of operations for the period
      ended March 31, 1998 are not  necessarily  indicative of the results to be
      expected for the full year.


      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.  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),  the excess is
      charged to expense in the period  during which such excess  occurs.  Sales
      and abandonments of






                                       5
<PAGE>





      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.

      The provision for depreciation, depletion, and amortization of oil and gas
      properties is calculated by dividing the oil and gas sales dollars  during
      the  period by the  estimated  future  gross  income  from the oil and gas
      properties and applying the resulting  rate to the net remaining  costs of
      oil and gas properties that have been  capitalized,  plus estimated future
      development costs.


2.    TRANSACTIONS WITH RELATED PARTIES
      ---------------------------------

      Under the terms of the Program's partnership  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 three  months  ended March 31, 1998 and 1997 the
      Program incurred such expenses totaling $23,443 and $25,279, respectively,
      of which $11,988 was paid each period 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.

      The  receivable  from the  General  Partner at March 31,  1998  represents
      proceeds  due to the Program  from the sale of oil and gas  properties  to
      third parties  during the first  quarter of 1998.  Subsequent to March 31,
      1998, this receivable was collected by the Program.




                                       6
<PAGE>



ITEM 2.     MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
            RESULTS OF OPERATIONS

USE OF FORWARD-LOOKING STATEMENTS AND ESTIMATES
-----------------------------------------------

      This Quarterly 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
      Quarterly 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, and otherwise indicated.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

      Net  proceeds  from the  Program's  operations  less  necessary  operating
      capital  are  distributed  to  investors  on a  quarterly  basis.  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 the Program's reserves which
      would result in a positive economic impact.

      The Program's  available capital from  subscriptions has been spent on oil
      and gas  drilling  activities.  There  should not be any further  material
      capital  resource  commitments  in the  future.  The  Program  has no debt
      commitments. Cash for operational purposes will be provided by current oil
      and gas production.



                                       7
<PAGE>



      The  Program's  Statement  of Cash  Flows  for the first  quarter  of 1998
      includes proceeds from the sale of oil and gas properties during the three
      months  ended  March  31,  1998.  These  proceeds  will be  reflected,  as
      applicable,  in the Program's  cash  distributions,  if any, to be paid in
      June 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.

RESULTS OF OPERATIONS
---------------------

      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  very  difficult.
      Substantially  all of the  Program's  gas  reserves  are being sold in the
      "spot market".  Prices on the spot market are subject to wide seasonal and
      regional pricing  fluctuations due to the highly competitive nature of the
      spot market. In addition,  such spot market sales are generally short-term
      in nature and are dependent upon the obtaining of transportation  services
      provided by pipelines.  Management is unable to predict whether future oil
      and gas prices will (i) stabilize, (ii) increase, or (iii) decrease.

      THREE  MONTHS  ENDED MARCH 31, 1998 AS COMPARED TO THE THREE  MONTHS ENDED
      MARCH 31, 1997.

                                               Three Months Ended March 31,
                                               ----------------------------
                                                    1998             1997
                                                  -------          --------
      Oil and gas sales                           $75,712          $172,694
      Oil and gas production expenses             $30,583          $ 38,837
      Barrels produced                                257               354
      Mcf produced                                 37,331            64,056
      Average price/Bbl                           $ 12.58          $  19.78
      Average price/Mcf                           $  1.94          $   2.59

      As shown in the table  above,  total oil and gas sales  decreased  $96,982
      (56.2%) for the three months ended March 31, 1998 as compared to the three
      months ended March 31, 1997. Of this decrease,  approximately  $69,000 was
      related to a decrease in volumes of gas sold and approximately



                                       8
<PAGE>



      $24,000  was  related  to a  decrease  in the  average  price of gas sold.
      Volumes  of oil  and  gas  sold  decreased  97  barrels  and  26,725  Mcf,
      respectively, for the three months ended March 31, 1998 as compared to the
      three  months  ended March 31,  1997.  The decrease in volumes of gas sold
      resulted primarily from the Program receiving in 1998 a reduced percentage
      of sales due to the  Program's  overproduced  position on one  significant
      well.  Average oil and gas prices decreased to $12.58 per barrel and $1.94
      per Mcf,  respectively,  for the three  months  ended  March 31, 1998 from
      $19.78 per barrel and $2.59 per Mcf,  respectively,  for the three  months
      ended March 31, 1997.

      Oil and gas production  expenses  (including lease operating  expenses and
      production  taxes)  decreased  $8,254  (21.3%) for the three  months ended
      March 31, 1998 as compared to the three months ended March 31, 1997.  This
      decrease resulted primarily from a decrease in production taxes associated
      with the decrease in oil and gas sales during the three months ended March
      31, 1998 as  compared  to the three  months  ended  March 31,  1997.  As a
      percentage of oil and gas sales, these expenses increased to 40.4% for the
      three  months  ended March 31, 1998 from 22.5% for the three  months ended
      March  31,  1997.  This  percentage  increase  was  primarily  due  to the
      decreases in the average prices of oil and gas sold discussed above.

      Depreciation,  depletion,  and  amortization  of oil  and  gas  properties
      decreased  $14,943  (65.5%) for the three  months  ended March 31, 1998 as
      compared to the three months ended March 31, 1997. This decrease  resulted
      primarily  from (i)  decreases  in volumes of oil and gas sold  during the
      three  months  ended March 31, 1998 as compared to the three  months ended
      March 31, 1997 and (ii) an increase in the gas price used in the valuation
      of reserves  for the three  months ended March 31, 1998 as compared to the
      three months ended March 31, 1997.  As a percentage  of oil and gas sales,
      this expense  decreased to 10.4% for the three months ended March 31, 1998
      from 13.2% for the three  months  ended March 31,  1997.  This  percentage
      decrease  was  primarily  due  to the  dollar  decrease  in  depreciation,
      depletion, and amortization discussed above.

      General and administrative  expenses decreased $1,836 (7.3%) for the three
      months  ended March 31, 1998 as compared to the three  months  ended March
      31, 1997. As a percentage of oil and gas sales,  these expenses  increased
      to 31.0% for the three  months  ended  March 31,  1998 from  14.6% for the
      three months ended March 31, 1997. This percentage  increase was primarily
      due to the decrease in oil and gas sales discussed above.





                                       9
<PAGE>



                          PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

      (a)    Exhibits

             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
                        March 31, 1998 and for the three  months ended March 31,
                        1998, filed herewith.

                        All other exhibits are omitted as inapplicable.

      (b) Reports on Form 8-K.

            None.





                                       10
<PAGE>



                                  SIGNATURES

Pursuant  to the  requirements  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 authorized.


                              DYCO OIL AND GAS PROGRAM 1981-2 LIMITED
                              PARTNERSHIP

                                    (Registrant)

                                    BY:   DYCO PETROLEUM CORPORATION

                                          General Partner


Date:  May 5, 1998                  By:         /s/Dennis R. Neill
                                       -------------------------------
                                              (Signature)
                                              Dennis R. Neill
                                              President


Date:  May 5, 1998                  By:         /s/Patrick M. Hall
                                       -------------------------------
                                              (Signature)
                                              Patrick M. Hall
                                              Chief Financial Officer



                                       11
<PAGE>



INDEX TO EXHIBITS


NUMBER      DESCRIPTION
------      -----------

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 March 31, 1998 and for the
            three months ended March 31, 1998, filed herewith.

            All other exhibits are omitted as inapplicable.




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