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
   June 30, 1998                                  0-10442



                       DYCO OIL AND GAS PROGRAM 1981-1
                           (A LIMITED PARTNERSHIP)
            (Exact Name of Registrant as specified in its charter)



         Minnesota                                  41-1411953
(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
                            ------                    ------




                                       1
<PAGE>




                        PART I. FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

             DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
                                BALANCE SHEETS
                                 (Unaudited)

                                    ASSETS

                                              June 30,         December 31,
                                                1998              1997
                                             -----------       ------------

CURRENT ASSETS:
   Cash and cash equivalents                    $126,103          $118,975
   Accrued oil and gas sales                      26,866            27,837
                                                --------          --------
      Total current assets                      $152,969          $146,812

NET OIL AND GAS PROPERTIES, utilizing
   the full cost method                           52,500            71,444

DEFERRED CHARGE                                    3,334             3,334
                                                --------          --------
                                                $208,803          $221,590
                                                ========          ========

                      LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
   Accounts payable                             $  2,865          $  3,225
   Gas imbalance payable                           2,249            47,188
                                                --------          --------
      Total current liabilities                 $  5,114          $ 50,413

ACCRUED LIABILITY                               $ 85,405          $ 85,405

PARTNERS' CAPITAL:
   General Partner, issued and
      outstanding, 70 units                     $  1,182          $    857
   Limited Partners, issued and
      outstanding, 7,000 units                   117,102            84,915
                                                --------          --------
      Total Partners' capital                   $118,284          $ 85,772
                                                --------          --------
                                                $208,803          $221,590
                                                ========          ========





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



                                       2
<PAGE>



             DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
                           STATEMENTS OF OPERATIONS
              FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
                                 (Unaudited)

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

REVENUES:
   Oil and gas sales                             $68,066           $37,249
   Interest                                        1,226               578
                                                 -------           -------
                                                 $69,292           $37,827

COST AND EXPENSES:
   Oil and gas production                        $13,361           $ 3,603
   Depreciation, depletion, and
      amortization of oil and gas
      properties                                  10,210               236
   General and administrative
      (Note 2)                                    13,874            16,220
                                                 -------           -------
                                                 $37,445           $20,059
                                                 -------           -------

NET INCOME                                       $31,847           $17,768
                                                 =======           =======
GENERAL PARTNER (1%) - net
   income                                        $   318           $   178
                                                 =======           =======
LIMITED PARTNERS (99%) - net
   income                                        $31,529           $17,590
                                                 =======           =======
NET INCOME PER UNIT                              $  4.51           $  2.51
                                                 =======           =======
UNITS OUTSTANDING                                  7,070             7,070
                                                 =======           =======



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



                                       3
<PAGE>



             DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
                           STATEMENTS OF OPERATIONS
               FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                 (Unaudited)

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

REVENUES:
   Oil and gas sales                            $106,080          $117,524
   Interest                                        2,629             2,442
                                                --------          --------
                                                $108,709          $119,966

COST AND EXPENSES:
   Oil and gas production                       $ 21,351          $ 44,651
   Depreciation, depletion, and
      amortization of oil and gas
      properties                                  15,126            14,287
   General and administrative
      (Note 2)                                    39,720            44,203
                                                --------          --------
                                                $ 76,197          $103,141
                                                --------          --------

NET INCOME                                      $ 32,512          $ 16,825
                                                ========          ========
GENERAL PARTNER (1%) - net
   income                                       $    325          $    168
                                                ========          ========
LIMITED PARTNERS (99%) - net
   income                                       $ 32,187          $ 16,657
                                                ========          ========
NET INCOME PER UNIT                             $   4.60          $   2.38
                                                ========          ========
UNITS OUTSTANDING                                  7,070             7,070
                                                ========          ========



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



                                       4
<PAGE>



             DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
                           STATEMENTS OF CASH FLOWS
               FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                 (Unaudited)


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

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                   $ 32,512          $ 16,825
   Adjustments to reconcile net income
      to net cash provided by operating
      activities:
      Depreciation, depletion, and
        amortization of oil and gas
        properties                                15,126            14,287
      Decrease in accrued oil and
        gas sales                                    971            21,910
      Decrease in accounts payable             (     360)        (   2,428)
      Decrease in gas imbalance payable        (  44,939)                -
                                                --------          --------
      Net cash provided by operating
        activities                              $  3,310          $ 50,594
                                                --------          --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from the sale of oil and
      gas properties                            $  3,818          $ 24,289
   Additions to oil and gas
      properties                                       -         (   1,085)
                                                --------          --------
   Net cash provided by investing
      activities                                $  3,818          $ 23,204
                                                --------          --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash distributions                           $      -         ($176,750)
                                                --------          --------
   Net cash used by financing
      activities                                $      -         ($176,750)
                                                --------          --------

NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                             $  7,128         ($102,952)

CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                           118,975           197,842
                                                --------          --------
CASH AND CASH EQUIVALENTS AT
   END OF PERIOD                                $126,103          $ 94,890
                                                ========          ========


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


                                       5
<PAGE>



             DYCO OIL AND GAS PROGRAM 1981-1 LIMITED PARTNERSHIP
                   CONDENSED NOTES TO FINANCIAL STATEMENTS
                                JUNE 30, 1998
                                  (Unaudited)


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

      The balance sheet as of June 30, 1998,  statements  of operations  for the
      three and six months ended June 30, 1998 and 1997,  and statements of cash
      flows for the six months  ended June 30, 1998 and 1997 have been  prepared
      by Dyco Petroleum  Corporation  ("Dyco"),  the General Partner of the Dyco
      Oil and Gas Program 1981-1 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 June 30,  1998,  results of  operations  for the three and six
      months ended June 30, 1998 and 1997, and changes in cash flows for the six
      months ended June 30, 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 June 30, 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




                                       6
<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 June 30,  1998 and 1997 the
      Program incurred such expenses totaling $13,874 and $16,220, respectively,
      of which $12,513 was paid each period to Dyco and its  affiliates.  During
      the six months  ended June 30,  1998 and 1997 the  Program  incurred  such
      expenses totaling $39,720 and $44,203,  respectively, of which $25,026 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.





                                       7
<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.



                                       8
<PAGE>




      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.


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 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. Such spot market sales are generally short-term in nature and
      are dependent upon the obtaining of  transportation  services  provided by
      pipelines. In addition, crude oil prices are at or near their lowest level
      in the past  decade  due  primarily  to the  global  surplus of crude oil.
      Management is unable to predict whether future oil and gas prices will (i)
      stabilize, (ii) increase, or (iii) decrease.

      THREE  MONTHS  ENDED JUNE 30, 1998 AS COMPARED TO THE THREE  MONTHS  ENDED
      JUNE 30, 1997.

                                                 Three Months Ended June 30,
                                                 ---------------------------
                                                   1998              1997
                                                  -------           -------
      Oil and gas sales                           $68,066           $37,249
      Oil and gas production expenses             $13,361           $ 3,603
      Barrels produced                                 98                44
      Mcf produced                                 34,603            18,637
      Average price/Bbl                           $ 14.74           $ 17.16
      Average price/Mcf                           $  1.93           $  1.82

      As shown in the table  above,  total oil and gas sales  increased  $30,817
      (82.7%) for the three  months ended June 30, 1998 as compared to the three
      months ended June 30, 1997.  This  increase  was  primarily  related to an
      increase in volumes of gas sold.  Volumes of oil and gas sold increased 54
      barrels and 15,966 Mcf, respectively,  for the three months ended June 30,
      1998 as compared to the three months ended June 30, 1997.  The increase in
      volumes of gas sold resulted  primarily from (i) the  curtailment of sales
      during the three



                                       9
<PAGE>



      months ended June 30, 1997 on one  significant  well due to the  Program's
      overproduced  position  in that  well,  and (ii) a positive  prior  period
      volume  adjustment by the  purchaser on another well in 1998.  Average oil
      prices  decreased to $14.74 per barrel for the three months ended June 30,
      1998 from  $17.16  per barrel for the three  months  ended June 30,  1997,
      while  average gas prices  increased to $1.93 per Mcf for the three months
      ended June 30, 1998 from $1.82 per Mcf for the three months ended June 30,
      1997.

      Oil and gas production  expenses  (including lease operating  expenses and
      production  taxes)  increased  $9,758  (270.8%) for the three months ended
      June 30, 1998 as compared to the three months  ended June 30,  1997.  This
      increase  resulted  primarily  from (i) an  increase in  production  taxes
      associated  with the increase in oil and gas sales and (ii) an increase in
      lease operating  expenses which was primarily due to credits received from
      the operators of two wells during the three months ended June 30, 1997 for
      prior period  operating  expenses.  As a percentage  of oil and gas sales,
      these expenses increased to 19.6% for the three months ended June 30, 1998
      from  9.7% for the three  months  ended  June 30,  1997.  This  percentage
      increase  was  primarily  due to  the  dollar  increase  in  oil  and  gas
      production expenses discussed above.

      Depreciation,  depletion,  and  amortization  of oil  and  gas  properties
      increased  $9,974  (4,226.3%)  for the three months ended June 30, 1998 as
      compared to the three months ended June 30, 1997.  This increase  resulted
      primarily  from (i) the  increase  in volumes of gas sold during the three
      months  ended June 30, 1998 as compared to the three months ended June 30,
      1997 and (ii) a decrease in the oil and gas prices  used in the  valuation
      of reserves at June 30, 1998 as compared to March 31, 1998 and an increase
      in the gas prices  used in the  valuation  of reserves at June 30, 1997 as
      compared to March 31,  1997.  As a percentage  of oil and gas sales,  this
      expense  increased  to 15.0% for the three months ended June 30, 1998 from
      0.6% for the three months ended June 30, 1997.  This  percentage  increase
      was primarily due to the dollar increase in depreciation,  depletion,  and
      amortization discussed above.

      General and administrative expenses decreased $2,346 (14.5%) for the three
      months  ended June 30, 1998 as compared to the three months ended June 30,
      1997.  This decrease  resulted  primarily from a decrease in  professional
      fees during the three  months ended June 30, 1998 as compared to the three
      months ended June 30, 1997.  As a percentage  of oil and gas sales,  these
      expenses  decreased to 20.4% for the three months ended June 30, 1998 from
      43.5% for the three months ended June 30, 1997. This  percentage  decrease
      was primarily due to the increase in oil and gas sales discussed above.




                                       10
<PAGE>




      SIX MONTHS  ENDED JUNE 30, 1998 AS  COMPARED TO THE SIX MONTHS  ENDED JUNE
      30, 1997.

                                                   Six Months Ended June 30,
                                                   -------------------------
                                                   1998              1997
                                                 --------          --------
      Oil and gas sales                          $106,080          $117,524
      Oil and gas production expenses            $ 21,351          $ 44,651
      Barrels produced                                130               103
      Mcf produced                                 51,767            48,199
      Average price/Bbl                          $  14.59          $  20.08
      Average price/Mcf                          $   2.01          $   2.34

      As shown in the table  above,  total oil and gas sales  decreased  $11,444
      (9.7%)  for the six  months  ended June 30,  1998 as  compared  to the six
      months ended June 30, 1997. Of this  decrease,  approximately  $20,000 was
      related to a decrease in the average price of gas sold,  partially  offset
      by an increase of  approximately  $9,000 due to an increase in the volumes
      of gas sold.  Volumes of oil and gas sold  increased  27 barrels and 3,568
      Mcf,  respectively,  for the six months ended June 30, 1998 as compared to
      the six months ended June 30, 1997.  Average oil and gas prices  decreased
      to $14.59 per barrel and $2.01 per Mcf,  respectively,  for the six months
      ended  June  30,   1998  from   $20.08  per  barrel  and  $2.34  per  Mcf,
      respectively, for the six months ended June 30, 1997.

      Oil and gas production  expenses  (including lease operating  expenses and
      production  taxes) decreased $23,300 (52.2%) for the six months ended June
      30, 1998 as compared to the six months ended June 30, 1997.  This decrease
      resulted  primarily from (i) workover expenses incurred on one well during
      the six months  ended June 30,  1997 in order to improve  the  recovery of
      reserves and (ii) the sale of one well during 1997. As a percentage of oil
      and gas sales,  these expenses decreased to 20.1% for the six months ended
      June 30,  1998 from 38.0% for the six months  ended  June 30,  1997.  This
      percentage  decrease was primarily  due to the dollar  decrease in oil and
      gas production expenses discussed above.

      Depreciation,  depletion,  and  amortization  of oil  and  gas  properties
      increased  $839 (5.9%) for the six months  ended June 30, 1998 as compared
      to the six months  ended June 30,  1997.  As a  percentage  of oil and gas
      sales,  this expense  increased to 14.3% for the six months ended June 30,
      1998 from 12.2% for the six months  ended June 30, 1997.  This  percentage
      increase was primarily  due to the decreases in the average  prices of oil
      and gas sold during the six months  ended June 30, 1998 as compared to the
      six months ended June 30, 1997.



                                       11
<PAGE>




      General and  administrative  expenses decreased $4,483 (10.1%) for the six
      months  ended June 30, 1998 as  compared to the six months  ended June 30,
      1997.  This decrease  resulted  primarily from a decrease in  professional
      fees  during the six months  ended June 30,  1998 as  compared  to the six
      months ended June 30, 1997.  As a percentage  of oil and gas sales,  these
      expenses  remained  relatively  constant at 37.4% for the six months ended
      June 30, 1998 and 37.6% for the six months ended June 30, 1997.





                                       12
<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
                        1981-1 Limited Partnership's  financial statements as of
                        June 30,  1998  and for the six  months  ended  June 30,
                        1998, filed herewith.

                        All other exhibits are omitted as inapplicable.

      (b) Reports on Form 8-K.

            None.





                                       13
<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 1981-1 LIMITED
                              PARTNERSHIP

                                    (Registrant)

                                    BY:   DYCO PETROLEUM CORPORATION

                                          General Partner


Date:  August 4, 1998        By:         /s/Dennis R. Neill
                                       -------------------------------
                                              (Signature)
                                              Dennis R. Neill
                                              President


Date:  August 4, 1998        By:         /s/Patrick M. Hall
                                       -------------------------------
                                              (Signature)
                                              Patrick M. Hall
                                              Chief Financial Officer



                                       14
<PAGE>



INDEX TO EXHIBITS


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

27.1        Financial Data Schedule  containing  summary  financial  information
            extracted   from  the  Dyco  Oil  and  Gas  Program  1981-1  Limited
            Partnership's  financial  statements as of June 30, 1998 and for the
            six months ended June 30, 1998, filed herewith.

            All other exhibits are omitted as inapplicable.



                                       15