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, 1997

Commission File Number 2-92702    (1985-1 Program)
                       2-92702-01 (1985-2 Program)

                        DYCO 1985 OIL AND GAS PROGRAMS
                          (TWO LIMITED PARTNERSHIPS)
            (Exact name of registrant as specified in its charter)

                                          41-1498087 (1985-1 Program)
           Minnesota                      41-1498086 (1985-2 Program)
(State or other jurisdiction of          (I.R.S. Employer
incorporation or organization)         Identification Number)

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

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.



                                       1
<PAGE>




                                 FORM 10-K405

                        DYCO 1985 OIL AND GAS PROGRAMS
                     (Two Minnesota limited partnerships)


                               TABLE OF CONTENTS
PART I.......................................................................3
      ITEM 1.     BUSINESS...................................................3
      ITEM 2.     PROPERTIES.................................................7
      ITEM 3.     LEGAL PROCEEDINGS.........................................14
      ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS.......15
PART II.....................................................................15
      ITEM 5.     MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP UNITS
                  AND RELATED LIMITED PARTNER MATTERS.......................15
      ITEM 6.     SELECTED FINANCIAL DATA...................................17
      ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS.......................19
      ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...............26
      ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE.......................49
PART III....................................................................49
      ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........49
      ITEM 11.    EXECUTIVE COMPENSATION....................................50
      ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT................................................55
      ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............56
PART IV.....................................................................57
      ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
                  ON FORM 8-K...............................................57
SIGNATURES..................................................................60



                                       2
<PAGE>



                                    PART I
ITEM 1.  BUSINESS

      General

      The Dyco Oil and Gas  Program  1985-1  Limited  Partnership  (the  "1985-1
Program") and Dyco Oil and Gas Program 1985-2 Limited  Partnership  (the "1985-2
Program")  (collectively,  the  "Programs") are Minnesota  limited  partnerships
engaged in the  production of oil and gas. The 1985-1 Program and 1985-2 Program
commenced  operations on April 1, 1985 and August 26, 1985,  respectively,  with
the  primary   financial   objective  of  investing   their  limited   partners'
subscriptions in the drilling of oil and gas prospects and then  distributing to
their  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  Programs.  See "Item 2.  Properties"  for a  description  of the
Programs' reserves and properties.

      The limited partnership  agreements for each of the Programs (the "Program
Agreements")  provide 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 each 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 32  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,  the "Samson Companies") 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 December 31, 1997, the
Samson  Companies  owned  interests  in  approximately  13,000 oil and gas wells
located  in 19  states  of the  United  States  and  the  countries  of  Canada,
Venezuela,  and Russia.  At December 31,  1997,  the Samson  Companies  operated
approximately 2,500 oil and gas wells located in 15 states of the United States,
as well as Canada, Venezuela, and Russia.

      As limited  partnerships,  the Programs  have no officers,  directors,  or
employees.  They rely  instead  on the  personnel  of Dyco and the other  Samson
Companies.  As of March 1, 1998, the Samson Companies employed approximately 820
persons.  No employees  are covered by  collective  bargaining  agreements,  and
management believes that the Samson Companies provide 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  Programs'  principal  place of  business  is located at
Samson Plaza, Two West Second Street, Tulsa, Oklahoma


                                       3
<PAGE>



74103, and their telephone number is (918) 583-1791 or (800) 283-1791.


      Funding

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


      Principal Products Produced and Services Rendered

      The Programs' sole business is the  development  and production of oil and
gas  with a  concentration  on  gas.  The  Programs  do not  hold  any  patents,
trademarks,  licenses,  or  concessions  and are not a party  to any  government
contracts.  The  Programs  have no backlog of orders and do not  participate  in
research and development activities. The Programs are 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 Programs 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
Programs.  Although virtually all of the Programs' 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  Programs'  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.


                                       4
<PAGE>



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.

      Regulation of the  Environment -- The Programs'  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 Programs'  operations or may affect
the  Programs'  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") and
Sanguine, Ltd. accounted for approximately 74.1% and 15.5%, respectively, of the
1985-1  Program's oil and gas revenues  during the year ended December 31, 1997.
Purchases  of gas by El Paso  accounted  for  approximately  52.7% of the 1985-2
Program's oil and gas revenues  during the year ended  December 31, 1997. In the
event of  interruption  of  purchases  by  these  significant  customers  or the
cessation or material change in availability  of open-access  transportation  by
the Programs' pipeline  transporters,  the Programs may encounter  difficulty in
marketing  their  gas and in  maintaining  historic  sales  levels.  Alternative
purchasers or transporters may not be readily available.

      The Programs'  principal  customers for crude oil  production are refiners
and other companies which have pipeline facilities near the producing properties
of the Programs.  Purchases of oil by Mobil Oil Corporation and Koch Oil Company
accounted  for  approximately  15.0%  and  14.1%,  respectively,  of the  1985-2
Program's oil and gas revenues  during the year ended  December 31, 1997. 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 Programs to produce and market oil
and gas profitably depends on a number of factors that are beyond the control of
the Programs.  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


                                       5
<PAGE>



(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.  The effect of these  factors on future oil and gas industry  trends
cannot be accurately predicted or anticipated.

      The most important variable affecting the Programs' revenues is the prices
received  for  the  sale  of oil  and  gas.  Predicting  future  prices  is very
difficult.  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,
significantly  below prices  received in the early 1980s.  Average gas prices in
the latter part of 1996 and parts of 1997,  however,  were somewhat  higher than
those yearly  averages.  Gas prices are  currently in the middle  portion of the
10-year average price range described above.

      Substantially  all of the  Programs'  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 Programs' gas decreased from approximately $3.57
per Mcf at December  31,  1996 to  approximately  $2.32 per Mcf at December  31,
1997.  Such prices  were on an MMBTU  basis and differ from the prices  actually
received  by the  Programs  due  to  transportation  and  marketing  costs,  BTU
adjustments, and regional price and quality differences.

      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 several  months,  as well as expectations of at least a short-term
slowdown in Asian energy  demand,  oil prices have  recently  been in the mid to
lower  portions of this  pricing  range,  and in early 1998 dropped to as low as
$12.00 per barrel. It is not known whether this trend will continue.  Prices for
the Programs' oil decreased from approximately $23.75 per barrel at December 31,
1996 to approximately $16.25 per barrel at December 31, 1997.

      Future prices for both oil and gas will likely be different  from (and may
be lower  than) the prices in effect on  December  31,  1997.  Primarily  due to
heating  season  demand,  year-end  prices in many past years have  tended to be
higher, and in some cases  significantly  higher,  than the yearly average price
actually received by the Programs for at least the following year. Management is
unable to predict  whether  future oil and gas prices will (i)  stabilize,  (ii)
increase, or (iii) decrease.





                                       6
<PAGE>



      Insurance Coverage

      The Programs are 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 Programs maintain  insurance coverage as is customary for
entities  of a  similar  size  engaged  in  operations  similar  to  that of the
Programs, but losses can occur from uninsurable risks or in 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  Programs'
financial position and results of operations.


ITEM 2.  PROPERTIES

      Well Statistics

      The  following  table sets forth the  numbers of gross and net  productive
wells of the Programs as of December 31, 1997.


                              Well Statistics(1)

                            As of December 31, 1998

                                               1985-1     1985-2
                                               Program    Program
                                               -------    -------

           Gross productive wells(2):
              Oil                                  -          3
              Gas                                 14          9
                                                  --         --
                Total                             14         12

           Net productive wells(3):
              Oil                                  -        .95
              Gas                               1.73       1.12
                                                ----       ----
                Total                           1.73       2.07

----------

(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


                                       7
<PAGE>



      wells.  For example, a 15% working interest in a well represents one Gross
      Well, but 0.15 Net Well.


      Drilling Activities

      The Programs  participated in no drilling  activities for the year ended
December 31, 1997


      Oil and Gas Production, Revenue, and Price History

      The following table sets forth certain historical  information  concerning
the oil  (including  condensates)  and  gas  production,  net of all  royalties,
overriding royalties, and other third party interests, of the Programs, revenues
attributable to such production, and certain price and cost information.




                                       8
<PAGE>

<TABLE>
<CAPTION>



                                    Net Production Data

                                                       Year Ended December 31,
                                               -----------------------------------------
                                                   1997             1996          1995
                                               -------------      --------      --------
<S>                                            <C>                <C>           <C>     
1985-1 Program:
--------------
   Production:
     Oil (Bbls)(1)                                   422 (2)           211         6,393
     Gas (Mcf)(3)                                200,882           191,163       224,539

   Oil and gas sales:
     Oil                                       ($ 24,012)(2)      $  4,842      $120,523
     Gas                                         458,588           403,984       293,643
                                                --------           -------       -------
        Total                                   $434,576          $408,826      $414,166
                                                ========           =======       =======

   Total direct operating expenses(4)           $ 93,649          $ 93,342      $169,295
                                                ========           =======       =======

   Direct operating expenses as a
     percentage of oil and gas sales               21.5%             22.8%         40.9%

   Average sales price:
     Per barrel of oil                            $19.69 (2)        $22.95        $18.85
     Per Mcf of gas                                 2.28              2.11          1.31

   Direct operating expenses per
     equivalent Mcf of gas(5)                     $  .46            $  .49        $  .64

</TABLE>



                                       9
<PAGE>

<TABLE>
<CAPTION>


                                                       Year Ended December 31,
                                               -----------------------------------------
                                                   1997             1996          1995
                                               -------------      --------      --------
<S>                                            <C>                <C>           <C>     
1985-2 Program:
--------------
   Production:
     Oil (Bbls)(1)                                 2,963 (6)         3,971         8,111
     Gas (Mcf)(3)                                 59,797            68,927        91,345

   Oil and gas sales:
     Oil                                        $ 44,854 (6)      $ 81,549      $140,303
     Gas                                         143,029           148,643       108,931
                                                 -------           -------       -------
        Total                                   $187,883          $230,192      $249,234
                                                 =======           =======       =======

   Total direct operating expenses(4)           $ 47,231          $ 77,992      $130,547
                                                 =======           =======       =======
   Direct operating expenses as a
     percentage of oil and gas sales               25.1%             33.9%         52.4%

   Average sales price:
     Per barrel of oil                            $18.87 (6)        $20.54        $17.30
     Per Mcf of gas                                 2.39              2.16          1.19

   Direct operating expenses per
     equivalent Mcf of gas(5)                     $  .61            $  .84        $  .93
</TABLE>



                                       10
<PAGE>




-------------
(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)   In  1997,  the  1985-1  Program  recognized  oil  sales  related  to  1997
      production  totaling  $8,308.  Such oil sales  were  offset by a refund of
      $32,320 made by the 1985-1  Program in 1997 to the  operators of two wells
      related to an  overpayment  for oil sales the 1985-1  Program  received in
      1995.  The oil volumes and average price per barrel listed above are based
      on actual production and sales in 1997.
(3)   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.
(4)   Includes lease operating expenses and production taxes.
(5)   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.
(6)   In  1997,  the  1985-2  Program  recognized  oil  sales  related  to  1997
      production  totaling  $55,908.  Such oil sales were  offset by a refund of
      $11,054 made by the 1985-2 Program in 1997


                                       11
<PAGE>



      to the  operator of one well  related to an overpayment for oil  sales the
      1985-2  Program  received in 1995.  The oil volumes and average  price per
      barrel listed above are based on actual production and sales in 1997.


      Proved Reserves and Net Present Value

      The following table sets forth the Programs'  estimated proved oil and gas
reserves and net present value  therefrom as of December 31, 1997.  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 Programs' proved reserves was calculated on the basis
of current costs and prices at December 31, 1997. 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  Programs'
proved  reserves  do not  necessarily  reflect  market  prices  for  oil and gas
production  subsequent to December 31, 1997. Year-end prices have generally been
higher than prices during the rest of the year.  There can be no assurance  that
the prices used in  calculating  the net present value of the  Programs'  proved
reserves at December 31, 1997 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.




                                       12
<PAGE>




                              Proved Reserves and
                              Net Present Values
                             From Proved Reserves

                            As of December 31, 1997

           1985-1 Program:
           --------------

              Estimated proved reserves:
                Gas (Mcf)                                 771,783
                Oil and liquids (Bbls)                      1,525

              Net present value
                (discounted at 10% per annum)            $761,192

           1985-2 Program:
           --------------

              Estimated proved reserves:
                Gas (Mcf)                                 307,346
                Oil and liquids (Bbls)                     10,595

              Net present value
                (discounted at 10% per annum)            $377,018


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


      Significant Properties

                                1985-1 Program
                                --------------

      As of December 31, 1997, the 1985-1 Program's  properties  consisted of 14
gross (1.73 net) productive  wells.  The 1985-1 Program also owned a non-working
interest in two additional  wells.  Affiliates of the 1985-1  Program  operate 6
(38%) of its total  wells.  As of  December  31,  1997,  the 1985-1  Program had
estimated  total proved reserves of 771,783 Mcf of gas and 1,525 barrels of oil,
with a present value  (discounted at 10% per annum) of estimated future net cash
flows of  $761,192.  All of the 1985-1  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.





                                       13
<PAGE>



                                1985-2 Program
                                --------------

      As of December 31, 1997, the 1985-2 Program's  properties  consisted of 12
gross (2.07 net) productive  wells.  The 1985-2 Program also owned a non-working
interest in two additional  wells.  Affiliates of the 1985-2  Program  operate 6
(43%) of its total  wells.  As of  December  31,  1997,  the 1985-2  Program had
estimated total proved reserves of 307,346 Mcf of gas and 10,595 barrels of oil,
with a present value  (discounted at 10% per annum) of estimated future net cash
flows of  $377,018.  Substantially  all of the  1985-2  Program's  reserves  are
located in the  Anadarko  Basin.  All of the  1985-2  Program's  properties  are
located onshore in the continental United States.

      As of December 31, 1997, the 1985-2  Program's  properties in the Anadarko
Basin  consisted of 12 gross (2.07 net) wells.  Affiliates of the 1985-2 Program
operate 5 (42%) of such wells.  As of December 31, 1997,  the 1985-2 Program had
estimated total proved reserves in the Anadarko Basin of  approximately  294,657
Mcf of gas and  approximately  10,595 barrels of crude oil, with a present value
(discounted at 10% per annum) of estimated future net cash flow of approximately
$376,075.


      Title to Oil and Gas Properties

      Management believes that the Programs have satisfactory title to their oil
and  gas  properties.  Record  title  to  substantially  all  of  the  Programs'
properties is held by Dyco as nominee.

      Title  to the  Programs'  properties  is  subject  to  customary  royalty,
overriding  royalty,   carried,   working,   and  other  similar  interests  and
contractual  arrangements  customary in the oil and 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 Programs'  interest  therein or materially  interfere  with their use in the
operation of the Programs' business.


ITEM 3.  LEGAL PROCEEDINGS

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






                                       14
<PAGE>




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

      There were no  matters  submitted  to a vote of the  limited  partners  of
either Program during 1997.


                                         PART II

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

      The Programs do not have an established  trading market for their units of
limited  partnership  interest  ("Units").  Pursuant to the terms of the Program
Agreements,  Dyco,  as  General  Partner,  is  obligated  to  annually  issue  a
repurchase  offer which is based on the  estimated  future net revenues from the
Programs'  reserves  and is  calculated  pursuant  to the  terms of the  Program
Agreements.  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  Programs'  cash  distributions  per Unit for the
same period.  For purposes of this Annual Report,  a Unit  represents an initial
subscription of $5,000 to a Program.

                                1985-1 PROGRAM
                                --------------

                                             Repurchase         Cash
                                                Price       Distributions
                                             ----------     -------------
           1996:
              First Quarter                     $ 96             $20
              Second Quarter                      96               -
              Third Quarter                      102              25
              Fourth Quarter                     102               -

           1997:
              First Quarter                     $ 67             $35
              Second Quarter                      42              25
              Third Quarter                      119               -
              Fourth Quarter                      94              25

           1998:
              First Quarter                     $ 69             $25






                                       15
<PAGE>



                                1985-2 PROGRAM
                                --------------

                                             Repurchase         Cash
                                                Price       Distributions
                                             ----------     -------------
           1996:
              First Quarter                     $30              $35(1)
              Second Quarter                     30                -
              Third Quarter                      92                -
              Fourth Quarter                     92                -

           1997:
              First Quarter                     $67              $25
              Second Quarter                     67                -
              Third Quarter                      56                -
              Fourth Quarter                     56                -

           1998:
              First Quarter                     $56              $ -

----------
(1) Includes proceeds from the sale of oil and gas properties in late 1995.


      The 1985-1 Program has 4,141 Units  outstanding  and  approximately  1,653
limited partners of record.  The 1985-2 Program has 4,374 Units  outstanding and
approximately 1,613 limited partners of record.



                                       16
<PAGE>



ITEM 6.  SELECTED FINANCIAL DATA

                             Selected Financial Data

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

                                               1985-1 Program
                                               --------------
                                                                      December 31,
                                                --------------------------------------------------------
                                                  1997        1996        1995        1994        1993
                                                --------    --------    --------    --------    --------
<S>                                             <C>         <C>         <C>         <C>         <C>     
Summary of Operations:
   Oil and gas sales                            $434,576    $408,826    $414,166    $444,580    $542,518
   Total revenues                                438,162     411,171     416,689     446,882     544,058

   Lease operating expenses                       58,594      63,559     130,367     117,846     121,325
   Production taxes                               35,055      29,783      38,928      39,704      46,257
   General and administrative
     expenses                                     57,406      55,169      55,314      51,307      54,658
   Depreciation, depletion, and
     amortization of oil and gas
     properties                                   34,859      27,369      57,994     119,316     131,014
   Impairment provision                             -           -         45,262        -           -

   Net income                                    252,248     235,291      88,824     118,709     190,804
     per Unit                                      60.91       56.82       21.45       28.67       46.08
   Cash distributions                            351,985     186,345     124,230     289,870     351,985
     per Unit                                         85          45          30          70          85

Summary Balance Sheet Data:
   Total assets                                  283,653     375,408     329,229     344,462     508,388
   Partners' capital                             240,053     339,790     290,844     326,250     497,411
</TABLE>




                                       17
<PAGE>


<TABLE>
<CAPTION>

                                               1985-2 Program
                                                --------------

                                                                       December 31,
                                              ----------------------------------------------------------
                                                1997         1996         1995        1994        1993
                                              --------     --------     --------    --------    --------
<S>                                           <C>          <C>          <C>         <C>         <C>     
Summary of Operations
   Oil and gas sales                          $187,883     $230,192     $249,234    $391,867    $327,655
   Total revenues                              189,554      232,494      250,411     393,943     329,312

   Lease operating expenses                     33,442       61,178      108,975     177,582     107,068
   Production taxes                             13,789       16,814       21,572      26,561      26,234
   General and administrative
     expenses                                   55,613       53,296       53,755      49,022      50,984
   Depreciation, depletion, and
     amortization of oil and gas
     properties                                 11,610        9,911       23,571     109,543      78,703

   Net income                                   75,100       91,295       42,538      31,235      66,323
     per Unit                                    17.17        20.87         9.73        7.14       15.16
   Cash distributions                          109,350      153,090         -        218,700     218,700
     per Unit                                       25           35         -             50          50

Summary Balance Sheet Data:
   Total assets                                201,447      244,561      306,398     254,024     442,714
   Partners' capital                           191,214      225,464      287,259     244,721     432,186
</TABLE>



                                       18
<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 Programs.

      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 very difficult. 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,  significantly  below prices received in the early
1980s.  Average gas prices in the latter part of 1996 and parts of 1997 however,
were somewhat higher than those yearly averages. Gas prices are currently in the
middle portion of the 10-year average price range described above.

      Substantially  all of the  Programs'  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


                                       19
<PAGE>



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
Programs' gas decreased from approximately $3.57 per Mcf at December 31, 1996 to
approximately  $2.32 per Mcf at December 31, 1997.  Such prices were on an MMBTU
basis and differ  from the  prices  actually  received  by the  Programs  due to
transportation  and marketing  costs,  BTU  adjustments,  and regional price and
quality differences.

      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 several  months as well as  expectations  of at least a short-term
slowdown in Asian energy  demand,  oil prices have  recently  been in the mid to
lower  portions of this  pricing  range,  and in early 1998 dropped to as low as
$12.00 per barrel. It is not known whether this trend will continue.  Prices for
the Programs' oil decreased from approximately $23.75 per barrel at December 31,
1996 to approximately $16.25 per barrel at December 31, 1997.

      Future prices for both oil and gas will likely be different  from (and may
be lower  than) the prices in effect on  December  31,  1997.  Primarily  due to
heating  season  demand,  year-end  prices in many past years have  tended to be
higher, and in some cases  significantly  higher,  than the yearly average price
actually received by the Program for at least the following year.  Management is
unable to predict  whether  future oil and gas prices will (i)  stabilize,  (ii)
increase, or (iii) decrease.


      Results of Operations

                                1985-1 Program
                                --------------

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

      Total oil and gas sales  increased  $25,750  (6.3%) in 1997 as compared to
1996. Of this increase, approximately $5,000 and $21,000, respectively,  related
to increases in volumes of oil and gas sold and approximately $34,000 related to
an increase in the average price of gas sold,  which  increases  were  partially
offset by a refund of prior oil sales of approximately  $32,000.  Volumes of oil
and gas sold  increased  211  barrels  and 9,719 Mcf,  respectively,  in 1997 as
compared to 1996. Average oil prices decreased to $19.69 per barrel in 1997 from
$22.95 per barrel in 1996. Average gas prices increased to $2.28 per Mcf in 1997
from $2.11 per Mcf in 1996.

      Oil and gas production  expenses  (including lease operating  expenses and
production taxes) remained  relatively constant in 1997 as compared to 1996. Any
increase in production taxes


                                       20
<PAGE>



related  to the  increase  in oil and gas  sales was  substantially  offset by a
decrease in lease operating expenses which resulted primarily from a workover on
one well in 1996. As a percentage of oil and gas sales, these expenses decreased
to 21.5% in 1997 from 22.8% in 1996. This percentage  decrease was primarily due
to the increase in the average price of gas sold in 1997.

      Depreciation,  depletion,  and  amortization  of oil  and  gas  properties
increased  $7,490  (27.4%)  in 1997 as  compared  to  1996.  This  increase  was
primarily a result of decreases in the oil and gas prices used in the  valuation
of reserves  at December  31,  1997 as  compared  to  December  31,  1996.  As a
percentage  of oil and gas sales,  this  expense  increased to 8.0% in 1997 from
6.7% in 1996. This percentage  increase was primarily due to the dollar increase
in depreciation, depletion, and amortization discussed above.

      General and  administrative  expenses  increased  $2,237 (4.1%) in 1997 as
compared to 1996.  As a percentage of oil and gas sales,  this expense  remained
relatively constant at 13.2% in 1997 as compared to 13.5% in 1996.


                     Year Ended December 31, 1996 Compared
                        to Year Ended December 31, 1995
                     -------------------------------------

      Total oil and gas sales  decreased  $5,340  (1.3%) for 1996 as compared to
1995. Of this decrease,  approximately $142,000 and $70,000, respectively,  were
related  to  decreases  in  volumes  of oil and gas  sold,  which  amounts  were
partially   offset  by  increases  of   approximately   $26,000  and   $180,000,
respectively,  related to increases  in the average  prices of oil and gas sold.
Volumes  of  oil  and  gas  sold   decreased   6,182  barrels  and  33,376  Mcf,
respectively,  for 1996 as compared to 1995. The decrease in volumes of oil sold
resulted  primarily  from the sale of two wells  during  1995.  The  decrease in
volumes of gas sold was primarily due to (i) normal  declines in production  due
to  diminished  gas reserves on several  wells and (ii) a positive  prior period
volume  adjustment made by the purchaser on two wells during 1995, which amounts
were partially  offset by a negative prior period volume  adjustment made by the
purchaser  on one well  during  1995.  Average oil and gas prices  increased  to
$22.95  per  barrel and $2.11 per Mcf,  respectively,  for 1996 from  $18.85 per
barrel and $1.31 per Mcf, respectively, for 1995.

      Oil and gas production  expenses  (including lease operating  expenses and
production  taxes) decreased  $75,953 (44.9%) for 1996 as compared to 1995. This
decrease was  primarily  due to (i) the sale of two wells during 1995,  (ii) the
abandonment of one well during 1995,  and (iii) surface  repair and  compression
expenses  incurred on another well during 1995.  As a percentage  of oil and gas
sales, these expenses decreased to 22.8% for 1996 from 40.9% for 1995.
This percentage decrease was primarily due to the


                                       21
<PAGE>



dollar decrease in oil and gas production expenses discussed above.

      Depreciation,  depletion,  and  amortization  of oil  and  gas  properties
decreased  $30,625  (52.8%)  for 1996 as  compared to 1995.  This  decrease  was
primarily due to (i) an impairment provision for oil and gas properties recorded
during the last half of 1995 which decreased the amortizable  capitalized  costs
of the oil and gas  properties,  (ii) an upward revision of previous gas reserve
estimates at December 31,  1996,  and (iii)  decreases in the volumes of oil and
gas sold. As a percentage of oil and gas sales,  this expense  decreased to 6.7%
for 1996 from 14.0% for 1995. This percentage  decrease was primarily due to the
dollar  decrease in  depreciation,  depletion,  and  amortization of oil and gas
properties  discussed  above and the increases in the average  prices of oil and
gas sold during 1996.

      As a result of the  declines  in gas prices  during the first part of 1995
the 1985-1  Program  recognized a non-cash  charge  against  earnings of $45,262
during 1995. This impairment  provision for oil and gas properties was necessary
due to the  unamortized  costs of oil and gas  properties  exceeding the present
value of estimated  future net  revenues  from such oil and gas  properties.  No
similar charge was necessary during 1996.

      General and administrative  expenses remained relatively constant for 1996
as  compared  to 1995.  As a  percentage  of oil and gas sales,  these  expenses
remained relatively constant at 13.5% for 1996 and 13.4% for 1995.


                                1985-2 Program
                                --------------

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

      Total oil and gas sales  decreased  $42,309 (18.4%) in 1997 as compared to
1996. Of this decrease, approximately $21,000 and $20,000, respectively, related
to decreases in volumes of oil and gas sold,  approximately  $5,000 related to a
decrease in the average price of oil sold, and approximately  $11,000 related to
a refund  of prior  oil  sales,  which  decreases  were  partially  offset by an
increase of approximately $14,000 related to an increase in the average price of
gas sold.  Volumes of oil and gas sold  decreased  1,008  barrels and 9,130 Mcf,
respectively,  in 1997 as compared to 1996.  The decreases in volumes of oil and
gas sold resulted  primarily from (i) normal  declines in  production,  (ii) the
shutting in of one well by the operator  during a portion of 1997, and (iii) the
sale of another well in 1996.  Average oil prices decreased to $18.87 per barrel
in 1997 from $20.54 per barrel in 1996.  Average gas prices  increased  to $2.39
per Mcf in 1997 from $2.16 per Mcf in 1996.



                                       22
<PAGE>




      Oil and gas production  expenses  (including lease operating  expenses and
production  taxes)  decreased  $30,761 (39.4%) in 1997 as compared to 1996. This
decrease  resulted  primarily  from (i) the  decrease  in volumes of oil and gas
sold,  (ii) a credit  received from the operator of one well during 1997,  (iii)
the  shutting-in of one well by the operator  during a portion of 1997, and (iv)
the  sale of one well in  1996.  As a  percentage  of oil and gas  sales,  these
expenses decreased to 25.1% in 1997 from 33.9% in 1996. This percentage decrease
was  primarily  due to the dollar  decrease in oil and gas  production  expenses
discussed  above and the  increase in the  average  price of gas sold in 1997 as
compared to 1996.

      Depreciation,  depletion,  and  amortization  of oil  and  gas  properties
increased  $1,699  (17.1%)  in 1997 as  compared  to  1996.  This  increase  was
primarily a result of decreases in the oil and gas prices used in the  valuation
of reserves  at December  31,  1997 as  compared  to  December  31,  1996.  As a
percentage of oil and gas sales,  these expenses  increased to 6.2% in 1997 from
4.3% in 1996. This percentage  increase was primarily due to the dollar increase
in depreciation, depletion, and amortization discussed above.

      General and  administrative  expenses  increased  $2,317 (4.3%) in 1997 as
compared to 1996. As a percentage of oil and gas sales, these expenses increased
to 29.6% in 1997 from 23.2% in 1996. This percentage  increase was primarily due
to the decrease in oil and gas sales discussed above.


                     Year Ended December 31, 1996 Compared
                        to Year Ended December 31, 1995
                     -------------------------------------

      Total oil and gas sales  decreased  $19,042 (7.6%) for 1996 as compared to
1995. Of this decrease,  approximately $85,000 and $48,000,  respectively,  were
related  to  decreases  in  volumes  of oil and gas  sold,  which  amounts  were
partially   offset  by   increases   of   approximately   $26,000  and  $89,000,
respectively,  related to increases  in the average  prices of oil and gas sold.
Volumes  of  oil  and  gas  sold   decreased   4,140  barrels  and  22,418  Mcf,
respectively,  for 1996 as compared to 1995. The decrease in volumes of oil sold
resulted  primarily from (i) the sale of several remaining wells during 1995 and
(ii) normal  declines in  production  from  diminished  oil  reserves on several
wells.  The  decrease in volumes of gas sold was  primarily  due to (i) a normal
decline  in  production  on one well due to  diminished  gas  reserves  and (ii)
downward prior period volume  adjustments  made by the purchaser on another well
during 1996. Average oil and gas prices increased to $20.54 per barrel and $2.16
per Mcf,  respectively,  for 1996  from  $17.30  per  barrel  and $1.19 per Mcf,
respectively, for 1995.




                                       23
<PAGE>



      Oil and gas production  expenses  (including lease operating  expenses and
production  taxes) decreased  $52,555 (40.3%) for 1996 as compared to 1995. This
decrease was primarily due to (i) the sale of several wells during 1995 and (ii)
a decrease in volumes of oil and gas sold during 1996 as compared to 1995.  As a
percentage of oil and gas sales, these expenses decreased to 33.9% for 1996 from
52.4% for  1995.  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
decreased  $13,660  (58.0%)  for 1996 as  compared to 1995.  This  decrease  was
primarily due to (i) the sale of several  wells during 1995 which  decreased the
amortizable  capitalized  costs of the oil and gas properties and (ii) decreases
in  volumes of oil and gas sold.  As a  percentage  of oil and gas  sales,  this
expense  decreased  to 4.3% for 1996 from 9.5% for the year ended  December  31.
1995. This percentage decrease was primarily due to the increases in the average
prices of oil and gas sold during 1996.

      General and administrative  expenses remained relatively constant for 1996
as  compared  to 1995.  As a  percentage  of oil and gas sales,  these  expenses
increased to 23.2% for 1996 from 21.6% for 1995.  This  percentage  increase was
primarily due to the decrease in oil and gas sales during 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 production levels for 1997, the 1985-1 and
1985-2  Programs'  proved  reserve  quantities  at December  31, 1997 would have
remaining  lives  of  approximately  3.8 and 5.1  years,  respectively,  for gas
reserves and 3.6 and 3.6 years, respectively,  for oil reserves.  However, since
the Programs'  reserve estimates are based on oil and gas prices at December 31,
1997,  it is  possible  that a  significant  decrease in oil and gas prices from
December  31, 1997 levels will  reduce  such  reserves  and their  corresponding
life-span.

      The Programs'  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.  Occasional expenditures by
the Programs for well completions or workovers, however, may reduce or eliminate
cash available for a particular  quarterly cash distribution.  The Programs have
no debt commitments. Cash for


                                       24
<PAGE>



operational purposes will be provided by current oil and gas production.

      There can be no  assurance as to the amount of the  Programs'  future cash
distributions.   The  Programs'  ability  to  make  cash  distributions  depends
primarily  upon the level of  available  cash flow  generated  by the  Programs'
operating  activities,  which will be affected (either positively or negatively)
by many factors  beyond the control of the Programs,  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 Programs are 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 1997.
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

      Dyco has reviewed its  computer  systems and hardware to locate  potential
operational  problems  associated  with the year 2000. Such review will continue
until all potential  problems are located and  resolved.  Dyco believes that all
year-2000  problems  in its  computer  system have been or will be resolved in a
timely  manner and have not caused and will not cause either (i)  disruption  of
the Programs'  operations or (ii) a material  effect on the Programs'  financial
condition or results of operations.  However,  it is possible that the Programs'
cash flows could be disrupted by year-2000 problems  experienced by operators of
the Programs' wells, buyers of the Programs' oil and gas, financial institutions
or other persons. Dyco is unable to quantify the effect, if any, on the Programs
of year-2000 computer problems which may be experienced by these third parties.





                                       25
<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



                       REPORT OF INDEPENDENT ACCOUNTANTS



TO THE PARTNERS

DYCO OIL AND GAS PROGRAM 1985-1 LIMITED PARTNERSHIP


      We have audited the  financial  statements of the Dyco Oil and Gas Program
1985-1 Limited  Partnership (a Minnesota limited  partnership) as listed in Item
14(a) of this Annual Report.  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 in accordance  with  generally  accepted  auditing
standards.  Those standards 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.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Dyco Oil and Gas Program
1985-1 Limited Partnership at December 31, 1997 and 1996, and the results of its
operations  and cash  flows  for each of the  three  years in the  period  ended
December 31, 1997, in conformity with generally accepted accounting principles.




                                          /s/ Coopers & Lybrand, L.L.C.


                                          COOPERS & LYBRAND L.L.P.


Tulsa, Oklahoma
March 20, 1998



                                       26
<PAGE>



                           DYCO OIL AND GAS PROGRAM
                          1985-1 LIMITED PARTNERSHIP
                                Balance Sheets
                          December 31, 1997 and 1996

                                    ASSETS
                                    ------
                                                           1997        1996
                                                         --------    --------
CURRENT ASSETS:
   Cash and cash equivalents                             $ 43,585    $ 86,724
   Accrued oil and gas sales                               83,721      95,458
                                                          -------     -------

     Total current assets                                $127,306    $182,182

NET OIL AND GAS PROPERTIES, utilizing the
   full cost method                                       141,913     177,707

DEFERRED CHARGE                                            14,434      15,519
                                                          -------     -------

                                                         $283,653    $375,408
                                                          =======     =======

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

CURRENT LIABILITIES:
   Accounts payable                                      $  6,485    $  5,916
   Gas imbalance payable                                   13,160        -
                                                          -------     -------
     Total current liabilities                           $ 19,645    $  5,916

ACCRUED LIABILITY                                          23,955      29,702

PARTNERS' CAPITAL:
   General Partner, issued and
     outstanding, 41 Units                                  2,400       3,398
   Limited Partners, issued and
     outstanding 4,100 Units                              237,653     336,392
                                                          -------     -------

     Total Partners' capital                             $240,053    $339,790
                                                          -------     -------

                                                         $283,653    $375,408
                                                          =======     =======




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



                                       27
<PAGE>



                           DYCO OIL AND GAS PROGRAM
                          1985-1 LIMITED PARTNERSHIP
                           Statements of Operations
             For the Years Ended December 31, 1997, 1996, and 1995


                                               1997        1996        1995
                                             --------    --------    --------

REVENUES:
   Oil and gas sales, including
     $217,001 of sales to related
     parties in 1995 (Note 2)                $434,576    $408,826    $414,166
   Interest                                     3,586       2,345       2,523
                                              -------     -------     -------

                                             $438,162    $411,171    $416,689

COSTS AND EXPENSES:
   Lease operating                           $ 58,594    $ 63,559    $130,367
   Production taxes                            35,055      29,783      38,928
   Depreciation, depletion, and
     amortization of oil and gas
     properties                                34,859      27,369      57,994
   Impairment provision                          -           -         45,262
   General and administrative                  57,406      55,169      55,314
                                              -------     -------     -------

                                             $185,914    $175,880    $327,865
                                              -------     -------     -------

NET INCOME                                   $252,248    $235,291    $ 88,824
                                              =======     =======     =======

GENERAL PARTNER (1%) - NET INCOME            $  2,522    $  2,353    $    888
                                              =======     =======     =======

LIMITED PARTNERS (99%) - NET INCOME          $249,726    $232,938    $ 87,936
                                              =======     =======     =======

NET INCOME per Unit                          $  60.91    $  56.82    $  21.45
                                              =======     =======     =======

UNITS OUTSTANDING                               4,141       4,141       4,141
                                              =======     =======     =======







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



                                       28
<PAGE>



                           DYCO OIL AND GAS PROGRAM
                          1985-1 LIMITED PARTNERSHIP
                        Statements of Partners' Capital
             For the Years Ended December 31, 1997, 1996, and 1995


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


Balances at December 31, 1994            $3,262      $322,988      $326,250
   Cash distributions                   ( 1,242)    ( 122,988)    ( 124,230)
   Net income                               888        87,936        88,824
                                          -----       -------       -------

Balances at December 31, 1995            $2,908      $287,936      $290,844
   Cash distributions                   ( 1,863)    ( 184,482)    ( 186,345)
   Net income                             2,353       232,938       235,291
                                          -----       -------       -------

Balances at December 31, 1996            $3,398      $336,392      $339,790
   Cash distributions                   ( 3,520)    ( 348,465)    ( 351,985)
   Net income                             2,522       249,726       252,248
                                          -----       -------       -------

Balances at December 31, 1997            $2,400      $237,653      $240,053
                                          =====       =======       =======








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



                                       29
<PAGE>



                                DYCO OIL AND GAS PROGRAM
                                1985-1 LIMITED PARTNERSHIP
                                 Statements of Cash Flows
                   For the Years Ended December 31, 1997, 1996, and 1995

                                              1997          1996         1995
                                           ----------    ----------   ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                               $252,248      $235,291     $ 88,824
   Adjustments to reconcile net
     income to net cash provided by
     operating activities:
     Depreciation, depletion, and
        amortization of oil and gas
        properties                            34,859        27,369       57,994
     Impairment provision                       -             -          45,262
     (Increase) decrease in accrued
        oil and gas sales                     11,737     (  33,236)   (  37,043)
     (Increase) decrease in deferred
        charge                                 1,085     (  10,778)   (   4,741)
     Increase (decrease) in accounts
        payable                                  569     (   4,037)       1,798
     Increase in gas imbalance payable        13,160          -            -
     Increase (decrease) in accrued
        liability                          (   5,747)        1,270       18,375
                                             -------       -------      -------
   Net cash provided by operating
     activities                             $307,911      $215,879     $170,469
                                             -------       -------      -------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from the sale of oil
     and gas properties                     $    935      $    907     $   -
   Additions to oil and gas properties          -        (   2,213)   (  27,440)
                                             -------       -------      -------

   Net cash provided (used) by
     investing activities                   $    935     ($  1,306)   ($ 27,440)
                                             -------       -------      -------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash Distributions                      ($351,985)    ($186,345)   ($124,230)
                                             -------       -------      -------
   Net cash used by financing activities   ($351,985)    ($186,345)   ($124,230)
                                             -------       -------      -------

NET INCREASE (DECREASE) IN CASH
     AND CASH EQUIVALENTS                  ($ 43,139)     $ 28,228     $ 18,799

CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                        86,724        58,496       39,697
                                             -------       -------      -------
CASH AND CASH EQUIVALENTS AT
   END OF PERIOD                            $ 43,585      $ 86,724     $ 58,496
                                             =======       =======      =======


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



                                       30
<PAGE>



               DYCO OIL AND GAS PROGRAM 1985-1 LIMITED PARTNERSHIP
                            Notes to Financial Statements
                For the Years Ended December 31, 1997, 1996, and 1995


1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Organization and Nature of Operations

            The  Dyco  Oil and  Gas  Program  1985-1  Limited  Partnership  (the
      "Program"), a Minnesota limited partnership, commenced operations on April
      1, 1985. Dyco Petroleum Corporation ("Dyco") is the General Partner of the
      Program.  Affiliates of Dyco owned 1,317 (31.8%) of the Program's Units at
      December 31, 1997.

            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.


      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.  Subsequent
      to  year-end,  all oil and gas sales  accrued as of December 31, 1997 have
      been collected.


      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.  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


                                       31
<PAGE>



      the years ended December 31, 1997, 1996, and 1995 were $0.17,  $0.14,  and
      $0.22, 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.  In
      addition, SEC rules provide that if prices decline subsequent to year end,
      any excess that results from these declines may also be charged to expense
      during the current year.  During 1995,  the Program  charged to expense an
      impairment   provision  of  $45,262  which   represented   the  amount  of
      unamortized  oil and gas properties  which exceeded the full cost ceiling.
      No such provision was incurred in 1996 or 1997.  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, 1997 and 1996  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, 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 42,204 Mcf,  resulting in prepaid
      lease  operating  expenses of $14,434.  At December 31,  1996,  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
      40,861 Mcf, resulting in prepaid lease operating expenses of $15,519.


      Accrued Liability

            The  Accrued  Liability  at December  31,  1997 and 1996  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, 1997,  cumulative  total gas sales  volumes
      for overproduced  wells exceeded the Program's pro-rata share of total gas
      production  from these wells by 70,045  Mcf,  resulting  in accrued  lease
      operating expenses of $23,955. At December 31, 1996,  cumulative total gas
      sales volumes for overproduced wells exceeded the Program's pro-rata


                                       32
<PAGE>



      share of total gas production from these wells by 78,205 Mcf, resulting in
      accrued lease operating expenses of $29,702.


      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, 1997,  total sales exceeded the
      Program's  share of  estimated  total gas  reserves on one well by $13,160
      (8,773 Mcf). This amount was recorded as gas imbalance payable at December
      31, 1997 in  accordance  with the sales  method.  At December 31, 1996, no
      such liability was recorded.


      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.




                                       33
<PAGE>





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 years ended December 31, 1997, 1996, and
      1995, such expenses totaled $57,406,  $55,169, and $55,314,  respectively,
      of which $42,840 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.  Such
      charges are  comparable to third party charges in the area where the wells
      are located and are the same as charged to other working  interest  owners
      in the wells.

            During 1995 the Program sold gas at market  prices to El Paso Energy
      Marketing  Company,  formerly known as Premier Gas Company ("El Paso"). El
      Paso,  like other  similar gas  marketing  firms,  then resold such gas to
      third  parties at market  prices.  El Paso was an affiliate of the Program
      until December 6, 1995. During 1995, these sales totaled $217,001.


3.    MAJOR CUSTOMERS

            The following purchasers  individually  accounted for 10% or more of
      the  combined  oil and gas  revenues  of the  Program  for the years ended
      December 31, 1997, 1996, and 1995:

        Purchaser                            1997    1996     1995
        ---------                            -----   -----    -----

        El Paso                              74.1%   74.9%    52.4%
        Flying J Oil and Gas, Inc.             -       -      24.1%
        Sanguine, Ltd.                       15.5%   17.9%      -


            In the  event of  interruption  of  purchases  by these  significant
      customers  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.





                                       34
<PAGE>



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, 1997 and
      1996 were as follows:

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

      Proved properties                       $20,980,422       $20,981,357

      Unproved properties, not
         subject to depreciation,
         depletion, and amortization                 -                 -
                                               ----------        ----------

                                              $20,980,422       $20,981,357

      Less accumulated depreciation,
         depletion, amortization, and
         valuation allowance                 ( 20,838,509)     ( 20,803,650)
                                               ----------        ----------

      Net oil and gas properties              $   141,913       $   177,707
                                               ==========        ==========


      Costs Incurred

            The  Program  incurred  no  oil  and  gas  property  acquisition  or
      exploration  costs  during 1997,  1996,  and 1995.  Costs  incurred by the
      Program in connection with its oil and gas property development activities
      during 1997, 1996, and 1995 were as follows:

                                                December 31,
                                          -------------------------
                                           1997       1996       1995
                                          ------     ------     -------

      Development costs                   $  -       $2,213     $27,440
                                           =====      =====      ======





                                       35
<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 crude oil and gas  reserves  for the years ended  December 31,
1997,  1996, and 1995.  Proved  reserves were  estimated by petroleum  engineers
employed by affiliates of Dyco. All of the Program's reserves are located in the
United  States  and there  are no proved  undeveloped  reserves.  The  following
information  includes  certain  gas  balancing  adjustments  which cause the gas
volumes to differ from the reserve information prepared by Dyco.
<TABLE>
<CAPTION>

                                                   1997                      1996                       1995
                                            -------------------      -------------------        -------------------
                                              Oil         Gas           Oil         Gas            Oil         Gas
                                            (Bbls)       (Mcf)        (Bbls)       (Mcf)         (Bbls)       (Mcf)
                                            -------    ---------     -------------------        --------    ---------

<S>                                         <C>        <C>           <C>         <C>            <C>         <C>    
Proved reserves,
   beginning of year                         1,975      732,477       35,788      597,729        32,723      554,156

Revisions of previous
   estimates                                (   28)     240,188      (   444)     242,711         9,458      268,112

Sales of reserves(1)(2)                       -            -         (33,982)    ( 18,334)         -            -

Purchases of reserves(1)                      -            -             824      101,534          -            -

Production                                  (  422)    (200,882)     (   211)    (191,163)      ( 6,393)    (224,539)
                                             -----      -------       ------      -------        ------      -------

Proved reserves,
   end of year                               1,525      771,783        1,975      732,477        35,788      597,729
                                             =====      =======       ======      =======        ======      =======

Proved developed reserves:
   Beginning of year                         1,975      732,477       35,788      597,729        32,723      554,156
                                             -----      -------       ------      -------        ------      -------
   End of year                               1,525      771,783        1,975      732,477        35,788      597,729
                                             =====      =======       ======      =======        ======      =======

</TABLE>

-----------------
(1)   These purchases and sales were non-cash exchanges of oil and gas reserves.
(2)   A  significant  portion of these  reserves were behind pipe and would have
      required   significant  capital  expenditures  in  order  to  produce  the
      reserves.



                                       36
<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,  1997 using oil and gas prices of $16.25 per barrel and $2.32 per Mcf,
      respectively.



                                       37
<PAGE>



                       REPORT OF INDEPENDENT ACCOUNTANTS



TO THE PARTNERS

DYCO OIL AND GAS PROGRAM 1985-2 LIMITED PARTNERSHIP


      We have audited the  financial  statements of the Dyco Oil and Gas Program
1985-2 Limited  Partnership (a Minnesota limited  partnership) as listed in Item
14(a) of this Annual Report.  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 in accordance  with  generally  accepted  auditing
standards.  Those standards 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.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Dyco Oil and Gas Program
1985-2 Limited Partnership at December 31, 1997 and 1996, and the results of its
operations  and cash  flows  for each of the  three  years in the  period  ended
December 31, 1997, in conformity with generally accepted accounting principles.




                                          /s/ Coopers & Lybrand, L.L.C.


                                          COOPERS & LYBRAND L.L.P.


Tulsa, Oklahoma
March 20, 1998



                                       38
<PAGE>



                           DYCO OIL AND GAS PROGRAM
                          1985-2 LIMITED PARTNERSHIP
                                Balance Sheets
                          December 31, 1997 and 1996

                                    ASSETS
                                    ------
                                                           1997        1996
                                                         --------    --------
CURRENT ASSETS:
   Cash and cash equivalents                             $ 68,271    $ 86,273
   Accrued oil and gas sales                               31,074      46,545
                                                          -------     -------
     Total current assets                                $ 99,345    $132,818

NET OIL AND GAS PROPERTIES, utilizing the
   full cost method                                        53,942      72,216

DEFERRED CHARGE                                            48,160      39,527
                                                          -------     -------

                                                         $201,447    $244,561
                                                          =======     =======

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

CURRENT LIABILITIES:
   Accounts payable                                      $  2,718    $  6,198
                                                          -------     -------

     Total current liabilities                           $  2,718    $  6,198

ACCRUED LIABILITY                                           7,515      12,899

PARTNERS' CAPITAL:
   General Partner, issued and
     outstanding, 44 Units                                  1,912       2,254
   Limited Partners, issued and
     outstanding, 4,330 Units                             189,302     223,210
                                                          -------     -------

     Total Partners' capital                             $191,214    $225,464
                                                          -------     -------

                                                         $201,447    $244,561
                                                          =======     =======





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



                                       39
<PAGE>



                           DYCO OIL AND GAS PROGRAM
                          1985-2 LIMITED PARTNERSHIP
                           Statements of Operations
             For the Years Ended December 31, 1997, 1996, and 1995


                                             1997        1996         1995
                                          ---------    ---------    --------

REVENUES:
   Oil and gas sales, including
     $71,328 of sales to related
     parties in 1995 (Note 2)              $187,883     $230,192    $249,234
   Interest                                   1,671        2,302       1,177
                                            -------      -------     -------

                                           $189,554     $232,494    $250,411

COSTS AND EXPENSES:
   Lease operating                         $ 33,442     $ 61,178    $108,975
   Production taxes                          13,789       16,814      21,572
   Depreciation, depletion, and
     amortization of oil and gas
     properties                              11,610        9,911      23,571
   General and administrative                55,613       53,296      53,755
                                            -------      -------     -------

                                           $114,454     $141,199    $207,873
                                            -------      -------     -------

NET INCOME                                 $ 75,100     $ 91,295    $ 42,538
                                            =======      =======     =======

GENERAL PARTNER (1%) - NET
   INCOME                                  $    751     $    913    $    425
                                            =======      =======     =======

LIMITED PARTNERS (99%) - NET
   INCOME                                  $ 74,349     $ 90,382    $ 42,113
                                            =======      =======     =======

NET INCOME per Unit                        $  17.17     $  20.87    $   9.73
                                            =======      =======     =======

UNITS OUTSTANDING                             4,374        4,374       4,374
                                            =======      =======     =======






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



                                       40
<PAGE>



                           DYCO OIL AND GAS PROGRAM
                          1985-2 LIMITED PARTNERSHIP
                        Statements of Partners' Capital
             For the Years Ended December 31, 1997, 1996, and 1995


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


Balances at December 31, 1994            $2,447      $242,274      $244,721
   Net income                               425        42,113        42,538
                                          -----       -------       -------

Balances at December 31, 1995            $2,872      $284,387      $287,259
   Cash distributions                   ( 1,531)    ( 151,559)    ( 153,090)
   Net income                               913        90,382        91,295
                                          -----       -------       -------

Balances at December 31, 1996            $2,254      $223,210      $225,464
   Cash distributions                   ( 1,093)    ( 108,257)    ( 109,350)
   Net income                               751        74,349        75,100
                                          -----       -------       -------

Balances at December 31, 1997            $1,912      $189,302      $191,214
                                          =====       =======       =======








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



                                       41
<PAGE>

<TABLE>
<CAPTION>


                                 DYCO OIL AND GAS PROGRAM
                                1985-2 LIMITED PARTNERSHIP
                                 Statements of Cash Flows
                   For the Years Ended December 31, 1997, 1996, and 1995

                                                      1997          1996         1995
                                                   ----------    ----------   ----------
<S>                                                <C>           <C>          <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                       $ 75,100      $ 91,295     $ 42,538
   Adjustments to reconcile net
     income to net cash provided
     by operating activities:
     Depreciation, depletion, and
        amortization of oil and gas
        properties                                    11,610         9,911       23,571
     (Increase) decrease in accrued
        oil and gas sales                             15,471     (   5,056)   (     980)
     Increase in deferred charge                   (   8,633)    (  11,190)   (   7,301)
     Decrease in accounts payable                  (   3,480)    (   2,827)   (     278)
     Increase (decrease) in
        accrued liability                          (   5,384)        2,785       10,114
                                                     -------       -------      -------
   Net cash provided by operating
     activities                                     $ 84,684      $ 84,918     $ 67,664
                                                     -------       -------      -------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from the sale of oil
     and gas properties                             $  6,664      $  7,329     $105,954
   Additions to oil and gas
     properties                                         -        (   7,396)   (  24,839)
                                                     -------       -------      -------

   Net cash provided (used) by
     investing activities                           $  6,664     ($     67)    $ 81,115
                                                     -------       -------      -------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash distributions                              ($109,350)    ($153,090)    $   -
                                                     -------       -------      -------

   Net cash used by financing
     activities                                    ($109,350)    ($153,090)    $   -
                                                     -------       -------      -------
NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                            ($ 18,002)    ($ 68,239)    $148,779

CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                                86,273       154,512        5,733
                                                     -------       -------      -------
CASH AND CASH EQUIVALENTS AT
   END OF PERIOD                                    $ 68,271      $ 86,273     $154,512
                                                     =======       =======      =======
</TABLE>


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



                                       42
<PAGE>



              DYCO OIL AND GAS PROGRAM 1985-2 LIMITED PARTNERSHIP
                         Notes to Financial Statements
             For the Years Ended December 31, 1997, 1996, and 1995



1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Organization and Nature of Operations

            The  Dyco  Oil and  Gas  Program  1985-2  Limited  Partnership  (the
      "Program"),  a Minnesota  limited  partnership,  commenced  operations  on
      August 26,  1985.  Dyco  Petroleum  Corporation  ("Dyco")  is the  General
      Partner of the  Program.  Affiliates  of Dyco owned  1,465  (33.5%) of the
      Program's Units at December 31, 1997.

            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.


      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.  Subsequent
      to  year-end,  all oil and gas sales  accrued as of December 31, 1997 have
      been collected.


      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.  Capitalized  costs are depleted on the gross revenue  method
      using estimates of proved reserves. The full cost amortization


                                       43
<PAGE>



      rates  per  equivalent  Mcf  of  gas   produced  during  the  years  ended
      December  31,  1997,  1996,  and  1995  were  $0.15,   $0.11,  and  $0.17,
      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.  In
      addition,  the SEC rules provide that if prices decline subsequent to year
      end, any excess that  results  from these  declines may also be charged to
      expense during the current year.  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, 1997 and 1996  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, 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 80,603 Mcf,  resulting in prepaid
      lease  operating  expenses of $48,160.  At December 31,  1996,  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
      60,999 Mcf, resulting in prepaid lease operating expenses of $39,527.


      Accrued Liability

            The  Accrued  Liability  at December  31,  1997 and 1996  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, 1997,  cumulative  total gas sales  volumes
      for overproduced  wells exceeded the Program's pro-rata share of total gas
      production  from these wells by 12,577  Mcf,  resulting  in accrued  lease
      operating  expenses of $7,515. At December 31, 1996,  cumulative total gas
      sales volumes for overproduced wells exceeded the Program's pro-rata share
      of total gas production from these wells by 19,906


                                       44
<PAGE>



      Mcf, resulting in accrued lease operating expenses of $12,899.


      Oil and Gas Sales

            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 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.  At December  31, 1997
      and 1996, no such liability was recorded.


      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 and the accrued liability 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.


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


                                       45
<PAGE>



      years  ended  December 31,  1997,  1996, and  1995, such  expenses totaled
      $55,613,  $53,296,  and $53,755,  respectively,  of which $40,272 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.  Such
      charges are  comparable to third party charges in the area where the wells
      are located and are the same as charged to other working  interest  owners
      in the wells.

            During 1995 the Program sold gas at market  prices to El Paso Energy
      Marketing  Company,  formerly known as Premier Gas Company ("El Paso"). El
      Paso,  like other  similar gas  marketing  firms,  then resold such gas to
      third  parties at market  prices.  El Paso was an affiliate of the Program
      until December 6, 1995. During 1995 these sales totaled $71,328.


3.    MAJOR CUSTOMERS

            The following purchasers  individually  accounted for 10% or more of
      the  combined  oil and gas  revenues  of the  Program  for the years ended
      December 31, 1997, 1996, and 1995:

           Purchaser                     1997     1996    1995
           ---------                     -----    -----   -----
           El Paso                       52.7%    36.8%   28.6%
           Sanguine, Ltd.                  - %    12.0%     - %
           Mobil Oil Corporation         15.0%    15.9%   14.5%
           Koch Oil Company              14.1%    14.8%     - %
           National Cooperative
             Refinery                      - %      - %   14.0%
           Phibro Energy Inc.              - %      - %   10.7%

            In the  event of  interruption  of  purchases  by these  significant
      customers  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.




                                       46
<PAGE>



      Capitalized Costs

            The  Program's  capitalized  costs  and  accumulated   depreciation,
      depletion,  amortization, and valuation allowance at December 31, 1997 and
      1996 were as follows:


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

     Proved properties                        $22,436,791       $22,443,455

     Unproved properties, not
       subject to depreciation,
       depletion, and amortization                   -                 -
                                               ----------        ----------

                                              $22,436,791       $22,443,455
     Less accumulated depreciation,
       depletion, amortization, and
       valuation allowance                   ( 22,382,849)     ( 22,371,239)
                                               ----------        ----------

     Net oil and gas properties               $    53,942       $    72,216
                                               ==========        ==========


      Costs Incurred

            The  Program  incurred  no  oil  and  gas  property  acquisition  or
      exploration  costs  during 1997,  1996,  and 1995.  Costs  incurred by the
      Program in connection with its oil and gas property development activities
      during 1997, 1996, and 1995 were as follows:

                                                      December 31,
                                             -------------------------------
                                              1997        1996        1995
                                             ------      ------      -------

        Development costs                    $   -       $7,396      $24,839
                                              =====       =====       ======



                                       47
<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  crude oil and gas  reserves  for the  years  ended
      December 31, 1997,  1996,  and 1995.  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>

                                           1997                         1996                        1995
                                    -------------------         -------------------         -------------------
                                       Oil         Gas             Oil         Gas             Oil         Gas
                                     (Bbls)       (Mcf)          (Bbls)       (Mcf)          (Bbls)       (Mcf)
                                    --------    ---------       --------    ---------       --------    ---------

<S>                                 <C>         <C>             <C>         <C>             <C>         <C>    
Proved reserves,
   beginning of year                 18,235      338,081         19,285      353,387         23,061      247,825

Revisions of previous
   estimates                        ( 4,677)      29,062         10,204       46,689          9,649      206,524

Sales of reserves(1)(2)                -            -           ( 7,380)    (  5,145)       ( 5,314)    (  9,617)

Purchases of reserves(1)               -            -                97       12,077           -            -

Production                          ( 2,963)    ( 59,797)       ( 3,971)    ( 68,927)       ( 8,111)    ( 91,345)
                                     ------      -------         ------      -------         ------      -------

Proved reserves,
   end of year                       10,595      307,346         18,235      338,081         19,285      353,387
                                     ======      =======         ======      =======         ======      =======

Proved developed reserves:
   Beginning of year                 18,235      338,081         19,285      353,387         23,061      247,825
                                     ------      -------         ------      -------         ------      -------
   End of year                       10,595      307,346         18,235      338,081         19,285      353,387
                                     ======      =======         ======      =======         ======      =======
--------------------
(1)  The purchases and sales during 1996 were non-cash exchanges of oil and gas reserves.
(2)  A significant  portion of the reserves sold were behind pipe and would have
     required significant capital expenditures in order to produce the reserves.
</TABLE>



                                       48
<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, 1997 using oil and gas prices of $16.25 per barrel and $2.32 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 Programs are limited  partnerships  and have no directors or executive
officers.  The following  individuals  are  directors and executive  officers of
Dyco,  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        46   President and Director

      Patrick M. Hall        39   Chief Financial Officer

      Judy K. Fox            47   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 the Samson Companies 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 the Samson Companies,  he was associated with
a Tulsa law


                                       49
<PAGE>



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 the Samson  Companies  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 the Samson  Companies  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 the Samson  Companies in 1990 and was named Secretary of
Dyco on June 30, 1996. Prior to joining the Samson Companies,  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  Programs and Dyco,  there were no officers,
directors,  or ten  percent  owners who were  delinquent  filers  during 1997 of
reports required under Section 16(a) of the Securities and Exchange Act of 1934.


ITEM 11.  EXECUTIVE COMPENSATION

      The Programs are limited partnerships and, therefore,  have no officers or
directors.  The following  table  summarizes the amounts paid by the Programs as
compensation and  reimbursements  to Dyco and its affiliates for the three years
ended December 31, 1997:





                                       50
<PAGE>



             Compensation/Reimbursement to Dyco and its affiliates
                      Three Years Ended December 31, 1997

Type of Compensation/Reimbursement(1)                     Expense
-------------------------------------           -----------------------------
                                                 1997       1996       1995
                                                -------    -------    -------

1985-1 Program
--------------

   Compensation:
     Operations                                   (2)        (2)        (2)
     Gas Marketing                                (3)        (3)        (3)

   Reimbursements:
     General and Administrative,
       Geological, and Engineering
       Expenses and Direct
       Expenses(4)                              $42,840    $42,840    $42,840

1985-2 Program
--------------

   Compensation:
     Operations                                   (2)        (2)        (2)
     Gas Marketing                                (3)        (3)        (3)

   Reimbursements:
     General and Administrative,
       Geological, and Engineering
       Expenses and Direct
       Expenses(4)                              $40,272    $40,272    $40,272

----------

(1)   The  authority  for  all of such  compensation  and  reimbursement  is the
      Program Agreements. 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 Programs  serve as operator of a significant  portion of
      the  Programs'  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 Programs to such affiliates is impossible
      to quantify as of the date of this Annual Report.
(3)   During 1995 El Paso, an affiliate of the Programs  until December 6, 1995,
      purchased a portion of the  Programs' gas at market prices and resold such
      gas at market prices directly


                                       51
<PAGE>



      to end-users and local distribution companies. During 1995, the 1985-1 and
      1985-2  Programs  sold  $217,001 and $71,328,  respectively,  of gas to El
      Paso.  After  December 6, 1995, the Programs' gas was marketed by Dyco and
      its  affiliates,  who were  reimbursed for such  activities as general and
      administrative expenses.
(4)   The  Programs  reimburse  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 Programs. The directors,  officers, and employees of Dyco
      and its affiliates  receive no direct  remuneration  from the Programs for
      their services to the Programs.  See "Salary  Reimbursement  Table" below.
      The allocable  general and  administrative,  geological,  and  engineering
      expenses are  apportioned  on a  reasonable  basis  between the  Programs'
      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 Programs 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 Programs for their services.  However,  to the extent such
services represent direct  involvement with the Programs,  as opposed to general
corporate  functions,  such persons' salaries are allocated to and reimbursed by
the  Programs.  Such  allocation to the  Programs'  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 Programs'  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, 1997:



                                       52
<PAGE>


<TABLE>
<CAPTION>

                                                   Salary Reimbursement
                                           Three Years Ended December 31, 1997
                                                     1985-1 Program
                                                     --------------
                                                                       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)         1995      -           -         -           -               -            -           -
                      1996      -           -         -           -               -            -           -
                      1997      -           -         -           -               -            -           -

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

All Executive
Officers,
Directors,
and Employees
as a group(4)         1995    $23,391       -         -           -               -            -           -
                      1996    $25,061       -         -           -               -            -           -
                      1997    $25,593       -         -           -               -            -           -
----------
(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 1985-1  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  1985-1  Program  and no  individual's  salary  or  other
      compensation  reimbursement  from the  1985-1  Program  equals or  exceeds
      $100,000 per annum.
</TABLE>



                                       53
<PAGE>

<TABLE>
<CAPTION>


                                                 1985-2 Program
                                                 --------------
                                                                        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)         1995      -           -         -           -               -            -           -
                      1996      -           -         -           -               -            -           -
                      1997      -           -         -           -               -            -           -

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

All Executive
Officers,
Directors,
and Employees
as a group(4)         1995    $21,989       -         -           -               -            -           -
                      1996    $23,559       -         -           -               -            -           -
                      1997    $24,058       -         -           -               -            -           -
----------
(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 1985-2  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  1985-2  Program  and no  individual's  salary  or  other
      compensation  reimbursement  from the  1985-2  Program  equals or  exceeds
      $100,000 per annum.

</TABLE>


                                       54
<PAGE>



      In addition to the  compensation/reimbursements  noted  above,  during the
three years ended December 31, 1997,  the Samson  Companies were in the business
of  supplying  field and  drilling  equipment  and  services to  affiliated  and
unaffiliated parties in the industry. Such companies may have provided equipment
and services for wells in which the Programs have an interest.  These  equipment
and  services  were  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  Programs for a portion of such costs based upon the  Programs'  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  Programs'  Units as of February 28, 1998 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)
      ---------------------------------             -----------------

      1985-1 Program:
      --------------

        Samson Resources Company                    1,317       (31.8%)

        All directors, officers, and
           affiliates of Dyco as a group
           and Dyco (5 persons)                     1,317       (31.8%)

      1985-2 Program:
      --------------

        Samson Resources Company                    1,468       (33.6%)

        All directors, officers, and
           affiliates of Dyco as a group
           and Dyco (5 persons)                     1,468       (33.6%)







                                       55
<PAGE>




ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

      In order to attempt to assure  limited  liability for limited  partners as
well as an orderly conduct of business,  management of the Programs is exercised
solely by Dyco. The Program Agreements grant Dyco broad discretionary  authority
with  respect  to  the  Programs'   participation  in  drilling   prospects  and
expenditure and control of funds,  including  borrowings.  These  provisions are
similar to those contained in prospectuses and partnership  agreements for other
public oil and gas  partnerships.  Broad discretion as to general  management of
the Programs  involves  circumstances  where Dyco has  conflicts of interest and
where it must allocate costs and expenses, or opportunities,  among the Programs
and other competing interests.

      Dyco does not devote all of its time, efforts,  and personnel  exclusively
to the  Programs.  Furthermore,  the  Programs  do not have any  employees,  but
instead rely on the personnel of the Samson Companies. The Programs thus compete
with the Samson  Companies  (including  other  currently  sponsored  oil and gas
programs) for the time and  resources of such  personnel.  The Samson  Companies
devote  such  time  and  personnel  to the  management  of the  Programs  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
Programs'  leasehold  interests.  Because  affiliates of the Program who provide
services to the Program have  fiduciary or other duties to other  members of the
Samson Companies, contract amendments and negotiating positions taken by them in
their effort to enforce contracts with purchasers may not necessarily  represent
the  positions  that a  Program  would  take if it were  to  administer  its own
contracts without involvement with other members of the Samson Companies. On the
other hand,  management  believes  that the Programs'  negotiating  strength and
contractual  positions have been enhanced by virtue of its affiliation  with the
Samson Companies.

     For a description of certain other  relationships and related  transactions
see "Item 11. Executive Compensation."




                                       56
<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  Programs  as of  December  31,  1997 and 1996 and for the
                  years ended  December  31, 1997,  1996,  and 1995 are filed as
                  part of this report:

                        Reports of Independent Accountants
                        Balance Sheets
                        Statements of Operations
                        Statements of Partners' Capital
                        Statements of Cash Flows
                        Notes to Financial Statements

            (2)   Financial Statement Schedules:

                        None.

            (3) Exhibits:

                  4.1   Drilling  Agreement dated April 1, 1985 for Dyco Oil and
                        Gas  Program  1985-1  by and  between  Dyco  Oil and Gas
                        Program 1985-1, 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 8, 1992
                        and is hereby incorporated by reference.

                  4.2   Program  Agreement  dated April 1, 1985 for Dyco Oil and
                        Gas  Program   1985-1  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 8, 1992 and is hereby  incorporated by
                        reference.

                  4.3   Amendment  to  Program  Agreement  for  Dyco Oil and Gas
                        Program  1985-1 dated  February 9, 1989 filed as Exhibit
                        4.3 to  Annual  Report  on Form 10K for the  year  ended
                        December  31,  1991  on  April  8,  1992  and is  hereby
                        incorporated by reference.




                                       57
<PAGE>



                  4.4   Certificate of Limited Partnership, as amended, for Dyco
                        Oil and Gas Program 1985-1 Limited  Partnership filed as
                        Exhibit  4.4 to Annual  Report on Form 10-K for the year
                        ended  December  31, 1991 on April 8, 1992 and is hereby
                        incorporated by reference.

                  4.5   Drilling  Agreement  dated  August 26, 1985 for Dyco Oil
                        and Gas Program  1985-2 by and between  Dyco Oil and Gas
                        Program 1985-2, Dyco Petroleum Corporation,  and Jaye F.
                        Dyer filed as Exhibit 4.5 to Annual  Report on Form 10-K
                        for the year ended  December  31,  1991 on April 8, 1992
                        and is hereby incorporated by reference.

                  4.6   Program Agreement dated August 26, 1985 for Dyco Oil and
                        Gas  Program   1985-2  by  and  between  Dyco  Petroleum
                        Corporation and the Participants filed as Exhibit 4.6 to
                        Annual  Report on Form 10-K for the year ended  December
                        31, 1991 on April 8, 1992 and is hereby  incorporated by
                        reference.

                  4.7   Amendment  to  Program  Agreement  for  Dyco Oil and Gas
                        Program  1985-2 dated  February 9, 1989 filed as Exhibit
                        4.7 to Annual  Report  on Form  10-K for the year  ended
                        December  31,  1991  on  April  8,  1992  and is  hereby
                        incorporated by reference.

                  4.8   Certificate of Limited Partnership, as amended, for Dyco
                        Oil and Gas Program 1985-2 Limited  Partnership filed as
                        Exhibit  4.8 to Annual  Report on Form 10-K for the year
                        ended  December  31, 1991 on April 8, 1992 and is hereby
                        incorporated by reference.

               *27.1    Financial  Data Schedule  containing  summary  financial
                        information  extracted from the Dyco Oil and Gas Program
                        1985-1 Limited Partnership's  financial statements as of
                        December  31, 1997 and for the year ended  December  31,
                        1997.

                *27.2   Financial  Data Schedule  containing  summary  financial
                        information  extracted from the Dyco Oil and Gas Program
                        1985-2 Limited Partnership's  financial statements as of
                        December  31, 1997 and for the year ended  December  31,
                        1997.




                                       58
<PAGE>



                  All other Exhibits are omitted as inapplicable.


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


      (b) Reports on Form 8-K filed during the fourth quarter of 1997:

                  None.




                                       59
<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 1985-1
                                    LIMITED PARTNERSHIP

                                    By:   DYCO PETROLEUM CORPORATION
                                          General Partner

                                          March 25, 1998


                                    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, 1998
      -------------------     Director (Principal
         Dennis R. Neill      Executive Officer)

      /s/Patrick M. Hall      Chief Financial         March 25, 1998
      -------------------     Officer (Principal
         Patrick M. Hall      Financial and
                              Accounting Officer)

      /s/Judy K. Fox          Secretary               March 25, 1998
      -------------------
         Judy K. Fox



                                       60
<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 1985-2
                                    LIMITED PARTNERSHIP

                                    By:   DYCO PETROLEUM CORPORATION
                                          General Partner

                                          March 25, 1998


                                    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, 1998
      -------------------         Director (Principal
         Dennis R. Neill          Executive Officer)

      /s/Patrick M. Hall          Chief Financial             March 25, 1998
      -------------------         Officer (Principal
         Patrick M. Hall          Financial and
                                  Accounting Officer)

      /s/Judy K. Fox              Secretary                   March 25, 1998
      -------------------
         Judy K. Fox



 
                                       61
<PAGE>



                               INDEX TO EXHIBITS


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

4.1         Drilling  Agreement dated April 1, 1985 for Dyco Oil and Gas Program
            1985-1  by and  between  Dyco  Oil  and  Gas  Program  1985-1,  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 8, 1992 and is hereby incorporated by reference.

4.2         Program  Agreement  dated April 1, 1985 for Dyco Oil and Gas Program
            1985-1  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 8,  1992 and is hereby
            incorporated by reference.

4.3         Amendment to Program  Agreement for Dyco Oil and Gas Program  1985-1
            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 8, 1992 and is
            hereby incorporated by reference.

4.4         Certificate of Limited Partnership, as amended, for Dyco Oil and Gas
            Program  1985-1 Limited  Partnership  filed as Exhibit 4.4 to Annual
            Report on Form 10-K for the year ended December 31, 1991 on April 8,
            1992 and is hereby incorporated by reference.

4.5         Drilling  Agreement  dated  August  26,  1985  for  Dyco Oil and Gas
            Program 1985-2 by and between Dyco Oil and Gas Program 1985-2,  Dyco
            Petroleum  Corporation,  and Jaye F. Dyer  filed as  Exhibit  4.5 to
            Annual  Report on Form 10-K for the year ended  December 31, 1991 on
            April 8, 1992 and is hereby incorporated by reference.

4.6         Program Agreement dated August 26, 1985 for Dyco Oil and Gas Program
            1985-2  by  and  between   Dyco   Petroleum   Corporation   and  the
            Participants  filed as Exhibit 4.6 to Annual Report on Form 10-K for
            the year  ended  December  31,  1991 on April 8,  1992 and is hereby
            incorporated by reference.

4.7         Amendment to Program  Agreement for Dyco Oil and Gas Program  1985-2
            Limited  Partnership  dated February 9, 1989 filed as Exhibit 4.7 to
            Annual  Report on Form 10-K for the year ended  December 31, 1991 on
            April 8, 1992 and is hereby incorporated by reference.




                                       62
<PAGE>



4.8         Certificate of Limited Partnership, as amended, for Dyco Oil and Gas
            Program  1985-2 Limited  Partnership  filed as Exhibit 4.8 to Annual
            Report on Form 10-K for the year ended December 31, 1991 on April 8,
            1992 and is hereby incorporated by reference.

*27.1       Financial Data Schedule  containing  summary  financial  information
            extracted   from  the  Dyco  Oil  and  Gas  Program  1985-1  Limited
            Partnership's  financial  statements as of December 31, 1997 and for
            the year ended December 31, 1997.

*27.2       Financial Data Schedule  containing  summary  financial  information
            extracted   from  the  Dyco  Oil  and  Gas  Program  1985-2  Limited
            Partnership's  financial  statements as of December 31, 1997 and for
            the year ended December 31, 1997.


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


                                       63