<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D. C. 20549

                                   Form 10-Q

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the Quarter ended
   June 30, 1999                                  Commission File Number 2-71865
--------------------                              ------------------------------

                      TEXLAND DRILLING PROGRAM-1981, LTD.
                      -----------------------------------
                             (Name of Registrant)


         TEXAS                                          75-1791491
-----------------------                               --------------
(State of Organization)                     (I.R.S. Employer Identification No.)

     500 Throckmorton Street, Suite 3100
               Fort Worth, Texas                              76102
-------------------------------------------------            -------
       (Address of Executive Offices)                        Zip Code

                Registrant's Telephone Number   (817) 336-2751
                                                --------------

          Securities registered pursuant to Section 12(b) of the Act:

Units of Limited Partnership Interest                          None
-------------------------------------                        ----------
      (Title of Class)                                     (Voting Units)


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

    YES  X    NO
        ---      ---


                   This report contains a total of 10 pages.


                                       1
<PAGE>

                      Texland Drilling Program-1981, Ltd.

                         Index To Financial Statements


                                Reference Page
                                --------------

Balance Sheets at June 30, 1999 and                                    3
    December 31, 1998.

Statements of Operations for the Six Months                            4
    Ended June 30, 1999 and 1998.

Statement of Partners' Equity at June 30, 1999.                        5

Statements of Cash Flows for Six Months Ended                          6
    June 30, 1999 and 1998.

Notes to Financial Statements.                                       7-8

                                       2
<PAGE>
                      Texland Drilling Program - 1981, Ltd.
                             (A Limited Partnership)

                                 Balance Sheets
                       June 30, 1999 and December 31, 1998
                                   (Unaudited)
<TABLE>
<CAPTION>

ASSETS
                                                                                               6/30/99        12/31/98
                                                                                            ------------    ------------
<S>                                                                                         <C>             <C>
Current Assets
    Cash                                                                                    $     29,775    $      8,308
    Accounts Receivable
       Trade                                                                                      76,916          73,153
       General Partner                                                                                --              --
                                                                                            ------------    ------------

       Total Current Assets                                                                      106,691          81,461

Property and Equipment, at Cost
    (Successful Efforts Method)
    Intangible Development Costs                                                               7,119,641       7,119,641
    Lease and Well Equipment                                                                   4,180,558       4,177,316
    Producing Leaseholds                                                                         165,314         165,295
                                                                                            ------------    ------------

                                                                                              11,465,514      11,462,252
    Less: Accumulated Depreciation, Depletion & Amortization                                   9,986,904       9,826,816
                                                                                            ------------    ------------

                                                                                               1,478,610       1,635,436
    Wells-in-Progress
    Nonproducing Leaseholds                                                                           --              --
                                                                                            ------------    ------------

       Net Property, Plant and Equipment                                                       1,478,610       1,635,436

Organizational Costs (net of $1,141,028 amortization in 1991
    and $1,069,798 in 1990)                                                                           --              --

    Total Assets                                                                            $  1,585,301    $  1,716,897
                                                                                            ============    ============



LIABILITIES AND PARTNERS' EQUITY

Current Liabilities
    Accounts Payable - Trade                                                                      42,081          43,557
                                                                                            ------------    ------------

    Total Current Liabilities                                                                     42,081          43,557

Partners' Equity
    Limited Partners - 2,425 Units Outstanding                                                 2,146,192       2,122,689
    General Partner                                                                             (602,971)       (449,349)
                                                                                            ------------    ------------

    Total Partners' Equity                                                                     1,543,221       1,673,340
                                                                                            ------------    ------------

    Total Liabilities and Partners' Equity                                                     1,585,301       1,716,897
                                                                                            ============    ============
</TABLE>


                             See Accompanying Notes

                                       3
<PAGE>
                      Texland Drilling Program - 1981, Ltd.
                             (A Limited Partnership)

                             Statement of Operations
                             June 30, 1999 and 1998
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                        Three Months Ended         Six Months Ended
                                                              June 30,                 June 30,
                                                         1999         1998         1999         1998
                                                      ---------    ---------    ---------    ---------
<S>                                                   <C>          <C>          <C>          <C>
Revenues
    Oil and Gas Sales                                 $ 231,877    $ 229,005    $ 403,497    $ 494,751
    Interest Income                                         136          306          231          745
    Gain on Sale                                             --           --           --           --
                                                      ---------    ---------    ---------    ---------

                                                        232,014      229,310      403,728      495,495

Expenses
    Fees to Managing General Partner                     21,975       19,730       43,950       43,990
    Production Expenses                                  95,487      149,868      195,727      273,194
    Severance Tax Withholding                            10,681       10,534       18,575       22,759
    Depreciation, Depletion & Amortization Expenses      80,044       78,905      160,087      157,809
    Other Expenses                                       14,878       11,996       16,157       13,687
                                                      ---------    ---------    ---------    ---------

                                                        223,064      271,033      434,496      511,439
                                                      ---------    ---------    ---------    ---------

Net Income (Loss)                                     $   8,950    $ (41,723)   $ (30,768)   $ (15,944)
                                                      ---------    ---------    ---------    ---------


Net Income (Loss) Allocation
    Limited Partners                                     (9,539)     (33,335)      53,815      (27,699)
    General Partner                                      18,489       (8,388)     (84,583)      11,755
                                                      ---------    ---------    ---------    ---------

                                                      $   8,950    $ (41,723)   $ (30,768)   $ (15,944)
                                                      ---------    ---------    ---------    ---------

Net Income (Loss) per $5,000 Limited Partner Unit
    (2,425 Units Outstanding)                         $      (4)   $     (14)   $      22    $     (11)
                                                      ---------    ---------    ---------    ---------
</TABLE>




                            See Accompanying Notes

                                       4
<PAGE>
                      Texland Drilling Program - 1981, Ltd.
                             (A Limited Partnership)

                          Statement of Partners' Equity
                         Six Months Ended June 30, 1999
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                         Limited        General
                                                           Total         Partner        Partner
                                                        -----------    -----------    -----------
<S>                                                     <C>            <C>            <C>
Balance December 31, 1998                               $ 1,673,340    $ 2,122,689    $  (449,349)

Partners' Contributions                                       3,262                         3,262

Partners' Distributions                                    (102,613)       (30,313)       (72,300)

Net Income (Loss)                                           (30,768)        53,815        (84,583)
                                                        -----------    -----------    -----------
Balance June 30, 1999                                   $ 1,543,221    $ 2,146,192    $  (602,971)
                                                        ===========    ===========    ===========
</TABLE>





                             See Accompanying Notes


                                       5
<PAGE>
                      Texland Drilling Program - 1981, Ltd.
                             (A Limited Partnership)

                             Statements of Cash Flow
                     Six Months Ended June 30, 1999 and 1998
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                      1999         1998
                                                                 ---------    ---------
<S>                                                              <C>          <C>
Cash Flows from Operating Activities
   Net Income (Loss)                                             $ (30,768)   $ (15,944)
   Adjustments to Reconcile Net Income to Net Cash Provided by
       Operating Activities:
       Depreciation, Depletion and Amortization Expenses           160,087      157,809
       Abandoned Leaseholds
       Loss on Sale of Assets
       Change in Accounts Receivable                                (3,763)      45,911
       Change in Accounts Payable                                   (1,476)         518
                                                                 ---------    ---------

       Total Adjustments                                           154,848      204,238
                                                                 ---------    ---------

       Net Cash Provided by Operating Activities                   124,079      188,294

Cash Flows from Investing Activities
   Acquisition of Property and Equipment                            (3,262)     (12,989)
   Proceeds from Sale of Property and Equipment                         --           --
                                                                 ---------    ---------
       Net Cash Used by Investing Activities                        (3,262)     (12,989)

Cash Flows from Financing Activities
   Partners' Contributions                                           3,262       12,212
   Partners' Distributions                                        (102,613)    (235,125)
                                                                 ---------    ---------

       Net Cash Used by Financing Activities                       (99,351)    (222,913)

Net Increase in Cash                                                21,467      (47,608)
Cash at Beginning of Year                                            8,308       63,132
                                                                 ---------    ---------

Cash at End of Quarter                                           $  29,775    $  15,524
                                                                 =========    =========
</TABLE>


                             See Accompanying Notes

                                       6
<PAGE>

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

                         Notes To Financial Statements
                                 June 30, 1999
                                  (Unaudited)


1.  Summary Of Significant Accounting Policies

The Partnership was organized as a limited partnership on June 20, 1981 for the
purpose of engaging in oil and gas exploration and production.  Texland
Properties-1981, a general partnership, and Texland Petroleum, Inc. are the
General Partners.  The Managing General Partner is Texland Petroleum, Inc.  The
Partnership's accounting policies are summarized below:

Basis Of Accounting

The Partnership follows generally accepted accounting principles applicable to
established enterprises in the extractive industries under a method which is
generally known as the successful method of accounting.

Property And Equipment

Costs incurred for the acquisition of producing and nonproducing leaseholds are
capitalized.  Costs of intangible development and lease and well equipment
incurred to drill and equip successful exploratory and development wells are
capitalized.  Costs to drill and equip unsuccessful exploratory wells are
charged to operations while costs of unsuccessful development wells remain
capitalized.  Costs associated with uncompleted wells are capitalized as wells-
in-progress.

Abandoned Leaseholds

Costs of nonproducing properties are charged to expense at such time as they are
deemed to be impaired, based upon periodic assessments of such costs.

Depletion

Leasehold costs of producing properties are amortized on the unit of production
method based on proved oil and gas reserves.  Intangible development costs of
producing properties are amortized on the unit of production method based on
estimated proved developed oil and gas reserves.

Depreciation

Depreciation of equipment is provided by using the unit of production method
based on estimated proved developed oil and gas reserves.

Organization Costs

These costs are amortized by the straight-line method over ten years, the life
of the Partnership.

Federal Income Tax

The Partnership files its federal income tax return on the accrual basis.

                                       7
<PAGE>

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

                   Notes To Financial Statements (Continued)
                                 June 30, 1999
                                  (Unaudited)

2.  Contributions By General Partner (Texland Properties-1981)

Under terms of the Partnership Agreement, the General Partner is charged for
certain costs related to drilling and production operations which are required
to be capitalized for federal income tax purposes.  These costs are treated as
capital contributions by the General Partner.  In addition, Texland Properties-
1981 and Texland Petroleum, Inc. have invested in limited partnership units in
the amount of $95,000 and $30,000 respectively.

3.  Fees To Managing General Partner (Texland Petroleum, Inc.)

In consideration of its management services rendered, the Managing General
Partner is entitled to charge management fees to the Partnership.  In addition,
for the six months ended June 30, 1999  and June 30, 1998, the Partnership was
charged $85,926 and $92,596 respectively for technical services, accounting
services, and supervisory services performed by the employees of the Managing
General Partner and such charges are included in intangible development costs,
production expenses and fees to Managing General Partner.  These charges are
allocated between the General and Limited Partners based upon applicable revenue
and expense sharing rates.

                                       8
<PAGE>

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

                   Notes To Financial Statements (Continued)
                                 June 30, 1999
                                  (Unaudited)

The Partnership's average price per barrel of oil for the second quarter of 1999
was $9.60 as compared to $7.24 for the second quarter of 1998. The decreased
revenue and related severance tax expense result primarily from the decrease in
average oil prices.

Production expenses for 1999 decreased from the comparable period in 1998, due
to discretionary cost cuts, decreased levels of remedial activity, and
curtailment of marginal production.  In addition, several wells were shut-in
temporarily due to low oil prices.

The Partnership was formed with cash contributions from the Limited and General
Partners.  Management does not intend to incur any substantial indebtedness and
any developmental drilling which is necessary will be processed by farmout to
other parties or by reinvestment of internally generated funds.  Management,
therefore, anticipates no liquidity problems during the life of the Partnership.

                                       9
<PAGE>

Part II

Items 1 through 6

Omitted - Not applicable to Registrant.


                                   Signature
                                   ---------


Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


     Texland Drilling Program-1981, Ltd.



                                    By       /s/ Michael A. Chapman
                                      ----------------------------------------
                                      M. E. Chapman, Vice President
                                      of Texland Petroleum, Inc.,
                                      General Partner - Texland
                                      Properties-1981



Date: August 13, 1999

                                       10