<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
    March 31, 2000                              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 March 31, 2000 and                  3
    December 31, 1999.

Statements of Operations for the Three Months         4
    Ended March 31, 2000 and 1999.

Statement of Partners' Equity at March 31, 2000.      5

Statements of Cash Flows for Three Months Ended       6
    March 31, 2000 and 1999.

Notes to Financial Statements.                      7-8

                                       2
<PAGE>

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

                                Balance Sheets
                     March 31, 2000 and December 31, 1999
                                  (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      03/31/00              12/31/99
                                                               ------------------     -----------------
<S>                                                              <C>                    <C>
ASSETS
Current Assets
Cash                                                                 $     60,207           $    67,071
Accounts receivable - trade (Note 6)                                      142,679               129,649
                                                               ------------------     -----------------
                                                                          202,886               196,720
                                                               ------------------     -----------------
Property and Equipment, at Cost (Successful
Efforts Method) (Notes 2, 3, 4, and 5)
Intangible development costs                                            7,135,257             7,122,249
Lease and well equipment                                                4,182,896             4,179,519
Producing leaseholds                                                      166,398               166,379
                                                               ------------------     -----------------
                                                                       11,484,551            11,468,147
Accumulated depreciation, depletion and amortization                  (10,022,991)           (9,985,437)
                                                               ------------------     -----------------
                                                                        1,461,560             1,482,710
                                                               ------------------     -----------------

                                                                     $  1,664,446           $ 1,679,430
                                                               ==================     =================

LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable:
Managing general partner (Note 5)                                    $     46,568           $    38,017
                                                               ------------------     -----------------

Partners' Capital (Notes 4 and 7)
Limited partners - 2,425 units outstanding                              1,361,300             1,361,198
General partners                                                          256,578               280,215
                                                               ------------------     -----------------
                                                                        1,617,878             1,641,413
                                                               ------------------     -----------------

                                                                     $  1,664,446           $ 1,679,430
                                                               ==================     =================
</TABLE>

--------------------------------------------------------------------------------
                See accompanying notes to financial statements.

                                       3
<PAGE>

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

                           Statements of Operations
                            March 31, 2000 and 1999
                                  (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                                                  March 31,
                                                                     2000                          1999
                                                                ---------------               ---------------
<S>                                                             <C>                          <C>
Revenue
Oil and gas sales (Note 6)                                             $355,199                     $ 171,620
Interest income                                                             610                            94
Miscellaneous Income                                                      2,066                             -
Gain on sale of assets                                                        -                             -
                                                                ---------------               ---------------
                                                                        357,875                       171,714
                                                                ---------------               ---------------
Expense (Note 5)
Fees to managing general partner                                         21,975                        21,975
Production expense                                                       98,934                       100,241
Severance tax                                                            17,888                         7,895
Depreciation, depletion and amortization                                 37,554                        80,044
Other                                                                     1,280                         1,279
                                                                ---------------               ---------------
                                                                        177,631                       211,433
                                                                ---------------               ---------------

Net Income (Loss)                                                      $180,244                     $(39,718)
                                                                ===============               ===============

Allocation of Net Income (Note 7)
Limited partners                                                       $ 84,977                     $(27,095)
General partners                                                         95,267                       (12,623)
                                                                ---------------               ---------------

                                                                       $180,244                     $(39,718)
                                                                ===============               ===============

Net Income (Loss) per $5,000 Limited Partner
Unit (2,425 Units Outstanding)                                         $     35                     $    (11)
                                                                ===============               ===============
</TABLE>

--------------------------------------------------------------------------------
                See accompanying notes to financial statements.

                                       4
<PAGE>

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

                        Statements of Partners' Capital
                       Three Months Ended March 31, 1999
                                  (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

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

<S>                                          <C>                 <C>                 <C>
Balance at December 31, 1999                     $1,361,198           $ 280,215          $1,641,413
Partners' distributions                             (84,875)           (122,300)           (207,175)
Partners' contributions                                   -               3,396               3,396
Net income                                           84,977              95,267             180,244
                                           ----------------    ----------------    ----------------

Balance at March 31, 2000                        $1,361,300           $ 256,578          $1,617,878
                                           ================    ================    ================
</TABLE>
--------------------------------------------------------------------------------
                See accompanying notes to financial statements.

                                       5
<PAGE>

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

                            Statements of Cash Flow
                  Three Months Ended March 31, 2000 and 1999
                                  (Unaudited)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                         2000                    1999
                                                 -------------------     -------------------
<S>                                                <C>                     <C>
Operating Activities
Net income                                                 $ 180,244                $(39,718)
                                                 -------------------     -------------------
Adjustments to reconcile net income to net
 cash provided by operating activities:
  Depreciation, depletion and amortization                    37,554                  80,044
  Gain on sale of assets                                           -                       -
  (Increase) decrease in accounts receivable                 (13,030)                     72
  Increase (decrease) in accounts payable                      8,550                  (2,929)
  Other                                                            -                       -
                                                 -------------------     -------------------
                                                              33,074                  77,187
                                                 -------------------     -------------------
Net cash provided by operating activities                    213,318                  37,468
                                                 -------------------     -------------------

Investing Activities
Acquisition of property and equipment                        (16,404)                 (2,079)
Proceeds from sale of assets                                       -                       -
                                                 -------------------     -------------------
Net cash used in investing activities                        (16,404)                 (2,079)
                                                 -------------------     -------------------

Financing Activities
Partners' contributions                                        3,396                   2,079
Partners' distributions                                     (207,175)                (25,563)
                                                 -------------------     -------------------
Net cash used in financing activities                       (203,779)                (23,483)
                                                 -------------------     -------------------

Net Increase in Cash                                          (6,865)                 11,906
Cash - beginning of year                                      67,072                   8,308
                                                 -------------------     -------------------

Cash - End of Year                                         $  60,207                $ 20,214
                                                 ===================     ===================

</TABLE>
--------------------------------------------------------------------------------
                See accompanying notes to financial statements

                                       6
<PAGE>

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

                         Notes To Financial Statements
                                 March 31, 2000
                                  (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)
                                March 31, 2000
                                  (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 three months ended March 31, 2000  and March 31, 1999, the Partnership
was charged $40,277 and $42,963. 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)

               Management's Discussion And Analysis Of Financial
                      Condition And Results Of Operations

                                March 31, 2000

The Partnership's average price per barrel of oil for the first quarter of 2000
was $22.93 as compared to $7.24 for the first quarter of 1999. The increased
revenue and related severance tax expense result primarily from the increase in
average oil prices.  Certain normal expected declines in production were also
experienced over the past twelve months.

Depreciation, depletion and amortization for the first quarter of 2000 was
$37,554 as compared to $80,044 for the first quarter of 1999.  This decrease is
directly related to change in the future oil and gas reserve estimates.  The
future oil and gas reserve estimates are effected by changes in the current
prices of oil and gas, which correspondingly affect the number of future years
that oil and gas properties will remain economically viable.

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: July 10, 2000

                                       10