##### Table of Contents

---



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, 2003 |  | 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.)
|                                             
|777 Main Street, Suite 3200 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.



---



---

##### Table of Contents



Texland Drilling Program-1981, Ltd.



Index To Financial Statements



Reference Page



|Balance Sheets at March 31, 2003 and December 31, 2002.                             |  | 3  
|----------------------------------------------------------------------------------- |  | ---
|                                                                                   
|Statements of Operations for the Three Months Months Ended March 31, 2003 and 2002. |  | 4  
|                                                                                   
|Statement of Partners Capital at March 31, 2003.                                   |  | 5  
|                                                                                   
|Statements of Cash Flows for Three Months Ended March 31, 2003 and 2002.            |  | 6  
|                                                                                   
|Notes to Financial Statements.                                                      |  | 7-8



2



---

##### Table of Contents

Texland Drilling Program1981, Ltd.

(A Limited Partnership)





Balance Sheets

March 31, 2003 and December 31, 2002

(Unaudited)

---



|                                                            |  | 03/31/03 |             |   | 12/31/02 |  
|----------------------------------------------------------- |  | -------- | ----------- | - | -------- | -
|ASSETS                                                      |  |          |             |   |          |  
|Current Assets                                              |  |          |             |   |          |  
|Cash                                                        |  | $        | 99,729      |   |          | $
|Accounts receivabletrade                                   |  |          | 197,934     |   |          |  
|Accounts receivablemanaging general partner                |  |          | 3,961       |   |          |  
|                                                            |  |          |             |   |          |  
|                                                            |  |          | 301,624     |   |          |  
|                                                            |  |          |             |   |          |  
|Property and Equipment, at Cost (Successful Efforts Method) |  |          |             |   |          |  
|Intangible development costs                                |  |          | 7,331,352   |   |          |  
|Lease and well equipment                                    |  |          | 4,247,153   |   |          |  
|Producing leaseholds                                        |  |          | 161,495     |   |          |  
|                                                            |  |          |             |   |          |  
|                                                            |  |          | 11,740,000  |   |          |  
|Accumulated depreciation, depletion and amortization        |  |          | (10,423,946 | ) |          |  
|                                                            |  |          |             |   |          |  
|                                                            |  |          | 1,316,054   |   |          |  
|                                                            |  |          |             |   |          |  
|                                                            |  | $        | 1,617,678   |   |          | $
|                                                            |  |          |             |   |          |  
|LIABILITIES AND PARTNERS CAPITAL                           |  |          |             |   |          |  
|Current Liabilities                                         |  |          |             |   |          |  
|Accounts payable:                                           |  |          |             |   |          |  
|Managing general partner                                    |  | $        | 44,983      |   |          | $
|                                                            |  |          |             |   |          |  
|                                                           
|Partners Capital                                           |  |          |             |   |          |  
|Limited partners2,425 units outstanding                    |  |          | 1,352,175   |   |          |  
|General partners                                            |  |          | 220,520     |   |          |  
|                                                            |  |          |             |   |          |  
|                                                            |  |          | 1,572,695   |   |          |  
|                                                            |  |          |             |   |          |  
|                                                            |  | $        | 1,617,678   |   |          | $
|                                                            |  |          |             |   |          |  



---

See accompanying notes to financial statements.



3



---

##### Table of Contents

Texland Drilling Program1981, Ltd.

(A Limited Partnership)





Statements of Operations

March 31, 2003 and 2002

(Unaudited)

---



|                                                                |  | Three Months Ended March 31,
|--------------------------------------------------------------- |  | ----------------------------
|                                                                |  | 2003                        
|Revenue                                                         |  |                             
|Oil and gas sales                                               |  | $                           
|Interest income                                                 |  |                             
|Miscellaneous Income                                            |  |                             
|Gain on sale of assets                                          |  |                             
|                                                                |  |                             
|                                                                |  |                             
|                                                                |  |                             
|Expense                                                         |  |                             
|Fees to managing general partner                                |  |                             
|Production expense                                              |  |                             
|Severance tax                                                   |  |                             
|Depreciation, depletion and amortization                        |  |                             
|Other                                                           |  |                             
|                                                                |  |                             
|                                                                |  |                             
|                                                                |  |                             
|Net Income                                                      |  | $                           
|                                                                |  |                             
|Allocation of Net Income                                        |  |                             
|Limited partners                                                |  | $                           
|General partners                                                |  |                             
|                                                                |  |                             
|                                                                |  | $                           
|                                                                |  |                             
|Net Income per $5,000 Limited Partner (2,425 Units Outstanding) |  | $                           
|                                                                |  |                             



---

See accompanying notes to financial statements.





4



---

##### Table of Contents

Texland Drilling Program1981, Ltd.

(A Limited Partnership)





Statements of Partners Capital

Three Months Ended March 31, 2003

(Unaudited)

---



|                             |  | Limited Partners |           |   | General Partners |   |          | Total | 
|---------------------------- |  | ---------------- | --------- | - | ---------------- | - | -------- | ----- | 
|Balance at December 31, 2002 |  | $                | 1,275,888 |   |                  | $ | 177,852  |       | 
|Partners distributions      |  |                  | (53,350   | ) |                  |   | (101,600 | )     | 
|Partners contributions      |  |                  |          |   |                  |   | 10,119   |       | 
|Net income                   |  |                  | 129,637   |   |                  |   | 134,149  |       | 
|                             |  |                  |           |   |                  |   |          |       | 
|Balance at March 31, 2003    |  | $                | 1,352,175 |   |                  | $ | 220,520  |       | 
|                             |  |                  |           |   |                  |   |          |       | 



---

See accompanying notes to financial statements.





5



---

##### Table of Contents

Texland Drilling Program1981, Ltd.

(A Limited Partnership)





Statements of Cash Flow

Three Months Ended March 31, 2003 and 2002

(Unaudited)

---



|                                                                                  |  | 2003 |          |   | 2002 |  
|--------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | -
|Operating Activities                                                              |  |      |          |   |      |  
|Net income                                                                        |  | $    | 263,786  |   |      | $
|                                                                                  |  |      |          |   |      |  
|Adjustments to reconcile net income to net cash provided by operating
activities: |  |      |          |   |      |  
|Depreciation, depletion and amortization                                          |  |      | 32,905   |   |      |  
|Gain on sale of assets                                                            |  |      | (2,739   | ) |      |  
|(Increase) decrease in accounts receivable                                        |  |      | (45,991  | ) |      |  
|(Decrease) increase in accounts payable                                           |  |      | (11,750  | ) |      |  
|Other                                                                             |  |      |         |   |      |  
|                                                                                  |  |      |          |   |      |  
|                                                                                  |  |      | (27,575  | ) |      |  
|                                                                                  |  |      |          |   |      |  
|Net cash provided by operating activities                                         |  |      | 236,211  |   |      |  
|                                                                                  |  |      |          |   |      |  
|                                                                                 
|Investing Activities                                                              |  |      |          |   |      |  
|Acquisition of property and equipment                                             |  |      | (30,589  | ) |      |  
|Proceeds from sale of assets                                                      |  |      | 2,739    |   |      |  
|                                                                                  |  |      |          |   |      |  
|Net cash used in investing activities                                             |  |      | (27,850  | ) |      |  
|                                                                                  |  |      |          |   |      |  
|                                                                                 
|Financing Activities                                                              |  |      |          |   |      |  
|Partners contributions                                                           |  |      | 10,119   |   |      |  
|Partners distributions                                                           |  |      | (154,950 | ) |      |  
|                                                                                  |  |      |          |   |      |  
|Net cash used in financing activities                                             |  |      | (144,831 | ) |      |  
|                                                                                  |  |      |          |   |      |  
|                                                                                 
|Net Increase in Cash                                                              |  |      | 63,530   |   |      |  
|Cashbeginning of year                                                            |  |      | 36,199   |   |      |  
|                                                                                  |  |      |          |   |      |  
|                                                                                 
|CashEnd of Quarter                                                               |  | $    | 99,729   |   |      | $
|                                                                                  |  |      |          |   |      |  



---

See accompanying notes to financial statements.





6



---

##### Table of Contents

Texland Drilling Program1981, Ltd.

(A Limited Partnership)





Notes to Financial Statements

March 31, 2003

(Unaudited)



1. Summary Of Significant Accounting Policies



The Partnership was organized as a limited partnership on July 20, 1981 for the purpose of engaging in oil and gas exploration and production. Texland Properties-1981, a general partnership, and Texland Petroleum, L.P. are the
General Partners. The Managing General Partner is Texland Petroleum, L.P. 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.



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, L.P. have invested in limited partnership units in the amount of $95,000 and $30,000 respectively.



7



---

##### Table of Contents

Texland Drilling Program1981, Ltd.

(A Limited Partnership)



Notes to Financial Statements (Continued)

March 31, 2003

(Unaudited)



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



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, 2003 and March 31, 2002, the Partnership was charged $42,523 and $41,590
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



---

##### Table of Contents

Texland Drilling Program1981, Ltd.

(A Limited Partnership)





Managements Discussion And Analysis Of Financial

Condition And Results Of Operations



March 31, 2003



The Partnerships approximate average price actually received per barrel
of oil for the first quarter of 2003 was $30.60 as compared to $18.60 for the first quarter of 2002. The increased revenue and related severance tax expense result primarily from such increase in average oil and gas prices. Gas sales, which
represent 15-20% of total oil and gas sales, also increased significantly for this period. Gas sales are primarily short-term contracts which can vary widely from month to month.



Depreciation, depletion and amortization for the first quarter of 2003 was $32,905 as compared to $43,606 for the first
quarter of 2002. Changes in depreciation and depletion for 2002 through 2003, are due primarily to the effect that changes in oil and gas prices have on the calculation of estimated future economically recoverable oil and gas reserves.



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



---

##### Table of Contents



Part II



Items 1 through 5



OmittedNot applicable to Registrant.



Item 6



|(a) |  | Exhibits:
|--- |  | ---------



| | 99.1 |  | Certification by CEO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------

| | 99.2 |  | Certification by CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------



|(b) |  | Reports on Form 8-K:
|--- |  | --------------------



| |  | None.
| |  | -----



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 E. ChapmanM. E. Chapman, Vice Presidentof Texland Petroleum, L.P.,General PartnerTexlandProperties-1981




Date: May 14, 2003



10