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 ~~September~~June 30, ~~2002~~2003 Commission File Number 2-71865

TEXLAND DRILLING PROGRAM–-1981, LTD.

(Name of Registrant)

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

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

777 Main Street, Suite 3200 Fort Worth, Texas (Address of Executive Offices) 76102 Zip Code

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) ~~None~~ (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 11 pages.

Texland Drilling Program–-1981, Ltd.

Index To Financial Statements

Reference Page

		Reference Page
Balance Sheets at June 30, 2003 and December 31, 2002.		3

Statements of Operations for the Three Months And Six Months Ended June 30, 2003 and 2002.		4

Statement of Partners’ Capital at June 30, 2003.		5

Statements of Cash Flows for Six Months Ended June 30, 2003 and 2002.		6

Notes to Financial Statements.		7-8

Balance Sheets at September 30, 2002 and December 31, 2001.		3
Statements of Operations for the Three Months and Nine Months Ended September 30, 2002 and 2001.		4
Statement of Partners’ Capital at September 30, 2002.		5
Statements of Cash Flows for Nine Months Ended September 30, 2002 and 2001.		6
Notes to Financial Statements.		7

Texland Drilling Program–-1981, Ltd.

(A Limited Partnership)

Balance Sheets

~~September~~June 30, ~~2002~~2003 and December 31, ~~2001~~2002

(Unaudited)

	09/30/02			12/31/01
	06/30/03			12/31/2002
ASSETS
Current Assets
Cash	$	50123,~~535~~730		$	236,~~599~~199
Accounts receivable—trade		147,525			91,976
Accounts receivable-trade		187,500			140,943
Accounts receivable—managing general partner					18,844
Accounts receivable-managing general partner		—			14,961
		198,060			113,419
		311,230			192,103
Property and Equipment, at Cost (Successful Efforts Method)
Intangible development costs		7,~~309~~333,~~040~~774			7,~~244~~313,~~553~~622
Lease and well equipment		4,~~229~~249,~~599~~703			4,~~202~~237,~~099~~033
Producing leaseholds		161,495			161,495
		11,700,133			11,608,147
		11,744,972			11,712,150
Accumulated depreciation, depletion and amortization		(10,~~395~~456,~~615~~983	)		(10,~~264~~393,~~228~~780	)
		1,304,518			1,343,919
		1,287,989			1,318,370
	$	1,~~502~~599,~~579~~219		$	1,~~457~~510,~~338~~473
LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable:
Managing general partner	$	73104,~~340~~129		$	5556,~~102~~733
Partners’ Capital
Partners' Capital
Limited partners—2,425 units outstanding		1,271,309			1,241,922
Limited partners-2,425 units outstanding		1,276,839			1,275,888
General partners		~~157~~218,~~930~~251			~~160~~177,~~314~~852
		1,429,239			1,402,236
		1,495,090			1,453,740
	$	1,~~502~~599,~~579~~219		$	1,~~457~~510,~~338~~473

See accompanying notes to financial statements.

Texland Drilling Program–-1981, Ltd.

(A Limited Partnership)

Statements of Operations

~~September~~June 30, ~~2002~~2003 and ~~2001~~2002

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended June 30,				Six Months Ended June 30,
	2002		2001		2002		2001
	2003		2002		2003		2002
Revenue
Oil and gas sales	$	~~345~~353,~~259~~938	$	~~323~~320,~~582~~204	$	~~909~~798,~~597~~379	$	1564,~~089,513~~338
Interest income		59190		~~201~~86		~~187~~327		~~1,140~~128
Miscellaneous Income		—		—		—		—
Gain on sale of assets		~~3,100~~88		—229		102,~~255~~827		—7,155
		348,418		323,783		920,039		1,090,653
		354,216		320,519		801,533		571,621
Expense
Fees to managing general partner		2322,~~250~~875		2123,~~975~~250		6945,750		6546,~~925~~500
Production expense		~~144~~130,~~012~~417		~~132~~133,~~979~~380		~~396~~231,~~566~~490		~~355~~252,~~703~~554
Severance tax		1718,~~293~~201		1516,~~869~~160		4643,~~087~~082		5728,~~645~~794
Depreciation, depletion and amortization		4833,~~877~~125		3949,~~450~~159		~~141~~66,~~642~~030		~~105~~92,~~217~~765
Other		220,~~023~~340		117,~~684~~637		2022,~~704~~137		1318,~~792~~681
		235,455		211,957		674,749		598,282
		224,958		239,586		408,489		439,294
Net Income (Loss)	$	112,963	$	111,826	$	245,290	$	492,371
Net Income	$	129,258	$	80,933	$	393,044	$	132,327
Allocation of Net Income (Loss)
Allocation of Net Income
Limited partners	$	5051,~~399~~977	$	5725,~~031~~913	$	96181,~~075~~614	$	~~251~~45,~~109~~677
General partners		6277,~~564~~281		5455,~~795~~020		~~149~~211,~~215~~430		~~241~~86,~~262~~650
	$	~~112~~129,~~963~~258	$	~~111~~80,~~826~~933	$	~~245~~393,~~290~~044	$	~~492~~132,~~371~~327
Net Income (Loss) per $5,000 Limited Partner (2,425 Units Outstanding)	$	21	$	24	$	40	$	104
Net Income per $5,000 Limited Partner (2,425 Units Outstanding)	$	21	$	11	$	75	$	19

See accompanying notes to financial statements.

Texland Drilling Program–-1981, Ltd.

(A Limited Partnership)

Statements of Partners’ Capital

~~Nine~~Six Months Ended ~~September~~June 30, ~~2001~~2003

(Unaudited)

	Limited Partners			~~General Partners~~GeneralPartners			Total
Balance at December 31, 2001	$	1,241,922		$	160,314		$	1,402,236
Balance at December 31, 2002	$	1,275,888		$	177,852		$	1,453,740
Partners’ distributions		(66,688	)		(179,100	)		(245,788	)
Partners' distributions		(180,663	)		(183,700	)		(364,363	)
Partners’ contributions		—			27,501			27,501
Partners' contributions		—			12,669			12,669
Net income		96181,~~075~~614			~~149~~211,~~215~~430			~~245~~393,~~290~~044
Balance at September 30, 2002	$	1,271,309		$	157,930		$	1,429,239
Balance at June 30, 2003	$	1,276,839		$	218,251		$	1,495,090

See accompanying notes to financial statements.

Texland Drilling Program–-1981, Ltd.

(A Limited Partnership)

Statements of Cash Flow

~~Nine~~Six Months Ended ~~September~~June 30, ~~2002~~2003 and ~~2001~~2002

(Unaudited)

Net income (loss)	$	245,290		$	492,371
	2003			2002
Operating Activities
Net income (loss)	$	393,044		$	132,327
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		~~141~~66,~~642~~030			~~105~~92,~~217~~765
Gain on sale of assets		(102,~~255~~827	)		—(7,155	)
(Increase) decrease in accounts receivable		(3631,~~705~~595	)		8(35,~~761~~878	)
(Decrease) increase in accounts payable		1847,~~238~~396			256,~~504~~618
Other		—			—
		112,920			139,482
		79,004			56,350
Net cash provided by operating activities		~~358~~472,~~210~~048			~~631~~188,~~853~~677
Investing Activities
Acquisition of property and equipment		(~~102~~35,~~242~~650	)		(~~179~~76,~~072~~803	)
Proceeds from sale of assets		102,~~255~~827			—7,155
Net cash used in investing activities		(9132,~~987~~823	)		(~~179~~69,~~072~~648	)
Financing Activities
Partners’ contributions		27,501			42,570
Partners' contributions		12,669			18,737
Partners’ distributions		(245,788	)		(533,968	)
Partners' distributions		(364,363	)		(131,400	)
Net cash used in financing activities		(~~218~~351,~~287~~694	)		(~~491~~112,~~398~~663	)
Net Increase in Cash		4787,~~936~~531			~~(38~~6,~~617~~366	)
Cash—beginning of year		2,599			58,887
Cash-beginning of year		36,199			2,599
Cash—End of Quarter	$	50,535		$	20,270
Cash-End of Quarter	$	123,730		$	8,965

See accompanying notes to financial statements.

Texland Drilling Program–-1981, Ltd.

(A Limited Partnership)

Notes toTo Financial Statements

~~September~~June 30, ~~2002~~2003

(Unaudited)

1. ~~Basis~~Summary ofOf ~~Presentation~~Significant Accounting Policies

InThe ~~the~~Partnership ~~opinion~~was oforganized ~~management,~~as ~~the accompanying~~a ~~balance~~limited ~~sheets~~partnership ~~and~~on ~~related~~July ~~interim statements of operations~~20, ~~cash~~1981 ~~flows,~~for ~~and~~the ~~partners’~~purpose ~~capital include all adjustments, consisting only~~ of engaging ~~normal recurring items necessary for their fair presentation~~ in ~~conformity~~oil ~~with~~and ~~U.S. generally~~gas ~~accepted~~exploration ~~accounting~~and ~~principals~~production. ~~Preparing~~Texland ~~financial~~Properties-1981, ~~statements~~a ~~requires~~general ~~management~~partnership, ~~to make estimates~~ and ~~assumptions~~Texland ~~that affect the reported amounts of assets~~Petroleum, ~~liabilities, revenue, and expenses~~L. ~~Actual results may differ from these estimates~~P. ~~Interim results~~ are ~~not~~the ~~necessarily~~General ~~indicative of results for a full year~~Partners. The ~~information~~Managing ~~included~~General inPartner ~~this~~is ~~From~~Texland ~~10-Q~~Petroleum, ~~should~~L.P. beThe ~~read in conjunction with Management~~Partnership’s ~~Discussion and Analysis and financial statements and notes thereto~~accounting ~~included~~policies inare ~~the~~summarized ~~Texland~~below: ~~Drilling Program–1981, Ltd. 2001 Form 10-K.~~

2. 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, 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.

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.

Texland Drilling Program–-1981, Ltd.

(A Limited Partnership)

Notes To Financial Statements (Continued)

June 30, 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 six months ended June 30, 2003 and June 30, 2002, the Partnership was charged $85,045 and $83,179 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.

Texland Drilling Program-1981, Ltd.

(A Limited Partnership)

Management’s Discussion And Analysis Of Financial

Condition And Results Of Operations

~~September~~June 30, ~~2002~~2003

~~(Unaudited)~~The Partnership’s approximate average price actually received per barrel of oil for the second quarter of 2003 was $25.88 as compared to $23.57 for the second 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 for this period. Gas sales are primarily short-term contracts which can vary widely from month to month.

~~The~~Depreciation, ~~Partnership’s~~depletion ~~average~~and ~~price~~amortization ~~per barrel of oil~~ for the ~~third~~second quarter of ~~2002~~2003 was $~~20.16~~33,125 as compared to $~~18.71~~49,159 for the ~~third~~second quarter of ~~2001~~2002. ~~The~~Changes ~~decreased~~in ~~revenue~~depreciation and depletion ~~related~~for ~~severance~~2003 ~~tax~~through ~~expense~~2002, ~~result~~are due primarily ~~from~~to ~~normal~~the ~~expected~~effect ~~declines~~that changes in ~~production~~oil and gas prices have on the calculation of estimated future economically recoverable oil and gas reserves.

Depreciation, depletion and amortization for the third quarter of 2002 was $48,877 as compared to $39,450 for the third quarter of 2001. Changes in depreciation and depletion for 2002 through 2001, 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.

~~Quantitative~~9 ~~and Qualitative Disclosures~~

About Market Risk

The Partnership is exposed to oil and gas price risks. The Partnership sells all of its oil and gas under short-term contracts. None of these risks are hedged.

Part II

Items 1 through 53

Omitted—Not applicable to Registrant.

Item 4. Controls and Procedures

Based on an evaluation of the effectiveness of the Texland Drilling Program-1981 (the Partnership) disclosure controls and procedures, the Partnership’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Partnership’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Partnership in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

There have been no changes in the Partnership’s internal control over financial reporting identified in connection with the evaluation described in the above paragraph that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Item 5

Omitted—Not applicable to Registrant.

Item 6

(a)

Exhibits:

~~99.1~~31 Certification ~~by CEO~~ Pursuant to ~~18 U.S.C.~~ Section ~~1350,~~302 ~~as Adopted Pursuant to Section 906~~ of the Sarbanes-Oxley Act of 2002.

~~99.2~~32 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~~10

PursuantTable 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. Contents

Texland Drilling Program–1981, Ltd.
By		/s/ Michael E. Chapman
		M. E. Chapman, Vice President of Texland Petroleum, Inc., General Partner—Texland Properties–1981

SIGNATURE

~~Date:~~Pursuant ~~November~~to 14the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ~~2002~~the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TEXLAND DRILLING PROGRAM-1981, LTD. Registrant

By	/s/ M. E. Chapman
	M. E. Chapman, Vice President—Finance Texland Petroleum, L.P.	Date August 14, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the dates indicated.

/s/ R. J. Schumacher

R. J. Schumacher, Chairman of the Board

Texland Petroleum, L.P.

Date August 14, 2003



By	/s/ J. N. Namy
	J. N. Namy, President & C.E.O. Texland Petroleum, L.P.	Date August 14, 2003



By	/s/ J. H. Wilkes
	J. H. Wilkes, President & C.O.O. Texland Petroleum, L.P.	Date August 14, 2003

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PursuantTable 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. Contents

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