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 30, 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 11 pages.

Texland Drilling Program-1981, Ltd.

Index To Financial Statements

Reference Page

Balance Sheets at September 30, 2003 and December 31, 2002		3

Statements of Operations for the Three Months And Nine Months Ended September 30, 2003 and 2002		4

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

Statements of Cash Flows for Nine Months Ended September 30, 2003 and 2002.		6

Notes to Financial Statements.		7-8

Texland Drilling Program-1981, Ltd.

(A Limited Partnership)

Balance Sheets

September 30, 2003 and December 31, 2002

(Unaudited)

	09/30/03			12/31/2002
ASSETS
Current Assets
Cash	$	70,158		$	36,199
Accounts receivable—trade		155,396			140,943
Accounts receivable—managing general partner		—			14,961

		225,554			192,103


Property and Equipment, at Cost (Successful Efforts Method)
Intangible development costs		7,339,536			7,313,622
Lease and well equipment		4,258,148			4,237,033
Producing leaseholds		161,495			161,495

		11,759,179			11,712,150
Accumulated depreciation, depletion and amortization		(10,492,192	)		(10,393,780	)

		1,266,987			1,318,370

	$	1,492,541		$	1,510,473

LIABILITIES AND PARTNERS’ CAPITAL
Current Liabilities
Accounts payable:
Managing general partner	$	74,222		$	56,733

Partners’ Capital
Limited partners—2,425 units outstanding		1,257,712			1,275,888
General partners		160,607			177,852

		1,418,319			1,453,740

	$	1,492,541		$	1,510,473

See accompanying notes to financial statements.

Texland Drilling Program-1981, Ltd.

(A Limited Partnership)

Statements of Operations

September 30, 2003 and 2002

(Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2003			2002		2003		2002
Revenue
Oil and gas sales	$	360,430		$	345,259	$	1,158,809	$	909,597
Interest income		114			59		441		187
Miscellaneous Income		—			—		—		—
Gain on sale of assets		(1,424	)		3,100		1,403		10,255

		359,120			348,418		1,160,653		920,039

Expense
Fees to managing general partner		22,875			23,250		68,625		69,750
Production expense		135,388			144,012		366,878		396,566
Severance tax		18,942			17,293		62,024		46,087
Depreciation, depletion and amortization		33,785			48,877		99,815		141,642
Other		5,337			2,023		27,474		20,704

		216,327			235,455		624,816		674,749

Net Income	$	142,793		$	112,963	$	535,837	$	245,290

Allocation of Net Income
Limited partners	$	66,232		$	50,399	$	247,846	$	96,075
General partners		76,561			62,564		287,991		149,215

	$	142,793		$	112,963	$	535,837	$	245,290

Net Income per $5,000 Limited Partner (2,425 Units Outstanding)	$	27		$	21	$	102	$	40

See accompanying notes to financial statements.

Texland Drilling Program-1981, Ltd.

(A Limited Partnership)

Statements of Partners’ Capital

Nine Months Ended September 30, 2003

(Unaudited)

	Limited Partners			General Partners			Total
Balance at December 31, 2002	$	1,275,888		$	177,852		$	1,453,740
Partners’ distributions		(266,022	)		(326,350	)		(592,372	)
Partners’ contributions		—			21,114			21,114
Net income		247,846			287,991			535,837

Balance at September 30, 2003	$	1,257,712		$	160,607		$	1,418,319

See accompanying notes to financial statements

Texland Drilling Program-1981, Ltd.

(A Limited Partnership)

Statements of Cash Flow

Nine Months Ended September 30, 2003 and 2002

(Unaudited)

	2003			2002
Operating Activities
Net income (loss)	$	535,837		$	245,290

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		99,815			141,642
Gain on sale of assets		(1,403	)		(10,255	)
(Increase) decrease in accounts receivable		508			(36,705	)
(Decrease) increase in accounts payable		17,489			18,238
Other		—			—

		116,409			112,920

Net cash provided by operating activities		652,246			358,210

Investing Activities
Acquisition of property and equipment		(48,432	)		(102,242	)
Proceeds from sale of assets		1,403			10,255

Net cash used in investing activities		(47,029	)		(91,987	)

Financing Activities
Partners’ contributions		21,114			27,501
Partners’ distributions		(592,372	)		(245,788	)

Net cash used in financing activities		(571,258	)		(218,287	)

Net Increase in Cash		33,959			47,936
Cash—beginning of year		36,199			2,599

Cash—End of Quarter	$	70,158		$	50,535

See accompanying notes to financial statements.

Texland Drilling Program-1981, Ltd.

(A Limited Partnership)

Notes To Financial Statements

September 30, 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.

Texland Drilling Program-1981, Ltd.

(A Limited Partnership)

Notes To Financial Statements

September 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 nine months ended September 30, 2003 and September 30, 2002, the Partnership was charged $127,568 and $124,769 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 30, 2003

The Partnership’s approximate average price actually received per barrel of oil for the third quarter of 2003 was $27.08 as compared to $25.63 for the third 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.

Depreciation, depletion and amortization for the third quarter of 2003 was $33,785 as compared to $48,877 for the third quarter of 2002. Changes in depreciation and depletion for 2003 through 2002, 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.

Part II

Items 1 through 3

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:

31		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification 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 Section 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 authorized.

TEXLAND DRILLING PROGRAM-1981, LTD. Registrant

By:	/s/ M. E. Chapman	Date November 13, 2003

	M. E. Chapman, Vice President—Finance Texland Petroleum, L.P.

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.


By:	/s/ R. J. Schumacher	Date November 13, 2003

	R. J. Schumacher, Chairman of the Board Texland Petroleum, L.P.


By:	/s/ J. N. Namy	Date November 13, 2003

	J. N. Namy, President & C.E.O. Texland Petroleum, L.P.


By:	/s/ J. H. Wilkes	Date November 13, 2003

	J. H. Wilkes, President & C.O.O. Texland Petroleum, L.P.

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TEXLAND DRILLING PROGRAM 1981 10-Q