1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 0-15408
Southwest Royalties, Inc. Income Fund V
(Exact name of registrant as specified
in its limited partnership agreement)
Tennessee 75-2104619
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6 Desta Drive, Suite 6500
Midland, Texas 79705
(Address of principal executive offices)
(432) 682-6324
(Registrant's telephone number,
including area code)
Indicate by check mark whether 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 ___
Indicate by check mark whether the registrant is large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer ___ Accelerated filer ___ Non-
accelerated filer X
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes__ No X
The registrant's outstanding securities consist of Units of limited
partnership interests for which there exists no established public market
from which to base a calculation of aggregate market value.
The total number of pages contained in this report is 20.
Glossary of Oil and Gas Terms
The following are abbreviations and definitions of terms commonly used in
the oil and gas industry that are used in this filing.
Bbl. One stock tank barrel, or 42 United States gallons liquid volume.
BOE. Equivalent barrels of oil, with natural gas converted to oil
equivalents based on a ratio of six Mcf of natural gas to one Bbl of oil.
Developmental well. A well drilled within the proved area of an oil or
natural gas reservoir to the depth of a stratigraphic horizon known to be
productive.
Exploratory well. A well drilled to find and produce oil or natural
gas reserves in an unproved area, to find a new reservoir in a field
previously found to be productive of oil or natural gas in another
reservoir, or to extend a known reservoir.
Farm-out arrangement. An agreement whereby the owner of a leasehold or
working interest agrees to assign his interest in certain specific acreage
to an assignee, retaining some interest, such as an overriding royalty
interest, subject to the drilling of one (1) or more wells or other
specified performance by the assignee.
Field. An area consisting of a single reservoir or multiple reservoirs
all grouped on or related to the same individual geological structural
feature and/or stratigraphic condition.
Mcf. One thousand cubic feet.
Net Profits Interest. An agreement whereby the owner receives a
specified percentage of the defined net profits from a producing property
in exchange for consideration paid. The net profits interest owner will
not otherwise participate in additional costs and expenses of the property.
Oil. Crude oil, condensate and natural gas liquids.
Overriding royalty interest. Interests that are carved out of a
working interest, and their duration is limited by the term of the lease
under which they are created.
Standardized measure of discounted future net cash flows. Present
value of proved reserves, as adjusted to give effect to estimated future
abandonment costs, net of the estimated salvage value of related equipment.
Production costs. Costs incurred to operate and maintain wells and
related equipment and facilities, including depreciation and applicable
operating costs of support equipment and facilities and other costs of
operating and maintaining those wells and related equipment and facilities.
Proved Area. The part of a property to which proved reserves have been
specifically attributed.
Proved developed oil and gas reserves. Proved oil and gas reserves
that can be expected to be recovered from existing wells with existing
equipment and operating methods.
Proved properties. Properties with proved reserves.
Proved oil and gas reserves. The estimated quantities of crude oil,
natural gas, and natural gas liquids with geological and engineering data
that demonstrate with reasonable certainty to be recoverable in future
years from known reservoirs under existing economic and operating
conditions, i.e., prices and costs as of the date the estimate is made.
Proved undeveloped reserves. Proved oil and gas reserves that are
expected to be recovered from new wells on undrilled acreage, or from
existing wells where a relatively major expenditure is required for
recompletion.
Reservoir. A porous and permeable underground formation containing a
natural accumulation of producible oil or gas that is confined by
impermeable rock or water barriers and is individual and separate from
other reservoirs.
Royalty interest. An interest in an oil and natural gas property
entitling the owner to a share of oil or natural gas production free of
costs of production.
Working interest. The operating interest that gives the owner the
right to drill, produce and conduct operating activities on the property
and a share of production.
Workover. Operations on a producing well to restore or increase
production.
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited condensed financial statements included herein have been
prepared by the Registrant (herein also referred to as the "Partnership")
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments necessary for a fair presentation have been included and are of
a normal recurring nature. The financial statements should be read in
conjunction with the audited financial statements and the notes thereto for
the year ended December 31, 2005, which are found in the Registrant's Form
10-K Report for 2005 filed with the Securities and Exchange Commission.
The December 31, 2005 balance sheet included herein has been taken from the
Registrant's 2005 Form 10-K Report. Operating results for the three and
six month periods ended June 30, 2006 are not necessarily indicative of the
results that may be expected for the full year.
Southwest Royalties, Inc. Income Fund V
Balance Sheets
June 30, December
31,
2006 2005
------ ------
(unaudit
ed)
Assets
- ---------
Current assets:
Cash and cash equivalents $ 97,745 78,392
Receivable from Managing General - 85,383
Partner
Distribution receivable 24 -
-------- --------
---- ----
Total current assets 97,769 163,775
-------- --------
---- ----
Oil and gas properties - using the
full-
cost method of accounting 6,243,17 6,243,17
1 1
Less accumulated depreciation,
depletion and amortization 5,696,26 5,684,27
5 2
-------- --------
---- ----
Net oil and gas properties 546,906 558,899
-------- --------
---- ----
$ 644,675 722,674
======= =======
Liabilities and Partners' Equity
- -------------------------------------
- ---
Current liability:
Distribution payable $ - 25
Payable to Managing General Partner 39,401 -
-------- --------
---- ----
Asset retirement obligation 331,053 318,204
-------- --------
---- ----
Partners' equity (deficit):
General partner (647,942 (634,920
) )
Limited partners 922,163 1,039,36
5
-------- --------
---- ----
Total partners' equity 274,221 404,445
-------- --------
---- ----
$ 644,675 722,674
======= =======
The accompanying notes are an integral
part of these financial statements.
Southwest Royalties, Inc. Income Fund V
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
----- ----- ----- -----
Revenues
- -------------
Income from net profits $ 61,550 104,766 236,091 213,093
interests
Interest 631 94 1,228 218
Other - - - -
-------- -------- -------- ---------
--- --- --- --
62,181 104,860 237,319 213,311
-------- -------- -------- ---------
--- --- --- --
Expenses
- ------------
Depreciation, depletion and 5,072 5,443 11,993 9,808
amortization
Accretion expense 6,880 3,926 12,849 7,852
General and administrative 35,818 31,241 67,701 62,520
-------- -------- -------- ---------
--- --- --- --
47,770 40,610 92,543 80,180
-------- -------- -------- ---------
--- --- --- --
Net income $ 14,411 64,250 144,776 133,131
====== ====== ====== ======
Net income allocated to:
Managing General Partner $ 1,441 6,425 14,478 13,313
====== ====== ====== ======
Limited Partners $ 12,970 57,825 130,298 119,818
====== ====== ====== ======
Per limited partner unit $ 1.73 7.71 17.38 15.98
====== ====== ====== ======
The accompanying notes are an integral
part of these financial statements.
Southwest Royalties, Inc. Income Fund V
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
2006 2005
----- ------
Cash flows from operating
activities:
Cash received from income from
net
profits interests $ 321,474 198,591
Cash paid to suppliers (28,300) (62,520)
Interest received 1,228 218
-------- --------
-- --
Net cash provided by operating 294,402 136,289
activities
-------- --------
-- --
Cash flows from financing
activities:
Distributions to partners (275,000 (140,000
) )
(Decrease) Increase in (49) 70
distributions payable/receivable
-------- --------
-- --
Net cash used in financing (275,049 (139,930
activities ) )
-------- --------
-- --
Net increase (decrease) in cash 19,353 (3,641)
and cash equivalents
Beginning of period 78,392 29,725
-------- --------
-- --
End of period $ 97,745 26,084
====== ======
Reconciliation of net income to
net cash
provided by operating
activities:
Net income $ 144,776 133,131
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation, depletion and 11,993 9,808
amortization
Accretion expense 12,849 7,852
Decrease (increase) in 85,383 (14,502)
receivables
Increase in accounts payable 39,401 -
-------- --------
-- --
Net cash provided by operating $ 294,402 136,289
activities
====== ======
Noncash investing and financing
activities:
Decrease in oil and gas $ - (16,881)
properties - SFAS No. 143
====== ======
The accompanying notes are an integral
part of these financial statements.
Southwest Royalties, Inc. Income Fund V
(a Tennessee limited partnership)
Notes to Financial Statements
1. Organization
Southwest Royalties, Inc. Income Fund V was organized under the laws
of the state of Tennessee on May 1, 1986 for the purpose of acquiring
producing oil and gas properties and to produce and market crude oil
and natural gas produced from such properties for a term of 50 years,
unless terminated at an earlier date as provided for in the
Partnership Agreement. The Partnership sells its oil and gas
production to a variety of purchasers with the prices it receives
being dependent upon the oil and gas economy. Southwest Royalties,
Inc., a wholly owned subsidiary of Clayton Williams Energy, Inc.,
serves as the Managing General Partner. Revenues, costs and expenses
are allocated as follows:
Limited General
Partners Partners
-------- --------
-- --
Interest income on capital 100% -
contributions
Oil and gas sales 90% 10%
All other revenues 90% 10%
Organization and offering 100% -
costs (1)
Amortization of organization 100% -
costs
Property acquisition costs 100% -
Gain/loss on property 90% 10%
disposition
Operating and administrative 90% 10%
costs (2)
Depreciation, depletion and
amortization
of oil and gas properties 90% 10%
All other costs 90% 10%
(1) All organization costs in excess of 3% of initial capital
contributions will be paid by the Managing General Partner and
will be treated as a capital contribution. The Partnership paid
the Managing General Partner an amount equal to 3% of initial
capital contributions for such organization costs.
(2) Administrative costs in any year, which exceed 2% of capital
contributions, shall be paid by the Managing General Partner and
will be treated as a capital contribution.
2. Summary of Significant Accounting Policies
The interim financial information as of June 30, 2006, and for the
three and six months ended June 30, 2006, is unaudited. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in this Form 10-Q pursuant
to the rules and regulations of the Securities and Exchange
Commission. However, in the opinion of management, these interim
financial statements include all the necessary adjustments to fairly
present the results of the interim periods and all such adjustments
are of a normal recurring nature. The interim consolidated financial
statements should be read in conjunction with the Partnership's Annual
Report on Form 10-K for the year ended December 31, 2005.
In September 2004, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 106 ("SAB 106"). SAB 106 expresses the SEC
staff's views regarding SFAS No. 143 and its impact on both the full-
cost ceiling test and the calculation of depletion expense. In
accordance with SAB 106, beginning in the first quarter of 2005,
undiscounted abandonment costs for wells to be drilled in the future
to develop proved reserves are included in the unamortized cost of oil
and gas properties, net of related salvage value, for purposes of
computing depreciation, depletion and amortization ("DD&A"). The
implementation of SAB 106 did not have a material impact on our
financial statements.
Southwest Royalties, Inc. Income Fund V
(a Tennessee limited partnership)
Notes to Financial Statements
3. Asset Retirement Obligations
Changes in abandonment obligations for the six months ended June 30,
2006 and 2005 are as follows:
2006 2005
------- -------
Beginning of year $ 318,204 274,578
Reduction of obligations due to - (16,881
farmouts )
Accretion expense 12,849 7,852
------- -------
------- -----
End of period $ 331,053 265,549
======= =======
=
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Royalties, Inc. Income Fund V was organized as a Tennessee
limited partnership on May 1, 1986 after receipt from investors of
$1,000,000 in limited partner capital contributions. The offering of
limited partnership interests began on January 22, 1986 and concluded on
July 22, 1986, with total limited partner contributions of $7,500,000.
The Partnership was formed to acquire royalty and net profits interests in
producing oil and gas properties, to produce and market crude oil and
natural gas produced from such properties, and to distribute the net
proceeds from operations to the limited and general partners. Net revenues
from producing oil and gas properties are not reinvested in other revenue
producing assets except to the extent that production facilities and wells
are improved or reworked, or where methods are employed to improve or
enable more efficient recovery of oil and gas reserves. The economic life
of the Partnership thus depends on the period over which the Partnership's
oil and gas reserves are economically recoverable.
Increases or decreases in Partnership revenues and, therefore,
distributions to partners, will depend primarily on changes in the prices
received for production, changes in volumes of production sold, increases
and decreases in lease operating expenses, enhanced recovery projects,
offset drilling activities pursuant to farm-out arrangements, sales of
properties, and the depletion of wells. Since wells deplete over time,
production can generally be expected to decline from year to year.
Well operating costs and general and administrative costs usually decrease
with production declines; however, these costs may not decrease
proportionately. Net income available for distribution to the partners is
therefore expected to fluctuate in later years based on these factors.
Oil and Gas Properties
Oil and gas properties are accounted for at cost under the full-cost
method. Under this method, all productive and nonproductive costs incurred
in connection with the acquisition, exploration and development of oil and
gas reserves are capitalized. Gain or loss on the sale of oil and gas
properties is not recognized unless significant oil and gas reserves are
sold.
Should the net capitalized costs exceed the estimated present value of oil
and gas reserves, discounted at 10%, such excess costs would be charged to
current expense. As of June 30, 2006, the net capitalized costs did not
exceed the estimated present value of oil and gas reserves.
The Partnership's interest in oil and gas properties consists of net
profits interests in proved properties located within the continental
United States. A net profits interest is created when the owner of a
working interest in a property enters into an arrangement providing that
the net profits interest owner will receive a stated percentage of the net
profit from the property. The net profits interest owner will not
otherwise participate in additional costs and expenses of the property.
The Partnership recognizes income from its net profits interest in oil and
gas property on an accrual basis, while the quarterly cash distributions of
the net profits interest are based on a calculation of actual cash received
from oil and gas sales, net of expenses incurred during that quarterly
period. If the net profits interest calculation results in expenses
incurred exceeding the oil and gas income received during a quarter, no
cash distribution is due to the Partnership's net profits interest until
the deficit is recovered from future net profits. The Partnership accrues
a quarterly loss on its net profits interest provided there is a cumulative
net amount due for accrued revenue as of the balance sheet date. As of
June 30, 2006, there were no timing differences which resulted in a deficit
net profit interest.
Critical Accounting Policies
The Partnership follows the full cost method of accounting for its oil and
gas properties. The full cost method subjects companies to quarterly
calculations of a "ceiling", or limitation on the amount of properties that
can be capitalized on the balance sheet. If the Partnership's capitalized
costs are in excess of the calculated ceiling, the excess must be written
off as an expense.
The Partnership's discounted present value of its proved oil and natural
gas reserves is a major component of the ceiling calculation, and
represents the component that requires the most subjective judgments.
Estimates of reserves are forecasts based on engineering data, projected
future rates of production and the timing of future expenditures. The
process of estimating oil and natural gas reserves requires substantial
judgment, resulting in imprecise determinations, particularly for new
discoveries. Different reserve engineers may make different estimates of
reserve quantities based on the same data. The Partnership's reserve
estimates are prepared by outside consultants.
The passage of time provides more qualitative information regarding
estimates of reserves, and revisions are made to prior estimates to reflect
updated information. However, there can be no assurance that more
significant revisions will not be necessary in the future. If future
significant revisions are necessary that reduce previously estimated
reserve quantities, it could result in a full cost property writedown. In
addition to the impact of these estimates of proved reserves on calculation
of the ceiling, estimates of proved reserves are also a significant
component of the calculation of depletion, depreciation, and amortization
("DD&A").
While the quantities of proved reserves require substantial judgment, the
associated prices of oil and natural gas reserves that are included in the
discounted present value of the reserves do not require judgment. The
ceiling calculation dictates that prices and costs in effect as of the last
day of the period are generally held constant indefinitely. Because the
ceiling calculation dictates that prices in effect as of the last day of
the applicable quarter are held constant indefinitely, the resulting value
is not indicative of the true fair value of the reserves. Oil and natural
gas prices have historically been cyclical and, on any particular day at
the end of a quarter, can be either substantially higher or lower than the
Partnership's long-term price forecast that is a barometer for true fair
value.
Supplemental Information
The following unaudited information is intended to supplement the financial
statements included in this Form 10-Q with data that is not readily
available from those statements.
Three Months Ended
June 30,
2006 2005
------ ------
Oil production in 1,644 2,791
barrels
Gas production in mcf 14,071 17,892
Total (BOE) 3,989 5,773
Average price per barrel $ 69.19
of oil 51.08
Average price per mcf of $ 7.47
gas 7.24
Partnership $ 125,000 60,000
distributions
Limited partner $ 112,500 54,000
distributions
Per unit distribution to $ 15.00
limited partners 7.20
Number of limited 7,499 7,499
partner units
Operating Results
The following discussion compares our results for the quarters ended June
30, 2006 and 2005. Unless otherwise indicated, references to 2006 and 2005
within this section refer to the respective quarterly period.
Income from net profits
Oil and gas prices continued to climb to record levels compared to the
previous two years. Comparing 2006 to 2005, oil and gas sales decreased
$53,300, of which price variances accounted for a $33,000 increase and
production variances accounted for a $86,300 decrease.
Production in 2006 (on a BOE basis) was 31% lower than 2005. The decrease
in oil and gas production in 2006 is due primarily to production declines
on several properties.
In 2006, our realized oil price was 35% higher than 2005, while our
realized gas price was 3% higher. Historically, the markets for oil and
gas have been volatile, and they are likely to continue to be volatile. We
have very little control over the prices we receive for our production at
the wellhead since most of our physical marketing arrangements are market-
sensitive.
Oil and gas production costs on a BOE basis increased from $28.99 per BOE
in 2005 to $39.43 per BOE in 2006. The increase resulted when production
volume declines exceeded production cost declines.
Expenses
Depletion on a BOE basis increased 35% in 2006. Comparing 2006 to 2005,
depletion expense decreased $400, of which rate variances accounted for a
$1,300 increase and production variances accounted for a $1,700 decrease.
Accretion expense increased 75% in 2006 due primarily to fourth quarter
2005 revisions in previous estimates related to increased costs to plug
wells.
General and administrative ("G&A") expenses were 15% higher in 2006. The
increase in general and administrative expenses is primarily due to higher
professional fees for audit and tax services.
Supplemental Information
The following unaudited information is intended to supplement the financial
statements included in this Form 10-Q with data that is not readily
available from those statements.
Six Months Ended
June 30,
2006 2005
------ ------
Oil production in 4,360 5,024
barrels
Gas production in mcf 29,667 32,372
Total (BOE) 9,305 10,419
Average price per barrel $ 62.69
of oil 50.55
Average price per mcf of $ 7.47
gas 6.50
Partnership $ 275,000 140,000
distributions
Limited partner $ 247,500 126,000
distributions
Per unit distribution to $ 33.00
limited partners 16.80
Number of limited 7,499 7,499
partner units
Operating Results
The following discussion compares our results for the six months ended June
30, 2006 and 2005. Unless otherwise indicated, references to 2006 and 2005
within this section refer to the respective six months period.
Income from net profits
Oil and gas prices continued to climb to record levels compared to the
previous two years. Comparing 2006 to 2005, oil and gas sales increased
$30,400, of which price variances accounted for a $81,600 increase and
production variances accounted for a $51,200 decrease.
Production in 2006 (on a BOE basis) was 11% lower than 2005. The decrease
in oil and gas production in 2006 is due primarily to normal production
declines.
In 2006, our realized oil price was 24% higher than 2005, while our
realized gas price was 15% higher. Historically, the markets for oil and
gas have been volatile, and they are likely to continue to be volatile. We
have very little control over the prices we receive for our production at
the wellhead since most of our physical marketing arrangements are market-
sensitive.
Oil and gas production costs on a BOE basis increased from $24.13 per BOE
in 2005 to $27.82 per BOE in 2006. The increase in oil and gas production
costs in 2006 was due primarily to higher production tax costs related to
higher product prices.
Expenses
Depletion on a BOE basis increased 37% in 2006. Comparing 2006 to 2005,
depletion expense increased $2,200, of which rate variances accounted for a
$3,200 increase and production variances accounted for a $1,000 decrease.
Accretion expense increased 64% in 2006 due primarily to fourth quarter
2005 revisions in previous estimates related to increased costs to plug
wells
General and administrative ("G&A") expenses were 8% higher in 2006. The
increase in general and administrative expenses is primarily due to higher
professional fees for audit and tax services.
Liquidity and Capital Resources
Partnership distributions during the six months ended June 30, 2006 were
$275,000, of which $247,500 was distributed to the limited partners and
$27,500 to the general partners. Cumulative cash distributions of
$8,701,841 have been made to the general and limited partners as of June
30, 2006. As of June 30, 2006, $7,816,118 or $1,042.29 per limited partner
unit has been distributed to the limited partners, representing 104% of
contributed capital.
Texas Margin Taxes
In May 2006, the State of Texas adopted House Bill 3, which modified the
state's franchise tax structure, replacing the previous tax based on
capital or earned surplus with a margin tax (the "Texas Margin Tax")
effective with franchise tax reports filed on or after January 1, 2008. The
Texas margin Tax is computed by applying the applicable tax rate (1% for
the Partnership's business) to the profit margin, which is generally
determined by total revenue less either cost of goods sold or compensation
as applicable. However the Partnership believes, based on it's
interpretation, that the Texas Margin Tax does not apply to the Partnership
since substantially all of it's income is derived from a net profits
interest.
Recent Accounting Pronouncements
There were no recent accounting pronouncements that had a significant
effect on the partnership.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Partnership is not a party to any derivative or embedded derivative
instruments.
Item 4. Controls and Procedures
The Managing General Partner has established disclosure controls and
procedures that are adequate to provide reasonable assurance that
management will be able to collect, process and disclose both financial and
non-financial information, on a timely basis, in the Partnership's reports
to the SEC. Disclosure controls and procedures include all processes
necessary to ensure that material information is recorded, processed,
summarized and reported within the time periods specified in the SEC's
rules and forms, and is accumulated and communicated to management,
including our chief executive and chief financial officers, to allow timely
decisions regarding required disclosures.
With respect to these disclosure controls and procedures:
management has evaluated the effectiveness of the disclosure
controls and procedures as of the end of the period covered by
this report;
this evaluation was conducted under the supervision and with the
participation of management, including the chief executive and
chief financial officers of the Managing General Partner; and
it is the conclusion of chief executive and chief financial
officers of the Managing General Partner that these disclosure
controls and procedures are effective in ensuring that
information that is required to be disclosed by the Partnership
in reports filed or submitted with the SEC is recorded,
processed, summarized and reported within the time periods
specified in the rules and forms established by the SEC.
Internal Control Over Financial Reporting
There has not been any change in the Partnership's internal control over
financial reporting that occurred during the six months ended June 30, 2006
that has materially affected, or is reasonably likely to materially affect,
its internal control over financial reporting.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matter to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
31.1 Rule 13a-14(a)/15d-14(a) Certification
31.2 Rule 13a-14(a)/15d-14(a) Certification
32.1 Certification of Chief Executive Officer and
Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements 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.
Southwest Royalties, Inc. Income Fund V, a
Tennessee limited partnership
By: Southwest Royalties, Inc., Managing
General Partner
By: /s/ L. Paul Latham
L. Paul Latham
President and Chief Executive Officer
Date: August 11, 2006
SECTION 302 CERTIFICATION Exhibit 31.1
I, L. Paul Latham, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Southwest
Royalties, Inc. Income Fund V,
2.Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this report;
3.Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a)Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b)Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c)Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a)All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 11, 2006 /s/ L. Paul Latham
L. Paul Latham
President and Chief Executive Officer
of Southwest Royalties, Inc., the
Managing General Partner of
Southwest Royalties, Inc. Income Fund V
SECTION 302 CERTIFICATION Exhibit 31.2
I, Mel G. Riggs, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Southwest
Royalties, Inc. Income Fund V,
2.Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this report;
3.Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a)Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b)Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c)Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a)All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 11, 2006 /s/ Mel G. Riggs
Mel G. Riggs
Vice President and Chief Financial
Officer of
Southwest Royalties, Inc., the
Managing General Partner of
Southwest Royalties, Inc. Income Fund V
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. 1350 and in connection with the accompanying report
on Form 10-Q for the period ended June 30, 2006 that is being filed
concurrently with the Securities and Exchange Commission on the date hereof
(the "Report"), each of the undersigned officers of Southwest Royalties,
Inc. Income Fund V (the "Company"), hereby certifies that:
1. The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operation of the Company.
/s/ L. Paul Latham
L. Paul Latham
President and Chief Executive Officer
of Southwest Royalties, Inc., the
Managing General Partner of
Southwest Royalties, Inc. Income
Fund V
August 11, 2006
/s/ Mel G. Riggs
Mel G. Riggs
Vice President and Chief Financial
Officer of
Southwest Royalties, Inc., the
Managing General Partner of
Southwest Royalties, Inc. Income
Fund V
August 11, 2006