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, 1995
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 0-16493
Southwest Oil & Gas Income Fund VII-A, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2145576
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
407 N. Big Spring, Suite 300
Midland, Texas 79701
(Address of principal executive offices)
(915) 686-9927
(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
The total number of pages contained in this report is 14.
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, 1994 which are found in the Registrant's Form 10-K Report
for 1994 filed with the Securities and Exchange Commission. The December 31,
1994 balance sheet included herein has been taken from the Registrant's 1994
Form 10-K Report. Operating results for the three and six month periods
ended June 30, 1995 are not necessarily indicative of the results that may be
expected for the full year.
Southwest Oil & Gas Income Fund VII-A, L.P.
Balance Sheets
June 30, December 31,
1995 1994
----------- ------------
(unaudited)
Assets
Current assets:
Cash $ 27,790 29,483
Receivable from Managing
General Partner 208,377 155,582
--------- ---------
Total current assets 236,167 185,065
--------- ---------
Oil and gas properties - using the full
cost method of accounting 4,626,169 4,612,263
Less accumulated depreciation,
depletion and amortization 3,121,737 3,002,737
--------- ---------
Net oil and gas properties 1,504,432 1,609,526
--------- ---------
$ 1,740,599 1,794,591
========= =========
Liabilities and Partners' Equity
Current liabilities:
Accounts payable $ 20,710 18,136
Distribution payable 2,824 389
--------- ---------
Total current liabilities 23,534 18,525
--------- ---------
Partners' equity:
General partners (472,728) (466,828)
Limited partners 2,189,793 2,242,894
--------- ---------
Total partners' equity 1,717,065 1,776,066
--------- ---------
$ 1,740,599 1,794,591
========= =========
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
Revenues
Oil and gas revenue $ 366,350 318,879 723,135 629,109
Interest income from operations 838 523 1,429 903
------- ------- ------- -------
367,188 319,402 724,564 630,012
------- ------- ------- -------
Expenses
Production 130,970 144,923 259,821 303,633
General and administrative 29,059 29,718 66,744 68,799
Depreciation, depletion and
amortization 61,000 84,000 119,000 165,000
------- ------- ------- -------
221,029 258,641 445,565 537,432
------- ------- ------- -------
Net income $ 146,159 60,761 278,999 92,580
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 13,154 5,468 25,110 8,332
======= ======= ======= =======
General Partner $ 1,462 608 2,790 926
======= ======= ======= =======
Limited Partners $ 131,543 54,685 251,099 83,322
======= ======= ======= =======
Per limited partner unit $ 8.77 3.64 16.74 5.55
======= ======= ======= =======
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1995 1994
---- ----
Cash flows from operating activities:
Cash received from oil and gas sales $ 672,569 617,837
Cash paid to suppliers (326,220) (344,430)
Interest received 1,429 903
------- -------
Net cash provided by operating
activities 347,778 274,310
------- -------
Cash flows from investing activities:
Additions to oil and gas properties (20,586) (6,798)
Sale of oil and gas properties 6,680 9,347
------- -------
Net cash provided by (used in) investing
activities (13,906) 2,549
------- -------
Cash used in financing activities:
Distributions to partners (335,565) (255,717)
------- -------
Net increase (decrease) in cash (1,693) 21,142
Cash -
beginning of period 29,483 4,103
------- -------
end of period $ 27,790 25,245
======= =======
(continued)
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Six Months Ended
June 30,
1995 1994
---- ----
Reconciliation of net income to
net cash provided by operating
activities:
Net income $ 278,999 92,580
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and amortization 119,000 165,000
Increase in accounts receivable (50,566) (11,272)
Increase in accounts payable 345 28,002
------- -------
Net cash provided by operating
activities $ 347,778 274,310
======= =======
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Oil & Gas Income Fund VII-A, L.P. was organized as a Delaware
limited partnership on January 30, 1987. The offering of limited partnership
interests began on March 4, 1987; minimum capital requirements were met on
April 28, 1987 and the offering concluded on September 21, 1987, with total
limited partner contributions of $7,500,000.
The Partnership was formed to acquire 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.
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 farmout arrangements, sale 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.
Results of Operations
A. General Comparison of the Quarters Ended June 30, 1995 and 1994
The following table provides certain information regarding performance
factors for the quarters ended June 30, 1995 and 1994:
Three Months
Ended Percentage
June 30, Increase
1995 1994 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 17.63 16.13 9%
Average price per mcf of gas $ 1.69 1.96 (14%)
Oil production in barrels * 15,500 15,300 1%
Gas production in mcf * 54,800 37,000 48%
Gross oil and gas revenue $ 366,350 318,879 15%
Net oil and gas revenue $ 235,380 173,956 35%
Total cost and expense $ 221,029 258,641 (15%)
Partnership distributions $ 173,000 121,000 43%
Limited partner distributions $ 155,700 109,788 42%
Per unit distribution to limited partners $ 10.38 7.32 42%
Number of limited partner units 15,000 15,000
*In the Form 10-Q, for the quarter ended June 30, 1994, the oil and gas
production volumes were calculated by rounding to the nearest 500 barrels or
mcf, respectively. In the Form 10-Q, for the quarter ended June 30, 1995,
the oil and gas production volumes were calculated by rounding to the nearest
100 barrels or mcf, respectively.
Revenues:
The Partnership's oil and gas revenues increased to $366,350 from $318,879
for the quarters ended June 30, 1995 and 1994, respectively, an increase of
15%. The principal factors affecting the comparison of the quarters ended
June 30, 1995 and 1994 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the quarter ended June 30, 1995 as compared to the
quarter ended June 30, 1994 by 9%, or $1.50 per barrel, resulting in an
increase of approximately $23,000 in revenues. Oil sales represented 75%
of total oil and gas sales during the quarter ended June 30, 1995 as
compared to 77% during the quarter ended June 30, 1994.
The average price for an mcf of gas received by the Partnership decreased
during the same period by 14%, or $.27 per mcf, resulting in a decrease
of approximately $10,000 in revenues.
The net total increase in revenues due to the change in prices received
from oil and gas production is approximately $13,000. The market price
for oil and gas has been extremely volatile over the past decade, and
management expects a certain amount of volatility to continue in the
foreseeable future.
2. Oil production increased approximately 200 barrels or 1% during the
quarter ended June 30, 1995 as compared to the quarter ended June 30,
1994, resulting in an increase of approximately $3,500 in revenues.
Gas production increased approximately 17,800 mcf or 48% during the same
period, resulting in an increase of approximately $30,100 in revenues.
The total increase in revenues due to the change in production is
approximately $33,600. The increase is the result of successful
workovers on two wells.
Costs and Expenses:
Total costs and expenses decreased to $221,029 from $258,641 for the quarters
ended June 30, 1995 and 1994, respectively, a decrease of 15%. The decrease
is the result of a decrease in lease operating costs, general and
administrative expense and depletion.
1. Lease operating costs and production taxes were 10% lower, or
approximately $14,000 less during the quarter ended June 30, 1995 as
compared to the quarter ended June 30, 1994. The decrease is a result of
workover costs incurred in 1994.
2. General and administrative costs consist of independent accounting and
engineering fees, computer services, postage, and Managing General
Partner personnel costs. General and administrative costs decreased 2%
or approximately $700 during the quarter ended June 30, 1995 as compared
to the quarter ended June 30, 1994.
3. Depletion expense decreased to $61,000 for the quarter ended June 30,
1995 from $84,000 for the same period in 1994. This represents a
decrease of 27%. Depletion is calculated using the gross revenue method
of amortization based on a percentage of current period gross revenues to
total future gross oil and gas revenues, as estimated by the
Partnership's independent petroleum consultants. Although oil and gas
revenues increased for the quarter ended June 30, 1995 as compared to the
quarter ended June 30, 1994, the decrease in depletion expense is the
result of the change in oil prices since 1994.
B. General Comparison of the Six Month Periods Ended June 30, 1995 and 1994
The following table provides certain information regarding performance
factors for the six month periods ended June 30, 1995 and 1994:
Six Months
Ended Percentage
June 30, Increase
1995 1994 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 17.13 14.18 21%
Average price per mcf of gas $ 1.73 2.17 (20%)
Oil production in barrels * 32,700 31,000 5%
Gas production in mcf * 94,100 87,700 7%
Gross oil and gas revenue $ 723,135 629,109 15%
Net oil and gas revenue $ 463,314 325,476 42%
Total cost and expense $ 445,565 537,432 (17%)
Partnership distributions $ 338,000 254,000 33%
Limited partner distributions $ 304,200 229,488 33%
Per unit distribution to limited partners $ 20.28 15.30 33%
Number of limited partner units 15,000 15,000
*In the Form 10-Q, for the six months ended June 30, 1994, the oil and gas
production volumes were calculated by rounding to the nearest 500 barrels or
mcf, respectively. In the Form 10-Q, for the six months ended June 30, 1995,
the oil and gas production volumes were calculated by rounding to the nearest
100 barrels or mcf, respectively.
Revenues:
The Partnership's oil and gas revenues increased to $723,135 from $629,109
for the six months ended June 30, 1995 and 1994, respectively, an increase of
15%. The principal factors affecting the comparison of the six months ended
June 30, 1995 and 1994 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the six months ended June 30, 1995 as compared to the
six months ended June 30, 1994 by 21%, or $2.95 per barrel, resulting in
an increase of approximately $91,500 in revenues. Oil sales represented
77% of total oil and gas sales during the six months ended June 30, 1995
as compared to 70% during the six months ended June 30, 1994.
The average price for an mcf of gas received by the Partnership decreased
during the same period by 20%, or $.44 per mcf, resulting in a decrease
of approximately $38,600 in revenues.
The net total increase in revenues due to the change in prices received
from oil and gas production is approximately $52,900. The market price
for oil and gas has been extremely volatile over the past decade, and
management expects a certain amount of volatility to continue in the
foreseeable future.
2. Oil production increased approximately 1,700 barrels or 5% during the six
months ended June 30, 1995 as compared to the six months ended June 30,
1994, resulting in an increase of approximately $29,100 in revenues.
Gas production increased approximately 6,400 mcf or 7% during the same
period, resulting in an increase of approximately $11,100 in revenues.
The total increase in revenues due to the change in production is
approximately $40,200.
Costs and Expenses:
Total costs and expenses decreased to $445,565 from $537,432 for the six
months ended June 30, 1995 and 1994, respectively, a decrease of 17%. The
decrease is the result of a decrease in lease operating costs, general and
administrative expense and depletion.
1. Lease operating costs and production taxes were 14% lower, or
approximately $43,800 less during the six months ended June 30, 1995 as
compared to the six months ended June 30, 1994. The decrease is a result
of workover costs incurred in 1994.
2. General and administrative costs consist of independent accounting and
engineering fees, computer services, postage, and Managing General
Partner personnel costs. General and administrative costs decreased 3%
or approximately $2,100 during the six months ended June 30, 1995 as
compared to the six months ended June 30, 1994.
3. Depletion expense decreased to $119,000 for the six months ended June 30,
1995 from $165,000 for the same period in 1994. This represents a
decrease of 28%. Depletion is calculated using the gross revenue method
of amortization based on a percentage of current period gross revenues to
total future gross oil and gas revenues, as estimated by the
Partnership's independent petroleum consultants. Although oil and gas
revenues increased for the six months ended June 30, 1995 as compared to
the six months ended June 30, 1994, the decrease in depletion expense is
the result of the change in oil prices since 1994.
Liquidity and Capital Resources:
The primary source of cash is from profitable operations. The Partnership
knows of no material change, nor does it anticipate any such change.
Cash flows provided by operating activities were approximately $347,800 in
the six months ended June 30, 1995 as compared to approximately $274,300 in
the six months ended June 30, 1994. Primary source of the 1995 cash flow
from operating activities was profitable operations.
Cash flows used by investing activities were approximately $13,900 in the six
months ended June 30, 1995 as compared to approximately $2,500 of cash
provided from the sale of oil and gas properties in the six months ended June
30, 1994. The principal use of the 1995 cash flow from investing activities
was the additions to oil and gas properties of approximately $20,600, offset
by the sale of oil and gas properties of approximately $6,700.
Cash flows used in financing activities were approximately $335,600 in the
six months ended June 30, 1995 as compared to approximately $255,700 in the
six months ended June 30, 1994. The only use in financing activities was the
distributions to partners.
Total distributions during the six months ended June 30, 1995 were $338,000
of which $304,200 was distributed to the limited partners and $33,800 was
distributed to the general partners. The per unit distribution to limited
partners during the six months ended June 30, 1995 was $20.28. Total
distributions during the six months ended June 30, 1994 were $254,000 of
which $229,488 was distributed to the limited partners and $24,512 was
distributed to the general partners. The per unit distribution to limited
partners during the six months ended June 30, 1994 was $15.30. The source
for the 1995 distributions of $338,000 was oil and gas operations of
approximately $347,800 and equipment sales of approximately $6,700, offset by
expenditures on equipment of approximately $20,600, with the balance from
available cash on hand at the beginning of the period. The source for the
1994 distributions of $254,000 was oil and gas operations of approximately
$274,300, and equipment sales of approximately $9,300, offset by expenditures
on equipment of approximately $6,800, resulting in excess cash for
contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions of
$8,405,093 have been made to the partners. As of June 30, 1995, $7,572,819
or $504.85 per limited partner unit has been distributed to the limited
partners, representing a 101% return of the capital contributed.
As of June 30, 1995, the Partnership had approximately $212,600 in working
capital. The Managing General Partner knows of no unusual contractual
commitments and believes the revenues generated from operations are adequate
to meet the needs of the Partnership.
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) None
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
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 OIL & GAS
INCOME FUND VII-A, L.P.
a Delaware limited partnership
By: Southwest Royalties, Inc.
Managing General Partner
Date: August 2, 1995 By: /s/ Bill E. Coggin
------------------------------
Bill E. Coggin, Vice President
and Chief Financial Officer