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 September 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 nine month periods
ended September 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
September 30, December 31,
1995 1994
------------- ------------
(unaudited)
Assets
Current assets:
Cash $ 41,230 29,483
Receivable from Managing General Partner 176,667 155,582
--------- ---------
Total current assets 217,897 185,065
--------- ---------
Oil and gas properties - using the full
cost method of accounting 4,649,541 4,612,263
Less accumulated depreciation,
depletion and amortization 3,166,737 3,002,737
--------- ---------
Net oil and gas properties 1,482,804 1,609,526
--------- ---------
$ 1,700,701 1,794,591
========= =========
Liabilities and Partners' Equity
Current liabilities:
Accounts payable $ 32,160 18,136
Distribution payable 3,223 389
--------- ---------
Total current liabilities 35,383 18,525
--------- ---------
Partners' equity:
General partners (477,903) (466,828)
Limited partners 2,143,221 2,242,894
--------- ---------
Total partners' equity 1,665,318 1,776,066
--------- ---------
$ 1,700,701 1,794,591
========= =========
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
Revenues
Oil and gas revenue $ 258,439 310,402 981,573 939,511
Interest income from
operations 476 721 1,905 1,624
------- ------- ------- -------
258,915 311,123 983,478 941,135
------- ------- ------- -------
Expenses
Production 112,906 131,526 372,726 435,159
General and administrative 26,905 27,992 93,650 96,793
Depreciation, depletion and
amortization 45,000 82,000 164,000 247,000
------- ------- ------- -------
184,811 241,518 630,376 778,952
------- ------- ------- -------
Net income $ 74,104 69,605 353,102 162,183
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 6,669 6,265 31,779 14,596
======= ======= ======= =======
General partner $ 741 696 3,531 1,622
======= ======= ======= =======
Limited partners $ 66,694 62,644 317,792 145,965
======= ======= ======= =======
Per limited partner unit $ 4.45 4.18 21.19 9.73
======= ======= ======= =======
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1995 1994
---- ----
Cash flows from operating activities:
Cash received from oil and gas sales $ 967,281 936,123
Cash paid to suppliers (459,145) (497,588)
Interest received 1,905 1,624
------- -------
Net cash provided by operating
activities 510,041 440,159
------- -------
Cash flows from investing activities:
Additions to oil and gas properties (43,958) (8,244)
Sale of oil and gas properties 6,680 9,347
------- -------
Net cash provided by (used in)
investing activities (37,278) 1,103
------- -------
Cash used in financing activities:
Distributions to partners (461,016) (406,129)
------- -------
Net increase in cash 11,747 35,133
Cash:
Beginning of period 29,483 4,103
------- -------
End of period $ 41,230 39,236
======= =======
(continued)
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1995 1994
---- ----
Reconciliation of net income to
net cash provided by operating
activities:
Net income $ 353,102 162,183
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and amortization 164,000 247,000
Increase in accounts receivable (14,292) (3,388)
Increase in accounts payable 7,231 34,364
------- -------
Net cash provided by operating
activities $ 510,041 440,159
======= =======
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, 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 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 September 30, 1995 and 1994
The following table provides certain information regarding performance
factors for the quarters ended September 30, 1995 and 1994:
Three Months
Ended Percentage
September 30, Increase
1995 1994 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 15.65 16.70 (6%)
Average price per mcf of gas $ 1.62 1.84 (12%)
Oil production in barrels 11,900 14,200 (16%)
Gas production in mcf 44,900 39,700 13%
Gross oil and gas revenue $ 258,439 310,402 (17%)
Net oil and gas revenue $ 145,533 178,876 (19%)
Partnership distributions $ 125,850 150,500 (16%)
Limited partner distributions $ 113,265 135,450 (16%)
Per unit distribution to limited
partners $ 7.55 9.03 (16%)
Number of limited partner units 15,000 15,000
Revenues
The Partnership's oil and gas revenues decreased to $258,439 from $310,402
for the quarters ended September 30, 1995 and 1994, respectively, a decrease
of 17%. The principal factors affecting the comparison of the quarters ended
September 30, 1995 and 1994 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the quarter ended September 30, 1995 as compared to the
quarter ended September 30, 1994 by 6%, or $1.05 per barrel, resulting in
a decrease of approximately $14,900 in revenues. Oil sales represented
72% of total oil and gas sales during the quarter ended September 30,
1995 as compared to 76% during the quarter ended September 30, 1994.
The average price for an mcf of gas received by the Partnership decreased
during the same period by 12%, or $.22 per mcf, resulting in a decrease
of approximately $8,700 in revenues.
The total decrease in revenues due to the change in prices received from
oil and gas production is approximately $23,600. 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 decreased approximately 2,300 barrels or 16% during the
quarter ended September 30, 1995 as compared to the quarter ended
September 30, 1994, resulting in a decrease of approximately $36,000 in
revenues.
Gas production increased approximately 5,200 mcf or 13% during the same
period, resulting in an increase of approximately $8,400 in revenues.
The net total decrease in revenues due to the change in production is
approximately $27,600. The increase in gas revenues is due to the
successful workovers on two wells. The decrease in oil production is due
to downtime experienced during the third quarter.
Costs and Expenses
Total costs and expenses decreased to $184,811 from $241,518 for the quarters
ended September 30, 1995 and 1994, respectively, a decrease of 23%. 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 $18,600 less during the quarter ended September 30, 1995 as
compared to the quarter ended September 30, 1994. The decrease is a
result of higher 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 4%
or approximately $1,100 during the quarter ended September 30, 1995 as
compared to the quarter ended September 30, 1994.
3. Depletion expense decreased to $45,000 for the quarter ended
September 30, 1995 from $82,000 for the same period in 1994. This
represents a decrease of 45%. 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. Consequently,
depletion will generally fluctuate in direct relation to oil and gas
revenues. As noted above, oil and gas revenues declined due to a decline
in price and production for the quarter ended September 30, 1995 as
compared to the same period for 1994. Depletion reflected a comparable
decline.
B. General Comparison of the Nine Month Periods Ended September 30, 1995 and
1994
The following table provides certain information regarding performance
factors for the nine month periods ended September 30, 1995 and 1994:
Nine Months
Ended Percentage
September 30, Increase
1995 1994 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 16.74 14.97 12%
Average price per mcf of gas $ 1.70 2.07 (18%)
Oil production in barrels 44,600 45,200 (1%)
Gas production in mcf 139,000 127,400 9%
Gross oil and gas revenue $ 981,573 939,511 4%
Net oil and gas revenue $ 608,847 504,352 21%
Partnership distributions $ 463,850 404,500 15%
Limited partner distributions $ 417,465 364,938 14%
Per unit distribution to limited
partners $ 27.83 24.33 14%
Number of limited partner units 15,000 15,000
Revenues
The Partnership's oil and gas revenues increased to $981,573 from $939,511
for the nine months ended September 30, 1995 and 1994, respectively, an
increase of 4%. The principal factors affecting the comparison of the nine
months ended September 30, 1995 and 1994 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the nine months ended September 30, 1995 as compared to
the nine months ended September 30, 1994 by 12%, or $1.77 per barrel,
resulting in an increase of approximately $80,000 in revenues. Oil sales
represented 76% of total oil and gas sales during the nine months ended
September 30, 1995 as compared to 72% during the nine months ended
September 30, 1994.
The average price for an mcf of gas received by the Partnership decreased
during the same period by 18%, or $.37 per mcf, resulting in a decrease
of approximately $47,100 in revenues.
The total increase in revenues due to the change in prices received from
oil and gas production is approximately $32,900. 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 decreased approximately 600 barrels or 1% during the nine
months ended September 30, 1995 as compared to the nine months ended
September 30, 1994, resulting in a decrease of approximately $10,000 in
revenues.
Gas production increased approximately 11,600 mcf or 9% during the same
period, resulting in an increase of approximately $19,700 in revenues.
The net total increase in revenues due to the change in production is
approximately $9,700. The increase is a result of the successful
workovers on two wells.
Costs and Expenses
Total costs and expenses decreased to $630,376 from $778,952 for the nine
months ended September 30, 1995 and 1994, respectively, a decrease of 19%.
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 $62,400 less during the nine months ended September 30,
1995 as compared to the nine months ended September 30, 1994. The
decrease is a result of higher 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 $3,100 during the nine months ended September 30, 1995
as compared to the nine months ended September 30, 1994.
3. Depletion expense decreased to $164,000 for the nine months ended
September 30, 1995 from $247,000 for the same period in 1994. This
represents a decrease of 34%. 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 nine months ended September 30, 1995 as
compared to the nine months ended September 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 $510,000 in
the nine months ended September 30, 1995 as compared to approximately
$440,200 in the nine months ended September 30, 1994. Primary source of the
1995 cash flow from operating activities was profitable operations.
Cash flows used in investing activities were approximately $37,300 in the
nine months ended September 30, 1995 as compared to approximately $1,100 of
cash provided in the nine months ended September 30, 1994.
Cash flows used in financing activities were approximately $461,000 in the
nine months ended September 30, 1995 as compared to approximately $406,100 in
the nine months ended September 30, 1994. The only use in financing
activities was the distributions to partners.
Total distributions during the nine months ended September 30, 1995 were
$463,850 of which $417,465 was distributed to the limited partners and
$46,385 was distributed to the general partners. The per unit distribution
to limited partners during the nine months ended September 30, 1995 was
$27.83. Total distributions during the nine months ended September 30, 1994
were $404,500 of which $364,938 was distributed to the limited partners and
$39,562 was distributed to the general partners. The per unit distribution
to limited partners during the nine months ended September 30, 1994 was
$24.33. The sources for the 1995 distributions of $463,850 were oil and gas
operations of approximately $510,000 and equipment sales of approximately
$6,700 reduced by expenditures on equipment of approximately $44,000,
resulting in excess cash for contingencies or subsequent distributions. The
sources for the 1994 distributions of $404,500 were oil and gas operations of
approximately $440,200 and equipment sales of approximately $9,300 reduced by
expenditures on equipment of approximately $8,200, resulting in excess cash
for contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions of
$8,530,943 have been made to the partners. As of September 30, 1995,
$7,686,084 or $512.41 per limited partner unit has been distributed to the
limited partners, representing a 102% return of the capital contributed.
As of September 30, 1995, the Partnership had approximately $182,500 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: November 8, 1995 By: /s/ Bill E. Coggin
------------------------------
Bill E. Coggin, Vice President
and Chief Financial Officer