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 March 31, 1996
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 12.
PAGE
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, 1995 which are found in the Registrant's Form 10-K Report
for 1995 filed with the Securities and Exchange Commission. The December 31,
1995 balance sheet included herein has been taken from the Registrant's 1995
Form 10-K Report. Operating results for the three month period ended March
31, 1996 are not necessarily indicative of the results that may be expected
for the full year.
PAGE
Southwest Oil & Gas Income Fund VII-A, L.P.
Balance Sheets
March 31, December 31,
1996 1995
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 13,507 44,954
Receivable from Managing
General Partner 147,317 128,681
--------- ---------
Total current assets 160,824 173,635
--------- ---------
Oil and gas properties - using the
full-cost method of accounting 4,593,590 4,594,283
Less accumulated depreciation,
depletion and amortization 3,221,737 3,181,737
--------- ---------
Net oil and gas properties 1,371,853 1,412,546
--------- ---------
$ 1,532,677 1,586,181
========= =========
Liabilities and Partners' Equity
Current liabilities:
Accounts payable $ 5,250 -
Distribution payable 3,657 3,489
--------- ---------
Total current liabilities 8,907 3,489
--------- ---------
Partners' equity:
General partners (489,298) (483,406)
Limited partners 2,013,068 2,066,098
--------- ---------
Total partners' equity 1,523,770 1,582,692
--------- ---------
$ 1,532,677 1,586,181
========= =========
PAGE
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended
March 31,
1996 1995
---- ----
Revenues
Oil and gas revenue $ 275,951 356,785
Interest income from operations 358 591
------- -------
276,309 357,376
------- -------
Expenses
Production 105,418 128,850
General and administrative 36,813 37,686
Depreciation, depletion and
amortization 40,000 58,000
------- -------
182,231 224,536
------- -------
Net income $ 94,078 132,840
======= =======
Net income allocated to:
Managing General Partner $ 8,467 11,956
======= =======
General partner $ 941 1,328
======= =======
Limited partners $ 84,670 119,556
======= =======
Per limited partner unit $ 5.64 7.97
======= =======
PAGE
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Cash Flows
(unaudited)
Three Months Ended
March 31,
1996 1995
---- ----
Cash flows from operating activities:
Cash received from oil and gas sales $ 273,525 340,431
Cash paid to suppliers (153,191) (171,349)
Interest received 358 591
------- -------
Net cash provided by operating
activities 120,692 169,673
------- -------
Cash flows from investing activities:
Sale of oil and gas properties 2,557 1,750
Additions to oil and gas properties (1,864) (7,624)
------- -------
Net cash provided by (used in) investing
activities 693 (5,874)
------- -------
Cash flows used in financing activities:
Distributions to partners (152,832) (162,673)
------- -------
Net increase (decrease) in cash (31,447) 1,126
Cash and cash equivalents:
Beginning of period 44,954 29,483
------- -------
End of period $ 13,507 30,609
======= =======
(continued)
PAGE
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Three Months Ended
March 31,
1996 1995
---- ----
Reconciliation of net income to
net cash provided by operating
activities:
Net income $ 94,078 132,840
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 40,000 58,000
Increase in receivables (2,426) (16,354)
Decrease in payables (10,960) (4,813)
------- -------
Net cash provided by operating
activities $ 120,692 169,673
======= =======
PAGE
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 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.
PAGE
Results of Operations
A. General Comparison of the Quarters Ended March 31, 1996 and 1995
The following table provides certain information regarding performance
factors for the quarters ended March 31, 1996 and 1995:
Three Months
Ended Percentage
March 31, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 18.09 16.68 8%
Average price per mcf of gas $ 2.10 1.79 17%
Oil production in barrels 11,300 17,200 (34%)
Gas production in mcf 34,000 39,400 (14%)
Gross oil and gas revenue $ 275,951 356,785 (23%)
Net oil and gas revenue $ 170,533 227,935 (25%)
Partnership distributions $ 153,000 165,000 (7%)
Limited partner distributions $ 137,700 148,500 (7%)
Per unit distribution to limited
partners $ 9.18 9.90 (7%)
Number of limited partner units 15,000 15,000
Revenues
The Partnership's oil and gas revenues decreased to $275,951 from $356,785
for the quarters ended March 31, 1996 and 1995, respectively, a decrease of
23%. The principal factors affecting the comparison of the quarters ended
March 31, 1996 and 1995 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the quarter ended March 31, 1996 as compared to the
quarter ended March 31, 1995 by 8%, or $1.41 per barrel, resulting in an
increase of approximately $24,300 in revenues. Oil sales represented 74%
of total oil and gas sales during the quarter ended March 31, 1996 as
compared to 80% during the quarter ended March 31, 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 17%, or $.31 per mcf, resulting in an increase
of approximately $12,200 in revenues.
The total increase in revenues due to the change in prices received from
oil and gas production is approximately $36,500. 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 5,900 barrels or 34% during the
quarter ended March 31, 1996 as compared to the quarter ended March 31,
1995, resulting in a decrease of approximately $106,700 in revenues.
Gas production decreased approximately 5,400 mcf or 14% during the same
period, resulting in a decrease of approximately $11,300 in revenues.
The total decrease in revenues due to the change in production is
approximately $118,000. The decrease is a result of downhole problems
and property sales.
Costs and Expenses
Total costs and expenses decreased to $182,231 from $224,536 for the quarters
ended March 31, 1996 and 1995, respectively, a decrease of 19%. The decrease
is the result of lower lease operating costs, general and administrative
expense and depletion expense.
1. Lease operating costs and production taxes were 18% lower or
approximately $23,400 less during the quarter ended March 31, 1996 as
compared to the quarter ended March 31, 1995. The decrease is a result
of workover costs incurred in 1995.
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 $900 during the quarter ended March 31, 1996 as compared
to the quarter ended March 31, 1995.
3. Depletion expense decreased to $40,000 for the quarter ended March 31,
1996 from $58,000 for the same period in 1995. This represents a
decrease of 31%. 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 decrease in
production for the quarter ended March 31, 1996 as compared to the same
period for 1995. Depletion reflected a comparable decline.
PAGE
Liquidity and Capital Resources
The primary source of cash is from operations, the receipt of income from
interests in oil and gas properties. The Partnership knows of no material
change, nor does it anticipate any such change.
Cash flows provided by operating activities were approximately $120,700 in
the three months ended March 31, 1996 as compared to approximately $169,700
in the three months ended March 31, 1995. The primary source of the 1996
cash flow from operating activities was profitable operations.
Cash flows provided by or (used in) investing activities were approximately
$700 in the three months ended March 31, 1996 as compared to approximately
$(5,900) in the three months ended March 31, 1995. The principle source of
the 1996 cash flow from investing activities was the sale of oil and gas
properties, offset by the additions to oil and gas properties.
Cash flows used in financing activities were approximately $152,800 in the
three months ended March 31, 1996 as compared to approximately $162,700 in
the three months ended March 31, 1995. The only use in financing activities
was the distributions to partners.
Total distributions during the three months ended March 31, 1996 were
$153,000 of which $137,700 was distributed to the limited partners and
$15,300 to the general partners. The per unit distribution to limited
partners during the three months ended March 31, 1996 was $9.18. Total
distributions during the three months ended March 31, 1995 were $165,000 of
which $148,500 was distributed to the limited partners and $16,500 to the
general partners. The per unit distribution to limited partners during the
three months ended March 31, 1995 was $9.90.
The sources for the 1996 distributions of $153,000 were oil and gas
operations of approximately $120,700 and the sale of oil and gas properties
of approximately $2,600, offset by additions to oil and gas properties of
approximately $1,900, with the balance from available cash on hand at the
beginning of the period. The sources for the 1995 distributions of $165,000
were oil and gas operations of approximately $169,700 and the sale of oil and
gas properties of approximately $1,800, offset by additions to oil and gas
properties of approximately $7,600, with the balance from available cash on
hand at the beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions of
$8,871,532 have been made to the partners. As of March 31, 1996, $7,995,373
or $533.02 per limited partner unit has been distributed to the limited
partners, representing a 107% return of the capital contributed.
As of March 31, 1996, the Partnership had approximately $151,900 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.
PAGE
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.
PAGE
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
By: /s/ Bill E. Coggin
------------------------------
Bill E. Coggin, Vice President
and Chief Financial Officer
Date: May 11, 1996