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, 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 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, 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 and six month periods
ended June 30, 1996 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,
1996 1995
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 15,587 44,954
Receivable from Managing
General Partner 134,568 128,681
Other receivable 728 -
--------- ---------
Total current assets 150,883 173,635
--------- ---------
Oil and gas properties - using the
full cost method of accounting 4,593,685 4,594,283
Less accumulated depreciation,
depletion and amortization 3,262,737 3,181,737
--------- ---------
Net oil and gas properties 1,330,948 1,412,546
--------- ---------
$ 1,481,831 1,586,181
========= =========
Liabilities and Partners' Equity
Current liability - Distribution payable $ 3,720 3,489
--------- ---------
Partners' equity:
General partners (493,864) (483,406)
Limited partners 1,971,975 2,066,098
--------- ---------
Total partners' equity 1,478,111 1,582,692
--------- ---------
$ 1,481,831 1,586,181
========= =========
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Revenues
Oil and gas revenue $ 279,542 366,350 555,493 723,135
Interest 497 838 855 1,429
------- ------- ------- -------
280,039 367,188 556,348 724,564
------- ------- ------- -------
Expenses
Production 119,007 130,970 224,425 259,821
General and administrative 27,691 29,059 64,504 66,744
Depreciation, depletion and
amortization 41,000 61,000 81,000 119,000
------- ------- ------- -------
187,698 221,029 369,929 445,565
------- ------- ------- -------
Net income $ 92,341 146,159 186,419 278,999
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 8,311 13,154 16,778 25,110
======= ======= ======= =======
General Partner $ 923 1,462 1,864 2,790
======= ======= ======= =======
Limited Partners $ 83,107 131,543 167,777 251,099
======= ======= ======= =======
Per limited partner
unit $ 5.54 8.77 11.19 16.74
======= ======= ======= =======
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1996 1995
Cash flows from operating activities:
Cash received from oil and gas sales $ 553,048 672,569
Cash paid to suppliers (293,099) (326,220)
Interest received 855 1,429
------- -------
Net cash provided by operating
activities 260,804 347,778
------- -------
Cash flows from investing activities:
Additions to oil and gas properties (3,542) (20,586)
Cash received from sale of oil
and gas property 4,140 6,680
------- -------
Net cash provided by (used in)
investing activities 598 (13,906)
------- -------
Cash flows used in financing activities:
Distributions to partners (290,769) (335,565)
------- -------
Net decrease in cash and cash equivalents (29,367) (1,693)
Beginning of period 44,954 29,483
------- -------
End of period $ 15,587 27,790
======= =======
(continued)
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Six Months Ended
June 30,
1996 1995
Reconciliation of net income to
net cash provided by operating
activities:
Net income $ 186,419 278,999
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 81,000 119,000
Increase in receivables (2,445) (50,566)
Increase (decrease) in payables (4,170) 345
------- -------
Net cash provided by operating
activities $ 260,804 347,778
======= =======
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, 1996 and 1995
The following table provides certain information regarding performance
factors for the quarters ended June 30, 1996 and 1995:
Three Months
Ended Percentage
June 30, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 20.82 17.63 18%
Average price per mcf of gas $ 2.39 1.69 41%
Oil production in barrels 10,100 15,500 (35%)
Gas production in mcf 29,000 54,800 (47%)
Gross oil and gas revenue $ 279,542 366,350 (24%)
Net oil and gas revenue $ 160,535 235,380 (32%)
Total cost and expense $ 187,698 221,029 (15%)
Partnership distributions $ 138,000 173,000 (20%)
Limited partner distributions $ 124,200 155,700 (20%)
Per unit distribution to limited
partners $ 8.28 10.38 (20%)
Number of limited partner units 15,000 15,000
Revenues
The Partnership's oil and gas revenues decreased to $279,542 from $366,350
for the quarters ended June 30, 1996 and 1995, respectively, a decrease of
24%. The principal factors affecting the comparison of the quarters ended
June 30, 1996 and 1995 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the quarter ended June 30, 1996 as compared to the
quarter ended June 30, 1995 by 18%, or $3.19 per barrel, resulting in an
increase of approximately $49,400 in revenues. Oil sales represented 75%
of total oil and gas sales during the quarters ended June 30, 1996 and
1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 41%, or $.70 per mcf, resulting in an increase
of approximately $38,400 in revenues.
The total increase in revenues due to the change in prices received from
oil and gas production is approximately $87,800. 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 5,400 barrels or 35% during the
quarter ended June 30, 1996 as compared to the quarter ended June 30,
1995, resulting in a decrease of approximately $112,400 in revenues.
Gas production decreased approximately 25,800 mcf or 47% during the same
period, resulting in a decrease of approximately $61,700 in revenues.
The total decrease in revenues due to the change in production is
approximately $174,100. The decrease in production is primarily
attributable to the sale of property and lease downtime.
Costs and Expenses
Total costs and expenses decreased to $187,698 from $221,029 for the quarters
ended June 30, 1996 and 1995, respectively, a decrease of 15%. 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 9% lower, or
approximately $12,000 less during the quarter ended June 30, 1996 as
compared to the quarter ended June 30, 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 5%
or approximately $1,400 during the quarter ended June 30, 1996 as
compared to the quarter ended June 30, 1995.
3. Depletion expense decreased to $41,000 for the quarter ended June 30,
1996 from $61,000 for the same period in 1995. This represents a
decrease of 33%. 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.
Two factors that attributed to the decline in depletion expense between
the comparative periods were the increase in the price of oil and gas
used to determine the Partnership's reserves for January 1, 1996 as
compared to 1995 and the decrease in oil and gas revenues.
B. General Comparison of the Six Month Periods Ended June 30, 1996 and 1995
The following table provides certain information regarding performance
factors for the six month periods ended June 30, 1996 and 1995:
Six Months
Ended Percentage
June 30, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 19.38 17.13 13%
Average price per mcf of gas $ 2.23 1.73 29%
Oil production in barrels 21,400 32,700 (35%)
Gas production in mcf 63,000 94,100 (33%)
Gross oil and gas revenue $ 555,493 723,135 (23%)
Net oil and gas revenue $ 331,068 463,314 (29%)
Total cost and expense $ 369,929 445,565 (17%)
Partnership distribution $ 291,000 338,000 (14%)
Limited partner distributions $ 261,900 304,200 (14%)
Per unit distribution to limited
partners $ 17.46 20.28 (14%)
Number of limited partner units 15,000 15,000
Revenues
The Partnership's oil and gas revenues decreased to $555,493 from $723,135
for the six months ended June 30, 1996 and 1995, respectively, a decrease of
23%. The principal factors affecting the comparison of the six months ended
June 30, 1996 and 1995 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the six months ended June 30, 1996 as compared to the
six months ended June 30, 1995 by 13%, or $2.25 per barrel, resulting in
an increase of approximately $73,600 in revenues. Oil sales represented
75% of total oil and gas sales during the six months ended June 30, 1996
as compared to 77% during the six months ended June 30, 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 29%, or $.50 per mcf, resulting in an increase
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 $120,700. 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 11,300 barrels or 35% during the
six months ended June 30, 1996 as compared to the six months ended June
30, 1995, resulting in a decrease of approximately $219,000 in revenues.
Gas production decreased approximately 31,100 mcf or 33% during the same
period, resulting in a decrease of approximately $69,400 in revenues.
The total decrease in revenues due to the change in production is
approximately $288,400. The decrease in production is primarily
attributable to the sale of property and lease downtime.
Costs and Expenses
Total costs and expenses decreased to $369,929 from $445,565 for the six
months ended June 30, 1996 and 1995, respectively, a decrease of 17%. 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 14% lower, or
approximately $35,400 less during the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995. The decrease is due to
the sale of oil and gas properties.
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 $2,200 during the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995.
3. Depletion expense decreased to $81,000 for the six months ended June 30,
1996 from $119,000 for the same period in 1995. This represents a
decrease of 32%. 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.
Two factors that attributed to the decline in depletion expense between
the comparative periods were the increase in the price of oil and gas
used to determine the Partnership's reserves for January 1, 1996 as
compared to 1995 and the decrease in oil and gas revenues.
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 $260,800 in
the six months ended June 30, 1996 as compared to approximately $347,800 in
the six months ended June 30, 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
$600 in the six months ended June 30, 1996 as compared to approximately
$(13,900) in the six months ended June 30, 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 $290,800 in the
six months ended June 30, 1996 as compared to approximately $335,600 in the
six months ended June 30, 1995. The only use in financing activities was the
distributions to partners.
Total distributions during the six months ended June 30, 1996 were $291,000
of which $261,900 was distributed to the limited partners and $29,100 to the
general partners. The per unit distribution to limited partners during the
six months ended June 30, 1996 was $17.46. 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 to the general partners. The
per unit distribution to limited partners during the six months ended June
30, 1995 was $20.28.
The sources for the 1996 distributions of $291,000 were oil and gas
operations of approximately $260,800 and the sale of oil and gas property of
approximately $4,100, offset by additions to oil and gas properties of
approximately $3,500, with the balance from available cash on hand at the
beginning of the period. The sources for the 1995 distributions of $338,000
were oil and gas operations of approximately $347,800 and the sale of oil and
gas properties of approximately $6,700, offset by additions to oil and gas
properties of approximately $20,600, with the balance from available cash on
hand at the beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions of
$9,009,532 have been made to the partners. As of June 30, 1996, $8,119,573
or $541.30 per limited partner unit has been distributed to the limited
partners, representing a 108% return of the capital contributed.
As of June 30, 1996, the Partnership had approximately $147,200 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
By: /s/ Bill E. Coggin
Bill E. Coggin, Vice President
and Chief Financial Officer
Date: August 12, 1996