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, 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 nine month periods
ended September 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
September 30, December 31,
1996 1995
------------- -------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 16,163 44,954
Receivable from Managing
General Partner 127,034 128,681
--------- ---------
Total current assets 143,197 173,635
--------- ---------
Oil and gas properties - using the
full cost method of accounting 4,595,282 4,594,283
Less accumulated depreciation,
depletion and amortization 3,301,737 3,181,737
--------- ---------
Net oil and gas properties 1,293,545 1,412,546
--------- ---------
$ 1,436,742 1,586,181
========= =========
Liabilities and Partners' Equity
Current liability - Distribution payable $ 227 3,489
--------- ---------
Partners' equity:
General partners (498,024) (483,406)
Limited partners 1,934,539 2,066,098
--------- ---------
Total partners' equity 1,436,515 1,582,692
--------- ---------
$ 1,436,742 1,586,181
========= =========
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Revenues
Oil and gas revenue $ 279,749 258,439 835,242 981,573
Interest 364 476 1,219 1,905
------- ------- ------- -------
280,113 258,915 836,461 983,478
------- ------- ------- -------
Expenses
Production 140,438 112,906 364,863 372,726
General and administrative 27,271 26,905 91,775 93,650
Depreciation, depletion and
amortization 39,000 45,000 120,000 164,000
------- ------- ------- -------
206,709 184,811 576,638 630,376
------- ------- ------- -------
Net income $ 73,404 74,104 259,823 353,102
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 6,606 6,669 23,384 31,779
======= ======= ======= =======
General Partner $ 734 741 2,598 3,531
======= ======= ======= =======
Limited Partners $ 66,064 66,694 233,841 317,792
======= ======= ======= =======
Per limited partner
unit $ 4.40 4.45 15.59 21.19
======= ======= ======= =======
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Cash received from oil and gas sales $ 833,062 967,281
Cash paid to suppliers (452,811) (459,145)
Interest received 1,219 1,905
------- -------
Net cash provided by operating
activities 381,470 510,041
------- -------
Cash flows from investing activities:
Additions to oil and gas properties (5,151) (43,958)
Cash received from sale of oil
and gas property 4,152 6,680
------- -------
Net cash used in investing activities (999) (37,278)
------- -------
Cash flows used in financing activities:
Distributions to partners (409,262) (461,016)
------- -------
Net increase (decrease) in cash
and cash equivalents (28,791) 11,747
Beginning of period 44,954 29,483
------- -------
End of period $ 16,163 41,230
======= =======
(continued)
Southwest Oil & Gas Income Fund VII-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1996 1995
Reconciliation of net income to
net cash provided by operating
activities:
Net income $ 259,823 353,102
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 120,000 164,000
Increase in receivables (2,180) (14,292)
Increase in payables 3,827 7,231
------- -------
Net cash provided by operating
activities $ 381,470 510,041
======= =======
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 September 30, 1996 and 1995
The following table provides certain information regarding performance
factors for the quarters ended September 30, 1996 and 1995:
Three Months
Ended Percentage
September 30, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 21.06 15.65 35%
Average price per mcf of gas $ 2.12 1.62 31%
Oil production in barrels 9,200 11,900 (23%)
Gas production in mcf 40,700 44,900 (9%)
Gross oil and gas revenue $ 279,749 258,439 8%
Net oil and gas revenue $ 139,311 145,533 (4%)
Partnership distributions $ 115,000 125,850 (9%)
Limited partner distributions $ 103,500 113,265 (9%)
Per unit distribution to limited
partners $ 6.90 7.55 (9%)
Number of limited partner units 15,000 15,000
Revenues
The Partnership's oil and gas revenues increased to $279,749 from $258,439
for the quarters ended September 30, 1996 and 1995, respectively, an increase
of 8%. The principal factors affecting the comparison of the quarters ended
September 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 September 30, 1996 as compared to the
quarter ended September 30, 1995 by 35%, or $5.41 per barrel, resulting
in an increase of approximately $64,400 in revenues. Oil sales
represented 69% of total oil and gas sales during the quarter ended
September 30, 1996 as compared to 72% during the quarter ended September
30, 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 31%, or $.50 per mcf, resulting in an increase
of approximately $22,500 in revenues.
The total increase in revenues due to the change in prices received from
oil and gas production is approximately $86,900. 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 2,700 barrels or 23% during the
quarter ended September 30, 1996 as compared to the quarter ended
September 30, 1995, resulting in a decrease of approximately $56,900 in
revenues.
Gas production decreased approximately 4,200 mcf or 9% during the same
period, resulting in a decrease of approximately $8,900 in revenues.
The total decrease in revenues due to the change in production is
approximately $65,800. The decrease is primarily attributable to the
sale of property and lease downtime.
Costs and Expenses
Total costs and expenses increased to $206,709 from $184,811 for the quarters
ended September 30, 1996 and 1995, respectively, an increase of 12%. The
increase is the result of higher lease operating costs and general and
administrative expense, offset by a decrease in depletion expense.
1. Lease operating costs and production taxes were 24% higher, or
approximately $27,500 more during the quarter ended September 30, 1996 as
compared to the quarter ended September 30, 1995. The increase is
primarily due to the repairs on one lease during 1996.
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 increased 1%
or approximately $400 during the quarter ended September 30, 1996 as
compared to the quarter ended September 30, 1995.
3. Depletion expense decreased to $39,000 for the quarter ended September
30, 1996 from $45,000 for the same period in 1995. This represents a
decrease of 13%. 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. One factor that
attributed to the decline in depletion expense between the comparative
periods was the increase in the price of oil and gas used to determine
the Partnership's reserves for January 1, 1996 as compared to 1995.
B. General Comparison of the Nine Month Periods Ended September 30, 1996 and
1995
The following table provides certain information regarding performance
factors for the nine month periods ended September 30, 1996 and 1995:
Nine Months
Ended Percentage
September 30, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 19.88 16.74 19%
Average price per mcf of gas $ 2.19 1.70 29%
Oil production in barrels 30,600 44,600 (31%)
Gas production in mcf 103,700 139,000 (25%)
Gross oil and gas revenue $ 835,242 981,573 (15%)
Net oil and gas revenue $ 470,379 608,847 (23%)
Partnership distribution $ 406,000 463,850 (12%)
Limited partner distributions $ 365,400 417,465 (12%)
Per unit distribution to limited
partners $ 24.36 27.83 (12%)
Number of limited partner units 15,000 15,000
Revenues
The Partnership's oil and gas revenues decreased to $835,242 from $981,573
for the nine months ended September 30, 1996 and 1995, respectively, a
decrease of 15%. The principal factors affecting the comparison of the nine
months ended September 30, 1996 and 1995 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the nine months ended September 30, 1996 as compared to
the nine months ended September 30, 1995 by 19%, or $3.14 per barrel,
resulting in an increase of approximately $140,000 in revenues. Oil
sales represented 73% of total oil and gas sales during the nine months
ended September 30, 1996 as compared to 76% during the nine months ended
September 30, 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 29%, or $.49 per mcf, resulting in an increase
of approximately $68,100 in revenues.
The total increase in revenues due to the change in prices received from
oil and gas production is approximately $208,100. 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 14,000 barrels or 31% during the
nine months ended September 30, 1996 as compared to the nine months ended
September 30, 1995, resulting in a decrease of approximately $278,300 in
revenues.
Gas production decreased approximately 35,300 mcf or 25% during the same
period, resulting in a decrease of approximately $77,300 in revenues.
The total decrease in revenues due to the change in production is
approximately $355,600. The decrease is primarily attributable to the
sale of property and lease downtime.
Costs and Expenses
Total costs and expenses decreased to $576,638 from $630,376 for the nine
months ended September 30, 1996 and 1995, respectively, a decrease of 9%.
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 2% lower, or
approximately $7,900 less during the nine months ended September 30, 1996
as compared to the nine months ended September 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 2%
or approximately $1,900 during the nine months ended September 30, 1996
as compared to the nine months ended September 30, 1995.
3. Depletion expense decreased to $120,000 for the nine months ended
September 30, 1996 from $164,000 for the same period in 1995. 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. 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 $381,500 in
the nine months ended September 30, 1996 as compared to approximately
$510,000 in the nine months ended September 30, 1995. The primary source of
the 1996 cash flow from operating activities was profitable operations.
Cash flows used in investing activities were approximately $1,000 in the nine
months ended September 30, 1996 as compared to approximately $37,300 in the
nine months ended September 30, 1995. The principle use 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 $409,300 in the
nine months ended September 30, 1996 as compared to approximately $461,000 in
the nine months ended September 30, 1995. The only use in financing
activities was the distributions to partners.
Total distributions during the nine months ended September 30, 1996 were
$406,000 of which $365,400 was distributed to the limited partners and
$40,600 to the general partners. The per unit distribution to limited
partners during the nine months ended September 30, 1996 was $24.36. 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 to the
general partners. The per unit distribution to limited partners during the
nine months ended September 30, 1995 was $27.83.
The sources for the 1996 distributions of $406,000 were oil and gas
operations of approximately $381,500, and the sale of oil and gas property of
approximately $4,200, offset by additions to oil and gas properties of
approximately $5,200, with the balance from available cash on hand at the
beginning of the period. The sources for the 1995 distributions of $463,850
was oil and gas operations of approximately $510,000, and the sale of oil and
gas property of approximately $6,700, offset by additions to oil and gas
properties of approximately $44,000, resulting in excess cash for
contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions of
$9,124,532 have been made to the partners. As of September 30, 1996,
$8,223,073 or $548.20 per limited partner unit has been distributed to the
limited partners, representing a 110% return of the capital contributed.
As of September 30, 1996, the Partnership had approximately $143,000 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) Financial Data Schedule
(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: November 15, 1996