Page 24 of 24
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, 2002
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 33-11576
Southwest Royalties Institutional Income Fund VII-B, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2165825
(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 20.
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 note thereto for the year ended
December 31, 2001 which are found in the Registrant's Form 10-K
Report for 2001 filed with the Securities and Exchange
Commission. The December 31, 2001 balance sheet included herein
has been taken from the Registrant's 2001 Form 10-K Report.
Operating results for the three and nine month periods ended
September 30, 2002 are not necessarily indicative of the results
that may be expected for the full year.
Southwest Royalties Institutional Income Fund VII-B, L.P.
Balance Sheets
September December
30, 31,
2002 2001
----------- ---------
(unaudited)
Assets
- ------
Current assets:
Cash and cash equivalents $ 69,935 118,007
Receivable from Managing General 86,831 71,440
Partner
--------- ---------
Total current assets 156,766 189,447
--------- ---------
Oil and gas properties - using the
full-
cost method of accounting 4,236,335 4,236,335
Less accumulated depreciation,
depletion and amortization 3,568,370 3,528,370
--------- ---------
Net oil and gas properties 667,965 707,965
--------- ---------
$ 824,731 897,412
========= =========
Liabilities and Partners' Equity
- --------------------------------
Current liability - distribution $ 414 534
payable
--------- ---------
Partners' equity:
General partners (555,463) (548,207)
Limited partners 1,379,780 1,445,085
--------- ---------
Total partners' equity 824,317 896,878
--------- ---------
$ 824,731 897,412
========= =========
Southwest Royalties Institutional Income Fund VII-B, L.P.
Statements of Operations
(unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
Revenues
- --------
Income from net profits $ 159,653 154,856 496,155 566,39
interests 2
Interest 493 1,202 1,388 4,786
Miscellaneous settlement - - 5,872 -
------- ------- ------- ------
-
160,146 156,058 503,415 571,17
8
------- ------- ------- ------
-
Expenses
- --------
General and 29,328 28,726 85,976 86,339
administrative
Depreciation, depletion
and
amortization 12,000 36,000 40,000 80,000
------- ------- ------- ------
-
41,328 64,726 125,976 166,33
9
------- ------- ------- ------
-
Net income $ 118,818 91,332 377,439 404,83
9
======= ======= ======= ======
=
Net income allocated to:
Managing General Partner $ 11,882 8,220 37,744 36,436
======= ======= ======= ======
=
General Partner $ - 913 - 4,048
======= ======= ======= ======
=
Limited Partners $ 106,936 82,199 339,695 364,35
5
======= ======= ======= ======
=
Per limited partner unit $ 7.13 5.48 22.65 24.29
======= ======= ======= ======
=
Southwest Royalties Institutional Income Fund VII-B, L.P.
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
2002 2001
---- ----
Cash flows from operating activities
Cash received from income from net
profits interests $ 459,418 639,688
Cash paid to suppliers (64,630 (65,408)
)
Interest received 1,388 4,786
Miscellaneous settlement 5,872 -
------- -------
Net cash provided by operating activities 402,048 579,066
------- -------
Cash flows provided by investing activities
Sale of oil and gas property - 100
------- -------
Cash flows used in financing activities
Distributions to partners (450,12 (625,773
0) )
------- -------
Net decrease in cash and cash equivalents (48,072 (46,607)
)
Beginning of period 118,007 155,801
------- -------
End of period $ 69,935 109,194
======= =======
Reconciliation of net income to net cash
provided by operating activities
Net income $ 377,439 404,839
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation, depletion and amortization 40,000 80,000
(Increase) decrease receivables (36,737 73,296
)
Increase in payables 21,346 20,931
------- -------
Net cash provided by operating activities $ 402,048 579,066
======= =======
Southwest Royalties Institutional Income Fund VII-B, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
1. Organization
Southwest Royalties Institutional Income Fund VII-B, L.P.
was organized under the laws of the state of Delaware on
January 28, 1987, for the purpose of acquiring producing oil
and gas properties and to produce and market crude oil and
natural gas produced from such properties for a term of 50
years, unless terminated at an earlier date as provided for
in the Partnership Agreement. The Partnership sells its oil
and gas production to a variety of purchasers with the
prices it receives being dependent upon the oil and gas
economy. Southwest Royalties, Inc. serves as the Managing
General Partner. Revenues, costs and expenses are allocated
as follows:
Limited General
Partners Partners
-------- --------
Interest income on capital contributions 100% -
Oil and gas sales 90% 10%
All other revenues 90% 10%
Organization and offering costs (1) 100% -
Syndication costs 100% -
Amortization of organization costs 100% -
Property acquisition costs 100% -
Gain/loss on property disposition 90% 10%
Operating and administrative costs (2) 90% 10%
Depreciation, depletion and amortization of
oil and gas properties 90% 10%
All other costs 90% 10%
(1)All organization costs in excess of 3% of initial
capital contributions will be paid by the Managing
General Partner and will be treated as a capital
contribution. The Partnership paid the Managing
General Partner an amount equal to 3% of initial
capital contributions for such organization costs.
(2)Administrative costs in any year which exceed 2% of
capital contributions shall be paid by the Managing
General Partner and will be treated as a capital
contribution.
2. Summary of Significant Accounting Policies
The interim financial information as of September 30, 2002
and for the three and nine months ended September 30, 2002,
is unaudited. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted in this Form 10-Q pursuant to
the rules and regulations of the Securities and Exchange
Commission. However, in the opinion of management, these
interim financial statements include all the necessary
adjustments to fairly present the results of the interim
periods and all such adjustments are of a normal recurring
nature. The interim consolidated financial statements
should be read in conjunction with the audited financial
statements for the year ended December 31, 2001.
3. Subsequent Event
On October 17, 2002, Southwest Royalties, Inc. the Managing
General Partner filed an S-4 "Registration of Securities,
Business Combinations" with the Securities and Exchange
Commission. The S-4 relates to a proposed plan of merger of
twenty-one limited partnerships.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
Southwest Royalties Institutional Income Fund VII-B, L.P. was
organized as a Delaware limited partnership on January 28, 1987.
The offering of such limited partnership interests began March
23, 1987; minimum capital requirements were met May 20, 1987 and
concluded December 1, 1987, with total limited partner
contributions of $7,500,000.
The Partnership was formed to acquire royalty and net profits
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 will not be 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, 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.
Based on current conditions, management anticipates performing
workovers during 2002 to enhance production. The partnership may
have an increase in production volumes for the year 2002,
otherwise, the partnership will most likely experience the
historical production decline of approximately 8% per year.
Oil and Gas Properties
Oil and gas properties are accounted for at cost under the full-
cost method. Under this method, all productive and nonproductive
costs incurred in connection with the acquisition, exploration
and development of oil and gas reserves are capitalized. Gain or
loss on the sale of oil and gas properties is not recognized
unless significant oil and gas reserves are involved.
The Partnership's policy for depreciation, depletion and
amortization of oil and gas properties is computed under the
units of revenue method. Under the units of revenue method,
depreciation, depletion and amortization is computed on the basis
of current gross revenues from production in relation to future
gross revenues, based on current prices, from estimated
production of proved oil and gas reserves.
Should the net capitalized costs exceed the estimated present
value of oil and gas reserves, discounted at 10%, such excess
costs would be charged to current expense. As of September 30
2002, the net capitalized costs did not exceed the estimated
present value of oil and gas reserves.
Under the units of revenue method, the Partnership computes the
provision by multiplying the total unamortized cost of oil and
gas properties by an overall rate determined by dividing (a) oil
and gas revenues during the period by (b) the total future gross
oil and gas revenues as estimated by the Partnership's
independent petroleum consultants. It is reasonably possible
that those estimates of anticipated future gross revenues, the
remaining estimated economic life of the product, or both could
be changed significantly in the near term due to the potential
fluctuation of oil and gas prices or production. The depletion
estimate would also be affected by this change.
The Partnership's interest in oil and gas properties consists of
net profits interests in proved properties located within the
continental United States. A net profits interest is created
when the owner of a working interest in a property enters into an
arrangement providing that the net profits interest owner will
receive a stated percentage of the net profit from the property.
The net profits interest owner will not otherwise participate in
additional costs and expenses of the property.
The Partnership recognizes income from its net profits interest
in oil and gas property on an accrual basis, while the quarterly
cash distributions of the net profits interest are based on a
calculation of actual cash received from oil and gas sales, net
of expenses incurred during that quarterly period. The net
profits interest is a calculated revenue interest that burdens
the underlying working interest in the property, and the net
profits interest owner is not responsible for the actual
development or production expenses incurred. Accordingly, if the
net profits interest calculation results in expenses incurred
exceeding the oil and gas income received during a quarter, no
cash distribution is due to the Partnership's net profits
interest until the deficit is recovered from future net profits.
The Partnership accrues a quarterly loss on its net profits
interest provided there is a cumulative net amount due for
accrued revenue as of the balance sheet date.
Critical Accounting Policies
Full cost ceiling calculations The Partnership follows the full
cost method of accounting for its oil and gas properties. The
full cost method subjects companies to quarterly calculations of
a "ceiling", or limitation on the amount of properties that can
be capitalized on the balance sheet. If the Partnership's
capitalized costs are in excess of the calculated ceiling, the
excess must be written off as an expense.
The Partnership's discounted present value of its proved oil and
natural gas reserves is a major component of the ceiling
calculation, and represents the component that requires the most
subjective judgments. Estimates of reserves are forecasts based
on engineering data, projected future rates of production and the
timing of future expenditures. The process of estimating oil and
natural gas reserves requires substantial judgment, resulting in
imprecise determinations, particularly for new discoveries.
Different reserve engineers may make different estimates of
reserve quantities based on the same data. The Partnership's
reserve estimates are prepared by outside consultants.
The passage of time provides more qualitative information
regarding estimates of reserves, and revisions are made to prior
estimates to reflect updated information. However, there can be
no assurance that more significant revisions will not be
necessary in the future. If future significant revisions are
necessary that reduce previously estimated reserve quantities, it
could result in a full cost property writedown. In addition to
the impact of these estimates of proved reserves on calculation
of the ceiling, estimates of proved reserves are also a
significant component of the calculation of DD&A.
While the quantities of proved reserves require substantial
judgment, the associated prices of oil and natural gas reserves
that are included in the discounted present value of the reserves
do not require judgment. The ceiling calculation dictates that
prices and costs in effect as of the last day of the period are
generally held constant indefinitely. Because the ceiling
calculation dictates that prices in effect as of the last day of
the applicable quarter are held constant indefinitely, the
resulting value is not indicative of the true fair value of the
reserves. Oil and natural gas prices have historically been
cyclical and, on any particular day at the end of a quarter, can
be either substantially higher or lower than the Partnership's
long-term price forecast that is a barometer for true fair value.
The Partnership's policy for depreciation, depletion and
amortization of oil and gas properties is computed under the
units of revenue method. Under the units of revenue method,
depreciation, depletion and amortization is computed on the basis
of current gross revenues from production in relation to future
gross revenues, based on current prices, from estimated
production of proved oil and gas reserves.
Results of Operations
A. General Comparison of the Quarters Ended September 30, 2002
and 2001
The following table provides certain information regarding
performance factors for the quarters ended September 30, 2002 and
2001:
Three Months
Ended Percentage
September 30, Increase
2002 2001 (Decrease)
---- ---- ---------
Average price per barrel of oil $ 27.15 24.50 11%
Average price per mcf of gas $ 2.97 2.51 18%
Oil production in barrels 6,000 7,300 (18%)
Gas production in mcf 23,500 14,300 64%
Income from net profits interests $ 159,653 154,856 3%
Partnership distributions $ 150,000 150,000 -
Limited partner distributions $ 135,000 135,000 -
Per unit distribution to limited partners $ 9.00 9.00 -
Number of limited partner units 15,000 15,000
Revenues
The Partnership's income from net profits interests increased to
$159,653 from $154,856 for the quarters ended September 30, 2002
and 2001, respectively, an increase of 3%. The principal factors
affecting the comparison of the quarters ended September 30, 2002
and 2001 are as follows:
1. The average price for a barrel of oil received by the
Partnership increased during the quarter ended September 30,
2002 as compared to the quarter ended September 30, 2001 by
11%, or $2.65 per barrel, resulting in an increase of
approximately $15,900 in income from net profits interests.
Oil sales represented 70% of total oil and gas sales during
the quarter ended September 30, 2002 as compared to 83%
during the quarter ended September 30, 2001.
The average price for an mcf of gas received by the
Partnership increased during the same period by 18%, or $.46
per mcf, resulting in an increase of approximately $10,800
in income from net profits interests.
The total increase in income from net profits interests due
to the change in prices received from oil and gas production
is approximately $26,700. 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 1,300 barrels or 18%
during the quarter ended September 30, 2002 as compared to
the quarter ended September 30, 2001, resulting in a decrease
of approximately $31,900 in income from net profits
interests.
Gas production increased approximately 9,200 mcf or 64%
during the same period, resulting in an increase of
approximately $23,100 in income from net profits interests.
The net total decrease in income from net profits interests
due to the change in production is approximately $8,800. The
decrease in oil production is due to one lease that
experience fluctuations in production. The increase in gas
production is due to an adjustment of gas balancing for a non-
operated lease.
3. Lease operating costs and production taxes were 10% higher,
or approximately $6,700 more during the quarter ended
September 30, 2002 as compared to the quarter ended September
30, 2001.
Costs and Expenses
Total costs and expenses decreased to $41,328 from $64,726 for
the quarters ended September 30, 2002 and 2001, respectively, a
decrease of 36%. The decrease is the result of lower depletion
expense, partially offset by an increase in general and
administrative expense.
1. General and administrative costs consists of independent
accounting and engineering fees, computer services, postage,
and Managing General Partner personnel costs. General and
administrative costs increased 2% or approximately $600
during the quarter ended September 30, 2002 as compared to
the quarter ended September 30, 2001.
2. Depletion expense decreased to $12,000 for the quarter ended
September 30, 2002 from $36,000 for the same period in 2001.
This represents a decrease of 67%. Depletion is calculated
using the units of 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. Contributing factors to
the decrease 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 October 1, 2002 as
compared to 2001, and the increase in oil and gas revenues
received by the Partnership during 2002 as compared to 2001.
B. General Comparison of the Nine Month Periods Ended September
30, 2002 and 2001
The following table provides certain information regarding
performance factors for the nine month periods ended September
30, 2002 and 2001:
Nine Months
Ended Percentage
September 30, Increase
2002 2001 (Decrease)
---- ---- ---------
Average price per barrel of oil $ 23.54 25.68 (8%)
Average price per mcf of gas $ 2.69 4.36 (38%)
Oil production in barrels 20,400 21,200 (4%)
Gas production in mcf 76,100 49,700 53%
Income from net profits interests $ 496,155 566,392 (12%)
Partnership distributions $ 450,000 625,000 (28%)
Limited partner distributions $ 405,000 562,500 (28%)
Per unit distribution to limited partners $ 27.00 37.50 (28%)
Number of limited partner units 15,000 15,000
Revenues.
The Partnership's income from net profits interests decreased to
$496,155 from $566,392 for the nine months ended September 30,
2002 and 2001, respectively, a decrease of 12%. The principal
factors affecting the comparison of the nine months ended
September 30, 2002 and 2001 are as follows:
1. The average price for a barrel of oil received by the
Partnership decreased during the nine months ended September
30, 2002 as compared to the nine months ended September 30,
2001 by 8%, or $2.14 per barrel, resulting in a decrease of
approximately $43,700 in income from net profits interests.
Oil sales represented 70% of total oil and gas sales during
the nine months ended September 30, 2002 as compared to 72%
during the nine months ended September 30, 2001.
The average price for an mcf of gas received by the
Partnership decreased during the same period by 38%, or $1.67
per mcf, resulting in a decrease of approximately $127,100 in
income from net profits interests.
The total decrease in income from net profits interests due
to the change in prices received from oil and gas production
is approximately $170,800. 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 800 barrels or 4%
during the nine months ended September 30, 2002 as compared
to the nine months ended September 30, 2001, resulting in a
decrease of approximately $20,500 in income from net profits
interests.
Gas production increased approximately 26,400 mcf or 53%
during the same period, resulting in an increase of
approximately $115,100 in income from net profits interests.
The net total increase in income from net profits interests
due to the change in production is approximately $94,600.
The increase in gas production is due to an adjustment of gas
balancing for a non-operated lease.
3. Lease operating costs and production taxes were 3% lower, or
approximately $5,700 less during the nine months ended
September 30, 2002 as compared to the nine months ended
September 30, 2001.
Costs and Expenses
Total costs and expenses decreased to $125,976 from $166,339 for
the nine months ended September 30, 2002 and 2001, respectively,
a decrease of 24%. The decrease is the result of lower depletion
expense and general and administrative expense.
1. General and administrative costs consists of independent
accounting and engineering fees, computer services, postage,
and Managing General Partner personnel costs. General and
administrative costs decreased less than 1% or approximately
$400 during the nine months ended September 30, 2002 as
compared to the nine months ended September 30, 2001.
2. Depletion expense decreased to $40,000 for the nine months
ended September 30, 2002 from $80,000 for the same period in
2001. This represents a decrease of 50%. Depletion is
calculated using the units of 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. Contributing
factors to the decrease 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 October
1, 2002 as compared to 2001, and the decrease in oil and gas
revenues received by the Partnership during 2002 as compared
to 2001.
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
$402,000 in the nine months ended September 30, 2002 as compared
to approximately $579,100 in the nine months ended September 30,
2001. The primary source of the 2002 cash flow from operating
activities was profitable operations.
There were no cash flows provided by investing activities in the
nine months ended September 30, 2002. Cash flows provided by
investing activities were approximately $100 in the nine months
ended September 30, 2001.
Cash flows used in financing activities were approximately
$450,100 in the nine months ended September 30, 2002 as compared
to approximately $625,800 in the nine months ended September 30,
2001. The only use in financing activities was the distributions
to partners.
Total distributions during the nine months ended September 30,
2002 were $450,000 of which $405,000 was distributed to the
limited partners and $45,000 to the general partners. The per
unit distribution to limited partners during the nine months
ended September 30, 2002 was $27.00. Total distributions during
the nine months ended September 30, 2001 were $625,000 of which
$562,500 was distributed to the limited partners and $62,500 to
the general partners. The per unit distribution to limited
partners during the nine months ended September 30, 2001 was
$37.50.
The source for the 2002 distributions of $450,000 was oil and gas
operations of approximately $402,000, with the balance from
available cash on hand at the beginning of the period. The
source for the 2001 distributions of $625,000 was oil and gas
operations of approximately $579,100 and the change in oil and
gas properties of approximately $100, with the balance from
available cash on hand at the beginning of the period.
Since inception of the Partnership, cumulative monthly cash
distributions of $11,244,295 have been made to the partners. As
of September 30, 2002, $10,134,776 or $675.65 per limited partner
unit has been distributed to the limited partners, representing a
135% return of the capital contributed.
As of September 30, 2002, the Partnership had approximately
$156,400 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.
On October 17, 2002, Southwest Royalties, Inc. the Managing
General Partner filed an S-4 "Registration of Securities,
Business Combinations" with the Securities and Exchange
Commission. The S-4 relates to a proposed plan of merger of
twenty-one limited partnerships.
Recent Accounting Pronouncements
The FASB has issued Statement No. 143 "Accounting for Asset
Retirement Obligations" which establishes requirements for the
accounting of removal-type costs associated with asset
retirements. The standard is effective for fiscal years
beginning after June 15, 2002, with earlier application
encouraged. The Managing General Partner is currently assessing
the impact on the partnerships financial statements.
On October 3, 2001, the FASB issued Statements No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets."
This pronouncement supercedes FAS 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed" and eliminates the requirement of Statement 121 to
allocate goodwill to long-lived assets to be tested for
impairment. The provisions of this statement are effective for
financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years.
The Managing General Partner believes that the impact from SFAS
No. 144 on the Partnerships financial position and results of
operation should not be significantly different from that of SFAS
No. 121.
In April 2002, FASB issued SFAS No. 145, "Rescission of SFAS No.
4, 44, and 64, Amendment of SFAS No. 13, and Technical
Corrections." This Statement rescinds SFAS No. 4, "Reporting
Gains and Losses from Extinguishment of Debt", and an amendment
of that Statement, SFAS No. 64, "Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements". This Statement also rescinds
or amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings, or describe
their applicability under changed conditions. This standard is
effective for fiscal years beginning after May 15, 2002. The
Managing General Partner believes that the adoption of this
statement will not have a significant impact on the Partnerships
financial statements.
In July 2002, FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" which establishes
requirements for financial accounting and reporting for costs
associated with exit or disposal activities. This standard is
effective for exit or disposal activities initiated after
December 31, 2002. The Managing General Partner is currently
assessing the impact of this statement on the Partnerships'
future financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
The Partnership is not a party to any derivative or embedded
derivative instruments.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. The
chief executive officer and chief financial officer of the
Partnership's managing general partner have evaluated the
effectiveness of the design and operation of the Partnership's
disclosure controls and procedures (as defined in Exchange Act
Rule 13a-14(c)) as of a date within 90 days of the filing date of
this quarterly report. Based on that evaluation, the chief
executive officer and chief financial officer have concluded that
the Partnership's disclosure controls and procedures are
effective to ensure that material information relating to the
Partnership and the Partnership's consolidated subsidiaries is
made known to such officers by others within these entities,
particularly during the period this quarterly report was
prepared, in order to allow timely decisions regarding required
disclosure.
(b) Changes in Internal Controls. There have not been any
significant changes in the Partnership's internal controls or in
other factors that could significantly affect these controls
subsequent to the date of their evaluation.
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) 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 Royalties
Institutional
Income Fund VII-B, L.P.
a Delaware limited partnership
By: Southwest Royalties, Inc.
Managing General Partner
By: /s/ Bill E. Coggin
-------------------------
- -----
Bill E. Coggin, Executive
Vice President
and Chief Financial
Officer
Date: November 14, 2002
CERTIFICATIONS
I, H.H. Wommack, III, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Southwest Royalties Institutional Income Fund VII-B, L.P.;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ H.H. Wommack, III
H. H. Wommack, III
Chairman, President and Chief Executive Officer
of Southwest Royalties, Inc., the
Managing General Partner of
Southwest Royalties Institutional
Income Fund VII-B, L.P.
CERTIFICATIONS
I, Bill E. Coggin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Southwest Royalties Institutional Income Fund VII-B, L.P.;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Bill E. Coggin
Bill E. Coggin
Executive Vice President
and Chief Financial Officer of
Southwest Royalties, Inc., the
Managing General Partner of
Southwest Royalties Institutional
Income Fund VII-B, L.P.