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 0-17707
Southwest Oil & Gas Income Fund VIII-A, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2220097
(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.
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 and six month periods
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the full year.
PAGE
Southwest Oil & Gas Income Fund VIII-A, L.P.
Balance Sheets
June 30, December 31,
1996 1995
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 22,300 38,356
Receivable from Managing
General Partner 171,401 147,157
--------- ---------
Total current assets 193,701 185,513
--------- ---------
Oil and gas properties - using the
full cost method of accounting 5,453,862 5,501,878
Less accumulated depreciation,
depletion and amortization 4,009,109 3,925,109
--------- ---------
Net oil and gas properties 1,444,753 1,576,769
--------- ---------
$ 1,638,454 1,762,282
========= =========
Liabilities and Partners' Equity
Current liability - Distributions payable $ 649 536
--------- ---------
Partners' equity:
General partners 16,020 18,943
Limited partners 1,621,785 1,742,803
--------- ---------
Total partners' equity 1,637,805 1,761,746
--------- ---------
$ 1,638,454 1,762,282
========= =========
PAGE
Southwest Oil & Gas Income Fund VIII-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 $ 443,480 401,324 836,307 811,646
Interest 688 450 1,013 932
------- ------- ------- -------
444,168 401,774 837,320 812,578
------- ------- ------- -------
Expenses
Production 240,200 235,551 496,928 492,768
General and administrative 25,169 25,274 59,621 61,221
Depreciation, depletion and
amortization 44,000 47,000 84,000 110,000
------- ------- ------- -------
309,369 307,825 640,549 663,989
------- ------- ------- -------
Net income $ 134,799 93,949 196,771 148,589
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 16,092 12,686 25,269 23,273
======= ======= ======= =======
General Partner $ 1,788 1,409 2,808 2,586
======= ======= ======= =======
Limited Partners $ 116,919 79,854 168,694 122,730
======= ======= ======= =======
Per limited partner
unit $ 8.60 5.87 12.41 9.03
======= ======= ======= =======
PAGE
Southwest Oil & Gas Income Fund VIII-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 $ 787,630 756,057
Cash paid to suppliers (535,116) (536,432)
Interest received 1,013 932
------- -------
Net cash provided by operating
activities 253,527 220,557
------- -------
Cash flows from investing activities:
Cash received from sale of oil
and gas properties 59,407 72,981
Additions to oil and gas properties (8,391) (12,893)
------- -------
Net cash provided by investing
activities 51,016 60,088
------- -------
Cash flows used in financing activities:
Distributions to partners (320,599) (225,438)
------- -------
Net increase (decrease) in cash
and cash equivalents (16,056) 55,207
Beginning of period 38,356 37,115
------- -------
End of period $ 22,300 92,322
======= =======
(continued)
PAGE
Southwest Oil & Gas Income Fund VIII-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 $ 196,771 148,589
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 84,000 110,000
Increase in receivables (48,677) (55,589)
Increase in payables 21,433 17,557
------- -------
Net cash provided by operating
activities $ 253,527 220,557
======= =======
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Oil & Gas Income Fund VIII-A, L.P. was organized as a Delaware
limited partnership on November 30, 1987. The offering of such limited
partnership interests began on March 31, 1988, minimum capital requirements
were met on July 6, 1988, and the offering concluded on March 31, 1989, with
total limited partner contributions of $6,798,000.
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 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 $ 20.57 17.75 16%
Average price per mcf of gas $ 2.56 2.02 27%
Oil production in barrels 18,500 19,300 (4%)
Gas production in mcf 25,000 28,800 (13%)
Gross oil and gas revenue $ 443,480 401,324 11%
Net oil and gas revenue $ 203,280 165,773 23%
Partnership distributions $ 190,000 112,510 69%
Limited partner distributions $ 171,000 105,510 62%
Per unit distribution to limited
partners $ 12.58 7.76 62%
Number of limited partner units 13,596 13,596
Revenues
The Partnership's oil and gas revenues increased to $443,480 from $401,324
for the quarters ended June 30, 1996 and 1995, respectively, an increase of
11%. 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 16%, or $2.82 per barrel, resulting in an
increase of approximately $54,400 in revenues. Oil sales represented 86%
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 27%, or $.54 per mcf, resulting in an increase
of approximately $15,600 in revenues.
The total increase in revenues due to the change in prices received from
oil and gas production is approximately $70,000. 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.
PAGE
2. Oil production decreased approximately 800 barrels or 4% during the
quarter ended June 30, 1996 as compared to the quarter ended June 30,
1995, resulting in a decrease of approximately $16,500 in revenues.
Gas production decreased approximately 3,800 mcf or 13% during the same
period, resulting in a decrease of approximately $9,700 in revenues.
The total decrease in revenues due to the change in production is
approximately $26,200. The decrease is primarily a result of the sale of
oil and gas properties.
Costs and Expenses
Total costs and expenses increased to $309,369 from $307,825 for the quarters
ended June 30, 1996 and 1995, respectively, an increase of 1%. The increase
is the result of higher lease operating costs, offset by a decline in general
and administrative expense and depletion expense.
1. Lease operating costs and production taxes were 2% higher, or
approximately $4,600 more 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 remained
relatively unchanged for the quarters ended June 30, 1996 and 1995.
Depletion expense decreased to $44,000 for the quarter ended June 30,
1996 from $47,000 for the same period in 1995. This represents a
decrease of 6%. 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 increase in property sales.
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 $ 19.41 17.22 13%
Average price per mcf of gas $ 2.57 2.07 24%
Oil production in barrels 36,500 39,800 (8%)
Gas production in mcf 50,000 60,600 (17%)
Gross oil and gas revenue $ 836,307 811,646 3%
Net oil and gas revenue $ 339,379 318,878 6%
Partnership distributions $ 320,712 225,510 42%
Limited partner distributions $ 289,712 207,210 40%
Per unit distribution to limited
partners $ 21.31 15.24 40%
Number of limited partner units 13,596 13,596
Revenues
The Partnership's oil and gas revenues increased to $836,307 from $811,646
for the six months ended June 30, 1996 and 1995, respectively, an increase of
3%. 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 $2.19 per barrel, resulting in
an increase of approximately $87,200 in revenues. Oil sales represented
85% of total oil and gas sales during the six months ended June 30, 1996
and 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 24%, or $.50 per mcf, resulting in an increase
of approximately $30,300 in revenues.
The total increase in revenues due to the change in prices received from
oil and gas production is approximately $117,500. 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 3,300 barrels or 8% during the six
months ended June 30, 1996 as compared to the six months ended June 30,
1995, resulting in a decrease of approximately $64,100 in revenues.
Gas production decreased approximately 10,600 mcf or 17% during the same
period, resulting in a decrease of approximately $27,200 in revenues.
The total decrease in revenues due to the change in production is
approximately $91,300. The decrease is primarily a result of the sale of
oil and gas properties and natural decline.
Costs and Expenses
Total costs and expenses decreased to $640,549 from $663,989 for the six
months ended June 30, 1996 and 1995, respectively, a decrease of 4%. The
decrease is the result of a decline in general and administrative expense and
depletion expense, offset by higher lease operating costs.
1. Lease operating costs and production taxes were 1% higher, or
approximately $4,200 more during the six months ended June 30, 1996 as
compared to the six months 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 3%
or approximately $1,600 during the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995.
3. Depletion expense decreased to $84,000 for the six months ended June 30,
1996 from $110,000 for the same period in 1995. This represents a
decrease of 24%. 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 increase in property sales.
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 $253,500 in
the six months ended June 30, 1996 as compared to approximately $220,600 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 investing activities were approximately $51,000 in the
six months ended June 30, 1996 as compared to approximately $60,100 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 $320,600 in the
six months ended June 30, 1996 as compared to approximately $225,400 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 $320,712
of which $289,712 was distributed to the limited partners and $31,000 to the
general partners. The per unit distribution to limited partners during the
six months ended June 30, 1996 was $21.31. Total distributions during the
six months ended June 30, 1995 were $225,510 of which $207,210 was
distributed to the limited partners and $18,300 to the general partners. The
per unit distribution to limited partners during the six months ended June
30, 1995 was $15.24.
The sources for the 1996 distributions of $320,712 were oil and gas
operations of approximately $253,500 and sale of oil and gas property of
approximately $59,400, offset by the addition of oil and gas property of
approximately $8,400, with the balance from available cash on hand at the
beginning of the period. The sources for the 1995 distributions of $225,510
were oil and gas operations of approximately $220,600 and the sale of oil and
gas property of approximately $73,000, offset by the addition of oil and gas
property of approximately $12,900, resulting in excess cash for contingencies
or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions of
$5,897,651 have been made to the partners. As of June 30, 1996, $5,347,530
or $393.32 per limited partner unit has been distributed to the limited
partners, representing a 79% return of the capital contributed.
As of June 30, 1996, the Partnership had approximately $193,100 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 VIII-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