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, 1997
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, 1996 which are found in the Registrant's Form 10-K Report
for 1996 filed with the Securities and Exchange Commission. The December 31,
1996 balance sheet included herein has been taken from the Registrant's 1996
Form 10-K Report. Operating results for the three and six month periods
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the full year.
Southwest Oil & Gas Income Fund VIII-A, L.P.
Balance Sheets
June 30, December 31,
1997 1996
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 10,025 55,844
Receivable from Managing General Partner 156,360 227,459
--------- ---------
Total current assets 166,385 283,303
--------- ---------
Oil and gas properties - using the
full cost method of accounting 5,443,782 5,448,326
Less accumulated depreciation,
depletion and amortization 4,102,109 4,049,109
--------- ---------
Net oil and gas properties 1,341,673 1,399,217
--------- ---------
$ 1,508,058 1,682,520
========= =========
Liabilities and Partners' Equity
Current liabilities:
Accounts payable $ 1,393 -
Distributions payable 711 271
--------- ---------
Total current liabilities 2,104 271
--------- ---------
Partners' equity:
General partners 12,134 24,464
Limited partners 1,493,820 1,657,785
--------- ---------
Total partners' equity 1,505,954 1,682,249
--------- ---------
$ 1,508,058 1,682,520
========= =========
Southwest Oil & Gas Income Fund VIII-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues
Oil and gas $ 391,226 443,480 768,685 836,307
Interest 475 688 1,210 1,013
------- ------- ------- -------
391,701 444,168 769,895 837,320
------- ------- ------- -------
Expenses
Production 198,120 240,200 403,821 496,928
General and administrative 25,346 25,169 59,369 59,621
Depreciation, depletion and
amortization 27,000 44,000 53,000 84,000
------- ------- ------- -------
250,466 309,369 516,190 640,549
------- ------- ------- -------
Net income $ 141,235 134,799 253,705 196,771
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 15,141 16,092 27,603 25,269
======= ======= ======= =======
General Partner $ 1,683 1,788 3,067 2,808
======= ======= ======= =======
Limited partners $ 124,411 116,919 223,035 168,694
======= ======= ======= =======
Per limited partner unit $ 9.15 8.60 16.40 12.41
======= ======= ======= =======
Southwest Oil & Gas Income Fund VIII-A, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Cash received from oil and gas sales $ 857,491 787,630
Cash paid to suppliers (479,504) (535,116)
Interest received 1,210 1,013
-------- --------
Net cash provided by operating activities 379,197 253,527
-------- --------
Cash flows from investing activities:
Cash received from sale of oil and gas properties 12,193 59,407
Additions to oil and gas properties (7,649) (8,391)
-------- --------
Net cash provided by investing activities 4,544 51,016
-------- --------
Cash flows used in financing activities:
Distributions to partners (429,560) (320,599)
-------- --------
Net decrease in cash and cash equivalents (45,819) (16,056)
Beginning of period 55,844 38,356
-------- --------
End of period $ 10,025 22,300
======== ========
(continued)
Southwest Oil & Gas Income Fund VIII-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Six Months Ended
June 30,
1997 1996
Reconciliation of net income to net
cash provided by operating activities:
Net income $ 253,705 196,771
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 53,000 84,000
(Increase) decrease in receivables 88,806 (48,677)
Increase (decrease) in payables (16,314) 21,433
------- -------
Net cash provided by operating activities $ 379,197 253,527
======= =======
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.
Based on current conditions, management anticipates performing workovers
during the next two years to enhance production. The Partnership may undergo
an increase later in 1997 and possibly in 1998. Thereafter, the Partnership
could possibly experience a normal decline of 10% to 12% per year.
Results of Operations
A. General Comparison of the Quarters Ended June 30, 1997 and 1996
The following table provides certain information regarding performance
factors for the quarters ended June 30, 1997 and 1996:
Three Months
Ended Percentage
June 30, Increase
1997 1996 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 19.19 20.57 (7%)
Average price per mcf of gas $ 2.74 2.56 7%
Oil production in barrels 17,100 18,500 (8%)
Gas production in mcf 23,000 25,000 (8%)
Gross oil and gas revenue $ 391,226 443,480 (12%)
Net oil and gas revenue $ 193,106 203,280 (5%)
Partnership distributions $ 185,000 190,000 (3%)
Limited partner distributions $ 166,500 171,000 (3%)
Per unit distribution to limited
partners $ 12.25 12.58 (3%)
Number of limited partner units 13,596 13,596
Revenues
The Partnership's oil and gas revenues decreased to $391,226 from $443,480
for the quarters ended June 30, 1997 and 1996, respectively, a decrease of
12%. The principal factors affecting the comparison of the quarters ended
June 30, 1997 and 1996 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the quarter ended June 30, 1997 as compared to the
quarter ended June 30, 1996 by 7%, or $1.38 per barrel, resulting in a
decrease of approximately $25,500 in revenues. Oil sales represented 84%
of total oil and gas sales during the quarter ended June 30, 1997 as
compared to 86% during the quarter ended June 30, 1996.
The average price for an mcf of gas received by the Partnership increased
during the same period by 7% or $.18 per mcf, resulting in an increase of
approximately $4,500 in revenues.
The net total decrease in revenues due to the change in prices received
from oil and gas production is approximately $21,000. 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.
2. Oil production decreased approximately 1,400 barrels or 8% during the
quarter ended June 30, 1997 as compared to the quarter ended June 30,
1996, resulting in a decrease of approximately $26,900 in revenues.
Gas production decreased approximately 2,000 mcf or 8% during the same
period, resulting in a decrease of approximately $5,500 in revenues.
The total decrease in revenues due to the change in production is
approximately $32,400.
Costs and Expenses
Total costs and expenses decreased to $250,466 from $309,369 for the quarters
ended June 30, 1997 and 1996, respectively, a decrease of 19%. The decrease
is the result of lower lease operating costs and depletion expense, partially
offset by an increase in general and administrative expense.
1. Lease operating costs and production taxes were 18% lower, or
approximately $42,100 less during the quarter ended June 30, 1997 as
compared to the quarter ended June 30, 1996. The decrease is primarily
attributable to higher workover costs incurred in 1996 as compared to
1997.
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 $200 during the quarter ended June 30, 1997 as compared
to the quarter ended June 30, 1996.
3. Depletion expense decreased to $27,000 for the quarter ended June 30,
1997 from $44,000 for the same period in 1996. This represents a
decrease of 39%. 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 decline in depletion expense between the comparative periods were the
increase in the price of oil used to determine the Partnership's reserves
for January 1, 1997 as compared to 1996 and the decrease in oil and gas
revenue.
B. General Comparison of the Six Month Periods Ended June 30, 1997 and 1996
The following table provides certain information regarding performance
factors for the six month periods ended June 30, 1997 and 1996:
Six Months
Ended Percentage
June 30, Increase
1997 1996 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 20.01 19.41 3%
Average price per mcf of gas $ 2.53 2.57 (2%)
Oil production in barrels 32,600 36,500 (11%)
Gas production in mcf 45,900 50,000 (8%)
Gross oil and gas revenue $ 768,685 836,307 (8%)
Net oil and gas revenue $ 364,864 339,379 8%
Partnership distributions $ 430,000 320,712 34%
Limited partner distributions $ 387,000 289,712 34%
Per unit distribution to limited
partners $ 28.46 21.31 34%
Number of limited partner units 13,596 13,596
Revenues
The Partnership's oil and gas revenues decreased to $768,685 from $836,307
for the six months ended June 30, 1997 and 1996, respectively, a decrease of
8%. The principal factors affecting the comparison of the six months ended
June 30, 1997 and 1996 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the six months ended June 30, 1997 as compared to the
six months ended June 30, 1996 by 3%, or $.60 per barrel, resulting in an
increase of approximately $21,900 in revenues. Oil sales represented 85%
of total oil and gas sales during the six months ended June 30, 1997 and
1996.
The average price for an mcf of gas received by the Partnership decreased
during the same period by 2%, or $.04 per mcf, resulting in a decrease of
approximately $2,000 in revenues.
The net total increase in revenues due to the change in prices received
from oil and gas production is approximately $19,900. 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 3,900 barrels or 11% during the
six months ended June 30, 1997 as compared to the six months ended June
30, 1996, resulting in a decrease of approximately $78,000 in revenues.
Gas production decreased approximately 4,100 mcf or 8% during the same
period, resulting in a decrease of approximately $10,400 in revenues.
The total decrease in revenues due to the change in production is
approximately $88,400.
Costs and Expenses
Total costs and expenses decreased to $516,190 from $640,549 for the six
months ended June 30, 1997 and 1996, respectively, a decrease of 19%. The
decrease is the result of lower lease operating costs, general and
administrative expense and depletion expense.
1. Lease operating costs and production taxes were 19% lower, or
approximately $93,100 less during the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996.
The decrease is primarily attributable to the following:
The Partnership incurred higher workover costs in the six months ended
June 30, 1996 as compared to the same period in 1997.
The lease operating costs for the six months ended June 30, 1996 were
overstated due to the accrual at December 31, 1995 for lease operating
costs being lower than the actual lease operating costs incurred. The
under-accrual of lease operating costs, at December 31, 1995, caused
the lease operating costs for the six months ended June 30, 1996 to be
overstated, thus skewing the comparison between the six months ended
June 30, 1997 and 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 decreased less
than 1% or approximately $300 during the six months ended June 30, 1997
as compared to the six months ended June 30, 1996.
3. Depletion expense decreased to $53,000 for the six months ended June 30,
1997 from $84,000 for the same period in 1996. This represents a
decrease of 37%. 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 decline in depletion expense between the comparative periods were the
increase in the price of oil used to determine the Partnership's reserves
for January 1, 1997 as compared to 1996 and the decrease in oil and gas
revenue.
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 $379,200 in
the six months ended June 30, 1997 as compared to approximately $253,500 in
the six months ended June 30, 1996. The primary source of the 1997 cash flow
from operating activities was profitable operations.
Cash flows provided by investing activities were approximately $4,500 in the
six months ended June 30, 1997 as compared to approximately $51,000 in the
six months ended June 30, 1996. The principle source of the 1997 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 $429,600 in the
six months ended June 30, 1997 as compared to approximately $320,600 in the
six months ended June 30, 1996. The only use in financing activities was the
distributions to partners.
Total distributions during the six months ended June 30, 1997 were $430,000
of which $387,000 was distributed to the limited partners and $43,000 to the
general partners. The per unit distribution to limited partners during the
six months ended June 30, 1997 was $28.46. 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.
The sources for the 1997 distributions of $430,000 were oil and gas
operations of approximately $379,200 and the net change in oil and gas
properties of approximately $4,500, with the balance from available cash on
hand at the beginning of the period. The sources for the 1996 distributions
of $320,712 were oil and gas operations of approximately $253,500 and the net
change in oil and gas properties of approximately $51,000, with the balance
from available cash on hand at the beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions of
$6,640,651 have been made to the partners. As of June 30, 1997, $6,016,230
or $442.50 per limited partner unit has been distributed to the limited
partners, representing an 89% return of the capital contributed.
As of June 30, 1997, the Partnership had approximately $164,300 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) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
On June 12, 1997, the Partnership filed Form 8-K and on June
24, 1997, the Partnership filed Form 8-K Amended, with
respect to Item 4, Changes in Registrant's Certifying
Accountant.
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 15, 1997