Page 13 of 14
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, 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 and 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.
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, 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
nine month periods ended September 30, 1997 are not necessarily indicative
of the results that may be expected for the full year.
Southwest Oil and Gas Income Fund VIII-A, L.P.
Balance Sheets
September 30, December 31,
1997 1996
------------- ------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 22,460 55,844
Receivable from Managing General Partner 124,925 227,459
- ---------- ---------
Total current assets 147,385 283,303
---------- ---------
Oil and gas properties - using the
full cost method of accounting 5,437,136 5,448,326
Less accumulated depreciation,
depletion and amortization 4,125,109 4,049,109
---------- ---------
Net oil and gas properties 1,312,027 1,399,217
---------- ---------
$1,459,412 1,682,520
========== =========
Liabilities and Partners' Equity
Current liability - Distribution payable $ 356 271
---------- ---------
Partners' equity
General partners 9,745 24,464
Limited partners 1,449,311 1,657,785
---------- ---------
Total partners' equity 1,459,056 1,682,249
---------- ---------
$1,459,412 1,682,520
========== =========
Southwest Oil and Gas Income Fund VIII-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues
Oil and gas $ 333,227 423,438 1,101,912 1,259,744
Interest 290 462 1,499 1,476
--------- --------- --------- ---------
333,517 423,900 1,103,411 1,261,220
--------- --------- --------- ---------
Expenses
Production 225,018 274,419 628,839 771,347
General and administrative 24,396 24,917 83,765 84,538
Depreciation, depletion and
amortization 23,000 43,000 76,000 127,000
--------- --------- --------- ---------
272,414 342,336 788,604 982,885
--------- --------- --------- ---------
Net income $ 61,103 81,564 314,807 278,335
========= ========= ========= =========
Net income allocated to:
Managing General Partner $ 7,569 11,211 35,173 36,480
========= ========= ========= =========
General Partner $ 842 1,246 3,908 4,053
========= ========= ========= =========
Limited Partners $ 52,692 69,107 275,726 237,802
========= ========= ========= =========
Per limited partner unit $ 3.88 5.08 20.28 17.49
========= ========= ========= =========
Southwest Oil and Gas Income Fund VIII-A, L.P.
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1997 1996
Cash flows from operating activities
Cash received from oil and gas sales $1,206,995 1,204,735
Cash paid to suppliers (715,153) (826,350)
Interest received 1,499 1,476
--------- ---------
Net cash provided by operating activities 493,341 379,861
--------- ---------
Cash flows from investing activities
Cash received from sale of oil and gas
property interest 21,855 62,390
Additions to oil and gas properties (10,665) (10,600)
--------- ---------
Net cash provided by investing activities 11,190 51,790
--------- ---------
Cash flows used in financing activities
Distributions to partners (537,915) (438,379)
--------- ---------
Net decrease in cash and cash equivalents (33,384) (6,728)
Beginning of period 55,844 38,356
--------- ---------
End of period $ 22,460 31,628
========= =========
(continued)
Southwest Oil and Gas Income Fund VIII-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1997 1996
Reconciliation of net income to net cash
provided by operating activities
Net income $ 314,807 278,335
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation, depletion and amortization 76,000 127,000
(Increase) decrease in receivables 105,083 (55,009)
Increase (decrease) in payables (2,549) 29,535
--------- ---------
Net cash provided by operating activities $ 493,341 379,861
========= =========
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 September 30, 1997 and 1996
The following table provides certain information regarding performance
factors for the quarters ended September 30, 1997 and 1996:
Three Months
Ended Percentage
September 30, Increase
1997 1996 (Decrease)
Average price per barrel of oil $ 17.88 21.77 (18%)
Average price per mcf of gas $ 2.46 2.30 7%
Oil production in barrels 15,600 17,100 (9%)
Gas production in mcf 22,100 21,900 1%
Gross oil and gas revenue $ 333,227 423,438 (21%)
Net oil and gas revenue $ 108,209 149,019 (27%)
Partnership distributions $ 108,000 118,000 (8%)
Limited partner distributions $ 97,200 106,200 (8%)
Per unit distribution to limited partners $ 7.15 7.81 (8%)
Number of limited partner units 13,596 13,596
Revenues
The Partnership's oil and gas revenues decreased to $333,227 from $423,438
for the quarters ended September 30, 1997 and 1996, respectively, a
decrease of 21%. The principal factors affecting the comparison of the
quarters ended September 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 September 30, 1997 as compared to
the quarter ended September 30, 1996 by 18%, or $3.89 per barrel,
resulting in a decrease of approximately $66,500 in revenues. Oil
sales represented 84% of total oil and gas sales during the quarter
ended September 30, 1997 as compared to 88% during the quarter ended
September 30, 1996.
The average price for an mcf of gas received by the Partnership
increased during the same period by 7%, or $.16 per mcf, resulting in
an increase of approximately $3,500 in revenues.
The net total decrease in revenues due to the change in prices received
from oil and gas production is approximately $63,000. 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 1,500 barrels or 9% during the
quarter ended September 30, 1997 as compared to the quarter ended
September 30, 1996, resulting in a decrease of approximately $26,800
in revenues.
Gas production increased approximately 200 mcf or 1% during the same
period, resulting in an increase of approximately $500 in revenues.
The net total decrease in revenues due to the change in production is
approximately $26,300. The decrease in primarily attributable to
downtime due to mechanical problems.
Costs and Expenses
Total costs and expenses decreased to $272,414 from $342,336 for the
quarters ended September 30, 1997 and 1996, respectively, a decrease of
20%. 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 18% lower, or
approximately $49,400 less during the quarter ended September 30, 1997 as
compared to the quarter ended September 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 decreased
2% or approximately $500 during the quarter ended September 30, 1997 as
compared to the quarter ended September 30, 1996.
3. Depletion expense decreased to $23,000 for the quarter ended September
30, 1997 from $43,000 for the same period in 1996. This represents a
decrease of 47%. 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. Two 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
decline in gross oil and gas revenues.
B. General Comparison of the Nine Month Periods Ended September 30, 1997
and 1996
The following table provides certain information regarding performance
factors for the nine month periods ended September 30, 1997 and 1996:
Nine Months
Ended Percentage
September 30, Increase
1997 1996 (Decrease)
Average price per barrel of oil $ 19.32 20.17 (4%)
Average price per mcf of gas $ 2.51 2.49 1%
Oil production in barrels 48,200 53,600 (10%)
Gas production in mcf 68,000 71,800 (5%)
Gross oil and gas revenue $1,101,9121,259,744 (13%)
Net oil and gas revenue $ 473,073 488,397 (3%)
Partnership distributions $ 538,000 438,712 23%
Limited partner distributions $ 484,200 395,912 22%
Per unit distribution to limited partners $ 35.61 29.12 22%
Number of limited partner units 13,596 13,596
Revenues
The Partnership's oil and gas revenues decreased to $1,101,912 from
$1,259,744 for the nine months ended September 30, 1997 and 1996,
respectively, a decrease of 13%. The principal factors affecting the
comparison of the nine months ended September 30, 1997 and 1996 are as
follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the nine months ended September 30, 1997 as compared
to the nine months ended September 30, 1996 by 4%, or $.85 per barrel,
resulting in a decrease of approximately $45,600 in revenues. Oil
sales represented 85% of total oil and gas sales during the nine months
ended September 30, 1997 as compared to 86% during the nine months
ended September 30, 1996.
The average price for an mcf of gas received by the Partnership
increased during the same period by 1%, or $.02 per mcf, resulting in
an increase of approximately $1,400 in revenues.
The net total decrease in revenues due to the change in prices received
from oil and gas production is approximately $44,200. The market price
for oil and gas has been extremely volatile over the past decade and
management expects a certain amount of volatility to continue in the
foreseeable future.
2. Oil production decreased approximately 5,400 barrels or 10% during the
nine months ended September 30, 1997 as compared to the nine months
ended September 30, 1996, resulting in a decrease of approximately
$104,300 in revenues.
Gas production decreased approximately 3,800 mcf or 5% during the same
period, resulting in a decrease of approximately $9,500 in revenues.
The total decrease in revenues due to the change in production is
approximately $113,800. The decrease is primarily attributable to
downtime due to mechanical problems.
Costs and Expenses
Total costs and expenses decreased to $788,604 from $982,885 for the nine
months ended September 30, 1997 and 1996, respectively, a decrease of 20%.
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 18% lower, or
approximately $142,500 less during the nine months ended September 30,
1997 as compared to the nine months ended September 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 decreased 1%
or approximately $800 during the nine months ended September 30, 1997
as compared to the nine months ended September 30, 1996.
3. Depletion expense decreased to $76,000 for the nine months ended
September 30, 1997 from $127,000 for the same period in 1996. This
represents a decrease of 40%. 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. Two
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 decline in gross 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 $493,300 in
the nine months ended September 30, 1997 as compared to approximately
$379,900 in the nine months ended September 30, 1996. The primary source
of the 1997 cash flow from operating activities was profitable operations.
Cash flows provided by investing activities were approximately $11,200 in
the nine months ended September 30, 1997 as compared to approximately
$51,800 in the nine months ended September 30, 1996. The principle source
of the 1997 cash flow from investing activities was the change in oil and
gas properties.
Cash flows used in financing activities were approximately $537,900 in the
nine months ended September 30, 1997 as compared to approximately $438,400
in the nine months ended September 30, 1996. The only use in financing
activities was the distributions to partners.
Total distributions during the nine months ended September 30, 1997 were
$538,000 of which $484,200 was distributed to the limited partners and
$53,800 to the general partners. The per unit distribution to limited
partners during the nine months ended September 30, 1997 was $35.61. Total
distributions during the nine months ended September 30, 1996 were $438,712
of which $395,912 was distributed to the limited partners and $42,800 to
the general partners. The per unit distribution to limited partners during
the nine months ended September 30, 1996 was $29.12.
The sources for the 1997 distributions of $538,000 were oil and gas
operations of approximately $493,300 and the change in oil and gas
properties of approximately $11,200, with the balance from available cash
on hand at the beginning of the period. The sources for the 1996
distributions of $438,712 were oil and gas operations of approximately
$379,900 and the change in oil and gas properties of approximately $51,800,
with the balance from available cash on hand at the beginning of the
period.
Since inception of the Partnership, cumulative monthly cash distributions
of $6,748,651 have been made to the partners. As of September 30, 1997,
$6,113,430 or $449.65 per limited partner unit has been distributed to the
limited partners, representing a 90% return of the capital contributed.
As of September 30, 1997, the Partnership had approximately $147,000 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)Exhibits:
27 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 and 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: November 15, 1997