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, 1995
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 0-16494
Southwest Royalties Institutional Income Fund VIII-B, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2220418
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
407 N. Big Spring, Suite 300
Midland, Texas 79701
(Address of principal executive offices)
(915) 686-9927
(Registrant's telephone number,
including area code)
Indicate by check mark whether registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
Yes X No
The total number of pages contained in this report is 14.
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited condensed financial statements included herein have been
prepared by the Registrant (herein also referred to as the "Partnership") in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
necessary for a fair presentation have been included and are of a normal
recurring nature. The financial statements should be read in conjunction
with the audited financial statements and the notes thereto for the year
ended December 31, 1994 which are found in the Registrant's Form 10-K Report
for 1994 filed with the Securities and Exchange Commission. The December 31,
1994 balance sheet included herein has been taken from the Registrant's 1994
Form 10-K Report. Operating results for the three and nine month periods
ended September 30, 1995 are not necessarily indicative of the results that
may be expected for the full year.
Southwest Royalties Institutional Income Fund VIII-B, L.P.
Balance Sheets
September 30, December 31,
1995 1994
------------- ------------
(unaudited)
Assets
Current assets:
Cash $ 35,118 29,455
Receivable from Managing General Partner 71,783 69,109
--------- ---------
Total current assets 106,901 98,564
--------- ---------
Oil and gas properties - using the full
cost method of accounting 4,211,953 4,260,353
Less accumulated depreciation,
depletion and amortization 2,819,434 2,692,434
--------- ---------
Net oil and gas properties 1,392,519 1,567,919
--------- ---------
$ 1,499,420 1,666,483
========= =========
Liabilities and Partners' Equity
Current liabilities:
Accounts payable $ - 660
Distributions payable 170 281
--------- ---------
Total current liabilities 170 941
--------- ---------
Partners' equity:
General partners 9,672 10,706
Limited partners 1,489,578 1,654,836
--------- ---------
Total partners' equity 1,499,250 1,665,542
--------- ---------
$ 1,499,420 1,666,483
========= =========
Southwest Royalties Institutional Income Fund VIII-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
Revenues
Income (loss) from net
profits interests $ (25,204) 76,327 277,451 234,722
Interest income 392 595 1,301 1,079
------- ------- ------- -------
(24,812) 76,922 278,752 235,801
------- ------- ------- -------
Expenses
General and administrative 17,948 19,064 64,591 68,691
Depreciation, depletion and
amortization 37,000 70,000 127,000 199,000
------- ------- ------- -------
54,948 89,064 191,591 267,691
------- ------- ------- -------
Net income (loss) $ (79,760) (12,142) 87,161 (31,890)
======= ======= ======= =======
Net income (loss) allocated
to:
Managing General Partner $ (3,848) 5,207 19,274 15,040
======= ======= ======= =======
General partner $ (428) 579 2,142 1,671
======= ======= ======= =======
Limited partners $ (75,484) (17,928) 65,745 (48,601)
======= ======= ======= =======
Per limited partner unit $ (7.44) (1.77) 6.48 (4.79)
======= ======= ======= =======
Southwest Royalties Institutional Income Fund VIII-B, L.P.
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1995 1994
---- ----
Cash flows from operating activities:
Cash received from income from net
profits interests $ 274,777 273,764
Cash paid to suppliers (65,251) (68,692)
Interest received 1,301 1,079
------- -------
Net cash provided by operating
activities 210,827 206,151
------- -------
Cash provided by investing activities:
Sale of oil and gas properties 48,400 -
------- -------
Cash used in financing activities:
Distributions to partners (253,564) (159,545)
------- -------
Net increase in cash 5,663 46,606
Cash:
Beginning of period 29,455 5,297
------- -------
End of period $ 35,118 51,903
======= =======
(continued)
Southwest Royalties Institutional Income Fund VIII-B, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1995 1994
---- ----
Reconciliation of net income (loss)
to net cash provided by operating
activities:
Net income (loss) $ 87,161 (31,890)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation, depletion and amortization 127,000 199,000
(Increase) decrease in accounts receivable (2,674) 39,042
Decrease in accounts payable (660) (1)
------- -------
Net cash provided by operating activities $ 210,827 206,151
======= =======
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Royalties Institutional Income Fund VIII-B, L.P. was organized as
a Delaware limited partnership on November 30, 1987. The offering of such
limited partnership interests began March 31, 1988, minimum capital
requirements were met July 11, 1988, and concluded on March 31, 1989 with
total limited partner contributions of $5,073,500.
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, 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 usually decrease with production declines; however,
these costs may not decrease proportionately. Net income available for
distribution to the partners is therefore expected to fluctuate in later
years based on these factors.
Results of Operations
A. General Comparison of the Quarters Ended September 30, 1995 and 1994
The following table provides certain information regarding performance
factors for the quarters ended September 30, 1995 and 1994:
Three Months
Ended Percentage
September 30, Increase
1995 1994 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 16.32 16.76 (3%)
Average price per mcf of gas $ 1.97 1.76 12%
Oil production in barrels 13,200 12,400 6%
Gas production in mcf 14,800 16,200 (9%)
Income (loss) from net profits interests $ (25,204) 76,327 (133%)
Partnership distributions $ 39,500 74,000 (47%)
Limited partner distributions $ 35,550 66,600 (47%)
Per unit distribution to limited partners $ 3.50 6.56 (47%)
Number of limited partner units 10,147 10,147
Net Profits Interests
The Partnership's income (loss) from net profits interests decreased to
$(25,204) from $76,327 for the quarters ended September 30, 1995 and 1994,
respectively, a decrease of 133%. The principal factors affecting the
comparison of the quarters ended September 30, 1995 and 1994 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the quarter ended September 30, 1995 as compared to the
quarter ended September 30, 1994 by 3%, or $.44 per barrel, resulting in
a decrease of approximately $5,500 in income from net profits interests.
Oil sales represented 88% of total oil and gas sales during the quarters
ended September 30, 1995 and 1994.
The average price for an mcf of gas received by the Partnership increased
during the same period by 12%, or $.21 per mcf, resulting in an increase
of approximately $3,400 in income from net profits interests.
The net total decrease in income from net profits interests due to the
change in prices received from oil and gas production is approximately
$2,100. The market price for oil and gas has been extremely volatile
over the past decade, and management expects a certain amount of
volatility to continue in the foreseeable future.
2. Oil production increased approximately 800 barrels or 6% during the
quarter ended September 30, 1995 as compared to the quarter ended
September 30, 1994, resulting in an increase of approximately $13,100 in
income from net profits interests.
Gas production decreased approximately 1,400 mcf or 9% during the same
period, resulting in a decrease of approximately $2,800 in income from
net profits interests.
The net total increase in income from net profits interests due to the
change in production is approximately $10,300.
3. Lease operating costs and production taxes were 68% higher, or
approximately $109,400 more during the quarter ended September 30, 1995
as compared to the quarter ended September 30, 1994. The increase is a
result of workover costs incurred in 1995.
Costs and Expenses
Total costs and expenses decreased to $54,948 from $89,064 for the quarters
ended September 30, 1995 and 1994, respectively, a decrease of 38%. The
decrease is the result of a decrease in general and administrative expense
and depletion.
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 6%
or approximately $1,100 during the quarter ended September 30, 1995 as
compared to the quarter ended September 30, 1994.
2. Depletion expense decreased to $37,000 for the quarter ended
September 30, 1995 from $70,000 for the same period in 1994. This
represents a decrease of 47%. 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. Although oil and
gas revenues increased for the quarter ended September 30, 1995 as
compared to the quarter ended September 30, 1994, the decrease in
depletion expense is the result of the change in oil prices since 1994.
B. General Comparison of the Nine Month Periods Ended September 30, 1995 and
1994
The following table provides certain information regarding performance
factors for the nine month periods ended September 30, 1995 and 1994:
Nine Months
Ended Percentage
September 30, Increase
1995 1994 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 16.94 15.26 11%
Average price per mcf of gas $ 2.03 1.89 7%
Oil production in barrels 43,900 37,800 16%
Gas production in mcf 48,100 52,800 (9%)
Income from net profits interests $ 277,451 234,722 18%
Partnership distributions $ 253,453 159,500 59%
Limited partner distributions $ 231,003 143,550 61%
Per unit distribution to limited partners $ 22.77 14.15 61%
Number of limited partner units 10,147 10,147
Net Profits Interests
The Partnership's income from net profits interests increased to $277,451
from $234,722 for the nine months ended September 30, 1995 and 1994,
respectively, an increase of 18%. The principal factors affecting the
comparison of the nine months ended September 30, 1995 and 1994 are as
follows:
1. The average price for a barrel of oil received by the Partnership
increased during the nine months ended September 30, 1995 as compared to
the nine months ended September 30, 1994 by 11%, or $1.68 per barrel,
resulting in an increase of approximately $63,500 in income from net
profits interests. Oil sales represented 88% of total oil and gas sales
during the nine months ended September 30, 1995 as compared to 85% during
the nine months ended September 30, 1994.
The average price for an mcf of gas received by the Partnership increased
during the same period by 7%, or $.14 per mcf, resulting in an increase
of approximately $7,400 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 $70,900.
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 increased approximately 6,100 barrels or 16% during the
nine months ended September 30, 1995 as compared to the nine months ended
September 30, 1994, resulting in an increase of approximately $103,300 in
income from net profits interests.
Gas production decreased approximately 4,700 mcf or 9% during the same
period, resulting in a decrease of approximately $9,500 in income from
net profits interests.
The net total increase in income from net profits interests due to the
change in production is approximately $93,800. The increase is a result
of successful workovers.
3. Lease operating costs and production taxes were 28% higher, or
approximately $121,900 more during the nine months ended September 30,
1995 as compared to the nine months ended September 30, 1994. The
increase is a result of workover costs incurred in 1995.
Costs and Expenses
Total costs and expenses decreased to $191,591 from $267,691 for the nine
months ended September 30, 1995 and 1994, respectively, a decrease of 28%.
The decrease is the result of a decrease in general and administrative
expense and depletion.
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 6%
or approximately $4,100 during the nine months ended September 30, 1995
as compared to the nine months ended September 30, 1994.
2. Depletion expense decreased to $127,000 for the nine months ended
September 30, 1995 from $199,000 for the same period in 1994. This
represents a decrease of 36%. 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. Although oil and
gas revenues increased during the nine months ended September 30, 1995 as
compared to the nine months ended September 30, 1994, the decrease in
depletion expense is the result of the change in oil prices since 1994.
Liquidity and Capital Resources
The primary source of cash is from profitable operations. The Partnership
knows of no material change, nor does it anticipate any such change.
Cash flows provided by operating activities were approximately $210,800 in
the nine months ended September 30, 1995 as compared to approximately
$206,200 in the nine months ended September 30, 1994. Primary source of the
1995 cash flow from operating activities was profitable operations.
Cash flows provided by investing activities were $48,400 in the nine months
ended September 30, 1995 as compared to none in the nine months ended
September 30, 1994.
Cash flows used in financing activities were approximately $253,600 in the
nine months ended September 30, 1995 as compared to approximately $159,500 in
the nine months ended September 30, 1994. The only use in financing
activities was the distributions to partners.
Total distributions during the nine months ended September 30, 1995 were
$253,453, of which $231,003 was distributed to the limited partners and
$22,450 was distributed to the general partners. The per unit distribution
to limited partners during the nine months ended September 30, 1995 was
$22.77. Total distributions during the nine months ended September 30, 1994
were $159,500, of which $143,550 was distributed to the limited partners and
$15,950 was distributed to the general partners. The per unit distribution
to limited partners during the nine months ended September 30, 1994 was
$14.15. The sources for the 1995 distributions of $253,453 were oil and gas
operations of approximately $210,800 and sales of oil and gas properties of
$48,400, resulting in excess cash for contingencies or subsequent
distributions. The source for the 1994 distributions of $159,500 was oil and
gas operations of approximately $206,200, resulting in excess cash for
contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions of
$4,039,863 have been made to the partners. As of September 30, 1995,
$3,653,189 or $360.03 per limited partner unit has been distributed to the
limited partners, representing a 72% return of the capital contributed.
As of September 30, 1995, the Partnership had approximately $106,700 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) None
(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 ROYALTIES INSTITUTIONAL
INCOME FUND VIII-B, L.P.
a Delaware limited partnership
By: Southwest Royalties, Inc.
Managing General Partner
Date: November 9, 1995 By: /s/ Bill E. Coggin
------------------------------
Bill E. Coggin, Vice President
and Chief Financial Officer