Page 2 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, 1998
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 0-18996
SOUTHWEST OIL & GAS 1990-91 INCOME PROGRAM
Southwest Oil and Gas Income Fund X-A, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2310854
(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 15.
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, 1997 which are found in the Registrant's Form
10-K Report for 1997 filed with the Securities and Exchange Commission.
The December 31, 1997 balance sheet included herein has been taken from the
Registrant's 1997 Form 10-K Report. Operating results for the three and
nine month periods ended September 30, 1998 are not necessarily indicative
of the results that may be expected for the full year.
Southwest Oil and Gas Income Fund X-A, L.P.
Balance Sheets
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 24,672 4,408
Receivable from Managing General Partner - 40,311
--------- ---------
Total current assets 24,672 44,719
--------- ---------
Oil and gas properties - using the
full cost method of accounting 3,847,669 3,936,664
Less accumulated depreciation
depletion and amortization 3,566,800 3,534,000
--------- ---------
Net oil and gas properties 280,869 402,664
--------- ---------
$ 305,541 447,383
========= =========
Liabilities and Partners' Equity
Current liabilities
Distribution payable $ 555 759
Payable to Managing General Partner 9,748 -
--------- ---------
Total current liabilities 10,303 759
--------- ---------
Partners' equity
General partners (23,508) (11,649)
Limited partners 318,746 458,273
--------- ---------
Total partners' equity 295,238 446,624
--------- ---------
$ 305,541 447,383
========= =========
Southwest Oil and Gas Income Fund X-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
Revenues
Oil and gas $ 58,563 133,671 232,285 420,055
Interest - 75 33 368
Miscellaneous 3 6,003 3 7,653
------- ------- ------- -------
58,566 139,749 232,321 428,076
------- ------- ------- -------
Expenses
Production 79,470 83,112 243,185 280,348
General and administrative 24,212 19,569 75,721 67,653
Depreciation, depletion and
amortization 3,800 9,000 32,800 29,000
------- ------- ------- -------
107,482 111,681 351,706 377,001
------- ------- ------- -------
Net income (loss) $ (48,916) 28,068 (119,385) 51,075
======= ======= ======= =======
Net income (loss) allocated to:
Managing General Partner $ (4,061) 3,336 (7,792) 7,207
======= ======= ======= =======
General Partner $ (451) 371 (866) 800
======= ======= ======= =======
Limited Partners $ (44,404) 24,361 (110,727) 43,068
======= ======= ======= =======
Per limited partner unit $ (4.24) 2.32 (10.56) 4.11
======= ======= ======= =======
Southwest Oil and Gas Income Fund X-A, L.P.
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1998 1997
---- ----
Cash flows from operating activities
Cash received from oil and gas sales $ 272,551 490,973
Cash paid to suppliers (309,110) (357,744)
Interest received 33 368
------- -------
Net cash provided by (used in ) operating
activities (36,526) 133,597
------- -------
Cash flows from investing activities
Additions to oil and gas properties (1,221) (7,916)
Cash received from sale of oil and gas
property interest 90,216 13,852
------- -------
Net cash provided by investing activities 88,995 5,936
------- -------
Cash flows used in financing activities
Distributions to partners (32,205) (142,997)
------- -------
Net increase (decrease) in cash and cash
equivalents 20,264 (3,464)
Beginning of period 4,408 8,919
------- -------
End of period $ 24,672 5,455
======= =======
(continued)
Southwest Oil and Gas Income Fund X-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1998 1997
---- ----
Reconciliation of net income (loss) to net
cash provided by operating activities
Net income (loss) $(119,385) 51,075
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation, depletion and amortization 32,800 29,000
Decrease in receivables 40,263 63,265
Increase (decrease) in payables 9,796 (9,743)
--------- ------
Net cash provided by (used in) operating
activities $ (36,526) 133,597
========= ======
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Oil & Gas Income Fund X-A, L.P. was organized as a Delaware
limited partnership on January 29, 1990. The offering of such limited
partnership interests began on May 11, 1990 as part of a shelf offering
registered under the name Southwest Oil & Gas 1990-91 Income Program.
Minimum capital requirements for the Partnership were met on August 15,
1990, with the offering of limited partnership interests concluding on
November 30, 1990, with total limited partner contributions of $5,242,000.
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 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 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 does not anticipate performing
workovers during the year. The Partnership could possibly experience a
normal decline of 8% to 10% 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, 1998, the net capitalized costs did
not exceed the estimated present value of oil and gas reserves. A
continuation of the oil price environment experienced during the first
three quarters of 1998 will have an adverse affect on the Company's
revenues and operating cash flow. Also, further declines in oil prices
could result in additional decreases in the carrying value of the Company's
oil and gas properties.
Results of Operations
A. General Comparison of the Quarters Ended September 30, 1998 and 1997
The following table provides certain information regarding performance
factors for the quarters ended September 30, 1998 and 1997:
Three Months
Ended Percentage
September 30, Increase
1998 1997 (Decrease)
---- ---- ---------
Average price per barrel of oil $ 10.60 17.31 (39%)
Average price per mcf of gas $ 2.05 2.79 (27%)
Oil production in barrels 4,500 6,500 (31%)
Gas production in mcf 5,300 7,600 (30%)
Gross oil and gas revenue $ 58,563 133,671 (56%)
Net oil and gas revenue $(20,907) 50,559 (141%)
Partnership distributions $ 10,000 31,000 (68%)
Limited partner distributions $ 9,000 27,900 (68%)
Per unit distribution to limited partners $ .86 2.66 (68%)
Number of limited partner units 10,484 10,484
Revenues
The Partnership's oil and gas revenues decreased to $58,563 from $133,671
for the quarters ended September 30, 1998 and 1997, respectively, a
decrease of 56%. The principal factors affecting the comparison of the
quarters ended September 30, 1998 and 1997 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the quarter ended September 30, 1998 as compared to
the quarter ended September 30, 1997 by 39%, or $6.71 per barrel,
resulting in a decrease of approximately $43,600 in revenues. Oil
sales represented 81% of total oil and gas sales during the quarter
ended September 30, 1998 as compared to 84% during the quarter ended
September 30, 1997.
The average price for an mcf of gas received by the Partnership
decreased during the same period by 27%, or $.74 per mcf, resulting in
a decrease of approximately $5,600 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $49,200. 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 2,000 barrels or 31% during the
quarter ended September 30, 1998 as compared to the quarter ended
September 30, 1997, resulting in a decrease of approximately $21,200 in
revenues.
Gas production decreased approximately 2,300 mcf or 30% during the same
period, resulting in a decrease of approximately $4,700 in revenues.
The total decrease in revenues due to the change in production is
approximately $25,900. The decrease in production is primarily
attributable to sale of properties and downtime.
Costs and Expenses
Total costs and expenses decreased to $107,482 from $111,681 for the
quarters ended September 30, 1998 and 1997, respectively, a decrease of 4%.
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 4% lower, or
approximately $3,600 less during the quarter ended September 30, 1998 as
compared to the quarter ended September 30, 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
24% or approximately $4,600 during the quarter ended September 30, 1998
as compared to the quarter ended September 30, 1997. The increase in
general and administrative costs are due largely to higher accounting
fees. The 10-Q's are now required to be reviewed based on new
accounting pronouncements.
3. Depletion expense decreased to $3,800 for the quarter ended September
30, 1998 from $9,000 for the same period in 1997. This represents a
decrease of 58%. 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 decrease in the price of oil and the decline in gross
oil and gas revenues.
B. General Comparison of the Nine Month Periods Ended September 30, 1998
and 1997
The following table provides certain information regarding performance
factors for the nine month periods ended September 30, 1998 and 1997:
Nine Months
Ended Percentage
September 30, Increase
1998 1997 (Decrease)
---- ---- ---------
Average price per barrel of oil $ 12.22 18.06 (32%)
Average price per mcf of gas $ 1.88 2.66 (29%)
Oil production in barrels 16,500 19,900 (17%)
Gas production in mcf 16,300 22,880 (29%)
Gross oil and gas revenue $ 232,285 420,055 (45%)
Net oil and gas revenue $(10,900) 139,707 (108%)
Partnership distributions $ 32,000 143,000 (78%)
Limited partner distributions $ 28,800 128,700 (78%)
Per unit distribution to limited partners $ 2.75 12.28 (78%)
Number of limited partner units 10,484 10,484
Revenues
The Partnership's oil and gas revenues decreased to $232,285 from $420,055
for the nine months ended September 30, 1998 and 1997, respectively, a
decrease of 45%. The principal factors affecting the comparison of the
nine months ended September 30, 1998 and 1997 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the nine months ended September 30, 1998 as compared
to the nine months ended September 30, 1997 by 32%, or $5.84 per
barrel, resulting in a decrease of approximately $116,200 in revenues.
Oil sales represented 87% of total oil and gas sales during the nine
months ended September 30, 1998 as compared to 86% during the nine
months ended September 30, 1997.
The average price for an mcf of gas received by the Partnership
decreased during the same period by 29%, or $.78 per mcf, resulting in
a decrease of approximately $17,800 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $134,000. 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 3,400 barrels or 17% during the
nine months ended September 30, 1998 as compared to the nine months
ended September 30, 1997, resulting in a decrease of approximately
$41,500 in revenues.
Gas production decreased approximately 6,600 mcf or 29% during the same
period, resulting in a decrease of approximately $12,400 in revenues.
The total decrease in revenues due to the change in production is
approximately $53,900. The decrease is primarily attributable to sale
of properties and downtime.
Costs and Expenses
Total costs and expenses decreased to $351,706 from $377,001 for the nine
months ended September 30, 1998 and 1997, respectively, a decrease of 7%.
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 13% lower, or
approximately $37,200 less during the nine months ended September 30,
1998 as compared to the nine months ended September 30, 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
12% or approximately $8,100 during the nine months ended September 30,
1998 as compared to the nine months ended September 30, 1997. The
increase in general and administrative costs are due largely to higher
accounting fees. The 10-Q's are now required to be reviewed based on
new accounting pronouncements.
3. Depletion expense increased to $32,800 for the nine months ended
September 30, 1998 from $29,000 for the same period in 1997. This
represents an increase of 13%. 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.
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 or (used in) operating activities were approximately
$(36,500) in the nine months ended September 30, 1998 as compared to
approximately $133,600 in the nine months ended September 30, 1997. The
primary use of the 1998 cash flow from operating activities was oil and gas
operations.
Cash flows provided by investing activities were approximately $89,000 in
the nine months ended September 30, 1998 as compared to approximately
$5,900 in the nine months ended September 30, 1997. The principle source
of the 1998 cash flow from investing activities was the change in oil and
gas properties.
Cash flows used in financing activities were approximately $32,200 in the
nine months ended September 30, 1998 as compared to approximately $143,000
in the nine months ended September 30, 1997. The only use in financing
activities was the distributions to partners.
Total distributions during the nine months ended September 30, 1998 were
$32,000 of which $28,800 was distributed to the limited partners and $3,200
to the general partners. The per unit distribution to limited partners
during the nine months ended September 30, 1998 was $2.75. Total
distributions during the nine months ended September 30, 1997 were $143,000
of which $128,700 was distributed to the limited partners and $14,300 to
the general partners. The per unit distribution to limited partners during
the nine months ended September 30, 1997 was $12.28.
The source for the 1998 distributions of $32,000 was oil and gas operations
of approximately $(36,500), partially offset by the change in oil and gas
properties of approximately $89,000, resulting with excess cash for
contingencies or subsequent distributions. The sources for the 1997
distributions of $143,000 were oil and gas operations of approximately
$133,600 and the change in oil and gas properties of approximately $5,900,
with the balance of available cash on hand at the beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions
of $2,693,706 have been made to the partners. As of September 30, 1998,
$2,474,805 or $236.06 per limited partner unit has been distributed to the
limited partners, representing a 47% return of the capital contributed.
As of September 30, 1998, the Partnership had approximately $14,400 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.
Information Systems for the Year 2000
The Partnership relies on the Managing General Partner for their data
processing requirements. This includes use of a program designed and
implemented by Midland Southwest Software, the Managing General Partner's
software subsidiary. Midland Southwest Software currently has a year 2000
plan in effect. They have surveyed existing programs and hardware and
estimate a compliance date of early 1999. Determination of the total cost
in connection with the year 2000 compliance issue is difficult to determine
due to the fact that they are in the process of developing their new 1998
version of marketed oil and gas software, which has, from inception,
included year 2000 compliance. Third party software programs utilized by
the Managing General Partner are either in compliance or are not affected
by the year 2000, with the exception of the payroll service, which is
currently modifying its system to accurately handle the Year 2000 issue.
The Managing General Partner has not completed its evaluation of its
vendors or suppliers systems to determine the effect, if any, the non-
compliance of such systems would have on the operations of the Managing
General Partner. Plans are under way to perform an audit in late 1998 or
early 1999 to determine the effect of non-compliance of its vendors and
suppliers on the Managing General Partner and thus formulate a contingency
plan.
A potential source of risk includes, but is not limited to, the inability
of principal purchasers and suppliers to be year 2000 compliant, which
could have a material effect on the Managing General Partner's production,
cash flow and overall financial condition, notwithstanding the Managing
General Partner's actions to prepare its own information systems. The
Managing General Partner currently does not have a contingency plan in
place to cover any unforeseen problems encountered that relate to the year
2000, but intends to produce one before the end of the fiscal year.
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 X-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, 1998