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 0-18398
Southwest Royalties Institutional Income Fund IX-B, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2274633
(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 Royalties Institutional Income Fund IX-B, L.P.
Balance Sheets
June 30, December 31,
1996 1995
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 140,684 37,215
Receivable from Managing
General Partner 60,077 73,754
--------- ---------
Total current assets 200,761 110,969
--------- ---------
Oil and gas properties - using the
full cost method of accounting 3,286,714 3,546,447
Less accumulated depreciation,
depletion and amortization 2,337,000 2,281,000
--------- ---------
Net oil and gas properties 949,714 1,265,447
--------- ---------
$ 1,150,475 1,376,416
========= =========
Liabilities and Partners' Equity
Current liability - Distributions payable $ 313 454
--------- ---------
Partners' equity:
General partners (40,399) (25,286)
Limited partners 1,190,561 1,401,248
--------- ---------
Total partners' equity 1,150,162 1,375,962
--------- ---------
$ 1,150,475 1,376,416
========= =========
PAGE
Southwest Royalties Institutional Income Fund IX-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Revenues
Income from net profits
interests $ 118,967 78,968 156,745 169,695
Interest 1,929 366 2,747 606
------- ------- ------- -------
120,896 79,334 159,492 170,301
------- ------- ------- -------
Expenses
General and administrative 17,617 16,105 42,624 44,288
Depreciation, depletion and
amortization 31,000 43,000 56,000 89,000
------- ------- ------- -------
48,617 59,105 98,624 133,288
------- ------- ------- -------
Net income $ 72,279 20,229 60,868 37,013
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 9,295 5,691 10,518 11,341
======= ======= ======= =======
General Partner $ 1,033 632 1,169 1,260
======= ======= ======= =======
Limited Partners $ 61,951 13,906 49,181 24,412
======= ======= ======= =======
Per limited partner
unit $ 6.33 1.42 5.03 2.50
======= ======= ======= =======
PAGE
Southwest Royalties Institutional Income Fund IX-B, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1996 1995
Cash flows from operating activities:
Cash received from income from net
profits interests $ 170,269 183,689
Cash paid to suppliers (42,630) (44,523)
Interest received 2,747 606
------- -------
Net cash provided by operating
activities 130,386 139,772
------- -------
Cash flows provided by investing activities:
Cash received from sale of oil
and gas properties 259,892 7,200
------- -------
Cash flows used in financing activities:
Distributions to partners (286,809) (136,997)
------- -------
Net increase in cash and cash equivalents 103,469 9,975
Beginning of period 37,215 16,078
------- -------
End of period $ 140,684 26,053
======= =======
(continued)
PAGE
Southwest Royalties Institutional Income Fund IX-B, 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 $ 60,868 37,013
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 56,000 89,000
Decrease in receivables 13,524 13,994
Decrease in payables (6) (235)
------- -------
Net cash provided by operating
activities $ 130,386 139,772
======= =======
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Royalties Institutional Income Fund IX-B, L.P. was organized as a
Delaware limited partnership on March 9, 1989. The offering of such limited
partnership interests began on May 11, 1989, minimum capital requirements
were met on September 26, 1989, and the offering concluded on March 31, 1990,
with total limited partner contributions of $4,891,000.
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 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, 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 $ 20.52 16.30 26%
Average price per mcf of gas $ 1.76 1.05 68%
Oil production in barrels 7,600 11,200 (32%)
Gas production in mcf 44,200 41,500 7%
Income from net profits interests $ 118,967 78,968 51%
Partnership distributions $ 205,000 67,159 205%
Limited partner distributions $ 184,500 60,759 204%
Per unit distribution to limited
partners $ 18.86 6.21 204%
Number of limited partner units 9,782 9,782
Revenues
The Partnership's income from net profits interests increased to $118,967
from $78,968 for the quarters ended June 30, 1996 and 1995, respectively, an
increase of 51%. 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 26%, or $4.22 per barrel, resulting in an
increase of approximately $47,300 in income from net profits interests.
Oil sales represented 67% of total oil and gas sales during the quarter
ended June 30, 1996 as compared to 81% during the quarter ended June 30,
1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 68%, or $.71 per mcf, resulting in an increase
of approximately $29,500 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 $76,800.
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 3,600 barrels or 32% during the
quarter ended June 30, 1996 as compared to the quarter ended June 30,
1995, resulting in a decrease of approximately $73,900 in income from net
profits interests.
Gas production increased approximately 2,700 mcf or 7% during the same
period, resulting in an increase of approximately $4,800 in income from
net profits interests.
The net total decrease in income from net profits interests due to the
change in production is approximately $69,100. The decrease is a result
of property sales, a well being shut-in during 1996 and scale damage to
two wells.
3. Lease operating costs and production taxes were 23% lower, or
approximately $33,300 less during the quarter ended June 30, 1996 as
compared to the quarter ended June 30, 1995. The decrease is primarily
a result of property sales.
Costs and Expenses
Total costs and expenses decreased to $48,617 from $59,105 for the quarters
ended June 30, 1996 and 1995, respectively, a decrease of 18%. The decrease
is the result of a decline in depletion expense, offset by an increase in
general and administrative expense.
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 increased 9%
or approximately $1,500 during the quarter ended June 30, 1996 as
compared to the quarter ended June 30, 1995.
2. Depletion expense decreased to $31,000 for the quarter ended June 30,
1996 from $43,000 for the same period in 1995. This represents a
decrease of 28%. 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
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 $ 18.61 15.88 17%
Average price per mcf of gas $ 1.64 1.22 34%
Oil production in barrels 15,700 22,300 (30%)
Gas production in mcf 81,000 91,800 (12%)
Income from net profits interests $ 156,745 169,695 (8%)
Partnership distributions $ 286,668 137,159 109%
Limited partner distributions $ 259,868 123,759 110%
Per unit distribution to limited
partners $ 26.57 12.65 110%
Number of limited partner units 9,782 9,782
Revenues
The Partnership's income from net profits interests decreased to $156,745
from $169,695 for the six months ended June 30, 1996 and 1995, respectively,
a decrease of 8%. 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 17%, or $2.73 per barrel, resulting in
an increase of approximately $60,900 in income from net profits
interests. Oil sales represented 69% of total oil and gas sales during
the six months ended June 30, 1996 as compared to 76% during the six
months ended June 30, 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 34%, or $.42 per mcf, resulting in an increase
of approximately $38,600 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 $99,500.
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.
PAGE
2. Oil production decreased approximately 6,600 barrels or 30% during the
six months ended June 30, 1996 as compared to the six months ended June
30, 1995, resulting in a decrease of approximately $122,800 in income
from net profits interests.
Gas production decreased approximately 10,800 mcf or 12% during the same
period, resulting in a decrease of approximately $17,700 in income from
net profits interests.
The total decrease in income from net profits interests due to the change
in production is approximately $140,500. The decrease is a result of
property sales, a well being shut-in during 1996 and scale damage to two
wells.
3. Lease operating costs and production taxes were 10% lower, or
approximately $28,300 less during the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995. The decrease is
primarily a result of property sales.
Costs and Expenses
Total costs and expenses decreased to $98,624 from $133,288 for the six
months ended June 30, 1996 and 1995, respectively, a decrease of 26%. The
decrease is the result of a decline in general and administrative expense and
depletion expense.
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 4%
or approximately $1,700 during the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995.
2. Depletion expense decreased to $56,000 for the six months ended June 30,
1996 from $89,000 for the same period in 1995. This represents a
decrease of 37%. 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.
Three 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, the increase in property sales and the decrease in oil
and gas revenues.
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 $130,400 in
the six months ended June 30, 1996 as compared to approximately $139,800 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 $259,900 in
the six months ended June 30, 1996 as compared to approximately $7,200 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.
Cash flows used in financing activities were approximately $286,800 in the
six months ended June 30, 1996 as compared to approximately $137,000 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 $286,668
of which $259,868 was distributed to the limited partners and $26,800 to the
general partners. The per unit distribution to limited partners during the
six months ended June 30, 1996 was $26.57. Total distributions during the
six months ended June 30, 1995 were $137,159 of which $123,759 was
distributed to the limited partners and $13,400 to the general partners. The
per unit distribution to limited partners during the six months ended June
30, 1995 was $12.65.
The sources for the 1996 distributions of $286,668 were oil and gas
operations of approximately $130,400 and the sale of oil and gas properties
of approximately $259,900, resulting in excess cash for contingencies or
subsequent distributions. The sources for the 1995 distributions of $137,159
were oil and gas operations of approximately $139,800 and the sale of oil and
gas properties of approximately $7,200, resulting in excess cash for
contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions of
$4,612,206 have been made to the partners. As of June 30, 1996, $4,188,212
or $428.15 per limited partner unit has been distributed to the limited
partners, representing an 86% return of the capital contributed.
As of June 30, 1996, the Partnership had approximately $200,400 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.
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 ROYALTIES INSTITUTIONAL
INCOME FUND IX-B, 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