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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, 2000
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 0-19585
SOUTHWEST OIL & GAS 1990-91 INCOME PROGRAM
Southwest Oil & Gas Income Fund X-B, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2332176
(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 16.
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, 1999 which are found in the Registrant's Form
10-K Report for 1999 filed with the Securities and Exchange Commission.
The December 31, 1999 balance sheet included herein has been taken from the
Registrant's 1999 Form 10-K Report. Operating results for the three and
six month periods ended June 30, 2000 are not necessarily indicative of the
results that may be expected for the full year.
Southwest Oil & Gas Income Fund X-B, L.P.
Balance Sheets
June 30, December 31,
2000 1999
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 61,953 35,345
Receivable from Managing General Partner 125,344 120,934
--------- ---------
Total current assets 187,297 156,279
--------- ---------
Oil and gas properties - using the
full cost method of accounting 4,426,666 4,413,783
Less accumulated depreciation,
depletion and amortization 4,065,706 4,055,706
--------- ---------
Net oil and gas properties 360,960 358,077
--------- ---------
$ 548,257 514,356
========= =========
Liabilities and Partners' Equity
Current liability - Distributions payable $ 96 72
--------- ---------
Partners' equity:
General partners 3,903 (485)
Limited partners 544,258 514,769
--------- ---------
Total partners' equity 548,161 514,284
--------- ---------
$ 548,257 514,356
========= =========
Southwest Oil & Gas Income Fund X-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues
Oil and gas $ 271,004 168,558 526,070 298,551
Interest 824 70 1,515 376
------- ------- ------- -------
271,828 168,628 527,585 298,927
------- ------- ------- -------
Expenses
Production 130,364 141,589 289,771 265,448
General and administrative 19,526 20,613 38,937 41,024
Depreciation, depletion and
amortization 1,000 7,000 10,000 21,000
------- ------- ------- -------
150,890 169,202 338,708 327,472
------- ------- ------- -------
Net income (loss) $ 120,938 (574) 188,877 (28,545)
======= ======= ======= =======
Net income (loss) allocated to:
Managing General Partner $ 10,974 578 17,899 (679)
======= ======= ======= =======
General Partner $ 1,220 65 1,989 (76)
======= ======= ======= =======
Limited partners $ 108,744 (1,217) 168,989 (27,790)
======= ======= ======= =======
Per limited partner unit $ 9.99 (.11) 15.52 (2.55)
======= ======= ======= =======
Southwest Oil & Gas Income Fund X-B, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
Cash from oil and gas sales $ 488,768 259,074
Cash paid to suppliers (295,816) (290,185)
Interest received 1,515 376
------- -------
Net cash provided by (used in) operating activities 194,467 (30,735)
------- -------
Cash flows from investing activities:
Additions to oil and gas properties (12,883) (3,618)
------- -------
Cash flows used in financing activities:
Distributions to partners (154,976) 453
------- -------
Net increase (decrease) in cash and cash
equivalents 26,608 (33,900)
Beginning of period 35,345 47,027
------- -------
End of period $ 61,953 13,127
======= =======
(continued)
Southwest Oil & Gas Income Fund X-B, L.P.
Statements of Cash Flows, continued
(unaudited)
Six Months Ended
June 30,
2000 1999
Reconciliation of net income (loss) to net
cash provided by (used in) operating activities:
Net income (loss) $ 188,877 (28,545)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation, depletion and amortization 10,000 21,000
Increase in receivables (37,302) (39,477)
Increase in payables 32,892 16,287
------- -------
Net cash provided by (used in) operating activities $ 194,467 (30,735)
======= =======
Southwest Oil & Gas Income Fund X-B, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
1. Organization
Southwest Oil & Gas Income Fund X-B, L.P. was organized under the laws
of the state of Delaware on November 27, 1990 for the purpose of
acquiring producing oil and gas properties and to produce and market
crude oil and natural gas produced from such properties for a term of
50 years, unless terminated at an earlier date as provided for in the
Partnership Agreement. The Partnership sells its oil and gas
production to a variety of purchasers with the prices it receives
being dependent upon the oil and gas economy. Southwest Royalties,
Inc. serves as the Managing General Partner and H. H. Wommack, III, as
the individual general partner. Revenues, costs and expenses are
allocated as follows:
Limited General
Partners Partners
-------- --------
Interest income on capital contributions 100% -
Oil and gas sales 90% 10%
All other revenues 90% 10%
Organization and offering costs (1) 100% -
Amortization or organization costs 100% -
Property acquisition costs 100% -
Gain/loss on property disposition 90% 10%
Operating and administrative costs (2) 90% 10%
Depreciation, depletion, and amortization
of oil and gas properties 100% -
All other costs 90% 10%
(1) All organization costs in excess of 3% of initial capital
contributions will be paid by the Managing General Partner and
will be treated as a capital contribution. The Partnership paid
the Managing General Partner an amount equal to 3% of initial
capital contributions for such organization costs.
(2) Administrative costs in any year which exceed 2% of capital
contributions shall be paid by the Managing General Partner and
will be treated as a capital contribution.
2. Summary of Significant Accounting Policies
The interim financial information as of June 30, 2000, and for the
three and six months ended June 30, 2000, is unaudited. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in this Form 10-Q pursuant
to the rules and regulations of the Securities and Exchange
Commission. However, in the opinion of management, these interim
financial statements include all the necessary adjustments to fairly
present the results of the interim periods and all such adjustments
are of a normal recurring nature. The interim consolidated financial
statements should be read in conjunction with the audited financial
statements for the year ended December 31, 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Oil & Gas Income Fund X-B, L.P. was organized as a Delaware
limited partnership on November 27, 1990. The offering of such limited
partnership interests began on December 1, 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 March 1, 1991,
with the offering of limited partnership interests concluding on September
30, 1991, with total limited partner contributions of $5,444,500.
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 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 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 next few years.
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 June 30, 2000, the net capitalized costs did not
exceed the estimated present value of the Partnership's reserves.
Results of Operations
A. General Comparison of the Quarters Ended June 30, 2000 and 1999
The following table provides certain information regarding performance
factors for the quarters ended June 30, 2000 and 1999:
Three Months
Ended Percentage
June 30, Increase
2000 1999 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 26.30 14.77 78%
Average price per mcf of gas $ 3.90 2.25 73%
Oil production in barrels 8,400 9,300 (10%)
Gas production in mcf 12,100 13,700 (12%)
Gross oil and gas revenue $ 271,004 168,558 61%
Net oil and gas revenue $ 140,640 26,969 421%
Partnership distributions $ 80,000 - 100%
Limited partner distributions $ 72,000 - 100%
Per unit distribution to limited
partners $ 6.61 - 100%
Number of limited partner units 10,889 10,889
Revenues
The Partnership's oil and gas revenues increased to $271,004 from $168,558
for the quarters ended June 30, 2000 and 1999, respectively, an increase of
61%. The principal factors affecting the comparison of the quarters ended
June 30, 2000 and 1999 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the quarter ended June 30, 2000 as compared to the
quarter ended June 30, 1999 by 78%, or $11.53 per barrel, resulting in
an increase of approximately $107,200 in revenues. Oil sales
represented 82% of total oil and gas sales during the quarter ended
June 30, 2000 as compared to 82% during the quarter ended June 30,
1999.
The average price for an mcf of gas received by the Partnership
increased during the same period by 73%, or $1.65 per mcf, resulting in
an increase of approximately $22,600 in revenues.
The total increase in revenues due to the change in prices received
from oil and gas production is approximately $129,800. 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.
2. Oil production decreased approximately 900 barrels or 10% during the
quarter ended June 30, 2000 as compared to the quarter ended June 30,
1999, resulting in a decrease of approximately $23,700 in revenues.
Gas production decreased approximately 1,600 mcf or 12% during the same
period, resulting in a decrease of approximately $6,200 in revenues.
The total decrease in revenues due to the change in production is
approximately $29,900.
Costs and Expenses
Total costs and expenses decreased to $150,890 from $169,202 for the
quarters ended June 30, 2000 and 1999, respectively, a decrease of 11%.
The decrease is the result of lower lease operating costs, depletion
expense and general and administrative expense.
1. Lease operating costs and production taxes were 8% lower, or
approximately $11,200 less during the quarter ended June 30, 2000 as
compared to the quarter ended June 30, 1999.
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 5%
or approximately $1,100 during the quarter ended June 30, 2000 as
compared to the quarter ended June 30, 1999.
3. Depletion expense decreased to $1,000 for the quarter ended June 30,
2000 from $7,000 for the same period in 1999. This represents a
decrease of 86%. 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 and gas used to determine
the Partnership's reserves for July 1, 2000 as compared to 1999.
B. General Comparison of the Six Month Periods Ended June 30, 2000 and 1999
The following table provides certain information regarding performance
factors for the six month periods ended June 30, 2000 and 1999:
Six Months
Ended Percentage
June 30, Increase
2000 1999 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 26.46 12.27 116%
Average price per mcf of gas $ 3.44 1.86 85%
Oil production in barrels 16,800 20,200 (17%)
Gas production in mcf 23,700 27,300 (13%)
Gross oil and gas revenue $ 526,070 298,551 76%
Net oil and gas revenue $ 236,299 33,103 614%
Partnership distributions $ 155,000 - 100%
Limited partner distributions $ 139,500 - 100%
Per unit distribution to limited
partners $ 12.81 - 100%
Number of limited partner units 10,889 10,889
Revenues
The Partnership's oil and gas revenues increased to $526,070 from $298,551
for the six months ended June 30, 2000 and 1999, respectively, an increase
of 76%. The principal factors affecting the comparison of the six months
ended June 30, 2000 and 1999 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the six months ended June 30, 2000 as compared to the
six months ended June 30, 1999 by 116%, or $14.19 per barrel, resulting
in an increase of approximately $286,600 in revenues. Oil sales
represented 85% of total oil and gas sales during the six months ended
June 30, 2000 as compared to 83% during the six months ended June 30,
1999.
The average price for an mcf of gas received by the Partnership
increased during the same period by 85%, or $1.58 per mcf, resulting in
an increase of approximately $43,100 in revenues.
The total increase in revenues due to the change in prices received
from oil and gas production is approximately $329,700. 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
six months ended June 30, 2000 as compared to the six months ended June
30, 1999, resulting in a decrease of approximately $90,000 in revenues.
Gas production decreased approximately 3,600 mcf or 13% 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 $102,400. The decrease in production was due primarily
to the sharp decline of one lease.
Costs and Expenses
Total costs and expenses increased to $338,708 from $327,472 for the six
months ended June 30, 2000 and 1999, respectively, an increase of 3%. The
increase is primarily the result of higher lease operating costs, partially
offset by a decrease in depletion expense and general administrative
expense.
1. Lease operating costs and production taxes were 9% higher, or
approximately $24,300 more during the six months ended June 30, 2000 as
compared to the six months ended June 30, 1999.
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 5%
or approximately $2,100 during the six months ended June 30, 2000 as
compared to the six months ended June 30, 1999.
3. Depletion expense decreased to $10,000 for the six months ended June
30, 2000 from $21,000 for the same period in 1999. This represents a
decrease of 52%. 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 and gas used to determine
the Partnership's reserves for July 1, 2000 as compared to 1999.
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 (used in) operating activities were approximately
$194,500 in the six months ended June 30, 2000 as compared to approximately
$(30,700) in the six months ended June 30, 1999.
Cash flows used in investing activities were approximately $12,900 in the
six months ended June 30, 2000 as compared to approximately $3,600 in the
six months ended June 30, 1999. The principle use of the 2000 cash flow
from investing activities was the addition of oil and gas properties.
Cash flows (used in) provided by financing activities were approximately
$(155,000) in the six months ended June 30, 2000 as compared to
approximately $500 in the six months ended June 30, 1999.
Total distributions during the six months ended June 30, 2000 were $155,000
of which $139,500 was distributed to the limited partners and $15,500 to
the general partners. The per unit distribution to limited partners during
the six months ended June 30, 2000 was $12.81. There were no distributions
during the six months ended June 30, 1999.
The sources for the 2000 distributions of $155,000 were oil and gas
operations of approximately $194,500 and the change in oil and gas
properties of approximately $(12,900), resulting in excess cash for
contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions
of $4,799,295 have been made to the partners. As of June 30, 2000,
$4,345,820 or $399.10 per limited partner unit has been distributed to the
limited partners, representing a 80% return of the capital contributed.
As of June 30, 2000, the Partnership had approximately $187,200 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.
Liquidity - Managing General Partner
The Managing General Partner has a highly leveraged capital structure with
over $50.1 million principal due by December 31, 2000 and $15.3 million
interest payments due within the next twelve months on its debt
obligations. The Managing General Partner is currently in the process of
renegotiating the terms of its various obligations with its creditors
and/or attempting to seek new lenders or equity investors. Additionally,
the Managing General Partner would consider disposing of certain assets in
order to meet its obligations.
There can be no assurance that the Managing General Partner's debt
restructuring efforts will be successful or that the lenders will agree to
a course of action consistent with the Managing General Partners
requirements in restructuring the obligations. Even if such agreement is
reached, it may require approval of additional lenders, which is not
assured. Furthermore, there can be no assurance that the sales of assets
can be successfully accomplished on terms acceptable to the Managing
General Partner. Under current circumstances, the Managing General
Partner's ability to continue as a going concern depends upon its ability
to (1) successfully restructure its obligations or obtain additional
financing as may be required, (2) maintain compliance with all debt
covenants, (3) generate sufficient cash flow to meet its obligations on a
timely basis, and (4) achieve satisfactory levels of future earnings. If
the Managing General Partner is unsuccessful in its efforts, it may be
unable to meet its obligations making it necessary to undertake such other
actions as may be appropriate to preserve asset values.
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:
No reports on Form 8-K were filed during the
quarter ended June 30, 2000.
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 X-B, L.P.
a Delaware limited partnership
By: Southwest Royalties, Inc.
Managing General Partner
By: /s/ J Steven Person
------------------------------
J Steven Person, Vice-President of
Marketing and Chief Financial Officer
of Southwest Royalties, Inc.
the Managing General Partner
Date: August 15, 2000