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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 0-20299
SOUTHWEST OIL & GAS 1990-91 INCOME PROGRAM
Southwest Oil & Gas Income Fund X-C, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2374445
(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-C, L.P.
Balance Sheets
June 30, December 31,
2000 1999
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 48,828 26,435
Receivable from Managing General Partner 98,918 122,710
--------- ---------
Total current assets 147,746 149,145
--------- ---------
Oil and gas properties - using the
full cost method of accounting 2,395,866 2,396,912
Less accumulated depreciation,
depletion and amortization 2,062,496 2,045,496
--------- ---------
Net oil and gas properties 333,370 351,416
--------- ---------
$ 481,116 500,561
========= =========
Liabilities and Partners' Equity
Partners' equity:
General partners $ (6,950) (6,705)
Limited partners 488,066 507,266
--------- ---------
Total partners' equity 481,116 500,561
--------- ---------
$ 481,116 500,561
========= =========
Southwest Oil & Gas Income Fund X-C, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues
Oil and gas $ 203,241 169,301 424,486 288,601
Interest 607 237 1,065 452
------- ------- ------- -------
203,848 169,538 425,551 289,053
------- ------- ------- -------
Expenses
Production 148,873 149,561 307,236 273,785
General and administrative 10,334 11,249 20,760 22,319
Depreciation, depletion and
amortization 4,000 13,000 17,000 34,000
------- ------- ------- -------
163,207 173,810 344,996 330,104
------- ------- ------- -------
Net income (loss) $ 40,641 (4,272) 80,555 (41,051)
======= ======= ======= =======
Net income (loss) allocated to:
Managing General Partner $ 4,018 786 8,780 (635)
======= ======= ======= =======
General Partner $ 446 87 975 (70)
======= ======= ======= =======
Limited Partners $ 36,177 (5,145) 70,800 (40,346)
======= ======= ======= =======
Per limited partner unit $ 5.79 (.82) 11.34 (6.46)
======= ======= ======= =======
Southwest Oil & Gas Income Fund X-C, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
Cash received from sale of oil and gas $ 428,316 274,202
Cash paid to suppliers (308,034) (273,867)
Interest received 1,065 452
------- -------
Net cash provided by operating activities 121,347 787
------- -------
Cash flows from investing activities:
Additions to oil and gas properties - (707)
Cash received from sale of oil and gas
properties 1,046 18,643
------- -------
Net cash provided by investing activities: 1,046 17,936
------- -------
Cash flows used in financing activities:
Distributions to partners (100,000) (23,122)
------- -------
Net increase (decrease) in cash and cash equivalents 22,393 (4,399)
Beginning of period 26,435 22,818
------- -------
End of period $ 48,828 18,419
======= =======
(continued)
Southwest Oil & Gas Income Fund X-C, 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 operating activities:
Net income (loss) $ 80,555 (41,051)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 17,000 34,000
Decrease (increase) in receivables 3,830 (14,399)
Increase in payables 19,962 22,237
------- -------
Net cash provided by operating activities $ 121,347 787
======= =======
Southwest Oil & Gas Income Fund X-C, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
1. Organization
Southwest Oil & Gas Income Fund X-C, L.P. was organized under the laws
of the state of Delaware on September 20, 1991, 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 several 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% -
Syndication costs 100% -
Amortization of 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-C, L.P. was organized as a Delaware
limited partnership on September 20, 1991. The offering of such limited
partnership interests began October 1, 1991 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 January 13,
1992 and the offering concluded on April 30, 1992 with total limited
partner contributions of $3,123,000.
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 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 in the next year. The Partnership could possibly experience a
normal decline of 10% to 11%.
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 oil and gas 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 $ 25.97 15.02 73%
Average price per mcf of gas $ 3.19 1.79 78%
Oil production in barrels 7,500 8,800 (15%)
Gas production in mcf 9,600 20,800 (54%)
Gross oil and gas revenue $ 203,241 169,301 20%
Net oil and gas revenue $ 54,368 19,740 175%
Partnership distributions $ 50,000 23,204 115%
Limited partner distributions $ 45,000 22,704 98%
Per unit distribution to limited
partners $ 7.20 3.63 98%
Number of limited partner units 6,246 6,246
Revenues
The Partnership's oil and gas revenues increased to $203,241 from $169,301
for the quarters ended June 30, 2000 and 1999, respectively, an increase of
20%. 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 73%, or $10.95 per barrel, resulting in
an increase of approximately $96,400 in revenues. Oil sales
represented 86% of total oil and gas sales during the quarter ended
June 30, 2000 as compared to 78% 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 78%, or $1.40 per mcf, resulting in
an increase of approximately $29,100 in revenues.
The total increase in revenues due to the change in prices received
from oil and gas production is approximately $125,500. 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.
2. Oil production decreased approximately 1,300 barrels or 15% during the
quarter ended June 30, 2000 as compared to the quarter ended June 30,
1999, resulting in a decrease of approximately $33,800 in revenues.
Gas production decreased approximately 11,200 mcf or 54% during the
same period, resulting in a decrease of approximately $35,700 in
revenues.
The total decrease in revenues due to the change in production is
approximately $69,500. The decrease in gas production is primarily due
to a non-operated gas well. The operator performed a workover during
the last quarter of 1999, which was not only unsuccessful, but caused
the well to shut down. The well is not believed to be recoverable,
thus the loss to the Partnership is considered to be permanent. This
well represented approximately 2,600 mcf a month to the Partnership.
Costs and Expenses
Total costs and expenses decreased to $163,207 from $173,810 for the
quarters ended June 30, 2000 and 1999, respectively, a decrease of 6%. The
decrease is the result of lower general and administrative, depletion
expense and lease operating expense.
1. Lease operating costs and production taxes were 1% lower, or
approximately $700 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 8%
or approximately $900 during the quarter ended June 30, 2000 as
compared to the quarter ended June 30, 1999.
3. Depletion expense decreased to $4,000 for the quarter ended June 30,
2000 from $13,000 for the same period in 1999. This represents a
decrease of 69%. 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 $ 25.73 12.17 111%
Average price per mcf of gas $ 3.54 1.69 109%
Oil production in barrels 15,300 18,000 (15%)
Gas production in mcf 8,700 41,000 (79%)
Gross oil and gas revenue $ 424,486 288,601 47%
Net oil and gas revenue $ 117,250 14,816 691%
Partnership distributions $ 100,000 23,204 331%
Limited partner distributions $ 90,000 22,704 296%
Per unit distribution to limited
partners $ 14.41 3.63 296%
Number of limited partner units 6,246 6,246
Revenues
The Partnership's oil and gas revenues increased to $424,486 from $288,601
for the six months ended June 30, 2000 and 1999, respectively, an increase
of 47%. 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 111%, or $13.56 per barrel, resulting
in an increase of approximately $244,100 in revenues. Oil sales
represented 93% of total oil and gas sales during the six months ended
June 30, 2000 as compared to 76% 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 109%, or $1.85 per mcf, resulting
in an increase of approximately $75,900 in revenues.
The total increase in revenues due to the change in prices received
from oil and gas production is approximately $320,000. 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 2,700 barrels or 15% during the
six months ended June 30, 2000 as compared to the six months ended June
30, 1999, resulting in a decrease of approximately $69,500 in revenues.
Gas production decreased approximately 32,300 mcf or 79% during the
same period, resulting in a decrease of approximately $114,300 in
revenues.
The total decrease in revenues due to the change in production is
approximately $183,800. The Partnership's dramatic decline in gas
production was primarily in connection with two wells. During 1999,
the Partnership was involved in a lawsuit in order to receive payment
for two months of production from the purchaser at that time. The
lawsuit was settled in the current year with the Partnership receiving
less than was owed from the purchaser. The original accrual recorded
during the second quarter of 1999 was reversed in the current year.
This reversal represented approximately 2,800 mcf. Additionally, the
partnership was informed during the current year that a workover which
was performed during the last quarter of 1999 on a non-operated well
was not only unsuccessful but caused the well to shut down. This well
is not believed to be recoverable, thus the loss to the Partnership is
considered to be permanent. This well represented approximately 2,770
mcf a month. Total decline for the partnership during the six months
ended June 30, 2000 in connection with this non-operated well was
approximately 24,900 mcf.
Costs and Expenses
Total costs and expenses increased to $344,996 from $330,104 for the six
months ended June 30, 2000 and 1999, respectively, an increase of 5%. The
increase is the result of a higher lease operating costs, partially offset
by a decrease in general and administrative expense and depletion expense.
1. Lease operating costs and production taxes were 12% higher, or
approximately $33,500 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 7%
or approximately $1,600 during the six months ended June 30, 2000 as
compared to the six months ended June 30, 1999.
3. Depletion expense decreased to $17,000 for the six months ended June
30, 2000 from $34,000 for the same period in 1999. This represents a
decrease of 50%. 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 operating activities were approximately $121,300 in
the six months ended June 30, 2000 as compared to approximately $800 in the
six months ended June 30, 1999. The primary source of the 2000 cash flow
from operating activities was profitable operations.
Cash flows provided by investing activities were approximately $1,000 in
the six months ended June 30, 2000 as compared to approximately $17,900 in
the six months ended June 30, 1999. The principle source of the 2000 cash
flow from investing activities was the sale of oil and gas properties.
Cash flows used in financing activities were approximately $100,000 in the
six months ended June 30, 2000 as compared to approximately $23,100 in the
six months ended June 30, 1999. The only use in financing activities was
the distributions to partners.
Total distributions during the six months ended June 30, 2000 were $100,000
of which $90,000 was distributed to the limited partners and $10,000 to the
general partners. The per unit distribution to limited partners during the
six months ended June 30, 2000 was $14.41. Total distributions during the
six months ended June 30, 1999 were $23,204 of which $22,704 was
distributed to the limited partners and $500 to the general partners. The
per unit distribution to limited partners during the six months ended June
30, 1999 was $3.63.
The source for the 2000 distributions of $100,000 was oil and gas
operations of approximately $121,300 and the change in oil and gas
properties of approximately $1,000, resulting in excess cash for
contingencies or subsequent distributions. The source for the 1999
distributions of $23,204 was oil and gas operations of approximately $800,
and the net change in oil and gas properties of approximately $17,900, with
the balance from available cash on hand at the beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions
of $3,137,022 have been made to the partners. As of June 30, 2000,
$2,842,148 or $455.03 per limited partner unit has been distributed to the
limited partners, representing a 91% return of the capital contributed.
As of June 30, 2000, the Partnership had approximately $147,700 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.
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-C, 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