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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, 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 0-18997
SOUTHWEST ROYALTIES INSTITUTIONAL 1990-91 INCOME PROGRAM
Southwest Royalties Institutional Income Fund X-A, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2310852
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
407 N. Big Spring, Suite 300
Midland, Texas 79701
(Address of principal executive offices)
(915) 686-9927
(Registrant's telephone number,
including area code)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
Yes X No
The total number of pages contained in this report is 14.
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited condensed financial statements included herein have been
prepared by the Registrant (herein also referred to as the "Partnership")
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments necessary for a fair presentation have been included and are of
a normal recurring nature. The financial statements should be read in
conjunction with the audited financial statements and the notes thereto for
the year ended December 31, 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
six month periods ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the full year.
Southwest Royalties Institutional Income Fund X-A, L.P.
Balance Sheets
June 30, December 31,
1998 1997
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 37,709 6,301
Receivable from Managing General Partner 1,631 57,891
--------- ---------
Total current assets 39,340 64,192
--------- ---------
Oil and gas properties - using the
full cost method of accounting 4,339,642 4,384,642
Less accumulated depreciation,
depletion and amortization 3,909,000 3,872,000
--------- ---------
Net oil and gas properties 430,642 512,642
--------- ---------
$ 469,982 576,834
========= =========
Liabilities and Partners' Equity
Current liability - Distributions payable $ 367 291
--------- ---------
Partners' equity:
General partners (12,292) (5,299)
Limited partners 481,907 581,842
--------- ---------
Total partners' equity 469,615 576,543
--------- ---------
$ 469,982 576,834
========= =========
Southwest Royalties Institutional Income Fund X-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues
Income (loss) from net profits
interests $ (4,613) 75,797 17,323 135,337
Interest 15 139 104 362
Miscellaneous income - - - 1,650
------- ------- ------- -------
(4,598) 75,936 17,427 137,349
------- ------- ------- -------
Expenses
General and administrative 26,155 23,219 57,355 52,979
Depreciation, depletion and
amortization 19,000 13,000 37,000 26,000
------- ------- ------- -------
45,155 36,219 94,355 78,979
------- ------- ------- -------
Net income (loss) $ (49,753) 39,717 (76,928) 58,370
======= ======= ======= =======
Net income (loss) allocated to:
Managing General Partner $ (2,768) 4,744 (3,594) 7,593
======= ======= ======= =======
General Partner $ (307) 528 (399) 844
======= ======= ======= =======
Limited partners $ (46,678) 34,445 (72,935) 49,933
======= ======= ======= =======
Per limited partner unit $ (4.12) 3.04 (6.45) 4.41
======= ======= ======= =======
Southwest Royalties Institutional Income Fund X-A, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Cash received from income from net profits
interests $ 63,666 198,558
Cash paid to suppliers (47,438) (52,595)
Interest received 104 362
------- -------
Net cash provided by operating activities 16,332 146,325
------- -------
Cash flows provided by investing activities:
Cash received from sale of oil and gas
property 45,000 -
------- -------
Cash flows used in financing activities:
Distributions to partners (29,924) (136,909)
------- -------
Net increase in cash and cash equivalents 31,408 9,416
Beginning of period 6,301 6,736
------- -------
End of period $ 37,709 16,152
======= =======
(continued)
Southwest Royalties Institutional Income Fund X-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Six Months Ended
June 30,
1998 1997
Reconciliation of net income (loss) to net
cash provided by operating activities:
Net income (loss) $ (76,928) 58,370
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 37,000 26,000
Decrease in receivables 46,343 61,571
Increase in payables 9,917 384
------- -------
Net cash provided by operating activities $ 16,332 146,325
======= =======
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Royalties Institutional 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 May 11, 1990 as part of a shelf
offering registered under the name Southwest Royalties Institutional 1990-
91 Income Program. Minimum capital requirements for the Partnership were
met on July 30, 1990, with the offering of limited partnership interests
concluding on November 30, 1990, with total limited partner contributions
of $5,658,000.
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 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 two years. The Partnership may undergo an
increase later in 1998. Thereafter, 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 June 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 half 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 June 30, 1998 and 1997
The following table provides certain information regarding performance
factors for the quarters ended June 30, 1998 and 1997:
Three Months
Ended Percentage
June 30, Increase
1998 1997 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 11.94 18.49 (35%)
Average price per mcf of gas $ 2.65 2.49 6%
Oil production in barrels 5,800 7,500 (23%)
Gas production in mcf 9,800 12,600 (22%)
Income from net profits interests $ (4,613) 75,797 (106%)
Partnership distributions $ 12,000 32,000 (63%)
Limited partner distributions $ 10,800 28,800 (63%)
Per unit distribution to limited
partners $ .95 2.55 (63%)
Number of limited partner units 11,316 11,316
Revenues
The Partnership's income from net profits interests decreased to $(4,613)
from $75,797 for the quarters ended June 30, 1998 and 1997, respectively, a
decrease of 106%. The principal factors affecting the comparison of the
quarters ended June 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 June 30, 1998 as compared to the
quarter ended June 30, 1997 by 35%, or $6.55 per barrel, resulting in a
decrease of approximately $49,100 in income from net profits interests.
Oil sales represented 73% of total oil and gas sales during the quarter
ended June 30, 1998 as compared to 82% during the quarter ended June
30, 1997.
The average price for an mcf of gas received by the Partnership
increased during the same period by 6%, or $.16 per mcf, resulting in
an increase of approximately $2,000 in income from net profits
interests.
The net total decrease in income from net profits interests due to the
change in prices received from oil and gas production is approximately
$47,100. The market price for oil and gas has been extremely volatile
over the past decade, and management expects a certain amount of
volatility to continue in the foreseeable future.
2. Oil production decreased approximately 1,700 barrels or 23% during the
quarter ended June 30, 1998 as compared to the quarter ended June 30,
1997, resulting in a decrease of approximately $20,298 in income from
net profits interests.
Gas production decreased approximately 2,800 mcf or 22% during the same
period, resulting in a decrease of approximately $7,420 in income from
net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $27,718. The decrease in oil
production is primarily attributable to a farm-out agreement, which
lowered the Partnership's interest in the Ballard Grayburg San Andres
Unit. The decrease in gas production is due primarily to the sale of
one well.
3. Lease operating costs and production taxes were 6% higher, or
approximately $5,500 more during the quarter ended June 30, 1998 as
compared to the quarter ended June 30, 1997.
Costs and Expenses
Total costs and expenses increased to $45,155 from $36,219 for the quarters
ended June 30, 1998 and 1997, respectively, an increase of 25%. The
increase is the result of higher depletion expense and 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
13% or approximately $2,900 during the quarter ended June 30, 1998 as
compared to the quarter ended June 30, 1997.
2. Depletion expense increased to $19,000 for the quarter ended June 30,
1998 from $13,000 for the same period in 1997. This represents an
increase of 46%. 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 increase in depletion expense between the comparative
periods were the decrease in the price of oil used to determine the
Partnership's reserves for January 1, 1998 as compared to 1997.
B. General Comparison of the Six Month Periods Ended June 30, 1998 and
1997
The following table provides certain information regarding performance
factors for the six month periods ended June 30, 1998 and 1997:
Six Months
Ended Percentage
June 30, Increase
1998 1997 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 12.70 18.62 (32%)
Average price per mcf of gas $ 2.24 2.63 (15%)
Oil production in barrels 13,200 14,700 (10%)
Gas production in mcf 20,700 25,000 (17%)
Income from net profits interests $ 17,323 135,337 (87%)
Partnership distributions $ 30,000 137,000 (78%)
Limited partner distributions $ 27,000 123,300 (78%)
Per unit distribution to limited
partners $ 2.39 10.90 (78%)
Number of limited partner units 11,316 11,316
Revenues
The Partnership's income from net profits interests decreased to $17,323
from $135,337 for the six months ended June 30, 1998 and 1997,
respectively, a decrease of 87%. The principal factors affecting the
comparison of the six months ended June 30, 1998 and 1997 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the six months ended June 30, 1998 as compared to the
six months ended June 30, 1997 by 32%, or $5.92 per barrel, resulting
in a decrease of approximately $87,000 in income from net profits
interests. Oil sales represented 78% of total oil and gas sales during
the six months ended June 30, 1998 as compared to 81% during the six
months ended June 30, 1997.
The average price for an mcf of gas received by the Partnership
decreased during the same period by 15%, or $.39 per mcf, resulting in
a decrease of approximately $9,750 in income from net profits
interests.
The total decrease in income from net profits interests due to the
change in prices received from oil and gas production is approximately
$96,750. 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 1,500 barrels or 10% during the
six months ended June 30, 1998 as compared to the six months ended June
30, 1997, resulting in a decrease of approximately $19,050 in income
from net profits interests.
Gas production decreased approximately 4,300 mcf or 17% during the same
period, resulting in a decrease of approximately $9,600 in income from
net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $28,650.
3. Lease operating costs and production taxes were 4% lower, or
approximately $7,400 less during the six months ended June 30, 1998 as
compared to the six months ended June 30, 1997.
Costs and Expenses
Total costs and expenses increased to $94,355 from $78,979 for the six
months ended June 30, 1998 and 1997, respectively, an increase of 19%. The
increase is the result of higher 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 increased 8%
or approximately $4,400 during the six months ended June 30, 1998 as
compared to the six months ended June 30, 1997.
2. Depletion expense increased to $37,000 for the six months ended June
30, 1998 from $26,000 for the same period in 1997. This represents an
increase of 42%. 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 increase in depletion expense between the comparative
periods were the decrease in the price of oil used to determine the
Partnership's reserves for January 1, 1998 as compared to 1997.
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 $16,300 in
the six months ended June 30, 1998 as compared to approximately $146,300 in
the six months ended June 30, 1997. The primary source of the 1998 cash
flow from operating activities was profitable operations.
Cash flows provided by investing activities were approximately $45,000 in
the six months ended June 30, 1998. There were no cash flows provided by
investing activities in the six months ended June 30, 1997. The source of
the 1998 cash flows were sale of oil and gas properties.
Cash flows used in financing activities were approximately $29,900 in the
six months ended June 30, 1998 as compared to approximately $136,900 in the
six months ended June 30, 1997. The only use in financing activities was
the distributions to partners.
Total distributions during the six months ended June 30, 1998 were $30,000
of which $27,000 was distributed to the limited partners and $3,000 to the
general partners. The per unit distribution to limited partners during the
six months ended June 30, 1998 was $2.39. Total distributions during the
six months ended June 30, 1997 were $137,000 of which $123,300 was
distributed to the limited partners and $13,700 to the general partners.
The per unit distribution to limited partners during the six months ended
June 30, 1997 was $10.90.
The sources for the 1998 distributions of $30,000 were oil and gas
operations of approximately $16,300 and the sale of oil and gas properties
of approximately $45,000. The source for the 1997 distributions of
$137,000 was oil and gas operations of approximately $146,300, resulting in
excess cash for contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions
of $3,013,122 have been made to the partners. As of June 30, 1998,
$2,760,161 or $243.92 per limited partner unit has been distributed to the
limited partners, representing a 49% return of the capital contributed.
As of June 30, 1998, the Partnership had approximately $39,000 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 Managing General Partner provides all data processing needs of the
Partnership. The Managing General Partner has reviewed and evaluated its
information systems to determine if its systems accurately process data
referencing the year 2000. Primarily all necessary programming
modifications to correct year 2000 referencing in the Managing General
Partners internal accounting and operating systems have been made to-date.
However the Managing General Partner has not completed its evaluation of
its vendors and suppliers systems to determine the effect, if any, the non-
compliance of such systems would have on the operation of the Managing
General Partnership or the operations of the Partnership.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matter to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) 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, 1998.
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 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: August 15, 1998