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, 1997
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 0-19601
SOUTHWEST ROYALTIES INSTITUTIONAL 1990-91 INCOME PROGRAM
Southwest Royalties Institutional Income Fund X-B, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2332174
(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, 1996 which are found in the Registrant's Form 10-K Report
for 1996 filed with the Securities and Exchange Commission. The December 31,
1996 balance sheet included herein has been taken from the Registrant's 1996
Form 10-K Report. Operating results for the three and six month periods
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the full year.
Southwest Royalties Institutional Income Fund X-B, L.P.
Balance Sheets
June 30, December 31,
1997 1996
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 11,923 16,680
Receivable from Managing General Partner 73,157 137,799
Other receivable - 100,000
--------- ---------
Total current assets 85,080 254,479
--------- ---------
Oil and gas properties - using the
full cost method of accounting 4,244,847 4,244,847
Less accumulated depreciation,
depletion and amortization 2,716,091 2,655,091
--------- ---------
Net oil and gas properties 1,528,756 1,589,756
--------- ---------
$ 1,613,836 1,844,235
========= =========
Liabilities and Partners' Equity
Current liabilities:
Accounts payable $ 360 -
Distributions payable 22 -
--------- ---------
Total current liabilities 382 -
--------- ---------
Partners' equity:
General partners (19,805) (6,433)
Limited partners 1,633,259 1,850,668
--------- ---------
Total partners' equity 1,613,454 1,844,235
--------- ---------
$ 1,613,836 1,844,235
========= =========
Southwest Royalties Institutional Income Fund X-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues
Income from net profits
interests $ 109,405 132,447 287,826 280,938
Interest 587 1,586 1,183 3,425
------- ------- ------- -------
109,992 134,033 289,009 284,363
------- ------- ------- -------
Expenses
General and administrative 18,758 17,981 44,732 44,963
Depreciation, depletion and
amortization 27,000 47,000 61,000 92,965
------- ------- ------- -------
45,758 64,981 105,732 137,928
------- ------- ------- -------
Net income $ 64,234 69,052 183,277 146,435
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 8,211 10,445 21,985 21,546
======= ======= ======= =======
General Partner $ 912 1,161 2,443 2,394
======= ======= ======= =======
Limited partners $ 55,111 57,446 158,849 122,495
======= ======= ======= =======
Per limited partner unit $ 4.93 5.14 14.21 10.96
======= ======= ======= =======
Southwest Royalties Institutional Income Fund X-B, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Cash received from income from net profits
interests $ 352,468 266,518
Cash paid to suppliers (44,372) (44,963)
Interest received 1,183 3,425
------- --------
Net cash provided by operating activities 309,279 224,980
------- --------
Cash flows provided by investing activities:
Cash received from sale of oil and gas
property interest 100,000 124,648
------- --------
Cash flows used in financing activities:
Distributions to partners (414,036) (522,536)
------- --------
Net decrease in cash and cash equivalents (4,757) (172,908)
Beginning of period 16,680 242,006
------- --------
End of period $ 11,923 69,098
======= ========
(continued)
Southwest Royalties Institutional Income Fund X-B, L.P.
Statements of Cash Flows, continued
(unaudited)
Six Months Ended
June 30,
1997 1996
Reconciliation of net income to net
cash provided by operating activities:
Net income $ 183,277 146,435
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 61,000 92,965
(Increase) decrease in receivables 64,642 (14,420)
Increase in payables 360 -
------- -------
Net cash provided by operating activities $ 309,279 224,980
======= =======
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Royalties Institutional 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 December 1, 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
March 11, 1991, with the offering of limited partnership interests concluding
September 30, 1991, with total limited partner contributions of $5,590,500.
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 anticipates performing workovers
during the next few years to enhance production. The Partnership could
possibly experience the following changes; a slight increase in 1997, another
increase in 1998 and 1999, leveling off in 2000 and beginning a decline in
2001.
Results of Operations
A. General Comparison of the Quarters Ended June 30, 1997 and 1996
The following table provides certain information regarding performance
factors for the quarters ended June 30, 1997 and 1996:
Three Months
Ended Percentage
June 30, Increase
1997 1996 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 17.46 20.66 (15%)
Average price per mcf of gas $ 2.14 2.07 3%
Oil production in barrels 13,200 14,900 (11%)
Gas production in mcf 30,300 35,700 (15%)
Income from net profits interests $ 109,405 132,447 (17%)
Partnership distributions $ 180,000 250,561 (28%)
Limited partner distributions $ 162,000 225,561 (28%)
Per unit distribution to limited
partners $ 14.49 20.17 (28%)
Number of limited partner units 11,181 11,181
Revenues
The Partnership's income from net profits interests decreased to $109,405
from $132,447 for the quarters ended June 30, 1997 and 1996, respectively, a
decrease of 17%. The principal factors affecting the comparison of the
quarters ended June 30, 1997 and 1996 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the quarter ended June 30, 1997 as compared to the
quarter ended June 30, 1996 by 15%, or $3.20 per barrel, resulting in a
decrease of approximately $47,700 in income from net profits interests.
Oil sales represented 78% of total oil and gas sales during the quarter
ended June 30, 1997 as compared to 81% during the quarter ended June 30,
1996.
The average price for an mcf of gas received by the Partnership increased
during the same period by 3%, or $.07 per mcf, resulting in an increase
of approximately $2,500 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
$45,200. 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 1,700 barrels or 11% during the
quarter ended June 30, 1997 as compared to the quarter ended June 30,
1996, resulting in a decrease of approximately $29,700 in income from net
profits interests.
Gas production decreased approximately 5,400 mcf or 15% during the same
period, resulting in a decrease of approximately $11,600 in income from
net profits interests.
The total decrease in income from net profits interests due to the change
in production is approximately $41,300. The decrease is primarily a
result of property sales during 1996 and the loss of gas production on
one well. Also contributing to the production decline is the natural
decline of oil and gas production. Since the Partnership does not drill
or purchase oil and gas properties, it is normal to expect production to
continue to decline over the remaining life of the wells.
3. Lease operating costs and production taxes were 25% lower, or
approximately $62,600 less during the quarter ended June 30, 1997 as
compared to the quarter ended June 30, 1996. The decrease is primarily
a result of workover costs incurred in 1996 as compared to 1997.
Costs and Expenses
Total costs and expenses decreased to $45,758 from $64,981 for the quarters
ended June 30, 1997 and 1996, respectively, a decrease of 30%. The decrease
is primarily the result of lower depletion expense, partially 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 4%
or approximately $800 during the quarter ended June 30, 1997 as compared
to the quarter ended June 30, 1996.
2. Depletion expense decreased to $27,000 for the quarter ended June 30,
1997 from $47,000 for the same period in 1996. This represents a
decrease of 43%. 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 January 1, 1997 as compared to 1996, property sales and the
decline in oil and gas revenues.
B. General Comparison of the Six Month Periods Ended June 30, 1997 and 1996
The following table provides certain information regarding performance
factors for the six month periods ended June 30, 1997 and 1996:
Six Months
Ended Percentage
June 30, Increase
1997 1996 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 19.69 19.31 2%
Average price per mcf of gas $ 2.25 2.03 11%
Oil production in barrels 26,700 30,500 (12%)
Gas production in mcf 59,300 71,200 (17%)
Income from net profits interests $ 287,826 280,938 2%
Partnership distributions $ 414,058 522,613 (21%)
Limited partner distributions $ 376,258 477,613 (21%)
Per unit distribution to limited
partners $ 33.65 42.72 (21%)
Number of limited partner units 11,181 11,181
Revenues
The Partnership's income from net profits interests increased to $287,826
from $280,938 for the six months ended June 30, 1997 and 1996, respectively,
an increase of 2%. The principal factors affecting the comparison of the six
months ended June 30, 1997 and 1996 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the six months ended June 30, 1997 as compared to the
six months ended June 30, 1996 by 2%, or $.38 per barrel, resulting in an
increase of approximately $11,600 in income from net profits interests.
Oil sales represented 80% of total oil and gas sales during the six
months ended June 30, 1997 and 1996.
The average price for an mcf of gas received by the Partnership increased
during the same period by 11%, or $.22 per mcf, resulting in an increase
of approximately $15,700 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 $27,300.
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 3,800 barrels or 12% during the
six months ended June 30, 1997 as compared to the six months ended June
30, 1996, resulting in a decrease of approximately $74,800 in income from
net profits interests.
Gas production decreased approximately 11,900 mcf or 17% during the same
period, resulting in a decrease of approximately $26,800 in income from
net profits interests.
The total decrease in income from net profits interests due to the change
in production is approximately $101,600. The decrease is primarily a
result of property sales during 1996 and the loss of gas production on
one well. Also contributing to the production decline is the natural
decline of oil and gas production. Since the Partnership does not drill
or purchase oil and gas properties, it is normal to expect production to
continue to decline over the remaining life of the wells.
3. Lease operating costs and production taxes were 18% lower, or
approximately $81,700 less during the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996. The decrease is
primarily a result of workover costs incurred in 1996 as compared to
1997.
Costs and Expenses
Total costs and expenses decreased to $105,732 from $137,928 for the six
months ended June 30, 1997 and 1996, respectively, a decrease of 23%. The
decrease is primarily the result of a decrease 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 1%
or approximately $200 during the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996.
2. Depletion expense decreased to $61,000 for the six months ended June 30,
1997 from $91,000 for the same period in 1996. This represents a
decrease of 33%. 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 January 1, 1997 as compared to 1996, property sales and the
decline in oil and gas revenues.
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 $309,300 in
the six months ended June 30, 1997 as compared to approximately $225,000 in
the six months ended June 30, 1996. The primary source of the 1997 cash flow
from operating activities was profitable operations.
Cash flows provided by investing activities were $100,000 in the six months
ended June 30, 1997 as compared to approximately $124,600 in the six months
ended June 30, 1996. The principle source of the 1997 cash flow from
investing activities was the sale of oil and gas properties.
Cash flows used in financing activities were approximately $414,000 in the
six months ended June 30, 1997 as compared to approximately $522,500 in the
six months ended June 30, 1996. The only use in financing activities was the
distributions to partners.
Total distributions during the six months ended June 30, 1997 were $414,058
of which $376,258 was distributed to the limited partners and $37,800 to the
general partners. The per unit distribution to limited partners during the
six months ended June 30, 1997 was $33.65. Total distributions during the
six months ended June 30, 1996 were $522,613 of which $477,613 was
distributed to the limited partners and $45,000 to the general partners. The
per unit distribution to limited partners during the six months ended June
30, 1996 was $42.72.
The sources for the 1997 distributions of $414,058 were oil and gas
operations of approximately $309,300 and sale of oil and gas properties of
$100,000, with the balance from available cash on hand at the beginning of
the period. The sources for the 1996 distributions of $522,613 were oil and
gas operations of approximately $225,000 and sale of oil and gas properties
of approximately $124,600, with the balance from available cash on hand at
the beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions of
$4,281,029 have been made to the partners. As of June 30, 1997, $3,900,216
or $348.83 per limited partner unit has been distributed to the limited
partners, representing a 70% return of the capital contributed.
As of June 30, 1997, the Partnership had approximately $84,700 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.
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:
On June 12, 1997, the Partnership filed Form 8-K and on June
24, 1997, the Partnership filed Form 8-K Amended, with respect
to Item 4, Changes in Registrant's Certifying Accountant.
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-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 15, 1997