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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, 2001
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 33-47668-01
SOUTHWEST ROYALTIES INSTITUTIONAL 1992-93 INCOME PROGRAM
Southwest Royalties Institutional Income Fund XI-A, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2427297
(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, 2000 which are found in the Registrant's Form
10-K Report for 2000 filed with the Securities and Exchange Commission.
The December 31, 2000 balance sheet included herein has been taken from the
Registrant's 2000 Form 10-K Report. Operating results for the three and
six month periods ended June 30, 2001 are not necessarily indicative of the
results that may be expected for the full year.
Southwest Royalties Institutional Income Fund XI-A, L.P.
Balance Sheets
June 30, December 31,
2001 2000
--------- ------------
(unaudited)
Assets
------
Current assets:
Cash and cash equivalents $ 40,593 57,241
Receivable from Managing General Partner 57,362 102,258
--------- ---------
Total current assets 97,955 159,499
--------- ---------
Oil and gas properties - using the
full-cost method of accounting 2,029,769 2,029,769
Less accumulated depreciation,
depletion and amortization 1,644,862 1,612,862
--------- ---------
Net oil and gas properties 384,907 416,907
--------- ---------
$ 482,862 576,406
========= =========
Liabilities and Partners' Equity
--------------------------------
Partners' equity:
General partners $ (22,814) (16,660)
Limited partners 505,676 593,066
--------- ---------
Total partners' equity 482,862 576,406
--------- ---------
$ 482,862 576,406
========= =========
Southwest Royalties Institutional Income Fund XI-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
----- ----- ----- -----
Revenues
--------
Income from net profits
interests $ 49,281 70,475 167,720 150,298
Interest 770 515 1,581 1,033
------- ------- ------- -------
50,051 70,990 169,301 151,331
------- ------- ------- -------
Expenses
--------
General and administrative 10,724 10,380 20,845 20,796
Depreciation, depletion and
amortization 19,000 4,000 32,000 16,000
------- ------- ------- -------
29,724 14,380 52,845 36,796
------- ------- ------- -------
Net income $ 20,327 56,610 116,456 114,535
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 3,539 5,455 13,361 11,748
======= ======= ======= =======
General Partner $ 394 606 1,485 1,305
======= ======= ======= =======
Limited partners $ 16,394 50,549 101,610 101,482
======= ======= ======= =======
Per limited partner unit $ 3.03 9.33 18.75 18.73
======= ======= ======= =======
Southwest Royalties Institutional Income Fund XI-A, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
2001 2000
----- -----
Cash flows from operating activities:
Cash received from income from net
profits interests $ 213,885 134,215
Cash paid to suppliers (22,114) (26,909)
Interest received 1,581 1,033
------- -------
Net cash provided by operating activities 193,352 108,339
------- -------
Cash flows used in financing activities:
Distributions to partners (210,000) (100,000)
------- -------
Net (decrease) increase in cash
(16,648) 8,339
Beginning of period 57,241 30,195
------- -------
End of period $ 40,593 38,534
======= =======
Reconciliation of net income to net
cash provided by operating activities:
Net income $ 116,456 114,535
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 32,000 16,000
Decrease (increase) in receivables 46,165 (16,083)
Decrease in payables (1,269) (6,113)
------- -------
Net cash provided by operating activities $ 193,352 108,339
======= =======
Southwest Royalties Institutional Income Fund XI-A, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
1. Organization
Southwest Royalties Institutional Income Fund XI-A, L.P. was organized
under the laws of the state of Delaware on May 5, 1992, 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 will sell 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. Partnership profits
and losses, as well as all items of income, gain, loss, deduction, or
credit, will be credited or charged as follows:
Limited General
Partners Partners (1)
-------- --------
Organization and offering expenses (2) 100% -
Acquisition costs 100% -
Operating costs 90% 10%
Administrative costs (3) 90% 10%
Direct costs 90% 10%
All other costs 90% 10%
Interest income earned on capital
contributions 100% -
Oil and gas revenues 90% 10%
Other revenues 90% 10%
Amortization 100% -
Depletion allowances 100% -
(1) H.H. Wommack, III, President of the Managing General
Partner, is an additional general partner in the Partnership and
has a one percent interest in the Partnership. Mr. Wommack is
the majority stockholder of the Managing General Partner whose
continued involvement in Partnership management is important to
its operations. Mr. Wommack, as a general partner, shares also
in Partnership liabilities.
(2) Organization and Offering Expenses (including all cost of
selling and organizing the offering) include a payment by the
Partnership of an amount equal to three percent (3%) of Capital
Contributions for reimbursement of such expenses. All
Organization Costs (which excludes sales commissions and fees) in
excess of three percent (3%) of Capital Contributions with
respect to a Partnership will be allocated to and paid by the
Managing General Partner.
(3) Administrative Costs will be paid from the Partnership's
revenues; however; Administrative Costs in the Partnership year
in excess of two percent (2%) of Capital Contributions shall be
allocated to and paid by the Managing General Partner.
2. Summary of Significant Accounting Policies
The interim financial information as of June 30, 2001, and for the
three and six months ended June 30, 2001, 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, 2000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Royalties Institutional Income Fund XI-A, L.P. (the Partnership)
was organized as a Delaware limited partnership on May 5, 1992. The
offering of such limited partnership interests began August 20, 1992, as
part of a shelf offering registered under the name Southwest Royalties
Institutional 1992-93 Income Program. Minimum capital requirements for the
Partnership were met on December 10, 1992 and the offering concluding on
April 30, 1993 with total limited partner contributions of $2,709,000.
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 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.
Based on current conditions, management anticipates performing some
workovers during 2001. The Partnership could possibly experience a
historical decline of 12% 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. The Partnership's capitalized cost did not exceed the
estimated present value of reserves as of June 30, 2001.
Results of Operations
A. General Comparison of the Quarters Ended June 30, 2001 and 2000
The following table provides certain information regarding performance
factors for the quarters ended June 30, 2001 and 2000:
Three Months
Ended Percentage
June 30, Increase
2001 2000 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 24.58 26.96 (9%)
Average price per mcf of gas $ 4.24 3.97 7%
Oil production in barrels 1,600 1,650 (3%)
Gas production in mcf 20,200 23,000 (12%)
Income from net profits interests $ 49,281 70,475 (30%)
Partnership distributions $ 90,000 40,000 125%
Limited partner distributions $ 81,000 36,000 125%
Per unit distribution to limited
partners $ 14.95 6.64 125%
Number of limited partner units 5,418 5,418
Revenues
The Partnership's income from net profits interests decreased to $49,281
from $70,475 for the quarters ended June 30, 2001 and 2000, respectively, a
decrease of 30%. The principal factors affecting the comparison of the
quarters ended June 30, 2001 and 2000 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the quarter ended June 30, 2001 as compared to the
quarter ended June 30, 2000 by 9%, or $2.38 per barrel, resulting in a
decrease of approximately $3,800 in income from net profits interests.
Oil sales represented 31% and 33% of total oil and gas sales during the
quarters ended June 30, 2001 and 2000.
The average price for an mcf of gas received by the Partnership
increased during the same period by 7%, or $.27 per mcf, resulting in
an increase of approximately $5,500 in income from net profits
interests.
The net total increase in income from net profits interests due to the
change in prices received from oil and gas production is approximately
$1,700. 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 50 barrels or 3% during the
quarter ended June 30, 2001 as compared to the quarter ended June 30,
2000, resulting in a decrease of approximately $1,300 in income from
net profits interests.
Gas production decreased approximately 2,800 mcf or 12% during the same
period, resulting in a decrease of approximately $11,100 in income from
net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $12,400.
3. Lease operating costs and production taxes were 11% lower, or
approximately $8,100 less during the quarter ended June 30, 2001 as
compared to the quarter ended June 30, 2000.
Costs and Expenses
Total costs and expenses increased to $29,724 from $14,380 for the quarters
ended June 30, 2001 and 2000, respectively, an increase of 107%. 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 3%
or approximately $300 during the quarter ended June 30, 2001 as
compared to the quarter ended June 30, 2000.
2. Depletion expense increased to $19,000 for the quarter ended June 30,
2001 from $4,000 for the same period in 2000. This represents an
increase of 375%. 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 and gas used to determine
the Partnership's reserves for July 1, 2001 as compared to 2000.
B. General Comparison of the Six Month Periods Ended June 30, 2001 and
2000
The following table provides certain information regarding performance
factors for the six month periods ended June 30, 2001 and 2000:
Six Months
Ended Percentage
June 30, Increase
2001 2000 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 24.88 27.06 (8%)
Average price per mcf of gas $ 5.22 3.52 48%
Oil production in barrels 3,300 3,600 (8%)
Gas production in mcf 40,700 47,800 (15%)
Income from net profits interests $ 167,720 150,298 12%
Partnership distributions $ 210,000 100,000 110%
Limited partner distributions $ 189,000 90,000 110%
Per unit distribution to limited
partners $ 34.88 16.61 110%
Number of limited partner units 5,418 5,418
Revenues
The Partnership's income from net profits interests increased to $167,720
from $150,298 for the six months ended June 30, 2001 and 2000,
respectively, an increase of 12%. The principal factors affecting the
comparison of the six months ended June 30, 2001 and 2000 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the six months ended June 30, 2001 as compared to the
six months ended June 30, 2000 by 8%, or $2.18 per barrel, resulting in
a decrease of approximately $7,200 in income from net profits
interests. Oil sales represented 28% of total oil and gas sales during
the six months ended June 30, 2001 as compared to 37% during the six
months ended June 30, 2000.
The average price for an mcf of gas received by the Partnership
increased during the same period by 48%, or $1.70 per mcf, resulting in
an increase of approximately $69,200 in income from net profits
interests.
The net total increase in income from net profits interests due to the
change in prices received from oil and gas production is approximately
$62,000. 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 300 barrels or 8% during the six
months ended June 30, 2001 as compared to the six months ended June 30,
2000, resulting in a decrease of approximately $8,100 in income from
net profits interests.
Gas production decreased approximately 7,100 mcf or 15% during the same
period, resulting in a decrease of approximately $25,000 in income from
net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $33,100.
3. Lease operating costs and production taxes were 10% higher, or
approximately $11,500 more during the six months ended June 30, 2001 as
compared to the six months ended June 30, 2000.
Costs and Expenses
Total costs and expenses increased to $52,845 from $36,796 for the six
months ended June 30, 2001 and 2000, respectively, an increase of 44%. 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
less than 1% or approximately $50 during the six months ended June 30,
2001 as compared to the six months ended June 30, 2000.
2. Depletion expense increased to $32,000 for the six months ended June
30, 2001 from $16,000 for the same period in 2000. This represents an
increase of 100%. 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 and gas used to determine
the Partnership's reserves for July 1, 2001 as compared to 2000, and
the increase in oil and gas revenues received by the Partnership during
2001 as compared to 2000.
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 $193,400 in
the six months ended June 30, 2001 as compared to approximately $108,300 in
the six months ended June 30, 2000. The primary source of the 2001 cash
flow from operating activities was profitable operations.
Cash flows used in financing activities were approximately $210,000 in the
six months ended June 30, 2001 as compared to approximately $100,000 in the
six months ended June 30, 2000. The only use in financing activities was
the distributions to partners.
Total distributions during the six months ended June 30, 2001 were $210,000
of which $189,000 was distributed to the limited partners and $21,000 to
the general partners. The per unit distribution to limited partners during
the six months ended June 30, 2001 was $34.88. 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 $16.61.
The source for the 2001 distributions of $210,000 was oil and gas
operations of approximately $193,400, with the balance from available cash
on hand at the beginning of the period. The sources for the 2000
distributions of $100,000 were oil and gas operations of approximately
$108,300, resulting in excess cash for contingencies or subsequent
distributions.
Since inception of the Partnership, cumulative monthly cash distributions
of $2,149,443 have been made to the partners. As of June 30, 2001,
$1,960,189 or $361.79 per limited partner unit has been distributed to the
limited partners, representing a 72% return of the capital contributed.
As of June 30, 2001, the Partnership had approximately $98,000 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Partnership is not a party to any derivative
or embedded derivative instruments.
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) Reports on Form 8-K:
No reports on Form 8-
K were filed during the quarter ended June 30, 2001.
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 XI-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, 2001