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 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, 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 XI-A, L.P.
Balance Sheets
June 30, December 31,
1997 1996
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 9,613 6,595
Receivable from Managing General Partner 60,065 118,399
Other receivable 50,076 57,669
--------- ---------
Total current assets 119,754 182,663
--------- ---------
Oil and gas properties - using the
full cost method of accounting 2,150,198 2,150,198
Less accumulated depreciation,
depletion and amortization 578,000 501,000
--------- ---------
Net oil and gas properties 1,572,198 1,649,198
--------- ---------
Organization costs, net 4,173 9,153
--------- ---------
$ 1,696,125 1,841,014
========= =========
Liabilities and Partners' Equity
Current liabilities:
Accounts payable $ 117 -
Distribution payable - 20
--------- ---------
Total current liabilities 117 20
--------- ---------
Partners' equity:
General partners (11,759) (3,468)
Limited partners 1,707,767 1,844,462
--------- ---------
Total partners' equity 1,696,008 1,840,994
--------- ---------
$ 1,696,125 1,841,014
========= =========
Southwest Royalties Institutional Income Fund XI-A, 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 $ 50,042 109,254 152,129 241,686
Interest 496 711 746 1,227
Miscellaneous income 13,553 - 19,906 -
------- ------- ------- -------
64,091 109,965 172,781 242,913
------- ------- ------- -------
Expenses
General and administrative 11,212 11,980 28,787 28,622
Depreciation, depletion and
amortization 35,490 59,580 81,980 122,160
------- ------- ------- -------
46,702 71,560 110,767 150,782
------- ------- ------- -------
Net income $ 17,389 38,405 62,014 92,131
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 3,539 8,819 11,168 19,286
======= ======= ======= =======
General Partner $ 394 980 1,241 2,143
======= ======= ======= =======
Limited partners $ 13,456 28,606 49,605 70,702
======= ======= ======= =======
Per limited partner unit $ 2.48 5.28 9.16 13.05
======= ======= ======= =======
Southwest Royalties Institutional Income Fund XI-A, 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 $ 237,962 208,414
Cash paid to suppliers (28,670) (28,622)
Interest received 746 1,227
------- -------
Net cash provided by operating activities 210,038 181,019
------- -------
Cash flows provided by investing activities:
Cash received from sale of oil and gas
property interest - 5,805
------- -------
Cash flows used in financing activities:
Distributions to partners (207,020) (212,103)
------- -------
Net increase (decrease) in cash and cash
equivalents 3,018 (25,279)
Beginning of period 6,595 73,533
------- -------
End of period $ 9,613 48,254
======= =======
(continued)
Southwest Royalties Institutional Income Fund XI-A, 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 $ 62,014 92,131
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 81,980 122,160
(Increase) decrease in receivables 65,927 (33,272)
Increase in payables 117 -
------- -------
Net cash provided by operating activities $ 210,038 181,019
======= =======
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 workovers
during 1997 to enhance production. The Partnership could possibly experience
the following changes; a little less than normal decline in 1997, with no
decline in 1998 and thereafter, experience a steady decline.
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 $ 18.62 20.58 (10%)
Average price per mcf of gas $ 1.98 2.12 (7%)
Oil production in barrels 3,900 4,700 (17%)
Gas production in mcf 41,500 52,100 (20%)
Income from net profits interests $ 50,042 109,254 (54%)
Partnership distributions $ 103,000 105,603 (2%)
Limited partner distributions $ 92,700 100,103 (7%)
Per unit distribution to limited
partners $ 17.11 18.48 (7%)
Number of limited partner units 5,418 5,418
Revenues
The Partnership's income from net profits interests decreased to $50,042 from
$109,254 for the quarters ended June 30, 1997 and 1996, respectively, a
decrease of 54%. 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 10%, or $1.96 per barrel, resulting in a
decrease of approximately $9,200 in income from net profits interests.
Oil sales represented 47% of total oil and gas sales during the quarters
ended June 30, 1997 and 1996.
The average price for an mcf of gas received by the Partnership decreased
during the same period by 7%, or $.14 per mcf, resulting in a decrease of
approximately $7,300 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 $16,500.
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 800 barrels or 17% during the
quarter ended June 30, 1997 as compared to the quarter ended June 30,
1996, resulting in a decrease of approximately $14,900 in income from net
profits interests.
Gas production decreased approximately 10,600 mcf or 20% during the same
period, resulting in a decrease of approximately $21,000 in income from
net profits interests.
The total decrease in income from net profits interests due to the change
in production is approximately $35,900. The decrease is primarily a
result of the sharp natural decline of one well and downtime due to
mechanical problems on another well.
3. Lease operating costs and production taxes were 8% higher, or
approximately $7,700 more during the quarter ended June 30, 1997 as
compared to the quarter ended June 30, 1996. The increase is primarily
attributable to the pulling expense incurred on an injector well during
1997.
Costs and Expenses
Total costs and expenses decreased to $46,702 from $71,560 for the quarters
ended June 30, 1997 and 1996, respectively, a decrease of 35%. The decrease
is the result of lower 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 6%
or approximately $800 during the quarter ended June 30, 1997 as compared
to the quarter ended June 30, 1996.
2. Depletion expense decreased to $33,000 for the quarter ended June 30,
1997 from $57,000 for the same period in 1996. This represents a
decrease 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 decline in depletion expense between the comparative periods were the
decrease in oil and gas revenues and the increase in the price of oil
used to determine the Partnership's reserves for January 1, 1997 as
compared to 1996.
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 $ 20.48 18.97 8%
Average price per mcf of gas $ 2.21 2.13 4%
Oil production in barrels 8,500 11,000 (23%)
Gas production in mcf 82,600 105,100 (21%)
Income from net profits interests $ 152,169 241,686 (37%)
Partnership distributions $ 207,000 212,103 (2%)
Limited partner distributions $ 186,300 195,953 (5%)
Per unit distribution to limited
partners $ 34.39 36.17 (5%)
Number of limited partner units 5,418 5,418
Revenues
The Partnership's income from net profits interests decreased to $152,129
from $241,686 for the six months ended June 30, 1997 and 1996, respectively,
a decrease of 37%. 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 8%, or $1.51 per barrel, resulting in
an increase of approximately $16,600 in income from net profits
interests. Oil sales represented 49% of total oil and gas sales during
the six months ended June 30, 1997 as compared to 48% during the six
months ended June 30, 1996.
The average price for an mcf of gas received by the Partnership increased
during the same period by 4%, or $.08 per mcf, resulting in an increase
of approximately $8,400 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 $25,000.
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 2,500 barrels or 23% during the
six months ended June 30, 1997 as compared to the six months ended June
30, 1996, resulting in a decrease of approximately $51,200 in income from
net profits interests.
Gas production decreased approximately 22,500 mcf or 21% during the same
period, resulting in a decrease of approximately $49,700 in income from
net profits interests.
The total decrease in income from net profits interests due to the change
in production is approximately $100,900. The decrease is primarily a
result of property sales, the sharp natural decline of one well and
downtime due to mechanical problems on another well.
3. Lease operating costs and production taxes were 7% higher, or
approximately $13,000 more during the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996. The increase is
primarily attributable to the pulling expense incurred on an injector
well during 1997.
Costs and Expenses
Total costs and expenses decreased to $110,767 from $150,782 for the six
months ended June 30, 1997 and 1996, respectively, a decrease of 27%. The
decrease is 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 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 $77,000 for the six months ended June 30,
1997 from $117,000 for the same period in 1996. This represents a
decrease of 34%. 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
decrease in oil and gas revenues and the increase in the price of oil
used to determine the Partnership's reserves for January 1, 1997 as
compared to 1996.
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 $210,000 in
the six months ended June 30, 1997 as compared to approximately $181,000 in
the six months ended June 30, 1996. The primary source of the 1997 cash flow
from operating activities was profitable operations.
There were no cash flows provided by investing activities in the six months
ended June 30, 1997 as compared to approximately $5,800 in the six months
ended June 30, 1996.
Cash flows used in financing activities were approximately $207,000 in the
six months ended June 30, 1997 as compared to approximately $212,100 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 $207,000
of which $186,300 was distributed to the limited partners and $20,700 to the
general partners. The per unit distribution to limited partners during the
six months ended June 30, 1997 was $34.39. Total distributions during the
six months ended June 30, 1996 were $212,103 of which $195,953 was
distributed to the limited partners and $16,150 to the general partners. The
per unit distribution to limited partners during the six months ended June
30, 1996 was $36.17.
The source for the 1997 distributions of $207,000 was oil and gas operations
of approximately $210,000, resulting in excess cash for contingencies or
subsequent distributions. The sources for the 1996 distributions of $212,103
were oil and gas operations of approximately $181,000, the sale of oil and
gas properties of approximately $5,800 and excess capital of $48,070,
resulting in excess cash for contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions of
$1,198,492 have been made to the partners. As of June 30, 1997, $1,094,642
or $202.04 per limited partner unit has been distributed to the limited
partners, representing a 40% return of the capital contributed.
As of June 30, 1997, the Partnership had approximately $119,600 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 XI-A, L.P.
a Delaware limited partnership
By: Southwest Royalties, Inc.
Managing General Partner
Date: August 15, 1997 By: /s/ Bill E. Coggin
Bill E. Coggin, Vice President
and Chief Financial Officer