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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 March 31, 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 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 13.
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 month
period ended March 31, 1998 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
March 31, December 31,
1998 1997
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 9,461 52,190
Receivable from Managing General Partner 35,258 85,473
Other receivable 49,498 53,536
--------- ---------
Total current assets 94,217 191,199
--------- ---------
Oil and gas properties - using the
full-cost method of accounting 2,103,239 2,105,397
Less accumulated depreciation,
depletion and amortization 985,822 952,822
--------- ---------
Net oil and gas properties 1,117,417 1,152,575
--------- ---------
$ 1,211,634 1,343,774
========= =========
Liabilities and Partners' Equity
Partners' equity:
General partners $ (22,753) (12,839)
Limited partners 1,234,387 1,356,613
--------- ---------
Total partners' equity 1,211,634 1,343,774
--------- ---------
$ 1,211,634 1,343,774
========= =========
Southwest Royalties Institutional Income Fund XI-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
Revenues
Income from net profits interests $ 29,149 102,088
Interest 573 250
Miscellaneous income - 6,353
------- -------
29,722 108,691
------- -------
Expenses
General and administrative 18,473 17,575
Depreciation, depletion and amortization 33,000 46,490
Miscellaneous expense 2,389 -
------- -------
53,862 64,065
------- -------
Net income (loss) $ (24,140) 44,626
======= =======
Net income (loss) allocated to:
Managing General Partner $ 797 7,629
======= =======
General partner $ 89 847
======= =======
Limited partners $ (25,026) 36,150
======= =======
Per limited partner unit $ 4.62 6.67
======= =======
Southwest Royalties Institutional Income Fund XI-A, L.P.
Statements of Cash Flows
(unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
Cash flows from operating activities:
Cash received from oil and gas sales $ 73,663 155,205
Cash paid to suppliers (12,773) (12,925)
Interest received 573 250
-------- --------
Net cash provided by operating activities 61,463 142,530
-------- --------
Cash flows from investing activities:
Sale of oil and gas properties 3,808 -
-------- --------
Cash flows used in financing activities:
Distributions to partners (108,000) (104,020)
-------- --------
Net increase (decrease) in cash and cash
equivalents (42,729) 38,510
Beginning of period 52,190 6,595
-------- --------
End of period $ 9,461 45,105
======== ========
(continued)
Southwest Royalties Institutional Income Fund XI-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
Reconciliation of net income (loss) to net
cash provided by operating activities:
Net income (loss) $ (24,140) 44,626
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depletion, depreciation and amortization 33,000 46,490
Decrease in receivables 44,514 46,764
Increase in payables 8,089 4,650
------- -------
Net cash provided by operating activities $ 61,463 142,530
======= =======
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 March 31, 1998, and for the
three months ended March 31, 1998, 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, 1997.
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"
or "Registrant") 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, with the
offering of limited partnership interests concluding April 30, 1993. At
the conclusion of the offering of limited partnership interests, 217
limited partners had purchased 5,418 units for $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 1998 to enhance production. The Partnership could possibly
experience the following changes; a little less than normal decline in 1998
and thereafter, experience a steady decline.
Results of Operations
A. General Comparison of the Quarters Ended March 31, 1998 and 1997
The following table provides certain information regarding performance
factors for the quarters ended March 31, 1998 and 1997:
Three Months
Ended Percentage
March 31, Increase
1998 1997 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 11.72 22.54 (48%)
Average price per mcf of gas $ 1.66 2.52 (35%)
Oil production in barrels 3,650 4,500 (19%)
Gas production in mcf 37,400 39,800 (6%)
Income from net profits interests $ 29,149 102,088 (72%)
Partnership distributions $ 108,000 104,000 4%
Limited partner distributions $ 97,200 93,600 4%
Per unit distribution to limited
partners $ 17.94 17.28 4%
Number of limited partner units 5,418 5,418
Revenues
The Partnership's income from net profits interests decreased to $29,149
from $102,088 for the quarters ended March 31, 1998 and 1997, respectively,
a decrease of 72%. The principal factors affecting the comparison of the
quarters ended March 31, 1998 and 1997 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the quarter ended March 31, 1998 as compared to the
quarter ended March 31, 1997 by 48%, or $10.82 per barrel, resulting in
a decrease of approximately $48,700 in income from net profits
interests. Oil sales represented 41% of total oil and gas sales during
the quarter ended March 31, 1998 and 50% during quarter ended March 31,
1997.
The average price for an mcf of gas received by the Partnership
decreased during the same period by 35%, or $.86 per mcf, resulting in
a decrease of approximately $34,200 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
$82,900. 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 850 barrels or 19% during the
quarter ended March 31, 1998 as compared to the quarter ended March 31,
1997, resulting in a decrease of approximately $9,900 in income from
net profits interests.
Gas production decreased approximately 2,400 mcf or 6% during the same
period, resulting in a decrease of approximately $4,000 in income from
net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $13,900. The decrease is
primarily a result of sharp natural decline of one well.
3. Lease operating costs and production taxes were 25% lower, or
approximately $24,100 less during the quarter ended March 31, 1998 as
compared to the quarter ended March 31, 1997. The decrease in lease
operating costs are due primarily to workover costs incurred in 1997.
Costs and Expenses
Total costs and expenses decreased to $53,862 from $64,065 for the quarters
ended March 31, 1998 and 1997, respectively, a decrease of 16%. 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 6%
or approximately $900 during the quarter ended March 31, 1998 as
compared to the quarter ended March 31, 1997.
2. Depletion expense decreased to $33,000 for the quarter ended March 31,
1998 from $44,000 for the same period in 1997. This represents a
decrease of 25%. 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 revenue and 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 $61,500 in
the quarter ended March 31, 1998 as compared to approximately $142,500 in
the quarter ended March 31, 1997. The primary source of the 1998 cash flow
from operating activities was profitable operations.
Cash flows provided by investing activities were approximately $3,800 in
the quarter ended March 31, 1998. There were no cash flows used in
investing activities in the quarter ended March 31, 1997. The primary
source of the 1998 cash flows from investing activities were from sales of
oil and gas properties.
Cash flows used in financing activities were approximately $108,000 in the
quarter ended March 31, 1998 as compared to approximately $104,000 in the
quarter ended March 31, 1997. The only use in financing activities was the
distributions to partners.
Total distributions during the quarter ended March 31, 1998 were $108,000
of which $97,200 was distributed to the limited partners and $10,800 to the
general partners. The per unit distribution to limited partners during the
quarter ended March 31, 1998 was $17.94. Total distributions during the
quarter ended March 31, 1997 were $104,000 of which $93,600 was distributed
to the limited partners and $10,400 to the general partners. The per unit
distribution to limited partners during the quarter ended March 31, 1997
was $17.28.
The primary source for the 1998 distributions of $108,000 was oil and gas
operations of approximately $61,500. The source for the 1997 distributions
of $104,000 was oil and gas operations of approximately $142,500, resulting
in excess cash for contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions
of $1,463,448 have been made to the partners. As of March 31, 1998,
$1,336,798 or $246.73 per limited partner unit has been distributed to the
limited partners, representing a 50% return of the capital contributed.
As of March 31, 1998, the Partnership had approximately $94,200 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:
No reports on Form 8-K were filed during the quarter
for which this report is filed.
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: May 15, 1998