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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, 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 33-47668-02
SOUTHWEST ROYALTIES INSTITUTIONAL 1992-93 INCOME PROGRAM
Southwest Royalties Institutional Income Fund XI-B, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2427289
(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, 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 month
period ended March 31, 2001 are not necessarily indicative of the results
that may be expected for the full year.
Southwest Royalties Institutional Income Fund XI-B, L.P.
Balance Sheets
March 31, December 31,
2001 2000
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 64,552 36,446
Receivable from Managing General Partner 46,784 59,613
--------- ---------
Total current assets 111,336 96,059
--------- ---------
Oil and gas properties - using the
full-cost method of accounting 2,006,334 2,006,334
Less accumulated depreciation,
depletion and amortization 1,692,721 1,682,721
--------- ---------
Net oil and gas properties 313,613 323,613
--------- ---------
$ 424,949 419,672
========= =========
Liabilities and Partners' Equity
Partners' equity:
General partners $ 11,231 9,703
Limited partners 413,718 409,969
--------- ---------
Total partners' equity 424,949 419,672
--------- ---------
$ 424,949 419,672
========= =========
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended
March 31,
2001 2000
---- ----
Revenues
Net profits interests $ 99,410 71,154
Interest income 614 436
------- -------
100,024 71,590
------- -------
Expenses
General and administrative 9,747 10,019
Depreciation, depletion and amortization 10,000 11,000
------- -------
19,747 21,019
------- -------
Net income $ 80,277 50,571
======= =======
Net income allocated to:
Managing General Partner $ 8,125 5,541
======= =======
General partner $ 903 616
======= =======
Limited partners $ 71,249 44,414
======= =======
Per limited partner unit $ 14.69 9.16
======= =======
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows
(unaudited)
Three Months Ended
March 31,
2001 2000
---- ----
Cash flows from operating activities:
Cash received from oil and gas sales $ 120,134 68,767
Cash paid to suppliers (17,642) (13,707)
Interest received 614 436
------- -------
Net cash provided by operating activities 103,106 55,496
------- -------
Cash flows used in financing activities:
Distributions to partners (75,000) (55,000)
------- -------
Net increase in cash and cash equivalents 28,106 496
Beginning of period 36,446 24,784
------- -------
End of period $ 64,552 25,280
======= =======
(continued)
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows, continued
(unaudited)
Three Months Ended
March 31,
2001 2000
---- ----
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 80,277 50,571
Adjustments to reconcile net income to net
cash provided by operating activities:
Depletion, depreciation and amortization 10,000 11,000
Decrease (increase) in receivables 20,724 (2,387)
Decrease in payables (7,895) (3,688)
------- -------
Net cash provided by operating activities $ 103,106 55,496
======= =======
Southwest Royalties Institutional Income Fund XI-B, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
1. Organization
Southwest Royalties Institutional Income Fund XI-B, L.P. was organized
under the laws of the state of Delaware on August 31, 1993, 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
Partner 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%
All 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 the 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, 2001, and for the
three months ended March 31, 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-B, L.P. was organized as a
Delaware limited partnership on August 13, 1993. The offering of such
limited partnership interests began October 25, 1993, 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 8, 1993, with the offering of limited partnership interests
concluding August 20, 1994, with total limited partner contributions of
$2,425,500.
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 any net
proceeds from operations to the general and limited partners. Net revenues
from producing oil and gas properties will not be reinvested in other
revenue producing assets except to the extent that producing facilities and
wells are reworked or where methods are employed to improve or enable more
efficient recovery of oil and gas reserves. The economic life of the
Partnership will thus depend on the period over which the Partnership's oil
and gas reserves are economically recoverable.
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 2001 to enhance production. Additional workovers may be performed
in the year 2003. The partnership may have an increase in production
volumes for the years 2001 and 2003, otherwise, the partnership will most
likely experience the historical production decline of approximately 11%
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 March 31, 2001, the net capitalized costs did not
exceed the estimated present value of oil and gas reserves.
Results of Operations
A. General Comparison of the Quarters Ended March 31, 2001 and 2000
The following table provides certain information regarding performance
factors for the quarters ended March 31, 2001 and 2000:
Three Months
Ended Percentage
March 31,
Increase
2001 2000 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 27.08 29.93 (10%)
Average price per mcf of gas $ 6.29 3.31 90%
Oil production in barrels 1,530 1,820 (16%)
Gas production in mcf 16,400 18,600 (12%)
Income from net profits interests $ 99,410 71,154 40%
Partnership distributions $ 75,000 55,000 36%
Limited partner distributions $ 67,500 49,500 36%
Per unit distribution to limited
partners $ 13.91 10.20 36%
Number of limited partner units 4,851 4,851
Revenues
The Partnership's income from net profits interests increased to $99,410
from $71,154 for the quarters ended March 31, 2001 and 2000, respectively,
an increase of 40%. The principal factors affecting the comparison of the
quarters ended March 31, 2001 and 2000 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the quarter ended March 31, 2001 as compared to the
quarter ended March 31, 2000 by 10%, or $2.85 per barrel, resulting in
a decrease of approximately $4,400 in income from net profits
interests. Oil sales represented 29% of total oil and gas sales during
the quarter ended March 31, 2001 as compared to 47% during the quarter
ended March 31, 2000.
The average price for an mcf of gas received by the Partnership
increased during the same period by 90%, or $2.98 per mcf, resulting in
an increase of approximately $48,900 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
$44,500. 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 300 barrels or 16% during the
quarter ended March 31, 2001 as compared to the quarter ended March 31,
2000, resulting in a decrease of approximately $8,700 in income from
net profits interests.
Gas production decreased approximately 2,200 mcf or 12% during the same
period, 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 production is approximately $16,000.
3. Lease operating costs and production taxes were 1% higher, or
approximately $300 more during the quarter ended March 31, 2001 as
compared to the quarter ended March 31, 2000.
Costs and Expenses
Total costs and expenses decreased to $19,747 from $21,019 for the quarters
ended March 31, 2001 and 2000, respectively, a decrease of 6%. 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 3%
or approximately $300 during the quarter ended March 31, 2001 as
compared to the quarter ended March 31, 2000.
2. Depletion expense decreased to $10,000 for the quarter ended March 31,
2001 from $11,000 for the same period in 2000. This represents a
decrease of 9%. 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.
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 $103,100 in
the quarter ended March 31, 2001 as compared to approximately $55,500 in
the quarter ended March 31, 2000. The primary source of the 2001 cash flow
from operating activities was profitable operations.
Cash flows used in financing activities were $75,000 in the quarter ended
March 31, 2001 as compared to approximately $55,000 in the quarter ended
March 31, 2000. The only use in financing activities was the distributions
to partners.
Total distributions during the quarter ended March 31, 2001 were $75,000 of
which $67,500 was distributed to the limited partners and $7,500 to the
general partners. The per unit distribution to limited partners during the
quarter ended March 31, 2001 was $13.91. Total distributions during the
quarter ended March 31, 2000 were $55,000 of which $49,500 was distributed
to the limited partners and $5,500 to the general partners. The per unit
distribution to limited partners during the quarter ended March 31, 2000
was $10.20. There were no distributions during the quarter ended March 31,
1999.
The source for the 2001 distributions of $75,000 was oil and gas operations
of approximately $103,100, resulting in excess cash for contingencies or
subsequent distributions to partners. The source for the 2000
distributions of $55,000 was oil and gas operations of approximately
$55,500, resulting in excess cash for contingencies or subsequent
distributions to partners.
Since inception of the Partnership, cumulative monthly cash distributions
of $1,412,875 have been made to the partners. As of March 31, 2001,
$1,285,615 or $265.02 per limited partner unit has been distributed to the
limited partners, representing a 53% return of the capital contributed.
As of March 31, 2001, the Partnership had approximately $111,300 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
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-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: May 15, 2001