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, 1996
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 12.
PAGE
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, 1995 which are found in the Registrant's Form 10-K Report
for 1995 filed with the Securities and Exchange Commission. The December 31,
1995 balance sheet included herein has been taken from the Registrant's 1995
Form 10-K Report. Operating results for the three month period ended
March 31, 1996 are not necessarily indicative of the results that may be
expected for the full year.
PAGE
Southwest Royalties Institutional Income Fund XI-B, L.P.
Balance Sheets
March 31, December 31,
1996 1995
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 96,025 96,063
Receivable from Managing General
Partner 76,075 50,110
--------- ---------
Total current assets 172,100 146,173
--------- ---------
Oil and gas properties - using the
full-cost method of accounting 2,008,569 2,008,569
Less accumulated depreciation,
depletion and amortization 390,000 344,000
--------- ---------
Net oil and gas properties 1,618,569 1,664,569
--------- ---------
Organization costs, net of
amortization 23,787 25,092
--------- ---------
$ 1,814,456 1,835,834
========= =========
Liabilities and Partners' Equity
Current liabilities:
Accounts payable $ 5,300 -
Distribution payable 27 29
--------- ---------
Total current liabilities 5,327 29
--------- ---------
Partners' equity:
General partners 7,855 5,792
Limited partners 1,801,274 1,830,013
--------- ---------
Total partners' equity 1,809,129 1,835,805
--------- ---------
$ 1,814,456 1,835,834
========= =========
PAGE
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended
March 31,
1996 1995
---- ----
Revenues
Net profits interests $ 80,578 66,297
Interest income 35 65
Interest income on capital
contributions 642 1,304
------- -------
81,255 67,666
------- -------
Expenses
General and administrative 17,488 16,058
Depreciation, depletion and
amortization 47,305 39,305
------- -------
64,793 55,363
------- -------
Net income $ 16,462 12,303
======= =======
Net income allocated to:
Managing General Partner $ 5,681 4,527
======= =======
General partner $ 631 503
======= =======
Limited partners $ 10,150 7,273
======= =======
Per limited partner unit $ 2.09 1.50
======= =======
PAGE
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows
(unaudited)
Three Months Ended
March 31,
1996 1995
---- ----
Cash flows from operating activities:
Cash received from oil and gas sales $ 54,613 76,279
Cash paid to suppliers (12,188) (11,767)
Interest received 677 1,379
------- -------
Net cash provided by operating
activities 43,102 65,891
------- -------
Cash flows used in investing activities:
Additions to oil and gas properties - (38,232)
------- -------
Cash flows used in financing activities:
Distributions to partners (43,140) (21,947)
------- -------
Net increase (decrease) in cash (38) 5,712
Cash and cash equivalents:
Beginning of period 96,063 217,111
------- -------
End of period $ 96,025 222,823
======= =======
(continued)
PAGE
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows, continued
(unaudited)
Three Months Ended
March 31,
1996 1995
---- ----
Reconciliation of net income to
net cash provided by operating
activities:
Net income $ 16,462 12,303
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depletion, depreciation and
amortization 47,305 39,305
Increase (decrease) in receivables (25,965) 9,992
Increase in payables 5,300 4,291
------- -------
Net cash provided by operating
activities $ 43,102 65,891
======= =======
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 April 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.
As of March 31, 1996, the Partnership had utilized approximately $2,008,600
of limited partner capital contributions to acquire interests in oil and gas
properties. This represents 96% of the limited partner capital contributions
available to acquire producing properties. The available capital
contributions are being held in an interest bearing account. During the
quarter ended March 31, 1996, the Partnership earned $642 on funds held in
such interest bearing account.
PAGE
Results of Operations
A. General Comparison of the Quarters Ended March 31, 1996 and 1995
The following table provides certain information regarding performance
factors for the quarters ended March 31, 1996 and 1995:
Three Months
Ended Percentage
March 31, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 18.07 16.96 7%
Average price per mcf of gas $ 1.85 1.65 12%
Oil production in barrels 5,100 4,200 21%
Gas production in mcf 34,300 32,100 7%
Income from net profits interests $ 80,578 66,297 22%
Partnership distributions $ 43,138 22,147 95%
Limited partner distributions $ 38,888 20,074 94%
Per unit distribution to limited
partners $ 8.02 4.14 94%
Number of limited partner units 4,851 4,851
Revenues
The Partnership's income from net profits interests increased to $80,578 from
$66,297 for the quarters ended March 31, 1996 and 1995, respectively, an
increase of 22%. The principal factors affecting the comparison of the
quarters ended March 31, 1996 and 1995 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the quarter ended March 31, 1996 as compared to the
quarter ended March 31, 1995 by 7%, or $1.11 per barrel, resulting in an
increase of approximately $4,700 in income from net profits interests.
Oil sales represented 59% of total oil and gas sales during the quarter
ended March 31, 1996 as compared to 58% during the quarter ended March
31, 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 12%, or $.20 per mcf, resulting in an increase
of approximately $6,400 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 $11,100.
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 increased approximately 900 barrels or 21% during the
quarter ended March 31, 1996 as compared to the quarter ended March 31,
1995, resulting in an increase of approximately $16,300 in income from
net profits interests.
Gas production increased approximately 2,200 mcf or 7% during the same
period, resulting in an increase of approximately $4,100 in income from
net profits interests.
The total increase in income from net profits interests due to the change
in production is approximately $20,400. The increase is a result of an
acquisition with an effective date of June 1995.
3. Lease operating costs and production taxes were 28% higher, or
approximately $16,600 more during the quarter ended March 31, 1996 as
compared to the quarter ended March 31, 1995. The increase is a result
of an acquisition with an effective date of June 1995 and higher
production taxes due to the increase in oil and gas revenues.
Costs and Expenses
Total costs and expenses increased to $64,793 from $55,363 for the quarters
ended March 31, 1996 and 1995, respectively, an increase of 17%. 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 9% or
approximately $1,400 during the quarter ended March 31, 1996 as compared
to the quarter ended March 31, 1995.
2. Depletion expense increased to $46,000 for the quarter ended March 31,
1996 from $38,000 for the same period in 1995. This represents an
increase of 21%. Depletion is calculated using the gross 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. Consequently, depletion
will generally fluctuate in direct relation to oil and gas revenues. As
noted above, oil and gas revenues increased due to an increase in price
and production for the quarter ended March 31, 1996 as compared to the
same period for 1995. Depletion reflected a comparable increase.
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 $43,100 in the
three months ended March 31, 1996 as compared to approximately $65,900 in the
three months ended March 31, 1995. The primary source of the 1996 cash flow
from operating activities was profitable operations.
Cash flows used in investing activities were none in the three months ended
March 31, 1996 as compared to approximately $38,200 in the three months ended
March 31, 1995.
Cash flows used in financing activities were approximately $43,100 in the
three months ended March 31, 1996 as compared to approximately $21,900 in the
three months ended March 31, 1995. The only use in financing activities was
the distributions to partners.
Total distributions during the three months ended March 31, 1996 were $43,138
of which $38,888 was distributed to the limited partners and $4,250 to the
general partners. The per unit distribution to limited partners during the
three months ended March 31, 1996 was $8.02. Total distributions during the
three months ended March 31, 1995 were $22,147 of which $20,074 was
distributed to the limited partners and $2,073 was distributed to the general
partners. The per unit distribution to limited partners during the three
months ended March 31, 1995 was $4.14.
The source for the 1996 distributions of $43,138 was oil and gas operations
of approximately $43,100, with the balance from available cash on hand at the
beginning of the period. The source for the 1995 distributions of $22,147
was oil and gas operations of approximately $65,900, offset by additions of
oil and gas properties of approximately $38,200, resulting in excess cash for
contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions of
$334,738 have been made to the partners. As of March 31, 1996, $305,812 or
$63.04 per limited partner unit has been distributed to the limited partners,
representing a 13% return of the capital contributed.
As of March 31, 1996, the Partnership had approximately $166,800 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.
PAGE
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) None
(b) No reports on Form 8-K were filed during the quarter for
which this report is filed.
PAGE
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 11, 1996