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, 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 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, 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 and six month periods
ended June 30, 1996 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
June 30, December 31,
1996 1995
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 40,147 96,063
Receivable from Managing
General Partner 84,034 50,110
Distribution receivable 70 -
--------- ---------
Total current assets 124,251 146,173
--------- ---------
Oil and gas properties - using the
full cost method of accounting 2,008,569 2,008,569
Less accumulated depreciation,
depletion and amortization 435,000 344,000
--------- ---------
Net oil and gas properties 1,573,569 1,664,569
--------- ---------
Organization costs, net 22,482 25,092
--------- ---------
$ 1,720,302 1,835,834
========= =========
Liabilities and Partners' Equity
Current liability- Distribution payable $ - 29
--------- ---------
Partner equity:
General partners 12,574 5,792
Limited partners 1,707,728 1,830,013
--------- ---------
Total partners' equity 1,720,302 1,835,805
--------- ---------
$ 1,720,302 1,835,834
========= =========
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Revenues
Income from net profits
interests $ 85,368 73,570 165,946 139,867
Interest income on capital
contributions 253 1,435 895 2,760
Interest income from
operations 587 171 622 215
------- ------- ------- -------
86,208 75,176 167,463 142,842
------- ------- ------- -------
Expenses
General and administrative 10,759 12,342 28,249 28,400
Depreciation, depletion and
amortization 46,305 51,305 93,610 90,610
------- ------- ------- -------
57,064 63,647 121,859 119,010
------- ------- ------- -------
Net income $ 29,144 11,529 45,604 23,832
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 6,768 5,526 12,449 10,051
======= ======= ======= =======
General Partner $ 752 614 1,383 1,117
======= ======= ======= =======
Limited Partners $ 21,624 5,389 31,772 12,664
======= ======= ======= =======
Per limited partner
unit $ 4.46 1.11 6.55 2.61
======= ======= ======= =======
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1996 1995
Cash flows from operating activities:
Cash received from oil and gas sales $ 132,022 74,795
Cash paid to suppliers (28,249) (28,398)
Interest received 1,517 3,112
------- -------
Net cash provided by operating
activities 105,290 49,509
------- -------
Cash flows used in investing activities:
Additions to oil and gas properties - (18,588)
------- -------
Cash flows used in financing activities:
Distributions to partners (161,206) (99,117)
------- -------
Net decrease in cash and cash equivalents (55,916) (68,196)
Beginning of period 96,063 217,111
------- -------
End of period $ 40,147 148,915
======= =======
(continued)
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows, continued
(unaudited)
Six Months Ended
June 30,
1996 1995
Reconciliation of net income to
net cash provided by operating
activities:
Net income $ 45,604 23,832
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 93,610 90,610
Increase in receivables (33,924) (64,935)
Increase in payables - 2
-------- --------
Net cash provided by operating $ 105,290 49,509
activities ======= =======
Supplemental schedule of noncash
financing and investing activities:
Oil and gas properties included in
accounts payable $ - 90,002
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 31, 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.
As of June 30, 1996, the Partnership had utilized approximately $2,008,600 of
limited partner capital contributions to acquire interests in oil and gas
properties. All excess capital, $89,489, has been distributed to the limited
partners in proportion to their capital contributions as a return of capital.
Results of Operations
A. General Comparison of the Quarters Ended June 30, 1996 and 1995
The following table provides certain information regarding performance
factors for the quarters ended June 30, 1996 and 1995:
Three Months
Ended Percentage
June 30, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 20.93 17.97 16%
Average price per mcf of gas $ 2.09 1.51 38%
Oil production in barrels 3,900 4,500 (13%)
Gas production in mcf 33,000 49,500 (33%)
Income from net profits interests $ 85,368 73,570 16%
Partnership distributions $ 117,969 77,077 53%
Limited partner distributions $ 115,169 69,524 66%
Per unit distribution to limited
partners $ 23.74 14.33 66%
Number of limited partner units 4,851 4,851
Revenues
The Partnership's income from net profits interests increased to $85,368 from
$73,570 for the quarters ended June 30, 1996 and 1995, respectively, an
increase of 16%. The principal factors affecting the comparison of the
quarters ended June 30, 1996 and 1995 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the quarter ended June 30, 1996 as compared to the
quarter ended June 30, 1995 by 16%, or $2.96 per barrel, resulting in an
increase of approximately $13,300 in income from net profits interests.
Oil sales represented 54% of total oil and gas sales during the quarter
ended June 30, 1996 as compared to 52% during the quarter ended June 30,
1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 38%, or $.58 per mcf, resulting in an increase
of approximately $28,700 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 $42,000.
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 600 barrels or 13% during the
quarter ended June 30, 1996 as compared to the quarter ended June 30,
1995, resulting in a decrease of approximately $12,600 in income from net
profits interests.
Gas production decreased approximately 16,500 mcf or 33% during the same
period, resulting in a decrease of approximately $34,500 in income from
net profits interests.
The total decrease in income from net profits interests due to the change
in production is approximately $47,100. The decrease is primarily a
result of surface problems.
3. Lease operating costs and production taxes were 22% lower, or
approximately $18,000 less during the quarter ended June 30, 1996 as
compared to the quarter ended June 30, 1995. The decrease is primarily
a result of workover costs incurred in 1995.
Costs and Expenses
Total costs and expenses decreased to $57,064 from $63,647 for the quarters
ended June 30, 1996 and 1995, respectively, a decrease of 10%. 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 13%
or approximately $1,600 during the quarter ended June 30, 1996 as
compared to the quarter ended June 30, 1995.
2. Depletion expense decreased to $45,000 for the quarter ended June 30,
1996 from $50,000 for the same period in 1995. This represents a
decrease of 10%. 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 declined due to a decrease in
production for the quarter ended June 30, 1996 as compared to the same
period for 1995. Depletion reflected a comparable decline.
B. General Comparison of the Six Month Periods Ended June 30, 1996 and 1995
The following table provides certain information regarding performance
factors for the six month periods ended June 30, 1996 and 1995:
Six Months
Ended Percentage
June 30, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 19.31 17.48 10%
Average price per mcf of gas $ 1.96 1.57 25%
Oil production in barrels 9,000 8,800 2%
Gas production in mcf 67,300 81,600 (18%)
Income from net profits interests $ 165,946 139,867 19%
Partnership distributions $ 161,107 99,224 62%
Limited partner distributions $ 154,057 89,598 72%
Per unit distribution to limited
partners $ 31.76 18.47 72%
Number of limited partner units 4,851 4,851
Revenues
The Partnership's income from net profits interests increased to $165,946
from $139,867 for the six months ended June 30, 1996 and 1995, respectively,
an increase of 19%. The principal factors affecting the comparison of the
six months ended June 30, 1996 and 1995 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the six months ended June 30, 1996 as compared to the
six months ended June 30, 1995 by 10%, or $1.83 per barrel, resulting in
an increase of approximately $16,100 in income from net profits
interests. Oil sales represented 57% of total oil and gas sales during
the six months ended June 30, 1996 as compared to 55% during the six
months ended June 30, 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 25%, or $.39 per mcf, resulting in an increase
of approximately $31,800 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 $47,900.
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 increased approximately 200 barrels or 2% during the six
months ended June 30, 1996 as compared to the six months ended June 30,
1995, resulting in an increase of approximately $3,900 in income from net
profits interests.
Gas production decreased approximately 14,300 mcf or 18% during the same
period, resulting in a decrease of approximately $28,000 in income from
net profits interests.
The net total decrease in income from net profits interests due to the
change in production is approximately $24,100. The decrease is primarily
a result of surface problems.
3. Lease operating costs and production taxes were 1% lower, or
approximately $1,400 less during the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995.
Costs and Expenses
Total costs and expenses increased to $121,859 from $119,010 for the six
months ended June 30, 1996 and 1995, respectively, an increase of 2%. The
increase is the result of an increase in depletion expense, offset by a
decline 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 decreased 1%
or approximately $200 during the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995.
2. Depletion expense increased to $91,000 for the six months ended June 30,
1996 from $88,000 for the same period in 1995. This represents an
increase of 3%. 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
for the six months ended June 30, 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 $105,300 in
the six months ended June 30, 1996 as compared to approximately $49,500 in
the six months ended June 30, 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 six months ended
June 30, 1996 as compared to approximately $18,600 in the six months ended
June 30, 1995.
Cash flows used in financing activities were approximately $161,200 in the
six months ended June 30, 1996 as compared to approximately $99,100 in the
six months ended June 30, 1995. The only use in financing activities was the
distributions to partners.
Total distributions during the six months ended June 30, 1996 were $161,107
of which $154,057 was distributed to the limited partners and $7,050 to the
general partners. The per unit distribution to limited partners during the
six months ended June 30, 1996 was $31.76. Total distributions during the
six months ended June 30, 1995 were $99,224 of which $89,598 was distributed
to the limited partners and $9,626 to the general partners. The per unit
distribution to limited partners during the six months ended June 30, 1995
was $18.47.
The sources for the 1996 distributions of $161,107 were oil and gas
operations of approximately $105,300 and the excess capital of $89,489,
resulting in excess cash for contingencies or subsequent distribution. The
source for the 1995 distributions of $99,224 was oil and gas operations of
approximately $49,500, offset by additions to oil and gas properties of
approximately $18,600, with the balance from available cash on hand at the
beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions of
$452,707 have been made to the partners. As of June 30, 1996, $420,981 or
$86.78 per limited partner unit has been distributed to the limited partners,
representing a 17% return of the capital contributed.
As of June 30, 1996, the Partnership had approximately $124,300 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.
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.
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
Date: August 12, 1996 By: /s/ Bill E. Coggin
Bill E. Coggin, Vice President
and Chief Financial Officer