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 September 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 nine month periods
ended September 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
September 30, December 31,
1996 1995
------------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 7,426 96,063
Receivable from Managing
General Partner 115,796 50,110
Distribution receivable 14 -
--------- ---------
Total current assets 123,236 146,173
--------- ---------
Oil and gas properties - using the
full cost method of accounting 2,008,569 2,008,569
Less accumulated depreciation,
depletion and amortization 478,000 344,000
--------- ---------
Net oil and gas properties 1,530,569 1,664,569
--------- ---------
Organization costs, net 16,222 25,092
--------- ---------
$ 1,670,027 1,835,834
========= =========
Liabilities and Partners' Equity
Current liability- Distribution payable $ - 29
--------- ---------
Partner equity:
General partners 12,498 5,792
Limited partners 1,657,529 1,830,013
--------- ---------
Total partners' equity 1,670,027 1,835,805
--------- ---------
$ 1,670,027 1,835,834
========= =========
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Revenues
Income from net profits
interests $ 63,737 76,231 229,683 216,097
Interest income on capital
contributions - 856 642 3,830
Interest income from
operations 401 - 1,276 -
Miscellaneous income 41,666 - 41,666 -
------- ------- ------- -------
105,804 77,087 273,267 219,927
------- ------- ------- -------
Expenses
General and administrative 10,818 10,480 39,068 38,877
Depreciation, depletion and
amortization 46,128 45,305 139,738 135,915
------- ------- ------- -------
56,946 55,785 178,806 174,792
------- ------- ------- -------
Net income $ 48,858 21,302 94,461 45,135
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 8,549 5,918 21,020 15,950
======= ======= ======= =======
General Partner $ 950 657 2,336 1,772
======= ======= ======= =======
Limited Partners $ 39,359 14,727 71,105 27,413
======= ======= ======= =======
Per limited partner
unit $ 8.11 3.04 14.66 5.65
======= ======= ======= =======
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Cash received from oil and gas sales $ 205,663 215,770
Cash paid to suppliers (39,068) (39,010)
Interest received 1,918 3,967
------- -------
Net cash provided by operating
activities 168,513 180,727
------- -------
Cash flows from investing activities:
Additions to oil and gas properties - (108,590)
Refund of organization costs 3,132 -
------- -------
Net cash provided by (used in)
investing activities 3,132 (108,590)
------- -------
Cash flows used in financing activities:
Distributions to partners (260,282) (186,214)
------- -------
Net decrease in cash and cash equivalents (88,637) (114,077)
Beginning of period 96,063 217,111
------- -------
End of period $ 7,426 103,034
======= =======
(continued)
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1996 1995
Reconciliation of net income to
net cash provided by operating
activities:
Net income $ 94,461 45,135
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 139,738 135,915
Increase in receivables (65,686) (190)
Decrease in payables - (133)
-------- --------
Net cash provided by operating
activities $ 168,513 180,727
======= =======
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 September 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, and the associated
organization costs of $3,132, 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 September 30, 1996 and 1995
The following table provides certain information regarding performance
factors for the quarters ended September 30, 1996 and 1995:
Three Months
Ended Percentage
September 30, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 21.68 16.46 32%
Average price per mcf of gas $ 1.83 1.59 15%
Oil production in barrels 3,800 4,800 (21%)
Gas production in mcf 34,000 40,000 (15%)
Income from net profits interests $ 63,737 76,231 (16%)
Partnership distributions $ 99,132 87,008 14%
Limited partner distributions $ 89,532 78,408 14%
Per unit distribution to limited
partners $ 18.46 16.16 14%
Number of limited partner units 4,851 4,851
Revenues
The Partnership's income from net profits interests decreased to $63,737 from
$76,231 for the quarters ended September 30, 1996 and 1995, respectively, a
decrease of 16%. The principal factors affecting the comparison of the
quarters ended September 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 September 30, 1996 as compared to the
quarter ended September 30, 1995 by 32%, or $5.22 per barrel, resulting
in an increase of approximately $25,100 in income from net profits
interests. Oil sales represented 57% of total oil and gas sales during
the quarter ended September 30, 1996 as compared to 55% during the
quarter ended September 30, 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 15%, or $.24 per mcf, resulting in an increase
of approximately $9,600 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 $34,700.
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 1,000 barrels or 21% during the
quarter ended September 30, 1996 as compared to the quarter ended
September 30, 1995, resulting in a decrease of approximately $21,700 in
income from net profits interests.
Gas production decreased approximately 6,000 mcf or 15% during the same
period, resulting in a decrease of approximately $11,000 in income from
net profits interests.
The total decrease in income from net profits interests due to the change
in production is approximately $32,700. The decrease is primarily a
result of surface problems.
3. Lease operating costs and production taxes were 22% higher, or
approximately $14,500 more during the quarter ended September 30, 1996 as
compared to the quarter ended September 30, 1995. The increase is a
result of post closing costs incurred in 1996 on an acquisition effective
in 1995.
Costs and Expenses
Total costs and expenses increased to $56,946 from $55,785 for the quarters
ended September 30, 1996 and 1995, respectively, an increase of 2%. The
increase is the result of higher general and administrative expense, offset
by a decline in 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 3%
or approximately $300 during the quarter ended September 30, 1996 as
compared to the quarter ended September 30, 1995.
2. Depletion expense decreased to $43,000 for the quarter ended September
30, 1996 from $44,000 for the same period in 1995. This represents a
decrease of 2%. 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.
B. General Comparison of the Nine Month Periods Ended September 30, 1996 and
1995
The following table provides certain information regarding performance
factors for the nine month periods ended September 30, 1996 and 1995:
Nine Months
Ended Percentage
September 30, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 20.01 17.12 17%
Average price per mcf of gas $ 1.92 1.57 22%
Oil production in barrels 12,800 13,500 (5%)
Gas production in mcf 101,300 121,600 (17%)
Income from net profits interests $ 229,683 216,097 6%
Partnership distributions $ 260,239 186,232 40%
Limited partner distributions $ 243,589 168,006 45%
Per unit distribution to limited
partners $ 50.21 34.63 45%
Number of limited partner units 4,851 4,851
Revenues
The Partnership's income from net profits interests increased to $229,683
from $216,097 for the nine months ended September 30, 1996 and 1995,
respectively, an increase of 6%. The principal factors affecting the
comparison of the nine months ended September 30, 1996 and 1995 are as
follows:
1. The average price for a barrel of oil received by the Partnership
increased during the nine months ended September 30, 1996 as compared to
the nine months ended September 30, 1995 by 17%, or $2.89 per barrel,
resulting in an increase of approximately $39,000 in income from net
profits interests. Oil sales represented 57% of total oil and gas sales
during the nine months ended September 30, 1996 as compared to 55% during
the nine months ended September 30, 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 22%, or $.35 per mcf, resulting in an increase
of approximately $42,600 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 $81,600.
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 700 barrels or 5% during the nine
months ended September 30, 1996 as compared to the nine months ended
September 30, 1995, resulting in a decrease of approximately $14,000 in
income from net profits interests.
Gas production decreased approximately 20,300 mcf or 17% during the same
period, resulting in a decrease of approximately $39,000 in income from
net profits interests.
The total decrease in income from net profits interests due to the change
in production is approximately $53,000. The decrease is primarily a
result of surface problems.
3. Lease operating costs and production taxes were 6% higher, or
approximately $13,200 more during the nine months ended September 30,
1996 as compared to the nine months ended September 30, 1995. The
increase is a result of post closing costs incurred in 1996 on an
acquisition effective during 1995.
Costs and Expenses
Total costs and expenses increased to $178,806 from $174,792 for the nine
months ended September 30, 1996 and 1995, respectively, an increase of 2%.
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 less
than 1% or approximately $200 during the nine months ended September 30,
1996 as compared to the nine months ended September 30, 1995.
2. Depletion expense increased to $134,000 for the nine months ended
September 30, 1996 from $132,000 for the same period in 1995. This
represents an increase of 2%. 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.
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 $168,500 in
the nine months ended September 30, 1996 as compared to approximately
$180,700 in the nine months ended September 30, 1995. The primary source of
the 1996 cash flow from operating activities was profitable operations.
Cash flows provided by (used in) investing activities were approximately
$3,100 in the nine months ended September 30, 1996 as compared to
approximately $(108,600) in the nine months ended September 30, 1995. The
principle source of the 1996 cash flow from investing activities was the
refund of organization costs.
Cash flows used in financing activities were approximately $260,300 in the
nine months ended September 30, 1996 as compared to approximately $186,200 in
the nine months ended September 30, 1995. The only use in financing
activities was the distributions to partners.
Total distributions during the nine months ended September 30, 1996 were
$260,239 of which $243,589 was distributed to the limited partners and
$16,650 to the general partners. The per unit distribution to limited
partners during the nine months ended September 30, 1996 was $50.21. Total
distributions during the nine months ended September 30, 1995 were $186,232
of which $168,006 was distributed to the limited partners and $18,226 to the
general partners. The per unit distribution to limited partners during the
nine months ended September 30, 1995 was $34.63.
The sources for the 1996 distributions of $260,239 were oil and gas
operations of approximately $168,500 and the refund of organization costs of
approximately $3,100, with the balance from available cash on hand at the
beginning of the period. The source for the 1995 distributions of $186,232
was oil and gas operations of approximately $180,700, offset by the additions
of oil and gas properties of approximately $108,600, with the balance from
available cash on hand at the beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions of
$551,839 have been made to the partners. As of September 30, 1996, $510,513
or $105.24 per limited partner unit has been distributed to the limited
partners, representing a 21% return of the capital contributed.
As of September 30, 1996, the Partnership had approximately $123,200 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) Financial Data Schedule
(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: November 15, 1996 By: /s/ Bill E. Coggin
Bill E. Coggin, Vice President
and Chief Financial Officer