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, 1997
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, 1996 which are found in the Registrant's Form 10-K Report
for 1996 filed with the Securities and Exchange Commission. The December 31,
1996 balance sheet included herein has been taken from the Registrant's 1996
Form 10-K Report. Operating results for the three and six month periods
ended June 30, 1997 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,
1997 1996
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,397 20,225
Receivable from Managing General Partner 45,150 79,012
Other receivable 50,076 57,669
Distribution receivable - 70
--------- ---------
Total current assets 96,623 156,976
--------- ---------
Oil and gas properties - using the
full cost method of accounting 2,008,569 2,008,569
Less accumulated depreciation,
depletion and amortization 566,000 502,000
--------- ---------
Net oil and gas properties 1,442,569 1,506,569
--------- ---------
Organization costs, net of amortization 10,642 14,362
--------- ---------
$ 1,549,834 1,677,907
========= =========
Liabilities and Partners' Equity
Current liabilities
Accounts payable $ 53 -
Distribution payable 6 -
--------- ---------
Total current liabilities 59 -
--------- ---------
Partner equity:
General partners 9,806 15,847
Limited partners 1,539,969 1,662,060
--------- ---------
Total partners' equity 1,549,775 1,677,907
--------- ---------
$ 1,549,834 1,677,907
========= =========
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues
Income from net profits
interests $ 38,364 85,368 109,323 165,946
Interest income from
operations 241 587 464 622
Interest income from
capital contributions - 253 - 895
Miscellaneous income 13,553 - 19,906 -
------- ------- ------- -------
52,158 86,208 129,693 167,463
------- ------- ------- -------
Expenses
General and administrative 11,013 10,759 28,105 28,249
Depreciation, depletion and
amortization 29,860 46,305 67,720 93,610
------- ------- ------- -------
40,873 57,064 95,825 121,859
------- ------- ------- -------
Net income $ 11,285 29,144 33,868 45,604
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 3,703 6,768 9,143 12,449
======= ======= ======= =======
General Partner $ 411 752 1,016 1,383
======= ======= ======= =======
Limited partners $ 7,171 21,624 23,709 31,772
======= ======= ======= =======
Per limited partner unit $ 1.48 4.46 4.89 6.55
======= ======= ======= =======
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Cash received from oil and gas sales $ 170,684 132,022
Cash paid to suppliers (28,052) (28,249)
Interest received 464 1,517
------- --------
Net cash provided by operating activities 143,096 105,290
------- --------
Cash flows used in financing activities:
Distributions to partners (161,924) (161,206)
------- --------
Net decrease in cash and cash equivalents (18,828) (55,916)
Beginning of period 20,225 96,063
------- --------
End of period $ 1,397 40,147
======= ========
(continued)
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows, continued
(unaudited)
Six Months Ended
June 30,
1997 1996
Reconciliation of net income to net
cash provided by operating activities:
Net income $ 33,868 45,604
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 67,720 93,610
(Increase) decrease in receivables 41,455 (33,924)
Increase in payables 53 -
-------- --------
Net cash provided by operating activities $ 143,096 105,290
======= =======
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.
Based on current conditions, management anticipates performing workovers
during the next four years to enhance production. The Partnership could
possibly experience a slight increase during that time and thereafter, could
possibly experience a normal decline.
Results of Operations
A. General Comparison of the Quarters Ended June 30, 1997 and 1996
The following table provides certain information regarding performance
factors for the quarters ended June 30, 1997 and 1996:
Three Months
Ended Percentage
June 30, Increase
1997 1996 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 18.32 20.93 (12%)
Average price per mcf of gas $ 2.01 2.09 (4%)
Oil production in barrels 2,900 3,900 (26%)
Gas production in mcf 27,000 33,000 (18%)
Income from net profits interests $ 38,364 85,368 (55%)
Partnership distributions $ 67,500 117,969 (43%)
Limited partner distributions $ 60,750 115,169 (47%)
Per unit distribution to limited
partners $ 12.52 23.74 (47%)
Number of limited partner units 4,851 4,851
Revenues
The Partnership's income from net profits interests decreased to $38,364 from
$85,368 for the quarters ended June 30, 1997 and 1996, respectively, a
decrease of 55%. The principal factors affecting the comparison of the
quarters ended June 30, 1997 and 1996 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the quarter ended June 30, 1997 as compared to the
quarter ended June 30, 1996 by 12%, or $2.61 per barrel, resulting in a
decrease of approximately $10,200 in income from net profits interests.
Oil sales represented 49% of total oil and gas sales during the quarter
ended June 30, 1997 as compared to 54% during the quarter ended June 30,
1996.
The average price for an mcf of gas received by the Partnership decreased
during the same period by 4%, or $.08 per mcf, resulting in a decrease of
approximately $2,600 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 $12,800.
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 26% during the
quarter ended June 30, 1997 as compared to the quarter ended June 30,
1996, resulting in a decrease of approximately $18,300 in income from net
profits interests.
Gas production decreased approximately 6,000 mcf or 18% during the same
period, resulting in a decrease of approximately $12,100 in income from
net profits interests.
The total decrease in income from net profits interests due to the change
in production is approximately $30,400. The decrease is primarily
attributable to the sharp natural decline on two leases and downtime, on
several wells, due to mechanical problems.
3. Lease operating costs and production taxes were 7% higher, or
approximately $4,300 more during the quarter ended June 30, 1997 as
compared to the quarter ended June 30, 1996. The increase is primarily
attributable to repairs on a salt water disposal well during the second
quarter of 1997.
Costs and Expenses
Total costs and expenses decreased to $40,873 from $57,064 for the quarters
ended June 30, 1997 and 1996, respectively, a decrease of 28%. 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 2%
or approximately $300 during the quarter ended June 30, 1997 as compared
to the quarter ended June 30, 1996.
2. Depletion expense decreased to $28,000 for the quarter ended June 30,
1997 from $45,000 for the same period in 1996. This represents a
decrease of 38%. 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 gross oil and gas revenues and the increase in the price of
oil used to determine the Partnership's reserves for January 1, 1997 as
compared to 1996.
B. General Comparison of the Six Month Periods Ended June 30, 1997 and 1996
The following table provides certain information regarding performance
factors for the six month periods ended June 30, 1997 and 1996:
Six Months
Ended Percentage
June 30, Increase
1997 1996 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 20.92 19.31 8%
Average price per mcf of gas $ 2.20 1.96 12%
Oil production in barrels 6,100 9,000 (32%)
Gas production in mcf 54,000 67,300 (20%)
Income from net profits interests $ 109,323 165,946 (34%)
Partnership distributions $ 162,000 161,107 1%
Limited partner distributions $ 145,800 154,057 (5%)
Per unit distribution to limited
partners $ 30.06 31.76 (5%)
Number of limited partner units 4,851 4,851
Revenues
The Partnership's income from net profits interests decreased to $109,323
from $165,946 for the six months ended June 30, 1997 and 1996, respectively,
a decrease of 34%. The principal factors affecting the comparison of the six
months ended June 30, 1997 and 1996 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the six months ended June 30, 1997 as compared to the
six months ended June 30, 1996 by 8%, or $1.61 per barrel, resulting in
an increase of approximately $14,500 in income from net profits
interests. Oil sales represented 52% of total oil and gas sales during
the six months ended June 30, 1997 as compared to 57% during the six
months ended June 30, 1996.
The average price for an mcf of gas received by the Partnership increased
during the same period by 12%, or $.24 per mcf, resulting in an increase
of approximately $16,200 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 $30,700.
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 2,900 barrels or 32% during the
six months ended June 30, 1997 as compared to the six months ended June
30, 1996, resulting in a decrease of approximately $60,700 in income from
net profits interests.
Gas production decreased approximately 13,300 mcf or 20% during the same
period, resulting in a decrease of approximately $29,300 in income from
net profits interests.
The total decrease in income from net profits interests due to the change
in production is approximately $90,000. The decrease is primarily
attributable to the sharp natural decline on two leases and downtime, on
several wells, due to mechanical problems.
3. Lease operating costs and production taxes were 2% lower, or
approximately $3,000 less during the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996.
Costs and Expenses
Total costs and expenses decreased to $95,825 from $121,859 for the six
months ended June 30, 1997 and 1996, respectively, a decrease of 21%. 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 1%
or approximately $100 during the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996.
2. Depletion expense decreased to $64,000 for the six months ended June 30,
1997 from $91,000 for the same period in 1996. This represents a
decrease of 30%. 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 gross oil and gas revenues and the increase in the price of
oil used to determine the Partnership's reserves for January 1, 1997 as
compared to 1996.
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 $143,100 in
the six months ended June 30, 1997 as compared to approximately $105,300 in
the six months ended June 30, 1996. The primary source of the 1997 cash flow
from operating activities was profitable operations.
Cash flows used in financing activities were approximately $161,900 in the
six months ended June 30, 1997 as compared to approximately $161,200 in the
six months ended June 30, 1996. The only use in financing activities was the
distributions to partners.
Total distributions during the six months ended June 30, 1997 were $162,000
of which $145,800 was distributed to the limited partners and $16,200 to the
general partners. The per unit distribution to limited partners during the
six months ended June 30, 1997 was $30.06. 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.
The source for the 1997 distributions of $162,000 was oil and gas operations
of approximately $143,100, with the balance from available cash on hand at
the beginning of the period. The sources for the 1996 distributions of
$161,107 were oil and gas operations of approximately $105,300 and excess
capital of $89,489, resulting in excess cash for contingencies or subsequent
distribution.
Since inception of the Partnership, cumulative monthly cash distributions of
$792,339 have been made to the partners. As of June 30, 1997, $726,963 or
$149.86 per limited partner unit has been distributed to the limited
partners, representing a 30% return of the capital contributed.
As of June 30, 1997, the Partnership had approximately $96,600 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:
On June 12, 1997, the Partnership filed Form 8-K and on June
24, 1997, the Partnership filed Form 8-K Amended, with
respect to Item 4, Changes in Registrant's Certifying
Accountant.
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: August 15, 1997