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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 September 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 note 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
nine month periods ended September 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
September 30, December 31,
1997 1996
------------- ------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 3,117 20,225
Receivable from Managing General Partner 37,156 79,012
Other receivable 60,000 57,669
Distribution receivable - 70
- --------- ---------
Total current assets 100,273 156,976
--------- ---------
Oil and gas properties - using the
full cost method of accounting 2,008,569 2,008,569
Less accumulated depreciation,
depletion and amortization 591,000 502,000
--------- ---------
Net oil and gas properties 1,417,569 1,506,569
--------- ---------
Organization costs, net 8,782 14,362
--------- ---------
$1,526,624 1,677,907
========= =========
Liabilities and Partners' Equity
Current liability - Distribution payable $ 209 -
--------- ---------
Partners' equity
General partners 10,156 15,847
Limited partners 1,516,259 1,662,060
--------- ---------
Total partners' equity 1,526,415 1,677,907
--------- ---------
$1,526,624 1,677,907
========= =========
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues
Income from net profits
interests $ 32,409 63,737 141,732 229,683
Interest income on capital
contributions - - - 642
Interest income from operations 99 401 563
1,276
Miscellaneous income 12,425 41,666 32,331 41,666
------ ------- ------- -------
44,933 105,804 174,626 273,267
------ ------- ------- -------
Expenses
General and administrative 10,832 10,818 38,938 39,068
Depreciation, depletion and
amortization 26,860 46,128 94,580 139,738
------ ------- ------- -------
37,692 56,946 133,518 178,806
------ ------- ------- -------
Net income $ 7,241 48,858 41,108 94,461
====== ======= ======= =======
Net income allocated to:
Managing General Partner $ 3,069 8,549 12,212 21,020
====== ======= ======= =======
General Partner $ 341 950 1,357 2,336
====== ======= ======= =======
Limited Partners $ 3,831 39,359 27,539 71,105
====== ======= ======= =======
Per limited partner unit $ .79 8.11 5.68 14.66
====== ======= ======= =======
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1997 1996
Cash flows from operating activities
Cash received from oil and gas sales $ 213,588 205,663
Cash paid to suppliers (38,938) (39,068)
Interest received 563 1,918
------- -------
Net cash provided by operating activities 175,213 168,513
------- -------
Cash flows provided by investing activities
Refund of organization costs - 3,132
------- -------
Cash flows used in financing activities
Distributions to partners (192,321) (260,282)
------- -------
Net decrease in cash and cash equivalents (17,108) (88,637)
Beginning of period 20,225 96,063
------- -------
End of period $ 3,117 7,426
======= =======
(continued)
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1997 1996
Reconciliation of net income to net cash
provided by operating activities
Net income $ 41,108 94,461
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation, depletion and amortization 94,580 139,738
(Increase) decrease in receivables 39,525 (65,686)
------- -------
Net cash provided by operating activities $ 175,213 168,513
======= =======
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 September 30, 1997 and 1996
The following table provides certain information regarding performance
factors for the quarters ended September 30, 1997 and 1996:
Three Months
Ended Percentage
September 30, Increase
1997 1996 (Decrease)
Average price per barrel of oil $ 17.12 21.68 (21%)
Average price per mcf of gas $ 1.85 1.83 1%
Oil production in barrels 2,600 3,800 (32%)
Gas production in mcf 26,900 34,000 (21%)
Income from net profits interests $ 32,409 63,737 (49%)
Partnership distributions $ 30,600 99,132 (69%)
Limited partner distributions $ 27,450 89,532 (69%)
Per unit distribution to limited partners $ 5.68 18.46 (69%)
Number of limited partner units 4,851 4,851
Revenues
The Partnership's income from net profits interests decreased to $32,409
from $63,737 for the quarters ended September 30, 1997 and 1996,
respectively, a decrease of 49%. The principal factors affecting the
comparison of the quarters ended September 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 September 30, 1997 as compared to
the quarter ended September 30, 1996 by 21%, or $4.56 per barrel,
resulting in a decrease of approximately $17,300 in income from net
profits interests. Oil sales represented 47% of total oil and gas
sales during the quarter ended September 30, 1997 as compared to 57%
during the quarter ended September 30, 1996.
The average price for an mcf of gas received by the Partnership
increased during the same period by 1%, or $.02 per mcf, resulting in
an increase of approximately $700 in income from net profits
interests.
The net total decrease in income from net profits interests due to the
change in prices received from oil and gas production is approximately
$16,600. 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 1,200 barrels or 32% during the
quarter ended September 30, 1997 as compared to the quarter ended
September 30, 1996, resulting in a decrease of approximately $20,500 in
income from net profits interests.
Gas production decreased approximately 7,100 mcf or 21% during the same
period, resulting in a decrease of approximately $13,100 in income from
net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $33,600. 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 23% lower, or
approximately $18,500 less during the quarter ended September 30, 1997
as compared to the quarter ended September 30, 1996. The decline is
attributable to workover costs incurred in 1996 as compared to 1997.
Costs and Expenses
Total costs and expenses decreased to $37,692 from $56,946 for the quarters
ended September 30, 1997 and 1996, respectively, a decrease of 34%. 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
less than 1% or $14 during the quarter ended September 30, 1997 as
compared to the quarter ended September 30, 1996.
2. Depletion expense decreased to $25,000 for the quarter ended September
30, 1997 from $43,000 for the same period in 1996. This represents a
decrease of 42%. 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 increase in the price of oil used to determine the
Partnership's reserves for January 1, 1997 as compared to 1996 and the
decline in gross oil and gas revenues.
B. General Comparison of the Nine Month Periods Ended September 30, 1997
and 1996
The following table provides certain information regarding performance
factors for the nine month periods ended September 30, 1997 and 1996:
Nine Months
Ended Percentage
September 30, Increase
1997 1996 (Decrease)
Average price per barrel of oil $ 19.79 20.01 (1%)
Average price per mcf of gas $ 2.08 1.92 8%
Oil production in barrels 8,700 12,800 (32%)
Gas production in mcf 80,900 101,300 (20%)
Income from net profits interests $ 141,732 229,683 (38%)
Partnership distributions $ 192,600 260,239 (26%)
Limited partner distributions $ 173,340 243,589 (29%)
Per unit distribution to limited partners $ 35.73 50.21 (29%)
Number of limited partner units 4,851 4,851
Revenues
The Partnership's income from net profits interests decreased to $141,732
from $229,683 for the nine months ended September 30, 1997 and 1996,
respectively, a decrease of 38%. The principal factors affecting the
comparison of the nine months ended September 30, 1997 and 1996 are as
follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the nine months ended September 30, 1997 as compared
to the nine months ended September 30, 1996 by 1%, or $.22 per barrel,
resulting in a decrease of approximately $2,800 in income from net
profits interests. Oil sales represented 51% of total oil and gas
sales during the nine months ended September 30, 1997 as compared to
57% during the nine months ended September 30, 1996.
The average price for an mcf of gas received by the Partnership
increased during the same period by 8%, or $.16 per mcf, resulting in
an increase of approximately $16,200 in income from net profits
interests.
The net total increase in income from net profits interests due to the
change in prices received from oil and gas production is approximately
$13,400. 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 4,100 barrels or 32% during the
nine months ended September 30, 1997 as compared to the nine months
ended September 30, 1996, resulting in a decrease of approximately
$81,100 in income from net profits interests.
Gas production decreased approximately 20,400 mcf or 20% during the
same period, resulting in a decrease of approximately $42,400 in income
from net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $123,500. 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 10% lower, or
approximately $21,400 less during the nine months ended September 30,
1997 as compared to the nine months ended September 30, 1996.
Costs and Expenses
Total costs and expenses decreased to $133,518 from $178,806 for the nine
months ended September 30, 1997 and 1996, respectively, a decrease of 25%.
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
less than 1% or $130 during the nine months ended September 30, 1997 as
compared to the nine months ended September 30, 1996.
2. Depletion expense decreased to $89,000 for the nine months ended
September 30, 1997 from $134,000 for the same period in 1996. This
represents a decrease of 34%. 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 increase in the price of oil used to
determine the Partnership's reserves for January 1, 1997 as compared to
1996 and the decline in gross oil and gas revenues.
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 $175,200 in
the nine months ended September 30, 1997 as compared to approximately
$168,500 in the nine months ended September 30, 1996. The primary source
of the 1997 cash flow from operating activities was profitable operations.
There were no cash flows provided by investing activities in the nine
months ended September 30, 1997 as compared to approximately $3,100 in the
nine months ended September 30, 1996.
Cash flows used in financing activities were approximately $192,300 in the
nine months ended September 30, 1997 as compared to approximately $260,300
in the nine months ended September 30, 1996. The only use in financing
activities was the distributions to partners.
Total distributions during the nine months ended September 30, 1997 were
$192,600 of which $173,340 was distributed to the limited partners and
$19,260 to the general partners. The per unit distribution to limited
partners during the nine months ended September 30, 1997 was $35.73. 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.
The source for the 1997 distributions of $192,600 was oil and gas
operations of approximately $175,200, with the balance from available cash
on hand at the beginning of the period. 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.
Since inception of the Partnership, cumulative monthly cash distributions
of $822,939 have been made to the partners. As of September 30, 1997,
$754,503 or $155.54 per limited partner unit has been distributed to the
limited partners, representing a 31% return of the capital contributed.
As of September 30, 1997, the Partnership had approximately $100,100 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) 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: November 15, 1997