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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 June 30, 1998
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 33-47667-01
SOUTHWEST OIL & GAS 1992-93 INCOME PROGRAM
Southwest Oil & Gas Income Fund XI-A, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2427267
(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, 1997 which are found in the Registrant's Form
10-K Report for 1997 filed with the Securities and Exchange Commission.
The December 31, 1997 balance sheet included herein has been taken from the
Registrant's 1997 Form 10-K Report. Operating results for the three and
six month periods ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the full year.
Southwest Oil & Gas Income Fund XI-A, L.P.
Balance Sheets
June 30, December 31,
1998 1997
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,084 4,368
Receivable from Managing General Partner 20,889 52,943
Other receivable - 1,605
--------- ---------
Total current assets 21,973 58,961
--------- ---------
Oil and gas properties - using the
full cost method of accounting 1,068,447 1,061,992
Less accumulated depreciation,
depletion and amortization 515,663 408,000
--------- ---------
Net oil and gas properties 552,784 653,992
--------- ---------
Organization costs, net - 1,044
--------- ---------
$ 574,757 713,997
========= =========
Liabilities and Partners' Equity
Current liability - Distribution payable $ 52 38
--------- ---------
Partners' equity:
General partners (8,319) (5,344)
Limited partners 583,024 719,303
--------- ---------
Total partners' equity 574,705 713,959
--------- ---------
$ 574,757 713,997
========= =========
Southwest Oil & Gas Income Fund XI-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues
Oil and gas $ 55,974 98,419 127,515 218,425
Interest 213 201 382 320
------- ------- ------- -------
56,187 98,620 127,897 218,745
------- ------- ------- -------
Expenses
Production 40,201 61,559 87,064 113,255
General and administrative 10,566 6,652 24,598 19,840
Depreciation, depletion and
amortization 26,459 20,755 49,044 45,510
Provision for impairment of oil
and gas properties 59,663 - 59,663 -
------- ------- ------- -------
136,889 88,966 220,369 178,605
------- ------- ------- -------
Net income (loss) $ (80,702) 9,654 (92,472) 40,140
======= ======= ======= =======
Net income (loss) allocated to:
Managing General Partner $ 488 2,737 1,461 7,709
======= ======= ======= =======
General Partner $ 54 304 163 856
======= ======= ======= =======
Limited partners $ (81,244) 6,613 (94,096) 31,575
======= ======= ======= =======
Per limited partner unit $ (28.80) 2.34 (33.36) 11.19
======= ======= ======= =======
Southwest Oil & Gas Income Fund XI-A, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Cash received from oil and gas sales $ 151,464 256,879
Cash paid to suppliers (103,554) (133,296)
Interest received 382 320
-------- --------
Net cash provided by operating activities 48,292 123,903
-------- --------
Cash flows from investing activities:
Additions of oil and gas properties (6,456) (4,906)
Sale of oil and gas properties 1,650 729
-------- --------
Net cash used in investing activities (4,806) (4,177)
-------- --------
Cash flows used in financing activities:
Distributions to partners (46,770) (117,981)
-------- --------
Net increase (decrease) in cash and cash
equivalents (3,284) 1,745
Beginning of period 4,368 456
-------- --------
End of period $ 1,084 2,201
======== ========
(continued)
Southwest Oil & Gas Income Fund XI-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Six Months Ended
June 30,
1998 1997
Reconciliation of net income (loss) to net
cash provided by operating activities:
Net income (loss) $ (92,472) 40,140
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 49,044 45,510
Provision for impairment of oil and gas
properties 59,663 -
Decrease in receivables 23,949 38,454
Increase (decrease) in payables 8,108 (201)
------- -------
Net cash provided by operating activities $ 48,292 123,903
======= =======
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Oil & Gas Income Fund XI-A, L.P. was organized as a Delaware
limited partnership on May 5, 1992. The offering of such limited
partnership interests began August 20, 1992 as part of a shelf offering
registered under the name Southwest Oil & Gas 1992-93 Income Program.
Minimum capital requirements for the Partnership were met on March 17,
1993, with the offering of limited partnership interests concluding April
30, 1993. At the conclusion of the offering of limited partnership
interests, 122 limited partners had purchased 2,821 units for $1,410,500.
The Partnership was formed to acquire interests in producing oil and gas
properties, to produce and market crude oil and natural gas produced from
such properties, and to distribute the net proceeds from operations to the
limited and general partners. Net revenues from producing oil and gas
properties will not be reinvested in other revenue producing assets except
to the extent that production facilities and wells are improved or reworked
or where methods are employed to improve or enable more efficient recovery
of oil and gas reserves.
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 farmout 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 does not anticipate performing
workovers during 1998. The Partnership could possibly experience a steady
decline.
Oil and Gas Properties
Oil and gas properties are accounted for at cost under the full-cost
method. Under this method, all productive and nonproductive costs incurred
in connection with the acquisition, exploration and development of oil and
gas reserves are capitalized. Gain or loss on the sale of oil and gas
properties is not recognized unless significant oil and gas reserves are
involved.
The Partnership's policy for depreciation, depletion and amortization of
oil and gas properties is computed under the units of revenue method.
Under the units of revenue method, depreciation, depletion and amortization
is computed on the basis of current gross revenues from production in
relation to future gross revenues, based on current prices, from estimated
production of proved oil and gas reserves.
Should the net capitalized costs exceed the estimated present value of oil
and gas reserves, discounted at 10%, such excess costs would be charged to
current expense. The Partnership reduced the net capitalized costs of oil
and gas properties in the quarter ended June 30, 1998 by approximately
$59,663. The write-down has the effect of reducing net income, but did not
affect cash flow or distributions. A continuation of the oil price
environment experienced during the first half of 1998 will have an adverse
affect on the Company's revenues and operating cash flow. Also, further
declines in oil prices could result in additional decreases in the carrying
value of the Company's oil and gas properties.
Results of Operations
A. General Comparison of the Quarters Ended June 30, 1998 and 1997
The following table provides certain information regarding performance
factors for the quarters ended June 30, 1998 and 1997:
Three Months
Ended Percentage
June 30, Increase
1998 1997 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 12.37 18.90 (35%)
Average price per mcf of gas $ 1.68 1.99 (16%)
Oil production in barrels 2,200 2,600 (15%)
Gas production in mcf 17,100 24,700 (31%)
Gross oil and gas revenue $ 55,974 98,419 (43%)
Net oil and gas revenue $ 15,773 36,860 (57%)
Partnership distributions $ 16,784 50,000 (66%)
Limited partner distributions $ 15,184 45,000 (66%)
Per unit distribution to limited
partners $ 5.38 15.95 (66%)
Number of limited partner units 2,821 2,821
Revenues
The Partnership's oil and gas revenues decreased to $55,974 from $98,419
for the quarters ended June 30, 1998 and 1997, respectively, a decrease of
43%. The principal factors affecting the comparison of the quarters ended
June 30, 1998 and 1997 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the quarter ended June 30, 1998 as compared to the
quarter ended June 30, 1997 by 35%, or $6.53 per barrel, resulting in a
decrease of approximately $17,000 in revenues. Oil sales represented
49% of total oil and gas sales during the quarter ended June 30, 1998
as compared to 50% during the quarter ended June 30, 1997.
The average price for an mcf of gas received by the Partnership
decreased during the same period by 16%, or $.31 per mcf, resulting in
a decrease of approximately $7,700 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $24,700. 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 400 barrels or 15% during the
quarter ended June 30, 1998 as compared to the quarter ended June 30,
1997, resulting in a decrease of approximately $4,900 in revenues.
Gas production decreased approximately 7,600 mcf or 31% during the same
period, resulting in a decrease of approximately $12,800 in revenues.
The total decrease in revenues due to the change in production is
approximately $17,700. The decrease in gas production is primarily
attributable to the sale of one well, another well being plugged and
abandoned and one major well being shut-in for 30 days.
Costs and Expenses
Total costs and expenses increased to $136,889 from $88,966 for the
quarters ended June 30, 1998 and 1997, respectively, an increase of 54%.
The increase is the result of higher general and administrative expense and
depletion expense, partially offset by a decrease in lease operating costs.
1. Lease operating costs and production taxes were 35% lower, or
approximately $21,400 less during the quarter ended June 30, 1998 as
compared to the quarter ended June 30, 1997. The decrease is primarily
attributable to the pulling expense incurred on an injector well during
1997.
2. General and administrative costs consist of independent accounting and
engineering fees, computer services, postage, and Managing General
Partner personnel costs. General and administrative costs increased
59% or approximately $3,900 during the quarter ended June 30, 1998 as
compared to the quarter ended June 30, 1997. Increase in general and
administrative costs are the result of higher accounting fees due to
the necessity of contracting out preparation of tax depletion and K-1
schedules.
3. Depletion expense increased to $26,000 for the quarter ended June 30,
1998 from $19,000 for the same period in 1997. This represents an
increase of 37%. 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 increase in depletion expense between the comparative
periods were the decrease in the price of oil used to determine the
Partnership's reserves for January 1, 1998 as compared to 1997. The
Partnership reduced the net capitalized costs of oil and gas properties
in the quarter ended June 30, 1998 by approximately $59,663. The write-
down has the effect of reducing net income, but did not affect cash
flow or distributions.
B. General Comparison of the Six Month Periods Ended June 30, 1998 and
1997
The following table provides certain information regarding performance
factors for the six month periods ended June 30, 1998 and 1997:
Six Months
Ended Percentage
June 30, Increase
1998 1997 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 12.36 20.15 (39%)
Average price per mcf of gas $ 1.94 2.24 (13%)
Oil production in barrels 4,500 5,400 (17%)
Gas production in mcf 37,000 48,900 (24%)
Gross oil and gas revenue $ 127,515 218,425 (42%)
Net oil and gas revenue $ 40,451 105,170 (62%)
Partnership distributions $ 46,784 118,000 (60%)
Limited partner distributions $ 42,184 106,200 (60%)
Per unit distribution to limited
partners $ 14.95 37.65 (60%)
Number of limited partner units 2,821 2,821
Revenues
The Partnership's oil and gas revenues decreased to $127,515 from $218,425
for the six months ended June 30, 1998 and 1997, respectively, a decrease
of 42%. The principal factors affecting the comparison of the six months
ended June 30, 1998 and 1997 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the six months ended June 30, 1998 as compared to the
six months ended June 30, 1997 by 39%, or $7.79 per barrel, resulting
in an decrease of approximately $42,100 in revenues. Oil sales
represented 44% of total oil and gas sales during the six months ended
June 30, 1998 as compared to 50% during the six months ended June 30,
1997.
The average price for an mcf of gas received by the Partnership
decreased during the same period by 13%, or $.30 per mcf, resulting in
a decrease of approximately $14,700 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $56,800. 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 900 barrels or 17% during the
six months ended June 30, 1998 as compared to the six months ended June
30, 1997, resulting in a decrease of approximately $11,100 in revenues.
Gas production decreased approximately 11,900 mcf or 24% during the
same period, resulting in a decrease of approximately $23,100 in
revenues.
The total decrease in revenues due to the change in production is
approximately $34,200. The decrease in gas production is primarily
attributable to the sale of one well, another well being plugged and
abandoned and one major well being shut-in for 30 days.
Costs and Expenses
Total costs and expenses increased to $220,369 from $178,605 for the six
months ended June 30, 1998 and 1997, respectively, an increase of 23%. The
increase is the result of higher general and administrative expense and
depletion expense, partially offset by a decrease in lease operating costs.
1. Lease operating costs and production taxes were 23% lower, or
approximately $26,200 less during the six months ended June 30, 1998 as
compared to the six months ended June 30, 1997. The decrease is
primarily attributable to the pulling expense incurred on an injector
well during 1997.
2. General and administrative costs consist of independent accounting and
engineering fees, computer services, postage, and Managing General
Partner personnel costs. General and administrative costs increased
24% or approximately $4,800 during the six months ended June 30, 1998
as compared to the six months ended June 30, 1997. Increase in general
and administrative costs are the result of higher accounting fees due
to the necessity of contracting out preparation of tax depletion and K-
1 schedules.
3. Depletion expense increased to $48,000 for the six months ended June
30, 1998 from $42,000 for the same period in 1997. This represents an
increase of 14%. 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 increase in depletion expense between the comparative
periods was the decrease in the price of oil used to determine the
Partnership's reserves for January 1, 1998 as compared to 1997. The
Partnership reduced the net capitalized costs of oil and gas properties
in the quarter ended June 30, 1998 by approximately $59,663. The write-
down has the effect of reducing net income, but did not affect cash
flow or distributions.
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 $48,300 in
the six months ended June 30, 1998 as compared to approximately $123,900 in
the six months ended June 30, 1997. The primary source of the 1998 cash
flow from operating activities was profitable operations.
Cash flows used in investing activities were approximately $4,800 in the
six months ended June 30, 1998 as compared to approximately $4,200 in the
six months ended June 30, 1997. The principle use of the 1998 cash flow
from investing activities was the additions to oil and gas properties,
partially offset by the sale of oil and gas properties.
Cash flows used in financing activities were approximately $46,800 in the
six months ended June 30, 1998 as compared to approximately $118,000 in the
six months ended June 30, 1997. The only use in financing activities was
the distributions to partners.
Total distributions during the six months ended June 30, 1998 were $46,784
of which $42,184 was distributed to the limited partners and $4,600 to the
general partners. The per unit distribution to limited partners during the
six months ended June 30, 1998 was $14.95. Total distributions during the
six months ended June 30, 1997 were $118,000 of which $106,200 was
distributed to the limited partners and $11,800 to the general partners.
The per unit distribution to limited partners during the six months ended
June 30, 1997 was $37.65.
The sources for the 1998 distributions of $46,784 were oil and gas
operations of approximately $48,300 less the net change in oil and gas
properties of approximately $4,800, with the balance from available cash on
hand at the beginning of the period. The source for the 1997 distributions
of $118,000 was oil and gas operations of approximately $123,900, partially
offset by the net change in oil and gas properties of approximately $4,200,
resulting in excess cash for contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions
of $835,788 have been made to the partners. As of June 30, 1998, $761,438
or $269.92 per limited partner unit has been distributed to the limited
partners, representing a 54% return of the capital contributed.
As of June 30, 1998, the Partnership had approximately $21,900 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.
Information Systems for the Year 2000
The Managing General Partner provides all data processing needs of the
Partnership. The Managing General Partner has reviewed and evaluated its
information systems to determine if its systems accurately process data
referencing the year 2000. Primarily all necessary programming
modifications to correct year 2000 referencing in the Managing General
Partners internal accounting and operating systems have been made to-date.
However the Managing General Partner has not completed its evaluation of
its vendors and suppliers systems to determine the effect, if any, the non-
compliance of such systems would have on the operation of the Managing
General Partnership or the operations 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:
No reports on Form 8-
K were filed during the quarter ended June 30, 1998.
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 OIL & GAS
INCOME FUND XI-A, 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 Officers
Date: August 15, 1998