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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, 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 and 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 16.
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, 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
nine month periods ended September 30, 1998 are not necessarily indicative
of the results that may be expected for the full year.
Southwest Oil and Gas Income Fund XI-A, L.P.
Balance Sheets
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 11,469 4,368
Receivable from Managing General Partner 18,724 52,943
Other receivable - 1,650
--------- ---------
Total current assets 30,193 58,961
--------- ---------
Oil and gas properties - using the
full cost method of accounting 1,066,823 1,061,992
Less accumulated depreciation,
depletion and amortization 527,663 408,000
--------- ---------
Net oil and gas properties 539,160 653,992
--------- ---------
Organization costs, net - 1,044
--------- ---------
$ 569,353 713,997
========= =========
Liabilities and Partners' Equity
Current liability - Distribution payable $ 37 38
--------- ---------
Partners' equity
General partners (7,659) (5,344)
Limited partners 576,975 719,303
--------- ---------
Total partners' equity 569,316 713,959
--------- ---------
$ 569,353 713,997
========= =========
Southwest Oil and Gas Income Fund XI-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Revenues
Oil and gas $ 65,180 96,866 192,696 315,290
Interest 120 80 502 400
------- ------- ------- -------
65,300 96,946 193,198 315,690
------- ------- ------- -------
Expenses
Production 39,058 73,361 126,122 186,615
General and administrative 8,629 6,186 33,228 26,025
Depreciation, depletion and
amortization 12,000 20,755 61,044 66,265
Provision for impairment of
oil and gas properties - - 59,663 -
------- ------- ------- -------
59,687 100,302 280,057 278,905
------- ------- ------- -------
Net income (loss) $ 5,613 (3,356) (86,859) 36,785
======= ======= ======= =======
Net income (loss) allocated to:
Managing General Partner $ 1,585 1,566 3,046 9,275
======= ======= ======= =======
General Partner $ 176 174 339 1,030
======= ======= ======= =======
Limited Partners $ 3,852 (5,096) (90,244) 26,480
======= ======= ======= =======
Per limited partner unit $ (1.37) (1.81) (31.99) 9.39
======= ======= ======= =======
Southwest Oil and Gas Income Fund XI-A, L.P.
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1998 1997
---- ----
Cash flows from operating activities
Cash received from oil and gas sales $ 214,704 348,696
Cash paid to suppliers (147,139) (195,723)
Interest received 502 400
------- -------
Net cash provided by operating activities 68,067 153,373
------- -------
Cash flows from investing activities
Additions of oil and gas properties (7,174) (8,189)
Sale of oil and gas properties 3,993 1,206
------- -------
Net cash used in investing activities (3,181) (6,983)
------- -------
Cash flows used in financing activities
Distributions to partners (57,785) (141,439)
------- -------
Net increase in cash and cash equivalents 7,101 4,951
Beginning of period 4,368 456
------- -------
End of period $ 11,469 5,407
======= =======
(continued)
Southwest Oil and Gas Income Fund XI-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1998 1997
---- ----
Reconciliation of net income (loss) to net
cash provided by operating activities
Net income (loss) $ (86,859) 36,785
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation, depletion and amortization 61,044 66,265
Provision for impairment of oil and gas properties 59,663
- -
Decrease in receivables 22,008 33,406
Increase in payables 12,211 16,917
------- -------
Net cash provided by operating activities $ 68,067 153,373
======= =======
Southwest Oil and Gas Income Fund XI-A, L.P.
Note to Financial Statements
Subsequent Events
The Partnership, subsequent to September 30, 1998 sold its interest in a
portion of non-operated oil and gas properties. The Partnership's
interests in the wells were sold for $49,703 net proceeds, after post
closing adjustments. The proceeds from the sale represented 8.79% of the
Partnership's total assets at December 31, 1997.
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. For the quarter ended September 30, 1998, the net
capitalized costs did not exceed the estimated present value. A
continuation of the oil price environment experienced during the first
three quarters 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 September 30, 1998 and 1997
The following table provides certain information regarding performance
factors for the quarters ended September 30, 1998 and 1997:
Three Months
Ended Percentage
September 30, Increase
1998 1997 (Decrease)
---- ---- ---------
Average price per barrel of oil $ 12.04 17.90 (33%)
Average price per mcf of gas $ 2.10 2.01 4%
Oil production in barrels 1,900 2,700 (30%)
Gas production in mcf 18,900 24,100 (22%)
Gross oil and gas revenue $ 65,180 96,866 (33%)
Net oil and gas revenue $ 26,122 23,505 11%
Partnership distributions $ 11,000 23,500 (53%)
Limited partner distributions $ 9,900 21,150 (53%)
Per unit distribution to limited partners $ 3.51 7.50 (53%)
Number of limited partner units 2,821 2,821
Revenues
The Partnership's oil and gas revenues decreased to $65,180 from $96,866
for the quarters ended September 30, 1998 and 1997, respectively, a
decrease of 33%. The principal factors affecting the comparison of the
quarters ended September 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 September 30, 1998 as compared to
the quarter ended September 30, 1997 by 33%, or $5.86 per barrel,
resulting in a decrease of approximately $15,800 in revenues. Oil
sales represented 35% of total oil and gas sales during the quarter
ended September 30, 1998 as compared to 50% during the quarter ended
September 30, 1997.
The average price for an mcf of gas received by the Partnership
increased during the same period by 4%, or $.09 per mcf, resulting in
an increase of approximately $2,200 in revenues.
The net total decrease in revenues due to the change in prices received
from oil and gas production is approximately $13,600. 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 800 barrels or 30% during the
quarter ended September 30, 1998 as compared to the quarter ended
September 30, 1997, resulting in a decrease of approximately $9,600
in revenues.
Gas production decreased approximately 5,200 mcf or 22% during the same
period, resulting in a decrease of approximately $10,900 in revenues.
The total decrease in revenues due to the change in production is
approximately $20,500. The decrease is primarily attributable to sharp
natural decline and property sales.
Costs and Expenses
Total costs and expenses decreased to $59,687 from $100,302 for the
quarters ended September 30, 1998 and 1997, respectively, a decrease of
40%. The decrease is the result of lower lease operating costs and
depletion expense, partially offset by an increase in general and
administrative expense.
1. Lease operating costs and production taxes were 47% lower, or
approximately $34,300 less during the quarter ended September 30, 1998 as
compared to the quarter ended September 30, 1997. The decrease is
primarily attributable to the decline in oil prices, which has made it
uneconomical to incur workover costs.
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
39% or approximately $2,400 during the quarter ended September 30, 1998
as compared to the quarter ended September 30, 1997. The increase in
general and administrative costs are due largely to higher accounting
fees. The 10-Q's are now required to be reviewed based on new
accounting pronouncements.
3. Depletion expense decreased to $12,000 for the quarter ended September
30, 1998 from $19,000 for the same period in 1997. This represents a
decrease 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.
B. General Comparison of the Nine Month Periods Ended September 30, 1998
and 1997
The following table provides certain information regarding performance
factors for the nine month periods ended September 30, 1998 and 1997:
Nine Months
Ended Percentage
September 30, Increase
1998 1997 (Decrease)
---- ---- ---------
Average price per barrel of oil $ 12.27 19.40 (37%)
Average price per mcf of gas $ 2.00 2.17 (8%)
Oil production in barrels 6,400 8,100 (21%)
Gas production in mcf 55,900 73,000 (23%)
Gross oil and gas revenue $ 192,696 315,290 (39%)
Net oil and gas revenue $ 66,574 128,675 (48%)
Partnership distributions $ 57,784 141,500 (59%)
Limited partner distributions $ 52,084 127,350 (59%)
Per unit distribution to limited partners $ 18.46 45.14 (59%)
Number of limited partner units 2,821 2,821
Revenues
The Partnership's oil and gas revenues decreased to $192,696 from $315,290
for the nine months ended September 30, 1998 and 1997, respectively, a
decrease of 39%. The principal factors affecting the comparison of the
nine months ended September 30, 1998 and 1997 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the nine months ended September 30, 1998 as compared
to the nine months ended September 30, 1997 by 37%, or $7.13 per
barrel, resulting in a decrease of approximately $57,800 in revenues.
Oil sales represented 41% of total oil and gas sales during the quarter
ended September 30, 1998 as compared to 50% during the quarter ended
September 30, 1997.
The average price for an mcf of gas received by the Partnership
decreased during the same period by 8%, or $.17 per mcf, resulting in a
decrease of approximately $12,400 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $70,200. 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 1,700 barrels or 21% during the
nine months ended September 30, 1998 as compared to the nine months
ended September 30, 1997, resulting in a decrease of approximately
$20,900 in revenues.
Gas production decreased approximately 17,100 mcf or 23% during the
same period, resulting in a decrease of approximately $34,200 in
revenues.
The total decrease in revenues due to the change in production is
approximately $55,100. The decrease is primarily attributable to sharp
natural decline and property sales.
Costs and Expenses
Total costs and expenses increased to $280,057 from $278,905 for the nine
months ended September 30, 1998 and 1997, respectively, an increase of less
than 1%. 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 32% lower, or
approximately $60,500 less during the nine months ended September 30,
1998 as compared to the nine months ended September 30, 1997. The
decrease is primarily attributable to the decline in oil prices, which
has made it uneconomical to incur workover costs.
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
28% or approximately $7,200 during the nine months ended September 30,
1998 as compared to the nine months ended September 30, 1997. The
increase in general and administrative costs are due largely to higher
accounting fees. The 10-Q's are now required to be reviewed based on
new accounting pronouncements.
3. Depletion expense decreased to $60,000 for the nine months ended
September 30, 1998 from $61,000 for the same period in 1997. This
represents a decrease of 2%. 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.
4. The net capitalized costs for the nine months ended September 30, 1998
exceeded the estimated present value of oil and gas reserves,
discounted at 10% in the amount of $59,663, such excess costs were
charged to current expense. The write-down had the effect of reducing
net income, but did not affect cash flow or partner 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 $68,100 in
the nine months ended September 30, 1998 as compared to approximately
$153,400 in the nine months ended September 30, 1997. The primary source
of the 1998 cash flow from operating activities was profitable operations.
Cash flows used in investing activities were approximately $(3,200) in the
nine months ended September 30, 1998 as compared to approximately $(7,000)
in the nine months ended September 30, 1997. The principle use of the 1997
cash flow from investing activities was the change in oil and gas
properties.
Cash flows used in financing activities were approximately $57,800 in the
nine months ended September 30, 1998 as compared to approximately $141,400
in the nine months ended September 30, 1997. The only use in financing
activities was the distributions to partners.
Total distributions during the nine months ended September 30, 1998 were
$57,784 of which $52,084 was distributed to the limited partners and $5,700
to the general partners. The per unit distribution to limited partners
during the nine months ended September 30, 1998 was $18.46. Total
distributions during the nine months ended September 30, 1997 were $141,500
of which $127,350 was distributed to the limited partners and $14,150 to
the general partners. The per unit distribution to limited partners during
the nine months ended September 30, 1997 was $45.14.
The sources for the 1998 distributions of $57,784 were oil and gas
operations of approximately $68,100, partially offset by the change in oil
and gas properties of approximately $3,200, resulting in excess cash for
contingencies or subsequent distributions. The source for the 1997
distributions of $141,500 was oil and gas operations of approximately
$153,400, partially offset by a change in oil and gas properties of
approximately $7,000, resulting in excess cash for contingencies or
subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions
of $846,788 have been made to the partners. As of September 30, 1998,
$771,338 or $273.43 per limited partner unit has been distributed to the
limited partners, representing a 55% return of the capital contributed.
As of September 30, 1998, the Partnership had approximately $30,200 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.
Information Systems for the Year 2000
The Partnership relies on the Managing General Partner for their data
processing requirements. This includes use of a program designed and
implemented by Midland Southwest Software, the Managing General Partner's
software subsidiary. Midland Southwest Software currently has a year 2000
plan in effect. They have surveyed existing programs and hardware and
estimate a compliance date of early 1999. Determination of the total cost
in connection with the year 2000 compliance issue is difficult to determine
due to the fact that they are in the process of developing their new 1998
version of marketed oil and gas software, which has, from inception,
included year 2000 compliance. Third party software programs utilized by
the Managing General Partner are either in compliance or are not affected
by the year 2000, with the exception of the payroll service, which is
currently modifying its system to accurately handle the Year 2000 issue.
The Managing General Partner has not completed its evaluation of its
vendors or suppliers systems to determine the effect, if any, the non-
compliance of such systems would have on the operations of the Managing
General Partner. Plans are under way to perform an audit in late 1998 or
early 1999 to determine the effect of non-compliance of its vendors and
suppliers on the Managing General Partner and thus formulate a contingency
plan.
A potential source of risk includes, but is not limited to, the inability
of principal purchasers and suppliers to be year 2000 compliant, which
could have a material effect on the Managing General Partner's production,
cash flow and overall financial condition, notwithstanding the Managing
General Partner's actions to prepare its own information systems. The
Managing General Partner currently does not have a contingency plan in
place to cover any unforeseen problems encountered that relate to the year
2000, but intends to produce one before the end of the fiscal year.
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 Oil and 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 Officer
Date: November 15, 1998