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, 1995
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 0-15408
Southwest Royalties, Inc. Income Fund V
(Exact name of registrant as specified
in its limited partnership agreement)
Tennessee 75-2104619
(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.
<PAGE>
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, 1994 which are found in the Registrant's Form 10-K Report
for 1994 filed with the Securities and Exchange Commission. The December 31,
1994 balance sheet included herein has been taken from the Registrant's 1994
Form 10-K Report. Operating results for the three and nine month periods
ended September 30, 1995 are not necessarily indicative of the results that
may be expected for the full year.
<PAGE>
Southwest Royalties, Inc. Income Fund V
Balance Sheets
September 30, December 31,
1995 1994
------------- ------------
(unaudited)
Assets
Current assets:
Cash $ 41,483 16,645
Receivable from Managing General Partner 71,306 103,629
--------- ---------
Total current assets 112,789 120,274
--------- ---------
Oil and gas properties - using the full
cost method of accounting 6,173,729 6,173,729
Less accumulated depreciation, depletion
and amortization 4,667,520 4,491,520
--------- ---------
Net oil and gas properties 1,506,209 1,682,209
--------- ---------
$ 1,618,998 1,802,483
========= =========
Liabilities and Partners' Equity
Current liabilities:
Accounts payable $ - 680
Distributions payable 36 -
--------- ---------
Total current liabilities 36 680
--------- ---------
Partners' equity:
General partners (515,203) (497,419)
Limited partners 2,134,165 2,299,222
--------- ---------
Total partners' equity 1,618,962 1,801,803
--------- ---------
$ 1,618,998 1,802,483
========= =========
<PAGE>
Southwest Royalties, Inc. Income Fund V
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
Revenues
Income from net profits
interests $ 63,644 94,082 219,030 236,575
Interest income from
operations 351 519 773 946
------- ------- ------- -------
63,995 94,601 219,803 237,521
------- ------- ------- -------
Expenses
General and administrative 27,363 28,383 93,644 96,064
Depreciation, depletion and
amortization 52,000 77,000 176,000 215,000
------- ------- ------- -------
79,363 105,383 269,644 311,064
------- ------- ------- -------
Net loss $ (15,368) (10,782) (49,841) (73,543)
======= ======= ======= =======
Net loss allocated to:
Managing General Partner $ (1,382) (970) (4,486) (6,619)
======= ======= ======= =======
General partner $ (155) (108) (498) (735)
======= ======= ======= =======
Limited partners $ (13,831) (9,704) (44,857) (66,189)
======= ======= ======= =======
Per limited partner unit $ (1.84) (1.29) (5.98) (8.83)
======= ======= ======= =======
<PAGE>
Southwest Royalties, Inc. Income Fund V
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1995 1994
---- ----
Cash flows from operating activities:
Cash received from income from net
profits interests $ 251,353 284,658
Cash paid to suppliers (94,324) (96,064)
Interest received 773 946
------- -------
Net cash provided by operating
activities 157,802 189,540
------- -------
Cash flows provided by investing activities:
Cash received from sale of oil and gas
property interest - 3,750
------- -------
Cash flows used in financing activities:
Distributions to partners (132,964) (152,529)
------- -------
Net increase in cash 24,838 40,761
Cash:
Beginning of period 16,645 413
------- -------
End of period $ 41,483 41,174
======= =======
(continued)
<PAGE>
Southwest Royalties, Inc. Income Fund V
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1995 1994
---- ----
Reconciliation of net loss to
net cash provided by operating
activities:
Net loss $ (49,841) (73,543)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation, depletion and amortization 176,000 215,000
Decrease in accounts receivable 32,323 48,083
Decrease in accounts payable (680) -
------- -------
Net cash provided by operating activities $ 157,802 189,540
======= =======
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Royalties, Inc. Income Fund V was organized as a Tennessee limited
partnership on May 1, 1986, after receipt from investors of $1,000,000 in
limited partner capital contributions. The offering of limited partnership
interests began on January 22, 1986 and concluded on July 22, 1986, with
total limited partner contributions of $7,500,000.
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 the net proceeds from
operations to the limited and general partners. Net revenues from producing
oil and gas properties are not 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, increases and decreases in
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.
<PAGE>
Results of Operations
A. General Comparison of the Quarters Ended September 30, 1995 and 1994
The following table provides certain information regarding performance
factors for the quarters ended September 30, 1995 and 1994:
Three Months
Ended Percentage
September 30, Increase
1995 1994 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 16.65 17.37 (4%)
Average price per mcf of gas $ 1.76 1.96 (10%)
Oil production in barrels 7,700 8,800 (13%)
Gas production in mcf 47,400 53,600 (12%)
Income from net profits interests $ 63,644 94,082 (32%)
Partnership distributions $ 38,500 69,000 (44%)
Limited partner distributions $ 34,650 62,100 (44%)
Per unit distribution to limited
partners $ 4.62 8.28 (44%)
Number of limited partner units 7,499 7,500
Net Profits Interests
The Partnership's income from net profits interests decreased to $63,644 from
$94,082 for the quarters ended September 30, 1995 and 1994, respectively, a
decrease of 32%. The principal factors affecting the comparison of the
quarters ended September 30, 1995 and 1994 are as follows:
1. The average price for a barrel of oil received by the Partnership
decreased during the quarter ended September 30, 1995 as compared to the
quarter ended September 30, 1994 by 4%, or $.72 per barrel, resulting in
a decrease of approximately $6,300 in income from net profits interests.
Oil sales represented 60% of total oil and gas sales during the quarter
ended September 30, 1995 as compared to 59% during the quarter ended
September 30, 1994.
The average price for an mcf of gas received by the Partnership decreased
during the same period by 10%, or $.20 per mcf, resulting in a decrease
of approximately $10,700 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 $17,000.
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.
<PAGE>
2. Oil production decreased approximately 1,100 barrels or 13% during the
quarter ended September 30, 1995 as compared to the quarter ended
September 30, 1994, resulting in a decrease of approximately $18,300 in
income from net profits interests.
Gas production decreased approximately 6,200 mcf or 12% during the same
period, resulting in a decrease of approximately $10,900 in income from
net profits interests.
The total decrease in income from net profits interests due to the change
in production is approximately $29,200. The decrease is a result of
increased downtime due to mechanical failures.
3. Lease operating costs and production taxes were 10% lower, or
approximately $15,600 less during the quarter ended September 30, 1995 as
compared to the quarter ended September 30, 1994.
Costs and Expenses
Total costs and expenses decreased to $79,363 from $105,383 for the quarters
ended September 30, 1995 and 1994, respectively, a decrease of 25%. The
decrease is the result of a decrease in general and administrative expense
and depletion.
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 4%
or approximately $1,000 during the quarter ended September 30, 1995 as
compared to the quarter ended September 30, 1994.
2. Depletion expense decreased to $52,000 for the quarter ended
September 30, 1995 from $77,000 for the same period in 1994. This
represents a decrease of 32%. 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. Consequently,
depletion will generally fluctuate in direct relation to oil and gas
revenues. As noted above, oil and gas revenues declined due to a decline
in price and production for the quarter ended September 30, 1995 as
compared to the same period for 1994. Depletion reflected a comparable
decline.
<PAGE>
B. General Comparison of the Nine Month Periods Ended September 30, 1995 and
1994
The following table provides certain information regarding performance
factors for the nine month periods ended September 30, 1995 and 1994:
Nine Months
Ended Percentage
September 30, Increase
1995 1994 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 17.45 15.94 9%
Average price per mcf of gas $ 1.94 1.94 0%
Oil production in barrels 23,900 25,600 (7%)
Gas production in mcf 152,000 162,000 (6%)
Income from net profits interests $ 219,030 236,575 (7%)
Partnership distributions $ 133,000 152,500 (13%)
Limited partner distributions $ 120,200 137,250 (12%)
Per unit distribution to limited
partners $ 16.03 18.30 (12%)
Number of limited partner units 7,499 7,500
Net Profits Interests
The Partnership's income from net profits interests decreased to $219,030
from $236,575 for the nine months ended September 30, 1995 and 1994,
respectively, a decrease of 7%. The principal factors affecting the
comparison of the nine months ended September 30, 1995 and 1994 are as
follows:
1. The average price for a barrel of oil received by the Partnership
increased during the nine months ended September 30, 1995 as compared to
the nine months ended September 30, 1994 by 9%, or $1.51 per barrel,
resulting in an increase of approximately $38,700 in income from net
profits interests. Oil sales represented 59% of total oil and gas sales
during the nine months ended September 30, 1995 as compared to 57% during
the nine months ended September 30, 1994.
The average price for an mcf of gas received by the Partnership remained
the same during the nine months ended September 30, 1995 as compared to
the nine months ended September 30, 1994.
The total increase in income from net profits interests due to the change
in prices received from oil and gas production is approximately $38,700.
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.
<PAGE>
2. Oil production decreased approximately 1,700 barrels or 7% during the
nine months ended September 30, 1995 as compared to the nine months ended
September 30, 1994, resulting in a decrease of approximately $29,700 in
income from net profits interests.
Gas production decreased approximately 10,000 mcf or 6% during the same
period, resulting in a decrease of approximately $19,400 in income from
net profits interests.
The total decrease in income from net profits interests due to the change
in production is approximately $49,100.
3. Lease operating costs and production taxes were 2% higher, or
approximately $7,600 more during the nine months ended September 30, 1995
as compared to the nine months ended September 30, 1994.
Costs and Expenses
Total costs and expenses decreased to $269,644 from $311,064 for the nine
months ended September 30, 1995 and 1994, respectively, a decrease of 13%.
The decrease is the result of a decrease in general and administrative
expense and depletion.
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 3%
or approximately $2,400 during the nine months ended September 30, 1995
as compared to the nine months ended September 30, 1994.
2. Depletion expense decreased to $176,000 for the nine months ended
September 30, 1995 from $215,000 for the same period in 1994. This
represents a decrease of 18%. 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. Consequently,
depletion will generally fluctuate in direct relation to oil and gas
revenues. As noted above, oil and gas revenues declined due to a decline
in oil price and oil and gas production for the nine months ended
September 30, 1995 as compared to the same period for 1994. Depletion
reflected a comparable decline.
Liquidity and Capital Resources
The primary source of cash is from profitable operations. The Partnership
knows of no material change, nor does it anticipate any such change.
<PAGE>
Cash flows provided by operating activities were approximately $157,800 in
the nine months ended September 30, 1995 as compared to approximately
$189,500 in the nine months ended September 30, 1994. The source of the 1995
cash flow from operating activities was profitable operations.
No cash flows were provided by investing activities in the nine months ended
September 30, 1995 as compared to approximately $3,800 of cash provided from
the sale of oil and gas properties in the nine months ended September 30,
1994.
Cash flows used in financing activities were approximately $133,000 in the
nine months ended September 30, 1995 as compared to approximately $152,500 in
the nine months ended September 30, 1994. The only use in financing
activities was the distributions to partners.
Total distributions during the nine months ended September 30, 1995 were
$133,000, of which $120,200 was distributed to the limited partners and
$12,800 was distributed to the general partners. The per unit distribution
to limited partners during the nine months ended September 30, 1995 was
$16.03. Total distributions during the nine months ended September 30, 1994
were $152,500, of which $137,250 was distributed to the limited partners and
$15,250 was distributed to the general partners. The per unit distribution
to limited partners during the nine months ended September 30, 1994 was
$18.30. The source for the 1995 distributions of $133,000 was oil and gas
operations of approximately $157,800, resulting in excess cash for
contingencies or subsequent distributions. The sources for the 1994
distributions of $152,500 were oil and gas operations of approximately
$189,500 and property sales of approximately $3,800, resulting in excess cash
for contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions of
$6,535,989 have been made to the partners. As of September 30, 1995,
$5,865,116 or $782.12 per limited partner unit has been distributed to the
limited partners, representing a 78% return of the capital contributed.
As of September 30, 1995, the Partnership had approximately $112,800 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.
<PAGE>
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) None
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
<PAGE>
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, INC.
INCOME FUND V,
a Tennessee limited partnership
By: Southwest Royalties, Inc.
Managing General Partner
Date: November 8, 1995 By: /s/ Bill E. Coggin
------------------------------
Bill E. Coggin, Vice President
and Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet at September 30, 1995 (Unaudited) and the Statement of Operations for the
Nine Months Ended September 30, 1995 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 41,483
<SECURITIES> 0
<RECEIVABLES> 71,306
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 112,789
<PP&E> 6,173,729
<DEPRECIATION> 4,667,520
<TOTAL-ASSETS> 1,618,998
<CURRENT-LIABILITIES> 36
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,618,962
<TOTAL-LIABILITY-AND-EQUITY> 1,618,998
<SALES> 219,030
<TOTAL-REVENUES> 219,803
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 269,644
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (49,841)
<INCOME-TAX> 0
<INCOME-CONTINUING> (49,841)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,841)
<EPS-PRIMARY> (5.98)
<EPS-DILUTED> (5.98)
</TABLE>
