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, 1996
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 0-17707
Southwest Oil & Gas Income Fund VIII-A, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2220097
(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.
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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, 1995 which are found in the Registrant's Form 10-K Report
for 1995 filed with the Securities and Exchange Commission. The December 31,
1995 balance sheet included herein has been taken from the Registrant's 1995
Form 10-K Report. Operating results for the three and nine month periods
ended September 30, 1996 are not necessarily indicative of the results that
may be expected for the full year.
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Southwest Oil & Gas Income Fund VIII-A, L.P.
Balance Sheets
September 30, December 31,
1996 1995
------------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 31,628 38,356
Receivable from Managing
General Partner 169,631 147,157
--------- ---------
Total current assets 201,259 185,513
--------- ---------
Oil and gas properties - using the
full cost method of accounting 5,453,088 5,501,878
Less accumulated depreciation,
depletion and amortization 4,052,109 3,925,109
--------- ---------
Net oil and gas properties 1,400,979 1,576,769
--------- ---------
$ 1,602,238 1,762,282
========= =========
Liabilities and Partners' Equity
Current liability - Distributions payable $ 869 536
--------- ---------
Partners' equity:
General partners 16,676 18,943
Limited partners 1,584,693 1,742,803
--------- ---------
Total partners' equity 1,601,369 1,761,746
--------- ---------
$ 1,602,238 1,762,282
========= =========
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Southwest Oil & Gas Income Fund VIII-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Revenues
Oil and gas $ 423,438 330,993 1,259,744 1,142,639
Interest 462 597 1,476 1,529
------- ------- --------- ---------
423,900 331,590 1,261,220 1,144,168
------- ------- --------- ---------
Expenses
Production 274,419 293,431 771,347 786,200
General and administrative 24,917 24,705 84,538 85,925
Depreciation, depletion and
amortization 43,000 47,000 127,000 157,000
------- ------- --------- ---------
342,336 365,136 982,885 1,029,125
------- ------- --------- ---------
Net income (loss) $ 81,564 (33,546) 278,335 115,043
======= ======= ========= =========
Net income (loss) allocated to:
Managing General Partner $ 11,211 1,211 36,480 24,484
======= ======= ========= =========
General Partner $ 1,246 135 4,053 2,720
======= ======= ========= =========
Limited Partners $ 69,107 (34,892) 237,802 87,839
======= ======= ========= =========
Per limited partner unit $ 5.08 (2.57) 17.49 6.46
======= ======= ========= =========
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Southwest Oil & Gas Income Fund VIII-A, L.P.
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Cash received from oil and gas sales $ 1,204,735 1,123,472
Cash paid to suppliers (826,350) (842,781)
Interest received 1,476 1,529
--------- ---------
Net cash provided by operating
activities 379,861 282,220
--------- ---------
Cash flows from investing activities:
Cash received from sale of oil
and gas properties 62,390 74,337
Additions to oil and gas properties (10,600) (40,920)
--------- ---------
Net cash provided by investing
activities 51,790 33,417
--------- ---------
Cash flows used in financing activities:
Distributions to partners (438,379) (309,774)
--------- ---------
Net increase (decrease) in cash
and cash equivalents (6,728) 5,863
Beginning of period 38,356 37,115
--------- ---------
End of period $ 31,628 42,978
========= =========
(continued)
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Southwest Oil & Gas Income Fund VIII-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1996 1995
Reconciliation of net income to net
cash provided by operating activities:
Net income $ 278,335 115,043
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and
amortization 127,000 157,000
Increase in receivables (55,009) (19,167)
Increase in payables 29,535 29,344
------- -------
Net cash provided by operating
activities $ 379,861 282,220
======= =======
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Oil & Gas Income Fund VIII-A, L.P. was organized as a Delaware
limited partnership on November 30, 1987. The offering of such limited
partnership interests began on March 31, 1988, minimum capital requirements
were met on July 6, 1988, and the offering concluded on March 31, 1989, with
total limited partner contributions of $6,798,000.
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 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 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.
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Results of Operations
A. General Comparison of the Quarters Ended September 30, 1996 and 1995
The following table provides certain information regarding performance
factors for the quarters ended September 30, 1996 and 1995:
Three Months
Ended Percentage
September 30, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 21.77 16.23 34%
Average price per mcf of gas $ 2.30 2.02 14%
Oil production in barrels 17,100 17,100 -
Gas production in mcf 21,900 26,800 (18%)
Gross oil and gas revenue $ 423,438 330,993 28%
Net oil and gas revenue $ 149,019 37,562 297%
Partnership distributions $ 118,000 84,500 40%
Limited partner distributions $ 106,200 76,050 40%
Per unit distribution to limited
partners $ 7.81 5.59 40%
Number of limited partner units 13,596 13,596
Revenues
The Partnership's oil and gas revenues increased to $423,438 from $330,993
for the quarters ended September 30, 1996 and 1995, respectively, an increase
of 28%. The principal factors affecting the comparison of the quarters ended
September 30, 1996 and 1995 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the quarter ended September 30, 1996 as compared to the
quarter ended September 30, 1995 by 34%, or $5.54 per barrel, resulting
in an increase of approximately $94,700 in revenues. Oil sales
represented 88% of total oil and gas sales during the quarter ended
September 30, 1996 as compared to 84% during the quarter ended September
30, 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 14%, or $.28 per mcf, resulting in an increase
of approximately $7,500 in revenues.
The total increase in revenues due to the change in prices received from
oil and gas production is approximately $102,200. 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.
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2. Oil production remained unchanged during the quarter ended September 30,
1996 as compared to the quarter ended September 30, 1995.
Gas production decreased approximately 4,900 mcf or 18% during the same
period, resulting in a decrease of approximately $11,300 in revenues.
The total decrease in revenues due to the change in production is
approximately $11,300. The decrease is primarily a result of the sale of
oil and gas properties.
Costs and Expenses
Total costs and expenses decreased to $342,336 from $365,136 for the quarters
ended September 30, 1996 and 1995, respectively, a decrease of 6%. The
decrease is the result of lower lease operating costs and depletion expense,
offset by an increase in general and administrative expense.
1. Lease operating costs and production taxes were 6% lower, or
approximately $19,000 less during the quarter ended September 30, 1996 as
compared to the quarter ended September 30, 1995.
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 1%
or approximately $200 during the quarter ended September 30, 1996 as
compared to the quarter ended September 30, 1995.
3. Depletion expense decreased to $43,000 for the quarter ended September
30, 1996 from $47,000 for the same period in 1995. This represents a
decrease of 9%. 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. Two factors that
attributed to the decline in depletion expense between the comparative
periods were the increase in the price of oil and gas used to determine
the Partnership's reserves for January 1, 1996 as compared to 1995 and
the increase in property sales.
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B. General Comparison of the Nine Month Periods Ended September 30, 1996 and
1995
The following table provides certain information regarding performance
factors for the nine month periods ended September 30, 1996 and 1995:
Nine Months
Ended Percentage
September 30, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 20.17 16.92 19%
Average price per mcf of gas $ 2.49 2.06 21%
Oil production in barrels 53,600 56,900 (6%)
Gas production in mcf 71,800 87,500 (18%)
Gross oil and gas revenue $ 1,259,744 1,142,639 10%
Net oil and gas revenue $ 488,397 356,439 37%
Partnership distributions $ 438,712 310,010 42%
Limited partner distributions $ 395,912 283,260 40%
Per unit distribution to limited
partners $ 29.12 20.83 40%
Number of limited partner units 13,596 13,596
Revenues
The Partnership's oil and gas revenues increased to $1,259,744 from
$1,142,639 for the nine months ended September 30, 1996 and 1995,
respectively, an increase of 10%. The principal factors affecting the
comparison of the nine months ended September 30, 1996 and 1995 are as
follows:
1. The average price for a barrel of oil received by the Partnership
increased during the nine months ended September 30, 1996 as compared to
the nine months ended September 30, 1995 by 19%, or $3.25 per barrel,
resulting in an increase of approximately $184,900 in revenues. Oil
sales represented 86% of total oil and gas sales during the nine months
ended September 30, 1996 as compared to 84% during the nine months ended
September 30, 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 21%, or $.43 per mcf, resulting in an increase
of approximately $37,600 in revenues.
The total increase in revenues due to the change in prices received from
oil and gas production is approximately $222,500. 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.
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<PAGE>
2. Oil production decreased approximately 3,300 barrels or 6% during the
nine months ended September 30, 1996 as compared to the nine months ended
September 30, 1995, resulting in a decrease of approximately $66,600 in
revenues.
Gas production decreased approximately 15,700 mcf or 18% during the same
period, resulting in a decrease of approximately $39,100 in revenues.
The total decrease in revenues due to the change in production is
approximately $105,700. The decrease is primarily a result of the sale
of oil and gas properties.
Costs and Expenses
Total costs and expenses decreased to $982,885 from $1,029,125 for the nine
months ended September 30, 1996 and 1995, respectively, a decrease of 4%.
The decrease is the result of lower lease operating costs, general and
administrative expense and depletion expense.
1. Lease operating costs and production taxes were 2% lower, or
approximately $14,900 less during the nine months ended September 30,
1996 as compared to the nine months ended September 30, 1995.
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 decreased 2%
or approximately $1,400 during the nine months ended September 30, 1996
as compared to the nine months ended September 30, 1995.
3. Depletion expense decreased to $127,000 for the nine months ended
September 30, 1996 from $157,000 for the same period in 1995. This
represents a decrease of 19%. 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. Two factors that
attributed to the decline in depletion expense between the comparative
periods were the increase in the price of oil and gas used to determine
the Partnership's reserves for January 1, 1996 as compared to 1995 and
the increase in property sales.
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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 $379,900 in
the nine months ended September 30, 1996 as compared to approximately
$282,200 in the nine months ended September 30, 1995. The primary source of
the 1996 cash flow from operating activities was profitable operations.
Cash flows provided by investing activities were approximately $51,800 in the
nine months ended September 30, 1996 as compared to approximately $33,400 in
the nine months ended September 30, 1995. The principle source of the 1996
cash flow from investing activities was the sale of oil and gas properties,
offset by the additions to oil and gas properties.
Cash flows used in financing activities were approximately $438,400 in the
nine months ended September 30, 1996 as compared to approximately $309,800 in
the nine months ended September 30, 1995. The only use in financing
activities was the distributions to partners.
Total distributions during the nine months ended September 30, 1996 were
$438,712 of which $395,912 was distributed to the limited partners and
$42,800 to the general partners. The per unit distribution to limited
partners during the nine months ended September 30, 1996 was $29.12. Total
distributions during the nine months ended September 30, 1995 were $310,010
of which $283,260 was distributed to the limited partners and $26,750 to the
general partners. The per unit distribution to limited partners during the
nine months ended September 30, 1995 was $20.83.
The sources for the 1996 distributions of $438,712 were oil and gas
operations of approximately $379,900 and the sale of oil and gas properties
of approximately $62,400, offset by additions to oil and gas properties of
approximately $10,600, with the balance from available cash on hand at the
beginning of the period. The sources for the 1995 distributions of $310,010
were oil and gas operations of approximately $282,200 and the sale of oil and
gas properties approximately $74,300, offset by additions to oil and gas
properties of approximately $40,900, resulting in excess cash for
contingencies and subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions of
$6,015,651 have been made to the partners. As of September 30, 1996,
$5,453,730 or $401.13 per limited partner unit has been distributed to the
limited partners, representing an 80% return of the capital contributed.
As of September 30, 1996, the Partnership had approximately $200,400 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.
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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) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
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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 VIII-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, 1996
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet at September 30, 1996 (Unaudited) and the Statement of Operations for the
Nine Months Ended September 30, 1996 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 31,628
<SECURITIES> 0
<RECEIVABLES> 169,631
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 201,259
<PP&E> 5,453,088
<DEPRECIATION> 4,052,109
<TOTAL-ASSETS> 1,602,238
<CURRENT-LIABILITIES> 869
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,601,369
<TOTAL-LIABILITY-AND-EQUITY> 1,602,238
<SALES> 1,259,744
<TOTAL-REVENUES> 1,261,220
<CGS> 771,347
<TOTAL-COSTS> 771,347
<OTHER-EXPENSES> 211,538
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 278,335
<INCOME-TAX> 0
<INCOME-CONTINUING> 278,335
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 278,335
<EPS-PRIMARY> 17.49
<EPS-DILUTED> 17.49
</TABLE>
