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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 March 31, 2000
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 0-18397
Southwest Oil & Gas Income Fund IX-A, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2274632
(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 12.
<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, 1999 which are found in the Registrant's Form
10-K Report for 1999 filed with the Securities and Exchange Commission.
The December 31, 1999 balance sheet included herein has been taken from the
Registrant's 1999 Form 10-K Report. Operating results for the three month
period ended March 31, 2000 are not necessarily indicative of the results
that may be expected for the full year.
<PAGE>
Southwest Oil & Gas Income Fund IX-A, L.P.
Balance Sheets
March 31, December 31,
2000 1999
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 175,328 153,580
Receivable from Managing General Partner 122,015 99,151
--------- ---------
Total current assets 297,343 252,731
--------- ---------
Oil and gas properties - using the
full-cost method of accounting 3,095,008 3,093,671
Less accumulated depreciation,
depletion and amortization 2,727,000 2,718,000
--------- ---------
Net oil and gas properties 368,008 375,671
--------- ---------
$ 665,351 628,402
========= =========
Liabilities and Partners' Equity
Current liability:
Distributions payable $ 381 126
--------- ---------
Partners' equity:
General partners (47,653) (62,509)
Limited partners 712,623 690,785
--------- ---------
Total partners' equity 664,970 628,276
--------- ---------
$ 665,351 628,402
========= =========
<PAGE>
Southwest Oil & Gas Income Fund IX-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
Revenues
Oil and gas $ 270,154 145,940
Interest 1,663 199
Miscellaneous income - 1,512
------- -------
271,817 147,651
------- -------
Expenses
Production 103,503 94,439
General and administrative 19,751 20,715
Depreciation, depletion and amortization 9,000 15,000
------- -------
132,254 130,154
------- -------
Net income $ 139,563 17,497
======= =======
Net income allocated to:
Managing General Partner $ 13,371 2,925
======= =======
General partner $ 1,486 325
======= =======
Limited partners $ 124,707 14,247
======= =======
Per limited partner unit $ 11.93 1.36
======= =======
<PAGE>
Southwest Oil & Gas Income Fund IX-A, L.P.
Statements of Cash Flows
(unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
Cash flows from operating activities:
Cash received from oil and gas sales $ 251,063 128,243
Cash paid to suppliers (127,027) (119,040)
Interest received 1,663 199
-------- -------
Net cash provided by operating activities 125,699 9,402
-------- -------
Cash flows from investing activities:
Additions to oil and gas properties (1,337) (2,180)
Sale of oil and gas properties - 32,495
-------- -------
Net cash provided by (used in) investing
activities (1,337) 30,315
-------- -------
Cash flows used in financing activities:
Distributions to partners (102,614) -
-------- -------
Net increase in cash and cash equivalents 21,748 39,717
Beginning of period 153,580 19,231
-------- -------
End of period $ 175,328 58,948
======== =======
(continued)
<PAGE>
Southwest Oil & Gas Income Fund IX-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
Reconciliation of net income to net
cash provided by operating activities:
Net income $ 139,563 17,497
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 9,000 15,000
Increase in receivables (19,091) (19,209)
Decrease in payables (3,773) (3,886)
------- -------
Net cash provided by operating activities $ 125,699 9,402
======= =======
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Oil & Gas Income Fund IX-A, L.P. was organized as a Delaware
limited partnership on March 9, 1989. The offering of such limited
partnership interests began on May 11, 1989, minimum capital requirements
were met on October 25, 1989, and the offering concluded on March 31, 1990,
with total limited partner contributions of $5,226,500.
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 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.
Based on current conditions, management anticipates performing workovers
during the year to enhance production. The Partnership could possibly
experience a normal decline of 7% per year.
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. As of March 31, 2000, the net capitalized costs did not
exceed the estimated present value of oil and gas reserves.
<PAGE>
Results of Operations
A. General Comparison of the Quarters Ended March 31, 2000 and 1999
The following table provides certain information regarding performance
factors for the quarters ended March 31, 2000 and 1999:
Three Months
Ended Percentage
March 31, Increase
2000 1999 (Decrease)
---- ---- ----------
Average price per barrel of oil $28.26 10.38 172%
Average price per mcf of gas $ 2.67 1.43 87%
Oil production in barrels 6,300 8,200 (23%)
Gas production in mcf 34,500 42,600 (19%)
Gross oil and gas revenue $270,154 145,940 85%
Net oil and gas revenue $166,651 51,501 224%
Partnership distributions $102,869 - 100%
Limited partner distributions $102,869 - 100%
Per unit distribution to limited
partners $ 9.84 - 100%
Number of limited partner units 10,453 10,453
Revenues
The Partnership's oil and gas revenues increased to $270,154 from $145,940
for the quarters ended March 31, 2000 and 1999, respectively, an increase
of 85%. The principal factors affecting the comparison of the quarters
ended March 31, 2000 and 1999 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the quarter ended March 31, 2000 as compared to the
quarter ended March 31, 1999 by 172%, or $17.88 per barrel, resulting
in an increase of approximately $146,600 in revenues. Oil sales
represented 66% of total oil and gas sales during the quarter ended
March 31, 2000 as compared to 58% during the quarter ended March 31,
1999.
The average price for an mcf of gas received by the Partnership
increased during the same period by 87%, or $1.24 per mcf, resulting in
an increase of approximately $52,800 in revenues.
The total increase in revenues due to the change in prices received
from oil and gas production is approximately $199,400. 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.
<PAGE>
2. Oil production decreased approximately 1,900 barrels or 23% during the
quarter ended March 31, 2000 as compared to the quarter ended March 31,
1999, resulting in a decrease of approximately $53,700 in revenues.
Gas production decreased approximately 8,100 mcf or 19% during the same
period, resulting in a decrease of approximately $21,600 in revenues.
The total decrease in revenues due to the change in production is
approximately $75,300. The decrease in production is due primarily to
property sales, steep decline on one gas well and sporadic production.
Costs and Expenses
Total costs and expenses increased to $132,254 from $130,154 for the
quarters ended March 31, 2000 and 1999, respectively, an increase of 2%.
The increase is the result of higher lease operating costs, partially
offset by a decrease in general and administrative expense and depletion
expense.
1. Lease operating costs and production taxes were 10% higher, or
approximately $9,100 more during the quarter ended March 31, 2000 as
compared to the quarter ended March 31, 1999.
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 5%
or approximately $1,000 during the quarter ended March 31, 2000 as
compared to the quarter ended March 31, 1999.
3. Depletion expense decreased to $9,000 for the quarter ended March 31,
2000 from $15,000 for the same period in 1999. This represents a
decrease of 40%. 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. A contributing
factor to the decrease in depletion expense between the comparative
periods was the increase in the price of oil and gas used to determine
the Partnership's reserves, and an increase in oil and gas revenue.
<PAGE>
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 $125,700 in
the quarter ended March 31, 2000 as compared to approximately $9,400 in the
quarter ended March 31, 1999. The primary source of the 2000 cash flow
from operating activities was profitable operations.
Cash flows (used in) or provided by investing activities were approximately
$(1,337) in the quarter ended March 31, 2000 as compared to approximately
$30,300 in the quarter ended March 31, 1999. The principle use of the 2000
cash flow from investing activities were additions to oil and gas
properties.
Cash flows used in financing activities were approximately $102,600 in the
quarter ended March 31, 2000. There were no cash flows used in financing
activities in the quarter ended March 31, 1999. The only use in financing
activities was the distributions to partners.
Total distributions during the quarter ended March 31, 2000 were $102,869
of which $102,869 was distributed to the limited partners. The per unit
distribution to limited partners during the quarter ended March 31, 2000
was $9.84. There were no distributions during the quarter ended March 31,
1999.
The sources for the 2000 distributions of $102,869 were oil and gas
operations of approximately $125,700, resulting in excess cash for
contingencies or subsequent distributions to partners
Since inception of the Partnership, cumulative monthly cash distributions
of $6,281,833 have been made to the partners. As of March 31, 2000,
$5,722,515 or $547.45 per limited partner unit has been distributed to the
limited partners, representing a 109% return of the capital contributed.
As of March 31, 2000, the Partnership had approximately $297,000 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.
Liquidity - Managing General Partner
The Managing General Partner has a highly leveraged capital structure with
over $50.1 million principal and $17.5 million interest payments due in
2000 on its debt obligations. Due to the severely depressed commodity
prices experienced during the last quarter of 1997, throughout 1998 and
continuing through the second quarter of 1999 the Managing General Partner
is experiencing difficulty in generating sufficient cash flow to meet its
obligations and sustain its operations. The Managing General Partner is
currently in the process of renegotiating the terms of its various
obligations with its creditors and/or attempting to seek new lenders or
equity investors. Additionally, the Managing General Partner would
consider disposing of certain assets in order to meet its obligations.
There can be no assurance that the Managing General Partner's debt
restructuring efforts will be successful or that the lenders will agree to
a course of action consistent with the Managing General Partners
requirements in restructuring the obligations. Even if such agreement is
reached, it may require approval of additional lenders, which is not
assured. Furthermore, there can be no assurance that the sales of assets
can be successfully accomplished on terms acceptable to the Managing
General Partner. Under current circumstances, the Managing General
Partner's ability to continue as a going concern depends upon its ability
to (1) successfully restructure its obligations or obtain additional
financing as may be required, (2) maintain compliance with all debt
covenants, (3) generate sufficient cash flow to meet its obligations on a
timely basis, and (4) achieve satisfactory levels of future earnings. If
the Managing General Partner is unsuccessful in its efforts, it may be
unable to meet its obligations making it necessary to undertake such other
actions as may be appropriate to preserve asset values.
<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) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
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 OIL & GAS
INCOME FUND IX-A, L.P.
a Delaware limited partnership
By: Southwest Royalties, Inc.
Managing General Partner
By: /s/ J Steven Person
------------------------------
J Steven Person, Vice-President of
Marketing and Chief Financial Officer
of Southwest Royalties, Inc.
the Managing General Partner
Date: May 15, 2000
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet at March 31, 2000 (Unaudited) and the Statement of Operations
for the Three Months Ended March 31, 2000 (Unaudited) and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 175,328
<SECURITIES> 0
<RECEIVABLES> 122,015
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 297,343
<PP&E> 3,095,008
<DEPRECIATION> 2,727,000
<TOTAL-ASSETS> 665,351
<CURRENT-LIABILITIES> 381
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 664,970
<TOTAL-LIABILITY-AND-EQUITY> 665,351
<SALES> 270,154
<TOTAL-REVENUES> 271,817
<CGS> 103,503
<TOTAL-COSTS> 103,503
<OTHER-EXPENSES> 28,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 139,563
<INCOME-TAX> 0
<INCOME-CONTINUING> 139,563
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,563
<EPS-BASIC> 11.93
<EPS-DILUTED> 11.93
</TABLE>
