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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 0-19585
SOUTHWEST OIL & GAS 1990-91 INCOME PROGRAM
Southwest Oil & Gas Income Fund X-B, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2332176
(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, 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.
<PAGE>
Southwest Oil & Gas Income Fund X-B, L.P.
Balance Sheets
June 30, December 31,
1998 1997
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 14,070 10,604
Receivable from Managing General Partner 38,546 118,652
Other receivable - 38,500
--------- ---------
Total current assets 52,616 167,756
--------- ---------
Oil and gas properties - using the
full cost method of accounting 4,539,246 4,552,075
Less accumulated depreciation,
depletion and amortization 3,495,346 3,310,604
--------- ---------
Net oil and gas properties 1,043,900 1,241,471
--------- ---------
$ 1,096,516 1,409,227
========= =========
Liabilities and Partners' Equity
Current liability - Distributions payable $ 392 134
--------- ---------
Partners' equity:
General partners (5,353) 6,085
Limited partners 1,101,477 1,403,008
--------- ---------
Total partners' equity 1,096,124 1,409,093
--------- ---------
$ 1,096,516 1,409,227
========= =========
<PAGE>
Southwest Oil & Gas Income Fund X-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues
Oil and gas $ 158,689 305,748 395,475 678,555
Interest 306 449 917 759
------- ------- ------- -------
158,995 306,197 396,392 679,314
------- ------- ------- -------
Expenses
Production 158,884 195,693 342,308 389,628
General and administrative 21,898 18,756 49,456 45,605
Depreciation, depletion and
amortization 71,000 29,000 117,000 64,000
Provision for impairment of
oil and gas properties 67,742 - 67,742 -
------- ------- ------- -------
319,524 243,449 576,506 499,233
------- ------- ------- -------
Net income (loss) $ (160,529) 62,748 (180,114) 180,081
======= ======= ======= =======
Net income (loss) allocated to:
Managing General Partner $ (1,960) 8,257 417 21,967
======= ======= ======= =======
General Partner $ (218) 918 46 2,441
======= ======= ======= =======
Limited partners $ (158,351) 53,573 (180,577) 155,673
======= ======= ======= =======
Per limited partner unit $ (14.54) 4.92 (16.58) 14.30
======= ======= ======= =======
<PAGE>
Southwest Oil & Gas Income Fund X-B, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Cash from oil and gas sales $ 479,452 748,227
Cash paid to suppliers (395,635) (432,666)
Interest received 917 759
------- -------
Net cash provided by operating activities 84,734 316,320
------- -------
Cash flows from investing activities:
Additions to oil and gas properties (582) (2,030)
Sale of oil and gas properties 51,911 1,977
------- -------
Net cash provided by (used in) investing
activities 51,329 (53)
------- -------
Cash flows used in financing activities:
Distributions to partners (132,597) (320,458)
------- -------
Net increase (decrease) in cash and cash
equivalents 3,466 (4,191)
Beginning of period 10,604 13,682
------- -------
End of period $ 14,070 9,491
======= =======
(continued)
<PAGE>
Southwest Oil & Gas Income Fund X-B, 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) $ (180,114) 180,081
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 117,000 64,000
Provision for impairment of oil and gas
properties 67,742 -
Decrease in receivables 83,977 69,672
Decrease (increase) in payables (3,871) 2,567
------- -------
Net cash provided by operating activities $ 84,734 316,320
======= =======
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Oil & Gas Income Fund X-B, L.P. was organized as a Delaware
limited partnership on November 27, 1990. The offering of such limited
partnership interests began on December 1, 1990 as part of a shelf offering
registered under the name Southwest Oil & Gas 1990-91 Income Program.
Minimum capital requirements for the Partnership were met on March 1, 1991,
with the offering of limited partnership interests concluding on September
30, 1991, with total limited partner contributions of $5,444,500.
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 the next few years. The Partnership could possibly
experience the following changes; a increase in 1998 and 1999, leveling off
in 2000 and beginning a decline in 2001.
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
$67,742. The write-down has the effect of reducing net income, but did not
affect cash flow or partner 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.
<PAGE>
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 $ 10.06 17.73 (43%)
Average price per mcf of gas $ 1.92 2.12 (9%)
Oil production in barrels 11,300 13,800 (18%)
Gas production in mcf 23,400 28,800 (19%)
Gross oil and gas revenue $ 158,689 305,748 (48%)
Net oil and gas revenue $ (195) 110,055 (100%)
Partnership distributions $ 9,000 125,000 (92%)
Limited partner distributions $ 8,100 112,500 (92%)
Per unit distribution to limited
partners $ .74 10.33 (92%)
Number of limited partner units 10,889 10,889
Revenues
The Partnership's oil and gas revenues decreased to $158,689 from $305,748
for the quarters ended June 30, 1998 and 1997, respectively, a decrease of
48%. 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 43%, or $7.67 per barrel, resulting in a
decrease of approximately $105,846 in revenues. Oil sales represented
72% of total oil and gas sales during the quarter ended June 30, 1998
as compared to 80% 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 9%, or $.20 per mcf, resulting in a
decrease of approximately $5,760 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $111,606. 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 2,500 barrels or 18% during the
quarter ended June 30, 1998 as compared to the quarter ended June 30,
1997, resulting in a decrease of approximately $25,150 in revenues.
Gas production decreased approximately 5,400 mcf or 19% during the same
period, resulting in a decrease of approximately $10,368 in revenues.
The total decrease in revenues due to the change in production is
approximately $35,518. The decrease is primarily due to natural
decline.
Costs and Expenses
Total costs and expenses increased to $319,524 from $243,449 for the
quarters ended June 30, 1998 and 1997, respectively, an increase of 31%.
The increase is the result of lower lease operating costs, offset by an
increase in depletion expense and general and administrative expense.
1. Lease operating costs and production taxes were 19% lower, or
approximately $36,809 less during the quarter ended June 30, 1998 as
compared to the quarter ended June 30, 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
17% or approximately $3,142 during the quarter ended June 30, 1998 as
compared to the quarter ended June 30, 1997.
3. Depletion expense increased to $71,000 for the quarter ended June 30,
1998 from $29,000 for the same period in 1997. This represents an
increase of 145%. 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 and gas 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 $67,742.
The write-down has the effect of reducing net income, but did not
affect cash flow or partner distributions.
<PAGE>
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 $ 11.95 19.50 (39%)
Average price per mcf of gas $ 1.85 2.27 (19%)
Oil production in barrels 25,600 28,300 (10%)
Gas production in mcf 48,500 55,700 (13%)
Gross oil and gas revenue $ 395,475 678,555 (42%)
Net oil and gas revenue $ 53,167 288,927 (81%)
Partnership distributions $ 132,854 320,555 (58%)
Limited partner distributions $ 120,954 288,755 (58%)
Per unit distribution to limited
partners $ 11.11 26.52 (58%)
Number of limited partner units 10,889 10,889
Revenues
The Partnership's oil and gas revenues decreased to $395,475 from $678,555
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 $7.55 per barrel, resulting
in a decrease of approximately $213,665 in revenues. Oil sales
represented 77% of total oil and gas sales during the six months ended
June 30, 1998 as compared to 81% 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 19%, or $.42 per mcf, resulting in
a decrease of approximately $23,394 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $237,059. 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 2,700 barrels or 10% during the
six months ended June 30, 1998 as compared to the six months ended June
30, 1997, resulting in a decrease of approximately $32,265 in revenues.
Gas production decreased approximately 7,200 mcf or 13% during the same
period, resulting in a decrease of approximately $13,320 in revenues.
The total decrease in revenues due to the change in production is
approximately $45,585.
Costs and Expenses
Total costs and expenses increased to $576,506 from $499,233 for the six
months ended June 30, 1998 and 1997, respectively, an increase of 15%. The
increase is primarily the result of lower lease operating costs, offset by
higher depletion expense and general administrative expense and.
1. Lease operating costs and production taxes were 12% lower, or
approximately $47,320 less during the six months ended June 30, 1998 as
compared to the six months ended June 30, 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 8%
or approximately $3,851 during the six months ended June 30, 1998 as
compared to the six months ended June 30, 1997.
3. Depletion expense increased to $117,000 for the six months ended June
30, 1998 from $64,000 for the same period in 1997. This represents an
increase of 83%. 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 and gas 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 $67,742. The write-
down has the effect of reducing net income, but did not affect cash
flow or partner distributions.
<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 $84,700 in
the six months ended June 30, 1998 as compared to approximately $316,300 in
the six months ended June 30, 1997. The primary source of the 1998 cash
flow from operating activities was profitable operations.
Cash flows provided by or (used in) investing activities were approximately
$51,300 in the six months ended June 30, 1998 as compared to approximately
$(50) in the six months ended June 30, 1997. The principle source of the
1998 cash flow from investing activities was the sale of oil and gas
properties.
Cash flows used in financing activities were approximately $132,600 in the
six months ended June 30, 1998 as compared to approximately $320,500 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 $132,854
of which $120,954 was distributed to the limited partners and $11,900 to
the general partners. The per unit distribution to limited partners during
the six months ended June 30, 1998 was $11.11. Total distributions during
the six months ended June 30, 1997 were $320,555 of which $288,755 was
distributed to the limited partners and $31,800 to the general partners.
The per unit distribution to limited partners during the six months ended
June 30, 1997 was $26.52.
The sources for the 1998 distributions of $132,854 were oil and gas
operations of approximately $84,700 and the net change in oil and gas
properties of approximately $51,300, with the balance from available cash
on hand at the beginning of the period. The source for the 1997
distributions of $320,555 was oil and gas operations of approximately
$316,300, offset by the net change in oil and gas properties of
approximately $50, with the balance from available cash on hand at the
beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions
of $4,501,647 have been made to the partners. As of June 30, 1998,
$4,070,922 or $373.86 per limited partner unit has been distributed to the
limited partners, representing a 75% return of the capital contributed.
As of June 30, 1998, the Partnership had approximately $52,224 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.
<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 ended June 30, 1998.
<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 X-B, 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: August 15, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial informations extracted from the
Balance Sheet at June 30, 1998 (Unaudited) and the Statement of Operations
for the Six Months Ended June 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 14,070
<SECURITIES> 0
<RECEIVABLES> 38,546
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 52,616
<PP&E> 4,539,246
<DEPRECIATION> 3,495,346
<TOTAL-ASSETS> 1,096,516
<CURRENT-LIABILITIES> 392
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,096,124
<TOTAL-LIABILITY-AND-EQUITY> 1,096,516
<SALES> 395,475
<TOTAL-REVENUES> 396,392
<CGS> 342,308
<TOTAL-COSTS> 342,308
<OTHER-EXPENSES> 234,198
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (180,114)
<INCOME-TAX> 0
<INCOME-CONTINUING> (180,114)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (180,114)
<EPS-PRIMARY> (16.58)
<EPS-DILUTED> (16.58)
</TABLE>
