Page 16 of 15
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 0-19585
SOUTHWEST OIL & GAS 1990-91 INCOME PROGRAM
Southwest Oil and 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 16.
<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 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.
<PAGE>
Southwest Oil and Gas Income Fund X-B, L.P.
Balance Sheets
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 11,545 10,604
Receivable from Managing General Partner 2,939 118,652
Other receivable - 38,500
--------- ---------
Total current assets 14,484 167,756
--------- ---------
Oil and gas properties - using the
full cost method of accounting 4,540,634 4,552,075
Less accumulated depreciation,
depletion and amortization 3,504,346 3,310,604
--------- ---------
Net oil and gas properties 1,036,288 1,241,471
--------- ---------
$1,050,772 1,409,227
========= =========
Liabilities and Partners' Equity
Current liability - Distribution payable $ 311 134
--------- ---------
Partners' equity
General partners (9,019) 6,085
Limited partners 1,059,480 1,403,008
--------- ---------
Total partners' equity 1,050,461 1,409,093
--------- ---------
$1,050,772 1,409,227
========= =========
<PAGE>
Southwest Oil and Gas Income Fund X-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
Revenues
Oil and gas $ 178,108 303,167 573,583 981,722
Interest 119 320 1,037 1,079
Miscellaneous income 9 - 9 -
------- ------- ------- ---------
178,236 303,487 574,629 982,801
------- ------- ------- ---------
Expenses
Production 189,856 187,802 532,165 577,430
General and administrative 22,544 17,967 72,000 63,572
Depreciation, depletion and
amortization 9,000 31,000 126,000 95,000
Provision for impairment of
oil and gas properties - - 67,742 -
------- ------- ------- ---------
221,400 236,769 797,907 736,002
------- ------- ------- ---------
Net income (loss) $ (43,164) 66,718 (223,278) 246,799
======= ======= ======= =========
Net income (loss) allocated to:
Managing General Partner $ (3,075) 8,795 (2,658) 30,762
======= ======= ======= =========
General Partner $ (342) 977 (296) 3,418
======= ======= ======= =========
Limited Partners $ (39,747) 56,946 (220,324) 212,619
======= ======= ======= =========
Per limited partner unit $ (3.65) 5.23 (20.23) 19.53
======= ======= ======= =========
<PAGE>
Southwest Oil and Gas Income Fund X-B, 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 $ 655,900 1,053,814
Cash paid to suppliers (570,760) (628,511)
Interest received 1,037 1,079
--------- ---------
Net cash provided by operating activities 86,177 426,382
--------- ---------
Cash flows from investing activities
Additions to oil and gas properties (1,973) (22,981)
Sale of oil and gas properties 51,914 2,078
--------- ---------
Net cash provided by (used in)
investing activities 49,941 (20,903)
--------- ---------
Cash flows used in financing activities
Distributions to partners (135,177) (402,272)
--------- ---------
Net increase in cash and cash equivalents 941 3,207
Beginning of period 10,604 13,682
--------- ---------
End of period $ 11,545 16,889
========= =========
(continued)
<PAGE>
Southwest Oil and Gas Income Fund X-B, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1998 1997
---- ----
Reconciliation of net income to net (loss)
cash provided by operating activities
Net income (loss) $(223,278) 246,799
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation, depletion and amortization 126,000 95,000
Provision for impairment of oil and gas
properties 67,742 -
Decrease in receivables 82,308 72,092
Increase in payables 33,405 12,491
------- -------
Net cash provided by operating activities $ 86,177 426,382
======= =======
<PAGE>
Southwest Oil and Gas Income Fund X-B, 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 $110,920 net proceeds, after post
closing adjustments. The proceeds from the sale represented 10.64% of the
Partnership's total assets at December 31, 1997.
<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; an 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. For the quarter ended September 30, 1998, the net
capitalized cost did not exceed the estimated present value of oil and gas
reserves. 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.
<PAGE>
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 $ 10.91 17.20 (37%)
Average price per mcf of gas $ 2.01 2.06 (2%)
Oil production in barrels 12,600 14,300 (12%)
Gas production in mcf 20,200 27,800 (27%)
Gross oil and gas revenue $ 178,108 303,167 (41%)
Net oil and gas revenue $(11,748) 115,365 (110%)
Partnership distributions $ 2,500 82,000 (97%)
Limited partner distributions $ 2,250 73,800 (97%)
Per unit distribution to limited partners $ .21 6.78 (97%)
Number of limited partner units 10,889 10,889
Revenues
The Partnership's oil and gas revenues decreased to $178,108 from $303,167
for the quarters ended September 30, 1998 and 1997, respectively, a
decrease of 41%. 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 37%, or $6.29 per barrel,
resulting in a decrease of approximately $89,900 in revenues. Oil
sales represented 77% of total oil and gas sales during the quarter
ended September 30, 1998 as compared to 81% during the quarter ended
September 30, 1997.
The average price for a mcf of gas received by the Partnership
decreased during the quarter ended September 30, 1998 as compared to
the quarter ended September 30, 1997 by 2%, or $.05 per mcf, resulting
in a decrease of approximately $1,400 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $91,300. 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 12% during the
quarter ended September 30, 1998 as compared to the quarter ended
September 30, 1997, resulting in a decrease of approximately $18,500 in
revenues.
Gas production decreased approximately 7,600 mcf or 27% during the same
period, resulting in a decrease of approximately $15,300 in revenues.
The total decrease in revenues due to the change in production is
approximately $33,800. The decrease is primarily a result of property
sales.
Costs and Expenses
Total costs and expenses decreased to $221,400 from $236,769 for the
quarters ended September 30, 1998 and 1997, respectively, a decrease of 6%.
The decrease is the result of lower depletion expense, partially offset by
an increase in lease operating costs and general and administrative
expense.
1. Lease operating costs and production taxes were 1% higher, or
approximately $2,100 more during the quarter ended September 30, 1998 as
compared to the quarter ended September 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
25% or approximately $4,600 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 $9,000 for the quarter ended September
30, 1998 from $31,000 for the same period in 1997. This represents a
decrease of 71%. 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 decline in depletion expense between the comparative
periods were the decrease in the price of oil and the decline in gross
oil and gas revenues.
<PAGE>
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 $ 11.61 18.73 (38%)
Average price per mcf of gas $ 1.90 2.20 (14%)
Oil production in barrels 38,200 42,600 (10%)
Gas production in mcf 68,700 83,500 (18%)
Gross oil and gas revenue $ 573,583 981,722 (42%)
Net oil and gas revenue $ 41,418 404,292 (90%)
Partnership distributions $ 135,354 402,555 (66%)
Limited partner distributions $ 123,204 362,555 (66%)
Per unit distribution to limited partners $ 11.31 33.30 (66%)
Number of limited partner units 10,889 10,889
Revenues
The Partnership's oil and gas revenues decreased to $573,583 from $981,722
for the nine months ended September 30, 1998 and 1997, respectively, a
decrease of 42%. 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 38%, or $7.12 per
barrel, resulting in a decrease of approximately $303,300 in revenues.
Oil sales represented 77% of total oil and gas sales during the nine
months ended September 30, 1998 as compared to 81% during the nine
months ended September 30, 1997.
The average price for an mcf of gas received by the Partnership
decreased during the same period by 14%, or $.30 per mcf, resulting in
a decrease of approximately $25,100 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $328,400. 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 4,400 barrels or 10% during the
nine months ended September 30, 1998 as compared to the nine months
ended September 30, 1997, resulting in a decrease of approximately
$51,100 in revenues.
Gas production decreased approximately 14,800 mcf or 18% during the
same period, resulting in a decrease of approximately $28,100 in
revenues.
The total decrease in revenues due to the change in production is
approximately $79,200. The decrease is primarily a result of property
sales.
Costs and Expenses
Total costs and expenses increased to $797,907 from $736,002 for the nine
months ended September 30, 1998 and 1997, respectively, an increase of 8%.
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 8% lower, or
approximately $45,300 less during the nine months ended September 30,
1998 as compared to the nine months ended September 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
13% or approximately $8,400 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 increased to $126,000 for the nine months ended
September 30, 1998 from $95,000 for the same period in 1997. This
represents an increase of 33%. 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 used to
determine the Partnership's reserves for October 1, 1998 as compared to
January 1, 1997 and the decline in gross oil and gas revenues. The
decrease in price has also dropped the basis of the reserves because of
the negative economics on some wells.
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 $67,742, 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.
<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 $86,200 in
the nine months ended September 30, 1998 as compared to approximately
$426,400 in the nine months ended September 30, 1997. The primary source
of the 1998 cash flow from operating activities was profitable operations.
Cash flows provided by or (used in) investing activities were approximately
$49,900 in the nine months ended September 30, 1998 as compared to
approximately $(20,900) in the nine months ended September 30, 1997. The
principle use of the 1998 cash flow from investing activities was the
change in oil and gas properties.
Cash flows used in financing activities were approximately $135,200 in the
nine months ended September 30, 1998 as compared to approximately $402,300
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
$135,354 of which $123,204 was distributed to the limited partners and
$12,500 to the general partners. The per unit distribution to limited
partners during the nine months ended September 30, 1998 was $11.31. Total
distributions during the nine months ended September 30, 1997 were $402,555
of which $362,555 was distributed to the limited partners and $40,000 to
the general partners. The per unit distribution to limited partners during
the nine months ended September 30, 1997 was $33.30.
The sources for the 1998 distributions of $135,354 were oil and gas
operations of approximately $86,200 and the change in oil and gas property
of approximately $49,900, resulting in excess cash for contingencies or
subsequent distributions. The source for the 1997 distributions of
$402,555 was oil and gas operations of approximately $426,400, partially
offset by a change in oil and gas property of approximately $20,900,
resulting in excess cash for contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions
of $4,504,147 have been made to the partners. As of September 30, 1998,
$4,073,172 or $374.06 per limited partner unit has been distributed to the
limited partners, representing a 75% return of the capital contributed.
As of September 30, 1998, the Partnership had approximately $14,200 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.
<PAGE>
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.
<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) 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 and 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: November 15, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contians summary fiancial information extracted from the
Balance Sheet at September 30, 1998 (Unaudited) and the Statement of
Operations for the Nine Months Ended September 30, 1998 (Unaudited) and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 11,545
<SECURITIES> 0
<RECEIVABLES> 2,939
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,484
<PP&E> 4,540,634
<DEPRECIATION> 3,504,346
<TOTAL-ASSETS> 1,050,772
<CURRENT-LIABILITIES> 311
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,050,461
<TOTAL-LIABILITY-AND-EQUITY> 1,050,772
<SALES> 573,583
<TOTAL-REVENUES> 574,629
<CGS> 532,165
<TOTAL-COSTS> 532,165
<OTHER-EXPENSES> 265,742
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (223,278)
<INCOME-TAX> 0
<INCOME-CONTINUING> (223,278)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (223,278)
<EPS-PRIMARY> (20.23)
<EPS-DILUTED> (20.23)
</TABLE>
