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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 0-19601
SOUTHWEST ROYALTIES INSTITUTIONAL 1990-91 INCOME PROGRAM
Southwest Royalties Institutional Income Fund X-B, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2332174
(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 Royalties Institutional Income Fund X-B, L.P.
Balance Sheets
June 30, December 31,
1998 1997
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 38,211 7,101
Receivable from Managing General Partner - 90,302
Other receivable - 38,500
--------- ---------
Total current assets 38,211 135,903
--------- ---------
Oil and gas properties - using the
full cost method of accounting 4,183,062 4,210,473
Less accumulated depreciation,
depletion and amortization 3,002,196 2,853,091
--------- ---------
Net oil and gas properties 1,180,866 1,357,382
--------- ---------
$ 1,219,077 1,493,285
========= =========
Liabilities and Partners' Equity
Current liabilities:
Distribution payable $ 51 -
Payable to Managing General Partner 27,198 -
--------- ---------
Total current liabilities 27,249 -
--------- ---------
Partners' equity:
General partners (31,756) (18,122)
Limited partners 1,223,584 1,511,407
--------- ---------
Total partners' equity 1,191,828 1,493,285
--------- ---------
$ 1,219,077 1,493,285
========= =========
<PAGE>
Southwest Royalties Institutional 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
Income (loss) from net profits
interests $ (34,589) 109,405 21,206 287,826
Interest 312 587 894 1,183
------- ------- ------- -------
(34,277) 109,992 22,100 289,009
------- ------- ------- -------
Expenses
General and administrative 21,670 18,758 49,430 44,732
Depreciation, depletion and
amortization 55,000 27,000 98,000 61,000
Provision for impairment of oil
and gas properties 51,105 - 51,105 -
------- ------- ------- -------
127,775 45,758 198,535 105,732
------- ------- ------- -------
Net income (loss) $ (162,052) 64,234 (176,435) 183,277
======= ======= ======= =======
Net income (loss) allocated to:
Managing General Partner $ (5,036) 8,211 (2,460) 21,985
======= ======= ======= =======
General Partner $ (559) 912 (273) 2,443
======= ======= ======= =======
Limited partners $ (156,457) 55,111 (173,702) 158,849
======= ======= ======= =======
Per limited partner unit $ (13.99) 4.93 (15.54) 14.21
======= ======= ======= =======
<PAGE>
Southwest Royalties Institutional Income Fund X-B, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Cash received from income from net profits
interests $ 123,804 352,468
Cash paid to suppliers (34,528) (44,372)
Interest received 894 1,183
------- --------
Net cash provided by operating activities 90,170 309,279
------- --------
Cash flows provided by investing activities:
Cash received from sale of oil and gas
property interest 65,911 100,000
------- --------
Cash flows used in financing activities:
Distributions to partners (124,971) (414,036)
------- --------
Net increase (decrease) in cash and cash
equivalents 31,110 (4,757)
Beginning of period 7,101 16,680
------- --------
End of period $ 38,211 11,923
======= ========
(continued)
<PAGE>
Southwest Royalties Institutional 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) $ (176,435) 183,277
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 98,000 61,000
Provision for impairment of oil and gas
properties 51,105 -
Decrease in receivables 102,598 64,642
Increase in payables 14,902 360
------- -------
Net cash provided by operating activities $ 90,170 309,279
======= =======
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Royalties Institutional 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 December 1, 1990 as part of a shelf
offering registered under the name Southwest Royalties Institutional 1990-
91 Income Program. Minimum capital requirements for the Partnership were
met on March 11, 1991, with the offering of limited partnership interests
concluding September 30, 1991, with total limited partner contributions of
$5,590,500.
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 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; 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
$51,105. 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 $ 10.74 17.46 (38%)
Average price per mcf of gas $ 1.75 2.14 (18%)
Oil production in barrels 10,400 13,200 (21%)
Gas production in mcf 23,600 30,300 (22%)
Income from net profits interests $ (34,589) 109,405 (132%)
Partnership distributions $ 4,000 180,000 (98%)
Limited partner distributions $ 3,600 162,000 (98%)
Per unit distribution to limited
partners $ .32 14.49 (98%)
Number of limited partner units 11,181 11,181
Revenues
The Partnership's income (loss) from net profits interests decreased to
$(34,589) from $109,405 for the quarters ended June 30, 1998 and 1997,
respectively, a decrease of 132%. 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 38%, or $6.72 per barrel, resulting in a
decrease of approximately $88,704 in income from net profits interests.
Oil sales represented 73% of total oil and gas sales during the quarter
ended June 30, 1998 as compared to 78% 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 18%, or $.39 per mcf, resulting in
a decrease of approximately $11,817 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
$100,521. 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 2,800 barrels or 21% during the
quarter ended June 30, 1998 as compared to the quarter ended June 30,
1997, resulting in a decrease of approximately $30,072 in income from
net profits interests.
Gas production decreased approximately 6,700 mcf or 22% during the same
period, resulting in a decrease of approximately $11,725 in income from
net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $41,797. The decrease is
primarily attributable to natural decline and sale of two oil wells.
3. Lease operating costs and production taxes were 1% higher, or
approximately $1,515 more during the quarter ended June 30, 1998 as
compared to the quarter ended June 30, 1997.
Costs and Expenses
Total costs and expenses increased to $127,775 from $45,758 for the
quarters ended June 30, 1998 and 1997, respectively, an increase of 179%.
The increase is primarily the result of higher depletion expense and
general and administrative expense.
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 increased
16% or approximately $2,912 during the quarter ended June 30, 1998 as
compared to the quarter ended June 30, 1997.
2. Depletion expense increased to $55,000 for the quarter ended June 30,
1998 from $27,000 for the same period in 1997. This represents an
increase of 104%. 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 $51,105.
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 $ 12.73 19.69 (35%)
Average price per mcf of gas $ 1.78 2.25 (21%)
Oil production in barrels 22,800 26,700 (15%)
Gas production in mcf 52,000 59,300 (12%)
Income from net profits interests $ 21,206 287,826 (93%)
Partnership distributions $ 125,021 414,058 (70%)
Limited partner distributions $ 114,121 376,258 (70%)
Per unit distribution to limited
partners $ 10.21 33.65 (70%)
Number of limited partner units 11,181 11,181
Revenues
The Partnership's income from net profits interests decreased to $21,206
from $287,826 for the six months ended June 30, 1998 and 1997,
respectively, a decrease of 93%. 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 35%, or $6.96 per barrel, resulting
in a decrease of approximately $185,832 in income from net profits
interests. Oil sales represented 76% of total oil and gas sales during
the six months 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 21%, or $.47 per mcf, resulting in
a decrease of approximately $27,871 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
$213,703. 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 3,900 barrels or 15% during the
six months ended June 30, 1998 as compared to the six months ended June
30, 1997, resulting in a decrease of approximately $49,647 in income
from net profits interests.
Gas production decreased approximately 7,300 mcf or 12% during the same
period, resulting in a decrease of approximately $12,994 in income from
net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $62,641.
3. Lease operating costs and production taxes were 3% lower, or
approximately $9,990 less during the six months ended June 30, 1998 as
compared to the six months ended June 30, 1997.
Costs and Expenses
Total costs and expenses increased to $198,535 from $105,732 for the six
months ended June 30, 1998 and 1997, respectively, an increase of 88%. The
increase is primarily the result of an increase in general and
administrative expense and depletion expense.
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 increased
11% or approximately $4,698 during the six months ended June 30, 1998
as compared to the six months ended June 30, 1997.
2. Depletion expense increased to $98,000 for the six months ended June
30, 1998 from $61,000 for the same period in 1997. This represents an
increase of 61%. 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 $51,105.
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 $90,200 in
the six months ended June 30, 1998 as compared to approximately $309,300 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 investing activities were $65,900 in the six months
ended June 30, 1998 as compared to approximately $100,000 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 $125,000 in the
six months ended June 30, 1998 as compared to approximately $414,000 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 $125,021
of which $114,121 was distributed to the limited partners and $10,900 to
the general partners. The per unit distribution to limited partners during
the six months ended June 30, 1998 was $10.21. Total distributions during
the six months ended June 30, 1997 were $414,058 of which $376,258 was
distributed to the limited partners and $37,800 to the general partners.
The per unit distribution to limited partners during the six months ended
June 30, 1997 was $33.65.
The sources for the 1998 distributions of $125,021 were oil and gas
operations of approximately $90,200 and sale of oil and gas properties of
approximately $65,900. The sources for the 1997 distributions of $414,058
were oil and gas operations of approximately $309,300 and sale of oil and
gas properties of $100,000, with the balance from available cash on hand at
the beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions
of $4,599,050 have been made to the partners. As of June 30, 1998,
$4,188,037 or $374.57 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 $10,962 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 ROYALTIES INSTITUTIONAL
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 information 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> 38,211
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 38,211
<PP&E> 4,183,062
<DEPRECIATION> 3,002,196
<TOTAL-ASSETS> 1,219,077
<CURRENT-LIABILITIES> 27,249
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,191,828
<TOTAL-LIABILITY-AND-EQUITY> 1,219,077
<SALES> 21,206
<TOTAL-REVENUES> 22,100
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 198,535
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (176,435)
<INCOME-TAX> 0
<INCOME-CONTINUING> (176,435)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (176,435)
<EPS-PRIMARY> (15.54)
<EPS-DILUTED> (15.54)
</TABLE>
