Page 2 of 14
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 33-38511
SOUTHWEST DEVELOPMENTAL DRILLING PROGRAM 1991-92
Southwest Developmental Drilling Fund 91-A, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2387814
(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 15.
<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 Developmental Drilling Fund 91-A, L.P.
Balance Sheets
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 7,957 3,477
Receivable from Managing General Partner - 17,702
--------- ---------
Total current assets 7,957 21,179
--------- ---------
Oil and gas properties - using the
full cost method of accounting 1,097,567 1,075,744
Less accumulated depreciation,
depletion and amortization 890,000 860,000
--------- ---------
Net oil and gas properties 207,567 215,744
--------- ---------
$ 215,524 236,923
========= =========
Liabilities and Partners' Equity
Current liabilities
Distribution payable $ 2,457 347
Payable to Managing General Partner 748 -
--------- ---------
Total current liabilities 3,205 347
--------- ---------
Partners' equity
Managing General Partner 21,318 20,686
Investor partners 191,001 215,890
--------- ---------
Total partners' equity 212,319 236,576
--------- ---------
$ 215,524 236,923
========= =========
<PAGE>
Southwest Developmental Drilling Fund 91-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
Revenues
Oil and gas $ 46,968 68,128 139,584 237,246
Interest 140 357 241 1,675
------ ------- ------- -------
47,108 68,485 139,825 238,921
------ ------- ------- -------
Expenses
Production 32,310 23,192 82,076 72,234
General and administrative 5,206 3,057 20,506 15,232
Depreciation, depletion and
amortization 6,000 13,000 30,000 35,923
------ ------- ------- -------
43,516 39,249 132,582 123,389
------ ------- ------- -------
Net income $ 3,592 29,236 7,243 115,532
====== ======= ======= =======
Net income allocated to:
Managing General Partner $ 1,055 4,646 4,097 16,660
====== ======= ======= =======
Investor Partners $ 2,537 24,590 3,146 98,872
====== ======= ======= =======
Per investor partner unit $ 2.22 21.49 2.75 86.39
====== ======= ======= =======
<PAGE>
Southwest Developmental Drilling Fund 91-A, 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 $ 149,896 271,147
Cash paid to suppliers (94,444) (87,702)
Interest received 241 1,675
------- -------
Net cash provided by operating activities 55,693 185,120
------- -------
Cash flows used in investing activities
Additions to oil and gas properties (21,823) (5,770)
------- -------
Cash flows used in financing activities
Distributions to partners (29,390) (239,807)
------- -------
Net increase (decrease) in cash and cash
equivalents 4,480 (60,457)
Beginning of period 3,477 72,991
------- -------
End of period $ 7,957 12,534
======= =======
(continued)
<PAGE>
Southwest Developmental Drilling Fund 91-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1998 1997
---- ----
Reconciliation of net income to net cash
provided by operating activities
Net income $ 7,243 115,532
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation, depletion and amortization 30,000 35,923
Decrease in receivables 10,312 33,901
Increase (decrease) in payables 8,138 (236)
------- -------
Net cash provided by operating activities $ 55,693 185,120
======= =======
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Developmental Drilling Fund 91-A, L.P. was organized as a
Delaware limited partnership on January 7, 1991. The offering of such
limited and general partner interests began September 17, 1991 as part of a
shelf offering registered under the name Southwest Developmental Drilling
Program 1991-92. Minimum capital requirements for the partnership were met
on April 22, 1992, with the offering of limited and general partner
interests concluding April 30, 1992, with total investor partner
contributions of $1,144,500. The Managing General Partner made a
contribution to the capital of the Partnership at the conclusion of its
offering period in an amount equal to 1% of its net capital contributions.
The Managing General Partner's contribution was $9,800. The total capital
contributions are $1,154,300.
The Partnership was formed to engage primarily in the business of drilling
developmental and exploratory wells, to produce and market crude oil and
natural gas produced from such properties, to distribute any net proceeds
from operations to the general and investor partners and to the extent
necessary, acquire leases which contain drilling prospects. Net revenues
will not be reinvested in other revenue producing assets except to the
extent that performance of remedial work is needed to improve a well's
producing capabilities. The economic life of the Partnership thus depends
on the period over which the Partnership's oil and gas reserves are
economically recoverable.
The Partnership has expended its capital and acquired leasehold interests
and completed drilling operations. 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 does not anticipate performing
workovers. The Partnership could possibly experience a normal decline.
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 September 30, 1998, the net capitalized costs 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 $ 12.46 19.17 (35%)
Average price per mcf of gas $ 1.74 2.04 (15%)
Oil production in barrels 3,100 3,000 3%
Gas production in mcf 4,800 5,200 (8%)
Gross oil and gas revenue $ 46,968 68,128 (31%)
Net oil and gas revenue $ 14,658 44,936 (67%)
Partnership distributions $ 11,500 76,000 (85%)
Investor partner distributions $ 10,235 67,640 (85%)
Per unit distribution to investor partners $ 8.94 59.10 (85%)
Number of investor partner units 1,144.5 1,144.5
Revenues
The Partnership's oil and gas revenues decreased to $46,968 from $68,128
for the quarters ended September 30, 1998 and 1997, respectively, a
decrease of 31%. 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 35%, or $6.71 per barrel,
resulting in a decrease of approximately $20,100 in revenues. Oil
sales represented 82% of total oil and gas sales during the quarter
ended September 30, 1998 as compared to 84% during the quarter ended
September 30, 1997.
The average price for an mcf of gas received by the Partnership
decreased during the same period by 15%, or $.30 per mcf, resulting in
a decrease of approximately $1,600 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $21,700. 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 increased approximately 100 barrels or 3% during the
quarter ended September 30, 1998 as compared to the quarter ended
September 30, 1997, resulting in an increase of approximately $1,200
in revenues.
Gas production decreased approximately 400 mcf or 8% during the same
period, resulting in a decrease of approximately $700 in revenues.
The net total increase in revenues due to the change in production is
approximately $500.
Costs and Expenses
Total costs and expenses increased to $43,516 from $39,249 for the quarters
ended September 30, 1998 and 1997, respectively, a increase of 11%. The
increase is the result of higher lease operating costs and general and
administrative expense, partially offset by a decrease in depletion
expense.
1. Lease operating costs and production taxes were 39% higher, or
approximately $9,100 more during the quarter ended September 30, 1998 as
compared to the quarter ended September 30, 1997. Increase in lease
operating costs are due primarily to workovers in 1998.
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
70% or approximately $2,100 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 $6,000 for the quarter ended September
30, 1998 from $13,000 for the same period in 1997. This represents a
decrease of 54%. 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 $ 13.19 20.52 (36%)
Average price per mcf of gas $ 1.66 2.11 (21%)
Oil production in barrels 8,800 9,900 (11%)
Gas production in mcf 14,100 16,200 (13%)
Gross oil and gas revenue $ 139,584 237,246 (41%)
Net oil and gas revenue $ 57,508 165,012 (65%)
Partnership distributions $ 31,500 240,000 (87%)
Investor partner distributions $ 28,035 213,600 (87%)
Per unit distribution to investor partners $ 24.50 186.63 (87%)
Number of investor partner units 1,144.5 1,144.5
Revenues
The Partnership's oil and gas revenues decreased to $139,584 from $237,246
for the nine months ended September 30, 1998 and 1997, respectively, a
decrease of 41%. 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 36%, or $7.33 per
barrel, resulting in a decrease of approximately $72,600 in revenues.
Oil sales represented 83% of total oil and gas sales during the nine
months ended September 30, 1998 as compared to 86% 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 21%, or $.45 per mcf, resulting in
a decrease of approximately $7,300 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $79,900. 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 1,100 barrels or 11% during the
nine months ended September 30, 1998 as compared to the nine months
ended September 30, 1997, resulting in a decrease of approximately
$14,500 in revenues.
Gas production decreased approximately 2,100 mcf or 13% during the same
period, resulting in a decrease of approximately $3,500 in revenues.
The total decrease in revenues due to the change in production is
approximately $18,000.
Costs and Expenses
Total costs and expenses increased to $132,582 from $123,389 for the nine
months ended September 30, 1998 and 1997, respectively, an increase of 7%.
The increase is the result of higher lease operating costs and general and
administrative expense, partially offset by a decrease in depletion
expense.
1. Lease operating costs and production taxes were 14% higher, or
approximately $9,800 more 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
35% or approximately $5,300 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 decreased to $30,000 for the nine months ended
September 30, 1998 from $34,000 for the same period in 1997. This
represents a decrease of 12%. 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.
<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 $55,700 in
the nine months ended September 30, 1998 as compared to approximately
$185,100 in the nine months ended September 30, 1997. The primary source
of the 1998 cash flow from operating activities was profitable operations.
Cash flows used in investing activities were approximately $21,823 in the
nine months ended September 30, 1998 as compared to approximately $5,800 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 $29,400 in the
nine months ended September 30, 1998 as compared to approximately $239,800
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
$31,500 of which $28,035 was distributed to the investor partners and
$3,465 to the Managing General Partner. The per unit distribution to
investor partners during the nine months ended September 30, 1998 was
$24.50. Total distributions during the nine months ended September 30,
1997 were $240,000 of which $213,600 was distributed to the investor
partners and $26,400 to the Managing General Partner. The per unit
distribution to investor partners during the nine months ended September
30, 1997 was $186.63.
The source for the 1998 distributions of $31,500 was oil and gas operations
of approximately $55,700, and the change in the oil and gas properties of
$21,800, resulting in excess cash for contingencies or subsequent
distributions. The source for the 1997 distributions of $240,000 was oil
and gas operations of approximately $185,100, partially offset by the
change in oil and gas properties of approximately $5,800, with the balance
from available cash on hand at the beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions
of $1,118,740 have been made to the partners. As of September 30, 1998,
$997,590 or $871.64 per investor partner unit has been distributed to the
investor partners, representing an 87% return of the capital contributed.
As of September 30, 1998, the Partnership had approximately $4,800 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 Developmental Drilling Fund 91-
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, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial 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> 7,957
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,957
<PP&E> 1,097,567
<DEPRECIATION> 890,000
<TOTAL-ASSETS> 215,524
<CURRENT-LIABILITIES> 3,205
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 212,319
<TOTAL-LIABILITY-AND-EQUITY> 215,524
<SALES> 139,584
<TOTAL-REVENUES> 139,825
<CGS> 82,076
<TOTAL-COSTS> 82,076
<OTHER-EXPENSES> 50,506
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,243
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,243
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,243
<EPS-PRIMARY> 2.75
<EPS-DILUTED> 2.75
</TABLE>
