Page 3 of 16
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, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________
Commission file number 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 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, 1999 which are found in the Registrant's Form
10-K Report for 1999 filed with the Securities and Exchange Commission.
The December 31, 1999 balance sheet included herein has been taken from the
Registrant's 1999 Form 10-K Report. Operating results for the three and
nine month periods ended September 30, 2000 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,
2000 1999
------------- ------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 15,791 56,196
Receivable from Managing General Partner 23,754 21,634
Distribution receivable 771 617
--------- ---------
Total current assets 40,316 78,447
--------- ---------
Oil and gas properties - using the
full cost method of accounting 1,098,592 1,098,441
Less accumulated depreciation,
depletion and amortization 959,000 949,000
--------- ---------
Net oil and gas properties 139,592 149,441
--------- ---------
$ 179,908 227,888
========= =========
Liabilities and Partners' Equity
Partners' equity
Managing General Partner $ 25,342 29,520
Investor partners 154,566 198,368
--------- ---------
Total partners' equity 179,908 227,888
--------- ---------
$ 179,908 227,888
========= =========
<PAGE>
Southwest Developmental Drilling Fund 91-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues
Oil and gas $ 50,127 127,204 129,310 211,648
Interest 63 455 133 511
------- ------- ------- -------
50,190 127,659 129,443 212,159
------- ------- ------- -------
Expenses
Production 19,015 24,502 55,623 59,568
General and administrative 3,843 3,822 11,800 12,751
Depreciation, depletion and
amortization 4,000 8,400 10,000 20,000
------- ------- ------- -------
26,858 36,724 77,423 92,319
------- ------- ------- -------
Net income $ 23,332 90,935 52,020 119,840
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 3,007 10,927 6,822 15,382
======= ======= ======= =======
Investor Partners $ 20,325 80,008 45,198 104,458
======= ======= ======= =======
Per investor partner unit $ 17.76 69.91 39.49 91.27
======= ======= ======= =======
<PAGE>
Southwest Developmental Drilling Fund 91-A, L.P.
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
2000 1999
---- ----
Cash flows from operating activities
Cash received from oil and gas sales $ 124,418 205,621
Cash paid to suppliers (64,651) (76,148)
Interest received 133 511
------- -------
Net cash provided by operating activities 59,900 129,984
------- -------
Cash flows used in investing activities
Additions to oil and gas properties (151) (806)
------- -------
Cash flows used in financing activities
Distributions to partners (100,154) (47,782)
------- -------
Net (decrease) increase in cash and cash equivalents (40,405)
81,396
Beginning of period 56,196 10,719
------- -------
End of period $ 15,791 92,115
======= =======
(continued)
<PAGE>
Southwest Developmental Drilling Fund 91-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
2000 1999
---- ----
Reconciliation of net income to net cash
provided by operating activities
Net income $ 52,020 119,840
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation, depletion and amortization 10,000 20,000
Increase in receivables (4,892) (6,027)
(Decrease) increase in payables 2,772 (3,829)
------- -------
Net cash provided by operating activities $ 59,900 129,984
======= =======
<PAGE>
Southwest Developmental Drilling Fund 91-A, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
1. Organization
Southwest Developmental Drilling Fund 91-A, L.P. was organized under
the laws of the state of Delaware on January 7, 1991 for the purpose
of drilling developmental and exploratory wells and to produce and
market crude oil and natural gas produced from such properties for a
term of 50 years, unless terminated at an earlier date as provided for
in the Partnership Agreement. The Partnership sells its oil and gas
production to a variety of purchasers with the prices it receives
being dependent upon the oil and gas economy. Southwest Royalties,
Inc. serves as the Managing General Partner. Revenues, costs and
expenses are allocated as follows:
Managing
General Investor
Partner Partners
-------- --------
Interest income on capital contributions - 100%
Oil and gas sales* 11% 89%
All other revenues* 11% 89%
Organization and offering costs (1) - 100%
Syndication costs - 100%
Amortization of organization costs - 100%
Lease acquisition costs 1% 99%
Gain/loss on property disposition* 11% 89%
Operating and administrative costs*(2) 11% 89%
Depreciation, depletion and amortization
of oil and gas properties - 100%
Intangible drilling and development costs - 100%
All other costs* 11% 89%
*After the Investor Partners have received distributions totaling 150%
of their capital contributions, the allocation will change to 15%
Managing General Partner and 85% Investor Partners.
(1) All organization costs in excess of 4% of initial capital
contributions will be paid by the Managing General Partner and will be
treated as a capital contribution. The Partnership paid the Managing
General Partner an amount equal to 4% of initial capital contributions
for such organization costs.
(2) Administrative costs in any year which exceed 2% of capital
contributions shall be paid by the Managing General Partner and will
be treated as a capital contribution.
2. Summary of Significant Accounting Policies
The interim financial information as of September 30, 2000, and for
the three and nine months ended September 30, 2000, is unaudited.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in this Form 10-Q
pursuant to the rules and regulations of the Securities and Exchange
Commission. However, in the opinion of management, these interim
financial statements include all the necessary adjustments to fairly
present the results of the interim periods and all such adjustments
are of a normal recurring nature. The interim consolidated financial
statements should be read in conjunction with the audited financial
statements for the year ended December 31, 1999.
<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.
Management does not anticipate performing workovers during the next year.
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, 2000, the net capitalized costs did
not exceed the estimated present value of oil and gas reserves.
<PAGE>
Results of Operations
A. General Comparison of the Quarters Ended September 30, 2000 and 1999
The following table provides certain information regarding performance
factors for the quarters ended September 30, 2000 and 1999:
Three Months
Ended Percentage
September 30, Increase
2000 1999 (Decrease)
---- ---- ---------
Average price per barrel of oil $ 30.99 18.01 72%
Average price per mcf of gas $ 4.51 1.79 152%
Oil production in barrels 1,510 6,220 (76%)
Gas production in mcf 1,700 8,500 (80%)
Gross oil and gas revenue $ 50,127 127,204 (61%)
Net oil and gas revenue $ 31,112 102,702 (70%)
Partnership distributions $ 30,000 25,000 20%
Investor partner distributions $ 26,700 22,250 20%
Per unit distribution to investor partners $ 23.33 19.44 20%
Number of investor partner units 1,144.5 1,144.5
Revenues
The Partnership's oil and gas revenues decreased to $50,127 from $127,204
for the quarters ended September 30, 2000 and 1999, respectively, a
decrease of 61%. The principal factors affecting the comparison of the
quarters ended September 30, 2000 and 1999 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the quarter ended September 30, 2000 as compared to
the quarter ended September 30, 1999 by 72%, or $12.98 per barrel,
resulting in an increase of approximately $80,700 in revenues. Oil
sales represented 86% of total oil and gas sales during the quarter
ended September 30, 2000 as compared to 88% during the quarter ended
September 30, 1999.
The average price for an mcf of gas received by the Partnership
increased during the same period by 152%, or $2.72 per mcf, resulting
in an increase of approximately $23,100 in revenues.
The total increase in revenues due to the change in prices received
from oil and gas production is approximately $103,800. 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 4,710 barrels or 76% during the
quarter ended September 30, 2000 as compared to the quarter ended
September 30, 1999, resulting in a decrease of approximately $146,000
in revenues.
Gas production decreased approximately 6,800 mcf or 80% during the same
period, resulting in a decrease of approximately $30,700 in revenues.
The total decrease in revenues due to the change in production is
approximately $176,600. The sharp decrease in oil and gas production
is in relation to a settlement of royalty on the Dagger Draw Lease.
Production interest of approximately 5,000 bbls and 7,230 mcfs were
held in suspense from 1993 through 1999. These dollars were received
and recorded in Partnership during the third quarter of 1999.
Costs and Expenses
Total costs and expenses decreased to $26,858 from $36,724 for the quarters
ended September 30, 2000 and 1999, respectively, a decrease of 27%. The
decrease is the result of lower lease operating costs and depletion
expense, partially offset by an increase in general and administrative
expense.
1. Lease operating costs and production taxes were 22% lower, or
approximately $5,500 less during the quarter ended September 30, 2000 as
compared to the quarter ended September 30, 1999.
2. General and administrative costs consist of independent accounting and
engineering fees, computer services, postage, and Managing General
Partner personnel costs. General and administrative costs increased 1%
or approximately $20 during the quarter ended September 30, 2000 as
compared to the quarter ended September 30, 1999.
3. Depletion expense decreased to $4,000 for the quarter ended September
30, 2000 from $8,400 for the same period in 1999. This represents a
decrease of 52%. 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 decrease in depletion expense between the comparative
periods was the increase in the price of oil and gas used to value the
reserves offset by the decrease in gross oil and gas revenues caused by
a decrease in ownership of one well which caused our oil and gas
property value to decline.
<PAGE>
B. General Comparison of the Nine Month Periods Ended September 30, 2000
and 1999
The following table provides certain information regarding performance
factors for the nine month periods ended September 30, 2000 and 1999:
Nine Months
Ended Percentage
September 30, Increase
2000 1999 (Decrease)
---- ---- ---------
Average price per barrel of oil $ 29.36 16.03 83%
Average price per mcf of gas $ 3.61 1.68 115%
Oil production in barrels 3,740 11,400 (67%)
Gas production in mcf 5,400 17,200 (69%)
Gross oil and gas revenue $ 129,310 211,648 (39%)
Net oil and gas revenue $ 73,687 152,080 (52%)
Partnership distributions $ 100,000 45,000 122%
Investor partner distributions $ 89,000 40,050 122%
Per unit distribution to investor partners $ 77.76 34.99 122%
Number of investor partner units 1,144.5 1,144.5
Revenues
The Partnership's oil and gas revenues decreased to $129,310 from $211,648
for the nine months ended September 30, 2000 and 1999, respectively, a
decrease of 39%. The principal factors affecting the comparison of the
nine months ended September 30, 2000 and 1999 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the nine months ended September 30, 2000 as compared
to the nine months ended September 30, 1999 by 83%, or $13.33 per
barrel, resulting in an increase of approximately $152,000 in revenues.
Oil sales represented 85% of total oil and gas sales during the nine
months ended September 30, 2000 as compared to 86% during the nine
months ended September 30, 1999.
The average price for an mcf of gas received by the Partnership
increased during the same period by 115%, or $1.93 per mcf, resulting
in an increase of approximately $33,200 in revenues.
The total increase in revenues due to the change in prices received
from oil and gas production is approximately $185,200. 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 7,660 barrels or 67% during the
nine months ended September 30, 2000 as compared to the nine months
ended September 30, 1999, resulting in a decrease of approximately
$224,900 in revenues.
Gas production decreased approximately 11,800 mcf or 69% during the
same period, resulting in a decrease of approximately $42,600 in
revenues.
The total decrease in revenues due to the change in production is
approximately $267,500. The sharp decrease in oil and gas production is
in relation to a settlement of royalty on the Dagger Draw Lease.
Production interest of approximately 5,000 bbls and 7,230 mcfs were
held in suspense from 1993 through 1999. These dollars were received
and recorded in Partnership during the third quarter of 1999.
Costs and Expenses
Total costs and expenses decreased to $77,423 from $92,319 for the nine
months ended September 30, 2000 and 1999, respectively, a decrease of 16%.
The decrease is the result of lower lease operating costs, general and
administrative expense and depletion expense.
1. Lease operating costs and production taxes were 7% lower, or
approximately $3,900 less during the nine months ended September 30,
2000 as compared to the nine months ended September 30, 1999.
2. General and administrative costs consist of independent accounting and
engineering fees, computer services, postage, and Managing General
Partner personnel costs. General and administrative costs decreased 7%
or approximately $1,000 during the nine months ended September 30, 2000
as compared to the nine months ended September 30, 1999.
3. Depletion expense decreased to $10,000 for the nine months ended
September 30, 2000 from $20,000 for the same period in 1999. This
represents a decrease of 50%. 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 increase in the price of oil and gas used
to determine the Partnership's reserves and the increase in oil and gas
revenues received by the Partnership.
<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 $59,900 in
the nine months ended September 30, 2000 as compared to approximately
$130,000 in the nine months ended September 30, 1999. The primary source
of the 2000 cash flow from operating activities was profitable operations.
Cash flows used in investing activities were approximately $200 in the nine
months ended September 30, 2000 as compared to approximately $800 in the
nine months ended September 30, 1999. The principle use of the 2000 cash
flow from investing activities was the change in oil and gas properties.
Cash flows used in financing activities were approximately $100,200 in the
nine months ended September 30, 2000 as compared to approximately $47,800
in the nine months ended September 30, 1999. The only use in financing
activities was the distributions to partners.
Total distributions during the nine months ended September 30, 2000 were
$100,000 of which $89,000 was distributed to the investor partners and
$11,000 to the Managing General Partner. The per unit distribution to
investor partners during the nine months ended September 30, 2000 was
$77.76. Total distributions during the nine months ended September 30,
1999 were $45,000 of which $40,050 was distributed to the investor partners
and $4,950 to the Managing General Partner. The per unit distribution to
investor partners during the nine months ended September 30, 1999 was
$34.99.
The source for the 2000 distributions of $100,000 was oil and gas
operations of approximately $59,900, with the balance from available cash
on hand at the beginning of the period. The source for the 1999
distributions of $45,000 was oil and gas operations of approximately
$130,000 and the change in oil and gas properties of approximately $800,
resulting in excess cash for contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions
of $1,312,740 have been made to the partners. As of September 30, 2000,
$1,170,250 or $1,022.50 per investor partner unit has been distributed to
the investor partners, representing an 102% return of the capital
contributed.
As of September 30, 2000, the Partnership had approximately $40,300 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>
Liquidity - Managing General Partner
The Managing General Partner has a highly leveraged capital structure with
approximately, $33.8 million of cash interest and $5.9 million of principal
due within the next twelve months. The Managing General Partner is
currently in the process of renegotiating the terms of its various
obligations with its note holders and/or attempting to seek new lenders or
equity investors. Additionally, the Managing General Partner would
consider disposing of certain assets in order to meet its obligations.
There can be no assurance that the Managing General Partner's continuing
debt restructuring efforts will be successful or that the lenders will
agree to a course of action consistent with the Managing General Partners
requirements in restructuring the obligations. Even if such agreement is
reached, it may require approval of additional lenders, which is not
assured. Furthermore, there can be no assurance that the sales of assets
can be successfully accomplished on terms acceptable to the Managing
General Partner. Under current circumstances, the Managing General
Partner's ability to continue as a going concern depends upon its ability
to (1) successfully restructure its obligations or obtain additional
financing as may be required, (2) maintain compliance with all debt
covenants, (3) generate sufficient cash flow to meet its obligations on a
timely basis, and (4) achieve satisfactory levels of future earnings. If
the Managing General Partner is unsuccessful in its efforts, it may be
unable to meet its obligations making it necessary to undertake such other
actions as may be appropriate to preserve asset values.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matter to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits:
27 Financial Data Schedule
(b) 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, 2000
<PAGE>
