Page 13 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 92-A, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2387816
(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 92-A, L.P.
Balance Sheets
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 5,396 7,887
Receivable from Managing General Partner 12,416 36,334
--------- ---------
Total current assets 17,812 44,221
--------- ---------
Oil and gas properties - using the
full cost method of accounting 1,314,359 1,315,352
Less accumulated depreciation,
depletion and amortization 807,671 677,000
--------- ---------
Net oil and gas properties 506,688 638,352
--------- ---------
$ 524,500 682,573
========= =========
Liabilities and Partners' Equity
Current liability - distribution payable $ 129 98
--------- ---------
Partners' equity
Investor partners 499,360 654,446
Managing General Partner 25,011 28,029
--------- ---------
524,371 682,475
--------- ---------
Total partners' equity $ 524,500 682,573
========= =========
<PAGE>
Southwest Developmental Drilling Fund 92-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 $ 44,416 75,978 153,445 255,164
Interest 185 130 487 447
------ ------- ------- -------
44,601 76,108 153,932 255,611
------ ------- ------- -------
Expenses
Production 26,240 32,265 84,484 98,853
General and administrative 5,269 3,069 20,681 15,308
Depreciation, depletion and
amortization 2,000 15,184 33,000 48,552
Provision for impairment of
oil and gas properties - - 97,671 -
------ ------- ------- -------
33,509 50,518 235,836 162,713
------ ------- ------- -------
Net income (loss) $ 11,092 25,590 (81,904) 92,898
====== ======= ======= =======
Net income (loss) allocated to:
Managing General Partner $ 1,440 4,485 5,364 15,559
====== ======= ======= =======
Investor Partners $ 9,652 21,105 (87,268) 77,339
====== ======= ======= =======
Per investor partner unit $ 6.86 15.00 (62.02) 54.97
====== ======= ======= =======
<PAGE>
Southwest Developmental Drilling Fund 92-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 $ 171,988 277,255
Cash paid to suppliers (99,790) (114,512)
Interest income 487 447
------- -------
Net cash provided by operating activities 72,685 163,190
------- -------
Cash flows provided by investing activities
Additions to oil and gas properties (7) -
Cash received from sale of oil and gas
property 1,000 180
------- -------
Net cash provided by investing activities 993 180
------- -------
Cash flows used in financing activities
Distributions to partners (76,169) (174,500)
------- -------
Net decrease in cash and cash equivalents (2,491) (11,130)
Beginning of period 7,887 17,730
------- -------
End of period $ 5,396 6,600
======= =======
(continued)
<PAGE>
Southwest Developmental Drilling Fund 92-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Nine Months Ended
September 30,
1998 1997
---- ----
Reconciliation of net income (loss) to net
cash provided by operating activities
Net income (loss) $ (81,904) 92,898
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation, depletion and amortization 33,000 48,552
Provision for impairment of oil and
gas properties 97,671 -
Decrease in receivables 18,543 22,091
Increase (decrease) in payables 5,375 (351)
------- -------
Net cash provided by operating activities $ 72,685 163,190
======= =======
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Developmental Drilling Fund 92-A, L.P. (the Partnership) was
organized as a Delaware limited partnership on May 5, 1992. The offering
of limited and general partner interests began August 11, 1992 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 December 28, 1992, with the offering of limited and general partner
interests concluding December 31, 1992, with total investor partner
contributions of $1,407,000, representing 1,407 interests ($1,000 per
interest). The Managing General Partner made a contribution to the capital
of the Partnership at the conclusion of the offering period in an amount
equal to 1% of its net capital contributions. The Managing General Partner
contribution was $12,030, for total capital contributions of $1,419,030.
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 limited 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.
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 anticipates the Partnership could
possibly experience a normal decline of 5% to 7% a year. There are no
current plans to perform any workovers in the future.
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 $ 12.52 18.74 (33%)
Average price per mcf of gas $ 1.94 2.67 (27%)
Oil production in barrels 2,400 2,900 (17%)
Gas production in mcf 7,400 8,100 (9%)
Gross oil and gas revenue $ 44,416 75,978 (42%)
Net oil and gas revenue $ 18,176 43,713 (58%)
Partnership distributions $ 20,500 49,000 (58%)
Investor partner distributions $ 18,245 43,610 (58%)
Per unit distribution to investor partners $ 12.97 31.00 (58%)
Number of investor partner units 1,407 1,407
Revenues
The Partnership's oil and gas revenues decreased to $44,416 from $75,978
for the quarters ended September 30, 1998 and 1997, respectively, a
decrease of 42%. 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 33%, or $6.22 per barrel,
resulting in a decrease of approximately $18,000 in revenues. Oil
sales represented 68% of total oil and gas sales during the quarter
ended September 30, 1998 as compared to 72% 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 27%, or $.73 per mcf, resulting in
a decrease of approximately $5,900 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $23,900. 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 500 barrels or 17% during the
quarter ended September 30, 1998 as compared to the quarter ended
September 30, 1997, resulting in a decrease of approximately $6,300 in
revenues.
Gas production decreased approximately 700 mcf or 9% during the same
period, resulting in a decrease of approximately $1,400 in revenues.
The total decrease in revenues due to the change in production is
approximately $7,700. The decline in production is primarily
attributable to natural decline.
Costs and Expenses
Total costs and expenses decreased to $33,509 from $50,518 for the quarters
ended September 30, 1998 and 1997, respectively, a decrease of 34%. 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 19% lower, or
approximately $6,000 less 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
72% or approximately $2,200 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 $2,000 for the quarter ended September
30, 1998 from $13,000 for the same period in 1997. This represents a
decrease of 85%. 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>
Results of Operations
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 $ 13.42 20.65 (35%)
Average price per mcf of gas $ 1.99 2.52 (21%)
Oil production in barrels 8,400 9,400 (11%)
Gas production in mcf 20,400 24,200 (16%)
Gross oil and gas revenue $ 153,445 255,164 (40%)
Net oil and gas revenue $ 68,961 156,311 (56%)
Partnership distributions $ 76,200 174,500 (56%)
Investor partner distributions $ 67,818 155,305 (56%)
Per unit distribution to investor partners $ 48.20 110.38 (56%)
Number of investor partner units 1,407 1,407
Revenues
The Partnership's oil and gas revenues decreased to $153,445 from $255,164
for the nine months ended September 30, 1998 and 1997, respectively, a
decrease of 40%. 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 35%, or $7.23 per
barrel, resulting in a decrease of approximately $68,000 in revenues.
Oil sales represented 74% of total oil and gas sales during the quarter
ended September 30, 1998 as compared to 76% 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 21%, or $.53 per mcf, resulting in
a decrease of approximately $12,800 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $80,800. 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 1,000 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
$13,400 in revenues.
Gas production decreased approximately 3,800 mcf or 16% during the same
period, resulting in a decrease of approximately $7,600 in revenues.
The total decrease in revenues due to the change in production is
approximately $21,000. The decline in production is primarily
attributable to natural decline.
Costs and Expenses
Total costs and expenses increased to $235,836 from $162,713 for the nine
months ended September 30, 1998 and 1997, respectively, an increase of 45%.
The increase is the result of higher general and administrative expense,
partially offset by a decrease in lease operating costs and depletion
expense.
1. Lease operating costs and production taxes were 15% lower, or
approximately $14,400 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
35% or approximately $5,400 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 decreased to $33,000 for the nine months ended
September 30, 1998 from $42,000 for the same period in 1997. This
represents a decrease of 21%. 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.
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 $97,671, 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 $72,700 in
the nine months ended September 30, 1998 as compared to approximately
$163,200 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 investing activities were approximately $993 in the
nine months ended September 30, 1998 as compared to $200 in the nine months
ended September 30, 1997. The principle source of the 1998 cash flow from
investing activities was the change in oil and gas properties.
Cash flows used in financing activities were approximately $76,200 in the
nine months ended September 30, 1998 as compared to approximately $174,500
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
$76,200 of which $67,818 was distributed to the investor partners and
$8,382 to the Managing General Partner. The per unit distribution to
investor partners during the nine months ended September 30, 1998 was
$48.20. Total distributions during the nine months ended September 30,
1997 were $174,500 of which $155,305 was distributed to the investor
partners and $19,195 to the Managing General Partner. The per unit
distribution to investor partners during the nine months ended September
30, 1997 was $110.38.
The source for the 1998 distributions of $76,200 was oil and gas operations
of approximately $72,700 and the change in oil and gas properties of
approximately $1,000, with the balance from available cash on hand at the
beginning of the period. The sources for the 1997 distributions of
$174,500 were oil and gas operations of approximately $163,200 and the
change in oil and gas properties of approximately $200, with the balance
from available cash on hand at the beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions
of $1,051,915 have been made to the partners. As of September 30, 1998,
$936,580 or $665.66 per investor partner unit has been distributed to the
investor partners, representing a 67% return of the capital contributed.
As of September 30, 1998, the Partnership had approximately $17,700 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 92-
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 31, 1998 (Unaudited) and is
qualified in its entirety by reference to such financial statement.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,396
<SECURITIES> 0
<RECEIVABLES> 12,416
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,812
<PP&E> 1,314,359
<DEPRECIATION> 807,671
<TOTAL-ASSETS> 524,500
<CURRENT-LIABILITIES> 129
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 524,371
<TOTAL-LIABILITY-AND-EQUITY> 524,500
<SALES> 153,445
<TOTAL-REVENUES> 153,932
<CGS> 84,484
<TOTAL-COSTS> 84,484
<OTHER-EXPENSES> 151,352
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (81,904)
<INCOME-TAX> 0
<INCOME-CONTINUING> (81,904)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (81,904)
<EPS-PRIMARY> (62.02)
<EPS-DILUTED> (62.02)
</TABLE>
