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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 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 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 Developmental Drilling Fund 92-A, L.P.
Balance Sheets
June 30, December 31,
1998 1997
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 5,353 7,887
Receivable from Managing General Partner 18,761 36,334
--------- ---------
Total current assets 24,114 44,221
--------- ---------
Oil and gas properties - using the
full cost method of accounting 1,315,359 1,315,352
Less accumulated depreciation,
depletion and amortization 805,671 677,000
--------- ---------
Net oil and gas properties 509,688 638,352
--------- ---------
$ 533,802 682,573
========= =========
Liabilities and Partners' Equity
Current liability - Accounts payable $ 22 98
--------- ---------
Partners' equity:
Investor partners 507,954 654,446
Managing General Partner 25,826 28,029
--------- ---------
Total partners' equity 533,780 682,475
--------- ---------
$ 533,802 682,573
========= =========
<PAGE>
Southwest Developmental Drilling Fund 92-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues
Oil and gas $ 49,075 90,067 109,029 179,186
Interest 142 151 302 317
------- ------- ------- -------
49,217 90,218 109,331 179,503
------- ------- ------- -------
Expenses
Production 27,226 30,624 58,244 66,588
General and administrative 5,876 3,612 15,411 12,239
Depreciation, depletion and
amortization 16,000 16,184 31,000 33,368
Provision for impairment of oil
gas properties 97,671 - 97,671 -
------- ------- ------- -------
146,773 50,420 202,326 112,195
------- ------- ------- -------
Net income (loss) $ (97,556) 39,798 (92,995) 67,308
======= ======= ======= =======
Net income (loss) allocated to:
Managing General Partner $ 1,773 6,158 3,924 11,074
======= ======= ======= =======
Investor partners $ (99,329) 33,640 (96,919) 56,234
======= ======= ======= =======
Per investor partner unit $ (70.60) 23.91 (68.88) 39.97
======= ======= ======= =======
<PAGE>
Southwest Developmental Drilling Fund 92-A, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Cash received from oil and gas sales $ 123,354 196,811
Cash paid to suppliers (70,407) (82,959)
Interest income 302 317
------- -------
Net cash provided by operating activities 53,249 114,169
------- -------
Cash flows used in investing activities:
Additions of oil and gas properties (7) -
------- --------
Cash flows used in financing activities:
Distributions to partners (55,776) (125,500)
------- -------
Net decrease in cash and cash equivalents (2,534) (11,331)
Beginning of period 7,887 17,730
------- -------
End of period $ 5,353 6,399
======= =======
(continued)
<PAGE>
Southwest Developmental Drilling Fund 92-A, 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) $ (92,995) 67,308
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 31,000 33,368
Provision for impairment of oil and gas
properties 97,671 -
Decrease in receivables 14,325 17,625
Increase (decrease) in payables 3,248 (4,132)
------- -------
Net cash provided by operating activities $ 53,249 114,169
======= =======
<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. The Partnership reduced the net capitalized costs of oil
and gas properties in the quarter ended June 30, 1998 by approximately
$97,671. The write-down has the effect of reducing net income, but did not
affect cash flow or partner distribution. 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 $ 12.76 19.76 (35%)
Average price per mcf of gas $ 2.17 2.96 (27%)
Oil production in barrels 2,740 3,300 (17%)
Gas production in mcf 6,500 8,400 (23%)
Gross oil and gas revenue $ 49,075 90,067 (46%)
Net oil and gas revenue $ 21,849 59,443 (63%)
Partnership distributions $ 15,200 54,500 (72%)
Investor partner distributions $ 13,528 48,505 (72%)
Per unit distribution to investor
partners $ 9.61 34.47 (72%)
Number of investor partner units 1,407 1,407
Revenues
The Partnership's oil and gas revenues decreased to $49,075 from $90,067
for the quarters ended June 30, 1998 and 1997, respectively, a decrease of
46%. 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 35%, or $7.00 per barrel, resulting in a
decrease of approximately $23,100 in revenues. Oil sales represented
71% of total oil and gas sales during the quarter ended June 30, 1998
as compared to 72% 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 27%, or $.79 per mcf, resulting in
a decrease of approximately $6,600 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $29,700. 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 decreased approximately 560 barrels or 17% during the
quarter ended June 30, 1998 as compared to the quarter ended June 30,
1997, resulting in a decrease of approximately $7,100 in revenues.
Gas production decreased approximately 1,900 mcf or 23% during the same
period, resulting in a decrease of approximately $4,100 in revenues.
The total decrease in revenues due to the change in production is
approximately $11,200. The decline in production is attributable to
normal decline.
Costs and Expenses
Total costs and expenses increased to $146,773 from $50,420 for the
quarters ended June 30, 1998 and 1997, respectively, an increase of 191%.
The increase is primarily the result of higher general and administrative
expense and depletion expense, partially offset by a decrease in lease
operating costs.
1. Lease operating costs and production taxes were 11% lower, or
approximately $3,400 less during the quarter ended June 30, 1998 as
compared to the quarter ended June 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
63% or approximately $2,300 during the quarter ended June 30, 1998 as
compared to the quarter ended June 30, 1997. Increase in general and
administrative costs are the result of higher accounting fees due to
the necessity of contracting out preparation of tax depletion and K-1
schedules.
3. Depletion expense increased to $16,000 for the quarter ended June 30,
1998 from $14,000 for the same period in 1997. This represents an
increase of 14%. Depletion is calculated using the units of revenue
method of amortization based on a percentage of current period gross
revenues to total future gross oil and gas revenues, as estimated by
the Partnership's independent petroleum consultants. Contributing
factors to the increase in depletion expense between the comparative
periods were the decrease in the price of oil used to determine the
Partnership's reserves for 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 $97,671. The write-
down has the effect of reducing net income, but did not affect cash
flow or partner distribution.
<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 $ 13.79 21.50 (36%)
Average price per mcf of gas $ 2.02 2.45 (18%)
Oil production in barrels 6,000 6,500 (8%)
Gas production in mcf 13,000 16,100 (19%)
Gross oil and gas revenue $ 109,029 179,186 (39%)
Net oil and gas revenue $ 50,785 112,598 (55%)
Partnership distributions $ 55,700 125,500 (56%)
Investor partner distributions $ 49,573 111,695 (56%)
Per unit distribution to investor
partners $ 35.23 79.39 (56%)
Number of limited partner units 1,407 1,407
Revenues
The Partnership's oil and gas revenues decreased to $109,029 from $179,186
for the six months ended June 30, 1998 and 1997, respectively, a decrease
of 39%. 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 36%, or $7.71 per barrel, resulting
in a decrease of approximately $50,100 in revenues. Oil sales
represented 76% of the total oil and gas sales during the six months
ended June 30, 1998 as compared to 78% during the six months ended June
30, 1997.
The average price for an mcf of gas received by the Partnership
decreased during the same period by 18%, or $.43 per mcf, resulting in
a decrease of approximately $6,900 in revenues.
The total decrease in revenues due to the change in prices received
from oil and gas production is approximately $57,000. 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 8% during the six
months ended June 30, 1998 as compared to the six months ended June 30,
1997, resulting in a decrease of approximately $6,900 in revenues.
Gas production decreased approximately 3,100 mcf or 19% during the same
period, resulting in a decrease of approximately $6,300 in revenues.
The total decrease in revenues due to the change in production is
approximately $13,200. The decline in production is attributable to
normal decline.
Costs and Expenses
Total costs and expenses increased to $202,326 from $112,195 for the six
months ended June 30, 1998 and 1997, respectively, an increase of 80%. The
increase is primarily the result higher general and administrative expense
and depletion expense, partially offset by a decrease in lease operating
costs.
1. Lease operating costs and production taxes were 13% lower, or
approximately $8,300 less during the six months ended June 30, 1998 as
compared to the six months ended June 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
26% or approximately $3,200 during the six months ended June 30, 1998
as compared to the six months ended June 30, 1997. Increase in general
administrative costs are the result of higher accounting fees due to
the necessity of contracting out preparation of tax depletion an K-1
schedules.
3. Depletion expense increased to $31,000 for the six months ended June
30, 1998 from $29,000 for the same period in 1997. This represents an
increase of 7%. Depletion is calculated using the units of revenue
method of amortization based on a percentage of current period gross
revenues to total future gross oil and gas revenues, as estimated by
the Partnership's independent petroleum consultants. Contributing
factors to the increase in depletion expense between the comparative
periods were the decrease in the price of oil used to determine the
Partnership's reserves for 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 $97,671. 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 $53,200 in
the six months ended June 30, 1998 as compared to approximately $114,200 in
the six months ended June 30, 1997. The primary source of the 1998 cash
flow from operating activities was profitable operations.
Cash flow used in investing activities were approximately $7 in the six
months ended June 30, 1998. There were no investing activities in the six
months ended June 30, 1997.
Cash flows used in financing activities were $55,800 in the six months
ended June 30, 1998 as compared to $125,500 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 $55,700
of which $49,573 was distributed to the investor partners and $6,127 to the
Managing General Partner. The per unit distribution to investor partners
during the six months ended June 30, 1998 was $35.23. Total distributions
during the six months ended June 30, 1997 were $125,500 of which $111,695
was distributed to the investor partners and $13,805 to the Managing
General Partner. The per unit distribution to investor partners during the
six months ended June 30, 1997 was $79.39.
The source for the 1998 distributions of $55,700 was oil and gas operations
of approximately $53,200 with the balance from available cash on hand at
the beginning of the period. The source for the 1997 distributions of
$125,500 was oil and gas operations of approximately $114,200, with the
balance from available cash on hand at the beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions
of $1,031,415 have been made to the partners. As of June 30, 1998,
$918,335 or $652.69 per investor partner unit has been distributed to the
investor partners, representing a 65% return of the capital contributed.
As of June 30, 1998, the Partnership had approximately $24,100 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 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: 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> 5,353
<SECURITIES> 0
<RECEIVABLES> 18,761
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,114
<PP&E> 1,315,359
<DEPRECIATION> 805,671
<TOTAL-ASSETS> 533,802
<CURRENT-LIABILITIES> 22
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 533,780
<TOTAL-LIABILITY-AND-EQUITY> 533,802
<SALES> 109,029
<TOTAL-REVENUES> 109,331
<CGS> 58,244
<TOTAL-COSTS> 58,244
<OTHER-EXPENSES> 144,082
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (92,995)
<INCOME-TAX> 0
<INCOME-CONTINUING> (92,995)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (92,995)
<EPS-PRIMARY> (68.88)
<EPS-DILUTED> (68.88)
</TABLE>
