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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 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 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 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 92-A, L.P.
Balance Sheets
September 30, December 31,
2000 1999
------------- ------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 33,181 22,743
Receivable from Managing General Partner 59,788 37,250
--------- ---------
Total current assets 92,969 59,993
--------- ---------
Oil and gas properties - using the
full cost method of accounting 1,314,509 1,314,442
Less accumulated depreciation,
depletion and amortization 1,101,240 1,088,240
--------- ---------
Net oil and gas properties 213,269 226,202
--------- ---------
$ 306,238 286,195
========= =========
Liabilities and Partners' Equity
Partners' equity
Managing General Partner $ 33,309 29,674
Investor partners 272,929 256,521
--------- ---------
Total partners' equity 306,238 286,195
--------- ---------
$ 306,238 286,195
========= =========
<PAGE>
Southwest Developmental Drilling Fund 92-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 $ 107,940 77,213 290,343 172,948
Interest 187 82 372 148
------- ------- ------- -------
108,127 77,295 290,715 173,096
------- ------- ------- -------
Expenses
Production 36,306 34,087 94,967 80,174
General and administrative 4,145 4,087 12,705 13,458
Depreciation, depletion and
amortization 5,000 3,000 13,000 12,000
------- ------- ------- -------
45,451 41,174 120,672 105,632
------- ------- ------- -------
Net income $ 62,676 36,121 170,043 67,464
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 7,444 4,303 20,135 8,741
======= ======= ======= =======
Investor Partners $ 55,232 31,818 149,908 58,723
======= ======= ======= =======
Per investor partner unit $ 39.25 22.61 106.54 41.74
======= ======= ======= =======
<PAGE>
Southwest Developmental Drilling Fund 92-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 $ 264,076 147,267
Cash paid to suppliers (103,943) (93,766)
Interest income 372 148
------- -------
Net cash provided by operating activities 160,505 53,649
------- -------
Cash flows provided by investing activities
Additions to oil and gas properties (67) (12)
------- -------
Cash flows used in financing activities
Distributions to partners (150,000) (45,020)
------- -------
Net increase in cash and cash equivalents 10,438 8,617
Beginning of period 22,743 7,512
------- -------
End of period $ 33,181 16,129
======= =======
(continued)
<PAGE>
Southwest Developmental Drilling Fund 92-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 $ 170,043 67,464
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation, depletion and amortization 13,000 12,000
Increase in receivables (26,267) (25,681)
Increase (decrease) in payables 3,729 (134)
------- -------
Net cash provided by operating activities $ 160,505 53,649
======= =======
<PAGE>
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
1. Organization
Southwest Developmental Drilling Fund 92-A, L.P. was organized under
the laws of the state of Delaware on May 5, 1992, for the purpose of
engaging primarily in the business of drilling developmental and
exploratory wells, to produce and market crude oil and natural gas
produced from such properties, and acquire leases which contain
drilling prospects. The activities of the Partnership should continue
for a term of 50 years, unless terminated at an earlier date as
provided for in the Partnership Agreement. The Partnership
anticipates selling 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 General
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 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 7% to 9% 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 nine months ended September 30, 2000, the net
capitalized cost 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 $ 31.34 21.06 49%
Average price per mcf of gas $ 4.79 2.53 89%
Oil production in barrels 2,540 2,800 (9%)
Gas production in mcf 6,260 7,210 (13%)
Gross oil and gas revenue $ 107,940 77,213 40%
Net oil and gas revenue $ 71,634 43,126 66%
Partnership distributions $ 60,000 19,000 216%
Investor partner distributions $ 53,400 16,910 216%
Per unit distribution to investor partners $ 37.95 12.02 216%
Number of investor partner units 1,407 1,407
Revenues
The Partnership's oil and gas revenues increased to $107,940 from $77,213
for the quarters ended September 30, 2000 and 1999, respectively, an
increase of 40%. 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 49%, or $10.28 per barrel,
resulting in an increase of approximately $28,800 in revenues. Oil
sales represented 73% of total oil and gas sales during the quarter
ended September 30, 2000 as compared to 76% 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 89%, or $2.26 per mcf, resulting in
an increase of approximately $16,300 in revenues.
The total increase in revenues due to the change in prices received
from oil and gas production is approximately $45,100. 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 260 barrels or 9% during the
quarter ended September 30, 2000 as compared to the quarter ended
September 30, 1999, resulting in a decrease of approximately $8,100 in
revenues.
Gas production decreased approximately 950 mcf or 13% during the same
period, resulting in a decrease of approximately $4,600 in revenues.
The total decrease in revenues due to the change in production is
approximately $12,700.
Costs and Expenses
Total costs and expenses increased to $45,451 from $41,174 for the quarters
ended September 30, 2000 and 1999, respectively, an increase of 10%. The
increase is the result of higher lease operating costs, depletion expense
and general and administrative expense.
1. Lease operating costs and production taxes were 7% higher, or
approximately $2,200 more 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 $100 during the quarter ended September 30, 2000 as
compared to the quarter ended September 30, 1999.
3. Depletion expense increased to $5,000 for the quarter ended September
30, 2000 from $3,000 for the same period in 1999. This represents an
increase of 67%. 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. The increase in
depletion expense is due to an accrual adjustment, which was made
during the quarter ended September 30, 1999 to adjust for the over
accrual of depletion in the first two quarters of 1999. The rapid rise
in prices during the first three quarters of 1999 from $14/bbl to
$23/bbl and from $1.71/mcf to $2.38/mcf caused an adjustment to be
necessary during the third quarter of 1999.
<PAGE>
Results of Operations
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 $ 29.16 15.85 84%
Average price per mcf of gas $ 3.80 2.23 70%
Oil production in barrels 7,790 8,160 (5%)
Gas production in mcf 16,620 19,510 (15%)
Gross oil and gas revenue $ 290,343 172,948 68%
Net oil and gas revenue $ 195,376 92,774 111%
Partnership distributions $ 150,000 45,000 233%
Investor partner distributions $ 133,500 40,050 233%
Per unit distribution to investor partners $ 94.88 28.46 233%
Number of investor partner units 1,407 1,407
Revenues
The Partnership's oil and gas revenues increased to $290,343 from $172,948
for the nine months ended September 30, 2000 and 1999, respectively, an
increase of 68%. 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 84%, or $13.31 per
barrel, resulting in an increase of approximately $108,600 in revenues.
Oil sales represented 78% of total oil and gas sales during the nine
months ended September 30, 2000 as compared to 75% 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 70%, or $1.57 per mcf, resulting in
an increase of approximately $30,600 in revenues.
The total increase in revenues due to the change in prices received
from oil and gas production is approximately $139,200. 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 370 barrels or 5% during the
nine months ended September 30, 2000 as compared to the nine months
ended September 30, 1999, resulting in a decrease of approximately
$10,800 in revenues.
Gas production decreased approximately 2,890 mcf or 15% during the same
period, resulting in a decrease of approximately $11,000 in revenues.
The total decrease in revenues due to the change in production is
approximately $21,800.
Costs and Expenses
Total costs and expenses increased to $120,672 from $105,632 for the nine
months ended September 30, 2000 and 1999, respectively, an increase of 14%.
The increase is the result of higher lease operating costs and depletion
expense, partially offset by a decrease in general and administrative
expense.
1. Lease operating costs and production taxes were 18% higher, or
approximately $14,800 more 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 6%
or approximately $800 during the nine months ended September 30, 2000
as compared to the nine months ended September 30, 1999.
3. Depletion expense increased to $13,000 for the nine months ended
September 30, 2000 from $12,000 for the same period in 1999. This
represents an increase of 8%. 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 $160,500 in
the nine months ended September 30, 2000 as compared to approximately
$53,600 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 $67 in the nine
months ended September 30, 2000 as compared to $12 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 $150,000 in the
nine months ended September 30, 2000 as compared to approximately $45,000
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
$150,000 of which $133,500 was distributed to the investor partners and
$16,500 to the Managing General Partner. The per unit distribution to
investor partners during the nine months ended September 30, 2000 was
$94.88. 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
$28.46.
The source for the 2000 distributions of $150,000 was oil and gas
operations of approximately $160,500, resulting in excess cash for
contingencies or subsequent distributions. The sources for the 1999
distributions of $45,000 were oil and gas operations of approximately
$53,600, resulting in excess cash for contingencies or subsequent
distributions.
Since inception of the Partnership, cumulative monthly cash distributions
of $1,302,915 have been made to the partners. As of September 30, 2000,
$1,159,970 or $824.43 per investor partner unit has been distributed to the
investor partners, representing a 82% return of the capital contributed.
As of September 30, 2000, the Partnership had approximately $93,000 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 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, 2000
<PAGE>
