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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, 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 notes 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
six month periods ended June 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
June 30, December 31,
2000 1999
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 36,340 22,743
Receivable from Managing General Partner 49,020 37,250
--------- ---------
Total current assets 85,360 59,993
--------- ---------
Oil and gas properties - using the
full cost method of accounting 1,314,442 1,314,442
Less accumulated depreciation,
depletion and amortization 1,096,240 1,088,240
--------- ---------
Net oil and gas properties 218,202 226,202
--------- ---------
$ 303,562 286,195
========= =========
Liabilities and Partners' Equity
Partners' equity:
Investor partners $ 271,098 256,521
Managing General Partner 32,464 29,674
--------- ---------
Total partners' equity 303,562 286,195
--------- ---------
$ 303,562 286,195
========= =========
<PAGE>
Southwest Developmental Drilling Fund 92-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues
Oil and gas $ 92,439 55,715 182,403 95,735
Interest 128 38 185 66
------- ------- ------- -------
92,567 55,753 182,588 95,801
------- ------- ------- -------
Expenses
Production 30,291 20,227 58,661 46,087
General and administrative 4,327 4,917 8,560 9,372
Depreciation, depletion and
amortization 3,000 4,000 8,000 9,000
------- ------- ------- -------
37,618 29,144 75,221 64,459
------- ------- ------- -------
Net income $ 54,949 26,609 107,367 31,342
======= ======= ======= =======
Net income allocated to:
Managing General Partner $ 6,374 3,367 12,690 4,438
======= ======= ======= =======
Investor partners $ 48,575 23,242 94,677 26,904
======= ======= ======= =======
Per investor partner unit $ 34.52 16.52 67.29 19.12
======= ======= ======= =======
<PAGE>
Southwest Developmental Drilling Fund 92-A, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
Cash received from oil and gas sales $ 170,210 86,276
Cash paid to suppliers (66,798) (60,220)
Interest income 185 66
------- -------
Net cash provided by operating activities 103,597 26,122
------- -------
Cash flows used in investing activities:
Additions of oil and gas properties - (12)
------- --------
Cash flows used in financing activities:
Distributions to partners (90,000) (26,080)
------- -------
Net increase in cash and cash equivalents 13,597 30
Beginning of period 22,743 7,512
------- -------
End of period $ 36,340 7,542
======= =======
(continued)
<PAGE>
Southwest Developmental Drilling Fund 92-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Six Months Ended
June 30,
2000 1999
Reconciliation of net income to net
cash provided by operating activities:
Net income $ 107,367 31,342
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 8,000 9,000
Increase in receivables (12,193) (9,459)
(Decrease) increase in payables 423 (4,761)
------- -------
Net cash provided by operating activities $ 103,597 26,122
======= =======
<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 June 30, 2000, and for the
three and six months ended June 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 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. As of June 30, 2000, the Partnership's capitalized cost
did not exceed the present value of oil and gas reserves.
<PAGE>
Results of Operations
A. General Comparison of the Quarters Ended June 30, 2000 and 1999
The following table provides certain information regarding performance
factors for the quarters ended June 30, 2000 and 1999:
Three Months
Ended Percentage
June 30, Increase
2000 1999 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 27.63 16.05 72%
Average price per mcf of gas $ 4.11 2.20 87%
Oil production in barrels 2,600 2,760 (6%)
Gas production in mcf 5,300 5,200 2%
Gross oil and gas revenue $ 92,439 55,715 66%
Net oil and gas revenue $ 62,148 35,488 75%
Partnership distributions $ 50,000 16,000 213%
Investor partner distributions $ 44,500 14,240 213%
Per unit distribution to investor
partners $ 31.63 10.12 213%
Number of investor partner units 1,407 1,407
Revenues
The Partnership's oil and gas revenues increased to $92,439 from $55,715
for the quarters ended June 30, 2000 and 1999, respectively, an increase of
66%. The principal factors affecting the comparison of the quarters ended
June 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 June 30, 2000 as compared to the
quarter ended June 30, 1999 by 72%, or $11.58 per barrel, resulting in
an increase of approximately $31,960 in revenues. Oil sales
represented 77% of total oil and gas sales during the quarter ended
June 30, 2000 as compared to 79% during the quarter ended June 30,
1999.
The average price for an mcf of gas received by the Partnership
increased during the same period by 87%, or $1.91 per mcf, resulting in
an increase of approximately $9,900 in revenues.
The total increase in revenues due to the change in prices received
from oil and gas production is approximately $41,860. 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 160 barrels or 6% during the
quarter ended June 30, 2000 as compared to the quarter ended June 30,
1999, resulting in a decrease of approximately $4,400 in revenues.
Gas production increased approximately 100 mcf or 2% during the same
period, resulting in an increase of approximately $400 in revenues.
The net total decrease in revenues due to the change in production is
approximately $4,000.
Costs and Expenses
Total costs and expenses increased to $37,618 from $29,144 for the quarters
ended June 30, 2000 and 1999, respectively, an increase of 29%. The
increase is primarily the result of higher lease operating costs, partially
offset by a decrease in general and administrative expense and depletion
expense.
1. Lease operating costs and production taxes were 50% higher, or
approximately $10,000 more during the quarter ended June 30, 2000 as
compared to the quarter ended June 30, 1999. The increase in lease
operating costs and production taxes is primarily a result of the
higher oil and gas prices received by the Partnership. Higher prices
have made it possible for the Partnership to perform needed major
repairs and maintenance. Since production taxes are based on gross
revenues, the increase in oil and gas prices have directly increased
production taxes.
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
12% or approximately $590 during the quarter ended June 30, 2000 as
compared to the quarter ended June 30, 1999.
3. Depletion expense decreased to $3,000 for the quarter ended June 30,
2000 from $4,000 for the same period in 1999. This represents a
decrease of 25%. 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 for July 1, 2000 as compared to 1999.
<PAGE>
B. General Comparison of the Six Month Periods Ended June 30, 2000 and
1999
The following table provides certain information regarding performance
factors for the six month periods ended June 30, 2000 and 1999:
Six Months
Ended Percentage
June 30, Increase
2000 1999 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 28.17 13.13 115%
Average price per mcf of gas $ 3.56 2.06 73%
Oil production in barrels 5,200 5,360 (3%)
Gas production in mcf 10,100 12,300 (18%)
Gross oil and gas revenue $ 182,403 95,735 91%
Net oil and gas revenue $ 123,742 49,648 149%
Partnership distributions $ 90,000 26,000 246%
Investor partner distributions $ 80,100 23,140 246%
Per unit distribution to investor
partners $ 56.93 16.45 246%
Number of limited partner units 1,407 1,407
Revenues
The Partnership's oil and gas revenues increased to $182,403 from $95,735
for the six months ended June 30, 2000 and 1999, respectively, an increase
of 91%. The principal factors affecting the comparison of the six months
ended June 30, 2000 and 1999 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the six months ended June 30, 2000 as compared to the
six months ended June 30, 1999 by 115%, or $15.04 per barrel, resulting
in an increase of approximately $80,600 in revenues. Oil sales
represented 80% of the total oil and gas sales during the six months
ended June 30, 2000 as compared to 74% during the six months ended June
30, 1999.
The average price for an mcf of gas received by the Partnership
increased during the same period by 73%, or $1.50 per mcf, resulting in
an increase of approximately $18,400 in revenues.
The total increase in revenues due to the change in prices received
from oil and gas production is approximately $99,000. 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 160 barrels or 3% during the six
months ended June 30, 2000 as compared to the six months ended June 30,
1999, resulting in a decrease of approximately $4,500 in revenues.
Gas production decreased approximately 2,200 mcf or 18% during the same
period, resulting in a decrease of approximately $7,800 in revenues.
The total decrease in revenues due to the change in production is
approximately $12,300.
Costs and Expenses
Total costs and expenses increased to $75,221 from $64,459 for the six
months ended June 30, 2000 and 1999, respectively, an increase of 17%. The
increase is primarily the result higher lease operating costs, partially
offset by a decrease in general and administrative expense, depletion
expense and.
1. Lease operating costs and production taxes were 27% higher, or
approximately $12,600 more during the six months ended June 30, 2000 as
compared to the six months ended June 30, 1999. The increase in lease
operating costs and production taxes is primarily a result of the
higher oil and gas prices received by the Partnership. Higher prices
have made it possible for the Partnership to perform needed major
repairs and maintenance. Since production taxes are based on gross
revenues, the increase in oil and gas prices have directly increased
production taxes.
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 9%
or approximately $800 during the six months ended June 30, 2000 as
compared to the six months ended June 30, 1999.
3. Depletion expense decreased to $8,000 for the six months ended June 30,
2000 from $9,000 for the same period in 1999. This represents a
decrease of 11%. 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 for July 1, 2000 as compared to 1999.
<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 $103,600 in
the six months ended June 30, 2000 as compared to approximately $26,100 in
the six months ended June 30, 1999. The primary source of the 2000 cash
flow from operating activities was profitable operations.
There were no investing activities in the six months ended June 30, 2000.
Cash flows used in financing activities were $90,000 in the six months
ended June 30, 2000 as compared to $26,100 in the six months ended June 30,
1999. The only use in financing activities was the distributions to
partners.
Total distributions during the six months ended June 30, 2000 were $90,000
of which $80,100 was distributed to the investor partners and $9,900 to the
Managing General Partner. The per unit distribution to investor partners
during the six months ended June 30, 2000 was $56.93. Total distributions
during the six months ended June 30, 1999 were $26,000 of which $23,140 was
distributed to the investor partners and $2,860 to the Managing General
Partner. The per unit distribution to investor partners during the six
months ended June 30, 1999 was $16.45.
The source for the 2000 distributions of $90,000 was oil and gas operations
of approximately $103,600, resulting in excess cash for contingencies or
subsequent distributions. The source for the 1999 distributions of $26,000
was oil and gas operations of approximately $26,100.
Since inception of the Partnership, cumulative monthly cash distributions
of $1,242,915 have been made to the partners. As of June 30, 2000,
$1,106,570 or $786.47 per investor partner unit has been distributed to the
investor partners, representing a 78% return of the capital contributed.
As of June 30, 2000, the Partnership had approximately $85,360 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
over $50.1 million principal due by December 31, 2000 and $15.3 million
interest payments due within the next twelve months on its debt
obligations. The Managing General Partner is currently in the process of
renegotiating the terms of its various obligations with its creditors
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 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) Reports on Form 8-K:
No reports on Form 8-
K were filed during the quarter ended June 30,2000.
<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/ J Steven Person
------------------------------
J Steven Person, Vice-President of
Marketing and Chief Financial Officer
of Southwest Royalties, Inc.
the Managing General Partner
Date: August 15, 2000
<PAGE>
