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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 March 31, 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 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, 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 month
period ended March 31, 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
March 31, December 31,
2000 1999
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 31,147 22,743
Receivable from Managing General Partner 46,264 37,250
--------- ---------
Total current assets 77,411 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 1,093,240 1,088,240
--------- ---------
Net oil and gas properties 221,202 226,202
--------- ---------
$ 298,613 286,195
========= =========
Liabilities and Partners' Equity
Partners' equity:
Investor partners $ 267,023 256,521
Managing General Partner 31,590 29,674
--------- ---------
Total partners' equity 298,613 286,195
--------- ---------
$ 298,613 286,195
========= =========
<PAGE>
Southwest Developmental Drilling Fund 92-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
Revenues
Oil and gas $ 89,963 40,020
Interest 57 28
------- -------
90,020 40,048
------- -------
Expenses
Production 28,370 25,860
General and administrative 4,232 4,454
Depreciation, depletion and amortization 5,000 5,000
------- -------
37,602 35,314
------- -------
Net income $ 52,418 4,734
======= =======
Net income allocated to:
Managing General Partner $ 6,316 1,071
======= =======
Investor partners $ 46,102 3,663
======= =======
Per investor partner unit $ 32.77 2.60
======= =======
<PAGE>
Southwest Developmental Drilling Fund 92-A, L.P.
Statements of Cash Flows
(unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
Cash flows from operating activities:
Cash received from oil and gas sales $ 79,259 41,170
Cash paid to suppliers (30,912) (34,038)
Interest income 57 28
------- -------
Net cash provided by operating activities 48,404 7,160
------- -------
Cash flows used in investing activities:
Additions to oil and gas properties - (10)
------- -------
Cash flows used in financing activities:
Distribution to investor partners (40,000) (10,015)
------- -------
Net increase (decrease) in cash and cash equivalents 8,404
(2,865)
Beginning of period 22,743 7,512
------- -------
End of period $ 31,147 4,647
======= =======
(continued)
<PAGE>
Southwest Developmental Drilling Fund 92-A, L.P.
Statements of Cash Flows, continued
(unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
Reconciliation of net income to net
cash provided by operating activities:
Net income $ 52,418 4,734
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 5,000 5,000
(Increase) decrease in receivables (10,704) 1,150
Increase (decrease) in payables 1,690 (3,724)
------- -------
Net cash provided by operating activities $ 48,404 7,160
======= =======
<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 March 31, 2000, and for the
three months ended March 31, 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" or
"Registrant") 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. 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.
Based on current conditions, management does not anticipate performing 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 March 31, 2000, the net capitalized costs did not
exceed the estimated present value of oil and gas reserves.
<PAGE>
Results of Operations
A. General Comparison of the Quarters Ended March 31, 2000 and 1999
The following table provides certain information regarding performance
factors for the quarters ended March 31, 2000 and 1999.
Three Months
Ended Percentage
March 31, Increase
2000 1999 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 28.66 10.04 185%
Average price per mcf of gas $ 3.03 1.96 55%
Oil production in barrels 2,600 2,600 -
Gas production in mcf 5,100 7,100 (28%)
Gross oil and gas revenue $ 89,963 40,020 125%
Net oil and gas revenue $ 61,593 14,160 335%
Partnership distributions $ 40,000 10,000 300%
Limited partner distributions $ 35,600 8,900 300%
Per unit distribution to limited
partners $ 25.30 6.33 300%
Number of limited partner units 1,407 1,407
Revenues
The Partnership's oil and gas revenues increased to $89,963 from $40,020
for the quarters ended March 31, 2000 and 1999, respectively, an increase
of 125%. The principal factors affecting the comparison of the quarters
ended March 31, 2000 and 1999 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the quarter ended March 31, 2000 as compared to the
quarter ended March 31, 1999 by 185%, or $18.62 per barrel, resulting
in an increase of approximately $48,400 in revenues. Oil sales
represented 83% of total oil and gas sales during the quarter ended
March 31, 2000 as compared to 65% during the quarter ended March 31,
1999.
The average price for an mcf of gas received by the Partnership
increased during the same period by 55%, or $1.07 per mcf, resulting in
an increase of approximately $7,600 in revenues.
The total increase in revenues due to the change in prices received
from oil and gas production is approximately $56,000. 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 remained unchanged during the quarter ended March 31,
2000 from March 31, 1999.
Gas production decreased approximately 2,000 mcf or 28% during the same
period, resulting in a decrease of approximately $6,100 in revenues.
The total decrease in revenues due to the change in production is
approximately $6,100. The decrease is due primarily to downtime on two
of the Partnerships major wells.
Costs and Expenses
Total costs and expenses increased to $37,602 from $35,314 for the quarters
ended March 31, 2000 and 1999, respectively, an increase of 6%. The
increase is the result of higher lease operating costs, partially offset by
a decrease in general and administrative expense.
1. Lease operating costs and production taxes were 10% higher, or
approximately $2,500 more during the quarter ended March 31, 2000 as
compared to the quarter ended March 31, 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 5%
or approximately $200 during the quarter ended March 31, 2000 as
compared to the quarter ended March 31, 1999.
3. Depletion expense was $5,000 for the quarters ended March 31, 2000 and
1999. 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 $48,400 in
the quarter ended March 31, 2000 as compared to approximately $7,200 in the
quarter ended March 31, 1999. The primary source of the 2000 cash flow
from operating activities was profitable operations.
There were no cash flows used in investing activities in the quarter ended
March 31, 2000. Cash flows used in investing activities were approximately
$10 in the quarter ended March 31, 1999.
Cash flows used in financing activities were $40,000 in the quarter ended
March 31, 2000 as compared to $10,000 in the quarter ended March 31, 1999.
The only use in financing activities was the distributions to partners.
Total distributions during the quarter ended March 31, 2000 were $40,000 of
which $35,600 was distributed to the investor partners and $4,400 to the
Managing General Partner. The per unit distribution to investor partners
during the quarter ended March 31, 2000 was $25.30. Total distributions
during the quarter ended March 31, 1999 were $10,000 of which $8,900 was
distributed to the investor partners and $1,100 to the Managing General
Partner. The per unit distribution to investor partners during the quarter
ended March 31, 1999 was $6.33.
The source for the 2000 distributions of $40,000 was oil and gas operations
of approximately $48,400, resulting in excess cash for contingencies or
subsequent distributions to partners. The source for the 1999
distributions of $10,000 was oil and gas operations of approximately
$7,200, with the balance from available cash on hand at the beginning of
the period.
Since inception of the Partnership, cumulative monthly cash distributions
of $1,192,915 have been made to the partners. As of March 31, 2000,
$1,062,070 or $754.85 per investor partner unit has been distributed to the
investor partners, representing a 75% return of the capital contributed.
As of March 31, 2000, the Partnership had approximately $77,400 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.
Liquidity - Managing General Partner
The Managing General Partner has a highly leveraged capital structure with
over $50.1 million principal and $17.5 million interest payments due in
2000 on its debt obligations. Due to the severely depressed commodity
prices experienced during the last quarter of 1997, throughout 1998 and
continuing through the second quarter of 1999 the Managing General Partner
is experiencing difficulty in generating sufficient cash flow to meet its
obligations and sustain its operations. 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.
<PAGE>
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
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/ J Steven Person
------------------------------
J Steven Person, Vice-President of
Marketing and Chief Financial Officer
of Southwest Royalties, Inc.
the Managing General Partner
Date: May 15, 2000
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet at March 31, 2000 (Unaudited) and the Statement of Operations
for the Three Months Ended March 31, 2000 (Unaudited) and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 31,147
<SECURITIES> 0
<RECEIVABLES> 46,264
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 77,411
<PP&E> 1,314,442
<DEPRECIATION> 1,093,240
<TOTAL-ASSETS> 298,613
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 298,613
<TOTAL-LIABILITY-AND-EQUITY> 298,613
<SALES> 89,963
<TOTAL-REVENUES> 90,020
<CGS> 28,370
<TOTAL-COSTS> 28,370
<OTHER-EXPENSES> 9,232
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 52,418
<INCOME-TAX> 0
<INCOME-CONTINUING> 52,418
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,418
<EPS-BASIC> 32.77
<EPS-DILUTED> 32.77
</TABLE>
