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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 33-47668-01
SOUTHWEST ROYALTIES INSTITUTIONAL 1992-93 INCOME PROGRAM
Southwest Royalties Institutional Income Fund XI-A, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2427297
(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 Royalties Institutional Income Fund XI-A, L.P.
Balance Sheets
June 30, December 31,
1998 1997
--------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 3,436 52,190
Receivable from Managing General Partner - 85,473
Other receivable 10,063 53,536
--------- ---------
Total current assets 13,499 191,199
--------- ---------
Oil and gas properties - using the
full cost method of accounting 2,103,239 2,105,397
Less accumulated depreciation,
depletion and amortization 1,174,319 952,822
--------- ---------
Net oil and gas properties 928,920 1,152,575
--------- ---------
$ 942,419 1,343,774
========= =========
Liabilities and Partners' Equity
Current liabilities:
Payable to Managing General Partner $ 1,809 -
Distribution payable 137 -
--------- ---------
Total current liabilities 1,946 -
--------- ---------
Partners' equity:
General partners (25,510) (12,839)
Limited partners 965,983 1,356,613
--------- ---------
Total partners' equity 940,473 1,343,774
--------- ---------
$ 942,419 1,343,774
========= =========
<PAGE>
Southwest Royalties Institutional Income Fund XI-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues
Income from net profits
interests $ 16,735 50,042 45,884 152,129
Interest 374 496 947 746
Miscellaneous income - 13,553 - 19,906
------- ------- ------- -------
17,109 64,091 46,831 172,781
------- ------- ------- -------
Expenses
General and administrative 15,067 11,212 33,540 28,787
Depreciation, depletion and
amortization 41,000 35,490 74,000 81,980
Provision for impairment of
oil and gas properties 147,497 - 147,497 -
Miscellaneous expense 52,706 - 55,095 -
------- ------- ------- -------
256,270 46,702 310,132 110,767
------- ------- ------- -------
Net income (loss) $ (239,161) 17,389 (263,301) 62,014
======= ======= ======= =======
Net income (loss) allocated to:
Managing General Partner $ 184 3,539 1,196 11,168
======= ======= ======= =======
General Partner $ 20 394 133 1,241
======= ======= ======= =======
Limited partners $ (239,365) 13,456 (264,630) 49,605
======= ======= ======= =======
Per limited partner unit $ (44.18) 2.48 (48.84) 9.16
======= ======= ======= =======
<PAGE>
Southwest Royalties Institutional Income Fund XI-A, L.P.
Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Cash received from income from net
profits interests $ 86,379 237,962
Cash paid to suppliers (25) (28,670)
Interest received 947 746
------- -------
Net cash provided by operating activities 87,301 210,038
------- -------
Cash flows provided by investing activities:
Cash received from sale of oil and gas
property interest 3,808 -
------- -------
Cash flows used in financing activities:
Distributions to partners (139,863) (207,020)
------- -------
Net increase (decrease) in cash and cash
equivalents (48,754) 3,018
Beginning of period 52,190 6,595
------- -------
End of period $ 3,436 9,613
======= =======
(continued)
<PAGE>
Southwest Royalties Institutional Income Fund XI-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) $ (263,301) 62,014
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 74,000 81,980
Provision for impairment of oil and gas
properties 147,497 -
Decrease in receivables 40,495 65,927
Increase in payables 88,610 117
------- -------
Net cash provided by operating activities $ 87,301 210,038
======= =======
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Southwest Royalties Institutional Income Fund XI-A, L.P. (the Partnership)
was organized as a Delaware limited partnership on May 5, 1992. The
offering of such limited partnership interests began August 20, 1992, as
part of a shelf offering registered under the name Southwest Royalties
Institutional 1992-93 Income Program. Minimum capital requirements for the
Partnership were met on December 10, 1992 and the offering concluding on
April 30, 1993 with total limited partner contributions of $2,709,000.
The Partnership was formed to acquire royalty and net profits interests in
producing oil and gas properties, to produce and market crude oil and
natural gas produced from such properties, and to distribute the net
proceeds from operations to the limited and general partners. Net revenues
from producing oil and gas properties will not be reinvested in other
revenue producing assets except to the extent that production facilities
and wells are improved or reworked or where methods are employed to improve
or enable more efficient recovery of oil and gas reserves.
Increases or decreases in Partnership revenues and, therefore,
distributions to partners will depend primarily on changes in the prices
received for production, changes in volumes of production sold, lease
operating expenses, enhanced recovery projects, offset drilling activities
pursuant to farm-out arrangements, sales of properties, and the depletion
of wells. Since wells deplete over time, production can generally be
expected to decline from year to year.
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 does not anticipate performing
workovers. The Partnership could possibly experience a steady decline.
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
$147,497. The write-down has the effect of reducing net income, but did
not affect cash flow or partner distributions. 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 $ 11.90 18.62 (36%)
Average price per mcf of gas $ 1.99 1.98 1%
Oil production in barrels 3,550 3,900 (9%)
Gas production in mcf 27,100 41,500 (35%)
Income from net profits interests $ 16,735 50,042 (67%)
Partnership distributions $ 32,000 103,000 (70%)
Limited partner distributions $ 28,800 92,700 (70%)
Per unit distribution to limited
partners $ 5.32 17.11 (70%)
Number of limited partner units 5,418 5,418
Revenues
The Partnership's income from net profits interests decreased to $16,735
from $50,042 for the quarters ended June 30, 1998 and 1997, respectively, a
decrease of 67%. 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 36%, or $6.72 per barrel, resulting in a
decrease of approximately $26,208 in income from net profits interests.
Oil sales represented 44% and 47% of total oil and gas sales during the
quarters ended June 30, 1998 and 1997.
The average price for an mcf of gas received by the Partnership
increased during the same period by 1%, or $.01 per mcf, resulting in
an increase of approximately $415 in income from net profits interests.
The net total decrease in income from net profits interests due to the
change in prices received from oil and gas production is approximately
$25,793. 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 350 barrels or 9% during the
quarter ended June 30, 1998 as compared to the quarter ended June 30,
1997, resulting in a decrease of approximately $4,165 in income from
net profits interests.
Gas production decreased approximately 14,400 mcf or 35% during the
same period, resulting in a decrease of approximately $28,656 in income
from net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $32,821. The decrease is
primarily a result of the sale of one gas well, downtime on a major gas
well and a gas plant explosion which effected gas production on several
wells for the month of April 1998.
3. Lease operating costs and production taxes were 25% lower, or
approximately $25,424 less during the quarter ended June 30, 1998 as
compared to the quarter ended June 30, 1997. The decrease is primarily
attributable to the pulling expense incurred on an injector well during
1997.
Costs and Expenses
Total costs and expenses increased to $256,270 from $46,702 for the
quarters ended June 30, 1998 and 1997, respectively, an increase of 449%.
The increase is the result of higher general and administrative expense and
depletion expense.
1. General and administrative costs consists of independent accounting and
engineering fees, computer services, postage, and Managing General
Partner personnel costs. General and administrative costs increased
34% or approximately $3,855 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.
2. Depletion expense increased to $41,000 for the quarter ended June 30,
1998 from $33,000 for the same period in 1997. This represents an
increase of 24%. 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 $147,497. The
write-down has the effect of reducing net income, but did not affect
cash flow or partner distributions.
3. The Partnership entered into a purchase agreement on the Tar Baby lease
that guaranteed net income each month from October 1994 through January
1998. This income was recorded on the Partnerships books as
miscellaneous income. Based on new information obtained in May 1998,
an adjustment of $52,706 was found to be necessary. This adjustment
was recorded as miscellaneous expense on the Partnerships books for the
quarter ended June 30, 1998.
<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 $ 11.81 20.48 (42%)
Average price per mcf of gas $ 1.80 2.21 (19%)
Oil production in barrels 7,200 8,500 (15%)
Gas production in mcf 64,500 82,600 (22%)
Income from net profits interests $ 45,884 152,129 (70%)
Partnership distributions $ 140,000 207,000 (33%)
Limited partner distributions $ 126,000 186,300 (33%)
Per unit distribution to limited
partners $ 23.26 34.39 (33%)
Number of limited partner units 5,418 5,418
Revenues
The Partnership's income from net profits interests decreased to $45,884
from $152,129 for the six months ended June 30, 1998 and 1997,
respectively, a decrease of 70%. 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 42%, or $8.67 per barrel, resulting
in a decrease of approximately $73,695 in income from net profits
interests. Oil sales represented 42% of total oil and gas sales during
the six months ended June 30, 1998 as compared to 49% 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 19%, or $.41 per mcf, resulting in
a decrease of approximately $33,866 in income from net profits
interests.
The total decrease in income from net profits interests due to the
change in prices received from oil and gas production is approximately
$107,561. The market price for oil and gas has been extremely volatile
over the past decade, and management expects a certain amount of
volatility to continue in the foreseeable future.
<PAGE>
2. Oil production decreased approximately 1,300 barrels or 15% during the
six months ended June 30, 1998 as compared to the six months ended June
30, 1997, resulting in a decrease of approximately $15,350 in income
from net profits interests.
Gas production decreased approximately 18,100 mcf or 22% during the
same period, resulting in a decrease of approximately $32,580 in income
from net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $47,930. The decrease is
primarily a result of the sale of one gas well, downtime on a major gas
well and a gas plant explosion which effected gas production on several
wells for the month of April 1998.
3. Lease operating costs and production taxes were 25% lower, or
approximately $49,594 less during the six months ended June 30, 1998 as
compared to the six months ended June 30, 1997. The decrease is
primarily attributable to the pulling expense incurred on an injector
well during 1997.
Costs and Expenses
Total costs and expenses increased to $310,132 from $110,767 for the six
months ended June 30, 1998 and 1997, respectively, an increase of 180%.
The increase is the result of higher depletion expense and general and
administrative expense.
1. General and administrative costs consists of independent accounting and
engineering fees, computer services, postage, and Managing General
Partner personnel costs. General and administrative costs increased
17% or approximately $4,753 during the six months ended June 30, 1998
as compared to the six months ended June 30, 1997.
2. Depletion expense decreased to $74,000 for the six months ended June
30, 1998 from $77,000 for the same period in 1997. This represents a
decrease of 4%. Depletion is calculated using the units of revenue
method of amortization based on a percentage of current period gross
revenues to total future gross oil and gas revenues, as estimated by
the Partnership's independent petroleum consultants. Contributing
factors to the decline in depletion expense between the comparative
periods were the decrease in oil and gas revenues and 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 $147,497. The write-down has the effect of
reducing net income, but did not affect cash flow or partner
distributions.
3. The Partnership entered into a purchase agreement on the Tar Baby lease
that guaranteed net income each month from October 1994 through January
1998. This income was recorded on the Partnerships books as
miscellaneous income. Based on new information obtained in May 1998,
an adjustment of $52,706 was found to be necessary. This adjustment
was recorded as miscellaneous expense on the Partnerships books for the
quarter ended June 30, 1998.
<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 $87,300 in
the six months ended June 30, 1998 as compared to approximately $210,000 in
the six months ended June 30, 1997. The primary source of the 1998 cash
flow from operating activities was profitable operations.
Cash flows provided by investing activities were approximately $3,800 in
the six months ended June 30, 1998. There were no cash flows provided by
investing activities in the six months ended June 30, 1997. The source of
the 1998 cash flow from investing activities were sale of oil and gas
properties.
Cash flows used in financing activities were approximately $140,000 in the
six months ended June 30, 1998 as compared to approximately $207,000 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 $140,000
of which $126,000 was distributed to the limited partners and $14,000 to
the general partners. The per unit distribution to limited partners during
the six months ended June 30, 1997 was $23.26. Total distributions during
the six months ended June 30, 1997 were $207,000 of which $186,300 was
distributed to the limited partners and $20,700 to the general partners.
The per unit distribution to limited partners during the six months ended
June 30, 1997 was $34.39.
The sources for the 1998 distributions of $140,000 were oil and gas
operations of approximately $87,300, the sale of oil and gas properties of
approximately $3,800. The source for the 1997 distributions of $207,000
was oil and gas operations of approximately $210,000, resulting in excess
cash for contingencies or subsequent distributions.
Since inception of the Partnership, cumulative monthly cash distributions
of $1,495,448 have been made to the partners. As of June 30, 1998,
$1,365,598 or $252.05 per limited partner unit has been distributed to the
limited partners, representing a 50% return of the capital contributed.
As of June 30, 1998, the Partnership had approximately $11,553 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 ROYALTIES INSTITUTIONAL
INCOME FUND XI-A, L.P.
a Delaware limited partnership
By: Southwest Royalties, Inc.
Managing General Partner
Date: August 15, 1998 By: /s/ Bill E. Coggin
Bill E. Coggin, Vice
President
and Chief Financial Officer
<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> 3,436
<SECURITIES> 0
<RECEIVABLES> 10,063
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,499
<PP&E> 2,103,239
<DEPRECIATION> 1,174,319
<TOTAL-ASSETS> 942,419
<CURRENT-LIABILITIES> 1,946
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 940,473
<TOTAL-LIABILITY-AND-EQUITY> 942,419
<SALES> 45,884
<TOTAL-REVENUES> 46,831
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 310,132
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (263,301)
<INCOME-TAX> 0
<INCOME-CONTINUING> (263,301)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (263,301)
<EPS-PRIMARY> (48.84)
<EPS-DILUTED> (48.84)
</TABLE>
