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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 33-47668-01
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 17.
<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 Royalties Institutional Income Fund XI-A, L.P.
Balance Sheets
September 30, December 31,
2000 1999
------------- ------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 49,926 30,195
Receivable from Managing General Partner 90,311 57,750
-----------
-------
Total current assets 140,237 87,945
--------- ---------
Oil and gas properties - using the
full cost method of accounting 2,029,769 2,029,769
Less accumulated depreciation,
depletion and amortization 1,613,862 1,591,862
--------- ---------
Net oil and gas properties 415,907 437,907
--------- ---------
$ 556,144 525,852
========= =========
Liabilities and Partners' Equity
Current liability - Distribution payable $ 170 -
--------- ---------
Partners' equity
General partners (18,603) (23,815)
Limited partners 574,577 549,667
--------- ---------
Total partners' equity 555,974 525,852
--------- ---------
$ 556,144 525,852
========= =========
<PAGE>
Southwest Royalties Institutional Income Fund XI-A, L.P.
Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues
Income from net profits
interests $ 86,234 59,408 236,532 115,902
Interest 584 433 1,617 1,363
Miscellaneous income - - - 20,999
------ ------- ------- -------
86,818 59,841 238,149 138,264
------ ------- ------- -------
Expenses
General and administrative 10,231 9,563 31,027 32,825
Depreciation, depletion and
amortization 6,000 7,000 22,000 35,000
------ ------- ------- -------
16,231 16,563 53,027 67,825
------ ------- ------- -------
Net income $ 70,587 43,278 185,122 70,439
====== ======= ======= =======
Net income allocated to:
Managing General Partner $ 6,893 4,525 18,641 7,600
====== ======= ======= =======
General Partner $ 766 503 2,071 844
====== ======= ======= =======
Limited Partners $ 62,928 38,250 164,410 61,995
====== ======= ======= =======
Per limited partner unit $ 11.61 7.06 30.35 11.44
====== ======= ======= =======
<PAGE>
Southwest Royalties Institutional Income Fund XI-A, L.P.
Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
2000 1999
---- ----
Cash flows from operating activities
Cash received from income from net
profits interests $ 206,014 91,083
Cash paid to suppliers (33,070) (1,045)
Interest received 1,617 1,363
------- -------
Net cash provided by operating activities 174,561 91,401
------- -------
Cash flows provided by investing activities
Addition of oil and gas properties - (5)
------- -------
Cash flows used in financing activities
Distributions to partners (154,830) (124,960)
------- -------
Net increase (decrease) in cash and cash equivalents 19,731
(33,564)
Beginning of period 30,195 57,406
------- -------
End of period $ 49,926 23,842
======= =======
(continued)
<PAGE>
Southwest Royalties Institutional Income Fund XI-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 $ 185,122 70,439
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation, depletion and amortization 22,000 35,000
Increase in receivables (30,518) (24,819)
(Decrease) increase in payables (2,043) 10,781
------- -------
Net cash provided by operating activities $ 174,561 91,401
======= =======
<PAGE>
Southwest Royalties Institutional Income Fund XI-A, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
1. Organization
Southwest Royalties Institutional Income Fund XI-A, L.P. was organized
under the laws of the state of Delaware on May 5, 1992, for the
purpose of acquiring producing oil and gas properties and to produce
and market crude oil and natural gas produced from such properties for
a term of 50 years, unless terminated at an earlier date as provided
for in the Partnership Agreement. The Partnership will sell 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 and H. H.
Wommack, III, as the individual general partner. Partnership profits
and losses, as well as all items of income, gain, loss, deduction, or
credit, will be credited or charged as follows:
Limited General
Partners Partners (1)
-------- --------
Organization and offering expenses (2) 100% -
Acquisition costs 100% -
Operating costs 90% 10%
Administrative costs (3) 90% 10%
Direct costs 90% 10%
All other costs 90% 10%
Interest income earned on capital
contributions 100% -
Oil and gas revenues 90% 10%
Other revenues 90% 10%
Amortization 100% -
Depletion allowances 100% -
(1) H.H. Wommack, III, President of the Managing General
Partner, is an additional general partner in the Partnership and
has a one percent interest in the Partnership. Mr. Wommack is
the majority stockholder of the Managing General Partner whose
continued involvement in Partnership management is important to
its operations. Mr. Wommack, as a general partner, shares also
in Partnership liabilities.
(2) Organization and Offering Expenses (including all cost of
selling and organizing the offering) include a payment by the
Partnership of an amount equal to three percent (3%) of Capital
Contributions for reimbursement of such expenses. All
Organization Costs (which excludes sales commissions and fees) in
excess of three percent (3%) of Capital Contributions with
respect to a Partnership will be allocated to and paid by the
Managing General Partner.
(3) Administrative Costs will be paid from the Partnership's
revenues; however; Administrative Costs in the Partnership year
in excess of two percent (2%) of Capital Contributions shall be
allocated to and paid by the Managing General Partner.
<PAGE>
Southwest Royalties Institutional Income Fund XI-A, L.P.
Note to Financial Statements
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 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.
Management does not anticipate performing workovers during the next year.
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. For the quarter ended September 30, 2000, the net
capitalized costs did not exceed the estimated present value.
<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 $ 29.77 21.71 37%
Average price per mcf of gas $ 4.74 2.33 103%
Oil production in barrels 1,700 2,060 (17%)
Gas production in mcf 22,200 27,860 (20%)
Income from net profits interests $ 86,234 59,408 45%
Partnership distributions $ 55,000 40,000 38%
Limited partner distributions $ 49,500 36,000 38%
Per unit distribution to limited partners $ 9.14 6.64 38%
Number of limited partner units 5,418 5,418
Revenues
The Partnership's income from net profits interests increased to $86,234
from $59,408 for the quarters ended September 30, 2000 and 1999,
respectively, an increase of 45%. 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 37%, or $8.06 per barrel,
resulting in an increase of approximately $16,600 in income from net
profits interests. Oil sales represented 32% of total oil and gas
sales during the quarter ended September 30, 2000 as compared to 41%
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 103%, or $2.41 per mcf, resulting
in an increase of approximately $67,100 in income from net profits
interests.
The total increase in income from net profits interests due to the
change in prices received from oil and gas production is approximately
$83,700. The market price for oil and gas has been extremely volatile
over the past decade, and management expects a certain amount of
volatility to continue in the foreseeable future.
<PAGE>
2. Oil production decreased approximately 360 barrels or 17% during the
quarter ended September 30, 2000 as compared to the quarter ended
September 30, 1999, resulting in a decrease of approximately $10,700 in
income from net profits interests.
Gas production decreased approximately 5,660 mcf or 20% during the same
period, resulting in a decrease of approximately $26,800 in income from
net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $37,500. The decrease in
production is due to the decline of several small non-operated wells,
which have not had repairs and maintenance performed on them due to
past price constraints.
3. Lease operating costs and production taxes were 5% higher, or
approximately $2,700 more during the quarter ended September 30, 2000
as compared to the quarter ended September 30, 1999.
Costs and Expenses
Total costs and expenses decreased to $16,231 from $16,563 for the quarters
ended September 30, 2000 and 1999, respectively, a decrease of 2%. The
decrease is the result of lower depletion expense, partially offset by an
increase in 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 7%
or approximately $700 during the quarter ended September 30, 2000 as
compared to the quarter ended September 30, 1999.
2. Depletion expense decreased to $6,000 for the quarter ended September
30, 2000 from $7,000 for the same period in 1999. This represents a
decrease of 14%. Depletion is calculated using the units of revenue
method of amortization based on a percentage of current period gross
revenues to total future gross oil and gas revenues, as estimated by
the Partnership's independent petroleum consultants. Contributing
factors to the 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 and the increase in oil and gas revenues
received by the Partnership.
<PAGE>
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 $ 27.85 14.82 88%
Average price per mcf of gas $ 3.75 2.05 83%
Oil production in barrels 5,300 6,530 (19%)
Gas production in mcf 68,500 79,660 (14%)
Income from net profits interests $ 236,532 115,902 104%
Partnership distributions $ 155,000 124,960 24%
Limited partner distributions $ 139,500 115,960 20%
Per unit distribution to limited partners $ 25.75 21.40 20%
Number of limited partner units 5,418 5,418
Revenues
The Partnership's income from net profits interests increased to $236,532
from $115,902 for the nine months ended September 30, 2000 and 1999,
respectively, an increase of 104%. 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 88%, or $13.03 per
barrel, resulting in an increase of approximately $85,100 in income
from net profits interests. Oil sales represented 36% of total oil and
gas sales during the nine months ended September 30, 2000 as compared
to 37% 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 83%, or $1.70 per mcf, resulting in
an increase of approximately $135,400 in income from net profits
interests.
The total increase in income from net profits interests due to the
change in prices received from oil and gas production is approximately
$220,500. 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 1,230 barrels or 19% during the
nine months ended September 30, 2000 as compared to the nine months
ended September 30, 1999, resulting in a decrease of approximately
$34,300 in income from net profits interests.
Gas production decreased approximately 11,160 mcf or 14% during the
same period, resulting in a decrease of approximately $41,900 in income
from net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $76,200. The decrease in
production is due primarily to natural decline.
3. Lease operating costs and production taxes were 17% higher, or
approximately $24,200 more during the nine months ended September 30,
2000 as compared to the nine months ended September 30, 1999.
Costs and Expenses
Total costs and expenses decreased to $53,027 from $67,825 for the nine
months ended September 30, 2000 and 1999, respectively, a decrease of 22%.
The decrease is the result of lower 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 decreased 5%
or approximately $1,800 during the nine months ended September 30, 2000
as compared to the nine months ended September 30, 1999.
2. Depletion expense decreased to $22,000 for the nine months ended
September 30, 2000 from $35,000 for the same period in 1999. This
represents a decrease of 37%. 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 and the increase in oil and gas
revenues received by the Partnership.
<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 $174,600 in
the nine months ended September 30, 2000 as compared to approximately
$91,400 in the nine months ended September 30, 1999. The primary source of
the 2000 cash flow from operating activities was profitable operations.
There were no cash flows provided by investing activities in the nine
months ended September 30, 2000. Cash flows used in investing activities
were approximately $5 in the nine months ended September 30, 1999.
Cash flows used in financing activities were approximately $154,800 in the
nine months ended September 30, 2000 as compared to approximately $125,000
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
$155,000 of which $139,500 was distributed to the limited partners and
$15,500 to the general partners. The per unit distribution to limited
partners during the nine months ended September 30, 2000 was $25.75. Total
distributions during the nine months ended September 30, 1999 were $124,960
of which $115,960 was distributed to the limited partners and $9,000 to the
general partners. The per unit distribution to limited partners during the
nine months ended September 30, 1999 was $21.40.
The sources for the 2000 distributions of $155,000 were oil and gas
operations of approximately $174,600, resulting in excess cash for
contingencies or subsequent distributions. The source for the 1999
distributions of $124,960 was oil and gas operations of approximately
$91,400 and the change in oil and gas properties of approximately (5), with
the balance from available cash on hand at the beginning of the period.
Since inception of the Partnership, cumulative monthly cash distributions
of $1,869,408 have been made to the partners. As of September 30, 2000,
$1,708,158 or $315.27 per limited partner unit has been distributed to the
limited partners, representing a 63% return of the capital contributed.
As of September 30, 2000, the Partnership had approximately $140,100 in
working capital. The Managing General Partner knows of no unusual
contractual commitments and believes the revenues generated from operations
are adequate to meet the needs of the Partnership.
<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 Royalties Institutional
Income Fund XI-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>
