Back to GetFilings.com
1 of 1
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, 2003
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 0-15411
Southwest Royalties, Inc. Income Fund VI
(Exact name of registrant as specified
in its limited partnership agreement)
Tennessee 75-2127812
(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 19.
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, 2002, which are found in the Registrant's Form 10-K Report for 2002
filed with the Securities and Exchange Commission. The December 31,
2002 balance sheet included herein has been taken from the Registrant's
2002 Form 10-K Report. Operating results for the three-month period
ended March 31, 2003 are not necessarily indicative of the results that
may be expected for the full year.
Southwest Royalties, Inc. Income Fund VI
Balance Sheets
March December
31, 31,
2003 2002
------ ------
(unaudit
ed)
Assets
- ---------
Current assets:
Cash and cash equivalents $ 112,364 18,015
Receivable from Managing General 250,409 86,014
Partner
-------- --------
---- ----
Total current assets 362,773 104,029
-------- --------
---- ----
Oil and gas properties - using the
full-
cost method of accounting 8,757,78 8,424,13
0 4
Less accumulated depreciation,
depletion and amortization 7,040,23 6,977,00
3 0
-------- --------
---- ----
Net oil and gas properties 1,717,54 1,447,13
7 4
-------- --------
---- ----
$ 2,080,32 1,551,16
0 3
======= =======
Liabilities and Partners' Equity
- -------------------------------------
- ---
Current liability - distribution $ 2,279 3,356
payable
-------- --------
---- ----
Other long term liabilities 1,082,77 -
2
-------- --------
---- ----
Partners' equity:
General partners (754,803 (699,549
) )
Limited partners 1,750,07 2,247,35
2 6
-------- --------
---- ----
Total partners' equity 995,269 1,547,80
7
-------- --------
---- ----
$ 2,080,32 1,551,16
0 3
======= =======
Southwest Royalties, Inc. Income Fund VI
Statements of Operations
(unaudited)
Three Months Ended
March 31,
2003 2002
------ ------
Revenues
- -------------
Income from net profits $ 297,280 17,787
interests
Interest 18 367
-------- --------
--- -
297,298 18,154
-------- --------
--- -
Expenses
- -------------
General and administrative 37,477 38,126
Depreciation, depletion and 21,000 20,000
amortization
Accretion 21,231 -
-------- --------
--- -
79,708 58,126
-------- --------
--- -
Net income (loss) before 217,590 (39,972)
cumulative effect
Cumulative effect of change
in accounting
principle (770,128 -
)
-------- --------
--- -
Net income (loss) $ (552,538 (39,972)
)
====== =====
Net income (loss) allocated
to:
Managing General Partner $ (55,254) (3,597)
====== =====
General partner $ - (400)
====== =====
Limited partners $ (497,284 (35,975)
)
====== =====
Per limited partner unit $ (24.86) (1.80)
====== =====
Southwest Royalties, Inc. Income Fund VI
Statements of Cash Flows
(unaudited)
Three Months Ended
March 31,
2003 2002
------ ------
Cash flows from operating
activities:
Cash received from income from
net profits
interests $ 112,890 8,221
Cash paid to suppliers (17,482) (24,057)
Interest received 18 367
-------- --------
-- --
Net cash provided by (used in) 95,426 (15,469)
operating activities
-------- --------
-- --
Cash flows used in financing
activities:
Distributions to partners (1,077) (7)
-------- --------
-- --
Net increase (decrease) in cash 94,349 (15,476)
and cash equivalents
Beginning of period 18,015 132,282
-------- --------
-- --
End of period $ 112,364 116,806
====== ======
Reconciliation of net income
(loss) to net
cash provided by (used in)
operating activities:
Net income (loss) $ (552,538 (39,972)
)
Adjustments to reconcile net
income (loss) to
net cash provided by (used in)
operating activities:
Depreciation, depletion and 21,000 20,000
amortization
Accretion 21,231 -
Cumulative effect of change in 770,128 -
accounting principle
Increase in receivables (184,390 (9,566)
)
Increase in payables 19,995 14,069
-------- --------
-- --
Net cash provided by (used in) $ 95,426 (15,469)
operating activities
====== ======
Noncash investing and financing
activities:
Increase in oil and gas
properties - Adoption $ 291,413 -
of SFAS No.143
====== ======
Southwest Royalties, Inc. Income Fund VI
(a Tennessee limited partnership)
Notes to Financial Statements
1. Organization
Southwest Royalties, Inc. Income Fund VI was organized under
the laws of the state of Tennessee on December 4, 1986, 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 sells
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. Effective
December 31, 2001, Mr. Wommack sold his general partners interest to
the Managing General Partner. Revenues, costs and expenses are
allocated as follows:
Limited General
Partners Partners
-------- --------
Interest income on capital 100% -
contributions
Oil and gas sales 90% 10%
All other revenues 90% 10%
Organization and offering costs (1) 100% -
Amortization of organization costs 100% -
Property acquisition costs 100% -
Gain/loss on property disposition 90% 10%
Operating and administrative costs (2) 90% 10%
Depreciation, depletion and
amortization
of oil and gas properties 90% 10%
All other costs 90% 10%
(1)All organization costs in excess of 3% 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 3% 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, 2003, and for the
three months ended March 31, 2003, 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, 2002.
Southwest Royalties, Inc. Income Fund VI
(a Tennessee limited partnership)
Notes to Financial Statements
3. Cumulative effect of change in accounting principle
On January 1, 2003, the Partnership adopted Statement of Financial
Accounting Standards No. 143, Accounting for Asset Retirement
Obligations ("SFAS No. 143"). Adoption of SFAS No. 143 is required
for all companies with fiscal years beginning after June 15, 2002.
The new standard requires the Partnership to recognize a liability
for the present value of all legal obligations associated with the
retirement of tangible long-lived assets and to capitalize an equal
amount as a cost of the asset and depreciate the additional cost
over the estimated useful life of the asset. On January 1, 2003,
the Partnership recorded additional costs, net of accumulated
depreciation, of approximately $291,413, a long term liability of
approximately $1,061,541 and a charge of approximately $770,128 for
the cumulative effect on depreciation of the additional costs and
accretion expense on the liability related to expected abandonment
costs of its oil and natural gas producing properties. At March
31, 2003, the asset retirement obligation was $1,082,772, and the
increase in the balance from January 1, 2003 of $21,231 is due to
accretion expense. The pro forma amount of the asset retirement
obligation was measured using information, assumptions and interest
rates as of the adoption date of January 1, 2003. Assuming the
Partnership had applied the provisions of SFAS No. 143 for the
three months ended March 31, 2002 pro forma net income (loss) and
related income (loss) per limited partner unit amounts would have
been $(59,504) and $(2.98), respectively.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
Southwest Royalties, Inc. Income Fund VI was organized as a Tennessee
limited partnership on December 4, 1986. The offering of such limited
partnership interests began August 25, 1986 minimum capital requirements
were met October 3, 1986 and concluded January 29, 1987, with total
limited partner contributions of $10,000,000.
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. The economic life of the partnership thus depends on the
period over which the Partnership's oil and gas reserves are
economically recoverable.
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, development drilling and workovers will be
performed during the years 2003 and 2004 to enhance production. The
partnership may have an increase in production volumes for the year 2003
and 2004, but thereafter, the partnership will most likely experience
the historical production decline, which has approximated 10% per year.
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.
Prior to October 1, 2002, the Partnership calculated depletion of oil
and gas properties under the units of revenue method. The Partnership
changed methods of estimating depletion effective October 1, 2002 to the
units of production method. The units of production method is more
predominantly used throughout the oil and gas industry and will allow
the Partnership to more closely align itself with its peers.
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. In applying the units to revenue method for
the three months ended March 31 2002, we have not excluded royalty and
net profit interest payments from gross revenues as all of our royalty
and net profit interest have been purchased and capitalized to the
depletion basis of our proved oil and gas properties. As of March 31,
2003, the net capitalized costs did not exceed the estimated present
value of oil and gas reserves.
The Partnership's interest in oil and gas properties consists of net
profits interests in proved properties located within the continental
United States. A net profits interest is created when the owner of a
working interest in a property enters into an arrangement providing that
the net profits interest owner will receive a stated percentage of the
net profit from the property. The net profits interest owner will not
otherwise participate in additional costs and expenses of the property.
The Partnership recognizes income from its net profits interest in oil
and gas property on an accrual basis, while the quarterly cash
distributions of the net profits interest are based on a calculation of
actual cash received from oil and gas sales, net of expenses incurred
during that quarterly period. The net profits interest is a calculated
revenue interest that burdens the underlying working interest in the
property, and the net profits interest owner is not responsible for the
actual development or production expenses incurred. Accordingly, if the
net profits interest calculation results in expenses incurred exceeding
the oil and gas income received during a quarter, no cash distribution
is due to the Partnership's net profits interest until the deficit is
recovered from future net profits. The Partnership accrues a quarterly
loss on its net profits interest provided there is a cumulative net
amount due for accrued revenue as of the balance sheet date. As of
March 31, 2003, there were no timing differences, which resulted in a
deficit net profit interest.
Critical Accounting Policies
Full cost ceiling calculations The Partnership follows the full cost
method of accounting for its oil and gas properties. The full cost
method subjects companies to quarterly calculations of a "ceiling", or
limitation on the amount of properties that can be capitalized on the
balance sheet. If the Partnership's capitalized costs are in excess of
the calculated ceiling, the excess must be written off as an expense.
The Partnership's discounted present value of its proved oil and natural
gas reserves is a major component of the ceiling calculation, and
represents the component that requires the most subjective judgments.
Estimates of reserves are forecasts based on engineering data, projected
future rates of production and the timing of future expenditures. The
process of estimating oil and natural gas reserves requires substantial
judgment, resulting in imprecise determinations, particularly for new
discoveries. Different reserve engineers may make different estimates
of reserve quantities based on the same data. The Partnership's reserve
estimates are on an annual basis prepared by outside consultants.
Quarterly reserves estimates are prepared by the Managing General
Partner's internal staff of engineers.
The passage of time provides more qualitative information regarding
estimates of reserves, and revisions are made to prior estimates to
reflect updated information. However, there can be no assurance that
more significant revisions will not be necessary in the future. If
future significant revisions are necessary that reduce previously
estimated reserve quantities, it could result in a full cost property
writedown. In addition to the impact of these estimates of proved
reserves on calculation of the ceiling, estimates of proved reserves are
also a significant component of the calculation of DD&A.
While the quantities of proved reserves require substantial judgment,
the associated prices of oil and natural gas reserves that are included
in the discounted present value of the reserves do not require judgment.
The ceiling calculation dictates that prices and costs in effect as of
the last day of the period are generally held constant indefinitely.
Because the ceiling calculation dictates that prices in effect as of the
last day of the applicable quarter are held constant indefinitely, the
resulting value is not indicative of the true fair value of the
reserves. Oil and natural gas prices have historically been cyclical
and, on any particular day at the end of a quarter, can be either
substantially higher or lower than the Partnership's long-term price
forecast that is a barometer for true fair value.
Prior to October 1, 2002, the Partnership calculated depletion of oil
and gas properties under the units of revenue method. The Partnership
changed methods of estimating depletion effective October 1, 2002 to the
units of production method. The units of production method is more
predominantly used throughout the oil and gas industry and will allow
the Partnership to more closely align itself with its peers.
Results of Operations
A. General Comparison of the Quarters Ended March 31, 2003 and 2002
The following table provides certain information regarding performance
factors for the quarters ended March 31, 2003 and 2002:
Three Months
Ended Percenta
ge
March 31, Increase
2003 2002 (Decreas
e)
----- ----- --------
--
Average price per $ 32.30 65%
barrel of oil 19.58
Average price per $ 6.01 178%
mcf of gas 2.16
Oil production in 4,600 6,300 (27%)
barrels
Gas production in 54,800 72,600 (25%)
mcf
Income from net $ 297,280 17,787 1,571%
profits interests
Partnership $ - - -
distributions
Limited partner $ - - -
distributions
Per unit
distribution to
limited
partners $ - - -
Number of limited 20,000 20,000
partner units
Revenues
The Partnership's income from net profits interests increased to
$297,280 from $17,787 for the quarters ended March 31, 2003 and 2002,
respectively, an increase of 1,571%. The principal factors affecting
the comparison of the quarters ended March 31, 2003 and 2002 are as
follows:
1. The average price for a barrel of oil received by the Partnership
increased during the quarter ended March 31, 2003 as compared to the
quarter ended March 31, 2002 by 65%, or $12.72 per barrel, resulting
in an increase of approximately $58,500 in income from net profits
interests. Oil sales represented 31% of total oil and gas sales
during the quarter ended March 31, 2003 as compared to 44% during
the quarter ended March 31, 2002.
The average price for an mcf of gas received by the Partnership
increased during the same period by 178%, or $3.85 per mcf,
resulting in an increase of approximately $211,000 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 $269,500. 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.
2. Oil production decreased approximately 1,700 barrels or 27% during
the quarter ended March 31, 2003 as compared to the quarter ended
March 31, 2002, resulting in a decrease of approximately $33,300 in
income from net profits interests.
Gas production decreased approximately 17,800 mcf or 25% during the
same period, resulting in a decrease of approximately $38,400 in
income from net profits interests.
The total decrease in income from net profits interests due to the
change in production is approximately $71,700. The decrease in oil
production is in connection with a change in estimate, which the
Partnership did not have an interest in a well, but another well on
a different lease owned a very small interest of the production.
The decrease in gas production is primarily due to a farm-out
arrangement during 2002 with the Managing General Partner, in which
the Partnership retained a smaller interest. This same lease also
experiences gas balancing.
3. Lease operating costs and production taxes were 31% lower, or
approximately $82,300 less during the quarter ended March 31, 2003
as compared to the quarter ended March 31, 2002. The decrease in
lease operating expense is due mainly to a workover performed on one
lease during the quarter ended March 31, 2002, partially offset by
an increase in production taxes due to an increase in revenues in
relation to prices.
Costs and Expenses
Total costs and expenses increased to $79,708 from $58,126 for the
quarters ended March 31, 2003 and 2002, respectively, an increase of
37%. The increase is a direct result of the accretion expense
associated with our long term liability related to expected abandonment
costs of our oil and natural gas properties and depletion expense,
partially offset by a decrease in 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
decreased 2% or approximately $600 during the quarter ended March
31, 2003 as compared to the quarter ended March 31, 2002.
2. Depletion expense increased to $21,000 for the quarter ended March
31, 2003 from $20,000 for the same period in 2002. This represents
an increase of 5%. Prior to October 1, 2002, the Partnership
calculated depletion of oil and gas properties under the units of
revenue method. The Partnership changed methods of estimating
depletion effective October 1, 2002 to the units of production
method. The units of production method is more predominantly used
throughout the oil and gas industry and will allow the Partnership
to more closely align itself with its peers. The effect of this
change in estimate if the units of production method were applied to
2002 would have increased 2002 depletion expense by $6,000 and
decreased 2002 net income by $6,000. The contributing factors to
the increase in depletion expense is in relation to the BOE
depletion rate for the quarter ended March 31, 2003 was $1.55
applied to 13,733 BOE as compared to $1.42 applied to 18,400 BOE for
the same period.
Cumulative effect of change in accounting principle
On January 1, 2003, the Partnership adopted Statement of Financial
Accounting Standards No. 143, Accounting for Asset Retirement
Obligations ("SFAS No. 143"). Adoption of SFAS No. 143 is required for
all companies with fiscal years beginning after June 15, 2002. The new
standard requires the Partnership to recognize a liability for the
present value of all legal obligations associated with the retirement of
tangible long-lived assets and to capitalize an equal amount as a cost
of the asset and depreciate the additional cost over the estimated
useful life of the asset. On January 1, 2003, the Partnership recorded
additional costs, net of accumulated depreciation, of approximately
$291,413, a long term liability of approximately $1,061,541 and a charge
of approximately $770,128 for the cumulative effect on depreciation of
the additional costs and accretion expense on the liability related to
expected abandonment costs of its oil and natural gas producing
properties. At March 31, 2003, the asset retirement obligation was
$1,082,772, and the increase in the balance from January 1, 2003 of
$21,231 is due to accretion expense. The pro forma amount of the asset
retirement obligation was measured using information, assumptions and
interest rates as of the adoption date of January 1, 2003. Assuming the
Partnership had applied the provisions of SFAS No. 143 for the three
months ended March 31, 2002 pro forma net income (loss) and related
income (loss) per limited partner unit amounts would have been $(59,504)
and $(2.98), respectively.
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 (used in) operating activities were approximately
$95,400 in the quarter ended March 31, 2003 as compared to approximately
$(15,500) in the quarter ended March 31, 2002. The primary source of
the 2003 cash flows from operating activities was profitable operations.
Cash flows used in financing activities were approximately $1,100 in the
quarter ended March 31, 2003. There were no material cash flows used in
financing activities in the quarter ended March 31, 2002.
There were no distributions during the quarter ended March 31, 2003 and
2002.
Since inception of the Partnership, cumulative monthly cash
distributions of $17,453,854 have been made to the partners. As of
March 31, 2003, $15,724,177 or $786.21 per limited partner unit has been
distributed to the limited partners, representing a 100% return of the
capital and a 57% return on capital contributed.
As of March 31, 2003, the Partnership had approximately $360,500 in
working capital. The Managing General Partner knows of no unusual
contractual commitments. Although the partnership held many long-lived
properties at inception, because of the restrictions on property
development imposed by the partnership agreement, the Managing General
Partner anticipates that at some point in the near future, the
partnership will need to be liquidated. Maintenance of properties and
administrative expenses are increasing relative to production. As the
properties continue to deplete, maintenance of properties and
administrative costs as a percentage of production will continue to
increase.
As the partnerships properties have matured, the net cash flows from
operations for the partnership have generally declined, except in
periods of substantially increased commodity pricing. Since the
partnership cannot develop their properties, the producing reserves
continue to deplete causing cash flow to steadily decline.
Liquidity - Managing General Partner
The Managing General Partner has a highly leveraged capital structure
with approximately $124.0 million of principal due between December 31,
2002 and December 31, 2004. The Managing General Partner is constantly
monitoring its cash position and its ability to meet its financial
obligations as they become due, and in this effort, is continually
exploring various strategies for addressing its current and future
liquidity needs. The Managing General Partner regularly pursues and
evaluates recapitalization strategies and acquisition opportunities
(including opportunities to engage in mergers, consolidations or other
business combinations) and at any given time may be in various stages of
evaluating such opportunities.
Based on current production, commodity prices and cash flow from
operations, the Managing General Partner has adequate cash flow to fund
debt service, developmental projects and day to day operations, but it
is not sufficient to build a cash balance which would allow the Managing
General Partner to meet its debt principal maturities scheduled for
2004. Therefore the Managing General Partner must renegotiate the terms
of its various obligations or seek new lenders or equity investors in
order to meet its financial obligations, specifically those maturing in
2004. The Managing General Partner may be required to dispose 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 debt holders will
agree to a course of action consistent with the Managing General
Partner's requirements in restructurings the obligations. Furthermore,
there can be no assurance that the sales of assets can be successfully
accomplished on terms acceptable to the Managing General Partner.
Recent Accounting Pronouncements
The FASB has issued Statement No. 143 "Accounting for Asset Retirement
Obligations" which establishes requirements for the accounting of
removal-type costs associated with asset retirements. The standard is
effective for fiscal years beginning after June 15, 2002, with earlier
application encouraged. This statement has been adopted by the
partnership effective January 1, 2003. The transition adjustment
resulting from the adoption of SFAS No. 143 has been reported as a
cumulative effect of a change in accounting principle
In April 2004, the FASB issued Statement of Financial Accounting
Standards No. 149, Amendment of Statement No. 133 on Derivative
Instruments and Hedging Activities ("SFAS No. 149"). SFAS No. 149
amendments require that contracts with comparable characteristics be
accounted for similarly, clarifies when a contract with an initial
investment meets the characteristic of a derivative and clarifies when a
derivative requires special reporting in the statement of cash flows.
SFAS No. 149 is effective for hedging relationships designated and for
contracts entered into or modified after June 30, 2003, except for
provisions that relate to SFAS No. 133 Statement Implementation Issues
that have been effective for fiscal quarters prior to June 15, 2003,
should be applied in accordance with their respective effective dates
and certain provisions relating to forward purchases or sales of when-
issued securities or other securities that do not yet exist, should be
applied to existing contracts as well as new contracts entered into
after June 30, 2003. Assessment by the Managing General Partner
revealed this pronouncement to have no impact on the partnership.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Partnership is not a party to any derivative or embedded derivative
instruments.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. The chief
executive officer and chief financial officer of the Partnership's
managing general partner have evaluated the effectiveness of the design
and operation of the Partnership's disclosure controls and procedures
(as defined in Exchange Act Rule 13a-14(c)) as of a date within 90 days
of the filing date of this quarterly report. Based on that evaluation,
the chief executive officer and chief financial officer have concluded
that the Partnership's disclosure controls and procedures are effective
to ensure that material information relating to the Partnership and the
Partnership's consolidated subsidiaries is made known to such officers
by others within these entities, particularly during the period this
quarterly report was prepared, in order to allow timely decisions
regarding required disclosure.
(b) Changes in Internal Controls. There have not been any significant
changes in the Partnership's internal controls or in other factors that
could significantly affect these controls subsequent to the date of
their evaluation.
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:
99.1 Certification pursuant to 18 U.S.C. Section
1350
99.2 Certification pursuant to 18 U.S.C. Section 1350
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the
quarter for which this report is filed.
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, INC.
INCOME FUND VI,
a Tennessee limited partnership
By: Southwest Royalties, Inc.
Managing General Partner
By: /s/ Bill E. Coggin
------------------------------
Bill E. Coggin, Vice President
and Chief Financial Officer
Date: May 15, 2003
CERTIFICATIONS
I, H.H. Wommack, III, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Southwest
Royalties, Inc. Income Fund VI;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which
this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or
operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data
and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrant's internal
controls; and
6. The registrant's other certifying officers and I have
indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: May 15, 2003
/s/ H.H. Wommack, III
H. H. Wommack, III
Chairman, President and Chief Executive Officer
of Southwest Royalties, Inc., the
Managing General Partner of
Southwest Royalties, Inc. Income Fund VI
CERTIFICATIONS
I, Bill E. Coggin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Southwest
Royalties, Inc. Income Fund VI;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which
this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls
and procedures as of a date within 90 days prior
to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or
operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial
data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or
other employees who have a significant role in t
he registrant's internal
controls; and
6. The registrant's other certifying officers and I have
indicated in
this quarterly report whether or not there were significant
changes in
internal controls or in other factors that could significantly
affect
internal controls subsequent to the date of our most r
ecent evaluation,
including any corrective actions with regard to significant
deficiencies
and material weaknesses.
Date: May 15, 2003
/s/ Bill E. Coggin
Bill E. Coggin
Executive Vice President
and Chief Financial Officer of
Southwest Royalties, Inc., the
Managing General Partner of
Southwest Royalties, Inc. Income Fund VI
CERTIFICATION PURSUANT TO
19 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Southwest Royalties,
Inc. Income Fund VI, Limited Partnership (the "Company") on Form 10-Q
for the period ending March 31, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, H.H. Wommack,
III, Chief Executive Officer of the Managing General Partner of the
Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation of
the Company.
Date: May 15, 2003
/s/ H.H. Wommack, III
H. H. Wommack, III
Chairman, President, Director and Chief Executive Officer
of Southwest Royalties, Inc., the
Managing General Partner of
Southwest Royalties, Inc. Income Fund VI
CERTIFICATION PURSUANT TO
19 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Southwest Royalties,
Inc. Income Fund VI, Limited Partnership (the "Company") on Form 10-Q
for the period ending March 31, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Bill E.
Coggin, Chief Financial Officer of the Managing General Partner of the
Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to
906 of the Sarbanes-Oxley Act of 2002, that:
(3) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(4) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation of
the Company.
Date: May 15, 2003
/s/ Bill E. Coggin
Bill E. Coggin
Executive Vice President
and Chief Financial Officer of
Southwest Royalties, Inc., the
Managing General Partner of
Southwest Royalties, Inc. Income Fund VI