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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1996
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission File Number 33-38511
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
407 N. Big Spring, Suite 300, Midland, Texas 79701
(Address of principal executive office) (Zip Code)
Registrant's telephone number,including area code (915) 686-9927
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
limited and general partner interests
Indicate by check mark whether registrant (1) has filed 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]
The registrant's outstanding securities consist of Units of limited
partnership interests for which there exists no established public market
from which to base a calculation of Aggregate market value.
The total number of pages contained in this report is 40. There is no
exhibit index.
PAGE
Table of Contents
Item Page
Part I
1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. Submission of Matters to a Vote of Security Holders . . . . . . . . 8
Part II
5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . 9
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . .10
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . .11
8. Financial Statements and Supplementary Data . . . . . . . . . . . .18
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. . . . . . . . . . . . . . .32
Part III
10. Directors and Executive Officers of the Registrant. . . . . . . . .33
11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . .36
12. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
13. Certain Relationships and Related Transactions. . . . . . . . . . .37
Part IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Part I
Item 1. Business
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 has no subsidiaries.
The Partnership has expended its capital and acquired leasehold interests and
completed drilling operations. The Partnership has produced and marketed the
crude oil and natural gas from such properties.
The principal executive offices of the Partnership are located at 407 N. Big
Spring, Suite 300, Midland, Texas, 79701. The Managing General Partner of
the Partnership, Southwest Royalties, Inc. (the "Managing General Partner")
and its staff of 245 individuals, together with certain independent
consultants used on an "as needed" basis, perform various services on behalf
of the Partnership, including the selection of leasehold interests upon which
drilling would be performed, and the marketing of future anticipated
production from such properties. The Partnership has no employees.
Principal Products, Marketing and Distribution
The Partnership has acquired undeveloped leasehold interests and drilled oil
and gas properties located in Texas and New Mexico. All activities of the
Partnership are confined to the continental United States. All oil and gas
produced from these properties will be sold to unrelated third parties in the
oil and gas business.
The revenues generated from the Partnership's oil and gas activities are
dependent upon the current market for oil and gas. The prices received by
the Partnership for its oil and gas production depend upon numerous factors
beyond the Partnership's control, including competition, economic, political
and regulatory developments and competitive energy sources, and make it
particularly difficult to estimate future prices of oil and natural gas.
The recent strength in the price of crude oil reflects a continued growth in
demand for energy. The worldwide demand for oil continues to grow. The
United States dependence on foreign oil reached a record 51% in 1996. The
supply of oil is not keeping up with the demand on either a domestic or
worldwide economic basis. Oil production in the United States fell for the
fifth straight year, dropping 1.8% to 6.45 million barrels per day in 1996.
At the same time, economic recovery in the world economy continues to apply
upward pressure on demand. Current oil consumption of over 70 million
barrels per day is growing on an annual basis. This is especially acute in
the lesser developed countries as they move toward industrialization. Supply
and demand for oil has moved very close to being in balance. The lack of
excess capacity in the oil markets has helped push oil prices into the mid-
20's during 1996.
For the last several years, the natural gas industry in the United States has
been affected generally by a surplus in available natural gas and enhanced
delivery capability causing a general deterioration in natural gas prices.
In 1996, natural gas prices recovered significantly after having been
adversely affected for many years by the chronic oversupply. A colder than
normal 1995 and 1996 winter for most of the nation and a cold start for the
1996 and 1997 heating season has increased demand, while supplies have
declined creating a guarded optimism within the industry in regards to the
1997 gas price. January 1997's gas price is the highest the industry has
seen since deregulation in 1985.
Following is a table of the ratios of revenues received from oil and gas
production for the last three years:
Oil Gas
1996 76% 24%
1995 75% 25%
1994 79% 21%
As the table indicates, the majority of the Partnership's revenue is from its
oil production; therefore, Partnership revenues will be highly dependent upon
the future prices and demands of oil.
Seasonality of Business
Although the demand for natural gas is highly seasonal, with higher demand in
the colder winter months and in very hot summer months, the Partnership
anticipates that it will be able to sell all of the expected future
production of natural gas, either through contracts or on the spot market at
the then prevailing spot market price.
Customer Dependence
No material portion of the Partnership's business is dependent on a single
purchaser, or a very few purchaser, where the loss of one would have a
material adverse impact on the Partnership. Three purchasers accounted for
96% of the Partnership's total oil and gas production during 1996: Scurlock
Permian Corporation 60%, Aquila Southwest Pipeline Corporation 19% and Navajo
Refining Company, Inc. 17%. Three purchasers, Scurlock Permian Corporation,
Aquila Southwest Pipeline Corporation and Navajo Refining Company, accounted
for 60%, 20% and 17%, respectively, of the Partnership's total oil and gas
production during 1995. Two purchasers, Scurlock Permian Corporation and
Navajo Refining Company, accounted for 60% and 17%, respectively, of the
Partnership's total oil and gas production during 1994. All purchasers of
the Partnership's oil and gas production are unrelated third parties. In the
event this purchaser were to discontinue purchasing the Partnership's
production, the Managing General Partner believes that a substitute purchaser
or purchasers could be located without undue delay. No other purchaser
accounted for an amount equal to or greater than 10% of the Partnership's
total oil and gas production.
Competition
Because the Partnership has utilized all of its funds available for the
acquisition of drilling prospects and drilling activities, it is not subject
to competition from other oil and gas property purchasers. See Item 2,
Properties.
Factors that may adversely affect the Partnership include delays in
completing arrangements for the sale of production, availability of a market
for production, rising operating costs of producing oil and gas and complying
with applicable water and air pollution control statutes, increasing costs
and difficulties of transportation, and marketing of competitive fuels.
Moreover, domestic oil and gas must compete with imported oil and gas and
with coal, atomic energy, hydroelectric power and other forms of energy.
Regulation
Oil and Gas Production - The production and sale of oil and gas is subject to
federal and state governmental regulation in several respects, such as
existing price controls on natural gas and possible price controls on crude
oil, regulation of oil and gas production by state and local governmental
agencies, pollution and environmental controls and various other direct and
indirect regulation. Many jurisdictions have periodically imposed
limitations on oil and gas production by restricting the rate of flow for oil
and gas wells below their actual capacity to produce and by imposing acreage
limitations for the drilling of wells. The federal government has the power
to permit increases in the amount of oil imported from other countries and to
impose pollution control measures. Various aspects of the Partnership's oil
and gas activities are regulated by administrative agencies under statutory
provisions of the states where such activities are conducted and by certain
agencies of the federal government for operations on Federal leases.
Moreover, certain prices at which the Partnership may sell its future
expected natural gas production are controlled by the Natural Gas Policy Act
of 1978, the Natural Gas Wellhead Decontrol Act of 1989 and the regulations
promulgated by the Federal Energy Regulatory Commission.
Environmental - The Partnership's oil and gas activities are subject to
extensive federal, state and local laws and regulations governing the
generation, storage, handling, emission, transportation and discharge of
materials into the environment. Governmental authorities have the power to
enforce compliance with their regulations, and violations carry substantial
penalties. This regulatory burden on the oil and gas industry increases its
cost of doing business and consequently affects its profitability. The
Managing General Partner is unable to predict what, if any, effect compliance
will have on the Partnership.
Industry Regulations and Guidelines - Certain industry regulations and
guidelines apply to the registration, qualification and operation of oil and
gas programs in the form of limited partnerships. The Partnership is subject
to these guidelines which regulate and restrict transactions between the
Managing General Partner and the Partnership. The Partnership complies with
these guidelines and the Managing General Partner does not anticipate that
continued compliance will have a material adverse effect on Partnership
operations.
Partnership Employees
The Partnership has no employees; however, the Managing General Partner has
a staff of geologists, engineers, accountants, landmen and clerical staff who
engage in Partnership activities and operations and perform additional
services for the Partnership as needed. In addition to the Managing General
Partner's staff, the Partnership engages independent consultants such as
petroleum engineers and geologists as needed. As of December 31, 1996, there
were 245 individuals directly employed by the Managing General Partner in
various capacities.
Item 2. Properties
In determining whether an interest in a particular leasehold was to be
acquired, the Managing General Partner considered such criteria as estimated
drilling costs, estimated oil and gas reserves, estimated cash flow from the
sale of future production, present and future prices of oil and gas, the
extent of undeveloped and unproved reserves and the availability of markets.
As of December 31, 1996, the Partnership possessed an interest in oil and gas
properties located in Eddy and Lea Counties of New Mexico and Ward County of
Texas. These properties consist of various interests in 9 wells.
Due to the Partnership's objective of maintaining current operations without
engaging in the additional drilling of any developmental or exploratory
wells, or additional acquisitions of producing properties, there has not been
any significant changes in properties during 1996, 1995 and 1994.
Significant Properties
The following table reflects the properties in which the Partnership has an
interest:
Date
Purchased No. of Proved Reserves*
Name and Location and Interest Wells Oil (bbls) Gas (mcf)
Mobil Fee G #1 12/92 at 1 48,489 104,252
Ward County, 100%
Texas working
interest
Mobil Fee H #1 12/92 at 1 72,140 142,915
Ward County, 100%
Texas working
interest
Howard State 32 #1 12/92 at 1 5,375 50,170
Lea County, 96%
New Mexico working
interest
N Brushy Draw Fed 12/92 at 6 37,698 38,448
"35" 6.25% to 50%
Eddy County, working
New Mexico interest
*The reserve estimates were prepared as of January 1, 1997, by Donald R.
Creamer, P.E., an independent registered petroleum engineer. The reserve
estimates were made in accordance with guidelines established by the
Securities and Exchange Commission pursuant to Rule 4-10(a) of Regulation S-
X. Such guidelines require oil and gas reserve reports be prepared under
existing economic and operation conditions, price and costs, as of the date
the estimation is made. Prices may include consideration of changes in
existing price provided only by contractual arrangements, but not on
escalations based upon future conditions.
An oil price of $24.84 per barrel was used in the preparation of the reserve
report as of January 1, 1997. The West Texas Intermediate posted price at
December 31, 1996 of $24.25 was used as the beginning basis for the oil
price. Oil price adjustments from $24.25 per barrel were made in the
individual evaluations to allow for the average difference between recent
prices actually received (current prices) and the West Texas Intermediate
posted price on the sales date. This effectively adjusts for temperature,
gravity, transportation and impurities on an individual property basis to
arrive at a fair value for the selling price.
A gas price of $4.45 per mcf was used in the preparation of the reserve
report as of January 1, 1997. The El Paso Permian Basin Index posted price
at December 31, 1996 of $3.59 was used as the beginning basis for the gas
price. Gas price adjustments from $3.59 per mcf were made in the individual
evaluations to allow for the average difference between recent prices
actually received (current prices) and the El Paso Permian Basin Index posted
price on the sales date. This effectively adjusts for temperature, gravity,
transportation and impurities on an individual property basis to arrive at a
fair value for the selling price.
As also discussed in Part II, Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, oil and gas prices were
subject to frequent changes in 1996.
The evaluation of oil and gas properties is not an exact science and
inevitably involves a significant degree of uncertainty, particularly with
respect to the quantity of oil or gas that any given property is capable of
producing. Estimates of oil and gas reserves are based on available
geological and engineering data, the extent and quality of which may vary in
each case and, in certain instances, may prove to be inaccurate.
Consequently, properties may be depleted more rapidly than the geological and
engineering data have indicated. Unanticipated depletion, if it occurs, will
result in lower reserves than previously estimated; thus an ultimately lower
return for the Partnership. As new data is gathered during the subsequent
year, the engineer must revise his earlier estimates. A year of new
information, which is pertinent to the estimation of future recoverable
volumes, is available during the subsequent year evaluation. In applying
industry standards and procedures, the new data may cause the previous
estimates to be revised. This revision may increase or decrease the earlier
estimated volumes. Pertinent information gathered during the year may
include actual production and decline rates, production from offset wells
drilled to the same geologic formation, increased or decreased water
production, workovers, and changes in lifting costs, among others.
Accordingly, reserve estimates are often different from the quantities of oil
and gas that are ultimately recovered.
The Partnership has reserves which are classified as proved developed
producing and proved undeveloped. All of the proved reserves are included in
the engineering reports which evaluate the Partnership's present reserves.
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the Partnership is
a party.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth
quarter of 1996 through the solicitation of proxies or otherwise.
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Market Information
Investor partner interests, or units, in the Partnership were initially
offered and sold for a price of $1,000. Investor partner units are not
traded on any exchange and there is no public or organized trading market for
them. Further, a transferee may not become a substitute limited or general
partner without the consent of the Managing General Partner.
Each Additional General Partner interest in the Partnership was converted
automatically into a limited partner interest immediately following December
31, 1993, the year in which the Partnership completed all drilling
activities.
The Managing General Partner has the right, but not the obligation, to
purchase limited partnership units should an investor desire to sell. The
value of the unit is determined by adding the sum of (1) current assets less
liabilities and (2) the present value of the future net revenues attributable
to proved reserves and by discounting the future net revenues at a rate not
in excess of the prime rate charged by Nations Bank, N.A. of Midland, Texas,
plus one percent (1%), which value shall be further reduced by a risk factor
discount of no more than one-third (1/3) to be determined by the Managing
General Partner in its sole and absolute discretion. As of December 31,
1996, 1995 and 1994, no limited partner units were purchased by the Managing
General Partner.
Number of Limited and General Partner Interest Holders
As of December 31, 1996, there were 104 holders of limited partner units.
Distributions
Pursuant to Article IV, Section 4.01 of the Partnership's Certificate and
Agreement of Limited Partnership "Net Cash Flow" is distributed to the
partners on a monthly basis. "Net Cash Flow" is defined as "the cash
generated by the Partnership's drilling activities, less (i) General and
Administrative Costs, (ii) Operating Costs, and (iii) any reserves necessary
to meet current and anticipated needs of the Partnership, including, but not
limited to drilling cost overruns, as determined in the sole discretion of
the Managing General Partner."
During 1996, twelve monthly distributions were made totaling $250,000, with
$222,500 distributed to the investor partners and $27,500 to the Managing
General Partner. For the year ended December 31, 1996, distributions of
$158.14 per investor partner unit were made, based upon 1,407 investor
partner units outstanding. For the year ended December 31, 1995, twelve
monthly distributions were made totaling $270,000, with $240,300 distributed
to the investor partners and $29,700 distributed to the Managing General
Partner. For the year ended December 31, 1995, distributions of $170.79 per
investor partner unit were made, based upon 1,407 investor partner units
outstanding. For the year ended December 31, 1994, twelve monthly
distributions were made totaling $99,800, with $88,932 distributed to the
investor partners and $10,868 distributed to the Managing General Partner.
For the year ended December 31, 1994, distributions of $63.21 per investor
partner unit were made, based upon 1,407 investor partner units outstanding.
Item 6. Selected Financial Data
The following selected financial data for the year ended December 31, 1996,
1995, 1994, 1993 and the period from December 28, 1992, date of inception,
through December 31, 1992 should be read in conjunction with the financial
statements included in Item 8:
Period from
inception
through
Years ended December 31, December 31,
-------------------------------------- ------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Revenues $ 425,671 455,640 405,099 364,420 -
Net income (loss) 178,706 165,968 103,054 (141,690) -
Partners' share of
net income (loss):
Managing General
Partner 28,208 29,338 22,747 23,058 -
Investor partners 150,498 136,630 80,307 (164,748) -
Investor partners'
net income (loss)
per unit 106.96 97.11 57.08 (117.09) -
Investor partners'
cash distributions
per unit 158.14 170.79 63.21 95.33 -
Total assets $ 794,538 865,832 969,949 967,110 1,441,783
Item 7. 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.
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 anticipates the Partnership could
possibly experience a normal decline of 5% to 7% a year. There are no
current plans to perform any workovers in the future.
Results of Operations
A. General Comparison of the Years Ended December 31, 1996 and 1995
The following table provides certain information regarding performance
factors for the years ended December 31, 1996 and 1995:
Year Ended Percentage
December 31, Increase
1996 1995 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 20.64 17.56 18%
Average price per mcf of gas $ 2.99 2.68 12%
Oil production in barrels 15,600 19,500 (20%)
Gas production in mcf 34,300 41,600 (18%)
Gross oil and gas revenue $ 424,676 454,587 (7%)
Net oil and gas revenue $ 274,432 284,771 (4%)
Partnership distributions $ 250,000 270,000 (7%)
Investor partner distributions $ 222,500 240,300 (7%)
Per unit distribution to investor
partners $ 158.14 170.79 (7%)
Number of investor partner units 1,407 1,407
Revenues
The Partnership's oil and gas revenues decreased to $424,676 from $454,587
for the years ended December 31, 1996 and 1995, respectively, a decrease of
7%. The principal factors affecting the comparison of the years ended
December 31, 1996 and 1995 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the year ended December 31, 1996 as compared to the year
ended December 31, 1995 by 18%, or $3.08 per barrel, resulting in an
increase of approximately $60,100 in revenues. Oil sales represented 76%
of total oil and gas sales during the year ended December 31, 1996 as
compared to 75% during the year ended December 31, 1995.
The average price for an mcf of gas received by the Partnership increased
during the same period by 12%, or $.31 per mcf, resulting in an increase
of approximately $12,900 in revenues.
The total increase in revenues due to the change in prices received from
oil and gas production is approximately $73,000. 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.
2. Oil production decreased approximately 3,900 barrels or 20% during the
year ended December 31, 1996 as compared to the year ended December 31,
1995, resulting in a decrease of approximately $80,500 in revenues.
Gas production decreased approximately 7,300 mcf or 18% during the same
period, resulting in a decrease of approximately $21,800 in revenues.
The total decrease in revenues due to the change in production is
approximately $102,300. The decrease is primarily a result of an
anticipated sharp decline on one well following a successful workover.
Costs and Expenses
Total costs and expenses decreased to $246,965 from $289,672 for the years
ended December 31, 1996 and 1995, respectively, a decrease of 15%. The
decrease is the result of lower lease operating costs, general and
administrative expense and depletion expense.
1. Lease operating costs and production taxes were 12% lower, or
approximately $19,600 less during the year ended December 31, 1996 as
compared to the year ended December 31, 1995. The decrease is a result
of workover costs incurred in 1995.
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 1%
or approximately $100 during the year ended December 31, 1996 as compared
to the year ended December 31, 1995.
3. Depletion expense decreased to $69,000 for the year ended December 31,
1996 from $92,000 for the same period in 1995. This represents a
decrease of 25%. Depletion is calculated using the units of revenue
method of amortization based on a percentage of current period gross
revenues to total future gross oil and gas revenues, as estimated by the
Partnership's independent petroleum consultants.
A contributing factor to the decline in depletion expense between the
comparative periods was the increase in the price of oil and gas used to
determine the Partnership's reserves for January 1, 1997 as compared to
1996. Another contributing factor was due to the impact of revisions of
previous estimates on reserves. Revisions of previous estimates can be
attributed to the changes in production performance, oil and gas price
and production costs. The impact of the revision would have decreased
depletion expense approximately $14,000 as of December 31, 1995. Also
contributing to the decline in depletion expense was the decrease in oil
and gas revenues between the comparative periods.
B. General Comparison of the Years Ended December 31, 1995 and 1994
The following table provides certain information regarding performance
factors for the years ended December 31, 1995 and 1994:
Year Ended Percentage
December 31, Increase
1995 1994 (Decrease)
---- ---- ----------
Average price per barrel of oil $ 17.56 16.24 8%
Average price per mcf of gas $ 2.68 2.21 21%
Oil production in barrels 19,500 19,600 (1%)
Gas production in mcf 41,600 39,100 6%
Gross oil and gas revenue $ 454,587 404,167 12%
Net oil and gas revenue $ 284,771 228,121 25%
Partnership distributions $ 270,000 99,800 171%
Investor partner distributions $ 240,300 88,932 170%
Per unit distribution to investor
partners $ 170.79 63.21 170%
Number of investor partner units 1,407 1,407
Revenues
The Partnership's oil and gas revenues increased to $454,587 from $404,167
for the years ended December 31, 1995 and 1994, respectively, an increase of
12%. The principal factors affecting the comparison of the years ended
December 31, 1995 and 1994 are as follows:
1. The average price for a barrel of oil received by the Partnership
increased during the year ended December 31, 1995 as compared to the
year ended December 31, 1994 by 8%, or $1.32 per barrel, resulting in an
increase of approximately $25,900 in revenue. Oil sales represented 75%
of total oil and gas sales during the year ended December 31, 1995 as
compared to 79% during the year ended December 31, 1994.
The average price for an mcf of gas received by the Partnership
increased during the same period by 21%, or $.47 per mcf, resulting in
an increase of approximately $18,400 in revenue.
The total increase in revenue due to the change in prices received from
oil and gas production is approximately $44,300. 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 100 barrels or 1% during the year
ended December 31, 1995 as compared to the year ended December 31, 1994,
resulting in a decrease of approximately $1,800 in revenue.
Gas production increased approximately 2,500 mcf or 6% during the same
period, resulting in an increase of approximately $6,700 in revenue.
The net total increase in revenue due to the change in production is
approximately $4,900.
Costs and Expenses
Total costs and expenses decreased to $289,672 from $302,045 for the years
ended December 31, 1995 and 1994, respectively, a decrease of 4%. The
decrease is the result of a decrease in production costs, general and
administrative expense and depletion expense.
1. Lease operating costs and production taxes were 4% lower, or
approximately $6,200 less during the year ended December 31, 1995 as
compared to the year ended December 31, 1994.
2. 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 14%
or approximately $3,100 during the year ended December 31, 1995 as
compared to the year ended December 31, 1994.
3. Depletion expense decreased to $92,000 for the year ended December 31,
1995 from $95,000 for the same period in 1994. This represents a
decrease of 3%. 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. Although oil and gas
revenue increased for the year ended December 31, 1995 as compared to
the year ended December 31, 1994, the decrease in depletion expense is
the result of the change in oil prices since 1994.
C. Revenue and Distribution Comparison
Partnership net income for the years ended December 31, 1996, 1995 and 1994
was $178,706, $165,968 and $103,054, respectively. Excluding the effects of
depreciation, depletion and amortization, net income for the years ended
December 31, 1996, 1995 and 1994 would have been $256,442, $266,704 and
$206,790, respectively. Correspondingly, Partnership distributions for the
years ended December 31, 1996, 1995 and 1994 were $250,000, $270,000 and
$99,800, respectively. These differences are indicative of the changes in
oil and gas prices, production and property during 1996, 1995 and 1994.
The source for the 1996 distributions of $250,000 was oil and gas operations
of approximately $260,100, resulting in excess cash for contingencies or
subsequent distributions. The sources for the 1995 distributions of $270,000
were oil and gas operations of approximately $278,100 and property sales of
$1,500, offset by additions to oil and gas properties of approximately
$12,500, with the balance from available cash on hand at the beginning of the
period. The source for the 1994 distributions of $99,800 was oil and gas
operations of approximately $183,300, offset by additions to oil and gas
properties of approximately $85,000, with the balance from available cash on
hand at the beginning of the period.
Total distributions during the year ended December 31, 1996 were $250,000 of
which $222,500 was distributed to the investor partners and $27,500 to the
Managing General Partner. The per unit distribution to investor partners
during the same period was $158.14. Total distributions during the year
ended December 31, 1995 were $270,000 of which $240,300 was distributed to
the investor partners and $29,700 to the Managing General Partner. The per
unit distribution to investor partners during the same period was $170.79.
Total distributions during the year ended December 31, 1994 were $99,800 of
which $88,932 was distributed to the investor partners and $10,868 to the
Managing General Partner. The per unit distribution to investor partners
during the same period was $63.21.
Since inception of the Partnership, cumulative monthly cash distributions of
$770,215 have been made to the partners. As of December 31, 1996, $685,867
or $487.47 per investor partner unit, has been distributed to the investor
partners, representing a 49% return of the capital contributed.
Liquidity and Capital Resources
The primary source of cash is from operations, the receipt of income from oil
and gas properties. The Partnership anticipates the primary source of cash
to continue being from the oil and gas operations.
Cash flows provided by operating activities were approximately $260,100 in
1996, $278,100 in 1995 and $183,300 in 1994. The primary source of the 1996
cash flow from operating activities was profitable operations.
There were no cash flows from investing activities during 1996. Cash flows
used in investing activities were approximately $11,000 in 1995 and $85,000
in 1994.
Cash flows used in financing activities were approximately $250,000 in 1996,
$270,000 in 1995 and $99,800 in 1994. The only use in the 1996 financing
activities was the distributions to partners.
As of December 31, 1996, the Partnership had approximately $71,300 in working
capital. The Managing General Partner knows of no unusual contractual
commitments and believes the revenue generated from operations are adequate
to meet the needs of the Partnership.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Page
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . .19
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . .21
Statement of Changes in Partners' Equity . . . . . . . . . . . . . . . .22
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . .23
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . .25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
Southwest Developmental Drilling
Fund 92-A, L.P.
Midland, Texas
We have audited the accompanying balance sheets of Southwest Developmental
Drilling Fund 92-A, L.P. as of December 31, 1996 and 1995, and the related
statements of operations, changes in partners' equity and cash flows for each
of the three years in the period ended December 31, 1996 These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Southwest Developmental
Drilling Fund 92-A, L.P. as of December 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
JOSEPH DECOSIMO AND COMPANY
A Tennessee Registered Limited Liability Partnership
Chattanooga, Tennessee
March 14, 1997
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Balance Sheets
December 31, 1996 and 1995
1996 1995
---- ----
Assets
Current assets:
Cash and cash equivalents $ 17,730 7,614
Receivable from Managing General Partner 53,520 57,194
--------- ---------
Total current assets 71,250 64,808
--------- ---------
Oil and gas properties - using the
full-cost method of accounting 1,315,532 1,315,532
Less accumulated depreciation,
depletion and amortization 601,000 532,000
--------- ---------
Net oil and gas properties 714,532 783,532
--------- ---------
Organization costs, net of amortization
of $34,944 and $26,208 for 1996 and 1995 8,756 17,492
--------- ---------
$ 794,538 865,832
========= =========
Liabilities and Partners' Equity
Partners' equity:
Investor partners $ 763,505 835,507
Managing General Partner 31,033 30,325
--------- ---------
Total partners' equity $ 794,538 865,832
========= =========
The accompanying notes are an integral
part of these financial statements.
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Statements of Operations
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Revenues
Oil and gas sales $ 424,676 454,587 404,167
Interest income from operations 995 1,053 932
------- ------- -------
425,671 455,640 405,099
------- ------- -------
Expenses
Production 150,244 169,816 176,046
General and administrative 18,985 19,120 22,263
Depreciation, depletion and
amortization 77,736 100,736 103,736
------- ------- -------
246,965 289,672 302,045
------- ------- -------
Net income $ 178,706 165,968 103,054
======= ======= =======
Net income allocated to:
Managing General Partner $ 28,208 29,338 22,747
======= ======= =======
Investor partners $ 150,498 136,630 80,307
======= ======= =======
Per investor partner unit $ 106.96 97.11 57.08
======= ======= =======
The accompanying notes are an integral
part of these financial statements.
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Statement of Changes in Partners' Equity
Years ended December 31, 1996, 1995 and 1994
Managing
General Investor
Partner Partners Total
-------- -------- -----
Balance at December 31, 1993 $ 18,808 947,802 966,610
Net income 22,747 80,307 103,054
Distributions (10,868) (88,932) (99,800)
------- -------- --------
Balance at December 31, 1994 30,687 939,177 969,864
Net income 29,338 136,630 165,968
Distributions (29,700) (240,300) (270,000)
------- -------- --------
Balance at December 31, 1995 30,325 835,507 865,832
Net income 28,208 150,498 178,706
Distributions (27,500) (222,500) (250,000)
------- -------- --------
Balance at December 31, 1996 $ 31,033 763,505 794,538
======= ======== ========
The accompanying notes are an integral
part of these financial statements.
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Cash received from oil and
gas sales $ 429,745 467,205 381,786
Cash paid to suppliers (170,624) (190,117) (199,430)
Interest received 995 1,053 932
-------- -------- --------
Net cash provided by operating
activities 260,116 278,141 183,288
-------- -------- --------
Cash flows from investing activities:
Additions to oil and gas properties - (12,475) (85,042)
Sale of oil and gas properties - 1,500 -
-------- -------- --------
Net cash used in investing
activities - (10,975) (85,042)
-------- -------- --------
Cash flows used in financing activities:
Distributions to partners (250,000) (270,000) (99,800)
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents 10,116 (2,834) (1,554)
Beginning of period 7,614 10,448 12,002
-------- -------- --------
End of period $ 17,730 7,614 10,448
======== ======== ========
(continued)
The accompanying notes are an integral
part of these financial statements.
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Statements of Cash Flows, continued
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 178,706 165,968 103,054
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 77,736 100,736 103,736
(Increase) decrease in receivables 5,069 12,618 (22,381)
Decrease in payables (1,395) (1,181) (1,121)
------- ------- -------
Net cash provided by operating
activities $ 260,116 278,141 183,288
======= ======= =======
The accompanying notes are an integral
part of these financial statements.
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
1. Summary of Significant Accounting Policies
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.
Under the units of revenue method, the Partnership computes the
provision by multiplying the total unamortized cost of oil and gas
properties by an overall rate determined by dividing (a) oil and gas
revenues during the period by (b) the total future gross oil and gas
revenues as estimated by the Partnership's independent petroleum
consultants. It is reasonably possible that those estimates of
anticipated future gross revenues, the remaining estimated economic life
of the product, or both could be changed significantly in the near term
due to the potential fluctuation of oil and gas prices or production.
The depletion estimate would also be affected by this change.
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 December 31, 1996, 1995 and 1994, the
net capitalized costs did not exceed the estimated present value of oil
and gas reserves.
Estimates and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
Organization Costs
Organization costs are stated at cost and are amortized over sixty
months using the straight-line method.
Syndication Costs
Syndication costs are accounted for as a reduction of partnership
equity.
Environmental Costs
The Partnership is subject to extensive federal, state and local
environmental laws and regulations. These laws, which are constantly
changing, regulate the discharge of materials into the environment and
may require the Partnership to remove or mitigate the environmental
effects of the disposal or release of petroleum or chemical substances
at various sites. Environmental expenditures are expensed or
capitalized depending on their future economic benefit. Costs which
improve a property as compared with the condition of the property when
originally constructed or acquired and costs which prevent future
environmental contamination are capitalized. Expenditures that relate
to an existing condition caused by past operations and that have no
future economic benefits are expensed. Liabilities for expenditures of
a non-capital nature are recorded when environmental assessment and/or
remediation is probable, and the costs can be reasonably estimated.
Gas Balancing
The Partnership utilizes the sales method of accounting for gas-
balancing arrangements. Under this method the Partnership recognizes
sales revenue on all gas sold. As of December 31, 1996, 1995 and 1994,
there were no significant amounts of imbalance in terms of units and
value.
Income Taxes
No provision for income taxes is reflected in these financial
statements, since the tax effects of the Partnership's income or loss
are passed through to the individual partners.
In accordance with the requirements of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," the Partnership's tax
basis in its assets at December 31, 1996 and 1995 was $572,137 and
$593,399, respectively, less than that shown on the accompanying Balance
Sheets in accordance with generally accepted accounting principles.
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Partnership considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents. The Partnership maintains its
cash at one financial institution.
Investor Partner Units
As of December 31, 1996, 1995 and 1994, there were 1,407 investor units
outstanding.
2. 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 Investor
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.
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
2. Organization - continued
(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.
3. Oil and Gas Properties
Costs incurred in connection with the Partnership's oil and gas
producing activities for the year ended December 31, 1996, 1995 and 1994
is as follows:
1996 1995 1994
---- ---- ----
Development costs $ - 12,475 85,042
====== ====== ======
Depreciation, depletion and
amortization $ 69,000 92,000 95,000
====== ====== ======
4. Commitments and Contingent Liabilities
The Partnership is subject to various federal, state and local
environmental laws and regulations which establish standards and
requirements for protection of the environment. The Partnership cannot
predict the future impact of such standards and requirements, which are
subject to change and can have retroactive effectiveness. The
Partnership continues to monitor the status of these laws and
regulations.
As of December 31, 1996, the Partnership has not been fined, cited or
notified of any environmental violations and management is not aware of
any unasserted violations which would have a material adverse effect
upon capital expenditures, earnings or the competitive position in the
oil and gas industry.
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
4. Commitments and Contingent Liabilities - continued
However, the Managing General Partner does recognize by the very nature
of its business, material costs could be incurred in the near term to
bring the Partnership into total compliance. The amount of such future
expenditures is not reliably determinable due to several factors,
including the unknown magnitude of possible contaminations, the unknown
timing and extent of the corrective actions which may be required, the
determination of the Partnership's liability in proportion to other
responsible parties and the extent to which such expenditures are
recoverable from insurance or indemnifications from prior owners of
Partnership's properties.
5. Related Party Transactions
A significant portion of the oil and gas properties in which the
Partnership has an interest are operated by and purchased from the
Managing General Partner. As is usual in the industry and as provided
for in the operating agreement for each respective oil and gas property
in which the Partnership has an interest, the operator is paid an amount
for administrative overhead attributable to operating such properties,
with such amounts to Southwest Royalties, Inc. as operator approximating
$19,000, $17,000 and $16,000 for the years ended December 31, 1996, 1995
and 1994, respectively. In addition, the Managing General Partner and
certain officers and employees may have an interest in some of the
properties that the Partnership also participates.
Certain subsidiaries of the Managing General Partner perform various
oilfield services for properties in which the Partnership owns an
interest. Such services aggregated approximately $400, $5,000 and
$12,600 for the years ended December 31, 1996, 1995 and 1994,
respectively, and the Managing General Partner believes that these costs
are comparable to similar charges paid by the Partnership to unrelated
third parties.
Southwest Royalties, Inc., the Managing General Partner, was paid an
administrative fee of $12,000 during 1996, 1995 and 1994 for
reimbursement of indirect general and administrative overhead expenses.
In addition, a director and officer of the Managing General Partner is
a partner in a law firm, with such firm providing legal services to the
Partnership approximating $50 during 1996. There were no legal services
provided during 1995 and approximately $400 during 1994.
Receivables from Southwest Royalties, Inc., the Managing General
Partner, of approximately $53,520 and $57,194 are from oil and gas
production, net of lease operating costs and production taxes, as of
December 31, 1996 and 1995, respectively.
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
6. Major Customers and Significant Leases
During 1996, three customers purchased 60%, 19% and 17% of the
Partnership's oil and gas production. During 1995, three customers
purchased 60%, 20% and 17% of the Partnership's oil and gas production.
During 1994, two customers purchased 60% and 17% of the Partnership's
oil and gas production.
During 1996, two lease accounted for 47% and 28% of the Partnership's
gross revenue. During 1995, two leases accounted for 26% and 51% of the
Partnership's gross revenues.
7. Estimated Oil and Gas Reserves (unaudited)
The Partnership's interest in proved oil and gas reserves is as follows:
Oil (bbls) Gas (mcf)
---------- ---------
Proved developed and undeveloped reserves -
January 1, 1994 169,000 296,000
Production (20,000) (39,000)
Revisions of estimates in place 39,000 82,000
------- -------
December 31, 1994 188,000 339,000
Production (20,000) (42,000)
Revisions of estimates in place (17,000) 20,000
------- -------
December 31, 1995 151,000 317,000
Production (16,000) (34,000)
Revisions of estimates in place 29,000 53,000
------- -------
December 31, 1996 164,000 336,000
======= =======
Proved developed reserves -
December 31, 1994 173,000 324,000
======= =======
December 31, 1995 151,000 316,000
======= =======
December 31, 1996 163,000 335,000
======= =======
All of the Partnership's reserves are located within the continental
United States.
Southwest Developmental Drilling Fund 92-A, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
7. Estimated Oil & Gas Reserves (unaudited) - continued
The standardized measure of discounted future net cash flows relating to
proved oil and gas reserves at December 31, 1996, 1995 and 1994 is
presented below:
1996 1995 1994
Future cash inflows $ 5,563,000 3,865,000 3,705,000
Production and development costs 2,738,000 2,248,000 1,891,000
--------- --------- ---------
Future net cash flows 2,825,000 1,617,000 1,814,000
10% annual discount for estimated
timing of cash flows 1,186,000 563,000 629,000
--------- --------- ---------
Standardized measure of discounted
future net cash flows $ 1,639,000 1,054,000 1,185,000
========= ========= =========
The principal sources of change in the standardized measure of
discounted future net cash flows for the years ended December 31, 1996,
1995 and 1994 are as follows:
1996 1995 1994
Sales of oil and gas produced,
net of production costs $ (364,000) (359,000) (256,000)
Changes in price 692,000 486,000 315,000
Revisions to estimated
production costs 74,000 (138,000) (48,000)
Revisions of previous
quantities estimates 44,000 (248,000) 209,000
Accretion of discount 139,000 128,000 90,000
Sales of minerals in place - - -
Discounted future net
cash flows -
Beginning of year 1,054,000 1,185,000 875,000
--------- --------- ---------
End of year $ 1,639,000 1,054,000 1,185,000
========= ========= =========
Future net cash flows were computed using year-end prices and costs that
related to existing proved oil and gas reserves in which the Partnership
has mineral interests.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
Management of the Partnership is provided by Southwest Royalties, Inc., as
Managing General Partner. The names, ages, offices, positions and length of
service of the directors and executive officers of Southwest Royalties, Inc.
are set forth below. Each director and executive officer serves for a term
of one year. The present directors of the Managing General Partner have
served in their capacity since the Company's formation in 1983.
Name Age Position
- -------------------- --- -------------------------------------
H. H. Wommack, III 41 Chairman of the Board, President,
Chief Executive Officer, Treasurer
and Director
H. Allen Corey 41 Secretary and Director
Bill E. Coggin 42 Vice President and Chief Financial
Officer
Richard E. Masterson 43 Vice President, Exploration and
Acquisitions
Jon P. Tate 39 Vice President, Land and Assistant
Secretary
Joel D. Talley 35 Vice President, Acquisitions and
Exploitation Manager
R. Douglas Keathley 41 Vice President, Operations
H. H. Wommack, III, is Chairman of the Board, President, Chief Executive
Officer, Treasurer, principal stockholder and a director of the Managing
General Partner, and has served as its President since the Company's
organization in August, 1983. Prior to the formation of the Company, Mr.
Wommack was a self-employed independent oil producer engaged in the purchase
and sale of royalty and working interests in oil and gas leases, and the
drilling of exploratory and developmental oil and gas wells. Mr. Wommack
holds a J.D. degree from the University of Texas from which he graduated in
1980, and a B.A. from the University of North Carolina in 1977.
H. Allen Corey, a founder of the Managing General Partner, has served as the
Managing General Partner's secretary and a director since its inception. Mr.
Corey is President of Trolley Barn Brewery, Inc., a brew pub restaurant chain
based in the Southeast. Prior to his involvement with Trolley Barn, Mr.
Corey was a partner at the law firm of Miller & Martin in Chattanooga,
Tennessee. He is currently of counsel to the law firm of Baker, Donelson,
Bearman & Caldwell, with the offices in Chattanooga, Tennessee. Mr. Corey
received a J.D. degree from the Vanderbilt University Law School and B.A.
degree from the University of North Carolina at Chapel Hill.
Bill E. Coggin, Vice President and Chief Financial Officer, has been with the
Managing General Partner since 1985. Mr. Coggin was Controller for Rod Ric
Corporation of Midland, Texas, an oil and gas drilling company, during the
latter part of 1984. He was Controller for C.F. Lawrence & Associates, Inc.,
an independent oil and gas operator also of Midland, Texas during the early
part of 1984. Mr. Coggin taught public school for four years prior to his
business experience. Mr. Coggin received a B.S. in Education and a B.B.A.
in Accounting from Angelo State University.
Richard E. Masterson, Vice President, Exploration and Acquisitions, first
became associated with the Managing General Partner as a geological
consultant in 1985. He was employed as a petroleum geologist by Grand Banks
Energy (1980-1985), Monsanto (1977-1980) and Texaco, Inc. (1974-1976) prior
to joining the Managing General Partner. Mr. Masterson is a member of the
Society of Economic Paleontologists and Mineralogists and the West Texas
Geological Society. Mr. Masterson received his B.A. degree in Geology from
Trinity University.
Jon P. Tate, Vice President, Land and Assistant Secretary, assumed his
responsibilities with the Managing General Partner in 1989. Prior to joining
the Managing General Partner, Mr. Tate was employed by C.F. Lawrence &
Associates, Inc., an independent oil and gas company, as Land Manager from
1981 through 1989. Mr. Tate is a member of the Permian Basin Landman's
Association and received his B.B.S. degree from Hardin-Simmons University.
Joel D. Talley, Vice President, Acquisitions and Exploitation Manager,
assumed his responsibilities with the Managing General Partner on July 15,
1996. Prior to joining the Managing General Partner, Mr. Talley was employed
for four (4) years by Merit Energy Company as Acquisitions Manager and then
as Region Manager over West Texas, New Mexico and Wyoming (1992-1996) and
eight (8) years by ARCO Oil & Gas Company in various engineering positions
(1984-1992). Mr. Talley received his B.S. in Mechanical Engineering in 1984
from Texas A&M University.
R. Douglas Keathley, Vice President, Operations, assumed his responsibilities
with the Managing General Partner as a Production Engineer in October, 1992.
Prior to joining the Managing General Partner, Mr. Keathley was employed for
four (4) years by ARCO Oil & Gas Company as senior drilling engineer working
in all phases of well production (1988-1992), eight (8) years by Reading &
Bates Petroleum Company as senior petroleum engineer responsible for drilling
(1980-1988) and two (2) years by Tenneco Oil Company as drilling engineer
responsible for all phases of drilling (1978-1980). Mr. Keathley received
his B.S. in Petroleum Engineering in 1977 from the University of Oklahoma.
Key Employees
Accounting and Administrative Officer - Debbie A. Brock, age 44, assumed her
position with the Managing General Partner in 1991. Prior to joining the
Managing General Partner, Ms. Brock was employed with Western Container
Corporation as Accounting Manager (1982-1990), Synthetic Industries (Texas),
Inc. as Accounting Manager (1976-1982) and held various accounting positions
in the manufacturing industry (1971-1975). Ms. Brock received a B.B.A. from
the University of Houston.
Controller - Robert A. Langford, age 47, assumed his responsibilities with
the Managing General Partner in 1992. Mr. Langford received his B.B.A.
degree in Accounting in 1975 from the University of Central Arkansas. Prior
to joining the Managing General Partner, Mr. Langford was employed with
Forest Oil Corporation as Corporate Coordinator, Regional Coordinator,
Accounting Manager. He held various other positions from 1982-1992 and 1976-
1980 and was Assistant Controller of National Oil Company from 1980-1982.
Financial Reporting Manager - Bryan Dixon, C.P.A., age 30, assumed his
responsibilities with the Managing General Partner in 1992. Mr. Dixon
received his B.B.A. degree in Accounting in 1988 from Texas Tech University
in Lubbock, Texas. Prior to joining the Managing General Partner, Mr. Dixon
was employed as a Senior Auditor with Johnson, Miller & Company from 1991-
1992 and Audit Supervisor for Texas Tech University and the Texas Tech
University Health Sciences Center from 1988-1991.
Production Superintendent - Steve C. Garner, age 55, assumed his
responsibilities with the Managing General Partner as Production
Superintendent in July, 1989. Prior to joining the Managing General Partner,
Mr. Garner was employed 16 years by Shell Oil Company working in all phases
of oil field production as operations foreman, one and one-half years with
Petroleum Corporation of Delaware as Production Superintendent, six years as
an independent engineering consultant, and one year with Citation Oil & Gas
Corp. as a workover, completion and production foreman. Mr. Garner has
worked extensively in the Permian Basin oil field for the last 25 years.
Tax Manager - Carolyn Cookson, age 40, assumed her position with the Managing
General Partner in April, 1989. Prior to joining the Managing General
Partner, Ms. Cookson was employed as Director of Taxes at C.F. Lawrence &
Associates, Inc. from 1983 to 1989, and worked in public accounting at
McCleskey, Cook & Green, P.C. from 1981 to 1983 and Deanna Brady, C.P.A. from
1980 to 1981. She is a member of the Permian Basin Chapter of the Petroleum
Accountants' Society, and serves on its Board of Directors and is liaison to
the Tax Committee. Ms. Cookson received a B.B.A. in accounting from New
Mexico State University.
Vice President, Marketing - Steve J. Person, age 38, joined the Managing
General Partner in 1989. Prior to joining the Managing General Partner, Mr.
Person served as Vice President of Marketing for CRI, Inc., and was
associated with Capital Financial Group and Dean Witter (1983). He received
a B.B.A. from Baylor University in 1982 and an M.D.A. from Houston Baptist
University in 1987.
Investor Relations Manager - Sandra K. Flournoy, age 50, came to Southwest
Royalties, Inc. in 1988 from Parker & Parsley Petroleum, where she was
Assistant Manager of Investor Services and Broker/Dealer Relations for two
years. Prior to that, Ms. Flournoy was Administrative Assistant to the
Superintendent at Greenwood ISD for four years.
In certain instances, the Managing General Partner will engage professional
petroleum consultants and other independent contractors, including engineers
and geologists in connection with property acquisitions, geological and
geophysical analysis, and reservoir engineering. The Managing General
Partner believes that, in addition to its own "in-house" staff, the
utilization of such consultants and independent contractors in specific
instances and on an "as-needed" basis allows for greater flexibility and
greater opportunity to perform its oil and gas activities more economically
and effectively.
Item 11. Executive Compensation
The Partnership does not have any directors or executive officers. The
executive officers of the Managing General Partner do not receive any cash
compensation, bonuses, deferred compensation or compensation pursuant to any
type of plan, from the Partnership. The Managing General Partner received
$12,000 during 1996, 1995 and 1994 as an administrative fee for reimbursement
of indirect general and administrative expenses.
Item 12. Security Ownership of Certain Beneficial Owners and Management
There are no investor partners who own of record, or are known by the
Managing General Partner to beneficially own, more than five percent of the
Partnership's investor partner interests.
The Managing General Partner owns an eleven percent interest as a Managing
General Partner.
No officer or director of the Managing General Partner owns Units in the
Partnership. There are no arrangements known to the Managing General Partner
which may at a subsequent date result in a change of control of the
Partnership.
Item 13. Certain Relationships and Related Transactions
In 1996, the Managing General Partner received $12,000 as an administrative
fee. This amount is part of the general and administrative expenses incurred
by the Partnership.
In some instances the Managing General Partner and certain officers and
employees may be working interest owners in an oil and gas property in which
the Partnership also has a working interest. Certain properties in which the
Partnership has an interest are operated by the Managing General Partner, who
was paid approximately $19,000 for administrative overhead attributable to
operating such properties during 1996.
Certain subsidiaries of the Managing General Partner perform various oilfield
services for properties in which the Partnership owns an interest. Such
services aggregated approximately $400 for the period ended December 31,
1996.
The law firm of Miller & Martin, of which H. Allen Corey, an officer and
director of the Managing General Partner, is a partner, is counsel to the
Partnership. Legal services rendered by Miller & Martin to the Partnership
during 1996 were approximately $50, which constitutes an immaterial portion
of that firm's business. Subsequent to December 31, 1996, the counsel to the
Partnership, H. Allen Corey, became a partner in the law firm Baker,
Donelson, Bearman & Caldwell.
In the opinion of management, the terms of the above transactions are similar
to ones with unaffiliated third parties.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements:
Included in Part II of this report --
Report of Independent Accountants
Balance Sheet
Statement of Changes in Partners' Equity
Statement of Cash Flows
Notes to Financial Statements
(2) Schedules required by Article 12 of Regulation S-X are
either omitted because they are not applicable or because
the required information is shown in the financial
statements or the notes thereto.
(3) Exhibits:
4 (a) Certificate of Limited Partnership of Southwest
Developmental Drilling Fund 92-A, L.P., dated May
5, 1992 (Incorporated by reference from
Partnership's Form 10-K for the fiscal year ended
December 31, 1992).
(b) Agreement of Limited Partnership of Southwest
Developmental Drilling Fund 92-A, L.P. dated May
5, 1992 (Incorporated by reference from
Partnership's Form 10-K for the fiscal year ended
December 31, 1992).
(c) First Amendment to Amended and Restated
Certificate of Limited Partnership of Southwest
Developmental Drilling Fund 92-A. L.P., dated as
of February 22, 1993 (Incorporated by reference
from Partnership's Form 10-K for the fiscal year
ended December 31, 1993).
(d) Second Amendment to Amended and Restated
Certificate of Limited Partnership of Southwest
Developmental Drilling Fund 92-A. L.P., dated as
of March 26, 1993 (Incorporated by reference from
Partnership's Form 10-K for the fiscal year ended
December 31, 1993).
(e) Second Amended and Restated Certificate of Limited
Partnership of Southwest Developmental Drilling
Fund 92-A. L.P., dated as of January 12, 1994.
(Incorporated by reference from Partnership's Form
10-K for the fiscal year ended December 31, 1993).
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter
ended December 31, 1996.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership 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/ H. H. Wommack, III
-----------------------------
H. H. Wommack, III, President
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Partnership and in the capacities and on the dates indicated.
By: /s/ H. H. Wommack, III
-----------------------------------
H. H. Wommack, III, Chairman of the
Board, President, Chief Executive
Officer, Treasurer and Director
Date: March 26, 1997
By: /s/ H. Allen Corey
-----------------------------
H. Allen Corey, Secretary and
Director
Date: March 26, 1997