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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 33-47668-02
SOUTHWEST ROYALTIES INSTITUTIONAL 1992-93 INCOME PROGRAM
Southwest Royalties Institutional Income Fund XI-B, L.P.
(Exact name of registrant as specified
in its limited partnership agreement)
Delaware 75-2427289
(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 Institutional Income Fund XI-B, L.P.
Balance Sheets
March December
31, 31,
2003 2002
---- ----
(unaudit
ed)
Assets
- ---------
Current assets:
Cash and cash equivalents $ 28,472 16,742
Receivable from Managing 45,978 32,324
General Partner
-------- --------
---- -----
Total current assets 74,450 49,066
-------- --------
---- -----
Oil and gas properties -
using the full-
cost method of accounting 2,056,03 1,978,74
0 5
Less accumulated
depreciation,
depletion and 1,802,60 1,762,72
amortization 3 1
-------- --------
---- -----
Net oil and gas 253,427 216,024
properties
-------- --------
---- -----
$ 327,877 265,090
======= =======
Liabilities and Partners'
Equity
- ----------------------------
- -----------
Current liability - $ - 148
distribution payable
-------- --------
---- ---
Other long term liabilities 218,619 -
-------- --------
---- ---
Partners Equity:
General partners (8,399) 3,181
Limited partners 117,657 261,761
-------- --------
---- -----
Total partners' equity 109,258 264,942
-------- --------
---- -----
$ 327,877 265,090
======= =======
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Operations
(unaudited)
Three Months Ended
March 31,
2003 2002
----- -----
Revenues
- ------------
Net profits interests $ 58,547 18,912
Interest income 46 87
-------- --------
-- --
58,593 18,999
-------- --------
-- --
Expenses
- ------------
General and administrative 9,940 9,891
Depreciation, depletion and 5,000 5,000
amortization
Accretion 4,287 -
-------- --------
-- --
19,227 14,891
-------- --------
-- --
Net income before cumulative 39,366 4,108
effect
Cumulative effect of change (145,050 -
in accounting principle )
-------- --------
-- --
Net income (loss) $ (105,684 4,108
)
====== ======
Net income (loss) allocated
to:
Managing General Partner $ (5,922) 820
====== ======
General partner $ (658) 91
====== ======
Limited partners $ (99,104) 3,197
====== ======
Per limited partner unit $ (20.43) .66
====== ======
Southwest Royalties Institutional Income Fund XI-B, L.P.
Statements of Cash Flows
(unaudited)
Three Months
Ended
March 31,
2003 2002
----- -----
Cash flows from operating
activities:
Cash received from oil and $ 47,034 23,549
gas sales
Cash paid to suppliers (12,081) (21,379)
Interest received 46 87
-------- --------
-- --
Net cash provided by 34,999 2,257
operating activities
-------- --------
-- --
Cash provided by investing
activities:
Sales of oil and gas 26,879 -
properties
-------- --------
-- --
Cash flows used in financing
activities:
Distributions to partners (50,148) (24,505)
-------- --------
-- --
Net increase (decrease) in 11,730 (22,248)
cash and cash equivalents
Beginning of period 16,742 35,398
-------- --------
-- --
End of period $ 28,472 13,150
====== ======
Reconciliation of net income
(loss) to net cash
provided by operating
activities:
Net income (loss) $ (105,684 4,108
)
Adjustments to reconcile net
income (loss) to net
cash provided by operating
activities:
Depletion, depreciation and 5,000 5,000
amortization
Accretion 4,287 -
Cumulative effect of change 145,050 -
in accounting principle
(Increase) decrease in (11,513) 4,637
receivables
Decrease in payables (2,141) (11,488)
-------- --------
-- --
Net cash provided by operating $ 34,999 2,257
activities
====== ======
Noncash investing and financing
activities:
Increase in oil and gas
properties - Adoption $ 69,283 -
of SFAS No.143
====== ======
Southwest Royalties Institutional Income Fund XI-B, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
1. Organization
Southwest Royalties Institutional Income Fund XI-B, L.P. was
organized under the laws of the state of Delaware on August 31,
1993, for the purpose of acquiring producing oil and gas
properties and to produce and market crude oil and natural gas
produced from such properties for a term of 50 years, unless
terminated at an earlier date as provided for in the Partnership
Agreement. The Partnership will sell its oil and gas production
to a variety of purchasers with the prices it receives being
dependent upon the oil and gas economy. Southwest Royalties,
Inc. serves as the Managing General Partner and H. H. Wommack,
III, as the individual general partner. Partnership profits and
losses, as well as all items of income, gain, loss, deduction,
or credit, will be credited or charged as follows:
Limited General
Partner Partners
(1)
-------- --------
- -----
Organization and 100% -
offering expenses (2)
Acquisition costs 100% -
Operating costs 90% 10%
Administrative costs 90% 10%
(3)
Direct costs 90% 10%
All other costs 90% 10%
Interest income earned
on capital
contributions 100% -
Oil and gas revenues 90% 10%
All other revenues 90% 10%
Amortization 100% -
Depletion allowances 100% -
(1) H.H. Wommack, III, President of the Managing General
Partner, is an additional general partner in the
Partnership and has a one percent interest in the
Partnership. Mr. Wommack is the majority stockholder of
the Managing General Partner whose continued involvement in
Partnership management is important to its operations. Mr.
Wommack, as a general partner, shares also in Partnership
liabilities.
(2) Organization and Offering Expenses (including all cost
of selling and organizing the offering) include a payment
by the Partnership of an amount equal to three percent (3%)
of Capital Contributions for reimbursement of such
expenses. All Organization Costs (which excludes sales
commissions and fees) in excess of three percent (3%) of
Capital Contributions with respect to the Partnership will
be allocated to and paid by the Managing General Partner.
(3) Administrative Costs will be paid from the
Partnership's revenues; however; Administrative Costs in
the Partnership year in excess of two percent (2%) of
Capital Contributions shall be allocated to and paid by the
Managing General Partner.
Southwest Royalties Institutional Income Fund XI-B, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
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.
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 $69,282, a long term liability of approximately
$214,332 and a charge of approximately $145,050 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 $218,619, and the increase in the balance from January 1,
2003 of $4,287 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 and related income per limited
partner unit amounts would have been $164 and $.04,
respectively.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
Southwest Royalties Institutional Income Fund XI-B, L.P. was
organized as a Delaware limited partnership on August 13, 1993. The
offering of such limited partnership interests began October 25,
1993, as part of a shelf offering registered under the name Southwest
Royalties Institutional 1992-93 Income Program. Minimum capital
requirements for the Partnership were met on December 8, 1993, with
the offering of limited partnership interests concluding August 20,
1994, with total limited partner contributions of $2,425,500.
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 any net proceeds from operations to the general and
limited partners. Net revenues from producing oil and gas properties
will not be reinvested in other revenue producing assets except to
the extent that producing facilities and wells are reworked or where
methods are employed to improve or enable more efficient recovery of
oil and gas reserves. The economic life of the Partnership will thus
depend 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, management anticipates performing no
workovers during 2003 to enhance production. Additional workovers
may be performed in the year 2004. The partnership may have an
increase in production volumes for the year 2004; otherwise, the
partnership will most likely experience the historical production
decline, which has approximated 11% 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 of 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 interests 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 reserve 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 $ 31.28 73%
barrel of oil 18.09
Average price per mcf $ 6.26 195%
of gas 2.12
Oil production in 1,300 1,460 (11%)
barrels
Gas production in mcf 9,800 15,400 (36%)
Income from net profits $ 58,547 18,912 210%
interests
Partnership $ 50,000 24,505 104%
distributions
Limited partner $ 45,000 23,005 96%
distributions
Per unit distribution
to limited
partners $ 9.28 96%
4.74
Number of limited 4,851 4,851
partner units
Revenues
The Partnership's income from net profits interests increased to
$58,547 from $18,912 for the quarters ended March 31, 2003 and 2002,
respectively, an increase of 210%. 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 73%, or $13.19 per barrel,
resulting in an increase of approximately $17,100 in income from
net profits interests. Oil sales represented 40% of total oil
and gas sales during the quarter ended March 31, 2003 as compared
to 45% 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 195%, or $4.14 per mcf,
resulting in an increase of approximately $40,600 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 $57,700. The market price for oil and gas has been
extremely volatile over the past decade, and management expects a
certain amount of volatility to continue in the foreseeable
future.
2. Oil production decreased approximately 160 barrels or 11% during
the quarter ended March 31, 2003 as compared to the quarter ended
March 31, 2002, resulting in a decrease of approximately $2,900
in income from net profits interests.
Gas production decreased approximately 5,600 mcf or 36% during
the same period, resulting in a decrease of approximately $11,900
in income from net profits interests.
The total decrease in income from net profits interests due to
the change in production is approximately $14,800. The decrease
in gas production is primarily due to one lease, which the wells
were shut in during 2002, and production is slowly being brought
back on.
3. Lease operating costs and production taxes were 9% higher, or
approximately $3,400 more during the quarter ended March 31, 2003
as compared to the quarter ended March 31, 2002.
Costs and Expenses
Total costs and expenses increased to $19,227 from $14,891 for the
quarters ended March 31, 2003 and 2002, respectively, an increase of
29%. 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 general
and administrative expense.
1. General and administrative costs consists of independent
accounting and engineering fees, computer services, postage, and
Managing General Partner personnel costs. General and
administrative costs increased less than 1% or approximately $50
during the quarter ended March 31, 2003 as compared to the
quarter ended March 31, 2002.
2. Depletion expense remained unchanged for the quarter ended March
31, 2003 compared to the same period in 2002. 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 $1,000 and decreased 2002 net
income by $1,000.
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 $69,282, a long term liability of
approximately $214,332 and a charge of approximately $145,050 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 $218,619, and the increase
in the balance from January 1, 2003 of $4,287 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 and related income per limited
partner unit amounts would have been $164 and $.04, 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 operating activities were approximately
$35,000 in the quarter ended March 31, 2003 as compared to
approximately $2,300 in the quarter ended March 31, 2002. The
primary source of the 2003 cash flow from operating activities was
profitable operations.
Cash flows provided by investing activities were $26,900 in the
quarter ended March 31, 2003. There were no cash provided by
investing activities in the quarter ended March 31, 2002. The
principle source of the 2003 cash flow from investing activities was
the sale of an oil and gas property.
Cash flows used in financing activities were $50,100 in the quarter
ended March 31, 2003 as compared to approximately $24,500 in the
quarter ended March 31, 2002. The only use in financing activities
was the distributions to partners.
Total distributions during the quarter ended March 31, 2003 were
$50,000 of which $45,000 was distributed to the limited partners and
$5,000 to the general partners. The per unit distribution to limited
partners during the quarter ended March 31, 2003 was $9.28. Total
distributions during the quarter ended March 31, 2002 were $24,505 of
which $23,005 was distributed to the limited partners and $1,500 to
the general partners. The per unit distribution to limited partners
during the quarter ended March 31, 2002 was $4.74.
The source for the 2003 distributions of $50,000 was oil and gas
operations of approximately $35,000, and the change in oil and gas
properties of approximately $26,900, resulting in excess cash for
contingencies or subsequent distributions to partners. The source
for the 2002 distributions of $24,505 was oil and gas operations of
approximately $2,300, with the balance from available cash on hand at
the beginning of the period.
Since inception of the Partnership, cumulative monthly cash
distributions of $1,715,910 have been made to the partners. As of
March 31, 2003, $1,559,297 or $321.44 per limited partner unit has
been distributed to the limited partners, representing a 64% return
of the capital contributed.
As of March 31, 2003, the Partnership had approximately $74,400 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 INSTITUTIONAL
INCOME FUND XI-B, L.P.
a Delaware limited partnership
By: Southwest Royalties, Inc.
Managing General Partner
By: /s/ Bill E. Coggin
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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 Institutional Income Fund XI-B, L.P.;
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 Institutional
Income Fund XI-B, L.P.
CERTIFICATIONS
I, Bill E. Coggin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Southwest
Royalties Institutional Income Fund XI-B, L.P.;
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/ Bill E. Coggin
Bill E. Coggin
Executive Vice President
and Chief Financial Officer of
Southwest Royalties, Inc., the Managing
General Partner of Southwest Royalties
Institutional Income Fund XI-B, L.P.
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
Institutional Income Fund XI-B, 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 Institutional Income Fund XI-B, L.P.
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
Institutional Income Fund XI-B, 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:
(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/ Bill E. Coggin
Bill E. Coggin
Executive Vice President
and Chief Financial Officer of
Southwest Royalties, Inc., the
Managing General Partner of
Southwest Royalties Institutional Income Fund XI-B, L.P.