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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
For the fiscal year ended December 31, 2002
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 000-24181
Southwest Partners III, L.P.
(Exact name of registrant as specified in
its limited partnership agreement)
Delaware 75-2699554
(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 partnership 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 ___. There is no
exhibit index.
Table of Contents
Item Page
Part I
1. Business 3
2. Properties 4
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
Part II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 6
6. Selected Financial Data 7
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
8. Financial Statements and Supplementary Data 13
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 23
Part III
10. Directors and Executive Officers of the Registrant 24
11. Executive Compensation 26
12. Security Ownership of Certain Beneficial Owners and
Management 26
13. Certain Relationships and Related Transactions 28
Part IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 29
Signatures 30
Part I
Item 1. Business
General
Southwest Partners III, L.P., a Delaware limited partnership (the
"Partnership") was organized March 11, 1997 to invest in oil field service
companies and assets. The Partnership's business strategy was to acquire
interests in oil field service companies and assets with a view to
providing capital appreciation in the value of the Partnership's units of
limited partnership interest (the "Units"). The Partnership concluded its
acquisition of oil field service company assets in December 1997.
Private Placement
From March 15, 1997 to June 30, 1997, the Partnership originally conducted
a "blind pool" offering of the Units in accordance with Regulation D
promulgated under the Securities Act (the "Private Placement"). On July 1,
1997, the Partnership amended the offering, which was concluded on
September 30, 1997, to invest the entire proceeds in the common stock of
Basic Energy Services, Inc. ("Basic"), an oil field service company
affiliated with the General Partner. A total of 170.92511 Units were sold
to 525 Investors for an aggregate net price of $17,092,510. The
Partnership invested a total of $17,054,500 (including the capital
contribution of the General Partner) in 2,005 shares of Basic's common
stock.
Basic in March 2000 filed a restated certificate of incorporation
increasing its authorized common shares to 25,000,000 and completed a 400-
for-1 stock split. All shares had been restated as if the stock split had
occurred at the beginning of 1998. The 400-for-1 stock split was reversed
during 2000. Basic on December 21, 2000 completed a 100-for-1 dividend.
On May 21, 2001, Basic issued a Notice to Stockholders of Preemptive
Rights. The Partnership purchased an additional 19,000 shares of common
stock at $380,000. The Partnership as of December 31, 2002 owns a total of
5.39%, or 219,500 shares of Basic's outstanding common stock.
The General Partner
The general partner of the Partnership is Southwest Royalties, Inc. (the
"General Partner"). The General Partner was formed in 1983 to acquire and
develop oil and gas properties. The General Partner initially financed the
acquisition of oil and gas reserves and its exploration and development
efforts through public and private limited partnership offerings. The
General Partner has raised approximately $115 million in 31 public and
private limited partnership offerings. The General Partner is a general
partner of these limited partnerships, owns interests in these partnerships
and receives management fees and operating cost reimbursements from such
partnerships. Since its inception, The General Partner, on behalf of itself
and the investment partnerships, has acquired over $320 million of oil and
gas properties, primarily in the Permian Basin of West Texas and New
Mexico.
The principal executive offices of the Partnership are located at 407 N.
Big Spring, Suite 300, Midland, Texas, 79701. The General Partner of the
Partnership, and its staff of 82 individuals, together with certain
independent consultants used on an "as needed" basis, perform various
services on behalf of the Partnership. The Partnership has no employees.
The Partnership
The sole business of the Partnership is holding Basic stock. The
Partnership has no employees and has no operations, except through Basic.
Basic Energy Services, Inc.
Basic provides a broad range of services used for the drilling, completion
and operation of oil and gas wells, including well servicing, liquids
handling and fresh and brine water supply and disposal services. Basic
provides services in its areas of operation in Texas, New Mexico, Oklahoma
and Louisiana. These services are used by oil and gas companies to
complete newly drilled oil and gas wells, maintain and optimize the
performance of existing wells, recomplete wells to additional producing
zones and plug and abandon wells at the end of their useful lives. Basic's
well servicing and fluid service equipment fleets includes well servicing
rigs and fluid service trucks.
Basic uses its well servicing rigs to provide completion, maintenance,
workover and plugging and abandonment services. Basic's related trucking
services are used to move large equipment to and from the job sites of its
customers. Basic also provides an integrated mix of liquids handling
services, including vacuum truck services, frac tank rentals, test tank
rentals and Enviro-Vat system rentals. Basic's fresh and brine water supply
and disposal services include the production and sale of fresh and brine
water which is used in drilling, completion and workover processes, as well
as operation of injection wells that dispose of produced salt water and
incidental non-hazardous oil field wastes. Basic also provides certain
other well services, including pit lining services and hot oil services.
Environmental
Hazards in the operation of oil field service companies, such as employee
injuries on the job site and accidental petroleum or waste spills, are
sometimes encountered. Such hazards may cause substantial liabilities to
third parties or governmental entities, the payment of which could reduce
ultimately the funds available for distribution. Although it is
anticipated that customary insurance will be obtained, the Partnership may
be subject to liability for pollution and other damages due to hazards,
which cannot be insured against or will not be insured against due to
prohibitive premium costs or for other reasons. Environmental regulatory
matters also could increase the cost of doing business or require the
modification of operations in certain areas. Environmental expenditures
are expensed or capitalized depending on their future economic benefit.
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 noncapital nature are recorded when environmental
assessment and/or remediation is probable, and the costs can be reasonably
estimated.
Industry Regulations and Guidelines
Certain industry regulations and guidelines apply to the registration,
qualification and operation of limited partnerships. The Partnership is
subject to these guidelines, which regulate and restrict transactions
between the General Partner and the Partnership. The Partnership complies
with these guidelines and the General Partner does not anticipate that
continued compliance would have a material adverse effect on Partnership
operations.
Partnership Employees
The Partnership has no employees; however the 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 General
Partner's staff, the Partnership engages independent consultants such as
petroleum engineers and geologists as needed. As of December 31, 2002
there were 82 individuals directly employed by the General Partner in
various capacities.
Item 2. Properties
The Partnership does not currently own or lease any property. The
Partnership operates from the offices of its General Partner in Midland,
Texas.
Basic's corporate office is located in Midland, Texas, which complements
the core of its operations in the Permian Basin of West Texas and eastern
New Mexico ("the Permian Basin"). Within the Permian Basin, Basic owns and
leases field offices. Additionally, Basic has field offices in South
Texas, East Texas and Oklahoma.
Basic's well servicing equipment fleet includes well servicing rigs, fluid
service trucks, Enviro-Vat systems and frac and test tanks. Additionally,
the Company operates injection wells and fresh or brine water stations.
Basic uses its well servicing rigs to provide completion, maintenance,
workover and plugging and abandonment services. Basic's related trucking
services are used to move large equipment to and from the job sites of its
customers as well as provide an integrated mix of liquids handling
services, including vacuum truck services, frac tank rentals, test tank
rentals and Enviro-Vat system rentals. Basic's fresh and brine water
supply and disposal services include the production and sale of fresh and
brine water which is used in drilling, completion and workover processes,
as well as operation of injection wells that dispose of produced salt water
and incidental non-hazardous oil field wastes.
Basic believes it has satisfactory title to all of its properties in
accordance with standards generally accepted within the well servicing
industry.
Item 3. Legal Proceedings
The Partnership is not currently involved in any legal proceeding nor is it
party to any pending or threatened claims that could reasonably be expected
to have a material adverse effect on its financial condition or results of
operations.
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 2002 through the solicitation of proxies or otherwise.
Part II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Market Information
There is no trading market for the Units, and it is unlikely that a trading
market will exist at any time in the future. The Partnership does not have
any units (i) that are subject to outstanding options or warrants to
purchase, or securities convertible into, common equity of the Partnership,
(ii) that could be sold pursuant to Rule 144 under the Securities Act or
that we have agreed to register under the Securities Act for sale by
security holders, or (iii) that are being, or have been publicly proposed
to be, publicly offered by the Partnership, the offering of which could
have a material effect on the market price of the limited partnership
units. Any transfer of the Units is severely restricted by certain
conditions outlined in the Partnership Agreement and requires the consent
of the General Partner.
There have been no cash distributions to the Limited Partners to date. In
general, the Partnership expects to reinvest all cash flow received from
operations and does not expect to make distributions until liquidation of
the Partnership. The following is a summary of certain allocation
provisions of the Partnership Agreement and is qualified in its entirety by
reference to the Partnership Agreement, which was filed as an Exhibit to
the partnership's Form 10, filed April 1998. Any distributions of cash
flow, income, gain, profit, or loss will be allocated 85% to the Limited
Partners and 15% to the General Partner in accordance with their capital
accounts until the Limited Partners have recovered, through cumulative
distributions 100% of their capital contributions plus a 10% cumulative
(but not compounded) return. Thereafter, distributions will be made 75% to
the Limited Partners and 25% to the General Partner.
The revenues generated and capital appreciation, if any, from the
Partnership's investment in Basic is highly dependent upon the future
prices and demand for oil and gas in that the level of use of oil field
services and equipment is directly related to the amount of activity in the
oil fields. In addition, investments in oil field service companies, while
presenting significant potential for capital appreciation, may take from
four to seven years from the date of initial investment to reach such a
state of maturity that disposition can be considered. Thus, it is
anticipated that capital gains or losses typically will take two to five
years or longer to realize. In view of these factors, it is unlikely that
any significant distributions of the proceeds from the disposition of
investments will be made until such time. The Partnership's investment in
Basic will generate little, if any, current income.
The General Partner has the right, but not the obligation, to purchase
limited partnership units should an investor desire to sell. The investor
must give written notice of intentions to dispose of their units to the
General Partner along with the nature and terms of the proposed
disposition. The notice shall be deemed to constitute an offer to sell the
units to the General Partner. The General Partner has 15 days from the
date of the offer to indicate in writing to the investor its decision as to
whether it will purchase all or any of the offered units. As of December
31, 2002, no limited partner units were purchased by the Managing General
Partner. Southwest, as Managing General Partner, evaluated several
liquidity alternatives for the partnerships in 2001 and 2002. During 2002,
Southwest specifically pursued the possible roll-up and merger of twenty-
one (21) partnerships with the general partner. Because of the
complexities and conflicts of interest in such a transaction, the Managing
General Partner did not make a formal repurchase offer in 2002 but has
responded to limited partners desiring to sell their units in the
partnerships on an "as requested" basis. Southwest anticipates that it
will maintain this policy in 2003 because the aforementioned transaction is
ongoing. As of December 31, 2001 the General Partner purchased 0.15
limited partner units for $13,950.
Number of Limited Partner Interest Holders
As of December 31, 2002, there were 528 holders of limited partner units in
the Partnership.
Distributions
Pursuant to Section 4.1 of the Partnership's Certificate and Agreement of
Limited Partnership, "Net Cash From Operations and Net Cash From Sales or
Refinancings" shall be distributed, at such times as the General Partner
may determine in its sole discretion. "Net Cash From Operations" is
defined as "the gross cash proceeds from Partnership operations less the
portion thereof used to pay or establish reasonable reserves for all
Partnership expenses, fees, commissions, debt payments, new investments,
capital improvements, replacements, repairs and contingencies, and such
other purposes deemed appropriate, all as determined by the General
Partner." "Net Cash From Sales or Refinancings" is defined as "the net
cash proceeds from all sales and other dispositions (other than in the
ordinary course of business) and all refinancings of Partnership Property,
less any portion thereof used to establish reserves, all as determined by
the General Partner. There have been no cash distributions to date.
Item 6. Selected Financial Data
The following selected financial data for the years ended December 31,
2002, 2001, 2000, 1999 and 1998 should be read in conjunction with the
financial statements included in Item 8:
Years ended December 31,
--------------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Revenues $ 220 4,021 11,403 11,164 11,514
Equity loss in
unconsolidated
subsidiary - - - (2,005,0 (5,046,3
00) 21)
Impairment of equity
investment
of unconsolidated - - - - (9,460,7
subsidiary 65)
Net loss (5,611) (1,643) (63,169) (2,120,4 (14,702,
33) 959)
Partners' share of net
loss:
General partner (842) (246) (9,475) (318,065 (2,195,1
) 81)
Limited partners (4,769) (1,397) (53,694) (1,802,3 (12,507,
68) 778)
Limited partners' net
loss per unit (28) (8) (314) (10,545) (73,177)
Total assets $ 404,828 408,120 404,112 392,709 2,386,54
5
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Southwest Partners III, L.P.
General
Southwest Partners III, L.P. was organized as a Delaware limited
partnership on March 11, 1997. The Partnership was formed for the purpose
of investing in Basic Energy Services, Inc., an oilfield service company
which provides services and products to oil and gas operators for the
workover, maintenance and plugging of existing oil and gas wells in the
southwestern United States.
The Partnership intends to wind up its operations and distribute its assets
or the proceeds therefrom on or before December 31, 2008, at which time the
Partnership's existence will terminate, unless sooner terminated or
extended in accordance with the terms of the Partnership agreement. As of
December 31, 2002, the Partnership owned a 5.39% interest in Basic, which
is accounted for using the cost method of accounting.
Results of Operations
For the year ended December 31, 2002
Revenues
Revenues consisted of interest income. The surplus cash remaining before
and after the May 21, 2001 additional investment in Basic generated
interest income of $220.
Expenses
Direct expenses totaled $5,831 for the year, relating to general and
administrative. General and administrative expenses primarily represent
independent accounting fees incurred to audit the Partnership.
Results of Operations
For the year ended December 31, 2001
Revenues
Revenues consisted of interest income. The surplus cash remaining before
and after the May 21, 2001 additional investment in Basic generated
interest income of $4,021.
Expenses
Direct expenses totaled $5,664 for the year, relating to general and
administrative. General and administrative expenses primarily represent
independent accounting fees incurred to audit the Partnership.
Revenue and Distribution Comparison
Partnership losses for the years ended December 31, 2002, 2001 and 2000
were $5,611, $1,643 and $63,169, respectively. Since inception of the
Partnership, no cash distributions have been made to the partners.
Liquidity and Capital Resources
Cash flows (used in) provided by operating activities were approximately
$(3,292) in 2002 compared to $4,008 in 2001 and approximately $11,403 in
2000.
There were no cash flows used in investing activities during 2002 and 2000.
Cash flows used in investing activities were approximately $380,000 in
2001.
There were no cash flows used in financing activities during 2002, 2001 and
2000.
The Partnership as of December 31, 2002 has negative working capital of
$323,249, which includes a payable to the General Partner of $348,077. The
Partnership does not generate operating income and has no current means of
settling the liability to the General Partner, but believes the fair value
of its assets are sufficient to meet their current obligations if
necessary. The General Partner, should it become necessary, has agreed to
either extend the payment terms until the Partnership can comfortably pay
the balance or make other mutually acceptable arrangements to settle the
payable by transfer, sale or assignment of Partnership assets.
Liquidity - Investment in Subsidiary
Southwest Partners III consist entirely of an investment in Basic's common
stock. The investment had been accounted for using the equity method.
Based on the December 21, 2000 transaction discussed below, the Partnership
accounted for the investment using the cost method. Southwest Partners III
no longer holds a 20% or more interest in Basic and exerts no significant
influence over Basic's operations.
On December 21, 2000, Basic entered into a refinancing and restructuring of
its debt and equity. Upon the signing of the documents, the Partnership's
percentage of ownership was diluted from 44.94% to 10.57%. A new equity
investor, in exchange for 1,441,730 shares of Basic's common stock,
purchased and retired $24.5 million of Basic's debt from its previous
lender. The equity investor received a 76% ownership. Additionally, $10.5
million of the debt held by the previous lender was refinanced with a new
lender. The remaining debt held by the previous lender of approximately
$21.7 million was cancelled.
Basic's new equity investor mentioned in the above paragraphs purchased an
additional 576,709 shares, during the first part of 2001, thereby
increasing their ownership from 76% to 81.6%. As a result of the purchase,
the Partnership's ownership decreased at that time from 10.57% to 8.11%.
On May 21, 2001, Basic issued a Notice to Stockholders of Preemptive
Rights. The Partnership purchased an additional 19,000 shares of common
stock at $380,000. The Partnership at December 31, 2002 owns a total of
5.39%, or 219,500 shares of Basic's outstanding common stock.
Liquidity - 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 would also consider disposing 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 is sued 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. Assessment by the General Partner revealed this pronouncement
to have no impact on the partnership.
Critical Accounting Policies
The Partnership used the cost method of accounting for its investment in
Basic since December 21, 2000. Prior to December 21, 2000 the Partnership
used the equity method of accounting for the investment. Under the cost
method of accounting the Partnership recognizes as income dividends
received that are distributed from net accumulated earnings of an investee
subsequent to the date of acquisition of the investment. The Partnership
would recognize a loss when there is a loss in value in the investment,
which is other than a temporary decline. In its assessment of value the
Partnership considers future cash flows either in the form of dividends or
other distributions from the investee or from selling it's investment to an
unrelated party.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Partnership is not a party to any derivative or embedded derivative
instruments.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Page
Independent Auditors Report 14
Balance Sheets 15
Statements of Operations 16
Statement of Changes in Partners' Equity 17
Statements of Cash Flows 18
Notes to Financial Statements 19
INDEPENDENT AUDITORS REPORT
The Partners
Southwest Partners III, L.P.
(A Delaware Limited Partnership):
We have audited the accompanying balance sheets of Southwest Partners III,
L.P. (the "Partnership") as of December 31, 2002 and 2001, and the related
statements of operations, changes in partners' equity and cash flows for
each of the years in the three year period ended December 31, 2002. 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 auditing standards generally
accepted in the United States of America. 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 Partners III,
L.P. as of December 31, 2002 and 2001 and the results of its operations and
its cash flows for each of the years in the three year period ended
December 31, 2002 in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Midland, Texas
March 14, 2003
Southwest Partners III, L.P.
(a Delaware limited partnership)
Balance Sheets
December 31, 2002 and 2001
2002 2001
---- ----
Assets
Current asset:
Cash and cash equivalents $ 24,828 28,120
-------- --------
-- --
Total current assets 24,828 28,120
-------- --------
-- --
Investment 380,000 380,000
-------- --------
-- --
Total assets $ 404,828 408,120
====== ======
Liabilities and Partners'
Equity
Current liabilities:
Payable to General Partner $ 348,077 345,758
-------- --------
-- --
Total current liabilities 348,077 345,758
-------- --------
-- --
Partners' equity:
General Partner (908,313 (907,471
) )
Limited partners 965,064 969,833
-------- --------
-- --
Total partners' equity 56,751 62,362
-------- --------
-- --
$ 404,828 408,120
====== ======
The accompanying notes are an integral
part of these financial statements.
Southwest Partners III, L.P.
(a Delaware limited partnership)
Statements of Operations
Years Ended December 31, 2002, 2001 and 2000
2002 2001 2000
---- ---- ----
Revenues
Interest income $ 220 4,021 11,403
-------- -------- --------
-- -- --
220 4,021 11,403
-------- -------- --------
-- -- --
Expenses
General and 5,831 5,664 74,572
administrative
-------- -------- --------
-- -- --
5,831 5,664 74,572
-------- -------- --------
-- -- --
Net loss $ (5,611) (1,643) (63,169)
====== ====== ======
Net loss allocated to:
General Partner $ (842) (246) (9,475)
====== ====== ======
Limited partners $ (4,769) (1,397) (53,694)
====== ====== ======
Per limited partner $ (28) (8) (314)
unit
====== ====== ======
The accompanying notes are an integral
part of these financial statements.
Southwest Partners III, L.P.
(a Delaware limited partnership)
Statement of Changes in Partners' Equity
Years Ended December 31, 2002, 2001 and 2000
General Limited
Partner Partners Total
-------- -------- -----
Balance - December 31, 1999 $ (897,750 1,024,92 127,174
) 4
Net loss (9,475) (53,694) (63,169)
-------- -------- --------
-- ---- --
Balance - December 31, 2000 (907,225 971,230 64,005
)
Net loss (246) (1,397) (1,643)
-------- -------- --------
-- ---- --
Balance - December 31, 2001 (907,471 969,833 62,362
)
Net loss (842) (4,769) (5,611)
-------- -------- --------
-- ---- --
Balance - December 31, 2002 $ (908,313 965,064 56,751
)
====== ======= ======
The accompanying notes are an integral
part of these financial statements.
Southwest Partners III, L.P.
(a Delaware limited partnership)
Statements of Cash Flows
Years Ended December 31, 2002, 2001 and 2000
2002 2001 2000
---- ---- ----
Cash flows from operating
activities:
Paid to suppliers $ (3,512) (13) -
Interest received 220 4,021 11,403
------- ------- --------
----- --- --
Net cash (used in) provided
by operating
activities (3,292) 4,008 11,403
------- ------- --------
----- --- --
Cash flows from investing
activities:
Purchase of Basic - (380,00 -
Investment 0)
------- ------- --------
----- --- --
Net (decrease) increase in
cash and cash
equivalents (3,292) (375,99 11,403
2)
Beginning of period 28,120 404,112 392,709
------- ------- --------
----- --- --
End of period $ 24,828 28,120 404,112
======= ====== ======
Reconciliation of net loss
to net cash
(used in) provided by
operating activities:
Net loss $ (5,611) (1,643) (63,169)
Adjustments to reconcile
net loss to net cash
(used in) provided by
operating activities:
Increase in accounts 2,319 5,651 74,572
payable
------- ------- --------
----- --- ---
Net cash (used in) provided
by $ (3,292) 4,008 11,403
operating activities
======= ====== ======
The accompanying notes are an integral
part of these financial statements.
Southwest Partners III, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
1. Organization
Southwest Partners III, L.P. (the "Partnership") was organized under
the laws of the state of Delaware on March 11, 1997 for the purpose of
investing in or acquiring oil field service companies' assets. The
Partnership intends to wind up its operations and distribute its
assets or the proceeds therefrom on or before December 31, 2008, at
which time the Partnership's existence will terminate, unless sooner
terminated or extended in accordance with the terms of the Partnership
Agreement. Southwest Royalties, Inc., a Delaware corporation formed
in 1983, is the General Partner of the Partnership. Revenues, costs
and expenses are allocated as follows:
Limited General
Partners Partner
------- --------
Interest income on capital (1) (1)
contributions
All other revenues 85% 15%
Organization and offering 100% -
costs
Syndication costs 100% -
Amortization of organization 100% -
costs
Gain or loss on property 85% 15%
disposition
Operating and administrative 85% 15%
costs
All other costs 85% 15%
After payout, allocations will be seventy-five (75%) to the limited
partners and twenty-five (25%) to the General Partner. Payout is when
the limited partners have received an amount equal to one hundred ten
percent (110%) of their limited partner capital contributions.
(1) Interest earned on promissory notes related to Capital
Contributions is allocated to the specific holders of those notes.
Method of Allocation of Administrative Costs
For the purpose of allocating Administrative Costs, the General
Partner will allocate each employee's time among three divisions: (1)
operating partnerships; (2) corporate activities; and (3) currently
offered or proposed partnerships. The General Partner determines a
percentage of total Administrative Costs per division based on the
total allocated time per division and personnel costs (salaries)
attributable to such time. Within the operating partnership division,
Administrative Costs are further allocated on the basis of the total
capital of each partnership invested in its operations.
2. Summary of Significant Accounting Policies
Investment
Investment in Basic Energy Services, Inc. in which the Partnership had
a 5.39% interest at December 31, 2002, is accounted for by the cost
method. Southwest Partners III no longer holds a 20% or more interest
in Basic and exerts no significant influence over Basic's operations.
Under the cost method of accounting the Partnership recognizes as
income dividends received that are distributed from net accumulated
earnings of an investee subsequent to the date of acquisition of the
investment. The Partnership would recognize a loss when there is a
loss in value in the investment, which is other than a temporary
decline. In its assessment of value the Partnership considers future
cash flows either in the form of dividends or other distributions from
the investee or from selling it's investment to an unrelated party.
Prior to December 2000, the Partnership accounted for the investment
on the equity method.
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 Partners III, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
2. Summary of Significant Accounting Policies - continued
Syndication Costs
Syndication costs are accounted for as a reduction of partnership
equity.
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 is $17,054,500 and $17,059,762
more, as of December 31, 2002 and 2001 as that shown on the
accompanying Balance Sheet in accordance with generally accepted
accounting principles.
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.
Number of Limited Partner Units
There were 170.925 limited partner units outstanding as of December
31, 2002, held by 528 partners.
Concentrations of Credit Risk
All partnership revenues are received by the General Partner and
subsequently remitted to the partnership and all expenses are paid by
the General Partner and subsequently reimbursed by the partnership.
Fair Value of Financial Instruments
The carrying amount of cash approximates fair value due to the short
maturity of these instruments.
Net loss per limited partnership unit
The net loss per limited partnership unit is calculated by using the
number of outstanding limited partnership units.
Recent Accounting Pronouncements
The FASB has is sued 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. Assessment by the General
Partner revealed this pronouncement to have no impact on the
partnership.
3. Liquidity - Partnership
The Partnership as of December 31, 2002 has negative working capital
of $323,249, which includes a payable to the General Partner of
$348,077. The Partnership does not generate operating income and has
no current means of settling the liability to the General Partner, but
believes the fair value of its assets are sufficient to meet their
current obligations if necessary. The General Partner, should it
become necessary, has agreed to either extend the payment terms until
the Partnership can comfortably pay the balance or make other mutually
acceptable arrangements to settle the payable by transfer, sale or
assignment of Partnership assets.
Southwest Partners III, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
4. Liquidity - 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
would also consider disposing 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.
5. Investment
Common stock ownership in Basic Energy Services, Inc. was as follows:
December 31, 1997 to March 45.89%
31, 1999
March 31, to December 21, 44.94%
2000
December 21, 2000 to 10.57%
December 31, 2000
January 1, 2001 to May 20, 8.11%
2001
May 21, 2001 to February 13, 6.32%
2002
February 14, 2002 to 5.39%
December 31, 2002
Southwest Partners III consist entirely of an investment in Basic's
common stock. The investment had been accounted for using the equity
method. Based on the December 21, 2000 transaction discussed below,
the Partnership accounted for the investment using the cost method.
Southwest Partners III no longer holds a 20% or more interest in Basic
and exerts no significant influence over Basic's operations.
On December 21, 2000, Basic entered into a refinancing and
restructuring of its debt and equity. Upon the signing of the
documents, the Partnership's percentage of ownership was diluted from
44.94% to 10.57%. A new equity investor, in exchange for 1,441,730
shares of Basic's common stock, purchased and retired $24.5 million of
Basic's debt from its previous lender. The equity investor received a
76% ownership. Additionally, $10.5 million of the debt held by the
previous lender was refinanced with a new lender. The remaining debt
held by the previous lender of approximately $21.7 million was
cancelled.
Basic's new equity investor mentioned in the above paragraphs
purchased an additional 576,709 shares, during the first part of 2001,
thereby increasing their ownership from 76% to 81.6%. As a result of
the purchase, the Partnership's ownership decreased at that time from
10.57% to 8.11%.
On May 21, 2001, Basic issued a Notice to Stockholders of Preemptive
Rights. The Partnership purchased an additional 19,000 shares of
common stock at $380,000.
On February 13, 2002, Basic sold 600,000 shares of common stock to a
group of related investors. Based on this transaction, the
Partnerships ownership percentage was diluted from 6.32% to 5.39%.
The Partnership at December 31, 2002 owns a total of 5.39%, or 219,500
shares of Basic's outstanding common stock.
Southwest Partners III, L.P.
(a Delaware limited partnership)
Notes to Financial Statements
6. Commitments and Contingent Liabilities
As a marketing incentive, brokers who sold in excess of one Unit
received three percent (3%) of the Partnership liquidation proceeds
which are distributed to the General Partner in proportion to the
dollar amount of Units sold by each such broker; provided, however
that no broker shall receive such interest unless the Partnership has
returned to the Limited Partners 100% of their Limited Partner Capital
Contribution plus a 10% cumulative (but not compounded) return at the
time of liquidation. As of December 31, 1998, there were 13 such
brokers who sold in excess of one Unit qualifying for the special
distribution.
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, 2002, 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 field service industry.
7. Related Party Transactions
Southwest Royalties, Inc., the General Partner, was paid a management
fee of $70,000 during 2000 for indirect general and administrative
expenses. Effective July 2000, the General Partner ceased to charge
the Partnership management fees.
Accounts payable to the General Partner at December 31, 2002 and 2001
totaled $348,077 and $345,758 and primarily represents management fees
billed in previous years.
8. Selected Quarterly Financial Results - (unaudited)
Quarter
--------------------------------------
--------
First Second Third Fourth
2002: ------ ------- ------ ------
Total revenues $ 61 63 60 36
Total expenses 1,223 1,419 1,929 1,260
Net loss (1,162) (1,356) (1,869) (1,224)
Net loss per
limited partner (6) (7) (9) (6)
unit
2001:
Total revenues $ 2,425 1,419 104 73
Total expenses 1,292 2,136 1,000 1,236
Net income (loss) 1,133 (717) (896) (1,163)
Net income (loss)
per
limited partner 6 (4) (4) (6)
unit
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
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.
Name Age Position
H. H. Wommack, III 47 Chairman of the Board,
President, Director
and Chief Executive Officer
James N. Chapman(1) 40 Director
William P. Nicoletti(2) 57 Director
Joseph J. Radecki, Jr. 44 Director
(2)
Richard D. Rinehart(1) 67 Director
John M. White(2) 46 Director
Herbert C. Williamson, 54 Director
III(1)
Bill E. Coggin 48 Executive Vice President and
Chief Financial Officer
J. Steven Person 44 Vice President, Marketing
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
H. H. Wommack, III has served as Chairman of the Board, President, Chief
Executive Officer and a director since Southwest's founding in 1983. Since
1997 Mr. Wommack has served as President, Chief Executive Officer and
Chairman of SRH, our former parent and current holder of 10% of our voting
share capital. Since 1997 Mr. Wommack has served as chairman of the board
of directors of Midland Red Oak Realty, Inc. From 1997 until December
2000, Mr. Wommack served as chairman of the board of directors of Basic
Energy Services, Inc. and since December 2000 has continued to serve on
Basic's board of directors. Prior to our formation, Mr. Wommack was a self-
employed independent oil and gas producer engaged in the purchase and sale
of royalty and working interests in oil and gas leases and the drilling of
well. Mr. Wommack graduated from the University of North Carolina at
Chapel Hill and received his law degree from the University of Texas.
James N. Chapman has served as a director since the closing of the Exchange
Transaction. Mr. Chapman has been involved in the investment banking
industry for 18 years, presently acting as a capital markets and strategic
planning consultant with private and public companies across a range of
industries, including metals, mining, manufacturing, aerospace, airline,
service and healthcare. Prior to establishing an independent consulting
practice, Mr. Chapman worked for The Renco Group, Inc., a multi-billion
private corporation in New York, for which Mr. Chapman developed and
implemented financing and merger and acquisitions strategies for Renco's
diverse portfolio of companies. Prior to Renco, Mr. Chapman was a founding
principal of Fieldstone Private Capital Group, a capital markets advisory
firm that he joined upon its inception in August 1990. Prior to joining
Fieldstone, Mr. Chapman worked for Bankers Trust Company for six years,
most recently in the BT Securities Capital Markets area. Mr. Chapman
received an MBA degree with distinction from the Amos Tuck School at
Dartmouth College and was elected an Edward Tuck Scholar. He received his
BA degree with distinction magna cum laude, at Dartmouth College, was
elected to Phi Beta Kappa and was a Rufus Choate Scholar.
William P. Nicoletti has served as a director since the closing of the
Exchange Transaction. Mr. Nicoletti is Managing Director of Nicoletti &
Company Inc., an investment banking and financial advisory firm. He was
formerly a senior officer and head of the Energy Investment Banking Groups
of E. F. Hutton & Company Inc., Paine Webber, Incorporated and McDonald
Investments Inc. Mr. Nicoletti is Chairman of the board of directors of
Russell-Stanley Holdings, Inc., a manufacturer and marketer of steel and
plastic industrial containers. He is a director of MarkWest Energy
Partners, L.P., a business engaged in the gathering and processing of
natural gas and the fractionation and storage of natural gas liquids. Mr.
Nicoletti is also a Director and Chairman of the Audit Committee of Star
Gas Partners, L.P., the nation's largest retail distributor of home heating
oil and a major retail distributor of propane gas. Mr. Nicoletti is a
graduate of Seton Hall University and received an MBA degree from Columbia
University Graduate School of Business.
Joseph J. Radecki, Jr. has served as a director since the closing of the
Exchange Transaction. Mr. Radecki is currently a Managing Director in the
Leveraged Finance Group of CIBC World Markets where he is principally
responsible for the firm's financial restructuring and distressed situation
advisory practice. Prior to joining CIBC World Markets, Mr. Radecki was an
Executive Vice President and Director of the Financial Restructuring Group
of Jefferies & Company, Inc. from 1990 to 1998. From 1983 until 1990, Mr.
Radecki was First Vice President in the International Capital Markets Group
at Drexel Burnham Lambert, Inc., where he specialized in financial
restructurings and recapitalizations. Over the past fourteen years, Mr.
Radecki has been integrally involved in over 120 transactions totaling
nearly $50 billion in recapitalized securities. Mr. Radeki currently
serves as a Director of Wherehouse Entertainment, Inc., a music and video
specialty retailer, and RBX Corporation, a manufacturer of rubber and
plastic foam and other polymer products. He has previously served as
Chairman of the Board of American Rice, Inc., an international rice miller
and marketer, as a member of the Board of Directors of Service America
Corporation, a national food service management firm, Bucyrus
International, Inc., a mining equipment manufacturer, and ECO-Net, a non-
profit engineering related network firm. Mr. Radecki graduated magna cum
laude in 1980 from Georgetown University with a B.A. in Government.
Richard D. Rinehart has served as a director since the closing of the
Exchange Transaction. Mr. Rinehart is a founding principal of PetroCap,
Inc. and president of Kestrel Resources, Inc. PetroCap, Inc. provides
investment and merchant banking services to a variety of clients active in
the oil and gas industry. Kestrel Resources, Inc. is a privately owned oil
and gas operating company. He served as Director of Coopers & Lybrand's
Energy Systems and Services Division prior to the founding of Kestrel
Resources, Inc. in 1992. Prior to joining Coopers & Lybrand, he was chief
executive officer/founder of Dawn Information Resources, Inc., formed in
1986 and acquired by Coopers & Lybrand in early 1991. Mr. Rinehart served
as CEO of Terrapet Energy Corporation during the period 1982 through 1986.
Prior to the formation of Terrapet in 1982, he was employed as President of
the Terrapet Division of E.I. DuPont de Nemours and Company. Before its
acquisition by DuPont, he served as CEO and President of Terrapet Corp., a
privately owned E & P company. Before the formation of Terrapet Corp. in
1972, he was manager of supplementary recovery methods and senior
evaluation engineer with H. J. Gruy and Associates, Inc., Dallas, Texas.
John M. White has served as a director since the closing of the Exchange
Transaction Mr. White is currently an oil and gas analyst with BMO Nesbitt
Burns, responsible for Fixed Income research on oil, gas and energy
companies. Prior to joining BMO Nesbitt Burns in 1998, Mr. White was
responsible for Fixed Income research on the oil and gas industry at John
S. Herold, Inc., an independent oil and gas research and consulting firm.
Mr. White's experience also includes managing a portfolio of oil and gas
loans for The Bank of Nova Scotia, which included independent exploration
and production companies, oil service companies, gas pipelines, gas
processors and refiners. Prior to entering banking, Mr. White was with BP
Exploration, where he worked primarily in exploration and production.
Herbert C. Williamson, III has served as a director since the closing of
the Exchange Transaction. At present, Mr. Williamson is self-employed as a
consultant. From March 2001 to March 2002 Mr. Williamson served as an
investment banker with Petrie Parkman & Co. From April 1999 to March 2001
Mr. Williamson served as chief financial officer and from August 1999 to
March 2001 as a director of Merlon Petroleum Company, a private oil and gas
company involved in exploration and production in Egypt. Mr. Williamson
served as executive vice president, chief financial officer and director of
Seven Seas Petroleum, Inc., a publicly traded oil and gas exploration
company, from March 1998 to April 1999. From 1995 through April 1998, he
served as director in the Investment Banking Department of Credit Suisse
First Boston. Mr. Williamson served as vice chairman and executive vice
president of Parker and Parsley Petroleum Company, a publicly traded oil
and gas exploration company (now Pioneer Natural Resources Company) from
1985 through 1995.
Bill E. Coggin has served as Vice President and Chief Financial Officer
since joining General Partner in 1985. Previously, Mr. Coggin was
Controller for Rod Ric Corporation, an oil and gas drilling company, and
for C.F. Lawrence & Associates, a large independent oil and gas operator.
Mr. Coggin received a B.S. in Education and a B.A. in Accounting from
Angelo State University.
J. Steven Person has served as our Vice President, Marketing since joining
General Partner in 1989. Mr. Person began in the investment industry with
Dean Witter in 1983. Prior to joining General Partner, Mr. Person was a
senior wholesaler with Capital Realty, Inc. While at Capital Realty, he was
involved in the syndication of mortgage based securities through the major
brokerage houses. Mr. Person received a B.B.A. degree from Baylor
University and an M.B.A. from Houston Baptist University.
Key Employees
Jon P. Tate, age 45, has served as Vice President, Land and Assistant
Secretary of General Partner since 1989. From 1981 to 1989, Mr. Tate was
employed by C.F. Lawrence & Associates, Inc., an independent oil and gas
company, as land manager. Mr. Tate is a member of the Permian Basin
Landman's Association.
R. Douglas Keathley, age 47, has served as Vice President, Operations of
General Partner since 1992. Before joining us, Mr. Keathley worked as a
senior drilling engineer for ARCO Oil and Gas Company and in similar
capacities for Reading & Bates Petroleum Co. and Tenneco Oil Co.
Item 11. Executive Compensation
The Partnership does not have any directors or executive officers. The
executive officers of the General Partner do not receive any cash
compensation, bonuses, deferred compensation or compensation pursuant to
any type of plan, from the Partnership. The General Partner billed $70,000
during 2000, as an annual administrative fee. Effective July 31, 2000, the
General Partner ceased billing management fees to the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
There are no limited partners who own of record, or are known by the
General Partner to beneficially own, more than five percent of the
Partnership's limited partnership interests.
The General Partner owns a 15 percent interest in the Partnership as a
general partner. Through repurchase, the General Partner also owns 0.15
limited partner units, a 0.07% limited partner interest. The General
Partner's total percentage interest ownership in the Partnership is 15.07%.
No officer or director of the General Partner owns units in the
Partnership. The officers and directors of the General Partner are
considered beneficial owners of the limited partner units acquired by the
General Partner by virtue of their status as such. A list of beneficial
owners of limited partner units, acquired by the General Partner, is as
follows:
Amount and
Nature of Percen
t
Name and Address of Beneficial of
Title of Class Beneficial Owner Ownership Class
- ------------------- --------------------- ---------- ------
-------------- -------------- ------ -----
Limited Partnership Southwest Royalties, Directly 0.07%
Interest Inc. Owns
Managing General 0.15 Units
Partner
407 N. Big Spring
Street
Midland, TX 79701
Limited Partnership H. H. Wommack, III Indirectly 0.07%
Interest Owns
Chairman of the 0.15 Units
Board,
President, and CEO
of Southwest
Royalties, Inc.,
the Managing General
Partner
407 N. Big Spring
Street
Midland, TX 79701
There are no arrangements known to the General Partner, which may at a
subsequent date result in a change of control of the Partnership.
Item 13. Certain Relationships and Related Transactions
The General Partner contributed $1,692,698, which entitled it to receive
100% of the Partnership's general partner interest. The general partner
interest entitles the General Partner to 15% interest in the Partnership.
See "Item 5."
In 2002, the General Partner received no administrative fees. The General
Partner ceased to charge the Partnership for administrative fees effective
July 31, 2000.
The Partnership originally invested primarily all of the proceeds of the
Private Placement in 2,005 shares 45.9% of Basic common stock. On May 21,
2001, Basic issued a Notice to Stockholders of Preemptive Rights. The
Partnership purchased an additional 19,000 shares of common stock at
$380,000. The Partnership at December 31, 2002 owns a total of 5.39%, or
219,500 shares of Basic's outstanding common stock.
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 Statements Schedules and Reports on Form 8-K
(a)(1) Financial Statements:
Southwest Partners III, L.P. Financial Statements
Included in Part II Item 8 of this report -
Independent Auditors Report
Balance Sheets
Statements of Operations
Statement of Changes in Partners' Equity
Statements 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
Partners III, L.P., dated March 11, 1997.
(Incorporated by reference from Partnership's
Form 10-K for the fiscal year ended December 31,
1998).
(b) Agreement of Limited Partnership of
Southwest Partners III, L.P., dated March 11,
1997. (Incorporated by reference from
Partnership's Form 10-K for the fiscal year ended
December 31, 1998).
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the
quarter ended December 31, 2002.
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 Partners III, L.P.
a Delaware limited partnership
By:
Southwest Royalties, Inc.,
General Partner
By: /s/ H. H. Wommack, III
------------------------------------------
- -----
H. H. Wommack, III, President
Date: March 17, 2003
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 By:/s/ James N. Chapman
- --------------------------- ------------------------
- -------------------- -----------------------
H. H. Wommack, III, James N. Chapman,
Chairman of the Board, Director
President, Director and
Chief Executive Officer
Date: April 17, 2003 Date: April 17, 2003
By:/s/ William P. Nicoletti By:/s/ Joseph J.
Radecki, Jr.
- --------------------------- ------------------------
- -------------------- -----------------------
William P. Nicoletti, Joseph J. Radecki, Jr.,
Director Director
Date: April 17, 2003 Date: April 17, 2003
By:/s/ Richard D. Rinehart By:/s/ John M. White
- --------------------------- ------------------------
- -------------------- -----------------------
Richard D. Rinehart, John M. White, Director
Director
Date: April, 2003 Date: April 17, 2003
By:/s/ Herbert C.
Williamson, III
- ---------------------------
- --------------------
Herbert C. Williamson, III,
Director
Date: April 17, 2003
CERTIFICATIONS
I, H.H. Wommack, III, certify that:
1. I have
reviewed this annual report on Form 10-K of Southwest Partners
III, L.P.;
2. Based on my
knowledge, this annual 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 annual
report;
3. Based on my
knowledge, the financial statements, and other financial
information included in this annual 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 annual 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
annual 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 annual report (the "Evaluation Date"); and
c) presented in
this annual 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 annual 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: April 17, 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 Partners III, L.P.
CERTIFICATIONS
I, Bill E. Coggin, certify that:
1. I have
reviewed this annual report on Form 10-K of Southwest Partners
III, L.P.;
2. Based on my
knowledge, this annual 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 annual
report;
3. Based on my
knowledge, the financial statements, and other financial
information included in this annual 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 annual 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
annual 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 annual report (the "Evaluation Date"); and
c) presented in
this annual 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 annual 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: April 17, 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 Partners III, 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 Annual Report of Southwest Partners
III, Limited Partnership (the "Company") on Form 10-K for the
period ending December 31, 2002 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: April 17, 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 Partners III, 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 Annual Report of Southwest Partners III,
Limited Partnership (the "Company") on Form 10-K for the period
ending December 31, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Bill E.
Coggin, Chief Financial Officer of the Managing General Partner
of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted
pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:
(3) The Report
fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(4) The
information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operation of the Company.
Date: April 17, 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 Partners III, L.P.