FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-17025
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
(Exact name of registrant as specified in its charter)
Texas 76-0226425
(State or other jurisdiction (I.R.S. Employer Identification No.)
of organization)
16825 Northchase Drive, Suite 400
Houston, Texas 77060
(Address of principal executive offices)
(Zip Code)
(281)874-2700
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the 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
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SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
INDEX
PART I. FINANCIAL INFORMATION PAGE
ITEM 1. Financial Statements
Statement of Net Assets in Process of Liquidation
- March 31, 2000 3
Balance Sheet
- December 31, 1999 4
Statements of Operations
- Three month periods ended March 31, 2000 and 1999 5
Statements of Cash Flows
- Three month periods ended March 31, 2000 and 1999 6
Notes to Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 11
SIGNATURES 12
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
STATEMENT OF NET ASSETS IN PROCESS OF LIQUIDATION
(Unaudited)
March 31,
2000
----------
ASSETS:
Cash and cash equivalents $ 4,500
Oil and gas sales receivable 260,348
Other 30,473
Gas Imbalance Receivable 683
Oil and Gas Properties 3,184,132
-----------
Total Assets 3,480,136
-----------
LIABILITIES:
Accounts Payable 32,709
Gas Imbalance Payable 142,001
-----------
Total Liabilities 174,710
-----------
Net Assets in Process of Liquidation $ 3,305,426
===========
See accompanying notes to financial statements.
3
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
BALANCE SHEET
December 31,
1999
-------------
ASSETS:
Current Assets:
Cash and cash equivalents $ 5,355
Oil and gas sales receivable 289,654
Other 28,043
-------------
Total Current Assets 323,052
-------------
Gas Imbalance Receivable 683
-------------
Oil and Gas Properties, using full cost
accounting 24,271,480
Less-Accumulated depreciation, depletion
and amortization (22,272,110)
-------------
1,999,370
-------------
$ 2,323,105
=============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 27,307
-------------
Deferred Revenues 143,198
Limited Partners' Capital (260,255 Limited Partnership
Units; $100 per unit) 2,092,632
General Partners' Capital 59,968
-------------
Total Partners' Capital 2,152,600
-------------
$ 2,323,105
=============
See accompanying notes to financial statements.
4
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
-------------------------
2000 1999
----------- ---------
REVENUES:
Oil and gas sales $ 154,768 $ 3,706
Interest income 2,456 5,794
----------- ---------
157,224 79,500
----------- ---------
COSTS AND EXPENSES:
Lease operating 35,391 36,041
Production taxes 7,903 3,667
Depreciation, depletion
and amortization 43,387 48,935
General and administrative 65,355 55,422
----------- ---------
152,036 144,065
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Income (Loss) Before Adoption
Of Liquidation Basis Of Accounting $ 5,188 $ (64,565)
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Effect Of Adoption Of Liquidation
Basis Of Accounting 1,218,546 --
----------- ---------
Income (Loss) $ 1,223,734 $ (64,565)
=========== =========
Limited Partners' net income (loss)
per unit
Income (Loss) Before Adoption
of Liquidation Basis of Accounting $ -- $ (0.24)
=========== =========
Effect of Adoption of Liquidation
Basis of Accounting $ 4.21 $ --
=========== =========
Income (Loss) $ 4.21 $ (0.24)
=========== =========
See accompanying notes to financial statements.
5
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
----------------------------
2000 1999
------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 1,223,734 $ (64,565)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Effect of adoption of liquidation basis of accounting (1,218,546) --
Depreciation, depletion and amortization 43,387 48,935
Change in gas imbalance receivable
and deferred revenues (1,197) --
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 29,306 (126,352)
(Increase) decrease in other current assets (2,430) (4,828)
Increase (decrease) in accounts payable 5,402 29,115
------------ ----------
Net cash provided by (used in) operating activities 79,656 (117,695)
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (9,603) (3,617)
Proceeds from sales of oil and gas properties -- 60,836
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Net cash provided by (used in) investing activities (9,603) 57,219
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Distributions to partners (70,908) (74,537)
------------ ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (855) (135,013)
------------ ----------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,355 252,359
------------ ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,500 $ 117,346
============ ==========
See accompanying notes to financial statements.
6
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The limited partners of the Partnership approved the
dissolution of the Partnership on March 30, 2000. As a result, the
Partnership has changed its basis of accounting, effective March 31,
2000, from historical cost basis to the liquidation basis. Under the
liquidation basis of accounting, the Partnership's assets at March 31,
2000 are reported at estimated net realizable value, and the
Partnership's liabilities are presented at estimated settlement amounts.
The net effect of the revaluation of the Partnership's assets and
liabilities due to the adoption of the liquidation basis of accounting
was an upward adjustment of $1,218,546.
Oil and gas properties at March 31, 2000 reflect the Managing
General Partner's estimate of value, in the absence of third party
appraisals or evaluations, based on future net revenues of the
properties, discounted at 10%, as of March 31, 2000. This estimate is
based on its assessment of the impact of selling existing assets based
on current market conditions and estimated disposal costs. The net
proceeds from the sales of oil and gas properties may vary substantially
due to changes in oil and gas prices, subsequent production and other
factors which may be applied by buyers.
For all other assets and liabilities presented on the
liquidation basis of accounting, the Managing General Partner believes
that historical cost approximates fair market value due to the
short-term nature of such assets and liabilities.
The accompanying statements of operations and cash flows were
prepared using the historical cost basis of accounting.
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1999 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(3) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
7
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(4) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
8
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Partnership was formed for the purpose of investing in producing oil
and gas properties located within the continental United States. In order to
accomplish this, the Partnership goes through two distinct yet overlapping
phases with respect to its liquidity and result of operations. When the
Partnership is formed, it commences its "acquisition" phase, with all funds
placed in short-term investments until required for such property acquisitions.
The interest earned on these pre-acquisition investments becomes the primary
cash flow source for initial partner distributions. As the Partnership acquires
producing properties, net cash from operations becomes available for
distribution, along with the investment income. After partnership funds have
been expended on producing oil and gas properties, the Partnership enters its
"operations" phase. During this phase, oil and gas sales generate substantially
all revenues, and distributions to partners reflect those revenues less all
associated partnership expenses. The Partnership may also derive proceeds from
the sale of acquired oil and gas properties, when the sale of such properties is
economically appropriate or preferable to continued operation.
Liquidation
During the first quarter of 2000, the Managing General Partner informed
the limited partners of a proposal to sell all of the Partnership's interests in
oil and gas properties and dissolve and liquidate the Partnership. The special
meeting of limited partners was held on March 30, 2000.
Of the total units held by the limited partners, a majority voted for
adoption of the proposal for sales of substantially all of the assets of the
Partnership and the dissolution, winding up and termination of the Partnership.
The Partnership adopted the liquidation basis of accounting for the period
subsequent to March 31, 2000.
Liquidity and Capital Resources
Oil and gas reserves are depleting assets and therefore often experience
significant production declines each year from the date of acquisition through
the end of the life of the property. The primary source of liquidity to the
Partnership comes almost entirely from the income generated from the sale of oil
and gas produced from ownership interests in oil and gas properties. This source
of liquidity and the related results of operations, and in turn cash
distributions, will decline in future periods as the oil and gas produced from
these properties also declines while production and general and administrative
costs remain relatively stable making it unlikely that the Partnership will hold
the properties until they are fully depleted, but will likely liquidate when a
substantial majority of the reserves have been produced. Cash distributions to
partners are determined quarterly, based upon net proceeds from sales of oil and
gas production after payment of lease operating expense, taxes and development
costs, less general and administrative expenses. In addition, future partnership
cash requirements are taken into account to determine necessary cash reserves.
Net cash provided by (used in) operating activities totaled $79,656 and
$(117,695) for the three months ended March 31, 2000 and 1999, respectively.
Cash provided by property sales proceeds totaled $60,836 for the three months
ended March 31, 1999. Cash distributions totaled $70,908 and $74,537 for the
three months ended March 31, 2000 and 1999, respectively.
The Partnership has expended all of the partners' net commitments
available for property acquisitions and development by acquiring producing oil
and gas properties. The partnership invests primarily in proved producing
properties with nominal levels of future costs of development for proven but
undeveloped reserves. Significant purchases of additional reserves or extensive
drilling activity are not anticipated. The Partnership does not allow for
additional assessments from the partners to fund capital requirements. The
Managing General Partner anticipates that the Partnership will have adequate
liquidity from income from continuing operations to satisfy any future capital
expenditure requirements. Funds generated from bank borrowings and proceeds from
the sale of oil and gas properties will be used to supplement this effort if
deemed necessary.
9
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
After sale of all its interests in oil and gas properties and settlement
of its liabilities, the Partnership's assets will consist solely of cash, which
it will distribute to its partners in complete liquidation. The Partnership will
not realize gain or loss upon such distribution of cash to its partners in
liquidation.
Results of Operations
Oil and gas sales increased $81,061 or 110 percent in the first quarter of
2000 when compared to the corresponding quarter in 1999. Increased oil and gas
prices had a significant impact on Partnership performance. Oil prices increased
130 percent or $14.53/BBL to an average of $25.74/BBL and gas prices increased
97 percent or $1.45/MCF to an average of $2.95/MCF for the quarter. Current
quarter production volumes increased 3 percent as oil and gas production
increased 3 percent and 4 percent, respectively, when compared to first quarter
1999 production volumes.
Corresponding production costs per equivalent MCF increased 5 percent in
the first quarter of 2000 compared to the first quarter of 1999 and total
production costs increased 9 percent.
Associated depreciation expense decreased 11 percent or $5,548 in 2000
compared to first quarter 1999.
The Partnership records an additional provision in depreciation, depletion
and amortization when the present value, discounted at ten percent, of estimated
future net revenues from oil and gas properties, using the guidelines of the
Securities and Exchange Commission, is below the fair market value originally
paid for oil and gas properties. Using prices in effect at March 31, 1999, the
Partnership would have recorded an additional provision at March 31, 1999 in the
amount of $27,041. However, these temporarily low quarter-end prices rebounded
and by using prices in effect at the filing date, the Partnership's unamortized
cost of oil and gas properties were not limited by this calculation.
During 2000, partnership revenues and costs will be shared between the
limited partners and general partners in a 90:10 ratio.
10
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-NONE-
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SWIFT ENERGY INCOME
PARTNERS 1987-B, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
Managing General Partner
Date: May 8, 2000 By: /s/ John R. Alden
----------- -----------------------------------
John R. Alden
Senior Vice President, Secretary
and Principal Financial Officer
Date: May 8, 2000 By: /s/ Alton D. Heckaman, Jr.
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Alton D. Heckaman, Jr.
Vice President, Controller
and Principal Accounting Officer
12