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 June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission File number 0-17025
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
(Exact name of registrant as specified in its charter)
Texas 76-0226425
(State or other jurisdiction of organization) (I.R.S. Employer Identification No.)
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
Balance Sheets
- June 30, 1999 and December 31, 1998 3
Statements of Operations
- Three month and six month periods ended June 30, 1999 and 1998 4
Statements of Cash Flows
- Six month periods ended June 30, 1999 and 1998 5
Notes to Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION 10
SIGNATURES 11
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
BALANCE SHEETS
June 30, December 31,
1999 1998
--------------- ---------------
(Unaudited)
ASSETS:
Current Assets:
Cash and cash equivalents $ 124,221 $ 252,359
Oil and gas sales receivable 266,403 199,398
Other 24,880 20,508
--------------- ---------------
Total Current Assets 415,504 472,265
--------------- ---------------
Gas Imbalance Receivable 683 683
--------------- ---------------
Oil and Gas Properties, using full cost
accounting 24,254,708 24,311,374
Less-Accumulated depreciation, depletion
and amortization (22,150,128) (22,059,511)
--------------- ---------------
2,104,580 2,251,863
=============== ===============
$ 2,520,767 $ 2,724,811
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 81,850 $ 59,977
--------------- ---------------
Deferred Revenues 177,385 177,385
Limited Partners' Capital (260,255.25 Limited Partnership
Units; $100 per unit) 2,195,386 2,409,401
General Partners' Capital 66,146 78,048
--------------- ---------------
Total Partners' Capital 2,261,532 2,487,449
=============== ===============
$ 2,520,767 $ 2,724,811
=============== ===============
See accompanying notes to financial statements.
3
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
REVENUES:
Oil and gas sales $ 93,743 $ 164,281 $ 167,450 $ 280,651
Interest income 1,914 6,472 7,708 9,812
Other -- 904 -- 1,955
-------------- -------------- -------------- --------------
95,657 171,657 175,158 292,418
-------------- -------------- -------------- --------------
COSTS AND EXPENSES:
Lease operating 40,479 63,179 76,519 157,227
Production taxes 5,606 5,764 9,273 10,327
Depreciation, depletion
and amortization 41,682 87,200 90,617 153,658
General and administrative 42,607 51,443 98,029 121,539
-------------- -------------- -------------- --------------
130,374 207,586 274,438 442,751
============== ============== ============== ==============
NET INCOME (LOSS) $ (34,717) $ (35,929) $ (99,280) $ (150,333)
============== ============== ============== ==============
Limited Partners' net income (loss)
per unit $ (0.13) $ (0.14) $ (0.37) $ (0.58)
============== ============== ============== ==============
Limited Partners' net income (loss)
per unit $ (.14) $ (.93) $ (.58) $ (.67)
============== ============== ============== ==============
See accompanying notes to financial statements.
4
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
-------------------------------------
1999 1998
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ (99,280) $ (150,333)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 90,617 153,658
Change in gas imbalance receivable
and deferred revenues -- (32,985)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable (67,005) 442,031
(Increase) decrease in other current assets (4,372) (7,677)
Increase (decrease) in accounts payable 21,873 (78,822)
--------------- ---------------
Net cash provided by (used in) operating activities (58,167) 325,872
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (10,063) (65,743)
Proceeds from sales of oil and gas properties 66,729 419,882
--------------- ---------------
Net cash provided by (used in) investing activities 56,666 354,139
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Distributions to partners (126,637) (326,760)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (128,138) 353,251
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 252,359 1,762
=============== ===============
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 124,221 $ 355,013
=============== ===============
See accompanying notes to financial statements.
5
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1998 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.
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.
(5) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the years 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership capable of addressing the Year 2000. These
steps include upgrading, testing and certifying its computer systems and
field operation services and obtaining Year 2000 compliance
certification from all important business suppliers. The Managing
General Partner formed a task force during 1998 to address the Year 2000
issue and prepare its business systems for the Year 2000. The Managing
General Partner has either replaced or updated mission critical systems
and expects to complete testing during the third quarter of 1999 and
continue remedial actions as needed.
6
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase is being conducted as the software is updated or certified
and is expected to be completed during the third quarter of 1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, or its liquidity and financial condition. The estimated
total cost to the Managing General Partner to address Year 2000 issues
is projected to be less than $150,000, most of which will be spent
during the testing phase. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or failure of certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. It is
undeterminable how all the aspects of the Year 2000 will impact the
Partnership. The most reasonably likely worst case scenario would
involve a prolonged disruption of external power sources upon which core
equipment relies, resulting in a substantial decrease in the
Partnership's oil and gas production activities. In addition, the
pipeline operators to whom the Managing General Partner sells the
Partnership's natural gas, as well as other customers and suppliers,
could be prone to Year 2000 problems that could not be assessed or
detected by the Managing General Partner. The Managing General Partner
is contacting its major purchasers, customers, suppliers, financial
institutions and others with whom it conducts business to determine
whether they will be able to resolve in a timely manner any Year 2000
problems directly affecting the Managing General Partner or Partnership
and to inform them of the Managing General Partner's internal assessment
of its Year 2000 review. There can be no assurance that such third
parties will not fail to appropriately address their Year 2000 issues or
will not themselves suffer a Year 2000 disruption that could have a
material adverse effect on the Partnership's activities, financial
condition or operating results. Based upon these responses and any
problems that arise during the testing phase, contingency plans or
back-up systems would be determined and addressed.
7
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.
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. Net cash
provided by (used in) operating activities totaled $(58,167) and $325,872 for
the six months ended June 30, 1999 and 1998, respectively. 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 provided by
property sales proceeds totaled $66,729 and $419,882 for the six months ended
June 30, 1999 and 1998, 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. Cash distributions
totaled $126,637 and $326,760 for the six months ended June 30, 1999 and 1998,
respectively.
The Partnership does not allow for additional assessments from the
partners to fund capital requirements. However, funds are available from
partnership revenues, borrowings or proceeds from the sale of partnership
property. The Managing General Partners believes that the funds currently
available to the partnership will be adequate to meet any anticipated capital
requirements.
RESULTS OF OPERATIONS
The following analysis explains changes in the revenue and expense
categories for the quarter ended June 30, 1999 (current quarter) when compared
to the quarter ended June 30, 1998 (corresponding quarter), and for the six
months ended June 30, 1999 (current period), when compared to the six months
ended June 30, 1998 (corresponding period).
Three Months Ended June 30, 1999 and 1998
Oil and gas sales declined $70,538 or 43 percent in the second quarter of
1999 when compared to the corresponding quarter in 1998, primarily due to
decreased oil and gas production. Current quarter oil and gas production
declined 70 percent and 53 percent, respectively, when compared to second
quarter 1998 production volumes. The partnership's sale of several properties in
1998 and the first quarter of 1999 had a significant impact on the partnership's
production decline. Oil prices increased 40 percent or $4.30/BBL to an average
of $15.14/BBL and gas prices increased 26 percent or $.47/MCF to an average of
$2.31/MCF for the quarter.
8
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Corresponding production costs per equivalent MCF increased 51 percent in
the second quarter of 1999 compared to the second quarter of 1998 while total
production costs decreased 33 percent, relating to the property sales in 1998
and 1999.
Associated depreciation expense decreased 52 percent or $45,518 in 1999
compared to second quarter 1998, also related to the decline in production
volumes.
Six Months Ended June 30, 1999 and 1998
Oil and gas sales declined $113,202 or 40 percent in the first six months
of 1999 when compared to the corresponding period in 1998, primarily due to
decreased oil and gas production. Current period oil and gas production declined
51 percent and 45 percent, respectively, when compared to the same period in
1998. The partnership's sale of several properties in 1998 and the first quarter
of 1999 had a significant impact on the partnership's production decline. Oil
prices increased 23 percent or $2.34/BBL to an average of $12.73/BBL and gas
prices increased 11 percent or $.19/MCF to an average of $1.88/MCF for the
current period.
Corresponding production costs per equivalent MCF decreased 5 percent in
the first six months of 1999 compared to the corresponding period in 1998 as
total production costs decreased 49 percent, relating to the property sales in
1998 and 1999.
Associated depreciation expense decreased 41 percent or $63,041 in 1999
compared to the first six months of 1998, also related to the decline in
production volumes.
During 1999, partnership revenues and costs will be shared between the
limited partners and general partners in a 90:10 ratio.
9
SWIFT ENERGY INCOME PARTNERS 1987-B, LTD.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-NONE-
10
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: August 4, 1999 By: /s/ John R. Alden
-------------- --------------------------------
John R. Alden
Senior Vice President, Secretary
and Principal Financial Officer
Date: August 4, 1999 By: /s/ Alton D. Heckaman, Jr.
-------------- --------------------------------
Alton D. Heckaman, Jr.
Vice President, Controller
and Principal Accounting Officer
11