Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to ____________________
Commission File number 33-11773-04
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
(Exact name of registrant as specified in
its Certificate of Limited Partnership)
TEXAS 76-0247812
(State of Organization) (I.R.S. Employer Identification No.)
16825 Northchase Dr., Suite 400
Houston, Texas 77060
(281) 874-2700
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
107,396.06 Limited Partnership Units
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 periods that the registrant was
required), 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 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 ]
Registrant does not have an aggregate market value for its Limited Partnership
Interests.
Documents Incorporated by Reference
Document Incorporated as to
Registration Statement No. 33-11773 Items 1 and 13
on Form S-1
TABLE OF CONTENTS
Form 10-K Annual Report
For the Period Ended December 31, 1996
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
ITEM NO. PART I PAGE
1 Business I-1
2 Properties I-4
3 Legal Proceedings I-7
4 Submission of Matters to a Vote of
Security Holders I-7
PART II
5 Market Price of and Distributions on the
Registrant's Units and Related Limited
Partner Matters II-1
6 Selected Financial Data II-2
7 Management's Discussion and Analysis of
Financial Condition and Results of Operations II-2
8 Financial Statements and Supplementary Data II-3
9 Disagreements on Accounting and Financial
Disclosure II-3
PART III
10 Directors and Executive Officers of the
Registrant III-1
11 Executive Compensation III-2
12 Security Ownership of Certain Beneficial
Owners and Management III-2
13 Certain Relationships and Related Transactions III-2
PART IV
14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K IV-1
OTHER
Signatures
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
PART I
Item 1. Business
General Description of Partnership
Swift Energy Income Partners 1988-A, Ltd., a Texas limited partnership
(the "Partnership" or the "Registrant"), is a partnership formed under a public
serial limited partnership offering denominated Swift Energy Income Partners III
(Registration Statement No. 33-11773 on Form S-1, originally declared effective
March 19, 1987, and amended effective March 28, 1988, May 4, 1989 and May 1,
1990 [the "Registration Statement"]). The Partnership was formed effective April
25, 1988 under a Limited Partnership Agreement dated April 22, 1988. The initial
1,013 limited partners made capital contributions of $10,739,606.
The Partnership is principally engaged in the business of acquiring,
developing and, when appropriate, disposing of working interests in proven oil
and gas properties within the continental United States. The Partnership does
not engage in exploratory drilling. Each working interest held by the
Partnership entitles the Partnership to receive, in kind or in value, a share of
the production of oil and gas from the producing property, and obligates the
Partnership to participate in the operation of the property and to bear its
proportionate share of all operating costs associated therewith. The Partnership
typically holds less than the entire working interest in its producing
properties.
At December 31, 1996, the Partnership had expended or committed to
expend 100% of the limited partners' net commitments (i.e., limited partners'
commitments available to the Partnership for property acquisitions after payment
of organization fees and expenses) in the acquisition and development of
producing properties, which properties are described under Item 2, "Properties,"
below. The Partnership's revenues and profits are derived almost entirely from
the sale of oil and gas produced from its properties and from the sale of
acquired oil and gas properties, when the sale of such properties is
economically preferable to continued operation.
The Partnership's business and affairs are conducted by its Managing
General Partner, Swift Energy Company, a Texas corporation ("Swift"). The
Partnership's Special General Partner, VJM Corporation, a California corporation
("VJM"), consults with and advises Swift as to certain financial matters. Swift
is the designated operator of many of the properties in which the Partnership
owns interests. The remaining properties are operated by industry operators
designated by the owners of a majority of the working interest in each property.
The general manner in which the Partnership acquires producing
properties and otherwise conducts its business is described in detail in the
Registration Statement under "Proposed Activities," which is incorporated herein
by reference.
Competition, Markets and Regulations
Competition
The oil and gas industry is highly competitive in all its phases. The
Partnership encounters strong competition from many other oil and gas producers,
many of which possess substantial financial resources, in acquiring economically
desirable Producing Properties.
Markets
The amounts of and price obtainable for oil and gas production from
Partnership Properties will be affected by market factors beyond the control of
the Partnership. Such factors include the extent of domestic production, the
level of imports of foreign oil and gas, the general level of market demand on a
regional, national and worldwide basis, domestic and foreign economic conditions
that determine levels of industrial production, political events in foreign
oil-producing regions, and variations in governmental regulations and tax laws
and the imposition of new governmental requirements upon the oil and gas
industry. There can be no assurance that oil and gas prices will not decrease in
the future, thereby decreasing net Revenues from Partnership Properties.
I-1
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
From time to time, there may exist a surplus of natural gas or oil
supplies, the effect of which may be to reduce the amount of hydrocarbons that
the Partnerships may produce and sell while such oversupply exists. In recent
years, initial steps have been taken to provide additional gas transportation
lines from Canada to the United States. If additional Canadian gas is brought to
the United States market, it could create downward pressure on United States gas
prices.
Regulations
Environmental Regulation
The federal government and various state and local governments have
adopted laws and regulations regarding the control of contamination of the
environment. These laws and regulations may require the acquisition of a permit
by Operators before drilling commences, prohibit drilling activities on certain
lands lying within wilderness areas or where pollution arises and impose
substantial liabilities for pollution resulting from operations, particularly
operations near or in onshore and offshore waters or on submerged lands. These
laws and regulations may also increase the costs of routine drilling and
operation of wells. Because these laws and regulations change frequently, the
costs to the Partnership of compliance with existing and future environmental
regulations cannot be predicted. However, the Managing Partner does not believe
that the Partnership is affected in a significantly different manner by these
regulations than are its competitors in the oil and gas industry.
Federal Regulation of Natural Gas
The transportation and sale of natural gas in interstate commerce is
heavily regulated by agencies of the federal government. The following
discussion is intended only as a summary of the principal statutes, regulations
and orders that may affect the production and sale of natural gas from
Partnership Properties. This summary should not be relied upon as a complete
review of applicable natural gas regulatory provisions.
FERC Orders
Several major regulatory changes have been implemented by the Federal
Energy Regulatory Commission ("FERC") from 1985 to the present that affect the
economics of natural gas production, transportation and sales. In addition, the
FERC continues to promulgate revisions to various aspects of the rules and
regulations affecting those segments of the natural gas industry that remain
subject to the FERC's jurisdiction. In April 1992, the FERC issued Order No. 636
pertaining to pipeline restructuring. This rule requires interstate pipelines to
unbundle transportation and sales services by separately stating the price of
each service and by providing customers only the particular service desired,
without regard to the source for purchase of the gas. The rule also requires
pipelines to (i) provide nondiscriminatory "no-notice" service allowing firm
commitment shippers to receive delivery of gas on demand up to certain limits
without penalties, (ii) establish a basis for release and reallocation of firm
upstream pipeline capacity and (iii) provide non-discriminatory access to
capacity by firm transportation shippers on a downstream pipeline. The rule
requires interstate pipelines to use a straight fixed variable rate design. The
rule imposes these same requirements upon storage facilities.
FERC Order No. 500 affects the transportation and marketability of
natural gas. Traditionally, natural gas has been sold by producers to pipeline
companies, which then resold the gas to end-users. FERC Order No. 500 alters
this market structure by requiring interstate pipelines that transport gas for
others to provide transportation service to producers, distributors and all
other shippers of natural gas on a nondiscriminatory, "first-come, first-served"
basis ("open access transportation"), so that producers and other shippers can
sell natural gas directly to end-users. FERC Order No. 500 contains additional
provisions intended to promote greater competition in natural gas markets.
It is not anticipated that the marketability of and price obtainable
for natural gas production from Partnership Properties will be significantly
affected by FERC Order No. 500. Gas produced from Partnership Properties
normally will be sold to intermediaries who have entered into transportation
arrangements with pipeline companies. These intermediaries will accumulate gas
purchased from a number of producers and sell the gas to end-users through open
access pipeline transportation.
I-2
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
State Regulations
Production of any oil and gas from Partnership Properties will be
affected to some degree by state regulations. Many states in which the
Partnership will operate have statutory provisions regulating the production and
sale of oil and gas, including provisions regarding deliverability. Such
statutes, and the regulations promulgated in connection therewith, are generally
intended to prevent waste of oil and gas and to protect correlative rights to
produce oil and gas between owners of a common reservoir. Certain state
regulatory authorities also regulate the amount of oil and gas produced by
assigning allowable rates of production to each well or proration unit.
Federal Leases
Some of the Partnership's properties are located on federal oil and gas
leases administered by various federal agencies, including the Bureau of Land
Management. Various regulations and orders affect the terms of leases,
exploration and development plans, methods of operation and related matters.
Employees
The Partnership has no employees. Swift, however, has a staff of
geologists, geophysicists, petroleum engineers, landmen, and accounting
personnel who administer the operations of Swift and the Partnership. As of
December 31, 1996, Swift had 191 employees. Swift's administrative and overhead
expenses attributable to the Partnership's operations are borne by the
Partnership.
I-3
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
Item 2. Properties
As of December 31, 1996, the Partnership has acquired interests in
producing oil and gas properties which are generally described below.
Principal Oil and Gas Producing Properties
The most valuable fields in the Partnership, based upon year-end
engineering estimates of discounted future net revenues using constant pricing
and costs, are described below.
1. Approximately 41% of the Partnership's value is from the AWP Field
in McMullen County, Texas (Bracken acquisition). The wells produce from the
Olmos formation.
The remaining value in the Partnership is attributable to numerous
properties none of which equals or exceeds 15 percent of the total Partnership
value.
Title to Properties
Title to substantially all significant producing properties of the
Partnership has been examined. The properties are subject to royalty, overriding
royalty and other interests customary in the industry. The Managing General
Partner does not believe any of these burdens materially detract from the value
of the properties or will materially detract from the value of the properties or
materially interfere with their use in the operation of the business of the
Partnership.
Production and Sales Price
The following table summarizes the sales volumes of the Partnership's
net oil and gas production expressed in MCFs. Equivalent MCFs are obtained by
converting oil to gas on the basis of their relative energy content; one barrel
equals 6,000 cubic feet of gas.
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1996 1995 1994
------- ------- -------
Net Volumes (Equivalent MCFs) 294,173 378,492 463,160
Average Sales Price
per Equivalent MCF $2.60 $1.81 $2.11
Average Production Cost
per Equivalent MCF
(includes production taxes) $1.14 $1.01 $0.93
I-4
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1996, 1995 and 1994. All of the Partnership's proved reserves
are located in the United States.
December 31,
-----------------------------------------------------------------------------
1996 1995 1994
--------------------- --------------------- ----------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- -------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
Proved developed
reserves at end of year 45,689 2,133 116,941 2,301 118,662 2,666
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 129,910 2,556 152,144 2,976 166,466 4,148
Extensions, discoveries
and other additions -- -- -- -- 720 1
Revisions of previous
estimates 27,281 960 (10,789) (110) 3,364 (720)
Sales of minerals in
place (78,839) (940) -- -- (3,642) (78)
Production (9,046) (240) (11,445) (310) (14,764) (375)
------- ----- -------- ----- ------- -----
Balance at end of year 69,306 2,336 129,910 2,556 152,144 2,976
------- ----- ------- ----- ------- -----
Revisions of previous quantity estimates are related to upward or
downward variations based on current engineering information for production
rates, volumetrics and reservoir pressure. Additionally, changes in quantity
estimates are the result of the increase or decrease in crude oil and natural
gas prices at each year end which have the effect of adding or reducing proved
reserves on marginal properties due to economic limitations.
I-5
SWIFT ENERGY COMPANY 1988-A, LTD.
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1996:
Reserves
December 31, 1996
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- -------- ------ ------- ------ -------
Broyles I & II,
Inverness homes LA -- 209 13 1.234
Union Drilling WV -- 810 122 21.138
Bracken TX 35,550 772 45 1.456
Potter AR, LA, MS,
NM, OK, TX 19,353 530 187 8.742
Norcen Explorer WY 14,403 15 29 0.221
------- ----- ---- ------
69,306 2,336 396 32.791
------- ----- ---- ------
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. Oil and gas reserve engineering must be recognized as a
subjective process of estimating underground accumulations of oil and gas that
cannot be measured in an exact way, and estimates of other engineers might
differ from those above, audited by H. J. Gruy and Associates, Inc., an
independent petroleum consulting firm. The accuracy of any reserve estimate is a
function of the quality of available data and of engineering and geological
interpretation and judgment. Results of drilling, testing and production
subsequent to the date of the estimate may justify revision of such estimate,
and, as a general rule, reserve estimates based upon volumetric analysis are
inherently less reliable than those based on lengthy production history.
Accordingly, reserve estimates are often different from the quantities of oil
and gas that are ultimately recovered.
In estimating the oil and natural gas reserves, the Registrant, in
accordance with criteria prescribed by the Securities and Exchange Commission,
has used prices received as of December 31, 1996 without escalation, except in
those instances where fixed and determinable gas price escalations are covered
by contracts, limited to the price the Partnership reasonably expects to
receive. The Registrant does not believe that any favorable or adverse event
causing a significant change in the estimated quantity of proved reserves has
occurred between December 31, 1996 and the date of this report.
Future prices received for the sale of the Partnership's product may be
higher or lower than the prices used in the evaluation described above; the
operating costs relating to such production may also increase or decrease from
existing levels. The estimates presented above are in accordance with rules
adopted by the Securities and Exchange Commission.
I-6
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
Item 3. Legal Proceedings
The Partnership is not aware of any material pending legal proceedings
to which it is a party or of which any of its property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of limited partners during the
fourth quarter of the fiscal year covered by this report.
I-7
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
PART II
Item 5. Market Price of and Distributions on the Registrant's Units and Related
Limited Partner Matters
Market Information
Units in the Partnership were initially sold at a price of $100 per
Unit. Units are not traded on any exchange and there is no established public
trading market for the Units. Swift is aware of negotiated transfers of Units
between unrelated parties; however, these transfers have been limited and
sporadic. Due to the nature of these transactions, Swift has no verifiable
information regarding prices at which Units have been transferred.
Holders
As of December 31, 1996, there were 1,013 Limited Partners holding
Units in the Partnership.
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to the restrictions set forth in the Limited
Partnership Agreement. In the fiscal years ending December 31, 1995 and 1996,
the Partnership distributed a total of $107,300 and $134,200, respectively, to
holders of its Units. Cash distributions constitute net proceeds from sale of
oil and gas production after payment of lease operating expenses and other
partnership expenses. Some or all of such amounts or any proceeds from the sale
of partnership properties could be deemed to constitute a return of investors'
capital.
Oil and gas investments involve a high risk of loss, and no assurance
can be given that any particular level of distributions to holders of Units can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1997, the Partnership's ability
to make distributions could be diminished by any event adversely affecting the
oil and gas properties in which the Partnership owns interests or the amount of
revenues received by the Partnership therefrom.
The Partnership's Limited Partnership Agreement contains various
provisions which might serve to delay, defer or prevent a change in control of
the Partnership, such as the requirement of a vote of Limited Partners in order
to sell all or substantially all of the Partnership's properties or the
requirement of consent by the Managing General Partner to transfers of limited
partnership interests.
II-1
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
Item 6. Selected Financial Data
The following selected financial data, prepared in accordance with
generally accepted accounting principles as of December 31, 1996, 1995, 1994,
1993, and 1992, should be read in conjunction with the financial statements
included in Item 8:
1996 1995 1994 1993 1992
------------- ------------- ------------- ------------- -------------
Revenues $ 797,491 $ 719,977 $ 1,014,297 $ 1,186,221 $ 1,354,250
Income (Loss) $ 106,525 $ (317,274) $ (9,177) $ 92,713 $ (928,570)
Total Assets $ 1,977,585 $ 2,287,491 $ 2,733,107 $ 3,063,513 $ 3,499,158
Cash Distributions $ 160,697 $ 123,178 $ 287,092 $ 359,797 $ 547,026
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership has expended all of the partners' net commitments
available for property acquisitions ("net commitments") 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. 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 will decline in future periods
as the oil and gas produced from these properties also declines.
Subject to 1997 market conditions remaining comparable with 1996, the
Managing General Partner ("MGP") anticipates an increase in liquidity provided
that certain development work scheduled in 1997 is completed successfully. The
Partnership plans to spend in 1997 an estimated $103,000 for capital
expenditures needed for this development work and the enhancement of proved oil
and gas reserves. The MGP 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.
Results of Operations
Oil and gas sales increased 11 percent in 1996 vs. 1995. Increases in
both 1996 gas and oil prices were major contributors to the increased revenues.
The Partnership experienced an increase in gas prices of 48 percent or $.81/MCF
and an increase in oil prices of 29 percent or $4.07/BBL. The average sales
price per equivalent MCF increased 44 percent in 1996. Production volumes
decreased 22 percent due to a 23 percent gas production decrease and a 21
percent oil production decline. The production declines partially offset the
effect of increased oil and gas prices impacting partnership performance.
Production cost per equivalent MCF increased 13 percent in 1996
compared to 1995; however, total production costs decreased 12 percent in 1996.
Associated depreciation expense decreased 22 percent in 1996 when
compared to 1995.
Oil and gas sales decreased 29 percent in 1995 vs. 1994. Production
volumes decreased 18 percent due to a 17 percent gas production decrease and a
22 percent oil production decline. Since the Partnership's reserves are 77
percent gas, the decrease in gas production, due to accelerated production
declines on mature wells, had a major impact on partnership performance. A
decline in the 1995 gas prices of 19 percent or $.41/MCF further contributed to
the Partnership's decreased revenues. The average sales price per equivalent MCF
decreased 14 percent in 1995.
II-2
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
Production cost per equivalent MCF increased 9 percent n 1995 compared
to 1994; however, total production costs decreased 11 percent in 1995.
Associated depreciation expense decreased 13 percent in 1995 when
compared to 1994.
The Partnership recorded an additional provision in depreciation,
depletion and amortization in 1995 and 1994 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, was below the
fair market value paid for oil and gas properties resulting in a full cost
ceiling impairment.
During 1997, Partnership revenues and costs will be shared between the
limited and general partners in a 90:10 ratio, based on the annualized rate of
cash distributions by the Partnership during a certain period prior to December
31, 1996. Based on current oil and gas prices, current levels of oil and gas
production and expected cash distributions during 1997, the MGP anticipates that
the Partnership sharing ratio will continue to be 90:10.
Item 8. Financial Statements and Supplementary Data
See Part IV, Item 14(a) for index to financial statements.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
II-3
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
PART III
Item 10. Directors and Executive Officers of the Registrant
As a limited partnership, the Registrant has no directors or executive
officers. The business and affairs of the Registrant are managed by Swift as
Managing General Partner. Set forth below is certain information as of March 17,
1997 regarding the directors and executive officers of Swift.
Position(s) with
Name Age Swift and Other Companies
---- --- -------------------------
DIRECTORS
A. Earl Swift 63 President, Chief Executive Officer and
Chairman of the Board
Virgil N. Swift 68 Executive Vice President - Business
Development, Vice Chairman of the Board
G. Robert Evans 65 Director of Swift; Chairman of the Board,
Material Sciences Corporation;
Director, Consolidated Freightways, Inc.,
Fibreboard Corporation, Elco Industries,
and Old Second Bancorp
Raymond O. Loen 72 Director of Swift; President, R. O. Loen
Company
Henry C. Montgomery 61 Director of Swift; Chairman of the Board,
Montgomery Financial Services Corporation;
Director, Southwall Technology Corporation
Clyde W. Smith, Jr. 48 Director of Swift; President, Somerset
Properties, Inc.
Harold J. Withrow 69 Director of Swift
EXECUTIVE OFFICERS
Terry E. Swift 41 Executive Vice President, Chief
Operating Officer
John R. Alden 51 Senior Vice President - Finance,
Chief Financial Officer and Secretary
Bruce H. Vincent 49 Senior Vice President - Funds Management
James M. Kitterman 52 Senior Vice President - Operations
Alton D. Heckaman, Jr. 39 Vice President - Finance and Controller
III-1
SWIFT ENRGY INCOME PARTNERS 1988-A, LTD.
From time to time, Swift as Managing General Partner of the Partnership
purchases Units in the Partnership from investors who offer the Units pursuant
to their right of presentment, which purchases are made pursuant to terms set
out in the Partnership's original Limited Partnership Agreement. Due to the
frequency and large number of these transactions, Swift reports these
transactions under Section 16 of the Securities Exchange Act of 1934 on an
annual rather than a monthly basis. In some cases such annual reporting may
constitute a late filing of the required Section 16 reports under the applicable
Section 16 rules.
Item 11. Executive Compensation
As noted in Item 10, "Directors and Executive Officers of the
Registrant," above, the Partnership has no executive officers. The executive
officers of Swift and VJM are not compensated by the Partnership.
Certain fees and allowances contemplated by the Limited Partnership
Agreement have been paid by the Partnership to Swift and VJM. See Note (4) in
Notes To Financial Statements (Related-Party Transactions) for further
discussion.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Swift Energy Company, the Managing General Partner, located at 16825
Northchase Drive, Suite 400, Houston, Texas 77060, owns 7,733 Limited
Partnership Units, which is 7.20 percent of all outstanding Limited Partnership
Units. All Limited Partnership Units owned by Swift were acquired from investors
who offered the Limited Partnership Units pursuant to their right of
presentment. As the Managing General Partner, Swift is not permitted generally,
under the Limited Partnership Agreement, to vote its Limited Partnership Units.
Swift also owns a general partnership interest of 9 percent of all partnership
interests in the Partnership.
Swift and VJM are not aware of any arrangement, the operation of which
may at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions
As noted in Item 10, "Directors and Executive Officers of the
Registrant," above, the Partnership has no executive officers or directors, and
thus has not engaged in any transactions in which any such person had an
interest. The Partnership is permitted to engage in certain transactions with
Swift as Managing General Partner and VJM as Special General Partner, subject to
extensive guidelines and restrictions described in the "Conflicts of Interest"
section of the Amended Prospectus contained in the Registration Statement, which
is incorporated herein by reference.
Summarized below are the principal transactions that have occurred
between the Partnership and Swift, VJM and their affiliates.
1. The oil and gas properties acquired by the Partnership, as described
in Item 2, "Properties" above, were typically acquired initially by Swift from
the seller thereof and subsequently transferred to the Partnership. Such
transfers were made by Swift at its Property Acquisition Costs (as defined in
the Limited Partnership Agreement), less any amounts received from sale of
production between the time of acquisition by Swift and the time of sale to the
Partnership.
2. Swift acts as operator for many of the wells in which the
Partnership has acquired interests and has received compensation for such
activities in accordance with standard industry operating agreements.
3. The Partnership paid to Swift and VJM certain fees as contemplated
by the Limited Partnership Agreement. See Note (4) in Notes To Financia
Statements (Related-Party Transactions) for further discussion.
III-2
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
IV-1
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
a(1) FINANCIAL STATEMENTS PAGE NO.
--------
Report of Independent Public Accountants IV-2
Balance Sheets as of December 31, 1996 and 1995 IV-3
Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 IV-4
Statements of Partners' Capital for the years ended
December 31, 1996, 1995 and 1994 IV-5
Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 IV-6
Notes to Financial Statements IV-7
a(2) FINANCIAL STATEMENT SCHEDULES
All schedules required by the SEC are either inapplicable or the
required information is included in the Financial Statements, the
Notes thereto, or in other information included elsewhere in this
report.
a(3) EXHIBITS
3.1 Limited Partnership Agreement of Swift Energy Income
Partners 1988-A, Ltd., dated April 22, 1988. (Form 10-K
for year ended December 31, 1988, Exhibit 3.1).
3.2 Certificate of Limited Partnership of Swift Energy Income
Partners 1988-A, Ltd., as filed April 25, 1988, with the
Texas Secretary of State. (Form 10-K for year ended
December 31, 1988, Exhibit 3.2).
99.1 A copy of the following section of the Prospectus dated
March 19, 1987, contained in Pre-Effective Amendment No. 1
to Registration Statement No. 33-11773 on Form S-1 for
Swift Energy Income Partners III, as filed on March 19,
1987, which have been incorporated herein by reference:
"Proposed Activities" (pp 30 - 36) and "Conflicts of
Interest" (pp. 70 - 78). (Form 10-K for year ended
December 31, 1989, Exhibit 28.1).
b(1) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter ended
December 31, 1996.
Supplemental Information to be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.
No annual report to security holders covering the Partnership's 1996
fiscal year, or proxy statement, form of proxy or other proxy soliciting
material has been sent to Limited Partners of the Partnership.
IV-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1988-A, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1988-A, Ltd., (a Texas limited partnership) as of December 31, 1996 and
1995, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1996, 1995 and 1994. These financial statements
are the responsibility of the general partner's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Swift Energy Income
Partners 1988-A, Ltd., as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years ended December 31, 1996, 1995 and
1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1997
IV-2
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
-------------- --------------
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,993 $ 1,832
Oil and gas sales receivable 169,919 157,715
--------------- --------------
Total Current Assets 171,912 159,547
--------------- --------------
Gas Imbalance Receivable 9,363 16,895
--------------- --------------
Oil and Gas Properties, using full cost
accounting 10,166,768 10,255,280
Less-Accumulated depreciation, depletion
and amortization (8,370,458) (8,144,231)
-------------- --------------
1,796,310 2,111,049
-------------- --------------
$ 1,977,585 $ 2,287,491
============== ==============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts payable and accrued liabilities $ 256,404 $ 483,159
Current portion of note payable -- 26,103
-------------- --------------
Total Current Liabilities 256,404 509,262
-------------- --------------
Deferred Revenues 35,816 38,692
Partners' Capital 1,685,365 1,739,537
-------------- --------------
$ 1,977,585 $ 2,287,491
============== ==============
See accompanying notes to financial statements.
IV-3
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
--------------- --------------- ---------------
REVENUES:
Oil and gas sales $ 790,957 $ 714,695 $ 1,010,782
Interest income 122 175 48
Other 6,412 5,107 3,467
--------------- --------------- ---------------
797,491 719,977 1,014,297
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 301,157 344,885 385,509
Production taxes 34,576 38,241 46,547
Depreciation, depletion
and amortization -
Normal provision 226,228 291,835 334,894
Additional provision -- 250,614 126,298
General and administrative 113,412 85,745 117,793
Interest expense 15,593 25,931 12,433
--------------- --------------- ---------------
690,966 1,037,251 1,023,474
--------------- --------------- ---------------
INCOME (LOSS) $ 106,525 $ (317,274) $ (9,177)
=============== =============== ===============
See accompanying notes to financial statements.
IV-4
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- ---------------- --------------
Balance,
December 31, 1993 $ 2,154,404 $ 56,866 $ 264,988 $ 2,476,258
Income (Loss) 4,711 38,536 (52,424) (9,177)
Cash Distributions (239,000) (48,092) -- (287,092)
--------------- --------------- --------------- --------------
Balance,
December 31, 1994 1,920,115 47,310 212,564 2,179,989
--------------- --------------- --------------- --------------
Income (Loss) (285,033) 16,583 (48,824) (317,274)
Cash Distributions (107,300) (15,878) -- (123,178)
--------------- --------------- --------------- --------------
Balance,
December 31, 1995 1,527,782 48,015 163,740 1,739,537
--------------- --------------- --------------- --------------
Income (Loss) 93,006 26,855 (13,336) 106,525
Cash Distributions (134,200) (26,497) -- (160,697)
--------------- --------------- --------------- --------------
Balance,
December 31, 1996 $ 1,486,588 $ 48,373 $ 150,404 $ 1,685,365
=============== =============== =============== ==============
Limited Partners' net income (loss)
per unit
1994 $ .04
===============
1995 $ (2.65)
===============
1996 $ .87
===============
See accompanying notes to financial statements.
IV-5
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
--------------- --------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 106,525 $ (317,274) $ (9,177)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 226,228 542,449 461,192
Change in gas imbalance receivable
and deferred revenues 4,655 1,087 (24,676)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable (12,204) 12,738 55,598
Increase (decrease) in accounts payable
and accrued liabilities (226,755) 69,115 79,762
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 98,449 308,115 562,699
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (71,514) (92,918) (215,927)
Proceeds from sales of oil and gas properties 160,026 704 29,767
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 88,512 (92,214) (186,160)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (160,697) (123,178) (287,092)
Payments on note payable (26,103) (92,261) (89,223)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities (186,800) (215,439) (376,315)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 161 462 224
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,832 1,370 1,146
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,993 $ 1,832 $ 1,370
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 16,249 $ 28,000 $ 13,502
=============== =============== ===============
See accompanying notes to financial statements.
IV-6
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-A, Ltd., a Texas limited partnership
(the Partnership), was formed on April 25, 1988, for the purpose of purchasing
and operating producing oil and gas properties within the continental United
States. Swift Energy Company ("Swift"), a Texas corporation, and VJM Corporation
("VJM"), a California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The general partners are
required to contribute up to 1/99th of limited partner net contributions. The
1,013 limited partners made total capital contributions of $10,739,606.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the general partners. Organization
and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate for a certain period equals or exceeds 17.5 percent, then for
the following calendar year, these continuing costs and revenues will be
allocated 85 percent to the limited partners and 15 percent to the general
partners. After partnership payout, continuing costs and revenues will be shared
85 percent by the limited partners, and 15 percent by the general partners, even
if the cash distribution rate is less than 17.5 percent. Payout had not occurred
as of December 31, 1996.
(2) Significant Accounting Policies -
Use of Estimates --
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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
estimates.
Oil and Gas Properties --
For financial reporting purposes, the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition and development of oil and gas reserves are capitalized. Such costs
include lease acquisitions, geological and geophysical services, drilling,
completion, equipment and certain general and administrative costs directly
associated with acquisition and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1996, 1995 and 1994.
Future development, site restoration, dismantlement and abandonment
costs, net of salvage values, are estimated on a property-by-property basis
based on current economic conditions and are amortized to expense as the
Partnership's capitalized oil and gas property costs are amortized.
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent, and the lower of
cost or fair value of unproved properties. Proceeds from the sale or disposition
of oil and gas properties are treated as a reduction of oil and gas property
costs with no gains or losses being recognized except in significant
transactions.
IV-7
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
determined by dividing the physical units of oil and gas produced during the
period by the total estimated units of proved oil and gas reserves at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
Statements of Cash Flows --
Highly liquid debt instruments with an initial maturity of three months
or less are considered to be cash equivalents.
(3) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
Year Ended December 31,
---------------------------------------------
1996 1995 1994
---------- ---------- ---------
Acquisition of
proved properties $ -- $ -- $ --
Development 71,514 92,918 215,927
---------- ---------- ---------
$ 71,514 $ 92,918 $ 215,927
---------- ---------- ---------
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
During 1995 and 1994, the Partnership's unamortized oil and gas
property costs exceeded the quarterly calculations of the "ceiling limitation"
resulting in an additional provision for depreciation, depletion and
amortization of $250,614 and $126,298, respectively. No such write downs were
required in 1996.In addition, the limited partners' share of unamortized oil and
gas property costs exceeded their "ceiling limitation" in 1995 and 1994
resulting in a valuation allowance of $217,532 and $95,539, respectively. These
amounts are included in the income (loss) attributable to the limited partners
shown in the statements of partners' capital together with a "combining
adjustment" for the differences between the limited partners' valuation
allowances and the Partnership's valuation allowances. The "combining
adjustment" changes quarterly as the Partnership's total depreciation, depletion
and amortization provision is more or less than the combined depreciation,
depletion and amortization provision attributable to general and limited
partners.
IV-8
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $268,115 for managing and overseeing the offering of limited
partnership units.
A one-time management fee of $268,490 was paid to Swift in 1988 for
services performed for the Partnership. During 1996, 1995 and 1994, the
Partnership paid Swift $72,547, $42,740 and $68,408, respectively, as general
and administrative overhead allowances.
(5) Note Payable to a Bank -
Note payable to a bank at December 31, 1996 and 1995 follows:
1996 1995
-------- --------
Date of current note: December 29, 1992
Note payable at 1.25% above the bank's base
rate (9.75% at December 31, 1995), principal
payable in quarterly installments of $23,065,
with the balance due at maturity (January 1,
1996), collateralized by partnership assets $ -- $ 26,103
Less: Current portion -- (26,103)
-------- --------
Long-term portion $ -- $ --
-------- --------
Note was paid in full at maturity. As provided by the Partnership
Agreement, the note payable was obtained to fund development wells. As of
December 31, 1996, the Partnership had no outstanding note payable to a Bank.
(6) Federal Income Taxes -
The Partnership is not a tax-paying entity. No provision is made in the
accounts of the Partnership for federal or state income taxes, since such taxes
are liabilities of the individual partners, and the amounts thereof depend upon
their respective tax situations.
The tax returns and the amount of distributable Partnership income are
subject to examination by the federal and state taxing authorities. If the
Partnership's ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1996, 1995 and 1994
was $360,753, $167,236 and $378,675, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
IV-9
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion is not included in the
Partnership's income for federal income tax purposes but is charged directly to
the partners' capital accounts to the extent of the cost of the leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion for federal income tax purposes may vary from that computed for
financial reporting purposes in cases where a ceiling adjustment is recorded, as
such amount is not recognized for tax purposes.
(7) Gas Imbalances -
The gas imbalance receivable and deferred revenues represent imbalances
assumed as part of property acquisitions. The imbalances are accounted for on
the entitlements method, whereby the Partnership records its share of revenue,
based on its entitled amount. Any amounts over or under the entitled amount are
recorded as an increase or decrease to the gas imbalance receivable or deferred
revenues as applicable.
(8) 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.
The Partnership extends credit 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.
(9) 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.
IV-10
SWIFT ENERGY INCOME PARTNERS 1988-A, LTD
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 1988-A, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
General Partner
Date: March 17, 1997 By: s/b A. Earl Swift
-------------- ----------------------------------
A. Earl Swift
President
Date: March 17, 1997 By: s/b John R. Alden
-------------- ----------------------------------
John R. Alden
Principal Financial Officer
Date: March 17, 1997 By: s/b Alton D. Heckaman, Jr.
-------------- ----------------------------------
Alton D. Heckaman, Jr.
Principal Accounting Officer
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 Registrant and
in the capacities and on the dates indicated.
SWIFT ENERGY INCOME
PARTNERS 1988-A, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
General Partner
Date: March 17, 1997 By: s/b A. Earl Swift
-------------- ----------------------------------
A. Earl Swift
Director and Principal
Executive Officer
Date: March 17, 1997 By: s/b Virgil N. Swift
-------------- ----------------------------------
Virgil N. Swift
Director and Executive
Vice President - Business
Development
IV-11
SWIFT ENERGY COMPANY 1988-A, LTD.
Date: March 17, 1997 By: s/b G. Robert Evans
-------------- ----------------------------------
G. Robert Evans
Director
Date: March 17, 1997 By: s/b Raymond O. Loen
-------------- ----------------------------------
Raymond O. Loen
Director
Date: March 17, 1997 By: s/b Henry C. Montgomery
-------------- ----------------------------------
Henry C. Montgomery
Director
Date: March 17, 1997 By: s/b Clyde W. Smith, Jr.
-------------- ----------------------------------
Clyde W. Smith, Jr.
Director
Date: March 17, 1997 By: s/b Harold J. Withrow
-------------- ----------------------------------
Harold J. Withrow
Director
IV-12