SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Swift Energy Managed Pension Assets Partnership 1990-D, Ltd.
(Name of Registrant as Specified In Its Charter)
Swift Energy Company
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(4).
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Limited Partnership Units
2) Aggregate number of securities to which transaction applies:
29,303.79
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
$15.46 - $21.11
Estimate based on estimated value of the underlying assets
4) Proposed maximum aggregate value of transaction:
$618,603.00
5) Total fee paid:
$123.72
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------------------
4) Date Filed:
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May ___, 1997
Dear Limited Partner:
Enclosed is a proxy statement and related information pertaining to a
proposal to sell all of the Partnership's properties and dissolve and liquidate
the Partnership. In order for the sale and liquidation to take place, Limited
Partners holding a majority of the outstanding Units must approve this proposal.
The Managing General Partner recommends that you vote in favor of such sale and
liquidation for a number of reasons.
Swift Energy Managed Pension Assets Partnership 1990-D, Ltd. has been in
existence for over six years, and most of the properties underlying its net
profits interest were purchased by 1991. All economically feasible enhancement
opportunities have already been implemented by the Partnership's companion
partnership on the properties in which the Partnership owns non-operating
interests. Consequently, the Partnership's interest in proved reserves that can
be produced without requiring further expenditures is quite low. Thus, even if
oil and gas prices were unusually high, there would be no impact upon the
Partnership's ultimate economic performance. To continue operation of the
Partnership means that Partnership administrative expenses (such as costs of
audits, reserve reports, and Securities and Exchange Commission filings), as
well as the cost of operating the properties in which the Partnership owns an
interest, will continue while revenues decrease, which may decrease the ultimate
funds available for Limited Partners. Liquidation of the Partnership's remaining
assets at this time is likely to result in a greater percentage of sales
proceeds being paid to Limited Partners, rather than being used to fund future
general and administrative and operating expenses, and will accelerate the
receipt by the partners of the remaining cash value of the Partnership.
If Limited Partners holding a majority of the Units approve this proposal,
the Managing General Partner will attempt to complete the sale of all
Partnership properties by the end of 1997.
Included in this package are the most recent financial and other
information prepared regarding the Partnership. If you need any further material
or have questions regarding this proposal, please feel free to contact the
Managing General Partner at (800) 777-2750.
We urge you to complete your Proxy and return it immediately, as your vote
is important in reaching a quorum necessary to have an effective vote on this
proposal. Enclosed is a green Proxy, along with a postage-paid envelope
addressed to the Managing General Partner for your use in voting and returning
your Proxy. Thank you very much.
SWIFT ENERGY COMPANY,
Managing General Partner
By:
---------------------------------
A. Earl Swift
Chairman
Swift Energy Managed Pension Assets Partnership 1990-D, Ltd.
16825 Northchase Drive, Suite 400
Houston, Texas 77060
(281) 874-2700
NOTICE OF SPECIAL MEETING OF LIMITED PARTNERS
To be held July ___, 1997
Notice is hereby given that a special meeting of limited partners of Swift
Energy Managed Pension Assets Partnership 1990-D, Ltd. (the "Partnership") will
be held at 16825 Northchase Drive, Houston, Texas, on July ___, 1997 at 4:00
p.m. Central Time to consider and vote upon:
The adoption of a proposal for (a) sale of substantially all of the assets
of the Partnership (consisting of its net profits interest), and (b) the
dissolution, winding up and termination of the Partnership (the
"Termination"). All asset sales and the Termination comprise a single
proposal (the "Proposal"), and a vote in favor of the Proposal will
constitute a vote in favor of each of these matters.
A record of limited partners of the Partnership has been taken as of the
close of business on May ___, 1997, and only limited partners of record on that
date will be entitled to notice of and to vote at the meeting, or any
adjournment thereof.
If you do not expect to be present in person at the meeting or prefer to
vote by proxy in advance, please sign and date the enclosed proxy card and
return it promptly in the enclosed postage-paid envelope which has been provided
for your convenience. The prompt return of the proxy card will ensure a quorum
and save the Partnership the expense of further solicitation.
SWIFT ENERGY COMPANY,
Managing General Partner
By:
---------------------
JOHN R. ALDEN
Secretary
May ___, 1997
TABLE OF CONTENTS
SUMMARY........................................................................1
GENERAL INFORMATION............................................................3
Documents Included.......................................................3
Vote Required............................................................3
Proxies; Revocation......................................................3
Dissenters' Rights.......................................................3
Solicitation.............................................................4
RISK FACTORS...................................................................4
THE PROPOSAL...................................................................5
General..................................................................5
Partnership Financial Performance and Condition..........................5
Estimates of Liquidating Distribution Amount.............................8
Comparison of Sale Versus Continuing Operations.........................10
Reasons for the Proposal................................................11
Simultaneous Proposal to Operating Partnerships.........................12
Steps to Implement the Proposal.........................................13
Impact on the Managing General Partner..................................14
Recommendation' of the Managing General Partner.........................15
FEDERAL INCOME TAX CONSEQUENCES...............................................15
General.................................................................15
Tax Treatment of Tax Exempt Plans.......................................16
Tax Treatment of Limited Partners Subject to Federal Income Tax Due
to Debt-financing or Who are Not Tax Exempt Plans....................17
Taxable Gain or Loss Upon Sale of Properties............................17
Liquidation of the Partnership..........................................18
Capital Gains Tax.......................................................18
Passive Loss Limitations................................................18
BUSINESS OF THE PARTNERSHIP...................................................20
Reserves................................................................20
The Managing General Partner............................................21
Transactions Between the Managing General Partner and the
Partnership..........................................................21
No Trading Market.......................................................21
Principal Holders of Limited Partner Units..............................22
Approvals...............................................................22
Legal Proceedings.......................................................22
i
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE AND ATTACHMENT
OF SUCH INFORMATION HERETO..............................................22
OTHER BUSINESS................................................................22
ii
Swift Energy Managed Pension Assets Partnership 1990-D, Ltd.
16825 Northchase Drive, Suite 400
Houston, Texas 77060-9468
(281) 874-2700
----------------------------------------
PROXY STATEMENT
----------------------------------------
SUMMARY
This Proxy Statement is being provided by Swift Energy Company, a Texas
corporation (the "Managing General Partner") in its capacity as the Managing
General Partner of Swift Energy Managed Pension Assets Partnership 1990-D, Ltd.
a Texas limited partnership (the "Partnership"), to holders of units of limited
partnership interests representing an initial investment of $100 per Unit in the
Partnership (the "Units"). This Proxy Statement and the enclosed proxy are
provided for use at a special meeting of limited partners (the "Limited
Partners"), and any adjournment of such meeting (the "Meeting") to be held at
16825 Northchase Drive, Houston, Texas, at 4:00 p.m. Central Time on July ___,
1997. The Meeting is called for the purpose of considering and voting upon a
proposal to (a) sell substantially all of the assets of the Partnership
(consisting of its net profits interest), and (b) dissolve, wind up and
terminate the Partnership (the "Proposal"), in accordance with the terms and
provisions of Article XVI of the Partnership's Limited Partnership Agreement
dated December 31, 1990 (the "Partnership Agreement"), and the Texas Revised
Limited Partnership Act (the "Texas Act"). This Proxy Statement and the enclosed
proxy are first being mailed to Limited Partners on or about May ___, 1997.
Under Article XVI.C of the Partnership Agreement, the affirmative vote of
Limited Partners holding at least 51% of the Units then held by Limited Partners
as of the Record Date (as defined) is required for approval of the Proposal.
Each Limited Partner appearing on the Partnership's records as of May ___, 1997
(the "Record Date"), is entitled to notice of the Meeting and is entitled to one
vote for each Unit held by such Limited Partner. Under Article XX.H of the
Partnership Agreement, the Managing General Partner may not vote its Units for
matters such as the Proposal. The Managing General Partner currently owns
approximately 4.14% of all outstanding Units. Therefore, the affirmative vote of
holders of 51% of the remaining Units is required to approve the proposed sale.
The working interest in the producing oil and gas properties in which the
Partnership owns the Property Interests is owned by an affiliated companion
partnership (the "Operating Partnership"). The Partnership's assets consist of a
net profits interest that covers multiple working interests, and which may be
divided into multiple net profits interests if the Operating Partnership
separately sells one or more of its working interests burdened by the net
profits
1
interest (the "Property Interests"). Upon approval of the Proposal by the
Limited Partners, the Managing General Partner intends to sell substantially all
of the Partnership's Property Interests, together with the Operating
Partnership's working interests in the same properties, in a sale or series of
sales, use the proceeds to pay or provide for the payment of liabilities, and
then wind up the affairs of the Partnership. The Partnership's Property
Interests cover 358 wells. The total PV10 value of the Partnership's remaining
reserves as of December 31, 1996 was $560,688. The most significant property
owned by the Partnership is the Velrex Field in Schleicher County, Texas, which
accounts for approximately 35% of the value of the Partnership's remaining
reserves. During 1996, approximately 78% of the Partnership's revenue was
attributable to natural gas production. For more information, see the attached
Annual Report on Form 10-K for the year ended December 31, 1996 and the Form
10-Q for the first quarter of 1997.
It is highly likely that the Property Interests will be sold in a series
of sales rather than in a single transaction. The Managing General Partner
anticipates that most of the Partnership's Property Interests will be sold in
auctions (together with the working interest owned by the Operating Partnership)
conducted by the Oil & Gas Asset Clearinghouse (the "O&G Clearinghouse"), or a
similar company engaged in auctions of oil and gas properties, although some of
the Partnership's Property Interests may be sold in negotiated transactions. The
Managing General Partner will not begin the sales process until the Proposal has
been approved by the Limited Partners. The Managing General Partner is asking
for approval of the Proposal prior to offering the Partnership's Property
Interests for sale to avoid delay in selling the Property Interests.
Furthermore, as the Managing General Partner must sell the Partnership's
Property Interests in its oil and gas properties together with the working
interests in those same properties owned by the Operating Partnerships and
several other Partnerships which it manages, solicitation of approval of each
purchase offer from all of the partnerships would be impractical.
It is possible, though unlikely, that less than all of the Partnership's
Property Interests will be sold. See "The Proposal--Steps to Implement the
Proposal--Negotiated Sale." The Managing General Partner anticipates that the
majority of sales will be made by the end of 1997. The sale of Partnership
Property Interests that account for at least 662/3% of the total value of the
Partnership Property Interests will cause the Partnership to dissolve
automatically under the terms of the Partnership Agreement and the Texas Act.
Any Partnership Property Interests that are not sold pursuant to an auction may
be sold pursuant to a negotiated sale.
Currently there are no buyers for the Property Interests and the price at
which they will be sold has not yet been determined. The Managing General
Partner cannot accurately predict the prices at which the Property Interests
ultimately will be sold. See "The Proposal--Estimates of Liquidating
Distribution Amount." In addition to the foregoing, there are some risks
involved in the Proposal. See "Risk Factors."
If the Proposal is not approved by Limited Partners holding 51% or more of
the Units held by Limited Partners, the Partnership will continue to exist. In
that event, however, due to the expected decline in revenues, the Managing
General Partner estimates that a portion of the
2
Partnership's Property Interests will need to be sold in order to cover future
direct costs, operating costs and administrative costs.
The Managing General Partner receives operating fees for wells in which
the Partnership has a net profits interest and for which the Managing General
Partner or its affiliates serve as operator. It is anticipated that, due to the
sale of interests in wells by the Operating Partnership, the Managing General
Partner will no longer serve as operator for a number of the wells in which the
Partnership has a net profits interest. To the extent that the operator changes
because of a change in ownership of the properties, the Managing General Partner
will lose the revenues it currently earns as operator. The Managing General
Partner believes, however, that it will be positively affected, on the other
hand, by liquidation of the Partnership, on the basis of its ownership interest
in the Partnership. See "The Proposal--Estimates of Liquidating Distribution
Amount," and "The Proposal--Impact on the Managing General Partner."
LIMITED PARTNERS ARE URGED TO COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AND TO RETURN IT TO THE MANAGING GENERAL
PARTNER NO LATER
THAN _________________, 1997.
3
GENERAL INFORMATION
Documents Included
The Partnership's Annual Report on Form 10-K for the year ended December
31, 1996 and its quarterly report on Form 10-Q for the first quarter of 1997 are
included with this Proxy Statement and incorporated herein by reference. See
"Incorporation of Certain Information By Reference and Attachment of Such
Information Hereto." Additionally, a reserve report dated May 20, 1997, prepared
as of December 31, 1996, and audited by H. J. Gruy & Associates, is attached
hereto.
Vote Required
According to the terms of the Partnership Agreement, approval of the
Proposal requires the affirmative vote by the holders of at least 51% of the
Units held by Limited Partners. Therefore, an abstention by a Limited Partner
will have the same effect as a vote against the Proposal. This solicitation is
being made for votes in favor of the Proposal (which will result in liquidation
and dissolution). As of the Record Date, 28,089.79 Units were outstanding and
were held of record by 277 Limited Partners (excluding the Managing General
Partner's Units). Each Limited Partner is entitled to one vote for each Unit
held in his name on the Record Date. Accordingly, the affirmative vote of
holders of at least 14,324.77 Units is required to approve the Proposal. The
Managing General Partner holds 1,214 Units, but, in accordance with Article XX.H
of the Partnership Agreement, the Managing General Partner may not vote its
Units. The Managing General Partner's non-vote, in contrast to abstention by
Limited Partners, will not affect the outcome, because for purposes of adopting
the Proposal its Units are excluded from the total number of voting Units.
The Limited Partners should be aware that once they approve the Proposal
pursuant to this Proxy Solicitation, they will have no opportunity to evaluate
the actual terms of any specific purchase offers for the Partnership's Property
Interests. See "The Proposal - General" herein. See "The Proposal -- Reasons for
the Proposal" and "The Partnership -- Transactions Between the Managing General
Partner and the Partnership." Proxies; Revocation
If a proxy is properly signed and is not revoked by a Limited Partner, the
Units it represents will be voted in accordance with the instructions of the
Limited Partner. If no specific instructions are given, the Units will be voted
FOR the Proposal. A Limited Partner may revoke his proxy at any time before it
is voted at the Meeting. Any Limited Partner who attends the Meeting and wishes
to vote in person may revoke his proxy at that time. Otherwise, a Limited
Partner must advise the Managing General Partner of revocation of his proxy in
writing, which revocation must be received by the Managing General Partner at
16825 Northchase Drive, Suite 400, Houston Texas 77060 prior to the time the
vote is taken.
4
Dissenters' Rights
Limited Partners are not entitled to any dissenters' or appraisal rights
in connection with the approval of the Proposal. Dissenting Limited Partners are
protected under state law by virtue of the fiduciary duty of general partners to
act with prudence in the business affairs of the Partnership.
Payment of Liquidating Distributions
Following the approval of the Proposal at the Meeting, Limited Partners
will receive a final liquidating distribution in cash from the Partnership as
soon as practicable after the affairs of the Partnership have been wound up. The
Managing General Partner expects that such payment will be made by year-end
1997. It will not be necessary for Limited Partners to surrender any certificate
or other documents representing their ownership of Units. Payment will be made
to each Limited Partner identified on the Partnership's records as of the Record
Date, or, upon appropriate written instruction from a Limited Partner, to his
assignee.
Solicitation
The solicitation is being made by the Partnership. The Partnership will
bear the costs of the preparation of this Proxy Statement and of the
solicitation of proxies and such costs will be allocated 90% to the Limited
Partners and 10% to the General Partners with respect to their general
partnership interests pursuant to Article VIII.A(iv). As the Managing General
Partner holds approximately 4.14% of the Units held by all Limited Partners,
4.14% of the costs borne by the Limited Partners will be borne by the Managing
General Partner, in addition to its portion borne as a General Partner.
Solicitations will be made primarily by mail. In addition to solicitations by
mail, a number of regular employees of the Managing General Partner may, if
necessary to ensure the presence of a quorum, solicit proxies in person or by
telephone. The Managing General Partner also may retain a proxy solicitor to
assist in contacting brokers or Limited Partners to encourage the return of
proxies, although it does not anticipate doing so. The costs of this proxy
solicitation, including legal and accounting fees and expenses, printing and
mailing costs, and related costs are estimated to be approximately $20,000.
RISK FACTORS
Notwithstanding the following discussion, there are risks involved in the
Proposal. While the Managing General Partner is not aware of any unknown
liabilities at this time, should any unexpected liabilities come to light prior
to making the final liquidating distribution, such liabilities could
significantly reduce, or eliminate altogether, such final distribution.
Anticipated sales prices for the properties may not be achieved. Should domestic
gas prices strengthen after the sales of the assets, it is possible that more
advantageous sales prices for the properties might have been realized at a later
date. Furthermore, if the Partnership approves the proposal to sell its
properties but the Operating Partnership does not approve the sale of its
Property Interests and
5
actually sell its interests in the same properties, then the Partnership will be
forced to sell its net profits interest as a single property (or undivided
interests therein). The purchaser or purchasers would have no control as working
interest owners, as the working interest will still be retained by the Operating
Partnership. Because this may affect the saleability of the Partnership's
Property Interests, it may be necessary for the Managing General Partner to
purchase the Partnership's interests in such properties. Therefore, the
likelihood of sale of the Partnership's Property Interests will be significantly
affected by the ability of the Partnership and its companion Operating
Partnership to sell their ownership interests in the same properties together,
which in turn is dependent upon approval of the proposal being made to the
Partnership and the similar proposal being made simultaneously to the companion
Operating Partnership. Failure to approve the proposal by either partnership
could significantly adversely affect the sale of properties by the other
partnership. See "The Proposal--Simultaneous Proposal to Operating
Partnerships."
6
THE PROPOSAL
General
The Managing General Partner has proposed that the Partnership's net
profits interest be sold, the Partnership be dissolved and that the Managing
General Partner, acting as liquidator, wind up its affairs and make final
distributions to its partners. The Partnership's assets consist of a net profits
interest (the "Property Interests") in producing oil and gas properties in which
the working interest is owned by an affiliated partnership also managed by the
Managing General Partner and formed at approximately the same time as the
Partnership was organized. The Partnership's non-operating net profits interest
exists by virtue of a Net Profits and Overriding Royalty Interest Agreement
("NP/OR Agreement") dated December 31, 1990 Swift Energy Income Partners 1990-
D, Ltd. (the "Operating Partnership"). The NP/OR Agreement gives the Partnership
a net profits interest in a group of producing properties in which the Operating
Partnership owns the working interests, and entitles the Partnership to receive
a portion of the net profits from operation of the group of producing properties
owned by the Operating Partnership which are subject to the NP/OR Agreement. The
net profits percentage to which the Partnership is entitled is based upon a
percentage of the gross proceeds (reduced by certain costs) from the sale of oil
and gas production from these properties.
The Managing General Partner intends to sell most of the Partnership's
Property Interests through auction conducted by the O&G Clearinghouse or a
similar company, although some of the Partnership's Property Interests might be
sold in negotiated transactions. The Managing General Partner expects to sell
all properties not sold by auction pursuant to negotiated sales conducted by the
Managing General Partner or a third party engaged to dispose of the
Partnership's assets. The Partnership, if not terminated earlier, will terminate
automatically, pursuant to the terms of the Partnership Agreement, on January 1,
2021.
The Managing General Partner is an independent oil and gas company engaged
in the exploration, development, acquisition and operation of oil and gas
properties, both directly and through partnership and joint venture
arrangements, and therefore holds various interests in numerous oil and gas
properties. Furthermore, the Managing General Partner is the managing general
partner of a number of oil and gas partnerships.
Partnership Financial Performance and Condition
The Partnership owns non-operating Property Interests in producing oil and
gas properties within the continental United States in which Operating
Partnerships managed by the Managing General Partner own the working interests.
By the end of 1991 the Partnership had expended all of its original capital
contributions for the purchase of a Property Interest in oil and gas producing
properties. During 1996 approximately 78% of the Partnership's revenue was
attributable to natural gas production. The Operating Partnership has, from time
to time, performed workovers and recompletions of wells in which the Partnership
has Property Interests, using funds advanced
7
by the Managing General Partner to perform these operations, a portion of which
amounts has been subsequently repaid from production.
The Limited Partners have made contributions of $2,930,379 in the
aggregate to the Partnership. The Managing General Partner has made capital
contributions with respect to its general partnership interest of $23,340.
Additionally, pursuant to the presentment right set forth in Article XVIII of
the Partnership Agreement, it purchased 1,214 Units from Limited Partners.
From inception through January 31, 1997, the Partnership has made cash
distributions to its Limited Partners totaling $1,391,400. Through January 31,
1997, the Managing General Partner has received cash distributions from the
Partnership of $129,299 with respect to its general partnership interest, and
distributions of $5,202 related to its limited partnership interests. On a per
Unit basis, Limited Partners had received, as of January 31, 1997, $47.48 per
$100 Unit, or approximately 47.48% of their initial capital contributions.
The Partnership acquired its Property Interests at a time when oil and gas
prices and industry projections of future prices were much higher than actually
occurred in subsequent years. As detailed in the Designated Properties
Supplement dated October 18, 1990 regarding Property Interests to be acquired by
the Partnership, when the Managing General Partner projected future oil and gas
prices to evaluate the economic viability of an acquisition, it compared its
forecasts with those made by banks, oil and gas industry sources, the U.S.
government, and other companies acquiring producing properties. Acquisition
decisions for the Partnership were based upon a range of increasing prices that
were within the mainstream of the forecasts made by these outside parties. At
the time that the Partnership's Property Interests covering producing properties
were acquired, prices averaged about $22.88 per barrel of oil and $2.15 per Mcf
of natural gas. Oil and gas prices were expected to escalate during subsequent
years of the Partnership's operations. In general, in 1990 and early 1991, all
of these sources forecasted increases in product prices that were based upon oil
and gas prices at the time, which reflected the invasion of Kuwait by Iraq in
the summer of 1990 and the commencement of hostilities in the Gulf War in 1991.
The majority of the Partnership's Property Interests were acquired during the
fourth quarter of 1990 and the first quarter of 1991 when current prices were
predicted to escalate according to certain parameters from that level. Thus the
majority of properties were bought upon an evaluated weighted average price of
$2.15 per Mcf. The predicted price increases did not occur and prices fell
precipitously from late 1991 to 1992. The bulk of the Partnership's reserves
were produced from 1991-1995 during which time the Partnership's oil prices in
fact averaged $16.37 per barrel and natural gas prices averaged approximately
$1.75 per Mcf.
The following graphs illustrate the above factors with respect to gas
revenues only, due to the fact that a substantial majority of the Partnership's
production to date being natural gas, the bulk of which was produced during the
years when gas prices were the lowest.
8
PRICE VECTORS
------------------------
GAS
PER MCF
------------------------
YEAR ACTUAL EXPECTED YEAR MCFE
- - - ---- ------ -------- ---- ------
1991 1.61 2.38 1991 458982
1992 1.82 2.84 1992 342701
1993 1.97 3.39 1993 259909
1994 1.92 3.59 1994 225786
1995 1.46 3.81 1995 177070
1996 2.05 4.04 1996 150063
GRAPHIC OMITTED (Comparison of Gas Prices Expected in 1990 to Gas Prices
Actually Received). Represented by table above.
GRAPHIC OMITTED (Amounts of Production to Date Produced by Year). Represented by
table above.
In addition to the effect of prices, Partnership performance has been
impacted by subsequent enhancement activities which were undertaken by the third
party operator of certain properties in which the Operating Partnership held a
working interest. The benefit of these enhancement activities was reduced by the
need to repay the costs incurred for these enhancements. The recoupment of costs
took much longer than anticipated due to lower than
9
expected prices subsequent to completion of these activities. Furthermore,
capital limitations resulted in the Partnership's interests in these wells being
relatively small and they thus did not have a major positive effect on the
Partnership's overall performance.
Lower prices also had an effect on the Partnership's interest in proved
reserves. Estimates of proved reserves represent quantities of oil and gas
which, upon analysis of engineering and geologic data, appear with reasonable
certainty to be recoverable in the future from known oil and gas reservoirs
under existing economic and operating conditions. When economic or operating
conditions change, proved reserves can be revised either up or down. If prices
had risen as predicted, the volumes of oil and gas reserves that are
economically recoverable might have been higher than the year-end levels
actually reported because higher prices typically extend the life of reserves as
production rates from mature wells remain economical for a longer period of
time. Production enhancement projects that are not economically feasible at low
prices can also be implemented as prices rise. At present, because of the small
remaining amount of reserves, further price increases would not have a
significant impact on the Partnership's performance.
As required by the Partnership Agreement, the Partnership expended all of
the partners' net commitments available for property acquisitions many years ago
to acquire Property Interests in producing oil and gas properties. The net
profits paid by the Operating Partnership to the Partnership have been reduced
by amounts used by the Operating Partnership to pay operating and enhancement
costs to the third party operator. These costs relate to the working interests
that were subject to the Partnership's net profits interest. The Managing
General Partner of the Operating Partnership advanced most of these costs
because it felt that such expenditures would increase the value of the
properties in which the Partnership and the Operating Partnership have an
interest. Neither the Operating Partnership's partnership agreement nor the
Partnership's partnership agreement allow additional assessments to be made
against any Limited Partners. No funds are available at the current time from
Partnership revenues or other sources to enable the Partnership to make
additional capital expenditures and no new capital expenditures are planned. The
Managing General Partner anticipates that if sales of the Partnership's
properties occur, there will be sufficient cash generated by the sales of the
Partnership's properties to make a final liquidating distribution.
Estimates of Liquidating Distribution Amount
It is not possible to accurately predict the prices at which the Property
Interests will be sold. The sales price of the Partnership's net profits
interest or possibly multiple net profits interests may vary. In the latter
case, certain Property Interests might sell for a higher price and others for a
lower price than those estimated below. The projected range of sales prices
below has been based upon estimated future net revenues for the Partnership's
Property Interests, using estimates of 1997 average prices without any
escalation. The future net revenues from production of such properties have then
been discounted to present value at 10% per annum. These pricing assumptions
vary from those mandated by the Securities and Exchange Commission ("SEC") for
reserves disclosures under applicable SEC rules, which require use of prices at
year-end, although
10
the discount rate and lack of escalation are the same. If estimates of reserves
and future net revenues had been prepared using December 31, 1996 prices, as
mandated by the SEC, reserves, future net revenues and the present value thereof
would be significantly higher. The Managing General Partner has determined not
to use these higher prices because current estimates of 1997 average prices more
accurately reflect prices purchasers of properties are willing to pay, rather
than higher values which do not reflect the decrease in prices since year-end
1996. For example, the weighted average price of gas received by the Partnership
for the first quarter of 1997 was $2.92 per Mcf, as compared to $4.68 per Mcf at
December 31, 1996. For the lower end of such projected sales proceeds, the
estimated sales proceeds have been further discounted to 70% of those shown for
the higher end of the range.
Set forth in the table below are estimated proceeds that the Partnership
may realize from sales of the Partnership's properties, estimated expenses of
the related dissolution and liquidation of the Partnership, and the estimated
amount of net distributions available for Limited Partners as a result of such
sales.
Range of Limited Partners' Share of Estimated Distributions
from Property Sales and Liquidation
Projected Range
-----------------------------
Low High
--------- ---------
Net Sales Proceeds(1) $ 471,000 $ 636,500
Partnership Dissolution Expenses(2) (18,000) (18,000)
--------- ---------
Net Distributions payable to Limited Partners $ 453,000 $ 618,500
========= =========
Net Distributions per $100 Unit $15.46 $21.11
====== ======
(1) Net of selling expenses estimated to be 7% of sales proceeds.
(2) Includes Limited Partners' share of all costs associated with
dissolution and liquidation of the Partnership.
If, on the other hand, the Partnership were to retain its Property
Interests and continue to produce those properties until depletion, the table
below estimates the return to Limited Partners, discounted to present value,
based upon the same pricing and discount assumptions used above. The estimates
of the present value of future net distributions have been further reduced by
continuing audit, tax return preparation and reserve engineering fees associated
with continued operations of the Partnership, along with direct and general and
administrative expenses estimated to occur during this time. Such estimates do
not take into account any sale of a portion of the Partnership's Property
Interests necessary in order to generate sufficient cash proceeds to pay
11
general, administrative and operating expenses, which would reduce the revenues
of the Partnership. Moreover, the following estimated future net revenues do not
take into account any growth in excess costs which might be incurred by the
Partnership's companion partnership due to needed future maintenance or remedial
work on the properties in which the Partnership has an interest.
Estimated Share of Limited Partners'
Net Distributions from Continued Operations
Projected
Cash Flows
-----------
Future Net Revenues from Net Profits Interest (over 20 $ 1,022,500
years)(1)
Partnership Direct and Administrative Expenses(2) (64,700)
-----------
Net Distributions to Limited Partners (payable over 20 $ 957,800
years)(3) ===========
Net Distributions per $100 Unit(4) $ 32.69
Present Value of Net Distributions per $100 Unit(5) $ 22.02
(1) Limited Partners' future net revenues are based on the reserve estimates
at December 31, 1996 assuming unescalated prices based on predictions of
1997 average prices. To a limited extent, future net revenues may be
influenced by a material change in the selling prices of oil or gas. For
further discussion of this, see "--Reasons for the Proposal." The actual
prices that will be received and the associated costs may be more or less
than those projected. See "The Partnership--Partnership Financial
Condition and Performance."
(2) Includes Limited Partners' share of general and administrative expenses,
and audit, tax, and reserve engineering fees.
(3) Based upon the Partnership's reserves having a projected 20-year life,
assuming flat pricing. To a limited extent, net distributions may be
influenced by a material change in the selling prices of oil or gas. For
further discussion of this, see "--Reasons for the Proposal." The actual
prices that will be received and the associated costs may be more or less
than those projected.
(4) Does not reflect effect of intermittent sales of Property Interests to pay
administrative costs once the properties no longer generate sufficient
revenues to cover such costs.
(5) Discounted at 10% per annum.
Among factors which can affect the ultimate sales price received for
Partnership Property Interests are the following:
(1) The above cases presume that 100% of the Partnership's Property
Interests will be sold.
12
(2) In certain instances, the Partnership, together with the Operating
Partnerships which will be offering its working interest in the
properties in which the Partnership owns a Property Interest, will
own a large enough interest in the properties to allow the
purchaser to designate a new operator of the properties, which
normally increases the amount that a purchaser is willing to pay.
(3) Changes in the market for gas or oil may affect the pricing
assumptions used by purchasers in evaluating property value and
possible purchase prices.
(4) Different evaluations of the amount of money required to be spent
to enhance or maintain production may have a significant effect
upon the ultimate purchase price.
(5) In certain instances, the Managing General Partner may set minimum
bidding prices for those properties offered at auction, which may
not be met.
(6) The Managing General Partner may choose to package certain less
attractive properties together with other properties in order to
enhance the likelihood of their sale. Such packaging could result
in a significant discount by prospective purchasers of the value of
the Partnership's more productive properties contained in such
packages.
The Partnership Agreement authorizes the Managing General Partner to sell
the Partnership Property Interests at a price that the Managing General Partner
deems reasonable. The proceeds of all sales, to the extent available for
distribution, are to be distributed to the Limited Partners and the General
Partners in accordance with Article XVI.E of the Partnership Agreement as
follows. After use of available proceeds from property sales to reserves for
contingent or unforeseen liabilities of the Partnership, the proceeds are to be
used to repay the capital accounts of the Partners whose capital accounts have
not yet been repaid. The amounts finally distributed will depend on the actual
sales prices received for the Partnership assets, results of operations until
such sales and other contingencies and circumstances.
Comparison of Sale Versus Continuing Operations
Based on the above tables, it is estimated that a Limited Partner could
expect to receive from $15.46 to $21.11 per $100 Unit upon immediate sale of the
Partnership Property Interests. In comparison, it is estimated that a Limited
Partner could expect to receive approximately $22.02 per $100 Unit, discounted
to present value ($32.69 per $100 Unit in actual dollars on an undiscounted
basis) over the life of its Property Interests, approximately 20 years, if the
Partnership continued operations.
Such estimates are based on December 31, 1996 reserve estimates assuming
unescalated pricing throughout the remaining life of the properties in which the
Partnership owns an interest. The actual prices that will be received and the
associated costs may be more or less than those projected. See "--Estimate of
Liquidating Distribution Amount."
13
Reasons for the Proposal
The Managing General Partner believes that it is in the best interest of
the Partnership and the Limited Partners for the Partnership to sell its
properties at this time and to dissolve the Partnership and make a final
liquidating cash distribution to its partners for the reasons discussed below.
Small Amount of Remaining Assets in Relation to Expenses. As of December
31, 1996, approximately 72% of the Partnership's ultimate recoverable reserves
had been produced, and the Limited Partners' share of the Partnership's interest
in remaining reserves, before any reduction for costs, is estimated to be less
than 604,000 Mcfe. The Partnership's share of oil and gas reserves are expected
to continue to decline as remaining reserves are produced. Distributions to
partners in recent years have declined and are not expected to increase
appreciably. Declines in well production are based principally upon the maturity
of the wells, not on market factors. Each producing well requires a certain
amount of overhead costs, as operating and other costs are incurred regardless
of the level of production. Likewise, general and administrative expenses such
as compliance with the securities laws, producing reports to partners and filing
partnership tax returns do not decline as revenues decline. As a result of the
depletion of the Partnership's oil and gas reserves, the Managing General
Partner believes the Partnership's asset base and future net revenues no longer
justify the continuation of operations. Consequently, the Managing General
Partner expects that the Partnership will have to start selling a portion of its
Property Interests to pay the expenses of future operations and administration.
By accelerating the liquidation of the Partnership, those future administrative
costs can be avoided and the receipt of the remaining cash value of the
interests of the Limited Partners in the Partnership can be accelerated.
Effect of Gas Prices on Value. The Managing General Partner believes that
the key factor affecting the Partnership's long-term performance has been the
decrease in oil and gas prices that occurred subsequent to the purchase of the
Partnership's properties. Based on 1996 year-end reserve calculations, the
Partnership had only about 28% of its ultimate recoverable reserves, before any
reduction for costs, remaining for future production. Because of this small
amount of remaining reserves, even if oil and gas prices were to increase in the
future, such increases would be unlikely to have a net positive impact on the
total return on investment to the partners in view of the expenses of the
Partnership as described above.
Potential of the Properties. Recovery in amounts great enough to
significantly impact the results of the Partnership's operations and the
ultimate cash distributions can only occur with the investment of new capital.
As provided in the Partnership Agreement, the Partnership expended all of the
partners' net commitments for the acquisition of Property Interests many years
ago, and it no longer has capital to invest in improvement of the properties
through secondary or tertiary recovery. No additional development activities are
contemplated by the Operating Partnership on the properties in which the
Partnership has a non-operating interest.
14
Orderly Sale of Properties Through Approval of the Proposal. The oil and
gas market is volatile, making the sale of the properties at optimal prices very
time sensitive. Therefore, the Managing General Partner believes that the
Partnership should liquidate and have the flexibility to sell its properties
when such sales appear to be most advantageous to the Partnership. The approval
of the Proposal as it is set forth will provide the Managing General Partner the
flexibility to sell the remaining properties in an orderly fashion to maximize
the potential return to the Limited Partners. The approval of the Proposal would
also allow the Managing General Partner to begin the winding up and dissolution
of the Partnership following the final sale of Partnership property. The
approval of the Proposal will act as the approval of all future asset sales
without the approval by the Limited Partners of the specific terms of such
future sales.
Limited Partners' Tax Reporting. Limited Partners will continue to have a
partnership income tax reporting obligation with respect to his Units as long as
the Partnership continues to exist. There is no trading market for the Units, so
Limited Partners generally are unable to dispose of their interests. See "The
Partnership - No Trading Market." The approval of the Proposal would also allow
the Managing General Partner to begin the winding up and dissolution of the
Partnership. Following the approval of the Proposal and the dissolution and sale
of the properties, the Limited Partners will recognize gain or loss or a
combination of both under the federal income tax laws. Thereafter, Limited
Partners will have no further tax reporting obligations with respect to the
Partnership. The dissolution of the Partnership will also allow Limited Partners
to take a capital loss deduction for syndication costs incurred in connection
with formation of the Partnership. See "Federal Income Tax Consequences."
Simultaneous Proposal to Operating Partnerships
Simultaneously with this proposal to the Partnership's Limited Partners to
sell all of its Property Interests, a similar proposal is being made to the
limited partners of the companion Operating Partnership which owns the working
interest in the same properties in which the Partnership owns a non-operating
interest. If both Partnerships approve the proposal, then the working interest
and non-operating interest will be sold simultaneously.
If the Partnership approves the proposal but its companion Operating
Partnership does not, then the Managing General Partner will attempt to sell the
Non-Operating Interest owned by the Partnership to a third party. If no economic
sale can be made to a third party, which may occur due to the difficulty in
selling a net profits interest in a property when operating and spending
decisions are controlled by another entity, then the Managing General Partner
will get a fair market appraisal of the value of the Partnership's Property
Interests and will purchase the Partnership's non-operating interests itself for
the highest price for which the Property Interests are appraised.
If the Partnership does not approve the proposal but its companion
Operating Partnership approves the proposal to sell its properties, then the
Operating Partnership will be forced to sell its working interests in its
properties subject to the net profits interest owned by the Partnership
15
which burdens the Operating Partnership's properties. Again this may affect the
saleability of the Operating Partnership's properties due to the burden on cash
flow caused by the existence of the Partnership's net profits interest. If this
burden prevents an economic sale to a third party, then the Managing General
Partner will again obtain a third party appraisal of the Operating Partnership's
properties and purchase those Property Interests itself.
Therefore the likelihood of sale of the Partnership's Property Interests
will be significantly affected by the ability of the Partnership and its
companion Operating Partnership to sell their ownership interests in the same
properties at approximately the same time, which in turn is dependent upon
approval of the proposal being made to the Partnership and the similar proposal
being made simultaneously to the companion Operating Partnership. Failure to
approve the proposal by either partnership could significantly adversely affect
the sale of properties by the other partnership to the NP/OR Agreement.
Steps to Implement the Proposal
Following the approval of the Proposal, the Managing General Partner
intends to take the following steps to implement it:
i. Make available to the appropriate persons (that is, the third
party, if any, handling the negotiated sales and/or the auction
house and prospective purchasers) the following types of data:
o Engineering and Geological Data
- Production curve
- Completion report
- Historical production data
- Engineering well files
- Geological maps (if available)
- Logs (if available)
o Land/Legal Data
- Net Profits Interest schedule for all properties
- Land files
- Payout data
o Accounting Data
- Lease operating statements by well
- Gas marketing data
- Oil marketing data
- Gas balancing data
16
ii. Pay or provide for payment of the Partnership's liabilities and
obligations to creditors (See --"Liquidation") using the
Partnership's cash on hand and proceeds from the sale of
Partnership properties;
iii. Conduct a final accounting and distribute any remaining cash to
the partners of the Partnership in accordance with the
Partnership Agreement;
iv. Cause final Partnership tax returns to be prepared and filed
with the Internal Revenue Service and appropriate state taxing
authorities;
v. Distribute to the Limited Partners final Form K-1 tax
information; and
vi. File a Certificate of Cancellation on behalf of the Partnership
with the Secretary of State of the State of Texas.
Auction. The Managing General Partner (or a third party seller) intends to
engage the O&G Clearinghouse or another similar company to conduct live auctions
for the sales working interests of the Operating Partnership and the
non-operating interests of the Partnership. The O&G Clearinghouse (as well as
other such auction companies) is in the business of conducting auctions for oil
and gas properties. The O&G Clearinghouse establishes a data room, which they
leave open for a period of time (generally three to four weeks), after which
they hold a live auction. The O&G Clearinghouse requires advance registration
for all bidders. Bidders may participate by invitation only, after having
qualified as knowledgeable and sophisticated parties routinely or actively
engaged in the oil and gas business. The O&G Clearinghouse publishes a brochure
regarding the properties. The O&G Clearinghouse is headquartered in Houston,
Texas. In auctions conducted by the O&G Clearinghouse, properties are generally
grouped into small packages with a single field often comprising a property.
Estimated Selling Costs. The expenses associated with the auction process
(auctioneer's fee plus advertising fee) is expected to be approximately 7% of
the sales price received. This does not include internal costs of the Managing
General Partner with respect to the sales, nor fees owed to third parties for
services incident to the sale. For example, if the Managing General Partner
engaged a third party to sell the properties, this would entail an additional
fee (although in such a case the Managing General Partner's internal costs would
be lower). This also does not include the costs of the proxy solicitation. See
"General Information--Solicitation."
Negotiated Sale. Although the Managing General Partner intends to offer
the Partnership's and the Operating Partnership's Property Interests at auction,
it is possible that the Managing General Partner or a third party engaged for
the purpose of selling the Partnership's assets may approach other oil and gas
companies and negotiate a sale of certain Property Interests. The Managing
General Partner (or such third party) may solicit bids on the oil and gas
properties for which the Managing General Partner is the operator. If the
Managing General Partner (or third party) solicits bids, it will provide all
interested parties with information about the properties
17
needed to bid on such properties. Such information would include raw data and
historical information on all of the operated properties that any of the
partnerships managed by the Managing General Partner intends to sell. See
"--Steps to Implement the Proposal." The data will be organized by property.
None of the Managing General Partner's other partnerships managed by the
Managing General Partner or affiliates of the Managing General Partner will
purchase any of the properties in this manner. In the event of a bid that is
lower than a price the Managing General Partner believes is reasonable, it may
sell the property to a third party bidder for such lower bid price, use another
method of sale such as an auction, or have the Partnership continue to hold such
property for a while longer. If the property has no appreciable value, the
Managing General Partner may dispose of such property by conveying it to the
operator or by conveying the property to itself, for no consideration. In no
event is the Managing General Partner obligated to purchase any of the Property
Interests.
Other. Any sale of the Partnership Property Interests and the subsequent
liquidating distributions to the Limited Partners, if any, pursuant to the
Proposal will be taxable transactions under federal and state income tax laws.
See "Federal Income Tax Consequences."
Impact on the Managing General Partner
The Managing General Partner will be economically impacted by liquidation
in at least two ways. First, to the extent of its ownership of Units,
liquidation will have the same effect on it as on the Limited Partners. See
"--Estimate of Liquidating Distribution Amount," and "--Estimated Share of
Limited Partners' Net Distributions from Continued Operations." Second, because
of the dissolution and liquidation of the Partnership, together with liquidation
of other partnerships, the Managing General Partner will no longer hold the
majority interest in various wells. Different operators are likely to be
selected and the Managing General Partner will therefore lose revenues that it
currently realizes from its role as operator for those properties. The Managing
General Partner is making its recommendations as set forth below, on the basis
of its fiduciary duty to the Limited Partners, rather than on the basis of the
direct economic impact on the Managing General Partner.
Recommendation' of the Managing General Partner
For the foregoing reasons, the Managing General Partner believes that it
is in the best interests of the Limited Partners to dissolve and liquidate the
Partnership in an effort to maximize the value of the Partnership's remaining
assets and the amounts distributed to Limited Partners and to accelerate the
receipt of such liquidating distributions. The Managing General Partner believes
that through the liquidation of the Partnership's remaining assets in the near
term, Limited Partners will benefit from the current higher levels of oil and
gas prices and therefore, may receive a greater liquidating cash distribution
than if the Partnership were to continue to operate as a going concern, and be
subject to possible future negative changes in oil and gas prices. Additionally,
distribution amounts may be affected by the anticipated continuation of declines
in revenues and the continuing relatively fixed general and administrative and
operating expenses that
18
will be incurred by the Partnership. Termination of the Partnership will allow
the current receipt of the remaining value of the Partnership and the
preparation of a final tax return, and will make available certain additional
tax deductions.
The Managing General Partner recommends that the Limited Partners vote FOR
the Proposal.
FEDERAL INCOME TAX CONSEQUENCES
General
The following summarizes certain federal income tax consequences to the
Limited Partners arising from the Partnership's proposed sale of its oil and gas
properties and liquidation pursuant to the Proposal. Statements of legal
conclusions regarding tax consequences are based upon relevant provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), and accompanying
Treasury Regulations, as in effect on the date hereof, upon private letter
rulings dated October 6, 1987 and August 22, 1991, upon reported judicial
decisions and published positions of the Internal Revenue Service (the
"Service"), and upon further assumptions that the Partnership constitutes a
partnership for federal tax purposes and that the Partnership will be liquidated
as described herein. The laws, regulations, administrative rulings and judicial
decisions which form the basis for conclusions with respect to the tax
consequences described herein are complex and are subject to prospective or
retroactive change at any time and any change may adversely affect Limited
Partners.
This summary does not describe all the tax aspects which may affect
Limited Partners because the tax consequences may vary depending upon the
individual circumstances of a Limited Partner. It is generally directed to
Limited Partners that are qualified plans and trusts under Code Section 401(a)
and individual retirement accounts ("IRAs") under Code Section 408 (collectively
"Tax Exempt Plans") and that are the original purchasers of the Units and hold
interests in the Partnership as "capital assets" (generally, property held for
investment). Each Limited Partner that is not a tax-exempt Plan is strongly
encouraged to consult its own tax advisor as to the rules which are specifically
applicable to it. Except as otherwise specifically set forth herein, this
summary does not address foreign, state or local tax consequences, and is
inapplicable to nonresident aliens, foreign corporations, debtors under the
jurisdiction of a court in a case under federal bankruptcy laws or in a
receivership, foreclosure or similar proceeding, or an investment company,
financial institution or insurance company.
19
Tax Treatment of Tax Exempt Plans
Sale of Property Interest and Liquidation of Partnership
The Managing General Partner is proposing to sell the Partnership's
Property Interest as well as any other royalties and overriding royalties the
Partnership may own. After the sale of the properties, the Partnership's assets
will consist solely of cash, which will be distributed to the partners in
complete liquidation of the partnership.
Tax Exempt Plans are subject to tax on their unrelated business taxable
income ("UBTI"). UBTI is income derived by an organization from the conduct of a
trade or business that is substantially unrelated to its performance of the
function that constitutes the basis of its tax exemption (aside from the need of
such organization for funds). Royalty interests, dividends, interest and gain
from the disposition of capital assets are generally excluded from
classification as UBTI. Notwithstanding these exclusions, royalties, interest,
dividends, and gains will create UBTI if they are received from debt-financed
property, as discussed below.
The Internal Revenue Service has previously ruled that the Partnership's
Property Interest, as structured under the NP/OR, is a royalty, as are any
overriding royalties the Partnership may own. To the extent that the Property
Interest is not debt-financed property, neither the sale of the Property
Interest by the Partnership nor the liquidation of the Partnership is expected
to cause Limited Partners that are Tax Exempt Plans to recognize taxable gain or
loss for federal income tax purposes, even though there may be gain or loss upon
the sale of the Property Interest for federal income tax purposes.
Debt-Financed Property
Debt-financed property is property held to produce income that is subject
to acquisition indebtedness. The income is taxable in the same proportion which
the debt bears to the total cost of acquiring the property. Generally,
acquisition indebtedness is the unpaid amount of (i) indebtedness incurred by a
Tax Exempt Plan to acquire an interest in a partnership, (ii) indebtedness
incurred in acquiring or improving property, or (iii) indebtedness incurred
either before or after the acquisition or improvement of property or the
acquisition of a partnership interest if such indebtedness would not have been
incurred but for such acquisition or improvement, and if incurred subsequent to
such acquisition or improvement, the incurrence of such indebtedness was
reasonably foreseeable at the time of such acquisition or improvement.
Generally, property acquired subject to a mortgage or similar lien is considered
debt-financed property even if the organization acquiring the property does not
assume or agree to pay the debt. Notwithstanding the foregoing, acquisition
indebtedness excludes certain indebtedness incurred by Tax Exempt Plans other
than IRAs to acquire or improve real property. Although this exception may
apply, its usefulness may be limited due to its technical requirements and the
fact that the debt excluded from classification as acquisition indebtedness
appears to be debt incurred by a partnership and not debt incurred by a partner
directly or indirectly in acquiring a partnership interest.
20
If a Limited Partner that is a Tax Exempt Plan borrowed to acquire its
Partnership interest or had borrowed funds either before or after it acquired
its Partnership Interest, its pro rata share of Partnership gain on the sale of
the Property Interest may be UBTI. The Managing General Partner has represented
that (i) the Partnership did not borrowed money to acquire its Property
Interest, and (ii) that the Property Interest of the Partnership is not subject
to any debt, mortgages or similar liens that will cause the Partnership's
Property Interest to be debt-financed property under Code Section 514. If a Tax
Exempt Plan has not caused its Partnership Interest to be debt-financed
property, and based upon the representations of the Managing General, the
Property Interest is not expected to be considered debt-financed property.
Tax Treatment of Limited Partners Subject to Federal Income Tax Due to
Debt-financing or Who are Not Tax Exempt Plans
All references hereinbelow to Limited Partners refers solely to Limited
Partners that either are not Tax Exempt Plans or are Tax Exempt Plans whose
Partnership Interest is debt-financed. To the extent that a Tax Exempt Plan's
Partnership Interest is only partially debt-financed, the percentage of gain or
loss from the sale of the Property Interest and liquidation of the Partnership
that will be subject to taxation as UBTI is the percentage of the Tax Exempt
Plan's share of Partnership income, gain, loss and deduction adjusted by the
following calculation. Section 514(a)(1) includes, with respect to each
debt-financed property, as gross income from an unrelated trade or business an
amount which is the same percentage of the total gross income derived during the
taxable year from or on account of the property as (i) the average acquisition
indebtedness for the taxable year with respect to the property is of (ii) the
average amount of the adjusted basis of the property during the period it is
held by the organization during the taxable year (the "debt/basis percentage").
A similar calculation is used to determine the allowable deductions. For
each debt-financed property, the amount of the deductions directly attributable
to the property are multiplied by the debt/basis percentage, which yields the
allowable deductions. If the average acquisition indebtedness is equal to the
average adjusted basis, the debt/basis percentage is zero and all the income and
deductions are included within UBTI. The debt/basis percentage is calculated on
an annual basis.
Tax Exempt Plans with debt-financed Partnership Interests should consult
their tax advisors to determine the portion of gain or loss that may be
recognized for federal income tax purposes. The following discussion of the tax
consequences of the sale of the Partnership Property Interest and the
liquidation of the Partnership assumes that all of a Limited Partner's income,
gain, loss and deduction from the Partnership is subject to federal taxation.
Taxable Gain or Loss Upon Sale of Properties
A Limited Partner will realize and recognize gain or loss, or a
combination of both, upon the Partnership's sale of its properties prior to
liquidation. The amount of gain realized with respect to each property, or
related asset, will be an amount equal to the excess of the amount realized by
the Partnership and allocated to the Limited Partner (i.e., cash or
consideration received) over the Limited Partner's adjusted tax basis for such
property. Conversely, the amount of loss
21
realized with respect to each property or related asset will be an amount equal
to the excess of the Limited Partner's tax basis over the amount realized by the
Partnership for such property and allocated to the Limited Partner. It is
projected that taxable loss will be realized upon the sale of Partnership
properties and that such loss will be allocated among the Limited Partners in
accordance with the Partnership Agreement. The Partnership Agreement includes an
allocation provision that requires allocations pursuant to a liquidation be made
among Partners in a fashion that equalizes capital accounts of the Partners so
that the amount in each Partner's capital account will reflect such Partner's
sharing ratio of income and loss. The extent to which capital accounts can be
equalized, however, is limited by the amount of gain and loss available to be
allocated.
Because the properties owned by the Partnership are properties used in a
trade or business, the character of gains and losses realized by the Partners
generally will be governed by Section 1231 of the Code. Deductions for
intangible drilling and development costs, depletion and depreciation expenses
with respect to these properties, however, may be subject to recapture as
ordinary income, in an amount which does not exceed gain recognized. Code
Section 1254 recaptures all intangible drilling and development costs and
depletion (to the extent of basis) as ordinary income. The Partnership did not
incur material amounts of intangible drilling and development costs, and
accordingly the recapture of same is not expected to be material if gain is
recognized.
Realized gains and losses generally must be recognized and reported in the
year the sale occurs. Accordingly, each Limited Partner will realize and
recognize his allocable share of gains and losses in his tax year within which
the Partnership properties are sold. Each Limited Partner's recognized allocable
share of the net Partnership 1231 gains or losses must be netted with that
Limited Partner's individual section 1231 gains and losses recognized during the
year in order to determine the character of such net gains or net losses under
section 1231. Net gains will be treated as capital gains except to the extent
recharacterized as ordinary income due to recapture and net losses will be
treated as ordinary losses.
Liquidation of the Partnership
After sale of its properties, 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. If the amount of cash distributed to a Limited Partner
in liquidation is less than such Limited Partner's adjusted tax basis in his
Partnership interest, the Limited Partner will realize and recognize a capital
loss to the extent of the excess. If the amount of cash distributed is greater
than such Limited Partner's adjusted tax basis in his Partnership interest, the
Limited Partner will recognize a capital gain to the extent of the excess.
Because each Limited Partner paid a portion of syndication and formation costs
upon entering the Partnership, neither of which costs were deductible expenses,
it is anticipated that liquidating distributions to Limited Partners will be
less than such Limited Partners' bases in their Partnership interests and thus
will generate capital losses.
22
Capital Gains Tax
Net long-term capital gains of individuals, trusts and estates will be
taxed at a maximum rate of 28%, while ordinarily income, including income from
the recapture of intangible drilling and development costs, depreciation and
depletion, will be taxed at a maximum rate depending on that Limited Partner's
taxable income of 36% or 39.6%. With respect to net capital losses, other than
Section 1231 net losses, the amount of net long-term capital loss that can be
utilized to offset ordinary income will be limited to the sum of net capital
gains from other sources recognized by the Limited Partner during the tax year,
plus $3,000 ($1,500, in the case of a married individual filing a separate
return). The excess amount of such net long-term capital loss may be carried
forward and utilized in subsequent years subject to the same limitations.
Corporations are taxed on net long-term capital gains at their ordinary Section
11 rates and are allowed to carry net capital losses back three years and
forward five years.
Passive Loss Limitations
Limited Partners that are individuals, trusts, estates, or personal
service corporations are subject to the passive activity loss limitations rules
that were enacted as part of the Tax Reform Act of 1986.
A Limited Partner's allocable share of Partnership income, gain, loss, and
deduction is treated as derived from a passive activity, except to the extent of
Partnership portfolio income, which includes interest, dividends, royalty income
and gains from the sale of property held for investment purposes. A Limited
Partner's allocable share of any gain realized on sale of Partnership properties
(other than gain from the sale of portfolio investments) will be characterized
as passive activity income that may be offset by passive activity losses from
other passive activity investments. Moreover, because the sale of properties and
liquidation of the Partnership will terminate the Limited Partner's interest in
the passive activity, a Limited Partner's allocable share of any loss (i)
previously realized as a Limited Partner in the Partnership and suspended
because of its passive characterization, (ii) realized on the liquidating sale
of Partnership properties, or (iii) realized by the Limited Partner upon
liquidation of his Partnership interest, will not be characterized as losses
from a passive activity.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS INTENDED
TO BE A SUMMARY OF CERTAIN INCOME TAX CONSIDERATIONS OF THE SALE OF PROPERTIES
AND LIQUIDATION. IT IS NOT INTENDED AS AN ALTERNATIVE FOR TAX PLANNING. EACH
LIMITED PARTNER SHOULD CONSULT ITS OWN TAX ADVISOR CONCERNING THE FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO IT OF THE SALE OF PROPERTIES
AND THE LIQUIDATION OF THE PARTNERSHIP.
23
BUSINESS OF THE PARTNERSHIP
The Partnership is a Texas limited partnership formed December 31, 1990.
Units in the Partnership are registered under Section 12(g) of the Securities
Exchange Act of 1934. In addition to the following information about the
business of the Partnership, see the attached Annual Report on Form 10-K for the
year ended December 31, 1996, and its quarterly report on Form 10-Q for the
first quarter of 1997, both included herewith.
Reserves
For information about the Partnership's interest in oil and gas
reserves and future net revenue expected from the production of those reserves
as of December 31, 1996, see the attached report which was audited by H. J. Gruy
& Associates, Inc., independent petroleum consultants. It should be noted that
the reserve estimates in the Annual Report on Form 10-K reflect the entire
Partnership reserves and that the reserve report in the attached letter from H.
J. Gruy & Associates, Inc. reflects only the Limited Partners' share of the
Partnership's estimated oil and gas reserves. Neither of these reports reflect
the Partnership's share of future costs of operations which must be debited from
the Partnership's interest in reserves in order to determine the Partnership's
net interest in reserves by virtue of its net profits interest. This report has
not been updated to include the effect of production since year-end 1996, nor
has the annual review of estimated quantities done each year-end taken place for
1997.
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates and timing of production,
future costs and future development plans. 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 in the attached report. 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 Partnership's interest in oil and natural gas
reserves, the Managing General Partner, has used flat pricing based upon
estimates of 1997 average prices, 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. These
pricing assumptions vary from those mandated by the Securities and Exchange
Commission ("SEC") for reserves disclosures under applicable SEC rules, which
require use of prices at year-end, although the discount rate and lack of
escalation are the same. If estimates of reserves and future net revenues had
been prepared using December 31, 1996 prices, as mandated by the SEC, reserves,
future net revenues and the present value thereof would be significantly higher.
The
24
Managing General Partner has determined not to use these higher prices because
current estimates of 1997 average prices more accurately reflect prices
purchasers of properties are willing to pay, rather than higher values which do
not reflect the decrease in prices since year-end 1996. For example, the
weighted average price of gas received by the Partnership during the first
quarter of 1997 was $2.92 per Mcf, as compared to $4.68 per Mcf at December 31,
1996. The Managing General Partner does not believe that any favorable or
adverse event causing a significant change in the estimated quantity of proved
reserves set forth in the attached report has occurred between December 31,
1996, and the date of this Proxy Statement.
Future prices received for the sale of the Partnership's products may
be higher or lower than the prices used in the Partnership's estimates of oil
and gas reserves; the operating costs relating to such production may also
increase or decrease from existing levels.
The Managing General Partner
Subject to certain limitations set forth in the Partnership Agreement, the
Managing General Partner has full, exclusive and complete discretion in the
management and control of the business of the Partnership. The Managing General
Partner has general liability for the debts and obligations of the Partnership.
The Managing General Partner is engaged in the business of oil and gas
exploration, development and production, and the Managing General Partner serves
as the general partner of a number of other oil and gas income and pension
partnerships. The Managing General Partner's common stock is traded on the New
York and Pacific Stock Exchanges.
The principal executive offices of the Managing General Partner are
located at 16825 Northchase Drive, Suite 400, Houston, Texas 77060, telephone
number (281) 874-2700.
Transactions Between the Managing General Partner and the Partnership
Under the Partnership Agreement, the Managing General Partner has received
certain compensation for its services and reimbursement for expenditures made on
behalf of the Partnership, which was paid at closing of the offering of Units,
in addition to revenues distributable to the Managing General Partner with
respect to its general partnership interest or limited partnership interests it
has purchased. In addition to those revenues, compensation and reimbursements,
the following summarizes the transactions between the Managing General Partner
and the Partnership pursuant to which the Managing General Partner has been paid
or has had its expenses reimbursed on an ongoing basis:
o The Managing General Partner receives per-well monthly operating fees
from the Operating Partnership for certain producing wells in which the
Partnership owns Property Interests and for which it serves as operator
in accordance with the joint operating
25
agreements for each of such wells. The fees that are set in the joint
operating agreements are negotiated with the other working interest
owners of the properties.
o The Managing General Partner is entitled to be reimbursed and has been
reimbursed for general and administrative costs incurred on behalf of
and allocable to the Partnership, including employee salaries and
office overhead. Amounts are calculated on the basis of Limited Partner
capital contributions to the Partnership relative to limited partner
contributions of all partnerships for which the Managing General
Partner serves as Managing General Partner.
No Trading Market
There is no trading market for the Units, and none is expected to develop.
Under the Partnership Agreement, the Limited Partners have the right to present
their Units to the Managing General Partner for repurchase at a price determined
in accordance with the formula established by Article XVIII of the Partnership
Agreement. Originally, 279 Limited Partners invested in the Partnership. Through
December 31, 1996, the Managing General Partner had purchased 1,214 Units from
Limited Partners pursuant to the right of presentment. As of May 1, 1997, there
were 277 Limited Partners (excluding the Managing General Partner). The Managing
General Partner does not have an obligation to repurchase Limited Partner
interests pursuant to this right of presentment but merely an option to do so
when such interests are presented for repurchase.
Principal Holders of Limited Partner Units
The Managing General Partner holds 4.14% of the Units of the Partnership.
To the knowledge of the Managing General Partner, there is no holder of Units
that holds more than 5% of the Units.
Approvals
No federal or state regulatory requirements must be satisfied or
approvals obtained in connection with the sale of the Partnership's Property
Interests.
Legal Proceedings
The Managing General Partner is not aware of any material pending legal
proceedings to which the Partnership is a party or of which any of its property
is the subject.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE AND
ATTACHMENT OF SUCH INFORMATION HERETO
26
The Partnership's Annual Report on Form 10-K for the year ended December
31, 1996, and its quarterly report on Form 10-Q for the first quarter of 1997,
which are attached hereto and incorporated herein by reference.
OTHER BUSINESS
The Managing General Partner does not intend to bring any other business
before the Meeting and has not been informed that any other matters are to be
presented at the Meeting by any other person.
SWIFT ENERGY COMPANY
as Managing General Partner of
Swift Energy Managed Pension Assets
Partnership 1990-D, Ltd.
By:
--------------------------------
John R. Alden
Secretary
27
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 33-15998-11
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
(Exact name of registrant as specified in
its Certificate of Limited Partnership)
TEXAS 76-0320253
(State of Organization) (I.R.S. Employer Identification No.)
16825 Northchase Dr., Suite 400
Houston, Texas 77060
(713) 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:
29,303.79 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. 33-15998 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 MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
ITEM NO. PART I PAGE
1 Business I-1
2 Properties I-5
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 MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
PART I
Item 1. Business
General Description of Partnership
Swift Energy Managed Pension Assets Partnership 1990-D, Ltd., a Texas
limited partnership (the "Partnership" or the "Registrant"), is a partnership
formed under a public serial limited partnership offering denominated Swift
Energy Managed Pension Assets Fund I (Registration Statement No. 33-15998 on
Form S-1, originally declared effective November 13, 1987, and amended effective
November 3, 1988, August 4, 1989 and May 1, 1990 [the "Registration
Statement"]). The Partnership was formed effective December 31, 1990 under a
Limited Partnership Agreement dated December 31, 1990. The initial 277 limited
partners made capital contributions of $2,930,379.
The Partnership is principally engaged in the business of acquiring
nonoperating interests (i.e., net profits interests, royalty interests and
overriding royalty interests) in proven oil and gas properties within the
continental United States. The Partnership does not acquire working interests in
or operate oil and gas properties, and does not engage in drilling activities.
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
organizational fees and expenses) in the acquisition and development of
nonoperating interests in producing properties, which properties are described
under Item 2, "Properties," below. The Partnership's income is derived almost
entirely from its nonoperating interests and the disposition thereof.
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.
The general manner in which the Partnership acquires nonoperating
interests and otherwise conducts its business is described in detail in the
Registration Statement under "Proposed Activities," which is incorporated herein
by reference. The following is intended only as a summary of the Partnership's
manner of doing business and specific activities to date.
Manner of Acquiring Nonoperating Interests in Properties; Net Profits and
Overriding Royalty Interest Agreement
The nonoperating interests owned by the Registrant have typically been
acquired pursuant to a Net Profits and Overriding Royalty Interest Agreement
dated December 31, 1990 (the "NP/OR Agreement") between the Registrant and Swift
Energy Income Partners 1990-D, Ltd. (the "Operating Partnership"). The Operating
Partnership is a Texas limited partnership that is also managed by Swift and
VJM. The Operating Partnership was formed to acquire and develop producing oil
and gas properties.
Under the NP/OR Agreement, the Registrant and the Operating Partnership
have, in effect, combined their funds to acquire producing properties. Using
funds committed to the NP/OR Agreement by both partnerships, the Operating
Partnership acquires producing properties, then promptly conveys nonoperating
interests therein to the Registrant. The Operating Partnership retains a working
interest in each such property, and is responsible for the production of oil and
gas therefrom. For the sake of legal and administrative convenience, producing
properties are usually acquired from the third party sellers by Swift, which
then conveys a working interest in each such property to the Operating
Partnership. The Registrant initially committed $2,494,897 and the Operating
Partnership initially committed $3,059,352 for acquisitions under the NP/OR
Agreement. The Operating Partnership is obligated under the NP/OR Agreement to
convey to the Registrant a 45% fixed net profits interest and a variable
overriding royalty interest in specified depths of all producing properties
acquired under the NP/OR Agreement.
Under the NP/OR Agreement, the Operating Partnership is required to
convey to the Registrant, and the Registrant is required to purchase,
nonoperating interests in all producing properties acquired by the Operating
Partnership, except that:
I-1
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
1. Properties anticipated to require significant development
operations and nonoperating interests offered to the Operating Partnership by
third parties may be purchased by the Operating Partnership outside the NP/OR
Agreement, without participation by the Registrant;
2. During a specified one-year period, the Registrant is
entitled to reduce the amount originally committed by it to purchases under the
NP/OR Agreement and to redirect such funds to the purchase of nonoperating
interests from sources other than the Operating Partnership; and
3. The Registrant's funds will be released from the NP/OR
Agreement if they are not completely spent by the Operating Partnership within a
specified period, or if there is a prior withdrawal of funds by the Operating
Partnership to purchase properties anticipated to require significant
development.
Purchases of nonoperating interests by the Registrant using withdrawn
or released funds may be made from the Managing General Partner and its
affiliates, other partnerships affiliated with the Operating Partnership
(possibly through the Registrant's entry into a new NP/OR Agreement), or from
unaffiliated third parties.
In accordance with its obligations under the NP/OR Agreement, as of
December 31, 1996 the Operating Partnership had conveyed to the Registrant a 45%
net profits interest burdening certain depths of all producing properties
acquired by the Operating Partnership thereunder. Typically, a net profits
interest in an oil and gas property entitles the owner to a specified percentage
share of the gross proceeds generated by the burdened property, net of operating
costs. The net profits interest conveyed to the Registrant under the NP/OR
Agreement differs from the typical net profits interest in that it is calculated
over the entire group of producing properties conveyed under the NP/OR
Agreement; i.e., all operating costs attributable to the burdened depths of such
properties are aggregated, and the total is then subtracted from the total of
all gross proceeds attributable to such depths in order to calculate the net
profits to which the Registrant is entitled. The net profits interest conveyed
to the Registrant burdens only those depths of each subject property which were
evaluated to contain proved reserves at the date of acquisition, to the extent
such depths underlie specified surface acreage.
The Operating Partnership has also conveyed to the Registrant under the
NP/OR Agreement an overriding royalty interests in each property acquired
thereunder. An overriding royalty interest is a fractional interest in the gross
production (or the gross proceeds therefrom) of oil and gas from a property,
free of any exploration, development, operation or maintenance expenses. Under
the NP/OR Agreement, the overriding royalty interest burdens the portions of
each producing property that were evaluated at the date of acquisition not to
contain proved reserves.
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-2
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, 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-3
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, 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-4
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
Item 2. Nonoperating Interests in Properties
As of December 31, 1996, the Partnership has acquired nonoperating
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. The Velrex Field is located in Schleicher County, Texas, and
accounts for 35% of the value in this Partnership. Wells in this field produce
from the Henderson and Canyon Sands, (Sugarland acquisition).
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 in which
the Partnership owns nonoperating interests has been examined. In addition to
the nonoperating interests owned by the Partnership, 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) 150,063 177,070 225,786
Average Net Nonoperating
Interest Price per
Equivalent MCF $1.39 $0.85 $1.10
I-5
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's nonoperating
interests in proved reserves as of December 31, 1996, 1995 and 1994. All of the
Partnership's nonoperating interests in 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 7,107 545 34,780 1,296 37,264 1,396
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 37,066 1,390 38,510 1,575 50,805 2,353
Purchase of minerals
in place -- -- -- -- -- --
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates 1,695 80 5,450 (49) (4,718) (598)
Sales of minerals in
place (26,282) (675) -- -- -- --
Production (3,940) (126) (6,894) (136) (7,577) (180)
------- ----- ------- ----- ------- -----
Balance at end of year 8,539 669 37,066 1,390 38,510 1,575
------- ----- ------- ----- ------- -----
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-6
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
The following table summarizes by acquisition the Registrant's reserves
and its nonoperating interests in gross and net 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
- - - ----------- -------- ------ ------- ----- -------
Richer TX 7 34 4 0.046
Hilliard LA 77 48 7 0.668
Sugarland OK, TX 8,094 525 56 2.410
Kerrco TX 315 1 1 0.015
Arkla TX 46 61 2 0.101
------ ----- ---- -----
8,539 669 70 3.240
------ ----- ---- -----
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 products 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.
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 MANAGED PENSION ASSETS PARTNERSHIP 1990-D, 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 277 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 ended December 31, 1995 and 1996, the
Partnership distributed a total of $38,900 and $115,000, respectively, to the
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 and provisions prohibiting the transfer of Limited
Partnership Units in any fiscal year in excess of a limit which has been
established in order to comply with certain federal income tax regulations.
II-1
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, 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 $ 209,232 $ 142,905 $ 248,998 $ 313,987 $ 442,456
Income (Loss) $ 39,362 $ (210,627) $ (582,199) $ 41,813 $ 113,022
Total Assets $ 577,292 $ 910,447 $ 1,190,308 $ 1,976,181 $ 2,207,136
Cash Distributions $ 132,132 $ 50,154 $ 123,640 $ 410,760 $ 474,736
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 and development by acquiring nonoperating
interests in 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 nonoperating interests in
oil and gas produced from 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.
Results of Operations
Income from nonoperating interests increased 46 percent in 1996 over
1995. Oil and gas sales increased 8 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 40 percent or $.59/MCF and
an increase in oil prices of 21 percent or $3.19/BBL. Production volumes
decreased 15 percent due to a 43 percent oil production decrease and a 7 percent
gas production decline. The production declines partially offset the effect of
increased oil and gas prices impacting partnership performance.
Associated amortization expense increased a slight 2 percent in 1996
when compared to 1995.
Income from nonoperating interests decreased 43 percent in 1995 over
1994. Oil and gas sales decreased 31 percent in 1995 vs. 1994. Production
volumes decreased 22 percent due to a 25 percent gas production decrease and a 9
percent oil production decline. Since the Partnership's reserves are 86 percent
gas, the decrease in gas production, due to accelerated production declines on
mature wells, a reduction in development drilling in the current year and
production curtailments due to declining prices, had a major impact on
partnership performance. A decline in the 1995 gas prices of 24 percent or
$.46/MCF further contributed to the Partnership's decreased revenues.
Associated amortization expense decreased 40 percent in 1995 when
compared to 1994.
The Partnership recorded an additional provision in 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, the 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 Managing
General Partner anticipates that the Partnership sharing ratio will continue to
be 90:10.
II-2
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
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 MANAGED PENSION ASSETS PARTNERSHIP 1990-D, 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 ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, 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
No single limited partner is known to the Partnership to be the
beneficial owner of more than five percent of the Partnership's Units.
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 are 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, on one hand, and Swift, VJM and their affiliates, on
the other.
Certain Transactions with General Partners
1. As described in Item 1, "Business," above, during 1990 the
Partnership entered into an NP/OR Agreement with the Operating Partnership,
which is also managed by Swift and VJM. Pursuant to such NP/Or Agreement, the
Operating Partnership acquired the oil and gas properties described under Item 2
above and conveyed nonoperating interests therein to the Partnership.
2. Swift acts as operator for many of the wells in which the
Partnership has nonoperating 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 Financial
Statements (Related-Party Transactions) for further discussion.
III-2
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
a(1) FINANCIAL STATEMENTS PAGE NO.
--------
Report of Independent Public Accountants IV-3
Balance Sheets as of December 31, 1996 and 1995 IV-4
Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 IV-5
Statements of Partners' Capital for the years ended
December 31, 1996, 1995 and 1994 IV-6
Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 IV-7
Notes to Financial Statements IV-8
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 Managed
Pension Assets Partnership 1990-D, Ltd., dated December
27, 1990. (Form 10-K for year ended December 31, 1990,
Exhibit 3.1).
3.2 Certificate of Limited Partnership of Swift Energy Managed
Pension Assets Partnership 1990-D, Ltd., as filed December
28, 1990, with the Texas Secretary of State. (Form 10-K
for year ended December 31, 1990, Exhibit 3.2).
10.1 Net Profits and Overriding Royalty Interest Agreement
between Swift Energy Managed Pension Assets Partnership
1990-D Ltd. and Swift Energy Income Partners 1990-D Ltd.
dated December 31, 1990. (Form 10-K for year ended
December 31, 1990, Exhibit 10.1).
99.1 A copy of the following section of the Amended Prospectus
dated November 13, 1987, contained in Post-Effective
Amendment No. 1 to Registration Statement No. 33-15998 on
Form S-1 for Swift Energy Managed Pension Assets Fund I,
as filed on November 3, 1988, which have been incorporated
herein by reference: "Proposed Activities" (pp 38 - 48)
and "Conflicts of Interest" (pp. 70 - 79). (Form 10-K for
year ended December 31, 1990, 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.
IV-1
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
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-2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Managed Pension Assets Partnership 1990-D, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Managed
Pension Assets Partnership 1990-D, 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 Managed
Pension Assets Partnership 1990-D, 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-3
SWIFT ENERGY MANAGED PENSIO ASSETS PARTNERSHIP 1990-D, LTD.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
-------------- --------------
ASSETS:
Current Assets:
Cash and cash equivalents $ 45,934 $ 1,414
Nonoperating interests income receivable 34,550 65,975
-------------- --------------
Total Current Assets 80,484 67,389
-------------- --------------
Nonoperating interests in oil and gas
properties, using full cost accounting 2,640,190 2,868,878
Less-Accumulated amortization (2,143,382) (2,025,820)
-------------- --------------
496,808 843,058
-------------- --------------
$ 577,292 $ 910,447
============== ==============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Payable related to excess costs $ 8,917 $ 249,302
-------------- --------------
Partners' Capital 568,375 661,145
-------------- --------------
$ 577,292 $ 910,447
============== ==============
See accompanying notes to financial statements.
IV-4
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
--------------- --------------- ---------------
REVENUES:
Income from nonoperating interests $ 208,834 $ 142,828 $ 248,949
Interest income 398 77 49
--------------- --------------- ---------------
209,232 142,905 248,998
--------------- --------------- ---------------
COSTS AND EXPENSES:
Amortization 117,562 316,003 780,316
General and administrative 52,308 37,529 50,881
--------------- --------------- ---------------
169,870 353,532 831,197
--------------- --------------- ---------------
INCOME (LOSS) $ 39,362 $ (210,627) $ (582,199)
=============== =============== ===============
See accompanying notes to financial statements.
IV-5
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, 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 $ 1,416,841 $ 35,769 $ 175,155 $ 1,627,765
Income (Loss) (508,823) 15,946 (89,322) (582,199)
Cash Distributions (107,000) (16,640) -- (123,640)
--------------- --------------- --------------- --------------
Balance,
December 31, 1994 801,018 35,075 85,833 921,926
--------------- --------------- --------------- ---------------
Income (Loss) (189,498) 8,253 (29,382) (210,627)
Cash Distributions (38,900) (11,254) -- (50,154)
--------------- --------------- --------------- --------------
Balance,
December 31, 1995 572,620 32,074 56,451 661,145
--------------- --------------- --------------- --------------
Income (Loss) 38,572 9,960 (9,170) 39,362
Cash Distributions (115,000) (17,132) -- (132,132)
--------------- --------------- --------------- --------------
Balance,
December 31, 1996 $ 496,192 $ 24,902 $ 47,281 $ 568,375
=============== =============== =============== ==============
Limited Partners' net income (loss)
per unit
1994 $ (17.36)
===============
1995 $ (6.47)
===============
1996 $ 1.32
===============
See accompanying notes to financial statements.
IV-6
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, 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) $ 39,362 $ (210,627) $ (582,199)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Amortization 117,562 316,003 780,316
Change in assets and liabilities:
(Increase) decrease in nonoperating interests income receivable 31,425 (11,587) 9,110
(Increase) decrease in other current assets -- -- 25,448
Increase (decrease) in accounts payable
and accrued liabilities -- (4,240) (1,038)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 188,349 89,549 231,637
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to nonoperating interests in oil
and gas properties (43,020) (24,897) (34,417)
Proceeds from sales on nonoperating interests
in oil and gas properties 271,708 419 5,465
Increase (decrease) in payable related to excess costs (240,385) (14,840) (78,996)
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (11,697) (39,318) (107,948)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (132,132) (50,154) (123,640)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 44,520 77 49
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,414 1,337 1,288
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,934 $ 1,414 $ 1,337
=============== =============== ===============
See accompanying notes to financial statements.
IV-7
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Managed Pension Assets Partnership 1990-D, Ltd., a Texas
limited partnership (the Partnership), was formed on December 31, 1990, for the
purpose of purchasing net profits interests, overriding royalty interests and
royalty interests (collectively, "nonoperating interests") in 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 277 limited partners made
total capital contributions of $2,930,379.
Nonoperating interests 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 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.
Nonoperating Interests in Oil and Gas Properties --
For financial reporting purposes, the Partnership follows the
"full-cost" method of accounting for nonoperating interests in oil and gas
properties. Under this method of accounting, all costs incurred in the
acquisition of nonoperating interests in oil and gas properties are capitalized.
The unamortized cost of nonoperating interests in 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
nonoperating interests in proved properties using current prices, discounted at
ten percent. Proceeds from the sale or disposition of nonoperating interests in
oil and gas properties are treated as a reduction of the cost of the
nonoperating interests with no gains or losses recognized except in significant
transactions.
The Partnership computes the provision for amortization of nonoperating
interests in oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of nonoperating interests in oil and gas properties by an overall rate
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 attributable
to the Partnership's nonoperating interests at the beginning of the period.
The calculation of the "ceiling limitation" and the provision for
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.
IV-8
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Statements of Cash Flows --
Highly liquid debt instruments with an initial maturity of three months
or less are considered to be cash equivalents.
(3) Acquisition of Nonoperating Interests in Oil and Gas Property Costs -
Effective December 31, 1990, the Partnership entered into a Net Profits
and Overriding Royalty Interests Agreement (NP/OR Agreement) with Swift Energy
Income Partners 1990-D, Ltd. (Operating Partnership), managed by Swift, for the
purpose of acquiring interests in producing oil and gas properties. Under the
terms of the NP/OR Agreement, the Partnership has been conveyed a nonoperating
interest in the aggregate net profits (i.e., oil and gas sales net of related
operating costs) of the properties acquired equal to its proportionate share of
the property acquisition costs, as defined. Property acquisition costs are
amounts actually paid by the Operating Partnership for the properties plus costs
incurred by the Operating Partnership in acquiring the properties and costs
related to screening and evaluation of properties not acquired. In 1996, 1995
and 1994, the Partnership acquired nonoperating interests in producing oil and
gas properties for $43,020, $24,897 and $34,417, respectively.
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 amortization of $200,898 and $588,696,
respectively. In computing the Partnership's third quarter 1994 "ceiling
limitation", the Partnership utilized the product prices in effect at the date
the Partnership's report was issued. Utilizing these subsequent prices, the
write down recorded by the Partnership was $310,454 less than the amount that
would have been recorded using product prices in effect at September 30, 1994.
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 $177,864 and $512,494, respectively. This amount is
included in the income (loss) attributable to the limited partners shown in the
statement of partners' capital together with a "combining adjustment" for the
difference between the limited partners' valuation allowance and the
Partnership's valuation allowance. The "combining adjustment" changes quarterly
as the Partnership's total amortization provision is more or less than the
combined amortization provision attributable to general and limited partners.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $73,259 for managing and overseeing the offering of limited partnership
units.
A one-time management fee of $73,259 was paid to Swift in 1990 for
services performed for the Partnership. During 1996, 1995 and 1994, the
Partnership paid Swift $39,916, $25,429 and $37,265, respectively, as a general
and administrative overhead allowance.
(5) 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 royalty income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Royalty income reported on the Partnership's
federal return of income for the years ended December 31, 1996, 1995 and 1994
was $249,406, $97,102 and $165,590, respectively. The difference between royalty
income for federal income tax purposes reported by the Partnership and income or
loss from nonoperating interests reported herein primarily results from the
exclusion of amortization (as described below) from ordinary income reported in
the Partnership's federal return of income.
IV-9
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For federal income tax purposes, amortization with respect to
nonoperating interests in oil and gas properties is computed separately by the
partners and not by the Partnership. Since the amount of amortization on
nonoperating interests in oil and gas is not computed at the Partnership level,
amortization 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 nonoperating interests in oil and gas properties, and thus is
treated as a separate item on the partners' Schedule K-1. Amortization 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.
(6) 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.
(7) 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 MANAGED PENSION ASSETS PARTNERSHIP 1990-D, 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 MANAGED PENSION
ASSETS PARTNERSHIP 1990-D, 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 MANAGED PENSION
ASSETS PARTNERSHIP 1990-D, 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 MANAGED PENSION ASSETS PARTNERSHIP 1990-C, 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
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, 1997
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 33-15998-11
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
(Exact name of registrant as specified in its charter)
Texas 76-0320253
(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
---- ----
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
INDEX
PART I. FINANCIAL INFORMATION PAGE
ITEM 1. Financial Statements
Balance Sheets
- March 31, 1997 and December 31, 1996 3
Statements of Operations
- Three month periods ended March 31, 1997 and 1996 4
Statements of Cash Flows
- Three month periods ended March 31, 1997 and 1996 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 9
SIGNATURES 10
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
BALANCE SHEETS
March 31, December 31,
1997 1996
-------------- --------------
(Unaudited)
ASSETS:
Current Assets:
Cash and cash equivalents $ 41,704 $ 45,934
Nonoperating interests income receivable 55,671 34,550
-------------- --------------
Total Current Assets 97,375 80,484
-------------- --------------
Nonoperating interests in oil and gas
properties, using full cost accounting 2,639,416 2,640,190
Less-Accumulated amortization (2,162,542) (2,143,382)
-------------- --------------
476,874 496,808
-------------- --------------
$ 574,249 $ 577,292
============== ==============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Payable related to excess costs $ 3,342 $ 8,917
-------------- --------------
Partners' Capital 570,907 568,375
-------------- --------------
$ 574,249 $ 577,292
============== ==============
See accompanying notes to financial statements.
3
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
---------------------------------
1997 1996
--------------- ---------------
REVENUES:
Income from nonoperating interests $ 52,046 $ 34,538
Interest income 383 7
--------------- ---------------
52,429 34,545
--------------- ---------------
COSTS AND EXPENSES:
Amortization 19,160 25,779
General and administrative 10,026 8,742
--------------- ---------------
29,186 34,521
--------------- ---------------
NET INCOME (LOSS) $ 23,243 $ 24
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1997 $ .79
===============
March 31, 1996 $ --
===============
See accompanying note to financial statements.
4
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
---------------------------------------
1997 1996
---------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 23,243 $ 24
Adjustments to reconcile income (loss) to
net cash provided by operations:
Amortization 19,160 25,779
Change in assets and liabilities:
(Increase) decrease in nonoperating interests income receivable (21,121) 9,048
---------------- ---------------
Net cash provided by (used in) operating activities 21,282 34,851
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to nonoperating interests
in oil and gas properties -- (3,729)
Proceeds from sale of nonoperating interests
in oil and gas properties 774 --
Increased (decrease) in payable related to excess costs (5,575) (27,640)
---------------- ---------------
Net cash provided by (used in) investing activities (4,801) (31,369)
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (20,711) (3,476)
---------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,230) 6
---------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 45,934 1,414
---------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 41,704 $ 1,420
================ ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 3,772
================ ===============
See accompanying notes to financial statements.
5
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, 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, 1996 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) Organization and Terms of Partnership Agreement -
Swift Energy Managed Pension Assets Partnership 1990-D, Ltd.,
a Texas limited partnership ("the Partnership"), was formed on December
31, 1990, for the purpose of purchasing net profits interests,
overriding royalty interests and royalty interests (collectively,
"nonoperating interests") in 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 277
limited partners made total capital contributions of $2,930,379.
Nonoperating interests 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.
Generally, 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,
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.
(3) 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. Certain reclassifications have been
made to prior year amounts to conform to the current year presentation.
6
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Nonoperating Interests in Oil and Gas Properties --
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for nonoperating interests in oil and
gas property costs. Under this method of accounting, all costs incurred
in the acquisition of nonoperating interests in oil and gas properties
are capitalized. The unamortized cost of nonoperating interests in 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 nonoperating interests
in proved properties using current prices, discounted at ten percent.
Proceeds from the sale or disposition of nonoperating interests in oil
and gas properties are treated as a reduction of the cost of the
nonoperating interests with no gains or losses recognized except in
significant transactions.
The Partnership computes the provision for 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 by an overall rate determined by dividing the
physical units of oil and gas produced during the period by the total
estimated 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.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $73,259 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $73,259 was
paid to Swift for services performed for the Partnership.
The Partnership entered into a Net Profits and Overriding
Royalty Interests Agreement ("NP/OR Agreement") with Swift Energy Income
Partners 1990-D, Ltd. ("Operating Partnership"), managed by Swift, for
the purpose of acquiring nonoperating interests in producing oil and gas
properties. Under terms of the NP/OR Agreement, the Partnership has been
conveyed a nonoperating interest in the aggregate net profits (i.e., oil
and gas sales net of related operating costs) of the properties acquired
equal to its proportionate share of the property acquisition costs.
(5) 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.
(6) 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.
7
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Partnership is formed for the purpose of investing in nonoperating
interests 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 results of
operations. When the Partnership is formed, it commences its "acquisition"
phase, with all funds placed in short-term investments until required for the
acquisition of nonoperating interests. Therefore, the interest earned on these
pre-acquisition investments becomes the primary cash flow source for initial
partner distributions. As the Partnership acquires nonoperating interests in
producing properties, net cash from ownership of nonoperating interests becomes
available for distribution, along with the investment income. After all
partnership funds have been expended on nonoperating interests in producing oil
and gas properties, the Partnership enters its "operations" phase. During this
phase, income from nonoperating interests in oil and gas sales generates
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 nonoperating interests in acquired oil and gas
properties, when the sale of such interests is economically appropriate or
preferable to continued operations.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has completed acquisition of nonoperating interests in
producing oil and gas properties, expending all of the limited partners' net
commitments available for property acquisitions.
Under the NP/OR Agreement, the Managing General Partner acquires interests
in oil and gas properties from outside parties and sells these interests to an
affiliated operating partnership, who in turn creates and sells to the
Partnership nonoperating interests in these same oil and gas properties. The
Managing General Partner expects funds available from net profits interests to
be distributed to the partners.
RESULTS OF OPERATIONS
Income from nonoperating interests increased 51 percent in the first
quarter of 1997 when compared to the same quarter in 1996. Oil and gas sales
remained stable in the first quarter of 1997 when compared to the same period in
1996, Oil production decreased 66 percent and gas production declined 14
percent. The decrease in production had a significant impact on partnership
performance. Production declines were offset by an increase in gas prices of 56
percent or $1.05/MCF and in oil prices of 23 percent or $3.85/BBL when compared
to first quarter 1996 prices.
Associated amortization expense decreased 26 percent or $6,619.
During 1997, partnership revenues and costs will be shared between the
limited partners and general partners in a 90:10 ratio.
8
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-NONE-
9
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 MANAGED PENSION
ASSETS PARTNERSHIP 1990-D, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
Managing General Partner
Date: May 5, 1997 By: /s/ John R. Alden
----------- --------------------------------
John R. Alden
Senior Vice President, Secretary
and Principal Financial Officer
Date: May 5, 1997 By: /s/ Alton D. Heckaman, Jr.
----------- --------------------------------
Alton D. Heckaman, Jr.
Vice President, Controller
and Principal Accounting Officer
10
May 20, 1997
Swift Energy Company
16825 Northchase Drive, Suite 400
Houston, Texas 77060
Swift Energy Managed Pension Assets 1990-D Ltd.
97-003-131
Gentlemen:
At your request, we have made an audit of the reserves and future net cash flow
as of December 31, 1996, prepared by Swift Energy Company ("Swift") for certain
interests owned by the limited partners in Swift Energy Managed Pension Assets
1990-D Ltd. This audit has been conducted according to the standards pertaining
to the estimating and auditing of oil and gas reserve information approved by
the Board of Directors of the Society of Petroleum Engineers on October 30,
1979. We have reviewed these properties and where we disagreed with the Swift
reserve estimates, Swift revised its estimates to be in agreement. The estimated
net reserves, future net cash flow and discounted future net cash flow are
summarized by reserve category as follows:
Estimated Estimated
Net Reserves Future Net Cash Flow
-------------------------------- ---------------------------------
Oil & Discounted
Condensate Gas at 10%
(Barrels) (Mcf) Nondiscounted Per Year
---------- -------- ------------- ---------
Proved Developed 6,455 499,550 $ 731,509 $ 504,435
Proved Undeveloped 1,230 102,318 $ 206,323 $ 89,018
------ -------- --------- ---------
Total Proved 7,685 601,868 $ 937,832 $ 593,453
G & A $ (64,686) $ (32,765)
------ -------- --------- ---------
TOTAL 7,685 601,868 $ 873,146 $ 560,688
Swift Energy Company - 2 - May 20, 1997
The discounted future net cash flow is not represented to be the fair market
value of these reserves and the estimated reserves included in this report have
not been adjusted for risk.
The estimated future net cash flow shown is that cash flow which will be
realized from the sale of the estimated net reserves after deduction of
royalties, ad valorem and production taxes, direct operating costs and required
capital expenditures, when applicable. Surface and well equipment salvage values
and well plugging and field abandonment costs have not been considered in the
cash flow projections. Future net cash flow as stated in this report is before
the deduction of federal income tax.
In the economic projections, prices, operating costs and development costs
remain constant for the projected life of each lease. For these projections, the
oil and gas prices were assumed to be $21.00 per barrel and $2.25 per MMBTU
respectively.
The reserves included in this study are estimates only and should not be
construed as exact quantities. Future conditions may affect recovery of
estimated reserves and cash flow, and all categories of reserves may be subject
to revision as more performance data become available. The proved reserves in
this report conform to the applicable definitions promulgated by the Society of
Petroleum Engineers and the Society of Petroleum Evaluation Engineers.
Attachment I, following this letter, sets forth all reserve definitions
incorporated in this study.
Extent and character of ownership, oil and gas prices, production data, direct
operating costs, capital expenditure estimates and other data provided by Swift
have been accepted as represented. The production data available to us were
through the month of October, 1996, except in those instances in which data were
available through December. Interim production to December 31, 1996, has been
estimated. No independent well tests, property inspections or audits of
operating expenses were conducted by our staff in conjunction with this study.
We did not verify or determine the extent, character, obligations, status or
liabilities, if any, arising from any current or possible future environmental
liabilities that might be applicable.
In order to audit the reserves, costs and future cash flows shown in this
report, we have relied in part on geological, engineering and economic data
furnished by our client. Although we have made a best efforts attempt to acquire
all pertinent data and to analyze it carefully with methods accepted by the
petroleum industry, there is no guarantee that the volumes of oil or gas or the
cash flows projected will be realized.
Production rates may be subject to regulation and contract provisions and may
fluctuate according to market demand or other factors beyond the control of the
operator. The reserve and cash flow projections presented in this report may
require revision as additional data become available.
Swift Energy Company - 3 - May 20, 1997
We are unrelated to Swift and we have no interest in the properties included in
the information reviewed by us. In particular:
1. We do not own a financial interest in Swift or its oil and gas
properties.
2. Our fee is not contingent on the outcome of our work or report.
3. We have not performed other services for or have any other
relationship with Swift that would affect our independence.
If investments or business decisions are to be made in reliance on these
estimates by anyone other than our client, such person with the approval of our
client is invited to visit our offices at his expense so that he can evaluate
the assumptions made and the completeness and extent of the data available on
which our estimates are based.
Any distribution or publication of this report or any part thereof must include
this letter in its entirety.
Yours very truly,
H.J. GRUY AND ASSOCIATES, INC.
By: /s/ James H. Hartsock
----------------------------
James H. Hartsock, PhD., P.E.
Executive Vice President
JHH:gdm
Attachment
C:\SWIFT\1990-D.131