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 INCOME PARTNERS 1990-C, 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).
[ ] 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:
56,952
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):
$15.29-$20.91. Estimate based on estimated value of the
underlying assets.
4) Proposed maximum aggregate value of transaction:
$1,080,046
5) Total fee paid:
$216.01
[ ] 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:
CORPHOU:9546.2 14323-00070
June ___, 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 Income Partners 1990-C, Ltd. has been in existence for over
six years, and most of its properties were purchased by 1991. All economically
feasible enhancement opportunities have already been implemented on the
Partnership's properties. Consequently, the Partnership's 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 Partnership's properties, 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
CORPHOU:9546.2 14323-00070
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
16825 NORTHCHASE DRIVE, SUITE 400
HOUSTON, TEXAS 77060
(281) 874-2700
NOTICE OF SPECIAL MEETING OF LIMITED PARTNERS
TO BE HELD AUGUST ___, 1997
Notice is hereby given that a special meeting of limited partners of Swift
Energy Income Partners 1990-C, 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 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 June ___, 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
JOHN R. ALDEN
Secretary
June ___, 1997
CORPHOU:9546.2 14323-00070
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 Pension 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
Taxable Gain or Loss Upon Sale of Properties.........................15
Liquidation of the Partnership.......................................16
Capital Gain Tax.....................................................16
Passive Loss Limitations.............................................17
BUSINESS OF THE PARTNERSHIP...................................................18
Reserves ............................................................18
The Managing General Partner.........................................19
Transactions Between the Managing General Partner and
the PartnershIp.....................................................19
No Trading Market....................................................19
Principal Holders of Limited Partner Units...........................20
Approvals............................................................20
Legal Proceedings....................................................20
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE AND
ATTACHMENT OF SUCH INFORMATION HERETO................................20
OTHER BUSINESS................................................................20
CORPHOU:9546.2 14323-00070
i
SWIFT ENERGY INCOME PARTNERS 1990-C, 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 Income Partners 1990-C, 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 August ___, 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 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 September 30, 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 June ___,
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 June ___, 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 6.26% of all outstanding Units. Therefore, the affirmative vote of
holders of 51% of the remaining Units is required to approve the proposed sale.
The Partnership's assets consist of working interests in producing oil and
gas properties (the "Property Interests"). The Property Interests are burdened
by a single net profits interest in the producing oil and gas properties granted
to an affiliated companion partnership (the "Pension Partnership"). 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 Pension Partnership's net profits interest 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 $1,187,752. The
most significant property owned by the Partnership is the Velrex Field in
Schleicher County, Texas, which accounts for approximately 33% of the value of
the Partnership's remaining reserves. During 1996, approximately 86% 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.
CORPHOU:9546.2 14323-00070
1
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 net profits interest owned by the Pension
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 net profits interests in those same properties owned by the Pension
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 66% 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.
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 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 working 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 Partnership, the Managing General Partner will
no longer serve as operator for a number of the wells in which the Partnership
has a working 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.
CORPHOU:9546.2 14323-00070
2
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, 53,405 Units were outstanding and were
held of record by 502 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 27,236.55 Units is required to approve the Proposal. The Managing General
Partner holds 3,547 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.
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.
CORPHOU:9546.2 14323-00070
3
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(v). As the Managing General
Partner holds approximately 6.26% of the Units held by all Limited Partners,
6.26% 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 $30,000.
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 Property
Interests but the Pension Partnership does not approve the sale of its Property
Interests properties and actually sell its interests in the same properties,
then the Partnership will be forced to sell its working interests burdened by
the net profits interest owned by the Pension 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 Pension 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 Pension 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 Pension Partnership."
CORPHOU:9546.2 14323-00070
4
THE PROPOSAL
GENERAL
The Managing General Partner has proposed that the Partnership's
properties 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 working interests (the
"Property Interests") in producing oil and gas properties, which are burdened by
a single net profits interest owned by an affiliated partnership (the "Pension
Partnership") also managed by the Managing General Partner and formed at
approximately the same time as the Partnership was organized. The non-operating
net profits interest was granted to Swift Energy Managed Pension Assets
Partnership 1990-C, Ltd. pursuant to a Net Profits and Overriding Royalty
Interest Agreement ("NP/OR Agreement") dated September 30, 1990. The NP/OR
Agreement gives the Pension Partnership a net profits interest in the group of
producing properties in which the Partnership owns working interests, and
entitles the Pension Partnership to receive a portion of the net profits from
operation of the group of producing properties owned by the Partnership which
are subject to the NP/OR Agreement. The net profits percentage to which the
Pension 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. 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 Property Interests in producing oil and gas
properties within the continental United States. By the end of 1991 the
Partnership had expended all of its original capital contributions for the
purchase of oil and gas producing properties. During 1996 approximately 86% of
the Partnership's revenue was attributable to natural gas production. The
Partnership has, from time to time, performed workovers and recompletions of
Partnership wells, using funds advanced 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 $5,695,200, in the
aggregate to the Partnership. The Managing General Partner has made capital
contributions with respect to its general partnership interest of $48,087.
Additionally, pursuant to the presentment right set forth in Article XVIII of
the Partnership Agreement, it purchased 3,547 Units from Limited Partners.
From inception through January 31, 1997, the Partnership has made cash
distributions to its Limited Partners totaling $2,534,900. Through January 31,
1997, the Managing General Partner has received cash distributions from the
Partnership of $286,628 with respect to its general partnership interest, and
distributions
CORPHOU:9546.2 14323-00070
5
related to its limited partnership interests of $11,051. On a per Unit basis,
Limited Partners had received, as of January 31, 1997, $44.51 per $100 Unit, or
approximately 44.51% 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 September 12, 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 $22.87 per barrel of oil and $2.04 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
$2.04 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 $16.41 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.
CORPHOU:9546.2 14323-00070
6
PRICE VECTORS
-------------------------
GAS
PER MCF
-------------------------
YEAR ACTUAL EXPECTED YEAR MCFE
---- ------ -------- ---- ------
1990 2.22 2.04 1990 253497
1991 1.84 2.24 1991 806323
1992 1.97 2.68 1992 704598
1993 2.06 3.19 1993 527436
1994 1.97 3.38 1994 463380
1995 1.67 3.58 1995 357960
1996 2.17 3.79 1996 305494
[GRAPHIC OMITTED]
COMPARISON OF GAS PRICES EXPECTED IN 1990 TO GAS PRICES ACTUALLY RECEIVED
[GRAPHIC OMITTED]
AMOUNTS OF PRODUCTION TO DATE PRODUCED BY YEAR
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 Partnership properties. The benefit of these
enhancement activities, however, 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 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.
CORPHOU:9546.2 14323-00070
7
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
Partnership's net revenues available for distribution have been reduced by
amounts used to pay operating and enhancement costs to the third party operator.
The Managing General Partner advanced most of these costs because it felt that
such expenditures would increase the value of the properties in which the
Partnership has an interest. The Partnership's partnership agreement does not
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 properties
may vary. 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 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 $2.89
per Mcf, as compared to $4.72 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.
CORPHOU:9546.2 14323-00070
8
RANGE OF LIMITED PARTNERS' SHARE OF ESTIMATED DISTRIBUTIONS
FROM PROPERTY SALES AND LIQUIDATION
PROJECTED RANGE
LOW HIGH
--------------------------------
Net Sales Proceeds(1) $ 759,192 $1,107,046
Partnership Dissolution Expenses(2) (27,000) (27,000)
-------------- ----------
Net Distributions payable to Limited Partners $ 732,192 $1,080,046
============== ==========
NET DISTRIBUTIONS PER $100 UNIT $12.86 $18.96
======= ======
(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
general, administrative and operating expenses, which would reduce the revenues
of the Partnership.
ESTIMATED SHARE OF LIMITED PARTNERS'
NET DISTRIBUTIONS FROM CONTINUED OPERATIONS
PROJECTED
CASH FLOWS
----------
Future Net Revenues (over 20 years)(1) $1,902,168
Partnership Direct and Administrative Expenses(2) (105,540)
----------
Net Distributions to Limited Partners (payable over 20 years)(3) $1,796,628
=========
NET DISTRIBUTIONS PER $100 UNIT(4) $31.55
PRESENT VALUE OF NET DISTRIBUTIONS PER $100 UNIT(5) $19.93
(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."
CORPHOU:9546.2 14323-00070
9
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.
(2) In certain instances, the Partnership, together with the
Pension Partnerships which will be offering
its net profits interest in the properties in which the
Partnership owns Property Interests, 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 $12.86 to $18.96 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 $_____ per $100 Unit, discounted
to present value ($19.93 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.
CORPHOU:9546.2 14323-00070
10
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."
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 1,376,000 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 Partnership on the properties in which the Partnership has
an interest.
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
CORPHOU:9546.2 14323-00070
11
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 their 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 PENSION 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 Pension Partnership which owns a net profits
interest in the same properties in which the Partnership owns the working
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 Pension
Partnership does not approve the proposal to sell its properties, then the
Partnership will be forced to sell its working interests in its properties
subject to the net profits interest owned by the Pension Partnership which
burdens the Partnership's properties. This may affect the saleability of the
Partnership's properties due to the burden on cash flow caused by the existence
of the Pension 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 Partnership's properties and purchase
those Property Interests itself.
If the Partnership does not approve the proposal but its companion
Pension Partnership approves the proposal to sell its properties, then the
Managing General Partner will attempt to sell the non-operating interest owned
by the Pension 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 Pension Partnership's net profits interest and
will purchase the Pension Partnership's non-operating interests itself for the
highest price for which such interests are appraised.
Therefore, the likelihood of sale of the Partnership's Property
Interests will be significantly affected by the ability of the Partnership and
its companion Pension 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 Pension 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.
CORPHOU:9546.2 14323-00070
12
STEPS TO IMPLEMENT THE PROPOSAL
Following the approval of the Proposal, the Managing General Partner
intends to take the following steps to implement it:
1. 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
2. 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;
3. Conduct a final accounting and distribute any remaining
cash to the partners of the Partnership in accordance
with the Partnership Agreement;
4. Cause final Partnership tax returns to be prepared and
filed with the Internal Revenue Service and appropriate
state taxing authorities;
5. Distribute to the Limited Partners final Form K-1 tax
information; and
6. 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 Partnership and the
non-operating interests of the Pension 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
CORPHOU:9546.2 14323-00070
13
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 Pension 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 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.
CORPHOU:9546.2 14323-00070
14
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 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 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
individual Limited Partners who 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 a corporation, trust, estate, tax
exempt entity, or other partnership 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.
TAXABLE GAIN OR LOSS UPON SALE OF PROPERTIES
Limited Partners 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 oil and gas
CORPHOU:9546.2 14323-00070
15
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 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 gain will be
realized upon the sale of Partnership properties and that such gain 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 oil and gas properties, and related assets, 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. With respect to properties placed in service after 1986, 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.
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 thusly will generate capital losses.
CAPITAL GAIN 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
CORPHOU:9546.2 14323-00070
16
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.
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 INDIVIDUAL
TAX PLANNING. EACH LIMITED PARTNER SHOULD CONSULT HIS OWN TAX ADVISOR CONCERNING
THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO HIM OF THE SALE
OF PROPERTIES AND THE LIQUIDATION OF THE PARTNERSHIP.
CORPHOU:9546.2 14323-00070
17
BUSINESS OF THE PARTNERSHIP
The Partnership is a Texas limited partnership formed September 30,
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. 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 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 $2.89 per Mcf, as compared to $4.72 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.
CORPHOU:9546.2 14323-00070
18
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 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 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, 539 Limited Partners invested in the
Partnership. Through December 31, 1996, the Managing General Partner had
purchased 3,547 Units from Limited Partners pursuant to the right of
presentment. As of June 1, 1997, there were 502 Limited Partners (excluding the
Managing General
CORPHOU:9546.2 14323-00070
19
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 6.26% 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
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 INCOME PARTNERS 1990-C, LTD.
John R. Alden
Secretary
CORPHOU:9546.2 14323-00070
20
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ____________________
Commission File number 33-11773-14
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
(Exact name of registrant as specified in
its Certificate of Limited Partnership)
TEXAS 76-0318471
(State of Organization) (I.R.S. Employer Identification No.)
16825 Northchase Dr., Suite 400
Houston, Texas 77060
(281) 874-2700
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
56,952 Limited Partnership Units
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Registrant does not have an aggregate market value for its Limited Partnership
Interests.
Documents Incorporated by Reference
Document Incorporated as to
Registration Statement No. 33-11773 Items 1 and 13
on Form S-1
TABLE OF CONTENTS
Form 10-K Annual Report
For the Period Ended December 31, 1996
SWIFT ENERGY INCOME PARTNERS 1990-C, 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 INCOME PARTNERS 1990-C, LTD.
PART I
Item 1. Business
General Description of Partnership
Swift Energy Income Partners 1990-C, Ltd., a Texas limited partnership
(the "Partnership" or the "Registrant"), is a partnership formed under a public
serial limited partnership offering denominated Swift Energy Income Partners III
(Registration Statement No. 33-11773 on Form S-1, originally declared effective
March 19, 1987, and amended effective March 28, 1988, May 4, 1989 and May 1,
1990 [the "Registration Statement"]). The Partnership was formed effective
September 30, 1990 under a Limited Partnership Agreement dated September 30,
1990. The initial 539 limited partners made capital contributions of $5,695,200.
The Partnership is principally engaged in the business of acquiring,
developing and, when appropriate, disposing of working interests in proven oil
and gas properties within the continental United States. The Partnership does
not engage in exploratory drilling. Each working interest held by the
Partnership entitles the Partnership to receive, in kind or in value, a share of
the production of oil and gas from the producing property, and obligates the
Partnership to participate in the operation of the property and to bear its
proportionate share of all operating costs associated therewith. The Partnership
typically holds less than the entire working interest in its producing
properties.
At December 31, 1996, the Partnership had expended or committed to
expend 100% of the limited partners' net commitments (i.e., limited partners'
commitments available to the Partnership for property acquisitions after payment
of organization fees and expenses) in the acquisition and development of
producing properties, which properties are described under Item 2, "Properties,"
below. The Partnership's revenues and profits are derived almost entirely from
the sale of oil and gas produced from its properties and from the sale of
acquired oil and gas properties, when the sale of such properties is
economically preferable to continued operation.
The Partnership's business and affairs are conducted by its Managing
General Partner, Swift Energy Company, a Texas corporation ("Swift"). The
Partnership's Special General Partner, VJM Corporation, a California corporation
("VJM"), consults with and advises Swift as to certain financial matters. Swift
is the designated operator of many of the properties in which the Partnership
owns interests. The remaining properties are operated by industry operators
designated by the owners of a majority of the working interest in each property.
The general manner in which the Partnership acquires producing
properties and otherwise conducts its business is described in detail in the
Registration Statement under "Proposed Activities," which is incorporated herein
by reference. The following is intended only as a summary of the Partnership's
manner of doing business and specific activities to date.
Manner of Acquiring Properties; Net Profits and Overriding Royalty
Interest Agreement
For the sake of legal and administrative convenience, the producing
properties owned by the Registrant have typically been acquired initially by
Swift, which then conveyed ownership of each such property to the Registrant.
The Registrant acquires producing properties from Swift at the property
acquisition cost of such properties to Swift, as adjusted for intervening
operations.
The Registrant entered into a Net Profits and Overriding Royalty
Interest Agreement dated September 30, 1990 (the "NP/OR Agreement") with Swift
Energy Managed Pension Assets Partnership 1990-C, Ltd. (the "Pension
Partnership"). The Pension Partnership is a Texas limited partnership that is
also managed by Swift and VJM. The Pension Partnership was formed to acquire
nonoperating interests, such as net profits, royalty and overriding royalty
interests, in producing oil and gas properties.
I-1
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
Under the NP/OR Agreement, the Registrant and the Pension Partnership
have, in effect, combined their funds in acquiring producing properties; using
funds committed to the NP/OR Agreement by both partnerships, the Registrant
acquires producing properties, then promptly conveys nonoperating interests
therein to the Pension Partnership. The Registrant initially committed
$5,200,650 and the Pension Partnership initially committed $3,072,822 for
acquisitions under the NP/OR Agreement. The Registrant is obligated under the
NP/OR Agreement to convey to the Pension Partnership a 37% fixed net profits
interest and a variable overriding royalty interest in specified depths of every
producing property it acquires, except that (i) properties anticipated to
require significant development operations, and (ii) nonoperating interests
offered to the Registrant by third parties may be purchased by the registrant
outside the NP/OR Agreement, without participation by the Pension Partnership.
The Registrant is entitled to withdraw up to 30% of its committed funds under
the NP/OR Agreement for such acquisitions.
All properties acquired by the Registrant since the date of the NP/OR
Agreement have been acquired subject to the NP/OR Agreement and the nonoperating
interests created thereby. At December 31, 1996, the Registrant had not made any
withdrawals to acquire properties anticipated to require significant
development.
In accordance with its obligations under the NP/OR Agreement, as of
December 31, 1996 the Registrant had conveyed to the Pension Partnership a net
profits interest burdening certain depths of all producing properties acquired
by the Registrant since the date of the NP/OR Agreement. 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 37% net profits interest conveyed to the Pension
Partnership under the NP/OR Agreement differs from the typical net profits
interest in that it is calculated over the entire group of producing properties
acquired 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 Pension Partnership is entitled.
The net profits interest conveyed to the Pension Partnership 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 Registrant has also conveyed to the Pension Partnership under the
NP/OR agreement an overriding royalty interest in each property acquired since
the date of the NP/OR Agreement. 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.
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.
I-2
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
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 INCOME PARTNERS 1990-C, 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 INCOME PARTNERS 1990-C, LTD.
Item 2. Properties
As of December 31, 1996, the Partnership has acquired interests in
producing oil and gas properties which are generally described below.
Principal Oil and Gas Producing Properties
The most valuable fields in the Partnership, based upon year-end
engineering estimates of discounted future net revenues using constant pricing
and costs, are described below.
1. The Velrex Field is located in Schleicher County, Texas, and
accounts for 33% 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 of the
Partnership has been examined. The properties are subject to royalty, overriding
royalty and other interests customary in the industry. The Managing General
Partner does not believe any of these burdens materially detract from the value
of the properties or will materially detract from the value of the properties or
materially interfere with their use in the operation of the business of the
Partnership.
Production and Sales Price
The following table summarizes the sales volumes of the Partnership's
net oil and gas production expressed in MCFs. Equivalent MCFs are obtained by
converting oil to gas on the basis of their relative energy content; one barrel
equals 6,000 cubic feet of gas.
Net Production
------------------------------------
For the Years Ended
December 31,
------------------------------------
1996 1995 1994
------ ------- -------
Net Volumes (Equivalent MCFs) 305,494 357,960 463,380
Average Sales Price
per Equivalent MCF $2.17 $1.67 $1.97
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.79 $0.82 $0.85
I-5
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1996, 1995 and 1994. All of the Partnership's proved reserves
are located in the United States.
December 31,
------------------------------------------------------------------
1996 1995 1994
------------------- ------------------- -------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
Proved developed
reserves at end of year 14,509 1,165 62,254 2,591 66,084 2,804
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 66,494 2,787 68,649 3,172 92,348 4,774
Purchase of minerals
in place -- -- -- -- -- --
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates 2,911 136 10,239 (102) (9,960) (1,221)
Sales of minerals in
place (44,633) (1,237) -- -- -- --
Production (7,283) (262) (12,394) (283) (13,739) (381)
------- ----- ------- ----- ------- -----
Balance at end of year 17,489 1,424 66,494 2,787 68,649 3,172
------- ----- ------- ----- ------- -----
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 INCOME PARTNERS 1990-C, LTD.
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1996:
Reserves
December 31, 1996
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- - ----------- -------- ------ ------- ------ -------
Richer TX 12 57 4 0.077
Hilliard LA 132 82 7 1.134
Sugarland OK, TX 16,658 1,080 56 4.959
Kerrco TX 535 2 1 0.026
Arkla TX 152 203 2 0.335
------- ----- ---- -----
17,489 1,424 70 6.531
------- ----- ---- -----
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 INCOME PARTNERS 1990-C, 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 539 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 $72,700 and $140,000, 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 INCOME PARTNERS 1990-C, 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 $ 672,124 $ 617,897 $ 916,168 $ 1,085,999 $ 1,391,521
Income (Loss) $ 65,688 $ (460,741) $ (1,140,169) $ 74,637 $ 203,668
Total Assets $ 1,205,615 $ 1,945,806 $ 2,541,069 $ 4,100,321 $ 4,547,698
Cash Distributions $ 174,103 $ 96,281 $ 215,823 $ 678,656 $ 792,934
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 producing oil
and gas properties. The partnership invests primarily in proved producing
properties with nominal levels of future costs of development for proven but
undeveloped reserves. Significant purchases of additional reserves or extensive
drilling activity are not anticipated. Oil and gas reserves are depleting assets
and therefore often experience significant production declines each year from
the date of acquisition through the end of the life of the property. The primary
source of liquidity to the Partnership comes almost entirely from the income
generated from the sale of oil and gas produced from ownership interests in oil
and gas properties. This source of liquidity and the related results of
operations will decline in future periods as the oil and gas produced from these
properties also declines.
Subject to 1997 market conditions remaining comparable with 1996, the
Managing General Partner anticipates an increase in liquidity provided that
certain development work scheduled in 1997 is completed successfully. The
Partnership plans to spend in 1997 an estimated $65,000 for capital expenditures
needed for this development work and the enhancement of proved oil and gas
reserves. The Managing General Partner anticipates that the Partnership will
have adequate liquidity from income from continuing operations to satisfy any
future capital expenditure requirements. Funds generated from bank borrowings
and proceeds from the sale of oil and gas properties will be used to supplement
this effort if deemed necessary.
Results of Operations
Oil and gas sales increased 9 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 $.58/MCF
and an increase in oil prices of 21 percent or $3.26/BBL. The average sales
price per equivalent MCF increased 30 percent in 1996. Production volumes
decreased 15 percent due to a 41 percent oil production decrease and a 8 percent
gas production decline. The production declines partially offset the effect of
increased oil and gas prices impacting partnership performance.
Production cost per equivalent MCF decreased 4 percent in 1996 compared
to 1995 and total production costs decreased 17 percent in 1996.
Oil and gas sales decreased 33 percent in 1995 vs. 1994. Production
volumes decreased 23 percent due to a 25 percent gas production decrease and a
10 percent oil production decline. Since the Partnership's reserves are 87
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
$.45/MCF further contributed to the Partnership's decreased revenues. The
average sales price per equivalent MCF decreased 15 percent in 1995.
II-2
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
Production cost per equivalent MCF decreased 4 percent in 1995 compared
to 1994. In addition, total production costs decreased 26 percent in 1995.
Associated depreciation expense decreased 40 percent in 1995 when
compared to 1994.
The Partnership recorded an additional provision in depreciation,
depletion and amortization in 1995 and 1994 when the present value, discounted
at ten percent, of estimated future net revenues from oil and gas properties,
using the guidelines of the Securities and Exchange Commission, was below the
fair market value paid for oil and gas properties resulting in a full cost
ceiling impairment.
During 1997, Partnership revenues and costs will be shared between the
limited partners 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.
Item 8. Financial Statements and Supplementary Data
See Part IV, Item 14(a) for index to financial statements.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
II-3
SWIFT ENERGY INCOME PARTNERS 1990-C, 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 INCOME PARTNERS 1990-C, LTD.
From time to time, Swift as Managing General Partner of the Partnership
purchases Units in the Partnership from investors who offer the Units pursuant
to their right of presentment, which purchases are made pursuant to terms set
out in the Partnership's original Limited Partnership Agreement. Due to the
frequency and large number of these transactions, Swift reports these
transactions under Section 16 of the Securities Exchange Act of 1934 on an
annual rather than a monthly basis. In some cases such annual reporting may
constitute a late filing of the required Section 16 reports under the applicable
Section 16 rules.
Item 11. Executive Compensation
As noted in Item 10, "Directors and Executive Officers of the
Registrant," above, the Partnership has no executive officers. The executive
officers of Swift and VJM are not compensated by the Partnership.
Certain fees and allowances contemplated by the Limited Partnership
Agreement have been paid by the Partnership to Swift and VJM. See Note (4) in
Notes To Financial Statements (Related-Party Transactions) for further
discussion.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Swift Energy Company, the Managing General Partner, located at 16825
Northchase Drive, Suite 400, Houston, Texas 77060, owns 3,565 Limited
Partnership Units, which is 6.26 percent of all outstanding Limited Partnership
Units. All Limited Partnership Units owned by Swift were acquired from investors
who offered the Limited Partnership Units pursuant to their right of
presentment. As the Managing General Partner, Swift is not permitted generally,
under the Limited Partnership Agreement, to vote its Limited Partnership Units.
Swift also owns a general partnership interest of 9 percent of all partnership
interests in the Partnership.
Swift and VJM are not aware of any arrangement, the operation of which
may at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions
As noted in Item 10, "Directors and Executive Officers of the
Registrant," above, the Partnership has no executive officers or directors, and
thus has not engaged in any transactions in which any such person had an
interest. The Partnership is permitted to engage in certain transactions with
Swift as Managing General Partner and VJM as Special General Partner, subject to
extensive guidelines and restrictions described in the "Conflicts of Interest"
section of the Amended Prospectus contained in the Registration Statement, which
is incorporated herein by reference.
Summarized below are the principal transactions that have occurred
between the Partnership and Swift, VJM and their affiliates.
1. The oil and gas properties acquired by the Partnership, as described
in Item 2, "Properties" above, were typically acquired initially by Swift from
the seller thereof and subsequently transferred to the Partnership. Such
transfers were made by Swift at its Property Acquisition Costs (as defined in
the Limited Partnership Agreement), less any amounts received from sale of
production between the time of acquisition by Swift and the time of sale to the
Partnership.
2. Swift acts as operator for many of the wells in which the
Partnership has acquired interests and has received compensation for such
activities in accordance with standard industry operating agreements.
3. The Partnership paid to Swift and VJM certain fees as contemplated
by the Limited Partnership Agreement. See Note (4) in Notes To Financial
Statements (Related-Party Transactions) for further discussion.
III-2
SWIFT ENERGY INCOME PARTNERS 1990-C, 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 Income
Partners 1990-C, Ltd., dated September 30, 1990. (Form
10-K for year ended December 31, 1990, Exhibit 3.1).
3.2 Certificate of Limited Partnership of Swift Energy Income
Partners 1990-C, Ltd., as filed September 27, 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 Income Partners 1990-C, Ltd. and
Swift Energy Managed Pension Assets Partnership 1990-C,
Ltd. dated September 30, 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 March 28, 1988, contained in Post-Effective
Amendment No. 1 to Registration Statement No. 33-11773 on
Form S-1 for Swift Energy Income Partners III, as filed on
March 25, 1988, which have been incorporated herein by
reference: "Proposed Activities" (pp 36 - 50) and
"Conflicts of Interest" (pp. 70 - 78). (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 INCOME PARTNERS 1990-C, 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 Income Partners 1990-C, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1990-C, Ltd., (a Texas limited partnership) as of December 31, 1996 and
1995, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1996, 1995 and 1994. These financial statements
are the responsibility of the general partner's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Swift Energy Income
Partners 1990-C, 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 INCOME PARTNERS 1990-C, LTD.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
--------------- ----------------
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,129 $ 2,045
Oil and gas sales receivable 137,626 167,211
--------------- ----------------
Total Current Assets 138,755 169,256
--------------- ----------------
Gas Imbalance Receivable 18,347 88,828
--------------- ---------------
Oil and Gas Properties, using full cost
accounting 5,849,487 6,252,047
Less-Accumulated depreciation, depletion
and amortization (4,800,974) (4,564,325)
--------------- ----------------
1,048,513 1,687,722
--------------- ----------------
$ 1,205,615 $ 1,945,806
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts payable and accrued liabilities $ 282,699 $ 889,040
Current portion of note payable -- 33,664
--------------- ----------------
Total Current Liabilities 282,699 922,704
--------------- ----------------
Deferred Revenues 23,268 15,039
Partners' Capital 899,648 1,008,063
--------------- ----------------
$ 1,205,615 $ 1,945,806
=============== ================
See accompanying notes to financial statements.
IV-4
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
--------------- --------------- ---------------
REVENUES:
Oil and gas sales $ 668,937 $ 614,169 $ 912,675
Interest income 94 187 183
Other 3,093 3,541 3,310
--------------- --------------- ---------------
672,124 617,897 916,168
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 199,839 251,627 335,885
Production taxes 42,747 40,204 59,410
Depreciation, depletion
and amortization -
Normal provision 236,648 236,382 396,718
Additional provision -- 417,905 1,142,899
General and administrative 100,780 69,371 102,454
Interest expense 26,422 63,149 18,971
--------------- --------------- ---------------
606,436 1,078,638 2,056,337
--------------- --------------- ---------------
INCOME (LOSS) $ 65,688 $ (460,741) $ (1,140,169)
=============== =============== ===============
See accompanying notes to financial statements.
IV-5
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- --------------- ---------------
Balance,
December 31, 1993 $ 2,483,354 $ 79,911 $ 357,812 $ 2,921,077
Income (Loss) (1,005,226) 34,986 (169,929) (1,140,169)
Cash Distributions (179,400) (36,423) -- (215,823)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1994 1,298,728 78,474 187,883 1,565,085
--------------- --------------- --------------- ---------------
Income (Loss) (417,253) 18,717 (62,205) (460,741)
Cash Distributions (72,700) (23,581) -- (96,281)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 808,775 73,610 125,678 1,008,063
--------------- --------------- --------------- ---------------
Income (Loss) 62,424 23,121 (19,857) 65,688
Cash Distributions (140,000) (34,103) -- (174,103)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 $ 731,199 $ 62,628 $ 105,821 $ 899,648
=============== =============== =============== ==============
Limited Partners' net income (loss)
per unit
1994 $ (17.65)
================
1995 $ (7.33)
================
1996 $ 1.10
================
See accompanying notes to financial statements.
IV-6
SWIFT ENERGY INCOME PARTNERS 1990-C, 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) $ 65,688 $ (460,741) $ (1,140,169)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 236,648 654,287 1,539,617
Change in gas imbalance receivable
and deferred revenues 78,711 3,721 1,799
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 29,585 (13,809) 26,082
(Increase) decrease in other current assets -- -- 43,190
Increase (decrease) in accounts payable
and accrued liabilities (606,340) 98,590 (70,400)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities (195,708) 282,048 400,119
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (93,600) (51,581) (60,410)
Proceeds from sales of oil and gas properties 496,160 863 11,247
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 402,560 (50,718) (49,163)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (174,103) (96,281) (215,823)
Payments on note payable (33,665) (134,659) (134,659)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities (207,768) (230,940) (350,482)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (916) 390 474
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,045 1,655 1,181
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,129 $ 2,045 $ 1,655
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 26,982 $ 65,280 $ 19,951
=============== =============== ===============
See accompanying notes to financial statements.
IV-7
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1990-C, Ltd., a Texas limited partnership
(the Partnership), was formed on September 30, 1990, for the purpose of
purchasing and operating producing oil and gas properties within the continental
United States. Swift Energy Company ("Swift"), a Texas corporation, and VJM
Corporation ("VJM"), a California corporation, serve as Managing General Partner
and Special General Partner of the Partnership, respectively. The general
partners are required to contribute up to 1/99th of limited partner net
contributions. The 539 limited partners made total capital contributions of
$5,695,200.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the general partners. Organization
and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate for a certain period equals or exceeds 17.5 percent, then for
the following calendar year, these continuing costs and revenues will be
allocated 85 percent to the limited partners and 15 percent to the general
partners. After partnership payout, continuing costs and revenues will be shared
85 percent by the limited partners, and 15 percent by the general partners, even
if the cash distribution rate is less than 17.5 percent. Payout had not occurred
as of December 31, 1996.
(2) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
estimates.
Oil and Gas Properties --
For financial reporting purposes, the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition and development of oil and gas reserves are capitalized. Such costs
include lease acquisitions, geological and geophysical services, drilling,
completion, equipment and certain general and administrative costs directly
associated with acquisition and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1996, 1995 and 1994.
Future development, site restoration, dismantlement and abandonment
costs, net of salvage values, are estimated on a property-by-property basis
based on current economic conditions and are amortized to expense as the
Partnership's capitalized oil and gas property costs are amortized.
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent, and the lower of
cost or fair value of unproved properties. Proceeds from the sale or disposition
of oil and gas properties are treated as a reduction of oil and gas property
costs with no gains or losses being recognized except in significant
transactions.
IV-8
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
determined by dividing the physical units of oil and gas produced during the
period by the total estimated units of proved oil and gas reserves at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
Statements of Cash Flows --
Highly liquid debt instruments with an initial maturity of three months
or less are considered to be cash equivalents.
(3) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
Year Ended December 31,
---------------------------------------
1996 1995 1994
-------- -------- --------
Acquisition of
proved properties $ -- $ -- $ --
Development 93,600 51,581 60,410
-------- -------- --------
$ 93,600 $ 51,581 $ 60,410
-------- -------- --------
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
During 1995 and 1994, the Partnership's unamortized oil and gas
property costs exceeded the quarterly calculations of the "ceiling limitation"
resulting in an additional provision for depreciation, depletion and
amortization of $417,905 and $1,142,899, respectively. In computing the
Partnership's third quarter 1994 "ceiling limitation", the Partnership utilized
the product prices in effect at the date of the filing of the Partnership's
report on Form 10-Q. Utilizing these subsequent prices, the write down recorded
by the Partnership was $659,872 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 $370,152 and $1,000,733, 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 depreciation, depletion and amortization provision is
more or less than the combined depreciation, depletion and amortization
provision attributable to general and limited partners.
IV-9
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $141,508 for managing and overseeing the offering of limited
partnership units.
A one-time management fee of $142,380 was paid to Swift in 1990 for
services performed for the Partnership. During 1996, 1995 and 1994, the
Partnership paid Swift $78,034, $46,966 and $75,884, respectively, as a general
and administrative overhead allowance.
Effective September 30, 1990, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift
Energy Managed Pension Assets Partnership 1990-C, Ltd. (Pension Partnership),
managed by Swift for the purpose of acquiring working interests in producing oil
and gas properties. Under the terms of the NP/OR Agreement, the Partnership has
conveyed to the Pension Partnership 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) Note Payable to a Bank -
Note payable to a bank at December 31, 1996 and 1995 follows:
1996 1995
-------- --------
Date of current note: December 29, 1992
Note payable at 1.25% above the bank's base rate (9.75% at December 31,
1995), principal payable in quarterly installments of $33,665, with the
balance due at maturity (February 1, 1996),
collateralized by partnership assets $ -- $ 33,664
Less: Current portion -- (33,664)
-------- --------
Long-term portion $ -- $ --
-------- --------
Note was paid in full at maturity. As provided by the Partnership
Agreement, the note payable was obtained to fund development wells. As of
December 31, 1996, the Partnership had no outstanding note payable to a Bank.
(6) Federal Income Taxes -
The Partnership is not a tax-paying entity. No provision is made in the
accounts of the Partnership for federal or state income taxes, since such taxes
are liabilities of the individual partners, and the amounts thereof depend upon
their respective tax situations.
The tax returns and the amount of distributable Partnership income are
subject to examination by the federal and state taxing authorities. If the
Partnership's ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1996, 1995 and 1994
was $429,938, $202,609 and $363,644, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
IV-10
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion is not included in the
Partnership's income for federal income tax purposes but is charged directly to
the partners' capital accounts to the extent of the cost of the leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion for federal income tax purposes may vary from that computed for
financial reporting purposes in cases where a ceiling adjustment is recorded, as
such amount is not recognized for tax purposes.
(7) Gas Imbalances -
The gas imbalance receivable and deferred revenues represent imbalances
assumed as part of property acquisitions. The imbalances are accounted for on
the entitlements method, whereby the Partnership records its share of revenue,
based on its entitled amount. Any amounts over or under the entitled amount are
recorded as an increase or decrease to the gas imbalance receivable or deferred
revenues as applicable.
(8) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales of its oil
and natural gas production. Market prices of oil and natural gas may fluctuate
and adversely affect operating results.
The Partnership extends credit to various companies in the oil and gas
industry which results in a concentration of credit risk. This concentration of
credit risk may be affected by changes in economic or other conditions and may
accordingly impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size, reputation, and
nature of the companies to which the Partnership extends credit. In addition,
the Partnership generally does not require collateral or other security to
support customer receivables.
(9) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and cash
equivalents and short-term receivables and payables. The carrying amounts
approximate fair value due to the highly liquid nature of the short-term
instruments.
IV-11
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SWIFT ENERGY INCOME
PARTNERS 1990-C, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
General Partner
Date: March 17, 1997 By: s/b A. Earl Swift
-------------- ----------------------------------
A. Earl Swift
President
Date: March 17, 1997 By: s/b John R. Alden
-------------- ----------------------------------
John R. Alden
Principal Financial Officer
Date: March 17, 1997 By: s/b Alton D. Heckaman, Jr.
-------------- ----------------------------------
Alton D. Heckaman, Jr.
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
SWIFT ENERGY INCOME
PARTNERS 1990-C, 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-12
SWIFT ENERGY INCOME PARTNERS 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-13
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 33-11773-14
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
(Exact name of registrant as specified in its charter)
Texas 76-0318471
(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 INCOME PARTNERS 1990-C, 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 9
PART II. OTHER INFORMATION 10
SIGNATURES 11
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
BALANCE SHEETS
March 31, December 31,
1997 1996
-------------- -------------
(Unaudited)
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,134 $ 1,129
Oil and gas sales receivable 147,630 137,626
-------------- --------------
Total Current Assets 148,764 138,755
-------------- --------------
Gas Imbalance Receivable 18,347 18,347
-------------- -------------
Oil and Gas Properties, using full cost
accounting 5,847,040 5,849,487
Less-Accumulated depreciation, depletion
and amortization (4,842,726) (4,800,974)
-------------- --------------
1,004,314 1,048,513
-------------- --------------
$ 1,171,425 $ 1,205,615
============== ==============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts payable and accrued liabilities $ 202,214 $ 282,699
-------------- --------------
Deferred Revenues 23,192 23,268
Partners' Capital 946,019 899,648
-------------- --------------
$ 1,171,425 $ 1,205,615
============== ==============
See accompanying notes to financial statements.
3
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
---------------------------------
1997 1996
--------------- ---------------
REVENUES:
Oil and gas sales $ 157,392 $ 138,682
Interest income 5 10
Other 521 584
--------------- ---------------
157,918 139,276
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 34,250 59,071
Production taxes 9,762 7,781
Depreciation, depletion
and amortization 41,752 51,407
General and administrative 18,443 16,117
Interest expense 1,899 15,253
--------------- ---------------
106,106 149,629
--------------- ---------------
NET INCOME (LOSS) $ 51,812 $ (10,353)
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1997 $ .91
===============
March 31, 1996 $ (.18)
===============
See accompanying note to financial statements.
4
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
----------------------------------------
1997 1996
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 51,812 $ (10,353)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 41,752 51,407
Change in gas imbalance receivable
and deferred revenues (76) 1,719
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable (10,004) 36,310
Increase (decrease) in accounts payable
and accrued liabilities (80,485) (27,332)
---------------- --------------
Net cash provided by (used in) operating activities 2,999 51,751
---------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties -- (12,097)
Proceeds from sales of oil and gas properties 2,447 --
---------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (5,441) (6,989)
Payments on note payable -- (33,665)
---------------- --------------
Net cash provided by (used in) financing activities (5,441) (40,654)
---------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5 (1,000)
---------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,129 2,045
---------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,134 $ 1,045
================ ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,899 $ 15,813
=============== ===============
See accompanying notes to financial statements.
5
SWIFT ENERGY INCOME PARTNERS 1990-C, 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 Income Partners 1990-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1990, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Corporation ("VJM"), a California
corporation, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The general partners are
required to contribute up to 1/99th of limited partner net
contributions. The 539 limited partners made total capital contributions
of $5,695,200.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
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.
6
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1997 and 1996.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $141,508 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $142,380 was
paid to Swift for services performed for the Partnership.
Effective September 30, 1990, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1990-C,
Ltd. (Pension Partnership), managed by Swift for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership has conveyed to the
Pension Partnership 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.
7
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The gas imbalance receivable and deferred revenues are
accounted for on the entitlements method, whereby the Partnership
records its share of revenue, based on its entitled amount. Any amounts
over or under the entitled amount are recorded as an increase or
decrease to the gas imbalance receivable or deferred revenues as
applicable.
(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.
8
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Partnership was formed for the purpose of investing in producing oil
and gas properties located within the continental United States. In order to
accomplish this, the Partnership goes through two distinct yet overlapping
phases with respect to its liquidity and result of operations. When the
Partnership is formed, it commences its "acquisition" phase, with all funds
placed in short-term investments until required for such property acquisitions.
The interest earned on these pre-acquisition investments becomes the primary
cash flow source for initial partner distributions. As the Partnership acquires
producing properties, net cash from operations becomes available for
distribution, along with the investment income. After partnership funds have
been expended on producing oil and gas properties, the Partnership enters its
"operations" phase. During this phase, oil and gas sales generate substantially
all revenues, and distributions to partners reflect those revenues less all
associated partnership expenses. The Partnership may also derive proceeds from
the sale of acquired oil and gas properties, when the sale of such properties is
economically appropriate or preferable to continued operation.
Liquidity and Capital Resources
The Partnership has completed acquisition of producing oil and gas
properties, expending all of the limited partners' net commitments available for
property acquisitions.
The Partnership does not allow for additional assessments from the
partners to fund capital requirements. However, funds are available from
partnership revenues, borrowings or proceeds from the sale of partnership
property. The Managing General Partner believes that the funds currently
available to the Partnership will be adequate to meet any anticipated capital
requirements.
Results of Operations
Oil and gas sales increased $18,710 or 13 percent in the first quarter of
1997 when compared to the same period in 1996, primarily due to increased gas
and oil prices. An increase in gas prices of 55 percent or $1.03/MCF and in oil
prices of 22 percent or $3.80/BBL had a significant impact on partnership
performance. Current quarter oil production declined 63 percent and gas
production declined 4 percent when compared to first quarter 1996 production
volumes, partially offsetting the effect of increased gas and oil prices.
Associated depreciation expense decreased 19 percent or $9,655.
During 1997, partnership revenues and costs will be shared between the
limited partners and general partners in a 90:10 ratio.
9
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-NONE-
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SWIFT ENERGY INCOME
PARTNERS 1990-C, 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
11
May 20, 1997
Swift Energy Company
16825 Northchase Drive, Suite 400
Houston, Texas 77060
SWIFT ENERGY INCOME PARTNERS 1990-C 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 Income Partners 1990-C
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 13,219 1,063,524 $ 1,544,161 $ 1,072,237
Proved Undeveloped 2,518 217,830 $ 410,473 $ 174,550
------------- -------------- -------------- -------------
TOTAL PROVED 15,737 1,281,354 $ 1,954,634 $ 1,246,787
G & A $ (105,540) $ (59,035)
------------- -------------- -------------- ------------
TOTAL 15,737 1,281,354 $ 1,849,094 $ 1,187,752
The 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.
James H. Hartsock, PhD., P.E.
-----------------------------
James H. Hartsock, PhD., P.E.
Executive Vice President
JHH:gdm
Attachment
C:\SWIFT\1990C131.97