SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] 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.
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(Name of Registrant as Specified In Its Charter)
Swift Energy Company
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(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:
2) Aggregate number of securities to which transaction applies:
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:
5) Total fee paid:
[X] 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:
October 15, 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 at least 51% of the outstanding Units must approve this
proposal. It is important that you review the enclosed materials before voting
on the proposal. The Managing General Partner recommends that you vote in favor
of such sale and liquidation for a number of reasons. See "The Proposal--Reasons
for the Proposal" and "--Recommendation of the Managing General Partner."
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD. has been in existence for
seven years, and most of its properties were purchased by early 1991. No capital
is available for any enhancement activities on its properties or to produce the
proved non-producing reserves on those properties. The Partnership's interest in
proved producing reserves at December 31, 1996 was only 1,086,000 Mcfe. Thus,
even if oil and gas prices were unusually high, there would be limited impact
upon the Partnership's ultimate economic performance. See "The
Proposal--Partnership Financial Performance and Condition." To continue
operation of the Partnership means that Partnership direct and 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 continue to decrease, which may
decrease the ultimate funds available for Limited Partners. See "The
Proposal--Estimates of Liquidating Distribution Amount." Liquidation of the
Partnership's remaining assets at this time will accelerate the receipt by the
partners of the remaining cash value of the Partnership.
If Limited Partners holding at least 51% of the Units approve this
proposal, the Managing General Partner will attempt to complete the sale of all
Partnership properties by the end of the first quarter of 1998.
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
/S/ A. Earl Swift
--------------------------
A. Earl Swift
Chairman
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 November 25, 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 Tuesday, November 25, 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 October 15, 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 and return
it promptly in the enclosed postage-paid envelope which has been provided for
your convenience. The prompt return of the proxy will ensure a quorum and save
the Partnership the expense of further solicitation.
SWIFT ENERGY COMPANY,
Managing General Partner
/S/ John R. Alden
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JOHN R. ALDEN
Secretary
October 15, 1997
Swift Energy Income Partners 1990-C, Ltd.
16825 Northchase Drive, Suite 400
Houston, Texas 77060-9468
(281) 874-2700
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PROXY STATEMENT
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SUMMARY
General
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 Tuesday, November 25, 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 October
21, 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
October 15, 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 General Partners may not vote any
limited partnership Units owned by them for matters such as the Proposal. VJM
Corporation, a California corporation, the Special General Partner of the
Partnership, owns a 1% interest in the Partnership as a General Partner, but
owns no Units. The Managing General Partner currently owns approximately 6.26%
of all outstanding Units. Therefore, the affirmative vote of holders of at least
51% of the remaining Units is required to approve the proposed sale.
Partnership Property Interests
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, Swift Energy Managed
Pension Assets Partnership 1990-C, Ltd. (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.
1
Neither the Managing General Partner nor any of its affiliates will
purchase any of the Partnership's Property Interests at auction or in negotiated
transactions, although it is possible that if a Property Interest cannot be sold
to a third party at auction or on a negotiated basis (which usually occurs
because a property has no appreciable value, often accompanied by the fact that
the property requires expenditures to plug and abandon wells), such Property
Interests may be conveyed to the Managing General Partner or the property's
operator for no consideration if necessary to dispose of such interest. The
Managing General Partner is not currently aware of any Property Interests owned
by the Partnership which are likely to be conveyed in this manner.
The total PV-10 Value of the Partnership's reserves as of December 31,
1996 was $1,187,752. During 1996, approximately 80% 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 second quarter of 1997.
Method of Sale
It is highly likely that the Property Interests will be sold in a
series of sales rather than in a single transaction. All sales of the
Partnership's Property Interests will be made through the auction process or
through negotiated transactions to unaffiliated third parties. The Managing
General Partner anticipates that most of the Partnership's Property Interests
will be sold at auction (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 with third parties. See "The Proposal--Steps to
Implement the Proposal--Negotiated Sale." Other than certain Property Interests
to be offered at auction in October 1997 as discussed under "Partnership
Property Interests" below, 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
Partnership 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 the first
quarter of 1998. The sale of Partnership Property Interests that account for at
least 662/3% of the total value of the Partnership Property Interests will cause
the Partnership to dissolve automatically under the terms of the Partnership
Agreement and the Texas Act. Any Partnership Property Interests that are not
sold at auction may be sold pursuant to negotiated sales to third parties.
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."
2
PARTNERSHIP PROPERTY INTERESTS
The chart below presents information on those fields in which the
Partnership has a Property Interest which constitutes 10% or more of the
Partnership's PV-10 Value at December 31, 1996. The information below includes
the location of each field, the number of wells and operator(s), together with
information on the percentage of the Partnership's total PV-10 Value
($1,187,752) on December 31, 1996 attributable to each of these fields.
Information is also provided regarding the percentage of the Partnership's
production for the eighteen months ended June 30, 1997 on a volumetric basis
from each of these fields. On a volumetric basis, the percentage of the PV-10
Value at December 31, 1996 of these fields attributable to natural gas ranged
between 87.8% and 99.6%, and most of the production from these fields (in excess
of 75% in every case during the last eighteen months) has been natural gas.
Of the remaining nine fields in which the Partnership owns a Property
Interest, three fields each comprise less than 1.0% of the Partnership's PV-10
Value at December 31, 1996 and the PV-10 Value of each of the other six fields
average 3.9% of the Partnership's PV-10 Value at the same date.
Cody Baker 9
Velrex Bell Ranch Key Other
Field Field Field Field Fields
-------------- -------------- --------------------- ------------ -------------
Schleicher Schleicher Schleicher Wheeler TX (26);
County and State County, County, County, County, LA (12);
Texas Texas Texas Texas OK (3)
Number of Wells 14 4 9 2 41
Operator Swift Swift Swift and Swift Swift and
2 others 5 others
% of 12/31/96 PV-10 Value 35.0% 14.4% 13.1% 12.7% 24.8%
% of Production for 18 months 20.9% 6.0% 11.8% 17.5% 43.8%
ended 6/30/97 (Vol.)
The Partnership's Property Interests include interests in five fields
in Schleicher, Irion and Crockett Counties in the Permian Basin in West Texas
which the Managing General Partner has determined to offer for sale at an
auction (along with interests in the same fields held by other partnerships
managed by the Managing General Partner) which is to be held in Midland, Texas
on October 22, 1997. Collectively, the Partnership's interests in these five
fields represent 23.6% of the Partnership's PV-10 Value at December 31, 1996,
and 25.2% of its production for the eighteen months ended June 30, 1997.
Interests in only two of the fields represent more than 2.0% of the
Partnership's PV-10 Value: the Partnership's interest in the Ozona Field in
Crockett County (7.9% of the Partnership's PV-10 Value at December 31, 1996) and
its interest in the Baker Ranch Field in Schleicher County (13.1% of the
Partnership's PV-10 Value at December 31, 1996). These interests are being
offered for sale to third parties at auction at this time in order to take
advantage of an auction focused upon West Texas and New Mexico Permian Basin
properties with buyers specifically interested in those properties, as O&G
Clearinghouse auctions are held in Midland only once every six months. All
Property Interests offered will have a minimum bid amount. Because there is no
assurance that these Property Interests will be sold at the auction, the
presentation of the Partnership's Property Interests above and the estimates of
liquidating distributions include the Partnership's interests in these fields.
3
If these interests are sold, proceeds from such sale will either be included in
the first liquidating distribution or sent to Limited Partners in an earlier
distribution, in the latter case whether or not the Proposal is approved.
SPECIAL CONSIDERATIONS
Reasons for the Proposal
Sale of the Partnership's assets and liquidation of the Partnership are
being proposed for Limited Partner approval in an attempt to realize the highest
value for the Partnership's Property Interests. The reasons for proposing the
sale of the Partnership's Property Interests at this time are described in
detail under "The Proposal --Reasons for the Proposal." In summary, these
reasons include: (i) the reduced levels of cash flow from the Partnership's
Property Interests, which has resulted in cash distributions to Limited Partners
since January 1, 1996 of only $57,000; (ii) the inherent decline in hydrocarbons
produced by oil and gas wells over time in the absence of any further capital
expenditures on the properties in which the Partnership has a Property Interest;
(iii) the continuation of certain fixed oil field overhead and operating costs
($55,938 in 1996) which are incurred regardless of the level of production; and
(iv) directs costs (audits, reserve reports, partnership filings) and general
and administrative costs incurred each year ($100,779 in 1996). Because of the
depletion of the Partnership's oil and gas reserves (1,375,776 Mcfe at December
31, 1996, 79% of which were proved producing reserves) and current low levels of
cash flow, the Managing General Partner believes that the Partnership's asset
base and future net revenues no longer justify the continuation of the
Partnership's operations. It is also the Managing General Partner's belief that
improvements over the last several years in the level of oil and gas prices,
particularly those for natural gas, make this an appropriate time to consider
the sale of the Partnership's Property Interests, and increase the likelihood of
maximizing the value of the Partnership's assets, although the level of future
prices cannot be predicted with any accuracy. By selling its Property Interests
and liquidating the Partnerships, future overhead, direct and general and
administrative costs can be avoided and the receipt of the value of the
Partnership's reserves accelerated so that such funds are received at one time.
Such sale and liquidation is viewed by the Managing General Partner as
preferable to requiring the periodic sale of a portion of its Property Interests
over a long period of time to pay the expenses of future operations and
administration.
Fairness of the Proposal
The Managing General Partner believes that the Proposal to sell the
Partnership's Property Interests and liquidate is fair to Limited Partners for
several reasons. The Proposal must be approved by Limited Partners holding at
least 51% of the Units, without the Managing General Partner voting its 6.26%
limited partnership interest. The Partnership's Property Interests will be sold
to the highest third-party bidder at auction or to the third party which is
willing to purchase the interests for the highest price in a negotiated sale.
Although the estimates contained under "The Proposal--Estimates of
Liquidating Distribution Amount" above show that estimated cash distributions to
Limited Partners (based on net present value) from continued operations over
twenty years would be approximately 5.1% higher than estimated cash
distributions from selling the Partnership's properties and liquidating the
Partnership at this time (based on the "high" range of estimates), the Managing
General Partner believes there is a substantial advantage in receiving the
liquidating distribution in one lump sum currently. The estimates of
distributions from continued operations are based upon current prices. It is
highly likely that over such a long period of time, oil and gas prices will vary
often and possibly widely from the prices used to prepare these estimates.
Continued operations over such a long period of time subject Limited Partners to
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the risk of receiving lower levels of cash distributions if oil and gas prices
over this twenty year period are lower on average than those used in preparing
the estimates of cash distributions from continued operations. Continued
operations over twenty years subject Limited Partners' potential distributions
to the risks of price volatility and to possible changes in costs or need for
workover or similar significant remedial work on the Partnership's properties,
for which the Partnership has no capital. The Managing General Partner also
believes that there is an advantage to Limited Partners taking any funds to be
received upon liquidation and redeploying those assets in other investments,
rather than continuing to receive small distributions over such a long period of
time. See "The Proposal--Fairness of the Proposal; Comparison of Sale Versus
Continuing Operations."
THE PROPOSAL INVOLVES CERTAIN RISKS. SEE "RISK FACTORS."
o If the Proposal is approved, the Limited Partners will not have an
opportunity to approve the specific terms of any particular sale of the
Property Interests.
o 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.
o No minimum prices will be established for most of the Property
Interests, so there is no guarantee that the Property Interests will be
sold at or above their fair market value.
o The sale of the Property Interests is dependent upon the simultaneous
sale of the Pension Partnership's interest in the same properties. The
failure of the Pension Partnership to approve the proposal could
significantly adversely affect the likelihood of the sale of the
Property Interests.
o If the Proposal is adopted, although a final liquidating distribution
is anticipated, the amount thereof is not assured. See "The Proposal--
Estimates of Liquidating Distribution Amount."
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
ranging from an average of 10% to 15% will need to be sold each year in order to
cover future direct costs, operating costs and administrative costs.
LIMITED PARTNERS ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSE
PROXY AND TO RETURN IT TO THE MANAGING GENERAL PARTNER NO LATER
THAN NOVEMBER 15, 1997.
5
GLOSSARY OF TERMS
Btu means British Thermal Unit, which is a heating equivalent measure for
natural gas.
Mcf means thousand cubic feet of natural gas.
Mcfe means thousand cubic feet of natural gas equivalent, which is determined
using the ratio of one barrel of oil, condensate or natural gas liquids to six
Mcf of natural gas.
Mmbtu means million British Thermal Units, which is a heating equivalent measure
for natural gas.
Net Profits Interest means an interest in oil and gas property which entitles
the owner to a specified percentage share of the Gross Proceeds generated by
such property, net of aggregate operating costs. Under the NP/OR Agreement, the
Pension Partnership receives a Net Profits Interest entitling it to a specified
percentage of the aggregate Gross Proceeds generated by, less the aggregate
operating costs attributable to, those depths of all Producing Properties
acquired pursuant to such agreement that are evaluated at the respective dates
of acquisition to contain Proved Reserves, to the extent such depths underlie
specified surface acreage.
NP/OR Agreement means the form of Net Profits and Overriding Royalty Interest
Agreement entered into between the Partnership and the Pension Partnership
pursuant to which the Pension Partnership acquired a Net Profits Interest from
the Partnership in a group of Producing Properties. The Working Interest in such
group of properties is held by the Partnership.
PV-10 Value means the estimated future net revenue to be generated from the
production of proved reserves discounted to present value using an annual
discount rate of 10%; these amounts are calculated net of estimated production
costs and future development costs, using prices and costs in effect as of a
certain date, without escalation and without giving effect to non-property
related expenses such as debt service, future income tax expense or
depreciation, depletion and amortization.
Producing Properties means Properties (or interests in properties) producing oil
and gas in commercial quantities, or containing shut-in wells capable of such
production, or properties which are acquired as an incidental part of the
acquisition of such properties. Producing Properties include associated well
machinery and equipment, gathering systems, storage facilities or processing
installations or other equipment and property associated with the production and
field processing of oil or gas. Interests in Producing Properties may include
Working Interests, production payments, Royalty Interests, Overriding Royalty
Interest, Net Profits Interests, and other non-operating interests. Producing
Properties may include gas gathering lines or pipelines. The geographical limits
of a Producing Property may be enlarged or contracted on the basis of
subsequently acquired geological data to define the productive limits of a
reservoir, or as a result of action by a regulatory agency employing such
criteria as the regulatory agency may determine.
Proved Reserves means those quantities of crude oil, natural gas, and natural
gas liquids which, upon analysis of geologic and engineering data, appear with
reasonable certainty to be recoverable in the future from known oil and gas
reservoirs under existing economic and operating conditions. Proved Reserves are
limited to those quantities of oil and gas which can be reasonably expected to
be recoverable commercially at current prices and costs, under existing
regulatory practices and with existing conventional equipment and operating
methods.
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Royalty Interest means a fractional interest in the gross production, or the
gross proceeds therefrom, of oil and gas and other minerals under a lease; free
of any expenses of exploration, development, operation and maintenance.
Working Interest means the operating interest under an oil, gas and mineral
lease or other property interest covering a specific tract or tracts of land.
The owner of a Working Interest has the right to explore for, drill and produce
the oil, gas and other minerals covered by such lease or other property interest
and the obligation to bear the costs of exploration, development, operation or
maintenance applicable to that owner's interest.
VOTING ON THE PROPOSAL
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 Statement, 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 "Business of the
Partnership--Transactions Between the Managing General Partner and the
Partnership."
Proxies; Revocation
A sample of the form of proxy is included in this Proxy Statement. The
actual proxy to be used to register your vote on the Proposal is the separate
green sheet of paper included with the Proxy Statement.
PLEASE USE THE GREEN PROXY TO VOTE UPON THE PROPOSAL.
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.
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No Appraisal or Dissenters' Rights Provided
In connection with the proposal to sell substantially all of its assets
and liquidate the Partnership, Limited Partners are not entitled to any
dissenters' or appraisal rights such as would be available to shareholders in a
corporation engaging in a merger. 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.
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
A Limited Partner considering whether to vote in favor of the Proposal
should give careful consideration to the risks involved, including those
summarized below:
Uncertainty of Liquidating Distributions
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.
Undetermined Sales Prices; Volatility of Oil and Gas Prices
Limited Partners will not have an opportunity to approve the specific
terms of any particular sale of the Property Interests and anticipated sales
prices for the Property Interests 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.
Dependence on Pension Partnership
If the Partnership approves the proposal to sell its properties but its
companion Pension Partnership does not approve the proposal to sell its assets,
then the Partnership will be forced to sell its working interests in its
properties burdened by the net profits interest owned by the Pension
Partnership. This may affect the saleability of the Partnership's properties due
8
to the burden on cash flow caused by the existence of the PensionPartnership's
net profits interest. If this burden prevents an economic sale to a third party,
then the Managing General Partner will obtain a third party independent
appraisal of the Partnership's properties from J.R. Butler and Company of
Houston, Texas, and purchase those Property Interests itself for the appraisal
price. 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
Partnerships."
Prices Used for Calculation of PV-10 Value of Proved Reserves
The PV-10 Value of the Partnership's proved oil and gas reserves upon
which the estimates of the range of liquidating distributions have been based
were calculated using an estimate of 1997 average prices without any escalation
of $2.25 per MMBTU. These estimated prices were based upon pricing scenarios
determined by the Managing General Partner and are not the same as those
mandated by the Securities and Exchange Commission 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 have been significantly higher. These higher prices have not been used
because of the fall in prices since year-end 1996 and the Managing General
Partner's determination that reserve estimates using 1997 average prices more
accurately reflect values likely to be received upon sale of the Partnership's
Property Interests within the next six months than estimates based upon year-end
1996 prices. If this assumption is incorrect or prices increase rapidly at the
end of 1997 or the beginning of 1998, the estimates of the Partnership's PV-10
Value and proceeds receivable upon liquidation of its Property Interests are
likely to be too low.
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 the Partnership's affairs and make final
distributions to its partners. The Partnership's assets consist of working
interests in producing oil and gas properties, which are burdened by a single
net profits interest owned by an affiliated partnership also managed by the
Managing General Partner and formed at approximately the same time as the
Partnership was organized. The Partnership's non-operating net profits interest
was granted to Swift Energy Managed Pension Assets Partnership 1990-C, Ltd. (the
"Pension Partnership") 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 the 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.
9
The Managing General Partner intends to sell most of the Partnership's
Property Interests through auction conducted by the O&G Clearinghouse or a
similar company, although some of the Partnership's Property Interests might be
sold to third parties in negotiated transactions. The Managing General Partner
expects to sell all properties not sold by auction pursuant to negotiated sales
conducted by the Managing General Partner or a third party engaged to dispose of
the Partnership's assets. The Partnership, if not terminated earlier, will
terminate automatically, pursuant to the terms of the Partnership Agreement, on
January 1, 2021.
The Managing General Partner is an independent oil and gas company
engaged in the exploration, development, acquisition and operation of oil and
gas properties, both directly and through partnership and joint venture
arrangements, and therefore holds various interests in numerous oil and gas
properties. Furthermore, the Managing General Partner is the managing general
partner of a number of oil and gas partnerships.
Partnership Financial Performance and Condition
The Partnership owns 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 80% 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 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
10
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 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 has been natural gas, the bulk of which was produced during
the years when gas prices were the lowest.
Comparison of Gas Prices Expected in 1990 to Gas Proces Actually Received
Swift Energy Income Partners 1990-C, Ltd.
PRICE PER MCF
YEAR ACTUAL EXPECTED
---- ------ --------
1990 $1.86 $2.04
1991 $1.63 $2.24
1992 $1.80 $2.68
1993 $1.96 $3.19
1994 $1.89 $3.38
1995 $1.44 $3.58
1996 $2.02 $3.79
11
Amounts of Production to Date Produced by Year
Swift Energy Income Partners 1990-C, Ltd.
YEAR MCFE
---- -------
1990 253,497
1991 806,323
1992 704,598
1993 527,436
1994 463,380
1995 357,960
1996 305,494
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. 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 material 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.
12
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 an estimate of 1997 average prices
without any escalation of $2.25 per Mmbtu. The "high" range of estimated
distributions from liquidation is based upon estimated future net revenues
discounted to present value at 10% per annum. The "low" range is 70% of the
"high" range estimate. The 1997 price estimate grew out of the pricing scenarios
determined by the Managing General Partner, which scenarios are used in various
circumstances, including economic modeling of partnership returns and evaluating
the economics of property sales or property acquisitions for the Managing
General Partner or for partnerships managed by the Managing General Partner.
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 these estimates of 1997 average prices more accurately reflect prices
purchasers of properties currently 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 six
months of 1997 was $2.35 per Mcf, as compared to $4.72 per Mcf at December 31,
1996. On July 1, the Managing General Partner's estimated weighted average price
of gas for the remainder of 1997 was $2.58 per Mcf.
Set forth in the table below are estimated net proceeds that the
Partnership may realize from sales of the Partnership's properties, estimated
expenses of the related dissolution and liquidation of the Partnership, and the
estimated amount of net distributions available for Limited Partners as a result
of such sales.
Range of Limited Partners' Share of Estimated Distributions
from Property Sales and Liquidation
Projected Range
Low High
Net Sales Proceeds(1) $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) Includes cash and net receivables and payables of the Partnership, 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,
13
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. Moreover, the following estimated future net revenues do not
take into account any costs which might be incurred by the Partnership due to
needed future maintenance of remedial work on the Partnership's properties.
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) Includes cash and net receivables and payables of the Partnership.
Limited Partners' future net revenues are based on the reserve
estimates at December 31, 1996 assuming unescalated prices based on
predictions of 1997 average prices. To a limited extent, future net
revenues may be influenced by a material change in the selling prices
of oil or gas. For further discussion of this, see "--Reasons for the
Proposal." The actual prices that will be received and the associated
costs may be more or less than those projected. See--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.
(4) Does not reflect effect of intermittent sales of a portion of the
Partnership's Property Interests to pay administrative costs once the
properties no longer generate sufficient revenues to cover such costs.
The Managing General Partner estimates that Property Interests ranging
from an average of 10% to 15% of the value of the Partnership's
properties would have to be sold each year 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 other
partnerships which will be offering their interests in the properties
in which the Partnership owns Property Interests, will own a large
14
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. 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.
Fairness of the Proposal; 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 $19.93 per $100 Unit, discounted
to present value ($31.55 per $100 Unit over twenty years on an undiscounted
basis) if the Partnership continued operations.
Although the estimates contained under "The Proposal--Estimates of
Liquidating Distribution Amount" above show that estimated cash distributions to
Limited Partners (based on net present value) from continued operations over
twenty years would be approximately 5.1% higher than estimated cash
distributions from selling the Partnership's properties and liquidating the
Partnership at this time (based on the "high" range of estimates), the Managing
General Partner believes there is a substantial advantage in receiving the
liquidating distribution in one lump sum currently. The estimates of
distributions from continued operations are based upon current prices. It is
highly likely that over such a long period of time, oil and gas prices will vary
often and possibly widely from the prices used to prepare these estimates.
Continued operations over such a long period of time subject Limited Partners to
the risk of receiving lower levels of cash distributions if oil and gas prices
over this twenty year period are lower on average than those used in preparing
the estimates of cash distributions from continued operations. Continued
operations over twenty years subject Limited Partners' potential distributions
to the risks of price volatility and to possible changes in costs or need for
workover or similar significant remedial work on the Partnership's properties
for which the Partnership has no capital. The Managing General Partner also
believes that there is an advantage to Limited Partners taking any funds to be
received upon liquidation and redeploying those assets in other investments,
rather than continuing to receive small distributions over such a long period of
time.
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."
15
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.
Potential Liquidating Distribution. After the sale of the Partnership's
Property Interests, there will be funds available for a liquidating
distribution. As discussed above, the Managing General Partner believes that the
ability to receive the estimated liquidating distribution in one lump sum
currently, rather than in smaller amounts over a 20 year period, is one of the
benefits of the Proposal, without the continuing risk of such potential
distributions being negatively affected by oil and gas price decreases. A vote
in favor of the proposal thus might have the effect of making additional funds
currently available to the Limited Partners.
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 is estimated to be less than 1,376,000 Mcfe. The
Partnership's 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, direct costs and/or 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. Additionally, prices are expected to continue to
vary widely over the remaining life of the Partnership, and such changes in gas
prices will affect future estimates of revenues from continued operations of the
Partnership. Based on 1996 year-end reserve calculations, the Partnership had
only about 28% of its ultimate recoverable reserves 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 material 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.
Limited Partners' Tax Reporting. Limited Partners will continue to
have a partnership income tax reporting obligation with respect to their Units
16
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 "Business of the Partnership--No Trading Market." Following the
approval of the Proposal, the sale of the properties and dissolution, 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 Partnership
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. The Managing General Partner intends to obtain
any such fair market value approval from J.R. Butler and Company.
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 an independent fair
market appraisal of the value of the Pension Partnership's net profits interest
from J.R. Butler and Company 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.
Steps to Implement the Proposal
Following the approval of the Proposal, the Managing General Partner
intends to take the following steps to implement it:
17
1. Make available to the appropriate persons (that is the third party,
if any, handling the negototiated 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 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 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 is in the business of conducting
auctions for oil and gas properties. The O&G Clearinghouse establishes a data
room, which it leaves open for a period of time (generally three to four weeks),
after which it holds a live auction. The O&G Clearinghouse requires advance
registration for all bidders. Bidders may participate by invitation only, after
having qualified as knowledgeable and sophisticated parties routinely or
actively engaged in the oil and gas business. The O&G Clearinghouse publishes a
brochure regarding the properties. The O&G Clearinghouse is headquartered in
Houston, Texas. In auctions conducted by the O&G Clearinghouse, properties are
generally grouped into small packages with a single field often comprising a
property.
18
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 "Voting on the Proposal-- 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. Neither the Managing General
Partner nor any of its affiliates nor any other partnerships managed by the
Managing General Partner will purchase any of the Partnership's 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 a property cannot be sold to a third party at auction or on a
negotiated basis, which usually occurs because it has no appreciable value,
often accompanied by the fact that the property requires expenditures to plug
and abandon wells, 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. Determination as to whether any such conveyance will be made,
including conveyances to the Managing General Partner in such cases, will be
made solely by the Managing General Partner. The Managing General Partner is not
currently aware of any Property Interests owned by the Partnership which are
likely to be conveyed in this manner. 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 "The Proposal--Estimate of Liquidating Distribution Amount." 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.
19
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 decreases in oil and gas prices
during the lengthy period of twenty years necessary to produce the Partnership's
remaining reserves. Additionally, distribution amounts will 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. Continued operations of the Partnership would mean continuation
of the additional costs incurred by the Limited Partners, including the costs
associated with inclusion of information from the Schedule K-1 relating to the
Partnership in their personal income tax returns. 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. This discussion is not
based upon an opinion of counsel and it is possible that results different than
those described may occur. 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.
20
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
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.
21
Capital Gains Tax
Net long-term capital gains of individuals, trusts and estates will be
taxed at a maximum rate of 20%, while ordinarily income, including income from
the recapture of intangible drilling and development costs, depreciation and
depletion, will be taxed at a maximum rate depending on that Limited Partner's
taxable income of 36% or 39.6%. With respect to net capital losses, other than
Section 1231 net losses, the amount of net long-term capital loss that can be
utilized to offset ordinary income will be limited to the sum of net capital
gains from other sources recognized by the Limited Partner during the tax year,
plus $3,000 ($1,500, in the case of a married individual filing a separate
return). The excess amount of such net long-term capital loss may be carried
forward and utilized in subsequent years subject to the same limitations.
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 INTENDED TO BE A SUMMARY OF CERTAIN INCOME
TAX CONSIDERATIONS OF THE SALE OF PROPERTIES AND LIQUIDATION. EACH LIMITED
PARTNER SHOULD CONSULT HIS OWN TAX ADVISOR CONCERNING ITS PARTICULAR TAX
CIRCUMSTANCES AND THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES
TO HIM OF THE SALE OF PROPERTIES AND THE LIQUIDATION OF THE PARTNERSHIP.
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
second 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 and
Associates, Inc., independent petroleum consultants. It should be
22
noted that the reserveestimates 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 and 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 six
months of 1997 was $2.35 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.
Future prices received for the sale of production from properties in
which the Partnership has an interest 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.
23
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
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, which are less than 1.0% of the
Managing General Partner's net revenues. 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."
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 has received management fees of
$142,380, internal acquisition costs reimbursements of
$294,969 and formation costs reimbursements of $113,904 from
the Partnership from inception through June 30, 1997.
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 from inception to June 30, 1997, $563,288
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.
o The Managing General Partner has been reimbursed $24,165 for
direct expenses, all of which were billed by, and then paid
directly to, third party vendors.
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
24
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 October 15, 1997, there were 502 Limited Partners (excluding
the Managing General Partner). The Managing General Partner does not have an
obligation to repurchase Limited Partner interests pursuant to this right of
presentment but merely an option to do so when such interests are presented for
repurchase.
Principal Holders of Limited Partner Units
The Managing General Partner holds 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 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 second quarter
of 1997, which are attached hereto and incorporated herein by reference.
Additionally, a reserve report dated May 20, 1997, prepared as of December 31,
1996, and audited by H. J. Gruy and Associates, Inc., is attached hereto.
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.
/S/ John R. Alden
-----------------------------------------
John R. Alden
Secretary
25
FORM OF PROXY
SWIFT ENERGY INCOME PARTNERS 1990-C, LTD.
This Proxy is Solicited by the Managing General
Partner for a Special Meeting of Limited Partners to be
held on November 25, 1997
The undersigned hereby constitutes and appoints A. Earl Swift, Bruce H.
Vincent, Terry E. Swift, or John R. Alden, as duly authorized officers of Swift
Energy Company, acting in its capacity as Managing General Partner of the
Partnership, or any of them, with full power of substitution and revocation to
each, the true and lawful attorneys and proxies of the undersigned at a Special
Meeting of the Limited Partners (the "Meeting") of SWIFT ENERGY INCOME PARTNERS
1990-C, LTD. (the "Partnership") to be held on November 25, 1997 at 4:00 p.m.
Houston time, at 16825 Northchase Drive, Houston, Texas, and any adjournments
thereof, and to vote as designated, on the matter specified below, the
Partnership Units standing in the name of the undersigned on the books of the
Partnership (or which the undersigned may be entitled to vote) on the record
date for the Meeting with all powers the undersigned would possess if personally
present at the Meeting:
The adoption of a proposal FOR AGAINST ABSTAIN
("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 undersigned hereby directs
said proxies to vote:
This proxy will be voted in accordance with the specifications made
hereon. If no contrary specification is made, it will be voted FOR the Proposal.
Receipt of the Partnership's Notice of Special Meeting of Limited
Partners and Proxy Statement dated October 15, 1997 is acknowledged.
PLEASE SIGN AND RETURN THE PROXY IN THE ENCLOSED,
POSTAGE-PAID, PRE-ADDRESSED ENVELOPE BY
NOVEMBER 15, 1997.
SIGNATURE DATE
- ------------------------------- -----------------------------
SIGNATURE DATE
- ------------------------------- -----------------------------
SIGNATURE DATE
- ------------------------------- -----------------------------
If Limited Partnership Units are held jointly, all joint tenants must sign.
26
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 second 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 and Associates,
Inc., is attached hereto.
TABLE OF CONTENTS
SUMMARY ......................................................................1
General .............................................................1
Partnership Property Interests........................................1
Method of Sale........................................................2
PARTNERSHIP PROPERTY INTERESTS.................................................3
SPECIAL CONSIDERATIONS.........................................................4
Reasons for the Proposal..............................................4
Fairness of the Proposal..............................................4
GLOSSARY OF TERMS..............................................................6
VOTING ON THE PROPOSAL.........................................................7
Vote Required.........................................................7
Proxies; Revocation...................................................7
No Appraisal or Dissenters' Rights Provided...........................8
Solicitation..........................................................8
RISK FACTORS...................................................................8
Uncertainty of Liquidating Distributions..............................8
Undetermined Sales Prices; Volatility of Oil and Gas Prices...........8
Dependence on Pension Partnership.....................................8
Prices Used for Calculation of PV-10 Value of Proved Reserves.........9
THE PROPOSAL...................................................................9
General .............................................................9
Partnership Financial Performance and Condition......................10
Estimates of Liquidating Distribution Amount.........................13
Fairness of the Proposal; Comparison of Sale Versus Continuing
Operations...........................................................15
Reasons for the Proposal.............................................16
Simultaneous Proposal to Pension Partnership.........................17
Steps to Implement the Proposal......................................17
Impact on the Managing General Partner...............................19
Recommendation of the Managing General Partner.......................20
i
FEDERAL INCOME TAX CONSEQUENCES...............................................20
General ............................................................20
Taxable Gain or Loss Upon Sale of Properties.........................21
Liquidation of the Partnership.......................................21
Capital Gains Tax....................................................22
Passive Loss Limitations.............................................22
BUSINESS OF THE PARTNERSHIP...................................................22
Reserves ............................................................22
The Managing General Partner.........................................23
Transactions Between the Managing General Partner and the
Partnership..........................................................24
No Trading Market....................................................24
Principal Holders of Limited Partner Units...........................25
Approvals............................................................25
Legal Proceedings....................................................25
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE AND ATTACHMENT
OF SUCH INFORMATION HERETO.................................................25
OTHER BUSINESS................................................................25
FORM OF PROXY.................................................................26
ii