FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO _________________
COMMISSION FILE NUMBER 33-19721-01
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0261809
(STATE OR OTHER JURISDICTION OF ORGANIZATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
16825 NORTHCHASE DRIVE, SUITE 400
HOUSTON, TEXAS 77060
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(713)874-2700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NONE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
INDEX
PART I. FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets
- September 30, 1995 and December 31, 1994 3
Statements of Operations
- Three month and nine month periods ended September 30, 1995
and 1994 4
Statements of Cash Flows
- Nine month periods ended September 30, 1995 and 1994 5
Notes to Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION 10
SIGNATURES 11
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(Unaudited)
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,126 $ 1,090
Nonoperating interests income receivable 6,769 5,021
----------- -----------
Total Current Assets 7,895 6,111
----------- -----------
Nonoperating interests in oil and gas
properties, using full cost accounting 1,658,036 1,653,140
Less-Accumulated amortization (1,333,397) (1,249,461)
----------- -----------
324,639 403,679
----------- -----------
$ 332,534 $ 409,790
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts payable and accrued liabilities $ 1,159 $ 965
Payable related to property capital costs 25,158 27,132
----------- -----------
Total Current Liabilities 26,317 28,097
----------- -----------
Partners' Capital 306,217 381,693
----------- -----------
$ 332,534 $ 409,790
----------- -----------
----------- -----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1995 1994 1995 1994
------- -------- -------- -------
REVENUES:
Income from nonoperating interests $12,897 $20,665 $ 40,892 $74,155
Interest income 16 10 36 20
------- -------- -------- -------
12,913 20,675 40,928 74,175
------- -------- -------- -------
COSTS AND EXPENSES:
Amortization 17,477 11,108 83,936 36,266
General and administrative 4,808 4,135 10,432 14,831
------- -------- -------- -------
22,285 15,243 94,368 51,097
------- -------- -------- -------
NET INCOME (LOSS) $(9,372) $ 5,432 $(53,440) $23,078
------- -------- -------- -------
------- -------- -------- -------
Limited Partners' net income (loss)
per unit $ (.50) $ .29 $ (2.85) $ 1.23
------- -------- -------- -------
------- -------- -------- -------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1995 1994
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $(53,440) $ 23,078
Adjustments to reconcile income (loss) to
net cash provided by operations:
Amortization 83,936 36,266
Change in assets and liabilities:
(Increase) decrease in nonoperating interests income receivable (1,748) (11,539)
Increase (decrease) in accounts payable
and accrued liabilities 194 20,985
-------- --------
Net cash provided by (used in) operating activities 28,942 68,790
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to nonoperating interests in oil and gas properties (6,299) (28,167)
Proceeds from sale of nonoperating interests
in oil and gas properties 1,403 7,594
Payable related to property capital costs (1,974) --
-------- --------
Net cash provided by (used in) investing activities (6,870) (20,573)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (22,036) (48,197)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 36 20
-------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,090 1,050
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,126 $ 1,070
-------- --------
-------- --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) GENERAL INFORMATION -
The financial statements included herein have been prepared by the
Partnership and are unaudited except for the balance sheet at December 31,
1994 which has been taken from the audited financial statements at that date.
The financial statements reflect adjustments, all of which were of a normal
recurring nature, which are, in the opinion of the managing general partner
necessary for a fair presentation. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
the rules and regulations of the Securities and Exchange Commission. The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with the
audited financial statements and the notes included in the latest Form 10-K.
(2) ORGANIZATION AND TERMS OF PARTNERSHIP AGREEMENT -
Swift Energy Managed Pension Assets Partnership 1988-1, Ltd., a Texas
limited partnership (the Partnership), was formed on September 14, 1988, for
the purpose of purchasing net profits interest, overriding royalty interests
and royalty interests (collectively, "nonoperating interests") in producing
oil and gas properties within the continental United States. Swift Energy
Company ("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a
California corporation, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The general partners are required
to contribute up to 1/99th of limited partner net contributions. The 190
limited partners made total capital contributions of $1,874,876.
Nonoperating interests acquisition costs and the management fee are
borne 99 percent by the limited partners and one percent by the general
partners. Organization and syndication costs were borne solely by the
limited partners.
Generally, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to
the general partners. If prior to partnership payout, however, the cash
distribution rate for a certain period equals or exceeds 17.5 percent, then
for the following calendar year, these continuing costs and revenues will be
allocated 85 percent to the limited partners and 15 percent to the general
partners. After partnership payout, continuing costs and revenues will be
shared 85 percent by the limited partners, and 15 percent by the general
partners, even if the cash distribution rate is less than 17.5 percent.
(3) SIGNIFICANT ACCOUNTING POLICIES -
NONOPERATING INTERESTS IN OIL AND GAS PROPERTIES --
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for nonoperating interests in oil and gas
property costs. Under this method of accounting, all costs incurred in the
acquisition of nonoperating interests in oil and gas properties are
capitalized. The unamortized cost of nonoperating interests in oil and gas
properties is limited to the "ceiling limitation" (calculated separately
for the Partnership, limited partners and general partners). The "ceiling
limitation" is calculated on a quarterly basis and represents the estimated
future net revenues from nonoperating interests in proved properties using
current prices discounted at ten percent. Proceeds from the sale or
disposition of nonoperating interests in oil and gas properties are treated
as a reduction of the cost of the nonoperating interests with no gains or
losses recognized except in significant transactions.
6
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The Partnership computes the provision for amortization of oil and gas
properties on the units-of-production method. Under this method, the
provision is calculated by multiplying the total unamortized cost of oil and
gas properties by an overall rate determined by dividing the physical units
of oil and gas produced during the period by the total estimated proved oil
and gas reserves at the beginning of the period.
(4) RELATED-PARTY TRANSACTIONS -
An affiliate of the Special General Partner, as Dealer Manager, received
$46,872 for managing and overseeing the offering of the limited partnership
units. A one-time management fee of $46,872 was paid to Swift for services
performed for the Partnership.
Effective September 14, 1988, the Partnership entered into a Net Profits
and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift
Energy Income Partners 1988-1, Ltd. (Operating Partnership), managed by
Swift, for the purpose of acquiring nonoperating interests in producing oil
and gas properties. Under terms of the NP/OR Agreement, the Operating
Partnership will convey to the Partnership nonoperating interests in the
aggregate net profits (i.e., oil and gas sales net of related operating
costs) of the properties acquired equal to its proportionate share of the
property acquisition costs.
(5) CONCENTRATION OF CREDIT RISK -
The Partnership extends credit to various companies in the oil and gas
industry which results in a concentration of credit risk. This concentration
of credit risk may be affected by changes in economic or other conditions and
may accordingly impact the Partnership's overall credit risk. However, the
Managing General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the partnership generally does not require collateral
or other security to support customer receivables.
7
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Partnership is formed for the purpose of investing in nonoperating
interests in producing oil and gas properties located within the continental
United States. In order to accomplish this, the Partnership goes through two
distinct yet overlapping phases with respect to its liquidity and results of
operations. When the Partnership is formed, it commences its "acquisition"
phase, with all funds placed in short-term investments until required for the
acquisition of nonoperating interests. Therefore, the interest earned on
these pre-acquisition investments becomes the primary cash flow source for
initial partner distributions. As the Partnership acquires nonoperating
interests in producing properties, net cash from ownership of nonoperating
interests becomes available for distribution, along with the investment
income. After all partnership funds have been expended on nonoperating
interests in producing oil and gas properties, the Partnership enters its
"operations" phase. During this phase, income from nonoperating interests
in oil and gas sales generates substantially all revenues, and distributions
to partners reflect those revenues less all associated partnership expenses.
The Partnership may also derive proceeds from the sale of nonoperating
interests in acquired oil and gas properties, when the sale of such interests
is economically appropriate or preferable to continued operations.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has completed the acquisition of nonoperating interests
in producing oil and gas properties, expending all of the limited partners'
net commitments available for property acquisitions.
Under the NP/OR Agreement, the Managing General Partner acquires
interests in oil and gas properties from outside parties and sells these
interests to an affiliated operating partnership, who in turn creates and
sells to the Partnership nonoperating interests in these same oil and gas
properties. The Managing General Partner expects funds derived from net
profits interests to be distributed to the partners.
RESULTS OF OPERATIONS
The following analysis explains changes in the revenue and expense
categories for the quarter ended September 30, 1995 (current quarter) when
compared to the quarter ended September 30, 1994 (corresponding quarter), and
for the nine months ended September 30, 1995 (current period), when compared
to the nine months ended September 30, 1994 (corresponding period).
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Income from nonoperating interests decreased 38 percent in the third
quarter of 1995 when compared to the same quarter in 1994. Oil and gas sales
declined $9,066 or 26 percent in the current quarter of 1995 when compared to
the corresponding quarter in 1994, primarily due to decreased gas prices. A
decline in gas prices of 22 percent or $.42/MCF had a significant impact on
partnership performance. Also, current quarter oil production declined 25
percent when compared to third quarter 1994 production volumes further
contributing to decreased revenues.
Associated amortization expense decreased 3 percent or $324.
The Partnership recorded an additional provision in amortization in the
third quarter of 1995 for $6,693 when the present value, discounted at ten
percent, of estimated future net revenues from oil and gas properties, using
the guidelines of the Securities and Exchange Commission, was below the fair
market value originally paid for oil and gas properties. The additional
provision results from the Managing General Partner's determination that the
fair market value paid for properties may or may not coincide with reserve
valuations determined according to guidelines of the Securities Exchange
Commission.
8
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Income from nonoperating interests decreased 45 percent in the current
period when compared to the corresponding period in 1994. Oil and gas sales
decreased $41,826 or 34 percent in the first nine months of 1995 over the
corresponding period in 1994. A decline in the current period gas prices of
31 percent in or $.66/MCF had a significant impact on partnership
performance. Also, current period gas and oil production declined 12 percent
and 13 percent, respectively, when compared to the corresponding period in
1994, further contributing to decreased income. Increased oil prices of 3
percent or $.45/BBL partially offset the revenue declines.
Associated amortization expense decreased a slight 2 percent or $891.
The Partnership recorded an additional provision in amortization in the
first nine months of 1995 for $48,561 when the present value, discounted at
ten percent, of estimated future net revenues from oil and gas properties,
using the guidelines of the Securities and Exchange Commission, was below the
fair market value originally paid for oil and gas properties. The additional
provision results from the Managing General Partner's determination that the
fair market value paid for properties may or may not coincide with reserve
valuations determined according to guidelines of the Securities Exchange
Commission.
During 1995, partnership revenues and costs will be shared between the
limited partners and general partners in a 90:10 ratio.
9
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-NONE-
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
Managing General Partner
Date: November 13, 1995 By: /s/ John R. Alden
----------------------- ---------------------------------
John R. Alden
Senior Vice President, Secretary
and Principal Financial Officer
Date: November 13, 1995 By: /s/ Alton D. Heckaman, Jr.
----------------------- ---------------------------------
Alton D. Heckaman, Jr.
Vice President, Controller
and Principal Accounting Officer
11