FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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: 0-25950
SWIFT ENERGY PENSION PARTNERS 1994-B, LTD.
(Exact name of registrant as specified in its charter)
Texas 76-0441892
(State or other jurisdiction of organization) (I.R.S. Employer Identification No.)
16825 Northchase Drive, Suite 400
Houston, Texas 77060
(Address of principal executive offices)
(Zip Code)
(281)874-2700
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
SWIFT ENERGY PENSION PARTNERS 1994-B, LTD.
INDEX
PART I. FINANCIAL INFORMATION PAGE
ITEM 1. Financial Statements
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 11
SIGNATURES 12
SWIFT ENERGY PENSION PARTNERS 1994-B, LTD.
BALANCE SHEETS
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,803 $ 1,794
Nonoperating interests income receivable 80,748 119,381
--------------- ----------------
Total Current Assets 82,551 121,175
--------------- ----------------
Nonoperating interests in oil and gas
properties, using full cost accounting 3,791,701 3,776,939
Less-Accumulated amortization (1,768,285) (1,657,287)
--------------- ----------------
2,023,416 2,119,652
--------------- ----------------
$ 2,105,967 $ 2,240,827
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 161,060 $ 171,748
--------------- ----------------
Interest Holders' Capital (3,535,809 Interest Holders's SDIs;
$1.00 per SDI) 1,912,808 2,032,562
General Partners' Capital 32,099 36,517
--------------- ----------------
Total Partners' Capital 1,944,907 2,069,079
--------------- ----------------
$ 2,105,967 $ 2,240,827
=============== ================
See accompanying notes to financial statements.
3
SWIFT ENERGY PENSION PARTNERS 1994-B, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
REVENUES:
Income from nonoperating interests $ 80,655 $ 119,901
Intterest income 8 7
--------------- ---------------
80,663 119,908
--------------- ---------------
COSTS AND EXPENSES:
Amortization -
Normal provision 57,517 56,960
Additional provision 53,481 --
General and administrative 13,413 19,173
--------------- ---------------
124,411 76,173
--------------- ---------------
NET INCOME (LOSS) $ (43,748) $ 43,735
=============== ==============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ (.01)
===============
March 31, 1997 $ .01
===============
See accompanying note to financial statements.
4
SWIFT ENERGY PENSION PARTNERS 1994-B, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
------------------------------------
1998 1997
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ (43,748) $ 43,735
Adjustments to reconcile income (loss) to
net cash provided by operations:
Amortization 110,998 56,960
Change in assets and liabilities:
(Increase) decrease in nonoperating interests income receivable 38,633 30,646
Increase (decrease) in accounts payable (10,688) (71)
-------------- --------------
Net cash provided by (used in) operating activities 95,195 131,270
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to nonoperating interests
in oil and gas properties (14,903) (17,766)
Proceeds from sale of nonoperating interests
in oil and gas properties 141 --
-------------- --------------
Net cash provided by (used in) investing activities (14,762) (17,766)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (80,424) (113,497)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9 7
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,794 1,704
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,803 $ 1,711
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,279 $ 763
============== ==============
See accompanying notes to financial statements.
5
SWIFT ENERGY PENSION PARTNERS 1994-B, 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, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Pension Partners 1994-B, Ltd., a Texas limited
partnership ("the Partnership"), was formed on June 30, 1994, 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
and Canada. 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 sole limited partner of the Partnership is Swift Depositary Company,
which has assigned all of its beneficial (but not of record) rights and
interest as limited partner to the investors in the Partnership
("Interest Holders"), in the form of Swift Depositary Interests
("SDIs").
The Managing General Partner has paid or will pay out of its
own corporate funds (as a capital contribution to the Partnership) all
selling commissions, offering expenses, printing, legal and accounting
fees and other formation costs incurred in connection with the offering
of SDIs and the formation of the Partnership, for which the Managing
General Partner will receive an interest in continuing costs and
revenues of the Partnership. The 323 Interest Holders made total capital
contributions of $3,535,809.
Generally, all continuing costs (including general and
administrative reimbursements and direct expenses) and revenues are
allocated 85 percent to the Interest Holders and 15 percent to the
general partners. After partnership payout, as defined in the
Partnership Agreement, continuing costs and revenues will be shared 75
percent by the Interest Holders, and 25 percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates. Certain reclassifications have been
made to prior year amounts to conform to the current year presentation.
6
SWIFT ENERGY PENSION PARTNERS 1994-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Nonoperating Interests in Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statements.
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 partner, and general partners).
The "ceiling limitation" is calculated on a quarterly basis and
represents the estimated future net revenues from nonoperating interests
in proved properties using current prices, discounted at ten percent.
Proceeds from the sale or disposition of nonoperating interests in oil
and gas properties are treated as a reduction of the cost of the
nonoperating interests with no gains or losses recognized except in
significant transactions.
The Partnership computes the provision for amortization of
nonoperating interests in oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of nonoperating
interests in oil and gas properties by an overall rate determined by
dividing the physical units of oil and gas produced during the period by
the total estimated units of proved oil and gas reserves attributable to
the Partnership's nonoperating interests at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
The Partnership entered into a Net Profits and Overriding
Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Operating Partners 1994-B, Ltd. ("Operating Partnership"), an affiliated
partnership managed by Swift for the purpose of acquiring working
interests in producing oil and gas properties. Under the terms of the
NP/OR Agreement, the Partnership has been conveyed a nonoperating
interest in the aggregate net profits (i.e., oil and gas sales net of
related operating costs) of the properties acquired equal to the
Partnership's proportionate share of the property acquisition costs.
7
SWIFT ENERGY PENSION PARTNERS 1994-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(6) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
8
SWIFT ENERGY PENSION PARTNERS 1994-B, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Partnership was formed for the purpose of investing in nonoperating
interests in producing oil and gas properties located within the continental
United States and Canada. 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 was formed, it commenced 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 Interest Holders
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
Oil and gas reserves are depleting assets and therefore often
experience significant production declines each year from the date of
acquisition through the end of the life of the property. The primary source of
liquidity to the Partnership comes almost entirely from the income generated
from the sale of oil and gas produced from ownership interests in oil and gas
properties. Net cash provided by operating activities totaled $95,195 and
$131,270 for the three months ended March 31, 1998 and 1997, respectively. This
source of liquidity and the related results of operations, and in turn cash
distributions, will decline in future periods as the oil and gas produced from
the properties also declines while production and general and administrative
costs remain relatively stable making it unlikely that the Partnership will hold
the properties until they are fully depleted, but will likely liquidate when a
substantial majority of the reserves have been produced. The Partnership has
expended all of the partner's net commitments available for property
acquisitions and development by acquiring producing oil and gas properties. The
partnership invests primarily in proved producing properties with nominal levels
of future costs of development for proven but undeveloped reserves. Significant
purchases of additional reserves or extensive drilling activity are not
anticipated. Cash distributions totaled $80,424 and $113,497 for the three
months ended March 31, 1998 and 1997, respectively.
The Partnership does not allow for additional assessments from the
partners or Interest Holders to fund capital requirements. However, funds are
available from partnership revenues or proceeds from the sale of partnership
property. The Managing General Partner believes that the funds currently
available to the Partnership will be adequate to meet any anticipated capital
requirements.
RESULTS OF OPERATIONS
Income from nonoperating interests decreased 33 percent in the first
quarter of 1998 when compared to the same quarter in 1997. Oil and gas sales
declined $70,573 or 37 percent in the first quarter of 1998 when compared to the
corresponding quarter in 1997, primarily due to decreased gas and oil prices. A
decline in gas prices of 32 percent or $.95/MCF and in oil prices of 46 percent
or $9.40/BBL had a significant impact on partnership performance. Also, current
quarter gas and oil production declined 6 percent and 2 percent respectively,
when compared to first quarter 1997 gas production volumes, further contributing
to decreased revenues.
Total amortization expense for the first quarter of 1998 increased 95
percent or $54,037 when compared to the first quarter of 1997. Two components,
the normal provision, calculated on the units of production method, and the
additional provision, relating to the ceiling limitation, make up total
amortization expense. Normal amortization expense increased a slight 1 percent
in the first quarter of 1998 when compared to the first quarter of 1997.
9
SWIFT ENERGY PENSION PARTNERS 1994-A, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Partnership recorded an additional provision in amortization for
the first quarter in 1998 of $53,481 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 for oil and gas properties, resulting in a full cost ceiling impairment.
Using prices in effect at March 31, 1997, the Partnership would have recorded an
additional provision at March 31, 1997 in the amount of $157,269. However, these
temporarily low quarter-end prices rebounded and by using prices in effect at
the filing date, the Partnership's unamortized cost of oil and gas properties
were not limited by this calculation.
During 1998, partnership revenues and costs will be shared between the
Interest Holders and general partners in an 85:15 ratio.
10
SWIFT ENERGY PENSION PARTNERS 1994-B, LTD.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-NONE-
11
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 PENSION
PARTNERS 1994-B, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
Managing General Partner
Date: May 5, 1998 By: /s/ John R. Alden
----------- ----------------------------------
John R. Alden
Senior Vice President, Secretary
and Principal Financial Officer
Date: May 5, 1998 By: /s/ Alton D. Heckaman, Jr.
----------- ----------------------------------
Alton D. Heckaman, Jr.
Vice President, Controller
and Principal Accounting Officer
12