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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 JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File number 33-19721-01
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
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
INDEX
PART I. FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets
- June 30, 1996 and December 31, 1995 3
Statements of Operations
- Three month and six month periods ended June 30, 1996 and 1995 4
Statements of Cash Flows
- Six month periods ended June 30, 1996 and 1995 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
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
BALANCE SHEETS
JUNE 30, DECEMBER 31,
1996 1995
--------------- --------------
(Unaudited)
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,173 $ 1,153
Nonoperating interests income receivable 7,450 1,954
--------------- --------------
Total Current Assets 8,623 3,107
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Nonoperating interests in oil and gas
properties, using full cost accounting 1,635,198 1,660,375
Less-Accumulated amortization (1,360,040) (1,342,507)
--------------- --------------
275,158 317,868
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$ 283,781 $ 320,975
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Payable related to property capital costs $ 1,699 $ 26,682
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Partners' Capital 282,082 294,293
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$ 283,781 $ 320,975
=============== ==============
See accompanying notes to financial statements.
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- ------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
REVENUES:
Income from nonoperating interests $ 17,013 $ 9,786 $ 30,415 $ 27,996
Interest income 15 15 20 20
-------------- -------------- -------------- --------------
17,028 9,801 30,435 28,016
-------------- -------------- -------------- --------------
COSTS AND EXPENSES:
Amortization 8,601 21,341 17,533 66,459
General and administrative 5,098 1,981 9,556 5,625
-------------- -------------- -------------- --------------
13,699 23,322 27,089 72,084
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NET INCOME (LOSS) $ 3,329 $ (13,521) $ 3,346 $ (44,068)
============== ============== ============== ==============
LIMITED PARTNERS' NET INCOME (LOSS)
PER UNIT $ .18 $ (.72) $ .18 $ (2.35)
============== ============== ============== ==============
See accompanying note to financial statements.
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
--------------------------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 3,346 $ (44,068)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Amortization 17,533 66,459
Change in assets and liabilities:
(Increase) decrease in nonoperating interests income receivable (5,496) 1,375
Increase (decrease) in accounts payable
and accrued liabilities -- (27)
-------------- ---------------
Net cash provided by (used in) operating activities 15,383 23,739
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to nonoperating interests in oil and gas properties (1,958) (5,792)
Proceeds from sales of nonoperating interests
in oil and gas properties 27,135 1,403
Payable related to property capital costs (24,983) (4,133)
-------------- ---------------
Net cash provided by (used in) investing activities 194 (8,522)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (15,557) (15,197)
-------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 20 20
-------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,153 1,090
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,173 $ 1,110
============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 694 $ 374
============== ===============
See accompanying notes to financial statements.
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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, 1995 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 -
USE OF ESTIMATES--
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
NONOPERATING INTERESTS IN OIL AND GAS PROPERTIES --
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for nonoperating interests in oil and
gas 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.
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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.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in
estimating quantities of proved reserves and in projecting the future
rates of production, timing and plan of development. The accuracy of
any reserve estimate is a function of the quality of available data
and of engineering and geological interpretation and judgment.
Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly,
reserve estimates are often different from the quantities of oil and
gas that are ultimately recovered.
(4) RELATED-PARTY TRANSACTIONS -
An affiliate of the Special General Partner, as Dealer
Manager, received $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) VULNERABILITY DUE TO CERTAIN CONCENTRATIONS -
The Company's revenues are primarily the result of sales of
its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
The Partnership extends credit to various companies in the oil
and gas industry which results in a concentration of credit risk.
This concentration of credit risk may be affected by changes in
economic or other conditions and may accordingly impact the
Partnership's overall credit risk. However, the Managing General
Partner believes that the risk is mitigated by the size, reputation,
and nature of the companies to which the Partnership extends credit.
In addition, the Partnership generally does not require collateral or
other security to support customer receivables.
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The
carrying amounts approximate fair value due to the highly liquid
nature of the short-term instruments.
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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 June 30, 1996 (current quarter) when compared
to the quarter ended June 30, 1995 (corresponding quarter), and for the six
months ended June 30, 1996 (current period), when compared to the six months
ended June 30, 1995 (corresponding period).
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Income from nonoperating interests increased 74 percent in the current
quarter of 1996 when compared to the second quarter in 1995. Oil and gas sales
increased $5,340 or 24 percent in the current quarter of 1996 when compared to
the corresponding quarter in 1995, primarily due to increased gas and oil
prices. An increase in gas prices of 81 percent or $1.12/MCF and in oil prices
of 25 percent or $3.67/BBL had a significant impact on partnership performance.
Current quarter gas and oil production decreased 25 percent and 26 percent,
respectively, when compared to second quarter 1995 production volumes,
partially offsetting the effect of the increased gas and oil prices.
Associated amortization expense decreased 11 percent or $1,105.
The Partnership recorded an additional provision in amortization in the
second quarter of 1995 for $11,635 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 and Exchange
Commission.
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Income from nonoperating interests increased 9 percent in the current
period of 1996 when compared to the first six months in 1995. However, oil and
gas sales declined $1,155 or 2 percent in the first six months of 1996 when
compared to the corresponding period in 1995, primarily due to decreased gas
and oil production. A decline of 31 percent in gas production and 10 percent
in oil production had a significant impact on partnership performance. Current
period gas and oil prices increased 41 percent or $.60/MCF and 17 percent or
$2.39/BBL, respectively, partially offsetting the revenue declines.
Associated amortization expense decreased 29 percent or $7,058.
The Partnership recorded an additional provision in amortization in the
first six months of 1995 for $41,868 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 and Exchange
Commission.
During 1996, partnership revenues and costs will be shared between the
limited partners and general partners in a 90:10 ratio.
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-NONE-
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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: August 9, 1996 By: /s/ John R. Alden
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John R. Alden
Senior Vice President, Secretary
and Principal Financial Officer
Date: August 9, 1996 By: /s/ Alton D. Heckaman, Jr.
-------------- -----------------------------------
Alton D. Heckaman, Jr.
Vice President, Controller
and Principal Accounting Officer
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Index to Exhibits
Exhibit
Number Description
- ------- -----------
27 Financial Data Schedule