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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 SEPTEMBER 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 33-19721-03
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
(Exact name of registrant as specified in its charter)
TEXAS 76-0282459
(State or other jurisdiction (I.R.S. Employer
of organization) 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 1989-1, LTD.
INDEX
PART I. FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets
- September 30, 1996 and December 31, 1995 3
Statements of Operations
- Three and nine month periods
ended September 30, 1996 and 1995 4
Statements of Cash Flows
- Nine month periods ended September 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 1989-1, LTD.
BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ------------
(Unaudited)
ASSETS:
Current Assets:
Cash and cash equivalents $ 96,370 $ 1,206
Nonoperating interests income receivable 135,808 108,092
------------ ------------
Total Current Assets 232,178 109,298
------------ ------------
Nonoperating interests in oil and gas
properties, using full cost accounting 3,118,457 3,169,854
Less-Accumulated amortization (1,773,654) (1,626,828)
------------ ------------
1,344,803 1,543,026
------------ ------------
$ 1,576,981 $ 1,652,324
============ ============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Payable related to property capital costs $ 4,520 $ 125,498
------------ ------------
Partners' Capital 1,572,461 1,526,826
------------ ------------
$ 1,576,981 $ 1,652,324
============ ============
See accompanying notes to financial statements.
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
REVENUES:
Income from nonoperating interests $ 121,656 $ 50,780 $ 401,039 $ 193,459
Interest income 528 17 592 38
---------- ---------- ---------- ----------
122,184 50,797 401,631 193,497
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Amortization 46,080 40,068 146,826 148,339
General and administrative 13,559 20,324 41,494 48,374
---------- ---------- ---------- ----------
59,639 60,392 188,320 196,713
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 62,545 $ (9,595) $ 213,311 $ (3,216)
========== ========== ========== ==========
LIMITED PARTNERS' NET INCOME (LOSS)
PER UNIT $ 1.91 $ (.29) $ 6.53 $ (.10)
========== ========== ========== ==========
See accompanying note to financial statements.
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 213,311 $ (3,216)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Amortization 146,826 148,339
Change in assets and liabilities:
(Increase) decrease in nonoperating interests income
receivable (27,716) 6,763
Increase (decrease) in accounts payable
and accrued liabilities -- 240
---------- ----------
Net cash provided by (used in) operating activities 332,421 152,126
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to nonoperating interests in oil
and gas properties (78,004) (51,133)
Proceeds from sale of nonoperating interests
in oil and gas properties 129,401 5,652
Payable related to property capital costs (120,978) (6,623)
---------- ----------
Net cash provided by (used in) investing activities (69,581) (52,104)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (167,676) (99,984)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 95,164 38
---------- ----------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,206 1,140
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 96,370 $ 1,178
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 883 $ 1,736
========== ==========
See accompanying notes to financial statements.
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, 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 ("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 Managed Pension Assets Partnership 1989-1, Ltd., a Texas
limited partnership (the Partnership), was formed on May 31, 1989, for the
purpose of purchasing net profits interests, 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 Partners,
Ltd. ("VJM"), a Texas limited partnership, serve as Managing General
Partner and Special General Partner of the Partnership, respectively. The
Managing General Partner is required to contribute up to 1/99th of limited
partner net contributions. The 343 limited partners made total capital
contributions of $3,267,837.
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. During 1992 and 1991, the cash distribution rate
(as defined in the Partnership Agreement) exceeded 17.5 percent and thus,
in 1993 and 1992, the continuing costs and revenues were shared 85 percent
by the limited partners and 15 percent by the general partners. During
1995, 1994 and 1993, the cash distribution rate fell below 17.5 percent
and thus, in 1996, 1995 and 1994, the continuing costs and revenues will
be (were) shared 90 percent by the limited partners and 10 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.
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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.
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 -
Affiliates of the Special General Partner, as Dealer Manager,
received $80,133 for managing and overseeing the offering of the limited
partnership units. A one-time management fee of $81,696 was paid to Swift
for services performed for the Partnership.
The Partnership entered into a Net Profits and Overriding Royalty
Interests Agreement ("NP/OR Agreement") with Swift Energy Income Partners
1989-2, Ltd. and Swift Energy Income Partners 1989-1, Ltd. (Operating
Partnerships), 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 Partnerships 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 1989-1, 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 available 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, 1996 (current quarter) when
compared to the quarter ended September 30, 1995 (corresponding quarter), and
for the nine months ended September 30, 1996 (current period), when compared to
the nine months ended September 30, 1995 (corresponding quarter).
Three Months Ended September 30, 1996 and 1995
Income from nonoperating interests increased 140 percent in the current
quarter of 1996 when compared to the third quarter in 1995. Oil and gas sales
increased $72,207 or 75 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 82 percent or $1.29/MCF and in oil prices
of 38 percent or $5.84/BBL had a significant impact on partnership performance.
Also, current quarter gas production increased 24 percent when compared to
third quarter 1995 production volumes, further contributing to increased
revenues.
Associated amortization expense increased 15 percent or $6,012.
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Nine Months Ended September 30, 1996 and 1995
Income from nonoperating interests increased 107 percent in the current
period of 1996 when compared to the corresponding period in 1995. Oil and gas
sales increased $169,333 or 46 percent in the first nine months of 1996 over
the corresponding period in 1995. An increase in gas prices of 65 percent or
$1.02/MCF and in oil prices of 24 percent or $3.71/BBL were major contributing
factors to the increased revenues for the period. Also, current period gas
production decreased 9 percent when compared to the corresponding period in
1995, partially offsetting the effect of increased gas and oil prices.
Associated amortization expense decreased 1 percent or $1,513.
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 1989-1, 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 1989-1, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
Managing General Partner
Date: November 6, 1996 By: /s/ John R. Alden
---------------- --------------------------------
John R. Alden
Senior Vice President, Secretary
and Principal Financial Officer
Date: November 6, 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