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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 33-19721-01
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 (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 1988-1, 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 month 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 1988-1, LTD.
BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ------------
(Unaudited)
ASSETS:
Current Assets:
Cash and cash equivalents $ 5,138 $ 1,153
Nonoperating interests income receivable 8,930 1,954
------------ ------------
Total Current Assets 14,068 3,107
------------ ------------
Nonoperating interests in oil and gas
properties, using full cost accounting 1,627,741 1,660,375
Less-Accumulated amortization (1,372,851) (1,342,507)
------------ ------------
254,890 317,868
------------ ------------
$ 268,958 $ 320,975
============ ============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Payable related to property capital costs $ 1,336 $ 26,682
------------ ------------
Partners' Capital 267,622 294,293
------------ ------------
$ 268,958 $ 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
REVENUES:
Income from nonoperating interests $ 11,564 $ 12,897 $ 41,980 $ 40,892
Interest income 14 16 35 36
-------- -------- -------- --------
11,578 12,913 42,015 40,928
-------- -------- -------- --------
COSTS AND EXPENSES:
Amortization 12,811 17,477 30,344 83,936
General and administrative 4,009 4,808 13,567 10,432
-------- -------- -------- --------
16,820 22,285 43,911 94,368
-------- -------- -------- --------
NET INCOME (LOSS) $ (5,242) $ (9,372) $ (1,896) $(53,440)
======== ======== ======== ========
LIMITED PARTNERS' NET INCOME (LOSS)
PER UNIT $ (.28) $ (.50) $ (.10) $ (2.85)
======== ======== ======== ========
See accompanying note to financial statements.
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-1, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (1,896) $(53,440)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Amortization 30,344 83,936
Change in assets and liabilities:
(Increase) decrease in nonoperating interests income receivable (6,976) (1,748)
Increase (decrease) in accounts payable
and accrued liabilities -- 194
-------- --------
Net cash provided by (used in) operating activities 21,472 28,942
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to nonoperating interests in oil and gas properties (5,495) (6,299)
Proceeds from sale of nonoperating interests
in oil and gas properties 38,129 1,403
Payable related to property capital costs (25,346) (1,974)
-------- --------
Net cash provided by (used in) investing activities 7,288 (6,870)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (24,775) (22,036)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,985 36
-------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,153 1,090
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,138 $ 1,126
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 694 $ 669
======== ========
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 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 period).
Three Months Ended September 30, 1996 and 1995
Income from nonoperating interests decreased 10 percent in the current
quarter of 1996 when compared to the third quarter in 1995. Oil and gas sales
declined $3,326 or 13 percent in the third quarter of 1996 when compared to the
corresponding quarter in 1995, primarily due to decreased oil and gas
production. A decline of 46 percent in oil production and 35 percent in gas
production had a significant impact on partnership performance. Current quarter
gas and oil prices increased 44 percent or $.64/MCF and 28 percent or
$3.89/BBL, respectively, partially offsetting the revenue declines.
Associated amortization expense decreased 16 percent or $1,740.
The Partnership recorded an additional provision in amortization in the
third quarter of 1996 and 1995 for $3,767 and $6,693, respectively, 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.
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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)
Nine Months Ended September 30, 1996 and 1995
Income from nonoperating interests increased 3 percent in the current
period of 1996 when compared to the corresponding period in 1995. Oil and gas
sales declined $4,481 or 5 percent in the first nine months of 1996 over the
corresponding period in 1995, primarily due to decreased gas and oil
production. A decline of 33 percent in gas production and 22 percent in oil
production had a significant impact on partnership performance. Current period
gas and oil prices increased 41 percent or $.61/MCF and 19 percent or
$2.77/BBL, respectively, partially offsetting the revenue declines.
Associated amortization expense decreased 25 percent or $8,798.
The Partnership recorded an additional provision in amortization in the
first nine months of 1996 and 1995 for $3,767 and $48,561, respectively, 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 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: 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