Securities and Exchange Commission
Washington, D.C. 20549
AMENDMENT No. 1 TO
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File number 0-28257
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
(Exact name of registrant as specified in
its Certificate of Limited Partnership)
TEXAS 76-0486529
(State of Organization) (I.R.S. Employer Identification No.)
16825 Northchase Dr., Suite 400
Houston, Texas 77060
(281) 874-2700
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
3,032,126 Limited Partnership Units
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 periods that the registrant was
required), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Registrant does not have an aggregate market value for its Limited Partnership
Interests.
Documents Incorporated by Reference
Document Incorporated as to
Registration Statement No. 33-37983 Items 1 and 13
on Form S-1
TABLE OF CONTENTS
Form 10-K Annual Report
For the Period Ended December 31, 1999
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
ITEM NO. PART I PAGE
- -------- ------ ----
1 Business I-1
2 Properties I-5
3 Legal Proceedings I-7
4 Submission of Matters to a Vote of
Security Holders I-7
PART II
-------
5 Market Price of and Distributions on the
Registrant's SDIs and Related Interest
Holder Matters II-1
6 Selected Financial Data II-2
7 Management's Discussion and Analysis of
Financial Condition and Results of Operations II-2
8 Financial Statements and Supplementary Data II-4
9 Disagreements on Accounting and Financial
Disclosure II-4
PART III
--------
10 Directors and Executive Officers of the
Registrant III-1
11 Executive Compensation III-2
12 Security Ownership of Certain Beneficial
Owners and Management III-2
13 Certain Relationships and Related Transactions III-2
PART IV
-------
14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K IV-1
OTHER
-----
Signatures
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
PART I
Item 1. Business
General Description of Partnership
Swift Energy Pension Partners 1995-B, Ltd., a Texas limited
partnership (the "Partnership" or the "Registrant"), is a partnership formed
under a public serial limited partnership offering denominated Swift Depositary
Interests I (Registration Statement No. 33-37983 on Form S-1, originally
declared effective March 19, 1991, and amended effective May 1, 1992, April 1,
1993, April 19, 1994 and May 9, 1995 [the "Registration Statement"]). The
Partnership was formed effective December 14, 1995 under a Limited Partnership
Agreement dated December 14, 1995. The initial 272 investors made capital
contributions of $2,866,912. Investors in the Partnership hold Swift Depositary
Interests ("SDIs") representing beneficial ownership interests in the
Partnership.
The Partnership is principally engaged in the business of acquiring
nonoperating interests (i.e., net profits interests, royalty interests and
overriding royalty interests) in proven oil and gas properties within the
continental United States. The Partnership does not acquire working interests in
or operate oil and gas properties, and does not engage in drilling activities.
At December 31, 1999, the Partnership had expended or committed to expend 100%
of the Interest Holders' commitments in the acquisition and development of
nonoperating interests in producing properties, which properties are described
under Item 2, "Nonoperating Interests in Properties," below. The Partnership's
income is derived almost entirely from its nonoperating interests and the
disposition thereof.
The Partnership's business and affairs are conducted by its Managing
General Partner, Swift Energy Company, a Texas corporation ("Swift"). The
Partnership's Special General Partner, VJM Corporation, a California corporation
("VJM"), consults with and advises Swift as to certain financial matters.
The general manner in which the Partnership acquires nonoperating
interests and otherwise conducts its business is described in detail in the
Registration Statement under "Proposed Activities of the Partnerships," which is
incorporated herein by reference. The following is intended only as a summary of
the Partnership's manner of doing business and specific activities to date.
Manner of Acquiring Nonoperating Interests in Properties; Net Profits and
Overriding Royalty Interest Agreement
The nonoperating interests owned by the Registrant have typically been
acquired pursuant to a Net Profits and Overriding Royalty Interest Agreement
dated December 14, 1995 (the "NP/OR Agreement") between the Registrant and Swift
Energy Operating Partners 1995-B, Ltd. (the "Operating Partnership"). The
Operating Partnership is a Texas limited partnership that is also managed by
Swift and VJM. The Operating Partnership was formed to acquire and develop
producing oil and gas properties.
Under the NP/OR Agreement, the Registrant and the Operating Partnership
have, in effect, combined their funds to acquire producing properties. Using
funds committed to the NP/OR Agreement by both partnerships, the Operating
Partnership acquires producing properties, then promptly conveys nonoperating
interests therein to the Registrant. The Operating Partnership retains a working
interest in each such property, and is responsible for the production of oil and
gas therefrom. For the sake of legal and administrative convenience, producing
properties are usually acquired from the third party sellers by Swift, which
then conveys a working interest in each such property to the Operating
Partnership. The Registrant initially committed $2,866,912 and the Operating
Partnership initially committed $2,500,000 for acquisitions under the NP/OR
Agreement. The Operating Partnership is obligated under the NP/OR Agreement to
convey to the Registrant a 53% fixed net profits interest and a variable
overriding royalty interest in specified depths of all producing properties
acquired under the NP/OR Agreement.
Under the NP/OR Agreement, the Operating Partnership is required to
convey to the Registrant, and the Registrant is required to purchase,
nonoperating interests in all producing properties acquired by the Operating
Partnership, except that:
1. properties anticipated to require significant development
operations and nonoperating interests offered to the Operating Partnership by
third parties may be purchased by the Operating Partnership outside the NP/OR
Agreement, without participation by the Registrant;
I-1
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
2. during a specified one-year period, the Registrant is
entitled to reduce the amount originally committed by it to purchases under the
NP/OR Agreement and to redirect such funds to the purchase of nonoperating
interests from sources other than the Operating Partnership; and
3. the Registrant's funds will be released from the NP/OR
Agreement if they are not completely spent by the Operating Partnership within a
specified period, or if there is a prior withdrawal of funds by the Operating
Partnership to purchase properties anticipated to require significant
development.
Purchases of nonoperating interests by the Registrant using withdrawn
or released funds may be made from the Managing General Partner and its
affiliates, other partnerships affiliated with the Operating Partnership
(possibly through the Registrant's entry into a new NP/OR Agreement), or from
unaffiliated third parties.
In accordance with its obligations under the NP/OR Agreement, as of
December 31, 1999, the Operating Partnership had conveyed to the Registrant a
53% net profits interest burdening certain depths of all producing properties
acquired by the Operating Partnership thereunder. Typically, a net profits
interest in an oil and gas property entitles the owner to a specified percentage
share of the gross proceeds generated by the burdened property, net of operating
costs. The net profits interest conveyed to the Registrant under the NP/OR
Agreement differs from the typical net profits interest in that it is calculated
over the entire group of producing properties conveyed under the NP/OR
Agreement; i.e., all operating costs attributable to the burdened depths of such
properties are aggregated, and the total is then subtracted from the total of
all gross proceeds attributable to such depths in order to calculate the net
profits to which the Registrant is entitled. The net profits interest conveyed
to the Registrant burdens only those depths of each subject property which were
evaluated to contain proved reserves at the date of acquisition, to the extent
such depths underlie specified surface acreage.
The Operating Partnership has also conveyed to the Registrant under the
NP/OR Agreement an overriding royalty interest in each property acquired
thereunder. An overriding royalty interest is a fractional interest in the gross
production (or the gross proceeds therefrom) of oil and gas from a property,
free of any exploration, development, operation or maintenance expenses. Under
the NP/OR Agreement, the overriding royalty interest burdens the portions of
each producing property that were evaluated at the date of acquisition not to
contain proved reserves.
Competition, Markets and Regulations
Competition
The oil and gas industry is highly competitive in all its phases. The
Partnership encounters strong competition from many other oil and gas producers,
many of which possess substantial financial resources, in acquiring economically
desirable Producing Properties.
Markets
The amounts of and price obtainable for oil and gas production from
Partnership Properties will be affected by market factors beyond the control of
the Partnership. Such factors include the extent of domestic production, the
level of imports of foreign oil and gas, the general level of market demand on a
regional, national and worldwide basis, domestic and foreign economic conditions
that determine levels of industrial production, political events in foreign
oil-producing regions, and variations in governmental regulations and tax laws
and the imposition of new governmental requirements upon the oil and gas
industry. There can be no assurance that oil and gas prices will not decrease in
the future, thereby decreasing net Revenues from Partnership Properties.
From time to time, there may exist a surplus of natural gas or oil
supplies, the effect of which may be to reduce the amount of hydrocarbons that
the Partnerships may produce and sell while such oversupply exists. In recent
years, initial steps have been taken to provide additional gas transportation
lines from Canada to the United States. If additional Canadian gas is brought to
the United States market, it could create downward pressure on United States gas
prices.
I-2
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
Regulations
Environmental Regulation
The federal government and various state and local governments have
adopted laws and regulations regarding the control of contamination of the
environment. These laws and regulations may require the acquisition of a permit
by Operators before drilling commences, prohibit drilling activities on certain
lands lying within wilderness areas or where pollution arises and impose
substantial liabilities for pollution resulting from operations, particularly
operations near or in onshore and offshore waters or on submerged lands. These
laws and regulations may also increase the costs of routine drilling and
operation of wells. Because these laws and regulations change frequently, the
costs to the Partnership of compliance with existing and future environmental
regulations cannot be predicted. However, the Managing Partner does not believe
that the Partnership is affected in a significantly different manner by these
regulations than are its competitors in the oil and gas industry.
Federal Regulation of Natural Gas
The transportation and sale of natural gas in interstate commerce is
heavily regulated by agencies of the federal government. The following
discussion is intended only as a summary of the principal statutes, regulations
and orders that may affect the production and sale of natural gas from
Partnership Properties. This summary should not be relied upon as a complete
review of applicable natural gas regulatory provisions.
FERC Orders
Several major regulatory changes have been implemented by the Federal
Energy Regulatory Commission ("FERC") from 1985 to the present that affect the
economics of natural gas production, transportation and sales. In addition, the
FERC continues to promulgate revisions to various aspects of the rules and
regulations affecting those segments of the natural gas industry that remain
subject to the FERC's jurisdiction. In April 1992, the FERC issued Order No. 636
pertaining to pipeline restructuring. This rule requires interstate pipelines to
unbundle transportation and sales services by separately stating the price of
each service and by providing customers only the particular service desired,
without regard to the source for purchase of the gas. The rule also requires
pipelines to (i) provide nondiscriminatory "no-notice" service allowing firm
commitment shippers to receive delivery of gas on demand up to certain limits
without penalties, (ii) establish a basis for release and reallocation of firm
upstream pipeline capacity and (iii) provide non-discriminatory access to
capacity by firm transportation shippers on a downstream pipeline. The rule
requires interstate pipelines to use a straight fixed variable rate design. The
rule imposes these same requirements upon storage facilities.
FERC Order No. 500 affects the transportation and marketability of
natural gas. Traditionally, natural gas has been sold by producers to pipeline
companies, which then resold the gas to end-users. FERC Order No. 500 alters
this market structure by requiring interstate pipelines that transport gas for
others to provide transportation service to producers, distributors and all
other shippers of natural gas on a nondiscriminatory, "first-come, first-served"
basis ("open access transportation"), so that producers and other shippers can
sell natural gas directly to end-users. FERC Order No. 500 contains additional
provisions intended to promote greater competition in natural gas markets.
It is not anticipated that the marketability of and price obtainable
for natural gas production from Partnership Properties will be significantly
affected by FERC Order No. 500. Gas produced from Partnership Properties
normally will be sold to intermediaries who have entered into transportation
arrangements with pipeline companies. These intermediaries will accumulate gas
purchased from a number of producers and sell the gas to end-users through open
access pipeline transportation.
State Regulations
Production of any oil and gas from Partnership Properties will be
affected to some degree by state regulations. Many states in which the
Partnership will operate have statutory provisions regulating the production and
sale of oil and gas, including provisions regarding deliverability. Such
statutes, and the regulations promulgated in connection therewith, are generally
intended to prevent waste of oil and gas and to protect correlative rights to
produce oil and gas between owners of a common reservoir. Certain state
regulatory authorities also regulate the amount of oil and gas produced by
assigning allowable rates of production to each well or proration unit.
I-3
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
Federal Leases
Some of the Partnership's properties are located on federal oil and gas
leases administered by various federal agencies, including the Bureau of Land
Management. Various regulations and orders affect the terms of leases,
exploration and development plans, methods of operation and related matters.
Employees
The Partnership has no employees. Swift, however, has a staff of
geologists, geophysicists, petroleum engineers, landmen, and accounting
personnel who administer the operations of Swift and the Partnership. As of
December 31, 1999, Swift had 173 employees. Swift's administrative and overhead
expenses attributable to the Partnership's operations are borne by the
Partnership.
I-4
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
Item 2. Nonoperating Interests in Properties
As of December 31, 1999, the Partnership has acquired nonoperating
interests in producing oil and gas properties which are generally described
below.
Principal Oil and Gas Producing Properties
The most valuable fields in the Partnership, based upon year-end 1999
engineering estimates of discounted future net revenues using constant pricing
and costs, and adjusted for the subsequent unsuccessful drilling of a
development well as discussed on page I-6, under "Net Proved Oil and Gas
Reserves",are described below.
1. The Holiday Field is in Adams County, Mississippi (Oxy USA
acquisition). This field accounts for 81% of the Partnership's value, as
adjusted.
2. The OK Field is in Campbell County, Wyoming (Ranch Oil acquisition).
This field is a waterflood oil unit and accounts for 15 % of the Partnership's
value, as adjusted.
The remaining value in the Partnership is attributable to numerous
properties none of which equals or exceeds 10 percent of the total Partnership
value, as adjusted.
Title to Properties
Title to substantially all significant producing properties in which
the Partnership owns nonoperating interests has been examined. In addition to
the nonoperating interests owned by the Partnership, the properties are subject
to royalty, overriding royalty and other interests customary in the industry.
The Managing General Partner does not believe any of these burdens materially
detract from the value of the properties or will materially detract from the
value of the properties or materially interfere with their use in the operation
of the business of the Partnership.
Production and Sales Price
The following table summarizes the sales volumes of the Partnership's
net oil and gas production expressed in MCFs. Equivalent MCFs are obtained by
converting oil to gas on the basis of their relative energy content; one barrel
equals 6,000 cubic feet of gas. Average Net Nonoperating Interest Price per
Equivalent MCF is determined by dividing the related oil and gas revenue from
nonoperating interests by the equivalent MCF's produced.
Net Production
-------------------------------
For the Years Ended
December 31,
-------------------------------
1999 1998 1997
------- ------- -------
Net Volumes (Equivalent MCFs) 274,068 484,902 110,879
Average Net Nonoperating
Interest Price per
Equivalent MCF $1.74 $1.26 $1.73
I-5
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1999, 1998 and 1997. The Partnership does not itself own a
direct interest in proved reserves. The proved reserve estimates shown below
represent an estimate of the proved reserves owned by the Operating Partnership
equal to the percentage net profits interest conveyed to the Partnership by the
Operating Partnership. All of the Partnership's nonoperating interests in proved
reserves are located in the United States.
December 31,
------------------------------------------------------------------
1999 1998 1997
------------------ ------------------ ------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- ------- ------- ------- ------- -------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
Proved developed
reserves at end of year 83,233 624 62,778 794 105,687 1,072
======== ======= ======= ======= ======= =======
Proved reserves
Balance at beginning
of year 134,399 1,975 215,163 2,306 7,015 294
Purchase of minerals
in place -- -- -- -- 210,588 2,095
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates 18,150 (881) (41,805) (62) 4,311 (13)
Sales of minerals in
place -- -- (1,825) (7) -- --
Production (17,776) (167) (37,134) (262) (6,751) (70)
------- ------- ------- ------- ------- -------
Balance at end of year 134,773 927 134,399 1,975 215,163 2,306
======= ======= ======= ======= ======= =======
In early 2000, the Partnerships' companion Operating Partnership
participated in the drilling of a development well in Wilkinson County,
Mississippi, (Oxy USA acquisition), in which well the Partnership owns a
nonoperating interest. This well was drilled to develop reserves classified as
proved non-developed in the Partnership's estimates of proved reserves at
December 31, 1999. In March 2000, the well was determined to be unsuccessful and
was plugged and abandoned. The Partnership's estimated reserve quantities as of
December 31, 1999, include proved non-developed reserves associated with this
well of 15,109 barrels of oil and 278 MMCF of natural gas or 369 MMCFE, or 11%
of the December 31, 1999 estimated oil reserve volumes and 30% of the estimated
natural gas reserve volumes, or 21% of the total proved reserve volumes. The
costs associated with the drilling of this well were originally reserved when
the Interest Holders' contributions were used to purchase the nonoperating
interests from the companion Operating Partnership.
Revisions of previous quantity estimates are related to upward or
downward variations based on current engineering information for production
rates, volumetrics and reservoir pressure. Additionally, changes in quantity
estimates are the result of the increase or decrease in crude oil and natural
gas prices at each year end which have the effect of adding or reducing proved
reserves on marginal properties due to economic limitations.
I-6
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
The following table summarizes by acquisition the Registrant's proved
reserves equal to the percentage net profits interests conveyed by the Operating
Partnership and its nonoperating interests in gross and net producing oil and
gas wells as of December 31, 1999, before adjustments for the unsuccessful
development well discussed above:
Reserves
December 31, 1999
-------------------
Natural Wells
Oil Gas ---------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- ------- ------- ------- ----- -----
BHP Petroleum LA 309 25 15 0.007
Nuevo Energy TX 849 26 5 0.125
Ranch Oil WY 72,597 -- 13 0.265
Oxy USA MS 61,018 876 7 0.262
------- ------- ----- -----
134,773 927 40 0.659
======= ======= ===== =====
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. Oil and gas reserve engineering must be recognized as a
subjective process of estimating underground accumulations of oil and gas that
cannot be measured in an exact way, and estimates of other engineers might
differ from those above, audited by H. J. Gruy and Associates, Inc., an
independent petroleum consulting firm. 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,
and, as a general rule, reserve estimates based upon volumetric analysis are
inherently less reliable than those based on lengthy production history.
Accordingly, reserve estimates are often different from the quantities of oil
and gas that are ultimately recovered.
In estimating the oil and natural gas reserves, the Registrant, in
accordance with criteria prescribed by the Securities and Exchange Commission,
has used prices received as of December 31, 1999 without escalation, except in
those instances where fixed and determinable gas price escalations are covered
by contracts, limited to the price the Partnership reasonably expects to
receive. Other than the unsuccessful development well previously discussed, the
registrant does not believe that any favorable or adverse event causing a
significant change in the estimated quantity of proved reserves has occurred
between December 31, 1999 and the date of this report.
Future prices received for the sale of the Partnership's products may
be higher or lower than the prices used in the evaluation described above; the
operating costs relating to such production may also increase or decrease from
existing levels. The estimates presented above are in accordance with rules
adopted by the Securities and Exchange Commission.
Item 3. Legal Proceedings
The Partnership is not aware of any material pending legal proceedings
to which it is a party or of which any of its property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of Interest Holders during the
fourth quarter of the fiscal year covered by this report.
I-7
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
PART II
Item 5. Market Price of and Distributions on the Registrant's SDIs and Related
Interest Holder Matters
Market Information
SDIs in the Partnership were initially sold at a price of $1 per SDI.
SDIs are not traded on any exchange and there is no established public trading
market for the SDIs. Swift is aware of negotiated transfers of SDIs between
unrelated parties; however, these transfers have been limited and sporadic. Due
to the nature of these transactions, Swift has no verifiable information
regarding prices at which SDIs have been transferred.
Holders
As of December 31, 1999, there were 268 Interest Holders holding SDIs
in the Partnership.
Distributions
The Partnership generally makes distributions to Interest Holders on a
quarterly basis, subject to the restrictions set forth in the Limited
Partnership Agreement. In the fiscal years ended December 31, 1998 and 1999, the
Partnership distributed a total of $268,900 and $254,400, respectively, to
holders of its SDIs. Cash distributions constitute net proceeds from sale of oil
and gas production after payment of lease operating expenses and other
partnership expenses. Some or all of such amounts or any proceeds from the sale
of partnership properties could be deemed to constitute a return of investors'
capital.
Oil and gas investments involve a high risk of loss, and no assurance
can be given that any particular level of distributions to holders of SDIs can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 2000, the Partnership's ability
to make distributions could be diminished by any event adversely affecting the
oil and gas properties in which the Partnership owns interests or the amount of
revenues received by the Partnership therefrom.
The Partnership's Limited Partnership Agreement contains various
provisions which might serve to delay, defer or prevent a change in control of
the Partnership, such as the requirement of a vote of Limited Partners in order
to sell all or substantially all of the Partnership's properties or the
requirement of consent by the Managing General Partner to transfers of limited
partnership interests and provisions prohibiting the transfer of Limited
Partnership Units in any fiscal year in excess of a limit which has been
established in order to comply with certain federal income tax regulations.
II-1
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
Item 6. Selected Financial Data
The following selected financial data, prepared in accordance with
generally accepted accounting principles for the years ended December 31, 1999,
1998, 1997, 1996 and the period from inception (December 14, 1995) through
December 31, 1995, should be read in conjunction with the financial statements
included in Item 8:
1999 1998 1997 1996 1995
----------- ----------- ----------- ------------ -----------
Revenues $ 504,975 $ 647,329 $ 327,090 $ 272,340 $ --
Income (Loss) $ 185,836 $ 239,550 $ 172,017 $ 113,638 $ --
Total Assets $ 2,585,549 $ 2,701,643 $ 2,810,241 $ 3,088,795 $ 2,866,912
Cash Distributions $ 310,106 $ 346,286 $ 243,328 $ 107,400 $ --
Long Term Obligations $ -- $ -- $ -- $ -- $ --
Interest Holders' Net
Income (Loss) Per SDI $ .04 $ .03 $ .03 $ .03 $ --
Interest Holders' Cash
Distributions Per SDI $ .09 $ .09 $ .08 $ .04 $ --
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of 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. 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
these 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. Cash distributions to
partners or Interest Holders are determined quarterly, based upon the net
profits interest payment received from the companion operating partnership, less
general and administrative expenses. The net profits interest payment is
determined based upon net proceeds from sale of oil and gas production after
payment of lease operating expense, taxes and development costs. In addition,
future partnership cash requirements are taken into account to determine
necessary cash reserves.
Net cash provided by operating activities totaled $460,920, $364,550 and
$244,445 in 1999, 1998 and 1997, respectively. Cash provided by operating
activities increased in 1998 due to increased production volumes as a result of
the Partnerships' purchase of nonoperating interest in oil and gas properties in
late 1997 (Oxy USA acquisition). The increase in 1999 is related to the decrease
in nonoperating interest income receivable as compared to 1998. The cash
provided by proceeds from the sale of nonoperating interests in properties
totaled $34,173 in 1998. Capital expenditures in 1999, 1998 and 1997 totaled
$95,121, $4,146 and $2,020,236, respectively. The capital expenditures in 1997
are related to the purchase of nonoperating interest in oil and gas properties.
Cash distributions to partners totaled $310,106, $346,286 and $243,328 in 1999,
1998 and 1997, respectively. Cash distributions increased in 1998, when compared
to 1997, as a result of the Oxy USA acquisition in late 1997. The decrease in
1999, as compared to 1998, is due to production declines and the sale of
nonoperating interests in two wells in late 1998.
II-2
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
The Partnership has expended all of the partners' 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. 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. As of December 31, 1999, the Partnership anticipates
that its net profits interest will be burdened with approximately $10,967 and
$79,567 over the next two years, respectively, to develop and enhance the proved
oil and gas reserves related to its nonoperating property interests. The
Managing General Partner believes that the funds currently available to the
Partnership will be adequate to meet any anticipated capital requirements. In
early 2000, the Partnership's companion Operating Partnership participated in
the drilling of a development well, in which well the Partnership owns a
nonoperating interest. The costs associated with the drilling of this well were
originally reserved when the Interest Holders' contributions were used to
purchase the nonoperating interests from the companion Operating Partnership,
therefore, no funds were used from current cash flow for the drilling of this
well.
Results of Operations
Income from nonoperating interests decreased 24 percent in 1999 over
1998. Oil and gas sales declined $357,784 or 34 percent in 1999 vs. 1998,
primarily due to decreased oil and gas production and a decrease in gas prices.
In 1999, production volumes decreased 44 percent as oil and gas production
declined 52 percent and 36 percent, respectively, when compared to 1998.
Production declines were related to a well in Mississippi, (Oxy USA
acquisition), reaching full depletion in 1999 and to properties sold in late
1998. The Mississippi well went off production in April 1999 and accounted for
12% of the decline in oil production and 42% of the gas production decline for
the year, when compared to 1998. In addition, two other Mississippi wells, (Oxy
USA acquisition), were sold in December 1998 and accounted for 59% of the
decrease in oil production and 26% of the decrease in gas production when
compared to 1998. The wells sold accounted for approximately 14% of oil and gas
sales in 1998. Oil prices increased 54 percent or $5.87/BBL to an average of
$16.85/BBL and gas prices decreased 3 percent or $0.07/MCF to an average of
$2.33/MCF for 1999. Increased oil prices helped offset the effect of decreased
production.
Corresponding production costs per equivalent MCF decreased 10 percent
in 1999 compared to 1998, and total production costs decreased 50 percent in
1999, due to the production declines mentioned above. The properties sold in
December 1998 accounted for approximately 29% of the total production costs in
1998.
Associated amortization expense decreased 31 percent or $108,873 in
1999 compared to 1998, also related to the decline in production volumes.
Revisions to previous proved oil and gas reserve estimates were recorded
during the year. See "Net Proved Oil and Gas Reserves" page on I-6. Oil quantity
estimates were revised upward due to the increase in oil prices from December
31, 1998, as compared to December 31, 1999. The increase in price had the effect
of adding back proved reserves on marginal properties which had previously been
limited due to economic conditions. A downward revision in gas quantity
estimates on a proved non-developed location in Mississippi was based on updated
engineering and geological information.
In early 2000, a development well in which the Partnership owns a
nonoperating interest was unsuccessfully drilled and in March was plugged and
abandoned. The Partnership anticipates that a significant downward reserve
revision and the costs associated with the drilling of the well will be recorded
in the first quarter of 2000, resulting in an increase in amortization expense
in the year 2000.
Income from nonoperating interests increased 198 percent in 1998 over
1997. Also, oil and gas sales increased 229 percent in 1998 vs. 1997. Production
volumes increased 337 percent. Gas production increased 272 percent or 191,725
MCF and oil production increased 450 percent or 30,383 barrels. The dramatic
increase in 1998 partnership revenues and production, when compared to 1997, was
the result of nonoperating interests acquired in producing oil and gas
properties in late 1997 (Oxy USA acquisition). 1998 was the first year of
production for these oil and gas properties acquired by the partnership.
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. Total amortization expense
increased 252 percent in 1998 when compared to 1997, primarily due to the 337
percent production volume increase. No additional provision for amortization was
recorded in 1998 or 1997.
II-3
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
Low oil prices at December 31, 1998 resulted in a downward revision in
oil quantity estimates as proved reserves on marginal properties were reduced
due to economic limitations.
During 2000, Partnership revenues and costs are expected to be shared
between the Interest Holders and general partners in an 85:15 ratio. Based on
current oil and gas prices, anticipated levels of oil and gas production and
expected cash distributions during 2000, the Managing General Partner
anticipates that the Partnership sharing ratio will continue to be 85:15.
Year 2000
The Year 2000 issue resulted from computer programs and embedded
computer chips with date fields which could not distinguish between the years
1900 and 2000. The Managing General Partner implemented steps necessary to make
its operations and the related operations of the Partnership capable of
addressing the Year 2000. These steps included upgrading, testing and certifying
its computer systems and field operation services and obtaining Year 2000
compliance certification from all important business suppliers. The Managing
General Partner formed a task force during 1998 to address the Year 2000 issue
and prepare its business systems for the Year 2000. The Managing General Partner
either replaced or updated mission critical systems and completed testing before
2000 began.
The Managing General Partner's business systems are almost entirely
comprised of off-the-shelf software. Most of the necessary changes in computer
instructional code were made by upgrading this software. In addition, the
Managing General Partner received certification as to Year 2000 compliance from
vendors or third party consultants.
The costs incurred to address the Year 2000 issue with respect to the
Managing General Partners' business systems did not have a material effect on
the Partnership's results of operations, or its liquidity and financial
condition. The estimated total cost to the Managing General Partner to address
Year 2000 issues was less than $150,000, most of which was spent during the
testing phase. The Partnership's share of this cost was insignificant.
The most reasonably likely worst case scenario would have been a
prolonged disruption of external power sources upon which core equipment relies,
resulting in a substantial decrease in the Partnership's oil and gas production
activities. In addition, the pipeline operators to whom the Managing General
Partner sells the Partnership's natural gas, as well as other customers and
suppliers, could have been prone to Year 2000 problems that could not be
assessed or detected by the Managing General Partner.
As of the filing of this report, the Managing General Partner is not
aware of any Year 2000 problems either experienced by it or by parties which it
does business, and does not expect to experience such problems in the future.
Item 8. Financial Statements and Supplementary Data
See Part IV, Item 14(a) for index to financial statements.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
II-4
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
PART III
Item 10. Directors and Executive Officers of the Registrant
As a limited partnership, the Registrant has no directors or executive
officers. The business and affairs of the Registrant are managed by Swift as
Managing General Partner. Set forth below is certain information as of March 10,
2000, regarding the directors and executive officers of Swift.
Position(s) with
Name Age Swift and Other Companies
---- --- -------------------------
DIRECTORS
---------
A. Earl Swift 66 Chief Executive Officer and
Chairman of the Board
Virgil N. Swift 71 Executive Vice President - Business
Development, Vice Chairman of the Board
G. Robert Evans 68 Director of Swift; Chairman of the Board,
Material Sciences Corporation;
Director, Consolidated Freightways, Inc.,
Fibreboard Corporation, Elco Industries, and
Old Second Bancorp
Raymond O. Loen 75 Director of Swift; President, R. O. Loen
Company
Henry C. Montgomery 64 Director of Swift; Chairman of the Board,
Montgomery Financial Services Corporation;
Director, Southwall Technology Corporation
Clyde W. Smith, Jr. 51 Director of Swift; President, Somerset
Properties, Inc.
Harold J. Withrow 72 Director of Swift
EXECUTIVE OFFICERS
------------------
Terry E. Swift 44 President
Joe A. D'Amico 51 Chief Operating Officer
John R. Alden 54 Senior Vice President - Finance,
Chief Financial Officer and Secretary
Bruce H. Vincent 52 Senior Vice President - Funds Management
James M. Kitterman 55 Senior Vice President - Operations
Alton D. Heckaman, Jr. 42 Vice President - Finance and Controller
III-1
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
From time to time, Swift as Managing General Partner of the Partnership
purchases Units in the Partnership from investors who offer the Units pursuant
to their right of presentment, which purchases are made pursuant to terms set
out in the Partnership's original Limited Partnership Agreement. Due to the
frequency and large number of these transactions, Swift reports these
transactions under Section 16 of the Securities Exchange Act of 1934 on an
annual rather than a monthly basis. In some cases such annual reporting may
constitute a late filing of the required Section 16 reports under the applicable
Section 16 rules.
Item 11. Executive Compensation
As noted in Item 10, "Directors and Executive Officers of the
Registrant," above, the Partnership has no executive officers. The executive
officers of Swift and VJM are not compensated by the Partnership.
Certain fees and allowances contemplated by the Limited Partnership
Agreement were paid by the Partnership to Swift and VJM. See Note (4) in Notes
To Financial Statements (Related-Party Transactions) for further discussion.
Item 12. Security Ownership of Certain Beneficial Owners and Management
No single Interest Holder is known to the Partnership to be the
beneficial owner of more than five percent of the Partnership's SDIs.
Swift and VJM are not aware of any arrangement, the operation of which
may at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions
As noted in Item 10, "Directors and Executive Officers of the
Registrant," above, the Partnership has no executive officers or directors, and
thus has not engaged in any transactions in which any such person had an
interest. The Partnership is permitted to engage in certain transactions with
Swift as Managing General Partner and VJM as Special General Partner, subject to
extensive guidelines and restrictions as described in the "Conflicts of
Interest" section of the Prospectus contained in the Registration Statement,
which is incorporated herein by reference.
Summarized below are the principal transactions that occurred during
1995 between the Partnership, on one hand, and Swift, VJM and their affiliates,
on the other.
Certain Transactions with General Partners
1. As described in Item 1, "Business," above, during 1995 the
Partnership entered into an NP/OR Agreement with the Operating Partnership,
which is also managed by Swift and VJM. Pursuant to such NP/OR Agreement, the
Operating Partnership acquired the oil and gas properties described under Item 2
above and conveyed nonoperating interests therein to the Partnership.
2. Swift acts as operator for many of the wells in which the
Partnership has nonoperating interests and has received compensation for such
activities in accordance with standard industry operating agreements.
3. The Partnership paid to Swift and VJM certain fees as contemplated
by the Limited Partnership Agreement. See Note (4) in Notes To Financial
Statements (Related-Party Transactions) for further discussion.
III-2
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
a(1) FINANCIAL STATEMENTS PAGE NO.
-------------------- --------
Report of Independent Public Accountants IV-2
Balance Sheets as of December 31, 1999 and 1998 IV-3
Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 IV-4
Statements of Partners' Capital for the years ended
December 31 1999, 1998 and 1997 IV-5
Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 IV-6
Notes to Financial Statements IV-7
a(2) FINANCIAL STATEMENT SCHEDULES
All schedules required by the SEC are either inapplicable or the
required information is included in the Financial Statements, the
Notes thereto, or in other information included elsewhere in this
report.
a(3) EXHIBITS
3.1 Limited Partnership Agreement of Swift Energy Pension
Partners 1995-B, Ltd., dated December 14, 1995. (Form 10-K
for year ended December 31, 1995, Exhibit 3.1).
3.2 Certificate of Limited Partnership of Swift Energy Pension
Partners 1995-B, Ltd., as December 14 1995, with the Texas
Secretary of State. (Form 10-K for year ended December 31,
1995, Exhibit 3.2).
10.1 Net Profits and Overriding Royalty Interest Agreement
between Swift Energy Pension Partners 1995-B, Ltd., and
Swift Energy Operating Partners 1995-B, Ltd., dated
December 14, 1995. (Form 10-K for year ended December 31,
1996, Exhibit 10.1).
99.1 A copy of the following section of the Prospectus dated
May 9, 1995, contained in Post-Effective Amendment No. 4
to Registration Statement No. 33-37983 on Form S-1 for
Swift Energy Depositary Interests I, as filed on May 9,
1995, which have been incorporated herein by reference:
"Proposed Activities" (pp 25 - 34) and "Conflicts of
Interests" (pp 92 - 96). (Form 10-K for year ended
December 31, 1995, Exhibit 28.1).
b(1) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter ended
December 31, 1999
Supplemental Information to be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.
No annual report to security holders covering the Partnership's 1999
fiscal has been sent to Interest Holders of the Partnership.
IV-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Pension Partners 1995-B, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Pension
Partners 1995-B, Ltd., (a Texas limited partnership) as of December 31, 1999 and
1998, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1999, 1998 and 1997. These financial statements
are the responsibility of the Managing General Partner's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Swift Energy Pension
Partners 1995-B, Ltd., as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years ended December 31, 1999, 1998 and
1997, in conformity with accounting principles generally accepted in the United
States.
ARTHUR ANDERSEN LLP
Houston, Texas
February 9, 2000
IV-2
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
1999 1998
----------- -----------
ASSETS:
Current Assets:
Cash and cash equivalents $ 704,809 $ 649,116
Nonoperating interests income receivable 312,349 342,267
----------- -----------
Total Current Assets 1,017,158 991,383
----------- -----------
Nonoperating interests in oil and gas
properties, using full cost accounting 2,301,939 2,206,818
Less-Accumulated amortization (733,548) (496,558)
----------- -----------
1,568,391 1,710,260
----------- -----------
$ 2,585,549 $ 2,701,643
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 14,716 $ 6,540
----------- -----------
Interest Holders' Capital (2,866,912 Interest Holders'
SDIs; $1.00 per SDI) 2,553,769 2,677,455
General Partners' Capital 17,064 17,648
----------- -----------
Total Partners' Capital 2,570,833 2,695,103
----------- -----------
$ 2,585,549 $ 2,701,643
=========== ===========
See accompanying notes to financial statements.
IV-3
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998 1997
--------- --------- ---------
REVENUES:
Income from nonoperating interests $ 472,984 $ 622,110 $ 208,860
Interest income 31,991 25,219 118,230
--------- --------- ---------
504,975 647,329 327,090
--------- --------- ---------
COSTS AND EXPENSES:
Amortization 236,990 345,863 98,153
General and administrative 82,149 61,916 56,920
--------- --------- ---------
319,139 407,779 155,073
--------- --------- ---------
NET INCOME (LOSS) $ 185,836 $ 239,550 $ 172,017
========= ========= =========
See accompanying notes to financial statements.
IV-4
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Interest General Combining
Holders Partners Adjustment Total
----------- --------- ---------- -----------
Balance,
December 31, 1996 $ 2,845,078 $ 1,907 $ 26,165 $ 2,873,150
Income (Loss) 99,261 21,880 50,876 172,017
Cash Distributions (229,300) (14,028) -- (243,328)
----------- --------- ---------- -----------
Balance,
December 31, 1997 2,715,039 9,759 77,041 2,801,839
----------- --------- ---------- -----------
Income (Loss) 88,494 85,275 65,781 239,550
Cash Distributions (268,900) (77,386) -- (346,286)
----------- --------- ---------- -----------
Balance,
December 31, 1998 2,534,633 17,648 142,822 2,695,103
----------- --------- ---------- -----------
Income (Loss) 102,367 55,122 28,347 185,836
Cash Distributions (254,400) (55,706) -- (310,106)
----------- --------- ---------- -----------
Balance,
December 31, 1999 $ 2,382,600 $ 17,064 $ 171,169 $ 2,570,833
=========== ========= ========== ===========
Interest Holders' net income (loss)
per SDI
1997 $ 0.03
===========
1998 $ 0.03
===========
1999 $ 0.04
===========
See accompanying notes to financial statements.
IV-5
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998 1997
--------- --------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 185,836 $ 239,550 $ 172,017
Adjustments to reconcile income (loss) to
net cash provided by operations:
Amortization 236,990 345,863 98,153
Change in assets and liabilities:
(Increase) decrease in nonoperating interests income receivable 29,918 (226,444) (29,983)
(Increase) decrease in other current assets -- 7,443 3,857
Increase (decrease) in accounts payable 8,176 (1,862) 401
--------- --------- -----------
Net cash provided by (used in) operating activities 460,920 364,550 244,445
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to nonoperating interests in oil and gas properties (95,121) (4,146) (2,020,236)
Proceeds from sales of nonoperating interests in oil and gas properties -- 34,173 --
--------- --------- -----------
Net cash provided by (used in) investing activities (95,121) 30,027 (2,020,236)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (310,106) (346,286) (243,328)
--------- --------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 55,693 48,291 (2,019,119)
--------- --------- -----------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 649,116 600,825 2,619,944
--------- --------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 704,809 $ 649,116 $ 600,825
========= ========= ===========
See accompanying notes to financial statements.
IV-6
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Pension Partners 1995-B, Ltd., a Texas limited partnership
("the Partnership"), was formed on December 14, 1995 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 interests 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) $575,482, which
includes 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 272 Interest Holders made total capital contributions of
$2,866,912.
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. Payout had not occurred as of December 31, 1999.
(2) 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.
Oil and Gas Revenues --
Oil and gas revenues are reported using the entitlement method in which
the Partnership recognizes its interest in oil and natural gas production as
revenue.
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.
IV-7
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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
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.
Cash and Cash Equivalents--
Highly liquid debt instruments with an initial maturity of three months
or less are considered to be cash equivalents.
Reclassifications --
Certain reclassifications have been made to the prior year balances to
conform with the current year presentation.
(3) Acquisition of Nonoperating Interests in Oil and Gas Property Costs -
Effective December 14, 1995, the Partnership entered into a Net Profits
and Overriding Royalty Interests Agreement ("NP/OR Agreement") with Swift Energy
Operating Partners 1995-B, Ltd. ("Operating Partnership"), managed by Swift, for
the purpose of acquiring 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 its
proportionate share of the property acquisition costs, as defined. Property
acquisition costs are amounts actually paid by the Operating Partnership for the
properties plus costs incurred by the Operating Partnership in acquiring the
properties and costs related to screening and evaluation of properties not
acquired. In 1999, 1998 and 1997, the Partnership acquired nonoperating
interests in producing oil and gas properties for $95,121, $4,146 and
$1,812,592, respectively, of which $206,174 in 1997, related to costs charged by
Swift to the Operating Partnership for the evaluation and acquisition effort,
including costs related to interests not acquired.
During 1997, the Interest Holders' share of unamortized oil and gas
property costs exceeded their "ceiling limitation", resulting in a valuation
allowance of $27,603. This amount is included in the income (loss) attributable
to the Interest Holders shown in the statement of partners' capital together
with a "combining adjustment" for the difference between the Interest Holders'
valuation allowance and the Partnership's full cost ceiling write down. The
"combining adjustment" changes quarterly as the Partnership's total amortization
provision is more or less than the combined amortization provision attributable
to the general partners and Interest Holders.
(4) Related Party Transactions -
During 1999, 1998 and 1997, the Partnership paid Swift $43,004 per year
as a general and administrative overhead allowance.
During 1999, 1998 and 1997, the Partnership also paid Swift an
incentive amount, as defined in the Partnership Agreement, for services rendered
to the Partnership. Such amounts totaled $5,074 in 1999, $8,105 in 1998 and
$4,043 in 1997 and are included in general and administrative expenses.
IV-8
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(5) Federal Income Taxes -
The Partnership is not a tax-paying entity. No provision is made in the
accounts of the Partnership for federal or state income taxes, since such taxes
are liabilities of the individual partners, and the amounts thereof depend upon
their respective tax situations.
The tax returns and the amount of distributable Partnership income are
subject to examination by the federal and state taxing authorities. If the
Partnership's royalty income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the Interest Holders
could be changed accordingly. Royalty income reported on the Partnership's
federal return of income for the years ended December 31, 1999, 1998, and 1997
was $334,614, $569,040 and $147,634, respectively. The difference between
royalty income for federal income tax purposes reported by the Partnership and
income or loss from nonoperating interests reported herein primarily results
from the exclusion of amortization (as described below) from ordinary income
reported in the Partnership's federal return of income.
For federal income tax purposes, amortization with respect to
nonoperating interests in oil and gas is computed separately by the partners and
not by the Partnership. Since the amount of amortization on nonoperating
interests in oil and gas is not computed at the Partnership level, amortization
is not included in the Partnership's income for federal income tax purposes but
is charged directly to the partners' capital accounts to the extent of the cost
of the nonoperating interests in oil and gas properties, and thus is treated as
a separate item on the partners' Schedule K-1. Amortization for federal income
tax purposes may vary from that computed for financial reporting purposes in
cases where a ceiling adjustment is recorded, as such amount is not recognized
for tax purposes.
(6) 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.
(7) 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) Subsequent Events (subsequent to the date of auditor's examination and
unaudited) -
Subsequent to the reserve estimate date of December 31, 1999, a development
well in which the Partnership owns a nonoperating interest was unsuccessfully
drilled and, in March 2000, was plugged and abandoned. The Partnership's
estimated reserve quantities as of December 31, 1999 include proved
non-developed reserves associated with this well of 15,109 barrels of oil and
278 MMCF of natural gas or 369 MMCFE, or 11% of the December 31, 1999 estimated
oil reserve volume and 30% of the estimated natural gas reserve volumes, or 21%
of the total proved reserve volumes.
IV-9
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to
Form 10-K for Swift Energy Pension Partners 1995-B, Ltd. for the year 1999 to be
signed on its behalf by the undersigned thereunto duly authorized.
SWIFT ENERGY PENSION
PARTNERS 1995-B, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
General Partner
Date: May 16, 2000 By: s/b A. Earl Swift
----------------------- ------------------------------
A. Earl Swift
Chief Executive Officer
Date: May 16, 2000 By: s/b John R. Alden
----------------------- ------------------------------
John R. Alden
Principal Financial Officer
Date: May 16, 2000 By: s/b Alton D. Heckaman, Jr.
----------------------- ------------------------------
Alton D. Heckaman, Jr.
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment No. 1 to Form 10-K for Swift Energy Pension Partners 1995-B, Ltd. for
the year 1999 has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SWIFT ENERGY PENSION
PARTNERS 1996-B, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
General Partner
Date: May 16, 2000 By: s/b A. Earl Swift
----------------------- ------------------------------
A. Earl Swift
Director and Principal
Executive Officer
Date: May 16, 2000 By: s/b Virgil N. Swift
----------------------- ------------------------------
Virgil N. Swift
Director and Executive
Vice President - Business
Development
V-1
SWIFT ENERGY PENSION PARTNERS 1995-B, LTD.
SIGNATURES
Date: May 16, 2000 By: s/b G. Robert Evans
----------------------- ------------------------------
G. Robert Evans
Director
Date: May 16, 2000 By: s/b Raymond O. Loen
----------------------- ------------------------------
Raymond O. Loen
Director
Date: May 16, 2000 By: s/b Henry C. Montgomery
----------------------- ------------------------------
Henry C. Montgomery
Director
Date: May 16, 2000 By: s/b Clyde W. Smith, Jr.
----------------------- ------------------------------
Clyde W. Smith, Jr.
Director
Date: May 16, 2000 By: s/b Harold J. Withrow
----------------------- ------------------------------
Harold J. Withrow
Director
V-2