SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1995
Commission File Number 1-8754
SWIFT ENERGY COMPANY
(Exact Name of Registrant as Specified in its Charter)
TEXAS 74-2073055
(State of Incorporation) (I.R.S. Employer
Identification No.)
16825 Northchase Dr., Suite 400
Houston, Texas 77060
(713) 874-2700
(Address and telephone number of principal executive offices)
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 ___
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the latest
practicable date.
Common Stock 6,718,742 Shares
($.01 Par Value) (Outstanding at April 30, 1995)
(Class of Stock)
<PAGE>
SWIFT ENERGY COMPANY
INDEX
PART I. FINANCIAL INFORMATION PAGE
ITEM 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
- March 31, 1995 and December 31, 1994 3
Condensed Consolidated Statements of Income
- For the Three-month periods ended
March 31, 1995 and 1994 5
Condensed Consolidated Statements of
Stockholders' Equity
- March 31, 1995 and December 31, 1994 6
Condensed Consolidated Statements of Cash Flows
- For the Three-month periods ended
March 31, 1995 and 1994 7
Notes to Condensed Consolidated Financial
Statements 8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 17
PART II. OTHER INFORMATION
ITEMS 1-6. None 24
SIGNATURES 25
<PAGE>
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
_______________ _______________
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,531,762 $ 985,498
Accounts receivable -
Oil and gas sales 12,532,029 12,394,636
Associated limited partnerships
and joint ventures 13,904,695 17,899,150
Joint interest owners 4,240,136 4,335,283
Producing oil and gas properties
held for transfer 3,005,520 3,525,841
Other current assets 128,255 68,010
___________ ___________
Total Current Assets 35,342,397 39,208,418
___________ ___________
Property and Equipment:
Oil and gas, using full-cost accounting
Proved properties being amortized 97,257,030 93,368,795
Unproved properties not being amortized 16,318,934 14,805,479
___________ ___________
113,575,964 108,174,274
Furniture, fixtures and other equipment 3,819,581 3,476,695
___________ ___________
117,395,545 111,650,969
Less-Accumulated depreciation, depletion
and amortization (23,533,177) (21,364,949)
___________ ___________
93,862,368 90,286,020
___________ ___________
Other Assets:
Receivables from associated limited partnerships,
net of current portion 2,185,975 1,916,477
Limited partnership formation and
marketing costs, net of current portion 3,162,422 2,991,873
Deferred charges 1,242,232 1,269,955
___________ ___________
6,590,629 6,178,305
___________ ___________
$135,795,394 $135,672,743
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
______________________________
(Unaudited) (Note 1)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term bank borrowings $ 30,550,000 $ 27,229,000
Accounts payable and accrued liabilities 6,634,006 9,516,005
Payable to associated limited partnerships 35,184 637,991
Undistributed oil and gas revenues 14,852,256 14,962,863
____________ ____________
Total Current Liabilities 52,071,446 52,345,859
____________ ____________
Long-Term Debt 28,750,000 28,750,000
Deferred Revenues 7,346,764 7,827,562
Deferred Income Taxes 4,748,684 4,622,191
Commitments and Contingencies
Stockholders' Equity:
Preferred stock $.01 par value, 5,000,000
shares authorized, none outstanding --- ---
Common stock, $.01 par value, 35,000,000
shares authorized, 6,710,412 and 6,685,137
shares issued and outstanding,
respectively 67,104 66,851
Additional paid-in capital 25,112,419 24,885,903
Retained earnings 17,698,977 17,174,377
____________ ____________
42,878,500 42,127,131
____________ ____________
$135,795,394 $135,672,743
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
_________________________________________
1995 1994
_______________ _______________
<S> <C> <C>
Revenues:
Oil and gas sales $ 4,876,041 $ 4,817,270
Fees from limited partnerships
and joint ventures 113,430 108,682
Supervision fees 904,539 943,148
Interest income 7,484 18,644
Other, net 357,094 250,791
________________ ______________
6,258,588 6,138,535
Costs and Expenses:
General and administrative, net
of reimbursement 1,306,765 1,195,331
Depreciation, depletion and
amortization 2,168,229 1,688,938
Oil and gas production 1,629,379 1,142,288
Interest expense 477,781 358,975
________________ ______________
5,582,154 4,385,532
________________ ______________
Income before Income Taxes 676,434 1,753,003
Provision for Income Taxes 151,834 542,281
________________ ______________
Income Before Cumulative Effect of Change in
Accounting Principle 524,600 1,210,722
________________ ______________
Cumulative effect of Change
in Accounting Principle --- (16,772,698)
________________ ______________
Net Income $ 524,600 $ (15,561,976)
================ ==============
Per share amounts -
Primary:
Income Before Cumulative Effect of Change in
Accounting Principle $ 0.08 $ 0.18
=============== ==============
Cumulative effect of change in Accounting
Principle $ --- $ (2.54)
Net Income $ 0.08 $ (2.36)
=============== ==============
Fully diluted:
Income before cumulative effect of change in
Accounting Principle $ 0.08 $ 0.17
=============== ==============
Cumulative effect of change in Accounting
Principle $ --- $ (2.54)
=============== ==============
Net Income $ 0.08 $ (2.36)
=============== ==============
Weighted Average Shares Outstanding 6,689,350 6,601,733
================ ==============
</TABLE>
<PAGE>
SWIFT ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock (1) Capital Earnings Total
_____________________________________________________________
<S> <C> <C> <C> <C>
Balance, December 31, 1993 $ 60,011 $17,515,417 $36,890,286 $54,465,714
Stock issued for benefit plans (26,488 shares) 265 271,176 --- 271,441
Stock options exercised (21,472 shares) 214 176,808 --- 177,022
Employee stock purchase plan (29,840 shares) 298 259,683 --- 259,981
10% stock dividend (606,262 shares) 6,063 6,662,819 (6,668,882) ---
Net Loss --- --- (13,047,027) (13,047,027)
_____________________________________________________________
Balance, December 31, 1994 $ 66,851 $24,885,903 $17,174,377 $42,127,131
Stock issued for benefit plans (22,782 shares) 228 207,587 --- 207,815
Stock options exercised (2,493 shares) 25 18,929 --- 18,954
Net Income --- --- 524,600 524,600
_____________________________________________________________
Balance, March 31, 1995 $ 67,104 $25,112,419 $17,698,977 $42,878,500
=============================================================
</TABLE>
(1) $.01 Par Value
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
SWIFT ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Periods ended March 31,
________________________________
1995 1994
__________ ____________
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 524,600 $(15,561,976)
Adjustments to reconcile net income to net cash provided
by operating activities -
Depreciation, depletion and amortization 2,168,229 1,688,938
Deferred income taxes 126,493 398,935
Deferred revenue amortization related to production payment (464,731) (570,629)
Cumulative effect of change in accounting principle --- 16,772,698
Other 27,723 25,830
Change in assets and liabilities -
(Increase) decrease in accounts receivable 27,181 (625,829)
Increase in accounts payable and accrued
liabilities, excluding income taxes payable 522,280 457,909
Increase in income taxes payable 32,322 94,095
__________ __________
Net Cash Provided by Operating Activities 2,964,097 2,679,971
Cash Flows From Investing Activities:
Additions to property and equipment (5,744,576) (4,042,728)
Net cash received (distributed) as operator
of oil and gas properties (4,219,442) 1,264,268
Property acquisition costs (incurred on behalf of)
reimbursed by partnerships and joint ventures 4,245,278 (11,310,786)
Limited partnership formation and marketing costs (170,549) (381,779)
Prepaid drilling costs (60,245) 780,217
Other (16,068) (7,263)
__________ __________
Net Cash Used in Investing Activities (5,965,602) (13,698,071)
__________ __________
Cash Flows From Financing Activities:
Net proceeds from short-term bank borrowings 3,321,000 11,350,000
Net proceeds from issuances of common stock 226,769 7,750
__________ __________
Net Cash Provided by Financing Activities 3,547,769 11,357,750
__________ __________
Net Increase in Cash and Cash Equivalents $ 546,264 $ 339,650
Cash and Cash Equivalents at Beginning of Period 985,498 636,349
__________ __________
Cash and Cash Equivalents at End of Period $1,531,762 $ 975,999
========== ==========
Supplemental disclosures of cash flow information:
___________________________________________________
Cash paid during period for interest, net of amounts
capitalized $ --- $ 111
Cash paid during period for income taxes $ 3,019 $ 11,951
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 (UNAUDITED) AND DECEMBER 31, 1994
(1) General Information -
The condensed consolidated financial statements
included herein have been prepared by Swift Energy Company
(the "Company") and are unaudited, except for the balance
sheet at December 31, 1994 which has been prepared from the
audited financial statements at that date. The financial
statements reflect necessary adjustments, all of which were
of a recurring nature, and are in the opinion of management,
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 Company believes that the disclosures
presented are adequate to allow the information presented
not to be misleading. The condensed consolidated financial
statements should be read in conjunction with the audited
financial statements and the notes thereto included in the
latest Form 10-K and Annual Report.
Because of the volatility in oil and gas prices, the
Company's reliance on limited partner and joint venture
capital and periodic differences in the availability of
commercially attractive oil and gas properties for purchase,
interim results are not necessarily indicative of those for
a full year.
Certain reclassifications have been made to the prior
year balances to conform to current year presentation.
(2) Summary of Significant Accounting Policies -
Oil and Gas Properties
For financial reporting purposes, the Company follows
the "full-cost" method of accounting for oil and gas
property and equipment costs. Under this method of
accounting, all productive and nonproductive costs incurred
in the acquisition, exploration, and development of oil and
gas reserves are capitalized. Such costs include lease
acquisitions, geological and geophysical services, drilling,
completion, equipment and certain general and administrative
costs directly associated with acquisition, exploration and
development activities. General and administrative costs
related to production and general overhead are expensed as
incurred. No gains or losses are recognized upon the sale
or disposition of oil and gas properties, except in
extraordinary transactions. Instead, the proceeds from the
sale of oil and gas properties are treated as a reduction of
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1995 (UNAUDITED) AND DECEMBER 31, 1994
oil and gas property costs. Fees from associated oil and
gas exploration and development limited partnerships are
credited to oil and gas property costs to the extent they
do not represent reimbursement of general and administrative
expenses currently charged to expense.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic
conditions and are amortized to expense as the Company's
capitalized oil and gas property costs are amortized. The
Company's properties are all onshore and historically the
salvage value of the tangible equipment offsets the
Company's site restoration, dismantlement and abandonment
costs. The Company expects this relationship will continue.
The Company computes the provision for depreciation,
depletion, and amortization of oil and gas properties on the
unit-of-production method. Under this method, the Company
computes the provision by multiplying the total unamortized
cost of oil and gas properties including future development,
site restoration, dismantlement and abandonment costs but
excluding costs of unproved 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. The cost of unproved
properties not being amortized is assessed quarterly to
determine whether the value has been impaired below the
capitalized cost. Any impairment assessed is added to the
cost of proved properties being amortized.
At the end of each quarterly reporting period, the
unamortized cost of oil and gas properties, net of related
deferred income taxes, is limited to the sum of the
estimated future net revenues from proved properties using
current prices, discounted at 10%, and the lower of
cost or fair value of unproved properties, adjusted for
related income tax effects.
Deferred Charges
Legal and accounting fees, underwriting fees, printing
costs, and other direct expenses associated with the
issuance of the Company's Convertible Subordinated
Debentures in June 1993 have been capitalized and are being
amortized over the life of the Debentures, which mature on
June 30, 2003. The balance at March 31, 1995 of $1,242,232
is net of accumulated amortization of $182,768.
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1995 (UNAUDITED) AND DECEMBER 31, 1994
Hedging Activities
The Company engages periodically in certain limited
hedging activities, but only to the extent of buying price
protection floors for portions of its and the limited
partnerships' oil and gas production. Costs and/or benefits
derived from these price floors are accordingly recorded as
a reduction or increase in oil and gas sales revenues and
are not significant for any period presented.
Deferred Revenues
In May 1992, the Company purchased interests in certain
wells using funds provided by the Company's sale of a
volumetric production payment in these properties. Under
the terms of the production payment agreement, the Company
continues to own the properties purchased but is required to
deliver a minimum quantity of hydrocarbons produced from the
properties (meeting certain quality and heating equivalent
requirements) over a specified period. Since entering into
this agreement, the Company has met all scheduled
deliveries. Net proceeds from the sale of the production
payment were recorded as deferred revenues. Deliveries
under the production payment agreement are recorded as oil
and gas sales revenues and a corresponding reduction of
deferred revenues.
Limited Partnerships and Joint Ventures
The Company forms limited partnerships and joint
ventures for the purpose of acquiring interests in producing
oil and gas properties, and since 1993, partnerships engaged
in drilling for oil and gas reserves. The Company's
investments in associated oil and gas partnerships and its
joint ventures are accounted for using the proportionate
consolidation method, whereby the Company's proportionate
share of each entity's assets, liabilities, revenues and
expenses is included in the appropriate classifications in
the consolidated financial statements. Because the Company
serves as the general partner of these entities, under
state partnership law it is contingently liable for the
liabilities of these partnerships, which liabilities are not
material for any of the periods presented in relation to
the partnerships' respective assets. These partnerships
liabilities generally consist of third party borrowings from
time to time to fund capital expenditures for development
of oil and gas properties, and will be repaid from oil
and gas sales proceeds of the partnerships in future periods.
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1995 (UNAUDITED) AND DECEMBER 31, 1994
Under the Swift Depositary Interests limited
partnership offering ("SDI Offering") which commenced in
March 1991, the Company receives a reimbursement of certain
costs and a fee, both payable out of revenues. The Company
bears all front-end costs of the offering and partnership
formations for which it receives an interest in the
partnerships. Prior to 1994, the Company recognized as
revenue, fees (earned interests) received in the form of
additional interests in producing oil and gas properties
acquired by these entities. As described in Note 3,
effective January 1, 1994, the Company changed its revenue
recognition policy for earned interests and under its newly
adopted policy, will no longer recognize earned interests as
revenue.
The Company acquires and transfers producing oil and
gas properties to the entities at cost, including interest,
other carrying costs, closing costs, and screening and
evaluation costs of properties not acquired, or in certain
instances at fair market value based upon the opinion of an
independent expert. These costs are reduced by net
operating revenues from the effective date of the
acquisition to the date of transfer to the entities.
Certain designated oil and gas properties acquired in
advance of formation of partnerships or joint ventures and
held by the Company pending resale to those partnerships or
joint ventures are classified as "Producing oil and gas
properties held for transfer".
Commencing September 15, 1993, the Company began
offering, on a private placement basis, general and limited
partnership interests in Swift Energy Drilling Ventures
("SEDV Offering"), a series of limited partnerships to be
formed, and under which approximately $9,000,000 had been
raised through March 31, 1995. As Managing General Partner,
the Company pays for all front-end costs incurred in connection
with this offering, for which the Company receives an
interest in the partnerships. The proceeds are to be
invested in development drilling (approximately 50%) and
exploratory drilling (approximately 25%), with the remaining
25% dependent upon the results of the initial drilling
activities. The first three partnerships closed December 8,
1993, July 18, 1994, and March 15, 1995.
Costs of syndication, registration, and qualification
of the SDI and SEDV limited partnerships incurred by the
Company have been deferred. Under the current SDI and SEDV
limited partnership offering, selling and formation costs
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1995 (UNAUDITED) AND DECEMBER 31, 1994
borne by the Company serve as the Company's general partner
contribution to such partnerships.
Income Taxes
The Company accounts for Income Taxes using Statement
of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." SFAS No. 109 utilizes the
liability method and deferred taxes are determined based on
the estimated future tax effects of differences between the
financial statement and tax bases of assets and liabilities
given the provisions of the enacted tax laws. Prior to the
adoption of SFAS No. 109, the Company accounted for income
taxes using Accounting Principles Board Opinion No. 11.
Income taxes for the interim periods have been provided
using the estimated annualized effective tax rate.
Income (Loss) Per Share
Primary income (loss) per share has been computed using
the weighted average number of common shares outstanding
during the respective periods. Stock options and warrants
outstanding do not have an effect on primary income (loss)
per share. The Company's Convertible Subordinated
Debentures are not common stock equivalents for the purpose
of computing primary income (loss) per share.
Primary income (loss) per share has been retroactively
restated in all periods presented to give recognition to an
equivalent change in capital structure as a result of a 10%
stock dividend. On September 6, 1994, the Company declared
a 10% stock dividend to shareholders of record on September
19, 1994, which was distributed on September 29, 1994,
resulting in an additional 606,262 shares being issued.
The calculation of fully diluted income (loss) per
share assumes conversion of the Company's Convertible
Subordinated Debentures as of the beginning of the period
and the elimination of the related after-tax interest
expense and assumes, as of the beginning of the period,
exercise (using the treasury stock method) of stock options
and warrants. The conversion price of the Convertible
Subordinated Debentures was revised to reflect the 10% stock
dividend declared September 6, 1994. The original
conversion price was $13.50 per common share and the revised
conversion price per common share is $12.27. Fully diluted
income (loss) per share has also been retroactively restated
for all periods presented to give effect to the resulting
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1995 (UNAUDITED) AND DECEMBER 31, 1994
conversion price revision stemming from the 10% stock
dividend. The weighted average number of shares used in the
computation of fully diluted per share amounts were
8,981,799 for the three-month period ended March 31, 1994.
During 1995 such amounts were antidilutive.
(3) Change in Accounting Principle
In the fourth quarter of 1994, the Company changed its
revenue recognition policy for earned interests, effective
January 1, 1994. Under the Company's newly adopted method
of accounting for earned interests, such amounts will not be
recognized as income. This change was made as the result of
a transition in the Company's current business activities
and changes in the oil and gas limited partnership
syndication markets. The Company feels the change in policy
results in more comparable financial statements in relation
to its current business focus and in comparison to its
current peers and competitors in the oil and gas exploration
and production industry.
The effect of the change on the 1994 first quarter results
was to increase income before cumulative effect of change in
accounting principle by approximately $400,000 or $.06 per
share. This increase was a result of the decrease in
depletion expense more than offsetting the decrease in
revenues as a result of not recognizing earned interests.
The cumulative effect of this change in accounting principle
resulted in a first quarter 1994 adjustment of $16,772,698
or $(2.54) per share (after reduction for income taxes of
$8,640,481), to retroactively apply the new method, thereby
reducing net income for the three-month period ended March
31, 1994.
(4) Short-Term Bank Borrowings
The Company had available through a two bank group, a
revolving line of credit of $35,000,000 at March 31, 1995
and $29,000,000 at December 31, 1994 bearing interest at the
banks' base rate plus 0.5% (9.5% at March 31, 1995 and 9% at
December 31, 1994), secured by the Company's interests in
certain oil and gas properties and general partner
interests. This facility also allows, at the Company's
option, draws which bear interest for specific periods at
the London Interbank Offered Rate ("LIBOR") plus 2.25%. Of
the $24,600,000 balance outstanding at March 31, 1995,
$15,000,000 was at the LIBOR plus 2.25% rate (8.49%). At
December 31, 1994, $14,000,000 of the $18,600,000
outstanding was at the LIBOR plus 2.25% rates (7.875% on
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1995 (UNAUDITED) AND DECEMBER 31, 1994
$3,000,000), (8.1875% on $6,000,000), and (8.5% on
$5,000,000). The outstanding amounts under this facility
at March 31, 1995 ($24,600,000) and at December 31, 1994
($18,600,000) were borrowed primarily to fund the advance
purchase of producing properties on behalf of affiliated
partnerships and/or joint ventures to be subsequently
reimbursed and to fund the Company's working capital and
capital expenditures needs.
The terms of the revolving line of credit include,
among other restrictions, a limitation on the level of cash
dividends (not to exceed $424,000 in any fiscal year),
requirements as to maintenance of certain minimum financial
ratios (principally pertaining to working capital, debt, and
equity ratios) and limitations on incurring other debt.
Since inception, no cash dividends have been declared on the
Company's common stock. The Company presently intends to
continue a policy of using retained earnings for expansion
of its business. As of March 31, 1995 and December 31,
1994, the Company was in compliance with the provisions of
these agreements. The revolving line of credit extends
through May 1, 1996.
The Company's second credit line is an Acquisition
Advance Agreement with the same two bank group, bearing
interest at the greater of (a) the bank's base rate plus 1%
(10% at March 31, 1995) or (b) the Federal Funds rate plus
1.5%, to be secured by producing oil and gas properties
acquired and held for transfer. At March 31, 1995,
$950,000 had been borrowed under this agreement to fund the
advance purchase of producing properties on behalf of
affiliated partnerships and/or joint ventures to be
subsequently reimbursed. This credit agreement extends
through June 15, 1995.
The Company's third credit facility is an amended and
restated revolving line of credit with the lead bank for
$5,000,000 bearing interest at the bank's base rate (9% at
March 31, 1995 and 8.5% at December 31, 1994), secured by
certain Company receivables. At both March 31, 1995, and
December 31, 1994 $5,000,000 was outstanding under this
facility. This credit facility extends through May 1, 1996.
In addition to interest on these credit facilities, the
Company pays a commitment fee to compensate the banks for
making funds available. The fee on the revolving line of
credit is calculated on the average daily remainder, if any,
of the commitment amount less the aggregate principal
amounts outstanding plus the amount of all outstanding
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1995 (UNAUDITED) AND DECEMBER 31, 1994
letters of credit during the period. The fee on the
Acquisition Advance Agreement is .5% of the amount of the
advance. The aggregate amounts of commitment fees paid by
the Company were $23,000 for the first three months of 1995
and $150,000 for the twelve month period in 1994.
(5) Long-Term Debt
The Company's long-term debt consists of $28,750,000 of
6.5% Convertible Subordinated Debentures ("Debentures").
The Debentures were issued on June 30, 1993, and will mature
on June 30, 2003. The Debentures are convertible into
common stock of the Company by the holders at any time prior
to maturity at a conversion price of $12.27 per share,
subject to adjustment upon the occurrence of certain events.
The conversion price reflects an adjustment of the original
conversion price of $13.50 per share to reflect the 10%
stock dividend declared September 6, 1994 and distributed
September 29, 1994. Interest on the Debentures is payable
semi-annually on June 30, and December 31, commencing with
the payment made at December 31, 1993. After June 30, 1997
(or in certain circumstances after June 30, 1996), the
Debentures are redeemable for cash at the option of the
Company, with certain restrictions, at 104.55% of principal,
declining to 100.65% in 2002. Upon certain changes in
control of the Company, if the price of the Company's common
stock is not above certain levels each holder of Debentures
will have the right to require the Company to repurchase the
Debentures at the principal amount thereof, together with
accrued and unpaid interest to the date of repurchase but
after the repayment of any Senior Indebtedness, as defined.
Interest expense on the Debentures, including
amortization of debt issuance costs, totaled $494,910 for
the three-month period ending March 31, 1995. Interest
expense on the Debentures, including amortization of debt
issuance costs, totaled $1,973,931 for the twelve-month
period ending December 31, 1994.
(6) Stockholders' Equity
On September 6, 1994, the Company declared a 10% stock
dividend to shareholders of record on September 19, 1994,
which was distributed on September 29, 1994. The
transaction was valued based on the closing price ($11.00)
of the Company's common stock on the New York Stock Exchange
on September 6, 1994. As a result of the issuance of
606,262 shares of the Company's Common Stock as a dividend,
retained earnings were reduced $6,668,882, with the Common
<PAGE>
SWIFT ENERGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
MARCH 31, 1995 (UNAUDITED) AND DECEMBER 31, 1994
Stock and additional paid-in capital accounts increased by
the same amount. Primary and fully diluted income (loss)
per share has been restated for all periods presented to
reflect the effect of the stock dividend.
(7) Foreign Activities
Russia
On September 3, 1993, the Company signed a
Participation Agreement with Senega, a Russian Federation
joint stock company (in which the Company has an indirect
interest of less than 1%), to assist in the development and
production of reserves from two fields in Western Siberia.
The Company will receive a minimum 5% net profits interest
from the sale of hydrocarbon products from the fields for
providing managerial, technical and financial support to
Senega limited to an initial budgeted capital expenditure of
less than $5,000,000. At March 31, 1995 the Company's
investment in Russia was approximately $4,540,000 and is
included in the unproved properties portion of oil and gas
properties.
Venezuela
The Company formed a wholly-owned subsidiary, Swift
Energy de Venezuela, C.A. for the purpose of submitting a
bid on August 5, 1993 under the Venezuelan Marginal Oil
Field Reactivation Program on the Quiriquire Unit located in
Northeastern Venezuela. Swift (together with a minority
interest holder) was one of six bidders on the Quiriquire
Unit. The Company did not win the bid for the Quiriquire
Unit; however, other fields and opportunities are continuing
to be evaluated in Venezuela. At March 31, 1995 the
Company's investment in Venezuela was approximately $880,000
and is included in the unproved properties portion of oil
and gas properties net of impairments of $45,668.
(8) Acquisition of Properties by Swift
During the second quarter of 1994, the Company acquired
approximately $18,100,000 of producing oil and gas
properties in a single acquisition transaction.
Approximately $13,200,000 of the properties were transferred
to affiliated partnerships formed under the Company's SDI
offering, approximately $1,900,000 of the properties were
retained by the Company for its own account and the
remaining amount of approximately $3,000,000 is included as
a current asset in "producing oil and gas properties held
for transfer" at March 31, 1995.
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital historically has been provided
principally by public and private limited partnerships and
joint ventures, which are sponsored, formed, and managed by
the Company, and to a lesser degree by equity offerings.
Supplemental cash and working capital are provided through
internally generated cash flow and through financing
arrangements with banks. In the second quarter of 1993, the
Company successfully completed its first public debt
offering.
On June 30, 1993, the Company issued $28,750,000 of
Convertible Subordinated Debentures (Debentures) due June
30, 2003, in a public offering. Proceeds of the offering
have been used primarily to acquire producing oil and gas
properties and to finance the Company's expanding
exploration and development programs. The principal terms
of these Debentures are described in Note 5 to the Company's
condensed financial statements included herein.
Prior to 1993, the partnership syndication business
provided the primary source of capital to the Company and
represented a significant source of income to the Company.
However, since the Company began offering oil and gas income
partnerships in 1984, the size of the oil and gas limited
partnership market, the availability of limited partner capital,
and the number of competitors in the business have shrunk
considerably, leaving the Company as one of few, if not the only,
public income partnership syndicator remaining. These changes in
the industry, together with changes in the oil and gas pricing
cycle, have led the Company to increase its focus on exploration
and development drilling activities from 1993 to the present, and
develop alternative capital sources for oil and gas exploration
and acquisition activities.
The Company offers interests in oil and gas production
partnerships under its Swift Depositary Interests (SDI),
offering. Under the SDI structure, the Company pays all of
the front-end partnership offering and formation costs, now
estimated to average approximately 16% of total investor
subscriptions over the remaining life of the program,
depending on the level of fund sales.
Through March 31, 1995, under the SDI offering, approxi-
mately $3,700,000 had been raised. Due to market conditions,
the formation of the first two partnerships to be organized
during 1995 was delayed from the end of the first quarter
until April 28, 1995, with total subscriptions of approximately
$7,000,000. This amount compares to funds raised through
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 1994 of $3,800,000 and total subscriptions of the
first two 1994 partnerships of $7,100,000, formed on April
15, 1994.
On March 15, 1995, the Company closed the third
partnership under its private placement offering, Swift
Energy Drilling Ventures (SEDV), of both general and limited
partnership interests. As Managing General Partner, the
Company anticipates that the $5,000,000 of subscriptions
will be invested by the partnership in development drilling
(approximately 50%) and exploratory drilling (approximately
25%), with the use of the remaining 25% dependent upon the
results of initial drilling activities. The Company
anticipates formation of at least one additional SEDV
partnership in 1995.
The Company has established credit facilities which are
used principally to finance the Company's purchase of
producing oil and gas properties on an interim basis pending
transfer of the properties to newly formed partnerships and
joint ventures, and to provide working capital. The
principal terms and restrictions of these credit facilities
are described in Note 4 to the Company's condensed financial
statements included herein. Outstanding amounts under the
Company's credit facilities have fluctuated and will
continue to fluctuate as borrowings are made and repaid in
connection with the timing of property purchases and sales
and working capital needs.
At December 31, 1994, the Company had $27,229,000
outstanding under these borrowing arrangements. The credit
facilities were used to finance approximately $8,000,000 of
producing oil and gas property purchases. Approximately
$4,500,000 of these properties were placed into partnerships
at December 31, 1994, as reflected in the "Associated
limited partnerships and joint ventures" receivable account
on the balance sheet. The Company received reimbursement
for that amount in January 1995. The remaining $3,500,000
of these properties are reflected in the "Producing oil and
gas properties held for transfer" account on the balance
sheet. The Company used the remainder of the outstanding
balance on the credit facilities, along with internally
generated cash flow, principally to fund the Company's
capital expenditures in 1994, and to a lesser extent, to
provide working capital.
At March 31, 1995, the Company had $30,550,000
outstanding under these borrowing arrangements. The
$3,321,000 borrowed since year-end was primarily used to
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
fund a substantial portion of the Company's first quarter
1995 capital expenditures described below.
At March 31, 1995, limited partnership formation and
marketing costs (which under the current offerings are borne
by the Company as part of the Company's general partner
contribution) amounted to $3,162,422, an increase of
$170,549, when compared with the December 31, 1994 balance.
Due to the deferred formation of the first two 1995 SDI
partnerships until after the end of the first quarter,
this increase will be exceeded by the decrease in formation
and marketing costs of approximately $813,000 to occur in the
second quarter based upon subscriptions of approximately
$7,000,000.
The Company's working capital deficit has increased
over the last three months, from deficit working capital of
$13,137,441 at December 31, 1994 to deficit working capital
of $16,729,049 at March 31, 1995. This decrease is
primarily the result of the investment of a portion of
current working capital into oil and gas property assets as
described under capital expenditures below, intended to
increase the Company's revenues from oil and gas sales, and
in turn the Company's cash flow from operations in future
periods.
Due to the nature of the Company's business highlighted
above, the individual components of working capital
fluctuate considerably from month to month.
The Company believes that 1995 anticipated internally
generated cash flows (expected to increase as the Company
receives its portion of oil and gas revenues in a growing
number of wells) will be sufficient to finance the costs
associated with its currently budgeted capital expenditures.
Further liquidity needs may also be met by the addition of
credit facilities based upon the value of any producing
properties proposed to be acquired, or future debt or equity
offerings.
Capital Expenditures
Additions to property, plant and equipment during the
first three months of 1995 were $5,744,576. These capital
expenditures include: (a) $2,000,000 of drilling costs, both
exploratory and developmental; (b) $1,800,000 of prospect costs
(principally prospect leasehold, seismic and geological costs of
unproven prospects for the Company's account); (c) $1,000,000 to
fund the Company's general partner capital contribution to the
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
partnership formed under its SEDV offering; (d) $600,000 invested
in foreign business opportunities in Russia (approximately
$530,000) and in Venezuela (approximately $70,000), as described
in Note 7 to the Company's condensed financial statements
included herein and (e) $300,000 spent for furniture and
fixtures, primarily computer equipment. In the remaining nine
months of 1995, the Company expects capital expenditures to be
approximately $32,000,000, including investments in all areas in
which investments were made during the first quarter of the year
as described above.
Net Cash From Operations
For the three month period ended March 31, 1995, cash
flows from operating activities increased to $2,964,097 as
compared to $2,679,971 during the first three months of
1994. The three-month 1995 increase of $284,126 was
primarily due to the cash flow from oil and gas sales, even
though average gas prices received were 26% lower than a
year earlier, as discussed below. Oil and gas sales increased
$164,669 or 4%, exclusive of the non-cash amortization of
deferred revenues associated with the Company's volumetric
production payment.
Change in Assets and Liabilities
Balance sheet changes in accounts receivable and
producing oil and gas properties held for transfer, are
principally determined by the timing of property purchases
and payments made by and to the Company relating to the
Company's management of its affiliated partnerships. The
first quarter 1995 activity is evidenced by the change in
the balance sheet caption "Accounts receivable - Associated
limited partnerships and joint ventures" as the Company was
reimbursed from the partnerships for approximately
$4,500,000 of producing properties placed into partnerships
at December 31, 1994.
The increase of $1,500,000 in "Unproved properties not
being amortized" was a result of the $1,800,000 in prospect
costs and the $600,000 invested in foreign business
opportunities as described above. Approximately $900,000 in
prospect costs previously classified as unproved properties,
which are not amortized, were reclassified during the first
quarter of 1995 to proved properties subject to
amortization. These expenditures on prospect costs and the
reclassification are a direct result of the Company's
increased drilling activity.
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS-
Three Months Ended March 31, 1995 and 1994
Effective January 1, 1994, the Company changed its
revenue recognition policy for earned interests. Earned
interests represented revenues in the form of interests in
proved developed oil and gas properties conveyed to
affiliated limited partnerships and joint ventures formed in
connection with the Company's organization and management of
limited partnerships and joint ventures, representing the
difference between the Company's capital contributions to
each partnership or joint venture and its earned revenue
interest in the partnership's or ventures properties (based
upon the expected levels of cash distributions to the
limited partners or joint ventures). Under the Company's
newly adopted method of accounting for earned interests,
such amounts will not be recognized as revenues. See
additional discussion in Note 3 to the Company's condensed
financial statements included herein.
Net income of $524,600 and earnings per share of $0.08
decreased 57% in the first quarter of 1995 when compared to
"Income before cumulative effect of change in accounting
principle" of $1,210,722 and earnings per share of $0.18 in
the same period for 1994. Lower net income primarily
reflected the effect on revenues of substantially lower gas
prices. The first quarter 1994 net loss of $15,561,976 included
a cumulative effect of a change in accounting principle (see
Note 3 to the Company's condensed financial statements
included herein) of $16,772,698.
Revenues
The 2% increase in revenues during the first quarter of
1995 from that of the comparable period in 1994 is due
primarily to the increase in oil and gas sales.
Oil and Gas Sales. Oil and gas sales increased 1% to
$4,876,041 in the first three months of 1995, compared to
$4,817,270 for the comparative period in 1994. The 35%
increase in oil production and the 4% increase in gas
production were primarily the result of (1) the acquisition
of interests in producing properties by Swift for its own
account in late 1993 and in the third quarter of 1994, and
(2) production from exploratory and developmental wells
drilled in late 1994 and in the first quarter of 1995.
Oil and gas sales comprised 78% of total revenues for
the first quarter of both 1995 and 1994. The majority of
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
these revenues were derived from the sale of the Company's
gas production. The Company expects oil and gas sales to
continue to increase as a direct consequence of the addition
of oil and gas reserves through the Company's interest in a
growing number of partnerships formed under the SDI offering
and through its active drilling programs. The Company's net
sales volume (including the volumetric production payment)
in the first quarter of 1995 increased by 12% (267,114
equivalent Mcf) over volumes in the comparable 1994 period,
however, due to the price mix received, oil and gas sales
revenues increased only 1%.
Offsetting the effect of the 26% decrease in gas prices
were (1) oil prices increased 32% (comparing average prices
received over the respective three-month periods) (2) oil
production increased 35%, and (3) gas production increased
4%.
The following table provides additional information
regarding the Company's oil and gas sales.
<TABLE>
<CAPTION>
NET SALES VOLUME AVERAGE SALES PRICE
Oil (Bbls) Gas (Mcf) Oil (Bbl) Gas (Mcf)
<S> <C> <C> <C> <C>
1994:
3 MONTHS
ENDED 3/31/94 99,992 1,643,348 $11.80 $2.21
1995:
3 MONTHS
ENDED 3/31/95 134,626 1,702,658 $15.61 $1.63
</TABLE>
Supervision Fees. Supervision fees decreased 4% when
comparing the first three months of 1995 to the comparable
1994 period. The portion of these fees attributable to
producing well overhead decreased 7% in 1995 due to the decrease
in the number of wells the Company operates. The portion of
these fees attributable to drilling well overhead increased 61%
in 1995 due to the Company's increased company operated
drilling activity.
Expenses
Total expenses for the three months ended March 31,
<PAGE>
SWIFT ENERGY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1995 increased 27% over the comparable period in 1994, as
compared to the 2% increase in revenues.
General and administrative expenses for the first
quarter of 1995 increased $111,434 or 9% when compared to
the same period in 1994, primarily due to salary increases
as the Company employed 209 employees compared to 188 a year
earlier.
The 43% increase in oil and gas production costs
relates to the growth in the Company's interests in
producing properties and the related sale of increased
quantities (12%) of oil and gas therefrom. However, the
current period also included significant one time workover
and remedial work expenses intended to enhance future
production from those wells involved. Further, well
insurance costs and ad valorem taxes incurred in the first
quarter of 1995 were substantially higher than the
corresponding amounts in the first quarter of 1994.
The 28% increase in depreciation, depletion and
amortization (DD&A) relates to the sale of increased
quantities of oil and gas, offset somewhat by an increase in
reserve quantities; however, the depletable full cost pool
base increased between the two periods, resulting in an
overall depletion expense increase.
Interest expense for the first three months of 1995 on
the Debentures, including amortization of debt issuance
costs, totaled $494,910. Interest expense on the credit
facilities, including commitment fees, totaled $653,701 for
the three-month period ended March 31, 1995. Of these
amounts, $670,830 was capitalized primarily as a result of
the Company's exploration, partnership, and foreign business
development activities. This compares to interest expense
on the Debentures for the first three months of 1994,
totaling $493,017 including amortization of debt issuance
costs. Interest expense on the credit facilities, including
commitment fees, totaled $193,359 for the three-month period
ended March 31, 1994. Of the 1994 amounts, $327,401 was
capitalized primarily as part of oil and gas property costs
and reimbursements from certain affiliated partnerships for
interest related to a portion of the Debenture proceeds used
to fund the advance purchase of producing oil and gas
properties on behalf of the affiliated partnerships.
<PAGE>
SWIFT ENERGY COMPANY
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings - N/A
Item 2. Changes in Securities - N/A
Item 3. Defaults Upon Senior Securities - N/A
Item 4. Submission of Matters to a Vote of Security
Holders - N/A
Item 5. Other Information - N/A
Item 6. Exhibits & Reports on Form 8K - None
<PAGE>
SIGNATURES
Pursuant to the requirements 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 COMPANY
(Registrant)
Date: May 12, 1995 By:(Original Signed By)
_____________________________
John R. Alden
Sr.Vice President, Secretary/
Principal Financial Officer
Date: May 12, 1995 By:(Original Signed By)
______________________________
Alton D. Heckaman, Jr.
Vice President,
Controller and Principal
Accounting Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,531,762
<SECURITIES> 0
<RECEIVABLES> 32,862,835
<ALLOWANCES> 0
<INVENTORY> 3,005,520
<CURRENT-ASSETS> 35,342,397
<PP&E> 117,395,545
<DEPRECIATION> 23,533,177
<TOTAL-ASSETS> 135,795,394
<CURRENT-LIABILITIES> 52,071,446
<BONDS> 0
<COMMON> 67,104
0
0
<OTHER-SE> 42,811,396
<TOTAL-LIABILITY-AND-EQUITY> 135,795,394
<SALES> 4,876,041
<TOTAL-REVENUES> 6,258,588
<CGS> 0
<TOTAL-COSTS> 3,797,608<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 477,781
<INCOME-PRETAX> 676,434
<INCOME-TAX> 151,834
<INCOME-CONTINUING> 524,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 524,600
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
<FN>
<F1>Includes depreciation, depletion and amortization and oil and gas
production costs. Excludes general and administrative and interest expense.
</FN>
</TABLE>
