<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (or Date of Earliest Event Reported): June 5, 1998
SWIFT ENERGY COMPANY
(Exact name of Registrant as specified in its charter)
TEXAS 1-8754 74-2073055
(State of incorporation (Commission File Number) (IRS Employer
or organization) Identification No.)
16825 Northchase Drive, Suite 400
Houston, Texas 77060
(Address of principal executive offices)
(281) 874-2700
(Registrant's telephone number)
<PAGE>
ITEM 7. Financial Statements and Exhibits.
Swift Energy Company (the "Company" or "Swift") has filed a
Registration Statement on Form S-4 (Registration No. 333-50637) relating to the
proposal by the Company to purchase substantially all of the assets of 63
partnerships of which the Company is the Managing General Partner. Of these 63
partnerships, 24 are not required to file reports pursuant to Section 13 or
15(d) of the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"). The audited financial statements for the years ended December 31, 1997,
1996 and 1995 and the unaudited financial statements for the quarter ended March
31, 1998 for each of the 24 partnerships not subject to the informational
requirements of the Exchange Act are set forth herein as follows:
2
<PAGE>
DOCUMENT DESCRIPTION
--------------------
1. SWIFT ENERGY INCOME PARTNERS 1988-1, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
2. SWIFT ENERGY INCOME PARTNERS 1988-1, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
3. SWIFT ENERGY INCOME PARTNERS 1988-2, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
4. SWIFT ENERGY INCOME PARTNERS 1988-2, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
5. SWIFT ENERGY INCOME PARTNERS 1988-3, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
6. SWIFT ENERGY INCOME PARTNERS 1988-3, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
7. SWIFT ENERGY INCOME PARTNERS 1988-D, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
8. SWIFT ENERGY INCOME PARTNERS 1988-D, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
9. SWIFT ENERGY INCOME PARTNERS 1989-1, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
10. SWIFT ENERGY INCOME PARTNERS 1989-1, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
11. SWIFT ENERGY INCOME PARTNERS 1989-2, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
12. SWIFT ENERGY INCOME PARTNERS 1989-2, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
13. SWIFT ENERGY INCOME PARTNERS 1989-3, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
14. SWIFT ENERGY INCOME PARTNERS 1989-3, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
15. SWIFT ENERGY INCOME PARTNERS 1989-4, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
16. SWIFT ENERGY INCOME PARTNERS 1989-4, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
17. SWIFT ENERGY INCOME PARTNERS 1989-A, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
18. SWIFT ENERGY INCOME PARTNERS 1989-A, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
19. SWIFT ENERGY INCOME PARTNERS 1989-C, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
20. SWIFT ENERGY INCOME PARTNERS 1989-C, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
21. SWIFT ENERGY INCOME PARTNERS 1989-D, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
22. SWIFT ENERGY INCOME PARTNERS 1989-D, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
23. SWIFT ENERGY INCOME PARTNERS 1990-1, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
24. SWIFT ENERGY INCOME PARTNERS 1990-1, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
3
<PAGE>
DOCUMENT DESCRIPTION
--------------------
25. SWIFT ENERGY INCOME PARTNERS 1990-2, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
26. SWIFT ENERGY INCOME PARTNERS 1990-2, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
27. SWIFT ENERGY INCOME PARTNERS 1990-B, LTD. ANNUAL REPORT FOR THE YEAR ENDED
12/31/97.
28. SWIFT ENERGY INCOME PARTNERS 1990-B, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
29. SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD. ANNUAL REPORT FOR THE YEAR
ENDED 12/31/97.
30. SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
31. SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD. ANNUAL REPORT FOR THE YEAR
ENDED 12/31/97.
32. SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
33. SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD. ANNUAL REPORT FOR THE YEAR
ENDED 12/31/97.
34. SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
35. SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD. ANNUAL REPORT FOR THE YEAR
ENDED 12/31/97.
36. SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
37. SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD. ANNUAL REPORT FOR THE YEAR
ENDED 12/31/97.
38. SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
39. SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD. ANNUAL REPORT FOR THE YEAR
ENDED 12/31/97.
40. SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
41. SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD. ANNUAL REPORT FOR THE YEAR
ENDED 12/31/97.
42. SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
43. SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD. ANNUAL REPORT FOR THE YEAR
ENDED 12/31/97.
44. SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
45. SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD. ANNUAL REPORT FOR THE YEAR
ENDED 12/31/97.
46. SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
47. SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD. ANNUAL REPORT FOR THE YEAR
ENDED 12/31/97.
48. SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD. QUARTERLY REPORT FOR THE PERIOD
ENDED 03/31/98.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
---------------------------------------
For the Years Ended
December 31,
---------------------------------------
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 29,848 47,697 71,756
Average Sales Price
per Equivalent MCF $2.63 $2.28 $1.65
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.77 $1.25 $0.88
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $32,600, $10,700, $15,800, $47,600 and
$75,400, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
------------------- ------------------- ----------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 2,399 200 5,078 364 21,617 391
------- ----- ------- ----- ------- ------
Proved reserves
Balance at beginning
of year 7,340 368 22,328 404 26,835 500
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates 126 12 (519) 60 (2,653) (35)
Sales of minerals in
place (4,736) (150) (13,324) (55) -- --
Production (330) (28) (1,145) (41) (1,854) (61)
------- ----- ------- ----- ------- -----
Balance at end of year 2,400 202 7,340 368 22,328 404
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- -------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Potter AR, LA, MS,
NM, OK, TX 1,010 131 187 2.710
Mega, Northwind TX 1,338 24 7 0.022
Anderson, Samedan
Oil, Strebor Oil
& Lake Ronel Oil TX 52 47 6 0.053
------ ----- ---- ------
2,400 202 200 2.785
------ ----- ---- ------
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1988-1, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1988-1, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1988-1, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 98,491 $ 13,905
Oil and gas sales receivable 22,681 27,736
--------------- ---------------
Total Current Assets 121,172 41,641
--------------- ---------------
Gas Imbalance Receivable 2,221 2,903
--------------- ---------------
Oil and Gas Properties, using full cost
accounting 1,614,337 1,686,849
Less-Accumulated depreciation, depletion
and amortization (1,465,040) (1,442,224)
--------------- ---------------
149,297 244,625
--------------- ---------------
$ 272,690 $ 289,169
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 6,520 $ 8,779
--------------- ---------------
Deferred Revenues 11,905 11,103
Limited Partners' Capital (18,643 Limited Partnership Units;
$100 per unit) 250,459 262,293
General Partners' Capital 3,806 6,994
--------------- ---------------
Total Partners' Capital 254,265 269,287
--------------- ---------------
$ 272,690 $ 289,169
=============== ===============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 82,003 $ 110,353 $ 120,769
Interest income 3,436 88 107
Other -- 888 186
--------------- --------------- ---------------
85,439 111,329 121,062
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 17,814 53,488 56,074
Production taxes 5,166 6,332 6,950
Depreciation, depletion
and amortization -
Normal provision 22,816 36,270 50,630
Additional provision -- 2,982 57,802
General and administrative 15,772 12,855 15,076
Interest expense -- 1,359 3,400
--------------- --------------- ---------------
61,568 113,286 189,932
--------------- --------------- ---------------
INCOME (LOSS) $ 23,871 $ (1,957) $ (68,870)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 331,900 $ 7,640 $ 32,814 $ 372,354
Income (Loss) (62,569) 2,626 (8,927) (68,870)
Cash Distributions (15,800) (2,852) -- (18,652)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 253,531 7,414 23,887 284,832
--------------- --------------- --------------- ---------------
Income (Loss) 732 2,468 (5,157) (1,957)
Cash Distributions (10,700) (2,888) -- (13,588)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 243,563 6,994 18,730 269,287
--------------- --------------- --------------- ---------------
Income (Loss) 22,750 3,105 (1,984) 23,871
Cash Distributions (32,600) (6,293) -- (38,893)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 233,713 $ 3,806 $ 16,746 $ 254,265
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit
1995 $ (3.36)
================
1996 $ .04
================
1997 $ 1.22
================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 23,871 $ (1,957) $ (68,870)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 22,816 39,252 108,432
Change in gas imbalance receivable
and deferred revenues 1,484 1,444 335
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 5,055 (4,115) 3,212
Increase (decrease) in accounts payable (2,259) (58,797) (12,967)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 50,967 (24,173) 30,142
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (893) (5,796) (11,383)
Proceeds from sales of oil and gas properties 73,405 55,507 --
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 72,512 49,711 (11,383)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (38,893) (13,588) (18,652)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 84,586 11,950 107
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 13,905 1,955 1,848
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 98,491 $ 13,905 $ 1,955
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ -- $ 1,359 $ 3,400
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-1, Ltd., a Texas limited partnership
("the Partnership"), was formed on August 9, 1988, for the purpose of purchasing
and operating producing oil and gas properties within the continental United
States. Swift Energy Company ("Swift"), a Texas corporation, and VJM Partners,
Ltd. ("VJM"), a Texas limited partnership, serve as Managing General Partner and
Special General Partner of the Partnership, respectively. The Managing General
Partner is required to contribute up to 1/99th of limited partner net
contributions. The 196 limited partners made total capital contributions of
$1,864,300.
Property interests acquisition costs and the management fee are borne
99 percent by the limited partners and one percent by the Managing General
Partner. Organization and syndication costs were borne solely by the limited
partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate for a certain period equals or exceeds 17.5 percent, then for
the following calendar year, these continuing costs and revenues will be
allocated 85 percent to the limited partners and 15 percent to the general
partners. After partnership payout, revenues and continuing costs will be shared
85 percent by the limited partners, and 15 percent by the general partners, even
if the cash distribution rate is less than 17.5 percent. Payout had not occurred
as of December 31, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 893 5,796 11,383
------- ------- -------
$ 893 $ 5,796 $ 11,383
------- ------- -------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
During 1996 and 1995, the Partnership's unamortized oil and gas
property costs exceeded the quarterly calculations of the "ceiling limitation"
resulting in an additional provision for depreciation, depletion and
amortization of $2,982 and $57,802, respectively. In addition, the limited
partners' share of unamortized oil and gas property costs exceeded their
"ceiling limitation" in 1995 resulting in a valuation allowance of $51,678. This
amount is included in the income (loss) attributable to the limited partners
shown in the statements of partners' capital together with a "combining
adjustment" for the differences between the limited partners' valuation
allowances and the Partnership's full cost ceiling write down. The "combining
adjustment" changes quarterly as the Partnership's total depreciation, depletion
and amortization provision is more or less than the combined depreciation,
depletion and amortization provision attributable to the general and limited
partners.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $46,608 for managing and overseeing the offering of limited partnership
units.
A one-time management fee of $46,608 was paid to Swift in 1988 for
services related to the evaluation of oil and gas properties and for general
services performed for the Partnership. During 1997, 1996 and 1995, the
Partnership paid Swift $7,347, $4,347 and $6,530, respectively, as general and
administrative overhead allowances.
Effective September 14, 1988, the Partnership entered into a Net
Profits and Overriding Royalty Interests Agreement ("NP/OR Agreement") with
Swift Energy Managed Pension Assets Partnership 1988-1, Ltd. ("Pension
Partnership"), managed by Swift, for the purpose of acquiring working interests
in producing oil and gas properties. Under the terms of the NP/OR Agreement, the
Partnership has conveyed to the Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $51,792, $53,441 and $36,755, respectively. The difference between ordinary
income for federal income tax purposes reported by the Partnership and net
income or loss reported herein primarily results from the exclusion of depletion
(as described below) from ordinary income reported in the Partnership's federal
return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
(8) 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.
13
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 91,628 $ 98,491
Oil and gas sales receivable 20,534 22,681
--------------- ---------------
Total Current Assets 112,162 121,172
--------------- ---------------
Gas Imbalance Receivable 2,081 2,221
--------------- ---------------
Oil and Gas Properties, using full cost
accounting 1,615,066 1,614,337
Less-Accumulated depreciation, depletion
and amortization (1,468,529) (1,465,040)
--------------- ---------------
146,537 149,297
--------------- ---------------
$ 260,780 $ 272,690
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 9,652 $ 6,520
--------------- ---------------
Deferred Revenues 11,844 11,905
Limited Partners' Capital (18,643 Limited Partnership Units;
$100 per unit) 238,000 250,459
General Partners' Capital 1,284 3,806
--------------- ---------------
Total Partners' Capital 239,284 254,265
--------------- ---------------
$ 260,780 $ 272,690
=============== ===============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 7,693 $ 36,026
Interest income 1,243 228
Other -- 3
--------------- ---------------
8,936 36,257
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 2,740 7,924
Production taxes 446 2,258
Depreciation, depletion
and amortization 3,489 8,916
General and administrative 4,434 3,960
--------------- ---------------
11,109 23,058
--------------- ---------------
NET INCOME (LOSS) $ (2,173) $ 13,199
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ (.12)
===============
March 31, 1997 $ .71
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ (2,173) $ 13,199
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 3,489 8,916
Change in gas imbalance receivable
and deferred revenues 79 --
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 2,147 (6,241)
Increase (decrease) in accounts payable 3,132 1,696
-------------- --------------
Net cash provided by (used in) operating activities 6,674 17,570
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (729) --
Proceeds from sales of oil and gas properties -- 173
-------------- --------------
Net cash provided by (used in) investing activities (729) 173
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (12,808) (7,156)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,863) 10,587
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 98,491 13,905
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 91,628 $ 24,492
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-1, Ltd., a Texas limited
partnership ("the Partnership"), was formed on August 9, 1988, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 196 limited partners made total capital contributions
of $1,864,300.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
received $46,608 for managing and overseeing the offering of the limited
partnership units. A one-time management fee of $46,608 was paid to
Swift for services performed for the Partnership.
Effective September 14, 1988, the Partnership entered into a
Net Profits and Overriding Royalty Interests Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1988-1,
Ltd. ("Pension Partnership"), managed by Swift, for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership has conveyed to the
Pension Partnership 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.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 50,655 66,429 81,353
Average Sales Price
per Equivalent MCF $2.86 $2.80 $1.98
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.93 $0.71 $0.88
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $86,400, $88,800, $60,200, $132,200 and
$215,900, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ----------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- ---------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 12,076 260 16,351 322 23,018 350
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 19,301 371 27,143 413 38,240 447
Extensions, discoveries
and other additions -- -- 8 1 79 3
Revisions of previous
estimates (1,401) (6) (2,522) 12 (5,274) 17
Sales of minerals in
place -- -- (1,952) (9) (1,340) --
Production (2,115) (38) (3,376) (46) (4,562) (54)
------- ----- ------- ----- ------- -----
Balance at end of year 15,785 327 19,301 371 27,143 413
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Shell Oil Company TX 6,245 158 67 0.361
Union Pacific AR, KS, NM,
OK, TX 8,041 36 127 0.629
Allstate KS, LA, OK 104 36 158 1.909
Amoco OK 1,156 97 108 0.133
Maxus WY 239 -- 11 0.005
------- ---- ---- ------
15,785 327 471 3.037
------- ---- ---- ------
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1988-2, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1988-2, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1988-2, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 71,570 $ 80,805
Oil and gas sales receivable 41,402 53,391
--------------- ---------------
Total Current Assets 112,972 134,196
--------------- ---------------
Gas Imbalance Receivable 20,611 26,706
--------------- ---------------
Oil and Gas Properties, using full cost
accounting 1,108,067 1,103,234
Less-Accumulated depreciation, depletion
and amortization (819,500) (779,194)
--------------- ---------------
288,567 324,040
--------------- ---------------
$ 422,150 $ 484,942
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 15,760 $ 17,688
--------------- ---------------
Deferred Revenues 19,311 21,753
Limited Partners' Capital (11,914 Limited Partnership Units;
$100 per unit) 387,008 441,019
General Partners' Capital 71 4,482
--------------- ---------------
Total Partners' Capital 387,079 445,501
--------------- ---------------
$ 422,150 $ 484,942
=============== ===============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 149,493 $ 195,297 $ 165,223
Interest income 3,398 2,929 2,388
Other 797 2,682 2,205
--------------- --------------- ---------------
153,688 200,908 169,816
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 39,244 37,069 61,740
Production taxes 7,847 10,067 9,611
Depreciation, depletion
and amortization -
Normal provision 40,306 50,725 60,964
Additional provision -- -- 13,897
General and administrative 23,193 23,198 23,512
--------------- --------------- ---------------
110,590 121,059 169,724
--------------- --------------- ---------------
INCOME (LOSS) $ 43,098 $ 79,849 $ 92
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 494,033 $ 5,209 $ 33,586 $ 532,828
Income (Loss) 4,485 5,025 (9,418) 92
Cash Distributions (60,200) (6,968) -- (67,168)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 438,318 3,266 24,168 465,752
--------------- --------------- --------------- ---------------
Income (Loss) 70,567 12,516 (3,234) 79,849
Cash Distributions (88,800) (11,300) -- (100,100)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 420,085 4,482 20,934 445,501
--------------- --------------- --------------- ---------------
Income (Loss) 36,829 10,709 (4,440) 43,098
Cash Distributions (86,400) (15,120) -- (101,520)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 370,514 $ 71 $ 16,494 $ 387,079
=============== =============== =============== ==============
Limited Partners' net income (loss)
per unit
1995 $ .38
===============
1996 $ 5.92
===============
1997 $ 3.09
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 43,098 $ 79,849 $ 92
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 40,306 50,725 74,861
Change in gas imbalance receivable
and deferred revenues 3,653 (375) (4,578)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 11,989 (8,789) 5,733
Increase (decrease) in accounts payable (1,928) (8,183) 2,278
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 97,118 113,227 78,386
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (7,245) (8,810) (26,173)
Proceeds from sales of oil and gas properties 2,412 33,351 28,818
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (4,833) 24,541 2,645
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (101,520) (100,100) (67,168)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (9,235) 37,668 13,863
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 80,805 43,137 29,274
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 71,570 $ 80,805 $ 43,137
============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-2, Ltd., a Texas limited partnership
("the Partnership"), was formed on October 3, 1988, for the purpose of
purchasing and operating producing oil and gas properties within the continental
United States. Swift Energy Company ("Swift"), a Texas corporation, and VJM
Partners, Ltd. ("VJM"), a Texas limited partnership, serve as Managing General
Partner and Special General Partner of the Partnership, respectively. The
Managing General Partner is required to contribute up to 1/99th of limited
partner net contributions. The 107 limited partners made total capital
contributions of $1,191,400.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the Managing General Partner.
Organization and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate for a certain period equals or exceeds 17.5 percent, then for
the following calendar year, these continuing costs and revenues will be
allocated 85 percent to the limited partners and 15 percent to the general
partners. After partnership payout, revenues and continuing costs will be shared
85 percent by the limited partners, and 15 percent by the general partners, even
if the cash distribution rate is less than 17.5 percent. Payout occurred in
1996; therefore, for 1997 and each year remaining in the life of the
Partnership, the continuing costs and revenues were (will be) shared 85 percent
by the limited partners and 15 percent by the general partners.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- ------- ---------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 7,245 8,810 26,173
------- ------- ---------
$ 7,245 $ 8,810 $ 26,173
------- ------- ---------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1995, the Partnership's unamortized oil and gas property costs
exceeded the quarterly calculations of the "ceiling limitation" resulting in an
additional provision for depreciation, depletion and amortization of $13,897. In
addition, the limited partners' share of unamortized oil and gas property costs
exceeded their "ceiling limitation" in 1995, resulting in a valuation allowance
of $7,867. This amount is included in the income (loss) attributable to the
limited partners shown in the statement of partners' capital together with a
"combining adjustment" for the difference between the limited partners'
valuation allowance and the Partnership's full cost ceiling write down. The
"combining adjustment" changes quarterly as the Partnership's total
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to the
general and limited partners.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $29,410 for managing and overseeing the offering of limited partnership
units.
A one-time management fee of $29,785 was paid to Swift in 1988 for
services related to the evaluation of oil and gas properties and for general
services performed for the Partnership. During 1997, 1996 and 1995, the
Partnership paid Swift $17,871, $17,871 and $17,871, respectively, as general
and administrative overhead allowances.
Effective February 10, 1989, the Partnership entered into a Net Profits
and Overriding Royalty Interests Agreement ("NP/OR Agreement") with Swift Energy
Managed Pension Assets Partnership 1988-2, Ltd. ("Pension Partnership"), managed
by Swift, for the purpose of acquiring working interests in producing oil and
gas properties. Under the terms of the NP/OR Agreement, the Partnership has
conveyed to the Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $84,454, $137,875 and $75,749, respectively. The difference between ordinary
income for federal income tax purposes reported by the Partnership and net
income or loss reported herein primarily results from the exclusion of depletion
(as described below) from ordinary income reported in the Partnership's federal
return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 64,991 $ 71,570
Oil and gas sales receivable 34,740 41,402
--------------- ---------------
Total Current Assets 99,731 112,972
--------------- ---------------
Gas Imbalance Receivable 20,611 20,611
--------------- ---------------
Oil and Gas Properties, using full cost
accounting 1,109,864 1,108,067
Less-Accumulated depreciation, depletion
and amortization (828,842) (819,500)
--------------- ---------------
281,022 288,567
--------------- ---------------
$ 401,364 $ 422,150
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 11,357 $ 15,760
--------------- ---------------
Deferred Revenues 19,311 19,311
Limited Partners' Capital (11,914 Limited Partnership Units;
$100 per unit) 369,862 387,008
General Partners' Capital 834 71
--------------- ---------------
Total Partners' Capital 370,696 387,079
--------------- ---------------
$ 401,364 $ 422,150
=============== ===============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 26,375 $ 47,409
Interest income 870 890
Other 135 271
--------------- ---------------
27,380 48,570
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 7,167 9,379
Production taxes 1,310 2,146
Depreciation, depletion
and amortization 9,342 11,553
General and administrative 4,807 5,920
--------------- ---------------
22,626 28,998
--------------- ---------------
NET INCOME (LOSS) $ 4,754 $ 19,572
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ .40
===============
March 31, 1997 $ 1.64
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 4,754 $ 19,572
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 9,342 11,553
Change in gas imbalance receivable
and deferred revenues -- (1,460)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 6,662 (126)
Increase (decrease) in accounts payable (4,403) (3,041)
-------------- --------------
Net cash provided by (used in) operating activities 16,355 26,498
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (1,797) (1,773)
Proceeds from sales of oil and gas properties -- 484
-------------- --------------
Net cash provided by (used in) investing activities (1,797) (1,289)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (21,137) (32,485)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,579) (7,276)
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 71,570 80,805
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 64,991 $ 73,529
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-2, Ltd., a Texas limited
partnership ("the Partnership"), was formed on October 3, 1988, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 107 limited partners made total capital contributions
of $1,191,400.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. Payout had
occurred as of December 31, 1996; therefore, beginning in 1997 and for
each year remaining in the life of the partnership, the continuing costs
and revenues will be (were) shared 85 percent by the limited partners
and 15 percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
received $29,410 for managing and overseeing the offering of the limited
partnership units. A one-time management fee of $29,785 was paid to
Swift for services performed for the Partnership.
Effective February 10, 1989, the Partnership entered into a
Net Profits and Overriding Royalty Interests Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1988-2,
Ltd. ("Pension Partnership"), managed by Swift, for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership has conveyed to the
Pension Partnership 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.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 78,043 100,687 123,444
Average Sales Price
per Equivalent MCF $2.78 $2.79 $1.98
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.92 $0.72 $0.87
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $133,300, $118,200, $93,600, $212,300 and
$301,800, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 21,482 372 29,828 459 39,478 505
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 33,939 528 46,281 593 65,393 631
Extensions, discoveries
and other additions -- -- 12 1 110 4
Revisions of previous
estimates (3,048) (9) (3,166) 11 (9,455) 34
Sales of minerals in
place -- -- (3,316) (12) (1,867) --
Production (3,965) (54) (5,872) (65) (7,900) (76)
------- ----- ------- ----- ------- -----
Balance at end of year 26,926 465 33,939 528 46,281 593
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Shell Oil Company TX 8,701 220 67 0.503
Union Pacific AR, KS, NM,
OK, TX 11,204 50 127 0.876
Allstate KS, LA, OK 145 50 158 2.661
Norcen Explorer WY 4,930 9 29 0.108
Amoco OK 1,616 136 108 0.186
Maxus WY 330 -- 11 0.007
------- ----- ---- ------
26,926 465 500 4.341
------- ----- ---- ------
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1988-3, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1988-3, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1988-3, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 100,684 $ 115,396
Oil and gas sales receivable 61,170 80,283
--------------- ----------------
Total Current Assets 161,854 195,679
--------------- ----------------
Gas Imbalance Receivable 28,801 37,303
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,624,782 1,617,543
Less-Accumulated depreciation, depletion
and amortization (1,178,436) (1,114,869)
--------------- ----------------
446,346 502,674
--------------- ----------------
$ 637,001 $ 735,656
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 22,079 $ 24,340
--------------- ----------------
Deferred Revenues 27,007 30,420
Limited Partners' Capital (16,652 Limited Partnership Units;
$100 per unit) 587,841 674,842
General Partners' Capital 74 6,054
--------------- ----------------
Total Partners' Capital 587,915 680,896
--------------- ----------------
$ 637,001 $ 735,656
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 224,020 $ 293,250 $ 249,989
Interest income 4,917 3,670 2,550
Other 1,639 3,179 3,870
--------------- --------------- ---------------
230,576 300,099 256,409
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 60,091 57,153 92,801
Production taxes 12,017 15,670 15,131
Depreciation, depletion
and amortization -
Normal provision 63,567 78,277 94,020
Additional provision -- -- 23,784
General and administrative 31,854 31,794 32,235
--------------- --------------- ---------------
167,529 182,894 257,971
--------------- --------------- ---------------
INCOME (LOSS) $ 63,047 $ 117,205 $ (1,562)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 742,439 $ 6,599 $ 55,832 $ 804,870
Income (Loss) 4,957 8,206 (14,725) (1,562)
Cash Distributions (93,600) (10,666) -- (104,266)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 653,796 4,139 41,107 699,042
--------------- --------------- --------------- ---------------
Income (Loss) 103,601 19,066 (5,462) 117,205
Cash Distributions (118,200) (17,151) -- (135,351)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 639,197 6,054 35,645 680,896
--------------- --------------- --------------- ---------------
Income (Loss) 54,038 16,748 (7,739) 63,047
Cash Distributions (133,300) (22,728) -- (156,028)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 559,935 $ 74 $ 27,906 $ 587,915
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit
1995 $ .30
===============
1996 $ 6.22
===============
1997 $ 3.25
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 63,047 $ 117,205 $ (1,562)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 63,567 78,277 117,804
Change in gas imbalance receivable
and deferred revenues 5,089 (527) (6,357)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 19,113 (13,054) 6,974
Increase (decrease) in accounts payable (2,261) (13,291) 3,129
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 148,555 168,610 119,988
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (10,603) (13,438) (35,913)
Proceeds from sales of oil and gas properties 3,364 48,177 40,158
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (7,239) 34,739 4,245
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (156,028) (135,351) (104,266)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (14,712) 67,998 19,967
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 115,396 47,398 27,431
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 100,684 $ 115,396 $ 47,398
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-3, Ltd., a Texas limited partnership
("the Partnership"), was formed on January 6, 1989, for the purpose of
purchasing and operating producing oil and gas properties within the continental
United States. Swift Energy Company ("Swift"), a Texas corporation, and VJM
Partners, Ltd. ("VJM"), a Texas limited partnership, serve as Managing General
Partner and Special General Partner of the Partnership, respectively. The
Managing General Partner is required to contribute up to 1/99th of limited
partner net contributions. The 144 limited partners made total capital
contributions of $1,665,200.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the Managing General Partner.
Organization and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate for a certain period equals or exceeds 17.5 percent, then for
the following calendar year, these continuing costs and revenues will be
allocated 85 percent to the limited partners and 15 percent to the general
partners. After partnership payout, revenues and continuing costs will be shared
85 percent by the limited partners, and 15 percent by the general partners, even
if the cash distribution rate is less than 17.5 percent. Payout occurred in
1996; therefore, for 1997 and each year remaining in the life of the
Partnership, the continuing costs and revenues were (will be) shared 85 percent
by the limited partners and 15 percent by the general partners.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 10,603 13,438 35,913
-------- -------- --------
$ 10,603 $ 13,438 $ 35,913
-------- -------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
During 1995, the Partnership's unamortized oil and gas property costs
exceeded the quarterly calculations of the "ceiling limitation" resulting in an
additional provision for depreciation, depletion and amortization of $23,784. In
addition, the limited partners' share of unamortized oil and gas property costs
exceeded their "ceiling limitation" in 1995, resulting in a valuation allowance
of $14,629. This amount is included in the income (loss) attributable to the
limited partners shown in the statement of partners' capital together with a
"combining adjustment" for the difference between the limited partners'
valuation allowance and the Partnership's full cost ceiling write down. The
"combining adjustment" changes quarterly as the Partnership's total
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to the
general and limited partners.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $41,130 for managing and overseeing the offering of limited partnership
units.
A one-time management fee of $41,630 was paid to Swift in 1989 for
services related to the evaluation of oil and gas properties and for general
services performed for the Partnership. During 1997, 1996 and 1995 the
Partnership paid Swift $24,978, $24,978 and $24,978, respectively, as general
and administrative overhead allowances.
Effective February 10, 1989, the Partnership entered into a Net Profits
and Overriding Royalty Interests Agreement ("NP/OR Agreement") with Swift Energy
Managed Pension Assets Partnership 1988-2, Ltd. ("Pension Partnership"), managed
by Swift, for the purpose of acquiring working interests in producing oil and
gas properties. Under the terms of the NP/OR Agreement, the Partnership has
conveyed to the Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $126,721, $204,420 and $112,875, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
(8) 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.
13
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 90,218 $ 100,684
Oil and gas sales receivable 50,643 61,170
--------------- ----------------
Total Current Assets 140,861 161,854
--------------- ----------------
Gas Imbalance Receivable 28,801 28,801
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,626,963 1,624,782
Less-Accumulated depreciation, depletion
and amortization (1,193,063) (1,178,436)
--------------- ----------------
433,900 446,346
--------------- ----------------
$ 603,562 $ 637,001
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 16,937 $ 22,079
--------------- ----------------
Deferred Revenues 27,007 27,007
Limited Partners' Capital (16,652 Limited Partnership Units;
$100 per unit) 558,944 587,841
General Partners' Capital 674 74
--------------- ----------------
Total Partners' Capital 559,618 587,915
--------------- ----------------
$ 603,562 $ 637,001
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 38,692 $ 71,306
Interest income 1,207 1,306
Other 273 543
--------------- ---------------
40,172 73,155
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 11,095 14,416
Production taxes 2,000 3,333
Depreciation, depletion
and amortization 14,627 18,037
General and administrative 6,706 8,308
--------------- ---------------
34,428 44,094
--------------- ---------------
NET INCOME (LOSS) $ 5,744 $ 29,061
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ .34
===============
March 31, 1997 $ 1.75
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 5,744 $ 29,061
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 14,627 18,037
Change in gas imbalance receivable
and deferred revenues -- (2,044)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 10,527 (157)
Increase (decrease) in accounts payable (5,142) (2,528)
-------------- --------------
Net cash provided by (used in) operating activities 25,756 42,369
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (2,181) (2,485)
Proceeds from sales of oil and gas properties -- 678
-------------- --------------
Net cash provided by (used in) investing activities (2,181) (1,807)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (34,041) (46,298)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,466) (5,736)
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 100,684 115,396
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 90,218 $ 109,660
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-3, Ltd., a Texas limited
partnership ("the Partnership"), was formed on January 6, 1989, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 144 limited partners made total capital contributions
of $1,665,200.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. Payout had
occurred as of December 31, 1996; therefore, beginning in 1997 and for
each year remaining in the life of the partnership, the continuing costs
and revenues will be (were) shared 85 percent by the limited partners
and 15 percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $41,130 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $41,630 was
paid to Swift for services performed for the Partnership.
Effective February 10, 1989, the Partnership entered into a
Net Profits and Overriding Royalty Interests Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1988-2,
Ltd. ("Pension Partnership"), managed by Swift, for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership has conveyed to the
Pension Partnership 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.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
--------------------------------------
For the Years Ended
December 31,
--------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 144,654 188,273 221,899
Average Sales Price
per Equivalent MCF $2.75 $2.72 $1.92
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.90 $0.67 $0.85
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $274,700, $211,600, $121,100, $234,400
and $538,000, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 32,841 808 41,738 918 60,153 987
------- ------- ------- ------- ------- -------
Proved reserves
Balance at beginning
of year 50,281 1,052 69,531 1,144 98,063 1,293
Extensions, discoveries
and other additions -- -- 6 1 54 2
Revisions of previous
estimates (2,113) 29 (5,608) 61 (13,822) 1
Sales of minerals in
place -- -- (4,676) (20) (3,145) --
Production (5,541) (111) (8,972) (134) (11,619) (152)
------- ----- ------- ----- ------- -----
Balance at end of year 42,627 970 50,281 1,052 69,531 1,144
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Mega, Northwind TX 3,018 54 7 0.040
Anderson, Samedan
Oil, Strebor Oil
& Lake Ronel Oil TX 188 171 6 0.193
Shell Oil Company TX 14,618 369 67 0.845
Union Pacific AR, KS, NM,
OK, TX 18,823 85 127 1.472
Allstate KS, LA, OK 245 84 158 4.491
Mission Oil
Company TX 3,194 90 47 0.489
Hardy Oil Company TX 1,192 50 4 0.019
Amoco OK 790 67 108 0.091
Maxus WY 559 -- 11 0.011
------- ----- ---- ------
42,627 970 535 7.651
------- ----- ---- ------
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1988-D, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1988-D, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1988-D, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 37,405 $ 97,575
Oil and gas sales receivable 105,763 146,288
--------------- ---------------
Total Current Assets 143,168 243,863
--------------- ---------------
Gas Imbalance Receivable 27,280 38,799
--------------- ---------------
Oil and Gas Properties, using full cost
accounting 4,222,551 4,215,070
Less-Accumulated depreciation, depletion
and amortization (3,398,167) (3,283,257)
--------------- ---------------
824,384 931,813
--------------- ---------------
$ 994,832 $ 1,214,475
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 40,725 $ 58,572
--------------- ---------------
Deferred Revenues 19,696 22,912
Limited Partners' Capital (43,610.70 Limited Partnership Units;
$100 per unit) 934,340 1,122,365
General Partners' Capital 71 10,626
--------------- ---------------
Total Partners' Capital 934,411 1,132,991
--------------- ---------------
$ 994,832 $ 1,214,475
=============== ===============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 417,740 $ 541,029 $ 442,500
Interest income 2,085 1,817 161
Other 1,728 4,930 4,623
--------------- --------------- ---------------
421,553 547,776 447,284
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 106,603 96,559 162,294
Production taxes 23,483 30,058 26,257
Depreciation, depletion
and amortization -
Normal provision 114,910 145,266 173,584
Additional provision -- -- 60,523
General and administrative 72,867 81,981 67,228
Interest expense -- -- 174
--------------- --------------- ---------------
317,863 353,864 490,060
--------------- --------------- ---------------
INCOME (LOSS) $ 103,690 $ 193,912 $ (42,776)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 1,282,314 $ 18,733 $ 61,854 $ 1,362,901
Income (Loss) (27,385) 12,693 (28,084) (42,776)
Cash Distributions (121,100) (18,636) -- (139,736)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 1,133,829 12,790 33,770 1,180,389
--------------- --------------- --------------- ---------------
Income (Loss) 173,927 27,546 (7,561) 193,912
Cash Distributions (211,600) (29,710) -- (241,310)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 1,096,156 10,626 26,209 1,132,991
--------------- --------------- --------------- ---------------
Income (Loss) 92,285 17,015 (5,610) 103,690
Cash Distributions (274,700) (27,570) -- (302,270)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 913,741 $ 71 $ 20,599 $ 934,411
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit
1995 $ (.63)
================
1996 $ 3.99
================
1997 $ 2.12
================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 103,690 $ 193,912 $ (42,776)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 114,910 145,266 234,107
Change in gas imbalance receivable
and deferred revenues 8,303 306 (16,193)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 40,525 (35,118) 17,962
Increase (decrease) in accounts payable (17,847) (26,246) (56,698)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 249,581 278,120 136,402
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (13,706) (18,630) (64,333)
Proceeds from sales of oil and gas properties 6,225 78,243 67,730
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (7,481) 59,613 3,397
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (302,270) (241,310) (139,736)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (60,170) 96,423 63
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 97,575 1,152 1,089
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 37,405 $ 97,575 $ 1,152
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ -- $ -- $ 174
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-D, Ltd., a Texas limited partnership
("the Partnership"), was formed on December 31, 1988, for the purpose of
purchasing and operating producing oil and gas properties within the continental
United States. Swift Energy Company ("Swift"), a Texas corporation, and VJM
Corporation ("VJM"), a California corporation, serve as Managing General Partner
and Special General Partner of the Partnership, respectively. The general
partners are required to contribute up to 1/99th of limited partner net
contributions. The 400 limited partners made total capital contributions of
$4,361,070.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the general partners. Organization
and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate for a certain period equals or exceeds 17.5 percent, then for
the following calendar year, these continuing costs and revenues will be
allocated 85 percent to the limited partners and 15 percent to the general
partners. After partnership payout, continuing costs and revenues will be shared
85 percent by the limited partners, and 15 percent by the general partners, even
if the cash distribution rate is less than 17.5 percent. Payout had not occurred
as of December 31, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
------ ------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 13,706 18,630 64,333
------- ------- ---------
$ 13,706 $ 18,630 $ 64,333
------- ------- ---------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
During 1995, the Partnership's unamortized oil and gas property costs
exceeded the quarterly calculations of the "ceiling limitation" resulting in an
additional provision for depreciation, depletion and amortization of $60,523. In
addition, the limited partners' share of unamortized oil and gas property costs
exceeded their "ceiling limitation" in 1995, resulting in a valuation allowance
of $42,359. This amount is included in the income (loss) attributable to the
limited partners shown in the statements of partners' capital together with a
"combining adjustment" for the differences between the limited partners'
valuation allowances and the Partnership's full cost ceiling write down. The
"combining adjustment" changes quarterly as the Partnership's total
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to the
general and limited partners.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $106,527 for managing and overseeing the offering of limited
partnership units.
A one-time management fee of $109,027 was paid to Swift in 1988 for
services performed for the Partnership. During 1997, 1996 and 1995, the
Partnership paid Swift $56,063, $65,416 and $49,325 as a general and
administrative overhead allowance.
Effective December 31, 1988, the Partnership entered into a Net Profits
and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Managed Pension Assets Partnership 1988-C, Ltd. ("Pension Partnership"), managed
by Swift for the purpose of acquiring working interests in producing oil and gas
properties. Under terms of the NP/OR Agreement, the Partnership has conveyed to
the Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $211,347, $341,540 and $187,984, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
(8) 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.
13
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
INDEX
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS: PAGE
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 9,650 $ 37,405
Oil and gas sales receivable 55,893 105,763
--------------- ---------------
Total Current Assets 65,543 143,168
--------------- ---------------
Gas Imbalance Receivable 27,280 27,280
--------------- ---------------
Oil and Gas Properties, using full cost
accounting 4,225,506 4,222,551
Less-Accumulated depreciation, depletion
and amortization (3,419,638) (3,398,167)
--------------- ---------------
805,868 824,384
--------------- ---------------
$ 898,691 $ 994,832
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 10,975 $ 40,725
--------------- ---------------
Deferred Revenues 19,696 19,696
Limited Partners' Capital (43,610.70 Limited Partnership Units;
$100 per unit) 867,757 934,340
General Partners' Capital 263 71
--------------- ---------------
Total Partners' Capital 868,020 934,411
--------------- ---------------
$ 898,691 $ 994,832
=============== ===============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 58,244 $ 135,835
Interest income 231 749
Other 285 605
--------------- ---------------
58,760 137,189
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 18,926 25,264
Production taxes 2,822 7,248
Depreciation, depletion
and amortization 21,471 33,896
General and administrative 17,621 16,128
--------------- ---------------
60,840 82,536
--------------- ---------------
NET INCOME (LOSS) $ (2,080) $ 54,653
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ (.05)
===============
March 31, 1997 $ 1.25
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (2,080) $ 54,653
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 21,471 33,896
Change in gas imbalance receivable
and deferred reveneus -- (999)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 49,870 16,768
Increase (decrease) in accounts payable (29,750) (33,049)
-------------- --------------
Net cash provided by (used in) operating activities 39,511 71,269
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (2,955) (2,254)
Proceeds from sales of oil and gas properties -- 1,711
-------------- --------------
Net cash provided by (used in) investing activities (2,955) (543)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (64,311) (85,376)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (27,755) (14,650)
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 37,405 97,575
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,650 $ 82,925
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 31, 1988, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 400 limited partners made total capital contributions
of $4,361,070.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
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 statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
received $106,527 for managing and overseeing the offering of the
limited partnership units. A one-time management fee of $109,027 was
paid to Swift for services performed for the Partnership.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1988-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Effective December 31, 1988, the Partnership entered into a
Net Profits and Overriding Royalty Interests Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1988-C,
Ltd. ("Pension Partnership"), managed by Swift, for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership has conveyed to the
Pension Partnership 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.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
----------------------------------------
For the Years Ended
December 31,
----------------------------------------
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 108,160 138,429 114,663
Average Sales Price
per Equivalent MCF $2.96 $2.97 $2.07
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.92 $0.82 $1.00
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $200,300, $74,900, $47,700, $110,200 and
$226,600, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- --------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 43,029 361 55,708 464 69,292 544
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 61,984 530 77,353 609 91,608 607
Extensions, discoveries
and other additions -- -- 735 33 215 7
Revisions of previous
estimates (3,001) (27) (3,045) (18) (5,708) 65
Sales of minerals in
place (252) (15) (3,181) (15) (1,254) --
Production (9,398) (52) (9,878) (79) (7,508) (70)
------- ----- ------- ----- ------- -----
Balance at end of year 49,333 436 61,984 530 77,353 609
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Shell Oil Company TX 7,947 201 67 0.459
Union Pacific AR, KS, NM,
OK, TX 10,234 46 127 0.800
Allstate KS, LA, OK 77 26 158 1.417
Ellison OK 25,199 4 40 0.371
Cairn AL, AR, CA, KS,
LA, MI, MS, NM,
OK, TX, WY 1,852 9 177 0.226
Hyde AR, LA, OK, TX 2,140 97 25 0.248
Mission Oil
Company TX 1,246 35 47 0.191
Hardy Oil Company TX 451 18 4 0.007
Maxus WY 187 -- 11 0.004
------- ----- ---- ------
49,333 436 656 3.723
------- ----- ---- ------
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1989-1, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1989-1, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1989-1, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 28,690 $ 68,940
Oil and gas sales receivable 82,002 122,975
Receivable due to property disposition -- 14,762
--------------- ----------------
Total Current Assets 110,692 206,677
--------------- ----------------
Gas Imbalance Receivable 10,946 16,931
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,893,426 1,834,724
Less-Accumulated depreciation, depletion
and amortization (1,218,682) (1,118,047)
--------------- ----------------
674,744 716,677
--------------- ----------------
$ 796,382 $ 940,285
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 30,030 $ 49,673
--------------- ----------------
Deferred Revenues 4,982 6,132
Limited Partners' Capital (19,083 Limited Partnership Units;
$100 per unit) 756,424 872,179
General Partners' Capital 4,946 12,301
--------------- ----------------
Total Partners' Capital 761,370 884,480
--------------- ----------------
$ 796,382 $ 940,285
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 334,336 $ 427,653 $ 247,447
Interest income 2,554 369 97
Other 723 4,158 1,864
--------------- --------------- ---------------
337,613 432,180 249,408
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 82,188 92,349 101,065
Production taxes 17,556 21,815 14,079
Depreciation, depletion
and amortization -
Normal provision 100,635 118,424 99,659
Additional provision -- -- 3,899
General and administrative 36,559 36,418 33,559
Interest expense -- 947 4,576
--------------- --------------- ---------------
236,938 269,953 256,837
--------------- --------------- ---------------
INCOME (LOSS) $ 100,675 $ 162,227 $ (7,429)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 823,332 $ 9,067 $ 48,218 $ 880,617
Income (Loss) (27,290) 7,407 12,454 (7,429)
Cash Distributions (47,700) (8,709) -- (56,409)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 748,342 7,765 60,672 816,779
--------------- --------------- --------------- ---------------
Income (Loss) 145,961 24,162 (7,896) 162,227
Cash Distributions (74,900) (19,626) -- (94,526)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 819,403 12,301 52,776 884,480
--------------- --------------- --------------- ---------------
Income (Loss) 90,457 16,130 (5,912) 100,675
Cash Distributions (200,300) (23,485) -- (223,785)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 709,560 $ 4,946 $ 46,864 $ 761,370
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit
1995 $ (1.43)
================
1996 $ 7.65
================
1997 $ 4.74
================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 100,675 $ 162,227 $ (7,429)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 100,635 118,424 103,558
Change in gas imbalance receivable
and deferred revenues 4,835 607 (11,405)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 40,973 (58,895) 3,313
Increase (decrease) in accounts payable (19,643) (63,400) (3,676)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 227,475 158,963 84,361
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (63,118) (59,264) (37,777)
Proceeds from sales of oil and gas properties 4,416 81,035 26,657
(Increase) decrease in receivable due to property disposition 14,762 (14,762) --
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (43,940) 7,009 (11,120)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (223,785) (94,526) (56,409)
Payments on note payable -- (4,166) (16,667)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities (223,785) (98,692) (73,076)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (40,250) 67,280 165
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 68,940 1,660 1,495
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 28,690 $ 68,940 $ 1,660
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 982 $ 4,713
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-1, Ltd., a Texas limited partnership
("the Partnership"), was formed on March 31, 1989, for the purpose of purchasing
and operating producing oil and gas properties within the continental United
States. Swift Energy Company ("Swift"), a Texas corporation, and VJM Partners,
Ltd. ("VJM"), a Texas limited partnership, serve as Managing General Partner and
Special General Partner of the Partnership, respectively. The Managing General
Partner is required to contribute up to 1/99th of limited partner net
contributions. The 181 limited partners made total capital contributions of
$1,908,300.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the Managing General Partner.
Organization and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate for a certain period equals or exceeds 17.5 percent, then for
the following calendar year, these continuing costs and revenues will be
allocated 85 percent to the limited partners and 15 percent to the general
partners. After partnership payout, revenues and continuing costs will be shared
85 percent by the limited partners, and 15 percent by the general partners, even
if the cash distribution rate is less than 17.5 percent. Payout had not occurred
as of December 31, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 63,118 59,264 37,777
-------- -------- --------
$ 63,118 $ 59,264 $ 37,777
-------- -------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
During 1995, the Partnership's unamortized oil and gas property costs
exceeded the quarterly calculations of the "ceiling limitaion" resulting in an
additional provision for depreciation, depletion and amortization of $3,899. In
addition, during 1995, the limited partners' share of unamortized oil and gas
property costs exceeded their "ceiling limitation", resulting in a valuation
allowance of $21,084. This amount is included in the income (loss) attributable
to the limited partners shown in the statement of partners' capital together
with a "combining adjustment" for the difference between the limited partners'
valuation allowance and the Partnership's full cost ceiling write down. The
"combining adjustment" changes quarterly as the Partnership's total
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to the
general and limited partners.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $47,708 for managing and overseeing the offering of limited partnership
units.
A one-time management fee of $47,708 was paid to Swift in 1989 for
services related to the evaluation of oil and gas properties and for general
services performed for the Partnership. During 1997, 1996 and 1995, the
Partnership paid Swift $28,625, $28,625 and $25,229, respectively, as general
and administrative overhead allowances.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $183,429, $280,843, and $85,577, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
(8) 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.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,179 $ 28,690
Oil and gas sales receivable 55,925 82,002
--------------- ----------------
Total Current Assets 57,104 110,692
--------------- ----------------
Gas Imbalance Receivable 10,987 10,946
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,911,613 1,893,426
Less-Accumulated depreciation, depletion
and amortization (1,243,547) (1,218,682)
--------------- ----------------
668,066 674,744
--------------- ----------------
$ 736,157 $ 796,382
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 23,264 $ 30,030
--------------- ----------------
Deferred Revenues 4,982 4,982
Limited Partners' Capital (19,083 Limited Partnership Units;
$100 per unit) 703,845 756,424
General Partners' Capital 4,066 4,946
--------------- ----------------
Total Partners' Capital 707,911 761,370
--------------- ----------------
$ 736,157 $ 796,382
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 54,418 $ 98,620
Interest income -- 611
Other 128 252
--------------- ---------------
54,546 99,483
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 16,448 19,190
Production taxes 2,609 4,773
Depreciation, depletion
and amortization 24,865 25,887
General and administrative 8,226 10,921
--------------- ---------------
52,148 60,771
--------------- ---------------
NET INCOME (LOSS) $ 2,398 $ 38,712
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ .13
===============
March 31, 1997 $ 2.03
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 2,398 $ 38,712
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 24,865 25,887
Change in gas imbalance receivable
and deferred revenues (41) --
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 26,077 7,993
(Increase) decrease in other current assets -- 14,762
Increase (decrease) in accounts payable (6,766) (21,387)
-------------- --------------
Net cash provided by (used in) operating activities 46,533 65,967
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (18,187) (3,771)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (55,857) (56,271)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (27,511) 5,925
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,690 68,940
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,179 $ 74,865
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are in the opinion
of the managing general partner necessary for a fair presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-1, Ltd., a Texas limited
partnership ("the Partnership"), was formed on March 31, 1989, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 181 limited partners made total capital contributions
of $1,908,300.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
received $47,708 for managing and overseeing the offering of the limited
partnership units. A one-time management fee of $47,708 was paid to
Swift for services performed for the Partnership.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
-----------------------------------------
For the Years Ended
December 31,
-----------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 240,704 304,249 293,656
Average Sales Price
per Equivalent MCF $2.89 $2.90 $2.06
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.91 $0.73 $0.99
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $460,900, $228,200, $98,600, $240,100 and
$492,500, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ----------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- ---------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 93,748 828 118,468 1,018 153,221 1,216
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 135,037 1,211 173,831 1,383 216,328 1,435
Extensions, discoveries
and other additions -- -- 958 43 356 12
Revisions of previous
estimates (4,602) (7) (5,939) (29) (19,350) 99
Sales of minerals in
place (918) (54) (11,825) (14) (1,778) --
Production (19,490) (124) (21,988) (172) (21,725) (163)
------- ----- ------- ----- ------- -----
Balance at end of year 110,027 1,026 135,037 1,211 173,831 1,383
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Shell Oil Company TX 22,650 572 67 1.309
Union Pacific AR, KS, NM,
OK, TX 29,165 131 127 2.280
Ellison OK 32,541 5 40 0.480
Cairn AL, AR, CA, KS,
LA, MI, MS, NM,
OK, TX, WY 6,740 31 177 0.822
Hyde AR, LA, OK, TX 2,763 125 25 0.320
Norcen Explorer WY 13,850 26 29 0.304
U.S. Companies TX 50 3 19 0.116
Mission Oil
Company TX 818 23 47 0.125
Hardy Oil Company TX 305 13 4 0.005
Amoco OK 1,145 97 108 0.132
------- ----- ---- ------
110,027 1,026 643 5.893
------- ----- ---- ------
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1989-2, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1989-2, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1989-2, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 205,800 $ 248,757
Oil and gas sales receivable 177,188 261,138
Receivable due to property disposition -- 54,292
--------------- ----------------
Total Current Assets 382,988 564,187
--------------- ----------------
Gas Imbalance Receivable 44,416 63,320
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 3,727,132 3,642,834
Less-Accumulated depreciation, depletion
and amortization (2,408,741) (2,205,496)
--------------- ----------------
1,318,391 1,437,338
--------------- ----------------
$ 1,745,795 $ 2,064,845
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 59,564 $ 104,230
--------------- ----------------
Deferred Revenues 29,492 34,124
Limited Partners' Capital (36,512 Limited Partnership Units;
$100 per unit) 1,634,355 1,887,361
General Partners' Capital 22,384 39,130
--------------- ----------------
Total Partners' Capital 1,656,739 1,926,491
--------------- ----------------
$ 1,745,795 $ 2,064,845
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 719,445 $ 905,252 $ 621,328
Interest income 11,602 4,005 267
Other 3,069 4,829 8,441
--------------- --------------- ---------------
734,116 914,086 630,036
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 179,599 175,101 254,916
Production taxes 39,153 47,624 35,423
Depreciation, depletion
and amortization 203,245 239,352 231,661
General and administrative 68,167 67,687 68,433
Interest expense -- 197 4,043
--------------- --------------- ---------------
490,164 529,961 594,476
--------------- --------------- ---------------
INCOME (LOSS) $ 243,952 $ 384,125 $ 35,560
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 1,869,119 $ 30,044 $ -- $ 1,899,163
Income (Loss) (51,415) 20,754 66,221 35,560
Cash Distributions (98,600) (21,421) -- (120,021)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 1,719,104 29,377 66,221 1,814,702
--------------- --------------- --------------- ---------------
Income (Loss) 335,506 53,889 (5,270) 384,125
Cash Distributions (228,200) (44,136) -- (272,336)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 1,826,410 39,130 60,951 1,926,491
--------------- --------------- --------------- ---------------
Income (Loss) 209,621 36,058 (1,727) 243,952
Cash Distributions (460,900) (52,804) -- (513,704)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 1,575,131 $ 22,384 $ 59,224 $ 1,656,739
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit
1995 $ (1.41)
===============
1996 $ 9.19
===============
1997 $ 5.74
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 243,952 $ 384,125 $ 35,560
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 203,245 239,352 231,661
Change in gas imbalance receivable
and deferred revenues 14,272 1,040 (30,235)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 83,950 (93,967) 11,931
Increase (decrease) in accounts payable (44,666) (43,311) (6,036)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 500,753 487,239 242,881
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (96,689) (97,539) (94,669)
Proceeds from sales of oil and gas properties 12,391 196,570 22,137
(Increase) decrease in receivable due to property disposition 54,292 (54,292) --
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (30,006) 44,739 (72,532)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (513,704) (272,336) (120,021)
Payments on note payable -- (12,500) (50,000)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities (513,704) (284,836) (170,021)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (42,957) 247,142 328
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 248,757 1,615 1,287
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 205,800 $ 248,757 $ 1,615
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 302 $ 4,455
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-2, Ltd., a Texas limited partnership
("the Partnership"), was formed on June 30, 1989, for the purpose of purchasing
and operating producing oil and gas properties within the continental United
States. Swift Energy Company ("Swift"), a Texas corporation, and VJM Partners,
Ltd. ("VJM"), a Texas limited partnership, serve as Managing General Partner and
Special General Partner of the Partnership, respectively. The Managing General
Partner is required to contribute up to 1/99th of limited partner net
contributions. The 250 limited partners made total capital contributions of
$3,651,200.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the Managing General Partner.
Organization and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate (as defined in the Partnership Agreement) for a certain period
equals or exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the limited
partners and 15 percent to the general partners. After partnership payout,
revenues and continuing costs will be shared 85 percent by the limited partners,
and 15 percent by the general partners, even if the cash distribution rate is
less than 17.5 percent. During 1992 and 1991, the cash distribution rate
exceeded 17.5 percent and thus, in 1993 and 1992, the continuing costs and
revenues were shared 85 percent by the limited partners and 15 percent by the
general partners. During 1997, 1996, 1995, 1994 and 1993, the cash distribution
rate fell below 17.5 percent and thus, in 1997, 1996, 1995 and 1994, the
continuing costs and revenues were shared 90 percent by the limited partners and
10 percent by the general partners. Payout occurred in January 1998; therefore,
for 1998 and each year remaining in the life of the partnership, the continuing
costs and revenues will be shared 85 percent by the limited partners and 15
percent by the general partners.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 96,689 97,539 94,669
-------- -------- --------
$ 96,689 $ 97,539 $ 94,669
-------- -------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1995, the limited partners' share of unamortized oil and gas
property costs exceeded their "ceiling limitation", resulting in a valuation
allowance of $63,354. This amount is included in the income (loss) attributable
to the limited partners shown in the statement of partners' capital together
with a "combining adjustment" for the difference between the limited partners'
valuation allowance and the Partnership's full cost ceiling write down. The
"combining adjustment" changes quarterly as the Partnership's total
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to the
general and limited partners.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $89,780 for managing and overseeing the offering of limited partnership
units.
A one-time management fee of $91,280 was paid to Swift in 1989 for
services related to the evaluation of oil and gas properties and for general
services performed for the Partnership. During 1997, 1996 and 1995, the
Partnership paid Swift $54,768, $54,768 and $54,768, respectively, as general
and administrative overhead allowances.
Effective June 30, 1989, the Partnership entered into a Net Profits and
Overriding Royalty Interests Agreement ("NP/OR Agreement") with Swift Energy
Managed Pension Assets Partnership 1989-1, Ltd. ("Pension Partnership"), managed
by Swift, for the purpose of acquiring working interests in producing oil and
gas properties. Under the terms of the NP/OR Agreement, the Partnership has
conveyed to the Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $474,452, $667,245 and $262,597, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 120,803 $ 205,800
Oil and gas sales receivable 145,071 177,188
--------------- ----------------
Total Current Assets 265,874 382,988
--------------- ----------------
Gas Imbalance Receivable 44,565 44,416
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 3,750,998 3,727,132
Less-Accumulated depreciation, depletion
and amortization (2,456,152) (2,408,741)
--------------- ----------------
1,294,846 1,318,391
--------------- ----------------
$ 1,605,285 $ 1,745,795
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 48,359 $ 59,564
--------------- ----------------
Deferred Revenues 29,492 29,492
Limited Partners' Capital (36,512 Limited Partnership Units;
$100 per unit) 1,509,340 1,634,355
General Partners' Capital 18,094 22,384
--------------- ----------------
Total Partners' Capital 1,527,434 1,656,739
--------------- ----------------
$ 1,605,285 $ 1,745,795
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 117,017 $ 224,853
Interest income 1,684 2,703
Other 525 1,021
--------------- ---------------
119,226 228,577
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 36,094 42,795
Production taxes 6,031 11,627
Depreciation, depletion
and amortization 47,411 55,875
General and administrative 14,646 22,320
--------------- ---------------
104,182 132,617
--------------- ---------------
NET INCOME (LOSS) $ 15,044 $ 95,960
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ .41
===============
March 31, 1997 $ 2.63
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 15,044 $ 95,960
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 47,411 55,875
Change in gas imbalance receivable
and deferred revenues (149) (1,450)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 32,117 24,148
(Increase) decrease in other current assets -- 54,292
Increase (decrease) in accounts payable (11,205) (41,710)
-------------- --------------
Net cash provided by (used in) operating activities 83,218 187,115
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (23,866) (7,276)
Proceeds from sales of oil and gas properties -- 439
-------------- --------------
Net cash provided by (used in) investing activities (23,866) (6,837)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (144,349) (133,922)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (84,997) 46,356
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 205,800 248,757
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 120,803 $ 295,113
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are in the opinion
of the managing general partner necessary for a fair presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-2, Ltd., a Texas limited
partnership ("the Partnership"), was formed on June 30, 1989, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 250 limited partners made total capital contributions
of $3,651,200.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1992 and 1991, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1993 and 1992, the
continuing costs and revenues were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996, 1995
and 1994, the cash distribution rate fell below 17.5 percent and thus,
in 1997, 1996 and 1995, the continuing costs and revenues were shared 90
percent by the limited partners and 10 percent by the general partners.
Payout occurred in January, 1998; therefore, for 1998 and each year
remaining in the life of the partnership, the continuing costs and
revenues will be shared 85 percent by the limited partners and 15
percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
received $89,780 for managing and overseeing the offering of the limited
partnership units. A one-time management fee of $91,280 was be paid to
Swift for services performed for the Partnership.
Effective June 30, 1989, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Managed Pension Assets Partnership 1989-1, Ltd.
("Pension Partnership"), managed by Swift for the purpose of acquiring
working interests in producing oil and gas properties. Under terms of
the NP/OR Agreement, the Partnership has conveyed to the Pension
Partnership 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.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
-----------------------------------------
For the Years Ended
December 31,
-----------------------------------------
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 92,461 175,305 185,223
Average Sales Price
per Equivalent MCF $2.60 $2.52 $1.90
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.92 $0.60 $0.69
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $253,700, $145,700, $87,200, $144,500 and
$275,400, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ----------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- --------- ------- ---------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 26,481 208 35,530 396 48,266 485
------- ----- ------- ----- ------- ------
Proved reserves
Balance at beginning
of year 41,102 452 54,474 545 80,048 522
Extensions, discoveries
and other additions -- -- 6 1 56 2
Revisions of previous
estimates 1,404 31 6,059 49 (14,056) 137
Sales of minerals in
place (2,782) (162) (9,835) (25) -- --
Production (7,196) (49) (9,602) (118) (11,574) (116)
------- ----- ------- ----- ------- ------
Balance at end of year 32,528 272 41,102 452 54,474 545
------- ----- ------- ----- ------- ------
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Cairn AL, AR, CA, KS,
LA, MI, MS, NM,
OK, TX, WY 20,431 94 178 2.492
Norcen Explorer WY 4,900 9 29 0.108
Mission Oil
Company TX 1,425 40 47 0.218
Hardy Oil Company TX 531 22 4 0.008
Amoco OK 1,079 74 108 0.095
AWP TX 4,162 33 1 0.012
------- ----- ---- ------
32,528 272 367 2.933
------- ----- ---- ------
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1989-3, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1989-3, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1989-3, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 137,885 $ 90,435
Oil and gas sales receivable 83,864 168,701
Receivable due to property disposition -- 161,517
--------------- ----------------
Total Current Assets 221,749 420,653
--------------- ----------------
Gas Imbalance Receivable 18,146 23,301
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,948,922 1,949,678
Less-Accumulated depreciation, depletion
and amortization (1,633,437) (1,571,128)
--------------- ----------------
315,485 378,550
--------------- ----------------
$ 555,380 $ 822,504
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 23,670 $ 87,438
--------------- ----------------
Deferred Revenues 11,039 12,122
Limited Partners' Capital (21,812 Limited Partnership Units;
$100 per unit) 520,643 709,073
General Partners' Capital 28 13,871
--------------- ----------------
Total Partners' Capital 520,671 722,944
--------------- ----------------
$ 555,380 $ 822,504
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 259,269 $ 468,963 $ 377,136
Interest income 7,492 437 216
Other 708 2,751 1,624
--------------- --------------- ---------------
267,469 472,151 378,976
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 71,183 79,185 104,741
Production taxes 13,951 26,486 23,813
Depreciation, depletion
and amortization -
Normal provision 62,309 132,641 170,857
Additional provision -- -- 3,488
General and administrative 41,209 40,921 41,425
Interest expense -- 1,302 6,096
--------------- --------------- ---------------
188,652 280,535 350,420
--------------- --------------- ---------------
INCOME (LOSS) $ 78,817 $ 191,616 $ 28,556
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 697,536 $ 10,153 $ 67,896 $ 775,585
Income (Loss) 29,795 15,900 (17,139) 28,556
Cash Distributions (87,200) (19,706) -- (106,906)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 640,131 6,347 50,757 697,235
--------------- --------------- --------------- ---------------
Income (Loss) 176,692 27,731 (12,807) 191,616
Cash Distributions (145,700) (20,207) -- (165,907)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 671,123 13,871 37,950 722,944
--------------- --------------- --------------- ---------------
Income (Loss) 75,193 13,547 (9,923) 78,817
Cash Distributions (253,700) (27,390) -- (281,090)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 492,616 $ 28 $ 28,027 $ 520,671
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit
1995 $ 1.37
===============
1996 $ 8.10
===============
1997 $ 3.45
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 78,817 $ 191,616 $ 28,556
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 62,309 132,641 174,345
Change in gas imbalance receivable
and deferred revenues 4,072 1,815 (12,993)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 84,837 (86,534) 19,517
Increase (decrease) in accounts payable (63,768) (39,413) (42,166)
---------------- --------------- ---------------
Net cash provided by (used in) operating activities 166,267 200,125 167,259
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (7,158) (12,389) (26,832)
Proceeds from sales of oil and gas properties 7,914 236,821 61
(Increase) decrease in receivable due to property disposition 161,517 (161,517) --
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 162,273 62,915 (26,771)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (281,090) (165,907) (106,906)
Payments on note payable -- (8,334) (33,333)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities (281,090) (174,241) (140,239)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 47,450 88,799 249
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 90,435 1,636 1,387
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 137,885 $ 90,435 $ 1,636
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 1,373 $ 6,372
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-3, Ltd., a Texas limited partnership
("the Partnership"), was formed on September 30, 1989, for the purpose of
purchasing and operating producing oil and gas properties within the continental
United States. Swift Energy Company ("Swift"), a Texas corporation, and VJM
Partners, Ltd. ("VJM"), a Texas limited partnership, serve as Managing General
Partner and Special General Partner of the Partnership, respectively. The
Managing General Partner is required to contribute up to 1/99th of limited
partner net contributions. The 160 limited partners made total capital
contributions of $2,181,200.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the Managing General Partner.
Organization and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate (as defined in the Partnership Agreement) for a certain period
equals or exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the limited
partners and 15 percent to the general partners. After partnership payout,
revenues and continuing costs will be shared 85 percent by the limited partners,
and 15 percent by the general partners, even if the cash distribution rate is
less than 17.5 percent. During, 1992 and 1991, the cash distribution rate
exceeded 17.5 percent and thus, in 1993 and 1992, the continuing costs and
revenues were shared 85 percent by the limited partners and 15 percent by the
general partners. During 1997, 1996, 1995, 1994 and 1993, the cash distribution
rate fell below 17.5 percent and thus, in 1998, 1997, 1996, 1995 and 1994, the
continuing costs and revenues will be (were) shared 90 percent by the limited
partners and 10 percent by the general partners. Payout had not occurred as of
December 31, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 7,158 12,389 26,832
-------- -------- --------
$ 7,158 $ 12,389 $ 26,832
-------- -------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1995, the Partnership's unamortized oil and gas property costs
exceeded the quarterly calculations of the "ceiling limitation", resulting in an
additional provision for depreciation, depletion and amortization of $3,488.
This amount is included in the income (loss) attributable to the limited
partners shown in the statement of partners' capital together with a "combining
adjustment" for the difference between the limited partners' valuation allowance
and the Partnership's full cost ceiling write down. The "combining adjustment"
changes quarterly as the Partnership's total depreciation, depletion and
amortization provision is more or less than the combined depreciation, depletion
and amortization provision attributable to the general and limited partners.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $54,530 for managing and overseeing the offering of limited partnership
units.
A one-time management fee of $54,530 was paid to Swift in 1989 for
services related to the evaluation of oil and gas properties and for general
services performed for the Partnership. During 1997, 1996 and 1995, the
Partnership paid Swift $32,718, $32,718 and $32,718, respectively, as general
and administrative overhead allowances.
Effective September 30, 1989, the Partnership entered into a Net
Profits and Overriding Royalty Interests Agreement ("NP/OR Agreement") with
Swift Energy Managed Pension Assets Partnership 1989-2, Ltd. ("Pension
Partnership"), managed by Swift, for the purpose of acquiring working interests
in producing oil and gas properties. Under the terms of the NP/OR Agreement, the
Partnership has conveyed to the Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $126,815, $309,518 and $169,907, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 122,799 $ 137,885
Oil and gas sales receivable 55,599 83,864
--------------- ----------------
Total Current Assets 178,398 221,749
--------------- ----------------
Gas Imbalance Receivable 18,600 18,146
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,949,476 1,948,922
Less-Accumulated depreciation, depletion
and amortization (1,647,396) (1,633,437)
--------------- ----------------
302,080 315,485
--------------- ----------------
$ 499,078 $ 555,380
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 20,597 $ 23,670
--------------- ----------------
Deferred Revenues 11,039 11,039
Limited Partners' Capital (21,812 Limited Partnership Units;
$100 per unit) 467,387 520,643
General Partners' Capital 55 28
--------------- ----------------
Total Partners' Capital 467,442 520,671
--------------- ----------------
$ 499,078 $ 555,380
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 37,694 $ 89,081
Interest income 1,665 995
Other 112 217
--------------- ---------------
39,471 90,293
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 12,689 19,921
Production taxes 1,899 4,401
Depreciation, depletion
and amortization 13,959 17,510
General and administrative 8,756 12,356
--------------- ---------------
37,303 54,188
--------------- ---------------
NET INCOME (LOSS) $ 2,168 $ 36,105
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ .10
===============
March 31, 1997 $ 1.66
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 2,168 $ 36,105
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 13,959 17,510
Change in gas imbalance receivable
and deferred revenues (454) (1,046)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 28,265 68,596
(Increase) decrease in other current assets -- 161,517
Increase (decrease) in accounts payable (3,073) (55,969)
-------------- --------------
Net cash provided by (used in) operating activities 40,865 226,713
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (554) (9,982)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (55,397) (82,131)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (15,086) 134,600
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 137,885 90,435
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 122,799 $ 225,035
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are in the opinion
of the managing general partner necessary for a fair presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-3, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1989, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 160 limited partners made total capital contributions
of $2,181,200.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1992 and 1991, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1993 and 1992, the
continuing costs and revenues were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996,
1995, 1994 and 1993, the cash distribution rate fell below 17.5 percent
and thus, in 1998, 1997, 1996, 1995 and 1994, the continuing costs and
revenues will be (were) shared 90 percent by the limited partners and 10
percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
received $54,530 for managing and overseeing the offering of the limited
partnership units. A one-time management fee of $54,530 was paid to
Swift for services performed for the Partnership.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-3, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Effective September 30, 1989, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1989-2,
Ltd. ("Pension Partnership"), managed by Swift for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership has conveyed to the
Pension Partnership 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.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
-----------------------------------------
For the Years Ended
December 31,
-----------------------------------------
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 81,351 105,333 123,445
Average Sales Price
per Equivalent MCF $2.40 $2.45 $1.81
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.88 $0.97 $0.76
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $83,200, $50,500, $51,200, $187,600 and
$272,800, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 24,226 286 34,578 299 36,603 361
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 36,899 360 42,669 420 61,179 500
Extensions, discoveries
and other additions -- -- 17 2 155 5
Revisions of previous
estimates (3,725) 76 3,079 22 (10,583) (9)
Sales of minerals in
place (527) (17) (2,638) (17) (4) (1)
Production (5,444) (49) (6,228) (67) (8,078) (75)
------- ----- ------- ----- ------- -----
Balance at end of year 27,203 370 36,899 360 42,669 420
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ---------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Norcen Explorer WY 21,362 40 29 0.469
U.S. Companies TX 82 6 19 0.192
Mission Oil
Company TX 2,261 64 47 0.346
Hardy Oil Company TX 844 35 4 0.013
Amoco OK 2,282 192 108 0.263
Sugarland OK, TX 372 33 56 0.265
------ ----- ---- ------
27,203 370 263 1.548
------ ----- ---- ------
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1989-4, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1989-4, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1989-4, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,184 $ 1,124
Oil and gas sales receivable 56,754 71,532
--------------- ----------------
Total Current Assets 57,938 72,656
--------------- ----------------
Gas Imbalance Receivable 25,028 28,301
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,533,340 1,545,108
Less-Accumulated depreciation, depletion
and amortization (1,208,865) (1,150,496)
--------------- ----------------
324,475 394,612
--------------- ----------------
$ 407,441 $ 495,569
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 23,419 $ 64,215
--------------- ----------------
Deferred Revenues 31,275 34,289
Limited Partners' Capital (15,158 Limited Partnership Units;
$100 per unit) 342,792 381,775
General Partners' Capital 9,955 15,290
--------------- ----------------
Total Partners' Capital 352,747 397,065
--------------- ----------------
$ 407,441 $ 495,569
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 209,575 $ 279,790 $ 242,146
Interest income 345 326 412
Other 2,511 3,021 3,895
--------------- --------------- ---------------
212,431 283,137 246,453
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 58,389 83,214 76,088
Production taxes 13,528 18,637 18,119
Depreciation, depletion
and amortization 58,369 85,591 92,226
General and administrative 28,889 28,720 29,096
Interest expense 109 7,298 11,212
--------------- --------------- ---------------
159,284 223,460 226,741
--------------- --------------- ---------------
INCOME (LOSS) $ 53,147 $ 59,677 $ 19,712
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance,
December 31, 1994 $ 430,587 $ 15,515 $ 446,102
Income (Loss) 5,569 14,143 19,712
Cash Distributions (51,200) (14,177) (65,377)
--------------- --------------- ---------------
Balance,
December 31, 1995 384,956 15,481 400,437
--------------- --------------- ---------------
Income (Loss) 47,319 12,358 59,677
Cash Distributions (50,500) (12,549) (63,049)
--------------- --------------- ---------------
Balance,
December 31, 1996 381,775 15,290 397,065
--------------- --------------- ---------------
Income (Loss) 44,217 8,930 53,147
Cash Distributions (83,200) (14,265) (97,465)
--------------- --------------- ---------------
Balance,
December 31, 1997 $ 342,792 $ 9,955 $ 352,747
=============== =============== ===============
Limited Partners' net income (loss)
per unit
1995 $ .37
===============
1996 $ 3.12
===============
1997 $ 2.92
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 53,147 $ 59,677 $ 19,712
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 58,369 85,591 92,226
Change in gas imbalance receivable
and deferred revenues 259 (1,345) 1,857
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 14,778 (9,713) (7,683)
Increase (decrease) in accounts payable (40,796) (110,482) 23,979
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 85,757 23,728 130,091
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (10,502) (6,420) (18,482)
Proceeds from sales of oil and gas properties 22,270 56,280 --
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 11,768 49,860 (18,482)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (97,465) (63,049) (65,377)
Payments on note payable -- (11,459) (45,838)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities (97,465) (74,508) (111,215)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 60 (920) 394
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,124 2,044 1,650
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,184 $ 1,124 $ 2,044
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 109 $ 7,489 $ 11,937
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-4, Ltd., a Texas limited partnership
("the Partnership"), was formed on December 31, 1989, for the purpose of
purchasing and operating producing oil and gas properties within the continental
United States. Swift Energy Company ("Swift"), a Texas corporation, and VJM
Partners, Ltd. ("VJM"), a Texas limited partnership, serve as Managing General
Partner and Special General Partner of the Partnership, respectively. The
Managing General Partner is required to contribute up to 1/99th of limited
partner net contributions. The 107 limited partners made total capital
contributions of $1,515,800.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the Managing General Partner.
Organization and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate (as defined in the Partnership Agreement) for a certain period
equals or exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the limited
partners and 15 percent to the general partners. After partnership payout,
revenues and continuing costs will be shared 85 percent by the limited partners,
and 15 percent by the general partners, even if the cash distribution rate is
less than 17.5 percent. During 1994, 1993 and 1992, the cash distribution rate
exceeded 17.5 percent and thus, in 1995, 1994 and 1993, the continuing costs and
revenues were shared 85 percent by the limited partners and 15 percent by the
general partners. During 1997, 1996 and 1995, the cash distribution rate fell
below 17.5 percent and thus, in 1998, 1997 and 1996 the continuing costs and
revenues will be (were) shared 90 percent by the limited partners and 10 percent
by the general partners. Payout had not occurred as of December 31, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 10,502 6,420 18,482
-------- -------- --------
$ 10,502 $ 6,420 $ 18,482
-------- -------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $37,520 for managing and overseeing the offering of limited partnership
units.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A one-time management fee of $37,895 was paid to Swift in 1989 for
services performed for the Partnership in 1990. During 1997, 1996 and 1995, the
Partnership paid Swift $22,737, $22,737 and $22,737, respectively, as general
and administrative overhead allowances.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $112,638, $170,659 and $99,551, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
(8) 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.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,189 $ 1,184
Oil and gas sales receivable 56,515 56,754
--------------- ----------------
Total Current Assets 57,704 57,938
--------------- ----------------
Gas Imbalance Receivable 25,026 25,028
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,515,404 1,533,340
Less-Accumulated depreciation, depletion
and amortization (1,220,441) (1,208,865)
--------------- ----------------
294,963 324,475
--------------- ----------------
$ 377,693 $ 407,441
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 14,288 $ 23,419
--------------- ----------------
Deferred Revenues 31,275 31,275
Limited Partners' Capital (15,158 Limited Partnership Units;
$100 per unit) 324,437 342,792
General Partners' Capital 7,693 9,955
--------------- ----------------
Total Partners' Capital 332,130 352,747
--------------- ----------------
$ 377,693 $ 407,441
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 30,984 $ 68,837
Interest income 94 69
Other 414 792
--------------- ---------------
31,492 69,698
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 9,841 13,586
Production taxes 2,235 4,389
Depreciation, depletion
and amortization 11,576 17,076
General and administrative 6,088 6,728
Interest expense -- 65
--------------- ---------------
29,740 41,844
--------------- ---------------
NET INCOME (LOSS) $ 1,752 $ 27,854
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ .12
===============
March 31, 1997 $ 1.84
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 1,752 $ 27,854
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 11,576 17,076
Change in gas imbalance receivable
and deferred revenues 2 (2,886)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 239 6,488
Increase (decrease) in accounts payable (9,131) (18,842)
-------------- --------------
Net cash provided by (used in) operating activities 4,438 29,690
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (63) (3,937)
Proceeds from sales of oil and gas properties 17,999 77
-------------- --------------
Net cash provided by (used in) operating activities 17,936 (3,860)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (22,369) (25,825)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5 5
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,184 1,124
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,189 $ 1,129
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 65
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are in the opinion
of the managing general partner necessary for a fair presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-4, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 31, 1989, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 107 limited partners made total capital contributions
of $1,515,800.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1994, 1993 and 1992, the cash distribution rate (as defined in the
Partnership Agreement) exceeded 17.5 percent and thus, in 1995, 1994 and
1993, the continuing costs and revenues were shared 85 percent by the
limited partners and 15 percent by the general partners. During 1997,
1996 and 1995, the cash distribution rate fell below 17.5 percent and
thus in 1998, 1997 and 1996, the continuing costs and revenues will be
(were) shared 90 percent by the limited partners and 10 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
received $37,520 for managing and overseeing the offering of the limited
partnership units. A one-time management fee of $37,895 was paid to
Swift for services performed for the Partnership.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-4, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 367,176 446,039 384,629
Average Sales Price
per Equivalent MCF $2.86 $2.93 $2.05
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.89 $0.75 $0.97
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $692,700, $317,200, $143,700, $332,700
and $668,200, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 152,549 1,118 197,700 1,397 244,153 1,627
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 219,749 1,626 272,257 1,819 326,694 1,804
Extensions, discoveries
and other additions -- -- 2,013 91 668 23
Revisions of previous
estimates (11,895) (41) (5,118) (24) (22,167) 196
Sales of minerals in
place (1,059) (62) (14,611) (23) (2,826) --
Production (33,079) (169) (34,792) (237) (30,112) (204)
------- ----- ------- ----- ------- -----
Balance at end of year 173,716 1,354 219,749 1,626 272,257 1,819
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas ------------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ --------
<S> <C> <C> <C> <C> <C>
Shell Oil Company TX 25,095 634 67 1.450
Union Pacific AR, KS, NM,
OK, TX 32,314 146 127 2.527
Allstate KS, LA, OK 105 36 158 1.925
Ellison OK 68,695 11 40 1.012
Cairn AL, AR, CA, KS
LA, MI, MS, NM
OK, TX, WY 7,777 36 177 0.948
Hyde AK, LA, OK, TX 5,833 264 25 0.675
Norcen Explorer WY 30,626 57 29 0.672
Mission Oil
Company TX 1,423 40 47 0.218
Hardy Oil Company TX 531 22 4 0.008
Amoco OK 1,201 101 108 1.138
U.S. Companies TX 116 7 19 0.268
------- ----- ---- ------
173,716 1,354 801 10.841
------- ----- ---- ------
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1989-A, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1989-A, Ltd., (a Texas limited partnership) as of December 31, 1997and
1996 and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1989-A, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 143,645 $ 262,455
Oil and gas sales receivable 264,694 395,329
Receivable due to property disposition -- 62,443
--------------- ----------------
Total Current Assets 408,339 720,227
--------------- ----------------
Gas Imbalance Receivable 48,599 69,545
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,402,779 5,227,499
Less-Accumulated depreciation, depletion
and amortization (3,464,374) (3,160,355)
--------------- ----------------
1,938,405 2,067,144
--------------- ----------------
$ 2,395,343 $ 2,856,916
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 94,176 $ 152,366
--------------- ----------------
Deferred Revenues 31,763 36,875
Limited Partners' Capital (51,792.81 Limited Partnership Units;
$100 per unit) 2,245,932 2,621,172
General Partners' Capital 23,472 46,503
--------------- ----------------
Total Partners' Capital 2,269,404 2,667,675
--------------- ----------------
$ 2,395,343 $ 2,856,916
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 1,084,962 $ 1,346,380 $ 816,124
Interest income 10,531 3,047 289
Other 4,918 9,515 9,416
--------------- --------------- ---------------
1,100,411 1,358,942 825,829
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 267,085 263,980 322,689
Production taxes 59,096 71,422 48,934
Depreciation, depletion
and amortization 304,019 339,769 295,199
General and administrative 97,272 96,863 97,975
Interest expense -- 263 6,814
--------------- --------------- ---------------
727,472 772,297 771,611
--------------- --------------- ---------------
INCOME (LOSS) $ 372,939 $ 586,645 $ 54,218
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance,
December 31, 1994 $ 2,550,262 $ 27,447 $ 2,577,709
Income (Loss) 26,342 27,876 54,218
Cash Distributions (143,700) (24,982) (168,682)
--------------- --------------- ---------------
Balance,
December 31, 1995 2,432,904 30,341 2,463,245
--------------- --------------- ---------------
Income (Loss) 505,468 81,177 586,645
Cash Distributions (317,200) (65,015) (382,215)
--------------- --------------- ---------------
Balance,
December 31, 1996 2,621,172 46,503 2,667,675
--------------- --------------- ---------------
Income (Loss) 317,460 55,479 372,939
Cash Distributions (692,700) (78,510) (771,210)
--------------- --------------- ---------------
Balance,
December 31, 1997 $ 2,245,932 $ 23,472 $ 2,269,404
=============== =============== ===============
Limited Partners' net income (loss)
per unit
1995 $ .51
===============
1996 $ 9.76
===============
1997 $ 6.13
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 372,939 $ 586,645 $ 54,218
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 304,019 339,769 295,199
Change in gas imbalance receivable
and deferred revenues 15,834 1,297 (33,968)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 130,635 (173,273) 855
Increase (decrease) in accounts payable (58,190) (85,245) (12,827)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 765,237 669,193 303,477
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (186,309) (175,505) (112,528)
Proceeds from sales of oil and gas properties 11,029 228,521 44,711
(Increase) decrease in receivable due to property disposition 62,443 (62,443) --
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (112,837) (9,427) (67,817)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (771,210) (382,215) (168,682)
Payments on note payable -- (16,666) (66,667)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities (771,210) (398,881) (235,349)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (118,810) 260,885 311
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 262,455 1,570 1,259
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 143,645 $ 262,455 $ 1,570
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 403 $ 7,364
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-A, Ltd., a Texas limited partnership
("the Partnership"), was formed on March 31, 1989, for the purpose of purchasing
and operating producing oil and gas properties within the continental United
States. Swift Energy Company ("Swift"), a Texas corporation, and VJM Corporation
("VJM"), a California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The general partners are
required to contribute up to 1/99th of limited partner net contributions. The
455 limited partners made total capital contributions of $5,179,281.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the general partners. Organization
and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate (as defined in the Partnership Agreement) for a certain period
equals or exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the limited
partners and 15 percent to the general partners. After partnership payout,
continuing costs and revenues will be shared 85 percent by the limited partners,
and 15 percent by the general partners, even if the cash distribution rate is
less than 17.5 percent. During 1992 and 1991, the cash distribution rate
exceeded 17.5 percent and thus, in 1993 and 1992, the continuing costs and
revenues were shared 85 percent by the limited partners and 15 percent by the
general partners. During 1997, 1996, 1995, 1994 and 1993, the cash distribution
rate fell below 17.5 percent and thus, in 1997, 1996, 1995 and 1994 the
continuing costs and revenues were shared 90 percent by the limited partners and
10 percent by the general partners. Payout occurred as of January 1998;
therefore, for 1998 and each year remaining in the life of the partnership, the
continuing costs and revenues will be shared 85 percent by the limited partners
and 15 percent by the general partners.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 186,309 175,505 112,528
-------- -------- --------
$ 186,309 $ 175,505 $ 112,528
-------- -------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of the properties.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $127,700 for managing and overseeing the offering of limited
partnership units.
A one-time management fee of $129,482 was paid to Swift in 1989 for
services performed for the Partnership. During 1997, 1996 and 1995, the
Partnership paid Swift $77,689, $77,689 and $77,689 as a general and
administrative overhead allowance.
Effective March 31, 1989, the Partnership entered into a Net Profits
and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Managed Pension Assets Partnership 1989-A, Ltd. ("Pension Partnership"), managed
by Swift for the purpose of acquiring working interests in producing oil and gas
properties. Under terms of the NP/OR Agreement, the Partnership has conveyed to
the Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $670,846, $937,415 and $312,826, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
(8) 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.
13
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 15,108 $ 143,645
Oil and gas sales receivable 219,736 264,694
--------------- ----------------
Total Current Assets 234,844 408,339
--------------- ----------------
Gas Imbalance Receivable 48,772 48,599
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,450,942 5,402,799
Less-Accumulated depreciation, depletion
and amortization (3,537,613) (3,464,374)
--------------- ----------------
1,913,329 1,938,405
--------------- ----------------
$ 2,196,945 $ 2,395,343
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 73,165 $ 94,176
--------------- ----------------
Deferred Revenues 31,763 31,763
Limited Partners' Capital (51,792.81 Limited Partnership Units;
$100 per unit) 2,067,674 2,245,932
General Partners' Capital 24,343 23,472
--------------- ----------------
Total Partners' Capital 2,092,017 2,269,404
--------------- ----------------
$ 2,196,945 $ 2,395,343
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 173,191 $ 330,229
Interest income 523 2,610
Other 846 1,595
--------------- ---------------
174,560 334,434
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 55,945 63,331
Production taxes 8,945 16,895
Depreciation, depletion
and amortization 73,239 80,421
General and administrative 20,876 32,647
--------------- ---------------
159,005 193,294
--------------- ---------------
NET INCOME (LOSS) $ 15,555 $ 141,140
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ .30
================
March 31, 1997 $ 2.73
================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 15,555 $ 141,140
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 73,239 80,421
Change in gas imbalance receivable
and deferred revenues (173) (1,521)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 44,958 27,973
(Increase) decrease in other current assets -- 62,443
Increase (decrease) in accounts payable (21,011) (61,029)
-------------- --------------
Net cash provided by (used in) operating activities 112,568 249,427
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (48,163) (15,514)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (192,942) (191,279)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (128,537) 42,634
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 143,645 262,455
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,108 $ 305,089
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are in the opinion
of the managing general partner necessary for a fair presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-A, Ltd., a Texas limited
partnership ("the Partnership"), was formed on March 31, 1989, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Corporation ("VJM"), a California
corporation, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The general partners are
required to contribute up to 1/99th of limited partner net
contributions.
The 449 limited partners made total capital contributions of $5,179,281.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1992 and 1991, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1993 and 1992, the
continuing costs and revenues were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996,
1995, 1994 and 1993, the cash distribution rate fell below 17.5 percent
and thus, in 1997, 1996, 1995 and 1994, the continuing costs and
revenues will be (were) shared 90 percent by the limited partners and 10
percent by the general partners. Payout occurred in January, 1998;
therefore, for 1998 and each year remaining in the life of the
partnership, the continuing costs and revenues will be shared 85 percent
by the limited partners and 15 percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $128,607 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $129,482 was
paid to Swift for services performed for the Partnership.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Effective March 31, 1989, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Managed Pension Assets Partnership 1989-A, Ltd.
("Pension Partnership"), managed by Swift for the purpose of acquiring
working interests in producing oil and gas properties. Under terms of
the NP/OR Agreement, the Partnership has conveyed to the Pension
Partnership 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.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------
For the Years Ended
December 31,
------------------------------------
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 179,475 341,474 361,718
Average Sales Price
per Equivalent MCF $2.59 $2.52 $1.91
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.91 $0.61 $0.70
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $475,500, $282,200, $189,100, $292,400
and $527,600, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------
1997 1996 1995
------------------- ----------------------- -----------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 54,393 371 73,359 730 99,870 910
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 84,520 839 111,648 1,013 164,218 952
Extensions, discoveries
and other additions -- -- 13 1 116 4
Revisions of previous
estimates 1,324 49 12,063 98 (29,078) 277
Sales of minerals in
place (5,439) (317) (19,738) (49) -- --
Production (14,681) (91) (19,466) (224) (23,608) (220)
------- ----- ------- ----- ------- -----
Balance at end of year 65,724 480 84,520 839 111,648 1,013
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas ___________________
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Cairn AL, AR, CA,
KS, LA, MI,
MS, NM, OK
TX, WY 39,940 184 178 4.871
Norcen Explorer WY 13,820 26 29 0.303
Mission Oil
Company TX 1,252 35 47 0.192
Hardy Oil Company TX 467 20 4 0.007
Amoco OK 2,191 152 108 0.196
AWP TX 8,054 63 1 0.021
------- ----- ---- ------
65,724 480 367 5.590
------- ----- ---- ------
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1989-C, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1989-C, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1989-C, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 302,308 $ 193,408
Oil and gas sales receivable 136,384 326,704
Receivable due to property disposition -- 315,837
--------------- ----------------
Total Current Assets 438,692 835,949
--------------- ----------------
Gas Imbalance Receivable 36,428 46,629
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 3,669,178 3,670,111
Less-Accumulated depreciation, depletion
and amortization (3,076,893) (2,957,967)
--------------- ----------------
592,285 712,144
--------------- ----------------
$ 1,067,405 $ 1,594,722
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 21,111 $ 171,796
--------------- ----------------
Deferred Revenues 22,741 24,971
Limited Partners' Capital (40,899 Limited Partnership Units;
$100 per unit) 1,023,551 1,371,116
General Partners' Capital 2 26,839
--------------- ----------------
Total Partners' Capital 1,023,553 1,397,955
--------------- ----------------
$ 1,067,405 $ 1,594,722
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 495,140 $ 906,467 $ 732,612
Interest income 16,038 1,026 359
Other 1,849 4,528 3,875
--------------- --------------- ---------------
513,027 912,021 736,846
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 136,065 156,277 204,906
Production taxes 26,527 51,365 46,772
Depreciation, depletion
and amortization 118,926 254,594 328,140
General and administrative 77,610 77,456 78,476
Interest expense -- 2,033 9,907
--------------- --------------- ---------------
359,128 541,725 668,201
--------------- --------------- ---------------
INCOME (LOSS) $ 153,899 $ 370,296 $ 68,645
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 1,320,434 $ 19,833 $ 167,577 $ 1,507,844
Income (Loss) 67,807 31,106 (30,268) 68,645
Cash Distributions (189,100) (38,741) -- (227,841)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 1,199,141 12,198 137,309 1,348,648
--------------- --------------- --------------- ---------------
Income (Loss) 346,738 53,430 (29,872) 370,296
Cash Distributions (282,200) (38,789) -- (320,989)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 1,263,679 26,839 107,437 1,397,955
--------------- --------------- --------------- ---------------
Income (Loss) 149,898 25,964 (21,963) 153,899
Cash Distributions (475,500) (52,801) -- (528,301)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 938,077 $ 2 $ 85,474 $ 1,023,553
=============== =============== ---============ ===============
Limited Partners' net income (loss)
per unit
1995 $ 1.66
===============
1996 $ 8.48
===============
1997 $ 3.67
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 153,899 $ 370,296 $ 68,645
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 118,926 254,594 328,140
Change in gas imbalance receivable
and deferred revenues 7,971 3,493 (25,151)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 190,320 (165,935) 35,465
Increase (decrease) in accounts payable (150,685) (53,670) (60,287)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 320,431 408,778 346,812
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (14,535) (25,285) (52,105)
Proceeds from sales of oil and gas properties 15,468 461,702 119
(Increase) decrease in receivable due to property disposition 315,837 (315,837) --
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 316,770 120,580 (51,986)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (528,301) (320,989) (227,841)
Payments on note payable -- (16,667) (66,667)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities (528,301) (337,656) (294,508)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 108,900 191,702 318
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 193,408 1,706 1,388
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 302,308 $ 193,408 $ 1,706
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 2,173 $ 10,456
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-C, Ltd., a Texas limited partnership
("the Partnership"), was formed on September 30, 1989, for the purpose of
purchasing and operating producing oil and gas properties within the continental
United States. Swift Energy Company ("Swift"), a Texas corporation, and VJM
Corporation ("VJM"), a California corporation, serve as Managing General Partner
and Special General Partner of the Partnership, respectively. The general
partners are required to contribute up to 1/99th of limited partner net
contributions. The 449 limited partners made total capital contributions of
$4,089,900.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the general partners. Organization
and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate (as defined in the Partnership Agreement) for a certain period
equals or exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the limited
partners and 15 percent to the general partners. After partnership payout,
continuing costs and revenues will be shared 85 percent by the limited partners,
and 15 percent by the general partners, even if the cash distribution rate is
less than 17.5 percent. During 1992 and 1991, the cash distribution rate
exceeded 17.5 percent and thus, in 1993 and 1992, the continuing costs and
revenues were shared 85 percent by the limited partners and 15 percent by the
general partners. During 1997, 1996, 1995, 1994 and 1993, the cash distribution
rate fell below 17.5 percent and thus, in 1998, 1997, 1996, 1995 and 1994 the
continuing costs and revenues will be (were) shared 90 percent by the limited
partners and 10 percent by the general partners.
Payout had not occurred as of December 31, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
------ ------ --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 14,535 25,285 52,105
-------- -------- --------
$ 14,535 $ 25,285 $ 52,105
-------- -------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $100,788 for managing and overseeing the offering of limited
partnership units.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A one-time management fee of $102,247 was paid to Swift in 1989 for
services performed for the Partnership. During 1997, 1996 and 1995, the
Partnership paid Swift $61,349, $61,349 and $61,349, respectively, as general
and administrative overhead allowances.
Effective September 30, 1989, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift
Energy Managed Pension Assets Partnership 1989-C, Ltd. ("Pension Partnership"),
managed by Swift for the purpose of acquiring working interests in producing oil
and gas properties. Under terms of the NP/OR Agreement, the Partnership has
conveyed to the Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $242,858, $581,050 and $325,520, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(8) 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.
13
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 270,302 $ 302,308
Oil and gas sales receivable 92,582 136,384
--------------- ----------------
Total Current Assets 362,884 438,692
--------------- ----------------
Gas Imbalance Receivable 37,315 36,428
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 3,670,035 3,669,178
Less-Accumulated depreciation, depletion
and amortization (3,104,075) (3,076,893)
--------------- ----------------
565,960 592,285
--------------- ----------------
$ 966,159 $ 1,067,405
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 26,249 $ 21,111
--------------- ----------------
Deferred Revenues 22,741 22,741
Limited Partners' Capital (40,899 Limited Partnership Units;
$100 per unit) 917,110 1,023,551
General Partners' Capital 59 2
--------------- ----------------
Total Partners' Capital 917,169 1,023,553
--------------- ----------------
$ 966,159 $ 1,067,405
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 71,928 $ 170,540
Interest income 3,676 2,202
Other 293 569
--------------- ---------------
75,897 173,311
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 25,428 38,425
Production taxes 3,632 8,293
Depreciation, depletion
and amortization 27,182 32,977
General and administrative 16,572 23,222
--------------- ---------------
72,814 102,917
--------------- ---------------
NET INCOME (LOSS) $ 3,083 $ 70,394
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ .08
===============
March 31, 1997 $ 1.72
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 3,083 $ 70,394
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 27,182 32,977
Change in gas imbalance receivable
and defered revenues (887) (2,157)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 43,802 161,858
(Increase) decrease in other current assets -- 315,837
Increase (decrease) in accounts payable 5,138 (137,819)
-------------- --------------
Net cash provided by (used in) operating activities 78,318 441,090
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (857) (19,596)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (109,467) (154,840)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (32,006) 266,654
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 302,308 193,408
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 270,302 $ 460,062
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are in the opinion
of the managing general partner necessary for a fair presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1989, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Corporation ("VJM"), a California
corporation, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The general partners are
required to contribute up to 1/99th of limited partner net
contributions.
The 449 limited partners made total capital contributions of $4,089,900.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1992 and 1991, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1993 and 1992, the
continuing costs and revenues were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996,
1995, 1994 and 1993, the cash distribution rate fell below 17.5 percent
and thus, in 1998, 1997, 1996, 1995 and 1994, the continuing costs and
revenues will be (were) shared 90 percent by the limited partners and 10
percent by the general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $100,788 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $102,247 was
paid to Swift for services performed for the Partnership.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Effective September 30, 1989, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1989-C,
Ltd. ("Pension Partnership"), managed by Swift for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership has conveyed to the
Pension Partnership 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.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
-----------------------------------------
For the Years Ended
December 31,
-----------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 218,388 279,570 328,062
Average Sales Price
per Equivalent MCF $2.40 $2.45 $1.80
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.88 $0.98 $0.77
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $219,600, $132,800, $151,700, $505,300
and $720,800, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- --------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 66,113 763 94,221 783 100,512 948
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 100,481 936 117,087 1,101 167,420 1,303
Extensions, discoveries
and other additions -- -- 46 5 428 14
Revisions of previous
estimates (10,374) 210 7,237 54 (28,950) (17)
Sales of minerals in
place (942) (31) (7,186) (45) (7) (2)
Production (14,826) (129) (16,703) (179) (21,804) (197)
------- ----- ------- ----- ------- -----
Balance at end of year 74,339 986 100,481 936 117,087 1,101
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Norcen Explorer WY 58,621 109 29 1.287
U.S. Companies TX 226 15 19 0.528
Mission Oil
Company TX 6,218 175 47 0.953
Hardy Oil Company TX 2,320 97 4 0.037
Amoco OK 6,291 529 108 0.724
Sugarland OK, TX 663 61 56 0.473
------- ----- ---- ------
74,339 986 263 4.002
------- ----- ---- ------
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1989-D, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1989-D, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1989-D, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 10,173 $ 1,015
Oil and gas sales receivable 139,699 188,662
--------------- ----------------
Total Current Assets 149,872 189,677
--------------- ----------------
Gas Imbalance Receivable 68,976 78,001
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,027,187 4,041,279
Less-Accumulated depreciation, depletion
and amortization (3,185,789) (3,035,286)
--------------- ----------------
841,398 1,005,993
--------------- ----------------
$ 1,060,246 $ 1,273,671
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 33,990 $ 133,508
--------------- ----------------
Deferred Revenues 85,388 93,668
Limited Partners' Capital (39,938.01 Limited Partnership Units;
$100 per unit) 914,457 1,006,511
General Partners' Capital 26,411 39,984
--------------- ----------------
Total Partners' Capital 940,868 1,046,495
--------------- ----------------
$ 1,060,246 $ 1,273,671
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 563,290 $ 743,649 $ 642,114
Interest income 839 807 958
Other 6,795 10,607 10,508
--------------- --------------- ---------------
570,924 755,063 653,580
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 155,816 223,090 202,915
Production taxes 36,682 49,722 48,162
Depreciation, depletion
and amortization 150,503 218,702 235,623
General and administrative 75,870 75,801 76,763
Interest expense -- 17,119 27,640
--------------- --------------- ---------------
418,871 584,434 591,103
--------------- --------------- ---------------
INCOME (LOSS) $ 152,053 $ 170,629 $ 62,477
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance,
December 31, 1994 $ 1,128,957 $ 40,216 $ 1,169,173
Income (Loss) 24,698 37,779 62,477
Cash Distributions (151,700) (37,880) (189,580)
--------------- --------------- ---------------
Balance,
December 31, 1995 1,001,955 40,115 1,042,070
--------------- --------------- ---------------
Income (Loss) 137,356 33,273 170,629
Cash Distributions (132,800) (33,404) (166,204)
--------------- --------------- ---------------
Balance,
December 31, 1996 1,006,511 39,984 1,046,495
--------------- --------------- ---------------
Income (Loss) 127,546 24,507 152,053
Cash Distributions (219,600) (38,080) (257,680)
--------------- --------------- ---------------
Balance,
December 31, 1997 $ 914,457 $ 26,411 $ 940,868
=============== =============== ===============
Limited Partners' net income (loss)
per unit
1995 $ .62
===============
1996 $ 3.44
===============
1997 $ 3.19
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 152,053 $ 170,629 $ 62,477
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 150,503 218,702 235,623
Change in gas imbalance receivable
and deferred revenues 745 (3,769) 5,268
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 48,963 (25,097) (17,833)
Increase (decrease) in accounts payable (99,518) (300,404) 76,555
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 252,746 60,061 362,090
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (28,967) (17,436) (47,878)
Proceeds from sales of oil and gas properties 43,059 153,821 --
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 14,092 136,385 (47,878)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (257,680) (166,204) (189,580)
Payments on note payable -- (31,092) (124,367)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities (257,680) (197,296) (313,947)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,158 (850) 265
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,015 1,865 1,600
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 10,173 $ 1,015 $ 1,865
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 17,736 $ 29,508
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-D, Ltd., a Texas limited partnership
("the Partnership"), was formed on December 31, 1989, for the purpose of
purchasing and operating producing oil and gas properties within the continental
United States. Swift Energy Company ("Swift"), a Texas corporation, and VJM
Corporation ("VJM"), a California corporation, serve as Managing General Partner
and Special General Partner of the Partnership, respectively. The general
partners are required to contribute up to 1/99th of limited partner net
contributions. The 447 limited partners made total capital contributions of
$3,993,801.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the general partners. Organization
and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate (as defined in the Partnership Agreement) for a certain period
equals or exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the limited
partners and 15 percent to the general partners. After partnership payout,
continuing costs and revenues will be shared 85 percent by the limited partners,
and 15 percent by the general partners, even if the cash distribution rate is
less than 17.5 percent. During 1994, 1993 and 1992, the cash distribution rate
exceeded 17.5 percent and thus, in 1995, 1994 and 1993, the continuing costs and
revenues were shared 85 percent by the limited partners and 15 percent by the
general partners. During 1997, 1996 and 1995, the cash distribution rate fell
below 17.5 percent and thus, in 1998, 1997 and 1996 the continuing costs and
revenues will be (were) shared 90 percent by the limited partners and 10 percent
by the general partners. Payout had not occurred as of December 31, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 28,967 17,436 47,878
-------- -------- --------
$ 28,967 $ 17,436 $ 47,878
-------- -------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $99,845 for managing and overseeing the offering of limited partnership
units.
A one-time management fee of $99,845 was paid to Swift in 1989 for
services performed for the Partnership. During 1997, 1996 and 1995, the
Partnership paid Swift $59,907, $59,907 and $59,907, respectively, as a general
and administrative overhead allowance.
Effective December 31, 1989, the Partnership entered into a Net Profits
and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Managed Pension Assets Partnership 1989-D, Ltd. ("Pension Partnership"), managed
by Swift for the purpose of acquiring working interests in producing oil and gas
properties. Under terms of the NP/OR Agreement, the Partnership has conveyed to
the Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $314,072, $450,392 and $279,813, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
(8) 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.
13
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 9,422 $ 10,173
Oil and gas sales receivable 152,235 139,699
--------------- ----------------
Total Current Assets 161,657 149,872
--------------- ----------------
Gas Imbalance Receivable 68,971 68,976
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 3,995,218 4,027,187
Less-Accumulated depreciation, depletion
and amortization (3,216,214) (3,185,789)
--------------- ----------------
779,004 841,398
--------------- ----------------
$ 1,009,632 $ 1,060,246
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 38,300 $ 33,990
--------------- ----------------
Deferred Revenues 85,388 85,388
Limited Partners' Capital (39,938.01 Limited Partnership Units;
$100 per unit) 865,539 914,457
General Partners' Capital 20,405 26,411
--------------- ----------------
Total Partners' Capital 885,944 940,868
--------------- ----------------
$ 1,009,632 $ 1,060,246
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 84,346 $ 183,772
Interest income 253 180
Other 1,128 2,149
--------------- ---------------
85,727 186,101
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 26,639 36,299
Production taxes 6,152 11,723
Depreciation, depletion
and amortization 30,425 43,424
General and administrative 16,181 16,962
--------------- ---------------
79,397 108,408
--------------- ---------------
NET INCOME (LOSS) $ 6,330 $ 77,693
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ .16
===============
March 31, 1997 $ 1.95
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 6,330 $ 77,693
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 30,425 43,424
Change in gas imbalance receivable
and deferred revenues 5 (7,957)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable (12,536) 14,971
Increase (decrease) in accounts payable 4,310 (49,278)
-------------- --------------
Net cash provided by (used in) operating activities 28,534 78,853
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (189) (10,877)
Proceeds from sales of oil and gas properties 32,158 137
-------------- --------------
Net cash provided by (used in) investing activities 31,969 (10,740)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (61,254) (68,108)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (751) 5
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,173 1,015
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,422 $ 1,020
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are in the opinion
of the managing general partner necessary for a fair presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1989-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 31, 1989, for
the purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Corporation ("VJM"), a California
corporation, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The general partners are
required to contribute up to 1/99th of limited partner net
contributions.
The 447 limited partners made total capital contributions of $3,993,801.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1994, 1993 and 1992, the cash distribution rate (as defined in the
Partnership Agreement) exceeded 17.5 percent and thus, in 1995, 1994 and
1993, the continuing costs and revenues were shared 85 percent by the
limited partners and 15 percent by the general partners. During 1997,
1996 and 1995, the cash distribution rate fell below 17.5 percent and
thus, in 1998, 1997 and 1996, the continuing costs and revenues will be
shared 90 percent by the limited partners and 10 percent by the general
partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $99,845 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $99,845 was
paid to Swift for services performed for the Partnership.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1989-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Effective December 31, 1989, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Managed Pension Assets Partnership 1989-D,
Ltd. ("Pension Partnership"), managed by Swift for the purpose of
acquiring working interests in producing oil and gas properties. Under
terms of the NP/OR Agreement, the Partnership has conveyed to the
Pension Partnership 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.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
-----------------------------------------
For the Years Ended
December 31,
-----------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 100,531 125,800 140,944
Average Sales Price
per Equivalent MCF $2.64 $2.35 $1.67
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.73 $0.65 $0.67
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $132,800, $55,000, $73,400, $179,700 and
$258,400, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- --------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 7,690 471 8,950 468 16,084 604
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 10,362 582 18,264 685 19,998 810
Extensions, discoveries
and other additions -- -- 39 4 364 12
Revisions of previous
estimates 976 122 (2,962) 83 1,870 (20)
Sales of minerals in
place (659) (23) (2,804) (78) (1) --
Production (1,500) (92) (2,175) (112) (3,967) (117)
------- ----- ------- ----- ------- -----
Balance at end of year 9,179 589 10,362 582 18,264 685
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Amoco OK 5,350 450 108 0.616
Bill Fenn, et al TX 2,918 47 32 0.949
Mission III TX 467 18 6 0.028
Commercial National
Bank LA -- 20 13 0.139
Richer TX 1 3 4 0.005
Sugarland OK, TX 436 40 56 0.311
Arkla TX 7 11 2 0.021
------ ----- ---- -----
9,179 589 221 2.069
------ ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1990-1, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1990-1, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1990-1, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 109,771 $ 48,238
Oil and gas sales receivable 86,103 88,112
--------------- ----------------
Total Current Assets 195,874 136,350
--------------- ----------------
Gas Imbalance Receivable 59,604 70,410
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,732,433 1,765,066
Less-Accumulated depreciation, depletion
and amortization (1,389,253) (1,316,090)
--------------- ----------------
343,180 448,976
--------------- ----------------
$ 598,658 $ 655,736
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 17,794 $ 18,908
--------------- ----------------
Deferred Revenues 72,604 82,060
Limited Partners' Capital (14,767.50 Limited Partnership Units;
$100 per unit) 489,329 528,741
General Partners' Capital 18,931 26,027
--------------- ----------------
Total Partners' Capital 508,260 554,768
--------------- ----------------
$ 598,658 $ 655,736
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 277,117 $ 322,243 $ 256,753
Interest income 3,262 1,994 763
Other 656 1,168 1,462
--------------- --------------- ---------------
281,035 325,405 258,978
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 56,137 63,194 78,363
Production taxes 17,040 18,052 15,575
Depreciation, depletion
and amortization -
Normal provision 73,163 102,295 110,573
Additional provision -- -- 121,993
General and administrative 28,407 28,384 28,837
Interest expense -- 105 3,589
--------------- --------------- ---------------
174,747 212,030 358,930
--------------- --------------- ---------------
INCOME (LOSS) $ 106,288 $ 113,375 $ (99,952)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 621,921 $ 79,192 $ 44,500 $ 745,613
Income (Loss) (84,488) 7,544 (23,008) (99,952)
Cash Distributions (73,400) (7,536) -- (80,936)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 464,033 79,200 21,492 564,725
--------------- --------------- --------------- ---------------
Income (Loss) 102,112 15,159 (3,896) 113,375
Cash Distributions (55,000) (68,332) -- (123,332)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 511,145 26,027 17,596 554,768
--------------- --------------- --------------- ---------------
Income (Loss) 95,623 12,900 (2,235) 106,288
Cash Distributions (132,800) (19,996) -- (152,796)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 473,968 $ 18,931 $ 15,361 $ 508,260
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit
1995 $ (5.72)
================
1996 $ 6.91
================
1997 $ 6.48
================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 106,288 $ 113,375 $ (99,952)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 73,163 102,295 232,566
Change in gas imbalance receivable
and deferred revenues 1,350 (3,746) 3,940
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 2,009 (12,120) 4,595
Increase (decrease) in accounts payable (1,114) (51,377) 38,136
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 181,696 148,427 179,285
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (1,903) (14,193) (48,736)
Proceeds from sales of oil and gas properties 34,536 48,322 1,000
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 32,633 34,129 (47,736)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (152,796) (123,332) (80,936)
Payments on note payable -- (12,572) (50,297)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities (152,796) (135,904) (131,233)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 61,533 46,652 316
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 48,238 1,586 1,270
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 109,771 $ 48,238 $ 1,586
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 314 $ 4,385
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1990-1, Ltd., a Texas limited partnership
("the Partnership"), was formed on April 17, 1990, for the purpose of purchasing
and operating producing oil and gas properties within the continental United
States. Swift Energy Company ("Swift"), a Texas corporation, and VJM Partners,
Ltd. ("VJM"), a Texas limited partnership, serve as Managing General Partner and
Special General Partner of the Partnership, respectively. The Managing General
Partner is required to contribute up to 1/99th of limited partner net
contributions. The 140 limited partners made total capital contributions of
$1,476,650.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the Managing General Partner.
Organization and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate (as defined in the Partnership Agreement) for a certain period
equals or exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the limited
partners and 15 percent to the general partners. After partnership payout,
revenues and continuing costs will be shared 85 percent by the limited partners,
and 15 percent by the general partners, even if the cash distribution rate is
less than 17.5 percent. During 1993 and 1992, the cash distribution rate
exceeded 17.5 percent and thus, in 1994 and 1993, the continuing costs and
revenues were shared 85 percent by the limited partners and 15 percent by the
general partners. During 1997, 1996, 1995 and 1994, the cash distribution rate
fell below 17.5 percent and thus, in 1998, 1997, 1996 and 1995 the continuing
costs and revenues will be (were) shared 90 percent by the limited partners and
10 percent by the general partners. Payout had not occurred as of December 31,
1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 1,903 14,193 48,736
-------- -------- --------
$ 1,903 $ 14,193 $ 48,736
-------- -------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1995, the Partnership's unamortized oil and gas property costs
exceeded the quarterly calculations of the "ceiling limitation" resulting in an
additional provision for depreciation, depletion and amortization of $121,993.
In addition, the limited partners' share of unamortized oil and gas property
costs exceeded their "ceiling limitation" in 1995, resulting in a valuation
allowance of $103,533. This amount is included in the income (loss) attributable
to the limited partners shown in the statement of partners' capital together
with a "combining adjustment" for the difference between the limited partners'
valuation allowance and the Partnership's full cost ceiling write down. The
"combining adjustment" changes quarterly as the Partnership's total
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to the
general and limited partners.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $36,916 for managing and overseeing the offering of limited partnership
units.
A one-time management fee of $36,916 was paid to Swift in 1990 for
services related to the evaluation of oil and gas properties and for general
services performed for the Partnership. During 1997, 1996 and 1995, the
Partnership paid Swift $22,150, $22,150 and $22,150, respectively, as a general
and administrative overhead allowance.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $183,160, $214,083 and $90,326, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
(8) 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.
13
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 101,035 $ 109,771
Oil and gas sales receivable 130,463 86,103
--------------- ----------------
Total Current Assets 231,498 195,874
--------------- ----------------
Gas Imbalance Receivable 59,600 59,604
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,673,813 1,732,433
Less-Accumulated depreciation, depletion
and amortization (1,401,235) (1,389,253)
--------------- ----------------
272,578 343,180
--------------- ----------------
$ 563,676 $ 598,658
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 16,167 $ 17,794
--------------- ----------------
Deferred Revenues 72,604 72,604
Limited Partners' Capital (14,767.50 Limited Partnership Units;
$100 per unit) 459,469 489,329
General Partners' Capital 15,436 18,931
--------------- ----------------
Total Partners' Capital 474,905 508,260
--------------- ----------------
$ 563,676 $ 598,658
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 44,095 $ 97,675
Interest income 1,442 634
Other 110 187
--------------- ---------------
45,647 98,496
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 12,072 13,274
Production taxes 2,643 5,510
Depreciation, depletion
and amortization 11,982 25,392
General and administrative 5,964 8,548
--------------- ---------------
32,661 52,724
--------------- ---------------
NET INCOME (LOSS) $ 12,986 $ 45,772
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ .88
===============
March 31, 1997 $ 3.10
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 12,986 $ 45,772
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 11,982 25,392
Change in gas imbalance receivable
and deferred revenues 4 (6,771)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable (44,360) (5,964)
Increase (decrease) in accounts payable (1,627) (3,712)
-------------- --------------
Net cash provided by (used in) operating activities (21,015) 54,717
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (4,206) (15,128)
Proceeds from sales of oil and gas properties 62,826 --
-------------- --------------
Net cash provided by (used in) investing activities 58,620 (15,128)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (46,341) (36,172)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,736) 3,417
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 109,771 48,238
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 101,035 $ 51,655
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are in the opinion
of the managing general partner necessary for a fair presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1990-1, Ltd., a Texas limited
partnership ("the Partnership"), was formed on April 17, 1990, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 140 limited partners made total capital contributions
of $1,476,650.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1993 and 1992, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1994 and 1993, the
continuing costs and revenues were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996, 1995
and 1994, the cash distribution rate fell below 17.5 percent and thus,
in 1998, 1997, 1996 and 1995, the continuing costs and revenues will be
(were) shared 90 percent by the limited partners and 10 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
received $36,916 for managing and overseeing the offering of the limited
partnership units. A one-time management fee of $36,916 was paid to
Swift for services performed for the Partnership.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
-----------------------------------------
For the Years Ended
December 31,
-----------------------------------------
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 72,421 91,601 107,244
Average Sales Price
per Equivalent MCF $2.66 $2.37 $1.71
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.73 $0.67 $0.69
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $79,500, $32,600, $55,600, $130,800 and
$173,200, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 6,134 339 7,002 333 14,589 433
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 7,979 408 16,378 485 17,927 581
Extensions, discoveries
and other additions -- -- 26 2 239 8
Revisions of previous
estimates 799 89 (4,771) 56 1,792 (18)
Sales of minerals in
place (461) (16) (1,962) (54) (1) --
Production (1,176) (65) (1,692) (81) (3,579) (86)
------- ----- ------- ----- ------- -----
Balance at end of year 7,141 416 7,979 408 16,378 485
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Amoco OK 3,515 296 108 0.404
Bill Fenn, et al TX 2,858 46 32 0.930
Mission III TX 457 18 6 0.027
Commercial National
Bank LA -- 19 13 0.136
Richer TX -- 2 4 0.003
Sugarland OK, TX 305 28 56 0.218
Arkla TX 6 7 2 0.015
------ ----- ---- -----
7,141 416 221 1.733
------ ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1990-2, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1990-2, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1990-2, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 49,115 $ 1,024
Oil and gas sales receivable 60,881 63,525
--------------- ----------------
Total Current Assets 109,996 64,549
--------------- ----------------
Gas Imbalance Receivable 39,195 47,247
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,381,086 1,407,069
Less-Accumulated depreciation, depletion
and amortization (1,135,400) (1,081,368)
--------------- ----------------
245,686 325,701
--------------- ----------------
$ 394,877 $ 437,497
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 12,498 $ 28,704
--------------- ----------------
Deferred Revenues 47,748 54,697
Limited Partners' Capital (10,265 Limited Partnership Units;
$100 per unit) 321,268 334,615
General Partners' Capital 13,363 19,481
--------------- ----------------
Total Partners' Capital 334,631 354,096
--------------- ----------------
$ 394,877 $ 437,497
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 200,470 $ 234,686 $ 198,293
Interest income 663 483 554
Other 473 934 1,092
--------------- --------------- ---------------
201,606 236,103 199,939
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 40,550 47,898 62,846
Production taxes 12,216 13,019 11,548
Depreciation, depletion
and amortization -
Normal provision 54,032 75,235 85,275
Additional provision -- -- 86,586
General and administrative 19,987 19,902 20,107
Interest expense -- 1,160 5,463
--------------- --------------- ---------------
126,785 157,214 271,825
--------------- --------------- ---------------
INCOME (LOSS) $ 74,821 $ 78,889 $ (71,886)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 405,466 $ 60,543 $ 25,547 $ 491,556
Income (Loss) (61,215) 5,144 (15,815) (71,886)
Cash Distributions (55,600) (5,838) -- (61,438)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 288,651 59,849 9,732 358,232
--------------- --------------- --------------- ---------------
Income (Loss) 71,073 10,057 (2,241) 78,889
Cash Distributions (32,600) (50,425) -- (83,025)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 327,124 19,481 7,491 354,096
--------------- --------------- --------------- ---------------
Income (Loss) 67,541 8,668 (1,388) 74,821
Cash Distributions (79,500) (14,786) -- (94,286)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 315,165 $ 13,363 $ 6,103 $ 334,631
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit
1995 $ (5.96)
===============
1996 $ 6.92
===============
1997 $ 6.58
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 74,821 $ 78,889 $ (71,886)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 54,032 75,235 171,861
Change in gas imbalance receivable
and deferred revenues 1,103 (2,320) 2,272
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 2,644 (7,218) (5,111)
Increase (decrease) in accounts payable (16,206) (87,153) 41,868
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 116,394 57,433 139,004
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties -- (12,339) (39,489)
Proceeds from sales of oil and gas properties 25,983 46,748 965
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 25,983 34,409 (38,524)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (94,286) (83,025) (61,438)
Payments on note payable -- (9,675) (38,697)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities (94,286) (92,700) (100,135)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 48,091 (858) 345
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,024 1,882 1,537
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 49,115 $ 1,024 $ 1,882
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 1,321 $ 6,075
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1990-2, Ltd., a Texas limited partnership
("the Partnership"), was formed on June 30, 1990, for the purpose of purchasing
and operating producing oil and gas properties within the continental United
States. Swift Energy Company ("Swift"), a Texas corporation, and VJM Partners,
Ltd. ("VJM"), a Texas limited partnership, serve as Managing General Partner and
Special General Partner of the Partnership, respectively. The Managing General
Partner is required to contribute up to 1/99th of limited partner net
contributions. The 78 limited partners made total capital contributions of
$1,026,500.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the Managing General Partner.
Organization and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate (as defined in the Partnership Agreement) for a certain period
equals or exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the limited
partners and 15 percent to the general partners. After partnership payout,
revenues and continuing costs will be shared 85 percent by the limited partners,
and 15 percent by the general partners, even if the cash distribution rate is
less than 17.5 percent. During 1993 and 1992, the cash distribution rate
exceeded 17.5 percent and thus, in 1994 and 1993, the continuing costs and
revenues were shared 85 percent by the limited partners and 15 percent by the
general partners. During 1997, 1996, 1995 and 1994, the cash distribution rate
fell below 17.5 percent and thus, in 1998, 1997, 1996 and 1995, the continuing
costs and revenues will be (were) shared 90 percent by the limited partners and
10 percent by the general partners. Payout had not occurred as of December 31,
1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development -- 12,339 39,489
-------- -------- --------
$ -- $ 12,339 $ 39,489
-------- -------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1995, the Partnership's unamortized oil and gas property costs
exceeded the quarterly calculations of the "ceiling limitation" resulting in an
additional provision for depreciation, depletion and amortization of $86,586. In
addition, the limited partners' share of unamortized oil and gas property costs
exceeded their "ceiling limitation" in 1995, resulting in a valuation allowance
of $73,601. This amount is included in the income (loss) attributable to the
limited partners shown in the statement of partners' capital together with a
"combining adjustment" for the difference between the limited partners'
valuation allowance and the Partnership's full cost ceiling write down. The
"combining adjustment" changes quarterly as the Partnership's total
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to
general and limited partners.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $25,663 for managing and overseeing the offering of limited partnership
units.
A one-time management fee of $25,663 was paid to Swift in 1990 for
services related to the evaluation of oil and gas properties and for general
services performed for the Partnership. During 1997, 1996 and 1995, the
Partnership paid Swift $15,398, $15,398 and $15,398, respectively, as a general
and administrative overhead allowance.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $133,671, $153,842 and $65,626, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
(8) 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.
13
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 47,012 $ 49,115
Oil and gas sales receivable 98,463 60,881
--------------- ----------------
Total Current Assets 145,475 109,996
--------------- ----------------
Gas Imbalance Receivable 39,193 39,195
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 1,332,436 1,381,086
Less-Accumulated depreciation, depletion
and amortization (1,143,770) (1,135,400)
--------------- ----------------
188,666 245,686
--------------- ----------------
$ 373,334 $ 394,877
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 11,690 $ 12,498
--------------- ----------------
Deferred Revenues 47,748 47,748
Limited Partners' Capital (10,265 Limited Partnership Units;
$100 per unit) 303,243 321,268
General Partners' Capital 10,653 13,363
--------------- ----------------
Total Partners' Capital 313,896 334,631
--------------- ----------------
$ 373,334 $ 394,877
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 31,605 $ 70,673
Interest income 735 102
Other 78 140
--------------- ---------------
32,418 70,915
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 8,809 9,742
Production taxes 1,836 3,959
Depreciation, depletion
and amortization 8,370 19,289
General and administrative 4,112 6,246
--------------- ---------------
23,127 39,236
--------------- ---------------
NET INCOME (LOSS) $ 9,291 $ 31,679
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ .91
===============
March 31, 1997 $ 3.09
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 9,291 $ 31,679
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 8,370 19,289
Change in gas imbalance receivable
and deferred revenues 2 (4,448)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable (37,582) (4,135)
Increase (decrease) in accounts payable (808) (6,042)
-------------- --------------
Net cash provided by (used in) operating activities (20,727) 36,343
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (2,986) (13,419)
Proceeds from sales of oil and gas properties 51,636 --
-------------- --------------
Net cash provided by (used in) investing activities 48,650 (13,419)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (30,026) (22,920)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,103) 4
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 49,115 1,024
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 47,012 $ 1,028
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are in the opinion
of the managing general partner necessary for a fair presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1990-2, Ltd., a Texas limited
partnership ("the Partnership"), was formed on June 30, 1990, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Partners, Ltd. ("VJM"), a Texas limited
partnership, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The Managing General Partner
is required to contribute up to 1/99th of limited partner net
contributions. The 78 limited partners made total capital contributions
of $1,026,500.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1993 and 1992, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1994 and 1993, the
continuing costs and revenues were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996, 1995
and 1994, the cash distribution rate fell below 17.5 percent and thus,
in 1998, 1997, 1996 and 1995, the continuing costs and revenues will be
(were) shared 90 percent by the limited partners and 10 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Affiliates of the Special General Partner, as Dealer Manager,
received $25,662 for managing and overseeing the offering of the limited
partnership units. A one-time management fee of $25,662 was paid to
Swift for services performed for the Partnership.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-2, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
-----------------------------------------
For the Years Ended
December 31,
-----------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 247,614 311,820 365,182
Average Sales Price
per Equivalent MCF $2.66 $2.38 $1.72
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.73 $0.66 $0.69
</TABLE>
Distributions
The Partnership generally makes distributions to Limited Partners on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $268,500, $101,300, $208,800, $459,800
and $597,600, respectively, to the Limited Partners. 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 Limited Partners can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 21,043 1,159 23,959 1,135 49,688 1,469
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 27,300 1,394 55,868 1,649 61,000 1,974
Extensions, discoveries
and other additions 1 -- 89 10 824 27
Revisions of previous
estimates 2,734 305 (16,697) 186 6,201 (59)
Sales of minerals in
place (1,469) (52) (6,251) (173) (4) (1)
Production (4,047) (223) (5,709) (278) (12,153) (292)
------- ----- ------- ----- ------- -----
Balance at end of year 24,519 1,424 27,300 1,394 55,868 1,649
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Amoco OK 12,108 1,018 111 1.393
Bill Fenn, et al TX 9,845 158 32 3.203
Mission III TX 1,576 62 6 0.094
Commercial National
Bank LA -- 65 13 0.468
Richer TX 1 7 4 0.011
Sugarland OK, TX 973 89 56 0.694
Arkla TX 16 25 2 0.047
------- ----- --- -----
24,519 1,424 224 5.910
------- ----- --- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1990-B, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income
Partners 1990-B, Ltd., (a Texas limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital and cash flows
for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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 Income
Partners 1990-B, Ltd., as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 132,431 $ 1,447
Oil and gas sales receivable 207,126 217,393
--------------- ----------------
Total Current Assets 339,557 218,840
--------------- ----------------
Gas Imbalance Receivable 134,839 162,538
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,696,100 4,780,031
Less-Accumulated depreciation, depletion
and amortization (3,850,287) (3,666,667)
--------------- ----------------
845,813 1,113,364
--------------- ----------------
$ 1,320,209 $ 1,494,742
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 42,691 $ 133,790
--------------- ----------------
Deferred Revenues 164,245 188,145
Limited Partners' Capital (34,642.06 Limited Partnership Units;
$100 per unit) 1,066,971 1,105,835
General Partners' Capital 46,302 66,972
--------------- ----------------
Total Partners' Capital 1,113,273 1,172,807
--------------- ----------------
$ 1,320,209 $ 1,494,742
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 685,687 $ 801,897 $ 679,072
Interest income 1,695 1,411 2,028
Other 1,606 3,454 3,792
--------------- --------------- ---------------
688,988 806,762 684,892
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 138,167 162,799 213,782
Production taxes 41,845 44,389 39,439
Depreciation, depletion
and amortization
Normal provision 183,620 254,375 290,190
Additional provision -- -- 293,850
General and administrative 65,680 65,743 66,581
Interest expense -- 11,606 30,939
--------------- --------------- ---------------
429,312 538,912 934,781
--------------- --------------- ---------------
INCOME (LOSS) $ 259,676 $ 267,850 $ (249,889)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Limited General Combining
Partners Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 1,362,608 $ 88,494 $ 88,223 $ 1,539,325
Income (Loss) (214,789) 18,003 (53,103) (249,889)
Cash Distributions (208,800) (33,113) -- (241,913)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 939,019 73,384 35,120 1,047,523
--------------- --------------- --------------- ---------------
Income (Loss) 240,638 34,854 (7,642) 267,850
Cash Distributions (101,300) (41,266) -- (142,566)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 1,078,357 66,972 27,478 1,172,807
--------------- --------------- --------------- ---------------
Income (Loss) 234,316 30,040 (4,680) 259,676
Cash Distributions (268,500) (50,710) -- (319,210)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 1,044,173 $ 46,302 $ 22,798 $ 1,113,273
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit
1995 $ (6.20)
================
1996 $ 6.95
================
1997 $ 6.76
================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 259,676 $ 267,850 $ (249,889)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 183,620 254,375 584,040
Change in gas imbalance receivable
and deferred revenues 3,799 (7,816) 7,789
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 10,267 (26,437) (20,163)
Increase (decrease) in accounts payable (91,099) (427,301) 175,624
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 366,263 60,671 497,401
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties -- (42,511) (135,438)
Proceeds from sales of oil and gas properties 83,931 155,434 3,313
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 83,931 112,923 (132,125)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (319,210) (142,566) (241,913)
Payments on note payable -- (30,936) (123,745)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities (319,210) (173,502) (365,658)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 130,984 92 (382)
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,447 1,355 1,737
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 132,431 $ 1,447 $ 1,355
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 12,121 $ 32,897
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1990-B, Ltd., a Texas limited partnership
("the Partnership"), was formed on June 30, 1990, for the purpose of purchasing
and operating producing oil and gas properties within the continental United
States. Swift Energy Company ("Swift"), a Texas corporation, and VJM Corporation
("VJM"), a California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The general partners are
required to contribute up to 1/99th of limited partner net contributions. The
375 limited partners made total capital contributions of $3,464,206.
Property acquisition costs and the management fee are borne 99 percent
by the limited partners and one percent by the general partners. Organization
and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, as defined, however, the cash
distribution rate (as defined in the Partnership Agreement) for a certain period
equals or exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the limited
partners and 15 percent to the general partners. After partnership payout,
continuing costs and revenues will be shared 85 percent by the limited partners,
and 15 percent by the general partners, even if the cash distribution rate is
less than 17.5 percent. During 1993 and 1992, the cash distribution rate
exceeded 17.5 percent and thus, in 1994 and 1993, the continuing costs and
revenues were shared 85 percent by the limited partners and 15 percent by the
general partners. During 1997, 1996, 1995 and 1994, the cash distribution rate
fell below 17.5 percent and thus, in 1998, 1997, 1996 and 1995, the continuing
costs and revenues will be (were) shared 90 percent by the limited partners and
10 percent by the general partners. Payout had not occurred as of December 31,
1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development -- 42,511 135,438
-------- -------- --------
$ -- $ 42,511 $ 135,438
-------- -------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1995, the Partnership's unamortized oil and gas property costs
exceeded the quarterly calculations of the "ceiling limitation" resulting in an
additional provision for depreciation, depletion and amortization of $293,850.
In addition, the limited partners' share of unamortized oil and gas property
costs exceeded their "ceiling limitation" in 1995, resulting in a valuation
allowance of $250,257. This amount is included in the income (loss) attributable
to the limited partners shown in the statement of partners' capital together
with a "combining adjustment" for the difference between the limited partners'
valuation allowance and the Partnership's full cost ceiling write down. The
"combining adjustment" changes quarterly as the Partnership's total
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to the
general and limited partners.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager,
received $86,605 for managing and overseeing the offering of limited partnership
units.
A one-time management fee of $86,605 was paid to Swift in 1990 for
services performed for the Partnership. During 1997, 1996 and 1995, the
Partnership paid Swift $51,963, $51,963 and $51,963, respectively, as a general
and administrative overhead allowance.
Effective June 30, 1990, the Partnership entered into a Net Profits and
Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Managed Pension Assets Partnership 1990-B, Ltd. ("Pension Partnership"), managed
by Swift for the purpose of acquiring working interests in producing oil and gas
properties. Under the terms of the NP/OR Agreement, the Partnership has conveyed
to the Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the limited partners
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $467,819, $530,235 and $301,687, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
12
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 125,710 $ 132,431
Oil and gas sales receivable 325,143 207,126
Other 6,169 --
--------------- ----------------
Total Current Assets 457,022 339,557
--------------- ----------------
Gas Imbalance Receivable 134,831 134,839
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,534,878 4,696,100
Less-Accumulated depreciation, depletion
and amortization (3,879,291) (3,850,287)
--------------- ----------------
655,587 845,813
--------------- ----------------
$ 1,247,440 $ 1,320,209
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 39,916 $ 42,691
--------------- ----------------
Deferred Revenues 164,245 164,245
Limited Partners' Capital (34,642.06 Limited Partnership Units;
$100 per unit) 1,006,129 1,066,971
General Partners' Capital 37,150 46,302
--------------- ----------------
Total Partners' Capital 1,043,279 1,113,273
--------------- ----------------
$ 1,247,440 $ 1,320,209
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 108,621 $ 241,552
Interest income 1,902 344
Other 267 477
--------------- ---------------
110,790 242,373
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 30,138 33,149
Production taxes 6,299 13,514
Depreciation, depletion
and amortization 29,004 64,516
General and administrative 14,019 19,573
--------------- ---------------
79,460 130,752
--------------- ---------------
NET INCOME (LOSS) $ 31,330 $ 111,621
=============== ===============
Limited Partners' net income (loss)
per unit
March 31, 1998 $ .90
==============
March 31, 1997 $ 3.22
==============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ 31,330 $ 111,621
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 29,004 64,516
Change in gas imbalance receivable
and deferred revenues 8 (15,320)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable (118,017) (13,906)
(Increase) decrease in other current assets (6,169) --
Increase (decrease) in accounts payable (2,775) (23,288)
-------------- --------------
Net cash provided by (used in) operating activities (66,619) 123,623
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (10,287) (46,248)
Proceeds from sales of oil and gas properties 171,509 --
-------------- ---------------
Net cash provided by (used in) investing activities 161,222 (46,248)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (101,324) (77,369)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,721) 6
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 132,431 1,447
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 125,710 $ 1,453
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are in the opinion
of the managing general partner necessary for a fair presentation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1990-B, Ltd., a Texas limited
partnership ("the Partnership"), was formed on June 30, 1990, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States. Swift Energy Company ("Swift"), a
Texas corporation, and VJM Corporation ("VJM"), a California
corporation, serve as Managing General Partner and Special General
Partner of the Partnership, respectively. The general partners are
required to contribute up to 1/99th of limited partner net
contributions.
The 375 limited partners made total capital contributions of $3,464,206.
Property acquisition costs and the management fee are borne 99
percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited
partners.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 90 percent to the limited partners
and ten percent to the general partners. If prior to partnership payout,
however, the cash distribution rate for a certain period equals or
exceeds 17.5 percent, then for the following calendar year, these
continuing costs and revenues will be allocated 85 percent to the
limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85
percent by the limited partners, and 15 percent by the general partners,
even if the cash distribution rate is less than 17.5 percent. During
1993 and 1992, the cash distribution rate (as defined in the Partnership
Agreement) exceeded 17.5 percent and thus, in 1994 and 1993, the
continuing costs and revenues are were shared 85 percent by the limited
partners and 15 percent by the general partners. During 1997, 1996, 1995
and 1994, the cash distribution rate fell below 17.5 percent and thus,
in 1998, 1997, 1996 and 1995, the continuing costs and revenues will be
shared 90 percent by the limited partners and 10 percent by the general
partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
6
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $86,605 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $86,605 was
paid to Swift for services performed for the Partnership.
7
<PAGE>
SWIFT ENERGY INCOME PARTNERS 1990-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Effective June 30, 1990, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Managed Pension Assets Partnership 1990-B, Ltd.
("Pension Partnership"), managed by Swift for the purpose of acquiring
working interests in producing oil and gas properties. Under terms of
the NP/OR Agreement, the Partnership has conveyed to the Pension
Partnership 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.
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 274,767 381,636 387,474
Average Sales Price
Equivalent MCF $2.55 $2.57 $1.81
Average Production Costs
per Equivalent MCf
(includes production taxes) $1.06 $0.80 $0.78
</TABLE>
Distributions
The Partnership generally makes distributions to Interest Holders on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $334,000, $245,000, $277,300, $493,200
and $723,600, respectively, to the Interest Holders. 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 Interest Holders can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- --------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 112,392 1,216 139,751 1,513 150,966 1,509
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 153,901 1,728 193,146 1,917 227,292 1,733
Extensions, discoveries
and other additions -- -- -- -- 493 16
Revisions of previous
estimates (18,632) (182) (12,730) 189 (8,189) 398
Sales of minerals in
place (805) (26) (3,878) (132) (215) --
Production (17,001) (173) (22,637) (246) (26,235) (230)
------- ----- ------- ----- ------- -----
Balance at end of year 117,463 1,347 153,901 1,728 193,146 1,917
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Prudential MS 9,445 -- 5 0.175
Hardy Oil & Gas TX 16,728 601 9 0.617
Lyne Trust TX 82,340 54 18 0.015
First Energy AL, AR, CO,
LA, MS, OK,
TX 450 39 80 0.624
Maxus WY 1,461 -- 11 0.028
Barney, et al AL, AR, CO,
LA, MS, OK,
TX 7,039 653 304 1.727
------- ----- ---- -----
117,463 1,347 427 3.186
------- ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Operating Partners 1991-C, Ltd.:
We have audited the accompanying balance sheets of Swift Energy
Operating Partners 1991-C, Ltd., (a Texas limited partnership) as of December
31, 1997 and 1996, and the related statements of operations, partners' capital
and cash flows for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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
Operating Partners 1991-C, Ltd., as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,649 $ 1,566
Oil and gas sales receivable 176,351 282,914
--------------- ----------------
Total Current Assets 178,000 284,480
--------------- ----------------
Gas Imbalance Receivable 79,419 90,350
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,109,574 5,137,153
Less-Accumulated depreciation, depletion
and amortization (3,530,952) (3,310,790)
--------------- ----------------
1,578,622 1,826,363
--------------- ----------------
$ 1,836,041 $ 2,201,193
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 69,828 $ 186,026
--------------- ----------------
Deferred Revenues 100,767 112,594
Interest Holders' Capital (4,453,469 Interest Holders' SDIs;
$1.00 per SDI) 1,604,364 1,815,565
General Partners' Capital 61,082 87,008
--------------- ----------------
Total Partners' Capital 1,665,446 1,902,573
--------------- ----------------
$ 1,836,041 $ 2,201,193
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 776,129 $ 1,119,088 $ 787,876
Interest income 985 862 982
Other 2,905 6,846 5,909
--------------- --------------- ---------------
780,019 1,126,796 794,767
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 245,692 239,898 257,807
Production taxes 45,712 64,307 45,129
Depreciation, depletion
and amortization -
Normal provision 220,162 307,285 337,795
Additional provision -- -- 315,978
General and administrative 89,452 94,550 98,779
Interest expense -- 19,892 26,487
--------------- --------------- ---------------
601,018 725,932 1,081,975
--------------- --------------- ---------------
INCOME (LOSS) $ 179,001 $ 400,864 $ (287,208)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Interest General Combining
Holders Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 2,108,012 $ 42,475 $ 271,394 $ 2,421,881
Income (Loss) (250,475) 52,803 (89,536) (287,208)
Cash Distributions (277,300) (33,636) -- (310,936)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 1,580,237 61,642 181,858 1,823,737
--------------- --------------- --------------- ---------------
Income (Loss) 278,218 102,394 20,252 400,864
Cash Distributions (245,000) (77,028) -- (322,028)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 1,613,455 87,008 202,110 1,902,573
--------------- --------------- --------------- ---------------
Income (Loss) 124,076 56,202 (1,277) 179,001
Cash Distributions (334,000) (82,128) -- (416,128)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 1,403,531 $ 61,082 $ 200,833 $ 1,665,446
=============== =============== =============== ===============
Interest Holders' net income (loss)
per SDI
1995 $ (.06)
===============
1996 $ .06
===============
1997 $ .03
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 179,001 $ 400,864 $ (287,208)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 220,162 307,285 653,773
Change in gas imbalance receivable
and deferred revenues (896) (11,974) 5,832
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 106,563 (58,159) (4,722)
Increase (decrease) in accounts payable (116,198) (386,993) 62,871
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 388,632 251,023 430,546
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (12,923) (104,449) (119,589)
Proceeds from sales of oil and gas properties 40,502 175,531 60
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 27,579 71,082 (119,529)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (416,128) (322,028) (310,936)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 83 77 81
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,566 1,489 1,408
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,649 $ 1,566 $ 1,489
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ -- $ 19,892 $ 26,487
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1991-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 30, 1991, for the
purpose of purchasing and operating 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) $512,149, 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 325 Interest Holders made total capital contributions of
$4,453,469.
Generally, all continuing costs (including development costs, operating
costs, 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, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 12,923 104,449 119,589
-------- --------- ---------
$ 12,923 $ 104,449 $ 119,589
-------- --------- ---------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1995, the Partnership's unamortized oil and gas property costs
exceeded the quarterly calculations of the "ceiling limitation" resulting in an
additional provision for depreciation, depletion and amortization of $315,978.
In addition, during 1995, the Interest Holders' share of unamortized oil and gas
property costs exceeded their "ceiling limitation", resulting in a valuation
allowance of $216,949. This amount is included in the income (loss) attributable
to the Interest Holders shown in the statements of partners' capital together
with a "combining adjustment" for the differences between the Interest Holders'
valuation allowances and the Partnership's full cost ceiling write down. The
"combining adjustment" changes quarterly as the Partnership's total
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to the
general partners and Interest Holders.
(4) Related-Party Transactions -
During 1997, 1996 and 1995, the Partnership paid Swift $66,802, $66,802
and $77,936, respectively, as a general and administrative overhead allowance.
During 1997, 1996 and 1995, the Partnership also paid Swift an
incentive amount, as defined in the Partnership Agreement, for services rendered
to the Partnership. Such amounts totaled $6,614 in 1997, $12,228 in 1996 and
$5,818 in 1995 and are included in general and administrative expenses.
Effective December 30, 1991, the Partnership entered into a Net Profits
and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Pension Partners 1991-C, Ltd. ("Pension 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 conveyed to the Pension
Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the Interest Holders
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $364,337, $772,199 and $337,274, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
12
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,657 $ 1,649
Oil and gas sales receivable 149,073 176,351
--------------- ----------------
Total Current Assets 150,730 178,000
--------------- ----------------
Gas Imbalance Receivable 79,419 79,419
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,076,560 5,109,574
Less-Accumulated depreciation, depletion
and amortization (3,575,920) (3,530,952)
--------------- ----------------
1,500,640 1,578,622
--------------- ----------------
$ 1,730,789 $ 1,836,041
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 42,945 $ 69,828
--------------- ----------------
Deferred Revenues 100,563 100,767
Interest Holders' Capital (4,453,469 Interest Holders' SDIs;
$1.00 per SDI) 1,537,707 1,604,364
General Partners' Capital 54,574 61,082
--------------- ----------------
Total Partners' Capital 1,587,281 1,665,446
--------------- ----------------
$ 1,730,789 $ 1,836,041
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 124,987 $ 265,525
Interest income 290 209
Other 387 978
--------------- ---------------
125,664 266,712
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 35,195 63,207
Production taxes 6,093 15,859
Depreciation, depletion
and amortization 44,968 76,393
General and administrative 18,068 26,922
--------------- ---------------
104,324 182,381
--------------- ---------------
NET INCOME (LOSS) $ 21,340 $ 84,331
=============== ===============
Limited Partners' net income (loss)
per SDI
March 31, 1998 $ --
==============
March 31, 1997 $ .02
==============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 21,340 $ 84,331
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 44,968 76,393
Change in gas imbalance receivable
and deferred revenues (204) (9,152)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 27,278 31,360
Increase (decrease) in accounts payable (26,883) (58,149)
-------------- --------------
Net cash provided by (used in) operating activities 66,499 124,783
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (13,142) (10,283)
Proceeds from sales oil and gas properties 46,156 --
-------------- --------------
Net cash provided by (used in) investing activities 33,014 (10,283)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (99,505) (114,493)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8 7
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,649 1,566
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,657 $ 1,573
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1991-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 30, 1991, for
the purpose of purchasing and operating 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 interest
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) 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 325 Interest Holders made total capital
contributions of $4,453,469.
Generally, all continuing costs (including development costs,
operating costs, 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.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective December 30, 1991, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1991-C, Ltd. ("Pension
Partnership"), an affiliated 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 conveyed to
the Pension Partnership 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 the Pension Partnership's proportionate
share of the property acquisition costs.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1991-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
------ ------- --------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 273,887 367,713 438,317
Average Sales Price
price per Equivalent MCF $2.51 $2.47 $1.72
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.96 $0.79 $0.72
</TABLE>
Distributions
The Partnership generally makes distributions to Interest Holders on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $452,400, $407,200, $399,000, $672,800
and $875,800, respectively, to the Interest Holders. 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 Interest Holders can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997 ,1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- --------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 17,520 1,110 55,364 1,075 83,362 1,401
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 60,229 1,324 89,013 1,496 200,931 1,785
Extensions, discoveries
and other additions -- -- -- -- 971 32
Revisions of previous
estimates (27,806) 246 (8,354) 167 (84,780) (51)
Sales of minerals in
place (1,587) (52) (2,347) (80) (130) --
Production (11,362) (206) (18,083) (259) (27,979) (270)
------- ----- ------- ----- ------- -----
Balance at end of year 19,474 1,312 60,229 1,324 89,013 1,496
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Maxus WY 5,326 -- 11 0.103
Barney, et al AL, AR, CO,
LA, MS, OK,
TX 14,148 1,312 304 3.404
------- ----- ---- -----
19,474 1,312 315 3.507
------- ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Operating Partners 1992-A, Ltd.:
We have audited the accompanying balance sheets of Swift Energy
Operating Partners 1992-A, Ltd., (a Texas limited partnership) as of December
31, 1997 and 1996, and the related statements of operations, partners' capital
and cash flows for the years ended December 31, 1997, 1996, and 1995. 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 generally accepted auditing
standards. 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
Operating Partners 1992-A, Ltd., as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 110,328 $ 168,316
Oil and gas sales receivable 217,520 262,338
Other 5,100 --
--------------- ----------------
Total Current Assets 332,948 430,654
--------------- ----------------
Gas Imbalance Receivable 157,041 178,587
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,967,181 5,012,598
Less-Accumulated depreciation, depletion
and amortization (3,893,374) (3,660,301)
--------------- ----------------
1,073,807 1,352,297
--------------- ----------------
$ 1,563,796 $ 1,961,538
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 75,509 $ 69,779
--------------- ----------------
Deferred Revenues 194,680 215,408
Interest Holders' Capital (4,639,621 Interest Holders' SDIs;
$1.00 per SDI) 1,255,347 1,619,935
General Partners' Capital 38,260 56,416
--------------- ----------------
Total Partners' Capital 1,293,607 1,676,351
--------------- ----------------
$ 1,563,796 $ 1,961,538
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 719,828 $ 983,610 $ 813,764
Interest income 4,578 2,046 3,281
Other 8,261 20,420 17,350
--------------- --------------- ---------------
732,667 1,006,076 834,395
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 221,276 233,823 264,331
Production taxes 42,951 55,941 50,283
Depreciation, depletion
and amortization
Normal provision 233,073 330,090 352,641
Additional provision -- -- 366,069
General and administrative 93,145 96,524 104,117
--------------- --------------- ---------------
590,445 716,378 1,137,441
--------------- --------------- ---------------
INCOME (LOSS) $ 142,222 $ 289,698 $ (303,046)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Interest General Combining
Holders Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 2,368,775 $ 42,511 $ 216,585 $ 2,627,871
Income (Loss) (273,392) 57,606 (87,260) (303,046)
Cash Distributions (399,000) (51,938) -- (450,938)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 1,696,383 48,179 129,325 1,873,887
--------------- --------------- --------------- ---------------
Income (Loss) 197,951 88,271 3,476 289,698
Cash Distributions (407,200) (80,034) -- (487,234)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 1,487,134 56,416 132,801 1,676,351
--------------- --------------- --------------- ---------------
Income (Loss) 98,707 54,410 (10,895) 142,222
Cash Distributions (452,400) (72,566) -- (524,966)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 1,133,441 $ 38,260 $ 121,906 $ 1,293,607
=============== =============== =============== ===============
Interest Holders' net income (loss)
per SDI
1995 $ (.06)
================
1996 $ .04
================
1997 $ .02
================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 142,222 $ 289,698 $ (303,046)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 233,073 330,090 718,710
Change in gas imbalance receivable
and deferred revenues 818 (12,063) 10,212
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 44,818 (29,824) 54,667
(Increase) decrease in other current assets (5,100) -- --
Increase (decrease) in accounts payable 5,730 (30,407) 4,447
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 421,561 547,494 484,990
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (19,236) (18,104) (86,538)
Proceeds from sales of oil and gas properties 64,653 111,958 326
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 45,417 93,854 (86,212)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (524,966) (487,234) (450,938)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (57,988) 154,114 (52,160)
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 168,316 14,202 66,362
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 110,328 $ 168,316 $ 14,202
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1992-A, Ltd., a Texas limited
partnership ("the Partnership"), was formed on March 31, 1992, for the purpose
of purchasing and operating 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) $545,155, 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 366 Interest Holders made total capital contributions of
$4,639,621.
Generally, all continuing costs (including development costs, operating
costs, 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, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 19,236 18,104 86,538
-------- -------- --------
$ 19,236 $ 18,104 $ 86,538
-------- -------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1995, the Partnership's unamortized oil and gas property costs
exceeded the quarterly calculations of the "ceiling limitation" resulting in an
additional provision for depreciation, depletion and amortization of $366,069.
In addition, during 1995, the Interest Holders' share of unamortized oil and gas
property costs exceeded their "ceiling limitation", resulting in a valuation
allowance of $275,136. This amount is included in the income (loss) attributable
to the Interest Holders shown in the statements of partners' capital together
with a "combining adjustment" for the differences between the Interst Holders'
valuation allowances 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 combined amortization provision attributable to
the general partners and Interest Holders.
(4) Related-Party Transactions -
During 1997, 1996 and 1995, the Partnership paid Swift $69,594, $69,594
and $81,193, respectively, as a general and administrative overhead allowance.
During 1997, 1996 and 1995, the Partnership also paid Swift an
incentive amount, as defined in the Partnership Agreement, for services rendered
to the Partnership. Such amounts totaled $6,664 in 1997, $10,353 in 1996 and
$6,501 in 1995 and are included in general and administrative expenses.
Effective March 31, 1992, the Partnership entered into a Net Profits
and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Pension Partners 1992-A, Ltd. ("Pension 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 conveyed to the Pension
Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the Interest Holders
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995,
was $333,900, $596,912 and $357,002, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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.
12
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 47,629 $ 110,328
Oil and gas sales receivable 267,036 217,520
Other 6,252 5,100
--------------- ----------------
Total Current Assets 320,917 332,948
--------------- ----------------
Gas Imbalance Receivable 157,041 157,041
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,886,132 4,967,181
Less-Accumulated depreciation, depletion
and amortization (3,941,861) (3,893,374)
--------------- ----------------
944,271 1,073,807
--------------- ----------------
$ 1,422,229 $ 1,563,796
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 55,507 $ 75,509
--------------- ----------------
Deferred Revenues 194,680 194,680
Interest Holders' Capital (4,639,621 Interest Holders' SDIs;
$1.00 per SDI) 1,144,012 1,255,347
General Partners' Capital 28,030 38,260
--------------- ----------------
Total Partners' Capital 1,172,042 1,293,607
--------------- ----------------
$ 1,422,229 $ 1,563,796
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 106,619 $ 265,605
Interest income 1,192 1,663
Other 1,193 2,830
--------------- ---------------
109,004 270,098
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 42,461 55,109
Production taxes 5,921 14,357
Depreciation, depletion
and amortization 48,487 82,985
General and administrative 19,132 25,202
--------------- ---------------
116,001 177,653
--------------- ---------------
NET INCOME (LOSS) $ (6,997) $ 92,445
=============== ===============
Limited Partners' net income (loss)
per SDI
March 31, 1998 $ --
==============
March 31, 1997 $ .02
==============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (6,997) $ 92,445
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 48,487 82,985
Change in gas imbalance receivable
and deferred revenues -- (18,038)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable (49,516) (38,987)
(Increase) decrease in other current assets (1,152) --
Increase (decrease) in accounts payable (20,002) 3,454
-------------- --------------
Net cash provided by (used in) operating activities (29,180) 121,859
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (10,716) (15,769)
Proceeds from sales of oil and gas properties 91,765 --
-------------- --------------
Net cash provided by (used in) investing activities 81,049 (15,769)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (114,568) (155,011)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (62,699) (48,921)
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 110,328 168,316
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 47,629 $ 119,395
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1992-A, Ltd., a Texas limited
partnership ("the Partnership"), was formed on March 31, 1992, for the
purpose of purchasing and operating 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 interest
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) 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 366 Interest Holders made total capital
contributions of $4,639,621.
Generally, all continuing costs (including development costs,
operating costs, 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.
(3) Significant Accounting Policies -
Use of Estimates -
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion, and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different form the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective March 31, 1992, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Pension Partners 1992-A, Ltd. ("Pension Partnership"),
an affiliated 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 conveyed to the Pension Partnership
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 the Pension Partnership's proportionate share of the property
acquisition costs.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 229,128 221,950 265,695
Average Sales Price
price per Equivalent MCF $2.82 $2.85 $1.98
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.70 $0.89 $0.86
</TABLE>
Distributions
The Partnership generally makes distributions to Interest Holders on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $304,500, $255,700, $283,900, $488,100
and $218,700, respectively, to the Interest Holders. 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 Interest Holders can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 40,295 694 48,888 1,049 45,439 918
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 69,225 1,655 93,537 1,920 115,104 2,359
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates 3,873 (267) (8,624) (50) (3,891) (263)
Sales of minerals in
place (3,560) (6) (4,779) (59) (2,205) (3)
Production (11,980) (157) (10,909) (156) (15,471) (173)
------- ----- ------- ----- ------- -----
Balance at end of year 57,558 1,225 69,225 1,655 93,537 1,920
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
American Cometra AL, CO, LA,
ND, NM, NV,
OK, TX, WY 30,169 86 793 5.036
AMC - So. Louisiana LA 14,708 1,100 49 0.590
Genesis TX 5,087 31 15 0.127
Camterra MS 7,594 8 19 0.241
------- ----- ---- -----
57,558 1,225 876 5.994
------- ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Operating Partners 1992-D, Ltd.:
We have audited the accompanying balance sheets of Swift Energy
Operating Partners 1992-D, Ltd., (a Texas limited partnership) as of December
31, 1997 and 1996, and the related statements of operations, partners' capital
and cash flows for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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
Operating Partners 1992-D, Ltd., as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 51,891 $ 70,301
Oil and gas sales receivable 143,153 187,651
--------------- ----------------
Total Current Assets 195,044 257,952
--------------- ----------------
Gas Imbalance Receivable 16,525 16,732
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 3,460,820 3,359,095
Less-Accumulated depreciation, depletion
and amortization (1,784,011) (1,543,878)
--------------- ----------------
1,676,809 1,815,217
--------------- ----------------
$ 1,888,378 $ 2,089,901
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 40,921 $ 62,931
--------------- ----------------
Deferred Revenues 17,983 17,983
Interest Holders' Capital (3,431,267 Interest Holders' SDIs;
$1.00 per SDI) 1,801,799 1,987,080
General Partners' Capital 27,675 21,907
--------------- ----------------
Total Partners' Capital 1,829,474 2,008,987
--------------- ----------------
$ 1,888,378 $ 2,089,901
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 646,666 $ 633,568 $ 527,687
Interest income 1,146 2,620 5,137
Other 4,033 10,749 8,532
--------------- --------------- ---------------
651,845 646,937 541,356
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 128,483 163,496 193,483
Production taxes 32,825 33,400 35,232
Depreciation, depletion
and amortization -
Normal provision 240,133 226,188 245,656
Additional provision -- 340,310 76,592
General and administrative 70,921 70,712 76,538
--------------- --------------- ---------------
472,362 834,106 627,501
--------------- --------------- ---------------
INCOME (LOSS) $ 179,483 $ (187,169) $ (86,145)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Interest General Combining
Holders Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 2,515,513 $ 16,416 $ 376,109 $ 2,908,038
Income (Loss) (97,110) 35,315 (24,350) (86,145)
Cash Distributions (283,900) (39,949) -- (323,849)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 2,134,503 11,782 351,759 2,498,044
--------------- --------------- --------------- ---------------
Income (Loss) (132,093) 56,313 (111,389) (187,169)
Cash Distributions (255,700) (46,188) -- (301,888)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 1,746,710 21,907 240,370 2,008,987
--------------- --------------- --------------- ---------------
Income (Loss) 113,078 60,264 6,141 179,483
Cash Distributions (304,500) (54,496) -- (358,996)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 1,555,288 $ 27,675 $ 246,511 $ 1,829,474
=============== =============== =============== ===============
Interest Holders' net income (loss)
per SDI
1995 $ (.03)
===============
1996 $ (.04)
===============
1997 $ .03
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 179,483 $ (187,169) $ (86,145)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 240,133 566,498 322,248
Change in gas imbalance receivable
and deferred revenues 207 1,784 (533)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 44,498 (35,088) 50,924
Increase (decrease) in accounts payable (22,010) (3,684) (5,173)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 442,311 342,341 281,321
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (132,596) (135,409) (21,532)
Proceeds from sales of oil and gas properties 30,871 66,660 11,216
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (101,725) (68,749) (10,316)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (358,996) (301,888) (323,849)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (18,410) (28,296) (52,844)
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 70,301 98,597 151,441
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 51,891 $ 70,301 $ 98,597
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1992-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 28, 1992, for the
purpose of purchasing and operating 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) $446,065, 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 290 Interest Holders made total capital contributions of
$3,431,267.
Generally, all continuing costs (including development costs, operating
costs, 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, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1997 1996 1995
------- ------- ---------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 132,596 135,409 21,532
------- ------- ---------
$ 132,596 $ 135,409 $ 21,532
------- ------- ---------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1996 and 1995, the Partnership's unamortized oil and gas
property costs exceeded the quarterly calculations of the "ceiling limitation"
resulting in an additional provision for depreciation, depletion and
amortization of $340,310 and $76,592, respectively. In addition, the Interest
Holders' share of unamortized oil and gas property costs exceeded their "ceiling
limitation" in 1996 and 1995, resulting in a valuation allowance of $223,265 and
$46,773, respectively. These amounts are 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
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to the
general partners and Interest Holders.
(4) Related-Party Transactions -
During 1997, 1996 and 1995, the Partnership paid Swift $51,469, $51,469
and $60,047, respectively, as a general and administrative overhead allowance.
During 1997, 1996 and 1995, the Partnership also paid Swift an
incentive amount, as defined in the Partnership Agreement, for services rendered
to the Partnership. Such amounts totaled $6,518 in 1997, $6,459 in 1996 and
$4,048 in 1995 and are included in general and administrative expenses.
Effective December 28, 1992, the Partnership entered into a Net Profits
and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Pension Partners 1992-D, Ltd. ("Pension 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 conveyed to the Pension
Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the Interest Holders
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $362,453, $483,125 and $187,746, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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.
12
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,041 $ 51,891
Oil and gas sales receivable 100,480 143,153
--------------- ----------------
Total Current Assets 101,521 195,044
--------------- ----------------
Gas Imbalance Receivable 16,525 16,525
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 3,476,194 3,460,820
Less-Accumulated depreciation, depletion
and amortization (1,818,300) (1,784,011)
--------------- ----------------
1,657,894 1,676,809
--------------- ----------------
$ 1,775,940 $ 1,888,378
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 47,759 $ 40,921
--------------- ----------------
Deferred Revenues 17,983 17,983
Interest Holders' Capital (3,431,267 Interest Holders' SDIs;
$1.00 per SDI) 1,696,956 1,801,799
General Partners' Capital 13,242 27,675
--------------- ----------------
Total Partners' Capital 1,710,198 1,829,474
--------------- ----------------
$ 1,775,940 $ 1,888,378
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 48,147 $ 247,040
Interest income 208 380
Other 626 1,526
--------------- ---------------
48,981 248,946
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 35,165 40,802
Production taxes 548 13,942
Depreciation, depletion
and amortization 34,289 75,767
General and administrative 12,912 17,490
--------------- ---------------
82,914 148,001
--------------- ---------------
NET INCOME (LOSS) $ (33,933) $ 100,945
=============== ===============
Limited Partners' net income (loss)
per SDI
March 31, 1998 $ (.01)
===============
March 31, 1997 $ .03
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (33,933) $ 100,945
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 34,289 75,767
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 42,673 (45,827)
Increase (decrease) in accounts payable 6,838 (9,627)
-------------- --------------
Net cash provided by (used in) operating activities 49,867 121,258
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (16,950) (35,568)
Proceeds from sales of oil and gas properties 1,576 --
-------------- --------------
Net cash provided by (used in) investing activities (15,374) (35,568)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (85,343) (101,998)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (50,850) (16,308)
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 51,891 70,301
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,041 $ 53,993
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1992-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 28, 1992, for
the purpose of purchasing and operating 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 interest
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) 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 290 Interest Holders made total capital contributions of $3,431,267.
Generally, all continuing costs (including development costs,
operating costs, 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.
(3) Significant Accounting Policies -
Use of Estimates -
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion, and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different form the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective December 28, 1992, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1992-D, Ltd. ("Pension
Partnership"), an affiliated 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 conveyed to
the Pension Partnership 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 the Pension Partnership's proportionate
share of the property acquisition costs.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1992-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(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
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 331,724 307,443 341,381
Average Sales Price
price per Equivalent MCF $2.78 $2.83 $1.97
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.78 $0.93 $1.09
</TABLE>
Distributions
The Partnership generally makes distributions to Interest Holders on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $350,700, $272,900, $326,700, $534,900
and $109,600, respectively, to the Interest Holders. 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 Interest Holders can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 57,024 999 73,044 1,485 75,882 1,230
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 126,680 2,336 160,610 2,646 217,408 3,232
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates 8,030 (354) (10,494) (76) (31,220) (393)
Sales of minerals in
place (4,843) (9) (5,975) (31) (680) (1)
Production (18,262) (222) (17,461) (203) (24,898) (192)
------- ----- ------- ----- ------- -----
Balance at end of year 111,605 1,751 126,680 2,336 160,610 2,646
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas ------------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ --------
<S> <C> <C> <C> <C> <C>
American Cometra AL, CO, LA,
ND, NM, NV,
OK, TX, WY 9,299 27 793 1.553
AMC - So. Louisiana LA 20,463 1,531 49 0.821
Genesis TX 14,919 91 15 0.372
L L & E AL, MS 46,488 82 19 0.281
Camterra MS 20,436 20 19 0.648
------- ----- ---- -----
111,605 1,751 895 3.675
------- ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Operating Partners 1993-A, Ltd.:
We have audited the accompanying balance sheets of Swift Energy
Operating Partners 1993-A, Ltd., (a Texas limited partnership) as of December
31, 1997 and 1996, and the related statements of operations, partners' capital
and cash flows for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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
Operating Partners 1993-A, Ltd., as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 3,334 $ 1,319
Oil and gas sales receivable 222,953 216,634
--------------- ----------------
Total Current Assets 226,287 217,953
--------------- ----------------
Gas Imbalance Receivable 20,677 20,741
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,646,076 4,502,247
Less-Accumulated depreciation, depletion
and amortization (2,258,584) (1,921,583)
--------------- ----------------
2,387,492 2,580,664
--------------- ----------------
$ 2,634,456 $ 2,819,358
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 74,703 $ 89,190
--------------- ----------------
Deferred Revenues 24,984 24,984
Interest Holders' Capital (4,384,150 Interest Holders' SDIs;
$1.00 per SDI) 2,463,364 2,650,818
General Partners' Capital 71,405 54,366
--------------- ----------------
Total Partners' Capital 2,534,769 2,705,184
--------------- ----------------
$ 2,634,456 $ 2,819,358
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 926,488 $ 869,463 $ 674,073
Interest income 70 65 1,449
Other 3,771 16,136 5,844
--------------- --------------- ---------------
930,329 885,664 681,366
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 208,325 237,697 325,106
Production taxes 49,614 48,309 46,426
Depreciation, depletion
and amortization -
Normal provision 337,001 317,124 314,373
Additional provision -- 711,212 --
General and administrative 90,704 90,144 79,428
--------------- --------------- ---------------
685,644 1,404,486 765,333
--------------- --------------- ---------------
INCOME (LOSS) $ 244,685 $ (518,822) $ (83,967)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Interest General Combining
Holders Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 3,454,333 $ 17,931 $ 506,149 $ 3,978,413
Income (Loss) (143,042) 33,284 25,791 (83,967)
Cash Distributions (326,700) (27,866) -- (354,566)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 2,984,591 23,349 531,940 3,539,880
--------------- --------------- --------------- ---------------
Income (Loss) (414,653) 73,991 (178,160) (518,822)
Cash Distributions (272,900) (42,974) -- (315,874)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 2,297,038 54,366 353,780 2,705,184
--------------- --------------- --------------- ---------------
Income (Loss) 150,992 81,439 12,254 244,685
Cash Distributions (350,700) (64,400) -- (415,100)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 2,097,330 $ 71,405 $ 366,034 $ 2,534,769
=============== =============== =============== ===============
Interest Holders' net income (loss)
per SDI
1995 $ (.03)
===============
1996 $ (.09)
===============
1997 $ .03
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 244,685 $ (518,822) $ (83,967)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 337,001 1,028,336 314,373
Change in gas imbalance receivable
and deferred revenues 64 2,536 1,707
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable (6,319) (46,991) 89,127
Increase (decrease) in accounts payable (14,487) (4,660) (16,643)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 560,944 460,399 304,597
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (195,294) (204,035) (102,582)
Proceeds from sales of oil and gas properties 51,465 59,574 8,213
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (143,829) (144,461) (94,369)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (415,100) (315,874) (354,566)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,015 64 (144,338)
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,319 1,255 145,593
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,334 $ 1,319 $ 1,255
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1993-A, Ltd., a Texas limited
partnership ("the Partnership"), was formed on March 31, 1993, for the purpose
of purchasing and operating 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) $569,940, 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 333 Interest Holders made total capital contributions of
$4,384,150.
Generally, all continuing costs (including development costs, operating
costs, 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, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1997 1996 1995
------- ------- ---------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 195,294 204,035 102,582
------- ------- ---------
$ 195,294 $ 204,035 $ 102,582
------- ------- ---------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1996, the Partnership's unamortized oil and gas property costs
exceeded the quarterly calculations of the "ceiling limitation" resulting in an
additional provision for depreciation, depletion and amortization of $711,212.
In addition, the Interest Holders' share of unamortized oil and gas property
costs exceeded their "ceiling limitation" in 1996 and 1995, resulting in a
valuation allowance of $521,784 and $13,944, respectively. These amounts are
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 allowances and the
Partnership's full cost ceiling write down. The "combining adjustment" changes
quarterly as the Partnership's total depreciation, depletion and amortization
provision is more or less than the combined depreciation, depletion and
amortization provision attributable to the general partners and Interest
Holders.
(4) Related-Party Transactions -
During 1997, 1996 and 1995, the Partnership paid Swift $65,762, $65,762
and $63,210, respectively, as a general and administrative overhead allowance.
During 1997, 1996 and 1995, the Partnership also paid Swift an
incentive amount, as defined in the Partnership Agreement, for services rendered
to the Partnership. Such amounts totaled $9,048 in 1997, $8,240 in 1996 and
$3,976 in 1995 and are included in general and administrative expenses.
Effective March 31, 1993, the Partnership entered into a Net Profits
and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Pension Partners 1993-A, Ltd. ("Pension 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 conveyed to the Pension
Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the Interest Holders
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $486,252, $578,089 and $199,880, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
12
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,007 $ 3,334
Oil and gas sales receivable 94,473 222,953
--------------- ----------------
Total Current Assets 95,480 226,287
--------------- ----------------
Gas Imbalance Receivable 20,677 20,677
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,669,685 4,646,076
Less-Accumulated depreciation, depletion
and amortization (2,311,780) (2,258,584)
--------------- ----------------
2,357,905 2,387,492
--------------- ----------------
$ 2,474,062 $ 2,634,456
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 59,649 $ 74,703
--------------- ----------------
Deferred Revenues 24,984 24,984
Interest Holders' Capital (4,384,150 Interest Holders' SDIs;
$1.00 per SDI) 2,336,410 2,463,364
General Partners' Capital 53,019 71,405
--------------- ----------------
Total Partners' Capital 2,389,429 2,534,769
--------------- ----------------
$ 2,474,062 $ 2,634,456
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 77,101 $ 341,582
Interest income 7 6
Other 628 2,327
--------------- ---------------
77,736 343,915
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 43,754 67,195
Production taxes 1,593 19,920
Depreciation, depletion
and amortization 53,196 103,176
General and administrative 16,613 22,797
--------------- ---------------
115,156 213,088
--------------- ---------------
NET INCOME (LOSS) $ (37,420) $ 130,827
=============== ===============
Limited Partners' net income (loss)
per SDI
March 31, 1998 $ (.01)
===============
March 31, 1997 $ .03
===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (37,420) $ 130,827
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 53,196 103,176
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 128,480 (71,223)
Increase (decrease) in accounts payable (15,054) (2,753)
-------------- --------------
Net cash provided by (used in) operating activities 129,202 160,027
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (24,274) (46,083)
Proceeds from sales of oil and gas properties 665 --
-------------- --------------
Net cash provided by (used in) investing activities (23,609) (46,083)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (107,920) (113,938)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,327) 6
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,334 1,319
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,007 $ 1,325
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1993-A, Ltd., a Texas limited
partnership ("the Partnership"), was formed on March 31, 1993, for the
purpose of purchasing and operating 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 interest
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) 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 333 Interest Holders made total capital
contributions of $4,384,150.
Generally, all continuing costs (including development costs,
operating costs, 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.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective March 31, 1993, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Pension Partners 1993-A, Ltd. ("Pension Partnership"),
an affiliated 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 conveyed to the Pension Partnership
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 the Pension Partnership's proportionate share of the property
acquisition costs.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Company's revenues are primarily the result of sales of
its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
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
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 359,411 372,962 483,922
Average Sales Price
price per Equivalent MCF $2.78 $2.86 $2.00
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.86 $1.01 $0.99
</TABLE>
Distributions
The Partnership generally makes distributions to Interest Holders on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $493,800, $401,000, $483,800, $748,100
and $0, respectively, to the Interest Holders. 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 Interest Holders can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 80,971 911 101,780 1,342 113,011 1,281
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 153,206 1,956 204,139 2,333 257,549 3,061
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates 10,683 (271) (19,075) (21) (17,725) (426)
Sales of minerals in
place (11,248) (20) (8,683) (122) (4,397) (6)
Production (22,342) (225) (23,175) (234) (31,288) (296)
------- ----- ------- ----- ------- -----
Balance at end of year 130,299 1,440 153,206 1,956 204,139 2,333
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas ------------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
American Cometra AL, CO, LA,
ND, NM, NV,
OK, TX, WY 60,168 172 793 10.043
AMC - So. Louisiana LA 14,901 1,115 49 0.598
Genesis TX 14,901 91 15 0.371
L L & E AL, MS 28,905 51 19 0.175
Camterra MS 11,424 11 19 0.362
------- ----- ---- -----
130,299 1,440 895 11.549
------- ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Operating Partners 1993-C, Ltd.:
We have audited the accompanying balance sheets of Swift Energy
Operating Partners 1993-C, Ltd., (a Texas limited partnership) as of December
31, 1997 and 1996, and the related statements of operations, partners' capital
and cash flows for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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
Operating Partners 1993-C, Ltd., as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 108,137 $ 171,415
Oil and gas sales receivable 306,015 287,696
--------------- ----------------
Total Current Assets 414,152 459,111
--------------- ----------------
Gas Imbalance Receivable 18,839 19,252
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,800,890 5,746,045
Less-Accumulated depreciation, depletion
and amortization (3,432,630) (2,987,389)
--------------- ----------------
2,368,260 2,758,656
--------------- ----------------
$ 2,801,251 $ 3,237,019
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 104,625 $ 104,625
--------------- ----------------
Deferred Revenues 18,247 18,247
Interest Holders' Capital (5,810,456 Interest Holders' SDIs;
$1.00 per SDI) 2,652,469 3,088,110
General Partners' Capital 25,910 26,037
--------------- ----------------
Total Partners' Capital 2,678,379 3,114,147
--------------- ----------------
$ 2,801,251 $ 3,237,019
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 1,002,406 $ 1,066,158 $ 970,103
Interest income 3,098 5,341 7,733
Other 9,269 22,633 17,599
--------------- --------------- ---------------
1,014,773 1,094,132 995,435
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 252,319 312,989 413,443
Production taxes 56,772 63,259 64,881
Depreciation, depletion
and amortization -
Normal provision 410,105 413,260 471,767
Additional provision 35,136 470,529 --
General and administrative 118,038 118,412 126,209
--------------- --------------- ---------------
872,370 1,378,449 1,076,300
--------------- --------------- ---------------
INCOME (LOSS) $ 142,403 $ (284,317) $ (80,865)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Interest General Combining
Holders Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 3,906,271 $ 25,933 $ 577,481 $ 4,509,685
Income (Loss) (143,626) 57,278 5,483 (80,865)
Cash Distributions (483,800) (67,398) -- (551,198)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 3,278,845 15,813 582,964 3,877,622
--------------- --------------- --------------- ---------------
Income (Loss) (188,436) 88,382 (184,263) (284,317)
Cash Distributions (401,000) (78,158) -- (479,158)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 2,689,409 26,037 398,701 3,114,147
--------------- --------------- --------------- ---------------
Income (Loss) 89,924 84,244 (31,765) 142,403
Cash Distributions (493,800) (84,371) -- (578,171)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 2,285,533 $ 25,910 $ 366,936 $ 2,678,379
=============== =============== =============== ===============
Interest Holders' net income (loss)
per SDI
1995 $ (.02)
===============
1996 $ (.03)
===============
1997 $ .02
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 142,403 $ (284,317) $ (80,865)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 445,241 883,789 471,767
Change in gas imbalance receivable
and deferred revenues 413 4,795 (5,800)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable (18,319) (18,715) 64,103
Increase (decrease) in accounts payable -- (23,584) (15,909)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 569,738 561,968 433,296
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (162,864) (162,448) (116,822)
Proceeds from sales of oil and gas properties 108,019 130,669 21,390
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (54,845) (31,779) (95,432)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (578,171) (479,158) (551,198)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (63,278) 51,031 (213,334)
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 171,415 120,384 333,718
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 108,137 $ 171,415 $ 120,384
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1993-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1993, for the
purpose of purchasing and operating 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) $755,359, 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 434 Interest Holders made total capital contributions of
$5,810,456.
Generally, all continuing costs (including development costs, operating
costs, 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, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1997 1996 1995
------- ------- ---------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 162,864 162,448 116,822
------- ------- ---------
$ 162,864 $ 162,448 $ 116,822
------- ------- ---------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1997 and 1996, the Partnership's unamortized oil and gas
property costs exceeded the quarterly calculations of the "ceiling limitation"
resulting in an additioinal provision for depreciation, depletion and
amortization of $35,136 and $470,529, respectively. In addition, the Interest
Holders' share of unamortized oil and gas property costs exceeded their "ceiling
limitation" in 1996, resulting in a valuation allowance of $280,931. 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 depreciation, depletion and amortization
provision is more or less than the combined depreciation, depletion and
amortization provision attributable to the general partners and Interest
Holders.
(4) Related-Party Transactions -
During 1997, 1996 and 1995, the Partnership paid Swift $87,157, $87,157
and $101,683, respectively, as a general and administrative overhead allowance.
During 1997, 1996 and 1995, the Partnership also paid Swift an
incentive amount, as defined in the Partnership Agreement, for services rendered
to the Partnership. Such amounts totaled $10,171 in 1997, $10,607 in 1996, and
$6,731 in 1995 and are included in general and administrative expenses.
Effective September 30, 1993, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift
Energy Pension Partners 1993-C, Ltd. ("Pension 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 conveyed to the
Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the Interest Holders
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $504,103, $617,010 and $319,518, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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.
12
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
The Partnership extends credit to various companies in the oil and gas
industry which results in a concentration of credit risk. This concentration of
credit risk may be affected by changes in economic or other conditions and may
accordingly impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size, reputation, and
nature of the companies to which the Partnership extends credit. In addition,
the Partnership generally does not require collateral or other security to
support customer receivables.
(8) 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.
13
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 359,411 372,962 483,922
Average Sales Price
price per Equivalent MCF $2.78 $2.86 $2.00
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.86 $1.01 $0.99
</TABLE>
Distributions
The Partnership generally makes distributions to Interest Holders on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $493,800, $401,000, $483,800, $748,100
and $0, respectively, to the Interest Holders. 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 Interest Holders can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 80,971 911 101,780 1,342 113,011 1,281
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 153,206 1,956 204,139 2,333 257,549 3,061
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates 10,683 (271) (19,075) (21) (17,725) (426)
Sales of minerals in
place (11,248) (20) (8,683) (122) (4,397) (6)
Production (22,342) (225) (23,175) (234) (31,288) (296)
------- ----- ------- ----- ------- -----
Balance at end of year 130,299 1,440 153,206 1,956 204,139 2,333
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas ------------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
American Cometra AL, CO, LA,
ND, NM, NV,
OK, TX, WY 60,168 172 793 10.043
AMC - So. Louisiana LA 14,901 1,115 49 0.598
Genesis TX 14,901 91 15 0.371
L L & E AL, MS 28,905 51 19 0.175
Camterra MS 11,424 11 19 0.362
------- ----- ---- -----
130,299 1,440 895 11.549
------- ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Operating Partners 1993-C, Ltd.:
We have audited the accompanying balance sheets of Swift Energy
Operating Partners 1993-C, Ltd., (a Texas limited partnership) as of December
31, 1997 and 1996, and the related statements of operations, partners' capital
and cash flows for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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
Operating Partners 1993-C, Ltd., as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 108,137 $ 171,415
Oil and gas sales receivable 306,015 287,696
--------------- ----------------
Total Current Assets 414,152 459,111
--------------- ----------------
Gas Imbalance Receivable 18,839 19,252
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,800,890 5,746,045
Less-Accumulated depreciation, depletion
and amortization (3,432,630) (2,987,389)
--------------- ----------------
2,368,260 2,758,656
--------------- ----------------
$ 2,801,251 $ 3,237,019
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 104,625 $ 104,625
--------------- ----------------
Deferred Revenues 18,247 18,247
Interest Holders' Capital (5,810,456 Interest Holders' SDIs;
$1.00 per SDI) 2,652,469 3,088,110
General Partners' Capital 25,910 26,037
--------------- ----------------
Total Partners' Capital 2,678,379 3,114,147
--------------- ----------------
$ 2,801,251 $ 3,237,019
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 1,002,406 $ 1,066,158 $ 970,103
Interest income 3,098 5,341 7,733
Other 9,269 22,633 17,599
--------------- --------------- ---------------
1,014,773 1,094,132 995,435
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 252,319 312,989 413,443
Production taxes 56,772 63,259 64,881
Depreciation, depletion
and amortization -
Normal provision 410,105 413,260 471,767
Additional provision 35,136 470,529 --
General and administrative 118,038 118,412 126,209
--------------- --------------- ---------------
872,370 1,378,449 1,076,300
--------------- --------------- ---------------
INCOME (LOSS) $ 142,403 $ (284,317) $ (80,865)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Interest General Combining
Holders Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 3,906,271 $ 25,933 $ 577,481 $ 4,509,685
Income (Loss) (143,626) 57,278 5,483 (80,865)
Cash Distributions (483,800) (67,398) -- (551,198)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 3,278,845 15,813 582,964 3,877,622
--------------- --------------- --------------- ---------------
Income (Loss) (188,436) 88,382 (184,263) (284,317)
Cash Distributions (401,000) (78,158) -- (479,158)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 2,689,409 26,037 398,701 3,114,147
--------------- --------------- --------------- ---------------
Income (Loss) 89,924 84,244 (31,765) 142,403
Cash Distributions (493,800) (84,371) -- (578,171)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 2,285,533 $ 25,910 $ 366,936 $ 2,678,379
=============== =============== =============== ===============
Interest Holders' net income (loss)
per SDI
1995 $ (.02)
===============
1996 $ (.03)
===============
1997 $ .02
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 142,403 $ (284,317) $ (80,865)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 445,241 883,789 471,767
Change in gas imbalance receivable
and deferred revenues 413 4,795 (5,800)
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable (18,319) (18,715) 64,103
Increase (decrease) in accounts payable -- (23,584) (15,909)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 569,738 561,968 433,296
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (162,864) (162,448) (116,822)
Proceeds from sales of oil and gas properties 108,019 130,669 21,390
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (54,845) (31,779) (95,432)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (578,171) (479,158) (551,198)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (63,278) 51,031 (213,334)
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 171,415 120,384 333,718
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 108,137 $ 171,415 $ 120,384
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1993-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1993, for the
purpose of purchasing and operating 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) $755,359, 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 434 Interest Holders made total capital contributions of
$5,810,456.
Generally, all continuing costs (including development costs, operating
costs, 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, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1997 1996 1995
------- ------- ---------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 162,864 162,448 116,822
------- ------- ---------
$ 162,864 $ 162,448 $ 116,822
------- ------- ---------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1997 and 1996, the Partnership's unamortized oil and gas
property costs exceeded the quarterly calculations of the "ceiling limitation"
resulting in an additioinal provision for depreciation, depletion and
amortization of $35,136 and $470,529, respectively. In addition, the Interest
Holders' share of unamortized oil and gas property costs exceeded their "ceiling
limitation" in 1996, resulting in a valuation allowance of $280,931. 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 depreciation, depletion and amortization
provision is more or less than the combined depreciation, depletion and
amortization provision attributable to the general partners and Interest
Holders.
(4) Related-Party Transactions -
During 1997, 1996 and 1995, the Partnership paid Swift $87,157, $87,157
and $101,683, respectively, as a general and administrative overhead allowance.
During 1997, 1996 and 1995, the Partnership also paid Swift an
incentive amount, as defined in the Partnership Agreement, for services rendered
to the Partnership. Such amounts totaled $10,171 in 1997, $10,607 in 1996, and
$6,731 in 1995 and are included in general and administrative expenses.
Effective September 30, 1993, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift
Energy Pension Partners 1993-C, Ltd. ("Pension 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 conveyed to the
Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the Interest Holders
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $504,103, $617,010 and $319,518, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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.
12
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
The Partnership extends credit to various companies in the oil and gas
industry which results in a concentration of credit risk. This concentration of
credit risk may be affected by changes in economic or other conditions and may
accordingly impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size, reputation, and
nature of the companies to which the Partnership extends credit. In addition,
the Partnership generally does not require collateral or other security to
support customer receivables.
(8) 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.
13
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 70,981 $ 108,137
Oil and gas sales receivable 177,628 306,015
--------------- ----------------
Total Current Assets 248,609 414,152
--------------- ----------------
Gas Imbalance Receivable 18,839 18,839
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,821,420 5,800,890
Less-Accumulated depreciation, depletion
and amortization (3,656,451) (3,432,630)
--------------- ----------------
2,164,969 2,368,260
--------------- ----------------
$ 2,432,417 $ 2,801,251
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 76,507 $ 104,625
--------------- ----------------
Deferred Revenues 18,247 18,247
Interest Holders' Capital (5,810,456 Interest Holders' SDIs;
$1.00 per SDI) 2,329,648 2,652,469
General Partners' Capital 8,015 25,910
--------------- ----------------
Total Partners' Capital 2,337,663 2,678,379
--------------- ----------------
$ 2,432,417 $ 2,801,251
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 92,745 $ 347,924
Interest income 892 1,174
Other 1,503 3,114
--------------- ---------------
95,140 352,212
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 55,283 72,157
Production taxes 3,489 20,641
Depreciation, depletion
and amortization -
Normal provision 64,818 120,708
Additional provision 159,003 --
General and administrative 21,955 27,136
--------------- ---------------
304,548 240,642
--------------- ---------------
NET INCOME (LOSS) $ (209,408) $ 111,570
=============== ===============
Limited Partners' net income (loss)
per SDI
March 31, 1998 $ (.04)
==============
March 31, 1997 $ .02
==============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (209,408) $ 111,570
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 223,821 120,708
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 128,387 (67,060)
Increase (decrease) in accounts payable (28,118) (8,812)
-------------- --------------
Net cash provided by (used in) operating activities 114,682 156,406
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (23,736) (43,527)
Proceeds from sales of oil and gas properties 3,206 --
-------------- --------------
Net cash provided by (used in) investing activities (20,530) (43,527)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (131,308) (158,292)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (37,156) (45,143)
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 108,137 171,415
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 70,981 $ 126,272
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1993-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1993, for
the purpose of purchasing and operating 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 interest
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) 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 434 Interest Holders made total capital contributions of $5,810,456.
Generally, all continuing costs (including development costs,
operating costs, 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.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective September 30, 1993, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1993-C, Ltd. ("Pension
Partnership"), an affiliated 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 conveyed to
the Pension Partnership 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 the Pension Partnership's proportionate
share of the property acquisition costs.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Company's revenues are primarily the result of sales of
its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
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
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 372,995 367,473 446,740
Average Sales Price
price per Equivalent MCF $2.62 $2.69 $1.87
Average Production Cost
per Equivalent MCF
(includes production taxes) $0.82 $0.88 $1.01
</TABLE>
Distributions
The Partnership generally makes distributions to Interest Holders on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995, 1994 and 1993,
the Partnership distributed a total of $366,100, $320,800, $435,300, $501,800
and $0, respectively, to the Interest Holders. 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 Interest Holders can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- --------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 74,701 1,085 93,180 1,396 129,091 1,359
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 167,967 1,954 213,009 2,256 285,870 2,834
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates 6,045 (113) (21,271) (33) (44,274) (303)
Sales of minerals in
place (4,372) (9) (4,432) (17) -- --
Production (17,959) (265) (19,339) (252) (28,587) (275)
------- ----- ------- ----- ------- -----
Balance at end of year 151,681 1,567 167,967 1,954 213,009 2,256
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -------------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ---------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Genesis TX 54,434 332 15 1.357
Corexcal LA 8,567 681 28 0.321
Cox Exploration TX 8,125 425 52 0.555
L L & E AL, MS 63,102 111 19 0.381
Camterra MS 17,453 18 19 0.553
------- ----- ---- -----
151,681 1,567 133 3.167
------- ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Operating Partners 1993-D, Ltd.:
We have audited the accompanying balance sheets of Swift Energy
Operating Partners 1993-D, Ltd., (a Texas limited partnership) as of December
31, 1997 and 1996, and the related statements of operations, partners' capital
and cash flows for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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
Operating Partners 1993-D, Ltd., as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,383 $ 1,313
Oil and gas sales receivable 211,490 152,044
--------------- ----------------
Total Current Assets 212,873 153,357
--------------- ----------------
Gas Imbalance Receivable 8,594 8,594
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,611,347 5,545,111
Less-Accumulated depreciation, depletion
and amortization (3,384,516) (2,987,028)
--------------- ----------------
2,226,831 2,558,083
--------------- ----------------
$ 2,448,298 $ 2,720,034
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 99,439 $ 113,206
--------------- ----------------
Deferred Revenues 20,532 20,532
Interest Holders' Capital (5,324,435 Interest Holders' SDIs;
$1.00 per SDI) 2,265,961 2,533,355
General Partners' Capital 62,366 52,941
--------------- ----------------
Total Partners' Capital 2,328,327 2,586,296
--------------- ----------------
$ 2,448,298 $ 2,720,034
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 990,033 $ 992,663 $ 847,929
Interest income 70 64 59
Other 4,572 17,462 7,692
--------------- --------------- ---------------
994,675 1,010,189 855,680
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 245,055 261,212 395,487
Production taxes 61,460 62,951 56,947
Depreciation, depletion
and amortization -
Normal provision 397,488 386,456 410,873
Additional provision -- 266,553 105,234
General and administrative 109,268 108,046 105,366
Interest expense 1,276 5,031 --
--------------- --------------- ---------------
814,547 1,090,249 1,073,907
--------------- --------------- ---------------
INCOME (LOSS) $ 180,128 $ (80,060) $ (218,227)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Interest General Combining
Holders Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 3,191,079 $ 21,540 $ 523,278 $ 3,735,897
Income (Loss) (204,266) 42,887 (56,848) (218,227)
Cash Distributions (435,300) (32,548) -- (467,848)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 2,551,513 31,879 466,430 3,049,822
--------------- --------------- --------------- ---------------
Income (Loss) (71,671) 83,728 (92,117) (80,060)
Cash Distributions (320,800) (62,666) -- (383,466)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 2,159,042 52,941 374,313 2,586,296
--------------- --------------- --------------- ---------------
Income (Loss) 90,806 81,422 7,900 180,128
Cash Distributions (366,100) (71,997) -- (438,097)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 1,883,748 $ 62,366 $ 382,213 $ 2,328,327
=============== =============== =============== ===============
Interest Holders' net income (loss)
per SDI
1995 $ (.04)
================
1996 $ (.01)
================
1997 $ .02
================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 180,128 $ (80,060) $ (218,227)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 397,488 653,009 516,107
Change in gas imbalance receivable
and deferred revenues -- 2,694 7,415
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable (59,446) (86,161) 269,066
Increase (decrease) in accounts payable (13,767) (10,266) (14,360)
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 504,403 479,216 560,001
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (115,188) (140,113) (96,655)
Proceeds from sales of oil and gas properties 48,952 44,427 4,586
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (66,236) (95,686) (92,069)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (438,097) (383,466) (467,848)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 70 64 84
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,313 1,249 1,165
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,383 $ 1,313 $ 1,249
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 1,276 $ 5,031 $ 3,137
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1993-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 31, 1993, for the
purpose of purchasing and operating 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) $692,177, 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 406 Interest Holders made total capital contributions of
$5,324,435.
Generally, all continuing costs (including development costs, operating
costs, 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, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1997 1996 1995
------- ------- ---------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 115,188 140,113 96,655
------- ------- ---------
$ 115,188 $ 140,113 $ 96,655
------- ------- ---------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1996 and 1995, the Partnership's unamortized oil and gas
property costs exceeded the quarterly calculations of the "ceiling limitation"
resulting in an additional provision for depreciation, depletion and
amortization of $266,553 and $105,234 respectively. In addition, the Interest
Holder's share of unamortized oil and gas property costs exceeded their "ceiling
limitation" in 1996 and 1995, resulting in a valuation allowance of $159,925 and
$37,510, respectively. These amounts are 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
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to the
general partners and Interest Holders.
(4) Related-Party Transactions -
During 1997, 1996 and 1995, the Partnership paid Swift $79,867, $79,867
and $82,987, respectively, as a general and administrative overhead allowance.
During 1997, 1996, and 1995, the Partnership also paid Swift an
incentive amount, as defined in the Partnership Agreement, for services rendered
to the Partnership. Such amounts totaled $9,198 in 1997, $9,068 in 1996 and
$5,059 in 1995 and are included in general and administrative expenses.
Effective December 31, 1993, the Partnership entered into a Net Profits
and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Pension Partners 1993-D, Ltd. ("Pension 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 conveyed to the Pension
Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the Interest Holders
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for years ended December 31, 1997, 1996 and 1995 was
$491,826, $540,346 and $229,175, respectively. The difference between ordinary
income for federal income tax purposes reported by the Partnership and net
income or loss reported herein primarily results from the exclusion of depletion
(as described below) from ordinary income reported in the Partnership's federal
return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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.
12
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,389 $ 1,383
Oil and gas sales receivable 121,869 211,490
--------------- ----------------
Total Current Assets 123,258 212,873
--------------- ----------------
Gas Imbalance Receivable 8,594 8,594
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,625,570 5,611,347
Less-Accumulated depreciation, depletion
and amortization (3,464,434) (3,384,516)
--------------- ----------------
2,161,136 2,226,831
--------------- ----------------
$ 2,292,988 $ 2,448,298
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 72,827 $ 99,439
--------------- ----------------
Deferred Revenues 20,532 20,532
Interest Holders' Capital (5,324,435 Interest Holders' SDIs;
$1.00 per SDI) 2,151,311 2,265,961
General Partners' Capital 48,318 62,366
--------------- ----------------
Total Partners' Capital 2,199,629 2,328,327
--------------- ----------------
$ 2,292,988 $ 2,448,298
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 129,132 $ 319,228
Interest income 6 6
Other 754 2,417
--------------- ---------------
129,892 321,651
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 41,969 78,922
Production taxes 7,263 20,250
Depreciation, depletion
and amortization 79,918 108,495
General and administrative 20,695 25,300
Interest expense -- 416
--------------- ---------------
149,845 233,383
--------------- ---------------
NET INCOME (LOSS) $ (19,953) $ 88,268
=============== ===============
Limited Partners' net income (loss)
per SDI
March 31, 1998 $ --
==============
March 31, 1997 $ .02
==============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (19,953) $ 88,268
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 79,918 108,495
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 89,621 (36,688)
Increase (decrease) in accounts payable (26,612) (12,709)
-------------- --------------
Net cash provided by (used in) operating activities 122,974 147,366
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (14,956) (26,795)
Proceeds from sales of oil and gas properties 733 --
-------------- --------------
Net cash provided by (used in) investing activities (14,223) (26,795)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (108,745) (120,565)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6 6
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,383 1,313
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,389 $ 1,319
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 416
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1993-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 31, 1993, for
the purpose of purchasing and operating 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 interest
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) 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 406 Interest Holders made total capital
contributions of $5,324,435.
Generally, all continuing costs (including development costs,
operating costs, 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.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective December 31, 1993, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1993-D, Ltd. ("Pension
Partnership"), an affiliated 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 conveyed to
the Pension Partnership 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 the Pension Partnership's proportionate
share of the property acquisition costs.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1993-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Company's revenues are primarily the result of sales of
its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
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
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 274,030 314,334 416,631
Average Sales Price
Equivalent MCF $2.70 $2.82 $2.03
Average Production Costs
per Equivalent MCf
(includes production taxes) $1.11 $0.92 $1.07
</TABLE>
Distributions
The Partnership generally makes distributions to Interest Holders on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995 and 1994, the
Partnership distributed a total of $398,200, $337,700, $492,400 and $166,100,
respectively, to the Interest Holders. 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 Interest Holders can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 105,721 1,457 117,211 1,604 186,058 1,885
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 218,632 2,317 264,641 2,722 336,470 3,062
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates 12,370 (17) (22,093) (183) (39,970) (115)
Sales of minerals in
place -- -- (4,075) (26) -- --
Production (18,891) (161) (19,841) (196) (31,859) (225)
------- ----- ------- ----- ------- -----
Balance at end of year 212,111 2,139 218,632 2,317 264,641 2,722
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -------------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Genesis TX 10,445 64 15 0.260
Corexcal LA 1,643 131 28 0.062
Cox Exploration TX 18,811 984 52 1.286
L L & E AL, MS 99,915 176 19 0.603
Camterra MS 15,400 16 19 0.488
Parker & Parsley AL, LA 65,897 768 41 0.130
------- ----- ---- -----
212,111 2,139 174 2.829
------- ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Operating Partners 1994-A, Ltd.:
We have audited the accompanying balance sheets of Swift Energy
Operating Partners 1994-A, Ltd., (a Texas limited partnership) as of December
31, 1997 and 1996, and the related statements of operations, partners' capital
and cash flows for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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
Operating Partners 1994-A, Ltd., as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,263 $ 1,199
Oil and gas sales receivable 195,628 231,056
--------------- ----------------
Total Current Assets 196,891 232,255
--------------- ----------------
Gas Imbalance Receivable 1,648 1,648
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,773,434 4,713,326
Less-Accumulated depreciation, depletion
and amortization (2,145,143) (1,687,139)
--------------- ----------------
2,628,291 3,026,187
--------------- ----------------
$ 2,826,830 $ 3,260,090
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 182,928 $ 119,100
--------------- ----------------
Deferred Revenues 7,137 8,154
Interest Holders' Capital (4,487,431 Interest Holders' SDIs;
$1.00 per SDI) 2,596,493 3,097,799
General Partners' Capital 40,272 35,037
--------------- ----------------
Total Partners' Capital 2,636,765 3,132,836
--------------- ----------------
$ 2,826,830 $ 3,260,090
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 806,012 $ 961,293 $ 916,389
Interest income 64 58 61
Other 4,562 18,838 5,208
--------------- --------------- ---------------
810,638 980,189 921,658
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 255,536 233,648 390,209
Production taxes 48,274 56,971 56,734
Depreciation, depletion
and amortization -
Normal provision 265,851 308,534 358,582
Additional provision 192,153 -- 30,751
General and administrative 89,752 92,777 100,301
Interest expense 1,555 673 --
--------------- --------------- ---------------
853,121 692,603 936,577
--------------- --------------- ---------------
INCOME (LOSS) $ (42,483) $ 287,586 $ (14,919)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Interest General Combining
Holders Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 3,258,424 $ 34,757 $ 539,986 $ 3,833,167
Income (Loss) (78,007) 54,755 8,333 (14,919)
Cash Distributions (492,400) (56,549) -- (548,949)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 2,688,017 32,963 548,319 3,269,299
--------------- --------------- --------------- ---------------
Income (Loss) 190,851 88,423 8,312 287,586
Cash Distributions (337,700) (86,349) -- (424,049)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 2,541,168 35,037 556,631 3,132,836
--------------- --------------- --------------- ---------------
Income (Loss) 28,571 60,623 (131,677) (42,483)
Cash Distributions (398,200) (55,388) -- (453,588)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 2,171,539 $ 40,272 $ 424,954 $ 2,636,765
=============== =============== =============== ===============
Interest Holders' net income (loss)
per SDI
1995 $ (.02)
================
1996 $ .04
================
1997 $ .01
================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (42,483) $ 287,586 $ (14,919)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 458,004 308,534 389,333
Change in gas imbalance receivable
and deferred revenues (1,017) 4,268 2,238
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 35,428 7,002 159,248
Increase (decrease) in accounts payable 63,828 (127,867) 144,122
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 513,760 479,523 680,022
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (60,108) (107,046) (135,059)
Proceeds from sales of oil and gas properties -- 51,631 4,047
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (60,108) (55,415) (131,012)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (453,588) (424,049) (548,949)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 64 59 61
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,199 1,140 1,079
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,263 $ 1,199 $ 1,140
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 1,555 $ 673 $ 2,339
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1994-A, Ltd., a Texas limited
partnership ("the Partnership"), was formed on April 20, 1994, for the purpose
of purchasing and operating 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) $650,677, 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 331 Interest Holders made total capital contributions of
$4,487,431.
Generally, all continuing costs (including development costs, operating
costs, 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, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1997 1996 1995
-------- -------- ---------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ 85,927
Development 60,108 107,046 49,132
-------- -------- ---------
$ 60,108 $ 107,046 $ 135,059
-------- -------- ---------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
In 1995, the Partnership acquired interests in producing oil and gas
properties for $85,927, which included $15,324 of costs incurred by Swift in the
evaluation and acquisition effort, including costs related to properties not
acquired.
11
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1997 and 1995, the Partnership's unamortized oil and gas
property costs exceeded the quarterly calculations of the "ceiling limitation"
resulting in an additional provision for depreciation, depletion and
amortization of $192,153 and $30,751, respectively. In addition, the Interest
Holders' share of unamortized oil and gas property costs exceeded their "ceiling
limitation" in 1997 and 1995, resulting in a valuation allowance of $52,258 and
$27,333, respectively. These amounts are 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
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to the
general partners and Interest Holders.
(4) Related-Party Transactions -
During 1997, 1996 and 1995, the Partnership paid Swift $67,311, $67,311
and $78,530, respectively, as a general and administrative overhead allowance.
During 1997, 1996 and 1995, the Partnership also paid Swift an
incentive amount, as defined in the Partnership Agreement, for services rendered
to the Partnership. Such amounts totaled $6,316 in 1997, $9,257 in 1996 and
$5,285 in 1995 and are included in general and administrative expenses.
Effective April 20, 1994, the Partnership entered into a Net Profits
and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Pension Partners 1994-A, Ltd. ("Pension 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 conveyed to the Pension
Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the Interest Holders
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for years ended December 31, 1997, 1996 and 1995 was
$362,072, $530,166 and $289,917, respectively. The difference between ordinary
income for federal income tax purposes reported by the Partnership and net
income or loss reported herein primarily results from the exclusion of depletion
(as described below) from ordinary income reported in the Partnership's federal
return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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.
12
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,269 $ 1,263
Oil and gas sales receivable 130,558 195,628
--------------- ----------------
Total Current Assets 131,827 196,891
--------------- ----------------
Gas Imbalance Receivable 1,648 1,648
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,790,712 4,773,434
Less-Accumulated depreciation, depletion
and amortization (2,386,626) (2,145,143)
--------------- ----------------
2,404,086 2,628,291
--------------- ----------------
$ 2,537,561 $ 2,826,830
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 152,446 $ 182,928
--------------- ----------------
Deferred Revenues 7,137 7,137
Interest Holders' Capital (4,487,431 Interest Holders' SDIs;
$1.00 per SDI) 2,341,717 2,596,493
General Partners' Capital 36,261 40,272
--------------- ----------------
Total Partners' Capital 2,377,978 2,636,765
--------------- ----------------
$ 2,537,561 $ 2,826,830
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 138,756 $ 222,875
Interest income 6 5
Other 853 2,216
--------------- ---------------
139,615 225,096
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 37,605 71,263
Production taxes 8,198 13,742
Depreciation, depletion
and amortization -
Normal provision 61,209 65,525
Additional provision 180,274 192,153
General and administrative 17,753 23,592
Interest expense 56 --
--------------- ---------------
305,095 366,275
--------------- ---------------
NET INCOME (LOSS) $ (165,480) $ (141,179)
=============== ===============
Limited Partners' net income (loss)
per SDI
March 31, 1998 $ (.04)
==============
March 31, 1997 $ (.03)
==============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (165,480) $ (141,179)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 241,483 257,678
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 65,070 21,923
Increase (decrease) in accounts payable (30,482) 9,846
-------------- --------------
Net cash provided by (used in) operating activities 110,591 148,268
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (17,419) (20,485)
Proceeds from sales of oil and gas properties 141 --
-------------- --------------
Net cash provided by (used in) investing activities (17,278) (20,485)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (93,307) (127,778)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6 5
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,263 1,199
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,269 $ 1,204
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 56 $ --
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1994-A, Ltd., a Texas limited
partnership ("the Partnership"), was formed on April 20, 1994, for the
purpose of purchasing and operating 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 interest
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) 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 331 Interest Holders made total capital
contributions of $4,487,431.
Generally, all continuing costs (including development costs,
operating costs, 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.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective April 20, 1994, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Pension Partners 1994-A, Ltd. ("Pension Partnership"),
an affiliated 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 conveyed to the Pension Partnership
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 the Pension Partnership's proportionate share of the property
acquisition costs.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-A, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Company's revenues are primarily the result of sales of
its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
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
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 387,488 427,336 533,852
Average Sales Price
Equivalent MCF $2.66 $2.75 $1.97
Average Production Costs
per Equivalent MCf
(includes production taxes) $1.03 $0.88 $1.06
</TABLE>
Distributions
The Partnership generally makes distributions to Interest Holders on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995 and 1994, the
Partnership distributed a total of $555,600, $547,100, $603,900 and $71,200,
respectively, to the Interest Holders. 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 Interest Holders can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 114,813 1,753 130,025 1,985 203,126 2,184
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 268,160 2,972 310,941 3,378 405,550 3,859
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates 20,061 (25) (15,822) (83) (58,498) (164)
Sales of mineral in
place -- -- (3,165) (38) -- --
Production (23,503) (246) (23,794) (285) (36,111) (317)
------- ----- ------- ----- ------- -----
Balance at end of year 264,718 2,701 268,160 2,972 310,941 3,378
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -------------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Genesis TX 16,523 101 15 0.412
Corexcal LA 2,599 207 28 0.097
Cox Exploration TX 29,759 1,556 52 2.035
L L & E AL, MS 158,038 279 19 0.955
Camterra MS 10,891 11 19 0.345
Parker & Parsley AL, LA 46,908 547 41 0.092
------- ----- ---- -----
264,718 2,701 174 3.936
------- ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Operating Partners 1994-B, Ltd.:
We have audited the accompanying balance sheets of Swift Energy
Operating Partners 1994-B, Ltd., (a Texas limited partnership) as of December
31, 1997 and 1996, and the related statements of operations, partners' capital
and cash flows for the years ended December 31, 1997, 1996 and 1995,. 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 generally accepted auditing
standards. 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
Operating Partners 1994-B, Ltd., as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,276 $ 1,212
Oil and gas sales receivable 270,176 316,197
--------------- ----------------
Total Current Assets 271,452 317,409
--------------- ----------------
Gas Imbalance Receivable 2,607 2,607
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,954,955 5,869,316
Less-Accumulated depreciation, depletion
and amortization (2,624,675) (2,239,618)
--------------- ----------------
3,330,280 3,629,698
--------------- ----------------
$ 3,604,339 $ 3,949,714
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 255,568 $ 172,243
--------------- ----------------
Deferred Revenues 7,042 7,766
Interest Holders' Capital (5,698,300 Interest Holders' SDIs;
$1.00 per SDI) 3,284,397 3,724,301
General Partners' Capital 57,332 45,404
--------------- ----------------
Total Partners' Capital 3,341,729 3,769,705
--------------- ----------------
$ 3,604,339 $ 3,949,714
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 1,095,823 $ 1,240,622 $ 1,130,801
Interest income 65 59 115
Other 6,922 22,206 4,794
--------------- --------------- ---------------
1,102,810 1,262,887 1,135,710
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 334,041 301,162 498,238
Production taxes 65,697 75,406 69,723
Depreciation, depletion
and amortization 385,057 417,155 463,364
General and administrative 113,845 116,803 118,984
Interest expense 3,190 357 --
--------------- --------------- ---------------
901,830 910,883 1,150,309
--------------- --------------- ---------------
INCOME (LOSS) $ 200,980 $ 352,004 $ (14,599)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Interest General Combining
Holders Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 4,057,874 $ 37,389 $ 658,866 $ 4,754,129
Income (Loss) (93,468) 64,929 13,940 (14,599)
Cash Distributions (603,900) (66,669) -- (670,569)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 3,360,506 35,649 672,806 4,068,961
--------------- --------------- --------------- ---------------
Income (Loss) 226,061 113,915 12,028 352,004
Cash Distributions (547,100) (104,160) -- (651,260)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 3,039,467 45,404 684,834 3,769,705
--------------- --------------- --------------- ---------------
Income (Loss) 113,999 85,284 1,697 200,980
Cash Distributions (555,600) (73,356) -- (628,956)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 2,597,866 $ 57,332 $ 686,531 $ 3,341,729
=============== =============== =============== ===============
Interest Holders' net income (loss)
per SDI
1995 $ (.02)
===============
1996 $ .04
===============
1997 $ .02
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 200,980 $ 352,004 $ (14,599)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 385,057 417,155 463,364
Change in gas imbalance receivable
and deferred revenues (724) 6,753 24,119
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 46,021 (24,916) 176,204
Increase (decrease) in accounts payable 83,325 8,370 55,232
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 714,659 759,366 704,320
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (85,639) (165,849) (48,300)
Proceeds from sales of oil and gas properties -- 57,803 2,862
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (85,639) (108,046) (45,438)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (628,956) (651,260) (670,569)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 64 60 (11,687)
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,212 1,152 12,839
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,276 $ 1,212 $ 1,152
=============== =============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 3,190 $ 357 $ --
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1994-B, Ltd., a Texas limited
partnership ("the Partnership"), was formed on June 30, 1994, for the purpose of
purchasing and operating 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) $826,254, 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 354 Interest Holders made total capital contributions of
$5,698,300.
Generally, all continuing costs (including development costs, operating
costs, 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, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1997 1996 1995
-------- --------- --------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ --
Development 85,639 165,849 48,300
-------- --------- --------
$ 85,639 $ 165,849 $ 48,300
-------- --------- --------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) Related-Party Transactions -
During 1997, 1996 and 1995, the Partnership paid Swift $85,475, $85,475
and $99,720, respectively, as a general and administrative overhead allowance.
During 1997, 1996 and 1995, the Partnership also paid Swift an
incentive amount, as defined in the Partnership Agreement, for services rendered
to the Partnership. Such amounts totaled $8,749 in 1997, $11,797 in 1996 and
$4,201 in 1995 and are included in general and administrative expenses.
Effective June 30, 1994, the Partnership entered into a Net Profits and
Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Pension Partners 1994-B, Ltd. ("Pension 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 conveyed to the Pension
Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the Interest Holders
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for years ended December 31, 1997, 1996 and 1995 was
$512,835, $697,435 and $333,757, respectively. The difference between ordinary
income for federal income tax purposes reported by the Partnership and net
income or loss reported herein primarily results from the exclusion of depletion
(as described below) from ordinary income reported in the Partnership's federal
return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
12
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,282 $ 1,276
Oil and gas sales receivable 176,718 270,176
--------------- ----------------
Total Current Assets 178,000 271,452
--------------- ----------------
Gas Imbalance Receivable 2,607 2,607
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,978,231 5,954,955
Less-Accumulated depreciation, depletion
and amortization (2,788,100) (2,624,675)
--------------- ----------------
3,190,131 3,330,280
--------------- ----------------
$ 3,370,738 $ 3,604,339
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 207,491 $ 255,568
--------------- ----------------
Deferred Revenues 7,042 7,042
Interest Holders' Capital (5,698,300 Interest Holders' SDIs;
$1.00 per SDI) 3,105,762 3,284,397
General Partners' Capital 50,443 57,332
--------------- ----------------
Total Partners' Capital 3,156,205 3,341,729
--------------- ----------------
$ 3,370,738 $ 3,604,339
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 188,018 $ 298,954
Interest income 6 5
Other 1,349 2,509
--------------- ---------------
189,373 301,468
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 48,632 92,734
Production taxes 11,300 18,546
Depreciation, depletion
and amortization -
Normal provision 90,444 89,373
Additional provision 72,981 --
General and administrative 22,582 30,105
Interest expense 144 --
--------------- ---------------
246,083 230,758
--------------- ---------------
NET INCOME (LOSS) $ (56,710) $ 70,710
=============== ===============
Limited Partners' net income (loss)
per SDI
March 31, 1998 $ (.01)
==============
March 31, 1997 $ .01
==============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (56,710) $ 70,710
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 163,425 89,373
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 93,458 35,789
Increase (decrease) in accounts payable (48,077) 14,077
-------------- --------------
Net cash provided by (used in) operating activities 152,096 209,949
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (23,498) (28,010)
Proceeds from sales of oil and gas properties 222 --
-------------- --------------
Net cash provided by (used in) investing activities (23,276) (28,010)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (128,814) (181,934)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6 5
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,276 1,212
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,282 $ 1,217
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 144 $ --
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1994-B, Ltd., a Texas limited
partnership ("the Partnership"), was formed on June 30, 1994, for the
purpose of purchasing and operating 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 interest
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) 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 354 Interest Holders made total capital
contributions of $5,698,300.
Generally, all continuing costs (including development costs,
operating costs, 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.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective June 30, 1994, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Pension Partners 1994-b, Ltd. ("Pension Partnership"),
an affiliated 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 conveyed to the Pension Partnership
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 the Pension Partnership's proportionate share of the property
acquisition costs.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Company's revenues are primarily the result of sales of
its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
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.
(6) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
------------------------------------------
For the Years Ended
December 31,
------------------------------------------
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 226,886 355,568 436,674
Average Sales Price
Equivalent MCF $2.88 $2.93 $2.17
Average Production Costs
per Equivalent MCf
</TABLE>
(includes production taxes) $1.59 $1.01 $0.94
Distributions
The Partnership generally makes distributions to Interest Holders on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995 and 1994, the
Partnership distributed a total of $551,000, $498,400, $402,300, and $0,
respectively, to the Interest Holders. 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 Interest Holders can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- --------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 210,025 2,366 228,102 2,500 330,331 3,289
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 340,560 3,315 417,438 4,209 343,344 3,651
Purchase of minerals
in place -- -- -- -- 116,334 796
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates (11,053) (81) (48,606) (703) (11,230) 13
Sales of minerals in
place -- -- (78) (5) -- --
Production (20,072) (106) (28,194) (186) (31,010) (251)
------- ----- ------- ----- ------- -----
Balance at end of year 309,435 3,128 340,560 3,315 417,438 4,209
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Genesis TX 2,513 15 15 0.063
Corexcal LA 395 31 28 0.015
Cox Exploration TX 4,527 237 52 0.309
L L & E AL, MS 24,067 42 19 0.145
Parker & Parsley AL, LA 190,781 2,228 41 0.375
Cabot Oil & Gas WY 58,918 -- 14 0.916
Bracken II TX 28,234 575 58 1.665
------- ----- ---- -----
309,435 3,128 227 3.488
------- ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Operating Partners 1994-C, Ltd.:
We have audited the accompanying balance sheets of Swift Energy
Operating Partners 1994-C, Ltd., (a Texas limited partnership) as of December
31, 1997 and 1996, and the related statements of operations, partners' capital
and cash flows for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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
Operating Partners 1994-C, Ltd., as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 28,762 $ 210,403
Oil and gas sales receivable 185,051 257,280
--------------- ----------------
Total Current Assets 213,813 467,683
--------------- ----------------
Gas Imbalance Receivable 397 397
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,257,507 5,208,893
Less-Accumulated depreciation, depletion
and amortization (1,972,763) (879,263)
--------------- ----------------
3,284,744 4,329,630
--------------- ----------------
$ 3,498,954 $ 4,797,710
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 118,816 $ 56,925
--------------- ----------------
Deferred Revenues 9,988 12,933
Interest Holders' Capital (5,125,411 Interest Holders' SDIs;
$100 per SDI) 3,324,611 4,674,150
General Partners' Capital 45,539 53,702
--------------- ----------------
Total Partners' Capital 3,370,150 4,727,852
--------------- ----------------
$ 3,498,954 $ 4,797,710
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 795,489 $ 1,232,353 $ 1,060,663
Interest income 4,010 11,355 39,385
Other 7,672 20,467 12,476
--------------- --------------- ---------------
807,171 1,264,175 1,112,524
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 319,447 297,461 342,358
Production taxes 41,845 61,537 68,700
Depreciation, depletion
and amortization -
Normal provision 183,646 316,302 329,220
Additional provision 909,854 -- 130,948
General and administrative 100,621 106,444 114,807
--------------- --------------- ---------------
1,555,413 781,744 986,033
--------------- --------------- ---------------
INCOME (LOSS) $ (748,242) $ 482,431 $ 126,491
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Interest General Combining
Holders Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 4,551,679 $ 21,834 $ 616,529 $ 5,190,042
Income (Loss) 18,905 83,818 23,768 126,491
Cash Distributions (402,300) (60,980) -- (463,280)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 4,168,284 44,672 640,297 4,853,253
--------------- --------------- --------------- ---------------
Income (Loss) 345,994 118,462 17,975 482,431
Cash Distributions (498,400) (109,432) -- (607,832)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 4,015,878 53,702 658,272 4,727,852
--------------- --------------- --------------- ---------------
Income (Loss) (665,874) 50,297 (132,665) (748,242)
Cash Distributions (551,000) (58,460) -- (609,460)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 2,799,004 $ 45,539 $ 525,607 $ 3,370,150
=============== =============== =============== ===============
Interest Holders' net income (loss)
per SDI
1995 $ --
===============
1996 $ .07
===============
1997 $ (.13)
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (748,242) $ 482,431 $ 126,491
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 1,093,500 316,302 460,168
Change in gas imbalance receivable
and deferred revenues (2,945) 1,029 100
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 72,229 73,420 (31,480)
(Increase) decrease in acquisitions receivable -- -- 137,395
Increase (decrease) in accounts payable 61,891 (276,491) 265,702
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 476,433 596,691 958,376
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (48,614) (161,137) (1,181,492)
Proceeds from sales of oil and gas properties -- 5,860 --
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (48,614) (155,277) (1,181,492)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (609,460) (607,832) (463,280)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (181,641) (166,418) (686,396)
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 210,403 376,821 1,063,217
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 28,762 $ 210,403 $ 376,821
=============== =============== ===============
Supplemental disclosure of non-cash investing and financing activities:
Oil and gas properties acquired which were paid for in a
subsequent period $ -- $ -- $ 112,992
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1994-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1994, for the
purpose of purchasing and operating 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) $743,185, 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 364 Interest Holders made total capital contributions of
$5,125,411.
Generally, all continuing costs (including development costs, operating
costs, 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, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- --------- ----------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ -- $ 1,132,544
Development 48,614 48,145 161,940
-------- --------- ----------
$ 48,614 $ 48,145 $ 1,294,484
-------- --------- ----------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
In 1995, the Partnership acquired interests in producing oil and gas
properties for $1,132,544, which included $128,785 of costs incurred by Swift in
the evaluation and acquisition effort, including costs related to properties not
acquired.
11
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During 1997 and 1995 , the Partnership's unamortized oil and gas
property costs exceeded the quarterly calculations of the "ceiling limitation"
resulting in an additional provision for depreciation, depletion and
amortization of $909,854 and $130,948, respectively. In addition, the Interest
Holders' share of unamortized oil and gas property costs exceeded their "ceiling
limitation" in 1997 and 1995, resulting in a valuation allowance of $769,961 and
$133,378, respectively. These amounts are 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
depreciation, depletion and amortization provision is more or less than the
combined depreciation, depletion and amortization provision attributable to the
general partners and Interest Holders.
(4) Related-Party Transactions -
During 1997, 1996 and 1995, the Partnership paid Swift $76,881, $76,881
and $89,695, respectively, as a general and administrative overhead allowance.
During 1997, 1996 and 1995, the Partnership also paid Swift an
incentive amount, as defined in the Partnership Agreement, for services rendered
to the Partnership. Such amounts totaled $5,573 in 1997, $11,388 in 1996 and
$3,626 in 1995 and are included in general and administrative expenses.
Effective September 30, 1994, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift
Energy Pension Partners 1994-C, Ltd. ("Pension 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 conveyed to the
Pension Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the Interest Holders
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $298,724, $683,114 and $509,957, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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.
12
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,016 $ 28,762
Oil and gas sales receivable 138,346 185,051
--------------- ----------------
Total Current Assets 139,362 213,813
--------------- ----------------
Gas Imbalance Receivable 397 397
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 5,275,616 5,257,507
Less-Accumulated depreciation, depletion
and amortization (2,075,599) (1,972,763)
--------------- ----------------
3,200,017 3,284,744
--------------- ----------------
$ 3,339,776 $ 3,498,954
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 113,919 $ 118,816
--------------- ----------------
Deferred Revenues 9,988 9,988
Interest Holders' Capital (5,125,411 Interest Holders' SDIs;
$100 per SDI) 3,171,282 3,324,611
General Partners' Capital 44,587 45,539
--------------- ----------------
Total Partners' Capital 3,215,869 3,370,150
--------------- ----------------
$ 3,339,776 $ 3,498,954
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 145,163 $ 223,016
Interest income 16 2,065
Other 1,414 2,272
--------------- ---------------
146,593 227,353
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 59,208 90,651
Production taxes 6,817 11,907
Depreciation, depletion
and amortization -
Normal provision 40,498 50,264
Additional provision 62,338 845,128
General and administrative 19,859 29,265
--------------- ---------------
188,720 1,027,125
--------------- ---------------
NET INCOME (LOSS) $ (42,127) $ (799,862)
=============== ===============
Limited Partners' net income (loss)
per SDI
March 31, 1998 $ (.01)
==============
March 31, 1997 $ (.16)
==============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (42,127) $ (799,862)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 102,836 895,392
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 46,705 44,106
Increase (decrease) in accounts payable (4,897) 36,354
-------------- --------------
Net cash provided by (used in) operating activities 102,517 175,990
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (18,143) (19,203)
Proceeds from sales of oil and gas properties 34 --
-------------- --------------
Net cash provided by (used in) investing activities (18,109) (19,203)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (112,154) (183,561)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (27,746) (26,774)
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,762 210,403
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,016 $ 183,629
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1994-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1994, for
the purpose of purchasing and operating 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 interest
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) 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 364 Interest Holders made total capital
contributions of $5,125,411.
Generally, all continuing costs (including development costs,
operating costs, 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.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective September 30, 1994, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1994-C, Ltd. ("Pension
Partnership"), an affiliated 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 conveyed to
the Pension Partnership 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 the Pension Partnership's proportionate
share of the property acquisition costs.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Company's revenues are primarily the result of sales of
its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
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
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
(a Texas Limited Partnership)
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
Selected Data
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.
<TABLE>
<CAPTION>
Net Production
---------------------------------------
For the Years Ended
December 31,
---------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net Volumes (Equivalent MCFs) 248,029 327,613 352,059
Average Sales Price
per equivalent MCF $2.85 $2.92 $2.22
Average Production Cost
per Equivalent MCF
(includes production taxes) $1.19 $0.91 $0.73
</TABLE>
Distributions
The Partnership generally makes distributions to Interest Holders on a
quarterly basis, subject to restrictions set forth in the Limited Partnership
Agreement. For the years ending December 31, 1997, 1996, 1995 and 1994, the
Partnership distributed a total of $579,000, $508,600, $248,400 and $0,
respectively, to the Interest Holders. 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 Interest Holders can
be achieved or maintained. Although it is anticipated that quarterly
distributions will continue to be made through 1998, 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.
2
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
Selected Data
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves
as of December 31, 1997, 1996 and 1995. All of the Partnership's proved reserves
are located in the United States.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1997 1996 1995
------------------- --------------------- ----------------------
Natural Natural Natural
Oil Gas Oil Gas Oil Gas
------- -------- ------- -------- ------- --------
(BBLS) (MMCF) (BBLS) (MMCF) (BBLS) (MMCF)
<S> <C> <C> <C> <C> <C> <C>
Proved developed
reserves at end of year 180,714 2,214 193,609 2,359 276,346 2,692
------- ----- ------- ----- ------- -----
Proved reserves
Balance at beginning
of year 279,372 3,000 343,217 3,385 259,776 2,784
Purchase of minerals
in place -- -- 1,872 375 109,818 751
Extensions, discoveries
and other additions -- -- -- -- -- --
Revisions of previous
estimates (12,187) (78) (41,881) (575) (1,369) 52
Sales of minerals in
place -- -- -- -- -- --
Production (16,734) (148) (23,836) (185) (25,008) (202)
------- ----- ------- ----- ------- -----
Balance at end of year 250,451 2,774 279,372 3,000 343,217 3,385
------- ----- ------- ----- ------- -----
</TABLE>
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.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
Selected Data
The following table summarizes by acquisition the Registrant's reserves
and gross and net interests in producing oil and gas wells as of December 31,
1997:
<TABLE>
<CAPTION>
Reserves
December 31, 1997
---------------------
Natural Wells
Oil Gas -----------------------
Acquisition State(s) (BBLS) (MMCF) Gross Net
- ----------- --------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Parker & Parsley AL, LA 166,687 1,946 41 0.328
Cabot Oil & Gas WY 55,618 -- 14 0.865
Bracken II TX 26,651 542 58 1.572
BHP Petroleum LA 1,495 286 15 0.016
------- ----- ---- -----
250,451 2,774 128 2.781
------- ----- ---- -----
</TABLE>
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, 1997 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. 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, 1997 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.
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Operating Partners 1994-D, Ltd.:
We have audited the accompanying balance sheets of Swift Energy
Operating Partners 1994-D, Ltd., (a Texas limited partnership) as of December
31, 1997 and 1996 and the related statements of operations, partners' capital
and cash flows for the years ended December 31, 1997, 1996 and 1995. 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 generally accepted auditing
standards. 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
Operating Partners 1994-D, Ltd., as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 393,495 $ 485,796
Oil and gas sales receivable 204,187 247,342
--------------- ----------------
Total Current Assets 597,682 733,138
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,546,962 4,509,703
Less-Accumulated depreciation, depletion
and amortization (1,527,279) (549,631)
--------------- ----------------
3,019,683 3,960,072
--------------- ----------------
$ 3,617,365 $ 4,693,210
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 87,057 $ 23,912
--------------- ----------------
Deferred Revenues 8,093 10,666
Interest Holders' Capital (4,775,604 Interest Holders' SDIs;
$1.00 per SDI) 3,477,005 4,605,842
General Partners' Capital 45,210 52,790
--------------- ---------------
Total Partners' Capital 3,522,215 4,658,632
--------------- ----------------
$ 3,617,365 $ 4,693,210
=============== ================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales $ 866,674 $ 1,125,712 $ 863,755
Interest income 20,389 46,875 89,294
Other 6,295 16,232 9,131
--------------- --------------- ---------------
893,358 1,188,819 962,180
--------------- --------------- ---------------
COSTS AND EXPENSES:
Lease operating 259,070 236,679 197,547
Production taxes 37,130 60,748 59,549
Depreciation, depletion
and amortization -
Normal provision 208,739 293,447 256,183
Additional provision 768,909 -- --
General and administrative 96,021 100,143 184,321
--------------- --------------- ---------------
1,369,869 691,017 697,600
--------------- --------------- ---------------
INCOME (LOSS) $ (476,511) $ 497,802 $ 264,580
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Interest General Combining
Holders Partners Adjustment Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 $ 4,775,604 $ -- $ -- $ 4,775,604
Income (Loss) 200,425 64,155 -- 264,580
Cash Distributions (248,400) (27,202) -- (275,602)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1995 4,727,629 36,953 -- 4,764,582
--------------- --------------- --------------- ---------------
Income (Loss) 292,536 110,989 94,277 497,802
Cash Distributions (508,600) (95,152) -- (603,752)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1996 4,511,565 52,790 94,277 4,658,632
--------------- --------------- --------------- ---------------
Income (Loss) (522,408) 73,326 (27,429) (476,511)
Cash Distributions (579,000) (80,906) -- (659,906)
--------------- --------------- --------------- ---------------
Balance,
December 31, 1997 $ 3,410,157 $ 45,210 $ 66,848 $ 3,522,215
=============== =============== =============== ===============
Interest Holders' net income (loss)
per SDI
1995 $ .04
===============
1996 $ .06
===============
1997 $ (.11)
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ (476,511) $ 497,802 $ 264,580
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 977,648 293,447 256,183
Change in gas imbalance receivable
and deferred revenues (2,573) 10,667 --
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 43,155 25,810 (273,152)
Increase (decrease) in accounts payable 63,145 (225,200) 249,112
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 604,864 602,526 496,723
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (37,259) (546,923) (1,200,352)
Increase (decrease) in payable related to property acquisition -- (106,662) (2,655,166)
--------------- --------------- ---------------
Net cash provided by (used in) investing activities (37,259) (653,585) (3,856,118)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (659,906) (603,752) (275,602)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (92,301) (654,811) (3,634,997)
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 485,796 1,140,607 4,775,604
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 393,495 $ 485,796 $ 1,140,607
=============== =============== ===============
Supplemental disclosure of noncash investing and financing activities:
Oil and gas properties acquired which were paid for in a
subsequent period $ -- $ -- $ 106,662
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1994-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 30, 1994, for the
purpose of purchasing and operating 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) $799,914, 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 321 Interest Holders made total capital contributions of
$4,775,604.
Generally, all continuing costs (including development costs, operating
costs, 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, 1997.
(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 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 oil and gas property costs. Under this
method of accounting, all productive and nonproductive costs incurred in the
acquisition 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 and development activities. General and
administrative costs related to production and general overhead are expensed as
incurred. No general and administrative costs were capitalized during the years
ended December 31, 1997, 1996 and 1995.
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
Partnership's capitalized oil and gas property costs are amortized.
10
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unamortized cost of oil and gas properties is limited to the
"ceiling limitation", (calculated separately for the Partnership, limited
partners, and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from proved
properties using current prices, discounted at ten percent. Proceeds from the
sale or disposition of oil and gas properties are treated as a reduction of oil
and gas property costs with no gains or losses being recognized except in
significant transactions.
The Partnership computes the provision for depreciation, depletion and
amortization of oil and gas properties on the units-of-production method. Under
this method, the provision is calculated by multiplying the total unamortized
cost of oil and gas properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate that is
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 at the
beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion, and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
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) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the
Partnership's oil and gas operations:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1997 1996 1995
------- ------- ---------
<S> <C> <C> <C>
Acquisition of
proved properties $ -- $ 497,143 $ 1,066,968
Development 37,259 49,780 133,384
------- ------- ---------
$ 37,259 $ 546,923 $ 1,200,352
------- ------- ---------
</TABLE>
All oil and gas property acquisitions are made by Swift on behalf of
the Partnership. The costs of the properties include the purchase price plus any
costs incurred by Swift in the evaluation and acquisition of properties.
11
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In 1996 and 1995, the Partnership acquired interests in producing oil
and gas properties for $497,143 and $1,066,968, which included $67,486 and
$133,943 in 1996 and 1995, respectively, of costs incurred by Swift in the
evaluation and acquisition effort, including costs related to properties not
acquired.
During 1997, the Partnership's unamortized oil and gas property costs
exceeded the quarterly calculations of the "ceiling limitation" resulting in an
additional provision for depreciation, depletion and amortization of $768,909.
In addition, the Interest Holders' share of unamortized oil and gas property
costs exceeded their "ceiling limitation" in 1997 and 1996, resulting in a
valuation allowance of $732,767 and $67,500, respectively. 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 1997, 1996 and 1995, the Partnership paid Swift $71,634, $71,634
and $83,573, respectively, as a general and administrative overhead allowance.
During 1997, 1996 and 1995, the Partnership also paid Swift an
incentive amount, as defined in the Partnership Agreement, for services rendered
to the Partnership. Such amounts totaled $7,464 in 1997, $11,142 in 1996 and
$71,634 in 1995 and are included in general and administrative expenses.
Effective December 31, 1994, the Partnership entered into a Net Profits
and Overriding Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Pension Partners 1994-D, Ltd. ("Pension 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 conveyed to the Pension
Partnership 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.
(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 ordinary income for federal income tax purposes is ultimately
changed by the taxing authorities, the tax liability of the Interest Holders
could be changed accordingly. Ordinary income reported on the Partnership's
federal return of income for the years ended December 31, 1997, 1996 and 1995
was $429,320, $660,106 and $450,899, respectively. The difference between
ordinary income for federal income tax purposes reported by the Partnership and
net income or loss reported herein primarily results from the exclusion of
depletion (as described below) from ordinary income reported in the
Partnership's federal return of income.
12
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For federal income tax purposes, depletion with respect to production
of oil and gas is computed separately by the partners and not by the
Partnership. Since the amount of depletion on the production of oil and gas is
not computed at the Partnership level, depletion 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 leasehold
interests, and thus is treated as a separate item on the partners' Schedule K-1.
Depletion 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) Gas Imbalances -
The Partnership recognizes its ownership interest in natural gas
production as revenue. Actual production quantities sold may be different than
the Partnership's ownership share in a given period. If the Partnership's sales
exceed its ownership share of production, the differences are recorded as
deferred revenue. Gas balancing receivables are recorded when the Partnership's
ownership share of production exceeds sales.
(7) 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.
(8) 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.
13
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, Ltd.
(a Texas Limited Partnership)
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
WITH NOTES
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, Ltd.
INDEX
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS:
<S> <C>
Balance Sheets
- March 31, 1998 and December 31, 1997 3
Statements of Operations
- Three month periods ended March 31, 1998 and 1997 4
Statements of Cash Flows
- Three month periods ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 336,863 $ 393,495
Oil and gas sales receivable 157,965 204,187
--------------- ----------------
Total Current Assets 494,828 597,682
--------------- ----------------
Oil and Gas Properties, using full cost
accounting 4,560,241 4,546,962
Less-Accumulated depreciation, depletion
and amortization (1,599,503) (1,527,279)
--------------- ----------------
2,960,738 3,019,683
--------------- ----------------
$ 3,455,566 $ 3,617,365
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 66,969 $ 87,057
--------------- ----------------
Deferred Revenues 8,093 8,093
Interest Holders' Capital (4,775,604 Interest Holders' SDIs;
$1.00 per SDI) 3,341,556 3,477,005
General Partners' Capital 38,948 45,210
--------------- ----------------
Total Partners' Capital 3,380,504 3,522,215
--------------- ----------------
$ 3,455,566 $ 3,617,365
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES:
Oil and gas sales $ 139,691 $ 277,344
Interest income 4,216 5,466
Other 1,144 1,893
--------------- ---------------
145,051 284,703
--------------- ---------------
COSTS AND EXPENSES:
Lease operating 50,097 74,545
Production taxes 3,544 13,508
Depreciation, depletion
and amortization -
Normal provision 41,759 66,741
Additional provision 30,465 712,148
General and administrative 18,755 29,518
--------------- ---------------
144,620 896,460
--------------- ---------------
NET INCOME (LOSS) $ 431 $ (611,757)
=============== ===============
Limited Partners' net income (loss)
per SDI
March 31, 1998 $ --
==============
March 31, 1997 $ (.13)
==============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 431 $ (611,757)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 72,224 778,889
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 46,222 (16,494)
Increase (decrease) in other current assets -- (5,466)
Increase (decrease) in accounts payable (20,088) 57,964
-------------- --------------
Net cash provided by (used in) operating activities 98,789 203,136
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (13,279) (17,393)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (142,142) (194,817)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (56,632) (9,074)
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 393,495 485,796
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 336,863 $ 476,722
============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, Ltd.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1997 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1994-D, Ltd., a Texas limited
partnership ("the Partnership"), was formed on December 30, 1994, for
the purpose of purchasing and operating 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 interest
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) 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 321 Interest Holders made total capital
contributions of $4,775,604.
Generally, all continuing costs (including development costs,
operating costs, 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.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
6
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, Ltd.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Oil and Gas Properties --
The Partnership accounts for its ownership 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 statement.
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition 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
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the three months ended
March 31, 1998 and 1997.
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 Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is 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 at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective December 31, 1994, the Partnership entered into a
Net Profits and Overriding Royalty Interest Agreement ("NP/OR
Agreement") with Swift Energy Pension Partners 1994-D, Ltd. ("Pension
Partnership"), an affiliated 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 conveyed to
the Pension Partnership 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 the Pension Partnership's proportionate
share of the property acquisition costs.
7
<PAGE>
SWIFT ENERGY OPERATING PARTNERS 1994-D, Ltd.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(5) Gas Imbalances -
The Partnership recognizes its ownership interest in natural
gas production as revenue. Actual production quantities sold may be
different than the Partnership's ownership share in a given period. If
the Partnership's sales exceed its ownership share of production, the
differences are recorded as deferred revenue. Gas balancing receivables
are recorded when the Partnership's ownership share of production
exceeds sales.
(6) Vulnerability Due to Certain Concentrations -
The Company's revenues are primarily the result of sales of
its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
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
<PAGE>
SIGNATURE
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.
Dated: June 5, 1998
Swift Energy Company
By:--------------------------------
Name: John R. Alden
Title: Senior Vice President
<PAGE>
EXHIBIT INDEX
Exhibit
No. Exhibit Description
*23 Consent of Arthur Andersen LLP
*Filed herewith
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated February 10, 1998 listed below, included in this Form 8-K, and
incorporated by reference in Swift Energy Company's Form S-4 Registration
Statement No. 333-50637. It should be noted that we have not audited any
financial statements of the below listed partnerships subsequent to December 31,
1997 or performed any audit procedures subsequent to the date of our reports.
Swift Energy Income Partners 1988-1, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1988-2, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1988-3, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1988-D, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1989-1, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1989-2, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1989-3, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1989-4, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1989-A, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1989-C, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1989-D, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1990-1, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1990-2, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Income Partners 1990-B, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Operating Partners 1991-C, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Operating Partners 1992-A, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Operating Partners 1992-D, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Operating Partners 1993-A, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Operating Partners 1993-C, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Operating Partners 1993-D, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Operating Partners 1994-A, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Operating Partners 1994-B, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Operating Partners 1994-C, Ltd., Annual Report for the Year Ended
12/31/97
Swift Energy Operating Partners 1994-D, Ltd., Annual Report for the Year Ended
12/31/97
ARTHUR ANDERSEN LLP
Houston, Texas
June 4, 1998
