<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission File number 33-15998-02
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-B, LTD.
(Exact name of registrant as specified in its charter)
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<S> <C>
Texas 76-0261807
(State or other jurisdiction of organization) (I.R.S. Employer Identification No.)
</TABLE>
16825 Northchase Drive, Suite 400
Houston, Texas 77060
(Address of principal executive offices)
(Zip Code)
(713)874-2700
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-B, LTD.
INDEX
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PART I. FINANCIAL INFORMATION PAGE
ITEM 1. Financial Statements
Balance Sheets
- September 30, 1996 and December 31, 1995 3
Statements of Operations
- Three month and nine month periods ended September 30, 1996 and 1995 4
Statements of Cash Flows
- Nine month periods ended September 30, 1996 and 1995 5
Notes to Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION 10
SIGNATURES 11
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-B, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
--------------- ----------------
(Unaudited)
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ASSETS:
Current Assets:
Cash and cash equivalents $ 1,242 $ 1,206
Nonoperating interests income receivable 28,812 27,428
--------------- ----------------
Total Current Assets 30,054 28,634
--------------- ----------------
Nonoperating interests in oil and gas
properties, using full cost accounting 3,305,156 3,363,418
Less-Accumulated amortization (2,797,880) (2,737,654)
--------------- ----------------
507,276 625,764
--------------- ----------------
$ 537,330 $ 654,398
============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Payable related to property capital costs $ 56,081 $ 141,306
--------------- ----------------
Partners' Capital 481,249 513,092
--------------- ----------------
$ 537,330 $ 654,398
============== ================
</TABLE>
See accompanying notes to financial statements.
3
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-B, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
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<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1996 1995 1996 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Income from nonoperating interests $ 37,453 $ 29,310 $ 109,534 $ 92,907
Interest income 15 17 36 38
--------------- --------------- --------------- ---------------
37,468 29,327 109,570 92,945
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Amortization 20,391 36,636 60,226 142,457
General and administrative 8,002 10,295 26,970 23,236
--------------- --------------- --------------- ---------------
28,393 46,931 87,196 165,693
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ 9,075 $ (17,604) $ 22,374 $ (72,748)
=============== =============== =============== ================
Limited Partners' net income (loss)
per unit $ .25 $ (.48) $ .62 $ (2.00)
=============== =============== =============== ================
</TABLE>
See accompanying note to financial statements.
4
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-B, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
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<CAPTION>
Nine Months Ended
September 30,
----------------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 22,374 $ (72,748)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Amortization 60,226 142,457
Change in assets and liabilities:
(Increase) decrease in nonoperating interests income receivable (1,384) (591)
Increase (decrease) in accounts payable
and accrued liabilities -- (1,075)
-------------- --------------
Net cash provided by (used in) operating activities 81,216 68,043
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to nonoperating interests in oil and gas properties (10,928) (20,622)
Proceeds from sale of nonoperting interests
in oil and gas properties 69,190 10,853
Payable related to property capital costs (85,225) 9,710
-------------- --------------
Net cash provided by (used in) investing activities (26,963) (59)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (54,217) (67,945)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 36 39
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,206 1,140
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,242 $ 1,179
============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 4,426 $ 5,310
============== ===============
</TABLE>
See accompanying notes to financial statements.
5
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-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, 1995
which has been taken from the audited financial statements at that date. The
financial statements reflect adjustments, all of which were of a normal
recurring nature, which are, in the opinion of the managing general partner
necessary for a fair presentation. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The Partnership believes
adequate disclosure is provided by the information presented. The financial
statements should be read in conjunction with the audited financial statements
and the notes included in the latest Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Managed Pension Assets Partnership 1988-B, Ltd., a Texas
limited partnership (the Partnership), was formed on September 14, 1988, for the
purpose of purchasing net profits interest, overriding royalty interests and
royalty interests (collectively, "nonoperating interests") in producing oil and
gas properties within the continental United States. Swift Energy Company
("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a California
corporation, serve as Managing General Partner and Special General Partner of
the Partnership, respectively. The general partners are required to contribute
up to 1/99th of limited partner net contributions. The 331 limited partners made
total capital contributions of $3,631,145.
Nonoperating interests acquisition costs and the management fee are borne
99 percent by the limited partners and one percent by the general partners.
Organization and syndication costs were borne solely by the limited partners.
Generally, all continuing costs (including development costs, operating
costs, general and administrative reimbursements and direct expenses) and
revenues are allocated 90 percent to the limited partners and ten percent to the
general partners. If prior to partnership payout, however, the cash distribution
rate for a certain period equals or exceeds 17.5 percent, then for the following
calendar year, these continuing costs and revenues will be allocated 85 percent
to the limited partners and 15 percent to the general partners. After
partnership payout, continuing costs and revenues will be shared 85 percent by
the limited partners, and 15 percent by the general partners, even if the cash
distribution rate is less than 17.5 percent.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
estimates.
6
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Nonoperating Interests in Oil and Gas Properties --
For financial reporting purposes the Partnership follows the "full-cost"
method of accounting for nonoperating interests in oil and gas property costs.
Under this method of accounting, all costs incurred in the acquisition of
nonoperating interests in oil and gas properties are capitalized. The
unamortized cost of nonoperating interests in oil and gas properties is limited
to the "ceiling limitation" (calculated separately for the Partnership, limited
partners and general partners). The "ceiling limitation" is calculated on a
quarterly basis and represents the estimated future net revenues from
nonoperating interests in proved properties using current prices discounted at
ten percent. Proceeds from the sale or disposition of nonoperating interests in
oil and gas properties are treated as a reduction of the cost of the
nonoperating interests with no gains or losses recognized except in significant
transactions.
The Partnership computes the provision for amortization of oil and gas
properties on the units-of-production method. Under this method, the provision
is calculated by multiplying the total unamortized cost of oil and gas
properties by an overall rate determined by dividing the physical units of oil
and gas produced during the period by the total estimated proved oil and gas
reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision for
depreciation, depletion and amortization is based on estimates of proved
reserves. There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates of production, timing and
plan of development. The accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Results of drilling, testing and production subsequent to the date of
the estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer
Manager, received $88,279 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $90,779 was
paid to Swift for services performed for the Partnership.
The Partnership entered into a Net Profits and Overriding
Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy Income
Partners 1988-C, Ltd. (Operating Partnership), managed by Swift, for the
purpose of acquiring nonoperating interests in producing oil and gas
properties. Under terms of the NP/OR Agreement, the Operating
Partnership will convey to the Partnership nonoperating interests in the
aggregate net profits (i.e., oil and gas sales net of related operating
costs) of the properties acquired equal to its proportionate share of
the property acquisition costs.
(5) Vulnerability Due to Certain Concentrations -
The Company's revenues are primarily the result of sales of
its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
The Partnership extends credit to various companies in the oil
and gas industry which results in a concentration of credit risk. This
concentration of credit risk may be affected by changes in economic or
other conditions and may accordingly impact the Partnership's overall
credit risk. However, the Managing General Partner believes that the
risk is mitigated by the size, reputation, and nature of the companies
to which the Partnership extends credit. In addition, the Partnership
generally does not require collateral or other security to support
customer receivables.
(6) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
7
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-B, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Partnership is formed for the purpose of investing in nonoperating
interests in producing oil and gas properties located within the continental
United States. In order to accomplish this, the Partnership goes through two
distinct yet overlapping phases with respect to its liquidity and results of
operations. When the Partnership is formed, it commences its "acquisition"
phase, with all funds placed in short-term investments until required for the
acquisition of nonoperating interests. Therefore, the interest earned on these
pre-acquisition investments becomes the primary cash flow source for initial
partner distributions. As the Partnership acquires nonoperating interests in
producing properties, net cash from ownership of nonoperating interests becomes
available for distribution, along with the investment income. After all
partnership funds have been expended on nonoperating interests in producing oil
and gas properties, the Partnership enters its "operations" phase. During this
phase, income from nonoperating interests in oil and gas sales generates
substantially all revenues, and distributions to partners reflect those revenues
less all associated partnership expenses. The Partnership may also derive
proceeds from the sale of nonoperating interests in acquired oil and gas
properties, when the sale of such interests is economically appropriate or
preferable to continued operations.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has completed acquisition of nonoperating interests in
producing oil and gas properties, expending all of the limited partners'
commitments available for acquisitions.
Under the NP/OR Agreement, the Managing General Partner acquires interests
in oil and gas properties from outside parties and sells these interests to an
affiliated operating partnership, who in turn creates and sells to the
Partnership nonoperating interests in these same oil and gas properties.
RESULTS OF OPERATIONS
The following analysis explains changes in the revenue and expense
categories for the quarter ended September 30, 1996 (current quarter) when
compared to the quarter ended September 30, 1995 (corresponding quarter), and
for the nine months ended September 30, 1996 (current period), when compared to
the nine months ended September 30, 1995 (corresponding period).
Three Months Ended September 30, 1996 and 1995
Income from nonoperating interests increased 28 percent in the current
quarter of 1996 when compared to the third quarter in 1995. Oil and gas sales
increased $9,226 or 18 percent in the current quarter of 1996 when compared to
the corresponding quarter in 1995, primarily due to increased gas and oil
prices. An increase in gas prices of 62 percent or $.87/MCF and in oil prices of
40 percent or $5.73/BBL had a significant impact on partnership performance.
Current quarter gas and oil production decreased 19 percent and 39 percent,
respectively, when compared to third quarter 1995 production volumes, partially
offsetting the increased revenues from increased gas and oil prices.
Associated amortization expense decreased 11 percent or $2,454.
The Partnership recorded an additional provision in amortization in the
third quarter of 1995 for $13,791 when the present value, discounted at ten
percent, of estimated future net revenues from oil and gas properties, using the
guidelines of the Securities and Exchange Commission, was below the fair market
value originally paid for oil and gas properties. The additional provision
results from the Managing General Partner's determination that the fair market
value paid for properties may or may not coincide with reserve valuations
determined according to guidelines of the Securities Exchange Commission.
8
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-B, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Nine Months Ended September 30, 1996 and 1995
Income from nonoperating interests increased 18 percent in the current
period of 1996 when compared to the corresponding period in 1995. Oil and gas
sales increased $10,059 or 6 percent in the first nine months of 1996 over the
corresponding period in 1995. An increase in gas prices of 49 percent or
$.71/MCF and in oil prices of 21 percent or $3.09/BBL were major contributing
factors to the increased revenues for the period. Also, current period gas
production decreased 27 percent when compared to the corresponding period in
1995, partially offsetting the effect of increased gas and oil prices.
Associated amortization expense decreased 20 percent or $15,101.
The Partnership recorded an additional provision in amortization in the
first nine months of 1995 for $67,130 when the present value, discounted at ten
percent, of estimated future net revenues from oil and gas properties, using the
guidelines of the Securities and Exchange Commission, was below the fair market
value originally paid for oil and gas properties. The additional provision
results from the Managing General Partner's determination that the fair market
value paid for properties may or may not coincide with reserve valuations
determined according to guidelines of the Securities Exchange Commission.
During 1996, partnership revenues and costs will be shared between the
limited partners and general partners in a 90:10 ratio.
9
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-B, LTD
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-NONE-
10
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1988-B, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
Managing General Partner
Date: November 6, 1996 By: /s/ John R. Alden
---------------- --------------------------------
John R. Alden
Senior Vice President, Secretary
and Principal Financial Officer
Date: November 6, 1996 By: /s/ Alton D. Heckaman, Jr.
---------------- --------------------------------
Alton D. Heckaman, Jr.
Vice President, Controller
and Principal Accounting Officer
11
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Swift Enerty
Pension Partners 1998-B, Ltd's Balance Sheet and Statement of Operations
contained in its Form 10-Q for the quarter ended September 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,242
<SECURITIES> 0
<RECEIVABLES> 28,812
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,054
<PP&E> 3,305,156
<DEPRECIATION> (2,797,880)
<TOTAL-ASSETS> 537,330
<CURRENT-LIABILITIES> 56,081
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 481,249
<TOTAL-LIABILITY-AND-EQUITY> 537,330
<SALES> 109,534
<TOTAL-REVENUES> 109,570
<CGS> 0
<TOTAL-COSTS> 60,226<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,374
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,374
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,374
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes lease operating expenses, production taxes and depreciation deple-
tion and amortization expense. Excludes general and administrative and interest
expense.
</FN>
</TABLE>
