<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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission File number 33-19721-03
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
(Exact name of registrant as specified in its charter)
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<S> <C>
Texas 76-0282459
(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)
(281)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 1989-1, LTD.
INDEX
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<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
ITEM 1. Financial Statements
Balance Sheets
- September 30, 1997 and December 31, 1996 3
Statements of Operations
- Three and nine month periods ended September 30, 1997 and 1996 4
Statements of Cash Flows
- Nine month periods ended September 30, 1997 and 1996 5
Notes to Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 11
SIGNATURES 12
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
BALANCE SHEETS
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<CAPTION>
September 30, December 31,
1997 1996
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 137,079 $ 154,086
Nonoperating interests income receivable 133,733 208,883
--------------- ----------------
Total Current Assets 270,812 362,969
--------------- ----------------
Nonoperating interests in oil and gas
properties, using full cost accounting 3,105,682 3,080,195
Less-Accumulated amortization (1,964,763) (1,833,768)
--------------- ----------------
1,140,919 1,246,427
--------------- ----------------
$ 1,411,731 $ 1,609,396
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Payable related to excess costs $ 3,971 $ 6,924
--------------- ----------------
Partners' Capital 1,407,760 1,602,472
--------------- ----------------
$ 1,411,731 $ 1,609,396
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
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<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Income from nonoperating interests $ 100,500 $ 121,656 $ 313,988 $ 401,039
Interest income 1,666 528 5,352 592
--------------- --------------- --------------- ---------------
102,166 122,184 319,340 401,631
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Amortization 43,988 46,080 130,995 146,826
General and administrative 11,914 13,559 49,083 41,494
--------------- --------------- --------------- ---------------
55,902 59,639 180,078 188,320
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ 46,264 $ 62,545 $ 139,262 $ 213,311
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ 1.42 $ 1.91 $ 4.26 $ 6.53
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
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<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 139,262 $ 213,311
Adjustments to reconcile income (loss) to
net cash provided by operations:
Amortization 130,995 146,826
Change in assets and liabilities:
(Increase) decrease in nonoperating interests income receivable 26,300 (27,716)
(Increase) decrease in other current assets 48,850 --
--------------- ---------------
Net cash provided by (used in) operating activities 345,407 332,421
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to nonoperating interests in oil and gas properties (27,251) (78,004)
Proceeds from sale of nonoperating interests
in oil and gas properties 1,764 129,401
Increase (decrease) in payable related to excess costs (2,953) (120,978)
--------------- ---------------
Net cash provided by (used in) investing activities (28,440) (69,581)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (333,974) (167,676)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17,007) 95,164
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 154,086 1,206
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 137,079 $ 96,370
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- $ 883
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 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, 1996 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 Managed Pension Assets Partnership 1989-1, Ltd.,
a Texas limited partnership ("the Partnership"), was formed on May 31,
1989, for the purpose of purchasing net profits interests, 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 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 343 limited partners
made total capital contributions of $3,267,837.
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. 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 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.
(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. Certain reclassifications have been
made to prior year amounts to conform to the present year presentation.
6
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, 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 -
Affiliates of the Special General Partner, as Dealer Manager,
received $80,133 for managing and overseeing the offering of the limited
partnership units. A one-time management fee of $81,696 was paid to
Swift for services performed for the Partnership.
The Partnership entered into a Net Profits and Overriding
Royalty Interests Agreement ("NP/OR Agreement") with Swift Energy Income
Partners 1989-2, Ltd. and Swift Energy Income Partners 1989-1, Ltd.
("Operating Partnerships"), 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 Partnerships 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.
7
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(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
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Partnership is formed for the purpose of investing in nonoperating
interests in producing oil and gas properties located within the continental
United States. In order to accomplish this, the Partnership goes through two
distinct yet overlapping phases with respect to its liquidity and results of
operations. When the Partnership is formed, it commences its "acquisition"
phase, with all funds placed in short-term investments until required for the
acquisition of nonoperating interests. Therefore, the interest earned on these
pre-acquisition investments becomes the primary cash flow source for initial
partner distributions. As the Partnership acquires nonoperating interests in
producing properties, net cash from ownership of nonoperating interests becomes
available for distribution, along with the investment income. After all
partnership funds have been expended on nonoperating interests in producing oil
and gas properties, the Partnership enters its "operations" phase. During this
phase, income from nonoperating interests in oil and gas sales generates
substantially all revenues, and distributions to partners reflect those revenues
less all associated partnership expenses. The Partnership may also derive
proceeds from the sale of nonoperating interests in acquired oil and gas
properties, when the sale of such interests is economically appropriate or
preferable to continued operations.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has completed the acquisition of nonoperating interests in
producing oil and gas properties, expending all of the limited partners' net
commitments available for property acquisitions.
Under the NP/OR Agreement, the Managing General Partner acquires interests
in oil and gas properties from outside parties and sells these interests to an
affiliated operating partnership, who in turn creates and sells to the
Partnership nonoperating interests in these same oil and gas properties. The
Managing General Partner expects funds available from net profits interests to
be distributed to the partners.
RESULTS OF OPERATIONS
The following analysis explains changes in the revenue and expense
categories for the quarter ended September 30, 1997 (current quarter) when
compared to the quarter ended September 30, 1996 (corresponding quarter), and
for the nine months ended September 30, 1997 (current period), when compared to
the nine months ended September 30, 1996 (corresponding quarter).
Three Months Ended September 30, 1997 and 1996
Income from nonoperating interests decreased 17 percent in the current
quarter of 1997 when compared to the third quarter in 1996. Oil and gas sales
declined $23,742 or 14 percent in the third quarter of 1997 when compared to the
corresponding quarter in 1996, primarily due to decreased gas and oil prices. A
decline of 15 percent or $.45/MCF in gas prices and 13 percent or $2.91/BBL in
oil prices had a significant impact on partnership performance. Also, current
quarter gas production declined 10 percent when compared to third quarter 1996
gas production, further contributing to decreased revenues.
Associated amortization expense decreased 5 percent or $2,092.
9
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Nine Months Ended September 30, 1997 and 1996
Income from nonoperating interests decreased 22 percent in the current
period of 1997 when compared to the corresponding period in 1996. Oil and gas
sales decreased $80,511 or 15 percent in the first nine months of 1997 over the
corresponding period in 1996. A decline of 18 percent in gas production and 13
percent in oil production were major contributing factors to the decreased
revenues for the period. Decreased oil prices of 2 percent or $.31/BBL further
contributed to the decreased revenues.
Associated amortization expense declined 11 percent or $15,831.
During 1997, partnership revenues and costs will be shared between the
limited partners and general partners in a 90:10 ratio.
10
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1989-1, LTD.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-NONE-
11
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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 1989-1, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
Managing General Partner
Date: November 4, 1997 By: /s/ John R. Alden
---------------- ---------------------------------------
John R. Alden
Senior Vice President, Secretary
and Principal Financial Officer
Date: November 4, 1997 By: /s/ Alton D. Heckaman, Jr.
---------------- ---------------------------------------
Alton D. Heckaman, Jr.
Vice President, Controller
and Principal Accounting Officer
12
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Swift Energy
Manged Pension Assets Partnership 1989-1, Ltd.'s balance sheet and statement of
operations contained in its Form 10-Q for the quarter ended September 30, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 137,079
<SECURITIES> 0
<RECEIVABLES> 133,733
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 270,812
<PP&E> 3,105,682
<DEPRECIATION> (1,964,763)
<TOTAL-ASSETS> 1,411,731
<CURRENT-LIABILITIES> 3,971
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,407,760
<TOTAL-LIABILITY-AND-EQUITY> 1,411,731
<SALES> 313,988
<TOTAL-REVENUES> 319,340
<CGS> 0
<TOTAL-COSTS> 130,995<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 139,262
<INCOME-TAX> 0
<INCOME-CONTINUING> 139,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,262
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes lease operating expenses, production taxes and depreciation,
depletion and amortization expense. Excludes general and administrative and
interest expense.
</FN>
</TABLE>
