<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, 1998
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 0-19251
SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1990-B LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Texas 76-0307500
(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 1990-B, LTD.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
ITEM 1. Financial Statements
Balance Sheets
- September 30, 1998 and December 31, 1997 3
Statements of Operations
- Three month and nine month periods ended September 30, 1998 and 1997 4
Statements of Cash Flows
- Nine month periods ended September 30, 1998 and 1997 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 1990-B, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 256,136 $ 193,882
Nonoperating interests income receivable 74,148 121,163
Other 8,539 --
--------------- ----------------
Total Current Assets 338,823 315,045
--------------- ----------------
Nonoperating interests in oil and gas
properties, using full cost accounting 3,932,052 4,060,603
Less-Accumulated amortization (3,403,992) (3,332,818)
--------------- ----------------
528,060 727,785
--------------- ----------------
$ 866,883 $ 1,042,830
=============== ================
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 7,245 $ 4,930
--------------- ----------------
Limited Partners' Capital (32,590.02 Limited Partnership Units;
$100 per unit) 835,179 999,776
General Partners' Capital 24,459 38,124
--------------- ----------------
Total Partners' Capital 859,638 1,037,900
--------------- ----------------
$ 866,883 $ 1,042,830
=============== ================
</TABLE>
See accompanying notes to financial statements.
3
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1990-B, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Income from nonoperating interests $ 47,451 $ 94,109 $ 159,002 $ 320,557
Interest income 3,968 1,387 10,318 2,945
--------------- --------------- --------------- ---------------
51,419 95,496 169,320 323,502
--------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Amortization 23,065 37,378 71,174 131,293
General and administrative 11,320 13,743 39,501 47,048
--------------- --------------- --------------- ---------------
34,385 51,121 110,675 178,341
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ 17,034 $ 44,375 $ 58,645 $ 145,161
=============== =============== =============== ===============
Limited Partners' net income (loss)
per unit $ .52 $ 1.36 $ 1.80 $ 4.45
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1990-B, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (Loss) $ 58,645 $ 145,161
Adjustments to reconcile income (loss) to
net cash provided by operations:
Amortization 71,174 131,293
Change in assets and liabilities:
(Increase) decrease in nonoperating interests income receivable 47,015 10,839
(Increase) decrease in other current assets (8,539) --
Increase (decrease) in accounts payable 2,315 598
--------------- ---------------
Net cash provided by (used in) operating activities 170,610 287,891
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to nonoperating interests in oil and gas properties (20,944) --
Proceeds from sale of nonoperating interests in oil and gas properties 149,495 4,115
--------------- ---------------
Net cash provided by (used in) investing activities 128,551 4,115
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (236,907) (222,421)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 62,254 69,585
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 193,882 31,415
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 256,136 $ 101,000
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 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 Managed Pension Assets Partnership 1990-B, Ltd.,
a Texas limited partnership ("the Partnership"), was formed on June 30,
1990, 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 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 345 limited partners
made total capital contributions of $3,259,002.
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
1993, 1992 and 1991, the cash distribution rate (as defined in the
Partnership Agreement) exceeded 17.5 percent and thus, in 1994, 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 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. Certain reclassifications have been
made to prior year amounts to conform to the current year presentation.
6
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1990-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Nonoperating Interests in Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
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 $81,475 for managing and overseeing the offering of
the limited partnership units. A one-time management fee of $81,475 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 1990-B, 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 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.
7
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1990-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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.
(7) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the year 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership Year 2000 compliant. These steps include
upgrading, testing and certifying computer systems and field operation
services and obtaining Year 2000 compliance certification from all
important business suppliers. The Managing General Partner formed a task
force during the year to address the Year 2000 issue to ensure that all
of its business systems are Year 2000 compliant by mid-1999 with mission
critical systems projected to be compliant by the end of 1998.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase will be conducted as the software is updated or certified
and is expected to be complete by mid-1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, liquidity and financial condition. The estimated total cost
to the Managing General Partner to address Year 2000 issues is projected
to be less than $150,000, most of which will be spent during the testing
phase in the next nine months. The Partnership's share of this cost is
expected to be insignificant.
The failure to correct a material Year 2000 problem could
result in an interruption, or a failure of, certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. The
Managing General Partner is uncertain, however, as to the impact that
the Year 2000 issue will have on field operations or as to how the
Managing General Partner or the Partnership will be indirectly affected
by the impact that the Year 2000 issue will have on companies with which
it conducts business. For example, the pipeline operators to whom the
Managing General Partner sells the Partnership's natural gas, as well as
other customers and suppliers, could be prone to Year 2000 problems that
could not be assessed or detected by the Managing General Partner. The
Managing General Partner plans to contact its major purchasers,
customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be Year 2000 compliant
and whether they will be able to resolve in a timely manner any Year
2000 problems. Based upon these responses and any problems that arise
during the testing phase, contingency plans or back-up systems would be
determined and addressed.
8
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1990-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
Oil and gas reserves are depleting assets and therefore often experience
significant production declines each year from the date of acquisition through
the end of the life of the property. The primary source of liquidity to the
Partnership comes almost entirely from the income generated from the sale of oil
and gas produced from ownership interests in oil and gas properties. Net cash
provided by operating activities totaled $170,610 and $287,891 for the nine
months ended September 30, 1998 and 1997, respectively. This source of liquidity
and the related results of operations, and in turn cash distributions, will
decline in future periods as the oil and gas produced from these properties also
declines while production and general and administrative costs remain relatively
stable making it unlikely that the Partnership will hold the properties until
they are fully depleted, but will likely liquidate when a substantial majority
of the reserves have been produced. Cash provided by property sale proceeds
totaled $149,495 for the nine months ended September 30, 1998. The Partnership
has expended all of the partners' net commitments available for property
acquisitions and development by acquiring producing oil and gas properties. The
partnership invests primarily in proved producing properties with nominal levels
of future costs of development for proven but undeveloped reserves. Significant
purchases of additional reserves or extensive drilling activity are not
anticipated. Cash distributions totaled $236,907 and $222,421 for the nine
months ended September 30, 1998 and 1997, respectively.
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, 1998 (current quarter) when
compared to the quarter ended September 30, 1997 (corresponding quarter), and
for the nine months ended September 30, 1998 (current period), when compared to
the nine months ended September 30, 1997 (corresponding period).
Three Months Ended September 30, 1998 and 1997
Income from nonoperating interests decreased 50 percent in the third
quarter of 1998 when compared to the same quarter in 1997. Oil and gas sales
declined $57,645 or 44 percent in the third quarter of 1998 when compared to the
corresponding quarter in 1997, primarily due to decreased gas and oil
production. Gas production decreased 25 percent and oil production declined 40
percent. The decrease in production volumes had a significant impact on
partnership performance. The partnership's sale of several properties in the
fourth quarter of 1997 and the first quarter of 1998 had an impact on 1998
partnership production volumes. Also, current quarter gas and oil prices
declined 20 percent or $.50/MCF and 35 percent or $5.95/BBL, respectively,
further contributing to decreased revenues.
9
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SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1990-B, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Associated amortization expense decreased 38 percent or $14,313 in 1998
compared to third quarter 1997, also related to the decline in production
volumes.
Nine Months Ended September 30, 1998 and 1997
Income from nonoperating interests decreased 50 percent in the first nine
months of 1998 when compared to the same period in 1997. Oil and gas sales
declined $191,844 or 44 percent in the first nine months of 1998 compared to the
corresponding period in 1997, primarily due to decreased gas and oil production.
Gas production decreased 30 percent and oil production declined 30 percent. The
decrease in production volumes had a significant impact on partnership
performance. The partnership's sale of several properties in the fourth quarter
of 1997 and the first quarter of 1998 had an impact on 1998 partnership
production volumes. Also, current period gas and oil prices declined 14 percent
or $.33/MCF and 34 percent or $6.20/BBL, respectively, further contributing to
decreased revenues.
Associated amortization expense decreased 46 percent or $60,119 in 1998
compared to the first nine months of 1997, also related to the decline in
production volumes.
During 1998, 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 1990-B, 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 1990-B, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
Managing General Partner
Date: November 4, 1998 By: /s/ John R. Alden
---------------- ---------------------------------------
John R. Alden
Senior Vice President, Secretary
and Principal Financial Officer
Date: November 4, 1998 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
Managed Pension Assets Partnership 1990-B, Ltd.'s balance sheet and statement of
operations contained in its Form 10-Q for the quarter ended September 30, 1998
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 256,136
<SECURITIES> 0
<RECEIVABLES> 74,148
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 338,823
<PP&E> 3,932,052
<DEPRECIATION> (3,403,992)
<TOTAL-ASSETS> 866,883
<CURRENT-LIABILITIES> 7,245
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 859,638
<TOTAL-LIABILITY-AND-EQUITY> 866,883
<SALES> 159,002
<TOTAL-REVENUES> 169,320
<CGS> 0
<TOTAL-COSTS> 71,174<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 58,645
<INCOME-TAX> 0
<INCOME-CONTINUING> 58,645
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,645
<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>
