SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)of the Securities Exchange Act of 1934
(Amendment No. 2)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Swift Energy Managed Pension Assets Partnership 1990-D, Ltd.
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(Name of Registrant as Specified In Its Charter)
Swift Energy Company
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(4).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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September 30, 1997
Dear Limited Partner:
Enclosed is a proxy statement and related information pertaining to a
proposal to sell all of the Partnership's properties and dissolve and liquidate
the Partnership. In order for the sale and liquidation to take place, Limited
Partners holding a majority of the outstanding Units must approve this proposal.
It is important that you review the enclosed materials before voting on the
proposal. The Managing General Partner recommends that you vote in favor of such
sale and liquidation for a number of reasons. See "The Proposal--Reasons for the
Proposal" and "--Recommendation of the Managing General Partner."
Swift Energy Managed Pension Assets Partnership 1990-D, Ltd. has been in
existence for almost seven years, and most of the properties underlying its net
profits interest were purchased by early 1991. No capital is available for any
enhancement activities on the properties in which the Partnership owns
non-operating interests or to produce the proved non-producing reserves on those
properties. The Partnership's interest in proved producing reserves at January
1, 1997 is only 506,000 Mcfe. Thus, even if oil and gas prices were unusually
high, there would be little impact upon the Partnership's ultimate economic
performance. See "The Proposal--Partnership Financial Performance and
Condition." To continue operation of the Partnership means that Partnership
direct and administrative expenses (such as costs of audits, reserve reports,
and Securities and Exchange Commission filings), as well as the cost of
operating the properties in which the Partnership owns an interest, will
continue while revenues continue to decrease, which may decrease the ultimate
funds available for Limited Partners. See "The Proposal--Estimates of
Liquidating Distribution Amount." Liquidation of the Partnership's remaining
assets at this time will accelerate the receipt by the partners of the remaining
cash value of the Partnership.
If Limited Partners holding a majority of the Units approve this proposal,
the Managing General Partner will attempt to complete the sale of all
Partnership properties by the end of the first quarter of 1998.
Included in this package are the most recent financial and other
information prepared regarding the Partnership. If you need any further material
or have questions regarding this proposal, please feel free to contact the
Managing General Partner at (800) 777-2750.
We urge you to complete your Proxy and return it immediately, as your vote
is important in reaching a quorum necessary to have an effective vote on this
proposal. Enclosed is a green Proxy, along with a postage-paid envelope
addressed to the Managing General Partner for your use in voting and returning
your Proxy. Thank you very much.
SWIFT ENERGY COMPANY,
Managing General Partner
By: /s/ A. Earl Swift
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A. Earl Swift
Chairman
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Swift Energy Managed Pension Assets Partnership 1990-D, Ltd.
16825 Northchase Drive, Suite 400
Houston, Texas 77060
(281) 874-2700
NOTICE OF SPECIAL MEETING OF LIMITED PARTNERS
To be held October 30, 1997
Notice is hereby given that a special meeting of limited partners of Swift
Energy Managed Pension Assets Partnership 1990-D, Ltd. (the "Partnership") will
be held at 16825 Northchase Drive, Houston, Texas, on Tuesday, October 30, 1997
at 4:00 p.m. Central Time to consider and vote upon:
The adoption of a proposal for (a) sale of substantially all of the assets
of the Partnership (consisting of its net profits interest), and (b) the
dissolution, winding up and termination of the Partnership (the
"Termination"). All asset sales and the Termination comprise a single
proposal (the "Proposal"), and a vote in favor of the Proposal will
constitute a vote in favor of each of these matters.
A record of limited partners of the Partnership has been taken as of the
close of business on September 15, 1997, and only limited partners of record on
that date will be entitled to notice of and to vote at the meeting, or any
adjournment thereof.
If you do not expect to be present in person at the meeting or prefer to
vote by proxy in advance, please sign and date the enclosed proxy and return it
promptly in the enclosed postage-paid envelope which has been provided for your
convenience. The prompt return of the proxy will ensure a quorum and save the
Partnership the expense of further solicitation.
SWIFT ENERGY COMPANY,
Managing General Partner
/s/ John R. Alden
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JOHN R. ALDEN
Secretary
September 30, 1997
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Swift Energy Managed Pension Assets Partnership 1990-D, Ltd.
16825 Northchase Drive, Suite 400
Houston, Texas 77060-9468
(281) 874-2700
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PROXY STATEMENT
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SUMMARY
This Proxy Statement is being provided by Swift Energy Company, a Texas
corporation (the "Managing General Partner") in its capacity as the Managing
General Partner of Swift Energy Managed Pension Assets Partnership 1990-D, Ltd.
a Texas limited partnership (the "Partnership"), to holders of units of limited
partnership interests representing an initial investment of $100 per Unit in the
Partnership (the "Units"). This Proxy Statement and the enclosed proxy are
provided for use at a special meeting of limited partners (the "Limited
Partners"), and any adjournment of such meeting (the "Meeting") to be held at
16825 Northchase Drive, Houston, Texas, at 4:00 p.m. Central Time on Tuesday,
October 30, 1997. The Meeting is called for the purpose of considering and
voting upon a proposal to (a) sell substantially all of the assets of the
Partnership (consisting of its net profits interest), and (b) dissolve, wind up
and terminate the Partnership (the "Proposal"), in accordance with the terms and
provisions of Article XVI of the Partnership's Limited Partnership Agreement
dated December 31, 1990 (the "Partnership Agreement"), and the Texas Revised
Limited Partnership Act (the "Texas Act"). This Proxy Statement and the enclosed
proxy are first being mailed to Limited Partners on or about October 6, 1997.
Under Article XVI.C of the Partnership Agreement, the affirmative vote of
Limited Partners holding at least 51% of the Units then held by Limited Partners
as of the Record Date (as defined) is required for approval of the Proposal.
Each Limited Partner appearing on the Partnership's records as of September 15,
1997 (the "Record Date"), is entitled to notice of the Meeting and is entitled
to one vote for each Unit held by such Limited Partner. Under Article XX.H of
the Partnership Agreement, the General Partners may not vote any Units owned by
them for matters such as the Proposal. VJM Corporation, a California
corporation, the Special General Partner of the Partnership, owns a 1% interest
in the Partnership as a General Partner, but owns no Units. The Managing General
Partner currently owns approximately 4.14% of all outstanding Units. Therefore,
the affirmative vote of holders of 51% of the remaining Units is required to
approve the proposed sale.
The working interest in the producing oil and gas properties in which the
Partnership owns the Property Interests is owned by an affiliated companion
partnership, Swift Energy Income Partners 1990-D, Ltd. (the "Operating
Partnership"). The Partnership's assets consist of a net profits interest that
covers multiple working interests, and which may be divided into multiple net
profits interests if the Operating Partnership separately sells one or more of
its working interests burdened by the net profits interest (the "Property
Interests"). Upon approval of the Proposal by the Limited Partners, the Managing
General Partner intends to sell substantially all of the Partnership's Property
Interests, together with the Operating Partnership's working interests in the
same properties, in a sale or series of sales, use the proceeds to pay or
provide for the payment of liabilities, and then wind up the affairs of the
Partnership.
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Neither the Managing General Partner nor any of its affiliates will
purchase any of the Partnership's Property Interests at auction or in negotiated
transactions, although it is possible that if a Property Interest cannot be sold
to a third party at auction or on a negotiated basis (which usually occurs
because a property has no appreciable value, often accompanied by the fact that
the property requires expenditures to plug and abandon wells) such Property
Interests may be conveyed to the Managing General Partner or the property's
operator for no consideration if necessary to dispose of such interest. The
Managing General Partner is not currently aware of any Property Interests owned
by the Partnership which are likely to be conveyed in this manner. The total
PV-10 Value of the Partnership's reserves as of December 31, 1996 was $560,688.
The most significant property owned by the Partnership is the Velrex Field in
Schleicher County, Texas, which accounts for approximately 35% of the value of
the Partnership's remaining reserves. During 1996, approximately 78% of the
Partnership's revenue was attributable to natural gas production. For more
information, see the attached Annual Report on Form 10-K for the year ended
December 31, 1996 and the Form 10-Q for the second quarter of 1997.
It is highly likely that the Property Interests will be sold in a series of
sales rather than in a single transaction. All sales of the Partnership's
Property Interests will be made through the auction process or through
negotiated transactions to unaffiliated third parties. The Managing General
Partner anticipates that most of the Partnership's Property Interests will be
sold at auction (together with the working interest owned by the Operating
Partnership) conducted by the Oil & Gas Asset Clearinghouse (the "O&G
Clearinghouse"), or a similar company engaged in auctions of oil and gas
properties, although some of the Partnership's Property Interests may be sold in
negotiated transactions. The Managing General Partner will not begin the sales
process until the Proposal has been approved by the Limited Partners. The
Managing General Partner is asking for approval of the Proposal prior to
offering the Partnership's Property Interests for sale to avoid delay in selling
the Property Interests. Furthermore, as the Managing General Partner must sell
the Partnership's Property Interests in its oil and gas properties together with
the working interests in those same properties owned by the Operating
Partnerships and several other Partnerships which it manages, solicitation of
approval of each purchase offer from all of the partnerships would be
impractical.
It is possible, though unlikely, that less than all of the Partnership's
Property Interests will be sold. See "The Proposal--Steps to Implement the
Proposal--Negotiated Sale." The Managing General Partner anticipates that the
majority of sales will be made by the end of the first quarter of 1998. The sale
of Partnership Property Interests that account for at least 662/3% of the total
value of the Partnership Property Interests will cause the Partnership to
dissolve automatically under the terms of the Partnership Agreement and the
Texas Act. Any Partnership Property Interests that are not sold at auction may
be sold pursuant to negotiated sales to third parties.
Currently there are no buyers for the Property Interests and the price at
which they will be sold has not yet been determined. The Managing General
Partner cannot accurately predict the prices at which the Property Interests
ultimately will be sold. See "The Proposal--Estimates of Liquidating
Distribution Amount." In addition to the foregoing, there are some risks
involved in the Proposal. See "Risk Factors."
PARTNERSHIP PROPERTY INTERESTS
The chart below presents information on those fields in which the
Partnership has a Property Interest which constitutes 10% or more of the
Partnership's PV-10 Value at January 1, 1997. The information below includes the
location of each field, the number of wells and operator(s), together with
information on the percentage of the Partnership's total PV-10 Value ($560,688)
on January 1, 1997 attributable to each of these fields. Information is also
provided regarding the percentage of the Partnership's production for the
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eighteen months ended June 30, 1997 on a volumetric basis from each of these
fields. On a volumetric basis, the percentage of the PV-10 Value at January 1,
1997 of these fields attributable to natural gas ranged between 87.8% and 99.6%
and most of the production from these fields (in excess of 75% in every case
during the past eighteen months) has been natural gas.
Of the remaining nine fields in which the Partnership owns a Property
Interest, three fields each comprise less than 1% of the Partnership's PV-10
Value at January 1, 1997 and the PV-10 Value of each of the other six fields
average 4.2% of the Partnership's PV-10 Value at the same date.
<TABLE>
<CAPTION>
Cody Baker 9
Velrex Bell Ranch Key Other
Field Field Field Field Fields
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<S> <C>
Schleicher Schleicher Schleicher Wheeler TX (26);
County and State County, County, County, County, LA (12);
Texas Texas Texas Texas OK (3)
......................................................
Number of Wells 14 4 9 2 41
......................................................
Operator Swift Swift Swift and Swift Swift and
2 others 5 others
......................................................
% of 1/1/97 PV-10 Value 34.8% 14.3% 13.1% 11.7% 26.1%
......................................................
% of Total Production for
18 months ended 6/30/97
(Vol.) 21.7% 5.8% 12.3% 11.2% 49.0%
.....................................................
.....................................................
</TABLE>
SPECIAL CONSIDERATIONS
Reasons for the Proposal
Sale of the Partnership's assets and liquidation of the Partnership are
being proposed for Limited Partner approval in an attempt to realize the highest
value for the Partnership's Property Interests. The reasons for proposing the
sale of the Partnership's Property Interests at this time are described in
detail under "The Proposal -- Reasons for the Proposal." In summary, these
reasons include: (i) the reduced levels of cash flow from the Partnership's
Property Interests, which has resulted in cash distributions to Limited Partners
since January 1, 1996 of only $62,300; (ii) the inherent decline in hydrocarbons
produced by oil and gas wells over time in the absence of any further capital
expenditures on the properties in which the Partnership has a Property Interest;
(iii) the continuation of certain fixed oil field overhead and operating costs
($27,665 in 1996) which are incurred regardless of the level of production; and
(iv) directs costs (audits, reserve reports, partnership filings) and general
and administrative costs incurred each year ($52,307 in 1996). Because of the
depletion of the Partnership's oil and gas reserves (647,978 Mcfe at January 1,
1997) and current low levels of cash flow, the Managing General Partner believes
that the Partnership's asset base and future net revenues no longer justify the
continuation of the Partnership's operations. It is also the Managing General
Partner's belief that improvements over the last several years in the level of
oil and gas prices, particularly those for natural gas, make this an appropriate
time to consider the sale of the Partnership's Property Interests, and increase
the likelihood of maximizing the value of the Partnership's assets, although the
level of future prices cannot be predicted with any accuracy. By selling its
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Property Interests and liquidating the Partnerships, future overhead, direct and
general administrative costs can be avoided and the receipt of the value of the
Partnership's reserves accelerated so that such funds are received at one time.
Such sale and liquidation is viewed by the Managing General Partner as
preferable to requiring the periodic sale of a portion of its Property Interests
over a long period of time to pay the expenses of future operations and
administration.
Fairness of the Proposal
The Managing General Partner believes that the Proposal to sell the
Partnership's Property Interests and liquidate is fair to Limited Partners for
several reasons. No such transactions will take place unless the Proposal is
approved by a majority of Limited Partners, without the Managing General Partner
voting its 4.14% limited partnership interest. The Partnership's Property
Interests will be sold to the highest third-party bidder at auction or to the
third party which is willing to purchase the interests for the highest price in
a negotiated sale.
Although the estimates contained under "The Proposal--Estimates of
Liquidating Distribution Amount" above show that estimated cash distributions to
Limited Partners (based on net present value) from continued operations over
twenty years would be approximately 4.3% higher than estimated cash
distributions from selling the Partnership's properties and liquidating the
Partnership at this time (based on the "high" range of estimates), the Managing
General Partner believes there is a substantial advantage in receiving the
liquidating distribution in one lump sum currently. The estimates of
distributions from continued operations are based upon current prices. It is
highly likely that over such a long period of time, oil and gas prices will vary
appreciably and possibly widely from the prices used to prepare these estimates.
Continued operations over such a long period of time subject Limited Partners to
the risk of receiving lower levels of cash distributions if oil and gas prices
over this twenty year period are lower on average than those used in preparing
the estimates of cash distributions from continued operations. With no further
capital to invest, continued operations over twenty years subject Limited
Partners to the risks of possible changes in costs or need for workover or
similar or significant remedial work on the properties in which the Partnership
owns Property Interests, for which the Partnership has no capital. The Managing
General Partner also believes that there is an advantage to Limited Partners
taking any funds to be received upon liquidation and redeploying those assets in
other investments, rather than continuing to receive small distributions over
such a long period of time.
THE PROPOSAL INVOLVES CERTAIN RISKS. SEE "RISK FACTORS."
o If the Proposal is approved, the Limited Partners will not have an
opportunity to approve the specific terms of any particular sale of the
Property Interests.
o Currently there are no buyers for the Property Interests and the price at
which they will be sold has not yet been determined. The Managing General
Partner cannot accurately predict the prices at which the Property
Interests ultimately will be sold.
o No minimum prices will be established for most of the Property Interests,
so there is no guarantee that the Property Interests will be sold at or
above their fair market value.
o The sale of the Property Interests is dependent upon the simultaneous sale
of the Operating Partnership's interest in the same properties. The failure
of the Operating Partnership to approve the proposal could significantly
adversely affect the likelihood of the sale of the Property Interests.
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o If the Proposal is adopted, although a final liquidating distribution is
anticipated, the amount thereof is not assured. See "The
Proposal--Estimates of Liquidating Distribution Amount."
If the Proposal is not approved by Limited Partners holding 51% or more of
the Units held by Limited Partners, the Partnership will continue to exist. In
that event, however, due to the expected decline in revenues, the Managing
General Partner estimates that a portion of the Partnership's Property Interests
ranging from an average of 10% to 15% will need to be sold each year in order to
cover future direct costs, operating costs and administrative costs.
LIMITED PARTNERS ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY AND TO RETURN IT TO THE MANAGING GENERAL PARTNER NO LATER
THAN OCTOBER 24, 1997.
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GLOSSARY OF TERMS
Btu means British Thermal Unit, which is a heating equivalent measure for
natural gas.
Mcf means thousand cubic feet of natural gas.
Mcfe means thousand cubic feet of natural gas equivalent, which is determined
using the ratio of one barrel of oil, condensate or natural gas liquids to six
Mcf of natural gas.
Mmbtu means million British Thermal Units, which is a heating equivalent measure
for natural gas.
Net Profits Interest means an interest in oil and gas property which entitles
the owner to a specified percentage share of the Gross Proceeds generated by
such property, net of aggregate operating costs. Under the NP/OR Agreement, the
Partnership receives a Net Profits Interest entitling it to a specified
percentage of the aggregate Gross Proceeds generated by, less the aggregate
operating costs attributable to, those depths of all Producing Properties
acquired pursuant to such agreement that are evaluated at the respective dates
of acquisition to contain Proved Reserves, to the extent such depths underlie
specified surface acreage.
NP/OR Agreement means the form of Net Profits and Overriding Royalty Interest
Agreement entered into between the Partnership and an Operating Partnership
pursuant to which the Partnership acquired a Net Profits Interest, or in certain
instances various Overriding Royalty Interests, from the Operating Partnership
in a group of Producing Properties. The Working Interest in such group of
properties is held by the Operating Partnership.
PV-10 Value means the estimated future net revenue to be generated from the
production of proved reserves discounted to present value using an annual
discount rate of 10%; these amounts are calculated net of estimated production
costs and future development costs, using prices and costs in effect as of a
certain date, without escalation and without giving effect to non-property
related expenses such as general and administrative expenses, debt service,
future income tax expense or depreciation, depletion and amortization.
Producing Properties means Properties (or interests in properties) producing oil
and gas in commercial quantities, or containing shut-in wells capable of such
production, or properties which are acquired as an incidental part of the
acquisition of such properties. Producing Properties shall include associated
well machinery and equipment gathering systems, storage facilities or processing
installations or other equipment and property associated with the production and
field processing of oil or gas. Interests in Producing Properties may include
Working Interests, production payments, Royalty Interests, Overriding Royalty
Interest, Net Profits Interests, and other nonoperating interests. Producing
Properties may include gas gathering lines or pipelines. The geographical limits
of a Producing Property may be enlarged or contracted on the basis of
subsequently acquired geological data to define the productive limits of a
reservoir, or as a result of action by a regulatory agency employing such
criteria as the regulatory agency may determine.
Proved Reserves means those quantities of crude oil, natural gas, and natural
gas liquids which, upon analysis of geologic and engineering data, appear with
reasonable certainty to be recoverable in the future from known oil and gas
reservoirs under existing economic and operating conditions. Proved Reserves are
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limited to those quantities of oil and gas which can be reasonably expected to
be recoverable commercially at current prices and costs, under existing
regulatory practices and with existing conventional equipment and operating
methods.
Royalty Interest means a fractional interest in the gross production, or the
Gross Proceeds therefrom, of oil and gas and other minerals under a lease; free
of any expenses of exploration, development, operation and maintenance.
Working Interest means the operating interest under an oil, gas and mineral
lease or other property interest covering a specific tract or tracts of land.
The owner of a Working Interest has the right to explore for, drill and produce
the oil, gas and other minerals covered by such lease or other property interest
and the obligation to bear the costs of exploration, development, operation or
maintenance applicable to his interest.
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GENERAL INFORMATION
Vote Required
According to the terms of the Partnership Agreement, approval of the
Proposal requires the affirmative vote by the holders of at least 51% of the
Units held by Limited Partners. Therefore, an abstention by a Limited Partner
will have the same effect as a vote against the Proposal. This solicitation is
being made for votes in favor of the Proposal (which will result in liquidation
and dissolution). As of the Record Date, 28,089.79 Units were outstanding and
were held of record by 277 Limited Partners (excluding the Managing General
Partner's Units). Each Limited Partner is entitled to one vote for each Unit
held in his name on the Record Date. Accordingly, the affirmative vote of
holders of at least 14,325.79 Units is required to approve the Proposal. The
Managing General Partner holds 1,214 Units, but, in accordance with Article XX.H
of the Partnership Agreement, the Managing General Partner may not vote its
Units. The Managing General Partner's non-vote, in contrast to abstention by
Limited Partners, will not affect the outcome, because for purposes of adopting
the Proposal its Units are excluded from the total number of voting Units.
The Limited Partners should be aware that once they approve the Proposal
pursuant to this Proxy Statement, they will have no opportunity to evaluate the
actual terms of any specific purchase offers for the Partnership's Property
Interests. See "The Proposal - General" herein. See "The Proposal -- Reasons for
the Proposal" and "The Partnership -- Transactions Between the Managing General
Partner and the Partnership."
Proxies; Revocation
A sample of the form of proxy is included in this Proxy Statement. The
actual proxy to be used to register your vote on the Proposal is the separate
green sheet of paper included with the Proxy Statement. PLEASE USE THE GREEN
PROXY TO VOTE UPON THE PROPOSAL.
If a proxy is properly signed and is not revoked by a Limited Partner, the
Units it represents will be voted in accordance with the instructions of the
Limited Partner. If no specific instructions are given, the Units will be voted
FOR the Proposal. A Limited Partner may revoke his proxy at any time before it
is voted at the Meeting. Any Limited Partner who attends the Meeting and wishes
to vote in person may revoke his proxy at that time. Otherwise, a Limited
Partner must advise the Managing General Partner of revocation of his proxy in
writing, which revocation must be received by the Managing General Partner at
16825 Northchase Drive, Suite 400, Houston Texas 77060 prior to the time the
vote is taken.
No Appraisal or Dissenters' Rights Provided
In connection with the proposal to sell substantially all of its assets and
liquidate the Partnership, Limited Partners are not entitled to any dissenters'
or appraisal rights such as would be available to shareholders in a corporation
engaging in a merger. Dissenting Limited Partners are protected under state law
by virtue of the fiduciary duty of general partners to act with prudence in the
business affairs of the Partnership.
Payment of Liquidating Distributions
Following the approval of the Proposal at the Meeting, Limited Partners
will receive a final liquidating distribution in cash from the Partnership as
soon as practicable after the affairs of the Partnership have been wound up. The
Managing General Partner expects that such payment will be made by year-end
1997. It will not be necessary for Limited Partners to surrender any certificate
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or other documents representing their ownership of Units. Payment will be made
to each Limited Partner identified on the Partnership's records as of the Record
Date, or, upon appropriate written instruction from a Limited Partner, to his
assignee.
Solicitation
The solicitation is being made by the Partnership. The Partnership will
bear the costs of the preparation of this Proxy Statement and of the
solicitation of proxies and such costs will be allocated 90% to the Limited
Partners and 10% to the General Partners with respect to their general
partnership interests pursuant to Article VIII.A(iv). As the Managing General
Partner holds approximately 4.14% of the Units held by all Limited Partners,
4.14% of the costs borne by the Limited Partners will be borne by the Managing
General Partner, in addition to its portion borne as a General Partner.
Solicitations will be made primarily by mail. In addition to solicitations by
mail, a number of regular employees of the Managing General Partner may, if
necessary to ensure the presence of a quorum, solicit proxies in person or by
telephone. The Managing General Partner also may retain a proxy solicitor to
assist in contacting brokers or Limited Partners to encourage the return of
proxies, although it does not anticipate doing so. The costs of this proxy
solicitation, including legal and accounting fees and expenses, printing and
mailing costs, and related costs are estimated to be approximately $20,000.
RISK FACTORS
A Limited Partner considering whether to vote in favor of the Proposal
should give careful consideration to the risks involved, including those
summarized below:
Uncertainty of Liquidating Distributions
While the Managing General Partner is not aware of any unknown liabilities
at this time, should any unexpected liabilities come to light prior to making
the final liquidating distribution, such liabilities could significantly reduce,
or eliminate altogether, such final distribution.
Undetermined Sales Prices; Volatility of Oil and Gas Prices
Limited Partners will not have an opportunity to approve the specific terms
of any particular sale of the Property Interests and anticipated sales prices
for the Property Interests may not be achieved. Should domestic gas prices
strengthen after the sales of the assets, it is possible that more advantageous
sales prices for the properties might have been realized at a later date.
Dependence on Operating Partnership
If the Partnership approves the proposal to sell its properties but the
Operating Partnership does not approve the sale of its Property Interests and
actually sell its interests in the same properties, then the Partnership will be
forced to sell its net profits interest as a single property (or undivided
interests therein). The purchaser or purchasers would have no control as working
interest owners, as the working interest will still be retained by the Operating
Partnership. If this lack of control prevents an economic sale to a third party
of the Partnership's Property Interests, then the Managing General Partner will
again obtain a third party appraisal of the Partnership's Property Interests
from J.R. Butler and purchase those properties itself for the appraised price.
Therefore, the likelihood of sale of the Partnership's Property Interests will
be significantly affected by the ability of the Partnership and its companion
Operating Partnership to sell their ownership interests in the same properties
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together, which in turn is dependent upon approval of the proposal being made to
the Partnership and the similar proposal being made simultaneously to the
companion Operating Partnership. Failure to approve the proposal by either
partnership could significantly adversely affect the sale of properties by the
other partnership. See "The Proposal--Simultaneous Proposal to Operating
Partnerships."
Prices Used for Calculation of PV-10 Value of Proved Reserves
The PV-10 Value of the Partnership's proved oil and gas reserves upon which
the estimates of the range of liquidating distributions have been calculated
using an estimate of 1997 average prices without any escalation of $2.25 per
MMBTU. These estimates were based upon pricing scenarios determined by the
Managing General Partner and are not the same as those mandated by the
Securities and Exchange Commission for reserves disclosures under applicable SEC
Rules, which require use of prices at year-end, although the discount rate and
lack of escalation are the same. If estimates of reserves and future net
revenues had been prepared using December 31, 1996 prices, as mandated by the
SEC, reserves, future net revenues and the present value thereof would be
significantly higher. These higher prices have not been used because of the fall
in prices since year-end 1996 and the Managing General Partner's determination
that reserve estimates using 1997 average prices more accurately reflect values
likely to be received upon sale of the Partnership's Property Interests within
the next six months than estimates based upon year-end 1996 prices. If this
assumption is incorrect or prices increase rapidly at the end of 1997, the
estimates of the Partnership's PV-10 Value and proceeds receivable upon
liquidation of its Property Interests are likely to be too low.
10
<PAGE>
THE PROPOSAL
General
The Managing General Partner has proposed that the Partnership's net
profits interest be sold, the Partnership be dissolved and that the Managing
General Partner, acting as liquidator, wind up its affairs and make final
distributions to its partners. The Partnership's assets consist of a net profits
interest (the "Property Interests") in producing oil and gas properties in which
the working interest is owned by an affiliated partnership also managed by the
Managing General Partner and formed at approximately the same time as the
Partnership was organized. The Partnership's non-operating net profits interest
exists by virtue of a Net Profits and Overriding Royalty Interest Agreement
("NP/OR Agreement") dated December 31, 1990 Swift Energy Income Partners 1990-D,
Ltd. (the "Operating Partnership"). The NP/OR Agreement gives the Partnership a
net profits interest in a group of producing properties in which the Operating
Partnership owns the working interests, and entitles the Partnership to receive
a portion of the net profits from operation of the group of producing properties
owned by the Operating Partnership which are subject to the NP/OR Agreement. The
net profits percentage to which the Partnership is entitled is based upon a
percentage of the gross proceeds (reduced by certain costs) from the sale of oil
and gas production from these properties.
The Managing General Partner intends to sell most of the Partnership's
Property Interests through auction conducted by the O&G Clearinghouse or a
similar company, although some of the Partnership's Property Interests might be
sold to a third party in negotiated transactions or to the Managing General
Partner or its affiliates under certain circumstances discussed in detail
herein. The Managing General Partner expects to sell all properties not sold by
auction pursuant to negotiated sales conducted by the Managing General Partner
or a third party engaged to dispose of the Partnership's assets. The
Partnership, if not terminated earlier, will terminate automatically, pursuant
to the terms of the Partnership Agreement, on January 1, 2021.
The Managing General Partner is an independent oil and gas company engaged
in the exploration, development, acquisition and operation of oil and gas
properties, both directly and through partnership and joint venture
arrangements, and therefore holds various interests in numerous oil and gas
properties. Furthermore, the Managing General Partner is the managing general
partner of a number of oil and gas partnerships.
Partnership Financial Performance and Condition
The Partnership owns non-operating Property Interests in producing oil and
gas properties within the continental United States in which Operating
Partnerships managed by the Managing General Partner own the working interests.
By the end of 1991 the Partnership had expended all of its original capital
contributions for the purchase of a Property Interest in oil and gas producing
properties. During 1996 approximately 78% of the Partnership's revenue was
attributable to natural gas production. The Operating Partnership has, from time
to time, performed workovers and recompletions of wells in which the Partnership
has Property Interests, using funds advanced by the Managing General Partner to
perform these operations, a portion of which amounts has been subsequently
repaid from production.
The Limited Partners have made contributions of $2,930,379 in the aggregate
to the Partnership. The Managing General Partner has made capital contributions
with respect to its general partnership interest of $23,340. Additionally,
pursuant to the presentment right set forth in Article XVIII of the Partnership
Agreement, it purchased 1,214 Units from Limited Partners.
11
<PAGE>
From inception through January 31, 1997, the Partnership has made cash
distributions to its Limited Partners totaling $1,391,400. Through January 31,
1997, the Managing General Partner has received cash distributions from the
Partnership of $129,299 with respect to its general partnership interest, and
distributions of $5,202 related to its limited partnership interests. On a per
Unit basis, Limited Partners had received, as of January 31, 1997, $47.48 per
$100 Unit, or approximately 47.48% of their initial capital contributions.
The Partnership acquired its Property Interests at a time when oil and gas
prices and industry projections of future prices were much higher than actually
occurred in subsequent years. As detailed in the Designated Properties
Supplement dated October 18, 1990 regarding Property Interests to be acquired by
the Partnership, when the Managing General Partner projected future oil and gas
prices to evaluate the economic viability of an acquisition, it compared its
forecasts with those made by banks, oil and gas industry sources, the U.S.
government, and other companies acquiring producing properties. Acquisition
decisions for the Partnership were based upon a range of increasing prices that
were within the mainstream of the forecasts made by these outside parties. At
the time that the Partnership's Property Interests covering producing properties
were acquired, prices averaged about $22.88 per barrel of oil and $2.15 per Mcf
of natural gas. Oil and gas prices were expected to escalate during subsequent
years of the Partnership's operations. In general, in 1990 and early 1991, all
of these sources forecasted increases in product prices that were based upon oil
and gas prices at the time, which reflected the invasion of Kuwait by Iraq in
the summer of 1990 and the commencement of hostilities in the Gulf War in 1991.
The majority of the Partnership's Property Interests were acquired during the
fourth quarter of 1990 and the first quarter of 1991 when current prices were
predicted to escalate according to certain parameters from that level. Thus the
majority of properties were bought upon an evaluated weighted average price of
$2.15 per Mcf. The predicted price increases did not occur and prices fell
precipitously from 1991 to 1992. The bulk of the Partnership's reserves were
produced from 1991-1995 during which time the Partnership's oil prices in fact
averaged $16.37 per barrel and natural gas prices averaged approximately $1.75
per Mcf.
The following graphs illustrate the above factors with respect to gas
revenues only, due to the fact that a substantial majority of the Partnership's
production to date being natural gas, the bulk of which was produced during the
years when gas prices were the lowest.
12
<PAGE>
<TABLE>
<CAPTION>
GAS PER MCF
------------------------
YEAR ACTUAL EXPECTED YEAR MCFE
- ---- ------ -------- ---- ------
<S> <C> <C> <C> <C>
1990 1.86 2.04 1990 253497
1991 1.63 2.24 1991 806323
1992 1.80 2.68 1992 704598
1993 1.96 3.19 1993 527436
1994 1.89 3.38 1994 463380
1995 1.44 3.58 1995 357960
1996 2.02 3.79 1996 305494
</TABLE>
[GRAPHIC OMITTED -- Represented by table above.] (Comparison of Gas Prices
Expected in 1990 to Gas Prices Actually Received)
[GRAPHIC OMITTED -- Represented by table above.] (Amounts of Production to Date
Produced by Year)
Lower prices also had an effect on the Partnership's interest in proved
reserves. Estimates of proved reserves represent quantities of oil and gas
which, upon analysis of engineering and geologic data, appear with reasonable
certainty to be recoverable in the future from known oil and gas reservoirs
under existing economic and operating conditions. When economic or operating
conditions change, proved reserves can be revised either up or down. If prices
had risen as predicted, the volumes of oil and gas reserves that are
economically recoverable might have been higher than the year-end levels
actually reported because higher prices typically extend the life of reserves as
production rates from mature wells remain economical for a longer period of
time. Production enhancement projects that are not economically feasible at low
prices can also be implemented as prices rise. At present, because of the small
remaining amount of reserves, further price increases would not have a
significant impact on the Partnership's performance.
As required by the Partnership Agreement, the Partnership expended all of
the partners' net commitments available for property acquisitions many years ago
to acquire Property Interests in producing oil and gas properties. The net
profits paid by the Operating Partnership to the Partnership have been reduced
by amounts used by the Operating Partnership to pay operating and enhancement
costs to the third party operator. These costs relate to the working interests
that were subject to the Partnership's net profits interest. The Managing
General Partner of the Operating Partnership advanced most of these costs
because it felt that such expenditures would increase the value of the
properties in which the Partnership and the Operating Partnership have an
interest. Neither the Operating Partnership's partnership agreement nor the
Partnership's partnership agreement allow additional assessments to be made
against any Limited Partners. No material funds are available at the current
time from Partnership revenues or other sources to enable the Partnership to
make additional capital expenditures and no new capital expenditures are
planned. The Managing General Partner anticipates that if sales of the
Partnership's properties occur, there will be sufficient cash generated by the
sales of the Partnership's properties to make a final liquidating distribution.
13
<PAGE>
Estimates of Liquidating Distribution Amount
It is not possible to accurately predict the prices at which the Property
Interests will be sold. The sales price of the Partnership's net profits
interest or possibly multiple net profits interests may vary. In the latter
case, certain Property Interests might sell for a higher price and others for a
lower price than those estimated below. The projected range of sales prices
below has been based upon estimated future net revenues for the Partnership's
Property Interests, using an estimate of 1997 average prices without any
escalation of $2.25 per Mmbtu. The "high" range of estimated distributions from
liquidation is based upon estimated future net revenues discounted to present
value at 10% per annum. The "low" range is 70% of the "high" range estimate. The
1997 price estimate grew out of the pricing scenarios determined by the Managing
General Partner, which scenarios are used in various circumstances, including
economic modeling of partnership returns and evaluating the economics of
property sales or property acquisitions for the Managing General Partner or for
partnerships managed by the Managing General Partner. These pricing assumptions
vary from those mandated by the Securities and Exchange Commission ("SEC") for
reserves disclosures under applicable SEC rules, which require use of prices at
year-end, although the discount rate and lack of escalation are the same. If
estimates of reserves and future net revenues had been prepared using December
31, 1996 prices, as mandated by the SEC, reserves, future net revenues and the
present value thereof would be significantly higher. The Managing General
Partner has determined not to use these higher prices because current estimates
of 1997 average prices more accurately reflect prices purchasers of properties
are willing to pay, rather than higher values which do not reflect the decrease
in prices since year-end 1996. For example, the weighted average price of gas
received by the Partnership for the first six months of 1997 was $2.36 per Mcf
as compared to $4.68 per Mcf at December 31, 1996. On July 1, the Managing
General Partner's estimated weighted average price of gas for the remainder of
1997 was $2.58 per Mcf.
Set forth in the table below are estimated proceeds that the Partnership
may realize from sales of the Partnership's properties, estimated expenses of
the related dissolution and liquidation of the Partnership, and the estimated
amount of net distributions available for Limited Partners as a result of such
sales.
<TABLE>
<CAPTION>
Range of Limited Partners' Share of Estimated Distributions
from Property Interest Sales and Liquidation
Projected Range
----------------------
Low High
--------- ----------
<S> <C> <C> <C>
Net Sales Proceeds(1) $ 471,000 $ 636,500
Partnership Dissolution Expenses(2) $ (18,000) $ (18,000)
---------- ----------
Net Distributions payable to Limited Partners $ 453,000 $ 618,500
========== ==========
Net Distributions per $100 Unit $ 15.46 $ 21.11
========== ==========
<FN>
- -------------------
(1) Includes cash and net receivables and payables of the Partnership, net of
selling expenses estimated to be 7% of sales proceeds.
(2) Includes Limited Partners' share of all costs associated with dissolution
and liquidation of the Partnership.
</FN>
</TABLE>
14
<PAGE>
If, on the other hand, the Partnership were to retain its Property
Interests and continue to produce those properties until depletion, the table
below estimates the return to Limited Partners, discounted to present value,
based upon the same pricing and discount assumptions used above. The estimates
of the present value of future net distributions have been further reduced by
continuing audit, tax return preparation and reserve engineering fees associated
with continued operations of the Partnership, along with direct and general and
administrative expenses estimated to occur during this time. Such estimates do
not take into account any sale of a portion of the Partnership's Property
Interests necessary in order to generate sufficient cash proceeds to pay
general, administrative and operating expenses, which would reduce the revenues
of the Partnership.
Estimated Share of Limited Partners'
Net Distributions from Continued Operations
Projected
Cash Flows
----------
Future Net Revenues from Net Profits Interest (over 20 years)(1) $ 1,022,500
Partnership Direct and Administrative Expenses(2) $ (64,700)
-------------
Net Distributions to Limited Partners (payable over 20 years)(3) $ 957,800
=============
Net Distributions per $100 Unit(4) $ 32.69
Present Value of Net Distributions per $100 Unit(5) $ 22.02
- -------------------
(1) Includes cash and net receivables and payables of the Partnership. Limited
Partners' future net revenues are based on the reserve estimates at
December 31, 1996 assuming unescalated prices based on predictions of 1997
average prices. To a limited extent, future net revenues may be influenced
by a material change in the selling prices of oil or gas. For further
discussion of this, see "--Reasons for the Proposal." The actual prices
that will be received and the associated costs may be more or less than
those projected. See "The Partnership--Partnership Financial Condition and
Performance."
(2) Includes Limited Partners' share of general and administrative expenses,
and audit, tax, and reserve engineering fees.
(3) Based upon the Partnership's reserves having a projected 20-year life,
assuming flat pricing. To a limited extent, net distributions may be
influenced by a material change in the selling prices of oil or gas. For
further discussion of this, see "--Reasons for the Proposal." The actual
prices that will be received and the associated costs may be more or less
than those projected.
(4) Does not reflect effect of intermittent sales of Property Interests to pay
administrative costs once the properties no longer generate sufficient
revenues to cover such costs. The Managing General Partner estimates that
Property Interests ranging from an average of 10% to 15% of the value of
the Partnership's properties would have to be sold each year to cover such
costs.
(5) Discounted at 10% per annum.
Among factors which can affect the ultimate sales price received for
Partnership Property Interests are the following:
(1) The above cases presume that 100% of the Partnership's Property
Interests will be sold.
15
<PAGE>
(2) In certain instances, the Partnership, together with the Operating
Partnerships which will be offering its working interest in the
properties in which the Partnership owns a Property Interest, will own
a large enough interest in the properties to allow the purchaser to
designate a new operator of the properties, which normally increases
the amount that a purchaser is willing to pay.
(3) Changes in the market for gas or oil may affect the pricing
assumptions used by purchasers in evaluating property value and
possible purchase prices.
(4) Different evaluations of the amount of money required to be spent to
enhance or maintain production may have a significant effect upon the
ultimate purchase price.
(5) In certain instances, the Managing General Partner may set minimum
bidding prices for those properties offered at auction, which may not
be met.
(6) The Managing General Partner may choose to package certain less
attractive properties together with other properties in order to
enhance the likelihood of their sale. Such packaging could result in a
significant discount by prospective purchasers of the value of the
Partnership's more productive properties contained in such packages.
The Partnership Agreement authorizes the Managing General Partner to sell
the Partnership Property Interests at a price that the Managing General Partner
deems reasonable. The proceeds of all sales, to the extent available for
distribution, are to be distributed to the Limited Partners and the General
Partners in accordance with Article XVI.E of the Partnership Agreement as
follows. After use of available proceeds from property sales to reserves for
contingent or unforeseen liabilities of the Partnership, the proceeds are to be
used to repay the capital accounts of the Partners whose capital accounts have
not yet been repaid. The amounts finally distributed will depend on the actual
sales prices received for the Partnership assets, results of operations until
such sales and other contingencies and circumstances.
Fairness of the Proposal; Comparison of Sale Versus Continuing Operations
Based on the above tables, it is estimated that a Limited Partner could
expect to receive from $15.46 to $21.11 per $100 Unit upon immediate sale of the
Partnership Property Interests. In comparison, it is estimated that a Limited
Partner could expect to receive approximately $22.02 per $100 Unit, discounted
to present value ($32.69 per $100 Unit over 20 years on an undiscounted basis)
over the life of its Property Interests, if the Partnership continued
operations.
Although the estimates contained under "The Proposal--Estimates of
Liquidating Distribution Amount" above show that estimated cash distributions to
Limited Partners (based on net present value) from continued operations over
twenty years would be approximately 4.3% higher than estimated cash
distributions from selling the Partnership's properties and liquidating the
Partnership at this time (based on the "high" range of estimates), the Managing
General Partner believes there is a substantial advantage in receiving the
liquidating distribution in one lump sum currently. The estimates of
distributions from continued operations are based upon current prices. It is
highly likely that over such a long period of time, oil and gas prices will vary
appreciably and possibly widely from the prices used to prepare these estimates.
Continued operations over such a long period of time subject Limited Partners to
the risk of receiving lower levels of cash distributions if oil and gas prices
over this twenty year period are lower on average than those used in preparing
the estimates of cash distributions from continued operations. With no further
capital to invest, continued operations over twenty years subject Limited
Partners to the risks of possible changes in costs or need for workover or
similar significant remedial work on the properties in which the Partnership
owns Property Interests, for which the Partnership has no capital. The Managing
General Partner also believes that there is an advantage to Limited Partners
taking any funds to be received upon liquidation and redeploying those assets in
other investments, rather than continuing to receive small distributions over
such a long period of time.
16
<PAGE>
Such estimates are based on December 31, 1996 reserve estimates assuming
unescalated pricing throughout the remaining life of the properties in which the
Partnership owns an interest. The actual prices that will be received and the
associated costs may be more or less than those projected. See "--Estimate of
Liquidating Distribution Amount."
Reasons for the Proposal
The Managing General Partner believes that it is in the best interest of
the Partnership and the Limited Partners for the Partnership to sell its
properties at this time and to dissolve the Partnership and make a final
liquidating cash distribution to its partners for the reasons discussed below.
Potential Liquidating Distribution. After the sale of the Partnership's
Property Interests, there will be funds available for a liquidating
distribution. As discussed above, the Managing General Partner believes that the
ability to receive the estimated liquidating distribution in one lump sum
currently, rather than in smaller amounts over a 20 year period, is one of the
benefits of the Proposal, without the continuing risk of such potential
distributions being negatively affected by oil and gas price decreases. A vote
in favor of the proposal thus might have the effect of making additional funds
currently available to the Limited Partners.
Small Amount of Remaining Assets in Relation to Expenses. As of December
31, 1996, approximately 72% of the Partnership's ultimate recoverable reserves
had been produced, and the Limited Partners' share of the Partnership's interest
in remaining reserves, before any reduction for costs, is estimated to be less
than 648,000 Mcfe. The Partnership's share of oil and gas reserves are expected
to continue to decline as remaining reserves are produced. Distributions to
partners in recent years have declined and are not expected to increase
appreciably. Declines in well production are based principally upon the maturity
of the wells, not on market factors. Each producing well requires a certain
amount of overhead costs, as operating and other costs are incurred regardless
of the level of production. Likewise, direct costs and/or general and
administrative expenses such as compliance with the securities laws; producing
reports to partners and filing partnership tax returns do not decline as
revenues decline. As a result of the depletion of the Partnership's oil and gas
reserves, the Managing General Partner believes the Partnership's asset base and
future net revenues no longer justify the continuation of operations.
Consequently, the Managing General Partner expects that the Partnership will
have to start selling a portion of its Property Interests to pay the expense of
future operations and administration. By accelerating the liquidation of the
Partnership, those future administrative costs can be avoided and the receipt of
the remaining cash value of the interests of the Limited Partners in the
Partnership can be accelerated.
Effect of Gas Prices on Value. The Managing General Partner believes that
the key factor affecting the Partnership's long-term performance has been the
decrease in oil and gas prices that occurred subsequent to the purchase of the
Partnership's properties. Additionally, prices are expected to continue to vary
widely over the remaining life of the Partnership, and such changes in gas
prices will affect future estimates of revenues from continued operations of the
Partnership. Based on 1996 year-end reserve calculations, the Partnership had
only about 28% of its ultimate recoverable reserves, before any reduction for
costs, remaining for future production. Because of this small amount of
remaining reserves, even if oil and gas prices were to increase in the future,
such increases would be unlikely to have a net positive impact on the total
return on investment to the partners in view of the expenses of the Partnership
as described above.
Potential of the Properties. Recovery in amounts great enough to
significantly impact the results of the Partnership's operations and the
ultimate cash distributions can only occur with the investment of new capital.
As provided in the Partnership Agreement, the Partnership expended all of the
partners' net commitments for the acquisition of Property Interests many years
17
<PAGE>
ago, and it no longer has capital to invest in improvement of the properties
through secondary or tertiary recovery. No additional development activities are
contemplated by the Operating Partnership on the properties in which the
Partnership has a non-operating interest.
Orderly Sale of Properties Through Approval of the Proposal. The oil and
gas market is volatile, making the sale of the properties at optimal prices very
time sensitive. The approval of the Proposal would also allow the Managing
General Partner to begin the winding up and dissolution of the Partnership
following the final sale of the Partnership's Property Interests. The approval
of the Proposal will act as the approval of all future asset sales without the
approval by the Limited Partners of the specific terms of such future sales.
Limited Partners' Tax Reporting. Limited Partners will continue to have a
partnership income tax reporting obligation with respect to his Units as long as
the Partnership continues to exist. There is no trading market for the Units, so
Limited Partners generally are unable to dispose of their interests. See "The
Partnership - No Trading Market." The approval of the Proposal would also allow
the Managing General Partner to begin the winding up and dissolution of the
Partnership. Following the approval of the Proposal and the dissolution and sale
of the properties, the Limited Partners will realize gain or loss or a
combination of both under the federal income tax laws. Thereafter, Limited
Partners will have no further tax reporting obligations with respect to the
Partnership. The dissolution of the Partnership will also allow Limited Partners
to take a capital loss deduction for syndication costs incurred in connection
with formation of the Partnership. See "Federal Income Tax Consequences."
Simultaneous Proposal to Operating Partnership
Simultaneously with this proposal to the Partnership's Limited Partners to
sell all of its Property Interests, a similar proposal is being made to the
limited partners of the companion Operating Partnership which owns the working
interest in the same properties in which the Partnership owns a non-operating
interest. If both Partnerships approve the proposal, then the working interest
and non-operating interest will be sold simultaneously.
If the Partnership approves the proposal but its companion Operating
Partnership does not, then the Managing General Partner will attempt to sell the
Non-Operating Interest owned by the Partnership to a third party. If no economic
sale can be made to a third party, which may occur due to the difficulty in
selling a net profits interest in a property when operating and spending
decisions are controlled by another entity, then the Managing General Partner
will get a third party appraisal of the value of the Partnership's Property
Interests and will purchase the Partnership's non-operating interests itself for
the highest price for which the Property Interests are appraised. The Managing
General Partner intends to obtain any such fair market value appraisal from J.R.
Butler and Company.
If the Partnership does not approve the proposal but its companion
Operating Partnership approves the proposal to sell its properties, then the
Operating Partnership will be forced to sell its working interests in its
properties subject to the net profits interest owned by the Partnership which
burdens the Operating Partnership's properties. Again this may affect the
saleability of the Operating Partnership's properties due to the burden on cash
flow caused by the existence of the Partnership's net profits interest. If this
burden prevents an economic sale to a third party, then the Managing General
Partner will again obtain a third party appraisal of the Operating Partnership's
properties and purchase those Property Interests itself.
Therefore the likelihood of sale of the Partnership's Property Interests
will be significantly affected by the ability of the Partnership and its
companion Operating Partnership to sell their ownership interests in the same
18
<PAGE>
properties at approximately the same time, which in turn is dependent upon
approval of the proposal being made to the Partnership and the similar proposal
being made simultaneously to the companion Operating Partnership. Failure to
approve the proposal by either partnership could significantly adversely affect
the sale of properties by the other partnership to the NP/OR Agreement.
Steps to Implement the Proposal
Following the approval of the Proposal, the Managing General Partner
intends to take the following steps to implement it:
i. Make available to the appropriate persons (that is, the third party,
if any, handling the negotiated sales and/or the auction house and
prospective purchasers) the following types of data:
o Engineering and Geological Data
- Production curve
- Completion report
- Historical production data
- Engineering well files
- Geological maps (if available)
- Logs (if available)
o Land/Legal Data
- Net Profits Interest schedule for all properties
- Land files
- Payout data
o Accounting Data
- Lease operating statements by well
- Gas marketing data
- Oil marketing data
- Gas balancing data
ii. Pay or provide for payment of the Partnership's liabilities and
obligations to creditors (See -- "Liquidation") using the
Partnership's cash on hand and proceeds from the sale of Partnership
properties;
iii. Conduct a final accounting and distribute any remaining cash to the
partners of the Partnership in accordance with the Partnership
Agreement;
iv. Cause final Partnership tax returns to be prepared and filed with the
Internal Revenue Service and appropriate state taxing authorities;
v. Distribute to the Limited Partners final Form K-1 tax information; and
vi. File a Certificate of Cancellation on behalf of the Partnership with
the Secretary of State of the State of Texas.
19
<PAGE>
Auction. The Managing General Partner intends to engage the O&G
Clearinghouse or another similar company to conduct live auctions for the sales
working interests of the Operating Partnership and the non-operating interests
of the Partnership. The O&G Clearinghouse (as well as other such auction
companies) is in the business of conducting auctions for oil and gas properties.
The O&G Clearinghouse establishes a data room, which they leave open for a
period of time (generally three to four weeks), after which they hold a live
auction. The O&G Clearinghouse requires advance registration for all bidders.
Bidders may participate by invitation only, after having qualified as
knowledgeable and sophisticated parties routinely or actively engaged in the oil
and gas business. The O&G Clearinghouse publishes a brochure regarding the
properties. The O&G Clearinghouse is headquartered in Houston, Texas. In
auctions conducted by the O&G Clearinghouse, properties are generally grouped
into small packages with a single field often comprising a property.
Estimated Selling Costs. The expenses associated with the auction process
(auctioneer's fee plus advertising fee) is expected to be approximately 7% of
the sales price received. This does not include internal costs of the Managing
General Partner with respect to the sales, nor fees owed to third parties for
services incident to the sale. For example, if the Managing General Partner
engaged a third party to sell the properties, this would entail an additional
fee (although in such a case the Managing General Partner's internal costs would
be lower). This also does not include the costs of the proxy solicitation. See
"General Information-- Solicitation."
Negotiated Sale. Although the Managing General Partner intends to offer the
Partnership's and the Operating Partnership's Property Interests at auction, it
is possible that the Managing General Partner or a third party engaged for the
purpose of selling the Partnership's assets may approach other oil and gas
companies and negotiate a sale of certain Property Interests. The Managing
General Partner (or such third party) may solicit bids on the oil and gas
properties for which the Managing General Partner is the operator. If the
Managing General Partner (or third party) solicits bids, it will provide all
interested parties with information about the properties needed to bid on such
properties. Such information would include raw data and historical information
on all of the operated properties that any of the partnerships managed by the
Managing General Partner intends to sell. See "--Steps to Implement the
Proposal." The data will be organized by property. Neither the Managing General
Partner nor its affiliates nor any of the partnerships managed by the Managing
General Partner will purchase any of the Partnership's Property Interests in
this manner. In the event of a bid that is lower than a price the Managing
General Partner believes is reasonable, it may sell the property to a third
party bidder for such lower bid price, use another method of sale such as an
auction, or have the Partnership continue to hold such property for a while
longer. If a property cannot be sold to a third party at auction or on a
negotiated basis, which usually occurs because it has no appreciable value,
often accompanied by the fact that the property requires expenditures to plug
and abandon wells, the Managing General Partner may dispose of such property by
conveying it to the operator or by conveying the property to itself, for no
consideration. Determination as to whether such conveyances will be made,
including conveyances to the Managing General Partner in such cases, will be
made solely by the Managing General Partner. The Managing General Partner is not
currently aware of any Property Interests owned by the Partnership which are
likely to be conveyed in this manner. In no event is the Managing General
Partner obligated to purchase any of the Property Interests.
Other. Any sale of the Partnership Property Interests and the subsequent
liquidating distributions to the Limited Partners, if any, pursuant to the
Proposal will be taxable transactions under federal and state income tax laws.
See "Federal Income Tax Consequences."
20
<PAGE>
Impact on the Managing General Partner
The Managing General Partner will be economically impacted by liquidation
in at least two ways. First, to the extent of its ownership of Units,
liquidation will have the same effect on it as on the Limited Partners. See
"--Estimate of Liquidating Distribution Amount," and "--Estimated Share of
Limited Partners' Net Distributions from Continued Operations." Second, because
of the dissolution and liquidation of the Partnership, together with liquidation
of other partnerships, the Managing General Partner will no longer hold the
majority interest in various wells. Different operators are likely to be
selected and the Managing General Partner will therefore lose revenues that it
currently realizes from its role as operator for those properties. The Managing
General Partner is making its recommendations as set forth below, on the basis
of its fiduciary duty to the Limited Partners, rather than on the basis of the
direct economic impact on the Managing General Partner.
Recommendation of the Managing General Partner
For the foregoing reasons, the Managing General Partner believes that it is
in the best interests of the Limited Partners to dissolve and liquidate the
Partnership in an effort to maximize the value of the Partnership's remaining
assets and the amounts distributed to Limited Partners and to accelerate the
receipt of such liquidating distributions. The Managing General Partner believes
that through the liquidation of the Partnership's remaining assets in the near
term, Limited Partners will benefit from the current higher levels of oil and
gas prices and therefore, may receive a greater liquidating cash distribution
than if the Partnership were to continue to operate as a going concern, and be
subject to possible future negative changes in oil and gas prices. Additionally,
distribution amounts will be affected by the anticipated continuation of
declines in revenues and the continuing relatively fixed general and
administrative and operating expenses that will be incurred by the Partnership.
Continued operations of the Partnership would mean continuation of the
additional costs incurred by the Limited Partners, including the costs
associated with inclusion of information from the Schedule K-1 relating to the
Partnership in their personal income tax returns. Termination of the Partnership
will allow the current receipt of the remaining value of the Partnership and the
preparation of a final tax return, and will make available certain additional
tax deductions.
The Managing General Partner recommends that the Limited Partners vote FOR
the Proposal.
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FEDERAL INCOME TAX CONSEQUENCES
General
The following summarizes certain federal income tax consequences to the
Limited Partners arising from the Partnership's proposed sale of its oil and gas
properties and liquidation pursuant to the Proposal. This discussion is not
based upon an opinion of counsel and it is possible that different results than
those described may occur. Statements of legal conclusions regarding tax
consequences are based upon relevant provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and accompanying Treasury Regulations, as in
effect on the date hereof, upon private letter rulings dated October 6, 1987 and
August 22, 1991, upon reported judicial decisions and published positions of the
Internal Revenue Service (the "Service"), and upon further assumptions that the
Partnership constitutes a partnership for federal tax purposes and that the
Partnership will be liquidated as described herein. The laws, regulations,
administrative rulings and judicial decisions which form the basis for
conclusions with respect to the tax consequences described herein are complex
and are subject to prospective or retroactive change at any time and any change
may adversely affect Limited Partners.
This summary does not describe all the tax aspects which may affect Limited
Partners because the tax consequences may vary depending upon the individual
circumstances of a Limited Partner. It is generally directed to Limited Partners
that are qualified plans and trusts under Code Section 401(a) and individual
retirement accounts ("IRAs") under Code Section 408 (collectively "Tax Exempt
Plans") and that are the original purchasers of the Units and hold interests in
the Partnership as "capital assets" (generally, property held for investment).
Each Limited Partner that is not a tax-exempt Plan is strongly encouraged to
consult its own tax advisor as to the rules which are specifically applicable to
it. Except as otherwise specifically set forth herein, this summary does not
address foreign, state or local tax consequences, and is inapplicable to
nonresident aliens, foreign corporations, debtors under the jurisdiction of a
court in a case under federal bankruptcy laws or in a receivership, foreclosure
or similar proceeding, or an investment company, financial institution or
insurance company.
Tax Treatment of Tax Exempt Plans
Sale of Property Interest and Liquidation of Partnership
The Managing General Partner is proposing to sell the Partnership's
Property Interest as well as any other royalties and overriding royalties the
Partnership may own. After the sale of the properties, the Partnership's assets
will consist solely of cash, which will be distributed to the partners in
complete liquidation of the partnership.
Tax Exempt Plans are subject to tax on their unrelated business taxable
income ("UBTI"). UBTI is income derived by an organization from the conduct of a
trade or business that is substantially unrelated to its performance of the
function that constitutes the basis of its tax exemption (aside from the need of
such organization for funds). Royalty interests, dividends, interest and gain
from the disposition of capital assets are generally excluded from
classification as UBTI. Notwithstanding these exclusions, royalties, interest,
dividends, and gains will create UBTI if they are received from debt-financed
property, as discussed below.
The Internal Revenue Service has previously ruled that the Partnership's
Property Interest, as structured under the NP/OR, is a royalty, as are any
overriding royalties the Partnership may own. To the extent that the Property
Interest is not debt-financed property, neither the sale of the Property
Interest by the Partnership nor the liquidation of the Partnership is expected
to cause Limited Partners that are Tax Exempt Plans to recognize taxable gain or
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loss for federal income tax purposes, even though there may be gain or loss upon
the sale of the Property Interest for federal income tax purposes.
Debt-Financed Property
Debt-financed property is property held to produce income that is subject
to acquisition indebtedness. The income is taxable in the same proportion which
the debt bears to the total cost of acquiring the property. Generally,
acquisition indebtedness is the unpaid amount of (i) indebtedness incurred by a
Tax Exempt Plan to acquire an interest in a partnership, (ii) indebtedness
incurred in acquiring or improving property, or (iii) indebtedness incurred
either before or after the acquisition or improvement of property or the
acquisition of a partnership interest if such indebtedness would not have been
incurred but for such acquisition or improvement, and if incurred subsequent to
such acquisition or improvement, the incurrence of such indebtedness was
reasonably foreseeable at the time of such acquisition or improvement.
Generally, property acquired subject to a mortgage or similar lien is considered
debt-financed property even if the organization acquiring the property does not
assume or agree to pay the debt. Notwithstanding the foregoing, acquisition
indebtedness excludes certain indebtedness incurred by Tax Exempt Plans other
than IRAs to acquire or improve real property. Although this exception may
apply, its usefulness may be limited due to its technical requirements and the
fact that the debt excluded from classification as acquisition indebtedness
appears to be debt incurred by a partnership and not debt incurred by a partner
directly or indirectly in acquiring a partnership interest.
If a Limited Partner that is a Tax Exempt Plan borrowed to acquire its
Partnership Interest or had borrowed funds either before or after it acquired
its Partnership Interest, its pro rata share of Partnership gain on the sale of
the Property Interest may be UBTI. The Managing General Partner has represented
that (i) the Partnership did not borrowed money to acquire its Property
Interest, and (ii) that the Property Interest of the Partnership is not subject
to any debt, mortgages or similar liens that will cause the Partnership's
Property Interest to be debt-financed property under Code Section 514. If a Tax
Exempt Plan has not caused its Partnership Interest to be debt-financed
property, and based upon the representations of the Managing General, the
Property Interest is not expected to be considered debt-financed property.
Tax Treatment of Limited Partners Subject to Federal Income Tax Due to
Debt-financing or Who are Not Tax Exempt Plans
All references hereinbelow to Limited Partners refers solely to Limited
Partners that either are not Tax Exempt Plans or are Tax Exempt Plans whose
Partnership Interest is debt-financed. To the extent that a Tax Exempt Plan's
Partnership Interest is only partially debt-financed, the percentage of gain or
loss from the sale of the Property Interest and liquidation of the Partnership
that will be subject to taxation as UBTI is the percentage of the Tax Exempt
Plan's share of Partnership income, gain, loss and deduction adjusted by the
following calculation. Section 514(a)(1) includes, with respect to each
debt-financed property, as gross income from an unrelated trade or business an
amount which is the same percentage of the total gross income derived during the
taxable year from or on account of the property as (i) the average acquisition
indebtedness for the taxable year with respect to the property is of (ii) the
average amount of the adjusted basis of the property during the period it is
held by the organization during the taxable year (the "debt/basis percentage").
A similar calculation is used to determine the allowable deductions. For
each debt-financed property, the amount of the deductions directly attributable
to the property are multiplied by the debt/basis percentage, which yields the
allowable deductions. If the average acquisition indebtedness is equal to the
average adjusted basis, the debt/basis percentage is zero and all the income and
deductions are included within UBTI. The debt/basis percentage is calculated on
an annual basis.
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Tax Exempt Plans with debt-financed Partnership Interests should consult
their tax advisors to determine the portion of gain or loss that may be
recognized for federal income tax purposes. The following discussion of the tax
consequences of the sale of the Partnership Property Interest and the
liquidation of the Partnership assumes that all of a Limited Partner's income,
gain, loss and deduction from the Partnership is subject to federal taxation.
Taxable Gain or Loss Upon Sale of Properties
A Limited Partner will realize and recognize gain or loss, or a combination
of both, upon the Partnership's sale of its properties prior to liquidation. The
amount of gain realized with respect to each property, or related asset, will be
an amount equal to the excess of the amount realized by the Partnership and
allocated to the Limited Partner (i.e., cash or consideration received) over the
Limited Partner's adjusted tax basis for such property. Conversely, the amount
of loss realized with respect to each property or related asset will be an
amount equal to the excess of the Limited Partner's tax basis over the amount
realized by the Partnership for such property and allocated to the Limited
Partner. It is projected that taxable loss will be realized upon the sale of
Partnership properties and that such loss will be allocated among the Limited
Partners in accordance with the Partnership Agreement. The Partnership Agreement
includes an allocation provision that requires allocations pursuant to a
liquidation be made among Partners in a fashion that equalizes capital accounts
of the Partners so that the amount in each Partner's capital account will
reflect such Partner's sharing ratio of income and loss. The extent to which
capital accounts can be equalized, however, is limited by the amount of gain and
loss available to be allocated.
Realized gains and losses generally must be recognized and reported in the
year the sale occurs. Accordingly, each Limited Partner will realize and
recognize his allocable share of gains and losses in his tax year within which
the Partnership properties are sold.
Liquidation of the Partnership
After sale of its properties, the Partnership's assets will consist solely
of cash which it will distribute to its partners in complete liquidation. The
Partnership will not realize gain or loss upon such distribution of cash to its
partners in liquidation. If the amount of cash distributed to a Limited Partner
in liquidation is less than such Limited Partner's adjusted tax basis in his
Partnership interest, the Limited Partner will realize and recognize a capital
loss to the extent of the excess. If the amount of cash distributed is greater
than such Limited Partner's adjusted tax basis in his Partnership interest, the
Limited Partner will recognize a capital gain to the extent of the excess.
Because each Limited Partner paid a portion of syndication and formation costs
upon entering the Partnership, neither of which costs were deductible expenses,
it is anticipated that liquidating distributions to Limited Partners will be
less than such Limited Partners' bases in their Partnership interests and thus
will generate capital losses.
Capital Gains Tax
Net long-term capital gains of individuals, trusts and estates will be
taxed at a maximum rate of 28%, while ordinarily income, including income from
the recapture of depletion, will be taxed at a maximum rate depending on that
Limited Partner's taxable income of 36% or 39.6%. With respect to net capital
losses, other than Section 1231 net losses, the amount of net long-term capital
loss that can be utilized to offset ordinary income will be limited to the sum
of net capital gains from other sources recognized by the Limited Partner during
the tax year, plus $3,000 ($1,500, in the case of a married individual filing a
separate return). The excess amount of such net long-term capital loss may be
carried forward and utilized in subsequent years subject to the same
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limitations. Corporations are taxed on net long-term capital gains at their
ordinary Section 11 rates and are allowed to carry net capital losses back three
years and forward five years.
Passive Loss Limitations
Limited Partners that are individuals, trusts, estates, or personal service
corporations are subject to the passive activity loss limitations rules that
were enacted as part of the Tax Reform Act of 1986.
A Limited Partner's allocable share of Partnership income, gain, loss, and
deduction is treated as derived from a passive activity, except to the extent of
Partnership portfolio income, which includes interest, dividends, royalty income
and gains from the sale of property held for investment purposes. A Limited
Partner's allocable share of any gain or loss realized on sale of the
Partnership's net profits interest is expected to be characterized as portfolio
and may not offset, or be offset by, passive activity gains or losses.
THE FOREGOING DISCUSSION IS INTENDED TO BE A SUMMARY OF CERTAIN INCOME TAX
CONSIDERATIONS OF THE SALE OF PROPERTIES AND LIQUIDATION. EACH LIMITED PARTNER
SHOULD CONSULT ITS OWN TAX ADVISOR CONCERNING ITS PARTICULAR TAX CIRCUMSTANCES
AND THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO IT OF THE
SALE OF PROPERTIES AND THE LIQUIDATION OF THE PARTNERSHIP.
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BUSINESS OF THE PARTNERSHIP
The Partnership is a Texas limited partnership formed December 31, 1990.
Units in the Partnership are registered under Section 12(g) of the Securities
Exchange Act of 1934. In addition to the following information about the
business of the Partnership, see the attached Annual Report on Form 10-K for the
year ended December 31, 1996, and its quarterly report on Form 10-Q for the
second quarter of 1997, both included herewith.
Reserves
For information about the Partnership's interest in oil and gas reserves
and future net revenue expected from the production of those reserves as of
December 31, 1996, see the attached report which was audited by H. J. Gruy and
Associates, Inc., independent petroleum consultants. It should be noted that the
reserve estimates in the Annual Report on Form 10-K reflect the entire
Partnership reserves and that the reserve report in the attached letter from H.
J. Gruy and Associates, Inc. reflects only the Limited Partners' share of the
Partnership's estimated oil and gas reserves. Neither of these reports reflect
the Partnership's share of future costs of operations which must be debited from
the Partnership's interest in reserves in order to determine the Partnership's
net interest in reserves by virtue of its net profits interest. This report has
not been updated to include the effect of production since year-end 1996, nor
has the annual review of estimated quantities done each year-end taken place for
1997.
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting the future rates and timing of production,
future costs and future development plans. 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 in the attached report. 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 Partnership's interest in oil and natural gas reserves,
the Managing General Partner, has used flat pricing based upon estimates of 1997
average prices, 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. These pricing assumptions
vary from those mandated by the Securities and Exchange Commission ("SEC") for
reserves disclosures under applicable SEC rules, which require use of prices at
year-end, although the discount rate and lack of escalation are the same. If
estimates of reserves and future net revenues had been prepared using December
31, 1996 prices, as mandated by the SEC, reserves, future net revenues and the
present value thereof would be significantly higher. The Managing General
Partner has determined not to use these higher prices because current estimates
of 1997 average prices more accurately reflect prices purchasers of properties
are willing to pay, rather than higher values which do not reflect the decrease
in prices since year-end 1996. For example, the weighted average price of gas
received by the Partnership during the first six months of 1997 was $2.36 per
Mcf, as compared to $4.68 per Mcf at December 31, 1996. The Managing General
Partner does not believe that any favorable or adverse event causing a
significant change in the estimated quantity of proved reserves set forth in the
attached report has occurred between December 31, 1996, and the date of this
Proxy Statement.
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Future prices received for the sale of the Partnership's products may be
higher or lower than the prices used in the Partnership's estimates of oil and
gas reserves; the operating costs relating to such production may also increase
or decrease from existing levels.
The Managing General Partner
Subject to certain limitations set forth in the Partnership Agreement, the
Managing General Partner has full, exclusive and complete discretion in the
management and control of the business of the Partnership. The Managing General
Partner has general liability for the debts and obligations of the Partnership.
The Managing General Partner is engaged in the business of oil and gas
exploration, development and production, and the Managing General Partner serves
as the general partner of a number of other oil and gas income and pension
partnerships. The Managing General Partner's common stock is traded on the New
York and Pacific Stock Exchanges.
The principal executive offices of the Managing General Partner are located
at 16825 Northchase Drive, Suite 400, Houston, Texas 77060, telephone number
(281) 874-2700.
Transactions Between the Managing General Partner and the Partnership
The Managing General Partner receives operating fees for wells in which the
Partnership has a net profits interest and for which the Managing General
Partner or its affiliates serve as operator. It is anticipated that, due to the
sale of interests in wells by the Operating Partnership, the Managing General
Partner will no longer serve as operator for a number of the wells in which the
Partnership has a net profits interest. To the extent that the operator changes
because of a change in ownership of the properties, the Managing General Partner
will lose the revenues it currently earns as operator, which are less than 1.0%
of the Managing General Partner's net revenues. The Managing General Partner
believes, however, that it will be positively affected, on the other hand, by
liquidation of the Partnership, on the basis of its ownership interest in the
Partnership. See "The Proposal--Estimates of Liquidating Distribution Amount,"
and "The Proposal--Impact on the Managing General Partner."
Under the Partnership Agreement, the Managing General Partner has received
certain compensation for its services and reimbursement for expenditures made on
behalf of the Partnership, which was paid at closing of the offering of Units,
in addition to revenues distributable to the Managing General Partner with
respect to its general partnership interest or limited partnership interests it
has purchased. In addition to those revenues, compensation and reimbursements,
the following summarizes the transactions between the Managing General Partner
and the Partnership pursuant to which the Managing General Partner has been paid
or has had its expenses reimbursed on an ongoing basis:
o The Managing General Partner has received management fees of $73,259,
internal acquisition costs reimbursements of $143,297 and formation
costs reimbursements of $58,608 from the Partnership from inception
through June 30, 1997.
o The Managing General Partner receives per-well monthly operating fees
from the Operating Partnership for certain producing wells in which
the Partnership owns Property Interests and for which it serves as
operator in accordance with the joint operating agreements for each of
such wells. The fees that are set in the joint operating agreements
are negotiated with the other working interest owners of the
properties.
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o The Managing General Partner is entitled to be reimbursed and has been
reimbursed from inception to June 30, 1997, $277,025 for general and
administrative costs incurred on behalf of and allocable to the
Partnership, including employee salaries and office overhead. Amounts
are calculated on the basis of Limited Partner capital contributions
to the Partnership relative to limited partner contributions of all
partnerships for which the Managing General Partner serves as Managing
General Partner.
o The Managing General Partner has been reimbursed $11,504 for direct
expenses, all of which was billed by, and then paid directly to, third
party vendors.
No Trading Market
There is no trading market for the Units, and none is expected to develop.
Under the Partnership Agreement, the Limited Partners have the right to present
their Units to the Managing General Partner for repurchase at a price determined
in accordance with the formula established by Article XVIII of the Partnership
Agreement. Originally, 279 Limited Partners invested in the Partnership. Through
December 31, 1996, the Managing General Partner had purchased 1,214 Units from
Limited Partners pursuant to the right of presentment. As of September 15, 1997,
there were 277 Limited Partners (excluding the Managing General Partner). The
Managing General Partner does not have an obligation to repurchase Limited
Partner interests pursuant to this right of presentment but merely an option to
do so when such interests are presented for repurchase.
Principal Holders of Limited Partner Units
The Managing General Partner holds 4.14% of the Units of the Partnership.
To the knowledge of the Managing General Partner, there is no holder of Units
that holds more than 5% of the Units.
Approvals
No federal or state regulatory requirements must be satisfied or approvals
obtained in connection with the sale of the Partnership's Property Interests.
Legal Proceedings
The Managing General Partner is not aware of any material pending legal
proceedings to which the Partnership is a party or of which any of its property
is the subject.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE AND ATTACHMENT OF
SUCH INFORMATION HERETO
The Partnership's Annual Report on Form 10-K for the year ended December
31, 1996, and its quarterly report on Form 10-Q for the second quarter of 1997,
which are attached hereto and incorporated herein by reference.
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OTHER BUSINESS
The Managing General Partner does not intend to bring any other business
before the Meeting and has not been informed that any other matters are to be
presented at the Meeting by any other person.
SWIFT ENERGY COMPANY
as Managing General Partner of
Swift Energy Managed Pension Assets
Partnership 1990-D, Ltd.
/s/ John R. Alden
------------------------------------------
John R. Alden
Secretary
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FORM OF PROXY
SWIFT ENERGY MANAGED PENSION ASSETS PARTNERSHIP 1990-D, LTD.
This Proxy is Solicited by the Managing General
Partner for a Special Meeting of Limited Partners to be
held on October 30, 1997
The undersigned hereby constitutes and appoints A. Earl Swift, Bruce H.
Vincent, Terry E. Swift or John R. Alden, as duly authorized officers of Swift
Energy Company, acting in its capacity as Managing General Partner of the
Partnership, or any of them, with full power of substitution and revocation to
each, the true and lawful attorneys and proxies of the undersigned at a Special
Meeting of the Limited Partners (the "Meeting") of SWIFT ENERGY MANAGED PENSION
ASSETS PARTNERSHIP 1990-D, LTD. (the "Partnership") to be held on October 30,
1997 at 4:00 p.m. Houston time, at 16825 Northchase Drive, Houston, Texas, and
any adjournments thereof, and to vote as designated, on the matter specified
below, the Partnership Units standing in the name of the undersigned on the
books of the Partnership (or which the undersigned may be entitled to vote) on
the record date for the Meeting with all powers the undersigned would possess if
personally present at the Meeting:
The adoption of a proposal FOR AGAINST ABSTAIN
("Proposal") for (a) sale of
substantially all of the [ ] [ ] [ ]
assets of the Partnership
(consisting of its net
profits interest), and
(b) the dissolution, winding
up and termination of the
Partnership. The undersigned
hereby directs said proxies
to vote:
This proxy will be voted in accordance with the specifications made hereon.
If no contrary specification is made, it will be voted FOR the Proposal.
Receipt of the Partnership's Notice of Special Meeting of Limited Partners
and Proxy Statement dated September 30, 1997 is acknowledged.
PLEASE SIGN AND RETURN THE PROXY IN THE ENCLOSED,
POSTAGE-PAID, PRE-ADDRESSED ENVELOPE BY
OCTOBER 24, 1997.
SIGNATURE DATE
--------------------------- -------------------------
SIGNATURE DATE
--------------------------- -------------------------
SIGNATURE DATE
--------------------------- -------------------------
If Limited Partnership Units are held jointly, all joint tenants must sign.
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The Partnership's Annual Report on Form 10-K for the year ended December
31, 1996 and its quarterly report on Form 10-Q for the second quarter of 1997
are included with this Proxy Statement and incorporated herein by reference. See
"Incorporation of Certain Information By Reference and Attachment of Such
Information Hereto." Additionally, a reserve report dated May 20, 1997, prepared
as of December 31, 1996, and audited by H. J. Gruy and Associates, Inc., is
attached hereto.
TABLE OF CONTENTS
SUMMARY .................................................................... 1
PARTNERSHIP PROPERTY INTERESTS............................................... 2
SPECIAL CONSIDERATIONS....................................................... 3
Reasons for the Proposal............................................ 3
Fairness of the Proposal............................................ 4
GENERAL INFORMATION.......................................................... 8
Vote Required....................................................... 8
Proxies; Revocation................................................. 8
Dissenters' Rights.................................................. 8
Solicitation........................................................ 9
RISK FACTORS................................................................. 9
Uncertainty of Liquidating Distributions............................ 9
Undetermined Sales Prices; Volatility of Oil and Gas Prices......... 9
Dependence on Operating Partnerships................................ 9
Prices Used for Calculation of PV-10 Value of Proceeds Reserves..... 9
THE PROPOSAL................................................................. 11
General ........................................................... 11
Partnership Financial Performance and Condition..................... 11
Estimates of Liquidating Distribution Amount........................ 14
Comparison of Sale Versus Continuing Operations..................... 16
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Reasons for the Proposal............................................ 17
Simultaneous Proposal to Operating Partnerships..................... 18
Steps to Implement the Proposal..................................... 19
Impact on the Managing General Partner.............................. 21
Recommendation of the Managing General Partner...................... 21
FEDERAL INCOME TAX CONSEQUENCES.............................................. 22
General ........................................................... 22
Tax Treatment of Tax Exempt Plans................................... 22
Tax Treatment of Limited Partners Subject to Federal Income Tax
Due to Debt-financing or Who are Not Tax Exempt Plans...... 23
Taxable Gain or Loss Upon Sale of Properties........................ 24
Liquidation of the Partnership...................................... 24
Capital Gains Tax................................................... 24
Passive Loss Limitations............................................ 25
BUSINESS OF THE PARTNERSHIP.................................................. 26
Reserves ........................................................... 26
The Managing General Partner........................................ 27
Transactions Between the Managing General Partner and the
Partnership................................................ 27
No Trading Market................................................... 28
Principal Holders of Limited Partner Units.......................... 28
Approvals........................................................... 28
Legal Proceedings................................................... 28
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
AND ATTACHMENT OF SUCH INFORMATION HERETO........................... 28
OTHER BUSINESS............................................................... 29
FORM OF PROXY................................................................ 30
ii
