<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File number: 0-23986
SWIFT ENERGY OPERATING PARTNERS 1993-B, LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Texas 76-0400061
(State or other jurisdiction of organization) (I.R.S. Employer Identification No.)
</TABLE>
16825 Northchase Drive, Suite 400
Houston, Texas 77060
(Address of principal executive offices)
(Zip Code)
(281)874-2700
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---
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SWIFT ENERGY OPERATING PARTNERS 1993-B, LTD.
INDEX
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<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
ITEM 1. Financial Statements
Balance Sheets
- June 30, 1999 and December 31, 1998 3
Statements of Operations
- Three month and six month periods ended June 30, 1999 and 1998 4
Statements of Cash Flows
- Six month periods ended June 30, 1999 and 1998 5
Notes to Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION 12
SIGNATURES 13
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SWIFT ENERGY OPERATING PARTNERS 1993-B, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 77,568 $ 17,133
Oil and gas sales receivable 162,897 176,972
--------------- ---------------
Total Current Assets 240,465 194,105
--------------- ---------------
Gas Imbalance Receivable 24,664 25,164
--------------- ---------------
Oil and Gas Properties, using full cost
accounting 9,355,154 9,430,159
Less-Accumulated depreciation, depletion
and amortization (7,504,805) (7,416,816)
--------------- ---------------
1,850,349 2,013,343
=============== ===============
$ 2,115,478 $ 2,232,612
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 87,965 $ 99,337
--------------- ---------------
Deferred Revenues 20,404 20,404
Interest Holders' Capital (9,627,683 Interest Holders'
SDIs; $1.00 per SDI) 2,003,405 2,112,844
General Partners' Capital 3,704 27
--------------- ---------------
Total Partners' Capital 2,007,109 2,112,871
=============== ===============
$ 2,115,478 $ 2,232,612
=============== ===============
</TABLE>
See accompanying notes to financial statements.
3
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SWIFT ENERGY OPERATING PARTNERS 1993-B, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 140,348 $ 178,306 $ 265,224 $ 318,904
Interest income 56 2,879 96 6,587
Other -- 3,434 -- 6,350
-------------- -------------- -------------- --------------
140,404 184,619 265,320 331,841
-------------- -------------- -------------- --------------
COSTS AND EXPENSES:
Lease operating 60,994 73,573 119,452 161,430
Production taxes 7,367 10,997 14,152 17,142
Depreciation, depletion
and amortization -
Normal provision 40,205 100,927 87,989 196,249
Additional provision -- 252,946 -- 521,997
General and administrative 28,754 37,506 68,340 73,703
-------------- -------------- -------------- --------------
137,320 475,949 289,933 970,521
============== ============== ============== ==============
NET INCOME (LOSS) $ 3,084 $ (291,330) $ (24,613) $ (638,680)
============== ============== ============== ==============
Limited Partners' net income (loss)
per SDI $ -- $ (0.03) $ -- $ (0.07)
============== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
4
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SWIFT ENERGY OPERATING PARTNERS 1993-B, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) $ (24,613) $ (638,680)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Depreciation, depletion and amortization 87,989 718,246
Change in gas imbalance receivable
and deferred revenues 500 461
Change in assets and liabilities:
(Increase) decrease in oil and gas sales receivable 14,075 286,059
Increase (decrease) in accounts payable (11,372) (63,387)
--------------- ---------------
Net cash provided by (used in) operating activities 66,579 302,699
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties (30,510) (109,409)
Proceeds from sales of oil and gas properties 105,515 6,551
--------------- ---------------
Net cash provided by (used in) investing activities 75,005 (102,858)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Distributions to partners (81,149) (348,727)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 60,435 (148,886)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 17,133 332,870
=============== ===============
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 77,568 $ 183,984
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
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SWIFT ENERGY OPERATING PARTNERS 1993-B, LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) General Information -
The financial statements included herein have been prepared by
the Partnership and are unaudited except for the balance sheet at
December 31, 1998 which has been taken from the audited financial
statements at that date. The financial statements reflect adjustments,
all of which were of a normal recurring nature, which are, in the
opinion of the managing general partner necessary for a fair
presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). The
Partnership believes adequate disclosure is provided by the information
presented. The financial statements should be read in conjunction with
the audited financial statements and the notes included in the latest
Form 10-K.
(2) Organization and Terms of Partnership Agreement -
Swift Energy Operating Partners 1993-B, Ltd., a Texas limited
partnership ("the Partnership"), was formed on June 30, 1993, for the
purpose of purchasing and operating producing oil and gas properties
within the continental United States and Canada. Swift Energy Company
("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a
California corporation, serve as Managing General Partner and Special
General Partner of the Partnership, respectively. The sole limited
partner of the Partnership is Swift Depositary Company, which has
assigned all of its beneficial (but not of record) rights and interest
as limited partner to the investors in the Partnership ("Interest
Holders"), in the form of Swift Depositary Interests ("SDIs").
The Managing General Partner has paid or will pay out of its
own corporate funds (as a capital contribution to the Partnership) all
selling commissions, offering expenses, printing, legal and accounting
fees and other formation costs incurred in connection with the offering
of SDIs and the formation of the Partnership, for which the Managing
General Partner will receive an interest in continuing costs and
revenues of the Partnership. The 606 interest holders made total capital
contributions of $9,627,683.
Generally, all continuing costs (including development costs,
operating costs, general and administrative reimbursements and direct
expenses) and revenues are allocated 85 percent to the interest holders
and 15 percent to the general partners. After partnership payout, as
defined in the Partnership Agreement, continuing costs and revenues will
be shared 75 percent by the interest holders, and 25 percent by the
general partners.
(3) Significant Accounting Policies -
Use of Estimates --
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from estimates.
Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
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SWIFT ENERGY OPERATING PARTNERS 1993-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes the Partnership follows the
"full-cost" method of accounting for oil and gas property costs. Under
this method of accounting, all productive and nonproductive costs
incurred in the acquisition and development of oil and gas reserves are
capitalized. Such costs include lease acquisitions, geological and
geophysical services, drilling, completion, equipment and certain
general and administrative costs directly associated with acquisition
and development activities. General and administrative costs related to
production and general overhead are expensed as incurred. No general and
administrative costs were capitalized during the six months ended June
30, 1999 and 1998.
Future development, site restoration, dismantlement and
abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on current economic conditions and are
amortized to expense as the Partnership's capitalized oil and gas
property costs are amortized.
The unamortized cost of oil and gas properties is limited to
the "ceiling limitation" (calculated separately for the Partnership,
limited partners and general partners). The "ceiling limitation" is
calculated on a quarterly basis and represents the estimated future net
revenues from proved properties using current prices, discounted at ten
percent, and the lower of cost or fair value of unproved properties.
Proceeds from the sale or disposition of oil and gas properties are
treated as a reduction of oil and gas property costs with no gains or
losses being recognized except in significant transactions.
The Partnership computes the provision for depreciation,
depletion and amortization of oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of oil and gas
properties, including future development, site restoration,
dismantlement and abandonment costs, by an overall amortization rate
that is determined by dividing the physical units of oil and gas
produced during the period by the total estimated units of proved oil
and gas reserves at the beginning of the period.
The calculation of the "ceiling limitation" and the provision
for depreciation, depletion and amortization is based on estimates of
proved reserves. There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting the future rates of
production, timing and plan of development. The accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate
may justify revision of such estimate. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered.
(4) Related-Party Transactions -
Effective June 30, 1993, the Partnership entered into a Net
Profits and Overriding Royalty Interest Agreement ("NP/OR Agreement")
with Swift Energy Pension Partners 1993-B, Ltd. ("Pension Partnership"),
an affiliated partnership managed by Swift for the purpose of acquiring
interests in producing oil and gas properties. Under the terms of the
NP/OR Agreement, the Partnership has conveyed to the Pension Partnership
a nonoperating interest in the aggregate net profits (i.e., oil and gas
sales net of related operating costs) of the properties acquired equal
to the Pension Partnership's proportionate share of the property
acquisition costs.
(5) Vulnerability Due to Certain Concentrations -
The Partnership's revenues are primarily the result of sales
of its oil and natural gas production. Market prices of oil and natural
gas may fluctuate and adversely affect operating results.
7
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SWIFT ENERGY OPERATING PARTNERS 1993-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
In the normal course of business, the Partnership extends
credit, primarily in the form of monthly oil and gas sales receivables,
to various companies in the oil and gas industry which results in a
concentration of credit risk. This concentration of credit risk may be
affected by changes in economic or other conditions and may accordingly
impact the Partnership's overall credit risk. However, the Managing
General Partner believes that the risk is mitigated by the size,
reputation, and nature of the companies to which the Partnership extends
credit. In addition, the Partnership generally does not require
collateral or other security to support customer receivables.
(6) Fair Value of Financial Instruments -
The Partnership's financial instruments consist of cash and
cash equivalents and short-term receivables and payables. The carrying
amounts approximate fair value due to the highly liquid nature of the
short-term instruments.
(7) Year 2000 -
The Year 2000 issue results from computer programs and
embedded computer chips with date fields that cannot distinguish between
the years 1900 and 2000. The Managing General Partner is currently
implementing the steps necessary to make its operations and the related
operations of the Partnership capable of addressing the Year 2000. These
steps include upgrading, testing and certifying its computer systems and
field operation services and obtaining Year 2000 compliance
certification from all important business suppliers. The Managing
General Partner formed a task force during 1998 to address the Year 2000
issue and prepare its business systems for the Year 2000. The Managing
General Partner has either replaced or updated mission critical systems
and expects to complete testing during the third quarter of 1999 and
continue remedial actions as needed.
The Managing General Partner's business systems are almost
entirely comprised of off-the-shelf software. Most of the necessary
changes in computer instructional code can be made by upgrading this
software. The Managing General Partner is currently in the process of
either upgrading the off-the-shelf software or receiving certification
as to Year 2000 compliance from vendors or third party consultants. A
testing phase is being conducted as the software is updated or certified
and is expected to be completed during the third quarter of 1999.
The Managing General Partner does not believe that costs
incurred to address the Year 2000 issue with respect to its business
systems will have a material effect on the Partnership's results of
operations, or its liquidity and financial condition. The estimated
total cost to the Managing General Partner to address Year 2000 issues
is projected to be less than $150,000, most of which will be spent
during the testing phase. The Partnership's share of this cost is
expected to be insignificant.
8
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SWIFT ENERGY OPERATING PARTNERS 1992-B, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The failure to correct a material Year 2000 problem could
result in an interruption, or failure of certain normal business
activities or operations. Based on activities to date, the Managing
General Partner believes that it will be able to resolve any Year 2000
problems concerning its financial and administrative systems. It is
undeterminable how all the aspects of the Year 2000 will impact the
Partnership. The most reasonably likely worst case scenario would
involve a prolonged disruption of external power sources upon which core
equipment relies, resulting in a substantial decrease in the
Partnership's oil and gas production activities. In addition, the
pipeline operators to whom the Managing General Partner sells the
Partnership's natural gas, as well as other customers and suppliers,
could be prone to Year 2000 problems that could not be assessed or
detected by the Managing General Partner. The Managing General Partner
is contacting its major purchasers, customers, suppliers, financial
institutions and others with whom it conducts business to determine
whether they will be able to resolve in a timely manner any Year 2000
problems directly affecting the Managing General Partner or Partnership
and to inform them of the Managing General Partner's internal assessment
of its Year 2000 review. There can be no assurance that such third
parties will not fail to appropriately address their Year 2000 issues or
will not themselves suffer a Year 2000 disruption that could have a
material adverse effect on the Partnership's activities, financial
condition or operating results. Based upon these responses and any
problems that arise during the testing phase, contingency plans or
back-up systems would be determined and addressed.
9
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SWIFT ENERGY OPERATING PARTNERS 1993-B, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Partnership was formed for the purpose of investing in producing oil
and gas properties located within the continental United States and Canada. In
order to accomplish this, the Partnership goes through two distinct yet
overlapping phases with respect to its liquidity and result of operations. When
the Partnership is formed, it commences its "acquisition" phase, with all funds
placed in short-term investments until required for such property acquisitions.
The interest earned on these pre-acquisition investments becomes the primary
cash flow source for initial Interest Holder distributions. As the Partnership
acquires producing properties, net cash from operations becomes available for
distribution, along with the investment income. After partnership funds have
been expended on producing oil and gas properties, the Partnership enters its
"operations" phase. During this phase, oil and gas sales generate substantially
all revenues, and distributions to Interest Holders reflect those revenues less
all associated partnership expenses. The Partnership may also derive proceeds
from the sale of acquired oil and gas properties, when the sale of such
properties is economically appropriate or preferable to continued operation.
LIQUIDITY AND CAPITAL RESOURCES
Oil and gas reserves are depleting assets and therefore often experience
significant production declines each year from the date of acquisition through
the end of the life of the property. The primary source of liquidity to the
Partnership comes almost entirely from the income generated from the sale of oil
and gas produced from ownership interests in oil and gas properties. Net cash
provided by operating activities totaled $66,579 and $302,699 for the six months
ended June 30, 1999 and 1998, respectively. This source of liquidity and the
related results of operations, and in turn cash distributions, will decline in
future periods as the oil and gas produced from these properties also declines
while production and general and administrative costs remain relatively stable
making it unlikely that the Partnership will hold the properties until they are
fully depleted, but will likely liquidate when a substantial majority of the
reserves have been produced. Cash provided by property sales proceeds totaled
$105,515 for the six months ended June 30, 1999. The Partnership has expended
all of the partners' net commitments available for property acquisitions and
development by acquiring producing oil and gas properties. The partnership
invests primarily in proved producing properties with nominal levels of future
costs of development for proven but undeveloped reserves. Significant purchases
of additional reserves or extensive drilling activity are not anticipated. Cash
distributions totaled $81,149 and $348,727 for the six months ended June 30,
1999 and 1998, respectively.
The Partnership does not allow for additional assessments from the
partners or Interest Holders to fund capital requirements. However, funds are
available from partnership revenues, borrowings or proceeds from the sale of
partnership property. The Managing General Partner believes that the funds
currently available to the Partnership will be adequate to meet any anticipated
capital requirements.
RESULTS OF OPERATIONS
The following analysis explains changes in the revenue and expense
categories for the quarter ended June 30, 1999 (current quarter) when compared
to the quarter ended June 30, 1998 (corresponding quarter), and for the six
months ended June 30, 1999 (current period), when compared to the six months
ended June 30, 1998 (corresponding period).
Three Months Ended June 30, 1999 and 1998
Oil and gas sales declined $37,957 or 21 percent in the second quarter of
1999 when compared to the corresponding quarter in 1998, primarily due to
decreased oil and gas production. Current quarter oil and gas production
declined 37 percent and 34 percent, respectively, when compared to second
quarter 1998 production volumes. The partnership's sale of properties in the
first six months of 1999 had an impact on the partnership's production decline.
Oil prices increased 51 percent or $5.24/BBL to an average of $15.53/BBL and gas
prices increased 7 percent or $.14/MCF to an average of $2.31/MCF for the
quarter.
10
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SWIFT ENERGY OPERATING PARTNERS 1993-B, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Corresponding production costs per equivalent MCF increased 26 percent in
the second quarter of 1999 compared to the second quarter of 1998 while total
production costs decreased 19 percent, relating to the property sales in 1999.
Total depreciation expense for the second quarter of 1999 decreased 89
percent or $313,668 when compared to the second quarter of 1998. In 1998, two
components, the normal provision, calculated on the units of production method,
and the additional provision, relating to the ceiling limitation, make up total
depreciation expense. Normal depreciation expense decreased 60 percent or
$60,722 in the second quarter of 1999 compared to the second quarter of 1998,
also related to the decline in production volumes.
The Partnership recorded an additional provision in depreciation,
depletion and amortization in the second quarter of 1998 for $252,946 when the
present value, discounted at ten percent, of estimated future net revenues from
oil and gas properties, using the guidelines of the Securities and Exchange
Commission, was below the fair market value originally paid for oil and gas
properties.
Six Months Ended June 30, 1999 and 1998
Oil and gas sales declined $53,680 or 17 percent in the first six months
of 1999 when compared to the corresponding period in 1998, primarily due to
decreased oil and gas production. Current period oil and gas production declined
26 percent and 25 percent, respectively, when compared to the same period in
1998. The partnership's sale of properties in the first six months of 1999 had
an impact on the partnership's production decline. Oil prices increased 20
percent or $2.15/BBL to an average of $13.05/BBL and gas prices increased 6
percent or $.12/MCF to an average of $2.08/MCF for the current period.
Corresponding production costs per equivalent MCF remained flat in the
first six months of 1999 compared to the corresponding period in 1998 while
total production costs decreased 25 percent, relating to the property sales in
1999.
Total depreciation expense for the first six months of 1999 decreased 88
percent or $630,257 when compared to the first six months of 1998. In 1998, two
components, the normal provision, calculated on the units of production method,
and the additional provision, relating to the ceiling limitation, make up total
depreciation expense. Normal depreciation expense decreased 55 percent or
$108,260 in the first six months of 1999 compared to the first six months of
1998, also related to the decline in production volumes.
The Partnership recorded an additional provision in depreciation,
depletion and amortization in the first six months of 1998 for $521,997 when the
present value, discounted at ten percent, of estimated future net revenues from
oil and gas properties, using the guidelines of the Securities and Exchange
Commission, was below the fair market value originally paid for oil and gas
properties.
During 1999, partnership revenues and costs will be shared between the
Interest Holders and general partners in an 85:15 ratio.
11
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SWIFT ENERGY OPERATING PARTNERS 1993-B, LTD.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-NONE-
12
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SWIFT ENERGY OPERATING
PARTNERS 1993-B, LTD.
(Registrant)
By: SWIFT ENERGY COMPANY
Managing General Partner
Date: August 4, 1999 By: /s/ John R. Alden
-------------- ---------------------------------
John R. Alden
Senior Vice President, Secretary
and Principal Financial Officer
Date: August 4, 1999 By: /s/ Alton D. Heckaman, Jr.
-------------- ---------------------------------
Alton D. Heckaman, Jr.
Vice President, Controller
and Principal Accounting Officer
13
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Swift Energy
Operating Partners 1993-B, Ltd.'s balance sheet and statement of operations
contained in its Form 10-Q for the quarter ended June 30, 1999 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 77,568
<SECURITIES> 0
<RECEIVABLES> 162,897
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 240,465
<PP&E> 9,355,154
<DEPRECIATION> (7,504,805)
<TOTAL-ASSETS> 2,115,478
<CURRENT-LIABILITIES> 87,965
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,007,109
<TOTAL-LIABILITY-AND-EQUITY> 2,115,478
<SALES> 265,224
<TOTAL-REVENUES> 265,320
<CGS> 0
<TOTAL-COSTS> 221,593<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (24,613)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,613)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,613)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes lease operating expenses, production taxes and depreciation,
depletion and amortization expense. Excludes general and administrative and
interest expense.
</FN>
</TABLE>
