<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: 33-37983-27
SWIFT ENERGY PENSION PARTNERS 1994-C, LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Texas 76-0447862
(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 PENSION PARTNERS 1994-C, LTD.
INDEX
<TABLE>
<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 9
PART II. OTHER INFORMATION 11
SIGNATURES 12
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SWIFT ENERGY PENSION PARTNERS 1994-C, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 1,116 $ 1,099
Nonoperating interests income receivable 65,925 37,894
--------------- ---------------
Total Current Assets 67,041 38,993
--------------- ---------------
Nonoperating interests in oil and gas
properties, using full cost accounting 3,023,735 3,151,104
Less-Accumulated amortization (2,362,913) (2,339,662)
--------------- ---------------
660,822 811,442
=============== ===============
$ 727,863 $ 850,435
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL:
Current Liabilities:
Accounts Payable $ 283,136 $ 398,165
--------------- ---------------
Interest Holders' Capital (2,783,562 Interest Holders'
SDIs; $1.00 per SDI) 413,776 427,879
General Partners' Capital 30,951 24,391
--------------- ---------------
Total Partners' Capital 444,727 452,270
=============== ===============
$ 727,863 $ 850,435
=============== ===============
</TABLE>
See accompanying notes to financial statements.
3
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SWIFT ENERGY PENSION PARTNERS 1994-C, 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:
Income from nonoperating interests $ 36,247 $ 20,695 $ 59,315 $ 64,456
Interest income 13 51 18 61
--------------- --------------- -------------- --------------
36,260 20,746 59,333 64,517
--------------- --------------- -------------- --------------
COSTS AND EXPENSES:
Amortization 11,472 387,356 23,251 443,233
General and administrative 10,719 12,695 24,825 23,505
--------------- --------------- -------------- --------------
22,191 400,051 48,076 466,738
=============== =============== ============== ==============
NET INCOME (LOSS) $ 14,069 $ (379,305) $ 11,257 $ (402,221)
=============== =============== ============== ==============
Limited Partners' net income (loss)
per SDI $ -- $ (0.14) $ -- $ (0.14)
=============== =============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
4
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SWIFT ENERGY PENSION PARTNERS 1994-C, 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) $ 11,257 $ (402,221)
Adjustments to reconcile income (loss) to
net cash provided by operations:
Amortization 23,251 443,233
Change in assets and liabilities:
(Increase) decrease in nonoperating interests income receivable (28,031) 17,771
Increase (decrease) in accounts payable (115,029) 263,853
--------------- ---------------
Net cash provided by (used in) operating activities (108,552) 322,636
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to nonoperating interests in oil and gas properties (22,441) (223,441)
Proceeds from sales of nonoperating interests in oil and gas properties 149,810 --
--------------- ---------------
Net cash provided by (used in) investing activities 127,369 (223,441)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Distributions to partners (18,800) (111,693)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 17 (12,498)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,099 13,559
=============== ===============
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,116 $ 1,061
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 10,788 $ 2,967
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
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SWIFT ENERGY PENSION PARTNERS 1994-C, 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 Pension Partners 1994-C, Ltd., a Texas limited
partnership ("the Partnership"), was formed on September 30, 1994, for
the purpose of purchasing net profits interest, overriding royalty
interests and royalty interests (collectively, "nonoperating interests")
in producing oil and gas properties within the continental United States
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 302 Interest Holders made total capital
contributions of $2,783,562.
Generally, all continuing costs (including 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.
Nonoperating Interests in Oil and Gas Properties --
The Partnership accounts for its ownership interest in oil and
gas properties using the proportionate consolidation method, whereby the
Partnership's share of assets, liabilities, revenues and expenses is
included in the appropriate classification in the financial statement.
6
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SWIFT ENERGY PENSION PARTNERS 1994-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For financial reporting purposes, the Partnership follows the
"full-cost" method of accounting for nonoperating interests in oil and
gas property costs. Under this method of accounting, all costs incurred
in the acquisition of nonoperating interests in oil and gas properties
are capitalized. The unamortized cost of nonoperating interests in oil
and gas properties is limited to the "ceiling limitation", (calculated
separately for the partnership, limited partner, and general partners).
The "ceiling limitation" is calculated on a quarterly basis and
represents the estimated future net revenues from nonoperating interests
in proved properties using current prices, discounted at ten percent.
Proceeds from the sale or disposition of nonoperating interests in oil
and gas properties are treated as a reduction of the cost of the
nonoperating interests with no gains or losses recognized except in
significant transactions.
The Partnership computes the provision for amortization of
nonoperating interests in oil and gas properties on the
units-of-production method. Under this method, the provision is
calculated by multiplying the total unamortized cost of nonoperating
interests in oil and gas properties by an overall rate determined by
dividing the physical units of oil and gas produced during the period by
the total estimated units of proved oil and gas reserves attributable to
the Partnership's nonoperating interests 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 -
The Partnership entered into a Net Profits and Overriding
Royalty Interest Agreement ("NP/OR Agreement") with Swift Energy
Operating Partners 1994-C, Ltd. ("Operating Partnership"), an affiliated
partnership managed by Swift for the purpose of acquiring working
interests in producing oil and gas properties. Under the terms of the
NP/OR Agreement, the Partnership has been conveyed 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
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.
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
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SWIFT ENERGY PENSION PARTNERS 1994-C, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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.
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.
8
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SWIFT ENERGY PENSION PARTNERS 1994-C, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Partnership was formed for the purpose of investing in nonoperating
interests 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
results of operations. When the Partnership was formed, it commenced its
"acquisition" phase, with all funds placed in short-term investments until
required for the acquisition of nonoperating interests. Therefore, the interest
earned on these pre-acquisition investments becomes the primary cash flow source
for initial partner distributions. As the Partnership acquires nonoperating
interests in producing properties, net cash from ownership of nonoperating
interests becomes available for distribution, along with the investment income.
After all partnership funds have been expended on nonoperating interests in
producing oil and gas properties, the Partnership enters its "operations" phase.
During this phase, income from nonoperating interests in oil and gas sales
generates substantially all revenues, and distributions to Interest Holders
reflect those revenues less all associated partnership expenses. The Partnership
may also derive proceeds from the sale of nonoperating interests in acquired oil
and gas properties, when the sale of such interests is economically appropriate
or preferable to continued operations.
LIQUIDITY AND CAPITAL RESOURCES
Oil and gas reserves are depleting assets and therefore often experience
significant production declines each year from the date of acquisition through
the end of the life of the property. The primary source of liquidity to the
Partnership comes almost entirely from the income generated from the sale of oil
and gas produced from ownership interests in oil and gas properties. Net cash
provided by (used in) operating activities totaled $(108,552) and $322,636 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
proceeds from the sale of nonoperating interests in properties totaled $149,180
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 $18,800 and $111,693 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 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
Income from nonoperating interests increased 75 percent in the second
quarter of 1999 when compared to the same quarter in 1998. Oil and gas sales
increased $1,660 or 2 percent in the second quarter of 1999 when compared to the
corresponding quarter in 1998. Current quarter oil and gas production declined
11 percent and 15 percent, respectively, when compared to second quarter 1998
production volumes. The partnership's sale of properties in 1999 had an impact
on the partnership's production decline. Oil prices increased 44 percent or
$4.38/BBL to an average of $14.29/BBL and gas prices increased 5 percent or
$.11/MCF to an average of $2.44/MCF for the quarter.
9
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SWIFT ENERGY PENSION PARTNERS 1994-C, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Corresponding production costs per equivalent MCF decreased 23 percent in
the second quarter of 1999 compared to the second quarter of 1998 as total
production costs decreased 32 percent, relating to the property sales in 1999.
Total amortization expense for the second quarter of 1999 decreased 97
percent or $375,884 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
amortization expense. Normal amortization expense decreased 51 percent or
$11,914 in the second quarter of 1999 when compared to the second quarter of
1998, also related to the decline in production volumes.
The Partnership recorded an additional provision in amortization in the
second quarter in 1998 for $363,970 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 for oil and gas properties resulting in a full cost ceiling impairment.
Six Months Ended June 30, 1999 and 1998
Income from nonoperating interests decreased 8 percent in the first six
months of 1999 when compared to the same period in 1998. Oil and gas sales
declined $15,654 or 10 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 15 percent and 9
percent, respectively, when compared to the same period in 1998. The
partnership's sale of properties in 1999 had an impact on the partnership's
production decline. Oil prices increased 17 percent or $1.77/BBL to an average
of $12.47/BBL and gas prices decreased 7 percent or $.15/MCF to an average of
$2.11/MCF for the current period.
Corresponding production costs per equivalent MCF decreased 13 percent in
the first six months of 1999 compared to the corresponding period in 1998 as
total production costs decreased 24 percent, relating to the property sales in
1999.
Total amortization expense for the first six months of 1999 decreased 95
percent or $419,982 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
amortization expense. Normal amortization expense decreased 49 percent or
$22,182 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 amortization for the
first six months in 1998 of $397,800 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 for oil and gas properties resulting in a full cost ceiling impairment.
During 1999, partnership revenues and costs will be shared between the
Interest Holders and general partners in an 85:15 ratio.
10
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SWIFT ENERGY PENSION PARTNERS 1994-C, LTD.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-NONE-
11
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SWIFT ENERGY PENSION
PARTNERS 1994-C, 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
12
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Swift Energy
Pension Partners 1994-C, 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> 1,116
<SECURITIES> 0
<RECEIVABLES> 65,925
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67,041
<PP&E> 3,023,735
<DEPRECIATION> (2,362,913)
<TOTAL-ASSETS> 727,863
<CURRENT-LIABILITIES> 283,136
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 444,727
<TOTAL-LIABILITY-AND-EQUITY> 727,863
<SALES> 59,315
<TOTAL-REVENUES> 59,333
<CGS> 0
<TOTAL-COSTS> 23,251<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,257
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,257
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,257
<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>
