Item 1. Business
(a) General American Entertainment Partners II L.P. (the "Partnership") was organized on December 19, 1986 under the laws of the State of Delaware as a limited partnership. Through its participation in Amercent Films II (the "Joint Venture"), a joint venture with Twentieth Century Fox Film Corporation ("Fox"), the Partnership produced, financed, acquired interests in and continues to exploit feature length motion picture films.
A public offering (the "Offering") of depositary units of limited partnership interests (the "Units") was completed in June 1987 by the Partnership. A total of 25,000 Units were sold for aggregate offering proceeds of $24,940,350 representing 24,403.5 Units at $1,000 per Unit and 596.5 Units at $900 per Unit purchased by the parent company of the general partner (which amount represents a price of $1,000 per Unit less selling commission of $100 per Unit which was not payable by the Partnership on these Units).
The general partner of the Partnership is AEP Premiere Corporation II, a Delaware corporation (the "General Partner") (See Item 10). The Partnership has certain consultation rights and, through a committee of the Joint Venture, may be called upon to make certain determinations with respect to such films. Fox, however, has day-to-day control of creative and artistic matters in connection with films in which the Joint Venture invests.
Joint Venture Films, Participation Films and Additional Films The films which the Partnership acquired interests or participations in can be classified into three categories. First, the Joint Venture produced "Joint Venture Films" pursuant to the product origination agreement with Fox (the "Product Origination Agreement"). To produce a Joint Venture Film, the Joint Venture engaged Fox under a production services agreement (the "Production Services Agreement") to produce such film on behalf of the Joint Venture and to provide all production services necessary to complete and deliver the film to the Joint Venture. The second category of films in which the Joint Venture invested were films in which the Joint Venture acquired participations ("Participation Films"). Participation Films are films acquired by another joint venture in which Fox has an interest. The Joint Venture does not own any of the rights in the Participation Films but instead the Partnership made capital contributions to the Joint Venture which were used to acquire participations in such films. The third category of films, "Additional Films", were films which did not meet the criteria as a Joint Venture film but which the Joint Venture could have, upon agreement of Fox and the Partnership, acquired.
The Joint Venture has invested all the net proceeds of the Offering in films, therefore, no additional investments in films will be made by the Joint Venture.
Distribution Agreement and Revenues of the Joint Venture The Joint Venture Films are distributed pursuant to a distribution agreement between the Joint Venture and Fox (the "Distribution Agreement"), but Fox is responsible for and makes all decisions with respect to distribution. A distribution committee of the Joint Venture, consisting of one designee of Fox and two designees of the Partnership (the "Distribution Committee"), has the right to consult periodically with Fox concerning the distribution of Joint Venture Films. Although the Distribution Committee supervises Fox's performance as a distributor, the Distribution Agreement does not set forth any objective standards to measure Fox's performance as a distributor and does not impose minimum commitment obligations with respect to the distribution and exploitation of Joint Venture Films. The Distribution Committee, however, is responsible for certain decisions including, among others, the exercise by the Joint Venture of the Joint Venture's right not to produce a film by reason of certain interests of third party participants in the film.
The Joint Venture receives all of the net proceeds from the Joint Venture Films in accordance with the terms of the Distribution Agreement. The terms of the Distribution Agreement are disclosed in a Joint Venture agreement (the "Joint Venture Agreement") which is incorporated by reference to the Partnership's Registration Statement No. 33-11101 on Form S-1 as filed with the Securities and Exchange Commission on March 4, 1987.
Films in Release The Partnership's percentage participation in the films in which the Partnership has an interest through the Joint Venture and certain other information, are set forth below:
Amount Partnership's Contributed Percentage Release to Joint Participation in Title Date Venture Net Proceeds
Joint Venture Films: Less Than Zero November 1987 $ 4,104,543 34.33% Bad Dreams April 1988 1,387,969 26.43 Big June 1988 6,185,491 29.17 Alien Nation October 1988 3,587,892 19.50
15,265,895 Participation Films: Predator June 1987 1,166,166 5.00 Revenge of the Nerds II: Nerds in Paradise July 1987 497,397 4.98 The Pick-Up Artist September 1987 805,507 4.84 Wall Street December 1987 889,145 5.01 Broadcast News December 1987 1,333,230 4.93 Off Limits March 1988 594,931 5.00
5,286,376
$ 20,552,271
Competition Distribution of motion pictures is a highly competitive business. Fox competes with several other prominent motion picture distributors, some of which have substantially greater financial and personnel resources, in licensing motion pictures to theaters and other markets. The Partnership's films currently are appearing primarily in ancillary markets such as domestic and foreign syndication, basic cable and home video. In addition to distributing the motion pictures of the Joint Venture in these markets, Fox is distributing other motion pictures produced by or on behalf of Fox and motion pictures as to which Fox has acquired distribution rights. These films as well as films released by other motion picture distributors are competing with films which the Joint Venture produces and films in which it has participations.
Relationship with Fox Although Fox had substantial discretion with respect to other aspects of the films, because all the films have been produced, Fox currently has substantial discretion only in the distribution of films in which the Joint Venture has an interest.
The Joint Venture's (and therefore the Partnership's) receipt of net proceeds from the exploitation of the films is dependent upon the compliance by Fox with its obligations under agreements entered into between it and the Joint Venture. The term net proceeds is utilized solely as a measuring device to calculate amounts payable to the Joint Venture by Fox and no specific funds will be segregated for payment to the Joint Venture. Fox's payment obligations are not secured, and the Joint Venture relies on the general credit of Fox to receive any amounts due to it.
Changes in the Motion Picture Industry The entertainment business in general, and the motion picture business in particular, has undergone significant changes, primarily due to technological developments such as the advent of home video equipment. While these developments have resulted in the availability of alternative forms of leisure time entertainment, which may have a negative impact on the Partnership's films while in domestic theatrical release, the developments have also resulted in additional sources of revenue for the Partnership's films. The level of domestic theatrical success, however, remains a critical factor in generating revenues in these ancillary markets where the Partnership's films are currently being distributed. Given the rapidity of technological development and shifting consumer tastes, it is impossible to predict what effect these technological and other changes will have on the potential overall revenues for the Partnership's feature length motion pictures in the future.
Employees The Partnership has no employees.
Item 2.

Item 2. Properties
The principal offices of the Partnership and the General Partner are located at 3 World Financial Center, 29th Floor, New York, New York. The Partnership pays no rent. All other charges for space and administrative facilities are borne by an affiliate of the General Partner.
Item 3.

Item 3. Legal Proceedings
The Registrant is not a party to any material pending legal proceedings.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5.

Item 5. Market for the Partnership's Limited Partnership Interests and Related Security Holder Matters
(a)(b) Market Information and Holders - The Partnership is a limited partnership and there is no established public market for the Partnership's Units. As of December 31, 1996 there were 4,847 holders of record ("Unitholders") of the Partnership's Units.
(c) Distributions - Incorporated by reference to the sections "Cash Distributions", "Financial Highlights" and Note 3 of the Notes to the Financial Statements of the Partnership's Annual Report to Unitholders for the year ended December 31, 1996, which is filed as an exhibit under Item 14 and incorporated herein by reference.
Item 6.

Item 6. Selected Financial Data
Incorporated by reference to the "Financial Highlights" table of the Partnership's Annual Report to Unitholders for the year ended December 31, 1996.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources The Partnership's principal source of funds is the proceeds received from Fox pursuant to the Distribution Agreement, as defined in the Partnership's prospectus. According to the terms set forth in the Partnership Agreement, effective January 1993, the Partnership receives proceeds from Fox on an annual basis. Accordingly, all future cash distributions from the Partnership's investment in the Joint Venture films will be paid to limited partners on an annual basis.
The Partnership's cash balance at December 31, 1996 was approximately $1,315,000 compared to approximately $2,085,000 at December 31, 1995. The $770,000 decrease is primarily attributable to the payment of the 1995 cash distribution of approximately $1,445,000 in February 1996, the payment of the Partnership's 1995 annual management fee in 1996 and the payment of 1996 Partnership expenses and offset by the receipt of the annual distribution of proceeds from Fox in the amount of $915,000. The Partnership's cash balance is expected to provide sufficient liquidity to enable the Partnership to fund cash distributions and meet its operating expenses.
In February 1997, the Partnership paid the 1996 annual distribution totaling $697,000 of which $690,000 or $27.60 per Unit was paid to the Limited Partners and $7,000 was paid to the General Partner.
The Partnership's receivable from Fox totaled approximately $148,000 at December 31, 1995 as compared to $0 at December 31, 1996. The Partnership had unearned motion picture revenue at December 31, 1996 of approximately $92,000 as compared to $0 at December 31, 1995. The change from receivable in 1995 to unearned revenue in 1996 is due to 1996 cash receipts in excess of revenues accrued through December 31, 1996.
Results of Operations
1996 compared to 1995 For the year ended December 31, 1996, the Partnership reported net income of approximately $399,000 as compared to approximately $243,000 for 1995. The increase in net income is primarily the result of increases in revenues from motion picture exploitation. Motion picture profits are based on current estimates of ultimate film revenues and costs. These estimates are subject to review periodically as more information about a film's distribution becomes available. Such reviews can result in significant adjustments to prior estimates.
For the year ended December 31, 1996, the Partnership recognized revenues from motion picture exploitation and amortization of motion picture costs with respect to its investment in the released films of approximately $675,000 and $50,000, respectively, compared to $520,000 and $33,000 during 1995. The increases in revenues from motion picture exploitation and amortization of motion picture costs are primarily attributable to higher revenue from international television licenses and from the home video sell- through market. The Partnership currently receives revenues from the distribution of the films in ancillary markets.
Professional fees decreased from approximately $34,000 at December 31, 1995 to $19,000 at December 31, 1996 primarily due to lower legal and audit fees incurred by the Partnership.
1995 compared to 1994 For the year ended December 31, 1995, the Partnership reported net income of approximately $243,000 as compared to approximately $601,000 for 1994. The decrease in net income is primarily the result of decreases in revenues from motion picture exploitation. Motion picture profits are based on current estimates of ultimate film revenues and costs. These estimates are subject to review periodically as more information about a film's distribution becomes available. Such reviews can result in significant adjustments to prior estimates.
For the year ended December 31, 1995, the Partnership recognized revenues from motion picture exploitation and amortization of motion picture costs with respect to its investment in the released films of approximately $520,000 and $33,000, respectively, compared to $1,027,000 and $164,000 during 1994. The decreases in revenues from motion picture exploitation and amortization of motion picture costs are primarily attributable to the mature stage of the films. The Partnership currently receives revenues from the distribution of the films in ancillary markets.
Interest income for the year ended December 31, 1995 totaled $36,000 compared to $20,000 during 1994. The increase is primarily due to higher interest rates earned on the Partnership's cash balance.
Item 8.

Item 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for the year ended December 31, 1996. For a listing of financial statements and schedules, see Item 14a.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None. PART III
Item 10.

Item 10. Directors and Executive Officers of the Partnership
The General Partner of the Partnership is AEP Premiere Corporation II, a Delaware corporation formed on November 18, 1986. It is an affiliate of Lehman Brothers Inc. ("Lehman Brothers")
Certain officers and directors of the General Partner are now serving (or in the past have served) as officers or directors of entities which act as general partners of a number of real estate limited partnerships which have sought protection under the provisions of the federal Bankruptcy Code. The partnerships which have filed bankruptcy petitions own real estate which has been affected adversely by the economic conditions in the markets in which that real estate is located and, consequently, the partnerships sought protection of the bankruptcy laws to protect the partnerships' assets from loss through foreclosure.
Name Office Moshe Braver Director, President & Chief Financial Officer
Moshe Braver, 43, is currently a Managing Director of Lehman Brothers and has held such position since October 1985. During this time, he has held positions with the Business Analysis Group, International and Capital Markets Administration and currently, with the Diversified Asset Group. Mr. Braver joined Shearson Lehman Brothers in August 1983 as Senior Vice President. Prior to joining Shearson, Mr. Braver was employed by the accounting firm of Coopers & Lybrand from January 1975 through August 1983 as an Audit Manager. He received a Bachelor of Business Administration degree from Bernard Baruch College in January 1975 and is a Certified Public Accountant.
Item 11.

Item 11. Executive Compensation
Neither the General Partner nor any of its officers or directors received any compensation from the Partnership.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners - No person is known to beneficially own in excess of 5% of the Units of the Partnership.
(b) Security Ownership of Management - No officers or directors of the General Partner beneficially owned any Units of the Partnership as of December 31, 1996.
(c) Changes in Control - None
Item 13.

Item 13. Certain Relationships and Related Transactions
The Partnership's operations relating to the production, acquisition of interests and participations and exploitation of films through the Joint Venture involves the following agreements with Fox: Joint Venture Agreement, Product Origination Agreement, Production Services Agreement (with respect to Joint Venture Films produced by Fox as the production services company), Participation Agreement and Distribution Agreement. See the Joint Venture Agreement which is incorporated by reference to the Partnership's Registration Statement No. 33-11101 on Form S-1 as filed with the Securities and Exchange Commission on March 4, 1987.
First Data Investor Services Group, formerly The Shareholder Services Group, provides partnership accounting and investor relations services for the Partnership. Prior to May 1993, those services were provided by an affiliate of the General Partner. Transfer agent services and certain tax reporting services are provided by Service Data Corporation. Both First Data Investor Services Group and Service Data Corporation are unaffiliated companies.
For additional information on related transactions with affiliates, see notes 5, 6 and 7 of the Notes to the Financial Statements of the Partnership's Annual Report to Unitholders for the year ended December 31, 1996, which is incorporated herein by reference.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports of Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
Balance Sheets At December 31, 1996 and 1995 (1) Statements of Partners' Capital For the years ended December 31, 1996, 1995 and 1994 (1) Statements of Operations For the years ended December 31, 1996, 1995 and 1994 (1) Statements of Cash Flows For the years ended December 31, 1996, 1995 and 1994 (1) Notes to the Financial Statements (1) Report of Independent Auditors (1)
(1) Incorporated by reference to the Partnership's Annual Report to Unitholders for the year ended December 31, 1996.
2. Financial Statement Schedules
No financial statement schedules have been filed as part of this report as none are required.
3. Exhibits Exhibit No.
* Certificate of Limited Partnership 3 (a) * Form of Amended and Restated Agreement of Limited Partnership 3 (b) * Form of Joint Venture Agreement 10 (b) * Form of Distribution Rights Acquisition Agreement 10 (c) * Form of Production Services Agreement 10 (d) * Form of Product Origination Agreement 10 (e) * Form of Participation Agreement 10 (f) * Form of Guarantee 10 (g) Annual Report to Unitholders for the year ended December 31, 1995 13 (a) Financial Data Schedule 27
* Incorporated by reference to the Partnership's Registration Statement No. 33-11101 on Form S-1 as filed with the Securities and Exchange Commission on March 4, 1987.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the year ended December 31, 1996.
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.
Dated: March 14, 1997
AMERICAN ENTERTAINMENT PARTNERS II L.P.
BY: AEP Premiere Corporation II General Partner
BY: /s/ Moshe Braver Name: Moshe Braver Title: Director and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
AEP PREMIERE CORPORATION II General Partner
Date: March 14, 1997 BY: /s/ Moshe Braver Moshe Braver Director, President & Chief Financial Officer
American Entertainment Partners II L.P. EXHIBIT 13(a)
1996 Annual Report American Entertainment Partners II L.P.


Item 1. Business
General Description of Partnership
Swift Energy Income Partners 1988-B, Ltd., a Texas limited partnership (the "Partnership" or the "Registrant"), is a partnership formed under a public serial limited partnership offering denominated Swift Energy Income Partners III (Registration Statement No. 33-11773 on Form S-1, originally declared effective March 19, 1987, and amended effective March 28, 1988, May 4, 1989 and May 1, 1990 [the "Registration Statement"]). The Partnership was formed effective July 1, 1988 under a Limited Partnership Agreement dated June 30, 1988. The initial 752 limited partners made capital contributions of $7,382,956.
The Partnership is principally engaged in the business of acquiring, developing and, when appropriate, disposing of working interests in proven oil and gas properties within the continental United States. The Partnership does not engage in exploratory drilling. Each working interest held by the Partnership entitles the Partnership to receive, in kind or in value, a share of the production of oil and gas from the producing property, and obligates the Partnership to participate in the operation of the property and to bear its proportionate share of all operating costs associated therewith. The Partnership typically holds less than the entire working interest in its producing properties.
At December 31, 1996, the Partnership had expended or committed to expend 100% of the limited partners' net commitments (i.e., limited partners' commitments available to the Partnership for property acquisitions after payment of organization fees and expenses) in the acquisition and development of producing properties, which properties are described under Item 2, "Properties," below. The Partnership's revenues and profits are derived almost entirely from the sale of oil and gas produced from its properties and from the sale of acquired oil and gas properties, when the sale of such properties is economically preferable to continued operation.
The Partnership's business and affairs are conducted by its Managing General Partner, Swift Energy Company, a Texas corporation ("Swift"). The Partnership's Special General Partner, VJM Corporation, a California corporation ("VJM"), consults with and advises Swift as to certain financial matters. Swift is the designated operator of many of the properties in which the Partnership owns interests. The remaining properties are operated by industry operators designated by the owners of a majority of the working interest in each property.
The general manner in which the Partnership acquires producing properties and otherwise conducts its business is described in detail in the Registration Statement under "Proposed Activities," which is incorporated herein by reference. The following is intended only as a summary of the Partnership's manner of doing business and specific activities to date.
Manner of Acquiring Properties; Net Profits and Overriding Royalty Interest Agreement
For the sake of legal and administrative convenience, the producing properties owned by the Registrant have typically been acquired initially by Swift, which then conveyed ownership of each such property to the Registrant. The Registrant acquires producing properties from Swift at the property acquisition cost of such properties to Swift, as adjusted for intervening operations.
The Registrant entered into a Net Profits and Overriding Royalty Interest Agreement dated July 1, 1988 (the "NP/OR Agreement") with Swift Energy Managed Pension Assets Partnership 1988-A, Ltd. (the "Pension Partnership"). The Pension Partnership is a Texas limited partnership that is also managed by Swift and VJM. The Pension Partnership was formed to acquire nonoperating interests, such as net profits, royalty and overriding royalty interests, in producing oil and gas properties.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
Under the NP/OR Agreement, the Registrant and the Pension Partnership have, in effect, combined their funds in acquiring producing properties; using funds committed to the NP/OR Agreement by both partnerships, the Registrant acquires producing properties, then promptly conveys nonoperating interests therein to the Pension Partnership. The Registrant initially committed $6,733,121 and the Pension Partnership initially committed $4,116,890 for acquisitions under the NP/OR Agreement. The Registrant is obligated under the NP/OR Agreement to convey to the Pension Partnership a 38% fixed net profits interest and a variable overriding royalty interest in specified depths of every producing property it acquires, except that (i) properties anticipated to require significant development operations, and (ii) nonoperating interests offered to the Registrant by third parties may be purchased by the registrant outside the NP/OR Agreement, without participation by the Pension Partnership. The Registrant is entitled to withdraw up to 30% of its committed funds under the NP/OR Agreement for such acquisitions.
All properties acquired by the Registrant since the date of the NP/OR Agreement have been acquired subject to the NP/OR Agreement and the nonoperating interests created thereby, except for certain nonoperating interests acquired outside the NP/OR Agreement by the Registrant from Northwind Exploration Company. At December 31, 1996, the Registrant had not made any withdrawals to acquire properties anticipated to require significant development.
In accordance with its obligations under the NP/OR Agreement, as of December 31, 1996 the Registrant had conveyed to the Pension Partnership a net profits interest burdening certain depths of all producing properties (other than the Northwind properties) acquired by the Registrant since the date of the NP/OR Agreement. Typically, a net profits interest in an oil and gas property entitles the owner to a specified percentage share of the gross proceeds generated by the burdened property, net of operating costs. The 38% net profits interest conveyed to the Pension Partnership under the NP/OR Agreement differs from the typical net profits interest in that it is calculated over the entire group of producing properties acquired under the NP/OR Agreement; i.e., all operating costs attributable to the burdened depths of such properties are aggregated, and the total is then subtracted from the total of all gross proceeds attributable to such depths in order to calculate the net profits to which the Pension Partnership is entitled. The net profits interest conveyed to the Pension Partnership burdens only those depths of each subject property which were evaluated to contain proved reserves at the date of acquisition, to the extent such depths underlie specified surface acreage.
The Registrant has also conveyed to the Pension Partnership under the NP/OR agreement an overriding royalty interest in each property (other that the Northwind properties) acquired since the date of the NP/OR Agreement. An overriding royalty interest is a fractional interest in the gross production (or the gross proceeds therefrom) of oil and gas from a property, free of any exploration, development, operation or maintenance expenses. Under the NP/OR Agreement, the overriding royalty interest burdens the portions of each producing property that were evaluated at the date of acquisition not to contain proved reserves.
Competition, Markets and Regulations
Competition
The oil and gas industry is highly competitive in all its phases. The Partnership encounters strong competition from many other oil and gas producers, many of which possess substantial financial resources, in acquiring economically desirable Producing Properties.
Markets
The amounts of and price obtainable for oil and gas production from Partnership Properties will be affected by market factors beyond the control of the Partnership. Such factors include the extent of domestic production, the level of imports of foreign oil and gas, the general level of market demand on a regional, national and worldwide basis, domestic and foreign economic conditions that determine levels of industrial production, political events in foreign oil-producing regions, and variations in governmental regulations and tax laws and the imposition of new governmental requirements upon the oil and gas industry. There can be no assurance that oil and gas prices will not decrease in the future, thereby decreasing net Revenues from Partnership Properties.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
From time to time, there may exist a surplus of natural gas or oil supplies, the effect of which may be to reduce the amount of hydrocarbons that the Partnerships may produce and sell while such oversupply exists. In recent yeras, initial steps have been taken to provide additional gas transportation lines from Canada to the United States. If additional Canadian gas is brought to the United States market, it could create downward pressure on United States gas prices.
Regulations
Environmental Regulation
The federal government and various state and local governments have adopted laws and regulations regarding the control of contamination of the environment. These laws and regulations may require the acquisition of a permit by Operators before drilling commences, prohibit drilling activities on certain lands lying within wilderness areas or where pollution arises and impose substantial liabilities for pollution resulting from operations, particularly operations near or in onshore and offshore waters or on submerged lands. These laws and regulations may also increase the costs of routine drilling and operation of wells. Because these laws and regulations change frequently, the costs to the Partnership of compliance with existing and future environmental regulations cannot be predicted. However, the Managing Partner does not believe that the Partnership is affected in a significantly different manner by these regulations than are its competitors in the oil and gas industry.
Federal Regulation of Natural Gas
The transportation and sale of natural gas in interstate commerce is heavily regulated by agencies of the federal government. The following discussion is intended only as a summary of the principal statutes, regulations and orders that may affect the production and sale of natural gas from Partnership Properties. This summary should not be relied upon as a complete review of applicable natural gas regulatory provisions.
FERC Orders
Several major regulatory changes have been implemented by the Federal Energy Regulatory Commission ("FERC") from 1985 to the present that affect the economics of natural gas production, transportation and sales. In addition, the FERC continues to promulgate revisions to various aspects of the rules and regulations affecting those segments of the natural gas industry that remain subject to the FERC's jurisdiction. In April 1992, the FERC issued Order No. 636 pertaining to pipeline restructuring. This rule requires interstate pipelines to unbundle transportation and sales services by separately stating the price of each service and by providing customers only the particular service desired, without regard to the source for purchase of the gas. The rule also requires pipelines to (i) provide nondiscriminatory "no-notice" service allowing firm commitment shippers to receive delivery of gas on demand up to certain limits without penalties, (ii) establish a basis for release and reallocation of firm upstream pipeline capacity and (iii) provide non-discriminatory access to capacity by firm transportation shippers on a downstream pipeline. The rule requires interstate pipelines to use a straight fixed variable rate design. The rule imposes these same requirements upon storage facilities.
FERC Order No. 500 affects the transportation and marketability of natural gas. Traditionally, natural gas has been sold by producers to pipeline companies, which then resold the gas to end-users. FERC Order No. 500 alters this market structure by requiring interstate pipelines that transport gas for others to provide transportation service to producers, distributors and all other shippers of natural gas on a nondiscriminatory, "first-come, first-served" basis ("open access transportation"), so that producers and other shippers can sell natural gas directly to end-users. FERC Order No. 500 contains additional provisions intended to promote greater competition in natural gas markets.
It is not anticipated that the marketability of and price obtainable for natural gas production from Partnership Properties will be significantly affected by FERC Order No. 500. Gas produced from Partnership Properties normally will be sold to intermediaries who have entered into transportation arrangements with pipeline companies. These intermediaries will accumulate gas purchased from a number of producers and sell the gas to end-users through open access pipeline transportation.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
State Regulations
Production of any oil and gas from Partnership Properties will be affected to some degree by state regulations. Many states in which the Partnership will operate have statutory provisions regulating the production and sale of oil and gas, including provisions regarding deliverability. Such statutes, and the regulations promulgated in connection therewith, are generally intended to prevent waste of oil and gas and to protect correlative rights to produce oil and gas between owners of a common reservoir. Certain state regulatory authorities also regulate the amount of oil and gas produced by assigning allowable rates of production to each well or proration unit.
Federal Leases
Some of the Partnership's properties are located on federal oil and gas leases administered by various federal agencies, including the Bureau of Land Management. Various regulations and orders affect the terms of leases, exploration and development plans, methods of operation and related matters.
Employees
The Partnership has no employees. Swift, however, has a staff of geologists, geophysicists, petroleum engineers, landmen, and accounting personnel who administer the operations of Swift and the Partnership. As of December 31, 1996, Swift had 191 employees. Swift's administrative and overhead expenses attributable to the Partnership's operations are borne by the Partnership.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
Item 2.

Item 2. Properties
As of December 31, 1996, the Partnership has acquired interests in producing oil and gas properties which are generally described below.
Principal Oil and Gas Producing Properties
The Partnership's fields are highly diversified in 8 states none of which equals or exceeds 15 percent of the total Partnership value.
Title to Properties
Title to substantially all significant producing properties of the Partnership has been examined. The properties are subject to royalty, overriding royalty and other interests customary in the industry. The Managing General Partner does not believe any of these burdens materially detract from the value of the properties or will materially detract from the value of the properties or materially interfere with their use in the operation of the business of the Partnership.
Production and Sales Price
The following table summarizes the sales volumes of the Partnership's net oil and gas production expressed in MCFs. Equivalent MCFs are obtained by converting oil to gas on the basis of their relative energy content; one barrel equals 6,000 cubic feet of gas.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
Net Proved Oil and Gas Reserves
Presented below are the estimates of the Partnership's proved reserves as of December 31, 1996, 1995 and 1994. All of the Partnership's proved reserves are located in the United States.
Revisions of previous quantity estimates are related to upward or downward variations based on current engineering information for production rates, volumetrics and reservoir pressure. Additionally, changes in quantity estimates are the result of the increase or decrease in crude oil and natural gas prices at each year end which have the effect of adding or reducing proved reserves on marginal properties due to economic limitations.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
The following table summarizes by acquisition the Registrant's reserves and gross and net interests in producing oil and gas wells as of December 31, 1996:
There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting the future rates of production, timing and plan of development. 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 above, audited by H. J. Gruy and Associates, Inc., an independent petroleum consulting firm. 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 oil and natural gas reserves, the Registrant, in accordance with criteria prescribed by the Securities and Exchange Commission, has used prices received as of December 31, 1996 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. The Registrant does not believe that any favorable or adverse event causing a significant change in the estimated quantity of proved reserves has occurred between December 31, 1996 and the date of this report.
Future prices received for the sale of the Partnership's products may be higher or lower than the prices used in the evaluation described above; the operating costs relating to such production may also increase or decrease from existing levels. The estimates presented above are in accordance with rules adopted by the Securities and Exchange Commission.
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SWIFT ENRGY INCOME PARTNERS 1988-B, LTD.
Item 3.

Item 3. Legal Proceedings
The Partnership is not aware of any material pending legal proceedings to which it is a party or of which any of its property is the subject.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote during the fourth quarter of the fiscal year covered by this report.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
PART II
Item 5.

Item 5. Market Price of and Distributions on the Registrant's Units and Relate Limited Partner Matters
Market Information
Units in the Partnership were initially sold at a price of $100 per Unit. Units are not traded on any exchange and there is no established public trading market for the Units. Swift is aware of negotiated transfers of Units between unrelated parties; however, these transfers have been limited and sporadic. Due to the nature of these transactions, Swift has no verifiable information regarding prices at which Units have been transferred.
Holders
As of December 31, 1996, there were 752 Limited Partners holding Units in the Partnership.
Distributions
The Partnership generally makes distributions to Limited Partners on a quarterly basis, subject to the restrictions set forth in the Limited Partnership Agreement. In the fiscal years ending December 31, 1995 and 1996, the Partnership distributed a total of $75,700 and $40,600, respectively, to holders of its Units. Cash distributions constitute net proceeds from sale of oil and gas production after payment of lease operating expenses and other partnership expenses. Some or all of such amounts or any proceeds from the sale of partnership properties could be deemed to constitute a return of investors' capital.
Oil and gas investments involve a high risk of loss, and no assurance can be given that any particular level of distributions to holders of Units can be achieved or maintained. Although it is anticipated that quarterly distributions will continue to be made through 1997, the Partnership's ability to make distributions could be diminished by any event adversely affecting the oil and gas properties in which the Partnership owns interests or the amount of revenues received by the Partnership therefrom.
The Partnership's Limited Partnership Agreement contains various provisions which might serve to delay, defer or prevent a change in control of the Partnership, such as the requirement of a vote of Limited Partners in order to sell all or substantially all of the Partnership's properties or the requirement of consent by the Managing General Partner to transfers of limited partnership interests.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
Item 6.

Item 6. Selected Financial Data
The following selected financial data, prepared in accordance with generally accepted accounting principles as of December 31, 1996, 1995, 1994, 1993, and 1992, should be read in conjunction with the financial statements included in Item 8.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
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. 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. This source of liquidity and the related results of operations will decline in future periods as the oil and gas produced from these properties also declines.
Subject to 1997 market conditions remaining comparable with 1996, the Managing General Partner ("MGP") anticipates an increase in liquidity provided that certain development work scheduled in 1997 is completed successfully. The Partnership plans to spend in the next two years an estimated $124,000 for capital expenditures needed for this development work and the enhancement of proved oil and gas reserves. The MGP anticipates that the Partnership will have adequate liquidity from income from continuing operations to satisfy any future capital expenditure requirements. Funds generated from bank borrowings and proceeds from the sale of oil and gas properties will be used to supplement this effort if deemed necessary.
Results of Operations
Oil and gas sales decreased 4 percent in 1996 vs. 1995. Production volumes decreased 32 percent due to a 33 percent gas production decrease and a 31 percent oil production decline. Increases in both 1996 gas and oil prices were experienced by the partnerhsip. The Partnership experienced an increase in gas prices of 47 percent $.69/MCF and an increase in oil prices of 29 percent or $3.98/BBL. The average sales price per equivalent MCF increased 42 percent in 1996. The price increases partially offset the effect of decreased oil and gas poduction impacting partneship performance.
Production cost per equivalent MCF increased 29 percent in 1996 compared to 1995; however, total production costs decreased 12 percent in 1996.
Associated depreciation expense decreased 26 percent in 1996 when compared to 1995.
Oil and gas sales decreased 31 percent in 1995 vs. 1994. Production volumes decreased 18 percent due to a 17 percent gas production decrease and a 20 percent oil production decline. Since the Partnership's reserves are 71 percent gas, the decrease in gas production, due to accelerated production declines on mature wells, had a major impact on partnership performance. A decline in the 1995 gas prices of 26 percent or $.51/MCF further contributed to the Partnership's decreased revenues. The average sales price per equivalent MCF decreased 18 percent in 1995.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
Production cost per equivalent MCF decreased 6 percent in 1995 compared to 1994. In addition, total production costs decreased 22 percent in 1995.
Associated depreciation expense decreased 17 percent in 1995 when compared to 1994.
The Partnership recorded an additional provision in depreciation, depletion and amortization in 1995 and 1994 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 paid for oil and gas properties resulting in a full cost ceiling impairment.
During 1997, Partnership revenues and costs will be shared between the limited and general partners in a 90:10 ratio, based on the annualized rate of cash distributions by the Partnership during a certain period prior to December 31, 1996. Based on current oil and gas prices, current levels of oil and gas production and expected cash distributions during 1997, the MGP anticipates that the Partnership sharing ratio will continue to be 90:10.
Item 8.

Item 8. Financial Statements and Supplementary Data
See Part IV, Item 14(a) for index to financial statements.
Item 9.

Item 9. Disagreements on Accounting and Financial Disclosure
None.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant
As a limited partnership, the Registrant has no directors or executive officers. The business and affairs of the Registrant are managed by Swift as Managing General Partner. Set forth below is certain information as of March 17, 1997 regarding the directors and executive officers of Swift.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
From time to time, Swift as Managing General Partner of the Partnership purchases Units in the Partnership from investors who offer the Units pursuant to their right of presentment, which purchases are made pursuant to terms set out in the Partnership's original Limited Partnership Agreement. Due to the frequency and large number of these transactions, Swift reports these transactions under Section 16 of the Securities Exchange Act of 1934 on an annual rather than a monthly basis. In some cases such annual reporting may constitute a late filing of the required Section 16 reports under the applicable Section 16 rules.
Item 11.

Item 11. Executive Compensation
As noted in Item 10, "Directors and Executive Officers of the Registrant," above, the Partnership has no executive officers. The executive officers of Swift and VJM are not compensated by the Partnership.
Certain fees and allowances contemplated by the Limited Partnership Agreement have been paid by the Partnership to Swift and VJM. See Note (4) in Notes To Financial Statements (Related-Party Transactions) for further discussion.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
Swift Energy Company, the Managing General Partner, located at 16825 Northchase Drive, Suite 400, Houston, Texas 77060, owns 4,016 Limited Partnership Units, which is 5.44 percent of all outstanding Limited Partnership Units. All Limited Partnership Units owned by Swift were acquired from investors who offered the Limited Partnership Units pursuant to their right of presentment. As the Managing General Partner, Swift is not permitted generally, under the Limited Partnership Agreement, to vote its Limited Partnership Units. Swift also owns a general partnership interest of 9 percent of all partnership interests in the Partnership.
Swift and VJM are not aware of any arrangement, the operation of which may at a subsequent date result in a change in control of the Partnership.
Item 13.

Item 13. Certain Relationships and Related Transactions
As noted in Item 10, "Directors and Executive Officers of the Registrant," above, the Partnership has no executive officers or directors, and thus has not engaged in any transactions in which any such person had an interest. The Partnership is permitted to engage in certain transactions with Swift as Managing General Partner and VJM as Special General Partner, subject to extensive guidelines and restrictions described in the "Conflicts of Interest" section of the Amended Prospectus contained in the Registration Statement, which is incorporated herein by reference.
Summarized below are the principal transactions that have occurred between the Partnership and Swift, VJM and their affiliates.
1. The oil and gas properties acquired by the Partnership, as described in Item 2, "Properties" above, were typically acquired initially by Swift from the seller thereof and subsequently transferred to the Partnership. Such transfers were made by Swift at its Property Acquisition Costs (as defined in the Limited Partnership Agreement), less any amounts received from sale of production between the time of acquisition by Swift and the time of sale to the Partnership.
2. Swift acts as operator for many of the wells in which the Partnership has acquired interests and has received compensation for such activities in accordance with standard industry operating agreements.
3. The Partnership paid to Swift and VJM certain fees as contemplated by the Limited Partnership Agreement. See Note (4) in Notes To Financial Statements (Related-Party Transactions) for further discussion.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
PART IV
a(2) FINANCIAL STATEMENT SCHEDULES
All schedules required by the SEC are either inapplicable or the required information is included in the Financial Statements, the Notes thereto, or in other information included elsewhere in this report.
a(3) EXHIBITS
3.1 Limited Partnership Agreement of Swift Energy Income Partners 1988-B, Ltd., dated June 30, 1988. (Form 10-K for year ended December 31, 1988, Exhibit 3.1).
3.2 Certificate of Limited Partnership of Swift Energy Income Partners 1988-B, Ltd., as filed July 1, 1988, with the Texas Secretary of State. (Form 10-K for year ended December 31, 1988, Exhibit 3.2).
10.1 Net Profits and Overriding Royalty Interest Agreement between Swift Energy Income Partners 1988-B, Ltd. and Swift Energy Managed Pension Assets Partnership 1989-A, Ltd. dated July 1, 1988. (Form 10-K for the year ended December 31, 1988, Exhibit 10.1).
99.1 A copy of the following section of the Amended Prospectus dated March 28, 1988, contained in Post-Effective Amendment No. 1 to Registration Statement No. 33-11773 on Form S-1 for Swift Energy Income Partners III, as filed on March 25, 1988, which have been incorporated herein by reference: "Proposed Activities" (pp 36 - 50) and "Conflicts of Interest" (pp. 70 - 78). (Form 10-K for year ended December 31, 1989, Exhibit 28.1).
b(1) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter ended December 31, 1996.
Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act.
No annual report to security holders covering the Partnership's 1996 fiscal year, or proxy statement, form of proxy or other proxy soliciting material has been sent to Limited Partners of the Partnership.
IV-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Swift Energy Income Partners 1988-B, Ltd.:
We have audited the accompanying balance sheets of Swift Energy Income Partners 1988-B, Ltd., (a Texas limited partnership) as of December 31, 1996 and 1995, and the related statements of operations, partners' capital and cash flows for the years ended December 31, 1996, 1995 and 1994. These financial statements are the responsibility of the general partner's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Swift Energy Income Partners 1988-B, Ltd., as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years ended December 31, 1996, 1995 and 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas February 10, 1997
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD. BALANCE SHEETS DECEMBER 31, 1996 AND 1995
See accompanying notes to financial statements.
IV-3
SWIFT ENERGY INCOME PARTNERS 1988-B, LTD. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
See accompanying notes to financial statements.
IV-4
SWIFT ENERGY INCOME PARTNERS 1988-B, LTD. STATEMENTS OF PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
See accompanying notes to financial statements.
IV-5
SWIFT ENERGY INCOME PARTNERS 1988-B, LTD. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
See accompanying notes to financial statements.
IV-6
SWIFT ENERGY INCOME PARTNERS 1988-B, LTD. NOTES TO FINANCIAL STATEMENTS
(1) Organization and Terms of Partnership Agreement -
Swift Energy Income Partners 1988-B, Ltd., a Texas limited partnership (the Partnership), was formed on July 1, 1988, for the purpose of purchasing and operating producing oil and gas properties within the continental United States. Swift Energy Company ("Swift"), a Texas corporation, and VJM Corporation ("VJM"), a California corporation, serve as Managing General Partner and Special General Partner of the Partnership, respectively. The general partners are required to contribute up to 1/99th of limited partner net contributions. The 752 limited partners made total capital contributions of $7,382,956.
Property acquisition costs and the management fee are borne 99 percent by the limited partners and one percent by the general partners. Organization and syndication costs were borne solely by the limited partners.
Initially, all continuing costs (including development costs, operating costs, general and administrative reimbursements and direct expenses) and revenues are allocated 90 percent to the limited partners and ten percent to the general partners. If prior to partnership payout, as defined, however, the cash distribution rate for a certain period equals or exceeds 17.5 percent, then for the following calendar year, these continuing costs and revenues will be allocated 85 percent to the limited partners and 15 percent to the general partners. After partnership payout, continuing costs and revenues will be shared 85 percent by the limited partners, and 15 percent by the general partners, even if the cash distribution rate is less than 17.5 percent. Payout had not occurred as of December 31, 1996.
(2) 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 --
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 years ended December 31, 1996, 1995 and 1994.
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.
IV-7
SWIFT ENERGY INCOME PARTNERS 1988-B, LTD. NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
Statements of Cash Flows --
Highly liquid debt instruments with an initial maturity of three months or less are considered to be cash equivalents.
(3) Oil and Gas Capitalized Costs -
The following table sets forth capital expenditures related to the Partnership's oil and gas operations:
All oil and gas property acquisitions are made by Swift on behalf of the Partnership. The costs of the properties include the purchase price plus any costs incurred by Swift in the evaluation and acquisition of properties.
During 1995 and 1994, the Partnership's unamortized oil and gas property costs exceeded the quarterly calculations of the "ceiling limitation" resulting in an additional provision for depreciation, depletion and amortization of $201,583 and $226,987, respectively. In computing the Partnership's third quarter 1994 "ceiling limitation", the Partnership utilized the product prices in effect at the date of the filing of the Partnership's report on Form 10-Q. Utilizing these subsequent prices, no write down was required by the Partnership. The write down would have been $21,348 using product prices in effect at September 30, 1994. No such write downs were required in 1996.
In addition, the limited partners' share of unamortized oil and gas property costs exceeded their "ceiling limitation" in 1996 and 1995 resulting in a valuation allowance of $179,983 and $187,205, respectively. These amounts are included in the income (loss) attributable to the limited partners shown in the statements of partners' capital together with a "combining adjustment" for the differences between the limited partners' valuation allowances and the Partnership's valuation allowances. The "combining adjustment" changes quarterly as the Partnership's total depreciation, depletion and amortization provision is more or less than the combined depreciation, depletion and amortization provision attributable to general and limited partners.
IV-8
SWIFT ENERGY COMPANY INCOME PARTNERS 1988-B, LTD. NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) Related-Party Transactions -
An affiliate of the Special General Partner, as Dealer Manager, received $183,061 for managing and overseeing the offering of limited partnership units.
A one-time management fee of $184,574 was paid to Swift in 1988 for services performed for the Partnership. During 1996, 1995 and 1994, the Partnership paid Swift $28,094, $27,672 and $40,707, respectively, as general and administrative overhead allowances.
Effective July 1, 1988, the Partnership entered into a Net Profits and Overriding Royalty Interests Agreement ("NP/OR Agreement") with Swift Energy Managed Pension Assets Partnership 1988-A, Ltd. (Pension Partnership), managed by Swift, for the purpose of acquiring working interests in producing oil and gas properties. Under 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 its proportionate share of the property acquisition costs.
(5) Note Payable to a Bank -
Note payable to a bank at December 31, 1996 and 1995 follows:
Note was paid in full at maturity. As provided by the Partnership Agreement, the note payable was obtained to fund development wells. As of December 31, 1996, the Partnership had no outstanding note payable to a Bank.
(6) Federal Income Taxes -
The Partnership is not a tax-paying entity. No provision is made in the accounts of the Partnership for federal or state income taxes, since such taxes are liabilities of the individual partners, and the amounts thereof depend upon their respective tax situations.
The tax returns and the amount of distributable Partnership income are subject to examination by the federal and state taxing authorities. If the Partnership's ordinary income for federal income tax purposes is ultimately changed by the taxing authorities, the tax liability of the limited partners could be changed accordingly. Ordinary income reported on the Partnership's federal return of income for the years ended December 31, 1996, 1995 and 1994 was $196,106, $115,858 and $295,711, respectively. The difference between ordinary income for federal income tax purposes reported by the Partnership and net income or loss reported herein primarily results from the exclusion of depletion (as described below) from ordinary income reported in the Partnership's federal return of income.
IV-9
SWIFT ENERGY COMPANY INCOME PARTNERS 1988-B, LTD. NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For federal income tax purposes, depletion with respect to production of oil and gas is computed separately by the partners and not by the Partnership. Since the amount of depletion on the production of oil and gas is not computed at the Partnership level, depletion is not included in the Partnership's income for federal income tax purposes but is charged directly to the partners' capital accounts to the extent of the cost of the leasehold interests, and thus is treated as a separate item on the partners' Schedule K-1. Depletion for federal income tax purposes may vary from that computed for financial reporting purposes in cases where a ceiling adjustment is recorded, as such amount is not recognized for tax purposes.
(7) Gas Imbalances -
The gas imbalance receivable and deferred revenues represent imbalances assumed as part of property acquisitions. The imbalances are accounted for on the entitlements method, whereby the Partnership records its share of revenue, based on its entitled amount. Any amounts over or under the entitled amount are recorded as an increase or decrease to the gas imbalance receivable or deferred revenues as applicable.
(8) 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.
The Partnership extends credit to various companies in the oil and gas industry which results in a concentration of credit risk. This concentration of credit risk may be affected by changes in economic or other conditions and may accordingly impact the Partnership's overall credit risk. However, the Managing General Partner believes that the risk is mitigated by the size, reputation, and nature of the companies to which the Partnership extends credit. In addition, the Partnership generally does not require collateral or other security to support customer receivables.
(9) 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.
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SWIFT ENERGY INCOME PARTNERS 1988-B, LTD
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 INCOME PARTNERS 1988-B, LTD. (Registrant)
By: SWIFT ENERGY COMPANY General Partner
Date: March 17, 1997 By: s/b A. Earl Swift -------------- ---------------------------------- A. Earl Swift President
Date: March 17, 1997 By: s/b John R. Alden -------------- ---------------------------------- John R. Alden Principal Financial Officer
Date: March 17, 1997 By: s/b Alton D. Heckaman, Jr. -------------- ---------------------------------- Alton D. Heckaman, Jr. Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SWIFT ENERGY INCOME PARTNERS 1988-B, LTD. (Registrant)
By: SWIFT ENERGY COMPANY General Partner
Date: March 17, 1997 By: s/b A. Earl Swift -------------- ---------------------------------- A. Earl Swift Director and Principal Executive Officer
Date: March 17, 1997 By: s/b Virgil N. Swift -------------- ---------------------------------- Virgil N. Swift Director and Executive Vice President - Business Development
IV-11
SWIFT ENERGY INCOME PARTNERS 1988-B, LTD.
Date: March 17, 1997 By: s/b G. Robert Evans -------------- ---------------------------------- G. Robert Evans Director
Date: March 17, 1997 By: s/b Raymond O. Loen -------------- ---------------------------------- Raymond O. Loen Director
Date: March 17, 1997 By: s/b Henry C. Montgomery -------------- ---------------------------------- Henry C. Montgomery Director
Date: March 17, 1997 By: s/b Clyde W. Smith, Jr. -------------- ---------------------------------- Clyde W. Smith, Jr. Director
Date: March 17, 1997 By: s/b Harold J. Withrow -------------- ---------------------------------- Harold J. Withrow Director
IV-12