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Shareholder Value Over the past three years (2004-2006) our shareholders have benefited from appreciation in Swift Energy’s stock price. Since year-end 2003, the price of our common stock has grown at an average rate of 39% per year, closing at $44.81 per share at year-end 2006. Increases in earnings supported this growth, with diluted earnings per share rising at an average rate of 71% per year between 2003 and 2006. Our net income in 2006 was $161.6 million, up more than fivefold from $29.9 million in 2003. Since our first full year of operations in 1980, we have had a compounded growth rate of 18% per year in proved reserves per share of common stock, with proved reserves totaling 28 Mcfe per share at year-end 2006. Similarly, our per-share production has grown at a compounded rate of 32% per year since our production activities were first initiated in 1981.
For many years we accomplished this growth by using the industry’s cycles to our advantage, emphasizing drilling when prices were high and producing property acquisitions when prices were low. In recent years as prices have remained strong, particularly for oil, we have continued our emphasis on drilling while also acquiring strategic producing properties where we think performance can be enhanced through drilling or through improved operating efficiencies. This strategy increases our economies of scale and takes advantage of the unique skills we develop through operating in particular geographical regions. Our acquisition in 2006 of five producing fields near our successful Lake Washington anchor area in South Louisiana is an example of this type of strategic acquisition. The diversity of our oil and gas assets held at year-end 2006 exemplifies another way we aim to ensure growth in shareholder value. With three regions in the United States, each with its own distinct characteristics, and a fourth region in New Zealand, we have achieved an effective balance between crude oil and natural gas reserves, between reserves with shorter and longer production lives, and between an assortment of diverse growth opportunities. During 2006, strong oil prices and record production drove our net cash provided by operating activities for the year to $424.9 million, the best in the history of the company and an increase of 49% over 2005. Per diluted share, cash flows rose 45% in 2006 to $14.16, and EBITDA (a measure of cash flows, see Glossary on page 77), rose 46% to $456.2 million. Strong oil prices also led to increases in cost and expenses across our industry in 2006 as demand for field services and equipment increased at a rapid pace. Despite the pressures on production costs and the fact that changes in accounting rules require the expensing of stock compensation, we managed to limit our combined production and net general and administrative expenses to 26% of the average per-unit sales price we received in 2006, which is within our long-term strategic goal of keeping these costs below 33%. Finding costs were under pressure during 2006 as the number of U.S. wells drilled rose 22%, footage drilled climbed 22%, and demand for seismic crews was up 11%. For our company, per-unit reserves replacement costs represented 50% of average sale prices in 2006, which is above our strategic goal of below 33% We continually strive to lower and to closely monitor our finding costs. In 2006, our finding costs were directly impacted not only by industry-wide pressures but, among other factors, also by the strategic decision we made to invest for future growth in shareholder value. As noted elsewhere in this report, steps we have taken include expanding our high-tech digital infrastructure, adding personnel with technical expertise, developing a cutting-edge geoscience database covering a broad swath in our South Louisiana region, acquiring additional seismic data in New Zealand, and making significant progress toward facility capacity upgrades. Though these steps have added to our costs and expenses, we believe that our upfront efforts will provide synergies far into the future, helping to reduce costs and build shareholder value over the longer term. Our common stock is traded on the New York Stock Exchange under the symbol “SFY.” The high and low quarterly closing sales prices for the common stock for 2005 and 2006 were as follows:
Since inception, no cash dividends have been declared on our common stock. Cash dividends are restricted under the terms of our credit agreements, and we presently intend to continue a policy of using retained earnings for expansion of our business. We had approximately 252 stockholders of record as of December 31, 2006.
Contact Investor RelationsScott Espenshade,
Director Also see our feedback and requests pages. Board of Directors and Company OfficersSee director profiles and officer profiles. Corporate HeadquartersSwift Energy Company Principal Subsidiary CompaniesSwift Energy Operating, LLC, Houston, Texas Transfer Agent and Registrar
American Stock Transfer & Trust Company Independent AccountantsErnst & Young
LLP CounselBaker & Hostetler, LLP
(Note: The preceding information was taken from Swift Energy's 2006 annual report.)
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This page was last updated on Friday, September 14, 2007, at 03:19:28 PM. Copyright © 1994-2008 by Swift Energy Company. |
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