1993 ANNUAL REPORT 

Assets Management

Reserves managed by Swift Energy at the end of 1993, excluding those held in inventory, totaled approximately 53.6 million BOEs, an amount that is about 3.6 times larger than the reserves owned by the Company itself. The management of assets considerably larger than those held for Swift’s own account provides the Company with a number of advantages.

First, effectively managing proved oil and gas reserves on behalf of outside investors assists the capital formation effort, since Swift’s ability to raise capital from external sources depends in part upon its reputation as an operator of co-investor properties.

Second, managing property for outside investors gives Swift control over a larger percentage of the wells with significant production and reserves. Since the organization controlling the largest percentage of the interests in a well usually becomes the well’s operator, managing co-investor properties allows Swift to operate more of its high-value wells.

Third, managing a large portfolio of assets leads to economies of scale, which in turn lowers operating costs and enhances revenues both for the Company and its co-investors. Cost reductions and revenue enhancements have been achieved in Swift’s major production centers in South Texas and the Weatherford Area of Oklahoma, and other economies of scale have been realized by pooling Swift’s natural gas production with production from supervised properties in order to provide Swift with negotiating leverage in marketing natural gas. Moreover, managing properties on behalf of others enables Swift to maintain a high caliber professional staff which is larger and more diverse than would otherwise be practical.

Finally, Swift’s assets management abilities provide it with opportunities to diversify investments by combining its own investment capital with the capital of others. In particular, Swift’s success over the years in raising capital through limited partnerships and joint ventures has allowed the Company to spread its corporate investments over a larger number of acquisition opportunities and drilling prospects (without a corresponding diminution of control) than could have been possible without co-investor capital. This diversification of investments is an important component of Swift’s risk management strategy.

For all of these reasons, Swift’s assets management activities make important contributions to the Company’s strategic success.

Dispositions of low-value wells are an important component of Swift's assets management strategy. During 1993, Swift sold 504 wells. Compared to year end, the properties sold during 1993 represented about 12% of the wells in which Swift had interests but only about 0.2% of the Company’s reserves. By selling low-value properties such as these, Swift can lower operating costs for itself and its co-investors.

This page was last updated on Saturday, February 08, 2003, at 07:28:34 PM.

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