A. Earl Swift, Chairman
President, and Chief
Executive Officer

During 1995, Swift Energy Company successfully completed its strategic transition from an emphasis on the acquisition of producing properties to an emphasis on exploration and development drilling. The transition was initiated several years ago when those of us responsible for charting the Company's course realized that the oil and natural gas industry would soon be greatly impacted by the on-going information revolution. That revolution, we believed, would introduce new advances in technology that could lead to a rebirth of domestic drilling.

In the ensuing years, the industry's technology development has exceeded our expectations, and Swift Energy has been at the forefront in taking advantage of the specific technologies applicable to the geographic areas in which our technical staff has particular expertise and a proven track record.

In all cases, our decisions to apply advanced technologies have been guided by our value-adding strategy, which is based on the premise that growth in proved oil and gas reserves results in increases in production, cash flows, earnings, and, of course, in shareholder value.

The validity of this strategy has been clearly demonstrated by our past performance. Between 1991 and 1995, Swift's proved oil and gas reserves increased more than 260%, production increased more than 180%, and cash flows from operating activities increased more than 140%.

In 1995, with our activities more focused on drilling, our increases in proved reserves were particularly dramatic. We had a 70% increase in reserves, pushing our proved reserves base to an all-time high of 176 Bcfe. We also had increases of 17% in production and 38% in cash flows during the year.

Of course, not all of our progress can be attributed to our use of better technologies. Equally important has been the establishment of a property base that allows for growth to continue into the future. We began the year 1995 with leasehold acreages containing 37.9 Bcfe of proved undeveloped reserves, which provided us with ample opportunity for development drilling. As that drilling was carried out, together with exploratory drilling, our proved developed reserves increased from 65.7 Bcfe at year end 1994 to 101.4 Bcfe at year end 1995. At the same time, additional undeveloped reserves were proven. As a result, we entered 1996 with 74.7 Bcfe of proved undeveloped reserves--nearly twice the volume with which we began 1995. Accordingly, we have planned a considerably expanded 1996 drilling program.

To underwrite the accelerated drilling activities, in the third quarter of 1995 we had a public offering of 5.75 million additional shares of Swift Energy's common stock that yielded net proceeds of approximately $46 million. We were extremely pleased with the reaction of the market place, which showed its acceptance of the increased size of our equity base with an increase in the per-share price of our stock from an offering price of $8.50 to a year-end price of $12.00, providing a welcome boost for all our shareholders.

With the most well-defined long-term drilling program in the Company's history, we plan to maintain our drilling emphasis throughout the remainder of this decade. As we apply the advanced technologies and add producing wells to our operations, we not only will increase our proved reserves and production, but also will accrue other important benefits. In particular, the new wells will have higher individual production rates, which should lead to higher gross margins as production costs; depreciation, depletion, and amortization expenses (DD&A); and general and administrative expenses (G&A) decline on a per-unit-of-production basis. These costs also will be reduced by simple economies of scale resulting from our focus on core geographical areas.

With these combined profit-margin benefits, Swift Energy can increase its earnings even if oil and gas prices remain relatively flat. If prices were to rise, our earnings, of course, could also be expected to rise.

With our reemphasis on drilling, we discontinued our public income fund offering--Swift Depositary Interests--at the end of 1995. This decision was accelerated by a recent rapid decline in attractive property acquisition opportunities. Future acquisitions will be limited to strategic areas where economies of scale or Swift's operational expertise provides a competitive advantage.

As Swift Energy has positioned itself to take advantage of the opportunities that technology and careful planning have made possible, we have once again challenged ourselves. Our new goal is to increase our oil and gas reserves at an annual rate of 40 to 45% through the year 2000. With the extraordinary ability and dedication of our staff, we firmly believe that this goal is achievable and are resolutely determined to accomplish the task.



A. Earl Swift
March 19, 1996