1996 ANNUAL REPORT 

The AWP Olmos Field in South Texas   The AWP Olmos Field is Swift Energy's largest producing property, accounting for 77% of the Company’s 1996 year-end proved reserves.

During 1996, Swift Energy’s largest operation was in the AWP Olmos Field in South Texas. Of the 142 wells comprising the Company’s 1996 development program, 123 were drilled in the AWP Olmos Field. With 119 of these wells successfully completed as producers, together with one successful exploratory well drilled in the area, Swift’s drilling success rate in the field for the year was 97%.

The impact of the new wells, in which Swift retained high working interests, has been dramatic. With their added production, the AWP Olmos Field contributed 11.1 Bcfe (or 57%) of the Company’s total 1996 production and $29.8 million (or 56%) of its total oil and gas sales.

From 1995 to 1996, oil and natural gas production from the AWP Olmos Field increased 227% to 11.1 Bcfe. Production from the field during 1996 represented 57% of Swift’s total production for the year.

The impact of the wells also should be long term, since wells producing from the field have estimated productive lifetimes of 15 to 20 years and therefore can be expected to provide Swift with cash flows for years to come.

Located in McMullen County, the AWP Olmos Field has long been known to hold vast quantities of hydrocarbons. However, it also presents special challenges to producers. Swift Energy first accepted the challenges in 1988 and 1989 when the Company obtained its initial interests in the field on a leasehold of approximately 4,900 acres.

It is the field’s Olmos formation, a tight, low-permeability sand located at depths of approximately 10,000 feet, that presents the greatest challenge. For oil and natural gas to flow from the formation and into a well, the formation must first be hydraulically fractured, a massive and costly operation that involves pumping a viscous water-based fluid and sand mixture down the hole and out into the formation under high pressure.

One of the first priorities of the Company’s technical team assigned to the AWP Olmos Field in 1989 was to improve the fracturing process and reduce its cost, both for fracturing new wells and refracturing older ones. At the same time, the team began studying drainage patterns within the field to better locate new wells and design the fracture treatments.

One of the first priorities of the Company’s technical team assigned to the AWP Olmos Field in 1989 was to improve the fracturing process and reduce its cost, both for fracturing new wells and refracturing older ones. At the same time, the team began studying drainage patterns within the field to better locate new wells and design the fracture treatments.

Swift’s team also worked on a "liquid loading" problem typical of wells that have been producing from the Olmos sand for some time. Because of reduced gas flow rates up the well bores of these older wells, droplets of condensate carried in the flow stream fall back into the well, blocking the flow. To avoid installing expensive pumps or shutting in the wells periodically to increase their pressure, Swift began equipping the wells with small-diameter (1-1/4-inch) coiled tubing to restrict the cross section of the gas flow, increase its velocity, and prevent the fallback of the droplets.

The hydraulic fracturing of tight sands has been critical to Swift’s success in the AWP Olmos Field. In hydraulic fracturing, a gel-like fluid is forced through the well bore into the target formation at high pressure, fracturing the formation. A resin-coated sand (pictured above) is carried by the fluid into the resulting fractures to prop them open, providing a high-conductivity pathway through which natural gas and oil can flow into the well bore and up to the surface.

Confident about its team’s increasing understanding of the field and successes in economically overcoming obstacles, Swift Energy acquired an additional 8,830-acre leasehold position in the area in 1994 and initiated an accelerated drilling program on the new acreage in the second quarter of 1995.

Because the Olmos sand in the new leasehold was less permeable than in the original leasehold, and also had other differing characteristics, Swift’s team again focused on the fracturing process, adjusting the amount of fluid and sand used, and, to ensure the best and most cost-effective fracture designs, tailoring each fracture job to the individual well. Also, costs associated with an operations engineer’s frequent travel to the site were eliminated by using telecommunications to remotely monitor the fracture jobs from the Company’s Houston office.

In addition, the team instituted cost-reducing measures in the drilling process. Since almost all AWP wells are eventually fitted with small-diameter coiled tubing for long-term production, the team determined how small a drilled hole could be without adversely affecting initial production. The subsequent decision to adopt "slim-hole" drilling techniques and other improvements led to a substantial savings per well. It also allowed the postponement of coiled tubing installations to later stages in the well’s life.

As drilling on the new leasehold continued, Swift’s landmen negotiated for other leases in the area, increasing Swift’s total acreage position to approximately 17,000 net acres by year end 1995 and more than doubling it to approximately 35,000 net acres by year end 1996.

With up to eight rigs operating simultaneously and many new wells being placed in production, Swift upgraded its infrastructure for product delivery in the AWP Olmos Field. By year end 1996, 13 flow stations, each capable of collecting multiple well streams, were sending separated streams of gas and condensate to the field’s central facility. Automated electronic flow meters installed throughout the field enhanced data retrieval capabilities and minimized the cost of manpower. Among the advantages was the ability of field personnel to remotely read and monitor each well’s production from the field office.

Coiled tubing (above) is inserted into older wells to reduce the diameter of the opening through which oil and natural gas flow from the well. Much as a nozzle restricts water flow from a garden hose, the reduced diameter increases the velocity of the flow, enhancing production and cutting operational costs.

In early 1996, the Company entered into an agreement with Valero Energy Corporation for the transportation and processing of up to 75 million cubic feet per day of natural gas from its central AWP facility. Valero constructed 13 miles of 12-inch-diameter pipeline to its processing plant, from which natural gas can be transported to 11 interstate and intrastate pipelines, thereby providing Swift with significant market diversification.

With the ability to deliver gas to numerous markets, Swift can continue to enjoy the economies of scale that come with having a major focus area. To more effectively sell its natural gas, the Company has set up an in-house marketing department to sell natural gas throughout much of the United States, especially the Northeast and Midwest.

During 1997, Swift plans to continue its development of the field with 146 additional wells. As part of this effort, the Company plans to conduct a three-dimensional seismic survey over a 20-square-mile area to supplement an ongoing study of stratigraphic traps based on available well log and seismic data.

The 1997 plans also include three exploratory wells. The locations of two of the wells, both in McMullen County, will be based on the analysis of existing seismic data. The location of the third well, in neighboring LaSalle County, will be determined from the analysis of data from two two-dimensional seismic line acquisitions to be conducted by Swift early in the year.

With these wells, by year end 1997 Swift Energy will have drilled 305 wells on AWP leaseholds obtained during the last three years.

Electronic flow meters (left) powered by solar panels transmit information about each well’s operation to a central facility in the AWP Olmos Field and to Swift’s main office in Houston. This real-time data allows the Company’s engineers to enhance production while minimizing costs.

This page was last updated on Saturday, February 08, 2003, at 07:28:43 PM.

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