1997 ANNUAL REPORT 

The Emergence of Horizontal Drilling

While horizontal drilling is still a small segment of the total drilling activity in the United States, its percentage of the total drilling activity has increased sharply during the last ten years. Between 1991 and 1996, the number of horizontal wells drilled rose by 28%, while the total number of wells drilled fell by 23%.

HORIZONTAL WELLS DRILLED IN THE UNITED STATES THROUGH 1996
		Horizontal drilling is still a small segment of domestic drilling activity, but during the last ten years, the number of horizontal wells drilled in the United States has increased rapidly.

With little earlier activity, U.S. horizontal drilling began to increase rapidly in late 1989, leading to 888 wells drilled in 1990 and 1,181 wells in 1991. By 1996, the number of horizontal wells had increased to 1,509, or 7% of all wells drilled.

The horizontal drilling concept was first introduced in 1891, when a patent was issued for using flexible shafts to drill lateral holes, initially for dental applications. The first true horizontal oil well was drilled near Texon, Texas, in 1929. However, horizontal drilling technology in the United States did not achieve commercial viability until the late 1980s, primarily in the Bakken shale in North Dakota and in the Texas Austin Chalk trend.

Swift Energy began its horizontal drilling program in the Austin Chalk trend in 1992, drilling 10 or fewer wells per year through 1996. In 1997, however, the Company increased its program to include 22 wells, at times having as many as six rigs drilling in the Austin Chalk simultaneously.

Of the 22 horizontal wells drilled in 1997, 18 were successful—two out of five exploratory wells and 16 out of 17 development wells, yielding a total success rate of approximately 82%. At year end, the Company had participated in 55 wells drilled in the Austin Chalk with an overall success rate of approximately 91%.

Swift’s success in the relatively thin Austin Chalk trend has been due to its use of recent technological advances that facilitate the drilling of truly horizontal wells. These include the development of a durable down-hole motor that is mounted directly behind the drill bit and down-hole measurement-while-drilling (MWD) instruments that signal the exact location of the bit, allowing the operators to ensure that the drilled hole stays within the targeted interval. Also important have been the introduction of underbalanced drilling and the completion of an increasing number of dual-lateral wells.

Swift Energy has approximately 113,000 net leasehold acres in the Austin Chalk trend, where it utilizes advanced horizontal drilling techniques to intercept potential hydrocarbon deposits identified by the Company's integration and analysis of geological and geophysical data. (Collage: A merged representation of a crew connecting pipe on a rig floor, at left, and a crew preparing for a seismic shoot in the field.)

A successful horizontal drilling program also requires a knowledge of the location of the potential hydrocarbon traps (natural vertical fractures) within the trend. These are determined with an advanced analysis system that integrates and analyzes geological and geophysical data, as previously described in this report.

In addition, a successful program in a competitive region such as the Austin Chalk is highly dependent on the skills of company landmen and legal staff to obtain the required leaseholds at reasonable costs. Not only must they acquire a thorough knowledge of the area, including the lateral extent of the wells’ horizontal legs, they also must work to develop mutually beneficial relationships with the landowners.

Swift Energy’s Austin Chalk team has expertise in all the disciplines necessary for a successful program. Its drilling engineers have years of experience in directional and horizontal drilling. Its geologists and geophysicists have correlated geologic data with the results of several two-dimensional seismic surveys over the trend, including a 52-mile long, 11-line survey conducted in Fayette County in 1997. And its landmen and legal staff have expanded Swift’s Austin Chalk leaseholds to approximately 113,000 net acres, including about 39,000 net acres acquired in 1997. The leaseholds, of which about 12,000 net acres have been developed to date, are located in the Texas counties of Fayette, Trinity, Washington, and others. Together, they represent 15% of the Company’s proved reserves.

Thus far, Swift’s drilling efforts in the Texas Austin Chalk trend have largely been focused in Fayette County, including 14 successful development wells drilled there during 1997. The 1998 program projects 23 development wells in Fayette County, among a total of 30 to be drilled in the Austin Chalk. The 1998 program also includes three exploratory prospects in the Austin Chalk.

In 1997, production from Swift’s Austin Chalk program rose to 4.9 billion cubic feet of natural gas equivalent, accounting for 19% of both the Company’s total production and its oil and gas sales.

This page was last updated on Saturday, February 08, 2003, at 07:28:45 PM.

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