1998 ANNUAL REPORT 

Developing Future Drilling Prospects

Swift Energy Company’s overall drilling program, like those of other U.S. exploration and development companies, was sharply curtailed during 1998 as oil and gas prices continued their downward trend. Instead of an anticipated 134 wells, the Company’s 1998 drilling program consisted of only 75 wells, three-fourths of which were completed during the first half of the year before prices tumbled to their lowest points. The total program included 61 development wells, 53 of which were successful, and 14 exploratory wells, five of which were successful. The resulting success rates of 87% for development wells and 36% for exploratory wells are to be compared with industry averages of 86% and 31%, respectively.

As would be expected for a low price environment, most of the drilling (59 of the 75 wells) occurred in the Austin Chalk trend and in the tight Olmos sand where the economic risks were minimized by the Company’s long experience with both formations. Outside of these areas, Swift drilled or participated in nine development wells (with six successes) and seven exploratory wells (with three successes).

U.S. Oil Production & Consumption (Billion Barrels per Year)
		Annual crude oil production in the United States peaked in 1970 at 3.5 billion barrels, and since the collapse of world oil prices in 1986, America’s dependence on imported oil has surged. The 6.8 billion barrels of oil consumed in 1998 approached an all-time high, while domestic production declined to levels of the 1950s.

Swift entered 1999 with a number of prospects that have been identified by Swift’s geologists and geophysicists for future drilling. Included among them are five prospects to be pursued in 1999, with others to follow as economic conditions improve. Of the five, four are domestic projects (including the Swift/Chevron Austin Chalk well discussed earlier), with each targeting over 100 Bcfe of potential reserves. The fifth well will be drilled in New Zealand on a structure containing up to 500 Bcfe of potential reserves.

These 1999 prospects, together with several other high-quality prospects currently projected for the year 2000 (other than those discussed previously in this report), are described in the following paragraphs.

Gulf Coast Region

Swift has identified two prospects for 1999 and six prospects for the year 2000 in the Gulf Coast region, which is defined by the Company to include all formations along the Texas and Louisiana coasts except the Austin Chalk trend and the Olmos sand formation.

The two 1999 prospects target the Edwards formation and both are located in Fayette County, Texas. In addition to geological studies to select the exact drilling sites, one prospect is supported by the analysis of seismic data that Swift obtained in a 1997 survey, and the other is supported by Swift’s evaluation of licensed two-dimensional seismic data.

Three other prospects, all slated for the year 2000, also target the Edwards formation, one each in the Texas counties of Fayette, Austin, and Colorado. While tentative drilling sites have been chosen for all three prospects, with one supported by Swift’s evaluation of seismic data, further proprietary seismic studies are planned for each.

In addition, three prospects have been identified in Cameron Parish, Louisiana, two targeting the Miogyp formation and one the Clark sand. The Miogyp targets are based in part on Swift’s analyses of available seismic data.

During 1998, Swift drilled a successful exploratory well to the Sparta formation in Pointe Coupee, Louisiana.

Ark-La-Tex Region

In the Ark-La-Tex region, Swift is focusing on three prospects along the Arkansas-Louisiana border, one for 1999 and two for the year 2000.

All three prospects have the Jurassic Smackover formation as their primary target and the Haynesville formation as their secondary target, both formations having been the subject of intense geophysical and geological analyses by the Company for a number of years. The 1999 prospect is scheduled to be drilled in Bossier Parish, Louisiana.

The other two prospects are located in Arkansas in the adjoining counties of Lafayette and Columbia. The Lafayette location is partially based on Swift’s processing of existing seismic data, while the Columbia location is supported by the analysis of seismic data that the Company acquired in 1997.

Rocky Mountains Region

In the Rocky Mountains region, where Swift has undertaken exploratory projects for a number of years, three of the Company’s prospects are located in Converse County, Wyoming. All are based on geological studies and all will be deferred until after 1999. Two of the prospects will target the Teapot formation and one will target both the Sussex formation and the Parkman formation.

During 1998, Swift was a participant in a successful exploratory well drilled in the Sussex formation in Converse County.

New Zealand

After several years of preparation, Swift Energy plans to drill an exploratory well on the North Island of New Zealand in 1999. This prospect, which targets the Mangahewa formation in the Taranaki Basin, is based on extensive analyses by Swift of several seismic data bases. These include existing two-dimensional and three-dimensional seismic data plus seismic data obtained in surveys conducted by Swift in 1997.

A second New Zealand prospect, to be considered later, will target the Tikorangi and Otaraoa formations in the Taranaki Basin.

These wells follow the Company’s participation in an unsuccessful well drilled in the Taranaki Basin in 1998 by another operator.

1973 – 1986: The Power of OPEC From 1973 through 1986, OPEC dominated world oil prices by restricting the oil production of its member nations, which controlled the world’s swing production capacity after U.S. oil production peaked in 1970. The United States’ increasing reliance on imported oil allowed OPEC to send shock waves through the U.S. economy in 1973 and again in 1979 by sharply curtailing production. Oil prices soared to an average annual price of $32 per barrel in 1981 but then fell 61% over the next five years as other regions of the world challenged OPEC’s dominance.

This page was last updated on Saturday, February 08, 2003, at 07:28:48 PM.

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