MANAGING GROWTH IN THE 21st CENTURY
	SWIFT ENERGY COMPANY 1999 ANNUAL REPORT
Notes to Consolidated Financial Statements

6. Stockholders' Equity

Common Stock. During the third quarter of 1999, we issued 4.6 million shares of common stock at a price of $9.75 per share. Gross proceeds from this offering were $44,850,000 with issuance costs of $2,888,690.

In October 1997, we declared a 10% stock dividend to stockholders of record. The transaction was valued based on the closing price ($28.8125) of our common stock on the New York Stock Exchange on October 1, 1997. As a result of the issuance of 1,494,622 shares of our common stock as a dividend, retained earnings were reduced by $43,063,796, with the common stock and additional paid-in capital accounts increased by the same amount. Basic and Diluted EPS were restated for all periods presented to reflect the effect of the stock dividend.

Stock-Based Compensation Plans. We have two stock option plans, the 1990 stock compensation plan and the 1990 non-qualified plan, as well as an employee stock purchase plan.

Under the 1990 stock compensation plan, incentive stock options and other options and awards may be granted to employees to purchase shares of common stock. Under the 1990 non-qualified plan, non-employee members of our Board of Directors may be granted options to purchase shares of common stock. Both plans provide that the exercise prices equal 100% of the fair value of the common stock on the date of grant. Options become exercisable for 20% of the shares on the first anniversary of the grant of the option and are exercisable for an additional 20% per year thereafter. Options granted expire 10 years after the date of grant or earlier in the event of the optionee’s separation from employment. At the time the stock options are exercised, the option price is credited to common stock and additional paid-in capital.

On December 9, 1998, we canceled certain previously issued options under the 1990 stock compensation plan and reissued them at an option price that reflected current market value of our common stock as of that date. No compensation expense was recognized in 1998 as a result of this transaction.

The employee stock purchase plan provides eligible employees the opportunity to acquire shares of Swift common stock at a discount through payroll deductions. The plan year is from June 1 to the following May 31. The first year of the plan commenced June 1, 1993. To date, employees have been allowed to authorize payroll deductions of up to 10% of their base salary during the plan year by making an election to participate prior to the start of a plan year. The purchase price for stock acquired under the plan will be 85% of the lower of the closing price of our common stock as quoted on the New York Stock Exchange at the beginning or end of the plan year or a date during the year chosen by the participant. Under this plan, we have issued 22,771 shares at a price range of $5.21 to $11.00 in 1999, 20,756 shares at a price range of $13.65 to $18.06 in 1998, and 26,551 shares at a price of $15.19 in 1997. The estimated weighted average fair value of shares issued under this plan was $4.74 in 1999, $6.86 in 1998, and $4.39 in 1997. As of December 31, 1999, there remained 414,677 shares available for issuance under this plan. There are no charges or credits to income in connection with this plan.

We account for the two stock option plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." As all options were issued at a price equal to market price, no compensation expense has been recognized. Had compensation expense for these plans been determined based on the fair value of the options consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," our net income (loss) and earnings per share would have been reduced to the following pro forma amounts:

Pro forma compensation cost reflected above may not be representative of the cost to be expected in future years.

The following is a summary of our stock options under these plans as of December 31, 1999, 1998, and 1997:

The fair value of each option grant, as opposed to its exercise price, is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions in 1999, 1998, and 1997, respectively: no dividend yield; expected volatility factors of 44.2%, 42.3%, and 38.7%; risk-free interest rates of 5.60%, 4.69%, and 6.02%; and expected lives of 7.5, 7.0, and 7.5 years. The following table summarizes information about stock options outstanding at December 31, 1999:

Employee Stock Ownership Plan. In 1996, we established an Employee Stock Ownership Plan ("ESOP") effective January 1, 1996. All employees over the age of 21 with one year of service are participants. This plan has a five-year cliff vesting, and service is recognized after the ESOP effective date. The ESOP is designed to enable our employees to accumulate stock ownership. While there will be no employee contributions, participants will receive an allocation of stock that has been contributed by Swift. Compensation expense is reported when such shares are released to employees. The plan may also acquire common stock of Swift purchased at fair market value. The ESOP can borrow money from Swift to buy Swift stock. This was done in September 1996 to purchase 25,000 shares (adjusted to 27,500 shares after the October 1, 1997, 10% stock dividend) from our chairman. Benefits will be paid in a lump sum or installments, and the participants generally have the choice of receiving cash or stock. At December 31, 1999 and 1998, all of the ESOP compensation was earned. At December 31, 1997, the unearned portions of the ESOP of $150,055 were recorded as a contra-equity account entitled "Unearned ESOP Compensation."

Employee Savings Plan. We have a 401(k) savings plan under Section 401(k) of the Internal Revenue Code. Eligible employees may make voluntary contributions into the 401(k) savings plan with Swift contributing on behalf of the eligible employee an amount equal to 100% of the first 2% of compensation and 75% of the next 4% of compensation based on the contributions made by the eligible employees. Our contribution to the 401(k) savings plan totaled $474,000, $498,000, and $438,000 for the years ended December 31, 1999, 1998, and 1997, respectively. The contributions in 1999 and 1997 were made half in common stock and half in cash, while the 1998 contribution was made all in common stock. The shares of common stock contributed to the 401(k) savings plan totaled 21,810, 68,318, and 11,372 shares for the 1999, 1998, and 1997 contributions, respectively. The 1999 and 1998 shares contributed were from common stock held as treasury stock and were contributed in early 2000 and 1999, respectively.

Common Stock Repurchase Program. In March 1997, our Board of Directors approved a common stock repurchase program that terminated pursuant to its terms as of June 30,1999. Under this program, we spent approximately $13.3 million to acquire 927,774 shares in the open market at an average cost of $14.34 per share. In March 1999, we used 68,318 shares of common stock held as treasury stock to fund our employer contribution in the 401(k) savings plan. Through December 31, 1999, 859,456 shares remain with a total cost of $12,325,668 and are included in "Treasury stock held, at cost" on the balance sheet.

Shareholder Rights Plan. In August 1997, the Board of Directors declared a dividend of one preferred share purchase right on each outstanding share of Swift common stock. The rights are not currently exercisable but would become exercisable if certain events occurred relating to any person or group acquiring or attempting to acquire 15% or more of our outstanding shares of common stock. Thereafter, upon certain triggers, each right not owned by an acquirer allows its holder to purchase Swift securities with a market value of two times the $150 exercise price.

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