MANAGING GROWTH IN THE 21st CENTURY
	SWIFT ENERGY COMPANY 1999 ANNUAL REPORT
Quantitative and Qualitative Disclosures About Market Risk

Commodity Risk. Our major market risk exposure is the commodity pricing applicable to our oil and natural gas production. Realized commodity prices received for such production are primarily driven by the prevailing worldwide price for crude oil and spot prices applicable to natural gas. The effects of such pricing volatility are discussed above, and such volatility is expected to continue.

Our price risk program permits the utilization of agreements and financial instruments (such as futures, forward and options contracts, and swaps) to mitigate price risk associated with fluctuations in oil and natural gas prices as they relate to our and the managed limited partnerships’ oil and gas production. Below is a description of the financial instruments we have utilized to hedge our exposure to price risk.

• Price Floors. Costs and any benefits derived from price floors are accordingly recorded as a reduction or increase, as applicable, in oil and gas sales revenue. The costs to purchase put options are amortized over the option period. Below is a summary of the utilization of price floors for the years ending December 31, 1999, 1998, and 1997.

• The costs related to 1999 hedging activities totaled approximately $909,000, with benefits of approximately $348,000 being received, resulting in a net cash outlay of approximately $561,000, or $0.013 per Mcfe. The costs related to the open contracts as of December 31, 1999, totaled approximately $98,000 and had a fair market value of $112,500.

• The costs related to 1998 hedging activities totaled approximately $377,000, with benefits of approximately $101,000 being received, resulting in a net cash outlay of approximately $276,000, or $0.007 per Mcfe.

• The costs related to 1997 hedging activities totaled approximately $1,052,000, with benefits of approximately $439,000 being received, resulting in a net cash outlay of approximately $613,000, or $0.014 per Mcfe.

• Participating Collars. During the fourth quarter of 1999, we entered into participating collars to hedge oil production through June 2000. Below is a summary of the collar arrangements for 2000. The participating collars are designated as hedges, and realized gains or losses are recognized in oil and gas revenues when the associated production occurs.

• We hedged 100,000 Bbls of oil per month for the months January through June 2000 with a floor price of $19.00 per Bbl and a ceiling price of $23.60 per Bbl, whereby we participate in 75% of any amount above the $23.60 ceiling price. At December 31, 1999, the participating collars had an approximate value, as quoted by the dealers, of $95,000. The January 2000 collar has expired at a loss of $62,550. The gains or losses of the remaining months are determined from an average of the closing price of the contracts.

Interest Rate Risk. All of our long-term debt obligations at December 31, 1999, have fixed interest rates, and we have no current plans to redeem long-term debt obligations before their stated maturity. Consequently we are not exposed to cash flow or fair value risk from market interest rate changes on our long-term debt portfolio. In 2000, we anticipate borrowing under our credit facility and accordingly will be exposed to fluctuations in interest rates.

Financial Instruments & Debt Maturities. Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, bank borrowings, convertible notes, and senior notes. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the highly liquid nature of these short-term instruments. The fair values of the bank borrowings approximate the carrying amounts as of December 31, 1998, and were determined based upon interest rates currently available to us for borrowings with similar terms. Based on quoted markets prices as of the respective dates, the fair values of our convertible notes were $89.7 million and $81.4 million at December 31, 1999 and 1998, respectively, and the fair value of our senior notes was $117.9 million at December 31, 1999. Our credit facility with the banks expires August 18, 2002. Our $115.0 million convertible notes mature on November 15, 2006. Our $125.0 million senior notes mature on August 1, 2009.

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