SWIFT ENERGY COMPANY 1999 ANNUAL REPORTBuilding on Exploratory Success in New ZealandFor Swift Energy, an important highlight of the year was the Company’s discovery of an oil and natural gas reservoir in the Taranaki Basin on the north island of New Zealand.
The Rimu #A-1 discovery well began drilling in July 1999, was completed in October, and was initially tested in December. Production from the well tested at 624 barrels of oil per day and 2.0 million cubic feet of gas per day; however, flow rates were intentionally restricted using 17/64-in. and 18/64-in. chokes because of temporary limitations on well-site storage and transportation capacity. The stabilized open flow potential from the well was estimated to be approximately 2,000 barrels of oil and 6.0 million cubic feet of gas per day. Swift holds a 90% interest in the 100,700-acre petroleum exploration permit on which the well was drilled. Antrim Oil & Gas, Ltd., and Marabella Enterprises, Ltd., each hold a 5% interest. Previous Activities. The Rimu discovery resulted from several years of effort focused on pursuing oil and gas drilling opportunities in New Zealand. In 1995, the Company obtained its first exploration permit covering approximately 65,000 acres. A second permit covering 69,300 acres was obtained in 1996. In 1997, the Company conducted a seismic swath survey across its permit areas that complemented approximately 120 kilometers of existing two-dimensional seismic data. The combined permit-area data was then integrated with over 700 kilometers of existing two-dimensional data in the Taranaki Basin, as well as two sets of three-dimensional data, and calibrated with all of the basin’s available well log data to identify exploratory targets. Based upon this analysis, the Company surrendered 46,400 acres on its first permit in March 1998, and the remaining acreage was combined with the second permit to create one expanded permit. At the time of the completion of the Rimu #A-1 well in October 1999, the expanded permit was extended by adding approximately 12,800 adjacent offshore acres.
Exploration and Development Potential. The present 100,700-acre permit holds substantial exploration and development potential. During the first half of 2000, Swift will conduct a new seismic data-acquisition project, designed using wireline log data from the Swift Rimu #A-1 well, to properly image the complex structure associated with the permit area. This seismic acquisition will include transition zone seismic data extending offshore southeast of the Rimu #A-1 in order to tie to existing marine data. With streamer cable, water-bottom cable, and land geophones recording three different sources, this seismic acquisition will be the first of its type to be conducted in New Zealand. Once analyzed, the data from this seismic survey should provide considerable information concerning the multiple potential zones of hydrocarbon-bearing rock in the permit area. Swift plans to drill a delineation well during the second half of 2000 in order to better determine the size and characteristics of the Rimu discovery. Although no proved reserves have currently been estimated for Rimu, preliminary projections suggest that ultimate recovery could range between 20 and 100 million barrels of oil equivalent or, in other words, 120 to 600 Bcfe. The new seismic survey will also analyze two additional exploration prospects: the Tawa prospect, located onshore to the northwest of Rimu #A-1, and the Kauri prospect, located both onshore and offshore to the southeast of Rimu. As in the development of the Rimu discovery itself, the Company anticipates that offshore targets can be drilled directionally using onshore drill sites. Current plans include drilling wells to test the Kauri prospect and the Tawa prospect within the next two years. Although exploratory drilling targets such as these traditionally have relatively low success rates, both of these wells, if successful, have the potential of becoming larger discoveries than the Rimu #A-1.
New Zealand’s Investment Climate. Of the hundreds of places around the globe where U.S. independents can look for international opportunities, New Zealand provides one of the more favorable investment climates. With a democratic government, a modern legal and regulatory system, a favorable tax structure, good royalty provisions for oil and gas, and a growing economy with a stable currency, New Zealand provides an attractive political and economic environment for investment. The nation’s concern for the environment favors clean-burning natural gas over other fossil fuels, and the industry infrastructure provides a great blend of established performance with under-explored areas of opportunity. Crude Oil Markets. New Zealand is a net importer of petroleum, but its exports of crude oil and condensate are also well integrated into the international economy, particularly the fast-growing economies of the Pacific Rim where, during the last few decades, crude oil consumption has grown more rapidly than for the rest of the world. Natural Gas Markets. Natural gas markets are more tied to energy consumption in New Zealand itself. The Rimu #A-1 well is located approximately one mile from a pipeline that would allow Swift to reach markets in New Zealand’s capital city of Wellington and its largest city of Auckland. The two largest uses of natural gas in New Zealand are methanol production and electricity generation. Methanol production, which used 39% of New Zealand’s gas production during the 12 months ending in March 1999, is expected to run near capacity for the next three years, while electricity generation, which used 41% of the country’s gas production, is expected to continue to grow. Over the last 25 years, electricity generated by natural gas in New Zealand has grown from essentially nothing to about a quarter of all the electricity produced. Looking at the current natural gas supply, over 70% of the gas currently consumed originates in the Maui Field, and production from that field is expected to substantially decline over the next ten years. Building on Success. The complexity of the geology of the Taranaki Basin and the variety of trapping mechanisms present in this basin are a natural fit for a technically driven independent like Swift. The Company has developed, and continues to refine, a team approach in its exploration and development programs that utilize a combination of cutting-edge and time-tested technologies. Swift therefore has many reasons to remain confident in its ability to build shareholder value on the foundation laid by its recent exploratory success in New Zealand.
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This page was last updated on Saturday, February 08, 2003, at 07:28:53 PM. Copyright © 1994-2008 by Swift Energy Company. |
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