SWIFT ENERGY COMPANY 1999 ANNUAL REPORTPursuing New Exploration and Acquisition OpportunitiesSwift Energy’s discovery in New Zealand is yet another example of the Company’s ongoing pursuit of exploratory successes to increase its oil and natural gas reserves and production. During the decade of the 1990s, Swift drilled or participated in 94 exploratory wells with a success rate of 41%—considerably higher than the national average of 30%. Also during the 1990s, Swift increased its reserves and production significantly through the acquisition of properties with proven reserves, both developed and undeveloped. For most acquisitions, the volumes of purchased reserves were subsequently increased through further reservoir analyses and drilling. Swift’s strategy for increasing reserves through both drilling and acquisitions, whether in parallel or in tandem, reflects its ability to take advantage of opportunities created by pricing cycles. By focusing on drilling when oil and gas wellhead prices are strong and on lower-priced acquisitions when wellhead prices have weakened, the Company is able to add reserves at the most economical prices. Over the last three years, Swift’s discovery costs have averaged $0.99 per Mcfe for domestic drilling, and its acquisition prices have averaged $0.57 per Mcfe.
Exploration. In developing exploration prospects, Swift focuses on areas where it has a competitive advantage through technical expertise and experience, preferring geologic targets near or within its core areas of production, where it also has the advantage of operating efficiencies and economies of scale. As Swift grows, its exploration efforts must increasingly focus on larger targets in order to sustain appropriate growth rates. In addition, exploration risks must be managed through diversification, which is made possible through partnering arrangements with other operators, such as joint ventures, in which Swift usually retains working interests of 50% or more for its operated wells. Purposely limiting its drilling activities in the low price environment that persisted into early 1999, Swift participated in five exploratory wells during 1999. Of these, two were successes, including the New Zealand discovery, which is still under evaluation. In addition, Swift drilled 22 development wells, of which 19 were successes. Current plans are for the Company to drill 10 exploratory wells during the year 2000, as well as participate in an additional exploratory well begun in 1999 (see discussion below). The Company will also drill or participate in 33 development wells in the year 2000, all within its core operating areas. In addition, it has participated in three development wells begun in 1999 and completed early in 2000, serving as the operator for one of the wells. Giddings Area Prospects. Swift’s exploratory drilling in the Giddings Area during the year 2000 includes two exploratory wells, each targeting estimated potential reserves of up to 125 Bcfe, to be drilled in Colorado County, Texas, under the Company’s joint venture agreements with Chevron USA Production Company. Partially based on Swift’s analyses of two- or three-dimensional seismic data, both wells will first be drilled to the Edwards formation below the Austin Chalk formation. Following evaluation and subsequent production (or non-production) from the Edwards, the wells will be horizontally drilled in the Austin Chalk. Also as part of the Swift-Chevron joint venture, the Company successfully completed an exploratory well in Colorado County early in the year 2000 that was begun in 1999. The well, producing from the Austin Chalk formation, tested at 3,044 Mcf of natural gas per day. In addition, Swift will drill a well in Austin County during 2000 that will not be part of a joint venture. The well will target both the Edwards and the Austin Chalk, with estimated potential reserves of up to approximately 120 Bcfe. A similar prospect will be drilled in Colorado County in 2001. Other Texas Prospects. Other prospects in 2000 will include a well in San Jacinto County, Texas, targeting the Woodbine sands, for which potential reserves of up to 515 Bcfe have been estimated. An analysis of two-dimensional seismic data for the prospect indicated that the reservoir characteristics of the prospect are similar to those from a corresponding analysis for the highly productive Double A Wells Field 27 miles to the east. Three other Texas prospects are all based on Swift’s analyses of two- and three-dimensional seismic data. One is located in Jackson County targeting the Middle Wilcox formation with estimated potential reserves of up to 110 Bcfe. Another is in Brazoria County targeting the Miocene with estimated potential reserves of up to 100 Bcfe, and the third is in Lavaca County targeting the Edwards with estimated potential reserves of up to 25 Bcfe. Four additional prospects are also identified in Lavaca County for the year 2001. Masters Creek Area Prospect. A year 2000 prospect in the Masters Creek Field in Rapides Parish, Louisiana, will target the Saratoga formation, a limestone interval about 2,000 feet above the Austin Chalk that can be drilled with relatively short horizontal legs. With estimated potential reserves of up to 160 Bcfe, this prospect is based on the analysis of existing two-dimensional seismic data combined with well log data. Rocky Mountain Prospects. In Converse County, Wyoming, two wells will be drilled in the year 2000 on adjacent prospects in the Powder River Basin. Projected to have combined potential reserves of up to approximately 100 Bcfe based on analyses of geological trends, the wells will target the Teapot formation, with the Teckla sand as a secondary target. Another prospect in Campbell County, Wyoming, is scheduled for 2002 and will target the Parkman and Sussex formations.
Acquisitions. Swift’s overall acquisition strategy is aimed at increasing the number of core areas it operates within the United States. To be considered, properties must have substantial development potential, reserves that are predominantly natural gas and concentrated in no more than two or three major areas, and available working interests of 50% or more. The properties should also help diversify the Company’s existing reserves base and be available at attractive prices. Swift’s 1998 acquisition of the Masters Creek Area and Brookeland Area met all these criteria. To further strengthen the Company’s position in the Masters Creek Area, in 1999 Swift acquired additional proved reserves in the area from Dominion Reserves, Inc., and Union Pacific Resources for approximately $15.9 million. As a result, the year-end reserves in the Masters Creek Field increased by 17.1 Bcfe, and those in the South Burr Ferry Field increased by 7.4 Bcfe. For the year 2000, Swift has allotted a minimum of $35 million for acquisitions. The acquisitions staff is currently evaluating numerous available packages, as well as seeking to identify properties not currently on the market but of key strategic interest to the Company.
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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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