SWIFT ENERGY COMPANY 1999 ANNUAL REPORTAchieving Flexibility for Future GrowthAs Swift Energy enters the 21st century, it has achieved flexibility and resources that will be critical for future growth. Swift began the year 2000 with strong cash flows from operating activities, a solid balance sheet, and well-diversified financing, all of which will enable the Company to pursue the significant opportunities it has targeted in both the United States and New Zealand.
Internally Generated Cash Flows. During 1999, Swift’s net cash flows of $73.6 million—which were 36% higher than in 1998—financed the majority of its $78.1 million of capital expenditures. For the past five years, Swift’s annual growth rate in net cash provided by operating activities has averaged 48%. This track record of growth in net cash flows has been made possible by the Company’s increase in oil and natural gas production from 9.6 Bcfe at year-end 1994 to 42.9 Bcfe at year-end 1999. Bank Credit Facility. In the year 2000, Swift anticipates that internally generated cash flows together with cash in the bank will finance the majority of its $114.8 million capital budget, as well as any working capital requirements. The Company’s credit facility consists of a $250.0 million revolving line of credit with a $100.0 million borrowing base from a syndicate of nine of the world’s leading energy banks. At year-end 1999, the Company had no outstanding borrowings under this credit facility, which was restated in March 2000 and will extend through August 2002. Stock Offering and Senior Notes. During 1999, Swift completed a concurrent offering of 4.6 million shares of common stock at $9.75 per share, with net proceeds of $42.0 million, and an offering of 10.25% senior notes due in 2009, with net proceeds of $120.5 million. The aggregate net proceeds from the 1999 offerings were used to repay all outstanding debt under the Company’s bank credit facility, and the remaining proceeds will fund a portion of the capital expenditures and working capital needs in the year 2000. At year-end 1999, Swift’s working capital had quad-rupled, rising from $3.8 million at year-end 1998 to $16.5 million in 1999, mainly as a result of the remaining proceeds from the two offerings.
Other Financial Instruments. In the past, Swift also has used convertible subordinated notes, private drilling partnerships, and public production partnerships to finance its operations. As the Company’s oil and natural gas reserves base has grown in recent years, it has significantly reduced its reliance on partnership financing. At year-end 1999, approximately 27% of the Company’s public production partnerships had been successfully liquidated and 61% had undertaken the process of voting on liquidation. Risk Management. One major component of Swift’s risk management is its balance of long- and short-lived reserves, which is achieved by focusing on diverse geological formations in its four major U.S. core areas. At year-end 1999, the Company’s average reserves life was 10.6 years, based on 1999 production and year-end proved reserves. Other ways Swift manages risk in its exploration and development activities are by using an engineering approach in its risk analysis of prospective projects, by forging strategic relationships with joint venture partners, and by focusing on geologic prospects where the Company has a competitive advantage. Swift also uses conservative, long-term pricing when evaluating prospective drilling or acquisition activities. In the sale of its oil and natural gas, Swift’s price risk management activities include financial transactions such as buying protection price floors for a portion of its oil and gas production. The Company also strives for diversity in marketing its oil and natural gas production by selling its production in a wide variety of locations across the nation.
Building Shareholder Value. The years ahead are expected to be a time of great opportunity for Swift Energy. The Company has a diversified inventory of drilling opportunities identified for the year 2000 and beyond in domestic core areas where it has a track record of success. Half way around the world, considerable exploration and development potential is associated with the Company’s recent exploratory discovery in New Zealand, where two more exploratory prospects with additional potential have been identified. The foundation to support these opportunities at home and abroad is provided by Swift’s existing financial resources and flexibility. Despite Swift’s significant achievements both in its financial performance and its exploration and development activities, the market continues to undervalue Swift’s stock as compared to its peers. As a measure of the Company’s faith in the upward potential for its stock valuation, Swift repurchased a total of $13.3 million of its common stock from 1997 through 1999. Swift Energy is confident that its successes both in the field and financially have laid the groundwork for building significant shareholder value in the future. The beginning of the 21st century could prove to be one of the most exciting times in the Company’s 21 years of operation.
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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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