SWIFT ENERGY COMPANY 2000 ANNUAL REPORTCompany Profile
Swift Energy Company is an independent oil and gas company engaged in the exploration, development, acquisition, and operation of oil and gas properties, with a focus on onshore natural gas reserves in the United States and onshore oil and natural gas reserves in New Zealand. The Company was founded in 1979 and is headquartered in Houston, Texas. Performance Comparison. Swift’s policy is to reinvest cash flows in order to promote growth in the value of its common stock. In 2000, the Company’s stock price rose 227% based on year-end prices and 139% based on average daily prices. Over the last five years, Swift’s year-end stock price has risen at a compounded annual rate of 28%, comparing favorably with that of a number of major indexes, including the S&P 500 index and the Dow Jones Industrial Average (both approximately 16%) and the Russell 2000 index (9%).
Mission and Goals. As a natural resource company, Swift Energy’s mission is to achieve growth in the volume and net present value of its proved reserves. The underlying premise is that reserves growth generally leads to increases in oil and gas production and sales, which in turn lead to higher cash flows and earnings, and ultimately to increases in shareholder value. Over the last five years, Swift has achieved an average annual compounded growth rate in proved oil and gas reserves of 29%. In 2000, a 38% increase in proved reserves replaced the Company’s production for the year by more than five times. Swift’s success in sustaining reserves growth in a volatile pricing environment has enabled it to achieve five-year annual compounded growth rates of approximately 31% in production, 53% in oil and gas sales, 55% in cash flows from operating activities, and 64% in net income. Swift’s primary goals for the next few years are to increase both its oil and gas reserves and its production at an average rate of 10% to 15% per year.
Business Strategy. Swift’s reserves growth is accomplished through a mix of exploratory and development drilling and producing property acquisitions. The specific mix of drilling and acquisitions is continually adjusted in response to changing industry conditions. Swift’s drilling program utilizes a number of innovative technology applications adapted to specific areas where the Company believes it can achieve a competitive advantage. Current domestic core operating areas include the Company’s Masters Creek Area in Louisiana and the Brookeland Area, AWP Olmos Area, and Giddings Area in Texas. In addition, Swift is pursuing domestic drilling opportunities in other locations in Texas, Louisiana, and Wyoming. Internationally, Swift drilled a significant onshore discovery well in New Zealand in 1999, the Rimu-A1. Based upon delineation activities in 2000, the Company now believes that its Rimu discovery and a yet-to-be-drilled Kauri prospect south of Rimu may be in direct communication to form a major multi-zone field. The Kauri exploratory well is planned for 2001.
In its acquisitions program, the Company continuously reviews opportunities to purchase strategic producing properties where performance can be enhanced through development drilling or improved operating efficiencies. In 1998, low oil and gas prices reduced in-the-ground values of producing properties and created attractive acquisition opportunities. Swift capitalized on these opportunities by acquiring its initial oil and gas reserves in the Brookeland Area and Masters Creek Area. In 1999 and 2000, Swift continued to make smaller strategic acquisitions that fit its stringent acquisition criteria. One reason for Swift’s consistent growth in a volatile, cyclical industry is its balanced capital formation strategy designed to preserve financial flexibility. Consistent with that strategy, approximately $100 million of subordinated notes were converted into shares of the Company’s common stock at the end of 2000. Swift also increased its borrowing base to $200 million. As a result, Standard & Poor’s upgraded the Company’s credit rating from B+ to BB–. Industry Environment. Although Swift’s U.S. reserves are predominantly natural gas (approximately 72% at year-end 2000), major cyclical swings in crude oil prices can nevertheless have a significant impact on revenues from oil and gas sales. Strong oil prices during 2000 were in dramatic contrast to the sharp declines experienced during 1998 and the first half of 1999. During 2000, Swift received an average of $29.35 per barrel for its oil production, an increase of 75% over 1999 prices received.
Despite one of the warmest winters on record during the first quarter, natural gas prices received by the Company rose 77% in 2000 to $4.24 per thousand cubic feet (Mcf), buoyed by the higher oil prices, increased natural gas demand, and a reduction in gas supply related to a slowdown in U.S. drilling activity. Even though drilling has since picked up, natural gas prices have remained strong during early 2001 largely because of continued strength in world oil prices, tight supplies, and higher demand related to more normal winter weather. As a result of these higher oil and natural gas prices, the 2000 composite price received for Swift’s production increased 76% from the previous year to $4.47 per thousand cubic feet of natural gas equivalent (Mcfe). Investor Information. Swift’s common stock has traded under the symbol "SFY" on the New York Stock Exchange (NYSE) since 1991 and on the Pacific Exchange, Inc., since 1988.
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This page was last updated on Saturday, February 08, 2003, at 07:28:58 PM. Copyright © 1994-2008 by Swift Energy Company. |
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