SWIFT ENERGY COMPANY 2000 ANNUAL REPORT

Letter to Stockholders 

Success is a journey. The validity of this axiom was particularly apparent to us at Swift Energy Company during the year 2000. When we began the year, we were emerging from an extraordinarily severe low-price environment that had temporarily crippled the oil and gas industry, and we were awaiting the results of an exploratory well in New Zealand—our first operated well outside the United States. Looking back, we now know that we were entering a fast-paced year in which we would successfully overcome more than the usual number of operating obstacles and make great strides forward. By year-end, we could cite many accomplishments, of which we consider the following to be major milestones:

• The price of our common stock rose throughout the year, attaining its highest year-end level ever.

• The Company’s revenues also reached record highs.

• The success of our New Zealand well was confirmed and other nearby prospects were found to be highly promising.

• We discovered a new producing zone in one of our core areas of operation and assembled an exceptional inventory of domestic exploration prospects for 2001.

• We eliminated nearly half of our debt and substantially strengthened our balance sheet.

• We completed a management transition that put in place a strong, forward-looking team comprised of experienced people.

These milestones, which are discussed in detail in the following pages, serve not only as a summary of what we accomplished in the year 2000, but also as indicators of where we have been and as guideposts to the future.

As we have emphasized many times, all our activities are focused on an overall mission of increasing shareholder value by increasing the volume and present value of our oil and natural gas reserves. Since the Company’s inception in 1979, we have achieved an annual compounded growth rate in proved reserves of 29% per share. As a result, over the last five years the growth in our year-end stock price has outperformed major stock indexes such as the Dow Jones Industrial Average and the S&P 500.

Sustaining this rate of growth in a cyclical and highly volatile industry is, of course, a formidable challenge. Over the past three years, we have witnessed a swing in oil prices from 50-year lows on an inflation-adjusted basis to recent highs that have been fluctuating around $30 per barrel. In order for us to effectively plan the future, we must focus on a strategy that can adjust to such swings, but only in a manner that is consistent with our long-term goals.

Our strategy over the years has been to take advantage of both industry upturns and downturns. During times of higher prices, we focus on drilling development wells in our core areas of operation to increase their production and on exploratory wells that could provide us with new core areas. During the downturns, we continue drilling insofar as is practical, but we also focus on acquiring additional producing properties that prevailing low prices have made economically attractive. When an industry upturn returns, we then exploit these new properties to ensure that they are yielding maximum production.

With the industry upturn we are now experiencing, we expect to spend approximately $98 million on domestic drilling in the year 2001. Of this amount, $82 million will be for development drilling and $16 million for exploratory drilling. In addition, we are allocating $34 million for acquisitions.

We have also set aside $36 million for further work in New Zealand, where we believe our recent exploratory efforts have provided a large growth potential for the Company. We have allotted $18 million for further drilling on our New Zealand permit area and another $18 million for production facilities, geological and seismic costs, and other capital expenditures.

As was our practice in 2000, we plan to pay for the majority of these expenditures from our cash flow. We do, however, have a credit line of $200 million should we need it. This financial flexibility derives from another element of our long-term strategy: whenever possible, to pay down debt and strengthen our balance sheet. Currently, our long-term debt is about half of what it was in early 2000.

Obviously, our foremost strength for carrying out these plans is the people of Swift Energy. For the areas in which we operate, the technical expertise of Swift’s staff is second to none, which allows us to profitably develop properties that others might overlook. For example, we do more horizontal drilling than most companies, and we do it particularly well. We’re also experts in tight-sand fracturing technologies, which is becoming increasingly important as all the nation’s easy-to-produce fields continue to be depleted. In tackling these sorts of jobs, our employees work in small, interdisciplinary teams, which gives us the organizational flexibility to quickly change focus and adapt to industry trends and developing opportunities.

Finally, we have an excellent management team. When Swift Energy was first founded, we sought the help of talented young oil and gas professionals who were highly motivated. The result is that we now have in place a second-generation management team, most of whose members have had 15 to 20 years of success in the industry right here at Swift Energy.

With this management team at the helm and its familiarity with a strategy that has served us well throughout our history, we look forward to a continuing journey with many more milestones to come.

 A. Earl Swift
Chairman and Chief Executive Officer

Terry E. Swift
President

This page was last updated on Saturday, February 08, 2003, at 07:28:55 PM.

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