SWIFT ENERGY COMPANY 2000 ANNUAL REPORTDomestic Exploration and Acquisition Activities
During 2000, Swift achieved several successes in its exploration program. Of particular note, the Company drilled two discovery wells in the Saratoga formation lying above the Austin Chalk formation in its Louisiana Masters Creek Area, which was part of a major producing property acquisition in 1998. Like the Austin Chalk formation providing production in the Masters Creek Area, the Saratoga is a limestone formation that accumulates oil and gas in natural vertical fractures, a number of which can be tapped successively by a single well bore drilled horizontally. During its development drilling in the area, the Company had found considerable evidence of hydrocarbons in the Saratoga. Wells drilled to the Austin Chalk penetrated the Saratoga vertically, providing Swift with geologic and petrophysical information, including core samples, that led to the decision to drill both exploratory wells, which are about 4.5 miles apart. To drill the wells, Swift applied the same horizontal drilling technique that it uses for the Austin Chalk formation; however, because of the shallowness of the target fractures in the formation and swelling of the penetrated shale immediately above it, it became necessary to modify the technique to prevent damage to the holes. The modification consisted in drilling vertically to below the target fractures and then "fishhooking" back up to the proper depth before drilling horizontally.
While both wells confirmed the discovery, it appears that the fishhook turn on the well bore limited the lengths of their horizontal legs and therefore reduced the number of fractures they could have encountered. A third well, to be drilled in the central part of the field during the second quarter of 2001, is being designed to eliminate the necessity for the fishhook. It will have a smaller angle coming into the Saratoga, which should minimize damage and allow the horizontal legs to extend to distances up to 5,000 feet. In the meantime, evaluation of both Saratoga wells continues. The Saratoga discovery and Swift’s ability to adapt its operations to new reservoir requirements are excellent examples of how the Company builds incrementally on previous success to find additional opportunities for growth. The discovery is on leasehold acreage with production infrastructure already in place, giving the Company significant economies of scale. Moreover, the prospective area covers approximately 35,000 gross acres (22,000 net acres) with potential for over 30 new well locations. 0ther Exploration Successes. In addition to the two Saratoga wells, Swift drilled or participated in seven other exploratory wells during the year 2000. Of these, three were successful, for an overall exploratory success rate of 56%. The three wells are located in the Texas counties of Colorado, Goliad, and Kenedy, where they are producing from the Austin Chalk, Wilcox, and Frio formations, respectively. With these and earlier successes, Swift’s success rates for exploratory drilling in the United States have exceeded industry averages for 10 consecutive years. These successes derive from the Company’s proven strengths in processing, analyzing, and interpreting two-dimensional and three-dimensional seismic data; in analyzing and interpreting geological data; and in integrating the seismic and geological information to identify prospects.
Exploration Prospects. For the year 2001, Swift has an inventory of 11 domestic prospects that will provide the Company with a total working interest reserves potential of approximately 2,225 Bcfe. Swift’s resulting proved reserves will be based on its net revenue interests, which are expected to be 70% to 75% of the working interests. Ten of the prospects are located along the Gulf Coast, nine of which are in Texas and targeting multiple pay zones in the Frio, Wilcox, and Woodbine formations. One is in Louisiana with the Miocene formation as a target, and another is in Wyoming with the Teapot formation as a target. Texas Frio Prospects. Swift’s inventory includes two prospects in the southern tip of Texas, the Garcia Ranch–Rome prospect in Willacy County and the Garcia Ranch–Sienna prospect in Kenedy County. Both prospects will be testing the deep Frio sands with depths of 16,000 feet. The Rome prospect will be targeting three significant sand packages, and the Sienna prospect will be targeting five sand packages. The reserves potential is estimated to be 150 Bcfe for the Rome prospect and 200 Bcfe for the Sienna prospect, with Swift retaining a 65% working interest in each. Both of these prospects, which are currently scheduled for the first quarter of 2001, were developed by the analysis of three-dimensional seismic surveys integrated with well bore data from producing wells in the area. Texas Wilcox Prospects. Three prospects in Goliad County will have the Tina series sands in the Wilcox formation as their primary targets and many shallower sands as their secondary targets. Identified as Nita #1, Nita #2, and Brandon, these prospects have estimated reserves potential of 40, 35, and 65 Bcfe, respectively. Swift’s working interests will be 76%, 50%, and 70%, respectively. For the Nita #1, the projected depth is 15,000 feet, and the primary target will be the first Tina sand. For Nita #2, the depth will be 15,500 feet with several sands in the Tina series as the primary target. And for the Brandon prospect, the depth will be 12,000 feet with the second Tina sand as the primary target. All three of the Goliad County prospects were based on the Company’s interpretation of existing seismic data, both two dimensional and three dimensional, together with well bore data from existing wells. The Nita #1 is scheduled for the first quarter of 2001, the Nita #2 for the second quarter, and the Brandon for the second quarter. A fourth Wilcox prospect is located in Lavaca County and is scheduled for drilling during the third quarter of 2001. Identified as the Pearl prospect and projected for a depth of 14,500 feet, its estimated reserves potential is 180 Bcfe in its primary target of three significant sand intervals. The prospect, in which Swift will have a 75% working interest, has been based on Swift’s analysis of existing two-dimensional seismic data. Texas Woodbine Prospects. Three additional Texas prospects with high reserves potential will be targeting the Woodbine sands: the Lion prospect in San Jacinto County and the Jaguar and Bobcat prospects in adjacent Polk County. The Lion prospect, in which Swift will retain a 65% working interest, will be drilled to a depth of 16,000 feet and is estimated to have a reserves potential of 400 Bcfe. It is approximately 27 miles west of the Double A Wells Field, which has successfully produced 380 Bcfe from the Woodbine sands since 1985. Swift’s analysis of two-dimensional seismic data for the prospect yielded results that were similar to those from corresponding seismic data for the Double A Wells Field. Drilling is currently scheduled for the second quarter. The Jaguar and Bobcat prospects in Polk County are also look-alikes to the Double A Wells Field. The Jaguar prospect is projected to drill during the third quarter to a depth of 14,500 feet and has potential reserves of 325 Bcfe. The Bobcat prospect is projected to drill during the fourth quarter at a depth of 15,000 feet and has a reserves potential of 225 Bcfe. Swift will have a 75% working interest in each.
Louisiana Miocene Prospect. Swift has one prospect for the late second or early third quarter of 2001 that is located along the Louisiana Gulf Coast—the Grand Lake prospect in Plaquemines Parish. The Grand Lake prospect will target the Miocene sand, particularly its massive sections identified as the Cib-Op, the Upper Rob L, and the Lower Rob L. The prospect, which is based on the Company’s analysis of two-dimensional and three-dimensional seismic data, will be drilled to a depth of 16,500 feet and is estimated to have a reserves potential of 2,000 Bcfe. Swift will retain a 50% working interest in the prospect. Wyoming Teapot Prospect. In Converse County, Wyoming, the Bullwinkle and Murphy prospects are two adjacent prospects in the southeastern portion of the Powder River Basin that are being treated as a single package. The Bullwinkle prospect is currently scheduled for the second quarter of 2001. The target reservoir is the Teapot formation with the shallower Teckla sand as a secondary potential. The estimated reserves potential is 100 Bcfe, and Swift’s working interest will be 100%. Producing Property Acquisitions. During 2000, Swift Energy made four acquisitions of producing properties that increased its reserves by 39.7 Bcfe. With these purchases, the Company’s cumulative acquisitions for itself and its coinvestors have included 140 transactions totaling $590.2 million, of which $233.7 million covering 339.7 Bcfe was for Swift’s own account. In its first acquisition in 2000, Swift paid $11.0 million for 12.7 Bcfe of proved reserves in the AWP Olmos Field in McMullen County, Texas, where the Company has operated for over a decade. With this acquisition, which was 76% natural gas, Swift now owns 100% of the working interest in 100 wells located in the northern part of the field. In its second acquisition, Swift paid $4.8 million for 9.7 Bcfe of proved reserves located in the Chunchula Field in Alabama, where the Company has had a presence for several years. The acquisition was 79% gas. Both the Chunchula and the AWP acquisitions were of producing properties from partnerships managed by Swift that are undergoing liquidation. In its third acquisition, Swift purchased 16.6 Bcfe of proved reserves (52% natural gas) located in the Texas Gulf Coast, including both onshore and smaller offshore interests, from multiple selling partners who are not affiliated with the Company. The purchase price was $17.5 million. The fourth acquisition, which was 80% gas, consisted of purchases from several individuals who collectively owned 0.7 Bcfe in several locations. The purchase price was $0.9 million. Swift’s overall acquisition strategy is to increase its number of core operated areas within North America. The Company’s checklist for property characteristics include substantial development potential, available working interests of 50% or more, predominantly natural gas reserves, and a geographic concentration limited to two or three areas. The properties also must help diversify the Company’s existing reserves base and be available at attractive prices. For 2001, Swift has allocated $34 million for acquisitions, with a potential emphasis in the Gulf Coast, the Mid-Continent, and other U.S. areas, as well as in Canada. While Swift expects to finance its planned acquisition budget through cash flows, it maintains the flexibility to increase its acquisition budget as needed through its credit line of $200 million, approximately $190 million of which was available at year-end 2000.
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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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