Swift Energy Company is an independent oil and natural gas company engaged in the development, exploration, acquisition, and operation of oil and gas properties, with a focus on onshore areas of Texas and Louisiana in the United States and onshore areas of the Taranaki Basin in New Zealand.

Mission and Goals. As a natural resource company, Swift Energy’s mission has always been to achieve growth in the volume and net present value of its proved reserves. The underlying premise is that reserves growth 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 10 years, the Company has achieved an average compounded growth rate in proved oil and gas reserves of approximately 30% per year. Swift’s success in sustaining reserves growth in a volatile pricing environment has enabled it to achieve 10-year compounded growth rates of approximately 27% per year in production, 36% per year in oil and gas sales, and 37% per year in cash flows from operating activities. Swift’s primary goals for the next few years are to continue increasing 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 primarily 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. In all its activities, the Company focuses on building a balanced portfolio of oil and gas properties with diversified production profiles and an assortment of drilling opportunities covering a range of risks and potential rewards.

Domestic drilling is generally focused on core operating areas, including the Lake Washington Area and Masters Creek Area in Louisiana and the AWP Olmos Area and Brookeland Area in Texas. In 2002, domestic drilling activities will be concentrated in the Lake Washington Area. International drilling activities will be focused in the Company’s Rimu/Kauri Area in New Zealand, where the Company is delineating what it believes to be a major multizone discovery.

In its acquisitions activities, the Company continuously reviews opportunities to purchase strategic producing properties where performance can be enhanced through development drilling or improved operating efficiencies. In 2001, Swift acquired interests in the Lake Washington Area in South Louisiana, and in January 2002, the Company acquired four onshore producing oil and gas fields in New Zealand, collectively known as the TAWN properties, through the purchase of an affiliate of Shell New Zealand.

Industry Environment. Because oil, natural gas liquids, and condensate represented over 40% of Swift’s total production in 2001, falling oil prices had a major impact on revenues from oil and gas sales. Sharp price declines during the second half of 2001 were a dramatic contrast to strong prices throughout the previous year. For 2001 as a whole, Swift received an average of $22.64 per barrel for its oil, a decrease of 23% over average oil prices received during 2000. Average natural gas prices received by the Company in 2001 totaled $4.23 per thousand cubic feet (Mcf), remaining essentially flat compared to the previous year despite declining sharply from unusual highs early in the year.

The 2001 composite price received for the Company’s production decreased 9% to $4.05 per thousand cubic feet of natural gas equivalent (Mcfe). At the same time, high demand for oilfield services significantly increased the costs associated with drilling and production operations, leading to even greater declines in operating margins.

Prices at the end of 2001 were much lower than average prices for the year as a whole. Year-end proved reserves values used in ceiling test calculations must be based upon pricing at the end of the year. Average year-end oil and natural gas prices used in the ceiling test of Swift’s domestic proved reserves were $18.51 per barrel for oil and $2.68 per Mcf for gas. This year-end pricing necessitated a $98.9 million non-cash write-down of the Company’s domestic oil and gas assets, leading to a net loss of $(22.3) million for 2001. Ceiling test calculations, which are calculated country by country, did not result in a write-down of the Company’s oil and gas assets in New Zealand.

Performance Comparison. Swift’s policy is to reinvest cash flows rather than pay cash dividends in order to promote long-term growth in the value of the Company’s common stock. Although industry price cycles can have a substantial impact on year-to-year performance, over the longer term, Swift has achieved consistent growth in shareholder value. From year-end 1991 to year-end 2001, Swift’s stock price increased a cumulative 308%, which compares favorably with cumulative increases in the Dow Jones Industrial Average (216%), the S&P 500 index (175%), the Russell 2000 index (157%), NYMEX natural gas prices (91%), and NYMEX oil prices (4%).

Investor Information. Swift Energy’s common stock has been traded under the symbol "SFY" on the New York Stock Exchange (NYSE) since 1991 and on the Pacific Exchange, Inc., since 1988.