Swift Energy Company 2001 Annual Report: Operating Domestic Core Areas

Over 80% of Swift Energy’s record production of 44.8 Bcfe in 2001 came from the producing horizons in the Company’s four domestic core areas of operation. Three of the areas continue to be the AWP Olmos Field in South Texas, the Masters Creek Area in Central Louisiana, and the Brookeland Area in East Texas, with a fourth, the new Lake Washington Area in South Louisiana, added during the year.

In addition to optimizing the performance of wells already in production, Swift focuses its domestic development drilling activities in these core areas. During 2001, the Company drilled 36 development wells, serving as the operator of 30 of them. All of the 36 wells were successful, and 33 of them were drilled in the core areas. As noted in the discussion below, the Company’s development drilling in 2002 will be concentrated in the Lake Washington Area.

The AWP Olmos Area. Swift’s operation in the AWP Olmos Field in McMullen County, Texas, which began on a 4,900-acre leasehold in 1989, now covers 28,562 net acres. The field produces from the tight Olmos sand, a depletion-driven reservoir characterized by very low permeability, and the formation around each well must be hydraulically fractured in order to provide pathways for the hydrocarbons to flow into the wells.

Swift has consistently improved its formation-fracturing techniques, learning in the process that reducing the size of the fractures around new wells and performing subsequent refractures improves the percentage recovery of reserves per well. The Company also determined that production improves with the installation of small-diameter coiled tubing (velocity strings) in the wells to accelerate the upward flow of the gas and gas liquids.

During 2001, the Company successfully completed 11 new AWP development wells, each with a 100% working interest. In addition, it performed 26 refractures and installed 19 velocity strings. Nine refractures and 30 coiled tubing installations are currently scheduled for 2002.

Drilling activity in the United States reached the highest peak in several
years during mid-2001, driving up the cost of oilfield services.

 

At year-end 2001, Swift was operating 492 wells in the field, which accounted for 29% of the Company’s total 2001 production. The field also held 32% of the Company’s proved reserves (38% of its domestic reserves) and 122 proved undeveloped locations awaiting future drilling. With each new well expected to have a productive lifetime of 15 to 20 years, the AWP Olmos Field should be a major production area for the Company for many years.

Masters Creek Area. The Masters Creek Area, acquired in 1998 and located in Rapides Parish and Vernon Parish, Louisiana, has two major fields, the Masters Creek Field and the South Burr Ferry Field, and several smaller fields, all producing primarily from the Austin Chalk formation. Like the Olmos sand, the Austin Chalk formation is generally depletion driven; however, it also contains natural vertical fractures which frequently become deposits for oil and gas accumulations. Tapping these deposits requires that a vertical hole first be drilled down to the Austin Chalk horizon and that the well bore then be gradually turned in a horizontal direction to intercept multiple fractures.

Because of the pooling of the oil and gas within the fractures, Austin Chalk wells are well known for their high initial production rates and early payout followed by sharp declines. In the Masters Creek Field, however, the wells have longer lives. In fact, two wells in the field have each already flowed over 2 million BOE, and five other wells have flowed over 1 million BOE. This is attributed to the fact that water is pushing the oil and gas from below and making a cleaner sweep of the reservoir.

While the large volumes of water aid production, they necessitate the construction of water disposal facilities that increase production costs. Also, the water causes a buildup of scale along the interior walls of the well bore tubulars that until recently could be removed only with an acidizing process that required two- or three-day shutdowns. Early in 2001, this problem was attacked with a procedure that consists of pumping up to 25 barrels of a chemical into the hole and then flushing it out into the formation with about 2,000 barrels of water following the chemical injection. Production can be resumed within a few hours, with the chemicals remaining in the formation and retarding the buildup of scale for several months.

A study is currently under way to further improve operations in this area by minimizing the costs of placing new wells on line. With the boundaries of the field now largely defined, future wells will probably be offsets close enough to older wells that facilities can be shared, thus eliminating the need to construct additional long flow lines and tank batteries.

During 2001, seven successful development wells were drilled in the Masters Creek Field and two in the South Burr Ferry Field, all with high Swift working interests (averaging 88%). At year-end, Swift was the operator of 90 wells in the Masters Creek Area, which accounted for 34% of the Company’s total 2001 production and held 16% of its total year-end proved reserves (19% of its domestic reserves). The area also has 18 proved undeveloped locations available for drilling in future years.

Distribution of Swift Energy's Proved Reserves
As of December 31, 2001

Proved Reservesb (Bcfe)
Developed
Undevel-
oped
Total
Percent of
Company's
Reserves
Percent
Natural
Gas
Percent
Undevel-
oped
Texas:
   AWP Areaa 134.0 73.5 207.5 32.1% 73.8% 35.4%
   Brookeland Areaa 26.3 32.8 59.1 9.1% 40.1% 55.6%
   Other Texas 34.1 41.1 75.2 11.7% 88.4% 54.6%

   Total Texas

 194.4 147.4 341.8 52.9% 71.2% 43.1%
 

Louisiana:
   Lake Washington Areaa 25.3 47.2 72.5 11.2% 5.0% 65.1%
   Masters Creek Areaa 52.5 52.3 104.8 16.2% 25.7% 49.9%
   Other Louisiana 0.9 0.0 0.9 0.1% 87.2% 0.0%

   Total Louisiana

 78.7 99.5 178.2 27.5% 17.6% 55.8%

 

Other States &
Federal Offshore 16.7 7.2 23.9 3.8% 58.6% 30.1%
Total Domestic 289.8 254.1 543.9 84.2% 53.1% 46.7%
New Zealanda 34.4 67.5 101.9 15.8% 35.7% 66.2%

Total Company

 324.2 321.6 645.8 100.0% 50.3% 49.8%

aFor a discussion of these areas, see pages 6-15 and pages 51-56.
bSee definitions of proved reserves, proved developed reserves, and proved undeveloped reserves on pages 59-60.

 

Brookeland Area. Swift’s Brookeland Area, also acquired in 1998 and located in Newton County and Jasper County, Texas, also produces from the Austin Chalk trend (in the Brookeland Field), but at shallower depths. Because of the shallower horizons, the capital costs of drilling a horizontal well in the Brookeland Field are only one-third to one-half the costs of wells in the Masters Creek Field. Also, their associated reserves are less, averaging from 3 to 5 Bcfe per well.

During 2001, Swift participated in nine successful development wells drilled in the Brookeland Field, six of them as the operator with retained working interests of 95% to 100%. At year-end, the Company was operating 67 wells in the field, which held 9% of the Company’s proved year-end reserves (11% of its domestic reserves) and contributed 15% of the Company’s 2001 production. The field has 17 proved undeveloped locations for future drilling.

Distribution of Wells in Which Swift Owned Interests
As of December 31, 2001
Wells

Operated
by Swiftb

 Wells
Operated
by Others		 Total
Wellsb		 Percent of
Swift's
 Year-End
Proved
Reserves		 Percent of
Swift's
2001
Production
Texas:
   AWP Areaa 492 4 496 32.1% 29.1%
   Brookeland Areaa 67 34 101 9.1% 14.5%
   Other Texas 118 173 291 11.7% 12.2%
   Total Texas 677 211 888 52.9% 55.8%
 

Louisiana:
   Lake Washington Areaa 61 20 81 11.2% 2.7%
   Masters Creek Areaa 90 39 129 16.2% 34.1%
   Other Louisiana 7 35 42 0.1% 3.3%
 

   Total Louisiana

 158 94 252 27.5% 40.1%
Other States & Federal Offshore  14 76 90 3.8% 3.0%
Total Domestic 849 381 1,230 84.2% 98.9%
New Zealandd 5 --- 5 15.8% 1.1%
Total Company 854 381 1,235 100.0% 100.0%
Percent of Reserves 95% 5%
Percent of Production 83% 17%

aFor a discussion of these areas, see pages 6-15 and pages 51-56.
bSwift is the operator of 828 producing wells and 26 service wells. The Company has interests in 1,187 producing wells and 48 service wells.

 

Lake Washington Area. Swift’s new core operating area is located in the Lake Washington Field in Plaquemines Parish, Louisiana. This field, covered by a lake, produces from multiple Miocene sands ranging in depth from 2,000 feet up to 10,000 feet and has the potential for deeper exploration prospects. Because this area also has a flatter production curve than Swift’s other core areas, as well as a high potential for development and revitalization at comparatively lower capital costs, it will be the focus of the Company’s domestic drilling and operational improvements during 2002.

Swift’s acquisition of the Lake Washington properties was effective March 1, 2001, with the Company paying $30.5 million to Elysium Energy, LLC, for proved reserves estimated at the time to be 7.1 million barrels of oil and 3.7 Bcf of natural gas, as well as some leasehold acreage. With the acquisition, Swift became the operator and 100% working interest owner of about 20 producing wells. Also with the acquisition, Swift received 100% interests in over 30 shut in or temporarily abandoned wells with the potential of being reinstated as producers. In addition, it received working interests in about 20 wells operated by another company. At the time of the acquisition, production from the area was approximately 1,000 BOE per day net to the purchased interests.


A tugboat tows a barge-based rig to a drilling location on Lake Washington.  Lake water depths at well locations are typically 6 to 11 feet.

 

Discovered in the 1930s and operated by major oil companies whose real interests were offshore, the Lake Washington Field has large unexploited areas. The field surrounds a deep salt dome whose center approaches the surface, and it is heavily faulted with a large number of potential traps for oil and gas that range in size from less than 5 acres to as much as 160 acres. Within the traps, whose depths increase with increasing distances from the dome’s center, are multilayers of potential pay sands, many of them hundreds of feet thick.

Previous operators concentrated their drilling efforts on the north and east sides of the salt dome away from the "attics" of the fault blocks, that is, the areas in which the sands have reached their highest (most shallow) positions and are closest to the salt dome’s surface. Swift also has been concentrating on the north and east sides, but with increasing attention given to the attics where the Company’s geological mapping indicates the potential presence of both oil and gas. During the last half of 2001, the Company successfully drilled one exploratory well and four development wells in the field, including one attic well, all of which boosted the year-end production in the area to about 1,700 barrels of oil and 1 million cubic feet of gas per day. (Additional gas produced is used for oil lift operations.)

Since year-end 2001, two additional successful development wells have been drilled, both as attic wells. The full 2002 program will include 20 development wells, some of which will be located on the under-exploited west and south sides. At year-end, Swift had identified 29 proved undeveloped locations in the field.

The Lake Washington reservoirs are strongly water driven, with high volumes of salt water produced with the oil. Currently, the water is separated out at the processing plant at Swift’s expense. Salt water disposal costs will be greatly reduced, however, as the Company converts some of the nonproducing wells to disposal wells.

The most challenging operational problem in Lake Washington is to prevent reservoir sand from clogging the inflow of hydrocarbons into the producing wells. This problem is typically combatted with "gravel packs" created by pumping large-grain sand down the well bore and back up into an annulus formed between a mesh screen and the inner surface of the well casing. This prevents the smaller-grain sand from entering the well bore while still allowing the oil and gas to flow through the gravel pack.

At year-end 2001, Swift was the operator of 61 wells in the Lake Washington Area, which held 11% of the Company’s total proved year-end reserves (13% of its domestic reserves) and contributed 3% of its 2001 production. Both the reserves and the production are expected to increase significantly during 2002.

 

This page was last updated on Saturday, February 08, 2003, at 07:29:00 PM.

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