Considering the inherent volatility of energy prices and their impact on stock valuations, growth in shareholder value for independent oil and gas companies should not be measured solely by short-term changes in the stock price. Over the long term, growth in shareholder value depends on sustained increases in the volume and value of the Company’s proved reserves. Over the past 22 years, from Swift’s first full year of operation in 1980 through year-end 2002, Swift has achieved an annual compounded growth rate of 26% in proved reserves per share of common stock. At the end of 2002, Swift’s proved reserves totaled 28 Mcfe per share, up approximately 6% per share from the previous year-end. 2002 INDUSTRY ENVIRONMENT. Achieving sustained reserves growth over the long term requires skill in balancing risk and reward in response to emerging opportunities and threats in the energy industry. In 2002, Swift’s management was able to quickly adjust its plans in response to the economic and industry challenges of the previous year, when a slowdown in the U.S. economy and unforeseeable terrorist attacks jolted domestic energy markets as field service costs skyrocketed.In 2002, domestic natural gas prices on the New York Mercantile Exchange (NYMEX) showed tremendous volatility, ranging from a low for the year of $1.91 per million British thermal units (MMBtu) on January 28 to a high for the year of $5.34 per MMBtu on December 16. Oil prices also varied widely in 2002, with NYMEX oil futures prices increasing from a low for the year of $17.97 per barrel on January 17 to a high for the year of $32.72 on December 27, with much volatility in between. LONG-TERM INDUSTRY OUTLOOK. Over the longer term, the outlook for both domestic and international oil and natural gas prices appears promising.In early 2003, the world experienced relatively strong crude oil prices, driven by tensions between the United States and Iraq, the Venezuelan oil strike, and a decline in world oil inventories. Oil prices are expected to continue undergoing significant price volatility in the years ahead, but with a trend toward strong prices as the global economy picks up speed and oil consumption levels rise in developing countries around the world. Natural gas is expected to remain the fastest growing fossil fuel, with electricity generation continuing as the fastest growing component of natural gas demand. Given anticipated growth in natural gas consumption, supply may struggle to keep pace. Growth in Canadian imports, which supplied over half of the increase in U.S. consumption during the previous decade, is expected to slow or even decline during the next 10 years, and challenges to U.S. production became apparent in 2002, when a 2001 peak in rig rates failed to forestall production declines the very next year. In New Zealand, natural gas is primarily produced under contractual agreements that are not subject to short-term price swings. Over the longer term, natural gas pricing trends are expected to significantly strengthen as the Maui Field nears depletion. The Maui Field, which currently supplies over 70% of the island nation’s natural gas, may reach depletion as early as 2007. With these positive long-term outlooks for oil and natural gas prices in both the United States and in New Zealand, Swift will continue to optimally balance risk and reward in its pursuit of more aggressive growth in shareholder value.
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This page was last updated on Tuesday, April 01, 2003, at 09:20:08 AM. Copyright © 1994-2008 by Swift Energy Company. |
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