Two of Swift’s six core areas are located in New Zealand, an economically developed country where Swift can enjoy the benefits of an internationally diversified portfolio without most of the political and economic disadvantages associated with many other parts of the world. New Zealand’s economic, political, and commercial risks are, in fact, often ranked lower than those of even the United States and Canada. New Zealand’s advantages include established oil and gas markets, existing infrastructure, a modern legal system, a reasonable tax structure, excellent royalty terms for oil and gas production, and a population with a generally positive attitude toward the United States.

In developing and exploring its New Zealand properties, Swift also has found the country’s permitting regime for oil and gas development and exploration to be attractive: exploration permits are exclusive for five years with a five-year renewal allowed, and mining permits are exclusive for up to 40 years.

After producing its first overseas commercial oil and gas production in New Zealand in 2002, Swift’s New Zealand operations reached a high point in 2003 when its production of natural gas surpassed the Company’s domestic natural gas on a volume basis. The New Zealand properties produced 14.3 Bcf of natural gas in 2003, which was 51% of Swift’s total natural gas production for the year. The properties also produced 572,683 barrels of oil, which was 17% of the Company’s total oil production, and 283,227 barrels of natural gas liquids (NGL), which was 34% of its total NGL production. Overall, New Zealand provided approximately 36% of Swift’s total production in 2003.

The average composite price that Swift received for its New Zealand production during the fourth quarter of 2003 increased approximately 75% from the price received in the first quarter of 2002 when commercial operations began. The average composite price for 2003 as a whole was $2.42 per Mcfe in U.S. Dollars, up 29% over the 2002 average composite price of $1.88 per Mcfe. Factors working in tandem to drive natural gas, oil, and natural gas condensate prices higher in New Zealand included the nearing depletion of New Zealand’s major natural gas field, an increase in natural gas demand in New Zealand, rising world oil prices, and a favorable exchange rate. All together, Swift’s New Zealand operations provided 22% of Swift’s revenue in 2003.

Swift’s proved reserves in New Zealand increased 13% in 2003 to 176 Bcfe, replacing 206% of the Company’s 2003 New Zealand production with a net finding and development cost of $0.63 per Mcfe. At year-end 2003, New Zealand reserves constituted 21% of the Company’s total reserves and consisted of 53% natural gas, 38% oil, and 9% natural gas liquids.

Both of Swift’s New Zealand core properties, the TAWN Area and the Rimu/Kauri Area, are located on the north island’s Taranaki Basin, where Swift is one of the top five exploration acreage holders. As with its properties held in the United States, Swift maintains a high level of operating control for these two core areas, which are strategically located just 17 miles apart.

During 2003, TAWN was Swift’s most prolific core area in terms of production, surpassing even the Lake Washington Area in the United States. TAWN produced 16.1 Bcfe of oil, natural gas, and natural gas liquids, which comprised 30% of Swift’s total production for the year.

Natural gas production from the TAWN properties was materially higher than originally expected for 2003, totaling 12.8 Bcf (46% of Swift’s total natural gas production). The increase was attributed to rising natural gas demand in New Zealand, fluctuations in hydroelectricity generation, and facility modifications that Swift undertook during the year. As a result of this increased production, the depletion of TAWN reserves occurred at a higher rate than was seen during 2002. To add new supply volumes, Swift plans to conduct future drilling operations in the area in 2004 and also to install compression to improve natural gas deliverability and recovery.

Swift owns 100% of the interests in its petroleum mining licenses covering the TAWN properties, which include four producing fields: the Tariki and Ahuroa fields, both producing from the Tariki formation, and the Waihapa and Ngaere fields, both producing from the Tikorangi formation. The name TAWN is an acronym derived from the first letters of these field names.

Swift’s infrastructure at TAWN includes 19 wells (including two service wells), two hydrocarbon-processing plants with significant excess capacity, and pipelines connecting the fields and facilities to export terminals and interior markets. The two processing plants, the Waihapa Production Station and the Tariki Ahuroa Gas Plant, have a current capacity of up to 15,000 barrels of oil and condensate per day and approximately 40 MMcf of natural gas per day. Natural gas processing can be increased significantly with additional compression as needed.

TAWN reserves, which are 76% natural gas, were 50.8 Bcfe at year-end 2003, representing 6% of Swift’s total oil and gas reserves and 29% of its New Zealand reserves.

Production from the Kauri sands was initiated in mid-July 2003 following the successful fracture stimulation of the Kauri-A4 exploration well drilled in 2002. The well tested at rates of up to 4.8 MMcf per day of natural gas and 202 barrels of condensate with a negligible amount of water on a 25/64-inch choke with 1,258 pounds per square inch of flowing tubing pressure. The well is connected by a pipeline to the Rimu Production Station.

MARKETING. Energy prices rose appreciably in New Zealand in 2003, with Swift’s average price received for natural gas increasing 38% from $1.32 per Mcf in 2002 to $1.83 in 2003. Oil prices rose 22% from $24.31 per barrel in 2002 to $29.58 in 2003, and natural gas liquids increased 22% from $11.06 per barrel in 2002 to $13.50 in 2003.