As Swift Energy continues to exploit its current core areas of operation, it also seeks other properties, through exploration or acquisition, that have the potential for becoming new core areas. Criteria for new properties include long-term growth opportunities and a logical fit into the Company’s overall operations. Locations of primary interest are along the Louisiana and Texas Gulf Coast and in New Zealand’s Taranaki Basin. During 2004, Swift took steps toward establishing new core areas in both geographic areas.

In view of its recent successes in the relatively shallow Miocene sands of the Lake Washington Field in Plaquemines Parish, Louisiana (see page 8), Swift has embarked upon a study of the field’s deeper horizons. During 2004, the Company conducted a three-dimensional seismic survey over 55 square miles of the field with a focus on intermediate depths between 6,000 and 12,000 feet. Swift further acquired 550 square miles of three-dimensional seismic data for the area west of its acreage to merge with its own data. To aid in the analysis of the entire data base, the Company has engaged the services of a third-party consulting firm.

The resulting proprietary analysis not only will help Swift in more precisely identifying intermediate-depth targets for its 2005 Lake Washington drilling program, which will include four or more exploratory wells, but also will help in assessing deeper prospects that the Company’s geologists and petrophysicists have developed around the salt dome. The Company anticipates that the deeper targets will most likely be natural gas.

In a related move, Swift has recently acquired two additional properties in South Louisiana. Purchased for $27.7 million, they consist of 100% working interests in two fields: the Bay de Chene Field (approximately 14,200 gross acres) located about 30 miles northwest of Lake Washington along the common boundary of Lafourche Parish and Jefferson Parish; and the Cote Blanche Island Field (approximately 6,200 gross acres) located about 100 miles west of Lake Washington in St. Mary Parish. Like Lake Washington, each field is located in inland waters over a salt dome and produces from multiple Miocene sand layers. Their combined estimated proved reserves were 5.6 million barrels of oil and 9.8 Bcfe of natural gas (or 7.3 million BOE), of which 9% were proved developed reserves. Over 80% of the value is in the Cote Blanche Island Field.

Each field has approximately 10 producing wells, numerous nonproducing wells, a centralized processing platform, and several tank batteries. Their combined current production is approximately 750 BOE per day, and Swift believes $50 million will be required to properly develop and exploit the fields’ reserves. A multiyear development program will be initiated during the second half of 2005 with two to three wells drilled in each field before year-end.

Existing three-dimensional data over the Bay de Chene Field will be merged with the 550-square-mile data base recently acquired for the region west of Swift’s Lake Washington acreage, and the Company is investigating acquiring three-dimensional data for the Cote Blanche Island Field. Swift may also conduct its own three-dimensional seismic surveys over both new areas.

In its South Texas activities during 2004, Swift continued drilling to the Wilcox sands in Goliad County northeast of its AWP Olmos Area in McMullen County, Texas. Following successful wells on the Nita prospect in 2001 and 2003 (the Post #1 and #2), the Company completed two more development wells in the area during 2004—the Post #3 and #4, both at depths of about 12,900 feet. The Post #3, in which Swift has a 68% working interest, tested at 2,300 Mcf of gas and 8 barrels of condensate per day. The Post #4, in which Swift has a 61% working interest, tested at 2 MMcf and 20 barrels of condensate per day. The Company also completed another Wilcox development well, the Bravo Land #2, with a 69% working interest in Duval County directly south of AWP. It reached a depth of 9,898 feet and tested at rates up to 1,300 Mcf of gas and 20 barrels of condensate per day.

During 2005, the Company will focus on developing additional Wilcox prospects in a contiguous seven-county area northeast of AWP that includes Goliad County, plus the counties of Victoria, De Witt, Jackson, Lavaca, Wharton, and Colorado. Prospects in the Frio and Yegua formations in these counties will also be developed.

During 2004, the Company also continued drilling to the Frio formation in Garcia Ranch, a region southeast of AWP in Kenedy County and Willacy County. It completed one exploratory well in Kenedy County and participated in the completion of another in Willacy County. A nonoperated exploratory well and an operated development well in Willacy County were unsuccessful.

For 2005, Swift’s tentative plans are to drill two exploratory and two development wells in the South Texas region.

During 2005, Swift will drill four exploration wells and participate in at least one nonoperated exploration well in New Zealand’s Taranaki Basin.

Three wells will be drilled by Swift as part of a joint venture the Company entered into in early 2005 with Mighty River Power (MRP), a state-owned New Zealand utility that provides up to 22% of the country’s electricity. One well is the Tawa prospect, which is located in the same petroleum exploration permit (PEP) area as the Rimu/Kauri Area (see PEP 38719 in map on page 13) and will be drilled in the third quarter of the year. Targeting multiple sands, including the Kauri sands, this prospect is a stratigraphic trap located on the flank of the prolific Kapuni Field and was developed on the basis of Swift’s analysis of available two- and three-dimensional seismic data plus two-dimensional data acquired during Company surveys in 1997 and 2000.

The other two joint venture wells are located in the Company’s TAWN Area. One is on the Goss prospect, also known as the Waihapa Deep prospect, located in petroleum mining license (PML) area 38140; the other is on the Trapper prospect located in PML 38141. The Trapper prospect combines two earlier prospects identified as the Toko Deep and Ahuroa Flank prospects. Both wells will have the Kapuni group sands (the major reservoir in the basin) as their main target, but they will also be drilled through the Tariki sandstone and other productive zones in the basin.

Swift also plans to participate in at least one nonoperated exploratory well targeting the Mt. Messenger formation in PEP 38716 with a 21.4% working interest.

In addition, the Company plans to conduct a 70- to 110-kilometer two-dimensional transitional zone seismic survey in the Rimu/Kauri Area (PEP 38719) that should help identify locations for a deep Tariki test (upper and lower plates) that would be along a trend with Swift’s Rimu-A1 discovery well. This seismic survey will also help identify additional potential Kauri and Manutahi sand targets. Note that PEP 38719 now includes the two areas previously identified as PEP 38756 and PEP 38759.

Finally, Swift has entered into a farm-in agreement with Balance Agri-Nutrients Limited to drill in PEP 38742 in search of natural gas as replacement feedstock for that company’s Kapuni urea manufacturing plant. Its first well, the Karaka A-1 drilled early in 2005 as a shallow test of the Mt. Messenger formation, was unsuccessful; however, other prospects will be matured through 2005.