In 2005, Swift Energy’s shareholders again enjoyed strong appreciation of the Company’s common stock. For the third consecutive year, the year-end stock price increased over 50%, having risen 74% in 2003, 72% in 2004, and 56% in 2005. These increases were made possible by substantial improvements in diluted earnings per share, which rose 140% in 2003, 123% in 2004, and 64% in 2005.

Although operating in a cyclical industry, Swift has built a legacy of steady growth in shareholder value. The Company focuses on growth in proved reserves and production, with the belief that growth in reserves and production generally leads to growth in oil and gas sales, which in turn leads to growth in cash flows, earnings, and value. Since its first full year of operations in 1980, Swift has achieved a compounded growth rate of 23% per year in proved reserves per share of common stock, with proved reserves totaling 26 Mcfe per share at year-end 2005. Similarly, per-share production has grown at a compounded rate of 33% per year since the Company’s production activities were first initiated in 1981.

To accomplish this growth, Swift for many years used the industry’s cyclical nature to its own advantage, emphasizing drilling when prices were high and producing property acquisitions when prices were low, thereby adding reserves in the most cost-effective manner. In recent years, as prices have remained strong, the strategy has been to emphasize both drilling and acquisitions, with the requirement that the acquisitions be strategically located near core areas. Over the past five years, Swift’s reserves replacements have averaged approximately 150% of production with an average replacement cost of approximately $2.34 per Mcfe, representing 49% of average sales prices. These costs, however, exceed long-term goals, which require replacement costs to remain under 33% of the average wellhead price Swift receives.

Higher than planned five-year replacement costs resulted largely from unforeseen events in 2005. Hurricane-related delays in exploratory drilling activity in South Louisiana prevented the delineation of some of the Company’s exploratory successes in that area, causing reserves growth from exploration to be less than originally anticipated. As drilling activity increases in 2006 and the delineation of the Company’s 2005 exploratory successes progresses, Swift anticipates that annual replacement costs should come back more in line with long-term strategic goals.

Building value not only depends on growth in reserves and production, it also requires maintaining attractive margins by controlling operating costs relative to product prices. Per-unit production costs (lease operating costs plus severance and other taxes) have averaged 23% of per-unit sales prices over the last five years, while per-unit general and administrative expenses (G&A) have averaged 6%. Like replacement costs, Swift’s long-term goal is to keep the combination of production and G&A costs below 33% of average sales prices.

Building value also requires appropriate diversification in oil and gas assets. With three regions in the United States and one in New Zealand, along with increasing expansion and diversity within those regions, Swift has achieved an effective balance between domestic and international properties, between oil and gas reserves, between shorter and longer production lives within the Company’s various fields, and between an assortment of diverse growth opportunities through focused operations. As a result, the Company believes it is well positioned to continue building shareholder value during the years ahead.