1995 SECOND QUARTER REPORTLetter to StockholdersWe are happy to report that, subsequent to the June 30, 1995, period covered by this report, Swift Energy made a successful sale to the public of 5,750,000 additional shares of common stock that resulted in net proceeds to the Company of approximately $46 million. This infusion of capital substantially improved the overall financial position of the Company and allowed us to retire all short-term debt. Most importantly, we now have funds to accelerate the expansive development drilling program that we initiated a few years ago. The result will be higher oil and gas sales, which, together with reduced interest payments, will greatly enhance our cash flow. This improved financial position gives us much more flexibility in both our short-term and long-term planning. The acceleration of drilling activities has already begun. Whereas we drilled a total of 23 wells during the first six months of the year--five exploratory wells with two successes and 18 development wells with 18 successes--we have already drilled more than half this number during the first six weeks of the third quarter. During all of 1995, we expect to drill up to 85 wells. Sixteen of the 1995 wells are expected to be exploratory, including several drilled to the Yegua and Frio formations along the Texas Gulf Coast. It was in this area that we conducted our first three-dimensional (3-D) seismic survey in late 1994. Using our in-house expertise in 3-D analysis to process and interpret the data, and also to integrate it with known geological data, our geophysicists and geologists have identified a number of locations along the coast for future exploratory drilling. Other exploratory wells will include two drilled to the Minnelusa formation in Wyoming and two drilled in southwest Arkansas, one to the Smackover limestone and the other to the Mitchell sand. Of the 69 development wells planned for the year, up to 40 wells are scheduled for McMullen County in South Texas. Several of our fields are located in that county, including the prolific AWP Olmos Field and an adjacent 8,830-acre leasehold which we acquired in 1994 and began developing this year. To date, 12 wells have been successfully completed on the new acreage, including eight since the end of the second quarter. The Company has a 100% working interest in the property. This new leasehold acreage, identified as Two Rivers, has already had a tremendous impact on Swift's 1995 reserves. When our reservoir engineers completed their assessment of the area and had it audited in May, 1995, the Company had realized a 60% increase in its total proven reserves. Our developmental drilling during the year will also include several additional horizontal wells on our large farmout acreage in Fayette County, Texas. During the second quarter, the LCRA/COA 5-H well successfully followed the two reported on during the first quarter, and at least four more wells are planned for the acreage before year end. Swift's working interest in these wells varies from 20 to 25%. With our current large volumes of undeveloped reserves and our accelerated drilling program (which will require five to eight rigs operating in various areas throughout the remainder of the year), we are projecting a steady increase in the Company's oil and natural gas production. During the second quarter of 1995, our production totaled 2.5 billion cubic feet of natural gas equivalent, which was 12% higher than the production level during the same period in 1994. The corresponding increase in 1995 second-quarter revenues compared to revenues for the same period of 1994 was limited to 7% due to persistently low natural gas prices. Second-quarter gas prices were an average of 17% lower in 1995 than in 1994 and were only partially offset by a 13% increase in the average price for oil, which comprised about 30% of our second-quarter production. The lower gas prices, combined with higher costs that were largely associated with the increased production volumes, also caused 1995 second-quarter earnings to fall below those recorded in 1994--$731,000 this year compared to $1,076,000 last year. Correspondingly, net income per share dropped to $0.11 from $0.16. As noted above, our expanded drilling program will increasingly include concentrations
of wells in the same regions, which through economies of scale and our own efficiency
measures should reduce our drilling and production costs. If the industry should also
benefit from rising prices--as we continue to believe it will--then Swift Energy's
financial position will improve even more. We look to the future with confidence.
This page was last updated on Saturday, February 08, 2003, at 07:45:44 PM. Copyright © 1994-2008 by Swift Energy Company.
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