During the third quarter of 2003, Swift Energy had oil and natural gas sales of $52.1 million, leading to a net income of $7.1 million ($0.26 per diluted share) and net cash provided by operating activities of $30.5 million. Compared to the third quarter of 2002, we realized increases of 42% in sales, 263% in net income, and 52% in net cash provided by operating activities.

For the nine months ending September 30, 2003, we had oil and natural gas sales of $157.8 million, yielding a net income of $20.4 million (after a $4.4 million charge from mandatory adoption of a new accounting principle in the first quarter) and net cash provided by operating activities of $84.0 million. Compared to the same period in 2002, we had increases of 55% in sales, 138% in net income, and 51% in net cash provided by operating activities.

Our total production in the third quarter of 2003 was 13.6 billion cubic feet of natural gas equivalent (Bcfe), a record volume that was 12% higher than the 12.2 Bcfe produced in the third quarter of 2002 and 3% higher than the 13.3 Bcfe produced in the second quarter of 2003. Our domestic production in the third quarter of 2003 was 8.7 Bcfe, an increase of 9% from the third quarter of 2002 and 3% from the second quarter of 2003. Our New Zealand production in the third quarter of 2003 totaled 4.9 Bcfe, an increase of 18% from the third quarter of 2002 and 2% from the second quarter of 2003.

Company-wide, the average price received for our third-quarter production was $3.82 per thousand cubic feet of gas equivalent (per Mcfe), which was 27% higher than the price received in the third quarter of 2002 but 1% lower than that received in the second quarter of this year. The slight price reduction from the last quarter was due to a 10% decline in domestic natural gas prices, which reduced overall domestic prices 3% to $4.56/Mcfe.

The average price received for our New Zealand production in the third quarter of 2003 was $2.48 per Mcfe, which was 9% higher than the average price received in the second quarter of this year. New Zealand prices continue to appreciate, in the most recent quarter because of higher crude oil prices, the on-going tightening of the country’s gas market, and the strengthening of the New Zealand dollar against the U.S. dollar.

The increase in domestic production during the third quarter came primarily from the Lake Washington Field in Plaquemines Parish, Louisiana, where we have been focusing our 2003 domestic drilling program and also working on a number of significant facility upgrades to increase the field’s oil delivery capacity. During the third quarter we completed most of the major upgrades, including adding equipment and decking space to the field’s three existing production platforms, adding new compression to the gas lift system used for oil production, installing a new oil delivery system, and building a permanent barge loading facility. By the end of November, we should have an oil delivery capacity of 20,000 barrels per day from the field. During September and October, our production averaged over 6,700 gross barrels per day (5,500 net barrels) from approximately 50 producing wells, with 15 additional wells awaiting flow line connections. We expect to exceed our production goal of 10,000 gross barrels per day (8,000 net barrels) from the field by year-end.

The Lake Washington wells awaiting connections include those completed during the third quarter—three exploratory wells and nine development wells. (Two other third-quarter development wells were not successful.) The exploratory wells were drilled on the southeast, south, and southwest sides of the field’s salt dome and show that some of the productive sands we have found on the east, northeast, north, and northwest sides extend around the dome. We have already begun delineation wells to further define the new areas. We are also planning to conduct a three-dimensional seismic survey in the field during 2004, the results of which should be available for planning our 2005 Lake Washington drilling program. At the end of the third quarter, we had state and federal approvals for a large number of additional drilling locations in the field and the permitting process is continuing for other locations. We are, however, temporarily releasing one of two rigs that have been drilling in the field throughout 2003 in order to focus more on the upcoming seismic survey and additional geologic and engineering reservoir studies.

In other domestic operations, we successfully drilled a development well (the Bego #1) in the Wilcox sands in Goliad County, Texas, and unsuccessfully drilled two of our several prospects to the Frio sands in the Garcia Ranch region in Kenedy County, Texas. The nonoperated Garcia Ranch well drilled to the Frio sands in the second quarter (the Burns #2) was completed and placed on production.

Through the first nine months of the year, we drilled a total of 55 domestic wells with an 82% success rate, serving as the operator of all but one well. Currently we are completing a third-quarter well drilled to the Austin Chalk trend in the Brookeland Area in Newton County, Texas, and will soon move a rig to another Austin Chalk location in the Masters Creek Area in Vernon Parish, Louisiana. In addition, we have engaged two rigs in the AWP Olmos Field in McMullen County, Texas, to drill six wells to the Olmos sand before year-end 2003.

In New Zealand, we were able to respond to a higher than expected market demand for natural gas with increased production from the TAWN Area, which averaged about 42 MMcfe (million cubic feet of gas equivalent) per day and accounted for approximately 80% of our total third-quarter New Zealand production. Production from the Rimu/Kauri Area also increased throughout the quarter, from approximately 7.5 MMcfe per day in July to a peak of about 15 MMcfe per day in September when the Kauri-A4 well and the recently completed Kauri-E1 and -E2 wells were placed on line. Following the initial impact of the new wells, the area’s production has averaged between 13 and 14 MMcfe per day. In July we entered into a new three-year agreement with Genesis Power for the sale of gas from the Rimu/Kauri Area.

We expect to drill more wells targeting the Kauri sand, spudding one (the Kauri-E3) during the fourth quarter. We also anticipate further drilling in the shallower Manutahi sand from which we are also producing. In addition, we are still looking at exploitation opportunities in the TAWN Area’s Tariki Field, as well as exploratory prospects in other New Zealand permit areas. Our recent re-entry into the Tuihu exploratory well in permit area PEP 38718 was unsuccessful.

Despite some delays in several areas, our overall results for the year to date have been excellent. We are on course to achieve growth in production and reserves, and we will have done so without significant draws under our bank line. Looking ahead, our 2004 operating budget assumes that we will be drilling in all our core areas, with the near-term focus continuing in the Lake Washington Area. We will also persist in our efforts to develop or acquire new core areas, with natural gas as the primary target. We are particularly encouraged by the current oil and gas pricing environment, which, when combined with the opportunities we have and our own determination to reduce per-unit production costs, should lead to the continued expansion of our increasingly profitable operations.