1983: The Company Changes Its Strategic Direction

In 1983, Swift Energy began to reduce its drilling activities as it initiated a new strategy. The Company’s management was among the first to recognize that the continuing decrease in oil prices from a high of $40 per barrel in 1980 was only one indication that a prolonged downturn in the U.S. oil and gas industry had begun. A more serious sign for Swift Energy was falling natural gas prices caused by U.S. regulations that had encouraged drilling for natural gas, while at the same time curtailing its use. The success of the government plan had given the country an oversupply of natural gas.

During 1983 and 1984, Swift Energy drilled 115 wells in five states, and of these, 97 were successfully completed as producers. By the end of 1984, however, falling natural gas prices led the Company to shift its emphasis toward the acquisition of producing oil and natural gas properties. The well above was a Swift well drilled in Campbell County, Wyoming.

By year end Swift Energy had drilled 76 wells, of which 67 were producers. Again, most of the drilling occurred in West Virginia (66 wells), with others drilled in Kansas (three), Alabama (five), and Wyoming (two). An important part of the Company’s drilling program had always been the reclamation of the land disturbed by the drilling process, and in 1983 the Company received the State of West Virginia’s 1983 Category I award for conservation of soil and water.

With its concentration of wells in West Virginia, the Company’s production activities in that state had accelerated. To facilitate its gas sales, Swift Energy and three industry partners formed a partnership to construct and operate a gas gathering system in Taylor County. Swift Energy became the operator of the 6.8-mile system.

The Company also continued to strengthen its position for future drilling with additional leasehold acquisitions and geological studies in the states of Kansas, Alabama, Wyoming, Utah, and Louisiana. At the same time, management recognized that drilling on most of these acreages would be deferred as the Company adapted to the reality of industry trends.

Adapting to that reality required that Swift Energy make a strategic shift in direction. Rather than limiting its activities to wells drilled by the Company itself, Swift Energy began acquiring working interests in wells that were already producing. Numerous such properties were becoming available at affordable prices from oil and gas companies forced to sell them because of reorganization or indebtedness resulting from the industry downturn. Swift Energy’s staff had the expertise to evaluate the properties, and, since the Company was already an established operator of producing properties, it also had the experience and capability for operating them.

Swift Energy had another advantage. It had a relatively small long-term debt and thus was in a strong financial position. However, as had been the case for its drilling activities, it needed additional funds for the property purchases. To finance its new activities, the Company initiated its first series of public income fund partnerships, a $30 million offering. Sales for the offering, identified as Swift Energy Income Partners 1983-1984, began late in 1983. To market the funds, the Company acquired the services of a dealer-manager, V. J. McGuinness Co., of Newport Beach, California.

This page was last updated on Tuesday, June 10, 2008, at 10:02:44 AM.

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