1990: Swift Integrates Exploration and Development Technologies

During Swift Energy’s second full year of operation under its 1988 strategic plan, the Company strengthened its commitment to the mission of its Exploration and Joint Ventures Strategic Business Unit (SBU), which was to integrate conventional and advanced exploration and development technologies to discover oil and gas reserves at the lowest possible cost. This commitment led to the addition of a number of carefully selected geologists and geophysicists who were charged with the responsibility of integrating their disciplines.

Because these integrated technologies were also being applied to development drilling with the expectation of increasing the volumes of proved reserves in fields that were already producing, the SBU was renamed the Exploration and Development SBU.

The Wyatt 1-29 well, a development well drilled by Swift in the Oklahoma Weatherford Area in 1990 was one of the Company’s largest producers at that time. Its wellhead was dropped six feet below the ground to accommodate the overhead rotation of the Wyatt family’s irrigation system shown in the background.

Relying on this technological expertise, the Company drilled 18 development wells and five exploratory wells in 1990, with 15 successes. From these, the Company placed into production corporate reserves totaling 260,000 barrels of oil and 3.7 Bcf of gas at an average low domestic cost of $1.80 per BOE.

As the year ended, the group’s exploration efforts were focusing on three geographical areas: in the Ark-La-Tex area (where the states of Arkansas, Louisiana, and Texas meet), in the Texas Gulf Coast Area, and in the Powder River Basin and the Williston Basin of the Rocky Mountain Region.

The drilling program was implemented by the Operations SBU, which had been charged with integrating the exploration and development technologies with advanced drilling technologies. This group also added select operations engineering personnel, as well as field operations personnel needed as the Company assumed the operation of many of the Weatherford Area wells that had been included in the 1989 acquisition from Amoco.

In 1990, the Weatherford Area held the largest single volume of reserves operated by Swift Energy. By instituting several upgrades in the Weatherford Area, including the drilling of a highly successful development well (the Wyatt No. 1-29), the Company increased the average daily production of the Swift-operated wells from 380 barrels of oil and 46 million cubic feet of gas to 650 barrels of oil and 54 million cubic feet of gas. It also increased the volume of proved reserves in the area, with the Wyatt 1-29 alone adding 1.8 Bcf of gas and 14,500 barrels of oil.

The Company intensified its property enhancement efforts in other fields as well, including a major workover of a well in Freestone County, Texas (the Southwest University No. 1) that more than doubled the well’s gas production from 2.5 to 6 million cubic feet per day and increased its flowing tubing pressure from 500 to 3,400 psi.

Upgrades were also instituted throughout the AWP Field in South Texas. The Company inserted "velocity strings" (1-1/4 inch coiled tubing) in 22 wells to increase the pressure of the wells and restore continuous production at higher rates. It also installed gas lift systems in several oil wells and performed a number of refracturing jobs. The overall effect was to increase the field’s total production rates above those at the time of purchase—even after 20 months of operation. At year end, gas production from the field had increased from 14.6 to 15.8 million cubic feet per day, and oil production had increased from 802 to 820 barrels per day.

Early in 1990, the Funds Management SBU established in the Company’s 1988 strategic plan was divided into two units: one retaining the name Funds Management and the other identified as Property Acquisitions and Dispositions. During the year, the latter group reviewed 529 property packages valued at approximately $3.4 billion. Of these, Swift contracted to purchase $70.5 million for the Company and its partners. Six packages comprised 70% of the total investments: a $26 million purchase from First Energy Corporation for interests in 145 wells located in nine states and the Gulf of Mexico; a $9 million purchase for interests in 56 wells in Oklahoma and Texas; two purchases (from Marathon Oil Company and Caspen Oil Inc.) totaling $8.4 million for interests in 21 wells in northern Louisiana; and two purchases (from groups of individual sellers) totaling $5.7 million for interests in four wells in Hidalgo County, Texas.

Also during 1990, the Company entered into four joint venture agreements effecting the sale of certain properties held for resale, principally from the Weatherford Area. Totaling over $17 million, these agreements were in keeping with Swift Energy’s plan toward a diversified capitalization strategy. With these ventures, plus significant increases in revenues from oil and gas sales and supervision fees, the Company’s dependence on limited partnerships was reduced from 63.6% of total revenues of $12.7 million in 1988 to 22.7% of total revenues of $20.4 million in 1990.

Because of an overall industry downturn in limited partnership investments, Swift Energy was one of the few companies still successfully marketing oil and gas partnerships in 1990, although its total sales dropped from $47 million in 1989 to $36 million. Recognizing the implications, the Company re-examined its partnership structure, listening to investors’ concerns about high front-end costs and a lack of liquidity. As a result, the Company began preparations for offering a new investor product that would eliminate the front-end costs and fully align Swift Energy’s interests with those of the investors. Moreover, the product would provide planned liquidation after five to nine years.

With its 1990 innovations and restructuring, together with its continued conservative management, Swift Energy ended the year 1990 with a 26% increase in net income (from $5.71 million to $7.17 million), a 37% increase in revenues (from $14.9 million to $20.4 million), and a 74% increase in oil and gas reserves (from 3.91 million BOEs to 6.81 million BOEs). Together with its public limited partnerships and joint venture partners, the Company’s cumulative investments in producing properties totaled $318.3 million, and it retained interests in 2,919 producing wells located in 17 states. By the end of the year, Swift Energy was operating 691 wells. Along with these increases, the Company’s staff had increased to 164 employees.

This page was last updated on Wednesday, July 11, 2007, at 04:34:33 PM.

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