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Company Profile from Swift Energy Company's 1998 Annual Report |
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Swift Energy Company is an independent oil and natural gas company engaged in the exploration, exploitation, acquisition, and operation of oil and gas properties, with a primary focus on U.S. onshore natural gas reserves. Founded in 1979 with headquarters in Houston, Texas, the Company has achieved an average compounded growth rate in proved oil and gas reserves of approximately 37% per year during the last five years. In 1998, reserves grew 21%, replacing 296% of the year’s production.
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Company Mission
As a natural resource company, Swift Energy’s mission has always been to achieve growth in the volume and net present value of its proved reserves. The underlying premise is that reserves growth leads to increases in oil and gas production and sales, which in turn lead to higher cash flows and earnings and ultimately to increases in shareholder value. Swift’s success in sustaining reserves growth in a volatile environment has enabled it to achieve five-year compounded annual growth rates of 40% in production, 39% in oil and gas sales, and 50% in cash flows from operating activities. Swift’s primary strategic goals for the next several years are to continue increasing its oil and gas reserves at an average rate of 15% per year and its production at an average rate of 25% per year.
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Business Strategy
Swift’s reserves growth is primarily accomplished through a mix of development and exploratory drilling and producing property acquisitions, with on-going adjustments to the specific mix of activities in order to adapt to changing industry conditions. In both drilling and acquisitions, teams of professionals from various disciplines apply appropriate tools to identified areas of opportunity where the Company believes it can achieve a competitive advantage. Current focus areas include the Austin Chalk trend and the South Texas AWP Olmos Field. In addition, Swift is pursuing drilling opportunities in other parts of Texas, as well as in Arkansas, Louisiana, Wyoming, and New Zealand. During 1998, Swift Energy drilled 75 gross wells. The resulting success rates of 36% for exploratory wells and 87% for development wells exceeded industry averages of 31% and 86%, respectively. In its acquisition activities, the Company reviews acquisition opportunities for strategic producing properties where performance can be enhanced through development drilling or improved operating efficiencies. In 1998, falling wellhead prices lowered in-the-ground reserves values, making strategic acquisitions of producing properties particularly attractive. Capitalizing on this opportunity, Swift acquired oil and natural gas reserves totaling 91.1 billion cubic feet of natural gas equivalent (Bcfe) in the Texas and Louisiana Austin Chalk trend as part of the largest acquisition in the Company’s history.
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Oil and Gas Price Volatility
Although Swift Energy’s reserves are predominantly natural gas (approximately 81% at the end of 1998), major cyclical swings in crude oil prices can nevertheless have a substantial impact on the Company’s revenues from oil and gas sales. In 1998, downward volatility in oil prices reached lows seldom seen in the industry. On an inflation-adjusted basis, oil prices fell to the lowest level since the 1940s, driven largely by reduced demand in Asia and increased production in the Middle East. For Swift Energy, the average price received for its 1998 oil production fell 33% from 1997 levels to $11.86 per barrel. At the same time, natural gas prices declined because of increased competition from cheap oil and lower demand triggered by one of the warmest winters (November 97–March 98) in U.S. history. As a result, the average price Swift received for its natural gas production fell 22% to $2.08 per thousand cubic feet. Together, these dramatic declines in oil and natural gas prices offset a substantial portion of the increased sales resulting from the Company’s 54% increase in production for the year.
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Common Stock Performance
Swift’s policy is to reinvest earnings in order to promote growth in proved reserves, which over time promotes growth in the value of the Company’s common stock. Although the Company has achieved substantial long-term growth in reserves, production, and cash flows, management believes that the downward price volatility experienced in 1998 caused the Company’s common stock, along with the common stock of its peers, to be greatly undervalued at year-end. As evidence, the ratio of Swift’s stock price to its cash flow at the end of 1998 (the year-end stock price divided by net cash provided by operating activities on a per-share basis) was 2.2 compared to long-term historical industry ranges for exploration and production companies of between 4.0 and 7.5. Investor Information
Swift Energy’s common stock is traded on the New York Stock Exchange (NYSE) under the symbol "SFY." Swift Energy’s 6.25% Convertible Subordinated Notes due in 2006 are listed on the NYSE under the symbol "SFY 06." (For an archive of company profiles, click here.)
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| This page was last updated on Saturday, February 08, 2003
, at 07:49:40 PM
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Copyright © 1994-2008 by Swift Energy Company.
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