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Company Profile from Swift Energy Company's 1999 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 34% per year during the last five years. In 1999, reserves growth replaced over 140% of the year’s production even though drilling activity was temporarily reduced during the first half of the year in response to low oil and gas prices.
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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 pricing environment has enabled it to achieve five-year compounded annual growth rates of 35% in production, 41% in oil and gas sales, and 48% in cash flows from operating activities. Swift’s primary goals for the next few years are to continue increasing both its oil and gas reserves and its production at a rate of between 10 and 15% per year.
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Business Strategy
Swift’s strategy for increasing reserves and production is accomplished through an exploratory and development drilling program conducted in conjunction with a reserves acquisitions program. During 1999, activities in these programs were focused in four core domestic areas and one international area. AWP Olmos Area. Swift began operations in the AWP Olmos Field in McMullen County, Texas, in 1989, and since then has introduced numerous innovative drilling and production techniques to reduce costs. Among them have been slim-hole drilling, improved techniques for fracturing the tight Olmos sand, installation of coiled tubing velocity strings, and remote monitoring of both production and the fracturing process. At year end 1999, the area had 460 producing wells (with average lifetimes of 15 to 20 years) and 141 proved undeveloped locations. It also held the largest single volume of Swift’s total proved reserves (207.7 billion cubic feet of natural gas equivalent) and the largest single volume of its proved undeveloped reserves (83.6 Bcfe). Giddings Area. Following extensive seismic studies, Swift drilled its first horizontal well in the Austin Chalk trend in the Giddings Field in Fayette County, Texas, in 1992. Subsequent drilling in the Austin Chalk has expanded to other fields and three other Texas counties (Colorado, Austin, and Washington). At year-end 1999, the area held 74 producing wells in which Swift had interests and 25.4 Bcfe of the Company’s year-end reserves. Swift’s 2000 drilling activities will include several wells in this area, including some exploratory wells targeting the Edwards formation. Brookeland Area and Masters Creek Area. Also producing from the Austin Chalk trend, the Brookeland Area in two Texas counties (Newton and Jasper) and the Masters Creek Area in two Louisiana parishes (Vernon and Rapides) were obtained in 1998 in the largest acquisition in Swift’s history. At year-end 1999, these areas together held 186 producing wells in which Swift had interests and 198.9 Bcfe of the Company’s reserves, including 24.5 Bcfe that resulted from two 1999 acquisitions. In addition to drilling additional Austin Chalk development wells in these two areas for several years, Swift also plans to drill exploratory wells targeting other formations. New Zealand. Internationally, Swift successfully completed its first operated exploratory well in New Zealand in December 1999 after conducting a seismic swath survey of the area in 1997. Reserves for the well, in which Swift retains a 90% interest, are still under evaluation and as yet are not booked; however, its open flow potential was estimated to be 2,000 barrels of oil and 6.0 million cubic feet of natural gas per day. Following additional seismic surveys in early 2000, the Company plans to drill two delineation wells to this discovery in 2000 and two more exploratory wells on other prospects within two years, both of which have the potential of becoming even larger discoveries.
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Impact of Oil and Gas Price Volatility
Major cyclical swings in crude oil prices, together with associated changes in natural gas prices, impact both the Company’s revenues from oil and gas sales and the number of rigs it deploys for drilling. When prices are low, as they were in 1998 and early 1999, Swift’s strategy is to postpone drilling projects, including exploratory projects outside its core areas, and to seek opportunities for acquiring in-the-ground reserves at reduced values. In 1999, the Company had 27 drilling projects, down from 182 in 1997 and 75 in 1998. With prices improving during the second half of 1999, Swift received an average composite price of $2.54 per thousand cubic feet of natural gas equivalent (Mcfe) for its oil and gas, a 24% increase over 1998 but still lower than in 1996 and 1997. The price increase and a 10% increase in production resulted in a 36% increase in oil and gas sales in 1999.
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Performance Comparison
Swift’s policy is to reinvest earnings in order to promote growth in proved reserves, which over time should promote growth in the value of the Company’s common stock. An important measure of performance in implementing this reinvestment strategy is the ratio of cash flows generated from production to the costs required to replace production with new reserves. For 1996-98, the three-year average ratio of Swift’s cash flows per Mcfe to its replacement costs per Mcfe was 1.67. In other words, Swift averaged $1.67 in cash flows for each dollar invested in adding new reserves. For 1997-99, this three-year average ratio equaled 1.49—in spite of low 1999 product prices compared to 1996 and the fact that proved reserves from the Company’s New Zealand discovery had not yet been estimated. By comparison, the three-year ratio for a group of 12 peer companies averaged 1.22 for 1996-98, with the ratios for the individual companies ranging between 0.71 and 1.49. Swift therefore has outperformed its peers in terms of the full cycle economics of its drilling and acquisitions activity. 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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