Mission and Goals. 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.

Mission and Goals. As a natural resource company, Swift Energy’s mission is to achieve growth in the volume and net present value of its proved reserves. The underlying premise is that reserves growth generally 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.

Over the last five years, Swift has achieved an average annual compounded growth rate in proved oil and gas reserves of 29%. In 2000, a 38% increase in proved reserves replaced the Company’s production for the year by more than five times. Swift’s success in sustaining reserves growth in a volatile pricing environment has enabled it to achieve five-year annual compounded growth rates of approximately 31% in production, 53% in oil and gas sales, 55% in cash flows from operating activities, and 64% in net income. Swift’s primary goals for the next few years are to increase both its oil and gas reserves and its production at an average rate of 10% to 15% per year.

Business Strategy. Swift’s reserves growth is accomplished through a mix of exploratory and development drilling and producing property acquisitions. The specific mix of drilling and acquisitions is continually adjusted in response to changing industry conditions.

Swift’s drilling program utilizes a number of innovative technology applications adapted to specific areas where the Company believes it can achieve a competitive advantage. Current domestic core operating areas include the Company’s Masters Creek Area in Louisiana and the Brookeland Area, AWP Olmos Area, and Giddings Area in Texas. In addition, Swift is pursuing domestic drilling opportunities in other locations in Texas, Louisiana, and Wyoming.

Internationally, Swift drilled a significant onshore discovery well in New Zealand in 1999, the Rimu-A1. Based upon delineation activities in 2000, the Company now believes that its Rimu discovery and a yet-to-be-drilled Kauri prospect south of Rimu may be in direct communication to form a major multi-zone field. The Kauri exploratory well is planned for 2001.

In its acquisitions program, the Company continuously reviews opportunities to purchase strategic producing properties where performance can be enhanced through development drilling or improved operating efficiencies. In 1998, low oil and gas prices reduced in-the-ground values of producing properties and created attractive acquisition opportunities. Swift capitalized on these opportunities by acquiring its initial oil and gas reserves in the Brookeland Area and Masters Creek Area. In 1999 and 2000, Swift continued to make smaller strategic acquisitions that fit its stringent acquisition criteria.

One reason for Swift’s consistent growth in a volatile, cyclical industry is its balanced capital formation strategy designed to preserve financial flexibility. Consistent with that strategy, approximately $100 million of subordinated notes were converted into shares of the Company’s common stock at the end of 2000. Swift also increased its borrowing base to $200 million. As a result, Standard & Poor’s upgraded the Company’s credit rating from B+ to BB–.

Prices at the end of 2001 were much lower than average prices for the year as a whole. Year-end proved reserves values used in ceiling test calculations must be based upon pricing at the end of the year. Average year-end oil and natural gas prices used in the ceiling test of Swift’s domestic proved reserves were $18.51 per barrel for oil and $2.68 per Mcf for gas. This year-end pricing necessitated a $98.9 million non-cash write-down of the Company’s domestic oil and gas assets, leading to a net loss of $(22.3) million for 2001. Ceiling test calculations, which are calculated country by country, did not result in a write-down of the Company’s oil and gas assets in New Zealand.

Performance Comparison. Swift’s policy is to reinvest cash flows rather than pay cash dividends in order to promote long-term growth in the value of the Company’s common stock. Although industry price cycles can have a substantial impact on year-to-year performance, over the longer term, Swift has achieved consistent growth in shareholder value. From year-end 1991 to year-end 2001, Swift’s stock price increased a cumulative 308%, which compares favorably with cumulative increases in the Dow Jones Industrial Average (216%), the S&P 500 index (175%), the Russell 2000 index (157%), NYMEX natural gas prices (91%), and NYMEX oil prices (4%).