MISSION AND GOALS As a natural resource company, Swift Energy is committed to achieving efficient, sustained growth in the volume and value of its proved oil and gas reserves, while simultaneously maintaining high standards for ethical conduct, the protection of health and safety, and the preservation of environmental quality. In all its activities, the Company focuses on optimizing stakeholder value by building a balanced portfolio of oil and gas properties with diversified production profiles and an assortment of growth opportunities covering a range of risks and potential rewards.

Over the last five years, the Company has achieved an average compounded growth rate in proved oil and gas reserves of approximately 4% per year. Maintaining a diverse portfolio of oil and gas reserves during a period of tight supplies has enabled Swift to achieve five-year compounded growth rates of approximately 7% per year in production, 18% per year in oil and gas sales, 17% per year in cash flows from operating activities, and 10% per year in diluted earnings per share.

During 2005, year-end proved reserves decreased by 5% from the previous year to about 762 billion cubic feet equivalent (Bcfe), largely because of hurricane-related drilling delays on the Louisiana Gulf Coast. In spite of these delays, Swift’s recent exploratory drilling successes in Louisiana demonstrate that growth opportunities remain strong, and with drilling increases in 2006, the Company anticipates that reserves growth will return to levels commensurate with strategic targets. Over the next five years, Swift’s primary strategic goals are to increase its proved oil and gas reserves at an average rate of 5% to 10% per year and its production at an average rate of 7% to 12% per year.

BUSINESS STRATEGY Swift’s reserves growth is primarily 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 and strategic opportunities.

The Company’s U.S. operations are generally focused in three regions—South Louisiana, South Texas, and Toledo Bend, a region spanning the Texas-Louisiana border. Within each region are one or more anchor properties that give Swift a strong base for developing the surrounding area. These include the Lake Washington Area in South Louisiana, the AWP Olmos Area in South Texas, and the Brookeland Area and Masters Creek Area in Toledo Bend. In a fourth region of operation, in the Taranaki Basin of New Zealand, they include the Rimu/Kauri Area and the TAWN Area. These anchor areas not only provide most of the Company’s production but also the opportunity for reserves additions through continued development and exploratory drilling both within and around the anchor areas, with the potential for adding new anchor assets. In 2005, Swift primarily focused its drilling activities in the Lake Washington Area in South Louisiana, and it plans to continue focusing in that area in 2006.

In its acquisitions activities, the Company continually reviews opportunities to purchase strategic producing properties whose performance can be enhanced through further development and exploratory drilling or improved operating efficiencies. This approach led to the purchase of the Company’s initial properties in AWP in 1988, in Brookeland and Masters Creek in 1998, in Lake Washington in 2001, and in TAWN in 2002. In 2004, Swift purchased interests in what are anticipated to become two additional anchor areas in South Louisiana—the Cote Blanche Island Field in St. Mary Parish and the Bay de Chene Field in Lafourche Parish and Jefferson Parish—and has initiated a multiyear exploitation program in both. In 2005, the Company acquired interests in the South Bearhead Creek Field located in Beauregard Parish in the Toledo Bend Region.

INDUSTRY ENVIRONMENT Volatility in the prices of crude oil, natural gas, and natural gas liquids (NGLs) can have a significant impact on the revenues and earnings from Swift’s operations. In 2005, average domestic crude oil prices received by the Company increased 33% to $53.45 per barrel. Average domestic NGL prices increased 37% to $34.00 per barrel, while domestic natural gas prices rose 29% to $7.40 per thousand cubic feet (Mcf).

In New Zealand, Swift Energy received an average of $55.57 per barrel for its crude oil, an increase of 32% from 2004. Average NGL prices increased 5% to $18.84 per barrel, and natural gas prices rose 30% to $3.09 per Mcf. Unlike crude oil sales, which are denominated in U.S. dollars, New Zealand natural gas and NGL prices are denominated in New Zealand dollars, which have significantly strengthened in relation to the U.S. dollar since 2001, leading to some of the appreciation in New Zealand product prices received by Swift.

PERFORMANCE COMPARISON Swift’s policy has always been 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 cycles can have a substantial impact on year-to-year performance, Swift has achieved excellent growth in shareholder value in recent years. At the end of 2005, the three-year cumulative appreciation in Swift’s year-end stock price totaled 366%, comparing favorably with three-year increases in the Amex Oil Index (121%), the Russell 2000 index (76%), the S&P 500 index (42%), and the Dow Jones Industrial Average (29%).

INVESTOR INFORMATION Swift Energy’s common stock has been traded under the symbol "SFY" on the New York Stock Exchange (NYSE) since 1991.