1991: The Company Positions Itself for Future Growth

During 1991, Swift Energy, along with other U.S. oil and gas companies, faced lower oil and natural gas prices caused by a recession, the conclusion of the Gulf War, and an unusually warm winter of 1990-91. Lower-than-average gas prices persisted throughout the year, reaching their lowest point in over a decade during the month of July.

In building and enhancing reserves, Swift relies upon teams of highly skilled professionals, working in the areas of geophysics, engineering, land, geology, and petrophysics.

Despite these low prices, the Company effectively realized the revenues from its 1991 production that had been predicted by its 1988 strategic plan, receiving actual production revenues of $8.36 million versus predicted revenues of $8.49 million. This goal was reached through higher-than-predicted production made possible from a reserves growth that continued to outpace the Company’s expectations. With reserves totaling 8.1 million BOEs at year end—an increase of 19% from the previous year and an increase of 21% from what had been projected—oil and gas sales plus income from supervision fees during the year reached $11.7 million, a 24% increase over their combined value in 1990.

The reserves increase continued to result from a combination of producing property acquisitions and drilling activities. During the year, acquisitions for Swift and its limited and joint venture partners totaled 1.1 million barrels of oil and 12.6 Bcf of natural gas at an average cost of $3.12 per BOE—well below the industry average.

The Company’s 1991 drilling activities consisted of 27 wells: three exploratory wells, one of which was successful, and 24 development wells, 21 of which were successful. One exploratory well, the Annie King No. 1 in the Pearsall Field of Texas, added 79,000 barrels of oil to the Company’s reserves.

Among the successful development wells were 17 drilled as enhancement projects that added over 1.3 million BOEs (80% gas) to the reserves of the Company and its limited partnerships at a low cost of $1.56 per BOE. Two of the wells were drilled in the Weatherford Area (the Wyatt 1-30 and the Kaiser 2-16) and together added corporate and limited partnership reserves totaling approximately 48,000 barrels of oil and 2.6 Bcf of gas.

At the end of 1991, Swift Energy and its limited and joint venture partners had interests in 3,005 wells in 18 states. Of these, Swift Energy was operating 674 wells in 10 states that accounted for 73% of the reserves.

The Weatherford Area in Oklahoma continued to be the Company’s largest producing field, with 39 Swift-operated wells having a gross average daily production (for all interest holders) of 44.5 million cubic feet of gas and 427 barrels of oil, and 61 wells operated by others having a gross daily production of 42.5 million cubic feet of gas and 477 barrels of oil.

The AWP Field in South Texas remained the Company’s second largest field, with 74 wells producing 13.9 million cubic feet of gas and 667 barrels of oil per day. Swift was operating 70 of the wells.

In spite of the continued upward trends in reserves growth and production, the Company for the first time in its history realized a decrease both in total revenues and net income. This was largely due to the prevailing economic conditions, spawning a wait-and-see attitude of the investing public. Capital raised from joint ventures totaled only $5.3 million in 1991, down from $17.1 million in 1990.

Partnership subscriptions were also down, partially because of a longer than expected transition to the Company’s new investor product, Swift Depositary Interests (SDI), which was launched in March 1991. To market the product, Swift Energy acquired a wholly owned subsidiary, Swift Energy Marketing Company, with offices in California.

Upon the availability of SDI, partnership subscriptions grew about 26% per quarter throughout the year, totaling $25.7 million for the year. Although this was significantly less than sales in the immediately preceding years, Swift Energy had assumed first place in market share for companies still offering direct investments in oil and gas to the public.

During the year, the Company was also accepted for listing on the New York Stock Exchange in July 1991.

In the meantime, Swift maintained its focus on the integration of exploration and development technologies, recognizing that only those companies keeping pace with the rapid changes in the industry could be assured of future growth.

Through a cooperative program carried out with Sierra Geophysics Inc., a subsidiary of Halliburton Inc., Swift Energy’s geologists and geophysicists had in-house access to Sierra’s state-of-the-art interactive exploration data enhancement software packages for integrating geophysical and geological data. They also had access to large seismic data bases.

In addition, the Swift staff had developed various software packages for their own requirements, among them a package that enabled the geologists to rapidly create subsurface cross sections and interpret and model subsurface intervals.

With these advanced tools, as well as the more traditional techniques, the Exploration and Development SBU had identified numerous locations they would be proposing for an increased drilling program in 1992.

At year end, the size of the Company had increased slightly to 171 employees.

This page was last updated on Tuesday, June 10, 2008, at 10:03:18 AM.

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