1996 SECOND QUARTER REPORTLetter to StockholdersSwift Energy's second quarter of 1996 ended with the Company again posting an all-time high in oil and natural gas sales. Sales for the period totaled $10.8 million, which was 122% higher than sales for the second quarter of 1995. Other record highs for the quarter were $12.6 million in total revenues (a 91% increase over revenues received during the same period in 1995); $8.7 million in net cash provided by operating activities (a 372% increase); and $3.7 million in net income (a 403% increase). The upsurge in sales resulted primarily from a doubling of our natural gas production, aided by an increase in prices. Our second-quarter gas production rose from 1.75 billion cubic feet last year to 3.50 billion cubic feet this year, which, on an equivalent energy basis, comprised 80% of our total production. Gas prices increased from an average of $1.64 per thousand cubic feet (Mcf) to $2.29 per Mcf. In addition, our oil and condensate production rose 24% (to 150,000 barrels), while the average price per barrel increased from $16.36 to $18.73. With the Company's emphasis on efficient operations and the use of cost-saving technologies, these large increases in production and sales were accomplished with only a 6% rise in production costs. On a per-unit basis, production costs for the quarter fell to $0.41 per Mcf equivalent, compared to $0.69 per Mcfe during the second quarter of 1995. Nowhere are our improvements in operations more apparent than in our continuing development program in the AWP Olmos Field in McMullen County, Texas. We are benefiting greatly from our technological innovations in the field, as well as from our considerable experience and increasing economies of scale. Our acceleration of drilling at AWP, which began in the second quarter of 1995 and yielded 41 new producing wells before year end, has already added 49 successful wells this year, 28 of which were drilled in the second quarter. Increasing the program at an ever-faster pace, we now expect to drill 115 wells in the AWP area this year. Our development drilling program in Texas' Austin Chalk trend is also expanding rapidly. In Fayette County, we have recently placed on production a third-quarter horizontal well that was the last of the series of wells with surface locations on a farmout from the Lower Colorado River Authority and a leasehold from the city of Austin (the LCRA/COA series). In another series on adjacent property in which Union Pacific Resources Company (UPRC) is our joint venture partner, we successfully completed one dual-lateral well in the second quarter and have begun drilling another in the third quarter. Two other dual-lateral wells, one in the second quarter and another now drilling, are joint LCRA/COA-UPRC projects. In our latest expansion in the area, we have signed a joint venture agreement with Snyder Oil Corporation to acquire a 56% working interest in the development of more than 31,000 acres in Walker County, bringing our total holdings in the Austin Chalk trend to approximately 60,000 gross acres. In other drilling activities during the second quarter, we successfully completed one development well in Cameron Parish, South Louisiana, and another in Custer County, Oklahoma, plus an exploratory well in Campbell County, Wyoming. We have subsequently completed a successful exploratory well along the Texas Gulf Coast, in Lavaca County. Both of the exploratory wells were largely based upon our analyses of seismic data. As part of our continuing acquisition of seismic data, we conducted a two-dimensional seismic swath survey in Lafayette County, Arkansas, in mid-May. In our international activities, we are continuing to pursue long-term prospects. We have recently formed a partnership with McDermott International Inc. and MOL Hungarian Oil and Gas Company for the development in the Russian Federation of the Samburg and Evo Yakha Fields in Western Siberia. Contingent upon additional agreements with our Russian partner, JSC Senega, as well as other Russian entities, our plans are to begin initial development during the next two years, with the potential recoverable reserves in this phase estimated to be 69 million barrels of oil and 1 trillion cubic feet of natural gas. Also, in fulfillment of an agreement with the New Zealand Minister of Energy last October, we are designing seismic surveys for a large acreage block on the North Island. Analyses of the data from these surveys, as well as from other surveys, will guide the development of a future drilling program. Finally, with our improved earnings outlook and the rise in value of our common shares,
we announced on July 1 that we would redeem on August 5, 1996, all of our $28.75 million
issue of 6-1/2% Convertible Subordinated Debentures due June 30, 2003. As expected,
bondholders preferred Swift's shares, and the conversion was completed, resulting in our
outstanding common stock increasing to approximately 15 million shares. This move
eliminated $1.9 million annual interest costs and leaves us with no conventional long-term
debt, considerably enhancing our financial flexibility for continued growth into the
future.
This page was last updated on Saturday, February 08, 2003, at 07:45:45 PM. Copyright © 1994-2009 by Swift Energy Company.
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