October 30, 2009 – Investors can measure Swift Energy's success in many ways, but the bedrock gauge for most shareholders is stock price performance.

As part of the oil and gas industry, we experience cyclical swings in our stock price as changes in supply and demand cause energy prices to rise and fall. During severe industry slumps, the impact can be considerable — our stock price has fallen up to 80% in previous downturns.

Investors who understand the cycles of the energy business can discover an upside to this inherent volatility. When demand for oil and natural gas has strengthened after past economic downturns, the upswing has often been even more pronounced than the earlier decline.  For example, our company’s monthly average stock price has risen from 530% to 676% from the trough of a cycle to the next peak. This compares to increases of 12% to 97% for the S&P 500 index over the same time periods. During the five-year period from December 1991 through January 1997, our average stock price increased over five times as much as the S&P 500, and we achieved even higher levels of performance during the 20-month period ending in October 2000 and the five and a half years ending in June 2008 (see table below). During the specific time periods in which our stock price went from a trough to a peak, the company outperformed not only S&P 500 but also the industry-specific AMEX Oil Index.

Price cycles have been inherent in the oil and gas industry from the beginning, and they are likely to continue to exert an influence going forward.  Recent cyclical declines in petroleum prices only serve to accelerate the sweeping structural trends that are tightening petroleum markets over the longer term. During the foreseeable future—and potentially through repeated price cycles—the global economy will require increasing amounts of oil to supply the needs of a burgeoning global population, particularly in emerging markets such as in China and India.  At the same time, the growth of global production is likely to slow, not only because oil is a finite resource, but also because the increasing government ownership of global reserves has led to chronic industry underinvestment.

The wide price swings seen from mid-2008 through early 2009 exemplify this potential for volatility. In the summer of 2008, prices for both oil and natural gas soared to all-time record highs before plummeting by more than two-thirds in early 2009.

While these price cycles are important, our strategy has always been geared toward long-term performance. From August 8, 1984, when our common stock was first listed on a public exchange, through December 31, 2009, our monthly average stock price rose 1,321%, compared with 571% for the S&P 500 over that same time frame. 

As a natural-resource company, we know that another key indicator of growing shareholder value is sustained increases in the volume and value of our proved oil and gas reserves. Our reserves are the source of our production, cash flows and earnings and, ultimately, they are the source of the value we create for our shareholders. For the 10-year period through December 31, 2008, our company recorded a compounded annual growth rate of 5%  in domestic proved reserves, and we plan to continue building reserves in the years ahead.

Along the way, industry cycles can provide growth opportunities to help us meet that goal.  As the downturn in the oil and gas industry that began in latter half of 2008 continued into 2009,  we positioned our company to take advantage of the opportunities that we knew would become available as prices improve.  We did this by establishing an inventory of promising projects in strategic basins where we have several competitive advantages, including experience and expertise with each basin’s geology and familiarity with the kinds of advanced technologies required to efficiently exploit each basin’s resources. Most of these projects are associated with our core properties, where we generally have significant operating experience and a high level of operational control.  In addition, we maintain a conservative balance sheet, which has allowed us to not only withstand the current global economic crisis, but also to remain financially positioned to take advantage of future opportunities.

With a keen focus on positioning our company to flourish through the ups and downs of industry cycles, we have exciting plans for Swift Energy's future that we believe will serve the interests of all of our stakeholders and will result in additional value for our shareholders.

CAUTIONARY STATEMENT:  Swift Energy’s past performance as described above may not be indicative of future performance in view of the uncertain and volatile economic and industry environments within which the company must operate.