Swift Energy Announces: 13% Increase in Third Quarter 2012 Production to 2.87 Million Barrels of Oil
Swift Energy Announces: 13% Increase in Third Quarter 2012 Production to 2.87 Million Barrels of Oil Equivalent
Third Quarter 2012 Earnings of $3.1 Million, or $0.07 Per Diluted Share;
Third Quarter 2012 Adjusted Cash Flow of $71.2 Million, or $1.66 Per Diluted Share
HOUSTON--(BUSINESS WIRE)-- Swift Energy Company (NYS: SFY) announced today earnings from continuing operations of $3.1 million for the third quarter of 2012, or $0.07 per diluted share, a decrease of 82% when compared to third quarter 2011 earnings from continuing operations of $17.0 million, or $0.39 per diluted share, and an increase of 3% when compared to earnings of $3.0 million in the second quarter of 2012.
Adjusted cash flow (cash flow before working capital changes, a non-GAAP measure - see page 7 for reconciliation to the GAAP measure) for the third quarter of 2012 decreased 21% to $71.2 million, or $1.66 per diluted share, compared to $90.0 million, or $2.11 per diluted share, for the third quarter 2011, and decreased 2% when compared to adjusted cash flow of $72.7 million, or $1.69 per diluted share, for the second quarter of 2012.
Swift Energy produced 2.87 million barrels of oil equivalent ("MMBoe") during the third quarter of 2012, a 13% increase over third quarter 2011 production of 2.54 MMBoe, and down 1% compared to second quarter 2012 production of 2.92 MMBoe. The Company previously announced that Hurricane Isaac caused approximately 175,000 barrels of oil equivalent ("Boe") of primarily crude oil production to be shut-in during the third quarter.
Terry Swift, CEO of Swift Energy commented, "We continue to grow crude oil and natural gas liquids production and reserves and are proud of the results we have achieved across our core assets. Despite the disruptive effects of Hurricane Isaac, our people safely restored shut-in production in Louisiana and brought several meaningful new wells and recompletions on production. We continue to find variations in fluid characteristics, rock properties and operating conditions that present challenges and opportunities in the Eagle Ford development. Recent challenges together with the effects of Hurricane Isaac have led us to adjust our full year 2012 expected production range to 11.6 to 11.7 MMboe.
"Having recently conducted our first 60 acre downspacing test in LaSalle County, we are encouraged that we will have downspacing opportunities within our Eagle Ford inventory. Further downspacing tests may lead to increased drilling inventories in this liquids rich area.
"Swift Energy is still on track to have double digit production and reserves growth for 2012. While we intend to grow daily production levels in the fourth quarter of this year, as noted earlier, we have taken steps to significantly reduce our capital spending levels in 2013. This approach will allow us to balance production growth targets with an emphasis on maintaining financial strength and ample liquidity in an uncertain commodity price environment, while still achieving our long term strategic growth objective."
Third Quarter Revenues and Expenses
Total revenues for the third quarter of 2012 decreased 10% to $128.8 million from the $142.5 million generated in the third quarter of 2011. This decrease is primarily attributable to lower realized commodity prices during the 2012 period.
Depreciation, depletion and amortization expense ("DD&A") of $20.52 per barrel of oil equivalent ("Boe") in the third quarter of 2012 decreased 4% from $21.40 per Boe in the comparable period in 2011 due to the addition of reserves in tandem with the realization of capital cost efficiencies.
Lease operating expenses, before severance and ad valorem taxes, were $9.26 per Boe in the third quarter 2012, a 10% decrease when compared to $10.31 per Boe in the same period of 2011, also driven by higher production levels during the 2012 period.
Severance and ad valorem taxes decreased to $3.72 per Boe in the third quarter 2012 from $5.32 per Boe in the third quarter of 2011 primarily due to lower prices realized per barrel of oil equivalent.
General and administrative expenses decreased to $4.16 per Boe during the third quarter of 2012, down from $4.48 per Boe in the same period in 2011 as a result of higher production levels. Interest expense increased to $4.79 per Boe in the third quarter of 2012 compared to $3.32 per Boe for the same period in 2011 due to new long term debt that was issued during the fourth quarter of 2011.
Third Quarter Pricing
The Company realized an aggregate average price of $44.51 per Boe during the quarter, a decline from the $56.31 per Boe average price received in the third quarter of 2011.
In the third quarter of 2012, Swift Energy's average crude oil prices decreased 3% to $102.73 per barrel from $105.55 per barrel realized in the same period in 2011. For the same periods, average natural gas prices were $2.52 per thousand cubic feet ("Mcf"), down by 32% from the $3.68 per Mcf average price realized a year earlier. Prices for NGLs averaged $31.29 per barrel in the 2012 third quarter, a 46% decrease from third quarter 2011 NGL prices of $57.76 per barrel.
Third Quarter Drilling Activity
In the third quarter of 2012, Swift Energy drilled fourteen operated development wells and participated in two non-operated development wells. In the Company's South Texas core area, eleven horizontal wells were drilled to the Eagle Ford shale, which included four wells in LaSalle County and seven wells in McMullen County.
In Swift Energy's Southeast Louisiana core area, three wells were drilled in the Lake Washington field. In the Company's Central Louisiana/East Texas core area, two non-operated wells targeting the Austin Chalk were drilled in the Burr Ferry field.
There are currently three operated rigs drilling in the Company's South Texas core area and one operated barge rig drilling in its Southeast Louisiana area. One non-operated rig is active in the Central Louisiana/East Texas area.
South Texas Operations
In the Company's South Texas core area, twelve operated wells were completed during the third quarter. In McMullen County, six Eagle Ford wells and one Olmos well were completed. In LaSalle County, five Eagle Ford wells were completed.
Initial Production Test Rates of South Texas Horizontal Wells
Completed in Third Quarter 2012
(Operated unless otherwise noted)
|Well Name||County/Formation Target||Oil|
|Carden EF 7H||LaSalle - Eagle Ford||110||236||2.6||779||16/64"||3,435|
|Baetz A EF 1H||LaSalle - Eagle Ford||356||197||1.6||819||18/64"||3,538|
|Baetz A EF 2H||LaSalle - Eagle Ford||468||259||2.1||1,076||12/64"||3,563|
|Alderman Ranch EF 4H||LaSalle - Eagle Ford||153||273||2.3||810||18/64"||2,650|
|Alderman Ranch EF 5H||LaSalle - Eagle Ford||135||260||2.2||759||18/64"||2,437|
|Hayes EF 2H||McMullen - Eagle Ford||632||52||0.4||755||12/64"||3,500|
|Henry EF 1H||McMullen - Eagle Ford||544||56||0.5||678||14/64"||2,625|
|Henry EF 2H||McMullen - Eagle Ford||520||47||0.4||631||14/64"||2,500|
|SMR EF 6H||McMullen - Eagle Ford||1,097||54||0.5||1,226||16/64"||2,407|
|SMR OL 4H||McMullen - Olmos||614||136||0.9||897||16/64"||2,894|
|SMR EF 7H||McMullen - Eagle Ford||912||51||0.4||1,033||16/64"||2,011|
|SMR EF 8H||McMullen - Eagle Ford||837||31||0.3||911||16/64"||1,791|
Further, three additional wells drilled (but not completed) in LaSalle County during the third quarter were drilled to test 60 acre downspacing assumptions. These wells have now been completed with initial production rates of each above 1,000 Boe, producing approximately 60% crude oil and natural gas liquids. Further downspacing tests will increase the Company's crude oil and liquids rich drilling inventory.
In the Lake Washington field in Plaquemines Parish, LA, the Company continued its ongoing recompletion and production optimization program, performing four recompletions and fourteen production optimization projects during the quarter. The Company previously announced results of the recompletion of the LL&E #5, also known as the Jelly Bowl prospect. This well tested at 1,544 barrels of oil per day and 1.0 million cubic feet of gas per day on a 22/64" choke. An offset drilling location to this well is being prepared and will be drilled in the first half of 2013.
The Company completed one well, the CM 423, at Lake Washington during the third quarter. The well was drilled to a measured depth of 9,016 feet, encountered 202 feet of true vertical pay and tested 912 barrels of oil per day and 0.3 million cubic feet of gas per day on a 22/64" choke.
Swift Energy also drilled the CM 427, CM 426 and CM 429 in the third quarter and has now completed two of these during the fourth quarter.
The CM 427 was drilled to a measured depth of 4,300 feet and encountered 104 feet of true vertical pay; it reported an initial rate of 971 barrels of oil per day and 0.3 million cubic feet of gas per day. The CM 426, drilled to a measured depth of 4,659 feet, encountered 18 feet of true vertical pay, and tested 144 barrels of oil per day and 0.1 million cubic feet of gas per day of gas. The CM 429 will be completed by the end of 2012.
Central Louisiana/East Texas
In the Burr Ferry field in Vernon Parish, LA, the Company's partner completed and tested the Forestar Minerals 18-1, which targeted the Austin Chalk. Initial production test rates of this well were 1,056 barrels of oil per day and 3.0 million cubic feet of gas per day with flowing tubing pressure of 4,000 psi on a 30/64" choke.
A second non-operated well, the GASRS 34-1, was also completed. Initial production test rates of this well were 840 barrels of oil per day and 5.1 million cubic feet of gas per day with flowing tubing pressure of 2,520 psi on a 30/64" choke.
In South Bearhead Creek, the Company has determined that its Wilcox position is prospective for horizontal drilling and has plans for a horizontal Wilcox test in the first half of 2013.
Increase in Borrowing Base
After a regularly scheduled semi-annual review, Swift Energy's bank group increased the Company's borrowing base under its revolving credit facility to $450 million from the previous borrowing base amount of $330 million, which was recently automatically decreased from $375 million after the early October issuance of the additional $150 million of senior notes due 2022. The Company had previously maintained a commitment amount of $300 million but increased this to $450 million with this recent review. The maturity of the credit facility was also extended to November 1, 2017 from May 12, 2016. There are currently no borrowings outstanding.
Price Risk Management
In the fourth quarter to date, Swift Energy has purchased gas floors covering approximately 20% - 25% of expected fourth quarter natural gas production at an average NYMEX strike price of $2.94 per MMBtu. On an ongoing basis, details of Swift Energy's complete price risk management activities can be found on the Company's website (www.swiftenergy.com).
Earnings Conference Call
Swift Energy will conduct a live conference call today, November 1, at 10:00 a.m. EDT to discuss third quarter 2012 financial results. To participate in this conference call, dial 973-339-3086 five to ten minutes before the scheduled start time and indicate your intention to participate in the Swift Energy conference call. A digital replay of the call will be available later on November 1 until November 8, by dialing 855-859-2056 and using Conference ID # 31901337. Additionally, the conference call will be available over the Internet by accessing the Company's website at www.swiftenergy.com and by clicking on the event hyperlink. This webcast will be available online and archived at the Company's website.
About Forward Looking Statements
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The opinions, forecasts, projections, guidance or other statements contained herein, other than statements of historical fact, are forward-looking statements, including targets for 2012 production and reserves growth, estimates of 2012 capital expenditures and guidance estimates for the fourth quarter of 2012 and full-year 2012. These statements are based upon assumptions that are subject to change and to risks, especially the uncertainty and costs of finding, replacing, developing and acquiring reserves, availability and cost of capital, labor, services, supplies and facility capacity, availability of transportation hurricanes or tropical storms disrupting operations, and, volatility in oil or gas prices, uncertainty and costs of finding, replacing, developing or acquiring reserves, and disruption of operations Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Certain risks and uncertainties inherent in the Company's business are set forth in the filings of the Company with the Securities and Exchange Commission. Estimates of future financial or operating performance provided by the Company are based on existing market conditions and engineering and geologic information available at this time. Actual financial and operating performance may be higher or lower. Future performance is dependent upon oil and gas prices, exploratory and development drilling results, engineering and geologic information and changes in market conditions.
SWIFT ENERGY COMPANY
(In Thousands Except Per Share and Price Amounts)
|Three Months Ended|
|Nine Months Ended|
|Oil & Gas Sales||$127,946||$143,123||(11)%||$396,068||$446,537||(11)%|
|Income From Continuing Operations||$3,122||$17,007||(82)%||$9,720||$63,938||(85)%|
|Basic EPS - Continuing Operations||$0.07||$0.39||(82)%||$0.22||$1.48||(85)%|
|Diluted EPS - Continuing Operations||$0.07||$0.39||(82)%||$0.22||$1.47||(85)%|
|Net Cash Provided By Operating Activities - Continuing Operations||$68,005||$101,573||(33)%||$223,684||$288,514||(22)%|
|Net Cash Provided By Operating Activities, Per Diluted Share - Continuing Operations||$1.58||$2.38||(34)%||$5.21||$6.77||(23)%|
|Cash Flow Before Working Capital Changes(2) (non-GAAP measure) - Continuing Operations||$71,215||$90,021||(21)%||$213,041||$274,764||(23)%|
|Cash Flow Before Working Capital Changes, Per Diluted Share - Continuing Operations||$1.66||$2.11||(21)%||$4.96||$6.45||(23)%|
|Weighted Average Shares Outstanding (Basic)||42,901||42,470||(1)%||42,812||42,365||(1)%|
|Weighted Average Shares Outstanding (Diluted)||42,971||42,678||(1)%||42,945||42,619||(1)%|
|EBITDA (non-GAAP measure)||$79,484||$91,421||(13)%||$242,190||$293,832||(18)%|
|Production (MBoe) - Continuing Operations||2.87||2.54||13%||8.59||7.83||10%|
|Realized Price ($/Boe) - Continuing Operations||$44.51||$56.31||(21)%||$46.10||$57.04||(19)%|
The production, revenue, expense, cash flow and income information reported are the results of continuing operations of Swift Energy.
See reconciliation on page 7. Management believes that the non-GAAP measures EBITDA and cash flow before working capital changes are useful information to investors because they are widely used by professional research analysts in the valuation, comparison, rating and investment recommendations of companies within the oil and gas exploration and production industry. Many investors use the published research of these analysts in making their investment decisions.
SWIFT ENERGY COMPANY
RECONCILIATION OF GAAP(a)TO NON-GAAP MEASURES
|Three Months Ended|
|September 30, 2012||September 30, 2011|
|CASH FLOW RECONCILIATIONS:|
|Net Cash Provided by Operating Activities - Continuing Operations||$68,005||$101,573||(33)%|
|Increases and Decreases In:|
|Accounts Payable and Accrued Liabilities||(262)||(7,094)|
|Income Taxes Payable||50||17|
|Cash Flow Before Working Capital Changes - Continuing Operations||$71,215||$90,021||(21)%|
|INCOME TO EBITDA RECONCILIATIONS:|
|Income from Continuing Operations|
|Provision for Income Taxes||2,422||10,388|
|Interest Expense, Net||13,762||8,439|
|Depreciation, Depletion & Amortization & ARO (b)||60,178||55,587|
|Nine Months Ended|
|September 30, 2012||September 30, 2011|
|CASH FLOW RECONCILIATIONS:|
|Net Cash Provided by Operating Activities - Continuing Operations||$223,684||$288,514||(22)%|
|Increases and Decreases In:|
|Accounts Payable and Accrued Liabilities||3,051||(8,077)|
|Income Taxes Payable||248||234|
|Cash Flow Before Working Capital Changes - Continuing Operations||$213,041||$274,764||(23)%|