As production rate rises, Swift Energy enters South Texas midstream agreement

By Oil & Gas Financial Journal staff 

To meet with its growing production in South Texas, Houston-based Swift Energy (NYSE: SFY) has entered a long-term agreement for natural gas gathering, processing and transportation services in the area with Dallas-based Southcross Energy GP LLC and its affiliates.

“Just over two years ago, Swift Energy drilled and completed its first horizontal well in the Olmos tight sand formation of South Texas” commented Terry Swift, Swift Energy CEO in a February 24 press release. “Since the drilling of that well, Swift Energy has made a gradual transition towards a more visible and predictable asset base. During the fourth quarter of 2010, that transition reached another milestone as our daily production rate in South Texas surpassed the daily production of our Southeast Louisiana area.

The new midstream services agreement calls for the construction of a new pipeline to Swift’s AWP operating area in McMullen County, TX. Southcross will construct the 25-mile, 20-inch natural gas pipeline with related lateral gathering lines and convert an existing dry pipeline system to rich gas service in order to gather the Swift Energy gas for processing. Swift will have up to 90 MMcfd of firm capacity for those services. 

The McMullen extension will have an initial, expandable capacity of 120 million cubic feet of natural gas per day. The system, which is expected to be in service in mid-2011, will originate in McMullen County, Texas and extend to Southcross’ CCNG Transmission pipeline for gas delivery to and processing at Southcross’ processing plant near Gregory, Texas.

According to the company’s 4Q10 earnings statement, three operated horizontal wells are currently being drilled by the company in McMullen County, with two wells targeting the Eagle Ford Shale and one well targeting the Olmos tight sand. During the fourth quarter and through Feb. 24, the company fracture stimulated 10 operated wells and one non-operated well drilled to the Eagle Ford shale formation and 7 wells drilled to the Olmos formation all in South Texas.

The company currently expects the new pipeline to be in service mid-2011. Swift has also executed a long term sales contract with Southcross Marketing Ltd for the NGLs extracted during processing and a portion of the residue gas that is indexed to market.

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