Swift Energy plans Central LA divestiture to fund Eagle Ford activity

Company takes South Texas JV off the table as financing option

Before market open this morning, as part of its 2Q13 earnings and production report, Swift Energy Inc. appears to have taken a potential joint venture of its South Texas assets off the table, noting instead that it plans to divest Central Louisiana assets.

The Houston-based company reported earnings of $6.7 million for the second quarter of 2013, or $0.15 per diluted share, an increase of 122% when compared to second quarter 2012 earnings of $3.0 million, or $0.07 per diluted share, and a decrease of 7% when compared to earnings of $7.2 million in the first quarter of 2013.  Production was reported at 2.78 million barrels of oil equivalent (MMboe) during the second quarter of 2013, a 5% decrease from second quarter 2012 production of 2.92 MMboe, and down 1% compared to first quarter 2013 production of 2.82 MMboe.

Swift plans to focus more heavily on its core South Texas properties targeting the Eagle Ford Shale, nixing earlier plans to pursue a joint venture in the region and opting instead to sell its non-core Central Louisiana. In a press release, the company noted that after a strategic review of the company’s assets and an evaluation of potential partners, it has been determined that a joint venture is not the most attractive option for financing the development of the company’s South Texas operations. 

Terry Swift, CEO of Swift Energy commented, “Our performance in the prolific Eagle Ford shale trend in South Texas continues to improve according to our plans. When compared to 2012, our 2013 South Texas well results have delivered higher initial production rates, larger estimated ultimate recoveries (EURs) and lower costs. Additionally, during July our average daily production rate in our South Texas core area was approximately 10% higher than our second quarter 2013 average production rate. Based on this performance, and following an extensive asset review, we plan to sell our Central Louisiana assets to increase our focus and build upon the operational success of our more predictable assets in South Texas.  We expect a disposition of these assets to occur within the next 6-12 months.

“In conjunction with these asset sales, we’ve also recently committed to accelerating our activity in South Texas during the second half of 2013 and now expect to keep two drilling rigs active and maintain the momentum we have established.

“This will increase our expected 2013 South Texas capital expenditures by approximately $50 million which will be funded initially through our credit facility.  We expect this additional spending to afford more consistent levels of production and predictable production growth in 2014,” Terry Swift continued. 

Swift Energy operations in the Eagle Ford shale

“SFY's 16 Eagle Ford completions, including two natural gas wells in the Fasken area of Webb County, TX, continue to post solid results with a 1,160 boepd average and a 58.1% liquids cut, excluding those two Fasken natural gas wells. Unfortunately, however, SFY's initial horizontal Wilcox well in Central Louisiana, the James O Dolby H1, encountered mechanical wellbore problems that resulted in a disappointing 100 boepd to 200 boepd production rate, as previously relayed. Drilling difficulties in the Jelly Bowl area with the LL&E #6 led management to temporarily suspend the drilling of this prospect. As a result of these two completion difficulties, management forecasts 220,000 fewer barrels of 2013 production; full-year 2013 guidance now is for a range of 11.7 MMboe to 11.9 MMboe, still above our 11.64 MMboe estimate,” said Global Hunter Securities analysts in a research note Thursday morning.

 

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