Swift Energy Company Q1 2010 Earnings Call Transcript

Swift Energy Company Q1 2010 Earnings Call Transcript
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Swift Energy Company (SFY)

Q1 2010 Earnings Call

May 6, 2010 10:00 AM ET

Executives

Paul Vincent - Director of Finance & IR

Terry Swift - Chairman & CEO

Alton Heckaman - EVP & CFO

Bruce Vincent - President

Bob Banks - EVP & COO

Mike Kitterman - SVP of Operations

Jim Mitchell - SVP of Commercial Transactions & Land

Analysts

Jason Wangler - Wunderlich

Michael Hall - Wells Fargo

Leo Mariani - RBC

Derrick Whitfield - Canaccord Adams

Biju Perincheril - Jeffries

Adam Leight - RBC

Ray Deacon - Pritchard Capital

Presentation

Operator

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Good morning. My name is [Carla] and I will be your conference operator today. At this time, I would like to welcome everyone to the Swift Energy first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Mr. Paul Vincent, you may begin your conference.

Paul Vincent

Good morning. I’m Paul Vincent, Director of Finance and Investor Relations. I’d like to welcome everyone to Swift Energy’s first quarter 2010 earnings conference call. On today’s call, Terry Swift, Chairman and CEO will provide an overview; Alton Heckaman, EVP and CFO will review the financial results for the first quarter; followed by Bruce Vincent, President; and Bob Banks, EVP and COO, who’ll provide an operational update. Terry Swift will then summarize before we open it up to questions. Also, present on today’s call are Mike Kitterman, SVP, Operations and Jim Mitchell, SVP, Commercial Transactions and Land.

Before I turn it over to Terry, let me remind everyone that our presentation will contain forward-looking statements, based on our current assumptions, estimates, and projections about us, our industry and the current environment in which we operate. These statements involve risks and uncertainties detailed in our SEC reports, to which we refer you along with cautionary statements contained in our press releases and our actual results could differ materially. We expect our presentation to take approximately 25 to 30 minutes and have allowed additional time for questions.

Terry Swift

Thanks Paul. Again, thank you for joining our conference call today. It’s very exciting time for Swift Energy Company. During the first quarter of 2010, we brought our first production from the Eagle Ford Shale formation in South Texas online. Results from these first wells are at the top end of our expectations and support our belief that our acreage in this trend has the resource potential to be transformational for the company.

As of the end of the quarter, we had two operated horizontal rigs under contract and drilling full-time for Swift Energy in this play, one smaller rig drilling vertical surface holes and one non-operated horizontal rig. Before going any further though, it’s necessary to comment on the recent accident that occurred in the Gulf of Mexico. Unfortunately, this accident is having an environmental impact that will be substantial and while not directly impacting our operations along Gulf Coast, the effects will be felt by the communities we’re involved in and the friends and families of the people who work for us and with us.

Not to be overlooked by the lasting effects of this accident is the tragic loss of life, which serves as a reminder to all of us, that our business is a business that involves significant risk at times. There can never be an upset about our commitment to health, safety and environment. Swift Energy is committed to a safe workplace, environmental stewardship and operational excellence. We’ve recognized the importance of integrating health, safety and environment, HSE management processes into all of our work activities. We approach all of our operations with this attitude and we’ll continue to do so.

In South Texas, we’ve recently taken steps operationally to improve our efficiencies as we accelerate our activity. As Bob will discuss in greater detail, we are now drilling the vertical surface holes for our horizontal wells with a small rig as part of the batch drilling program we’ve launched. We now have a water production handling and management program in place and operational. We have improved our supply chain management capabilities and we are aligning with our service providers, vendors and midstream partners to reduce supply and service delays as much as possible.

While natural gas prices remain weak, the oil and natural gas liquids market pricing is considerably strong. Our current production mix is weighted towards crude oil and natural gas liquids, which provides stronger cash flows. We have adjusted our 2010 capital program to take advantage of this stronger liquids pricing environment by focusing our activity on oil and liquids production as we continue evaluating and delineating our entire acreage position. This focus should add higher value production, but slightly lower full-year production volumes than previously guided.

Our drilling results on the other hand also support increasing our previously stated year-end reserve guidance from growth of 5% to10% to a new range of growth of 8% to 12% over year-end 2009 levels. We are also increasing our daily average production exit rate guidance from 27,500 barrels of oil equivalent per day to 28,000 barrels of oil equivalent per day.

Bruce and Bob will detail all of our operational activity and performance in just a few minutes, but first I’d like to like to highlight some of the results of the first quarter, which include the Swift operated Fasken 1H, the PCQ 1H and the non-operated Bracken JV 1H, Eagle Ford discovered wells. The Fasken Eagle Ford 1H in Webb County tested at a rate of 9.4 million cubic feet of gas per day, the PCQ 1H in McMullen County tested at a rate of 1,134 barrels of oil per day and 1.1 million cubic feet of natural gas per day.

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