Since the latter half of last year, Swift Energy Co. has been directing Eagle Ford drilling at a narrower section of the lower Eagle Ford with more precision than previous drilling, and it's been paying off, said CEO Terry Swift.
"This has allowed us to complete our wells in a more porous section of the shale with higher total organic content," he said during an earnings conference call.
The PCQ7H well drilled during the first quarter initially tested at 1,742 boe/d. "This compares to the last well in this area we announced, the PCQ6H, which tested at a rate of 1,011 [boe/d] in the fourth quarter," he said. "This is only one example and while no two wells are the same, we do believe the refined targeting of our horizontal laterals will continue to yield improved production and reserve profiles to varying degrees across all of our Eagle Ford acreage."
While performance in South Texas is improving, spending is declining due to a lower rig count and reduced drilling activity. The company is mindful of cash flow, Swift said, and realizes that it has "an incredible opportunity to develop the high-value predictable crude oil and liquid rich play that we have in South Texas."
That's why the company is pursuing a partnership or joint venture in the Eagle Ford that will allow it to maintain a drilling program of at least three rigs in its highest-value acreage without increasing leverage, Swift said.
"There have been numerous transactions in the Eagle Ford Shale announced this year, and we will still expect to have a transaction in place by the end of the third quarter," he said. "As we achieve this milestone, we will be able to increase activity levels shortly thereafter.
"While we do not believe that we have to enter into such a transaction, we believe that a deal would accelerate the present value of our assets, and at the same time provide a positive benchmark to the market for the per-acre value of our acreage."
Swift Energy divested of its interest in the Brookeland field in Louisiana on May 1 and received sale proceeds of about $6 million, the company said. More divestitures could be on the way as Swift works to rationalize its portfolio, the CEO told analysts.
"Near term, our focus remains on improving performance, cost efficiencies and results throughout our active operational areas," Swift said. "We are also taking steps to introduce new, high-value opportunities to our operations through horizontal drilling in the Louisiana Wilcox, horizontal drilling in the Southwestern Colorado Niobrara and Subsalt exploration in South Louisiana."
Swift Energy produced 2.82 million boe during the first quarter, a 1% increase over first quarter 2012 production of 2.8 million boe and down 9% compared to fourth quarter 2012 production of 3.11 million boe.
Net income was $7.2 million (16 cents/share), an increase of 96% when compared to first quarter 2012 net income of $3.6 million (8 cents/share) and a decrease of 37% when compared to net income of $11.2 million in the fourth quarter of 2012. Revenues for the first quarter increased 8% to $146.2 million from the $135.9 million a year ago, mainly due to higher oil production and higher gas prices.