Swift Energy Company (NYSE:SFY) will put the majority of its 2011 capital budget toward developing its properties in South Texas as the company moves to generate production growth between 25% and 30% for the year. (For background reading, check out our Oil And Gas Industry Primer.)
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2011 Capital Expenditures
Swift Energy is focusing on the well-known Eagle Ford Shale and is also putting capital into the Olmos formation, a shallower tight sand formation on some of the same acreage in South Texas.
Swift Energy spent $421 million in 2010, and has established a 2011 capital budget that will range between $430 million and $480 million, after taking asset sales during the year into account. The company will spend between $340 million and $365 million in South Texas in 2011. Swift Energy estimates that this level of capital spending will result in production growth of 25-30% in 2011.
Eagle Ford Shale
Swift Energy has 78,000 net acres prospective for the Eagle Ford Shale in four counties spread across both the oil and gas windows of the play. The company estimates that it has 1,000 drilling locations in the Eagle Ford Shale and that each well will cost an average of $6.5 million to $7.5 million to drill and complete. Swift Energy plans to drill 25 wells in the Eagle Ford Shale in 2011, and another 70 wells in 2012 and 2013.
Olmos Tight Sand
Swift Energy has 40,000 net acres prospective for the Olmos, and estimates that it has 250 drilling locations on its properties. Swift Energy plans to drill 11 wells into the Olmos in 2011, and another 34 in 2012 and 2013. The Olmos produces a mix of oil, natural gas and natural gas liquids.
Another company involved with developing the Olmos formation is Vanguard Natural Resources (NYSE:VNR). The company entered the play in 2008 when it purchased developed and undeveloped acreage from a private oil and gas company.
SM Energy (NYSE:SM) also has exposure to the Olmos play, which the company acquired through two acquisitions in 2007. The company has since focused most of its attention on the Eagle Ford Shale, which is also present on some of the acquired properties.
Swift Energy also has production and proved reserves from several areas in East Texas and Louisiana. The company reported proved reserves there of 56.2 million barrels of oil equivalent at the end of 2010.
Swift Energy has also been testing the potential of the Austin Chalk, another formation that underlies part of its Texas acreage. The company has 158,000 net acres under lease in one area of the play and is encouraged by the results of the first few wells here. Evolution Petroleum (NYSE:EPM) is also working the Austin Chalk in the Giddings Field in Texas, where it has 18,000 net acres under lease.
The Bottom Line
Swift Energy is betting that its properties in South Texas will pay off and is putting most of its capital in 2011 into this area. The company is working the Eagle Ford Shale and Olmos trend on its properties.
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