SilverBow Resources Inc (SBOW) 2005 Q4 法說會逐字稿

Good morning, ladies and gentlemen, my name is Nelson, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the fourth quarter and full year 2005 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 period.

[OPERATOR INSTRUCTIONS] Thank you.

It is now my pleasure to turn the floor over to your host, Director of Corporate Development and Investor Relations, Scott Espenshade.

I'd like to welcome everyone to Swift Energy's fourth quarter and full year 2005 earnings conference call. Terry Swift, Swift's CEO, will provide an overview, Alton Heckaman, Executive Vice President and CFO, will review the financial results for the fourth quarter, and Joe D'Amico, Executive Vice President and COO, will cover our recent domestic activity, and Bruce Vincent, President, will update our New Zealand operations. Terry Swift will then summarize before we open it up to questions.

I would like to remind everyone that Swift Energy will also be hosting it's Annual Investor Analyst Day here in Houston on February 23rd. Please see this morning's press release for details.

Before I turn it over to Terry, let me remind everyone that our presentations will contain forward-looking statements based on our current assumptions, estimates and projections, about us and our industry. These statements involve risks and uncertainties, detailed in our SEC reports, and our actual results could differ materially. We expect our presentation to take 25 to 30 minutes, and have allowed additional times for questions.

With that, I'd like to turn it over to Terry.

Thanks, Scott, and thank you again for joining us on this morning's conference call. 2005 was a year of records. It was filled with records in many areas such as hydrocarbon prices, our oil production in Lake Washington, exploration tests in the Lake Washington area associated with our 3-D data set, and of course, it was filled with record hurricanes in the Gulf of Mexico.

Operationally and financially it was the best year in the Company's history, and we posted many records that were unique, again production, some net income records, cash flow records, plus as I mentioned, and I'll speak more about, our exciting exploratory wells in our 3-D data set. Of course, there were also many challenges that we had to overcome, specifically with every one of our employees needing and actually stepping up at a time of crisis, relative to the hurricanes hitting in South Louisiana.

These hurricanes both Katrina and Rita, of course, were record hurricanes and we won't go into the nature of those hurricanes too much, but I think everyone is aware of how devastating they were to the region. It's with this backdrop that I'm proud to report that Swift Energy Co. had its best financial quarter and year in our 26-year history.

Swift Energy had a 69% increase in net income to $115.8 million, and a 50% increase in cash flow to $278 million for 2005. Through the remarkable efforts of our oil and gas professionals, we've experienced a rapid recovery of our production operations following hurricanes Katrina and Rita. This extraordinary recovery effort has allowed us to take advantage of the strong commodity pricing environment.

I want to take this opportunity to acknowledge our folks, and the efforts they undertook in light of the hurricanes. Many of our folks families live in the region that was directly impacted by hurricanes Katrina and Rita. These storms caused serious hardships that have created significant personal challenges for them. We at Swift Energy Co. have a ongoing commitment to our folks in the communities in which we work. Together we are going to achieve our goals and meet the future challenges of the region.

Our Lake Washington property was in the direct path of hurricane Katrina. The events of the second half of 2005 have instilled a sense of confidence, and increased our pride in the way that our facilities were constructed. The skilled efforts of our personnel to safely restore production operations is of course, admirable. In the midst of these hurricane recovery operations, Swift Energy Co. evaluated and acquired interests in a new property, South Bearhead Creek, located in Beauregard Parish Louisiana.

Speaking for all stakeholders and investors, I applaud the efforts of every Swift Energy Company employee, and the results that we've achieved in 2005. We were drilling several impactful wells including the Newport appraisal well, when Hurricane Katrina hit. The hurricane forced to us suspend our Lake Washington drilling operations, and focus on recovery. The hurricanes had a greater impact on drilling and production services in the region, than could have been anticipated. The lost drilling time also impacted our ability to increase production and add reserves during 2005. While disappointed that we have a slight decline in our 2005 year end reserves, we recognized that this year end snapshot is less than expected, due to the hurricanes that temporarily stopped our drilling activity.

With a full 12 months of drilling activity in 2006, we believe we can deliver growth in both volume and value. Looking forward, I'm very excited to discuss 2006 and our recent announcement of our year-end drilling successes, at both the Newport and Bondi prospects. These two new exploration wells, and the opportunities they create for us in south Louisiana are very important to the Company.

Additionally, we have opportunities at Bay de Chene and Cote Blanche Island that have come forward as we have evaluated our 3-D data set, and continue to find new opportunities in that set. The Newport well in particular, is probably the best and most meaningful well, the company has drilled, certainly in our history. The two exploration tests Newport and Bondi tested at combined rates of up to 10,700 barrels of oil per day equivalent, and over 7 million cubic feet of gas per day, from the four sands totaling 283 feet of net pay, two sands in each well. Newport we believe is a multisand package oil Discovery, that could potentially hold anywhere from 10 to 30 million gross barrels of oil.

We're extremely excited to further evaluate this oil discovery to determine it's full potential. Swift Energy Co. will be drilling several follow up wells at Newport, the first of which begins in the first quarter, and should penetrate and test additional deeper sand targets, that in the first prospecting activity, were not even tested. As we continue our successful development and exploitation efforts around our assets, the inventory of future drilling opportunities will become more fully understood and appreciated and we believe valued in the equity markets.

The facility expansions in Lake Washington are beginning their commissioning process now over the next several weeks. We expect to see increases in production that are commensurate with the activity we've had relative to these facility improvements. Cote Blanche Island is expected to be back online at the end of the first quarter. Swift is also working to get the Newport well and Bondi wells connected in a timely fashion, which should be early in the second quarter for Newport and in the second half of 2005 for Bondi. We have certainly regained the momentum that we displayed prior to the hurricanes. It's this type of performance that will allow Swift to deliver 14 to 18% production growth for 2006.

Cost pressures continue to affect the industry, especially along the Gulf Coast following the hurricanes, and the tightening availability of crews, as well as increasing the cost of services and basic equipment. Swift, however, has focused on maintaining cost controls in this environment. I believe that our per unit cost should start to moderate and stabilize as the production increases come throughout the year. Swift is not remaining static after these successes.

We continue to add skilled personnel to our talented staff, and enhance the breadth and knowledge of our Board of Directors. We also continue to pursue opportunities that will add value for Swift Energy stakeholders in our future. These items will become evident as we discuss our 2006 plans at our upcoming Analyst Investor Day, which we're hosting in Houston on February 23.

To name but a few, Swift Energy is reviewing future and further potential capacity increases in the facilities in Lake Washington. We're looking to expand our seismic data footprint in South Louisiana, by planning a new 3-D data shoot over the Cote Blanche Island area. These items, plus Swift Energy's diversified drilling portfolio, position us with high impact drilling projects over the next several years. We'll also discuss the recent addition to our portfolio of South Bearhead Creek, and the opportunities associated with that property, which was announced in September of last year.

With these strategic property additions, the Company is posed well to grow in both volume and value. We expect to continue delivering value to our stakeholders, through consistent operating results and, of course, that begins with strategic plans, and efficient implementation of those plans, which ultimately should increase our earnings as well.

With that, I'd like to turn it over to Alton to present the fourth quarter and 2005 financial results.

Thanks, Terry. And good morning, everyone. I'm proud to report that Swift Energy had record earnings for the fourth quarter and full year of 2005. Specific to the fourth quarter record revenues were $122.5 million, up 24% over 4Q '04. Net income set a Company record of $34.7 million, up 29%, and diluted EPS increased 25% to $1.16, while cash flow before working capital changes increased 26%, to $2.83 per diluted share. Production for the fourth quarter declined 8% to 14.7 BCFE, as during the quarter New Zealand experienced both natural production decline and an effect from the timing of crude liftings in the fourth quarter. As we continue to recover from the hurricane events, domestic production declined 2% for the quarter when compared to 2004.

On a positive note, Swift Energy's production decline was more than offset by an increase in commodity prices received, leading the way for our great results. 55% of Swift's production for the quarter was crude oil, which in its current pricing environment is quite favorable. With the current weighting of crude oil in the equation, Swift's average composite realized price for 4Q '05 increased 34%, to $8.34 per MCFE. Domestic composite prices actually averaged $9.77, which is up 36% from the fourth quarter 2004, and New Zealand composite prices rose 3%, to just over $4, resulting in a 24% increase in oil and gas revenues over last year's quarter. These prices are great.

We continue to focus as Terry said, on our per unit cost and metrics, which were obviously adversely effected this quarter by the hurricane-deferred production. As to the fourth quarter 2005, G&A came in at $0.44 per unit on the high side of guidance, D&A per unit came in at $2.09, above our guidance, due to higher drilling cost and the change in our year-end reserves. Production costs came in at $0.85, which was on the low side of guidance, and production taxes increased in tandem with the higher prices and, as you would expect, with the production mix that we had. Interest expense came in at $0.41, which was slightly below guidance. Swift Energy thus realized net income of $34.7 million, which equates to $1.20 basic, and $1.16 diluted, beating Consensus First Call estimates for the 15th consecutive quarter.

Cash flow before working capital, as I mentioned earlier, for the fourth quarter came in at $84.3 million, or $2.83 per diluted share, while EBITDA was $91 million for the quarter, both well over the 2004 comparable amounts. CapEx for 4Q '05 was 106 million, including the South Bearhead Creek acquisitions, but even with these acquisitions, our CapEx for the year stayed well within our cash flow from operations, allowing us to end the year with a healthy cash balance.

Swift Energy's full year numbers for 2005 were equally as impressive for virtually the same reasons as the fourth quarter. As you can see in the details and the results in this morning's press release. Our bank line remains unused providing plenty of available capital for any value-adding strategic opportunities that might avail themselves. With respect to Swift Energy's hedging activity, we have natural gas price floors in place, covering February through June 2006 production, with strike prices in the $8 to $9 range. Please see our website for more information.

As always, we've included additional financial and operational information in our press release, including initial guidance for the first quarter and full year 2006. As Terry mentioned, 2005 was a great year for Swift Energy Co. It was both challenging and rewarding. With the remarkable recovery we've made from the 2005 devastating weather events, thanks to our remarkable people, and the results we are now seeing from our 3-D seismic-aided exploration endeavors, as Terry mentioned, we're even more excited about 2006 than what the future has in store.

And with that, I'll turn it over to Joe D'Amico for an overview of our domestic operations.

Thanks, Alton. Good morning, everyone. Today I want to discuss fourth quarter and 2005 domestic production, 2005 year end reserves, the facility upgrades at Lake Washington and current field status, and recent drilling results in our domestic co-areas, including the recent discoveries at Lake Washington.

Swift Energy achieved record 2005 production increasing approximately 2% to 59.6 Bcf equivalent, with 43 Bcf equivalent produced domestically, and 16.6 Bcf equivalent produced in New Zealand. Swift Energy's fourth quarter 2005 domestic production was 11 Bcf equivalent of domestic production, which was a 21% increase over the third quarter of 2005, but a 2% decrease when compared to production in the same period in 2004. As has been highlighted, Hurricanes Katrina and Rita caused domestic production decreases and deferred approximately 3 to 3.5 Bcf equivalent of production growth in the fourth quarter, on top of another 3 Bcf equivalent of suspended production in the third quarter of 2005.

In the fourth quarter, Swift Energy completed the connection of a new CM3 production platform, which handles Lake Washington's sour crude oil production. This new production facility will increase the capacity for handling sour crude oil from 5,000 to 10,000 barrels of oil per day. The compression project at the 6700 platform has just finished this quarter, and the commissioning process is ongoing. These expanded facilities should be fully operational by the end of the first quarter, and will increase total liquids throughput capacity by approximately 50%.

Cote Blanche Island field is Swift Energy's only remaining field to shut in from damage from Hurricanes Katrina and Rita. Cote Blanche Island is averaging approximately 370 barrels of oil equivalent per day of production in August 2005. We expect to restart this field by the end of the first quarter.

In the fourth quarter Swift Energy completed two acquisitions of interest in the South Bearhead Creek field in Beauregard Parish, Louisiana. The total purchase price of these acquisitions was approximately $28.9 million. South Bearhead Creek field is located in the Toledo Bend area, approximately 50 miles south of Swift Energy's Masters Creek field. Oil and gas are produced predominantly from the upper and lower Wilcox bands, at depths from approximately 10,600 to 13,700 feet. The field also has production in the comp field sands at approximately 8,000 to 8,500 feet. Production from the field is just over 200 barrels of oil equivalent per day.

Swift Energy expects to see some synergies from our Toledo Bend operations, and is currently drilling a well in this area. And for domestic drilling results, Swift Energy drilled a total of 14 wells domestically and successfully completed 9 of these. The successful development wells include a well in the Lake Washington area in Plaquemines Parish Louisiana, 5 completed in AWP Olmos area in South Texas, and 2 in the Garcia Ranch area are also in south Texas.

Swift Energy was also successful in two of four domestic exploration wells in the fourth quarter of 2005. The successful exploration wells included the previously announced Newport and Bondi, both in Lake Washington, and the 2 unsuccessful wells were in Lake Washington and Bay de Chene fields. The Company deferred 10 to 15 domestic wells from our 2005 drilling program into 2006, due to lost rig time from the hurricanes. From this nine month drilling program, Swift Energy ended 2005 with total proved reserves of approximately 762 Bcf equivalent, a decrease of 5% from 800 Bcf equivalent at year end 2004, which resulted primarily from the delays in drilling activity necessitated by hurricane damage and recovery efforts, interrupting the Company's drilling program.

Year end 2005 proved reserves consist of 51% crude oil, 38% natural gas, and 11% natural gas liquid. Proved developed reserves were 50% of total reserves at year end 2005. I want to take a minute to further highlight the Newport and Bondi discoveries. These are very material to Swift Energy, not only because they are significant discoveries of reserves and production, but they also further validate the value of our 3-D base strategy in Lake Washington, and in the southern Louisiana area, as well as illustrate the potential yet to be exploited in this area.

We believe Newport alone has gross potential reserves of 10 to 30 million barrels, and only a fraction of this amount has been included in our year-end 2005 reserves. The Newport Discovery, the downdip delineation well from the discovery well at the Newport prospect announced in August of 2005. The delineation well tested rates up to 8,340 barrels of oil equivalent from two zones, this included 3,792 barrels per day, and 1.7 million cubic feet per day, with no water, on a 23/64th-inch choke, and flowing tubing pressure 2378 psi, on the first of three perspective sand intervals encountered in this well.

In the second sand interval, the well tested at rates up to 3,637 barrels per day of crude oil, and 2.8 million cubic feet per day of gas, with no water on 26/64th inch choke, with flowing tubing pressure of 2,295 psi. The well was drilled to a total vertical depth of 12,736 feet, And encountered approximately 283 feet of net pay, in three different sand intervals. The third sand interval, with a 30 foot net pay interval, was not tested at this time, but we believe will also be an excellent producing horizon.

The Bondi prospect tested at rates of up to 3,581 barrels of oil equivalent per day from two zones, which included 1,723 barrels per day, and 1.1 million cubic feet per day, with 34 barrels of water per day, on a 22/64th-inch choke, and flowing tubing pressure of 1,301 psi in the upper sand interval, encountered in this well. The lower sand interval tested at rates up to 1,560 barrels per day, and 700 mcf per day, with 19 barrels of water per day on a 22/64th-inch choke, with flowing tubing pressure of 1,066 psi. The well was drilled to a total vertical depth of 13,649 feet, and at two sands intervals encountered totaled approximately 39 feet of net pay.

Swift Energy owns 100% working interest in both wells. The Newport delineation well is located approximately 700 feet downdip to the west of the initial discovery well, and is expected to be placed on production in the second quarter of 2006. The Bondi discovery well is located approximately 5 miles to the northwest of the fields facility infrastructure, and is not expected to be on production until the second half of 2006.

Actual production sales rates for the Bondi and Newport discoveries will be determined based on additional reservoir testing, state allowables, and facility capabilities. Swift Energy currently has three barge drilling rigs operating, with two located in the Lake Washington area, and one in Cote Blanche Island. Swift Energy continues to utilize one completion rig, which is alternating between Bay de Chene, Lake Washington, and Cote Blanche Island

A fourth barge rig is expected to begin working in these fields by sometime in March. At this time a drilling rig is operating in Swift Energy's AWP Olmos field in South Texas, with another rig operating the Company's newly acquired South Bearhead Creek field in Central Louisiana.

Now I'll turn you over to Bruce to talk about our New Zealand operations.

Thanks, Joe and good morning, everybody. I'd like to cover several things in New Zealand this morning, including our fourth quarter and full year production, a 2005 drilling program update, along with our ongoing drilling plans for 2006, and also discuss the 2005 year end reserves in New Zealand. New Zealand produced 16.5 billion cubic feet equivalent in 2005. Which was evenly split between the TAWN and Rimu Kauri areas. This is a result of Swift Energy's continually increasing production through the drill bit at Rimu Kauri, following the initial acquisition in New Zealand of the TAWN assets back in 2002.

For the fourth quarter of 2005, New Zealand accounted for 25% of Swift Energy's total production, with 3.7 billion cubic feet equivalent produced in the quarter. This is a 20% decrease from the 4.6 billion cubic feet equivalent produced in the fourth quarter of 2004. Production in the Rimu Kauri area averaged approximately 20 million cubic feet equivalent per day in the fourth quarter, a decrease of 11% from the fourth quarter of '04, primarily resulting from had natural declines in the Kauri sand. In the TAWN fields production averaged over 21 million cubic feet per day in the fourth quarter, down 21% from the fourth quarter of 2004. The Piakau N A-1 well, a new exploration discovery well, had been shut in for the majority of the quarter, as the Piakau North A-2, which was a downdip well, was being evaluated with a possible oil leg.

The Piakau North A-1 well is back on production, having determined that the oil leg is not present, and the Piakau North A-1 well appears to be compartmentalized. The Company completed two of five development wells, and one of five exploration wells in 2005. And of this total, Swift Energy was successful in one development well, but unsuccessful in three exploration wells in the fourth quarter. Those were the Tawa well, which was a deep exploration test, in conjunction with our partner Mighty River Power, and then Oru, which was a small non-operated interest in shallow Mount Messenger sand, and in the Ahuroa North, which was a significant extension, designed to encounter the same sands as the Piakau North A-1 well.

In 2005, Swift Energy accelerated its exploration program in New Zealand, beginning with the success of the Piakau well in the TAWN area. Our initial interpretation of this discovery, was that it had the potential to cover a larger structural area. but with further delineation activity, we have determined that the initial discovery well is compartmentalized. We are, however, quite encouraged by the prospectivity of this sand, and are conducting further analysis of this play in the TAWN area.

We believe our ongoing 2006 exploration program is exposing Swift Energy New Zealand to significant reserves potential. Swift Energy New Zealand is currently drilling the Goss Prospect which is located in the Waihapa area at TAWN, and the Trapper Prospect, which is located near the Ahuroa field area at TAWN, as part of the exploration joint venture with Mighty River Power. Both of these wells are impactful deep tests, and should be finished drilling in the second quarter of this year. Both of these areas are part of the TAWN area, and if successful the wells can be placed on production relatively quickly.

In our development activity, the Company was successful on one of three development wells targeting the Kauri sand. Our drilling activity in 2005 in the Kauri sand was disappointing, in that we did encounter the sand on structure in all three wells, but sand quality at two of these locations led to noncommercial results. Our technical work in this area has continued, and we are now targeting the Kauri sand in another area of the field, where we believe there is a greater opportunity for productivity.

We were also successful in one development well targeting the shallow Manutahi sand. In terms of reserves New Zealand year end 2005 proved reserves declined by 20%, to 118 billion cubic feet equivalent, down from 147 billion cubic feet equivalent at year end 2004. The primary reason for the decline was that Swift Energy's 2005 drilling campaign was focused largely on development drilling for the conversion of puds in the Kauri sand, and the resulting downward revision relating to the drilling results in the Kauri sand, led to this decrease. New Zealand's 2005 proved reserves consist of 53% natural gas, 37% crude oil, and 10% natural gas liquid.

Swift Energy New Zealand currently has three drilling rigs operating in New Zealand, two on the Goss and Trapper exploration wells, and one rig targeting the Kauri sand in the Rimu/Kauri area. Following these wells Swift Energy New Zealand plans to drill the [Kofa] prospect, in permit 38742, which is on the north side of the Taranaki basin onshore. We also intend to have further exploitation of the Kauri and Manutahi sands in the Rimu/Kauri area this year, and are looking at other opportunities up in the TAWN area.

Swift Energy New Zealand's near term exploration focus coupled with our development assets gives us a very competitive drilling portfolio, to deliver targeted growth over the next several years. And Swift Energy 10 years in New Zealand, we have built a regional expertise in the Taranaki basin, plus substantial infrastructure and onshore acreage to position us for success in the future. Swift Energy New Zealand continues to focus our assets to aid the projected New Zealand natural gas shortfall, that becomes more evident each year in this underexplored basin.

Thanks for your attention, and I'll turn it back to Terry for a summary, thanks.

Thank you, Bruce. I'd like us to review some of the Swift company investment highlights for 2005. Swift Energy Co. had impressive financial results for the year and, of course, we intend to continue delivering the same operational results through our plans in 2006, in an effort to top those records set in 2005.

Our 2005 revenues increased by 50%, to over $400 million, earnings increased 69% to $115 million, and cash flow increased 50% to $288 million. These results all lead directly to increased shareholder value, and of course, these results strengthen and solidify our strong balance sheet. We recognize that the hurricanes in 2005 impacted our ability to add reserves and increase production.

Nonetheless, we had record production of 59.6 Bcf equivalent, a 2% increase. We expect to increase production by 14 to 18% in 2006 over our 2005 levels. With the full 12 months of drilling activity in 2006, we believe we can deliver growth in both volume and value.

The Newport and Bondi discovery wells will be further delineated this year. They also showcase the potential of our high impact South Louisiana and New Zealand exploration programs. Once again, we believe that the Newport oil discovery has the potential to evaluate out and appraise out to gross reserves between 10 million and 30 million barrels of oil equivalent, which of course, is very exciting to us. As it's one of many opportunities in our 3-D data set.

We're encouraged by our progress in all of our core areas, especially this eminent growth in Lake Washington, and the opportunities in New Zealand, as well as our drilling opportunities in the Bay de Chene, Cote Blanche, and South Bearhead Creek areas, and we believe they're going to contribute significantly in 2006.

We continue to have a strong and flexible financial position, which allows to us take advantage of our future opportunities, and once again, I have to express our excitement that our recent exploration successes in Lake Washington, specifically the Newport and Bondi discoveries, which tested a combined rates of over 11,000 barrels of oil per oil per day equivalent, illustrate to us, that we have significant growth potential that has been developed from our South Louisiana 3-D seismic data set.

With that I'd like to turn it over for questions.

Thank you [OPERATOR INSTRUCTIONS] We'll pause for just a moment to compile the Q&A roster. Your first question is coming from Adam Leight.

Good morning, guys.

Good morning, Adam.

Good morning.

Couple of different questions. On capital program for 06, could you give us a regional breakdown of that?

Adam, we're going to detail all that have out in the analysts meeting in about two weeks or I guess three weeks so we could just put that off until then, I don't think we have that in front of us.

Okay. Second question, could you remind me what the cost of those Newport and Bondi wells were?

$6 million.

[multiple speakers]

6.5 on Newport.

The dry hole cost for the deeper wells in that 12, 13, 14,000-foot depth is going to run probably roughly $6 million, completed would be another $1 million per 7.

Great and then last question. On the hedging program, given the importance of oil to your mix in the U.S., what are your thoughts about putting in some floors?

Well, our hedging strategy has been fairly consistent for probably a decade. And that's to try to protect the downside without giving away the upside. Try to layer in hedges over time in strong markets. We tend be for more successful with gas because of the nature of the markets, and the forward curve.

Oil when you look out on that curve and try to put floors in place, at prices that make sense, it's just difficult to do when you get too far out on the curve. And so certainly in the last year, we've had fewer floor protection on the oil side, than we have with the gas. But we believe our strategy has worked effectively over the last decade, and don't see any particular reason to change it in the short run.

That means you're going to leave it at zero?

Well, that means that we're going to continue to look for opportunities when we think that hedging, or the floor support makes sense. You know, that can vary with the volatility of the market. We look at that all the time. We just haven't had the opportunity to put some in place, at prices we think made sense, and at levels we think made sense. We do continue to look at that, but it is a value-related proposition.

Thanks.

Thank you. Your next question is coming from David Anderson.

I would expect to see some insurance rolling through in the fourth quarter, which didn't appear to materialize. Can I expect to see it in the first, second quarter this year, and how much would that be?

Insurance proceeds?

Right from the hurricanes.

Actually any insurance proceeds are netted out of the costs that they're related to. If we have the ability to seek reimbursement from the insurance company, and it's not a significant number to indicate it as a separate line item.

Okay. My other question is on New Zealand. Did you add any reserves in New Zealand this year, or it was all just downward revision?

We would have had a small amount of reserves from the Piakau discovery, but the biggest impact on New Zealand reserves would have been the downward revisions in the Kauri sands, based upon the drilling results.

We've had two years of not adding any reserves, and you've had two years of downward revisions in New Zealand, are you starting to reconsider your strategy there , or talk about it in a couple weeks, or shed any light on that?

We'll certainly talk about in much more detail at the Analyst Investor meeting. Much of the drilling activity, in fact, I think virtually all the drilling activity back in '04 was focused on development. We began doing more exploration in '05 and '06. The impactful exploration, which is the join venture program we have with Mighty River Power did get delayed last year. We had to wait on rig availability, because some other operator was using it, so it got kicked off a little later than we planned on. The Tawa well we decided to take deeper, so the actual drilling time with that took longer. We had expected to have one, either the Gaza Trapper well completed last year, and those got pushed into '06. That's where the most meaningful exploration is.

The Kopi well, we actually originally hoped to get drilled last year, but we had some issues with regard to the site location. And so it took some additional time to get the consenting process done. That will be drilled in '06.

This is Terry. I think that is an excellent question, and it's clear that we have already addressed our strategy in New Zealand, by bringing in what we believe as strong partner in how we drill out some of our New Zealand activities. We had earlier been pretty much a 100% player in New Zealand, in most what have we were doing and now we've got Mighty River Power involved in a significant amount of our activity. We do believe that activity's going to be successful, and the strategy has been to share it with a partner.

I'd also add that from an overall strategic point of view, our domestic assets are a much greater proportion of our overall value and production data set today.

Okay. Agreed on that last point. But is it fair to say that your shift is going to be deemphasizing the Kauri TAWN area, and looking more I'm sorry in the Kauri/Rimu area, and shifting more into the TAWN properties, is that really where the focus is going to be kind of this year and going forward?

I think it's a fair to say that's potentially an area where we think we could add a lot of value. But really we very, and we hope we've always been very value-based, so if one of these exploratory wells in New Zealand changes the equation, we'll get after it right away and be value-based, but yes, the TAWN area is going to get a lot of attention going forward.

Great, thank you. That's all for me.

Thank you. Your next question is coming from Frank Bracken.

Hi, can you hear me.

Yes.

Sorry. Couple questions on Newport and Bondi, could you share with us any of the [Peliea] work you've done, to give us a handle of the production zones, and also could you share with you any work you've done, that would indicate an allowables allowed by the DNR in Louisiana on analogous, unanalogous production?

We can share a little bit of that but clearly we're in the very early stages of the development plan itself. Frank, I appreciate the question. In terms of the well, itself, just a qualitative comment. These are excellent high quality sands.

The tests that we conducted at present were rather short-term tests, in the sense that this was very, very large volumes of oil and, you know, you would have almost had to have facilities out there at the time, to test at these rates for sustained periods of time. We are hooking up as we said, the well as expeditiously as we can, so we can get it into the large test facilities. We'll get a lot more data when that comes forward, but we all think that's going to be better data. We've got the logs in our hands.

We've got an incredible amount of data relative to the 3-D data set, in terms of AVO offset versus amplitude responses. Lots of good strong information. We had a trap here, we had a structure. We had to proof sand, we had to proof sourcing, we had to proof seal, we proved all those things, and we got high-quality reservoir sand.

We have not credited ourselves, isn't the proper word, booked very much of this at all, in terms of looking at the log, we didn't test all of the zones. We didn't get as deep into the prospect, as we intend to get on this next appraisal well. In terms of allowables if you produce on a lease basis, a whole lease zone basis, it's a much lower type of allowable. I'll have Joe speak to that in a moment, and we'll have to use some estimates and approximations there. If you produce on a geologic unit basis, we think we can work with the state over time, to get some very appropriate maximum efficient rate allowables from wells like this.

Said differently right now, these wells are capable of producing based on the initial test at rates well over what any lease-based or zone-based allowable would allow us. Joe, do you want to speak up what the allowable are from a lease basis.

On a lease basis, on a well base is the allowable is 100 barrels added to the depth you're producing, if you're producing at 12,000 feet, you're allowable is 1300 barrels a day, and that's on a monthly basis so it's 1300 barrels a day times the number of days in a month. It's pretty straightforward, but as Terry was saying, if you get the maximum equivalent efficient rate, you can increase your allowables substantially, just proving that the wells are capable of producing at a higher rate by showing the geology attached to it.

I think that's the key point. I'll follow up on that. We do not want to go to the state presently, and put all our seismic data out into the public domain. That's just not an approach we would take, given the information we have right now. We are going to drill numerous appraisal wells, that'll give us subsurface control into the 3-D. We believe that subsurface geology will then allow us to go to the state, and achieve what is a proper rate of extraction from these reservoirs. I would also add that we've got some facilities, we've got to build out there, that would be able to test these at the higher rate, so there's some timing issues as well.

Okay.

Thank you. [OPERATOR INSTRUCTIONS] Your next question is coming from Dirk Van Doren.

Hey, guys, how are you?

Fine, how about you?

All right. Could you help me fill in the reserves, looking back over all your press releases, what the additions were, and what the revisions to go from last year to this year?

Yes, Dirk, that information is currently under review. It's not completed both the auditing process with our outside auditors, nor is it completed the internal review. We will be putting that information out within the next few weeks.

Okay, great, thanks.

[OPERATOR INSTRUCTIONS] Gentlemen, there appear to be no further questions.

I want to thank everyone for joining Swift Energy's fourth quarter and 2005 call. And we look forward to seeing you on February 23 for our Analyst Investor Day. Thank you.

Thank you. This does conclude today's fourth quarter and full year 2005 earnings conference call. You may now disconnect.