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Swift Energy Company (SFY)

Q3 2013 Earnings Conference Call

October 31, 2013 10:00 AM ET


Paul Vincent - Director of Finance and IR

Terry Swift - Chairman and CEO

Alton Heckaman - EVP and CFO

Bruce Vincent - President

Bob Banks - EVP COO


Andrew Coleman - Raymond James

Leo Mariani - RBC

Michael Hall - Heikkinen Energy Advisors

Noel Parks - Ladenburg Thalmann

Gordon Douthat - Wells Fargo

Neal Dingmann - SunTrust

Tom Morgan - Global Hunter

David Deckelbaum - KeyBanc

Andrew Coleman - Raymond James

Ravi Kamath - Global Hunter Securities

Jeb Bachmann - Howard Weil



Good morning my name is Lia and I will be your conference operator today. At this time, I would like to welcome everyone to the Swift Energy Company Third Quarter 2013 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator instructions).

Thank you. I would now like to turn the conference over to Mr. Vincent, Director of Finance and Investor Relations. Sir you may begin.

Paul Vincent

Good morning. I am Paul Vincent, Director of Finance and Investor Relations. Welcome to Swift Energy’s third quarter 2013 earnings conference call. On today’s call, Terry Swift, Chairman and CEO, will provide an overview. Alton Heckaman, Executive Vice President and Chief Financial Officer will review our financial results for the first quarter. Then Bruce Vincent, President; and Bob Banks, Executive Vice President and Chief Operating Officer, will provide an operational update. Terry Swift will then summarize before we open up the line for questions. Also present on the call is Steve Tomberlin, Senior Vice President of Resource Development and Engineering; and Jim Mitchell, Senior Vice President, Commercial Transactions and Land.

Before I turn the call 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 in 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.

In addition to our prepared remarks, we have also posted a copy of this morning’s press release to our website.

Terry Swift

Good morning. Thanks, Paul. We again thank you for joining our call. The third quarter was a very active one for Swift Energy. We realized production growth in our South Texas area of 10% over the second quarter of 2013 and we continue to demonstrate meaningful cost reduction and performance improvements in our Eagle Ford program. We announced and have opened a data room to accommodate the sale of Austin Chalk and Wilcox working interest and minerals positions in Central Louisiana. We’ve also begun our 2014 budget process and while our 2014 program won’t be finalized until we are further along in the sales process of our Central Louisiana assets we do anticipate shifting the portion of our capital spending in 2014 towards our high value South Texas assets well spending a lower percentage of our CapEx in Louisiana.

Our performance in South Texas during the quarter was bolstered by a high volume of completions during the second quarter which tapered off during the third quarter as we reduced some of our drilling activity.

While, we don’t expect to experience similar production growth in the fourth quarter, we are expecting to increase our rig count later this year and anticipate this will report regular production growth from this assets during the calendar year of 2014 as we maintain higher levels of drilling activity in South Texas than we have today.

Our production growth is come from higher activity and better wells. We are drilling these wells by performing better completions and believe we can improve further our performance by increasing our lateral lengths, increasing the number of frac stages in our wells while decreasing the distance between each stage and increasing the amount of frac sand and profit we use in each stage.

While we optimize these measures, we will continue to modify and improve the returns from these wells. We are just a big believer that the technology learning curve is a continual thing that will produce better results as we go. Bob is going to provide the more details on these specific measures that we’ve implemented and some of the things that might be to come as well as talk about the reduced cost and how those relate to overall improved performance.

Our PCQ area and McMullen County has been one of our best performing areas where we’ve drilled more than 10 wells. While no two wells are the same, we have seen significant increases in the 30, 60, 90 and 120 day all recoveries from our more recent vintage wells. We believe this is attributable to more precise targeting of our laterals in the lower Eagle Ford Shale section and more precise placement of frac stages in these newer wells.

In the future, as we increase these lateral links, shorten our frac stage, intervals and increase the amount of frac Sanford stage, we expect to see further increases in Q1 production in all of our areas.

As we previously disclosed, we have hired Scotia Waterous to assist with the disposition of our Central Louisiana assets. The data room has been active and we're pleased with progress thus far, we expect to begin receiving bids during the fourth quarter, but don't expect to close the transaction until 2014.

We expect that this transaction once concluded will reflect a better valuation of these assets than it's implied in our current equity, with the proceeds being used to initially improve the balance sheet and also help bridge any gap between internally generate cash flows and expected cash spending in 2014.

The CenLouisi assets will also allow us to increase the focus of our human capital and CapEx resources and growing our South Texas properties. Reviewing additional strategic goals we set forth this year, we spudded and drilled a horizontal well in La Plata County, Colorado during the quarter. This was currently awaiting completion operations, we have conducted significant levels of science with regard to this well and will monitor the activity going forward and certainly get back with you guys as we proceed into 2014 with this project.

We also continue to pursue a joint venture for our Subsalt test in Lake Washington. We're encouraged in the discussions with potential partners and we hope to move forward on the prospect after the 2014 Hurricane season concludes.

Read the rest of this transcript for free on seekingalpha.com