Standard & Poor's Affirms Credit Rating on Swift Energy Co.

Swift Energy Co., an independent oil and gas exploration and production company, has seen its corporate credit rating and subordinated debt rating affirmed by Standard & Poor's. The rating remains stable, with $100 million in rated debt securities affected. The company's focus is on the onshore U.S., particularly in Texas, where it operates producing properties. Swift Energy Co. plans to acquire Sonat Inc.'s oil and gas properties in the Austin Chalk formation of Texas and Louisiana for $88 million, expanding its asset base and adding significant production and cash flow.

Key Takeaways:

• Standard & Poor's affirmed its single-'B'-plus corporate credit rating and single-'B'-minus subordinated debt rating on Swift Energy Co., citing a stable outlook.
• The acquisition of Sonat Inc.'s oil and gas properties in the Austin Chalk formation is valued at $88 million and represents an opportunistic move for Swift Energy Co. to build up its inventory of operated, producing wells.
• The assets to be acquired include 91 billion cubic feet equivalent of reserves (56% gas), 20% interests in two gas processing plants, and over 200,000 undeveloped net acres.
• The expected reserve life of the properties is 3.6 years at current production rates of 25 billion cubic feet per year.
• Swift Energy Co.'s credit ratios are good for the rating, providing a measure of debt capacity despite the need for debt financing to acquire the properties.
• The company's experience in drilling in the Austin Chalk formation in the Giddings Field in Texas is limited, but it has the challenge of avoiding the missteps taken by other companies in the region.
• The acquisition will broaden Swift Energy Co.'s asset base by increasing reserves 20% to 535 billion cubic feet and nearly doubling its inventory of undeveloped acreage.

Statistics:

• $100 million: the amount of rated debt securities affected by the credit rating affirmation.
• 91 billion cubic feet equivalent: the amount of reserves to be acquired in the Austin Chalk formation.
• 56%: the percentage of gas in the acquired reserves.
• 20%: the interest in two gas processing plants to be acquired.
• 200,000: the number of undeveloped net acres to be acquired.
• 25 billion cubic feet per year: the current production rate of the properties.
• 3.6 years: the expected reserve life of the properties.
• $88 million: the value of the acquisition.

Sources:

• Standard & Poor's CreditWire. (July 13, 1998).
• Swift Energy Co. press release. (July 13, 1998).