Estimates prepared by Swift Energy project total proved reserves of the purchased properties to be approximately 3.6 million barrels of oil equivalent ("BOE"). Approximately 42% of the reserves are classified proved developed and future development costs are estimated to be $22.7 million for an all-in acquisition cost of $13.11 per BOE (or $2.19 per thousand cubic feet equivalent). Current production is approximately 90% crude oil and is less than 160 BOE per day net to the purchased working interests. The purchase price will be funded with current cash flow. Pursuant to the terms of the agreement, Swift Energy will acquire a 100% working interest in the seller's operated wells in the field and a 25% working interest in certain non-operated wells.
South Bearhead Creek Field ("SBC") is located in the Toledo Bend area approximately 50 miles south of Swift Energy's Masters Creek Field and 30 miles north of Lake Charles, Louisiana. Oil and gas are produced in SBC predominantly from the upper and lower Wilcox sands, at depths ranging from approximately 10,600 to 13,700 feet. The field also has production in the Cockfield sands at approximately 8,000 to 8,500 feet. SBC was discovered in 1958 by a major oil company. It is a large east-west trending anticlinal closure and has had cumulative production of over 4 million BOE. The field consists of approximately 5,800 gross acres with an average net revenue interest of approximately 78%.
Swift Energy plans to initiate an exploitation program in the first-half of 2006 to drill proved undeveloped and probable locations, fracture stimulate several wells, enhance facilities and improve per unit operating costs. It is expected that Swift Energy's 2006 budget will include $8 million to $12 million of capital expenditures in this field.
Terry Swift, Chief Executive Officer of Swift Energy Company, noted, "This acquisition of interests in South Bearhead Creek Field provides Swift Energy with additional opportunities where we can use our experience and capital to enhance value. We believe that Swift Energy will be able to use its engineering and geologic experience to increase production and evaluate additional reserves potential. Over the next 12-18 months, our technical teams will exploit and further quantify the hydrocarbon potential of this area. We will also continue to look at additional niche acquisition opportunities with a focus on the Gulf Coast region."
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