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Gold/Mining/Energy : Strictly: Oil and Gas Exploration Companies -- Ignore unavailable to you. Want to Upgrade?

To: SliderOnTheBlack who wrote (58)	9/30/1998 6:49:00 PM
From: The Ox	Respond to of 318

You will need patience with SFY. You are correct, IMO, it's a great story. I doubt this stock will pop over night. I do believe that current investors will be nicely rewarded. Good luck, Michael

To: SliderOnTheBlack who wrote (58)	10/9/1998 1:06:00 PM
From: The Ox	Respond to of 318

Moody's cuts Swift Energy <SFY.N> rating to B2 NEW YORK, Oct 8 - Moody's Investors Service downgraded the rating for Swift Energy Company's convertible subordinated notes from B1 to B2. Moody's also assigned a rating of Ba3 to the company's unsecured bank revolving credit facility. The ratings downgrade concludes a review which was initiated on September 14, 1998, based on concerns which include a rising level of debt, and a weak price outlook for oil and natural gas. In addition to these factors, the rating action also incorporates reduced financial flexibility due to tighter capital markets and the limited borrowing capacity under the company's committed bank credit facility. Swift's debt balances have increased to approximately $260 million from $180 million at mid-year, as a result of the company's $80 million debt financed acquisition of Austin Chalk oil and gas properties from Sonat Exploration Company. This transaction increased Swift's oil and gas reserves by 25% to about 430 billion cubic feet equivalent. However, the acquisition significantly increased leverage, with debt to total capitalization rising to just over 60%, and also increased the company's sensitivity to oil prices by boosting the oil portion of the company's total production from 13% to about 25%. While the acquisition is expected to boost Swift's daily production by more than 60% to 140 million cubic feet equivalent by year-end, wells in this area tend to have flush initial production followed by a steep decline in output. As a result, the significant boost to Swift's production will be short-lived unless the company is able to demonstrate a healthy success rate with new wells. The rating outlook is negative, reflecting concerns that the company's financial flexibility may be further constrained if weak market conditions continue. Ratings Affected: 115 million of convertible subordinated notes, downgraded from B1 to B2. The rating reflects the subordinated position of the notes within the company's capital structure, which also includes senior bank financing. New rating of Ba3 assigned to $250 million four year unsecured bank credit agreement maturing in August 2002. Availability for borrowings is governed by a borrowing base calculation on oil and gas reserves. The current borrowing base is $170 million, against which Swift has borrowed approximately $145 million. Moody's believes that cash flow and debt coverage measures will be pressured by the combination of elevated debt balances and a weak price environment. In addition, the recent significant reduction in capital markets access for lower rated exploration and production companies constrains Swift's refinancing options for the near term. These market and financial factors are likely to result in markedly slower growth in reserves and production, in sharp contrast to the company's past record of strong growth. Based on existing and near term projected cash flows, Moody's believes that the company will be able to support a level of capital spending which maintains a relatively flat production profile in 1999, measured against expected 4th quarter 1998 estimated daily production of 140 mcfe per day. Greater reliance upon bank financing increases the risk of reduced borrowing access due to possible revisions of the borrowing base or covenant violations. Given that Swift uses full cost accounting for its reserves, Moody's particularly notes the risk of covenant violation as a result of a balance sheet write-down of reserves. With natural gas comprising 75% of its oil and gas reserves, Swift has been able to avoid the reserve write downs which have been incurred by some oil dominated producers. However, the company's balance sheet valuation has not been severely tested in recent periods as downward fluctuations in natural gas prices have not coincided with quarter end dates. Swift yesterday filed an S-4 detailing plans for a future roll-up of certain limited partnerships for which the company acts as managing general partner. While the election to terminate these limited partnerships and the timing of such action is believed to be wholly at the company's option, this would require financing of approximately $70 million. Given current capital market conditions, Moody's believes that the company is likely to defer the repurchase of the limited partnerships until conditions are more favorable. Strengths of the company include a strong record as an operator of a majority of its property holdings, and an operating strategy which has focused heavily on further exploitation of areas of existing production, particularly the AWP Olmos Field in South Texas, which constitutes 55% of total reserves. These strategies have resulted in an above average growth rate for reserves and production in recent years, achieved at finding and development costs which rank better than the average for peer companies. The properties acquired from Sonat strategically fit with Swift's geographic concentration on the AWP Olmos Field and the Austin Chalk as its two principal areas of operations, representing over 90% of production and reserves. Swift Energy Company, located in Houston, Texas, is an oil and natural gas company engaged in the exploration, development, acquisition, and operation of oil and gas properties, with a focus on U.S. onshore natural gas reserves. 16:58 10-08-98 Copyright 1998 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. All active hyperlinks have been inserted by AOL.