UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2006

SWIFT ENERGY COMPANY

(Exact Name of Registrant as Specified in its Charter)

TEXAS		20-3940661
(State of Incorporation)		(I.R.S. Employer Identification No.)
16825 Northchase Drive, Suite 400
Houston, Texas		77060
(Address of principal executive offices)		(Zip Code)

(281) 874-2700
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ           Accelerated filer o           Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ

Indicate the number of shares outstanding of each of the Issuer’s classes
of common stock, as of the latest practicable date.

Common Stock		29,240,768 Shares
($.01 Par Value)		(Outstanding at July 31, 2006)
(Class of Stock)

 

 

SWIFT ENERGY COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006

INDEX

								PAGE
PART I.		FINANCIAL INFORMATION
				Item 1.		Condensed Consolidated Financial Statements
						Condensed Consolidated Balance Sheets - June 30, 2006 and December 31, 2005			3
						Condensed Consolidated Statements of Income - For the Three month and Six month periods ended June 30, 2006 and 2005			4
						Condensed Consolidated Statements of Stockholders’ Equity - For the Six month period ended June 30, 2006 and year ended December 31, 2005			5
						Condensed Consolidated Statements of Cash Flows - For the Six month periods ended June 30, 2006 and 2005			6
						Notes to Condensed Consolidated Financial Statements			7
				Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
				Item 3.		Quantitative and Qualitative Disclosures About Market Risk			38
				Item 4.		Controls and Procedures			39
PART II.		OTHER INFORMATION
				Item 1.		Legal Proceedings			40
				Item 1A.		Risk Factors			40
				Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		40
				Item 3.		Defaults Upon Senior Securities		40
				Item 4.		Submission of Matters to a Vote of Security Holders			40
				Item 5.		Other Information		40
				Item 6.		Exhibits			41
SIGNATURES									42
Amended Employee Stock Purchase Plan
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certifications of CEO and CFO Pursuant to Section 906

Condensed Consolidated Balance Sheets
Swift Energy Company and Subsidiaries

		June 30, 2006				December 31, 2005
ASSETS
Current Assets:
Cash and cash equivalents		$	72,073,575			$	53,004,562
Accounts receivable-
Oil and gas sales			54,316,805				45,518,260
Joint interest owners			1,375,144				1,082,187
Other Receivables			11,626,451				3,795,080
Deferred tax asset			10,091,251				—
Other current assets			17,980,159				11,655,046
Total Current Assets			167,463,385				115,055,135
Property and Equipment:
Oil and gas, using full-cost accounting
Proved properties			1,881,432,276				1,731,866,298
Unproved properties			96,489,581				87,553,220
			1,977,921,857				1,819,419,518
Furniture, fixtures, and other equipment			24,580,227				15,313,277
			2,002,502,084				1,834,732,795
Less — Accumulated depreciation, depletion, and amortization			(830,555,121	)			(755,699,056	)
			1,171,946,963				1,079,033,739
Other Assets:
Debt issuance costs			7,434,390				8,026,780
Restricted assets			2,221,507				2,296,968
			9,655,897				10,323,748
		$	1,349,066,245			$	1,204,412,622
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued liabilities		$	45,818,560			$	51,973,004
Accrued capital costs			42,054,613				30,073,728
Accrued interest			8,506,805				8,508,196
Undistributed oil and gas revenues			9,400,634				7,866,086
Total Current Liabilities			105,780,612				98,421,014
Long-Term Debt			350,000,000				350,000,000
Deferred Income Taxes			178,888,868				129,306,891
Asset Retirement Obligation			19,811,717				19,095,368
Lease Incentive Obligation			1,847,490				271,182
Commitments and Contingencies
Stockholders’ Equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized, none outstanding			—				—
Common stock, $.01 par value, 85,000,000 shares authorized, 29,649,138 and 29,458,974 shares issued, and 29,222,052 and 29,009,530 shares outstanding, respectively			296,491				294,590
Additional paid-in capital			369,191,727				365,085,695
Treasury stock held, at cost, 427,086 and 449,444 shares, respectively			(6,124,944	)			(6,445,586	)
Unearned compensation			—				(5,849,820	)
Retained earnings			329,785,711				254,302,757
Accumulated other comprehensive loss, net of income tax			(411,427	)			(69,469	)
			692,737,558				607,318,167
		$	1,349,066,245			$	1,204,412,622

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Income
Swift Energy Company and Subsidiaries

		Three Months Ended								Six Months Ended
		06/30/06				06/30/05				06/30/06				06/30/05
Revenues:
Oil and gas sales		$	144,993,977			$	104,922,400			$	279,946,970			$	200,443,733
Price-risk management and other, net			2,183,269				(622,475	)			3,399,207				(523,124	)
			147,177,246				104,299,925				283,346,177				199,920,609
Costs and Expenses:
General and administrative, net			7,618,054				4,995,887				15,304,963				9,870,195
Depreciation, depletion and amortization			38,877,234				28,777,631				74,283,731				52,983,009
Accretion of asset retirement obligation			202,752				187,495				494,267				374,002
Lease operating costs			18,523,049				11,565,223				32,917,538				22,614,005
Severance and other taxes			15,967,270				10,708,754				30,720,876				19,911,835
Interest expense, net			5,799,187				6,286,894				11,660,106				12,630,903
			86,987,546				62,521,884				165,381,481				118,383,949
Income Before Income Taxes			60,189,700				41,778,041				117,964,696				81,536,660
Provision for Income Taxes			22,021,252				13,896,383				42,481,742				27,965,850
Net Income		$	38,168,448			$	27,881,658			$	75,482,954			$	53,570,810
Per Share Amounts
Basic: Net Income		$	1.31			$	0.98			$	2.59			$	1.90
Diluted: Net Income		$	1.27			$	0.96			$	2.52			$	1.86
Weighted Average Shares Outstanding			29,160,123				28,376,518				29,115,944				28,268,733

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Stockholders’ Equity
Swift Energy Company and Subsidiaries

						Additional																Other
		Common				Paid-In				Treasury				Unearned				Retained				Comprehensive
		Stock(1)				Capital				Stock				Compensation				Earnings				Income (Loss)				Total
Balance, December 31, 2004		$	285,706			$	343,536,298			$	(6,896,245	)		$	(1,728,585	)		$	138,524,301			$	450,665			$	474,172,140
Stock issued for benefit plans (31,424 shares)			—				435,134				450,659				—				—				—				885,793
Stock options exercised (840,847 shares)			8,409				9,804,555				—				—				—				—				9,812,964
Tax benefits from exercise of stock options			—				4,366,236				—				—				—				—				4,366,236
Employee stock purchase plan (32,495 shares)			325				642,354				—				—				—				—				642,679
Issuance of restricted stock (15,000 shares)			150				—				—				—				—				—				150
Grants of restricted stock (158,500 shares)			—				6,668,608				—				(6,072,008	)			—				—				596,600
Forfeitures of restricted stock			—				(367,490	)			—				367,490				—				—				—
Amortization of restricted stock compensation			—				—				—				1,583,283				—				—				1,583,283
Comprehensive Income:
Net income			—				—				—				—				115,778,456				—				115,778,456
Other Comprehensive Income			—				—				—				—				—				(520,134	)			(520,134	)
Total Comprehensive Income			—				—				—				—				—				—				115,258,322
Balance, December 31, 2005		$	294,590			$	365,085,695			$	(6,445,586	)		$	(5,849,820	)		$	254,302,757			$	(69,469	)		$	607,318,167
Stock issued for benefit plans (22,358 shares)			—				714,049				320,642				—				—				—				1,034,691
Stock options exercised (147,360 shares)			1,473				2,407,940				—				—				—				—				2,409,413
Adoption of SFAS No. 123R			—				(5,875,280	)			—				5,849,820				—				—				(25,460	)
Excess tax benefits from stock-based awards			—				1,407,367				—				—				—				—				1,407,367
Employee stock purchase plan (22,028 shares)			220				671,110				—				—				—				—				671,330
Issuance of restricted stock (20,776 shares)			208				(208	)			—				—				—				—				—
Amortization of stock compensation			—				4,781,054				—				—				—				—				4,781,054
Comprehensive Income:
Net income			—				—				—				—				75,482,954				—				75,482,954
Other Comprehensive Income			—				—				—				—				—				(341,958	)			(341,958	)
Total Comprehensive Income			—				—				—				—				—				—				75,140,996
Balance, June 30, 2006		$	296,491			$	369,191,727			$	(6,124,944	)		$	—			$	329,785,711			$	(411,427	)		$	692,737,558

(1) $.01 Par Value

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Cash Flows
Swift Energy Company and Subsidiaries

		Six Months Ended June 30,
		2006				2005
Cash Flows from Operating Activities:
Net income		$	75,482,954			$	53,570,810
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation, depletion, and amortization			74,283,731				52,983,009
Accretion of asset retirement obligation			494,267				374,002
Deferred income taxes			41,098,065				27,565,850
Stock-based compensation expense			3,241,254				407,872
Other			(2,817,045	)			(378,632	)
Change in assets and liabilities-
Increase in accounts receivable			(9,091,502	)			(4,738,848	)
Increase in accounts payable and accrued liabilities			516,464				113,433
Increase in income taxes payable			548,676				88,684
Decrease in accrued interest			(1,391	)			(702,449	)
Net Cash Provided by Operating Activities			183,755,473				129,283,731
Cash Flows from Investing Activities:
Additions to property and equipment			(183,855,738	)			(101,766,582	)
Proceeds from the sale of property and equipment			20,305,525				2,339,634
Net cash distributed as operator of oil and gas properties			(5,910,556	)			(3,840,937	)
Net cash received as operator of partnerships and joint ventures			225,520				243,286
Other			572,334				50,105
Net Cash Used in Investing Activities			(168,662,915	)			(102,974,494	)
Cash Flows from Financing Activities:
Payments of bank borrowings			—				(7,500,000	)
Net proceeds from issuances of common stock			3,080,743				3,998,935
Excess tax benefits from stock-based awards			895,712				—
Net Cash Provided by (Used in) Financing Activities			3,976,455				(3,501,065	)
Net Increase in Cash and Cash Equivalents		$	19,069,013			$	22,808,172
Cash and Cash Equivalents at Beginning of Period			53,004,562				4,920,118
Cash and Cash Equivalents at End of Period		$	72,073,575			$	27,728,290
Supplemental Disclosures of Cash Flows Information:
Cash paid during period for interest, net of amounts capitalized		$	11,078,838			$	12,798,576
Cash paid during period for income taxes		$	835,000			$	400,000

See accompanying notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SWIFT ENERGY COMPANY AND SUBSIDIARIES

(1) General Information

     The condensed consolidated financial statements included herein have been prepared by Swift Energy Company and reflect necessary adjustments, all of which were of a recurring nature, and are in the opinion of our management necessary for a fair presentation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. We believe that the disclosures presented are adequate to allow the information presented not to be misleading. The condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the latest Annual Report on Form 10-K as filed with the Securities and Exchange Commission.

(2) Summary of Significant Accounting Policies

     Holding Company Structure

     In December 2005, we implemented a holding company structure pursuant to Texas and federal law in a manner designed to be a non-taxable transaction. The new parent holding company assumed the Swift Energy Company name and its common stock continues to trade on the New York and NYSE Arca (formerly the Pacific Stock Exchange) Exchanges. The purposes of this new holding company structure are to separate Swift Energy’s domestic and international operations to better reflect management practices, to improve our economics, and to provide greater administrative and organizational flexibility. Under the new organizational structure, four new subsidiaries were formed with the Texas parent holding company wholly owning three Delaware subsidiaries, which in turn wholly own Swift Energy’s operating subsidiaries. Swift Energy Operating, LLC is the operator of record for Swift Energy’s domestic properties. Swift Energy’s name, charter, bylaws, officers, board of directors, authorized shares and shares outstanding remain substantially identical. The Company’s international operations continue to be conducted through Swift Energy International, Inc. Swift Energy amended its bank credit agreement, debt indentures and various other plans and documents to accommodate the internal reorganization, but the Company’s day-to-day conduct of business was not impacted. Accordingly, there was no impact on our financial position or results of operations.

     Property and Equipment

     We follow the “full-cost” method of accounting for oil and gas property and equipment costs. Under this method of accounting, all productive and nonproductive costs incurred in the exploration, development, and acquisition of oil and gas reserves are capitalized. Such costs may be incurred both prior to and after the acquisition of a property and include lease acquisitions, geological and geophysical services, drilling, completion, and equipment. Internal costs incurred that are directly identified with exploration, development, and acquisition activities undertaken by us for our own account, and which are not related to production, general corporate overhead, or similar activities, are also capitalized. For the six months ended June 30, 2006 and 2005, such internal costs capitalized totaled $12.6 million and $8.8 million, respectively. Interest costs are also capitalized to unproved oil and gas properties. For the six months ended June 30, 2006 and 2005, capitalized interest on unproved properties totaled $4.3 million and $3.5 million, respectively. Interest not capitalized and general and administrative costs related to production and general overhead are expensed as incurred.

     No gains or losses are recognized upon the sale or disposition of oil and gas properties, except in transactions involving a significant amount of reserves or where the proceeds from the sale of oil and gas properties would significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center. Internal costs associated with selling properties are expensed as incurred.

     Future development costs are estimated property-by-property based on current economic conditions and

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

are amortized to expense as our capitalized oil and gas property costs are amortized.

     We compute the provision for depreciation, depletion, and amortization of oil and gas properties by the unit-of-production method. Under this method, we compute the provision by multiplying the total unamortized costs of oil and gas properties—including future development costs, gas processing facilities, and both capitalized asset retirement obligations and undiscounted abandonment costs of wells to be drilled, net of salvage values, but excluding costs of unproved properties—by an overall rate determined by dividing the physical units of oil and gas produced during the period by the total estimated units of proved oil and gas reserves at the beginning of the period. This calculation is done on a country-by-country basis, and the period over which we will amortize these properties is dependent on our production from these properties in future years. Furniture, fixtures, and other equipment, held at cost, are depreciated by the straight-line method at rates based on the estimated useful lives of the property, which range between three and 20 years. Repairs and maintenance are charged to expense as incurred. Renewals and betterments are capitalized.

     Geological and geophysical (G&G) costs incurred on developed properties are recorded in “Proved properties” and therefore subject to amortization. G&G costs incurred that are directly associated with specific unproved properties are capitalized in “Unproved properties” and evaluated as part of the total capitalized costs associated with a prospect. The cost of unproved properties not being amortized is assessed quarterly, on a country-by-country basis, to determine whether such properties have been impaired. In determining whether such costs should be impaired, we evaluate current drilling results, lease expiration dates, current oil and gas industry conditions, international economic conditions, capital availability, foreign currency exchange rates, the political stability in the countries in which we have an investment, and available geological and geophysical information. Any impairment assessed is added to the cost of proved properties being amortized. To the extent costs accumulate in countries where there are no proved reserves, any costs determined by management to be impaired are charged to expense.

     Full-Cost Ceiling Test.

     At the end of each quarterly reporting period, the unamortized cost of oil and gas properties, including gas processing facilities, capitalized asset retirement obligations, net of related salvage values and deferred income taxes, and excluding the recognized asset retirement obligation liability is limited to the sum of the estimated future net revenues from proved properties, excluding cash outflows from recognized asset retirement obligations, including future development and abandonment costs of wells to be drilled, using period-end prices, adjusted for the effects of hedging, discounted at 10%, and the lower of cost or fair value of unproved properties, adjusted for related income tax effects (“Ceiling Test”). Our hedges at June 30, 2006 consisted of crude oil price floors with strike prices lower than the period end price but did not materially affect prices used in this calculation. This calculation is done on a country-by-country basis.

     The calculation of the Ceiling Test and provision for depreciation, depletion, and amortization (“DD&A”) is based on estimates of proved reserves. There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting the future rates of production, timing, and plan of development. The accuracy of any reserves estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing, and production subsequent to the date of the estimate may justify revision of such estimates. Accordingly, reserves estimates are often different from the quantities of oil and gas that are ultimately recovered.

     Given the volatility of oil and gas prices, it is reasonably possible that our estimate of discounted future net cash flows from proved oil and gas reserves could change in the near term. If oil and gas prices decline from our period-end prices used in the Ceiling Test, even if only for a short period, it is possible that non-cash write-downs of oil and gas properties could occur in the future.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

     Principles of Consolidation

     The accompanying consolidated financial statements include the accounts of Swift Energy Company and its wholly owned subsidiaries, which are engaged in the exploration, development, acquisition, and operation of oil and natural gas properties, with a focus on inland waters and onshore oil and natural gas reserves in Louisiana and Texas, as well as onshore oil and natural gas reserves in New Zealand. Our undivided interests in gas processing plants, and investments in oil and gas limited partnerships where we are the general partner are accounted for using the proportionate consolidation method, whereby our proportionate share of each entity’s assets, liabilities, revenues, and expenses are included in the appropriate classifications in the accompanying consolidated financial statements. Intercompany balances and transactions have been eliminated in preparing the accompanying consolidated financial statements.

     Revenue Recognition

     Oil and gas revenues are recognized when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectibility of the revenue is probable. Processing costs for natural gas and natural gas liquids (NGLs) that are paid in-kind are deducted from revenues. The Company uses the entitlement method of accounting in which the Company recognizes its ownership interest in production as revenue. If our sales exceed our ownership share of production, the natural gas balancing payables are reported in “Accounts payable and accrued liabilities” on the accompanying balance sheet. Natural gas balancing receivables are reported in “Other current assets” on the accompanying balance sheet when our ownership share of production exceeds sales. As of June 30, 2006, we did not have any material natural gas imbalances.

     Accounts Receivable

     We assess the collectibility of accounts receivable, and based on our judgment, we accrue a reserve when we believe a receivable may not be collected. At both June 30, 2006 and December 31, 2005, we had an allowance for doubtful accounts of less than $0.1 million. The allowance for doubtful accounts has been deducted from the total “Accounts receivable” balances on the accompanying balance sheets. Receivables related to insurance reimbursement are computed in accordance with applicable accounting guidance; and we monitor our costs incurred and their collectibility under our insurance policies and believe all amounts recorded are recoverable.

     Inventories

     We value inventories at the lower of cost or market value. Cost of crude oil inventory is determined using the weighted average method and all other inventory is accounted for using the first in, first out method (“FIFO”). The major categories of inventories, which are included in “Other current assets” on the accompanying balance sheets, are shown as follows:

		Balance at				Balance at December
		June 30, 2006				31, 2005
		(000's)				(000's)
Materials, Supplies and Tubulars		$	11,754			$	8,494
Crude Oil			1,757				916
Total		$	13,511			$	9,410

     Use of Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires us to make estimates and assumptions that affect the reported amount of

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

certain assets and liabilities and the reported amounts of certain revenues and expenses during each reporting period. We believe our estimates and assumptions are reasonable; however, such estimates and assumptions are subject to a number of risks and uncertainties that may cause actual results to differ materially from such estimates. Significant estimates underlying these financial statements include:

	•		the estimated quantities of proved oil and natural gas reserves used to compute depletion of oil and natural gas properties and the related present value of estimated future net cash flows there-from,
	•		accruals related to oil and gas revenues, capital expenditures and lease operating expenses,
	•		estimates of insurance recoveries related to property damage,
	•		estimates of stock compensation expense,
	•		estimates of our ownership in properties prior to final division of interest determination,
	•		the estimated future cost and timing of asset retirement obligations, and
	•		estimates made in our income tax calculations.

     While we are not aware of any material revisions to any of our estimates, there will likely be future revisions to our estimates resulting from matters such as changes in ownership interests, payouts, joint venture audits, re-allocations by purchasers or pipelines, or other corrections and adjustments common in the oil and gas industry, many of which require retroactive application. These types of adjustments cannot be currently estimated and will be recorded in the period during which the adjustment occurs.

     Income Taxes

     Under SFAS No. 109, “Accounting for Income Taxes,” deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities, given the provisions of the enacted tax laws. The effective tax rate for the six months ended June 30, 2006 and 2005 was higher than the U.S. Federal statutory tax rate primarily due to state income taxes, partially offset by reductions from the New Zealand statutory rate attributable to the currency effect on the New Zealand deferred tax calculation. As of June 30, 2006, we believe we will utilize all of our U.S. federal operating loss carryforwards during the 2006 tax year, and these amounts are classified as current in the “Deferred tax asset” account on the accompanying balance sheet.

     Accounts Payable and Accrued Liabilities

     Included in “Accounts payable and accrued liabilities,” on the accompanying balance sheets, at June 30, 2006 and December 31, 2005 are liabilities of approximately $9.0 million and $9.9 million, respectively, representing the amount by which checks issued, but not presented to the Company’s banks for collection, exceeded balances in the applicable disbursement bank accounts.

     Accumulated Other Comprehensive Income (Loss), Net of Income Tax

     We follow the provisions of SFAS No. 130, “Reporting Comprehensive Income,” which establishes standards for reporting comprehensive income. In addition to net income, comprehensive income or loss includes all changes to equity during a period, except those resulting from investments and distributions to the owners of the Company. At June 30, 2006, we recorded $0.4 million, net of taxes of $0.2 million, of derivative losses in “Accumulated other comprehensive income (loss), net of income tax” on the accompanying balance sheet. The components of accumulated other comprehensive Income (loss) and related tax effects for 2006 were as follows:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

		Gross Value				Tax Effect				Net of Tax Value
Other comprehensive loss at December 31, 2005		$	(110,094	)		$	40,625			$	(69,469	)
Change in fair value of cash flow hedges			(2,570,637	)			951,136				(1,619,501	)
Effect of cash flow hedges settled during the period			2,028,708				(751,165	)			1,277,543
Other comprehensive loss at June 30, 2006		$	(652,023	)		$	240,596			$	(411,427	)

     Total comprehensive income was $37.3 million and $28.1 million for the second quarters of 2006 and 2005, respectively. Total comprehensive income was $75.1 and $52.8 million for the first six months of 2006 and 2005, respectively.

     Price-Risk Management Activities

     The Company follows SFAS No. 133, which requires that changes in the derivative’s fair value are recognized currently in earnings unless specific hedge accounting criteria are met. The statement also establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) is recorded in the balance sheet as either an asset or a liability measured at its fair value. Hedge accounting for a qualifying hedge allows the gains and losses on derivatives to offset related results on the hedged item in the income statements and requires that a company formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Changes in the fair value of derivatives that do not meet the criteria for hedge accounting, and the ineffective portion of the hedge, are recognized currently in income.

     We have a price-risk management policy to use derivative instruments to protect against declines in oil and gas prices, mainly through the purchase of price floors and collars. During the second quarters of 2006 and 2005, we recognized a net gain of $1.1 million and a net loss of $0.4 million, respectively, relating to our derivative activities. During the first six months of 2006 and 2005, we recognized a net gain of $2.0 million and a net loss of $0.5 million, respectively, relating to our derivative activities. This activity is recorded in “Price-risk management and other, net” on the accompanying statements of income. At June 30, 2006, the Company had recorded $0.4 million, net of taxes of $0.2 million, of derivative losses in “Accumulated other comprehensive income (loss), net of income tax” on the accompanying balance sheet. This amount represents the change in fair value for the effective portion of our hedging transactions that qualified as cash flow hedges. The amount of ineffectiveness reported in “Price-risk management and other, net” for the first six months of 2006 and 2005 were not material. We expect to reclassify all amounts currently held in “Accumulated other comprehensive income (loss), net of income tax” into the statement of income within the next six months when the forecasted sale of hedged production occurs.

     When we entered into these transactions discussed above, they were designated as a hedge of the variability in cash flows associated with the forecasted sale of oil and natural gas production. Changes in the fair value of a hedge that is highly effective and is designated and documented and qualifies as a cash flow hedge, to the extent that the hedge is effective, are recorded in “Accumulated other comprehensive income (loss), net of income tax.” When the hedged transactions are recorded upon the actual sale of oil and natural gas, these gains or losses are reclassified from “Accumulated other comprehensive income (loss), net of income tax” and recorded in “Price-risk management and other, net” on the accompanying statement of income. The fair value of our derivatives is computed using the Black-Scholes-Merton option pricing model and is periodically verified against quotes from brokers.

     At June 30, 2006, we had in place price floors in effect for July 2006 through the December 2006 contract month for oil that cover a portion of our domestic oil production for July 2006 to December 2006. The oil price floors cover notional volumes of 1,350,000 barrels with a weighted average floor price of $63.91 per barrel. Our oil price floors in place at June 30, 2006 are expected to cover approximately 35% to 40% of our

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

estimated domestic oil production from July 2006 to December 2006. The fair value of these instruments at June 30, 2006, was $0.5 million and is recognized on the accompanying balance sheet in “Other current assets.”

     Supervision Fees

     Consistent with industry practice, we charge a supervision fee to the wells we operate including our wells in which we own up to a 100% working interest. Supervision fees are recorded as a reduction to general and administrative, net based on our estimate of the costs incurred to operate the wells. The total amount of supervision fees charged to the wells we operate was $4.2 million and $3.8 million in the first six of months of 2006 and 2005, respectively.

     Asset Retirement Obligation

     In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” The statement requires entities to record the fair value of a liability for legal obligations associated with the retirement obligations of tangible long-lived assets in the period in which it is incurred. When the liability is initially recorded, the carrying amount of the related long-lived asset is increased. The liability is discounted from the year the well is expected to deplete. Over time, accretion of the liability is recognized each period, and the capitalized cost is depreciated on a unit-of-production basis over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement which is included in the full cost pool. This standard requires us to record a liability for the fair value of our dismantlement and abandonment costs, excluding salvage values. Based on our experience and analysis of the oil and gas services industry, we have not factored a market risk premium into our asset retirement obligation. SFAS No. 143 was adopted by us effective January 1, 2003. The following provides a roll-forward of our asset retirement obligation:

		2006				2005
Asset Retirement Obligation recorded as of January 1		$	19,356,367			$	17,639,136
Accretion expense for the six months ended June 30			494,267				374,002
Liabilities incurred for new wells and facilities construction			310,657				54,622
Reductions due to sold, or plugged and abandoned wells			—				(277,604	)
Decrease due to currency exchange rate fluctuations			(88,574	)			(19,087	)
Asset Retirement Obligation as of June 30.		$	20,072,717			$	17,771,069

     At both June 30, 2006 and December 31, 2005, approximately $0.3 million of our asset retirement obligation is classified as a current liability in “Accounts payable and accrued liabilities” on the accompanying balance sheets.

     New Accounting Pronouncements

     In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections: a replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS No. 154 requires voluntary changes in accounting principles to be applied retrospectively, unless it is impracticable. SFAS No. 154’s retrospective application requirement replaces APB 20’s requirement to recognize most voluntary changes in accounting principle by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. If retrospective application for all prior periods is impracticable, the method used to report the change and the reason the retrospective application is impracticable are to be disclosed.

     Under SFAS No. 154, retrospective application will be the transition method in the unusual instance that a newly issued accounting pronouncement does not provide specific transition guidance. It is expected that many pronouncements will specify transition methods other than retrospective. SFAS No. 154 is effective

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

for accounting changes made in fiscal years beginning after December 15, 2005, and the adoption of this statement had no impact on our financial position or results of operations.

     In July 2006, the FASB issued FASB Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” This Interpretation provides guidance for recognizing and measuring uncertain tax positions, as defined in SFAS No. 109, “Accounting for Income Taxes.” FIN No. 48 prescribes a threshold condition that a tax position must meet for any of the benefit of the uncertain tax position to be recognized in the financial statements. Guidance is also provided regarding derecognition, classification and disclosure of these uncertain tax positions. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company has not yet determined what impact, if any, this Interpretation will have on its financial position or results of operations.

(3) Share-Based Compensation

     We have various types of share-based compensation plans. Refer to Note 6 of our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005, for additional information related to these share-based compensation plans.

     Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123 (R), “Share-Based Payment” (SFAS No. 123R) utilizing the modified prospective approach. Prior to the adoption of SFAS No. 123R, we accounted for stock option grants in accordance with Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees” (the intrinsic value method), and accordingly, recognized no compensation expense for employee stock option grants.

     Under the modified prospective approach, SFAS No. 123R applies to new awards and to awards that were outstanding on January 1, 2006 as well as those that are subsequently modified, repurchased or cancelled. Under the modified prospective approach, compensation cost recognized for the six months ended June 30, 2006 includes compensation cost for all share-based awards granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, and compensation cost for all share-based awards granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. Prior periods were not restated to reflect the impact of adopting the new standard.

     As a result of adopting SFAS No. 123R on January 1, 2006, our income before taxes, net income and basic and diluted earnings per share for the three months ended June 30, 2006, were $0.8 million, $0.5 million, $0.02, and $0.02 lower, respectively, than if we had continued to account for share-based compensation under APB Opinion No. 25 for our stock option grants. For the six months ended June 30, 2006, income before taxes, net income and basic and diluted earnings per share were $1.9 million, $1.2 million, $0.04, and $0.04 lower, respectively. Upon adoption of SFAS 123R, we recorded an immaterial cumulative effect of a change in accounting principle as a result of our change in policy from recognizing forfeitures as they occur to one recognizing expense based on our expectation of the amount of awards that will vest over the requisite service period for our restricted stock awards. This amount was recorded in “General and Administrative, net” in the accompanying condensed consolidated statements of operations.

     We receive a tax deduction for certain stock option exercises during the period the options are exercised, generally for the excess of the price at which the stock is sold over the exercise price of the options. In addition, we receive an additional tax deduction when restricted stock vests at a higher value than the value used to recognize compensation expense at the date of grant. Prior to adoption of SFAS No. 123R, we reported all tax benefits resulting from the award of equity instruments as operating cash flows in our condensed consolidated statements of cash flows. In accordance with SFAS No. 123R, we are required to report excess tax benefits from the award of equity instruments as financing cash flows, these benefits totaled $0.3 million and $0.9 million for the three and six months ended June 30, 2006, respectively.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

     Net cash proceeds from the exercise of stock options were $2.4 million for the six months ended June 30, 2006. The actual income tax benefit realized from stock option exercises was $1.3 million for the same period.

     Stock compensation expense for both stock options and restricted stock issued to both employees and non-employees is recorded in “General and Administrative, net” in the accompanying condensed consolidated statements of income, and was $1.4 million and $0.3 million for the three months ended June 30, 2006 and 2005, respectively. Stock compensation expense for the six months ended June 30, 2006, and 2005 was $3.1 million and $0.4 million. We view all awards of stock compensation as a single award with an expected life equal to the average expected life of component awards and amortize the award on a straight-line basis over the life of the award.

     The following table illustrates the effect on June 30, 2005 operating results and per share information had the Company accounted for share-based compensation in accordance with SFAS No. 123R. Our net income and earnings per share would have been adjusted to the following pro forma amounts:

						Three Months				Six Months
						Ended				Ended
						June 30, 2005				June 30, 2005
Net Income:				As Reported		$	27,881,658			$	53,570,810
				Stock-based employee compensation expense determined under fair value method for all awards, net of tax			(1,113,938	)			(1,973,089	)
				Pro Forma		$	26,767,720			$	51,597,721
Basic EPS:				As Reported		$	.98			$	1.90
				Pro Forma		$	.94			$	1.83
Diluted EPS:				As Reported		$	.96			$	1.86
				Pro Forma		$	.92			$	1.79

     Stock Options

     We use the Black-Scholes-Merton option pricing model to estimate the fair value of stock option awards with the following weighted-average assumptions for the indicated periods.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Dividend yield			0	%			0	%			0	%			0	%
Expected volatility			39	%			43	%			40	%			43	%
Risk-free interest rate			5.1	%			3.9	%			4.9	%			3.8	%
Expected life of options (in years)			1.8				3.8				5.6				3.5
Weighted-average grant-date fair value		$	9.71			$	11.16			$	19.33			$	10.27

     The expected term has been calculated using the Securities and Exchange Commission Staff’s shortcut approach from Staff Accounting Bulletin No. 107. We have analyzed historical volatility and based on an analysis of all relevant factors use a three-year period to estimate expected volatility of our stock option grants.

     At June 30, 2006, there was $5.1 million of unrecognized compensation cost related to stock options which is expected to be recognized over a weighted-average period of 1.9 years.

     The following table represents stock option activity for the six months ended June 30, 2006:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

		June 30, 2006
						Wtd. Avg.				Wtd. Avg.
		Shares				Exer. Price				Contract Life
Options outstanding, beginning of period			2,118,179			$	21.28
Options granted			163,755			$	43.57
Options canceled			(45,180	)		$	21.37
Options exercised			(176,729	)		$	20.45
Options outstanding, end of period			2,060,025			$	23.12			5.7 Yrs
Options exercisable, end of period			1,235,041			$	22.46			4.5 Yrs

     The aggregate intrinsic value of options outstanding at June 30, 2006 was $55.7 million, and the aggregate intrinsic value of options exercisable was $25.3 million. Total intrinsic value of options exercised was $3.9 million for the six months ended June 30, 2006.

     Restricted Stock

     The plans, as described in Note 6 of our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005, allow for the issuance of restricted stock awards that may not be sold or otherwise transferred until certain restrictions have lapsed. The unrecognized compensation cost related to these awards is expected to be expensed over the period the restrictions lapse (generally one to five years).

     The compensation expense for these awards was determined based on the market price of our stock at the date of grant applied to the total number of shares that were anticipated to fully vest. As of June 30, 2006, we have unrecognized compensation expense of $9.6 million associated with these awards which are expected to be recognized over a weighted-average period of 2.3 years.

     The following table represents restricted stock activity for the six months ended June 30, 2006:

		June 30, 2006
						Wtd. Avg.
						Grant
		Shares				Price
Restricted shares outstanding, beginning of period			236,950			$	34.79
Restricted shares granted			141,330			$	43.61
Restricted shares canceled			(18,380	)		$	38.70
Restricted shares vested			(20,776	)		$	27.20
Restricted shares outstanding, end of period			339,124			$	38.83

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

(4) Earnings Per Share

     Basic earnings per share (“Basic EPS”) have been computed using the weighted average number of common shares outstanding during the respective periods. Diluted earnings per share (“Diluted EPS”) for all periods also assumes, as of the beginning of the period, exercise of stock options and restricted stock grants to employees using the treasury stock method. Certain of our stock options, that could potentially dilute Basic EPS in the future, were antidilutive for periods ended June 30, 2006 and 2005, and are discussed below.

     The following is a reconciliation of the numerators and denominators used in the calculation of Basic and Diluted EPS for the periods ended June 30, 2006 and 2005:

		Three Months Ended June 30,
		2006												2005
		Net								Per Share				Net								Per Share
		Income				Shares				Amount				Income				Shares				Amount
Basic EPS:
Net Income and Share Amounts		$	38,168,448				29,160,123			$	1.31			$	27,881,658				28,376,518			$	0.98
Dilutive Securities:
Restricted Stock			—				97,343								—				30,579
Stock Options			—				770,761								—				601,835
Diluted EPS:
Net Income and Assumed Share Conversions		$	38,168,448				30,028,227			$	1.27			$	27,881,658				29,008,932			$	0.96

		Six Months Ended June 30,
		2006												2005
		Net								Per Share				Net								Per Share
		Income				Shares				Amount				Income				Shares				Amount
Basic EPS:
Net Income and Share Amounts		$	75,482,954				29,115,944			$	2.59			$	53,570,810				28,268,733			$	1.90
Dilutive Securities:
Restricted Stock			—				99,189								—				25,781
Stock Options			—				781,536								—				554,986
Diluted EPS:
Net Income and Assumed Share Conversions		$	75,482,954				29,996,669			$	2.52			$	53,570,810				28,849,500			$	1.86

     Options to purchase approximately 2.1 million shares at an average exercise price of $23.12 were outstanding at June 30, 2006, while options to purchase 2.6 million shares at an average exercise price of $20.10 were outstanding at June 30, 2005. Approximately 1.5 million and 0.3 million stock options and non-vested shares of restricted stock were not included in the computation of Diluted EPS for the three-month periods ended June 30, 2006, and 2005, respectively, and 1.5 million and 0.7 million options and non-vested shares of restricted stock were not included in the computation of Diluted EPS for the six-month periods ended June 30, 2006, and 2005, respectively, because these options were antidilutive in that the option price was greater than the average closing market price for the common shares during those periods.

(5) Long-Term Debt

     Our long-term debt, including the current portion, as of June 30, 2006 and December 31, 2005, was as follows (in thousands):

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

		June 30,				December 31,
		2006				2005
Bank Borrowings		$	—			$	—
7-5/8% senior notes due 2011			150,000				150,000
9-3/8% senior subordinated notes due 2012			200,000				200,000
Long-Term Debt		$	350,000			$	350,000

     Bank Borrowings

     At June 30, 2006, we had no outstanding borrowings under our $400.0 million credit facility with a syndicate of ten banks that has a borrowing base of $250.0 million and expires in October 2008. The interest rate is either (a) the lead bank’s prime rate (8.25% at June 30, 2006) or (b) the adjusted London Interbank Offered Rate (“LIBOR”) plus the applicable margin depending on the level of outstanding debt. The applicable margin is based on the ratio of the outstanding balance to the last calculated borrowing base. In June 2004, we renewed this credit facility, increasing the facility to $400 million from $300 million and extending its expiration to October 1, 2008 from October 1, 2005. The other terms of the credit facility, such as the borrowing base amount and commitment amount, stayed largely the same. The covenants related to this credit facility changed somewhat with the extension of the facility and are discussed below. We incurred $0.4 million of debt issuance costs related to the renewal of this facility in 2004, which is included in “Debt issuance costs” on the accompanying balance sheets and will be amortized to interest expense over the life of the facility.

     The terms of our credit facility include, among other restrictions, a limitation on the level of cash dividends (not to exceed $5.0 million in any fiscal year), a remaining aggregate limitation on purchases of our stock of $15.0 million, requirements as to maintenance of certain minimum financial ratios (principally pertaining to adjusted working capital ratios and EBITDAX), and limitations on incurring other debt or repurchasing our 7-5/8% senior notes due 2011 or 9-3/8% senior subordinated notes due 2012. Since inception, no cash dividends have been declared on our common stock. We are currently in compliance with the provisions of this agreement. The credit facility is secured by our domestic oil and gas properties. We have also pledged 65% of the stock in our two New Zealand subsidiaries as collateral for this credit facility. The borrowing base is re-determined at least every six months and was reconfirmed by our bank group at $250.0 million effective May 1, 2006. We requested that the commitment amount with our bank group be reduced to $150.0 million effective May 9, 2003. Under the terms of the credit facility, we can increase this commitment amount back to the total amount of the borrowing base at our discretion, subject to the terms of the credit agreement. The next scheduled borrowing base review is in November 2006.

     Interest expense on the credit facility, including commitment fees and amortization of debt issuance costs, totaled $0.2 million and $0.2 million for the three months ended June 30, 2006 and 2005, respectively, and $0.4 million and $0.6 million for the six months ended June 30, 2006 and 2005, respectively. The amount of commitment fees included in interest expense, net was $0.1 million for both the three months ended June 30, 2006 and 2005, respectively, and $0.3 million and $0.3 million for both the six months ended June 30, 2006 and 2005, respectively.

     Senior Notes Due 2011

     These notes consist of $150.0 million of 7-5/8% senior notes due 2011, which were issued on June 23, 2004 at 100% of the principal amount and will mature on July 15, 2011. The notes are senior unsecured obligations that rank equally with all of our existing and future senior unsecured indebtedness, are effectively subordinated to all our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, including borrowing under our bank credit facility, and rank senior to all of our existing and future subordinated indebtedness. Interest on these notes is payable semi-annually on January 15 and July 15, and commenced on January 15, 2005. On or after July 15, 2008, we may redeem some or all of the notes, with certain restrictions, at a redemption price, plus accrued and unpaid interest, of 103.813% of principal, declining to 100% in 2010 and thereafter. In addition, prior to July 15, 2007, we may redeem up to

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

35% of the notes with the net proceeds of qualified offerings of our equity at a redemption price of 107.625% of the principal amount of the notes, plus accrued and unpaid interest. We incurred approximately $3.9 million of debt issuance costs related to these notes, which is included in “Debt issuance costs” on the accompanying balance sheets and will be amortized to interest expense, net over the life of the notes using the effective interest method. Upon certain changes in control of Swift Energy, each holder of notes will have the right to require us to repurchase all or any part of the notes at a purchase price in cash equal to 101% of the principal amount, plus accrued and unpaid interest to the date of purchase. The terms of these notes include, among other restrictions, a limitation on how much of our own common stock we may repurchase. We are currently in compliance with the provisions of the indenture governing these senior notes.

     Interest expense on the 7-5/8% senior notes due 2011, including amortization of debt issuance costs totaled $3.0 million for both the three months ended June 30, 2006 and 2005, respectively, and $6.0 million and $5.9 million for the six months ended June 30, 2006 and 2005, respectively.

     Senior Subordinated Notes Due 2012

     These notes consist of $200.0 million of 9-3/8% senior subordinated notes due May 2012, which were issued on April 16, 2002, and will mature on May 1, 2012. The notes are unsecured senior subordinated obligations and are subordinated in right of payment to all our existing and future senior debt, including our bank credit facility and 7-5/8% senior notes. Interest on these notes is payable semiannually on May 1 and November 1, and commenced on November 1, 2002. On or after May 1, 2007, we may redeem these notes, with certain restrictions, at a redemption price, plus accrued and unpaid interest, of 104.688% of principal, declining to 100% in 2010. In addition, prior to May 1, 2005, we could have redeemed up to 33.33% of these notes with the net proceeds of qualified offerings of our equity at 109.375% of the principal amount of these notes, plus accrued and unpaid interest. Upon certain changes in control of Swift Energy, each holder of these notes will have the right to require us to repurchase the notes at a purchase price in cash equal to 101% of the principal amount, plus accrued and unpaid interest to the date of purchase. The terms of these notes include, among other restrictions, a limitation on how much of our own common stock we may repurchase. We are currently in compliance with the provisions of the indenture governing these subordinated notes.

     Interest expense on the 9-3/8% senior subordinated notes due 2012, including amortization of debt issuance costs totaled $4.8 million for both the three months ended June 30, 2006 and 2005, respectively, and $9.6 million for both the six months ended June 30, 2006 and 2005.

     The aggregate maturities on our long-term debt are $150 million for 2011 and $200 million for 2012.

     We have capitalized interest on our unproved properties in the amount of $2.2 million and $1.7 million for the three months ended June 30, 2006 and 2005, respectively, and $4.3 million and $3.5 million for the six months ended June 30, 2006 and 2005, respectively.

(6) Foreign Activities

     As of June 30, 2006, our gross capitalized oil and gas property costs in New Zealand totaled approximately $321.5 million. Approximately $298.8 million has been included in the “Proved properties” portion of our oil and gas properties, while $22.7 million is included as “Unproved properties.” Our functional currency in New Zealand is the U.S. Dollar. Net assets of our New Zealand operations total $252.9 million at June 30, 2006.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

(7) Acquisitions and Dispositions

     In November 2005, we acquired interests in the South Bearhead Creek field in Central Louisiana. This field is approximately 50 miles south of our Masters Creek field. We paid approximately $24.3 million in cash for these interests. After taking into account internal acquisition costs of $2.6 million, and assumed liabilities of $1.4 million, our total cost was $28.3 million. We allocated $26.2 million of the acquisition price to “Proved properties,” $2.5 million to “Unproved properties,” and recorded a liability for $0.4 million to “Asset retirement obligation” on our accompanying consolidated balance sheet. In December 2005, we acquired additional interests in this field. We paid approximately $4.6 million in cash for these additional interests. After taking into account internal acquisition costs of $0.6 million, our total cost was $5.2 million. We allocated $4.9 million of the acquisition price to “Proved properties,” $0.4 million to “Unproved properties,” and recorded a liability for $0.1 million to “Asset retirement obligation” on our accompanying consolidated balance sheets. These acquisitions were accounted for by the purchase method of accounting. We made these acquisitions to increase our exploration and development opportunities in this area. The revenues and expenses from these properties have been included in our accompanying consolidated statements of income from the date of acquisition forward, however, given the acquisitions were in November and December 2005, these amounts were immaterial for 2005.

     In April 2006, we sold our minority interests in the Brookeland and Masters Creek natural gas processing plants for approximately $20.3 million in cash. Under the “full-cost” method of accounting for oil and gas property and equipment costs, the proceeds of this sale were applied against our oil and gas properties and equipment balance, and no gain or loss was recognized on this transaction.

(8) Condensed Consolidating Financial Information

     In December 2005, we amended the indenture for our 9-3/8% Senior Subordinated Notes due 2012 and our 7-5/8% Senior Notes due 2011 to reflect our new holding company organizational structure (as discussed in Note 2). As part of this restructuring our indentures were amended so that both Swift Energy Company and Swift Energy Operating, LLC (a wholly owned indirect subsidiary of Swift Energy Company) became co-obligors of these senior notes and senior subordinated debt. The co-obligations are full and unconditional and are joint and several. Prior to this restructure, Swift Energy Company was the sole obligor. The following is condensed consolidating financial information for Swift Energy Company, Swift Energy Operating, LLC, and significant subsidiaries:

Condensed Consolidating Balance Sheets

(in 000's)		June 30, 2006
		Swift Energy Co.				Swift Energy
		(Parent and				Operating, LLC				Other								Swift Energy Co.
		Co-obligor)				(Co-obligor)				Subsidiaries				Eliminations				Consolidated
ASSETS
Current assets		$	—			$	148,823			$	18,640			$	—			$	167,463
Property and equipment			—				940,775				231,172				—				1,171,947
Investment in subsidiaries (equity method)			692,738				—				491,017				(1,183,755	)			—
Other assets			—				39,962				598				(30,904	)			9,656
Total assets		$	692,738			$	1,129,560			$	741,427			$	(1,214,658	)		$	1,349,066
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities		$	—			$	96,681			$	9,100			$	—			$	105,781
Long-term liabilities			—				541,862				39,590				(30,904	)			550,548
Stockholders’ equity			692,738				491,017				692,738				(1,183,755	)			692,738
Total liabilities and stockholders’ equity		$	692,738			$	1,129,560			$	741,427			$	(1,214,658	)		$	1,349,066

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

(in 000's)		December 31, 2005
		Swift Energy Co.				Swift Energy
		(Parent and				Operating, LLC				Other								Swift Energy Co.
		Co-obligor)				(Co-obligor)				Subsidiaries				Eliminations				Consolidated
ASSETS
Current assets		$	—			$	92,788			$	22,267			$	—			$	115,055
Property and equipment			—				862,717				216,316				—				1,079,034
Investment in subsidiaries (equity method)			607,318				—				410,612				(1,017,930	)			—
Other assets			—				31,955				682				(22,313	)			10,324
Total assets		$	607,318			$	987,460			$	649,877			$	(1,040,243	)		$	1,204,413
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities		$	—			$	85,472			$	12,949			$	—			$	98,421
Long-term liabilities			—				491,376				29,610				(22,313	)			498,674
Stockholders’ equity			607,318				410,612				607,318				(1,017,930	)			607,318
Total liabilities and stockholders’ equity		$	607,318			$	987,460			$	649,877			$	(1,040,243	)		$	1,204,413

Condensed Consolidating Statements of Income

(in 000's)		Three Months Ended June 30, 2006
		Swift Energy Co.				Swift Energy
		(Parent and				Operating, LLC				Other								Swift Energy Co.
		Co-obligor)				(Co-obligor)				Subsidiaries				Eliminations				Consolidated
Revenues		$	—			$	133,363			$	13,814			$	—			$	147,177
Expenses			—				75,184				11,803				—				86,988
Income (loss) before the following:			—				58,179				2,011				—				60,190
Equity in net earnings of subsidiaries			38,168				—				36,641				(74,809	)			—
Income before income taxes			38,168				58,179				38,651				(74,809	)			60,190
Income tax provision (benefit)			—				21,538				483				—				22,021
Net income		$	38,168			$	36,641			$	38,168			$	(74,809	)		$	38,168

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

(in 000's)		Six Months Ended June 30, 2006
		Swift Energy Co.				Swift Energy
		(Parent and				Operating, LLC				Other								Swift Energy Co.
		Co-obligor)				(Co-obligor)				Subsidiaries				Eliminations				Consolidated
Revenues		$	—			$	252,801			$	30,545			$	—			$	283,346
Expenses			—				140,982				24,399				—				165,381
Income (loss) before the following:			—				111,819				6,146				—				117,965
Equity in net earnings of subsidiaries			75,483				—				70,468				(145,951	)			—
Income before income taxes			75,483				111,819				76,614				(145,951	)			117,965
Income tax provision (benefit)			—				41,351				1,131				—				42,482
Net income		$	75,483			$	70,468			$	75,483			$	(145,951	)		$	75,483

(in 000's)		Three Months Ended June 30, 2005
		Swift Energy Co.
		(Parent and												Swift Energy Co.
		Issuer)				Other Subsidiaries				Eliminations				Consolidated
Revenues		$	88,958			$	15,342			$	—			$	104,300
Expenses			51,446				11,076				—				62,522
Income (loss) before the following:			37,512				4,266				—				41,778
Equity in net earnings of subsidiaries			4,129				—				(4,129	)			—
Income before income taxes			41,641				4,266				(4,129	)			41,778
Income tax provision (benefit)			13,760				137				—				13,897
Net income		$	27,881			$	4,129			$	(4,129	)		$	27,881

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Continued
SWIFT ENERGY COMPANY AND SUBSIDIARIES

(in 000's)		Six Months Ended June 30, 2005
		Swift Energy Co.
		(Parent and												Swift Energy Co.
		Issuer)				Other Subsidiaries				Eliminations				Consolidated
Revenues		$	165,726			$	34,197			$	(2	)		$	199,921
Expenses			95,883				22,503				(2	)			118,384
Income (loss) before the following:			69,843				11,694				—				81,537
Equity in net earnings of subsidiaries			9,508				—				(9,508	)			—
Income before income taxes			79,351				11,694				(9,508	)			81,537
Income tax provision (benefit)			25,780				2,186				—				27,966
Net income		$	53,571			$	9,508			$	(9,508	)		$	53,571