Zero rigs, that is.
Amid last week's flurry of earnings releases from exploration and production outfits -- and I apologize for missing key reports by Apache
No rigs operating! Swift, a seasoned Gulf Coast oil patch player, definitely isn't alone in expecting service costs to fall further. Chesapeake Energy
Think about what Swift is giving up here. The company is likely sacrificing both reserve growth and production growth in 2009. If you're trying to appease short-term oriented investors, this is suicide.
You can draw one of two conclusions here. Either Swift is distressed, and this is another sign of panic in the oil patch, or it's maximizing long-term value by deferring drilling, which would hardly be accretive in this environment.
The reality may actually lie somewhere in between. While the company does appear to have decent liquidity through its 10-member bank borrowing facility, the company managed to run up a 49% debt-to-capital ratio at year's end, which is far above my comfort level. Its headcount reductions also suggest that Swift overstretched during good times, and is now paying the price with uncomfortable adjustments.