to Restate 2013 Full-Year and 2014 Quarterly Financial Results to Correct Understatement of Retained Earnings and Overstatement of Full Cost Ceiling Test Write-Down
- The ceiling test error causing this restatement relates to the incorrect inclusion in prior periods of the tax effect of Swift Energys asset retirement obligations when computing the ceiling test limitation of its oil and natural gas properties under full-cost pool accounting. The Company has determined that the error caused understatement in periods prior to 2014 of retained earnings and overstatement of its full cost ceiling-test write-down.
- For the fiscal year ended December 31, 2013, correction of this error is expected to increase the Company's overall net oil and gas property balances by approximately $50 million, increase its deferred tax liability by approximately $20 million, and increase its retained earnings to increase by approximately $30 million.
- As the ceiling-test-error resulted in an understatement of the undepleted full cost pool subject to depletion in all periods after a ceiling write-down, at December 31, 2013, the most recent ceiling write-down of approximately $74 million (on a pre-tax basis), which occurred in the fourth quarter of 2013, is overstated by approximately $27 million on a pre-tax basis. Reversal of this overstatement is currently anticipated to substantially reduce the Companys previously reported net loss for 2013. A similar error occurred in connection with the Companys full cost ceiling write-down at December 31, 2008 and at March 31, 2009.
- For the first two fiscal quarters of 2014 (financial statements for which are included in the Company's Forms 10-Q filed with the Commission on May 1, 2014 and August 1, 2014, respectively), correction of the ceiling-test-error is expected to decrease net income for each quarterly period by amounts currently estimated to be approximately $500,000.