Southwestern Energy Co. reported record third quarter production from Appalachia to nearly 2.4 Bcfe/d, 42% higher compared to the year-ago period.

While the bulk of Southwestern’s volumes were again driven by its assets in northeast Pennsylvania, the company finalized several commercial development projects aimed at extracting more value from its properties in southwest Appalachia and the Fayetteville Shale in Arkansas.

The company inked a deal with Williams Partners LP to expand the producer’s gas gathering and processing services in West Virginia, including dedicating its Utica Shale dry gas acreage, which the producer recently began developing. A company-owned water infrastructure project that started in the West Virginia panhandle is also expected to reduce completion costs by $500,000 per well and reduce the breakeven gas price across the acreage by 25 cents/Mcfe beginning in late 2018, said Senior Vice President Jack Bergeron, who is in charge of exploration and production.

The company exited the third quarter producing 958 MMcfe/d in southwest Appalachia, a 54% increase year/year. Southwestern brought online its first Utica Shale well in Marshall County, WV, earlier this year. Its second well, the Marlin Funka 9H, was placed to sales in Washington County, PA, over the summer and is averaging a 60-day rate of 17.7 MMcf/d on pressure management.

“While we focus on bringing down the costs, the deliverability of the reservoir of our first two Utica wells is very encouraging and will compete very well for capital once our costs are reduced to the expected $12-14 million per well range,” Bergeron said.

Tests also continued in the Marcellus Shale’s northern tier, where Southwestern is delineating acreage in Tioga County, PA.

Southwestern brought on a four-well pad at a combined production rate of 80 MMcf/d. Two more Moorefield Shale step-out wells also were drilled in Arkansas, which were drilled and completed for an average cost of $5.3 million each with initial production rates of 5.4 MMcf/d.

The Moorefield, which sits below the Fayetteville, offers Southwestern direct access to Gulf Coast markets and could help offset declining volumes in the state, where the company reached an agreement with Boardwalk Pipeline Partners LP to restructure firm transportation agreements to reduce excess capacity and cut costs.

Southwestern has yet to finalize its 2018 development plans, but CEO Bill Way said the company remains focused on deleveraging and creating more value for shareholders.

In Appalachia, more operators are switching their focus and turning away from rapid production growth to block up their positions, develop only the best assets and generate higher returns, he said.

“We’ll take the options of investing at the drillbit and weigh those with debt reduction and any other options that come on the table to create the highest value-adding plan to go forward,” Way said of plans for next year during a third quarter earnings call last Friday. “We already have begun to shape that plan, and as we work through the balance of the year, we’ll look at the winter and see how pricing will come together, then we’ll be able to lock that down more.

“This isn’t about production growth at all costs; it hasn’t been for us and it won’t be for us going forward.”

A compressor station that was knocked offline and three days of downtime on a long-haul pipeline for maintenance in Appalachia held back third quarter volumes, but Southwestern still hit guidance for the period. Midstream issues in Appalachia have so far factored into the results of other operators that have reported third quarter earnings.

Southwestern produced 232 Bcfe during the third quarter, including 153 Bcfe from the Appalachian Basin and 78 Bcf from the Fayetteville Shale. That’s up from 211 Bcfe in 3Q2016 and 222 Bcfe in 2Q2017. Fayetteville volumes were down from 90 Bcf in the year-ago period and 82 Bcf in 2Q2017.

The company’s average realized gas price increased year/year to $1.97/Mcf from $1.73/Mcf. Revenue climbed to $737 million from $651 million.

Southwestern reported net income of $43 million (9 cents/share), compared with a year-ago net loss from impaired oil and gas properties of $735 million (minus $1.52). The absence of impairments and restructuring charges in 3Q2017, combined with higher realized gas and natural gas liquids prices, helped lift the company to a profit.