The Appalachian Basin continued to drive results for Southwestern Energy Co. during the first quarter, with a 37% year/year increase in natural gas liquids (NGL) production.
Southwestern produced 226 Bcfe in the first quarter, up 11% from 1Q2017 but down from 239 Bcfe in 4Q2017. Appalachia accounted for 159 Bcfe of first quarter volumes. NGL production once again soared to 4.2 million bbl, driven by the southwest Appalachia division.
CEO Bill Way said over the last year condensate prices have increased by more than $12.00/bbl, while NGL prices have increased $2.00/bbl. Southwestern increased year/year NGL volumes by 15% to 14.2 million bbl in 2017.
The company is currently running six rigs, with four in southwest Appalachia and the other two working in northeast Appalachia.
“The majority of our 2018 drilling activity in southwest Appalachia will be done in the northern panhandle area of West Virginia in the liquids-rich area, which includes both condensate and NGLs,” said COO Clay Carrell.
Like other leading Appalachian operators that have so far reported first quarter results, such as Range Resources Corp., EQT Corp. and Antero Resources Corp., Southwestern also drilled its longest lateral to date during the period in southwest Appalachia to more than 13,400 feet.
Takeaway capacity constraints are easing across the basin as well, particularly in northeast Pennsylvania, Way said.
“We continue to realize the benefits of our northeast transportation capacity in operating our business there, as differentials improved more than 30 cents/Mcf this first quarter due to more weather related demand and more takeaway.”
Including hedges, the company’s average realized price increased to $2.77/Mcfe in 1Q2018 from $2.61/Mcfe in 1Q2017.
Management said little about efforts in the Fayetteville Shale of Arkansas, where it’s started to redevelop its legacy areas with the latest technology to increase value ahead of a possible sale. Production from the play again dropped to 67 Bcf in the first quarter from 81 Bcf at the same time last year. The company tested two legacy wellswith optimized landing zones and advanced completions during the first quarter.
“The company has been working closely with JPMorgan to evaluate strategic alternatives and has commenced a process to maximize value of the Fayetteville business,” Way told financial analysts during a call on Friday to discuss first quarter results. “In the best interest of our shareholders, and the integrity of the process, we will not discuss additional details, nor speculate on the future outcomes of that process.”
Southwestern reported first quarter net income of $205 million (36 cents/share), compared with net income of $281 million (57 cents) in the year-ago period. Revenue was up to $920 million in 1Q2018 from $846 million in 1Q2017.