Southwestern Energy Co. increased year/year production by 5% to 946 Bcfe in 2018, even after divesting its Fayetteville Shale assets and becoming a pure-player focused on the Appalachian Basin, where it continues to extend laterals in a big way and see success in different intervals such as the Upper Devonian Shale.

 Year/year production increased by 21% in the Appalachian Basin, driving last year’s  gains, and accounting for 702 Bcfe of volumes. Natural gas liquids (NGL) production increased 40% from 2017, coming in at 63,100 b/d.

Now the third largest NGL producer in the basin, Southwestern is guiding for a 20% annual increase this year in liquids production, or 75,600 b/d. To do that, the primary focus in 2019 is the Southwest Appalachia division, where assets in southwestern Pennsylvania and northern West Virginia are to receive the bulk of its $1.08-1.18 billion capital budget. The division produced 243 Bcfe in 2018 and accounted for all of the company’s NGL production during the year, while its Northeast Appalachia division produced 459 Bcf of natural gas in 2018. 

The focus on Southwest Appalachia comes after notable gains by the division. CEO Bill Way said crews recently drilled and cased an “ultra-long lateral” of more than 18,000 feet in West Virginia. A $60 million water project in West Virginia also is operational and forecast to save $500,000 per well in the region. COO Clay Carrell added that company-wide, lateral lengths would increase to more than 11,000 feet this year from an average of 7,500 feet in 2018.

About a year after the company announced the Southwest Appalachia division’s first successful test of the Utica Shale in West Virginia, management said during a year-end earnings call on Friday it is also making progress in the region’s Upper Devonian Shale formations. Southwestern drilled its first Upper Devonian well in West Virginia during 3Q2018. Another two wells were brought online in the fourth quarter with a 49% liquids cut.

“It’s really early, but the wells are performing well,” Carrell said. The 30-day average production rate for both is more than 12 MMcfe/d, “and we’re getting the liquids content we were hoping for.”

The company has three Upper Devonian wells online, but Way said “we don’t have the facts yet.” He added that Southwestern will need more time to study the interval before reaching any conclusions on the shales and how they might factor into the program going forward.

Southwestern produced 234 Bcfe in 4Q2018, down slightly from 239 Bcfe in the year-ago quarter, reflecting the loss of the Fayetteville assets in Arkansas, which were divested in a $1.65 billion sale in early December.

The company reported fourth quarter net income of $307 million (54 cents/share), compared with $267 million (53 cents) in the year-ago period.

For 2018, net income was $535 million (93 cents), compared with $815 million ($1.63) in 2017. Revenue increased to $3.9 billion last year from $3.2 billion in 2017.