Southwestern Energy Co. beat several of its own records, including those for completion stages, drilled footage and lateral lengths, during its first full quarter as an Appalachian pure-play operator.
COO Clay Carrell said the company set a new pad record of 8.3 completion stages per day and drilled 8,300 feet in a 24-hour period in the first quarter. A Marcellus Shale well in Tioga County, PA, also tested at a record 39 MMcf/d. Southwestern added that an18,683-foot lateral it drilled set a state record in Pennsylvania, while another 18,000-foot lateral it drilled during the first quarter set a company record in West Virginia.
CEO Bill Way said the company’s average lateral lengths are expected to increase by 35% to over 10,000 feet this year.
The company produced 182 Bcfe in 1Q2019, compared to 226 Bcfe in the year-ago period and 234 Bcfe in the fourth quarter. Southwestern sold its Fayetteville Shale assets in December, which accounted for 67 Bcf of production in 1Q2018.
But in Appalachia, where the company operates in the northeastern and southwestern parts of the basin, production increased 14% year/year during the first quarter, while liquids production from the basin was up 33% to 71,740 b/d.
Now one of the largest natural gas liquids (NGL) producers 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 is the Southwest Appalachia division, where assets in southwestern Pennsylvania and northern West Virginia are to receive the bulk of this year’s capital budget.
While the Northeast Appalachia division drove dry gas production at 1.24 Bcf/d, the Southwest Appalachia division accounted for the majority of NGLs at 71,680 b/d, thanks in large part to the area’s liquids-rich Marcellus Shale. Those assets produced 345 MMcf/d of natural gas.
Management said the company continues to evaluate the Upper Devonian and Utica shales throughout its footprint, along with the Upper Marcellus interval.
The company drilled its fourth Upper Devonian well during the first quarter and plans to complete it in the coming months. It also plans to drill three Upper Marcellus wells in Pennsylvania during the second quarter. After its first Utica test in 2017, management again said the company plans to continue gathering data from those wells until it builds more of the asset into its program.
Southwestern reported first quarter net income of $594 million ($1.10/share), compared to net income of $205 million (36 cents) in the year-ago period. First quarter results got a boost from an income tax benefit, the company said.
Revenue increased slightly to $990 million, up from $920 million in 1Q2018. Weighted average realized pricing in the first quarter, excluding derivatives, was $2.98/Mcfe, up 6% from the same time last year. However, management acknowledged that prices could weaken as the shoulder season gets underway and demand falls off.
Way also announced that after years of cost-cutting initiatives and the deleveraging that came with the Fayetteville sale, Southwestern ended the first quarter with its “best liquidity position in almost four years” at $2.2 billion, including $366 million of cash.