Southwestern Energy Co.'s natural gas-weighted production in 3Q2009 jumped 38% from a year ago, driven by continued success in the Fayetteville Shale, the company said last week. The increased output led the Houston-based independent to raise its production guidance for 2009 by 53% over 2008 levels.
The gains in output came despite a drop in net profits to $118.3 million (34 cents/share) in 3Q2009, compared with $218.2 million (63 cents) in 3Q2008.
"We had a solid quarter despite depressed natural gas prices, which were at a seven-year low and the various curtailment issues we experienced related to maintenance and repairs of the Boardwalk Pipeline," said Executive Chairman Harold M. Korell.
"We do not expect these factors to weigh as heavily in the fourth quarter of 2009, as the Boardwalk Pipeline was placed online sooner than we had expected and as gas prices appear to be moving higher than they have been over the past nine months" (see related story). Southwestern hit a milestone in mid-October "when we surpassed 1 Bcfe of net production per day as a company."
Operating income from the company's exploration and production segment was $172 million, down from $280.6 million in the year-ago period, "primarily due to a 41% decrease in realized natural gas prices and a 12% increase in operating costs and expenses," the company said.
Gas and oil production totaled 73.2 Bcfe in the period, up from 52.8 Bcfe a year earlier, and included 58.8 Bcf from the company's Fayetteville Shale play, up from 37.2 Bcf. Around 9 Bcf was produced in East Texas and another 5.3 Bcf came from the Arkoma Basin.
What the company has learned in the Fayetteville Shale is helping to fuel emerging prospects in the Haynesville and Marcellus shales, said CEO Steve Mueller.
Southwestern's total production from the Haynesville Shale currently is about 34.7 MMcf/d gross, or 10.2 MMcf/d net. The company has participated in several wells, each one producing at initial rates greater than the one before. The third well tested in 3Q2009 at 16.7 MMcf/d, and a fourth well is currently being tested, Mueller said.
The company also has begun to develop its leasehold in the Marcellus Shale, but that's happening at a slower pace.
"We have been working in 2009 to capture the water we need to drill...for a three-rig program," said Mueller. "We are forming wells right now...I don't know that it will end up to be a three-year rig program next year, but you should see us drilling early in the year in Pennsylvania, and then we'll kind of give more guidance on that as we finalize our capital budget.
"As far as takeaway, as you know, we have already drilled four wells up there. We do have about 20 MMcf/d of takeaway...and we can get some more takeaway, so as far as 2010 is concerned, we're preparing for that program and we think we'll be able to both sell our gas and drill and complete the wells when we need to."
With the repairs to the Boardwalk system, Southwestern said it now is able to transport all of its current production from the Fayetteville Shale and on Oct. 24 was producing at a gross operated rate of about 1,230 MMcf/d.
Southwestern revised its previous production guidance for 2009 to 297-300 Bcfe from 278-288 Bcfe, which would be 53% higher than 2008 levels (using midpoints). Of the total, around 243-245 Bcf is expected to come from the Fayetteville Shale play.
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