Nearly 10 years on and after 3 Tcf of cumulative operated production, the Fayetteville Shale is still setting records for the play's pioneer, Southwestern Energy Co. Meanwhile, Marcellus Shale activity last year drove overall company production to record levels.
"Our Fayetteville Shale division had one of its best years ever in 2013, not only by surpassing the milestone of 3 Tcf of cumulative gross operated production, but also by achieving our highest average initial production rate per well at the lowest average cost per well since we began drilling in the Fayetteville in 2004," said Southwestern CEO Steve Mueller.
Overall, Southwestern’s 2013 natural gas and oil production was up 16% from a year ago to 656.8 Bcfe. The company booked record total proved reserves of about 7 Tcf, up 74% from a year ago.
Marcellus production was up 181% compared to 2012, with gross operated production nearing 700 MMcf/d while a well in Susquehanna County, PA, reached a peak production rate of more than 32 MMcf/d. Back in the Fayetteville, a record initial production rate for a well in that play was set last year at more than 12 MMcf/d.
"We set records in production, reserves, net income, [earnings before interest, taxes, depreciation and amortization] and cash flow, and all of this was achieved in a gas price environment below $4.00/Mcf," Mueller said. "Our Marcellus Shale division drove our overall production growth, with gross operated production reaching nearly 700 MMcf/d at year-end 2013 compared to 300 MMcf/d at year end 2012. Our production in the Marcellus nearly tripled while total proved reserves more than doubled."
During the fourth quarter gas and oil production totaled 176.6 Bcfe, up 18% from 149.9 Bcfe in the fourth quarter of 2012, and included 123.2 Bcf from the Fayetteville Shale, compared to 125.1 Bcf in the fourth quarter of 2012. Gas production from the Marcellus Shale was 48.5 Bcf in the fourth quarter of 2013, more than double its production of 19.3 Bcf in the fourth quarter of 2012.
In the fourth quarter Southwestern placed on production its three highest initial production rate wells since the inception of its drilling program in the Fayetteville Shale, which will be 10 years ago this coming September. The company's Ledbetter 07-16 13-14H, 14-14H and 15-14H wells in Conway County, AR, achieved peak 24-hour production rates of 12,173, 11,919 and 12,207 Mcf/d, respectively. The company's Fayetteville wells placed on production during the fourth quarter of 2013 averaged initial production rates of 4,877 Mcf/d.
Last year Ed Ratchford, the Arkansas Geological Survey's fossil fuels supervisor, told NGI the Fayetteville was about one-third of the way to maturity in terms of the number of producing wells it could ultimately support. "The play will accommodate, I think, 20,000 wells and that's basically looking at 80-acre spacing," he said (see Daily GPI, June 24, 2013).
A notable Southwestern Marcellus well placed on production during the fourth quarter was the company's Seamen 2H horizontal well in northern Susquehanna County, PA, which was placed on production in November and reached a peak 24-hour initial rate of 32.2 MMcf/d. The well has a lateral length of 6,194 feet with 20 stages stimulated and flowed up casing.
For the full year, gas and oil production was 656.8 Bcfe, up 16% compared to 565.0 Bcfe in 2012, and included 486.0 Bcf from the Fayetteville Shale, up from 485.5 Bcf in 2012. Production from the Marcellus Shale was 150.6 Bcf in 2013, more than double its production of 53.6 Bcf in 2012.
Estimated proved gas and oil reserves increased by 74% to 6,976 Bcfe at Dec. 31 compared to 4,018 Bcfe at the end of 2012, mainly due to drilling in the Fayetteville and Marcellus as well as higher natural gas prices compared to 2012. Approximately 100% of the company's estimated proved reserves were natural gas and 61% were classified as proved developed at year-end 2013, compared to 100% and 80%, respectively, at year-end 2012.
For the fourth quarter, Southwestern reported adjusted net income of $188.4 million (54 cents/share) when excluding a $51.3 million loss on derivatives and other discrete income tax expense adjustments totaling $13.0 million. Including these adjustments, net income for the fourth quarter was $144.5 million (41 cents/share). For the year-ago quarter Southwestern reported adjusted net income of $156.7 million (45 cents/share) when excluding an $849.3 million non-cash ceiling test impairment and a $3.0 million loss on derivatives. Including these adjustments, Southwestern reported a net loss of $355.6 million (minus $1.02/share) in the fourth quarter of 2012.
For the full year, Southwestern reported adjusted net income of $703.9 million ($2.00/share) when excluding a $21.4 million gain on derivative contracts and other discrete income tax expense adjustments totaling $13.0 million. For 2012 Southwestern reported adjusted net income of $486.7 million ($1.39/share) when excluding a $1.94 billion non-cash ceiling test impairment of natural gas and oil properties and a $2.2 million loss on derivatives. Including these adjustments, Southwestern reported a net loss of $707.1 million (minus $2.03/share) in 2012.