Southwestern Energy Co. CEO Harold Korell said Friday that progress in 2007 in the company’s core Fayetteville Shale program and investments in emerging plays across the country have helped to “set the stage” for 30-35% production growth this year.

The Houston-based producer now expects to produce 35-36 Bcfe in the first three months of 2008, which is about 1 Bcfe more than expected. In total, Southwestern is forecasting production of 148-152 Bcfe this year. Of the total, 90-95 Bcfe is expected to come from the Fayetteville play in Arkansas.

“The key accomplishment for us in 2007 was the progress we made in our Fayetteville Shale play,” said Korell. “During the year, we made advancements in our completion techniques, significantly increased our 3-D seismic data base thereby improving our ability to reduce risk in our drilling program, and began drilling and completing longer laterals, all of which is leading to higher productivity in our horizontal wells.”

Korell and his management team spoke of the final quarter of 2007 and the full year’s accomplishments in a conference call Friday.

“2007 was an outstanding year for Southwestern Energy,” said Korell. “Looking at our achievements, we grew our production volumes by 57% to 113.6 Bcfe and our reserves by 41% to 1.45 Tcfe, which represents a reserve replacement ratio of 474%, and we had a finding and development cost of $2.55/Mcfe.” Southwestern’s gas and oil output in the final quarter reached 34.9 Bcfe, up from 20.7 Bcfe for the same period of 2006. More than half of Southwestern’s output came from its Arkansas play.

Southwestern reported net income of $71.6 million (41 cents/share) in 4Q2007, more than double the $33.8 million (20 cents) reported in 4Q2006. The company credited a 68% increase in total gas and oil production and higher realized prices. Revenue totaled $204.3 million, up from $108.7 million in 4Q2006. Southwestern’s average realized gas price was $6.90/Mcf, including the effect of hedges, in the last three months of 2007, compared with $6.12 a year earlier.

Estimated proved reserves totaled 1,450 Bcfe at year-end 2007, which is 41% more than the 1,026 Bcfe at the end of 2006. About 96% of the company’s year-end estimated proved reserves were natural gas and 64% were classified as proved developed. Southwestern last year invested $1.38 billion in its exploration and production business, drilling 653 wells, 439 of which were successful. Of the 197 wells in progress at year’s end, 141 are in the Fayetteville Shale play, where the company spent the most money, $960 million.

Southwestern’s 4Q2007 output was “7% above our expectation,” said analysts with SunTrust Robinson Humphrey/the Gerdes Group. “Notably, the Fayetteville Shale accounted for 87% of the ’07 reserve additions at an F&D [finding and development] cost of $2.05/Mcfe. Stronger 4Q2007 production partly offset by higher operating expense should have a minor positive valuation implication.”

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