Houston-based Southwestern Energy Co. said that gross production from its Fayetteville Shale play has now reached 30 MMcf/d, up from 20 MMcf/d on May 1. The company said the production increase is due to several factors including the recent delivery of more drilling rigs, an increase in well completion service resources and generally improving well results.

“The delivery of our fourth company-owned rig brings our operated rig count to 10 and the recent availability of additional fracture stimulation equipment and crews is allowing for an increased pace of development,” said CEO Harold Korell.

As of June 12, the average initial test rate for 35 of 37 completed horizontal wells, excluding two horizontal wells that had mechanical problems, is 2 MMcf/d.

Recent horizontal wells completed with slickwater fracture stimulation are displaying shallower initial decline rates, potentially pointing toward higher estimated ultimate recoveries than wells stimulated with nitrogen foam. Costs of recently completed slickwater horizontal wells have averaged approximately $2.1 million per well. The company said that, while service costs continue to rise, it has been able to mitigate that through the utilization of a surface hole drilling program and increased efficiencies from its new built-for-purpose drilling rigs.

“There has been considerable recent discussion in the investment community about well costs in the play” (see Daily GPI, June 6), said Korell. “Our competitive well costs, when compared to other operators in the play, can be attributed to more efficient drilling equipment, lower costs associated with operating our own rigs, shallower wells, varying lateral lengths and, we believe, generally being further along the learning curve.”

Southwestern currently has 10 drilling rigs running in its Fayetteville Shale play area, eight of which are capable of drilling horizontal wells, and two smaller rigs are being used to drill the vertical section of the horizontal wells. Four of the 10 new drilling rigs that the company contracted to buy in 2005 have been delivered and are drilling. Southwestern recently entered into an agreement to purchase one additional rig capable of drilling horizontal wells and entered into agreements to fabricate two smaller rigs which will be used to drill the vertical section of its horizontal wells.

The company expects to have 18 to 19 rigs drilling in the play area by year-end 2006, 15 of which will be capable of drilling horizontal wells. Delays in rig deliveries in late 2005 and early 2006 slowed the pace of Southwestern’s drilling program in the first half of the year. While the company still expects to drill 175 to 200 wells in the Fayetteville Shale play area in 2006, the earlier delays in rig deliveries have impacted the company’s second quarter production, which is currently forecasted to be approximately 16.5 Bcfe. However, Southwestern’s oil and gas production guidance for calendar year 2006 remains unchanged at 74 to 76 Bcfe, an increase of 21% to 25% over its 2005 production.

Southwestern expects to continue to evaluate its large acreage position in the Fayetteville Shale play by testing an additional 17 to 22 pilot areas during the remainder of 2006, which includes testing four to six additional pilot areas by the end of July.

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