Boosted by successful drilling in the Overton Field of East Texas and its higher production volumes in the River Ridge discovery in New Mexico, Houston-based Southwestern Energy said Friday it recorded record production results in the second quarter, with natural gas and oil output up 25% over the same period a year ago.
Gas and oil production for the period totaled 12.6 Bcfe, up from 10.1 Bcfe a year ago, and up 10% sequentially from 11.4 Bcfe in 1Q2004. Its second quarter natural gas production totaled 11.8 Bcf, while oil accounted for 140,000 bbl.
“This is a very exciting time for our company,” said CEO stated Harold M. Korell. “Our development drilling programs in East Texas and the Arkoma Basin continue to create significant value, and our recent exploration success in New Mexico is also contributing nicely to our production volumes.”
Southwestern also announced that it has acquired additional working interest in its River Ridge discovery in Lea County, NM for $14.4 million, consolidating its position in this property and gaining additional development opportunities. The acquired interest adds approximately 6.5 net Bcfe in proved reserves, bringing Southwestern’s total net proved reserves in the field to approximately 17.0 Bcfe, for an overall finding and development cost of approximately $1.27/Mcfe.
“The two existing wells at our River Ridge discovery continue to perform well with a combined gross production rate of 30 MMcfe/d,” said Korell. “The acquisition increases our working interest to 50% in the Rio Blanco 4-1 discovery well, currently producing at 11.5 MMcfe/d, and gives us a 50% working interest in the currently drilling development well, the Rio Blanco 4-3, in which the company previously held no interest. While the stand-alone finding and development cost of the acquisition ($2.22/Mcfe) is high, the transaction exceeds our investment return targets and adds solid long-life, high-margin production.”
The company’s Rio Blanco 33 #2 development well is currently drilling at approximately 14,800 feet and the Rio Blanco 9 #1, the fifth development well in the field, has recently spudded. “This new field discovery confirms that, with the right people, applying new technology, we can economically find and produce significant gas accumulations in mature areas,” said Korell.
With the acquisition and associated additional development drilling, Southwestern is forecasting 2004 total capital expenditures to be approximately $254.0 million, up from $239.0 million previously announced in June, of which approximately $244.5 million is allocated to the company’s exploration and production segment.
Southwestern is targeting 2004 oil and gas production at 50.0-52.0 Bcfe, an increase of 21-26% over the company’s 2003 production of 41.2 Bcfe. Of the annual total, natural gas output is expected to total 46.8-48.7 Bcf. The increase from the company’s June estimate of 48.5-50.5 Bcfe for 2004 is due to the increased net production from the company’s recent acquisition of additional working interest in its River Ridge discovery in New Mexico and from continued success of the company’s drilling program.
Southwestern will host a teleconference call on Friday (July 30) to discuss the company’s quarterly results.
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