Southwestern Energy Increases Marcellus Budget for 2012

Southwestern Energy just released their fourth quarter and year-end financial and operating results, along with a revised 2012 capital budget. In the Marcellus Shale, Southwestern spent $332 million to drill 45 wells in 2011. They have budgeted an increase in their Marcellus budget for 2012 to $526 million with plans to drill 80-85 wells.

From the relevant portion of the press release:

In 2011, Southwestern invested approximately $332 million in the Marcellus Shale, which included approximately $214 million to participate in 45 wells. Of the 45 wells in which the company participated during 2011, 18 were horizontal wells located in Bradford County and the remaining 27 wells were located in Susquehanna County. The company added 327.3 Bcf of new  reserves in the Marcellus Shale, including net upward reserve revisions of 98.1 Bcf due primarily to upward revisions of 102.6 Bcf from improved well performance offset by downward price revisions of 4.5 Bcf. Included in the company’s total capital investments in the Marcellus Shale during 2011 was approximately $77 million for acquisition of leasehold properties, $13 million for seismic and $29 million in capitalized costs and other expenses. In 2010, Southwestern invested approximately $118  million in the Marcellus Shale and participated in 21 wells, adding new reserves of 38 Bcf.

As of year-end 2011, Southwestern had spud 70 wells, 23 of which were on production and 67 of which were horizontal wells, resulting in net production from this area of 23.4 Bcf in 2011, compared to 1.0 Bcf in 2010. At December 31, 2011, the company’s gross operated production from the area was approximately 133 MMcf per day and limited by high line pressures.

Total proved net reserves from the company’s Marcellus Shale area were 342 Bcf at year-end 2011 from a total of 60 locations, of which 30 were proved developed producing, 2 were proved developed non-producing and 28 were proved undeveloped. The average gross proved reserves for  the undeveloped wells included in the company’s year-end reserves was approximately 7.5 Bcf per well, up from 3.0 per well at year-end 2010.

At December 31, 2011, the  company had 22 operated horizontal wells on production which had an average completed well cost of $6.4 million per well, average horizontal lateral length of 4,007 feet and an average of 12 fracture stimulation stages.

The graph below provides normalized average daily production data through December 31, 2011, for the company’s horizontal wells in the Marcellus Shale. The “purple curve” indicates results for 8 wells with more than 12 fracture stimulation stages, the “orange curve” indicates results for 13 wells with 9  to 12 fracture stimulation stages and the “green curve” indicates results for 1 well  with less than 9 fracture stimulation stages. The normalized production curves are intended to provide a qualitative indication of the company’s Marcellus Shale wells’ performance and should not be used to estimate an
individual well’s estimated ultimate recovery. The 4, 6, 8 and 10 Bcf type curves are shown solely for reference purposes and  are not intended to be projections of the performance of the company’s wells.

Southwestern Marcellus Production 2011

At December 31, 2011, Southwestern held leases for approximately 186,893 net acres in the Marcellus Shale area, compared to approximately 173,009 net acres at year-end 2010.

In 2012, Southwestern plans to invest  approximately $526 million in the Marcellus Shale, $435 million of which will be directed toward  drilling and completing approximately 80 to 85 gross horizontal wells (65 to 70 net wells), all of which will be operated by the company.*

*Southwestern Energy (Feb 27, 2012) – Southwestern Energy Announces Record 2011 Financial and Operating Results and Revises 2012 Capital Investments Program (PDF)

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