Southwestern Says Marcellus Cheaper to Drill than Elsewhere

An interesting comment from Southwestern Energy. According to Southwestern’s CEO Steven Mueller, it’s more expensive to drill for shale gas in the Fayetteville Shale than in the Marcellus Shale, and if prices for natural gas remain as low as they are now, Southwestern will elect to reduce spending and drilling in the Fayetteville, but not the Marcellus.

Southwestern Energy Co., the biggest natural-gas producer in Arkansas’s Fayetteville Shale, may reduce spending and cut drilling if prices stay low.

Southwestern expects to realize an average of $4 per million British thermal units during the next three years, Chief Executive Officer Steven Mueller told Bloomberg News.

“If we decide in the next three or four months that there’s just going to be a glut of gas for the next three years, you could see us significantly reduce the capital budget,” Mueller said in an interview yesterday at Southwestern’s Houston headquarters.

The slowdown would happen in the Fayetteville Shale; Southwestern’s acreage in the Marcellus Shale is profitable even at low prices, he said.

Gas drilling is similar to manufacturing, Mueller said.

“The guys who can do it cheaper, the guys who have the better quality, the guys who have the better location, are going to win,” he said.*

Viva la Marcellus!

*Bloomberg Businessweek (Jan 9, 2012) – Southwestern May Cut Spending If Gas Price Stays Low, CEO Says