Southwestern Energy released its second quarter earnings and operations update yesterday. The company lost $488 million dollars largely because of the low cost of natural gas. Interestingly, they report that their “all-in cash operating costs” for drilling shale gas wells averages $1.20 per 1,000 cubic feet equivalent (or Mcfe). One Mcfe is equivalent to one MMBtu, or “one million Btus”—the unit of measurement used to sell natural gas. The going price for natural gas on the NYMEX as of this morning is $2.90 MMBtu (or $2.90 Mcfe). Theoretically, Southwestern produces the gas for $1.20 per unit, and can sell it for $2.90 per unit (leaving hedging out of the equation). A bit simplistic, but useful nonetheless.
We learn from the update that so far Southwestern has drilled 120 wells in the Marcellus, 41 of which are currently producing. The holdup on many of the ones not producing? Lack of gathering pipelines—a recurring theme in a number of company quarterly updates for 2Q12.