Fayetteville Shale boosting Southwestern Energy earns

Southwestern Energy invested a whopping $319 million in the Fayetteville Shale during the first quarter of 2010, propelling the Houston-based natural gas driller back into the black despite dismal natural gas prices.

For the period ended March 31, Southwestern Energy reported net income of $171.8 million, or 49 cents per diluted share, up 141 percent from a net loss of $432.8 million, or $1.26 per diluted share, a year ago.

Southwestern’s revenue jumped 24% to $668.1 million, pushed up largely by increased production in the Arkansas shale basin. Wall Street expected Southwestern to earn 46 cents a share on revenue of $506 million, according to Thomson Reuters.

Southwestern President and CEO Steve Mueller said the company’s financial results were driven primarily by the significant growth in production volumes from the Fayetteville Shale play, but partially offset by lower realized natural gas prices and poor weather conditions.

"We currently expect to catch up to our original well count schedule in the third quarter," Mueller said, adding that the company driller 26 fewer wells than expected.

Meuller said Southwestern did submit the winning bids on a new exploration program in New Brunswick, Canada, during the quarter, but will keep "a watchful eye on natural gas prices."

Still, Mueller said Southwestern plans to cut its annual production outlook to 393 to 401 billion cubic feet of natural gas equivalent (bcfe), down from 400 bcfe to 410 bcfe. Approximately 337-343 bcf is expected to come from the Fayetteville Shale, where the company spent $319 million of its $411 million oil and gas budget in the first quarter.



Overall, Southwestern placed a total of 106 operated wells on production in the Fayetteville Shale play, all of which were horizontal wells fracture stimulated using slickwater. As of April 25, the company’s gross production rate from the Shale was about 1,330 million cubit feet (mmcf) per day, up 56.5 percent from 850 mmcf day a year ago.

Mueller said the company is utilizing 24 drilling rigs in its Fayetteville Shale play, including 16 capable of drilling horizontal wells and 8 smaller rigs that are used to drill the vertical portion of the wells.

Southwestern’s average realized gas price was $5.42 per thousand cubit feet (mcf), down from $5.94 per mcf in the first quarter of 2009. The company’s average price during the first quarter was nearly 43 cents per mcf lower than average New York Mercantile Exchange (NYMEX) spot prices.