New Fayetteville Shale Exec Says Arkansas Play Has Another Decade Of Strong Production

Over the last decade, Southwestern Energy Co. wrote the state of Arkansas a billion-dollar economic development check each year, not counting the interest made on high-paying jobs and shale dollars turning over in local communities.

But the question on a lot of people’s mind – from the Arkansas Legislature to the mom-and-pop businesses largely dependent on Fayetteville Shale currency – is how long this dynamic economic engine will continue to produce at the same “billion-dollar-a-year” level.

On Wednesday, as hundreds of Southwestern employees celebrated the company’s decade dominance in the unconventional shale play, the new Houston-based executive tabbed to lead the company’s profit-producing shale investment quashed any notions that the company’s natural gas wells in Arkansas have run dry.

“There is a lot left. We are going to be here for a long time,” said Paul Geiger, senior vice president and head of Southwestern’s Fayetteville Shale operations.

Geiger began his career with the former Burlington Resources Co. in 1994. Burlington was later acquired by integrated oil giant ConocoPhillips in 2006 for $35 billion.

The industry veteran, who only joined Southwestern Energy in April, said he has hit the ground running. After only one month on the job, he was appointed to guide the company’s Fayetteville Shale operations from his Houston base of operations.

Geiger said besides the more than 1,500 workers Southwestern employs in local communities all across the Fayetteville Shale, he has a dedicated staff at the company’s Texas headquarters also working daily to maximize the natural gas driller’s Arkansas operations.

“All the folks here and all the folks we have in Houston are focused on the Fayetteville Shale and figuring out every week and every month how we can do things better – more economically and more efficiently,” Geiger said. “It is very exciting to be a part of that team.”

Over the past decade, Geiger said the Fayetteville Shale development has paralleled the company’s overall growth.

Today, Southwestern is not only the fourth largest natural gas producer in the U.S., it is highly lauded on Wall Street with a market cap of $12.9 billion and a line-up of influential institutional investors ranging from State Street and The Vanguard Group to J.P. Morgan Chase and Wellington Management.

The company also remains the largest producer of natural gas in the Fayetteville Shale where the company’s Arkansas workforce is focused on the development of the company’s 905,684 net acres. As part of its $10 billion investment in the project since 2004, the company has drilled more than 3,500 wells by the end of 2013.

Of its $2.4 billion capital investment in 2014, the Fayetteville Shale still gets the lion’s share of the energy giant’s budget with more than $900 million allocated this year to the continued development of the unconventional Arkansas shale play.

During Wednesday’s 10-year celebration of the company’s leadership position in the Arkansas shale play, company Chairman and CEO Steve Mueller told many of the Southwestern employees that 10 to 20 years down the road, the Fayetteville Shale production would still be an economic powerhouse.

“When many of you in this room are retired, the Fayetteville Shale will still be going strong,” Mueller said.

Geiger reiterated that same point, but also provided some impressive numbers to back the assertion up. He said that the company has projected that the Arkansas shale play has another 18 trillion cubic feet (Tcf) of recoverable natural gas reserves.

“That’s more than the combined (annual) market value of cotton, rice and soybean production in Arkansas combined,” Geiger said.

Also since 2004, Southwestern has produced more than 3.6 trillion Tcf of natural gas from the north central Arkansas shale play. In 2013, the Houston-based energy giant produced 486 billion cubic feet (Bcf) alone.

That tally represents almost half of the natural gas that was produced in Arkansas, according to the latest statistics from the Arkansas Oil and Gas Commission and the U.S. Energy Information Administration.

Currently, Arkansas is the eight largest producer of marketed natural gas with more 1.14 trillion cubic feet (Tcf) of production. Between 2004 and 2008, as Fayetteville Shale drilling and development matured, Arkansas’ annual production of marketed natural gas jumped nearly 140% from 187 billion cubic feet (Bcf) to 446.5 Bcf, EIA statistics show.

But Geiger is not resting on the company’s past triumphs. Conservatively speaking, he said the next 10 years should be even better than the past 10 years.

“There is a lot left, if you look at the individual wells that have more than 30 or 40 years of production left,” he said. “By what we’ve seen today, there is at least a decade of drilling and we will continue to learn things that will take us beyond that.”

Geiger said the key to the company’s amazing development and success has been the people who work in Arkansas and the drilling technology that has advanced the industry on many levels. For instance, only 7 years ago, there were more than 60 drilling rigs in the Arkansas shale play when Southwestern, Chesapeake Energy and other independent drillers poured billions of dollars into the development of the shale play’s unproduced acreage.

Today, Southwestern has been able to increase production by only operating eight drilling rigs or “pads,” Geiger said. That means instead of drilling more holes in the ground for each well, Southwestern company’s newer hydraulic drilling pads allow the company to maximize production with fewer rigs and less impact on the surface.

“From a technology standpoint, we are at the (beginning) of any amazing frontier,” Geiger said. “Some of the targets that we go after are a mile down and a mile out from the surface location. As you get more and more wells on one pad, it minimizes those surface disruptions.”

Going forward, Geiger said he will continue to focus on operating safely in the Fayetteville Shale, and conducting day-to-day business in a way that is environmental sound. He readily admits that the industry has had to change the way it operates due to a laundry list of environmental and property owner concerns – including questions about fracking technology, drilling-induced earthquakes and groundwater pollution from well fluids.

He said the improved technology will not only help Southwestern to operate more economically and efficiently, it also allows the company to be a better environmental steward.

“People are our (major) priority – first our own people and also the people in the areas where we operate,” Geiger said. “But, we are also focused on being a responsible member of the community from an environmental standpoint. I think if you look across the state of Arkansas, most of our stakeholders will vouch for the way we operate. If we don’t do it safely, we are not going to do it,” he said.