Southwestern CEO, Gov. Beebe praise Fayetteville Shale Play investments

Gov. Mike Beebe thanked hundreds of Southwestern Energy Co. employees on Wednesday (Oct. 1) for not only boosting the state’s economic fortunes over the last decade, but for also investing $10 billion in Arkansas to help lessen the nation’s dependence on foreign energy sources. 

“As a result of what you are doing, America now has more than 100 years of natural gas,” Beebe said of the nation’s domestic supply of the shale-produced energy resource.

Beebe made his remarks at the Conway Expo Center, where Southwestern executives from the company’s Houston headquarters joined nearly 1,000 employees who had traveled to Central Arkansas from across the Fayetteville Shale in their distinct white “SWN-logo’ed” natural-gas powered trucks. The occasion was to celebrate the energy giant’s 10 year anniversary as the leading natural gas producer in the Arkansas shale play.

Southwestern, whose Arkansas roots go all the way back to the 1920s as a Fayetteville-based natural gas provider, celebrated the milestone by recognizing employees for their contributions to the company and helping to put Arkansas on the “global energy map.”

Southwestern CEO Steve Mueller began the two-hour celebration by sharing that the Fayetteville Shale played a major role in the company’s growth from a small, struggling Arkansas-based drilling concern into the nation’s four-largest natural gas producer. 

“Arkansas is where it all started,” Mueller told the cheering employees. 

“This is certainly a milestone in the development of the play, and I’m proud of our role in its discovery and production,” he said. “Our work together in the Fayetteville Shale play has helped make us a strong company and put the state on the map as a major contributor to the country’s energy supply.”

Beebe followed Mueller and echoed the Southwestern CEO’s comments by telling the company‘s employees they have help strengthen America’s national security because the U.S. no longer has to purchase high-priced natural gas from unfriendly nations, including Iran and Russia.

“We know how (natural gas) transforms our economy, but what people don’t often talk about is what it has done for our national security,” Beebe said. “How many thousands of lives will be saved? How many times will we not have to go into harm’s way … because of the work you do to get this resource out of the ground?”

Altogether, Southwestern officials said the company has invested more than $10 billion in development into the Arkansas shale play over the past decade. That capital investment is also largely responsible for making Arkansas one of the top natural gas producers in the U.S.

According to the U.S. Energy Information Administration (EIA), 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.

Then in 2009, Arkansas first joined the list of the nation’s top 10 marketed natural gas producers when sales of Arkansas natural gas spiked 53% to 683 Bcf of production. In 2010, Arkansas natural gas sales continued on an upward trend, jumping 35.7% to 927 Bcf of annual production, according to EIA figures.

Since 2011, despite fewer drilling rigs, Arkansas' marketed production moved over a trillion cubic feet for the first time, joining other top natural gas producing states in the top tier – including Texas, Colorado, New Mexico, Pennsylvania, Oklahoma, Wyoming and Louisiana.

Severance tax collections in Arkansas reached an all-time high of $77.3 million in fiscal 2014, pushed upward by stronger natural gas prices and better drilling techniques and production at the wellhead, industry experts say.

For the fiscal year ended June 30, 2014, gross natural gas severance tax revenue were up more than 50% from $50.6 million for fiscal 2013, according to tax data compiled by the Revenue Division of the Arkansas Department of Finance & Administration.

At the same time, collections of $8.44 million in July, the beginning of fiscal 2015, put the state on track to top $100 million for the first time since the state began keeping such records.

A decade ago, Southwestern began development of the Arkansas shale play by spending nearing $8.5 million to drill about 20 test wells in the basin in August 2004. Today, Southwestern plans to invest nearly $900 million in the Fayetteville Shale properties, which includes participating in nearly 460 to 470 company-operated wells.

Altogether, Southwestern has spudded a total of 4,110 wells in the Fayetteville Shale since its commencement in 2004 through the end of 2013, of which 3,538 were operated by Southwestern and 572 were outside-operated wells. Of these wells, 527 were spud in 2013, 491 in 2012 and 650 in 2011. Of the wells spud in 2013, 525 were designated as horizontal wells.

In addition, Southwestern has seen continuous improvement in its drilling practices in the Fayetteville Shale, the company said. In 2013, Southwestern’s operated wells had an average completed well cost of $2.4 million per well, average horizontal lateral length of 5,356 feet, and an average time to drill to total depth of 6.2 days from re-entry to re-entry.

After the event, Southwestern Senior Vice President Paul Geiger said the Fayetteville Shale will be viable for years to come, especially with the industry’s improving technology and drilling techniques. Geiger, who is based in Houston, was appointed in May to head the company’s Fayetteville Shale operations.

“The most exciting thing to me is that we got another decade (of production), based on what we know today,” Geiger said.