Fayetteville Shale

Southwestern Energy Company - Fayetteville Shale Update - Part II

Southwestern Energy Company (SWN) discussed its operations in the Fayetteville Shale during its third quarter earnings conference call held on October 30, 2009.

Rig Count

“We currently have 17 drilling rigs running in the Fayetteville, 13 in are capable drilling horizontal wells and four smaller rigs that are used to drill the vertical portion of the holes.”

Fayetteville Shale Well Cost

“During the third quarter our horizontal wells had an average completed well cost of $2.9 million per well, average horizontal length of 4,100 feet and average time to drill to total depth of 12 days from out entry to reentry.”

Well Spacing

“Through September 30, we have placed over 200 wells on production that have well spacing of 700 feet or less representing approximately 65 acre spacing or less… we are testing eight different pilot areas with well spacings that will range from 300 to 600 feet apart.”

Source: Seeking Alpha

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Southwestern Energy Company - Fayetteville Shale Update - Part I

Southwestern Energy Company (SWN) discussed its operations in the Fayetteville Shale during its third quarter earnings conference call held on October 30, 2009.

Fayetteville Shale Production

“Our Fayetteville Shale production was 58.8 Bcf, 60% greater than the 37.2, we produced in the third quarter of 2008.”

Pipeline Issues

“Beginning on October 8, the Fayetteville lateral was placed back into service after being shutdown since September 1. The Greenville lateral was placed back in service in October after the shutdown.”

Capital Investment

“We invested $167 million in our midstream segment, almost entirely in the Fayetteville Shale. Speaking of the Fayetteville Shale, we invested approximately $1 billion in the first nine months of 2009 in this play, including both our E&P and midstream activities.”

Source: Seeking Alpha

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Fayetteville Shale Technical Presentation

I recently found a technical presentation given by Brian Teller, a Senior drilling engineer at XTO Energy (XTO). The presentation was given at the AADE Mid-Continent Annual Technical Symposium in January 2009. The presentation gives some excellent detail on XTO Energy, and its 380,000 net acres under lease in the Fayetteville Shale.

Presentation

Petrohawk Energy Discusses Fayetteville Shale

Petrohawk Energy (HK) made the following comments on its properties in the Fayetteville Shale during its second quarter of 2009 conference call held on August 5, 2009.

“In the Fayetteville, we averaged two operated rigs and drilling only ten operated horizontal wells. However, we had 68 non-operated wells drilled, which help grow production 16% from 68 million a day to 79 million a day.”

“As recently as the middle of the fourth quarter of 2008, we were operating 11 horizontal rigs in the field. But have now decreased that to two rigs. However, due to the increased level of activity and exceptional operational results of our non-operative partners, we have been able to achieve steady and impressive production growth in the field."

"At the beginning of the year, our net production in the field was approximately 71 million a day and by the end of the second quarter it had grown to just over 80 million a day, or approximately 13% growth.”

“Regarding the Fayetteville Shale, we have intentionally decreased our operated focus in the Fayetteville Shale.”

Source

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XTO Energy Updates Fayetteville Shale

XTO Energy (XTO) made the following comments regarding its Fayetteville Shale operations on its second quarter of 2009 conference call held on August 5, 2009.

General Operations

“Fayetteville went from 60 million a day last quarter to 85 million a day. At the end of this quarter, we still were on target to exit at 120 million a day. Our drill time in Fayetteville is now sub 20 days per rig per well, more like 18 days per well. We're still running six rigs. Our costs are down closer to $2.5 million to $2.7 million for those wells and yes, our EURs look to be going up like everybody else's.”

Pipeline Curtailments

“We could see a little curtailment in the third quarter for that because we are in Southwestern's wells and I know that they were talking about getting curtailed. Our volume is not high enough at the moment that I think we'll get hit real bad. We're going to be able to offload our volume to other pipes in a particular area.” ___________________________________________________________________

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XTO Energy - Fayetteville Shale Update

XTO Energy (XTO) updated its drilling operations in the Fayetteville Shale when it released earnings for the second quarter of 2009. The company has 380,000 net acres under lease, and is running 6 rigs. XTO Energy reported that its production from its Fayetteville Shale properties averaged approximately 80 million cubic feet per day (MMCFPD) on a gross basis.

XTO Energy reported the initial production rates of 6 wells that it completed during the second quarter of 2009 on its acreage in the Fayetteville Shale:

Williams 1-35H - 4.0 MMCFPD (88% WI)
Moffit 1-32H - 2.5 MMCFPD (56% WI)
Kissinger 1-16H - 2.5 MMCFPD (86% WI)
Diamond Bluff Farms 1-7H - 2.5 MMCFPD (80% WI)
Steelman 1-19H - 2.6 MMCFPD (86% WI)
Staggs 1-30H - 2.3 MMCFPD (75% WI) ___________________________________________________________________

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Southwestern Energy Company - Fayetteville Shale Initial Production Rates

The increased operational efficiency of Southwestern Energy Company (SWN) can be seen in its improvement in initial production rates over the last two years. The company just released data on its wells drilled in the Fayetteville Shale over the last ten quarters.

Q1-2007 – 1.261 mmcf per day
Q2-2007 – 1.497
Q3-2007 – 1.769
Q4-2007 – 2.027
Q1-2008 – 2.343
Q2-2008 – 2.541
Q3-2008 – 2.882
Q4-2008 – 3.350
Q1-2009 – 2.992
Q2-2009 – 3.611

These increases are also due to longer laterals, and a better understanding of the technology require to produce from the Fayetteville Shale. The decrease in the first quarter of 2009 was due to pipeline constraints. ___________________________________________________________________

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Petrohawk Energy - Fayetteville Shale Update

Petrohawk Energy (HK) reported its second quarter earnings for the period ending 6/30/2009, and provided an update on its operations in several shale plays where it has a large acreage position.

The company’s average daily production from the Fayetteville Shale was 79 million cfe/day. This production is divided into operated and non-operated portions as follows:

Non-operated - 32.6 million cfe/day
Operated - 47.7 million cfe/day

The non-operated portion is growing much faster as Petrohawk Energy cuts its rigs operating in the Fayetteville Shale to two during the quarter ___________________________________________________________________

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Southwestern Energy Company - Fayetteville Shale Update

The business model that Southwestern Energy Company (SWN) follows in the Fayetteville Shale is sometimes referred to as a manufacturing or assembly line model. An exploration and production company finds a development play where it knows hydrocarbons are present, and figures out the geology and technology required to develop it. The company must then continue this development more efficiently and less expensively over time.

Southwestern Energy Company successfully implemented this strategy in the Fayetteville Shale, and released several data points to demonstrate this efficiency.

The company said that its average completed well cost in the Fayetteville Shale was $2.9 million each during the second quarter of 2009, compared to $3.1 million in the first quarter of 2009. The average horizontal lateral length was 4,123 feet, and the average time to drill a well to total depth was 11 days. This compares to average laterals of 3,874 feet and 12 days to drill in the first quarter of 2009.

These statistics are interesting, because longer laterals probably require more hydraulic fracturing, which would increase the average cost to drill. Southwestern Energy Company is obviously benefiting from a fall in service costs, but is also gaining efficiency as it cut one day from its average drilling time. ___________________________________________________________________

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Southwestern Energy Company - Fayetteville Shale

Southwestern Energy Company (SWN) reported its second quarter results last week, and updated its operations in the Fayetteville Shale. Southwestern Energy Company now has 879,000 acres under lease. The company’s production passed one billion cubic feet (BCF) per day in July 2009, and totaled 60.6 BCF in the quarter.

Natural gas in the Fayetteville Shale is transported along the Fayetteville Lateral of the Texas Gas Transmission Pipeline, also called the Boardwalk Pipeline. Due to inspection and repairs on this pipeline, operators are facing capacity curtailments.

Southwestern Energy Company said that it would have to curtail its production due to these constraints, from 750 to 450 million cubic feet per day. This will affect its production guidance, and Southwestern Energy Company revised its yearly production for 2009 from a range of 289 to 292 Bcfe to 278 to 288 Bcfe. 

Southwestern Energy Company also released some other operational details. The company has 17 drilling rigs under contract, 13 of which are capable of drilling horizontal wells, and 4 used for vertical wells. The company estimates that its gross well count in the Fayetteville Shale during 2009 will be approximately 575 wells. ___________________________________________________________________

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