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Southwestern Energy Inc.

Thu, 11 Dec 2008|



Southwestern Energy. Can best be described as very simple company. We do three science we concentrate a natural gas row over 90% natural gas. We concentrate on growing with the drill bit and when growing through drove it. Not -- -- was just the size of business. And our whole business process. Is basically. Summed up from the formula actually at the bottom -- page. And I -- go through the details and I think this season results that form as good as -- presentation. But I will say if if you stop by our office in Houston walk up to the receptionists. And ask her about the formula. -- I wish they would tell you about the foreign it was true we'll tell you how that fits and what she's doing. And how that's helped her with her process in -- -- she works. -- the end result of being simple. You'll see is there we go through the presentation. But overall. 10 lowest cost. Companies in the business was that in itself and the cost or they'll -- side -- -- cost. We've captured a very large. And -- physician -- call Fayetteville shale of a lot of detailed idea. -- it gives us transparency for growth for many years to come. And with what we've learned in the Fayetteville we're stern expand its mother is not talk about -- expansion -- well. Now part of what we're going to do the future and what we're doing in the near term can really be seen what we've done here recently in the last 36 months. And I just wanna quickly review some of the highlights for you -- the last quarter. -- -- and numbers -- he starts his staggering numbers. We've grown up production over 76% -- year 70% quarter over quorum productions. You can see on our net income that's thrown largely also -- discretionary cash flows -- 4% -- view here. And along the way the big drivers that's from the Fayetteville shale we set an all -- -- -- the Fed -- six firmly Q for -- day. And what's really significant about that I was on September 30. On July 1 of this year just 3 months earlier this morning at five and one -- -- we increase to undermine today just one quarter. And we'll go one more. And then we have a successful program we started in late 2007 -- line that is going well for -- we'll discuss that. But -- -- -- twelve wells and james' want and those are averaging over nine million. Using some technology. Which it. And then finally we've got to balance sheet that. Sets us up what we do not have to go to market for the next couple years so as we start worrying about what's going on in future. We're set that we can do of the program we go ahead of this without having to worry about -- or. This shows a little bit about track record of -- the last ten years. Production to for this year we think will be up over 70% from last year on reserve replacement we've average or 300%. -- average of reset this year and what we're doing. Even dot. 33 months where one point one billion dollars or 70%. Over last year was -- three more months ago. We get announcing overall plan would be about double from -- over last -- you don't basis. RF and the standpoint. We were down last year over the previous year the issue should be down again. We're right in the really hard as booking -- -- -- So -- companies over the next few years taken religion and we say we no orphaned because you can go down. We start looking to where we work. If -- a look at this map in early 2000. A late 2007. UC two other bombs on the map fool's Gold Coast and permanent. We sold those this past year for about 250 million dollars has about -- to BC. But reserves about sixteen million daily production. If you look at that map also -- also seen -- Pennsylvania wasn't on the map. And we just had a discussion last talk about the Marcellus we have about a 100000 acres in the Marcellus Shale -- 101000 acres. We drilled four wells today three verticals and more horizontal. We've completed to the verticals and -- right now completed nearly horizontal well and it's too early to give you much more details about it. Except -- we're very excited about what's going morsels and or increase in Pennsylvania and now we have program he starts he has. Build next year they're really its 20102000. Loan program for us. From a capital investment standpoint. We'll spend about one point seven billion dollars this year. -- that just over 90% in the U -- the business. The there. -- and a half percent is in our midstream you know talking about mainstream and and we did or utility company. We solar utility companies analyze this past year but we did -- captain goes utility. Of our overall capital. About 76% will go to Fayetteville shale. And on this map to 70% to chew on here that's -- growing portion. The other 6% some midstream side and -- from. Standpoint of the other areas. Both east Texas -- -- coma. We'll talk more about that. But those will be consistent type number one percentage basis on the quite sure you go -- room and into. Let's talk just quickly about the areas. In east Texas. We got into this area in in 2000. In the field -- -- and -- -- -- central. For part of that. -- The production and reserves we have a little over 300 BC of their own reserves almost all that's an overtime and the blue part of -- -- -- over to production. And I said beginning in late 2007. Which started James -- program you see the production we've already -- this year and James on. As I mentioned before nine million -- -- average for the change on wells and those wells are down and and Angelina river trend area and southern part of that map. Well we're the largest acreage holder in the -- line play. And -- -- -- -- -- -- wells this year to four million dollar wells to -- complete. There are over two BC FO UR standpoint. And like I'm -- talk about. And -- -- learning -- Warner early stage and learning curve here. What's making this place successful as we took some of the completion technology. Or use shale. Decided usable -- -- in this case alliance. And it's working for us. But again -- in the very early stages of doing that all the way to the point where when I talk later about the stages -- number of tracks and how much energy from the ground Fayetteville. We're just now learning what that -- work who's influencing you see that increase as we move -- future. Yes -- it's going on in east Texas and a lot of people talk about -- a haynesville play. That some Americans we have as -- is outside and certain exploratory. To the overall haynesville play. But -- six wells permitted right around our acreage one of -- -- TV recently by Kevin within a mile or. One block of acreage. And we actually have -- well being drilled by a private company right now on our acreage is strewn about 111000 feet on his way to roughly 141000 feet. And we'll get to test in the next six months on on the haynesville. The interesting thing here is was -- as well outside of -- The -- -- in the -- there's no well in 1970s it was drove by AMOCO. On our acreage that has mud log shows and was very -- things that there are being drilled two north us. So this is one of those upsides and we have also been would be down and -- all that and we were community. -- -- legacy property. We started in Arkansas and -- are really in Arkansas company from our production loans. We start when call fairway -- -- which are okay -- Tyson's. In northern Arkansas. And while it's a legacy position forward -- very significant position is over 300. He CF reserves there we make about 75 million today. Managing soon -- chart we're gonna drove up our wells is for those conventions things. -- its legacy it doesn't mean and it's it's over. And it's not over from a -- -- standpoint -- it was on this acreage or figured out Fayetteville who work and kicked off patent. But also. You see on this acreage is the ranger and a client midway area. Ranger Klein was -- late ninety's discovery for we drove over water wells -- ranger Klein continues through today. Midway is a feel that we discovered in 2006. It has over thirty wells when it -- waited several hundred wells overall. And the three -- we have running right now and our home base and are actually work and then midway field. However I want spend little time -- here's Fayetteville shale you see that that highlighted area on this network shows from Fayetteville outlined. This next slide. Shows that overall area in little bit more detail. There's a lot of -- on -- and agreed as we cancers -- the trend we have most Torre reached about 860000. Acres. The little squares that are on their pilot areas in red squares and blue -- unconventional and conventional -- we -- They're still as conventional production we have on this acreage we drove up 20/20 five was a year -- For the conventional. I was in February needs to -- about -- me today. The key thing -- -- the famed ocean itself and put this in perspective that it earned 60000 acres net. -- about the size of the state of Delaware. It's 120 miles long twenty miles wide so it's a very large area that we're going after wheel drove -- 500 wells the year -- usage. And now the real key to what's going on there. These are learning crew -- won't spend a couple slides here talk about them. As first line is a table. And there's a lot of numbers on the table first -- just -- State's second homes get the number wells are actually going loses the -- -- some other problems. The third fourth and fifth homes are different. Production different point in time. And then the last the last two columns it was a letter -- collateral needs and completion technique. Don't worry about that last phone but if you look at the average -- -- -- -- -- it's been increasing and if you look at. From the end 2007. Through third quarter of this year it's increased about 17%. If you look at any of those IP and -- the same thing with at the end of the -- 2007 and look what happened through third -- you see they went up 45%. And -- -- 45% for two reasons one he did have an increase laterally which gave more contact rob. But you also have 3-D survey. We now have seven or 70% or -- -- Shot with three view within two years of summary page that elections that are -- wells. In early days we didn't have -- three you all so we're getting some benefit from 3-D. And then by far the biggest portion is what we complete. And that last phone possible about the completion without -- details about a -- noticed the last few quarters everything's in the first part of that. We're doing. Slick water for Axl you know before we start with different kinds of France and come on through and there. Where continue to work with the fluids and foods part of it. But the big thing we've done is we've put a lot more energy -- when we've done tracks. And put them perspective at the end of last year typical -- for us and we got completely well. We about two million pounds -- it two million gallons of water. Today on 4005. -- levels we're putting you know formally iTunes and and forming -- war. Longhorn -- he's going formation for breaking up the rock a lot better and we're getting better overall production. That's just on the nineties -- your -- agency's overall production. This next slide shows a little bit about. -- overall wells have gone. The three. Smooth curbs on there or end of year 2007. Tight curves or use or reserve engineers. The bottom line it's jacket on there is all the wells drilled. And then the red lines that's on top of that is wells are greater than 3000 feet about half the -- we drove now -- written 3000 feet. And you see not only repeating an increased -- -- -- sixty days but two years out received significantly better production and all wells. The -- and think about that their production. Is that our costs and flat from late 2006 are today and project in our cost will be nearly flat per -- basis when next year. And the reason it happened. Mainly is that we've taken from the end of 2007. Average -- time of sixteen days and brought that down -- third quarter averaged twelve days. In our had -- in some things we've done in -- second and third quarters of this year we've actually done wells under. Ten days. And we actually 20 we've done a great season. We're working that down -- that goes down -- drilling cost decrease. And management for more energy round the completion costs and increase in the end result of that it's been flat. Not -- worried about fuel costs going up we're going -- you costs going up. And look in the future. If those other cost -- -- and you may actually see some war overall -- cost of men -- that. As we drives and uses things system. Now we're not done there -- -- things those systems for taking days. There's a lot of other things we're doing I mentioned that we have. 22. Went from two million pounds of sand -- pounds and whose -- that's a lot of sand. We bought her own mind. And mine -- completely operational in 2009. What that'll do this I was about a 150000 dollars -- well and we have several thousand miles of realtors who view a very good investment for -- -- At the end of 2007. We were tracking all of those millions of gallons of water to the location. By the end of this year 2008. We will ever think -- essays about -- thousand. Dollars -- well. And then we're doing a lot of little things is to help long way and one more creative things who we've worked on. These wells seasonal basement the world -- -- -- much diesel. Historically what you have to do is go basically. Figure out ways to disposes. The oil based mud after you've used it. We've come -- the technique is another company where we can strictly the diesel out of mud dispose of the the other component -- easier and and reason diesel. Well the total cost to do and that's about a dollar per gallon. Whereas you know pieces going for three plus right now you know that's another 5060000 dollars -- -- well. So we're still working on the as well -- -- this kind of shows you results what's happened. And 32 months in the Fayetteville shale but not for basically no production over 600 million today. And this is nice curve a look at this -- steep incline and we think any Klansmen who continue for several years. But it's only part of the story. -- -- talked about the fact that we don't -- and we don't eleven rigs we know we're gonna have to water rigs and you're basically where themselves on the field. With those eleven rigs were able 400 employees just for the drilling side of it. We didn't have enough experience people in northern Arkansas. To handle that many rigs so -- -- -- -- -- we can't just like you do foreign area and we house 200 people full time in northern Arkansas. -- going that direction with them. On the -- side and so we have much water that we have to transport we have to actually get the water transported. So we have -- 125 on that we built to date that we home. Well I don't want assault on -- reform on that we put out there. We've hired full time former four service people to help hospitals on to figure out what how to manage -- overall constant standpoint. And today we have about a 150. -- 180 million barrels. The water available to us to use when it's all done we'll have close to 300 million girls water. Using this project. So there's a lot of things going on because that's 600 million today plus he's going on me that -- -- in future. When we talk a little bit of just a second about her or midstream rules midstream side. But we've put in about -- her miles -- that we haven't midstream part of company and -- gather all of our guests and some third party yes but some it's important yes. And as our production gone up -- receive their their earnings gone up as well. Along the way. We've also committed as a company to two different major pipeline projects -- you gas out of the area in -- last slide. You might have noticed that we were up six term in -- in Mosul dip down -- line. That Vietnam was because of the delay in almost pipelines and shown -- -- -- boardwalk pipeline it was supposed to -- in September of this past year. They've got are all in except for one -- it's not 2000 foot. Long underneath a small river.

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