Fayetteville shale gas output up as spending eases

Southwestern Energy Co., Houston, has drilled the backbone of its Fayetteville shale gas play in the eastern Arkoma basin and is phasing down capital spending in the play this year and in 2012, the company said last week.

Southwestern still calls the Fayetteville its “key project,” in which it is drilling 130 wells/quarter and from which it produced 112 bcf in the quarter ended Sept. 30, up 21%. Net reserves are 4.3 tcf. The 2012 capital budget should be set in mid-December.

The company has produced 320 bcf from the Fayetteville in the first 9 months of 2011 compared with 350 bcf in all of 2010.

The company placed 418 Fayetteville wells on production in the first 9 months, including 132 in the most recent quarter. It held 916,000 net acres at the end of 2010 across Conway, Van Buren, Faulkner, Cleburne, and White counties, Ark.

Operated horizontal wells drilled in the third quarter averaged $2.8 million, 4,847 ft of lateral in the shale, 7.8 days of drilling time, and an initial rate of 3.4 MMcfd, up 14% from the second quarter. Southwestern has drilled 80 wells in 5 days or less so far.

The company has drilled on but not fully developed about 600,000 acres. On 160,000 acres of federal land it has drilled six wells and plans to drill five more in the next few months. It has cored but not tested the six wells. Another 150,000 acres in the established part of the play are held by production and can be drilled later.

Southwestern has 75% working interest and an inventory of 8,000 net (12,000 gross) locations left to drill on the 600,000 acres. The company assumes that gas prices will hold in the $4-5/Mcf range for the next few years and sees the bulk of the play as being commercial at its current profitability hurdle.