When a company plans to drill close to 1,000 wells and spend more than $2 billion in one play, its footprint is large. That makes it all the more important to maintain a good relationship with the neighbors.

“Southwestern Energy Co. actively supports the communities in which we operate, not only because it is important to our continued success, but because we believe it is the right thing to do,” says Richard F. Lane, president of exploration and production.

The Houston-based producer chooses community projects, like conservation and education, according to the same formula it follows for regular business operations: “The right people doing the right things, wisely investing the cash flow from our underlying assets, will create value-plus.”

Greg Kerley, chief financial officer, says, “We support initiatives we think will improve the quality of peoples’ lives. We have a company committee that reviews and selects charitable-giving requests based on our formula and giving criteria. We have also established several new programs as well.”

Southwestern has a large presence in its primary focus area—the Fayetteville shale play in north-central Arkansas. The company holds more than 900,000 net acres there. It has 525 square miles of 3-D seismic data in the play area, and has drilled and completed 478 wells, including 372 horizontals. Its gross operated production from the Fayetteville increased to about 350 million cubic feet per day by mid-February 2008, up from about 120 million cubic feet in February 2007.

“We will drill another 475 horizontal wells in 2008, approximately,” says Kerley. “By the end of the year we will have invested a total of $2.6 billion in the Fayetteville shale play. Those dollars, along with investments by other operators, have had quite an impact on the economy in Arkansas. It’s really fueling the state’s economic growth.”

Due to its large presence in north-central Arkansas, Southwestern has a close relationship with the landowners and communities in the area. “Our relationship with the landowners is one of the most important parts of our business,” Kerley says. “We keep in touch with them by personal visits and quarterly newsletters. We also have a toll-free owners’ hotline and website to keep them informed.”

The company’s major conservation effort is its creation of the Damascus Bobwhite Quail Habitat Project in north-central Arkansas.

“As we were leasing land in Arkansas, we became aware of the need to protect the natural habitat. We partnered with the Natural Resources Conservation Service, the Arkansas Game & Fish Commission, and the Arkansas Association of Conservation Districts. Now there are more than 9,700 acres in Conway, Faulkner and Van Buren counties in north-central Arkansas where we are supporting the restoration of quail-friendly habitat.”

Such restoration measures include planting native grasses and woody plants that serve as food sources and nesting structures for the birds. Southwestern provides both technical and financial support to the project.
To date, Southwestern has donated some $250,000 to fund the conservancy effort. As a result, the bobwhite quail, a species in decline in Arkansas since the 1980s, will have an opportunity to thrive, as will other species that live in the area, including game animals like deer. While area landowners are invited to participate in these restoration activities, they do not incur any costs for improvements made by the project.

Meanwhile, Southwestern goes far beyond its conservation program by also undertaking charitable-giving and educational programs. In 2007, it established its formal corporate-giving program. As a result, many of the company’s initiatives are fairly new. Nonetheless, it has nearly reached its $1-million milestone. To underscore such significant growth, Southwestern established several signature charitable initiatives to form partnerships with “organizations of excellence.”

To support higher learning in nearby communities, Southwestern partnered with the University of Arkansas Community College at Morrilton (UACCM) to establish a petroleum technology program in connection with its Fayetteville play. The company pledged $200,000 to the university and is an ongoing contributor to the related Fayetteville Shale Scholarship Fund, which awards scholarships to students preparing for careers in Arkansas’ oil and gas industry.

“We developed part of the curriculum for the petroleum technology certification program ourselves. We want to help build a strong, local workforce in energy. Together with the university, we offer classes in drilling, well construction, production management, gathering systems and other technology,” Kerley says. “There are only a handful of these types of programs in the U.S.”

While the university holds the majority of the classes on the university campus, employees from Southwestern conduct hands-on training for the students, taking them on field trips to its rig sites. The company also offers internships.

The programs vary from one to four semesters, and generally result in a technical certificate, a certificate of proficiency or an associate’s degree of applied science in petroleum technology.

Southwestern also supports educational outreach at the high school level. In April 2007, the company pledged $250,000 to Junior Achievement of Arkansas. The gift establishes a new three-year partnership to bring a career curriculum, with special focus on the energy industry, to high school students in several communities throughout north-central and northwestern Arkansas. The company’s contribution is the largest donation made to Junior Achievement of Arkansas in its 20-year history.

“We’re very proud of this partnership,” says Kerley. “We developed the energy-focused component of this curriculum, called Energizing Careers, which our employees teach during the six-week program.
“Based on the feedback we’re getting from students, teachers and our employees, who are volunteering, this effort is making a positive impact on young people. Hopefully, we are getting them excited about their future careers. We want to plant a seed in high school kids to explore some facet of this industry, like engineering or geology.

“Then our program at UACCM can impact these young people or people of all ages. It’s important because it can train people to go right into the industry.”

Other notable programs
As an ongoing process, Southwestern’s employees are encouraged to give generously to charitable organizations through fund-raising initiatives with matching-gift programs. Recent efforts include the Salvation Army, American Red Cross, March of Dimes, American Heart Association, Susan G. Komen Race for the Cure and the United Way.

Specifically, Southwestern pledged $400,000 to the American Red Cross, Salvation Army and the Bush-Clinton Katrina Fund to support relief efforts in the aftermath of Hurricane Katrina and matched employees’ cash contributions without limit.

The company’s charitable activities haven’t gone unnoticed in the state. It recently was recognized as the 2007 Philanthropic Corporation of the Year by the Arkansas Community Foundation during the 20th annual Arkansas Business of the Year awards ceremony in late February.

Southwestern’s giving strategies also extend to supporting causes affecting rural communities because so much of its operations occur in rural areas.

In January, it kicked off Everyday Heroes, a new charitable-giving effort that includes donations to and training for local volunteer fire departments (VFDs) and their countywide associations. VFDs are often first responders and safety partners for the company. Their needs are closely aligned with Southwestern’s operations, so Southwestern wants to ensure the VFDs receive support for equipment and programs. The new campaign will also include donations to rural police departments and sheriffs’ offices.

During 2007, the company also supported 4-H programs in counties where it has active operations. Southwestern made an overall contribution of $15,000 to 4-H foundations in Cleburne, Conway, Faulkner, White, Van Buren and Pope counties ($2,500 each). The company will make the same donation again this year.

The 4-H donations will allow the clubs to help more children enjoy and experience opportunities to learn leadership and citizenship skills. By serving more children with more services, the funds also help 4-H fulfill its mission of “learning by doing.” These donations are very large ones, relatively speaking, for these foundations because they do not typically receive major gifts.
Meanwhile, Southwestern made several donations totaling $30,000 to United Way chapters throughout the Fayetteville shale region, including in Faulkner, Cleburne, Conway, Van Buren and White counties. This is in addition to employees’ contributions.

With these signature programs, Southwestern makes an effort to support nonprofits of all sizes that meet its giving criteria. As a result, in the past year, Southwestern’s charitable-giving committee has approved and provided financial support to dozens of nonprofit, civic and educational organizations and events.

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