Houston-based Southwestern Energy Co. reports its total capital investment program in 2011 is expected to be approximately $1.9 billion, down from $2.1 billion in 2010. The company's 2011 capital program includes approximately $1.6 billion for its E&P segment, $225 million for its midstream segment and $60 million for corporate and other purposes.

"Our large inventory of high-return wells in the Fayetteville shale gives us the ability to have profitable growth in today's price environment and our economies of scale in the play enable us to enjoy one of the lowest cost structures in the industry," says Steve Mueller, president and chief executive, Southwestern Energy. "The continued focus on keeping our costs low and adding the maximum value for each dollar we invest are the keys to success in 2011."

Of the approximate $1.6 billion E&P capital budget for 2011, $1.2 billion (or 72%) will be invested in development and exploratory drilling, $50 million in seismic and other geological and geophysical expenditures, $145 million in leasehold and $255 million in capitalized interest and expenses and other equipment, facilities and technology-related expenditures.

Southwestern expects to participate in approximately 580 to 600 total gross wells (480 to 500 operated) in 2011, compared with an estimated 700 total gross wells in 2010 (approximately 575 operated). The company's 2011 net well count will be approximately 380 to 400 wells compared to approximately 440 net wells in 2010.

In 2011, Southwestern plans to participate in approximately 530 to 540 gross wells in the Fayetteville shale play, 440 to 450 of which will be operated. Average drilled lateral length per operated horizontal well in the Fayetteville shale is expected to increase to approximately 4,800 feet, up from an average of approximately 4,400 feet projected for 2010. The company also expects that the average time to drill to total depth from re-entry to re-entry will decrease in 2011 to approximately 9.5 days from approximately 11 days projected for 2010.

The company is projecting average completed well costs of $2.8 million per well for 2011. Approximately 60 of the operated wells in 2011 are planned to be the first well drilled in a section compared to approximately 220 operated wells projected for 2010. Approximately 2.3 wells per drilling pad are planned in 2011, compared to approximately 1.8 wells per drilling pad projected for 2010.

In the Marcellus shale play in Pennsylvania, the company plans to begin the year drilling with one operated rig and end the year with two operated rigs. Southwestern plans to participate in a total of 40 to 45 gross wells, all of which will be operated. In East Texas, the company expects to participate in approximately 8 to 10 gross wells, two of which will be operated and targeting the James lime formation. Southwestern also plans to invest approximately $170 million in various other unconventional, exploration and New Ventures projects in 2011, which includes drilling two operated wells.

Southwestern is targeting total gas and oil production of 465- to 475 billion cubic feet equivalent, up approximately 18% over the company's expected 2010 levels. Approximately 410- to 420 Bcf of the 2011 targeted gas production is projected to come from the company's activities in the Fayetteville shale play, up from the 2010 projected production of approximately 346- to 349 Bcf.

The 2011 investments are expected to be funded through the company's existing cash flow and through borrowings on its revolving credit facility. Additionally, Southwestern's debt-to-total capitalization ratio is expected to remain approximately 30% through 2011.

"While we continue to believe that the long-term fundamentals for natural gas are very good, we are entering the new year with gas prices at lower levels than what we saw at the beginning of 2010," notes Mueller. "Our 2011 capital program is flexible, and we have the ability to adjust as market conditions change throughout the year."