Houston-based Southwestern Energy Co., with interests in the Fayetteville shale gas play in the Arkoma Basin, has reported highlights of its recent Fayetteville activity including producing the play's highest rate well.

For the first nine months of 2010, Southwestern invested a total of approximately $1.5 billion during the first three quarters of 2010. The company spent $1.4 billion during the three quarters of 2009, which included $1.3 billion invested in its E&P business and $216.0 million invested in its Midstream Services segment. Of the approximately $1.3 billion invested in its E&P business, $968.7 million was invested in its Fayetteville shale play, $117.9 million in east Texas, $55.4 million in Appalachia, $110.7 million in new ventures and $10.2 million in its conventional Arkoma Basin program.

During the third quarter of 2010, Southwestern placed a total of 145 operated horizontal wells on production in the Fayetteville shale play, all of which were fracture stimulated using slickwater. At October 23, 2010, the company's gross production rate from the Fayetteville shale play was 1,536 MMcf per day, up from approximately 1,230 MMcf per day a year ago. The company is currently utilizing 22 drilling rigs in its Fayetteville shale play, including 13 that are capable of drilling horizontal wells and nine smaller rigs that are used to drill the vertical portion of the wells.

The company's wells placed on production during the third quarter of 2010 averaged initial production rates of 3,281 Mcf per day, down five percent from average initial production rates of 3,449 Mcf per day in the second quarter of 2010. Results for the third quarter of 2010 include 58 wells (40%) placed on production which were the first well in a new section. The company also placed five wells on production in the third quarter of 2010 which were completed before 2008 using older completion techniques and shorter laterals, but were not on production until recently due to pipeline infrastructure. Excluding these five wells, the company's average initial production rate would have been 3,335 Mcf per day.

Record Well

Southwestern's Harlan 09-10 #1-12H well located in Cleburne County set a production record rate for the Fayetteville shale play. The well was placed on production with an initial flow rate of approximately 8.7 MMcf per day from a 3900-ft completed lateral, following a nine-stage fracture stimulation. After 34 days on line, it's producing 5.7 million cubic feet of gas per day.

Tighter Well Spacing

Southwestern continues to test tighter well spacing and, at September 30, 2010, had placed 523 wells on production that have well spacing of 700 ft or less, representing approximately 65-acre spacing or less. Previously, the company has stated that based on the wells drilled to date, it expected a minimum of 10 to 12 wells per section to effectively drain the reserves, which would represent approximately 65-acre spacing. Early production performance from recent well spacing tests indicates that there are areas of the field that may be economically developed at tighter spacing. At this time, the company believes that approximately 20 percent of the approximately 600,000 net acres drilled to date can be developed at 30- to 40-acre spacing, approximately 40 percent can be developed at 65-acre spacing and the remaining 40 percent of that acreage needs more results from testing to determine if development on tighter spacing than 65-acres would be economic. The company will continue its well spacing program to better define the areas of the field that are suitable for tighter spacing and expects to know more about well spacing on the remainder of its acreage in 2011.

On September 30, 2010, Southwestern held approximately 889,000 net acres in the Fayetteville play area (including approximately 125,000 net acres in the traditional fairway portion of the Arkoma Basin).

Outside the Fayetteville shale play area, production from the company's conventional Arkoma Basin properties was 14.8 Bcf for the first nine months of 2010, compared to 16.9 Bcf for the first nine months of 2009. Southwestern has participated in drilling eight wells in its conventional Arkoma Basin properties during the first nine months of 2010.