April 16 - SWN CEO Steve Mueller’s presentation to the IPPA Oil & Gas Symposium in New York

Note:  Only the comments about the Brown Dense have been transcribed.

Now we’ve also got the New Ventures group.   And I said that in the future we want to be only in five or six areas.  But we recognize that, even with the Fayetteville Shale, there’s some point in time where the Fayetteville Shale and Marcellus are going to get less to our overall company, and we need to replace those.  And we set up a New Ventures team about three years ago to look for and develop new projects.   The goal was that, to develop, developments, we’d get to a point where we’d drill two new projects a year, that we drill over a five-year period time 10 of these projects.  And those 10 projects have two to three that are successful.  And those two to three would add up to the Fayetteville Shale.

The first one we rolled out is this one, the Brown Dense, in southern Arkansas and northern Louisiana.  It’s a 350 to 400-foot thick section of carbonated shale.  It is the source rock not only for southern Arkansas and northern Louisiana, but sources all of the oil production all the way over to Florida and part of your offshore.  It covers a very large area.

On this map, there were 32 wells already drilled through the section.  There were 11 wells are actually tested in the section before we did any drilling.  There were eight cores that were in the section.  So we had a good chance of seeing the entire section.  And because of that we think we’ve been able to pretty much put acreage together in what we consider the oil window here.  There is a gas window, and those contours are depth contours on there, the southern side of that, where you run out of contours, below there that’s going to be a 100 percent gas.  And then the oil window goes from there up to the top part of the map.

The three stars you see in there, yellow stars, those are the three wells that we either drilled or are drilling.

The first well we talked about in our conference call in February.  It was doing a 100 barrels of oil a day at that time, about 200 MCF of gas, and about a 1,000 barrels of water.  But about 40 percent of its load, or its frack fluid, had come back at that point in time.

The second well has been on production now for about, about 30 days.  A little short of 30 days.  The first well was a 3,500-foot lateral, a nine stage, or 11 stage frack.  The second well is a 19 stage,  6,500-foot lateral.  And then the third well, the one that’s the most southern well on there, will be 9,500-foot one.  It’s at TD.

The second well, as I said, has been on production for about, well less than 30 days.  It takes about 20 percent of the frack fluid back before you start seeing any kind of hydrocarbons with it.  That was consistent with both the first well and the second well.  But we are seeing hydrocarbons at this point in time.   It’s still cleaning up.  It’s about 40 percent cleaned up at this point in time.  We are – there’s a picture going around on the Internet showing a gas flare, so I can tell you that we are producing gas up there.  And there is some oil with that.  And we’ll talk more about that at our next conference call once we’ve got the well completely cleaned up.

The third well, as I said, it’s drilling.  We’re right to the point of where we’re drilling the horizontal portion of it.  It’ll be a 9,500-foot lateral.  The second well, we were able to drill almost 2,000 feet a day, so as we get to that horizontal point, this should go and drill fairly quickly.

The other stars you see on there, the blue stars are companies that, uh, other companies who have drilled wells in the past two years through this formation.  And then the gray stars that are on there are wells that are permitted.  So there’s other activity.

We should know if this play is going to work sometime late this year.   And, as I said, we’ve got over 500,000 acres to date, it’s about 520,000 acres.

If you want to look at an in-place number, which it really isn’t fair, but something around 3 – 30 billion barrels in-place.  And if you want to say eight to nine percent, 10 percent recovery, you’ll have about 3 billion barrels potential recovery.   And so there’s a big prize here.  As you can see, we’ve only got about $375 an acre into it.  So it’s something that certainly could have that potential to replace, or potentially replace the Fayetteville Shale.