SWN's Mueller September 6 Presentation

Finally transcribed Steven Mueller's presentation to the Barclays Capital CEO Energy-Power Conference on September 6.  So this is over a month old, but still interesting, nevertheless.

Steven Mueller, President and CEO of Southwestern Energy
Presentation to the Barclays Capital CEO Energy-Power Conference
September 6, 2012

Note: Only the portion of the presentation pertaining to the Brown Dense has been transcribed.

We started talking about our first project a little over a year ago.  And we said at that time – and it’s the Brown Dense, and I’ll talk more about it on the slide – we said at that time, it’s going to take 10 to 12 wells to figure it out.  And our goal was to have it figured out by the end of 2012, whether it was going to work or not work.  We’re on that pace.

At this point in time, we just are nearly finishing our sixth well out there.  By the end of the year we’ll have eight wells drilled.    And today, what started out at last year as about a 20 percent chance of working project, is up to a 40 percent chance of working.   It’s still not 50-50-even to working, but I think over the next three months we’ll either go up to 75 or 80 percent very quickly, or it’s going to go down to zero.

And you say, “What’s it going to take to get there?”  What it’s going to take to get there is about 90 or a 120 days of production so we can get the shape of the production curves.  And the reason I say that, to date we’ve tested three wells.  The first one was 100 barrels-a-day at maximum rate.  The second one was 300 barrels-a-day maximum rate.  The third one was a little over 400 barrels-a-day maximum rate. 

What was significant about the second and third, that on a 30-day average rate, the second one was about 250.  On the third, the 30-day average rate was over 350 barrels-a-day.

We need something somewhere around 500 barrels-a-day if the shape of the production curve is what we think it is.  And so we need to verify that.  But if we can get that shape of the curve, the interesting thing, that third well is only about a 3,500 – 4,000-foot lateral.  The sixth well will be over 6,000-foot on lateral.  Just on lateral length we should to be able to get up to around that 500 barrel-a-day 30-day average mark.

So we’re getting close, but we’re not there yet.   Not quite to 50-50 on this field.  But it’s an example of what we’re looking for.

We’ve put together 560,000 acres.  We got in early.  We’re one of the few players in here.  There’s only a couple of other major companies that have any position at all.  By getting in early, we have a very low entry cost.   Our average acreage cost here is something around $390 to $400 an acre.  And when we’re all done testing the play, we’ll only have a few hundred million dollars total in it as we get through the whole process.

So this is the kind of thing we’re looking for.  It may or may not work.

I get asked all the time, “Well what happens if the Brown Dense doesn’t work?”  And then what I tell them is we want to roll two year-out over a five-year period of time and test 10.  Today we’ve got four of those identified, and we have 380,000 acres that we haven’t talked about because we’re still picking up acreage on the ideas.

Tags: presentation

Views: 1295

Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on October 14, 2012 at 12:26

Thanks for providing the transcript, Bill.  Mr. Mueller provides some information not previously made public as far as I know.  And I think he is being candid in his assessments.  I also think his tone could be taken as an effort to lower expectations for the Brown Dense.

Permalink Reply by robert edwards on October 14, 2012 at 16:53

hope he is just being conservative and waiting on the results of their "test" wells and that they find the key to the pressure and the brown dense.

Permalink Reply by whodat on October 15, 2012 at 0:46

The Brown Dense may not be the next Baken or Eagle Ford play but I believe SWN has located an area of interest that is economical.IMO the BML well was a succes...

Permalink Reply by Skip Peel - Mineral Consultant on October 15, 2012 at 2:37

You may be correct, whodat.  The Doles completion results will go a long way toward confirming or refuting that opinion.   However if you are correct then the commercial area of the Brown Dense would appear to be a relatively small portion of the 560,000 acre SWN leasehold.  Not exactly the Resource Play SWN was looking for.

Permalink Reply by Skip Peel - Mineral Consultant on October 15, 2012 at 3:18

Webcast Alert: Southwestern Energy Company Invites You to Join Its Third Quarter 2012 Earnings Conference Call on the Web

Information contained on this page is provided by companies via press release distributed through PR Newswire, an independent third-party content provider. PR Newswire, WorldNow and this Station make no warranties or representations in connection therewith.

SOURCE Southwestern Energy Company

HOUSTON, Oct. 15, 2012 /PRNewswire/ -- In conjunction with Southwestern Energy Company's 2012 Third Quarter earnings release, you are invited to listen to its conference call that will be broadcast live over the Internet on Friday, November 2, 2012, at 10:00 a.m. EDT with Steve Mueller, President and Chief Executive Officer of Southwestern Energy Company.  Southwestern Energy Company announces the following Webcast:

What:

Southwestern Energy Company's Third Quarter 2012 Earnings

When: 

November 2, 2012 @ 10:00 a.m. EDT

Where: 

http://www.videonewswire.com/event.asp?id=89795

How: 

Live over the Internet -- Simply log on to the web at the address above or go to the Company's Web site: www.swn.com

If you are unable to participate during the live webcast, the call will be archived on the Company's Web site: www.swn.com.  To access the replay, look under "Latest News." 

Southwestern Energy Company (NYSE: SWN) is an integrated natural gas company whose wholly-owned subsidiaries are engaged in oil and natural gas exploration and production, natural gas gathering and marketing.  Additional information on the Company can be found on the internet at http://www.swn.com.

©2012 PR Newswire. All Rights Reserved.

Permalink Reply by Jimburgess on October 16, 2012 at 11:10

Skip........"How many acres would you say is a 'relatively small portion' of 560,000

acres?????? Are you discounting any possibilities for Union County based on what has been drilled  so far?  Please advise this old layman who would like to sustain a little positive attitude

a little bit longer.  Thanks

Jim B.

Permalink Reply by Skip Peel - Mineral Consultant on October 16, 2012 at 11:22

Jim, it's hard to estimate until SWN drills their next group of wells.  Where they choose to drill will give some indication of the extent of the fairway they are testing.  It would also help if the Doles well meets the economic benchmark that SWN has set.

Permalink Reply by Terry L. Antee on October 16, 2012 at 7:41

"we will only have a few hundred million in the play"  What kind of statement is that a few hundred million is only chump change to the government, that is serious money to a company.

Permalink Reply by Skip Peel - Mineral Consultant on October 16, 2012 at 7:55

IMO, it's a confirmation of the fact that energy companies regularly invest in new prospects some of which work out while others do not.  In the early discussions of the Lower Smackover/Brown Dense many laymen felt that success was a sure thing.  They could not fathom that a company would spend that kind of money and build that extensive a leasehold without a high confidence of success.  Well we now know that SWN considered the odds of success at 20% then and 40% now.  One particular local expert attempted to point out that the leases were so cheap and for such a long term that SWN would have an opportunity to recoup much of their investment in farm-outs even if the BD was a bust.  This is the way the energy industry works.   There are no "sure things" and there is an incredible level of risk. Companies make high stake bets knowing that some will prove up and some will fail.  They just hope to have more winners than losers.  The jury is still out on the BD.

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