Southwestern Energy today announced their capital investment budget for 2014.  They are planning up to 14 wells total in the Lower Smackover Brown Dense (all verticals), and will have a 10 well development program and a separate program to continue to delineate the lateral extent of the play.  Sounds like good news!

http://investor.shareholder.com/swn/secfiling.cfm?filingID=7332-13-50

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If SWN is only going to drill 14 wells (all vertical) at a cost of 6 million each for a total of 84 million in drilling cost, then that leaves approx. 94 million additional dollars allocated to the LSBD for 2014. I am sure they have some infrastructure to build out but it might be that those funds are for lease renewals. 400K acres at $250 per acre would be 100 million. Just a thought.

Not sure how swn budgets, but generally I have not seen lease renewals or lease payments as capital budget items. Very encouraging announcements....

If you renew a lease for X dollars in any play, it would be a capex expenditure. It is a capital expenditure no matter how funds are used . Leasing is included in that expenditure. You can ask all the landmen on this site and their fees are in the capex budget of the company that they represent. ddozier,  I am not trying to be confrontational, I just wonder where the other 98 million is going to be spent.

just another thought, but it's always easier to not spend it all then go back in July and ask for more...

SWN has stated that they are targeting well costs for LSBD development wells at about $6M, but real-world costs to-date have been running more in the range of $7M - $10M when you factor in the extra science and the various well issues they've encountered.  Based on their early experiences, I think the company probably has given themselves a bit of a cushion in the budget to account for the unexpected.  Also, don't forget that there will certainly be  some additional science costs in those couple of play-delineation wells that they are planning in addition to the 10 development wells they're targeting to drill; you can expect those to be higher cost than the development wells.  Given that, I think the general thoughts posed here are right that there is probably extra money budgeted for the LSBD play for other than purely the drilling.  My "pure guess" estimate is that they have somewhere around $110M budgeted for drilling and somewhere closer to $50M budgeted for "other" activities.  But seriously, my estimates really aren't worth very much.

One other thought on this... If you look at SWN's overall budget, it looks like they have basically shifted about $100M from their highly profitable Marcellus drilling program to fund their development drilling of the LSBD.  Since SWN budgets based on highest PVI return for the company, they wouldn't do that it they didn't see the LSBD as a potentially very profitable venture. 

This might be why SWN has  lowered their capex for the Marcellus.

http://seekingalpha.com/article/1891091-marcellus-shale-the-1-bcf-p...

Fair Enough...

I'm assuming your implication is that because SWN's Marcellus production is growing so quickly as-is, that they may be concerned about production outstrip their contracted pipeline take-away capacity in that area?  IF they had firm capacity to transport the higher volumes, but then elected to shift money to drill the LSBD instead of the Marcellus, I suppose the last part of my comments would make more sense.  But, reality is that their Marcellus production growth has been planned to stay within their contracted available take-away capacity.  So, in this case, shifting some capital from the Marcellus to the LSBD has the double benefit of keeping their Marcellus production from hitting a wall until additional take-away capacity comes online, while also allowing them to start developing their LSBD play. 

I agree Matthew. I also think you are correct about the 50 million. Even that number would cover a large amount of acreage renewals. Especially since they are lowballing their renewal offers. Most have been in $150-200 range with new 4/3 term. That buys them a lot of time for a small amount of money.

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