A program of the West Virginia Oil & Natural Gas Association

Southwestern Commits $2.6 BILLION For Development

By Casey Junkins | February 1, 2015

Despite a decrease in natural gas prices, Southwestern Energy plans to spend an additional $2.6 billion for drilling and fracking this year.

In Ohio County, Clerk Patty Fahey and her staff are busy recording the transfer of documents recording Southwestern's $5 billion purchase of the oil and natural gas leases previously held by Chesapeake Energy.

These leases are some of those reflecting the Houston, Texas-based firm's acquisition of 413,000 acres in West Virginia and Pennsylvania.

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"Every lease, every pooled unit - they all have to be recorded," Fahey said of the transfers. "They will keep us busy, but it means income for us."

Those who are now receiving royalty payments from Chesapeake should start seeing checks from Southwestern for the January production, according to company spokeswoman Susan Richardson. She said these checks will be mailed in March.

Southwestern CEO Steve Mueller said the company has no intention to curtail drilling and fracking, despite the declining prices of oil and natural gas.

"Almost everyone agrees demand will continue to grow through the end of the decade, mainly driven by new power generation and exports, but also including additional industrial growth that takes advantage of the lower energy costs compared to the rest of the world," he said.

The 1,500 Chesapeake wells sold to Southwestern are now producing 57,000 barrels of oil equivalent per day. This metric is the amount of energy that a barrel of oil would yield, even if the substance is not chemically considered to be oil. These Marcellus wells, however, are just the beginning, according to Jeff Sherrick, Southwestern executive vice president for Exploration and Business Development.

"We estimate another 2,550 Marcellus wells can be drilled, with 1,850 of those in the wet gas window ... ," he said. "The Marcellus justified the acquisition, but it only hints at the exciting upside across the acreage position."

Sherrick said the company's Messenger well in Wetzel County tested at production rate of 25 million cubic feet per day from the Utica.

Bill Way, Southwestern executive vice president and chief operating officer, said the company plans to drill about 70 wells in northern West Virginia this year in an area ranging from Brooke County in the north to Tyler County in the south and Monongalia County in the east. He said the firm plans on paying an average of $9 million to drill and frack each of these horizontal wells.


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