Production Projected to Grow Approximately 36% in 2010; Low-Cost
Operations Sets the Stage for A Record Year HOUSTON, Dec. 17
/PRNewswire-FirstCall/ -- Southwestern Energy Company (NYSE:SWN)
today announced a planned capital investment program for 2010 of
approximately $2.1 billion, including approximately $1.5 billion of
planned investments in its Fayetteville Shale play in Arkansas. The
company's 2010 capital program includes approximately $1.7 billion
for its exploration and production segment, $270 million for its
midstream segment and $95 million for corporate and other purposes.
"While we are proud of the accomplishments we have made in the
Fayetteville Shale play, which has resulted in another year of
significant production growth and record cash flow, we are just
beginning to unlock the true value of this play," stated Steve
Mueller, President and Chief Executive Officer of Southwestern
Energy. "Our 2010 capital program will allow us to continue our
progress in the Fayetteville Shale and East Texas programs, and
begin drilling in the Marcellus Shale in Pennsylvania." "Our 2010
program in the Fayetteville will continue to focus on optimizing
well spacing and completion techniques. We plan to operate 14
horizontal rigs in the Fayetteville Shale, two rigs in our East
Texas operations and kick off our drilling activity in the
Marcellus Shale in January with one operated rig. Our 2010
production is expected to grow over 100 Bcf and be in a range of
400 to 410 Bcfe, which is an increase of approximately 36% (using
midpoints) compared to our expected 2009 levels. The capital
program is flexible and will be adjusted to reflect market
conditions. It is expected to be funded through our cash flow and
our borrowings, while keeping our balance sheet in excellent shape.
Gas prices are expected to remain volatile in 2010 but our low-cost
operations, our position in a world-class play in the Fayetteville
Shale and our financial flexibility will allow us to create
significant value. We plan to accelerate the development of our
Fayetteville Shale play if gas prices do rebound in 2010," stated
Mueller. The following tables provide annual forecast information
for 2010, as compared to projected 2009 results, for capital
investments and the gross and net well counts (including wells
operated by others) for each of the company's operating areas.
Capital Investments ------------------- Projected Forecast
--------- -------- 2009 2010 ---- ---- (in millions) Fayetteville
Shale Play $1,260 $1,200 East Texas 160 230 Appalachia 40 145 New
Ventures 22 135 Arkoma Basin 40 25 Midstream Services 220 270
Corporate & Other 58 95 --- --- Total Capital Investments
$1,800 $2,100 ====== ====== Gross Well Count Net Well Count
---------------- -------------- Projected Forecast Projected
Forecast --------- -------- --------- -------- 2009 2010 2009 2010
---- ---- ---- ---- Fayetteville Shale Play 540 650-680 355 375-400
East Texas 50 50-60 28 25-30 Appalachia -- 35-40 -- 25-29 Arkoma
Basin 20 15-20 7 5-6 --- ----- --- --- Total Well Count 610 750-800
390 430-465 === ======= === ======= Southwestern expects to
participate in approximately 750 to 800 total gross wells (520 to
555 operated), compared to an estimated 610 total gross wells in
2009 (approximately 460 operated). The company's 2010 net well
count will be approximately 430 to 465 wells compared to
approximately 390 net wells in 2009. In 2010, Southwestern plans to
participate in approximately 650 to 680 gross wells in the
Fayetteville Shale play, 475 to 500 of which will be operated. The
company expects its average drilled lateral length per operated
horizontal well in the Fayetteville Shale play to increase to
approximately 4,500 feet, up from an average of approximately 4,080
feet in 2009. However, due to lower proppant costs resulting from
the operation of a company-owned sand mine and increased
efficiencies, the company expects to more than offset the higher
drilling and completion costs associated with longer laterals and
is currently projecting average completed well costs of $2.75
million per well for 2010. Approximately 36% of the operated wells
are planned to be the first well drilled in a section and
approximately 200 wells are planned to further test appropriate
downspacing for the play. The company is expected to average
approximately 1.5 new wells drilled per section in 2010, compared
to approximately 1.8 new wells per section in 2009. Over 98% of
these operated wells will be drilled with the benefit of the
company's growing 3-D seismic database. In East Texas, the company
expects to participate in approximately 50 to 60 gross wells, 22 to
27 of which will be operated. Of the wells planned in 2010, 21 to
26 wells will be targeting the Haynesville or Middle Bossier Shales
and 29 to 34 wells will be targeting the James Lime, Pettet or
Cotton Valley formations. In the Marcellus Shale play in
Pennsylvania, the company plans to begin drilling in January 2010
with one operated rig and participate in a total of 35 to 40 wells,
21 to 24 of which will be operated. Southwestern also expects to
invest approximately $135 million in various other unconventional,
exploration and New Ventures projects in 2010. Of the approximate
$1.7 billion E&P capital budget for 2010, $1.3 billion (or 76%)
will be invested in development and exploratory drilling, $25
million in seismic and other geological and geophysical (G&G)
expenditures, $180 million in leasehold and $220 million in
capitalized interest and expenses and other equipment, facilities
and technology-related expenditures. Southwestern Issues Guidance
for 2010 Southwestern is targeting total gas and oil production of
400 to 410 Bcfe, up approximately 36% (using midpoints) over the
company's current forecasted 2009 production of 297 to 300 Bcfe.
Approximately 344 to 352 Bcf of the 2010 targeted gas production is
projected to come from the company's activities in the Fayetteville
Shale play, up from the 2009 projected production of approximately
243 to 245 Bcf. As of December 17, 2009, the company had NYMEX
fixed price hedges in place on notional volumes of 36.0 Bcf of its
2010 gas production at a weighted average price of $9.04 per MMBtu
and collars in place on notional volumes of 14.0 Bcf of its 2010
gas production at an average floor and ceiling price of $8.29 and
$10.57 per MMBtu, respectively. The company's projected results for
2010 are as follows: Estimated Production by Quarter in 2010
--------------------------------------- 1st 2nd 3rd 4th Full-Year
Quarter Quarter Quarter Quarter 2010 ------- ------- -------
------- --------- Total Production (Bcfe) 91 - 93 99 - 101 103 -
106 107 - 110 400 - 410 Estimated E&P Pricing Deductions in
2010 ($ per Mcfe, except for fuel charges)
----------------------------------------------------------------
Average Basis Differential $0.10 - $0.20 Average Transportation
Charge $0.25 - $0.32 Average Fuel Charge 0.25% - 1.00% Estimated
E&P Operating Expenses in 2010 (assumes $5.00 gas price)
----------------------------------------------------------- Lease
Operating Expenses $0.87 - $0.92 General & Administrative
Expense $0.32 - $0.37 Taxes, Other Than Income Taxes $0.20 - $0.25
Other Operating Income and Expenses in 2010 ($ in millions)
-----------------------------------------------------------
Midstream Operating Income $145.0 - $155.0 Net Interest Expense
$19.0 - $20.0 Income Tax Rate (99% Deferred) 38.0% Assuming a NYMEX
commodity price of $5.00 per Mcf of gas for 2010, the company is
targeting net income of $640 - $650 million and net cash provided
by operating activities before changes in operating assets and
liabilities (a non-GAAP measure; see "Explanation and
Reconciliation of Non-GAAP Financial Measures" below) of $1,680 -
$1,690 million in 2010. The company expects its operating income to
approximate $1,065 - $1,075 million and its net income plus
interest, income tax expense, depreciation, depletion and
amortization (also known as EBITDA, a non-GAAP measure; see
"Explanation and Reconciliation of Non-GAAP Financial Measures"
below) to be approximately $1,690 - $1,700 million in 2010. The
company's debt-to-total capitalization ratio is expected to range
between 29% and 31% at year-end 2010. The company has also provided
additional price scenarios and their corresponding estimated
financial results for 2010 in the table below: NYMEX Commodity Net
Operating Net Prices Income Income Cash Flow (1) EBITDA (1)
--------- ------ ------ ------------- ---------- $4.00 Gas $435 -
$445 $735 - $745 $1,355 - $1,365 $1,365 - $1,375 Million Million
Million Million ------- ------- ------- ------- $5.00 Gas $640 -
$650 $1,065 - $1,075 $1,680 - $1,690 $1,690 - $1,700 Million
Million Million Million ------- ------- ------- ------- $6.00 Gas
$845 - $855 $1,390 - $1,400 $1,990 - $2,000 $2,010 - $2,020 Million
Million Million Million ------- ------- ------- ------- (1) Net
cash provided by operating activities before changes in operating
assets and liabilities and EBITDA are non-GAAP measures; see
Explanation and Reconciliation of Non-GAAP Financial Measures
below. Explanation and Reconciliation of Non-GAAP Financial
Measures Net cash provided by operating activities before changes
in operating assets and liabilities is presented because of its
acceptance as an indicator of an oil and gas exploration and
production company's ability to internally fund exploration and
development activities and to service or incur additional debt. The
company has also included this information because changes in
operating assets and liabilities relate to the timing of cash
receipts and disbursements which the company may not control and
may not relate to the period in which the operating activities
occurred. Net cash provided by operating activities before changes
in operating assets and liabilities should not be considered in
isolation or as a substitute for net cash provided by operating
activities prepared in accordance with generally accepted
accounting principles. The table below reconciles net cash provided
by operating activities before changes in operating assets and
liabilities with net cash provided by operating activities as
derived from the company's financial information. 2010 Guidance
--------------- NYMEX Commodity Price Assumption $4.00 Gas $5.00
Gas $6.00 Gas $70.00 Oil $70.00 Oil $70.00 Oil ----------
---------- ---------- ($ in millions) Net cash provided by
operating activities $1,355-$1,365 $1,680-$1,690 $1,990-$2,000 Add
back (deduct): Assumed change in operating assets and liabilities
-- -- -- -- -- -- Net cash flow $1,355-$1,365 $1,680-$1,690
$1,990-$2,000 ============= ============= ============= EBITDA is
defined as net income plus interest expense, income tax expense,
depreciation, depletion and amortization. Southwestern has included
information concerning EBITDA because it is used by certain
investors as a measure of the ability of a company to service or
incur indebtedness and because it is a financial measure commonly
used in the energy industry. EBITDA should not be considered in
isolation or as a substitute for net income, net cash provided by
operating activities or other income or cash flow data prepared in
accordance with generally accepted accounting principles or as a
measure of the company's profitability or liquidity. EBITDA as
defined above may not be comparable to similarly titled measures of
other companies. Net income is a financial measure calculated and
presented in accordance with generally accepted accounting
principles. The table below reconciles 2010 forecasted EBITDA with
2010 forecasted net income. 2010 Guidance --------------- NYMEX
Commodity Price Assumption $4.00 Gas $5.00 Gas $6.00 Gas $70.00 Oil
$70.00 Oil $70.00 Oil ---------- ---------- ---------- ($ in
millions) Net income (loss) attributable to SWN $435-$445 $640-$650
$845-$855 Add back: Provision (benefit) for income taxes 271-277
395-401 518-524 Interest expense 21-22 19-20 16-17 Depreciation,
depletion and amortization 625-630 625-630 625-630 ------- -------
------- EBITDA $1,365-$1,375 $1,690-$1,700 $2,010-$2,020
============= ============= ============= Southwestern Energy
Company is an integrated company whose wholly-owned subsidiaries
are engaged in oil and 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/. All statements,
other than historical financial information, may be deemed to be
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements that
address activities, outcomes and other matters that should or may
occur in the future, including, without limitation, statements
regarding the financial position, business strategy, production and
reserve growth and other plans and objectives for the company's
future operations, are forward-looking statements. Although the
company believes the expectations expressed in such forward-looking
statements are based on reasonable assumptions, such statements are
not guarantees of future performance and actual results or
developments may differ materially from those in the
forward-looking statements. The company has no obligation and makes
no undertaking to publicly update or revise any forward-looking
statements. You should not place undue reliance on forward-looking
statements. They are subject to known and unknown risks,
uncertainties and other factors that may affect the company's
operations, markets, products, services and prices and cause its
actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements. In addition
to any assumptions and other factors referred to specifically in
connection with forward-looking statements, risks, uncertainties
and factors that could cause the company's actual results to differ
materially from those indicated in any forward-looking statement
include, but are not limited to: the timing and extent of changes
in market conditions and prices for natural gas and oil (including
regional basis differentials); the company's ability to transport
its production to the most favorable markets or at all; the timing
and extent of the company's success in discovering, developing,
producing and estimating reserves; the economic viability of, and
the company's success in drilling, the company's large acreage
position in the Fayetteville Shale play, overall as well as
relative to other productive shale gas plays; the company's ability
to fund the company's planned capital investments; the company's
ability to determine the most effective and economic fracture
stimulation for the Fayetteville Shale formation; the impact of
federal, state and local government regulation, including any
increase in severance taxes; the costs and availability of oil
field personnel services and drilling supplies, raw materials, and
equipment and services; the company's future property acquisition
or divestiture activities; increased competition; the financial
impact of accounting regulations and critical accounting policies;
the comparative cost of alternative fuels; conditions in capital
markets, changes in interest rates and the ability of the company's
lenders to provide it with funds as agreed; credit risk relating to
the risk of loss as a result of non-performance by the company's
counterparties and any other factors listed in the reports the
company has filed and may file with the Securities and Exchange
Commission (SEC). For additional information with respect to
certain of these and other factors, see the reports filed by the
company with the SEC. The company disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
DATASOURCE: Southwestern Energy Company CONTACT: Greg D. Kerley,
Executive Vice President and Chief Financial Officer,
+1-281-618-4803, or Brad D. Sylvester, CFA, Vice President,
Investor Relations, +1-281-618-4897, both of Southwestern Energy
Company Web Site: http://www.swn.com/
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