Southwestern Energy Company

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Southwestern Energy Marcellus shale drilling rig back-dropped
by Appalachian fall colors. Photo courtesy of Southwestern Energy.

Houston, Texas-based Southwestern Energy Company (NYSE: SWN) is a domestic oil and gas exploration and development company.

During the first quarter of 2009, Southwestern had increased its leasehold from 110,000 to 137,000 net acres in Pennsylvania prospective for Marcellus shale. This increase resulted from the purchase of 21,715 net acres of drilling rights in the northeastern Pennsylvania county of Lycoming for $8.2 million ($378/acre). Update #1: According to a February, 2010 company update, the company's acreage position stood at 149,000 net prospective acres in Pennsylvania at the close of 2009. Some factoids regarding Southwestern's acreage include:

• 5 years average remaining lease term
• 13% average royalty interest
• $594 per acre acquisition cost

Update #2:According to Southwestern's web site, accessed in February, 2011, the company controlled 175,000 net acres that were prospective for Marcellus shale.

In 2008 the company had drilled four wells in Bradford and Susquehanna counties--three were vertical and one had been horizontal. As of the end of 2008 three of these wells were in the process of being production tested, and a forth one was awaiting recompletion. The ratio of Susquehanna to Bradford acreage was 60/40% held in three main acreage blocks.

A March, 2008 report indicated that a wholly-owned subsidiary of Southwestern, Southwestern Energy Production Co. (SEPCO), had drilled an exploratory well in Herrick Township, Susquehanna County, PA.

In December, 2008 the company reported that it had invested $61 million in Pennsylvania Marcellus shale development in 2008 and planned to do another $42 million in 2009. The money was to be used to acquire additional land as well as for seismic testing and drilling two wells.

A June, 2009 report found Southwestern had applied for withdrawal of 380,000 gallon/day from Tunkhannock Creek, Gibson Twp about thirty miles east of Montrose in Susquehanna County, PA. It had been approved by the Susquehanna River Basin Commission for a well on the Price farm.

According to a Southwestern update provided in July, 2009, the company planned to begin drilling on its Marcellus shale acreage in earnest during 2010. The company's major emphasis during 2009 focused on obtaining drilling permits, getting water rights lined up, and evaluating pipeline right-of-way options.

A late October, 2009 company update stated that it was still in a holding pattern from a drilling standpoint, and depending upon a number of factors, planned to upgrade its Marcellus drilling program with three rigs operating in northeastern Pennsylvania during 2010. Drilling in Bradford County had first priority and the company intended to move out from there to other blocks. The Marcellus shale formation is very thick in Southwestern's leasehold--over 400 feet thick in some places with very little faulting. All of the company's future wells were planned to be horizontal.

By December, 2009 in a capital budget update, the company noted that it planned to field one rig in the Marcellus shale starting in January, 2010.

A February, 2010 update mentioned that during the previous year Southwestern had invested $40 million in Pennsylvania mostly for acquiring acreage. It included purchasing 22,800 acres in Lycoming Co. for $8.7 million ($382/acre). This was probably the same northeastern Pennsylvania acquisition mentioned in the second paragraph above, yet the cost per acre appears to be slightly different. The company was in the process of drilling its first Pennsylvania horizontal well since 2008. It was the Heckman Camp #1 located in Bradford County; it was to be producing by the second quarter of 2010. The company was expecting to drill between 20 and 24 wells in Bradford Co. All were to be located close to the Stagecoach Pipeline on which the company had contracted for 20 Mmcf/d of natgas transport capacity. Southwestern also planned to participate as minority partner in up to 20 Marcellus shale wells mostly located in Susquehanna Co.

In a September, 2010 news item, Southwestern was mentioned as defendant in a lawsuit filed in Susquehanna County regarding its Price #1 well drilled during 2008 in Lenox Township, Susquehanna Co., PA. The plaintiffs, thirteen families who live near the Price well, claimed that the drilling operation had contaminated their water wells located within 2,000 feet of the gas well. The suit alleged that the contamination resulted from a faulty well casing and spills of diesel fuel and toxic waste. Southwestern denied the plaintiffs' allegations and said there was no link between the well and contaminated water supplies. Plaintiffs were represented by attorney Peter Cambs of Port Washington, NY.

As of mid-December, 2010, the Southwestern had drilled a dozen horizontal wells in northeastern Pennsylvania. Three of these had been drilled in the Greenzweig area of eastern Bradford County close to the Susquehanna County border. These had been placed into production in November, 2010 and by mid-December were producing between 5.9 to 6.8 Mmcf/d. Flowing tubing pressure for these wells ranged from 1,722 to 1,848 psi. The company planned to drill between 40 and 45 gross wells during 2011 with two rigs operating.

A news item appeared in February, 2011 indicating that Southwestern had purchased all of EXCO's leased acreage in Lackawanna, Susquehanna and Wyoming counties in northeastern Pennsylvania. The agreement had been signed in December, 2010. Before the sale, EXCO had owned 25,000 acres in Lackawanna County that had been acquired from the Greenfield Gas Group. During the same time-frame, Southwestern had applied for a drilling permit for an exploratory well in Benton Township, a rural area of Lackawanna Co. approximately 12 miles north of the City of Scranton. If results were favorable, the company eventually planned to drill a total of six horizontal wells from this same well pad.

Later in February, 2011 another story emerged about the planned exploratory well in Benton Township. The well location appears to have been within a 3,700 acre area covered by the Pennsylvania Bureau of Farmland Preservation's easement purchase program in Lackawanna Co. Southwestern planned to build a drill pad and access roads on 3.5 acres of idled pasture on the 175 acre Willard and Sally Wells farm. 115 acres of this farm were covered by state preservation easements.

• Harold M. Korell is Southwestern's Chairman.
• Steven L, (Steve) Mueller is President and CEO.
• Greg D. Kerley is Executive Vice President and CFO.
• Gene A. Hammons is President of Southwestern Midstream Services Company.
• John Nicholas oversees Marcellus development for Southwestern.
• Dave Sweeley is Southwestern's Pennsylvania Operations Manager.
• Elise Mitchell is a spokesperson.