26
Feb
SWN 4Q08 Pre Call Note
SWN Reported "In Line" 4Q08 Results; Provides Further Positive Results In The Fayetteville Shale
- The 4Q Numbers:
- Production: 57.6 Bcfe (626 MMcfepd)
- 44.1 Bcfe (479 MMcfepd) from the Fayetteville Shale
- Revenues reported of $500 mm vs $540 mm expected
- Fayetteville shale price realizations averaged $1.80 per Mcf below NYMEX prior to the completion of the Boardwalk pipeline in late December. This was expected.
- EPS reported of $0.30 vs $0.31 expected
- CFPS reported of $0.82 vs $0.82 expected
- Production: 57.6 Bcfe (626 MMcfepd)
- 2008 Reserves:
- F&D of $1.53 per Mcfe (very good)
- F&D of $1.21 per Mcfe in the Fayetteville alone (even better)
- Reserve growth of 51% to 2.185 Tcfe.
- Operations:
- Fayetteville Shale:
- YE 08 Production: 720 MMcfepd gross
- As of Feb 15, 2009:750 MMcfepd gross
- Fayetteville Shale:
- Hedges: 48% of expected production with an average floor price of $8.48.
- Balance Sheet:
- 23% debt to total cap
- $1B revolver, untapped at present
- "nearly $200 mm cash on hand
- Fayetteville Shale Well Update
- Fayetteville wells now seen at average of 1.9 Bcfe estimated ultimiate recovery, up from prior 1.5 Bcfe previous estimate at YE07.
- 2H08 wells cost $3 mm apiece, have gross reserves of 2.2 Bcfe each, for a straight up F&D cost of $1.36
- Including improved well performance they scored F&D in the Fayetteville of $1.21 per Mcfe last year.
- IPs are trending up with long lateral lengths.
- 1Q08: Lateral length of 3,301' with initial production of 2.3 MMcfepd
- 4Q08: Lateral length of 3,850' with an IP of 3.347 MMcfepd
- 4Q08 wells cost $3.1 mm a pop with that 3,850' lateral and took 13 days to drill (this was 17 days a year ago)
- Closer Perforation Cluster Spacing test resulted in 20 to 25% better IPs. Will use on all wells going forward
- They see completed well costs falling to an average of $2.9 mm in 2009 due to lower service costs and efficiencies (sounds a bit conservative given their past and the speed of the fall).
- 875,000 net acres so lots and lots and lots of potential locations.
- 26% HBP, average remaining leases have 5 years remaining and a 15% royalty burden.
- 22 rigs running (1 more than last I'd heard).
- East Texas Update
- Their first Horizontal Haynesville well has been drilled, completed and is currently testing so hopefully we get a little flavor on the call.
- Second well is drilling and will be completed in 2Q09
- "the company may invest more capital in the Haynesville/Bossier Shale than previously planned"
- They also had good results from their horizontal James Lime program,
- Guidance:
- 2009 Production: 280 to 284 Bcfe (767 to 778 MMcfepd) or up 45% (on the mid) over 2008 volumes of 194.6 Bcfe. This is the same as the prior guidance from the December operations updated reviewed here.
- Fayetteville forecast to be
- 2009 Capital Budget: $1.9 B
- This is less than the prior budget by $100 mm as they plan to release 4 additional rigs over the course of the year.
- $1.6 B goes to E&P vs 1.78 B in the old budget
- $1.3 B goes to the Fayetteville vs $1.5 B in the old budget
- 2009 Production: 280 to 284 Bcfe (767 to 778 MMcfepd) or up 45% (on the mid) over 2008 volumes of 194.6 Bcfe. This is the same as the prior guidance from the December operations updated reviewed here.
- Conference Call: 10 am EST.
[…] SWN 4Q08 Pre Call Note […]
February 28th, 2009 at 1:09 pm