1) New Ventures: 620K net acres in Lower 48 in 3 potential plays – one of which is oil – waiting on permitting in first 2 plays – still accumulating acreage in 3rd play – mngmt continues to be hesitant on timing of release of new information – our view is 30-40% chance it comes on Q2 earnings release and more likely sometime this fall
2) Fayetteville: running 11 rigs – 470-480 operated wells in 11 – given drilling efficiencies will likely drill another 60-70 wells in 12 with no change in capex – another 200 non-operated wells of which 80% are first wells on section to capture acreage – Lateral lengths have gone up, but well costs have come down & mngmt comfortable that costs will stay in the $2.8mm/well range – drilling times are down to 7-8 days per well - Well inventory @ 8,000 net wells – 600K net acres/15 yr drilling inventory (70% at 10 wells per section/20% @ more than 10 wells per section
3) Fayetteville Midstream: 260-$270 mm of Ebitda in 11 – moves to over $300 mm in 12 – mnmgt view is it is worth at least $3B – SWN has invested about $1B – no decision on monetizing until more clarity on New Ventures
4) Marcellus: 173K acres w/1,000 well inventory – 1-2 operated rigs (drill 40-45 wells in 11) & moves to 5 rigs by end 12 – production 60 mmcfd (gross)/40 mmcfed (net) & expect to exit 2011 @ 100 mmcfd – by end of 2012 will have access to 290-300 mmcfd of capacity - EUR’s: starting see more 8 Bcfed/well potential – Breakeven @ 4 Bcf = $4.20-$4.25/mcf - @ 5 Bcf = $3.85/mcf - @ 8 Bcf = $2.65/mcf
5) New Brunswick: shooting seismic on 400K acres – will have data back in late August and interpret this fall
6) Gas Macro: conversations with utilities on longer-term contracts have already taken place, incremental decision is on price – continue to believe gas becomes a bigger part of the transportation fuel mix on the commercial and industrial side & already incorporating in Fayeteville – Majors/IOC’s/NOC’s resource constrained and expect continued investment in N America
- Strong interest below $40/sh – Marcellus starting to ramp up breakout and long awaited update on New Ventures should come over the next couple months - + read across for COG on Marcellus.
