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How Southwestern Energy's capital budget will impact Appalachia drilling Pittsburgh Business Times How Southwestern Energy's capital budget will impact Appalachia drillingSouthwestern Energy, one of the biggest producers in Appalachia, will spend a little less than twice as much this year on drilling and other investments than it did a year ago now that it's drilling in a second basin, the Haynesville, with the acquisition of Indigo Natural Resources and GeoSouthern Energy Corp. The company is much bigger than it was this time last year: Southwestern (NYSE: SWN) is planning capital costs of between $1.9 billion and $2 billion in 2022, up from $1.1 billion in 2021 and $899 million in 2020. The capital program isn't all drilling. It includes between $215 million and $230 million in capitalized interest and expense and $15 million to $20 million in ESG-related initiatives. But drilling is the bulk of the capital investment, with about 55% in the Haynesville and 55% in the Appalachian states of Pennsylvania, West Virginia and Ohio. That translates into bringing to sales between 70 and 75 wells in the Haynesville and between 60 and 65 wells to sales in Appalachia. The company, like most if not all of the major natural gas producers, remain in what is called a maintenance-level production profile: It's drilling just as much natural gas to replace the dropoff in older wells but not enough to grow much and flood the market, which has been a problem in the gas industry in recent years. Southwestern Energy produced about 4.7 billion cubic feet in 2021, including 4.1 billion cubic feet of natural gas and the rest natural gas liquids, a lot of that in Appalachia. In a conference call with Wall Street analysts Friday, Southwestern executives said they aren't emphasizing one shale basin over the other. Both the Haynesville and Appalachian basins have competitive economics that they said will get even better as Southwestern brings more operational efficiencies and scale to bear. CEO Bill Way said that the company sees opportunities in the Haynesville and it wants to add to its position in the Gulf Coast markets, where a majority of the natural gas and natural gas liquids growth is expected in the next few years. "(But) it's not materially less across the other parts of the business," Way said. "The results are an overall flat a profile." Southwestern, unlike many other drillers, operate some its own rigs instead of just contracting with other companies for the service. It has seven rigs that it owns out of the 12 to 13 that it plans to employ in 2022. It will have between eight and nine of the rigs in the Haynesville, along with three to four completion crews out of the six that it will have across the two basins. One companywide initiative is the move to certify all of its operations as responsibly produced natural gas, a movement across the industry that Southwestern pioneered several years ago and that has taken root in a big way in the past year and a half. Southwestern earlier this month that it would certify as RSG all of its production, both Appalachia and Haynesville, which would be about 5 billion cubic feet per day. It expects to have all of the Appalachian natural gas operations certified by March and Haynesville, the newer wells to the company that were acquired from Indigo and Geo, by the end of the year. "Our strategy and execution of that strategy and our people have transformed Southwestern Energy, significantly advancing our strategic intent to generate free cash flow from responsible natural gas development and increasing the value realization for our shareholders," Way said. |
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