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“We’re in a golden age for exploration” – Company profile: Southwestern Energy Co.

Shane Thielges | Shale Plays Media

The annual Barclays CEO Energy Conference, held in New York this week, provided an opportunity for energy company executives to showcase their successes and update their colleagues on the previous year’s business.

Steve Mueller, CEO of Southwestern Energy Company, gave a presentation on Tuesday outlining the company’s growth in the past year and the corporate philosophies he says guided its success. Based in Houston, Texas, Southwestern is one of the largest natural gas companies operating in the U.S. It produced a record-setting 189 billion cubic feet of natural gas in 2014’s second quarter, a feat Mueller called the “eighth or ninth record-setting quarter in a row.”

Despite consistent, relatively low natural gas prices, he called current market conditions favorable. For example, Bloomberg.com lists the price of natural gas today at $3.85 per million British Thermal Units (MMBtu). Mueller said anything in the range of “the high threes (dollar per MMBtu) to lower fours means we make a lot of money,” adding that the company’s practices allow it to operate “in good times and in bad times.” In 2012, when gas prices dipped down into the $2 per mmBTU range, the company still nearly matched revenues from 2011 when gas prices were more than twice as high.

The key to Southwestern’s success, Mueller said, is focus. The company operates in only a few key shale areas at a time and operates its own supply chain in a process called “vertical integration.” This protects against lost revenue from price fluctuations by allowing it to alter the volume of drilling, processing and transportation as needed.

The other factor that makes Southwestern unique is its emphasis on exploration. Mueller said his company’s strategy is to operate in two to four shale plays at a time, a couple of which are proven producers and a couple which have the potential to become so. Southwestern was the first company to drill in Arkansas’s Fayetteville shale and was an early participant in the Marcellus shale as well. It currently owns 1.7 million exploratory acres in potentially profitable shales, and consistently aims to discover the next big energy-producing region. Mueller believes the country is in “a golden age for exploration.”

The three shale plays in Southwestern’s focus this year are the Fayetteville, Marcellus and Niobrara.

As the company’s first big success, the Fayetteville shale serves as Southwestern’s flagship operation. It owns over 900,000 acres in the region, and operates 3800 of the 4500 drilled wells. Mueller said the company plans to drill another 6-7,000 wells during the shale’s lifetime with an eventual concentration of ten per square mile.

He also said the best wells in the area produce between ten and fourteen million cubic feet of gas a day, an extremely good yield. Mueller credits his company’s exploratory spirit and close attention to geological detail for the high production. In fact, a single overproducing well led the company to develop in the region. In attempting to determine why it produced so much gas, analysts found the area’s undiscovered gas deposits and set Southwestern on the path to success.

The other proven producer in Mueller’s arsenal this year is the Marcellus shale. Recent hikes in estimated lifetime gas recovery have driven companies like Southwestern to double down on drilling efforts due to the high likelihood of profit. Southwestern owns 300,000 acres in the region, half of which it purchased in the last year.

Related: Wood Mackenzie: Marcellus could hold another $90 billion in value

Mueller said gas production is so good the company has had to drill fewer wells than expected to meet its goals, ensuring a longer profit window. In fact, gas pressure from wells is so high, (an indicator of large underground deposits), the company has been able to bypass compressor stations and send natural gas directly into transport pipelines.

Rounding out Southwestern’s portfolio is the Niobrara formation, its current exploratory property, in northeastern Colorado and parts of the neighboring Wyoming and Nebraska. Mueller said the company owns 300,000 acres in the region, and that the profit outlook is good: “We don’t want to have small projects or small plays.” Only a few wells have been drilled so far, as operators probe the deposit’s 2,400-2,500 foot depth for the most productive oil and gas “windows,” or concentrations.

Mueller said he looks forward to seeing what kind of production numbers can be found in the Niobrara, and in the country at large in the coming years. He criticized analysts who claim the shale boom will be short-lived as short-sighted. The country spent the last 150 years looking for “conventional,” or shallow, soft-sediment, oil and gas deposits, he said, that we now know make up less than 20 percent of total formations.

If energy companies can redefine what’s possible so drastically in the few years since the shale revolution began, he said, they can do it again in the future.

Committing to exploration and innovation, Mueller says, will keep Southwestern Energy on the cutting edge for years to come: “There’s a lot to be found, and a lot more to learn.”

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