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Southwestern renegotiates Fayetteville capacity

3 Oct 2017, 8.22 pm GMT

Southwestern renegotiates Fayetteville capacity

Houston, 3 October (Argus) — Southwestern Energy has reached an agreement with Boardwalk Pipeline Partners to reduce its pipeline capacity out of Arkansas' Fayetteville shale, saving the natural gas producer about $70mn through 2020.

The agreement — which still requires approval from the US Federal Energy Regulatory Commission — will cut Southwestern's firm pipeline capacity obligations on Boardwalk's Fayetteville lateral to about 100mn cf/d (3mn m³/d) from 800mn cf/d. Southwestern has the option to add that capacity back in 2021 at a restructured rate of about 10¢/mmBtu. The company had paid an average rate of about 26¢/mmBtu across its portfolio of Fayetteville takeaway capacity agreements.

Southwestern, under the renegotiated agreement, can ramp up drilling in the Fayetteville "as economics dictate" without incurring additional liabilities related to reduced activity, Bill Way, Southwestern's chief executive said.

The company has pared back the development of the Fayetteville shale to focus on more lucrative drilling opportunities in the Marcellus shale in Pennsylvania and West Virginia.

Southwestern said in August it had about 2 Bcf/d of firm takeaway capacity from the Fayetteville. Its output from the field in the third quarter averaged about 900mn cf/d, down by 15pc from a year earlier.

The Fayetteville lateral is part of Boardwalk's 2.4 Bcf/d Texas Gas Transmission system that can carry supplies to the US Gulf coast.

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