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Southwestern to market Fayetteville assets

13 Feb 2018 15:21 GMT
Southwestern to market Fayetteville assets

Houston, 13 February (Argus) — Southwestern Energy, the third largest producer of US natural gas by volume, is marketing its assets in Arkansas' Fayetteville shale as part of a plan to reduce debt and to focus on more lucrative opportunities in the Appalachian region.

The potential multi-billion dollar deal would represent a stark change for Southwestern. The company discovered the Fayetteville and grew to become the largest producer there before moving into the Marcellus shale. The Marcellus, a vast gas-bearing formation in Pennsylvania and the surrounding states, began to overshadow the Arkansas field. Southwestern's Marcellus wells were larger than those in the Fayetteville and offered better returns, especially when gas prices were low.

Southwestern is following a similar strategy as other large gas producers such as Chesapeake Energy and Devon Energy. Those companies are planning to sell or have sold assets that provided an early foundation for growth and a place to hone shale drilling and well completion techniques.

Southwestern has more than 900,000 acres in the Fayetteville as well as gas gathering systems. A sale of those assets would position the company to "compete and win in the future," Southwestern chief executive Bill Way said.

"We are now in a position to further advance our opportunities in Appalachia, to deliver sustainable, value-driven growth and greater returns for our shareholders," Way said.

Southwestern's net 2017 production was about 2.46 Bcf/d (70mn m³/d) of natural gas equivalent, 64pc of which came from the Appalachian region. The company plans this year to have four working rigs in Appalachia. It will drill 100-125 new wells and turn 125-145 wells to sales.

Southwestern this year plans to spend $1.15bn-$1.25bn, 71pc of which is earmarked for developing its southwest and northeast Appalachian assets. The spending guidance is based on a realized natural gas price of $2.85/1,000 cf.

The Fayetteville sale could fetch $3bn in proceeds, according to Tudor Pickering Holt. The "sizeable price tag" makes an outright sale less likely and opens the possibility of a joint venture, which would allow a buyer to retain Southwestern's expertise in the Fayetteville, the energy investment bank said.