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Must-know: Investing in Southwestern Energy Company

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Part 2
Must-know: Investing in Southwestern Energy Company PART 2 OF 8

Why Southwestern’s wells and production are slated for growth

Production guidance

Southwestern expects total production of 740 to 752 bcfe in 2014, up ~14% compared to 2013 production expectations of 653 to 655 bcfe. Production contribution from the Fayetteville Shale is expected to be 479 to 484 bcfe, roughly flat with 2013 production of 483 to 484 bcfe. Production contribution from the Marcellus Shale is expected to be 244 to 249 bcfe—up over 60% compared to 2013 production of 148 to 149 bcfe.

Why Southwestern&#8217;s wells and production are slated for growth

Management noted that Marcellus production is expected to grow significantly despite slightly less capital investment due to continued improvement in well performance in the company’s acreage in Bradford, Lycoming, and Susquehanna counties. For example, the company recently brought online a Susquehanna County well that achieved peak production of over 32 million cubic feet per day.

The company also gave quarterly production guidance. SWN expects to produce 177 to 179 bcfe in 1Q14, 183 to 185 bcfe in 2Q14, 187 to 191 in 3Q14, and 193 to 197 bcfe in 4Q14, for a total of 740 to 752 bcfe in FY2014.

Changes in performance and well costs in 2014 versus 2013

In the Fayetteville Shale, SWN expects that in 2014, it will continue to realize drilling efficiencies and that the average time to drill wells in the area will decrease from 6.5 days in 2013 to 6.2 days in 2014. The average well cost is expected to increase to $2.6 million per well with an average horizontal lateral (essentially the length of the well) of 5,400 feet compared to 2013 average well costs of $2.5 million, but with a shorter length of 5,300 feet.

In the Marcellus Shale, Southwestern Energy also expects operational improvements, with the average time to drill wells decreasing from 11.9 days (the 2013 average) to 11.3 days (the projected 2014 average). Marcellus Shale well costs in 2014 are expected to decline to $6.8 million per well (4,950 feet average horizontal lateral, 18.0 frac stages) from $7.0 million per well (4,900 feet average horizontal lateral, 17.5 frac stages).

In the Brown Dense, SWN plans a ten-well development program (drilling wells with the purpose of being economically productive, rather than wells to test the viability of the play) and will continue to delineate the play (drill to test which areas are economic).

Other 2014 guidance

Why Southwestern&#8217;s wells and production are slated for growth

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