Wall Street Journal
Southwestern Energy Taps Gas From Shale

Wednesday, October 07, 2009

By Jason Womak

Natural-gas producer Southwestern Energy Co. is navigating the rough-and-tumble commodity markets by doing more with less. The Houston-based energy company has managed to boost its natural-gas output and post big returns, attracting investors even as natural-gas prices have languished. Southwestern has increased production while streamlining its operations and cutting costs. The company’s shares have climbed nearly 50% this year.

Southwestern’s underscores how the advent of new natural gas-rich fields known as shales are changing the way investors and the energy industry assess risk associated with natural-gas drilling. Companies such as Southwestern are driving costs down and improving results as they learn to unlock vast amounts of gas trapped inside these dense rock formations.

The time it takes to drill a well has also declined to 11 days from 17 days over the past few years. The company can now keep up its drilling pace with fewer rigs, while keeping the cost of drilling more intricate wells relatively flat.

The efficiency gains made by energy producers in these shales highlight how U.S. natural-gas production has avoided the sharp declines seen in domestic drilling activity. “The shale producers are increasing production and making money,” said Rusty Braziel, managing director of Bentek Energy, a natural-gas research firm. “It’s the most important trend the natural gas industry has seen in a long time.”

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