Fayetteville Shale Stocks

Brian Hicks

Written By Brian Hicks

Posted July 18, 2013

The Fayetteville Shale, found in north-central Arkansas and part of the Arkoma Basin, cuts clear east to the Mississippi River.

The geology of the shale, with a thickness anywhere between 50 and 550 feet, and depths up to 6,500 feet is one swollen unconventional gas reservoir. The shale has become a permeable asset with the advances in both horizontal drilling and hydraulic fracturing.

Production of its gas first began in 2004 and has seen a steady rise ever since. And as of this time last year, 4,000 wells were producing in the region.

But as natural gas prices have gone down, so too has the activity in the Fayetteville; hovering gas prices have been right around $3.00. At those prices, drilling isn’t worth the time or the money.

But drilling by no means is being abandoned, so let’s not lose hope. Timing is everything…

The Fayetteville Shale has a whole heck of a lot to give yet, but production isn’t supposed to ramp up until those prices of natural gas start hitting the $5.00 mark again; that’s what many are saying.

Everybody is simply biding their time until that happens.

Until then, producers are looking more at wet gas instead of Fayetteville’s dry gas, where advantages can be found with the sale of liquids.


As far as maturity, the Fayetteville is still in its early to middle stages of development. There are a ton of areas left to be drilled that show a lot of potential. While there are roughly 4,000 wells drilled throughout the reserve today, it’s still only about one-third the amount that it could be once it reaches maturity, and that’s a very generous estimation.

According to EON, Ed Ratchford of the Arkansas Geological Survey said, “The play will accommodate, I think, 20,000 wells and that’s basically looking at 80-acre spacing.” So, if that’s any indication of what the future holds than things in the Fayetteville are just getting started.

2010 saw its rate of production soar as it increased 62 percent in January of that year and 97 percent by September, according to EON, but since then it has been declining pretty consistently. Last February was the first month that growth rate turned negative at minus 1.4 percent. In March, it did go up 0.2 percent, but still, it hasn’t exactly blown any minds in the past couple years.

So, while production growth could put us all to sleep, it’s still growth! And that’s with a significant reduction in operational rigs; those numbers are down 33 percent from a year ago.


Underneath it all, no matter how much activity drops off, the Fayetteville Shale is showing remarkable gains in production. The wells that are in full operation are beginning to reach their full potential.

“In 2013, Southwestern Energy projects to drill its average well in just 6.5 days, re-entry to re-entry, compared to 11 days in 2010. The comparison is even more impressive given that the average length of the lateral is expected to increase by over 10%.” That’s according to an April Arkansas Geological Survey report.

As drilling times decline and laterals grow in length, producers are showing more results with the same amount of resources.

The leading producer in the Fayetteville by far is the Southwestern Energy Co. (NYSE: SWN) who was the first company to explode on the scene and successfully produce its natural gas. As of the start of 2013, Southwestern Energy has held roughly 913,502 net acres in the play.

They have thousands of locations already in their exploratory stages and are expected to be drilling at a torrent pace for many years to come.

In 2013, despite every sign that points to slowing down in the Fayetteville, Southwestern Energy still plans to invest about $900 million into its operations, according to Southwestern Energy, $830 of which will go to drilling between 385 to 390 wells for this year, all of which will be operated.

Behind Southwestern Energy, you have other giant producers like BHP Billiton Ltd. (NYSE: BHP) and Exxon Mobil Corp. (NYSE: XOM), who despite waning gas prices, will still prove their strength in the Fayetteville Shale.

These companies are there to stay. For the long haul. For better or worse. Because they know that it’s just a matter of time before things in Fayetteville take off again.

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