Jul 30, 2021
Operator
Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Southwestern Energy's Second Quarter 2021 Earnings Call.
Management will open up the call for questions with a question-and-answer session following the prepared remarks. [Operator Instructions].
I would now like to turn the conference over to Brittany Raiford, Southwestern Energy's Director of Investor Relations. You may begin
Brittany Raiford
Thank you, Keith. Good morning, and welcome to Southwestern Energy's Second Quarter 2021 Earnings Call.
Joining me today are Bill Way, President and Chief Executive Officer; s, Chief Operating Officer; Michael Hancock, Interim Chief Financial Officer; and Jason Kurtz, Head of Marketing and Transportation. Before we get started, I'd like to point out that many of the comments we make during this call are forward-looking statements that involve risks and uncertainties affecting outcomes.
Many of these are beyond our control and are discussed in more detail in the risk factors in the Forward-Looking Statements section of our annual report, our quarterly and our definitive proxy statement for the special meeting regarding the Indigo transaction all as filed with the Securities and Exchange Commission. Although we believe the expectations expressed are based on reasonable assumptions.
They are not guarantees of future performance, and actual results and developments may differ materially, and we are under no obligation to update them. We may also refer to some non-GAAP financial measures, which help facilitate comparisons across periods and with peers.
For any non-GAAP measures we use, a reconciliation to the nearest corresponding GAAP measure can be found in our earnings release available on our website. I will now turn the call over to Bill Way.
William Way
Thank you, Britney. Good morning, everyone.
We appreciate you joining us today, and I hope that you're all safe and well. I'm delighted that so many of our employees have been able to join the call this morning as well.
My thanks go out to each of you for all that you do for the company each and every day. Before we get started, I'd like to welcome Carl Giesler to Southwestern Energy as our Executive Vice President and Chief Financial Officer.
His strategic perspective and disciplined approach really complement our existing strategy and our management team. I would also like to thank Michael Hancock and the entire finance and accounting organization for your exceptional work, especially over the last 6 months, as we work to fill the CFO role left behind by the loss of Julian Bott.
I look forward to working with both of these talented leaders as we continue to execute our strategy to enhance sustainable value for our shareholders. Southwestern Energy's returns-driven strategy focuses on creating sustainable value, protecting financial strength, consistently delivering leading operational and financial results and pursuing opportunities to capture the benefits of increasing scale.
At the core of our strategy and value proposition is a commitment to the right people doing the right things. Our success depends on the alignment and commitment of a fully engaged, diverse and inclusive workforce nurtured by our high performing, innovative and value-driven culture.
In the second quarter, we took additional steps to deliver further value enhancements from our strategy in action. The highlight of the quarter was the announced acquisition of Indigo Natural Resources.
The integration planning process is going well and ahead of schedule. The shareholder vote is set for August 27, and we expect to close shortly thereafter.
This transaction expands the scope and scale of our company by combining core positions across the country's to premier natural gas basin and accelerates the delivery of key financial and strategic objectives. Because of Indigo's low-cost structure and strong balance sheet, we expect to see immediate accretion to key financial metrics, including improvement in corporate returns, an increase in free cash flow and the accelerated delivery of our deleveraging goal later this year.
Indigo furthers our sustainable value creation strategy by expanding our overall opportunity set and moderating risks to our business. The expansion into Kingsville adds Tier 1 dry gas inventory locations that complement our existing Appalachia inventory.
These locations are adjacent to premium gas markets, including LNG and other growing demand centers. Notably, the firm sales agreements and fixed basis differentials will expand the company's margins and dampen its overall basis volatility.
Twin is well positioned to capture the many tangible benefits of scale that this transaction brings, including cost economies, expanded inventory and further capital allocation optionality. The benefits improved the sustainability of our free cash flow generation, particularly as commodity prices continue to improve.
We are on track to deliver the promised synergies at closing. And furthermore, we see the potential for additional value enhancements once the transaction closes from operational and commercial improvements, a strengthened credit profile and a lower cost of capital.
We are proven integrators, and I'm confident that our new combined Haynesville team will find ways to deliver additional value from our newly integrated business. Twin's commitment to sustainability goes beyond the economics of a scale enhancing transaction like Indigo, it is the ultimate objective of our ESG strategy as well.
Responsibly sourced gas is one of our key initiatives. This quarter, we implemented a basin wine program to certify and continuously monitor all of our Appalachia Basin unconventional wells through an agreement with project Canary.
We have a long history with the firm as we've been marketing responsibly sourced gas for several years to end users in the Eastern United States. We specifically selected a certification provider that utilizes a rigorous and comprehensive process.
The basin-wide well certification process and site monitoring has begun, and we have already installed continuous monitors at several operating sites across our Pennsylvania acreage, enabling our operating teams to immediately address potential emissions should they occur. Southwestern is a leading natural gas producer that is well positioned for our low-carbon future.
We have a unique combination of a strong balance sheet, large-scale Tier 1 operated assets, proven execution and ESG performance, providing the means to deliver sustainable value creation. We continue to believe disciplined consolidation and the benefits of scale are core to our strategy for driving shareholder value.
We remain committed to holding capital investment and maintenance capital levels and discipline in our risk management strategy, including hedging. Over the next few quarters, we will further refine our capital allocation strategy, including additional debt reduction and the potential return of capital to shareholders.
Now I'd like to turn the call over to Clay to discuss the quarter's operational results.
Clayton Carrell
Thanks, Bill, and good morning. Operationally, 2Q was another active quarter, and our teams continued to deliver results within our guidance ranges, while ensuring the continued protection of our people and our operations from the ongoing challenges presented by COVID-19.
Our 2021 plan is on track, and we look forward to operating in the Haynesville. I'll start with some highlights from the quarter.
Total production was 276 Bcfe or 3 Bcfe per day. This included 2.4 Bcf per day of gas, representing 79% of total production and approximately 104,000 barrels per day of oil and NGOS, flat to the first quarter and consistent with our maintenance capital program.
During the quarter, we averaged 5 drilling rigs, 2 in Pennsylvania, 2 in West Virginia and one in Ohio with two frac crews. As planned, we invested $259 million of capital in the quarter and expect Q3 to trend lower with a further decrease in Q4.
The shaping of our maintenance capital investment in 2021 is consistent with our well-established approach of front-end loading and tapering in the second half of the year. We brought 31 wells to sales in the quarter, drilled 23 and completed 19.
Costs on wells to sales were in line with the first quarter at $626 per foot with an average lateral length of approximately 14,000 feet. While we are starting to see some inflationary impacts mainly related to diesel, steel and labor, due to our vertical integration, proactive procurement strategy and operational efficiency gains, we continue to expect low single-digit deflation in 2021.
In Southwest Appalachia, we brought online our first Ohio Utica dry gas pad and achieved our $100 per foot cost reduction goal with an average well cost of $728 per foot. This 3-well pad had an average lateral length of approximately 13,700 feet and an average 30-day rate of 25 million cubic feet per day, all performing in line with expectations.
In Northeast Appalachia, we continue to drive operational efficiencies to reduce costs and enhance the capital program returns. We placed 11 wells to sales in the quarter with an average well cost of $531 per foot and an average lateral length of approximately 11,600 feet.
These wells had an average 30-day rate of 14 million cubic feet per day. As Bill mentioned, we are excited to join with our newest colleagues from Indigo and hit the ground running in the Haynesville.
We are currently doing our operational, technical and HSE planning, and we'll have a great operating team in place that represents a combination of employees from both Indigo and SWN. Initially, we will be focused on incorporating current Haynesville best practices and then look to combine that knowledge with our own operational expertise.
I'll now turn it over to Carl to discuss the financial highlights.
Carl Giesler
Thank you, Clay, and good morning, everyone. I'm excited to join the team and help build on the momentum SWN generated this base business and acquisition progress.
As Bill mentioned earlier, this quarter, the company accelerated delivery on its financial goals. It generated a free cash flow for the third consecutive quarter.
We're on track with the 2021 plan to generate meaningful annual free cash flow, expecting free cash flow generation to accelerate in the second half of this year. Once the transaction closes, we'll provide updated guidance to account for the addition of Indigo.
The solid quarterly financial results further improved our leverage ratio by almost 0.5 turn to 2.6x. Liquidity remains in good shape with just under $570 million in borrowings and $1.2 billion of capacity on our credit facility.
With the accretive acquisition of Indigo and current robust commodity price outlook, we expect to achieve our 2x sustainable leverage goal by late 2021. A key part of achieving this financial strength has been SWNs commodity and face is hedging strategy, which is directly linked to the company's enterprise risk management strategy.
The company incorporates balance sheet strength, leverage, commodity and basis fundamentals and the benefits to the company's financial strength resulting from acquisitions, among other aspects and returning the level and instruments hedging that will be employed. As a result of our basis hedging strategy, the company maintains its full year guidance despite widening basis in Appalachia.
As we integrate Indigo and update our capital allocation strategy in the coming months, we continue to ensure that our commodity and risk management strategy and practice remains aligned with the company's risk profile and our long-term value creation objectives. That concludes our prepared remarks.
Keith, if you don't mind, please open the line for questions.
Operator
[Operator Instructions]. And the first question comes from Charles Meade with Johnson Rice.
Charles Meade
Bill, to you and Clay, and welcome to call. Bill, I want to go back to a theme, I think I've explored with you before, but a couple of years ago, when you guys were -- it has to do with capital allocation with respect to hedges.
And so a couple of years ago, you guys had some in the money hedges and kind of explored whether you guys were ranking and selecting your projects based on the strip or your hedge price. And your answer a bit when you had in the money hedges was, no, we -- the hedges are the hedges that we evaluate on the strip.
And I'm curious, if we look now where you guys have 22 where the strip is above where you guys have hedged? Is it symmetrical on the other side as well?
In other words, are you going to rank and select based on the strip of, call it, 343 gas, even though you're hedged is something closer to the high 2s?
William Way
Yes. Thanks, Charles, for the question.
Our practice of using strip pricing to determine capital allocation remains. I think the choice of yes or no, I think it's a bit broader than that.
Yes, we will -- we allocate against strip. In addition, we're going to take a look at, okay, what are -- what does the hedge both look like?
Where are we actually going to land on pricing, and that will be -- that will be blended into our thinking as we look at projects and allocation. But the economics, yes, that's where one stop.
Charles Meade
Okay. So would it be a fair effort that the company's overall cash flows as affected by hedges, it's going to set the capital budget, but with inside that budget, the ranking is really more strip.
Is that -- yes.
William Way
The capital budget will be maintenance capital budget. And so however, all that plays out to get there, we're going to be holding production flat year-end '21 to year-end '22.
So get that on there. And then, yes, as we look at the mix of projects and where we invest, first clearly we'll probably invest across all of our -- of the places where we operate because we've got complementary projects across multiple parts of our business.
And then second, yes, you'll run a sensitivity at least and look at, okay, what's trip look like? What do the project economics look like with the hedges in place and then make decisions based on that.
Charles Meade
And then a quick follow-up, picking up on that thread. Those 3 Ohio Utica wells coming on at 25 million a day.
That looks like a pretty attractive rate, but -- and you hit your well cost target there. But where would those slot in or maybe differently, would those slot in, in like the top quartile, top half of your projects for next year?
William Way
I think the key issue there is you've got to look at gas and liquids prices, you've got like a basis, you've got to look at all the dynamics that are at play, sell costs, et cetera. And we typically do that as we move into the latter part of the year in anticipation of our budget release in February.
And so we'll run those. We have -- we already look at the business on a 2-year basis anyway, but we'll run those more specifically as we get closer to the capital budget.
Charles Meade
Thank you, Bill.
William Way
That's the comment on the other comments you made, $25 million was as expected. They're strong economics.
And again, I think when you look across our portfolio at the opportunities we have for investing they are very complementary from an economic perspective, one to the other. And where there's an opportunity to look at that mix as we get closer to the budget, I think you'll see that we will largely be investing in each part of our business because of the quality of investments we have to [indiscernible].
Operator
And the next question comes from Holly Stewart with Scotia Howard Weil.
Holly Stewart
Welcome, Carl.
Carl Giesler
Thank you.
Holly Stewart
Maybe Clay, can I start off with you just on a due diligence question. I know that's probably been ongoing over the last few months.
But maybe just bigger picture, what have you seen so far with the Indigo asset base that maybe you were not aware of kind of coming in two months ago?
Clayton Carrell
Yes. We're pleased with what we see as we've been doing all the diligence across all the different categories.
We've always been very excited about the inventory opportunity operationally, they've done a good job. One of the things that was probably something we were pleased to see was all the way down into thinking about some of the ESG components in the methane intensity, which was in line with what SWN legacy has been.
So that was another positive of the overall diligence that we've been doing on the asset.
William Way
And we've met some incredibly strong and talented people who will be joining our team as well. So where the business is -- it looks like it's performing at or above what we thought.
Holly Stewart
And then maybe, Bill, just kind of bigger picture. The Southwest area has kind of been your growth driver for a while now while you've been more in sort of that maintenance activity in Northeast PA.
So with the closing of the Indigo deal, does this cause you to kind of revisit the Northeast PA asset base, maybe meaning, is this the right mix of assets going forward?
William Way
Our view on asset mix and the scale of each of those assets are. We've got core assets in Pennsylvania, Ohio, West Virginia and soon to be Louisiana.
They all fit into the strategy and all fit into the plan. Enhancements are being made across the piece and not just associated with price, but well performance, capability, well cost, yields, you name it.
And so as we take the pricing and other assumptions into accounts and build our '21 -- or excuse me, '22 and beyond plans. We see a place for investment in all of those areas.
Operator
And the next question comes from Neal Dingmann with Truist Securities.
Neal Dingmann
First question kind of maybe tie both the two couple of questions getting early together with sort of the hedge strategies you have now, I'm just wanting to kind of look at hedge strategy and shareholder return going forward. Does that give you the confidence that, I guess, sort of two questions around that shareholder turn.
One, that you'll reach that kind of shareholder or I should say, leverage goal at a certain period. And once you hit that, is that when you all decide kind of what does the best course for shareholder return at that point?
William Way
If you're referring to capital allocation strategy and return of capital to shareholders, as we work through and fully integrate the Indigo asset and get it closed, we'll take a lot of look at our capital allocation strategy, mindful of a number of key aspects of that discussion around fundamentals outlook, equity performance, strategic opportunities, bonds and all -- a number of those things. And all of those -- that decision criteria will be put on maximizing sustainable value for the shareholders.
And does that mean return of capital to shareholders. Of course, we have to look at that.
Does it mean -- in its multiple forms, does it mean further investment, that will probably be a piece. If you go back to when we sold Fayetteville, it's kind of a proof point.
We stepped back from the whole thing, looked at the -- at where we were as a company and where we were headed, allocated some of those proceeds to further debt reduction and debt reduction is obviously part of this equation. Return of capital, which we did to shareholders and then further investments.
So it's imperative for us to look at that on a balanced basis linked to all of those things I talked about.
Neal Dingmann
And just a follow-up. I look at Indigo, just can you remind me, I forget the amount kind of that you assumed as far as FT and the hedges and how you sort of blended that?
I'm sure that's part of the integration of how you'll blend that into sort of the current portfolio?
William Way
I think what I would need to do is we need to close Indigo, and then we can put together a pro forma any of the data that we're able to put out so far as in the proxy that we've issued. But I'm advised that we've got wait until closing to kind of lay all that out, and then we will.
Operator
And the next question comes from Umang Choudhary with Goldman Sachs.
Umang Choudhary
I kind of wanted to follow-up on the question around activity levels in hedging. As you meet your to turn sustainable leverage target by late 2021, what is the -- do you see -- or do you expect to kind of hedge less going forward because your balance sheet has been the right place.
And then also on the activity levels, if you look at the outlook for NGLS, natural gas and basis here, is there any kind of tilt towards drilling more liquids area within Southwest PA versus dry gas area? And then how does Haynesville kind of factor in there?
William Way
Well, I think, first of all, our hedging strategy is directly linked to our enterprise risk management strategy. And so as we look across the forward 36 months, which is our kind of our rolling program, we take into account the various enterprise opportunities, whether that's balance sheet strength or cash flow or debt targets for any of those and enterprise risks, which are commodity and basis for sure and any other risks that are there.
Certainly, the scale of adding and Indigo to the corporation and bringing all that together is another variable in factor that we look at. We have quite a bit of flexibility in our programs when we use that, whether that's tenor of hedging or whether that's in each of the 36 months or the 4-quarter periods using collars or swaps or whatever.
So we will always maintain the linkage and continue to do so between our program, all of those macro factors in the company and our financial statement. So as we build out our program and our long-range plan, and we look at our capital, whether it's return of capital or investing capital or other uses.
And we look at the overall state of the company in terms of leverage, balance sheet strength, all of that. That will -- certainly, as it does today, inform how we shape hedging profile over that rolling period going forward.
And one misunderstand that as you go further and further out at this 10 seconds, because of just how far out we go. That rolling concept means that less hedge further out, more hedged today, and we continue to balance that as well as the use of tools.
So it's all incorporated. It's quite a comprehensive view and a strategic view at the same time.
And I think I'm very comfortable with that how we work there.
Clayton Carrell
The other piece about the dry gas and liquids split. We're very happy with the improvement in all the commodity prices, and the 2021 program is roughly a 50-50 split between dry gas and liquids.
The dry gas is both Northeast and Ohio dry gas that we touched on a little bit earlier. And so that mix has somewhat been a consistent mix for us as we've moved forward.
And sometimes we'll opportunistically make some adjustments there, but we're close to that 50-50 split as we think about 2021.
William Way
And a standout example of just managing all of this together is our basis hedging position. Where the teams have done a great job in protecting the company from a very strongly widening basis in the outpatient basin.
And so we attract that challenge by basic hedging, which means we're not going to -- we don't have to change our guidance on basis for the year. And then you combine that with the combination between SWN and Indigo and the natural benefits of a blend Gulf Coast basis and Appalachia basis, you get the economic advantages and you get the derisking of that particular aspect.
So it all goes together.
Umang Choudhary
If I can squeeze one more in. With respect to cost inflation pressures, you talked about seeing higher cost inflation pressures from diesel, labor and steel.
But you also talked about efficiency gains and expect costs to go down. As you look towards next year are more like based on your conversations with service providers, specifically in the Haynesville, where you compete with some of the services from oily basins, what do you expect cost tends to be there?
Clayton Carrell
Yes. As you mentioned, our procurement strategy that we've been using through the years has protected us well.
The fact that we own our own drilling rigs has been a key protection item for us from inflation. And we do still expect the low to mid single-digit deflation in 2021.
We are seeing some signs there. It's pretty early for 2022.
Right now, we do expect to see some continued inflation pressure as we move into 2022. An early preliminary look is maybe a low single-digit inflationary view, but we're still working that, and we're going to use our same procurement strategies and benefit from the broader scale that we'll have on the other side of Indigo.
William Way
And while there may be, as you put it, competitive pricing pressures the Permian. We've been very successful in using the fact that we are vertically integrated, that we do have rigs that will bring to bear.
We do have a frac fleet and a number of other items that we'll bring to bear in helping maintain and contain cost increases. So I think, as Clay said, we're in a solid position, there is a bit of pressure, but we'll manage through that.
Operator
And the next question comes from Scott Hanold with RBC.
Scott Hanold
My first question is, when you step back and think about how you define sustainable leverage ratios. And obviously, when it's a starting point of getting there to gauge your shareholder returns, but how do you think about the mid- cycle gas price with respect to that?
And can you give us a sense of where that fits into it? And if you've got a view on where that might land?
Clayton Carrell
When we think about leverage, I think we looked at it predominantly on what we expect it to be with the strip as opposed to a multiyear strip as opposed to an arbitrary mid-cycle. And we say sustainable leverage just under -- at or under 2x.
We're trying to balance having a cost-efficient capital structure. We get, still maintaining the marginal safety to use that term from a financial perspective.
William Way
And on putting a -- like today, of course, with elevated prices, we've been running -- or looking at a $2.75 to $3 range in sort of a mid-cycle price book. And there today, a positive pressure on that, but we want to be sure that we're not taking a transient increase and putting it into strategic decisions.
So we'll run both.
Scott Hanold
So there's a little bit of -- it's a little bit dynamic, but it sounds like you've got a frame view there. Okay.
And my follow-up question is just a couple of things. First, just to clarify, Clay, you mentioned the CapEx trends are down and down again in the fourth quarter.
And just to confirm, that obviously doesn't have any impact from Indigo. So it wouldn't be surprising to see that a little bit more sequentially flat when that comes online, does that make sense?
Clayton Carrell
Yes. As we indicated, when we close Indigo, we'll put out a new guy that will include the capital associated with the ongoing capital program on those assets that will then be additive to the tapered off design that we have in the third and fourth quarter.
Scott Hanold
And then the other point I was going to ask is on the NGL market. It sounds like -- it looks like your guidance for NGL prices remains fairly strong, and the realizations are very robust, especially for the quarter.
I know, obviously, pricing is very solid right now. But can you give us a little bit more insight into what you all are seeing real-time on the NGL market?
Jason Kurtz
Yes, Scott, this is Jason. So I think if we think about the NGL market, we think about propane first.
There's probably several factors that are driving propane, just the limited propane supply due to oil-related CapEx reductions and then just definitely increased plastics demand and exports to Asia. I think that the other thing that's driving propane hires just the exports, probably roughly 1.2 million barrels per day on average, and this is just due to increasing global demand and the additional export facilities out of the Gulf Coast.
And then the other big thing on propane from a pricing perspective is just that inventory for propane is at the low-end of the 5-year range. We'll likely in or winter pretty tight unless something changes here.
So just as propane demand -- the market continues to grow, I mean, there's even less days of supply potentially available this winter, which is another factor that's putting pressure on prices. When we think about ethane, there's probably several factors, natural gas ACO the floor for ethane from a pricing perspective.
So obviously, natural gas prices are higher. You've got increased exports as well.
And then also, the other thing from an ethane perspective, is just the return and stable ethane cracker facilities in the Gulf Coast, the cracker is just running around 1.8 million barrels per day, which is probably up a couple of hundred thousand barrels per day from what they've been over the past couple of years. So there's just a lot of strong demand for those products out there.
Operator
And the next question is from Jeoffrey Lambujon with Tudor, Pickering, Holt.
Jeoffrey Lambujon
First, just wanted to ask on the Utica well cost reductions, if there's anything more to add there on the moving pieces and what the near-term runout could be and also how applicable it might be across your position?
William Way
I think the more at-bats we get under our belt there, we're going to continue to look for efficiency gains, just like we've done on the SWN legacy assets. We were very pleased with seeing that $100 a foot reduction on the very first three well pad.
And there's some good learnings there. Some of the things that we thought we were going to benefit from write-offs at that we did.
And we think there's still room for cycle time improvements in the different sections of the whole. And we'll continue to look at ways to continue to optimize the completion design as we move through time, but all consistent with the way we've been doing our well costs across the company.
Jeoffrey Lambujon
And then just shifting gears a little bit. My second one is a follow-up to one of the questions earlier on return of capital.
And I know you mentioned this a bit in the prepared remarks and then expanded on it earlier in the Q&A. But just wanted to revisit that specifically in isolation, that there's a way to maybe speak to the different options that you might have that you might be more inclined to pursue as you kind of refine your thoughts on that?
Clayton Carrell
I think several factors come into play. Yes, I think it's no secret.
Our primary focus for strategy is to continue building scale, and we'll continue to try to be active in M&A to do that. And so with that variable, that could obviously impact how we use free cash flow.
I think another book mark, if you want, how we think about allocation of capital, as you heard Bill say, we're committed to maintenance capital led to the enterprise level. I think that will be the case going forward as we bring Indigo into the fold.
And so once you take those things beside, I think it becomes a function of how comfortable we are, whether in the mid-cycle prices, strip prices or whatnot, being able to make on a sustainable basis, as we said many times, keeping that leverage at around 2x and then after that, we view the most expedient way to potentially return capital to shareholders. So I think that's how we're framing that discussion.
Operator
And the next question from John Abbott with Bank of America.
John Abbott
Just wanted to ask a question here on the Ohio Utica. I mean, just given the strength in liquids pricing that we're seeing here for NGLs and also for oil, what would you have to see in order to bring in activity into the liquids window of the Ohio Utica?
And where does the sort of the decline rate look like with that asset?
William Way
I think the initial focus that we had as a company, when we were looking at Mantas was we recognized the high-quality dry gas Utica and the high-quality rich Marcellus on that acreage position. One of the things that helped us lean towards starting in the dry gas window was the added benefit that, that was going to have for us around the SWN legacy existing Utica inventory and the ability to get the wells drilled with our rigs and with our team and get that knowledge and prove that we can bring the cost down.
And then that was going to help us as we think through the resource to reserves effort on the existing Utica. So that was the main reason for the Utica dry gas initially, we will definitely be incorporating over time the liquids-rich Marcellus assets there.
But like I commented in the beginning, all the commodities have seen nice improvement, and we've got strong economics across all the different play types in our areas. And so it will be part of the go forward plans, but we're liking what we're seeing right now in the Utica and hopefully can continue to improve that performance.
John Abbott
Appreciate that answer and you've already answered this in part from your explanation there. But when you think about the Indigo assets being bringing those in, how do -- I mean, you've talked about in the past possibly looking up at flat cap.
So how does that sort of opportunity rank to you at this point in time if you bring in the Indigo assets?
William Way
Indigo has way more focus with the high-quality proven inventory that already exists there and an active program that will be ongoing when we take over at closing. We like the opportunity, the upside opportunity tied to flat castle, and we're doing a lot of the subsurface technical work on that right now.
But clearly, the proven aspect of what's going on in the Haynesville with the Indigo inventory is our main focus between those two.
Clayton Carrell
And economics like always will drive all of those decisions. And as we build that plan out, we can communicate a bit more about that.
Operator
And the next question comes from Noel Parks with Tuohy Brothers.
Noel Parks
Just a couple of things. I wanted to head back to the Utica.
So for any day IPs of 25 million a day across the 3 wells, is your choke management on those?
William Way
We're making sure we're doing the right flowback to maximize the economics of the well and the performance of the well. And there's a flat portion in those Unica well profiles for exact reason that you mentioned to make sure that we're watching the drawdown and that you'll produce those in an optimal way.
So we're in the flat portion of the wells right now.
Noel Parks
And just as a follow-up, if you -- I'll have something else too, because you care to get an insight into what the 24-hour peak rate was on that because the 30-day 25 million a day reasons is pretty impressive. But my main other thing was, just curious, what were the most sort of recently drilled offsets to where you are up there?
I'm just trying to get a feel for whether there's been a lot of activity or sort of how neglected the areas been by other operators?
William Way
The highest rate we saw was upper 20s in the area, but the intention all along was to bring them to a level and then they would be at a flat production profile, which is why that average of 25. When you look at the at public data, the data we have from offset operators and then in particular, Montage because Montage is who the most active operator was in the area before we took over immediately adjacent and on these assets.
The well performance was probably, on average, closer to around $20 million a day in that flat portion, maybe 21 million a day. And so we've continued to utilize our practices as we've brought these assets in, and we were comfortable with our subsurface understanding and reservoir engineering, and that's why we're producing those at about 25 million a day.
Operator
And that does conclude the question-and-answer session. I would like to turn the floor to Bill Way for any closing comments.
William Way
Well, thank you all for your questions and dialogue. We really appreciate it, and we also thank you for joining us on the call today.
Your interest in the company and your support as we progress our strategy, bring Indigo into the fold and then and take a much stronger company forward really is an exciting time for us. So with that, I'll tell you, have a great weekend.
Take care. And we look forward to sharing more about SWN as we close Indigo and certainly on the next conference call.
Thanks again.
Operator
Thank you. That concludes today's teleconference.
Thank you for dialing to today's presentation. You may now disconnect your lines.