Friday, January 23, 2015

Southwestern Energy Looks Great, If You're Long-Term Bullish On Natural Gas

This article was first published by Seeking Alpha on January 8, 2015

By Sarfaraz A. Khan. Research Asst. Adnan Mushtaq

The supply led slump in crude oil prices has forced several energy companies to trim their capital budgets. ConocoPhillips (NYSE:COP), Marathon Oil (NYSE:MRO) and Eclipse Resources (NYSE:ECR) have slashed their 2015 capital expenditure by 20%. However, Southwestern Energy (NYSE:SWN), the fourth leading natural gas producer in the Lower 48 states, has gone the other way by increasing its capital budget for the current year to $2.6 billion from the projected $2.4 billion for 2014.

Southwestern Energy has been growing its capital expenditure since 2013, which allows the company to grow its output at double digit rates. The company plans to increase its output to between 970 Bcfe and 980 Bcfe in 2015, up from its guidance of 758 Bcfe to 764 Bcfe for 2014 and 657 Bcfe in 2013. Southwestern has allocated more than 80% of its 2015 capital budget for its properties in Fayetteville Shale, Northeast Appalachia and Southwest Appalachia. Around $1.4 billion will be invested in Appalachia alone where the company has risen to become one of the top leaseholders, ahead of EQT Corp (NYSE:EQT) and Antero Resources (NYSE:AR). Last year, Southwestern doubled its footprint in this region by acquiring gas assets from Chesapeake Energy (CHK) for $5.38 billion.

In FY2015, Southwestern plans to begin drilling at Southwest Appalachia by spending $625 million on 65 to 73 gross wells. This property already had 1,500 wells producing around 370 MMcfe of gas per day. At Northeast Appalachia, Southwestern will spend $790 million and will drill … read full article on Seeking Alpha