Current SWN Stock Info

Southwestern Energy Company (ticker: SWN) will be going deeper into the Appalachian once again in 2018. The plan includes drilling 100-120 wells, completing 105-125 wells and placing 125-145 wells to sales.
2017 recap
In 2017, SWN had a total net production of 897 Bcfe, including 578 Bcfe from the Appalachian Basin and 316 Bcf from the Fayetteville Shale – this was comprised of 89% natural gas and 11% NGLs and condensate. The Appalachian Basin gross operated exit rate production hit 2.35 Bcfe/day, a 40% increase compared to December 2016.


Analyst Commentary

From John Gerdes - KLR

SWN ($3.60, B, $9, Gerdes) – Production in ’17 In Line, Provides ’18 Guidance (Modestly Negative Value Impact), Pursuing Strategic Alternatives for Fayetteville Assets – Southwestern announced ’17 production of ~897 Bcfe (~89% gas, ~11% liquids), in line with our expectation and fractionally below the consensus estimate (~898 Bcfe). The company anticipates capital spending this year of $1,150-$1,250 million (almost entirely in Appalachia), which is ~$100 million lower than our prior expectation. Southwestern expects 1Q/18 production of 223-229 Bcfe (~88% gas, ~11% NGLs, ~1% oil) and ’18 production of 930-965 Bcfe (~86% gas, ~12% NGLs, ~2% oil). Preliminarily we anticipate 1Q/18 production at the high end of company guidance and ’18 production in the lower half of guidance. Southwestern plans to operate four rigs/three completion crews in Southwest Appalachia and two rigs/two completion crews in Northeast Appalachia. The company anticipates drilling 100-120 wells and placing 125-145 wells to sales this year. The drilled lateral lengths in Appalachia should average 7,100’-7,200’. Southwestern anticipates increasing drilled lateral lengths in Southwest Appalachia in the second half of this year to ~8,500’. Further, the company’s YE17 proven reserves increased ~181% (~9.6 Tcfe) to ~14.8 Tcfe (~54% PD, ~75% gas) equating to a ~1170% reserve replacement ratio.

Fayetteville/Midstream Rationalization: Southwestern announced plans to potentially rationalize its Fayetteville Shale E&P and midstream gathering assets. The company’s Fayetteville upstream production was ~800 Mmcfpd. Assuming a ~$2k per Mmcfpd production rate multiple, the sale of the Fayetteville upstream assets should generate approximately $1.5 billion in net proceeds. Assuming an 8x-10x EBITDA multiple, the sale of the Fayetteville midstream assets ($170-$200 million in EBITDA) should generate approximately $1.5 billion in net proceeds. The sale of the Fayetteville assets, per the contemplated terms, would lower ’18 net debt to EBITDA from ~2.7x to ~1.2x and is modestly value accretive.  

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