8%-12% production growth projected
Southwestern Energy (ticker: SWN) announced fourth quarter results and 2016 reserves on Feb. 23, showing a net loss of $237 million, or ($0.08) per share. Full year results are a loss of $2.75 billion, or ($6.32) per share. After adjusting for special charges earnings are $39 million and ($6 million) for the fourth quarter and full year, respectively.
The company’s reserves decreased by 15% in 2016, ending the year at 5,253 Bcfe. This is primarily due to price revisions on natural gas reserves driving down overall numbers. Natural gas makes up 93% of Southwestern’s reserves, while NGLs comprise 6% and oil the remaining 1%.
Southwestern anticipates 2017 CapEx of $1.175-$1.275 billion. Most of this spending will be funded with operating cash flow, but $200 million will come from funds from Southwestern’s 2016 equity offering. This spending will fund 150-170 wells, and allow Southwestern to exit 2017 with a DUC inventory of 55-65. Southwestern projects that this level of capital investment will production growth of between 8% and 10%.
Southwestern’s core acreage is in Appalachia, targeting the Marcellus and Utica formations. The company owns approximately 640,000 net acres in West Virginia and Pennsylvania, with an estimated 2,000 gross potential drilling locations. The company has seen significant improvements in well design in recent years. Average drilling time has reduced by 61% in the last five years, while average lateral length increased by 41% in the same period. A new completion design that utilizes higher intensity stimulation and optimized flow techniques is currently being tested.
Southwestern also owns 755,000 net acres in the Fayetteville shale in Arkansas. The company reports that preliminary results of delineation efforts on the Moorefield shale are positive. Southwestern owns 100,000 net acres with Moorefield shale drilling potential, which may prove advantageous if these efforts are successful.
