An introduction to Southwestern Energy

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Southwestern Energy

Southwestern Energy Company (SWN) is a Houston, Texas and Conway, Arkansas–based energy company. It traces its roots back ~85 years to when it started out as a gas utility company.

Today, the company operates two business segments:

  • Exploration and Production (or E&P) of mostly natural gas
  • Midstream Services, that primarily serves its upstream (or E&P) operations

SWN - P1.1

Premier natural gas producer

The company—one of the earliest players to enter the Fayetteville Shale play—is one of the largest natural gas producers in the U.S. today.

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At the end of 2013, Southwestern Energy Company, or SWN, had ~6,976 billion cubic feet of gas equivalent (or Bcfe) in reserves and produced ~657 Bfce for the year. Most of this production came from its flagship Fayetteville Shale assets in Arkansas. The next-highest production came from its Marcellus Shale assets in Pennsylvania.

SWN - P1.2

By 2Q14, SWN’s mostly gas production climbed to just over 2 Bcf per day (Bcf/d). This allowed the company to rank itself the fourth-largest natural gas producer in the lower 48 states.

The top three are much larger energy companies including globally integrated Exxon Mobil Corporation (XOM), Chesapeake Energy Corporation (CHK), SWN’s gas-heavy neighbor in the Fayetteville play, and Anadarko Petroleum Corporation (APC), a balanced oil and gas producer with operations spanning the globe. Not bad company to keep.

Recent deal with Chesapeake Energy

In mid-October, SWN agreed to purchase oil and gas assets from Chesapeake Energy for ~$5.4 billion. These assets span ~413,000 acres in West Virginia and southwest Pennsylvania.

The market did not receive the deal well, and SWN shares fell following the announcement. Likely, the market perceived the purchase as expensive given the weak commodity-price environment.

For more information on this deal, read Market Realist’s series, Must-know: Chesapeake Energy and Southwestern Energy’s agreement.

Key ETF

While SWN’s stock went down, Chesapeake Energy’s soared following the announcement. Rather than guess which company will rise and which will fall, a good way to gain exposure to the entire upstream sector is an exchange-traded fund such as the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

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