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Southwestern Energy in 2Q16: Operational Performance, Strategies

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2Q16 operational performance

For 2Q16, Southwestern Energy (SWN) reported total production of ~225 Bcfe (billion cubic feet equivalent). That’s above its 2Q16 production guidance of 210–215 Bcfe.

Southwestern Energy’s 2Q16 production is lower by ~8% when compared with 2Q15 production of ~245 Bcfe. Sequentially, Southwestern Energy’s 2Q16 production is lower by ~5% when compared with 1Q16.

Fayetteville Shale contributed 96 Bcfe (or ~43%), Northeast Appalachia contributed 90 Bcfe (or ~40%), and Southwest Appalachia contributed 38 Bcfe (or ~17%) to SWN’s total production for 2Q16.

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Other upstream players

Range Resources (RRC) and Consol Energy (CNX) also operate in the Marcellus shale. Range Resources (RRC) has reported a ~4% sequential decrease, and Consol Energy (CNX) has reported a ~2% sequential increase in 1Q16 productions. Exco Resources (XCO) and Chesapeake Energy (CHK) also operate in the Marcellus Shale.

The First Trust ISE-Revere Natural Gas ETF (FCG) invests in natural gas producers. The Vanguard Energy ETF (VDE) invests in the broader energy market.

Southwestern Energy’s equity offering

On July 5, 2016, Southwestern Energy closed a public offering of 86 million shares of its common stock at a price to the public of $13 per share. Additionally, underwriters purchased 12.9 million shares of common stock from Southwestern Energy at the public offering price, less a discount of $0.38 per share. Credit Suisse, Bank of America, Merrill Lynch, JPMorgan, Citigroup, and Mizuho Securities acted as joint book-running managers for the offering.

SWN received net proceeds of ~1.2 billion from the offering, including the issuance and sale of the additional shares. It plans to spend the proceeds from its equity offering to fund part of its capital program, to strengthen its balance sheet, and for general corporate purposes.

Southwestern Energy’s divestiture

Last month, Southwestern Energy announced a divestiture of ~55,000 net acres in West Virginia for $450 million. Net production from this acreage is ~14 MMcfe (million cubic feet equivalent) per day, primarily from non-operated wells. Proved reserves on this acreage were 11 Bcfe as of December 31, 2015.

Southwestern Energy plans to use the cash proceeds from the divestiture to reduce the principal balance of its $750 million term loan due in November 2018.

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