uploads///SWN Q Realized Price Effectiveness

Analyzing Southwestern Energy’s Realized Price Effectiveness

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Jul. 11 2017, Updated 1:07 p.m. ET

What is realized price effectiveness?

Realized price effectiveness is defined as an excess or shortfall of realized price to cost item, scaled by cost item. In other words, realized price effectiveness tells us how much higher or lower a company’s realized price is compared to its production costs.

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SWN’s realized price

For 1Q17, Southwestern Energy’s total realized price, excluding hedging loss, was $2.76 per Mcfe (thousand cubic feet equivalent). That was much better than $1.41 per Mcfe in 1Q16. Its realized price is calculated by scaling oil and gas revenue by total production.

Cash cost

Southwestern Energy’s production cash cost has risen on a year-over-year basis. For 1Q17, its production cash cost was $1.25 per Mcfe, which was higher than $1.08 per Mcfe in 1Q16. SWN’s production cash cost includes production and ad valorem taxes, production operating expenses, general and administration cash expenses, and interest cash expenses.

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Total production cost

Southwestern Energy’s total production cost has improved on a year-over-year basis. For 1Q17, its total production cost was $1.77 per Mcfe, which was higher than $1.68 per Mcfe in 1Q16. SWN’s total production cost includes production cash cost plus DD&A (depletion, depreciation, and amortization) expenses.

Southwestern Energy’s realized price effectiveness

For 1Q17, Southwestern Energy reported a positive realized price effectiveness of ~118.0% in terms of cash cost and ~54.0% in terms of total production cost. Devon Energy’s (DVN) realized price, without hedging benefit, was ~68.0% above production cash cost and ~13.0% above total production cost for the same quarter.

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