Southwestern Energy Company (SWN)

SWN 
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Southwestern Energy Co. (SWN)

UBS Global Oil & Gas Conference

September 20, 2013 8:30 AM ET

Executives

Steve Mueller - Chief Executive Officer

Analysts

Bill Featherston - UBS Securities, Inc.

Presentation

Bill Featherston - UBS Securities, Inc.

Okay. If I could ask everyone to get seated, we are going to get started with our first presentation this morning Southwestern Energy, which we have rated buy. It’s been an exciting growth story. Historically, a lot of that has come from the Fayetteville Shale and as we look forward with their increased position you will see a lot of that growth coming from the Marcellus.

Here to tell us about the story is Steve Mueller, CEO. Steve?

Steve Mueller

Thank you. And that’s probably one of the best introduction you could possibly have, that is my whole talk right there. So we’ve had great run in the Fayetteville Shale and I’ll talk about, a little bit more about that great run has been continuing to go in Fayetteville. And then, certainly, we’ve built the position in the Marcellus, [inaudible] position in Marcellus.

There are really, as we think about Southwestern Energy I want to remind everyone, yes, we are the number fifth largest gas producer in the Lower 48, but we are driven by some other objectives and those are the objectives we will see through the presentation today. But we want to stay focused. We want to use economies of scale. We do have vertical integration. I’ll talk about all of those as we go through. And we like to get in early in the plays and to put that position together and certainly, what we did in the Marcellus and in the Fayetteville show that.

I will have some forward-looking statements, as matter of fact. I’ll give you some hints of 2014. We haven’t done our budget yet. But certainly some of the things that we did at the end of the second quarter kind of can point to some of things that might happen in 2014 and what we are thinking about going forward.

As you think about our company and you think about what’s happened to our company. Today we get three sets of questions. One of the questions are, is how fast can you grow the Marcellus? How fast you want to grow the Marcellus? What’s holding you back from growing the Marcellus, it’s all in that kind of question?

The other question is the kind of questions [inaudible] today is what’s going on - the basis in Marcellus, or the basis affecting you in the Marcellus, I’ll talk a little bit about that.

And then the third question that we get is, what should we think about your exploration program and when we should expect something in the exploration program, and I will address all those.

What’s interesting, the question we are getting today have very little to do with the Fayetteville Shale and people obviously must think they’ve got Fayetteville Shale figured out. I will show in the presentation today that it’s not figured out yet and we are still working on it. We are still learning. We are still getting better at what we are doing and we got a couple of surprises left there as well.

Had a great second quarter. As a matter fact we set a record in the second quarter. I’ll show you in some of the slides on that. We did update our -- both our production, I want to guide a little bit higher on production for the year in the second quarter and we actually guided our capital up a little bit and I’ll talk about how that goes.

This just shows our historical growth in various areas that are out there. I talk all the time in the slide, one, two slides that send out the most demand here is that second on the left, where it looks at gas price, gas price last year, we all know was a tough year, was almost half what it was the year before.

But when you look at on the second graph on the right, you look at our EBITDA; we almost match the previous year on the EBITDA side of it. We really cut cost, grew production to hit that EBITDA and that set us up for this year.

This year average gas price is about half point between what it was in 2011, 2012. We set records in second quarter on the EBITDA and you will see us, I think for the year set records there. You will see us set records again on production as we grow over 12%, 13% that side of the equation.

And on the F&D side, last year certainly especially in the Fayetteville Shale, we went from having 1500 spuds on our book, so we are having around 300 at the end of the year. We will get a lot of those back this year and you see that F&D go back to what I think it will be a normal range for us just over $1 per Mcf.

By the way we do to that as we stay focused. This slide hasn’t changed in several years. From a capital standpoint, I am going to detail the next slide, but half the capital on drilling side is going to Fayetteville, half is going to Marcellus and then there is a little bit in our exploration area.

One of the key things about our exploration is that we spent the last two, three years to get our exploration where it is today. I get asked a lot of time, are you on schedule, we are right on schedule.

Where we want to be today was have over 1 million acres that we are looking at any point in time. What we want to do is test two to three plays at any given year and because some of the plays go over a year, have four projects working at any point in time. Today we have four plus projects working. We have 1.3 million acres. I’ll talk a little bit about that later in the presentation.

Read the rest of this transcript for free on seekingalpha.com