Southwestern Energy Company (SWN)

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Southwestern Energy's (SWN)

Johnson Rice Energy Conference

October 1, 2013 09:30 AM ET


Jeff Sherrick - SVP, Corporate Development



Unidentified Analyst

Next up we have Southwestern, we have Jeff Sherrick and Randy Barron, Jeff is VP of Corporate Development and I think we've always known Southwestern as really the -- for the excellent job they've done in the Fayetteville Play, while that Play still improving more of the emphasis for Southwestern and for investors going forward is on the -- already what's been good growth in Marcellus and expectation for even better growth there. We also have some interesting oiled new ventures play, so with that Jeff please, can go ahead.

Jeff Sherrick

Okay I wanted to just get started with little information, there'll be a few forward statements but I won't go through those today. You know a lot about Southwestern Energy, Southwestern Energy is a very simple story, we're mainly gas. I know that's a tough tape and with the current -- the way prices have been but we've been very-very successful with that program over the last several years I'm going to show you, a lot of the information that's on this slide, but we're a little over 4 tcf today. again we've got a strong track record, very low cost, we've had a great run, the Company's really been built on this formula. The formula we talked a lot about it, it's really the way we run our business, we are from the standpoint of a very disciplined investor, we're a very curious Company, we've had a lot of innovation and a lot of success associated with that.

In the second quarter this year our production was up about 17%, this is largely due to the Fayetteville and the Marcellus the two big slabs that's in the Company. The Marcellus has been a tremendous producer for us, year to date at the end of the first quarter we're roughly about 300 million a day, we ended the second quarter roughly 500 million a day gross, so very-very strong quarter. We've had record EBITDA year as far as 2013, and we're going to end the year on a strong note in that regards as well.

As we look forward to the new activities our new venture program has been very active, we're currently involved in about four or five new ventures at this point in time, I will be talking a lot more about these as we come up to the end of the third and fourth quarters of this year. Company had very strong balance sheet, allows us to do a lot of different things, our net to book is about 36% today, but as we look forward to the end of 2013, couple of things have changed. The capital budget has been increased to about $2.25 billion or roughly $2 billion as we started out the year. We'll go through the details of this but it's largely due to some acquisition activity that we had occur in the second quarter of this year. In 2013 our production's going to be up about 15% associated with some of the activities as well though, so very strong year.

When you look back at Southwestern here's roughly about 10 years of the history. You can see the Company's had just a fantastic history as far as the growth record -- growth associated with the overall program. If we look across this graph and specially if we start on the left hand side, the red bars there are production and you can see the tremendous growth that we’ve had, we plan in 2013 to be somewhere in the neighborhood of 650 bcf production for this year so a growth again of about another 15% as we go through the year.

When you look across the graph there's a couple of interesting points on here, in the center of the graph is the yellow bars, the yellow bars are proved reserves and as you may recall in 2012, average prices for the year were roughly $2.76, the effect of that average pricing on the gas in the way the FCC pricing works we had a write-down in our PUDs associated with the Fayetteville Shale of roughly about 1.6 tcf, so that's what that change in proved reserves were in 2012, and you that corollary change in the finding costs associated with 2012 as well with that low jump up, but the really interesting thing is you go back and look at the purple bars associated with price, you can see that as we've moved down price, you can see we average $3.44 from the standpoint of our realized prices including our hedges for 2012, and you can see that growth in EBITDA. So again with the volume our hedging program, we've had a pretty successful program and this year in 2013 EBITDA will again be another record year.

The last thing I'll share with you on this slide again if we go back to the finding cost bars associated with the green bars that's on the graph here, you can see how that number for 2012 was roughly a little over $2. With the way year's progressing what we anticipate for 2013, this will be in line with the 2009-2011 finding cost and that will give you a little feel for what will happen associated with reserves.

The Company as I mentioned earlier is a very simple story, we're really located in just three places currently, the bulk of our operations are in central Arkansas on the Fayetteville Shale the other asset being in northeast Pennsylvania, both dry gas, very dry gas about a 1000 btu gas, but a very strong position in both of these locations. This was one of the things as we look forward as we're developing the Company that we'd like to keep the story relatively simple. If you think about Southwestern five to 10 years from now we'd like to think that we're in four or five places, again we have very significant positions in these four or five places and that we would be able to control our destiny through economies of scale approach in that we can use vertical integration to our advantage which is a key part of our program the success that we have had today.

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