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Southwestern Energy in $750M Term Loan Deal for 3 Years

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Independent natural gas operator, Southwestern Energy CompanySWN announced that it has entered into a $750 million three-year term loan agreement. The proceeds were used to pay down balances under its existing credit facility and commercial paper program. The term loan is unsecured and includes an interest rate calculated on the basis of the company's credit rating (currently 137.5 basis points over the current London Interbank Offered Rate).

The term loan is prepayable at any time and requires prepayment from the net cash proceeds of any issuance of debt or equity securities and sales of assets. The other provisions in the term loan are substantially the same as those contained in the existing revolving credit facility.

As of Sep 30, 2015, the company had approximately $4.6 billion in long-term debt, representing a debt-to-capitalization ratio of 51.2% (compared with 42.2% in the prior quarter). During the first nine months of the year, Southwestern invested a total of $1.4 billion. This is lower than $1.8 billion invested in the corresponding period of 2014.

Southwestern Energy has a diversified reserve base in multiple U.S. basins and made investments in high-return areas such as Fayetteville, Appalachia and New Ventures. Moreover, the company maintains a competitive cost structure, which should contribute to steady growth and returns throughout the business cycle.

However, the company's dependence on natural gas for almost all of its reserves and production makes its results vulnerable to commodity price fluctuations. The negative near-term outlook for natural gas adds to its woes. Moreover, an oversupplied U.S. natural gas market, along with lower demand, provides little scope for Southwestern Energy to flourish. Industrial volatility also raises caution as it might lead a sub-par performance by the company.

Moreover, Southwestern Energy's operations are exposed to various technological disruptions and the possibility of harsh weather conditions that might lead to delays in well completion. These, together with high service costs, are headwinds to the company's profitability in the near-to-medium term.

Southwestern Energy's asset portfolio lacks geographical diversification since most of its activities are concentrated on the Fayetteville Shale, Arkoma and East Texas fields. Thus, the company's earnings and cash flow streams are sensitive to regional pricing or upheavals.

Southwestern Energy carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space are Energy Transfer Equity, L.P. ETE , Matrix Service Company MTRX and Seadrill Partners L.P SDLP . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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SOUTHWESTRN ENE (SWN): Free Stock Analysis Report

MATRIX SERVICE (MTRX): Free Stock Analysis Report

ENERGY TRAN EQT (ETE): Free Stock Analysis Report

SEADRILL PTNRS (SDLP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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