Southwestern Slashes $1.4B from Budget

Southwestern Slashes $1.4B from Budget

Southwestern Energy (NYSE: SWN) has taken an axe to their 2016 capital budget expecting to spend $350 to $400 million in 2016 down from $1,828 in 2015. The company is aiming to spend within cash flow during the year and has only 5% of production headed for 2016. Production will fall within the range of 815 to 835 Bcfe down ~15% from 2015 production. There are no plans for rigs to be running this year with zero wells to be drilled. The company expects to turn 20 to 30 wells to sale during the year.

SWN-total-resources-by-area-chart

Drilling Days Reduced in Appalachia but No Plans to Drill This Year

Southwest Appalachia

  • 425,000 net acres in Southwest Appalachia with net production of 446 MMcfe/d
  • Using tighter stage spacing and higher proppant volumes in new completions
  • Laterals have increased from an average of 5,399 in the second quarter of 2015 to 7,833 in the fourth quarter
  • Average drilling days have decreased to 17.3 days or 30% from the second quarter of 2015
  • Drilled first Utica well

 SWN-Marcellus-Frac-Count

Northeast Appalachia

  • 270,000 net acres in Northeast Appalachia
  • Well costs have been reduced to $5.6 million per well in 2015 from $6.1 million in 2014
  • Q4’15 average completed well costs were down to $4.9 million

SWN-northeast-appalachia-well-stats

Fayetteville

  • Well costs have increased from $2.6 million to $2.8 million in 2015
  • Production has rolled over during 2015 totaling 465 Bcf down from 2014 production of 494 Bcf

Southwestern Energy Ready to React to Improved Pricing

  • Not breaking down equipment and selling off, ready to react quickly if prices improve
    • SWN owned rigs and frac crews time to bring activity back is around 30-60 days depending on when crews can be ready
  • DUCs are not growing in the inventory with rigs being stacked
    • 100 to 110 in SWN inventory at the end of 2016
    • 2015 ended with 128 DUCs, 380 drilled wells and 410 wells brought online
  • Liquidity issues are being looked at and future cash flows are greater then debt obligations in the near term
    • Every $0.25 increase in gas price will add ~$200 million to cash flow at the bottom line

SWN-tradingView-chart

 

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