Southwestern Energy Profits Off 60%, Fayetteville Shale Production Stays Flat

Southwestern Energy Co. reported on Thursday first quarter profits well below last year’s results as depressed natural gas prices eroded the Fayetteville Shale leader’s operating revenue and net income.

For the period ended March 31, Southwestern posted first quarter net income of $78 million, 22 cents per share, down 59.8% from $194 million, or 55 cents a year ago. Revenue also declined 16% to $933 million from $1.11 billion. Analysts surveyed by Thomson Reuters forecasted earnings of 23 cents a share on revenue of $905 million.

Despite a gradual shifting of its operation to Pennsylvania’s Appalachian region over the past year, Southwestern’s production in the Arkansas shale play continued to bank most of the Houston-based driller’s operating revenues.

In the first quarter of 2015, Southwestern’s net gas production from the Fayetteville Shale was 115 billion cubic feer (Bcf), compared to 119 Bcf in the first quarter of 2014. Gross operated gas production in the Arkansas play was more than 2 million cubic feet (MMcf) per day during the quarter as 99 wells were place into action.

“As we do every year, we have begun 2015 with the same focused approach on generating strong returns with a platform for significant growth for our shareholders in any price environment,” said Southwestern Chairman and CEO Steve Mueller. “Our first quarter results once again demonstrated the strength of our portfolio, which continues to deliver economic projects at current prices due to the quality of our assets, our focus on maintaining our low cost structure and our differentiating firm transportation capacity.”

Operating income from the company’s exploration and production division was $78 million for the first quarter of 2015, a 77.8% decline when compared to $352 million for the same period in 2014. The decrease was primarily due to lower realized natural gas prices and increased operating costs and expenses from higher activity levels, partially offset by the revenue impacts of higher production volumes, company officials said.

Also, despite its hedging program to mitigate low gas prices, Southwestern’s average realized gas price in the first quarter of 2015 was only $2.99 per thousand cubic feet (Mcf), nearly 29% below $4.19 per Mcf in the first quarter of 2014. The company’s commodity hedging activities increased the Texas driller’s average realized gas price by 36 cents per Mcf during the first quarter of 2015, compared to a decrease of 44 cents per Mcf a year ago.