Southwestern Energy Co. plans to scale back on its drilling in the second half of the year, lowering its average rig count of six rigs in the first half of the year to two rigs by the end of the third quarter, company officials said Aug. 7.
The planned reduction in drilling activity comes in response to continued low commodity prices seen in the Appalachian region for natural gas and natural gas liquids, company officials said during a conference call to discuss second-quarter results.
The volatile commodity price environment is expected to continue to be a challenge for Southwestern as the producer works to "manage risk, lower cost and capture opportunities to build long-term value," President and CEO Bill Way said.
Southwestern reported second-quarter production of 186 Bcfe, or 2.04 Bcfe/d, down from 234 Bcfe, or 2.57 Bcfe/d, in the year-ago quarter, according to the company's operational results released Aug. 6
The year-over-year second-quarter production drop was the result of Southwestern's sale of its assets in the Fayetteville Shale of Arkansas — where second-quarter 2018 production totaled 67 Bcf, or 736 MMcf/d — in late 2018. Excluding the Fayetteville divestiture, total production increased by 11% compared with the prior-year second quarter.
During the quarter, the operator produced 148 Bcf, or 1.63 Bcf/d, of gas; 937,000 barrels, or 10,297 barrels per day, of oil; and about 5.50 million barrels, or 60,440 bbl/d, of NGLs. In the second quarter, Southwestern drilled 41 wells, completed 40 wells and brought 36 wells into production.
In its liquids-rich Southwest Appalachia acreage of West Virginia, Southwestern's total production averaged 802 MMcfe/d, including 10,200 bbl/d of oil and 60,400 bbl/d of NGL. The producer said it saw a reduction in its NGL production in the region because it saw greater value in allowing ethane volumes to remain in the gas stream during the quarter.
In the dry gas northeastern Pennsylvania play, Southwestern said its total production of about 1.2 Bcf/d was effectively flat compared to the prior-year quarter. In the play during the second quarter of 2019, the company drilled 18 wells, completed 14 wells and placed 13 wells to sales with an average lateral length of 9,981 feet.
Southwestern reported $40.0 million, or 8 cents per share, in adjusted net income for the second quarter, compared to $105.0 million, or 18 cents per share, in the year-ago quarter.
The S&P Global Market Intelligence consensus normalized earnings estimate for the second quarter was 9 cents per share.
The company's second-quarter adjusted EBITDA was $186 million, about 4% below Wall Street consensus estimate, analysts with Stiffel said in a note to investors.
"[The] EBITDA miss mainly driven by weaker than expected NGL and natural gas price realizations, factors outside of management's control," the analysts wrote.
Jim Magill is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.