Therefore, Southwestern Energy Company (NYSE:SWN) doubled its coverage in the Marcellus Shale, known for “dry gas,” providing a strong opportunity for extracting natural gas. It is expected that the midstream activities, which enable the company to grow in Fayetteville, will replicate the same in this region also. Currently, 17 wells in region are producing around 2 million cfed of natural gas per day, and it expects to raise the production to double digits.
Chesapeake Energy Corporation (NYSE:CHK) is the second-largest gas producing company in the U.S. It sold its Marcellus assets to Southwestern Energy Company (NYSE:SWN) to improve its cash position and offset the impact of falling natural gas prices. Since 2012, the company has been continuously selling its assets to fill the gap between its planned expenditures and its cash flow in 2013. Through these sell-offs, it expects to generate the funds of more than $4 billion this year, which it will use to pay outstanding debts and expand its footprint in oil rich fields.
It recently sold other assets in North Eagle Ford Shale and Haynesville Shale to Exco Resources for $1 billion. With these sales, it has collected funds of around $3.6 billion year-to-date. Chesapeake Energy Corporation (NYSE:CHK) planned to devote 80% of its spending to drilling activity compared to 50% in the last three years, which will balance out its asset selling program. It is expected that the company may generate total revenue of $6.98 billion this year from $5.73 billion last year.
Meanwhile, Southwestern’s competitor Range Resources Corp. (NYSE:RRC) recently posted results for the second quarter ended in June 2013, reporting year-over-year production growth of 27% to 910 Million cfepd, driven by the continuous success of drilling activities in the Marcellus Shale. In April 2013, the company sold its New Mexico assets for $275 million in order to develop its Marcellus area further. With these efforts, Range Resources Corp. (NYSE:RRC) expects to have production of around 950 million cfepd in the third quarter of 2013 and year-over-year production growth of around 25%.
Overall, by exploring the Marcellus Shale region and increased drilling activities in Fayetteville region, Southwestern’s total revenue may increase by nearly 18% to $872 million with the EBITDA margin of around 59.25% in second quarter of 2013.
Conclusion
With the aim of enhancing its footprint, Southwestern has expanded its drilling activities in the Fayetteville region and is improving its drilling methodology, which will enhance its drilling efficiency. Further, by acquiring more acreage in the Marcellus Shale, the company should be able grow its production and revenue.
Therefore, I recommend buying this stock for long-term growth.
Shweta Dubey has no position in any stocks mentioned. The Motley Fool recommends Range Resources. The Motley Fool has the following options: long January 2014 $30 calls on Chesapeake Energy. Shweta is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article This Oil and Gas Company Is Expanding for the Better originally appeared on Fool.com is written by Shweta Dubey.
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