On August 12, 2015, Zacks analyst released a research report on Southwestern Energy Company (NYSE:SWN), a firm that engages in production, exploration and development of crude oil and natural gas in the U.S. The company owns a first mover benefit in the core Fayetteville Shale assets, which accounts for a major part of its production.

The highlights

The economies of scale assisted Southwestern to achieve rapid growth. Last year, the company disclosed $2.6 million of costs per well with drilling average time of 6.8 days. With an expert management team and low-cost operations, the company demonstrates solid upside potential. Following this Southwestern raised FY2015 gas and oil production estimate by 27%. The production is expected to come in between 973 Bcfe and 982 Bcfe.

The buzz

Southwestern has been making significant investment to develop the fertile Marcellus play. In the same region, the company holds leases for nearly 337,300 net acres. Also, the company bought additional stakes to increase acreage in the Marcellus Shale. This provided the access to a play with additional acreage and low cost structure. At the same time, gas production jumped to 766 Bcf last year from 656 Bcf in 2013.

The strength

Southwestern Energy Company (NYSE:SWN) owns a diversified reserve base in various U.S. basins and it has made investments in prolific areas such as New Ventures, Fayetteville and Appalachia. Also, the company has a competitive cost structure that is going to lead in impressive returns and growth throughout the business cycle. The only problem is the dependence on natural gas for its production and reserves which makes it vulnerable to fluctuations in commodity prices.

There exists a dismal outlook for natural gas and an oversupplied natural gas market in the U.S and lower demand is creating problems for the company. Industrial volatility warrants caution as it can affect the company’s performance adversely.