As Appalachian Basin gas production surges, many of the region's producers, including Southwestern Energy Co., are still promising maintenance-level output and balance-sheet discipline through the fourth quarter and into 2021.
Producers have begun to restore output at wells temporarily curtailed during the peak of this shoulder season's market volatility, but a number of operators are promising investors continued production and capital-spending discipline.
For the third quarter, Southwestern Energy reported total production of 221 Bcfe, which was above the midpoint of its previous guidance, and 9% higher compared to its output in both the third quarter of 2019 and the second quarter of 2020.
Still, Southwestern CEO Bill Way promised investors on the company's Oct. 30 earnings call that it has no plans to invest above maintenance capital in 2021 and intends to hold its fourth-quarter exit-rate production flat through at least the end of 2021.
"To be clear, should seasonal prices improve further, we will not increase our activity above maintenance level," Way said. "Any excess cash that comes from seasonal prices changes, at least at this point, would go to pay down debt."
As Appalachia's producers face what could be their highest winter gas prices in two years or more, recent production records in Appalachia could be an early warning sign of what is to come. On Oct. 30, operators across the Marcellus and Utica delivered a surprise single-day production record at 34.2 Bcf/d — up about 4 Bcf from an annual low in early October, S&P Global Platts Analytics data shows.
Southwestern reported a capital investment of $223 million for the third quarter, compared to $240 million during the same period of 2019. The company drilled 16 new wells, completed 25 wells and turned 30 wells to sales. The company reported a NYMEX Henry Hub average realized price of $1.98/MMBtu, which was down 25 cents compared to the year-ago period. Southwestern achieved an offsetting 12 cents/MMBtu gain on settled financial basis derivatives, compared to a 1 cent loss in the third quarter of 2019.
The company reported third-quarter adjusted net income of $47 million, or 8 cents per share, compared to net income of $44 million, or 8 cents per share, in the 2019 period. On a GAAP basis, the Appalachian shale gas driller's net loss was $593 million, down from net income of $49 million a year earlier. Southwestern said the results for the quarter included $361 million of non-cash impairments and a $289 million non-cash loss on unsettled mark-to-market derivatives due to rising prices in future periods.
Southwestern's third-quarter operating revenue was $527 million, down from $636 million in the year-ago period.
Jonathan Robinson 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.