Southwestern Energy (NYSE:SWN) is encouraged by preliminary results from the development of oil and liquid plays within the company's New Ventures portfolio, and plans to shift more capital to this area in 2012.
Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

2012 Capital Budget
Southwestern Energy set a $2.1 billion capital program for 2012, down about 5% from 2011. The company's original plan called for spending 9% or approximately $190 million on properties within the New Ventures portfolio. The latest update, announced by the company along with earnings for the first quarter of 2012, calls for an additional $50 million of spending in 2012.

Lower Smackover Brown Dense
Southwestern Energy's main focus within the New Ventures portfolio is the Lower Smackover Brown Dense formation which is spread across Louisiana, Arkansas and Mississippi. The company has 540,000 net acres under lease and has disclosed details on three wells recently drilled into this play.

Although the results of these wells may have been below investor's expectations, this is typical of early results in emerging areas and occurred also at the initial stages of development in other plays that have been proved up by the industry.

The industry is interested in the Lower Smackover Brown Dense formation because of the high price of crude oil relative to natural gas. Core Laboratories (NYSE:CLB) is currently conducting a study of the geological and other properties of this play to assist operators with future development.

SEE: Unearth Profits In Oil Exploration And Production

New Ventures Portfolio
Southwestern Energy also moved forward on the development of other plays within the New Ventures portfolio during the first quarter of 2012. The company has 264,000 net acres in the Denver Julesburg Basin and it testing several different formations in this prolific basin.

Southwestern Energy reached total depth on its first well here and plans to start drilling the company's second well in the Denver Julesburg Basin during May 2012.

Southwestern Energy has several million acres in New Brunswick, Canada, and is involved in a multiyear exploration program testing many different formations. The company allocated $13 million to this area in its original 2012 capital budget.

Another company that is exploring in Eastern Canada is Lone Pine Resources (NYSE:LPR), which spun off from Forest Oil (NYSE:FST) in 2011. The company has approximately 240,000 net acres under lease in Quebec and is testing the potential of the Utica Shale in this area.

SEE: Oil And Gas Industry Primer

The Bottom Line
Southwestern Energy is the acknowledged king of the Fayetteville Shale and is now making initial efforts in emerging plays in the company's New Ventures portfolio. The company's previous success in its core area makes it likely that Southwestern Energy will replicate that achievement in the New Ventures portfolio.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Fundamental Analysis

    4 Predictions for Oil in 2016

    Learn four predictions for oil markets in 2016 including where prices are heading and the key fundamental factors driving the market.
  3. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  4. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  5. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  6. Economics

    Will Silver Recover in 2016? (SLV, GLD, JJC)

    The end of the silver downtrend is likely to coincide with similar recoveries in gold, iron and copper.
  7. Stock Analysis

    The Top 5 Silver Penny Stocks for 2016 (LODE,AG)

    Learn about five of the top silver penny stocks and why investors may want to consider adding them to their investment portfolios in 2016.
  8. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  9. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  10. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center