LITTLE ROCK — Houston-based Southwestern Energy Co.’s New York Stock Exchange share price fell by $2.02, or 5.72 percent, to $33.31 Tuesday after announcing on Monday what several analysts subsequently called disappointing results from its first Lower Smackover Brown Dense well in south Arkansas.
The well produced 103 barrels a day during its best 24-hour period since it went into production on Feb. 9, according to the company. Southwestern has said there could be more than 3 billion barrels of recoverable oil in its Brown Dense property.
In a note to clients Tuesday, Scott Hanold, an analyst with RBC Capital Markets in Minneapolis, called initial results “disappointing,” Bloomberg reported.
However, Southwestern’s chief operating officer, Steve Mueller, said in a conference call Tuesday that he was “excited about having 100 barrels a day coming out” of the first well, adding that a second test well was already showing signs of improvements from the first well.
Mueller had said earlier in February that that level of initial production would make him ecstatic.
He called the Brown Dense a “quality” oil formation and that the company’s first four wells are tests to figure out the best way to extract oil from the limestone formation. Southwestern’s second well has been drilled in Louisiana but is not yet producing; its third well is in the initial phases of drilling in Louisiana; its fourth well is planned for sometime this year in Arkansas.
Stephens Inc. analyst Will Green of Dallas on Tuesday said Southwestern’s share price falling could be due to both “disappointed” investors from early Brown Dense well results, coupled with Southwestern’s announcement that it would reduce the amount of money it plans to spend to extract natural gas in the Fayetteville Shale of north-central Arkansas, in which it is the largest producer. Natural gas prices are near 10-year lows.
Green said that there needs to be “additional testing ... before we count out the [Brown Dense]. We’d expect Brown Dense results to improve from here.”
Meanwhile, Mike Kelly of Global Hunter Securities said in an investor note that well results were “unimpressive.”
Marshall Carver, an analyst with Capital One Southcoast, urged patience with Southwestern and the Brown Dense.
“Peak rate so far of 103 [barrels per day] will be viewed as disappointing,” Carver said of Southwestern’s results in a research note, according to Upstream Online, an oil and natural-gas trade journal. “Investors will need to be patient with this potential [formation]; it will likely take several more wells before we have a good idea of what Brown Dense wells are capable of producing.”
Southwestern’s share price bounced back in after-hours trading, jumping up $2.02, or 6.06 percent to $35.33.
Other oil and natural-gas companies did not do as poorly as Southwestern did during regular trading hours. Oklahoma City-based Chesapeake Energy Corp.’s share price on the New York Stock Exchange fell 6 cents to $25.05, while Devon Energy Corp. fell $1.17, or 1.56 percent, to end the day at $73.98.
But, like Southwestern, Oklahoma City-based Devon rebounded in after-hours trading by the same amount it had lost during the day.
Business, Pages 27 on 02/29/2012