BUY OR SELL-Are Southwestern shares a bargain?
By Shradhha Sharma
BANGALORE Dec 26 (Reuters) - Shares of Southwestern Energy Co (SWN.N: Cotización), an independent oil and gas company, have continued to outperform its peers, despite a volatile energy market and an extreme commodity price environment.
While most exploration and production (E&P) companies have cut their 2009 production outlook and capex budgets to conserve cash in a tough credit environment, Southwestern has projected a 48 percent jump in its oil and gas production for the year.
Last week, the company also forecast a capex budget of $2 billion for 2009, up from about $1.7 billion for 2008. [ID:nBNG422701]
Southwestern, which operates mainly in the Arkoma Basin -- including the Fayetteville Shale -- and East Texas, has been able to weather these extremes, mainly because of a strong balance sheet, solid assets and effective well economics, according to analysts who cover the stock.
Shares of the company have fared significantly better than the wider Dow Jones U.S. Exploration and Production Index , losing only about 5 percent of their value since the start of the year compared to a 46 percent drop in the index.
But is the company's stock worth investing in, given the currently depressed E&P space that has been battling a precipitous drop in oil and gas prices from record highs in July?
"It is unusual. They are definitely going against the grain and are actually planning on outspending cash flow next year," Thomas Weisel Partners analyst Michael Scialla said by phone. Continuación...