Southwestern Energy's Progress Not a Surprise

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Reviewing quarterly results is a great way to evaluate a company's performance and keep tabs on whether it is delivering the goods. Houston-based Southwestern Energy (NYS: SWN) has reported impressive second-quarter results that should give a perspective of what its future holds.

Fundamentals
Total production of 123 billion cubic feet equivalent (Bcfe) for the second quarter was a healthy 25% jump from last year's corresponding volumes. For a low-cost producer of natural gas, an increase in production should always be good news.

What really stands out is the ever-dropping cost of production. The average cost of production has dropped to $2.46/Mcfe from $2.58/Mcfe a year ago. That amounts to a whopping $14.7 million in savings for an equivalent production volume. Additionally, natural gas price realizations of $4.30/Mcfe indicate solid profits for the company.

Naturally, operating income saw a healthy 37% rise to $282.5 million during the quarter. The exploration and production segment (E&P) itself saw a rise of 37%. Net cash flow from operations saw a 30% growth during the corresponding period.

Shale plays are delivering
The company had expanded its Fayetteville operations (its primary region of operation); gross production went up to 1.8 Bcf from 1.4 Bcf. The number of producing wells in this region rose to 149 from 106 a year ago. This is exactly what I'm looking for.

Don't forget, Southwestern's Marcellus operations are showing signs of promise. While production from this region did not contribute substantially to overall volumes, the 82% production growth from the previous quarter looks exciting. With 18 producing wells and another 10 under production, one should expect high growth from this region in the near future. EXCO Resources (NYS: XCO) , Cabot Oil and Gas (NYS: COG) , and Range Resources (NYS: RRC) are already reaping the benefits of this region.

Foolish takeaway
Future operations in New Brunswick, Canada, have a huge potential for growth. Southwestern is currently surveying the area for oil and natural gas reserves. Given the reputation of this place, the results should not be disappointing.

Overall growth prospects also look very promising. A sneak peek into Southwestern's quarterly results shows that the company is on track for huge long-term gain. Foolish investors should take special note of this stock.

Agree with me? Use the comments section below to let your fellow Fools know what you think.

At the time this article was published Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Range Resources. Motley Fool newsletter services have recommended buying shares of Range Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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