Southwestern Gas Case Study
Q4 - OE_Strengths
What do you see as Southwestern Energy’s particular strengths as an investment?
"Exposure to natural gas prices. Exposure to the commodity price. Runway and liquidity position would be another one. Specifically, cash balance. Large cash balance."
Q5 - OE_Weaknesses
What do you see as Southwestern Energy’s particular weaknesses as an investment?
"The number one weakness is the balance sheet. They have too much debt. The capital structure is too complicated. There's too many different types of bonds, loans, etc. What I would view as a good thing would be if they only had unsecured bonds or others maturities. The fact that they have a first lien loan that's out there is complicating the story. A first lien loan that has …show more content…
"Number one is balance sheet. Number two would be rate of change of asset productivity. The asset productivity isn't improving a lot, like dramatically. Or it's not improving more relative to peers."
Q24 - OE_MostImportantThingsNeedToKnowMoreAbout
What are the two or three most important things you need to know more about in order for you to have greater confidence in Southwestern Energy as an investment?
"Number one would be further delineation of acreage. They put out the map of their acreage position in Appalachia and they don't break out how many acres they have in each county, and they don't break out how many acres they have in each productivity area or type curve window. That's a really important one. Further disclosure on spacing assumptions. They give a location count of how many wells they can drill in each type curve, but they don't give or discuss the spacing assumptions. That could be useful. They give like 400 locations, and I can't use that because that's what management is telling me. I have to have a credible way of calculating that myself. Because they don't give the underlying assumptions, I just give them a haircut. I don't give them full credit for that. Further detail on operating costs would be helpful. Like operating costs by region or even by type curve. In Appalachia they have both a dry gas and a dry met wet, like combo curves. It would be nice to have operating cost information for each of those and how those vary from each
What do you see as Southwestern Energy’s particular strengths as an investment?
"Exposure to natural gas prices. Exposure to the commodity price. Runway and liquidity position would be another one. Specifically, cash balance. Large cash balance."
Q5 - OE_Weaknesses
What do you see as Southwestern Energy’s particular weaknesses as an investment?
"The number one weakness is the balance sheet. They have too much debt. The capital structure is too complicated. There's too many different types of bonds, loans, etc. What I would view as a good thing would be if they only had unsecured bonds or others maturities. The fact that they have a first lien loan that's out there is complicating the story. A first lien loan that has …show more content…
"Number one is balance sheet. Number two would be rate of change of asset productivity. The asset productivity isn't improving a lot, like dramatically. Or it's not improving more relative to peers."
Q24 - OE_MostImportantThingsNeedToKnowMoreAbout
What are the two or three most important things you need to know more about in order for you to have greater confidence in Southwestern Energy as an investment?
"Number one would be further delineation of acreage. They put out the map of their acreage position in Appalachia and they don't break out how many acres they have in each county, and they don't break out how many acres they have in each productivity area or type curve window. That's a really important one. Further disclosure on spacing assumptions. They give a location count of how many wells they can drill in each type curve, but they don't give or discuss the spacing assumptions. That could be useful. They give like 400 locations, and I can't use that because that's what management is telling me. I have to have a credible way of calculating that myself. Because they don't give the underlying assumptions, I just give them a haircut. I don't give them full credit for that. Further detail on operating costs would be helpful. Like operating costs by region or even by type curve. In Appalachia they have both a dry gas and a dry met wet, like combo curves. It would be nice to have operating cost information for each of those and how those vary from each