Southwestern Energy Takes 2 Rigs Offline, State Count Falls To Lowest Level In 12 Years

A drilling rig in Faulkner County in 2010.
Credit Arkansas Times

Southwestern Energy Corp. officials said Friday that the Houston-based oil and gas operator has shut down two drilling rigs in the Fayetteville Shale as the price of natural gas fell this week to its lowest level in more than 15 years.

Southwestern Energy spokeswoman Christina Fowler told Talk Business & Politics on Friday evening that the company’s Arkansas operating rigs will be mothballed for the foreseeable future, but did not include any loss of jobs.

The Southwestern spokeswoman said the company will issue its capital guidance for fiscal 2016 at the beginning of the year, which will offer a clearer picture of how depressed crude oil and natural gas prices are affecting the company’s overall operations. “Just look at what is happening with the price of natural gas,” Fowler said of Southwestern’s delayed 2016 capital budget.

On Friday, Southwestern’s stock price rebounded off its 52-week low when its shares fell to only $5.00 in the previous day’s session that pushed the company’s market cap below $2 billion. The company’s stock price, which closed the week up 39 cents at $5.54 per share, is down 83.39% in 2015 with only two weeks left in the fiscal year.

Last year, Southwestern provided its yearly capital guidance on Dec. 1, 2014, when the company was then the third largest natural gas producer in the U.S. Last year, the Houston driller’s capital budget was pegged at $1.87 billion, with $645 million set aside for Fayetteville Shale development and production.

Southwestern’s capital spending peaked in fiscal 2014, when the Texas driller’s capital outlay neared $2.5 billion. The company still holds most of the prime drilling areas in the Arkansas shale play and invested well over $800 million and $1 billion annually between 2007 and 2013.

ARKANSAS RIG COUNT FALLS TO THREE

Nationwide, the U.S. rig count remained unchanged at 709, down 62% from 1,875 a year ago. The number of oil rigs rose for the first time in five weeks, up 17 to 541. That is still down 65% from 1536 oil rigs that were in use a year ago.

Arkansas now has only three drilling rigs in operation, down from 12 a year ago. That is the lowest rig count in the state since October 2003, according to data compiled by Baker Hughes Inc. The number of natural gas rigs fell by 17 to 168 across the U.S. There were 338 rotary gas rigs operating a week before Christmas in 2014.

According to industry analysts, the nation’s declining year-over-year rig count reflects the pain that record low crude oil and natural gas prices is spreading across the oil industry, from the drill bit to the commodities trading floor in New York City. A report earlier this month by outplacement firm Challenger, Gray & Christmas noted U.S.-based energy companies have laid off 93,800 jobs year to date through November. The U.S Bureau of Labor statistics reported that the oil and gas sector loss 11,000 jobs in November, which pushes the number of job cuts since December 2014 to 123,000.

Earlier this week, integrated oil giant Royal Dutch Shell updated its $3.5 billion restructuring plan related to its $70 billion takeover of Australia’s BG Group. The Dutch oil giant said now it expects an overall workforce reduction of 2,800 positions, or approximately 3% of its global workforce. These reductions are in addition to the previously announced plans to reduce Shell’s headcount and contractor positions by 7,500 globally.

At the end of this week’s session on the New York Mercantile Exchange, West Texas Intermediate settled 22 cents lower at $34.73. Natural gas for January delivery closed at 1.767 per million British thermal units, up 1.2 cents or 0.7%.