Upstream player Southwestern Energy Company (SWN - Free Report) has inked a revised transportation agreement with a subsidiary of master limited partnership Boardwalk Pipeline Partners , Texas Gas Transmission, LLC, relating to a portion of its Fayetteville firm takeaway capacity. The agreement is subject to consent from the Federal Energy Regulatory Commission.
Effective Nov 1, 2017, this new agreement is anticipated to offer savings of about $70 million from 2017 through 2020. This takes into account savings of about $45 million in 2018 through the reduction of current excess capacity, while assuring future flexible takeaway capacity through 2030 at competitive rates.
Key Components of Revised Agreement
The agreement aims at offering right-sized, fixed-rate, guaranteed long-term takeaway capacity and future option capacity to extremely preferred gulf coast markets. Per the agreement, Fayetteville Lateral volume commitment has been lowered to 100,000 million British Thermal units (MMBTU) per day from 800,000 MMBTU in November 2017 through October 2020 at existing rates. The amended firm transportation agreements and demand fees are likely to commence in 2021 at about 10 cents per MMBTU. Firm transportation agreements for about 800,000 MMBTU beginning in 2021 will decrease each year.
Benefits of the Agreement
The agreement provides Southwestern Energy an opportunity to accelerate activity in the Fayetteville and Moorefield area at viable transportation rates without incurring extra liabilities during times of lower activity. It also boosts margins and lowers further demand capacity while securing option capacity for future development.
About Southwestern Energy
Southwestern Energy enjoys strong acreage positions in the Fayetteville and Marcellus shales, which offer ample opportunities for newer natural gas discoveries. However, we remain concerned about the company’s high-debt load. The company’s shares have decreased 0.7% against the industry’s gain of 2.8% over the last three months.
Zacks Rank & Key Picks
Currently, Southwestern Energy carries a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector are First Solar Inc (FSLR - Free Report) and Alliance Holdings GP LP . Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
First Solar designs, based in Tempe, AZ, manufactures and sells solar electric power modules using a proprietary thin-film semiconductor technology. The company delivered an average positive earnings surprise of 524.24% over the last four quarters.
Alliance Holdings, headquartered in Tulsa, OK, involves in producing and marketing coal. The firm delivered an average positive earnings surprise of 13.64% over the last four quarters.
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