Modest natural-gas prices in 2012 cost Southwestern Energy Co. a $1.9 billion impairment charge that lowered the value of the company’s natural-gas and oil assets.
The write-down resulted in a net loss of $707.1 million for the year, according to the company’s fourth-quarter earnings report, released Wednesday.
For the fourth quarter, Southwestern reported a net loss of $355.6 million, or $1.02 per share, after posting a $849.3 million impairment charge on its natural-gas and oil properties for the period. It was the third quarter in 2012 that the Houston-based company took a write-down on its natural-gas and oil assets.
In its earnings report, Southwestern said the writedown was the result of low natural-gas prices. The company did not say whether the assets were in the Fayetteville Shale.
Will Green, an analysts withStephens Inc., said the charge was on undrilled wells.
“The write-down looks entirely based on natural-gas prices in 2012,” he said. “The bottom line, it feels like the worst part of the write-downs are over.”
Declining natural-gas prices have plagued the industry within the past year, causing companies to cut back on drilling. Successful drilling, partly from new techniques such as hydraulic fracturing, in shale formations has produced a rapid supply of natural gas that pushed prices down.
“It just ended up putting too much natural gas on the market,” said James Williams, an energy analyst who operates WTRG Economics near Russellville. “[Prices are] up but the problem is that gas pricesare too low to drill a lot of prospects you have.”
Williams said prices need to rebound to at least $4 per British thermal unit to get companies like Southwestern to increase drilling.
Prices failed to reached $4 per million Btu in 2012 and in April dropped briefly below $2 per million Btu on the New York Mercantile Exchange.
On Thursday, the price for natural gas fell 3 cents to settle at $3.25 per million Btu.
Southwestern took its first write-down on its assets in its second quarter. The company said in August 2012 that the value of its natural-gas and oil assets was lowered by $935.9 million, which caused the company to record a net loss of $488.1 million, or $1.40 per share.
Southwestern announced in November a second impairment charge of $441.5 million on its natural-gas and oil properties.
BHP Billiton Ltd., another big operator in the Fayetteville Shale, also took a write-down on its natural-gas assets.
The Australian company said in August that its Fayetteville Shale assets, which it acquired from Chesapeake Energy in 2011, would be lowered by $2.84 billion.
Southwestern announced in December that it plans to spend less money in the Fayetteville Shale next year.
The company said it plans to invest about $830 million in the Fayetteville Shale in 2013, compared with the $991 million that it spent in 2012.
Shares of Southwestern rose 4 cents to close Thursday at $33.13 on the New York Stock Exchange.
Business, Pages 4 on 02/22/2013