I'm curious as to why SWN thought this was a good idea/deal? With years of downward pressure on natural gas prices and near record inventories, why would they take on so much debt at seemingly the worst possible time? Does anyone know the particulars of how this deal happened? Was this a unanimous decision by the Board? Also, am I the only one who noticed unusual insider transactions around the time of this "deal?"
We can talk about the Canadian fiasco another time.
I think you could argue too that the shale plays in North America are decreasing which is why SWN MGT thought they needed to buy another's assets. You could also argue that SWN does not have a good new ventures team that could discover an area...see how brown dense played out? and what about the acreage in montana that they disclosed..nothing!
It was not a bad deal, just a bad deal a that time. They risked too much. The rock there is still good, but they lost lots of the good people so not sure they have the culture/expertise to pull it off now.
Volume is only part of the game. Here in 'merica gas is marketed by the BTU (British thermal unit) or heating value. The marcellus shale has a much more rich payzone than the Fayetteville. My opinion is the acquisition was made to remain competitive in the marketing sector.
They are selling cubic foot but the bottom line is quality not quantity.
I wasn't involved in it but my understanding of the logic is that Fayetteville is approaching the downside of "mature" and SWN was looking for a new area to grow into. (Yes I know that Fayetteville still has a lot of drillable locations, but SWN has pretty well covered the sweet spots already). West Virginia appeared to offer value. What apparently wasn't considered was the midstream options in West Virginia also required expenditures that limited the immediate value.
Beats me bro