Is Southwestern Energy Worth a Closer Look?

Southwestern Energy (NYSE: SWN  ) recently recorded profits for the 10th consecutive quarter, with the bottom line jumping 9% in its most recent quarter. The company has done well by boosting production in the Fayetteville and Marcellus shale regions and plans to continue to increase output for the rest of the year. This makes me want to take a closer look at how the market has priced the stock.

Higher production, low prices
Low natural gas prices have compelled natural gas producers across the board to increase production, in order to boost top lines. Southwestern has been no different. Last quarter, Southwestern's production grew 23%, which includes a 21% rise in the company's Fayetteville shale operations.

Consequently, Southwestern has increased its production target for the rest of the year. It now plans to produce around 496 billion cubic feet equivalent (Bcfe) to 500 Bcfe, up from its earlier forecast of 483 Bcfe to 491 Bcfe. In the last quarter, it produced a staggering 128.9 billion cubic feet equivalent of oil and gas. Out of this, 111.9 Bcf was produced by its Fayetteville operations. Another thing which catches the eye about this company is its impressive cost structure, which has helped the company boost its margins in recent quarters. In its most recent quarter, its cash operating cost declined to $1.26 per thousand cubic feet (Mcf) from $1.31 per Mcf in the year-ago period.

Let's see how Mr. Market values the stock when it's stacked up against its peers.

The price you pay

Company	Trailing P/E	Forward P/E
Southwestern	19.8	16.5
AmeriGas Partners (NYSE: APU  )	18.8	20.4
Hess (NYSE: HES  )	9.8	8.2
Anadarko Petroleum (NYSE: APC  )	NM	25.6

Source: S&P Capital IQ. NM = not meaningful.

Looking at the trailing P/E, Southwestern looks a little on the expensive side compared to its peers. But, going ahead, the rift between its current and forward P/E shows that it has value in it to unlock. The company's plans to expand production should pay off in the long run, especially as consumption of natural gas in the U.S. is expected to rise. This, coupled with an impressive cost structure, means that we can expect the company's bottom line to grow going ahead.

Thus, I think Southwestern is a stock worth taking a closer look at. What say you? Leave your comments below, and click here to stay up to date on all the top news and analysis on Southwestern.