Southwestern Energy (NYSE: SWN) is reaping rich benefits by boosting production in its Fayetteville and Marcellus shale operations. Profits in its third quarter shot up 9% from a year ago, and it was also the 10th consecutive quarter of profits for the Houston-based company. Given its quarterly performance, Southwestern announced plans to ramp up its annual production. Let's dig a little deeper.

Falling prices. So what?
Production for the quarter rose 23% compared with the same period last year. This rise was mainly because of a 21% jump in production from Southwestern's Fayetteville shale operations. The company produced a total of 128.9 billion cubic feet equivalent of oil and gas in the quarter. Out of this, a whopping 111.9 Bcf was produced in Fayetteville. The hike in production pushed revenue up 12% to $767.3 million.

Companies such as Southwestern were, in a way, forced to ramp up production as natural gas prices continue to remain low. The mean realized price, which includes hedging, for natural gas fell 7.9% whereas oil jumped 19%, which, basically, compelled natural gas producers to increase production. The hike helped offset the pressures of falling gas prices. This pushed up profits for the company by 9% to $175.2 million.  

One thing to note here is Southwestern's impressive cost structure, a feature that has endeared the company to many and also helped margins. Its cash operating cost declined again in the quarter to $1.26 per thousand cubic feet (Mcf) as compared with $1.31 per Mcf a year ago.

Ramping it up
As oil and gas production has been better than expected this quarter, many companies have made their intentions clear of increasing production for the rest of the year, and Southwestern is no different. The decision has come on the back of solid performance in the Marcellus and Fayetteville shale regions. It decided to crank up its yearly production target to somewhere between 496 Bcfe and 500 Bcfe, up from the earlier projection of 483 Bcfe and 491 Bcfe.

Another Houston-based company, Noble Energy (NYSE: NBL), expects to produce somewhere between 220 million and 222 million barrels of oil equivalent a day in the next quarter, up from the earlier-forecast 215 million to 218 million. The increased focus on the Marcellus shale region comes after the company signed a deal with coal producer Consol Energy (NYSE: CNX). The deal gives Noble a 50% stake in the Marcellus shale play, which happens to be one of the most abundant natural gas hubs in the world.

Foolish takeaway
A company that is looking to increase production levels and has an impressive cost structure certainly catches my eye. The only hurdle along Southwestern's path is the declining gas prices. Still the stock is worth keeping an eye on in my books. To do so and to follow Southwestern as it continues to hike output, click here to add it to your stock watchlist.