Southwestern Energy cutting 40% of workforce, 200 jobs in Appalachia
Natural gas producer Southwestern Energy Co. is shedding 40 percent of its workforce as it struggles with low prices that won't budge.
The cuts, announced Thursday, include 200 workers in the company's operations in Northeastern Pennsylvania and the Marcellus and Utica shale areas in Southwestern Pennsylvania, leaving about 230 employees in the Appalachian region.
The remaining 900 job losses will be from Southwestern's Houston headquarters and operations in the Fayetteville shale in Arkansas.
Gas prices hit 16-year lows in late December as a warm start to winter cut demand for heating and electricity, compounding a supply glut that grew through 2015. Prices have posted only moderate gains since then as a record amount of gas remains in storage for the winter.
Most analysts don't expect prices to begin any rebound until exports increase and more pipelines are built to carry gas from shale-rich areas such as Pennsylvania to more lucrative markets.
“Cash flow will be significantly lower, and these cuts are required to maintain a competitive position in this low-price environment,” said Southwestern spokeswoman Sarah Battisti.
The layoffs cut across all segments of the company. It expected to spend more than $45 million on severance payments to affected workers, it said in a Securities and Exchange Commission filing. The company expected annual savings from the cuts of between $150 million and $175 million.
Its stock closed up nearly 20 percent to $8.80, which is 70 percent lower than the 52-week high it hit in May.
Southwestern last year became Pennsylvania's No. 3 shale gas producer as it developed a chunk of land and wells it bought in 2014 from Chesapeake Energy for $5 billion and more from WPX Energy. Southwestern last year wrote down hundreds of millions of dollars on the value of some of that land as prices tumbled.
As of the beginning of the year, the company had no drilling rigs in operation as it writes a capital spending plan for 2016.
Development slowed to a trickle in the northeast corner, as overall drilling in Pennsylvania last year decreased by 40 percent from 2014 levels. Most producers cut spending last year, and several have announced further reductions for 2016.
David Conti is the Tribune-Review's assistant business editor. Reach him at 412-388-5802 or email@example.com.