NEW YORK (AP) -- Shares of Southwestern Energy Co. rose Monday on news that the oil and gas producer reached a deal to buy natural gas properties located in a key gas-producing field for about $93 million.
THE SPARK: Southwestern is buying about 162,000 acres, located in the Pennsylvania portion of the Marcellus Shale, from Chesapeake Energy Corp. and its partners. The deal will boost the company's Marcellus holdings to more than 337,000 acres.
THE BIG PICTURE: A drilling boom is under way in the Marcellus Shale, a massive underground gas reserve stretching from New York across Pennsylvania and West Virginia to Ohio. At the same time, natural gas companies are getting a slight boost from an uptick in prices following months of record lows that cut into their bottom lines.
THE ANALYSIS: Brean Capital LLC analyst Raymond Deacon initiated coverage of Southwestern with a "Buy" rating and a $48 price target, saying that the company should get a boost from rising natural gas prices and that the markets aren't fairly factoring in the value of its Marcellus holdings.
In addition the efficiency of the company's capital spending in Arkansas' Fayetteville Shale is improving, he said, adding that Southwestern has low cost and debt levels compared with its closest competitors.
THE SHARES: Up $1.61, or 4.5 percent, to $37.08 in afternoon trading, after peaking at $37.23 earlier in the day. Over the past 52 weeks, the stock has traded between $25.63 and $39.71.