OREANDA-NEWS. Natural gas producer Southwestern Energy has ceased drilling and will pursue a "minimal amount of new activity" as the company waits for a recovery in commodity prices.

Southwestern and other large US gas producers have been stung by a sharp downturn in prices. Spot prices at the Henry Hub this week were down by more than 40pc from a year earlier thanks to a mild winter, robust production and unusually high inventories. Producers are tightening their belts and bracing for a prolonged period of low prices.

Southwestern has cut deeply, reducing its workforce by 40pc and idling drilling rigs. The company will focus this year on bringing on an inventory of about 100 wells that were drilled but not completed. Those efforts will result in average output this year of 2.2 Bcf-2.3 Bcf/d (62mn-65mn m?/d) of natural gas equivalent (Bcfe/d), down from 2.7 Bcfe/d in 2015.

"The fact that production is declining from a company as large as ours is a market signal," chief executive Bill Way said during a conference call with investors today. Southwestern does have the ability to ramp up when commodity prices increase, he said.

This month, Southwestern negotiated lower fees associated with gathering, transportation and processing services in West Virginia with midstream services provider Williams that should reduce costs by $35mn this year. The company also dedicated some acreage in the Marcellus and Utica shales to Williams. Southwestern will be subject to minimum volume commitments, only when it directs Williams to build additional infrastructure, the independent said.

Southwestern has slashed 2016 spending to $350mn-$400mn from $1.8bn in 2015. Those cuts are based on a gas price of $2.35/mmBtu and an oil price of $35/bl.