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Southwestern Energy (SWN) Q1 Loss Narrower than Expected

Independent natural gas operator, Southwestern Energy Company SWN reported first-quarter 2016 adjusted loss of 8 cents per share, narrower than the Zacks Consensus Estimate of a loss of 20 cents. Last year, the company had posted earnings of 22 cents.

 

 Quarterly operating revenues of $579 million surpassed the Zacks Consensus Estimate of $550 million but declined considerably from $933 million in the first quarter of 2015.  

Production and Realized Prices

During first-quarter 2016, the company’s total production grew 1.7% year over year to 237 billion cubic feet equivalent (Bcfe) on increased Northeast Appalachia volumes.

The company’s average realized gas price for the quarter, including hedges, fell to $1.48 per thousand cubic feet (Mcf) from $2.99 per Mcf in the year-ago period. Oil was sold at $18.65 per barrel, down from the year-earlier level of $30.9 per barrel. Natural gas liquids were sold at $4.98 per barrel, down from $10.35 in the year-ago period.  

Segmental Highlights

Operating loss from the company’s Exploration and Production (E&P) segment was $65 million for the first quarter of 2016. The company reported operating income of $78 million in the comparable quarter last year. The decrease was primarily attributable to lower realized natural gas prices and decline in realized oil and NGL prices. This was partially offset by the revenue growth from higher production volumes.

On a per-Mcfe basis, lease operating expenses were 88 cents, lower than the prior-year quarter level of 92 cents. However, general and administrative expenses per unit of production decreased to 19 cents from 24 cents in the prior-year quarter.

Operating income for the company’s Midstream Services segment was $63 million in the first quarter compared with $88 million in the year-ago quarter. The decline in operating income was largely due to a fall in production volume in the Fayetteville Shale division and the sale of the company’s northeast Pennsylvania gathering assets.

Capex and Debt

The company’s total capital expenditure during the first quarter was approximately $122 million. As of Mar 31, 2016, the company’s long-term debt was $6.4 billion, which represents a debt-to-capitalization ratio of 84.9%.

Guidance

For second-quarter 2016, total production is expected between 210 Bcfe and 215 Bcfe. Full-year production is estimated at 815–835 Bcfe.

Of the total expected production for 2016, the company anticipates approximately 364–371 Bcf from Fayetteville Shale, about 324–332 Bcf from Northeast Appalachia and 125–130 Bcfe from Southwest Appalachia.

Zacks Rank

Southwestern currently carries a Zacks Rank #3 (Hold).

Some better-ranked players from the energy sector areVanguard Natural Resources, LLC VNR, OMV Aktiengesellschaft OMVJF and PetroChina Co. Ltd. PTR. All these stocks sport a Zacks Rank #1 (Strong Buy).

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