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Cowen: Southwest Energy Has Limited Upside After Strong Run

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Southwestern Energy Company SWN have rallied so far in 2016. Cowen’s Charles Robertson downgraded the rating for the company from Outperform to Market Perform, with a price target of $13. The analyst said there is limited upside to Southwestern Energy’s shares after their strong performance.

Southwestern Energy’s shares have spiked 73 percent year-to-date, versus a 27 percent increase in the EPX. Shares are up 57 percent month-to-date, versus a 26 percent rise in the EPX.

Strategic Initiatives To Continue

Analyst Charles Robertson said that Southwestern Energy appears to be on track to achieving its goals of strengthening the balance sheet and preparing for debt repayment in 2018. He added, “SWN likely remains active with its hedging above $2.35 mcf. Improving commodity pricing should help the company to delever.”

Robertson expects the company’s asset sale program to be updated throughout the year. Management may also consider an equity raise as an option.

The company continues to execute well in NE Appalachia and the early results in SW Appalachia's Alice Edge pad are promising.

Southwestern Energy may beat the 2Q expectations, given its updated production numbers, cost assumptions and hedges. The analyst believes that the frontloading of the company’s capital budget will allow it to stem anticipated production declines for the first half of 2016.

The company is also taking steps to optimize its gas flow from existing infrastructure. Robertson added that this had led to operational improvements.

Apr 2016Cowen & CompanyDowngradesOutperformMarket Perform
Apr 2016UBSDowngradesNeutralSell
Apr 2016JP MorganDowngradesNeutralUnderweight

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