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Southwestern Energy (SWN) Down 6.8% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Southwestern Energy (SWN). Shares have lost about 6.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Southwestern Energy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Southwestern Energy Q1 Earnings Beat Estimates

Southwestern Energy reported first-quarter 2020 adjusted earnings of 10 cents per share, beating the Zacks Consensus Estimate of 7 cents. However, the bottom line declined from the year-ago profit of 27 cents.

Quarterly operating revenues of $592 million missed the Zacks Consensus Estimate of $641 million and declined from $990 million in first-quarter 2019.

The earnings beat was supported by higher gas equivalent production, partially offset by lower average realized commodity prices.

Total Production Increases

The company’s total first-quarter production increased to 201 billion cubic feet equivalent (Bcfe) from 182 Bcfe a year ago. Gas production in the quarter was 156 Bcf compared with the year-ago level of 143 Bcf.

Moreover, oil production surged to 1,399 thousand barrels (MBbls) from 854 MBbls in the year-ago quarter. Natural gas liquids production in the quarter under review was recorded at 6,128 MBbls, higher than the year-ago level of 5,603 MBbls. It is to be noted that almost 77.6% of its volume mix constituted of natural gas.

Average Realized Prices Fall

The company’s average realized gas price in the quarter, excluding derivatives, fell to $1.53 per thousand cubic feet (Mcf) from $2.95 a year ago. Oil was sold at $36.72 per barrel compared with the year-earlier level of $45.48. Natural gas liquids were sold at $8.16 per barrel, lower than $14.45 in the year-ago period.

Expenses

On a per-Mcfe basis, lease operating expenses were 96 cents compared with the prior-year level of 90 cents. However, general and administrative expenses per unit of production were 11 cents, down from 19 cents in the year-ago quarter.

Financials

Southwestern Energy’s total capital expenditure during the first quarter was $86 million.

As of Mar 31, 2020, the company’s cash and cash equivalents were $5 million. Long-term debt was $2,279 million, which represents a debt-to-capitalization of 58.8%.

Guidance

The upstream energy player expects production volumes in the June quarter of 2020 to be mostly unaffected, thanks to improvement in well performance.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 21.71% due to these changes.

VGM Scores

Currently, Southwestern Energy has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Southwestern Energy has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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