Back to top

Image: Bigstock

Southwestern Energy's Reserve Base Strong, High Debt a Drag

Read MoreHide Full Article

We issued an updated research report on independent energy player, Southwestern Energy Company (SWN - Free Report) on Mar 10, 2017. The company boasts strong acreage positions in the Fayetteville and Marcellus shales, which offer scope for more natural gas discoveries. However, the company’s high debt level raises concerns.

Southwestern Energy has a diversified reserve base with presence in multiple U.S. basins. It also focuses on investments in high-return areas like Fayetteville, Appalachia and New Ventures.

The company has already invested heavily in the development of the fertile Marcellus play, where it held leases for approximately 337,300 net acres. Subsequently, the company increased its acreage in the Marcellus Shale in Pennsylvania by acquiring equity interest from other stakeholders. We can expect significant output from those prolific plays in the coming days, which in turn, should increase the company’s profit.

In 2016, Southwestern Energy spent $648 million for both upstream and midstream operations. The company’s return of capital (ROC) is above that of the Zacks categorized Oil & Gas-U.S Exploration & Production industry. Over a one-year period, the company’s ROC was positive 0.2%, while ROC for the broader industry was negative 2.6%.

However, the company’s fourth-quarter 2016 adjusted earnings of 8 cents per share missed the Zacks Consensus Estimate of 12 cents due to lower production. The company had an average negative earnings surprise of 1.29% in the last four quarters.

Southwestern Energy’s shares have underperformed the broader industry in the last one year. The company’s shares lost 7% during the aforesaid period, whereas the broader industry increased almost 14%.

Given that U.S producers are gathering to the oil patches, the oil price improvement has been limited to some extent. This is unfavorable for the upstream business of energy players like Chevron Corporation (CVX - Free Report) , BP Plc (BP - Free Report) and Royal Dutch Shell plc . Southwestern Energy, which is an upstream energy player, is also not an exception.

5 Trades Could Profit ""Big-League"" from Trump Policies  

If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.

Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


BP p.l.c. (BP) - $25 value - yours FREE >>

Chevron Corporation (CVX) - $25 value - yours FREE >>

Southwestern Energy Company (SWN) - $25 value - yours FREE >>