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Southwestern (SWN) Gains More Than 5% on Q3 Earnings Beat

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Southwestern Energy Company (SWN - Free Report) reported third-quarter 2020 earnings of 8 cents per share, beating the Zacks Consensus Estimate of 2 cents. The bottom line was flat with the prior-year quarter level.

Quarterly operating revenues of $527 million missed the Zacks Consensus Estimate of $609 million and declined from $636 million in third-quarter 2019.

The earnings beat was supported by higher gas equivalent production, partially offset by lower average realized commodity prices. Notably, following the earnings beat, the stock has gained 5.4% since the earnings release on Oct 29.

Higher Total Production

The company’s total third-quarter production increased to 221 billion cubic feet equivalent (Bcfe) from 202 Bcfe a year ago. Gas production in the quarter was 173 Bcf compared with the year-ago level of 158 Bcf.

Moreover, natural gas liquids production in the quarter under review was recorded at 6,687 MBbls, higher than the year-ago level of 5,911 MBbls. However, oil production declined to 1,294 thousand barrels (MBbls) from 1,419 MBbls in the year-ago quarter. It is to be noted that almost 78.3% of its volume mix constituted of natural gas.

Lower Average Realized Prices

The company’s average realized gas price in the quarter, excluding derivatives, fell to $1.09 per thousand cubic feet (Mcf) from $1.45 a year ago. Oil was sold at $29.46 per barrel compared with the year-earlier level of $46.54. Natural gas liquids were, however, sold at $10.34 per barrel, higher than $8.89 in the year-ago period.

Expenses

On a per-Mcfe basis, lease operating expenses were 91 cents compared with the prior-year level of 94 cents. Also, general and administrative expenses per unit of production were 12 cents versus 15 cents in the year-ago quarter.

Financials

Southwestern’s total capital investment during the third quarter was $223 million. As of Sep 30, 2020, the company’s cash and cash equivalents were $95 million. Long-term debt was $2,450 million, which represents a debt-to-capitalization ratio of 0.86.

Outlook

Improving operational and capital efficiencies led the company to raise its 2021 free cashflow estimate to $300 million.

Zacks Rank & Key Picks

Southwestern currently has a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space include PDC Energy Inc. (PDCE - Free Report) , Matador Resources Company (MTDR - Free Report) and Antero Resources Corporation (AR - Free Report) . While PDC Energy sports a Zacks Rank #1 (Strong Buy), Matador and Antero carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PDC Energy is likely to see earnings growth of 13.3% in 2020.

Matador has seen upward estimate revisions for its 2020 bottom line in the past 30 days.

Antero has seen upward estimate revisions for 2020 bottom line in the past 30 days.

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