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Southwestern Energy (SWN) Beats Earnings Estimates in Q2

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Southwestern Energy Company (SWN - Free Report) reported second-quarter 2018 adjusted earnings of 18 cents per share, which beat the Zacks Consensus Estimate of 16 cents. In the prior-year quarter, the company had delivered earnings of 8 cents.
 

Southwestern Energy Company Price, Consensus and EPS Surprise

Southwestern Energy Company Price, Consensus and EPS Surprise | Southwestern Energy Company Quote

Quarterly operating revenues of $816 million beat the Zacks Consensus Estimate of $806 million and improved from $811 million in second-quarter 2017.  

The upside can be attributed to higher production and realized liquids prices, which were partially offset by lower natural gas prices.

Production and Realized Prices

During the second quarter, the company’s total production grew 5.4% year over year to 234 billion cubic feet equivalent (Bcfe).

The company’s average realized gas price for the quarter, including hedges, declined to $2.11 per thousand cubic feet (Mcf) from $2.15 per Mcf in the year-ago quarter. Oil was sold at $59.22 per barrel compared with the year-earlier quarter’s level of $40.56. Natural gas liquids were sold at $15.05 per barrel compared with $11.25 in the prior-year quarter.  

Segmental Highlights

Operating income from the Exploration and Production (E&P) segment was $97 million compared with $146 million in the year-ago quarter. The decline was due to lower natural gas prices and higher lease operating expenses. This was offset by higher production and realized liquids prices.

On a per-Mcfe basis, lease operating expenses were 91 cents compared with the prior-year quarter’s level of 89 cents. General and administrative expenses per unit of production declined to 19 cents from 23 cents in the prior-year quarter.

Operating income in the company’s Midstream Services segment was $27 million compared with $42 million in the year-ago quarter. The decline was primarily caused due to lower production volumes in the Fayetteville Shale.

Capex and Debt

The company’s total capital expenditure during the first six months of 2018 was approximately $714 million. As of Jun 30, the company’s long-term debt was $3.6 billion, which represents a debt-to-capitalization ratio of 61.3%.

Guidance

For 2018, Southwestern raised production estimate in the range of 955-970 Bcfe, up from the previous view of 930-965 Bcfe. The company has also hiked its Appalachia Basin net production estimate in the range of 695-707 Bcfe, up 21% from 2017 level. The company reiterated 2018 capital expenditure in the range of $1.15-$1.25  billion.

Price Performance

The company has outperformed the industry during the second quarter. The company’s sharesreturned 22.4% compared with the industry's 12.5% rise.

 

Zacks Rank and Other Stocks to Consider

Southwestern currently carries a Zacks Rank #2 (Buy).

A few other top-ranked players in the same sector are Canadian Natural Resources Ltd. (CNQ - Free Report) , China Petroleum and Chemical Corp. (SNP - Free Report) , also known as Sinopec, and Sunrun Inc. (RUN - Free Report) . All these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Canadian Natural Resources, based in Calgary, Alberta, is an exploration and production (E&P) company. It pulled off an average positive earnings surprise of 4.7% in the last four quarters.

Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company delivered an average positive earnings surprise of 492.8% in the trailing four quarters.

Sunrun is engaged in offering solar services through various channels. The company delivered an average positive earnings surprise of 16.3% in the last four quarters.

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