Why Is Southwestern Energy (SWN) Down 8.2% Since Last Earnings Report?

·3 min read

A month has gone by since the last earnings report for Southwestern Energy (SWN). Shares have lost about 8.2% 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 Q3 Earnings & Revenues Beat Estimates

Southwestern declined 1.8% despite reporting strong results for the third quarter of 2021. This reflects that investors are still concerned with coronavirus-induced energy market uncertainty.

The upstream energy firm reported third-quarter earnings of 24 cents per share, beating the Zacks Consensus Estimate by a penny. The bottom line improved from the year-ago quarter’s earnings per share of 8 cents.

Quarterly operating revenues of $1,598 million outpaced the Zacks Consensus Estimate of $1,015 million and the year-ago figure of $527 million.

The strong quarterly results were owing to higher gas equivalent production and commodity prices.

Total Production

The company’s total third-quarter production increased to 310 billion cubic feet equivalent (Bcfe) from 221 Bcfe a year ago. Gas production in the reported quarter was 251 Bcf compared with the year-ago level of 173 Bcf.

Natural gas liquids’ production in the quarter under review was 8,011 thousand barrels (MBbls), higher than the year-ago level of 6,687 MBbls. Oil production increased to 1,729 MBbls from 1,294 MBbls in the year-ago quarter. Almost 81% of its volume mix constituted natural gas.

Average Realized Prices

The company’s average realized gas price in the reported quarter, excluding derivatives, increased to $3.18 per thousand cubic feet (Mcf) from $1.09 a year ago. Oil was sold at $62.32 per barrel compared with the year-earlier level of $29.46. Natural gas liquids were sold at $31.76 per barrel, significantly higher than $10.34 in the year-ago period.

Expenses

On a per-Mcfe basis, lease operating expenses were 95 cents compared with the prior-year level of 91 cents. General and administrative expenses per unit of production were 9 cents versus 12 cents in the year-ago quarter.

Financials

Southwestern’s total capital investment in the third quarter was $291 million.

As of Sep 30, 2021, the company’s cash and cash equivalents were $12 million. Long-term debt was $4,036 million.

Acquisition Deal

In a separate release the company announced a definitive agreement to acquire GEP Haynesville, LLC – the third-largest private producer in the prolific Haynesville sale play. The deal is valued at $1.85 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Southwestern Energy has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Southwestern Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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