Southwestern Energy (SWN) Misses Q3 Earnings Estimates

Independent natural gas operator, Southwestern Energy Company (NYSE:SWN) reported third-quarter 2016 adjusted earnings of 3 cents per share that missed the Zacks Consensus Estimate of earnings of 5 cents. Lower realized natural gas prices led to the underperformance.

The bottom line, however, came in above the year-ago adjusted figure of 1 cent due to lower exploration expenses and higher natural gas liquids (NGL) prices.

Quarterly operating revenues of $651 million surpassed the Zacks Consensus Estimate of $626 million. The improvement in oil prices drove the upside. The top line, however, decreased from $749 million in the third quarter of 2015 owing to lower production.

Production and Realized Prices

During the reported quarter, the company’s oil and gas production declined 15.3% year over year to 211 billion cubic feet equivalent (Bcfe).

The company’s average realized gas price for the quarter, including hedges, fell to $1.73 per thousand cubic feet (Mcf) from $2.21 per Mcf in the year-ago period. Oil was sold at $35.41 per barrel, higher than the year-earlier level of $33.50. NGL was sold at $7.04 per barrel, up from $4.72 in the year-ago period.

Segmental Highlights

Operating loss from the company’s Exploration and Production (E&P) segment was $777 million in the third quarter, much narrower than the operating loss of $2,910 million in the year-ago quarter. The improvement was owing to lower cost from operations and increased NGL prices.

On a per-Mcfe basis, lease operating expenses were 86 cents, lower than the prior-year level of 92 cents. Also, general and administrative expenses per unit of production were 23 cents as against 20 cents in the year-ago comparable period.

Operating income for the company’s Midstream Services segment was $52 million compared with $68 million in the year-earlier quarter.

Capex and Debt

As of Sep 30, 2016, the company had approximately $4,651 million in long-term debt, representing a debt-to-capitalization ratio of 80.6%. Over the nine months of the year, Southwestern invested a total of $376 million as against $2,054 million invested in the corresponding period of 2015.

Zacks Rank

Southwestern holds a Zacks Rank #3 (Buy). Some better-ranked players from the energy sector are Helix Energy Solutions Group, Inc. (NYSE:HLX) , W&T Offshore Inc. (NYSE:WTI) and Ultra Petroleum Corp. (OTC:UPLMQ) . All the stocks sport a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Helix Energy posted an average positive beat of 56.42% over the last four quarters.

W&T Offshore is projected to witness year-over-year earnings growth of 25.5% for the current year.

Ultra Petroleum is projected to witness year-over-year earnings growth of 148.4% for the current year.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>