Southwestern Energy Posts Strong Q1 Earnings - Analyst Blog


Independent natural gas operator, Southwestern Energy Co. ( SWN ) reported robust first-quarter 2014 results, owing to a significant increase in production along with higher natural gas prices .

Southwestern reported adjusted earnings of 66 cents per share, surpassing the Zacks Consensus Estimate of 63 cents and the prior-year quarter's earnings of 42 cents.

Southwestern Energy Company Inc - Quarterly Earnings Per Share | FindTheBest

Quarterly operating revenues of $1,112.8 million comfortably beat the Zacks Consensus Estimate of $970.0 million and increased considerably from $733.7 million in the first quarter of 2013.  

Production and Realized Prices

During the reported quarter, the company's oil and gas production grew 23.0% year over year to 182.0 billion cubic feet equivalent (Bcfe) - almost entirely gas - driven by increased Marcellus Shale activities. Production from Southwestern's Fayetteville shale plays increased marginally 0.4% from the year-earlier period to 119.4 Bcf. Moreover, output from the Marcellus shale plays soared 146.8% from the prior-year quarter to 58.0 Bcf.

The company's average realized gas price, including hedges, rose 22.5% to $4.19 per thousand cubic feet (Mcf) from $3.42 per Mcf in the year-ago period. Oil was sold at $100.43 per barrel, down 6.1% from the year-earlier level of $106.93 per barrel. Natural gas liquids (NGL) were sold at $50.16 per barrel.  

Segmental Highlights

Operating income from the Exploration and Production (E&P) segment increased 100.3% year over year to $352.1 million in the first quarter. Improved output level and natural gas prices aided the results, partially offset by higher operating expenses.  

On a per-Mcfe basis, lease operating expenses were 93 cents versus 81 cents in the prior-year quarter. On the other hand, general and administrative expenses per unit of production increased to 25 cents from 21 cents in the prior-year quarter.

The Midstream Services segment's operating income increased 8.0% to $82.6 million in the first quarter from $76.3 million in the year-earlier quarter. Higher gas gathering volumes along with increased marketing margins brought forth the improvement.

Capex and Debt

The company's total capital expenditure in first-quarter 2014 was approximately $542.0 million, of which $499.0 million was spent on E&P activities and $39 million was expended in the Midstream segment.

As of Mar 31, 2014, long-term debt stood at $1,827.4 million, representing a debt-to-capitalization ratio of 32.5%.

Zacks Rating

Southwestern currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.

Meanwhile, one can look at better-ranked players in the oil and gas exploration and production sector like Athlon Energy Inc. ( ATHL ), RSP Permian Inc. ( RSPP ) and Clayton Williams Energy Inc. ( CWEI ). All the stocks sport a Zacks Rank #1 (Strong Buy).

ATHLON ENERGY (ATHL): Free Stock Analysis Report

WILLIAMS(C)ENGY (CWEI): Free Stock Analysis Report

RSP PERMIAN INC (RSPP): Free Stock Analysis Report

SOUTHWESTRN ENE (SWN): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: NGL , ATHL , C , CWEI , RSPP

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