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Southwestern Energy's Q3 Earnings Beat; Revenues Miss

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Independent natural gas operator, Southwestern Energy CompanySWN reported third-quarter 2015 adjusted earnings of 1 cent per share, which handily beat the Zacks Consensus Estimate of a loss of 3 cents by 133%. The bottom line, however, deteriorated substantially from the prior-year quarter earnings of 50 cents.

Quarterly operating revenues of $749 million missed the Zacks Consensus Estimate of $818 million. The top line also decreased from $928 million in the third quarter of 2014.

Production and Realized Prices

During the reported quarter, the company's oil and gas production surged 27% year over year to 249 billion cubic feet equivalent (Bcfe). The upside was driven by increased Appalachia production.

The company's average realized gas price for the quarter, including hedges, fell to $2.21 per thousand cubic feet (Mcf) from $3.43 per Mcf in the year-ago period. Oil was sold at $33.50 per barrel, significantly below the year-earlier level of $97.71 per barrel. Natural gas liquids were sold at $4.72 per barrel, down from $35.57 in the year-ago period.

Segmental Highlights

Operating loss from the company's Exploration and Production (E&P) segment was $71 million for the third quarter, which compared unfavorably with an operating income of $189 million in the comparable quarter of 2014. The decrease primarily stemmed from lower realized natural gas prices and increased operating costs from higher activity levels. This was partially offset by revenues of higher production volumes.

On a per-Mcfe basis, lease operating expenses were 92 cents, higher than the prior-year quarter level of 91 cents. General and administrative expenses per unit of production decreased to 20 cents from 23 cents in the year-ago quarter.

Operating income for the company's Midstream Services segment was $68 million compared with $97 million in the prior-year quarter. As of Sep 30, 2015, the company's midstream segment was gathering approximately 2.1 Bcf per day through 2,037 miles of gathering lines in the Fayetteville Shale.

Capex and Debt

As of Sep 30, 2015, the company had approximately $4.6 billion in long-term debt, representing a debt-to-capitalization ratio of 51.2% (compared with 42.2% in the prior quarter). During the first nine months of the year, Southwestern invested a total of $1.4 billion. This is lower than $1.8 billion invested in the corresponding period of 2014.

Zacks Rank and Stocks to Consider

Currently, Southwestern carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space are Natural Gas Services Group Inc. NGS , Matrix Service Company MTRX and ReneSola Ltd SOL . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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SOUTHWESTRN ENE (SWN): Free Stock Analysis Report

MATRIX SERVICE (MTRX): Free Stock Analysis Report

RENESOLA LT-ADR (SOL): Free Stock Analysis Report

NATURAL GAS SVC (NGS): Free Stock Analysis Report

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


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

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