Seeking Alpha • Aug 08

Southwestern Energy: Earnings Has Lower Production, But Pending Merger Offers Upside

Summary Southwestern Energy Company reported disappointing second-quarter earnings, missing revenue and profit expectations, leading to a 6.20% stock decline. Despite struggles in the natural gas industry, Southwestern Energy's net loss was due to a non-cash impairment charge, with positive cash flow. The delayed merger with Chesapeake Energy presents a potential short-term profit opportunity for investors if and when it closes. The company's weighted average realized prices were actually up year-over-year, suggesting that it was entirely lower production that caused a revenue decline. Read the full article on Seeking Alpha

Seeking Alpha • May 23

Southwestern Energy Remains On Track For The Merger With Chesapeake

Summary Southwestern Energy has curtailed production in the face of a challenging natural gas market as it prepares to merge with Chesapeake Energy. The FTC continues to push back on O&G mergers, causing potential delays and challenges for the Southwestern-Chesapeake merger. Despite the challenges, Southwestern is engaging with the FTC's requests and expects the merger to close in 2H24, which could lead to operational efficiencies and a larger natural gas footprint. Read the full article on Seeking Alpha

Seeking Alpha • Jan 07

Southwestern Energy: Is A Merger Worth It?

Summary Southwestern Energy is considering a merger with Chesapeake Energy, potentially benefiting from their operations in the Marcellus and Haynesville regions. The company's focus on liquids gives them an advantage over Chesapeake Energy, which has primarily focused on dry gas production. Antero Resources receives the best-selling prices in the Marcellus while Comstock Resources has the lowest costs in the Haynesville. Increasing the presence by combining the Haynesville operations of Chesapeake and Southwestern makes little business sense. Read the full article on Seeking Alpha

Seeking Alpha • Dec 25

Southwestern Energy Is The LNG Export Play For Late 2024

Summary Southwestern Energy reported a lackluster quarter due to challenging natural gas pricing. The company is curtailing production and focusing on resource development in anticipation of growing export capacity. Management aims to reduce debt, generate free cash flow, and potentially consider M&A activity, share buybacks, and a dividend to enhance shareholder value. Read the full article on Seeking Alpha

Seeking Alpha • Dec 12

Southwestern Energy May Reduce Development Activity In 2024

Summary Southwestern Energy Company may generate only $62 million in 2024 free cash flow at the current $2.50 NYMEX gas strip if it wants to keep production nearly flat. Southwestern benefits from having close to half of its 2024 natural gas production hedged at $3.47. It may need to reduce development activity further to get closer to its $3.5 billion debt target. Southwestern stock value is now estimated at $7.25 per share, reflecting lower near-term free cash flow expectations. Read the full article on Seeking Alpha

Seeking Alpha • Dec 06

Southwestern Energy: Deep Value Natural Gas With An M&A Kicker

Summary Southwestern Energy's stock trades at a 50% discount to my $10 per share discounted cash flow target price. Chesapeake Energy's potential acquisition of Southwestern Energy could offer short-term and long-term upside for SWN shareholders. The recent dip in gas prices has little impact on Southwestern's cash flows or valuation, but offers a good buying opportunity in the stock. Southwestern's sizable hedge book protects cash flows through 2024 while I expect rising LNG exports to support prices beyond 2025. Read the full article on Seeking Alpha

Seeking Alpha • Oct 10

Southwestern Energy: Natural Gas Is Not Oil, Yet

Summary Southwestern Energy is solely focused on two primary natural gas shale plays that are close to end markets. Southwestern Energy diluted shareholders to remain solvent in 2020-21 and history could repeat itself if natural gas prices don't remain elevated. Southwestern Energy's balance sheet has improved, but investing in a pure natural gas producer is riskier than investing in an oil and gas company. The company has hedged a substantial amount of its natural gas production through 2024 and so increased prices will take time to be realized. Read the full article on Seeking Alpha

Seeking Alpha • Oct 02

Southwestern Energy: Developing Markets May Offset Mid-Atlantic Weakness

Summary Southwestern Energy is recommended as a buy for speculative investors who expect stable or rising natural gas prices. SWN is particularly well-positioned to serve the much-expanding LNG export market. Dividend hunters should look elsewhere as the company does not offer a dividend. The Biden administration's proposed policies and regional restrictions on natural gas use impact the price of Southwestern's Marcellus (Appalachian) gas. Read the full article on Seeking Alpha

Seeking Alpha • Aug 26

Southwestern Energy: Free Cash Flow Generation Set To Improve

Summary Southwestern's near-term free cash flow has been limited due to weak natural gas prices. The strip for 2024 and 2025 is now around $3.50 and $4.00 respectively. At those prices, Southwestern could generate $2.4 billion in free cash flow over that two year period. Southwestern does have a significant amount of debt, but the bond markets are not very concerned about its ability to deal with its debt. Read the full article on Seeking Alpha

Seeking Alpha • Aug 02

Southwestern Energy Preview: Embracing The Energy Transition With Natural Gas

Summary Southwestern Energy Company is reporting Q2 2023 results soon; don't expect immediate fireworks. Long-term prospects for natural gas excite me, as it plays a crucial role in the energy transition and meets growing electricity demand. Southwestern Energy's significant debt holds it back, but the anticipated LNG export boom in 2024 offers growth opportunities. Despite leverage concerns, I see a compelling risk-reward upside in both natural gas and SWN for patient investors. Read the full article on Seeking Alpha

Seeking Alpha • Jun 05

Southwestern Energy's Leadership Continues To Maximize Shareholder Value Through This Soft Market

Summary Southwestern Energy is in a gray area following high natural gas prices in 2022, but has taken strategic steps to diversify and enhance assets for future production in the Haynesville/Bossier region. The company has focused on maximizing free cash flow, reducing leverage, and optimizing shareholder value, including a $1 billion share buyback program and debt extinguishment. Despite near-term challenges in commodities pricing, Southwestern Energy is on the right track to fix its capital structure and take advantage of potential upswings in the market. Read the full article on Seeking Alpha

Seeking Alpha • Jan 26

Southwestern Energy: Crunch Time, What's Next

Summary Southwestern Energy will see its free cash flow turn very negative compared with the same period a year ago. At least in Q1 2022. The dynamics within the natural gas sector in the near-term look bad. What does this mean? Why I believe SWN remains compelling at 6x FCF. Investment Thesis Southwestern Energy (SWN) is primarily a natural gas company. That means that when natural gas prices go up, this company's operating leverage works wonders. And when natural gas prices go down, Southwestern Energy's free cash flow rapidly dwindles. What's more, with natural gas prices rapidly moving lower, there are plenty of reasons to throw in the towel on this stock. But here I explain that despite the near-term looking uncertain, the medium-term looks very compelling. Ultimately, why paying 6x free cash flow for SWN is an attractive investment. Crunch Time For Natural Gas If you are reading this article, I presume you know that natural gas prices have imploded recently. Data by YCharts Prices are down about 50% in a month. The message from the spot market is clear. We won't need any more natural gas in the foreseeable future. We just got over this winter, when everyone was talking about there being a potential energy crisis. And now the dynamics rapidly went from a crisis-type shortage, and spikes in natural gas prices, to overabundance. Time to Call it a Day Here? The problem is made worse by two aspects. In the first case, the unseasonably warm winter impacted the amount of supply the US used. Secondly, the Freeport LNG facility, that's responsible for approximately 17% of LNG exports out of the US has seen its reopening delayed countless times since August. More specifically, Freeport LNG exports about 2.2 bcf. This led investors to believe that despite Freeport LNG asserting that in January it would reopen, this may not be the case, at least not immediately. And that even if it does resume soon, it will be in small batches. Altogether both characteristics have made natural gas supplies turn from scarce to oversupply. What's more, even after the Freeport LNG facility reopens and temperatures revert to seasonal averages, there will be a natural gas stockpile glut that will take a long time to go through. Altogether, it now appears $5 MMBtu is a mirage for 2023. Got It, So This Trade Is Now Done? I don't believe this trade is done. In the first instance, there's reason to believe that a partial restart of the Freeport LNG is imminent. In the second instance, the major tailwind for US LNG hasn't gone away because of a few weeks of low natural gas prices. Presently, the difference between natural gas prices in the US and in Europe is more than 6x. Essentially, there's no reason for prices in the US to be so much lower than this much-coveted energy commodity in Europe. Antero Resources presentation Thirdly, and perhaps the most important consideration, next year we'll see LNG exports go from 14.9 bcf/d to 17.7 bcf/d. That's approximately a 17% increase. Note, this is on top of the 17% that will come back online from Freeport LNG in 2023. Consequently, my argument is that this is not the time to sell SWN. SWN Stock Valuation -- 6x 2023 FCF SWN is 60% hedged in 2023. That means that only 40% of its production is exposed to natural gas prices. What in late 2022 seemed like a blemish in the bull case, has ironically turned out to be now a huge cash driver for SWN.

Seeking Alpha • Dec 13

Southwestern Energy: Many Bullish Drivers

Summary I believe that US-based natural gas is going to be in higher demand in 2023 than in 2022. Here, I lay out why. Southwestern Energy is well positioned for high natural gas prices, as its hedged book moves from 80% to 60% in 2023, leaving it better exposed to high natural gas prices. Southwestern Energy is priced at roughly 6x free cash flow. Investment Thesis Southwestern Energy (SWN) has several near-term and medium-term drivers. There's a happy mixture of drivers, but I put the bulk of my own investment case on the long-term driver for US-based natural gas. Essentially, this is the core of my argument. There's a positive risk reward being offered to investors right now. Meanwhile, the energy trade has run out of steam. However, I not only maintain my thesis, but I actually believe that the fundamental thesis has now significantly strengthened. What's Happening Right Now? Data by YCharts For all the talk about energy as the place to be in 2022, energy stocks are down 9% in the past month. Substantially underperforming both the S&P 500 (SPY) and the Nasdaq Composite (COMP.IND). But is this move justified? weatherstreet.com, fahrenheit I highlighted the above graphic mostly as a way to get your attention. It's going to get cold. This is a near-term catalyst that's going to get investors interested in SWN. But this is not what this investment case is about. My investment thesis is not even the fact that in the past several days, we've seen the spot price for natural gas jump 10% higher. Again, that's a positive catalyst, but that's not what my investment case is about. EIA website I must also note that natural gas inventory is average for this time of the year, even though the Freeport LNG facility, which exports 20% of US-based natural gas inventory is out of commission until the end of this month. Put another way, there should be an oversupply right now, because the US' ability to export natural gas is subdued. And yet, the opposite appears to be taking place, and supply is simply average. FT.com, German manufacturers' view on natural gas Furthermore, also note that the FT.com reported a few days ago, how some German manufacturers are considering moving to the US since energy prices are significantly lower, allowing these businesses to increase their profitability with lower feedstock prices. In sum, this is my argument. There's overall support for natural gas prices in the US. But at the same time, demand for US natural gas is going to be significantly higher in 2023. You have the European companies that are too small to uproot to the US thirsty for cheap energy. And at the same time, you have energy-intensive European companies cutting back on production. And on top of that, a lot of commodities, for example, fertilizer, food, chemicals, and metals, will be cost advantages operating in the US. So, this will once more stimulate further demand for cheap US-based natural gas in 2023, as the globe looks to replace European-based supplies that have been reduced because of high energy prices, with US-based energy-intensive products. Sounds Good, But The backdrop sounds compelling, I'm confident you'll agree. But why are energy stocks not responding positively to all these drivers? Why have energy stocks sold off? Or more specifically, why have natural gas stocks sold off lately? Data by YCharts That's a critical question that I don't know the answer to. To the best of my knowledge, US-based natural gas is less discretionary than oil. Oil is highly sensitive to the global macro environment. While the performance of US-based equities driven by US-based natural gas should not be performing in this manner. And yet.

Seeking Alpha • Nov 11

Southwestern Energy: Weather Aside, Demand Is Going Up

Summary Unseasonably warm weather is creating an external "shock" to the system. Southwestern Energy's long-term bull case remains intact, even though its share price is failing to reflect this. I believe that paying up for companies that make strong free cash flows and are cheaply priced make for good investments. But as always, there's nuance too. Investment Thesis Southwestern Energy (SWN) has seen its share go nowhere since the start of April. This makes no sense. Back in April, we had some pieces to this puzzle but we struggled to get the whole picture. Today, the picture is very nearly fully visible. This is the bull case for SWN. It's going to benefit from a substantial demand for US natural gas in the coming several years. There are a few more nuances than this, which we'll discuss. Yet ultimately, there's no need to over-intellectualize this investment opportunity. A cheaply valued stock, making a lot of free cash flow, makes for a rewarding investment. Now, let's get to it. What's Happening Right Now? Yesterday, the CPI figure come in lower than expected. And investors quickly saw an opportunity to buy into tech stocks. That's the dream, to buy at the bottom of a bear market. However, I ask you, what's changed? Nothing has changed! Fundamentally, the demand for US natural gas will continue to increase. But everything becomes further complicated with this unseasonably warm weather. Hence, many investors now appear to believe that we'll go from autumn straight to spring and miss 2022 winter altogether. And while that's certainly a possibility, I deem it highly improbable. Nevertheless, the thesis at stake here is not about the weather being hot or cold this winter. The thesis is about the long-term demand for US-based natural gas. There's a significant price discrepancy between US natural gas and that of Europe and Asia. Depending on the month, the discrepancy ranges from 7x to 9x. That's the underlying opportunity, and until that's resolved a few years from now, there's going to remain a secular growth story for US natural gas. What's more, European gas prices will be above-average for many years to come. This is a simple and unavoidable fact. So, not only are prices in the US lower than in Europe, but European prices are going to climb higher in 2022. Even though, the market, for now, appears not to have come to this conclusion. Southwestern Energy's Hedged Book The one consideration that weighs on Southwestern Energy's bull case is its hedged portfolio: SWN Q3 2022 What you see above is that going into 2023, SWN is 60% hedged. This is a step down from the 80% that Southwestern Energy is going to exit this year. But when asked extensively on the call about its hedging portfolio into 2024, SWN make their stance clear. They view hedging as a financial responsibility to protect against natural gas's downward pricing volatility. And as the graphic above infers is that 2024 will be hedged by approximately 20% to 50%. Simply put, this would take SWN from an 80% hedged book with hedges at very approximately $3 per mmbtu. Perhaps by 2024, SWN will only be 50% hedged at the max. That still leaves 50% of its production exposed to upside natural gas prices. And to be clear, when SWN hedges out its 2024 book, it's highly likely to be much higher than approximately $3 per mmbtu that we see for 2023 -- thus, the investment case will improve in the coming months. Next, we'll discuss another element that is weighing down SWN. Balance Sheet Still Leveraged SWN Q3 2022 SWN's balance sheet at the end of Q3 2022, still carries close to $5 billion of net debt. Until that figure gets down to $3 billion, SWN is not able to ramp up its capital return program. So, for now, SWN is in a position where it must divert free cash flows to pay down debt. And until its debt comes to $3.5 billion, at some point in 2023, SWN's shareholders will not be in a place to benefit from this investment in a serious manner. Consequently, investors are paying approximately 6x 2022 free cash flows, and having to wait around and be patient. Something investors always struggle with. Particularly when many of SWN's peers are already ramping up their share repurchase programs. The Bottom Line I believe that in the very short term, the market fails to recognize opportunities for what they are. If you want evidence of this, consider the following two examples.

Seeking Alpha • Oct 11

Southwestern Energy: Don't Underestimate The Coming Global Recession

Summary Southwestern Energy would progressively roll off its hedges through 2023, leveraging its optimistic natural gas market outlook. However, that outlook could be tempered if demand destruction worsens in the face of a worse-than-expected global economic recession. We discuss why investors need to be prepared for further value compression, which could impact Southwestern Energy's profitability estimates moving ahead. We also explain the critical levels to watch for investors considering adding more exposure. But, for now, watching the action from the sidelines is appropriate. Thesis Investors in leading US independent natural gas exploration and production (E&P) player Southwestern Energy Company (SWN) have benefited tremendously in 2022, as it posted a YTD total return of 45.5%. Therefore, despite its relatively aggressive hedging program, which has significantly reduced its average post-hedging realized prices, the market has still rewarded its investors. The company is confident in the near- to the medium-term outlook of the US natural gas market, given the need for energy security and its role in the world's energy transition to cleaner fuels. Also, it would progressively roll off its hedges from 2023, allowing Southwestern Energy to realize more of the strength in the underlying commodity prices moving ahead. However, we assess the post-Q2 price action for Henry Hub natural gas futures (NG1:COM) has weakened considerably after posting its highs in August/September. Therefore, it could weigh on the company's H2'22 results but could be mitigated by the performance of its hedges. Hence, the company's more conservative approach to its hedging program could continue to help reduce the impact on its underlying profitability, providing more visibility for its debt reduction program and subsequent use of its $1B share repurchase authorization (representing 13.3% of its current market cap). We deduce that SWN has likely formed a short-term bottom at its September lows. However, we are concerned with the price action in the underlying futures market. While we believe the natural gas market has been pricing in a coming economic recession, we urge investors to remain patient as further near-term demand destruction could impact the earnings estimates of SWN as its hedges roll off. Hence, it could lead to value compression as the market adjusts its expectations for Southwestern Energy's forward profitability profile. Accordingly, we rate SWN as a Hold for now. NYMEX Market Volatility Would Likely Continue The energy crisis in Europe has continued to batter the EU, even as they consider strategies to limit the escalating impact of rising energy costs while dealing with record inflation levels. As a result, slower growth and rising costs have posed significant challenges politically among the EU partners. In addition, the challenges of imposing price caps have also been discussed widely, which could exacerbate the European crisis unless demand is rationed further to curb consumption. However, Dutch TTF futures have already responded to the macroeconomic slowdown, portending a near-term recession is increasingly likely. The IMF and World Bank have warned that we are increasingly close to a global recession, hobbled by the energy crisis and rising inflation. Bloomberg reported: The heads of the International Monetary Fund and World Bank warned of a rising risk of a global recession as advanced economies slow and faster inflation forces the Federal Reserve to keep raising interest rates, adding to the debt pressures on developing nations. - Bloomberg Notably, Dutch TTF futures have collapsed about 55% from their August highs, while Henry Hub futures have fallen nearly 35% from their August highs. Hence, we believe the market has been anticipating further demand destruction, given the rapid surge of natural gas futures in 2022. The critical question for investors is how it would affect the underlying performance of SWN moving ahead, with potentially weaker near-term demand in mind. SWN Could See Markedly Slower Growth SWN Revenue change % and Adjusted EBITDA change % consensus estimates (S&P Cap IQ) The consensus estimates (bullish) have modeled for Southwestern Energy's revenue growth to fall markedly to 56.9% in FQ3, with its adjusted EBITDA growth moderating to 87.6%. Therefore, SWN is still expected to post remarkable metrics, given much easier comps against FY21's performance with the surge in natural gas prices in 2022. However, SWN could see its growth moderate further through FY23, in line with our thesis of further demand destruction. Therefore, the critical question is whether the market has appropriately de-risked Southwestern Energy's execution risks in its valuation. SWN Adjusted EBITDA margins % consensus estimates (S&P Cap IQ) However, Southwestern Energy's near-term profitability impact should be mitigated given its aggressive hedging program. In Q2, the company posted a post-hedging average realized natural gas price of $2.68 (Vs. discounted unhedged price of $6.48).

Seeking Alpha • Sep 16

Southwestern Energy: Revving The Engines For 2023

Summary Southwestern Energy has suffered from aggressive hedging in 2022. This, combined with weakness in commodities, has taken the stock down 30% from recent highs. We think that there is value in the company, and SWN shares could return to higher levels. We suggest a little patience as the gas markets consolidate before going higher later this year. Investors with a modest risk tolerance may find SWN attractive at slight lower prices than are available today. Introduction Southwestern Energy Company (SWN), a Marcellus and Haynesville natural gas and NGL producer, is a company we have meant to cover previously, but just never got around to doing. As you can see from the price chart, we are a little late to the game. Oops! SWN Price chart (Seeking Alpha) The company rallied hard from lows in March to attain nearly $10 per share in early June. Almost 2.5X! Darn! It is my practice and custom to look ahead rather than backward, and in this article we will see if the company now is at an attractive price point, based on future prospects. The $7's are not a bad place to begin a new position if the company's story remains intact! The current softening price environment might present patient investors a still better entry point in the $6's. The nineteen or so analysts who cover the stock are all over the map, with an overweight rating, and price targets that range from $7 to $20. The average is $10.93, implying a respectable amount of growth from current prices. Or nearly a triple if that $20 outlier estimate bears fruit. Let's look a little deeper. The thesis for SWN The company is mid-size producer - nearly 5 BCFe/D of mostly gas and gas liquids from the two key basins known for favoring those commodities, the Marcellus, and the Haynesville. Currently they are focusing on areas known for dry gas and NGLs. You all know me as a "rock-guy." That's where I look immediately when a company gives me information such as you see in the acreage footprint slide below. SWN Asset Base (SWN Filings) A look at the EIA thickness map of the Marcellus shows that a nice chunk of the SWN acreage is in the premium part of the play, with thicknesses in the 300-500' range. That said, the bulk of their 768K acre position is in the western portion of the play where thicknesses run more like 50'. Still pretty good, as the contours thin out rapidly the farther west you go. SWN notes they have 4,900 economic locations at $2.75 gas. EIA Marcellus Counter map ((EIA)) Looking at the Haynesville, the best stuff seems to be on the Louisiana side, and that's just where SWN's footprint seems to be. They show 1,700 economic locations at $2.75 gas, which should mean they have many more at $9.00 gas. EIA Contour map-Haynesville ((EIA)) So SWN passes the rock test. Looking below, you can clearly what they view as their target market. They have established relationship in the LNG market that drives 1.5 BCF/Day to export. This base is due to nearly double in the coming years as more liquefaction comes online. SWN Access to markets (SWN filings) Bill Way, CEO of SWN, commented in regard to their view of the export market opportunity for gas: As a key differentiator for SWN is our proximity and firm transportation to the long-term demand growth along the Gulf Coast. As the largest producer in Haynesville with complementary firm transportation from Appalachia, 65% of our total production reaches this market. Approximately 12 Bcf per day of liquefaction is currently in service, which could more than double with FERC approved projects, including approximately 7 Bcf per day that is already under construction. Today, Southwestern Energy is one of the largest suppliers of natural gas to existing LNG exporters at 1.5 billion cubic feet per day. As natural gas transitions from a regional to a global price-linked commodity, we believe we will differentially benefit as the Haynesville and Gulf Coast garner premium pricing relative to other basins. Source In summary, SWN has years' worth of quality assets and solid export contracts. So why are they selling in the $7's? Hedging is one reason Hedging is problematic for SWN. They produce about 1.5 BCF/d of gas and have about 62% of that hedged at what I would call extremely low pricing. The upside here is that there is a plan to dial this back, starting next year, adding additional volumes to be exposed to market pricing. SWN Hedging (SWN filings) Bill Way's comment in regard to an analyst question on hedging: With our improved financial position, however, and the supportive fundamental outlook for natural gas prices, expect our future hedging levels to migrate lower within our approved ranges and with preference for using collars. As our hedges settle, our reinvestment rate will more clearly reflect the inherent cash generation capability of our asset base. The resulting prospective rate of change in our free cash flow profile differentiates SWN as an investment opportunity. Source Yep, can't argue with that. Pay less for hedging as shown below, and do other things with that money. In Q-2 alone, settlement costs ran to $722 mm in the quarter and $2.5 bn for the first half. Somebody needs to talk to Mr. Way about that. I get covering your bases if pricing goes pear-shaped, but c'mon fellas...$3 per mmbtu????? A lot could be done with that money, like pay down some their $5.0 bn in long term debt! SWN hedging costs (SWN Filings) Q-2, 2022 This quarter beat expectations, on revenues of $4,140 bn on which SWN generated approximately $1.5 bn of EBITDA and $170 million of free cash flow. A working capital draw caused by the sharp rise in natural gas prices between April and June, and settlement of hedges, cut into their OCF for the quarter. Looking forward, due to strong operational performance, and given the current commodity price outlook, free cash flow should approximate $1 billion in 2022 and, as their hedges settle, $2 billion per year starting in 2023. The company plans to prioritize allocation of this free cash flow to debt retirement in the near term before shifting more heavily towards share repurchases. At the current strip, they are targeting $3.5 billion top end of the target debt range by the end of next year, while also completing the share repurchase authorization. This capital allocation strategy is consistent with their strategic objective of returning to investment grade. As noted previously SWN holds $5.0 bn of long term debt. The company rescheduled its RBL of $3.5 bn to 2027 last April. Other debt maturities are staggered 2024,25, 27, 28, 29 in varying amounts ($400-600 mm), with $1.2 bn due in 2030, and $1,150 bn in 2032. In my view, SWN doesn't present a risk of default with commodity prices in the present range.

Seeking Alpha • Aug 11

Southwestern Energy Company Poised To Outperform On Expected Higher Oil And Gas Prices

In The Energy Sector, Southwestern Energy Company Appears to Have Significant Growth Potential. The US Oil and Gas Company Has Highly Profitable Assets, while Oil and Natural Gas Prices will Remain Supportive. The Stock Price, which Seems Affordable Compared to Recent Performance, Could Outperform in the Coming Weeks. In the energy sector, Southwestern Energy Company (SWN) appears to have significant growth potential thanks to a portfolio of highly profitable assets that can provide the cash to execute projects for many years ahead of fossil fuels production, while reducing debt reliance. Essentially, the investor should monitor these management aspects, in addition to the company's program of share buybacks, as these are the future developments that will affect the share price. Of course, a favorable environment for commodity prices will greatly assist the company in pursuing its growth goals and contribute to a greater chance of a stock price rising to new heights. Favorable environment for commodity prices International geopolitical turmoil, with the war in Ukraine at its heart, continues to put tremendous pressure on commodity prices, particularly oil and natural gas. The market is desperate for more oil as supply is insufficient, even after OPEC's decision last week to pump an additional 100,000 barrels starting in September. Natural gas prices also remain under strong upward pressure due to supply concerns after Russia cut gas shipments to European countries in response to US-led Western countries' sanctions over the war in Ukraine. Based on the factors just mentioned, analysts expect sharp increases in oil and natural gas prices from the current levels, as the below table illustrates. Price forecasts are from tradingeconomics.com. Contract Future Price at the time of this writing Expected price in a year Expected positive price change West Texas Intermediate ((WTI)) crude oil due September 2022 $90.60 per barrel (/bbl) ≈$103/bbl ≈13.6% Brent oil futures due October 2022 $96.45/bbl ≈$110/bbl ≈13.6% Natural gas futures due September 2022 (NYMEX) $7,828 per metric million British Thermal Unit (/MMBtu) ≈$10.24/MMBtu ≈30.8% With prices of these commodities rising rapidly, Southwestern Energy Company appears well positioned to benefit from the expected tailwinds of the next oil and natural gas bull market. What does Southwestern Energy Company do? Headquartered in Spring, Texas, Southwestern Energy Company is a leading US producer and marketer of natural gas, oil and liquefied natural gases ((NGLS)) through the development of large fossil fuel deposits in a highly productive area of shale gas basins in the United States. These unconventional natural gas and oil reservoirs are located on a net area of over 768,000 acres in the Appalachian Mountains of Pennsylvania, West Virginia, Ohio, and Louisiana. As of December 31, 2021, Southwestern Energy Company was operating 1,527 wells and had approximately 21.15 trillion cubic feet of natural gas equivalent stored in proven natural gas, oil and NGL reserves. It also deals with the marketing and transportation of these goods. High Return Operations: A look at relevant results for the second quarter and first half of 2022 For the second quarter of 2022, Southwestern Energy’s Adjusted net income grew 185.3% year over year to $368 million, from $129 million in the same quarter of 2021. In other words, the company saw adjusted earnings per share ((EPS)) up 73.7% year over year to $0.33 from $0.19 a year ago. Southwestern Energy outperformed analysts by $0.03 on average. Item Q2 2022 Q2 2021 YOY Adjusted net income $368 million $129 million ≈+185.3% Adjusted EPS $0.33 $0.19 ≈+73.7% Revenue $4.14 billion $1.05 billion ≈+294.3% Adjusted EBITDA $822 million $300 million ≈+174% Revenue came in at $4.14 billion, up more than 294% year over year, beating the average analyst forecast by $2.27 billion. Adjusted EBITDA shot up 174% to $822 million in the second quarter of 2022, from $300 million in the second quarter of 2021. As a result, Southwestern Energy Company, which benefited from higher oil and natural gas prices while running strong operations, also reported an adjusted EBITDA margin of 20%. As higher commodity prices positively impact Southwestern Energy's top and bottom lines over a longer period than just the most recent quarter, adjusted EBITDA for the first half of 2022 was $1.73 billion (up 57.7% sequentially), while total revenue was $7.08 billion (up 55.8% sequentially). Item H1 2022 H2 2021 Positive Change Adjusted EBITDA $1.73 billion Nearly $1.1 billion ≈57.7% Revenue $7.08 billion $4.55 billion ≈55.8% Adjusted EBITDA margin 24.44% 24.11% ≈33 bps up These two items led to an adjusted EBITDA margin of 24.44% in the first half of 2022, an improvement of 33 basis points (bps) from 24.11% in the second half of 2021. These numbers show that the company's asset portfolio has responded very well to the increase in weighted average gross price per thousand cubic feet equivalent (Mcfe) due to the increase in commodity prices. The NYMEX rose 153% year on year, while the WTI rose year on year by 64%. The company's net production in the quarter was 438 billion cubic feet equivalent (Bcfe), or 4.8 Bcfe per day, up 58.7% year over year. The Balance Sheet Net cash flow, which grew 2.8x year over year to $754 million in the second quarter of 2022 helped the company shrink another portion of its balance sheet. The cash flow growth was accompanied by a further reduction of the revolving credit facility and the allocation of $45 million to repurchase senior corporate bonds with maturities in 2027 and 2028. The performance has been recognized by rating agencies, with Moody's upgrading Southwestern Energy Company's rating to Ba1 as a long-term debt issuer in May 2022. Now the company is slightly below the investment-grade rating of Moody's and S&P. As of June 30, 2022, Southwestern Energy's balance sheet was burdened with total debt of nearly $5.1 billion, while the ratio of net debt to adjusted 12-month EBITDA, a measure of financial leverage, was 1.6 times, which is an improvement from 1.7x in the previous quarter. Item As of Q2 2022 As of Q1 2022 Cash on hand $50 million $21 million Total debt $5.067 billion $4.932 billion Adjusted ttm EBITDA $3.225 billion $2.940 billion Net debt to adjusted EBITDA ≈ 1.6 times ≈ 1.7 times While the company must maintain its share repurchase program (up to $1 billion through December 2023), further reduce debt and support investments, its current financial position should allow the company to easily meet its next production targets. The company calls for higher production in Q3 and the full year of 2022 Looking ahead to the third quarter of 2022, Southwestern Energy is targeting total production of between 429 Bcfe and 444 Bcfe, while looking ahead to the full year, the company expects total production to be between 1,715 Bcfe and 1,745 Bcfe.

Snowflake Score
Valuation	4/6
Future Growth	4/6
Past Performance	0/6
Financial Health	0/6
Dividends	0/6

Historical stock prices
Current Share Price	US$7.11
52 Week High	US$7.80
52 Week Low	US$5.85
Beta	1.12
1 Month Change	11.44%
3 Month Change	4.25%
1 Year Change	16.18%
3 Year Change	28.80%
5 Year Change	282.26%
Change since IPO	896.44%

	SWN	US Oil and Gas	US Market
7D	3.3%	-0.8%	1.6%
1Y	16.2%	17.0%	21.1%

SWN volatility
SWN Average Weekly Movement	3.7%
Oil and Gas Industry Average Movement	6.2%
Market Average Movement	7.2%
10% most volatile stocks in US Market	16.7%
10% least volatile stocks in US Market	3.1%

SWN fundamental statistics
Market cap	US$7.89b
Earnings (TTM)	-US$2.76b
Revenue (TTM)	US$5.64b

SWN income statement (TTM)
Revenue	US$5.64b
Cost of Revenue	US$3.91b
Gross Profit	US$1.73b
Other Expenses	US$4.49b
Earnings	-US$2.76b

Earnings per share (EPS)	-2.50
Gross Margin	30.70%
Net Profit Margin	-48.91%
Debt/Equity Ratio	110.8%

Data	Last Updated (UTC time)
Company Analysis	2024/09/30 12:36
End of Day Share Price	2024/09/30 00:00
Earnings	2024/06/30
Annual Earnings	2023/12/31

Package	Data	Timeframe	Example US Source ^*
Company Financials	10 years	Income statement Cash flow statement Balance sheet	SEC Form 10-K SEC Form 10-Q
Analyst Consensus Estimates	+3 years	Forecast financials Analyst price targets	Analyst Research Reports Blue Matrix
Market Prices	30 years	Stock prices Dividends, Splits and Actions	ICE Market Data SEC Form S-1
Ownership	10 years	Top shareholders Insider trading	SEC Form 4 SEC Form 13D
Management	10 years	Leadership team Board of directors	SEC Form 10-K SEC Form DEF 14A
Key Developments	10 years	Company announcements	SEC Form 8-K

Analyst	Institution
Daniel Katzenberg	Baird
Thomas Driscoll	Barclays
Robert Brackett	Bernstein

This company has been acquired

Southwestern Energy (SWN) Stock Overview

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Recent News & Updates

Chesapeake Energy Corporation (NasdaqGS:CHK) completed the acquisition of Southwestern Energy Company (NYSE:SWN).

Consensus EPS estimates fall by 10%

Consensus EPS estimates fall by 13%

Consensus EPS estimates fall by 28%

Southwestern Energy: Earnings Has Lower Production, But Pending Merger Offers Upside

Second quarter 2024 earnings: EPS and revenues miss analyst expectations

Recent updates

Chesapeake Energy Corporation (NasdaqGS:CHK) completed the acquisition of Southwestern Energy Company (NYSE:SWN).

Consensus EPS estimates fall by 10%

Consensus EPS estimates fall by 13%

Consensus EPS estimates fall by 28%

Southwestern Energy: Earnings Has Lower Production, But Pending Merger Offers Upside

Second quarter 2024 earnings: EPS and revenues miss analyst expectations

Southwestern Energy Company to Report Q2, 2024 Results on Aug 01, 2024

Southwestern Energy Remains On Track For The Merger With Chesapeake

First quarter 2024 earnings: EPS and revenues miss analyst expectations

Consensus EPS estimates fall by 11%

Southwestern Energy Company to Report Q1, 2024 Results on May 02, 2024

New major risk - Revenue and earnings growth

Consensus revenue estimates increase by 31%, EPS downgraded

Consensus EPS estimates fall by 15%

President exercised options and sold US$1.2m worth of stock

Full year 2023 earnings: EPS and revenues miss analyst expectations

Southwestern Energy Company to Report Q4, 2023 Results on Feb 22, 2024

Chesapeake Energy Corporation (NasdaqGS:CHK) entered into an agreement to acquire Southwestern Energy Company (NYSE:SWN) for $7.4 billion.

Southwestern Energy: Is A Merger Worth It?

Southwestern Energy Is The LNG Export Play For Late 2024

Southwestern Energy May Reduce Development Activity In 2024

Southwestern Energy: Deep Value Natural Gas With An M&A Kicker

Third quarter 2023 earnings: Revenues exceed analysts expectations while EPS lags behind

Southwestern Energy Company Provides Production Guidance for the Fourth Quarter and Full Year 2023

Southwestern Energy Company to Report Q3, 2023 Results on Nov 02, 2023

Southwestern Energy: Natural Gas Is Not Oil, Yet

Southwestern Energy: Developing Markets May Offset Mid-Atlantic Weakness

Insufficient new directors

Southwestern Energy: Free Cash Flow Generation Set To Improve

New major risk - Revenue and earnings growth

Consensus EPS estimates increase by 11%, revenue downgraded

Second quarter 2023 earnings: EPS exceeds analyst expectations while revenues lag behind

Southwestern Energy Company Provides Production Guidance for the Third Quarter and Full Year 2023

Southwestern Energy Preview: Embracing The Energy Transition With Natural Gas

Consensus EPS estimates increase by 10%

Consensus EPS estimates fall by 10%

Southwestern Energy Company to Report Q2, 2023 Results on Aug 03, 2023

Southwestern Energy Company(NYSE:SWN) dropped from Russell 1000 Growth Index

Southwestern Energy Company Expands the Board to Ten Directors and Elects Shameek Konar as an Independent Director of the Company

Southwestern Energy's Leadership Continues To Maximize Shareholder Value Through This Soft Market

Consensus EPS estimates increase by 14%

SenecSeneca Resources Company, LLC entered into an agreement to acquire 30,000 net acres upstream assets in northwest Tioga County, Pennsylvania from Southwestern Energy Company (NYSE:SWN) for approximately $130 million.

Consensus revenue estimates decrease by 14%, EPS upgraded

First quarter 2023 earnings: EPS exceeds analyst expectations while revenues lag behind

Consensus EPS estimates fall by 12%

Consensus EPS estimates fall by 13%

Consensus EPS estimates fall by 11%

Consensus EPS estimates fall by 12%

Consensus revenue estimates fall by 26%

President exercised options and sold US$664k worth of stock

Full year 2022 earnings: EPS and revenues exceed analyst expectations

Southwestern Energy Company to Report Q4, 2022 Results on Feb 23, 2023

Southwestern Energy: Crunch Time, What's Next

Price target decreased by 8.5% to US$9.43

Now 21% undervalued after recent price drop

Now 22% undervalued after recent price drop

Southwestern Energy: Many Bullish Drivers

Now 21% undervalued after recent price drop

Insufficient new directors

Southwestern Energy: Weather Aside, Demand Is Going Up

Now 22% undervalued after recent price drop