Post Earnings Coverage as Southwestern Narrows its Loss by More Than a $1 Billion

LONDON, UK / ACCESSWIRE / October 27, 2016 / Active Wall St. announces its post-earnings coverage on Southwestern Energy Co. (NYSE: SWN). The company released its financial results for the third quarter fiscal 2016 on October 20, 2016. The independent oil and Gas Company reduced its net loss significantly, but still came in below market expectations. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

For the three months ended on September 30th, 2016, Southwestern Energy reported a net loss attributable to common stock of $735 million, or $1.52 per diluted share, and adjusted net income attributable to common stock of $12 million, or $0.03 per diluted share. This compares to a net loss attributable to common stock of $1.8 billion, or $4.62 per diluted share, and an adjusted net income attributable to common stock of $3 million, or $0.01 per diluted share, in Q3 2015. The results missed analysts’ expectations of earnings of $0.5 per share.

For Q3 2016, net cash provided by operating activities was $172 million compared to $287 million in Q3 2015. Net cash flow was $173 million for the reported quarter compared to $330 million for the prior year’s period. The spring, Texas-based company posted revenue of $651 million in the period, surpassing Street’s forecasts of $631.8 million.

Segment Review

For its E&P segment, Exelon reported operating loss of $777 million for Q3 2016 compared to an operating loss of $2.9 billion during the year ago period. Net production totaled 211 Billions of Cubic Feet Equivalent (Bcfe) in the reported quarter, down from 249 Bcfe in Q3 2015 as a result of limited drilling and completion activity. The quarter included 90 Bcf from the Fayetteville Shale, 84 Bcf from Northeast Appalachia, and 37 Bcfe from Southwest Appalachia. This compares to 118 Bcf from the Fayetteville Shale, 93 Bcf from Northeast Appalachia, and 37 Bcfe from Southwest Appalachia reported in the third quarter of 2015.

Southwestern Energy’s average realized gas price including the effect of derivatives in Q3 2016 was $1.73 per Mcf, down from $2.21 per Mcf in Q3 2015. The Company’s average price received for its gas production, during the reported quarter, was approximately $1.03 per Mcf, lower than average NYMEX settlement prices, compared to approximately $1.00 per Mcf, lower than average NYMEX settlement prices during Q3 2015.

Lease operating expenses per unit of production for the Company’s E&P segment were down to $0.86 per Mcfe in Q3 2016 compared to $0.92 per Mcfe in Q3 2015. The Company’s full cost pool amortization rate declined significantly to $0.35 per Mcfe in the reported quarter compared to $0.98 per Mcfe in the year earlier quarter.

During Q3 2016, Southwestern Energy’s Midstream division reported operating income of $52 million compared to $68 million for the same period in 2015. The decrease in operating income was largely due to a decrease in volumes gathered, resulting from lower production volumes in the Fayetteville Shale.

Operations Review

In Northeast Appalachia, the Company reported net gas production of 84 Bcf in Q3 2016, compared to 93 Bcf in Q3 2015. During the reported quarter, the company invested $52 million, drilling 18 wells, completing 9 wells, and placing 3 wells on production. Gross operated production in Northeast Appalachia was approximately 1,046 million cubic feet equivalent (MMcf) per day at September 30, 2016. In Southwest Appalachia, the Company invested $41 million during Q3 2016, drilling 4 wells and completing 8 wells, the first of which is expected to be placed to sales in the fourth quarter of 2016. Net production was flat at 37 Bcfe in the reported quarter as compared to Q3 2015. The gross operated production rate in Southwest Appalachia was approximately 621 MMcfe per day at September 30, 2016.

The Company achieved a monumental milestone in the Fayetteville Shale during Q3 2016, surpassing 5 Trillion cubic feet of cumulative production since its inception. After over a decade of development, this asset continues to account for approximately 2% of the nation’s natural gas supply and remains a significant value creator for the Company.

Capital Structure and Investments

As of September 30, 2016, Southwestern Energy had total debt of approximately $4.7 billion and $3.2 billion in net debt. As of September 30, 2016, there were no borrowings under the Company’s revolving credit facilities. As a result of the equity offering closed in July 2016, the Company repaid $375 million of its $750 million term loan originally due in November 2018, which extended the maturity on this term loan to December 2020, subject to certain conditions. The Company paid down an additional $48 million following the closing of the previously announced sale of approximately 55,000 net acres in West Virginia. At September 30, 2016, the Company has $317 million in remaining 2017 and 2018 debt maturities, well below the $1.0 billion at December 31, 2015, and also well below the $1.5 billion cash balance.

Stock Performance

At the close of trading session on October 26, 2016, Southwestern Energy’s stock price declined 2.79% to end the day at $10.46. A total volume of 31.86 million shares were exchanged during the session, which was above the 3-month average volume of 12.21 million shares. The company’s share price has surged 47.12% on an YTD basis. The stock currently has a market cap of $5.63 billion.

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