Could Southwestern Energy Report Positive Free Cash Flow in 3Q17?
Southwestern Energy’s cash flow estimates
Wall Street analysts expect Southwestern Energy (SWN) to report ~72% higher cash flow of ~$239 million in 3Q17, up from ~$172 million in 3Q16. On a sequential basis, SWN’s estimated 3Q17 cash flow is ~10% lower when compared with ~$266 million in 1Q17.
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Southwestern Energy’s cash flow trend
Southwestern Energy’s cash flows started to decline in 2Q14 when natural gas (UNG) prices peaked. In fiscal 2015 and fiscal 2016, Southwestern Energy reported lower cash flows when compared with the preceding years. In 3Q16, Southwestern Energy reported its lowest cash flow since 2005 of ~$73 million.
Wall Street analysts expect SWN’s 3Q17 capital expenditures to be ~$297 million. As a result, SWN’s 3Q17 free cash flow should be negative.
Southwestern Energy’s 2017 capital program guidance
According to Southwestern Energy’s 2016 earnings conference call, it has increased its fiscal 2017 capital program to a range of $1.2 million–$1.4 million, a midpoint increase of ~$652 million from its 2016 capital spending of ~$648 million.
In 1H17, SWN spent ~$615 million in capital expenditures (or capex). Out of this, ~$601 million was spent on the E&P (exploration and production) business. The remaining spending was for its midstream business and corporate purposes.
SWN’s peer Encana (ECA) expects its 2017 capex to be $1.6 billion–$1.8 billion, which represents a midpoint increase of ~55% when compared with capex of ~$1.1 billion in 2016.