How Has SWN Performed?


Dec. 27 2017, Updated 9:02 a.m. ET

What triggered operating revenue growth in 9M17?

Southwestern Energy Company’s (SWN) operating revenue fell 22% in 2016 before gaining 37% in the first nine months of 2017 (or 9M17). The decline in 2016 was attributable to slightly lower production and lower natural gas and oil prices offset by growth in NGL prices. Lower revenue from gas sales, marketing, and gas gathering led to the 2016 decline offset by growth in oil sales and NGL sales revenue. Revenue from the exploration and production and midstream services segments noted a decline in 2016. However, in 9M17, the growth in natural gas, oil, and NGL prices offset the slight drop in production. NGL sales recorded growth in 9M17 followed by a flat growth rate for marketing offset by a decline in the other segments. Both exploration and production and midstream services segments recorded growth in 9M17.

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What led to the positive diluted EPS in 9M17?

Gross margin went down 31% in 2016 before growing 47% in 9M17. Operating expenses decreased 57% and 68% in 2016 and 9M17, respectively. This was due to lower asset impairments in both the periods. As a result, the operating loss of the company decreased 66% and 124% in 2016 and 9M17, respectively. The company recorded a positive operating income in 9M17. Other expenses increased due to higher interest expenses and loss on early debt extinguishment. This led to a 110% and 400% decline in net income for 2016 and 9M17, respectively. Net income turned negative for 2016 and positive for 9M17. Diluted EPS decreased 105% in 2016 and 358% in 9M17. Therefore, diluted EPS ended in the red for 2016 before turning positive in 9M17. The company barely manages positive free cash flow.

The First Trust ISE-Revere Natural Gas Index Fund (FCG) has exposure to SWN. It has a PE of 24.6x and a dividend yield of 2.1%. The PowerShares Dynamic Energy Exploration & Production (PXE) has exposure to SWN. It has a PE of 127.8x and a dividend yield of 2%.

We will discuss SWN’s performance versus its peers and broad indexes like S&P 500 (SPX-INDEX) (SPY), Dow Jones Industrial Average (DJIA-INDEX) (DIA) and NASDAQ Composite (COMP-INDEX) (ONEQ) in the next part. The next part will also include the stock’s outlook.


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