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Southwestern Energy: Analysts’ Recommendations and Key Drivers

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May. 23 2019, Published 8:12 a.m. ET

Analysts’ recommendations

Among the 28 analysts tracking Southwestern Energy (SWN), according to data compiled by Reuters, 7% recommended a “buy,” 68% recommended a “hold,” and 25% recommended a “sell.” On May 16, UBS increased its target price on Southwestern Energy by $0.2 to $3.8. On May 22, Southwestern Energy’s stock prices closed at $3.77.

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Stock prices fell

Since Southwestern Energy’s first-quarter earnings results, the stock prices have fallen 7.1%. Southwestern Energy’s first-quarter adjusted net income outperformed analysts’ consensus estimate by 28.6%.

US crude oil prices fell 5.8% on April 25–May 22. However, natural gas futures rose 1.2%. Southwestern Energy operated with a production mix of 78.6% in natural gas last quarter.

For 2019, Southwestern Energy hasn’t hedged ~61% and 73% of its oil and NGL (natural gas liquids) estimated production. Currently, US crude oil prices are near their 2019 high, which will likely impact Southwestern Energy’s stock price movement.

However, the same figure for Southwestern Energy’s 2019 estimated natural gas production is 26%. Around 37% of the company’s estimated natural gas production in 2019 is hedged with three-way collars of $2.48, $2.88, and $3.21 per thousand cubic feet benchmarked to Henry Hub natural gas prices.

On May 22, Henry Hub natural gas active futures settled at $2.48 per thousand cubic feet. If natural gas prices fall below this level, it would have a negative impact on Southwestern Energy’s realized natural gas prices including hedges for the second quarter.

Mean target price

Analysts’ mean target price of $4.96 for Southwestern Energy implies an ~31.6% upside based on its last closing price. In comparison, Chesapeake Energy (CHK) and Gulfport Energy’s (GPOR) target prices suggest 42.5% and 67.9% increases, respectively.

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