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Southwestern (SWN) Q2 Earnings Miss on Lower Gas Production

Zacks

Southwestern Energy Company SWN reported second-quarter 2019 adjusted earnings of 8 cents per share, missing the Zacks Consensus Estimate by a penny and declining from the year-ago profit of 18 cent.

Quarterly operating revenues of $667 million failed to beat the Zacks Consensus Estimate of $734 million and also declined from $816 million in the second quarter of 2018.

The weak quarterly results were because of lower gas equivalent production and a decline in the price of the commodity.

Production and Realized Prices

During the second quarter, the company’s total production fell 20.5% year over year to 186 billion cubic feet equivalent (Bcfe).

The company’s average realized gas price for the quarter, including hedges, fell to $1.94 per thousand cubic feet (Mcf) from $2.11 per Mcf a year ago. Oil was sold at $51.60 per barrel compared with the year-earlier level of $59.22. Natural gas liquids were sold at $12.62 per barrel, lower than $15.05 in the year-ago period.

Segmental Highlights

In the quarter under review, operating income from the Exploration and Production (E&P) segment was $30 million, down from $97 million in the last-year quarter.

On a per-Mcfe basis, lease operating expenses were 90 cents compared with the prior-year quarter level of 91 cents. General and administrative expenses per unit of production were 19 cents, flat year over year.

Operating loss at the company’s Midstream Services segment totaled $8 million in the second quarter against a profit of $27 million in the year-ago quarter.

Capex and Debt

Southwestern’s total capital expenditure during the second quarter was approximately $368 million. As of Jun 30, 2019, the company’s long-term debt was $2.3 billion, which represents a debt-to-capitalization ratio of 42.9%.

Outlook

The upstream energy player announced that it has boosted its capital efficiencies owing to which it will not be spending more than $1.15 billion of capital in 2019. The limit that has been set by the company is below the high end of its prior projection.

Zacks Rank & Stocks to Consider

Southwestern currently carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space include World Fuel Services Corporation INT, Delek Logistics Partners, L.P. DKL and TC PipeLines, LP TCP. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

World Fuel beat the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 16.4%.

Delek Logistics is likely to see earnings growth of 4.9% through 2019.

TC PipeLines has an average positive earnings surprise of 12.6% for the past four quarters.

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