Southwestern Energy Q4 Earnings In Line; Guidance Update - Analyst Blog
Independent natural gas operator, Southwestern Energy Company (SWN) reported fourth-quarter 2014 adjusted earnings of 52 cents per share, in line with the Zacks Consensus Estimate. The bottom line decreased from the prior-year quarter’s earnings of 54 cents.
Quarterly operating revenues of $962 million missed the Zacks Consensus Estimate of $976 million but increased considerably from $907 million in the fourth quarter of 2013.
For 2014, the company reported adjusted earnings per share of $2.27, in line with the Zacks Consensus Estimate but up from $2.00 in 2013. Revenues of $4,038.0 million missed the Zacks Consensus Estimate of $4,059.0 million and increased from the year-ago level of $3,371.0 million.
Production and Realized Prices
During full-year 2014, the company’s oil and gas production grew 17% year over year to 768 billion cubic feet equivalent (Bcfe) driven by increased Northeast Appalachia division.
The company’s average realized gas price for the quarter, including hedges, fell to $3.52 per thousand cubic feet (Mcf) from $3.68 per Mcf in the year-ago period. Oil was sold at $60.51 per barrel, down from the year-earlier level of $98.41 per barrel. Natural gas liquids were sold at $12.38 per barrel, down from $41.54 in the year-ago period.
Segmental Highlights
Operating income from the company’s Exploration and Production (E&P) segment was $196 million for the fourth quarter of 2014, compared to $227 million for the same period in 2013. The decrease was primarily due to lower realized natural gas prices and increased operating costs and expenses from higher activity levels. This was partially offset by the revenue impacts of higher production volumes.
On a per-Mcfe basis, lease operating expenses were 90 cents, higher than the prior-year quarter level of 89 cents. However, general and administrative expenses per unit of production decreased to 24 cents from 26 cents in the prior-year quarter.
Operating income for the company’s Midstream Services segment was $89 million for the fourth quarter compared to $90 million for the corresponding quarter in 2013. At Dec 31, 2014, the company’s midstream segment was gathering approximately 2.4 Bcf per day through 2,017 miles of gathering lines in the Fayetteville Shale and approximately 443 MMcf per day in Northeast Appalachia.
Capex and Debt
The company’s total capital expenditure during 2014 was approximately $2,043 million. As of Dec 31, 2014, long-term debt stood at $2,466.0 million, representing a debt-to-capitalization ratio of 60.0%.
Guidance
The company also updated its production guidance for 2015 due to the reduction in its previous planned capital investments. The revised total gas and oil production guidance of 940–955 Bcfe is an increase of approximately 23% over the company’s 2014 gas and oil production.
Of the total expected production for 2015, the company expects approximately 448–453 Bcf to come from Fayetteville Shale, approximately 356–361 Bcf contribution from Northeast Appalachia and 136–141 Bcfe from Southwest Appalachia.
Zacks Rank
Southwestern currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the same sector include Valero Energy Partners L.P. (VLP), Golar Energy Partners LP (GMLP) and Hallador Energy Co. (HNRG). All these sport a Zacks Rank #1 (Strong Buy).
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