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Southwestern Provides 2019 Production, Capital and Cost Data

Zacks Equity Research
Transdigm Group's (TDG) top line in second-quarter fiscal 2019 is likely to gain from solid commercial after-market sales and the Esterline acquisition.

Southwestern Energy Company SWN released projections for 2019 production, capital and operational costs. The estimates are based on NYMEX gas price of $2.85 per MMBtu and WTI oil price of $50 per barrel in 2019.

In 2018, Southwestern invested about $1.25 billion. Internal cash flow was used to finance the spending and was within the initial capital guidance. Production in Appalachia was 702 billion cubic feet equivalent (Bcfe), of which 20% was liquids. During 2018, general & administrative (G&A) and interest cost saving initiatives generated savings of $155 million.

For 2019, capital spending is estimated in the range of $1,080-$1,180 million. The projection is lower by $200 million compared with the estimated 2019 plan at the time of the Fayetteville sale announcement and $120 million less than 2018 level. A significant chunk of the investments will be apportioned for Southwest Appalachia. Production in the region is estimated to grow 20% to 75,600 barrels per day. Northeast Appalachia is expected to continue generating free cash flow, while maintaining flat production.

Total production in 2019 is estimated in the range of 750-785 Bcfe. Of which, natural gas is expected to be 588-616 Bcfe. Natural gas liquids and condensates are projected in the range of 26,950-28,250 thousand barrels (MBbl).

During the first quarter of 2019, Southwestern expects total production of 176-184 Bcfe. Of which, natural gas is expected in the range of 140-146 Bcfe and natural gas liquids and condensates is projected to be 6,075-6,400 thousand barrels (MBbl).

Natural gas discount to NYMEX including transportation is estimated at $0.70 -$0.80 per Mcf. Oil discount to West Texas Intermediate (WTI) including transportation is projected in the range of $9.00 -$11.00 per Bbl.

In 2019, lease operating expenses and G&A expenses are expected in the range of $0.92-$0.97 per Mcfe and $0.18-$0.22 per Mcfe, respectively.

In 2019, the company expects to drill 95-115 wells, plans to complete 100-120 wells and proposes to place 90-110 wells to sales. Majority of the drilling and well completion activity will be initiated during the first half of 2019. The average well cost is anticipated to decline 25% and reach about $875 per lateral foot. The average lateral length is expected to increase 35% to more than10,000 feet.

Zacks Rank & Key Picks

Southwestern Energy carries a Zacks Rank #3 (Hold).

A few better-ranked players in the energy space are Evergy, Inc EVRG, Sunoco L.P SUN and Contura Energy CTRA, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Evergy, through its operating subsidiaries — Kansas City Power & Light Company (KCP&L) and Westar Energy, Inc — provides clean, safe and reliable energy in Kansas and Missouri. The company delivered average negative earnings surprise of 11.1% in the last four quarters.

Headquartered in Houston, TX, Sunoco operates as a wholesale fuel distributor. The company is expected to witness year-over-year earnings decline of 38.9% in 2018.

Bristol-based Contura Energy is a mining company. The company reported average negative surprise of 17.9% in the trailing four quarters.

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