Southwestern Energy (SWN) Update - Jan 25

[dan_s]

Rehan Rashid at B.Riley FBR filed a new report on SWN with Reuters on 1/18/2019. His valuation is $7.30/share.

SWN closed on January 25 at $4.53.

SWN is "a company in transition". On December 4, 2018 they closed the sale of their Fayetteville Shale assets in Northern Arkansas for net proceeds of $1.65 Billion. That cash SIGNIFICANTLY improves the balance sheet and it will fund a stock repurchase plan. We'll get a lot more information when the company announces Q4 results and their 2019 CapEx program in late February.

SWN is a "Gasser" and the Wall Street Gang still believes that natural gas prices will remain depressed forever.
My forecast/valuation model assumes that SWN's realized gas price averages $2.40/mcf in 2019 and $2.50/mcf in 2020.
Several "Polar Vortex" cold waves could make a big difference in this year's gas price because a gas price of $3.00 will "do wonders" for this stock and all of our other "gassers".
Differentials in the Marcellus/Utica are coming down as new pipelines open access to better gas markets.
SWN also produces a lot of NGLs and the U.S. NGL market has improved a lot in the last year.

This one is more of a "value" play than a "growth" stock at this point. Why?...because it is now trading at less than 2.5X operating cash flow per share AND cash flow from operations should more than cover their growth program. Once things settle down after the Fayetteville sale closes, they should resume 12% to 15% production growth.