SFY Earning
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patrick
SFY Earning
SFY reported and they are being taken to the "wood shed". Right now at $11.12, -$1.23
Re: SFY Earning
Production down from Q4 and I think the market was expecting them to announce the sale of the central Louisiana package. Comments in press release indicate they may not be able to sell it. I will update my forecast model and post it late today.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: SFY Earning
Swift Energy (SFY): An updated Net Income & Cash Flow Forecast model has been posted under the Watch List Tab.
SFY is on-track to generate more than $6.00 cash flow per share this year. Q1 CFPS was $1.67.
An E&P company trading at less than 2X CFPS is rare. They do have too much debt, but nowhere close to pushing them over the cliff. They were very bullish about recent Eagle Ford results on the conference call.
My take is that the long delay in getting a buyer for their Central Louisiana package or a JV partner for Faskin area (Eagle Ford) has frustrated a lot of shareholders. Hard to tell if this is a buying opportunity until we see results of the negotiations. They did say on the CC that they are in negotiations with interested parties on both deals and they are totally independent of each other.
SFY is on-track to generate more than $6.00 cash flow per share this year. Q1 CFPS was $1.67.
An E&P company trading at less than 2X CFPS is rare. They do have too much debt, but nowhere close to pushing them over the cliff. They were very bullish about recent Eagle Ford results on the conference call.
My take is that the long delay in getting a buyer for their Central Louisiana package or a JV partner for Faskin area (Eagle Ford) has frustrated a lot of shareholders. Hard to tell if this is a buying opportunity until we see results of the negotiations. They did say on the CC that they are in negotiations with interested parties on both deals and they are totally independent of each other.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: SFY Earning
The market has a hard time swallowing the conditional nature of things at SFY right now coming from a management team that inspires little confidence: if we sell all or some of the three Louisiana plays; if we sell or JV in the Eagle Ford, when will cash flow cover CAPEX, 3Q or 4Q, without a sale or JV, etc, etc.
Re: SFY Earning
I agree and I am not recommending SFY, despite the fact that the stock does look very cheap (2X CFPS).
A lot of very good companies are outspending their cash flows. As long as proven reserves are going up faster than debt it is OK.
The problem, which you point out, is that investors are tired of how long it is taking to sell the central Louisiana assets. With gas prices much higher today, you'd think they could attract a good offer. I think there is a better chance they announce the Eagle Ford JV soon.
A lot of very good companies are outspending their cash flows. As long as proven reserves are going up faster than debt it is OK.
The problem, which you point out, is that investors are tired of how long it is taking to sell the central Louisiana assets. With gas prices much higher today, you'd think they could attract a good offer. I think there is a better chance they announce the Eagle Ford JV soon.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
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bearcatbob
Yahoo (Re: SFY Earning)
U:SFY Swift Energy Company and PT Saka Energi Indonesia Announce Agreement to Jointly Develop Fasken Eagle Ford Acreage in South Texas
Re: SFY Earning
The cash at closing will certainly make Swift's bankers feel better. This a good first step to de-leverage the balance sheet. - Dan
Swift Energy Company (SFY) (“Swift Energy”) and PT Saka Energi Indonesia (“Saka”) announced that U.S. subsidiaries of Swift Energy and Saka have executed definitive agreements to fully develop approximately 8,300 acres of Fasken area Eagle Ford shale properties owned by Swift Energy in Webb County, Texas. Closing is anticipated on or about June 30, 2014, subject to normal closing conditions.
The executed agreements, effective January 1, 2014, provide for Saka to pay Swift Energy $175 million in total cash consideration to acquire a 36% full participating interest in Swift Energy’s Fasken properties. The consideration is comprised of $125 million in cash to be paid at closing and $50 million in cash to be paid by Saka to carry a portion of Swift Energy’s future field development costs.
Swift Energy will continue to serve as operator of the Fasken properties, conducting all drilling, completion and production operations, with development plans for the field to be mutually agreed upon by Swift Energy and Saka as provided for in the definitive agreements.
Swift Energy Company (SFY) (“Swift Energy”) and PT Saka Energi Indonesia (“Saka”) announced that U.S. subsidiaries of Swift Energy and Saka have executed definitive agreements to fully develop approximately 8,300 acres of Fasken area Eagle Ford shale properties owned by Swift Energy in Webb County, Texas. Closing is anticipated on or about June 30, 2014, subject to normal closing conditions.
The executed agreements, effective January 1, 2014, provide for Saka to pay Swift Energy $175 million in total cash consideration to acquire a 36% full participating interest in Swift Energy’s Fasken properties. The consideration is comprised of $125 million in cash to be paid at closing and $50 million in cash to be paid by Saka to carry a portion of Swift Energy’s future field development costs.
Swift Energy will continue to serve as operator of the Fasken properties, conducting all drilling, completion and production operations, with development plans for the field to be mutually agreed upon by Swift Energy and Saka as provided for in the definitive agreements.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
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bearcatbob
Re: SFY Earning
Dan,
Help me understand SFY in terms of cash flow and valuation. Some of this may be 101 to you but your thoughts would be appreciated.
Much of the controversy re SFY is when they will live within their cash flow.
It seems to me that a more important parameter is how that cash flow is used. If the cash flow is used to create assets - eg Faskin - the value is reflected by new cash flow or the price the asset can be sold for. I assume Faskin is a home run in terms of return on investment.
The other use of cash flow is to grow production. This new production should return cash at a rate/amount greater than what was put in.
If investors see cash flow being well utilized then share valuation will increase. If not - we get what I see in SFY share price performance. In effect - poorly invested cash flow is simply a route to liquidation.
So - when you say that SFY trades at a very very low multiple of cash flow - what does that mean? Does it mean the share price is undervalued or that the market does not trust management with cash? If that is the case IMO the brothers ought to be selling the company or bringing in an outsider CEO.
Bob
Help me understand SFY in terms of cash flow and valuation. Some of this may be 101 to you but your thoughts would be appreciated.
Much of the controversy re SFY is when they will live within their cash flow.
It seems to me that a more important parameter is how that cash flow is used. If the cash flow is used to create assets - eg Faskin - the value is reflected by new cash flow or the price the asset can be sold for. I assume Faskin is a home run in terms of return on investment.
The other use of cash flow is to grow production. This new production should return cash at a rate/amount greater than what was put in.
If investors see cash flow being well utilized then share valuation will increase. If not - we get what I see in SFY share price performance. In effect - poorly invested cash flow is simply a route to liquidation.
So - when you say that SFY trades at a very very low multiple of cash flow - what does that mean? Does it mean the share price is undervalued or that the market does not trust management with cash? If that is the case IMO the brothers ought to be selling the company or bringing in an outsider CEO.
Bob
Re: SFY Earning
First, a lot of E&P companies (including most of the Sweet 16) are currently outspending their cash flow from operations. So, that is not the real issue.
The issue is then: Are they increasing the value of their assets faster than their debt level? [This is why I am so focused on finding companies with very strong production and proven reserve growth locked.]
At 12-31-2013 Swift's proven reserves (38% liquids) had a present value discounted at 10% ("PV") of $2.4 billion. BTW that value was based on a much lower natural gas price then we have today, so you can argue that the value of their assets today is even higher. This valuation, by 3rd party reserve engineers, does not include P2 or P3 reserves.
At 3-31-2014 their Total Debt - Current Asset was $1.549 Billion. So, their net asset value (just using proven reserves) is around $900 million. Swift's market cap as of Friday's close is only $492 million. That makes no sense. Unless there is something seriously wrong with an E&P company, it should not be trading for half NAV.
The Saka joint venture brings in $125 million cash at closing and Saka will carry SFY on an additional $50 million of future field development within Fasken Eagle Ford AMI. This deal plus cash flow from operations should more than cover their capital program this year.
My current valuation of SFY is based on 4X cash flow from operations per share. A 4X multiple of CFPS is very low for a company with positive earnings.
I think the market still considers SFY a "gasser". That is not a popular label in today's market. The best thing they can do is close the deal with Saka and focus on ramping up production at Fasken. It would be nice if they'd find a buyer for the Central Louisiana package, but I sure don't think they will give it away nor should they.
NOTE: SFY is no longer in our Small-Cap Growth Portfolio. I am not recommending it at this time, but I do own a few shares and I will continue to follow it since I know a lot of you do own it.
The issue is then: Are they increasing the value of their assets faster than their debt level? [This is why I am so focused on finding companies with very strong production and proven reserve growth locked.]
At 12-31-2013 Swift's proven reserves (38% liquids) had a present value discounted at 10% ("PV") of $2.4 billion. BTW that value was based on a much lower natural gas price then we have today, so you can argue that the value of their assets today is even higher. This valuation, by 3rd party reserve engineers, does not include P2 or P3 reserves.
At 3-31-2014 their Total Debt - Current Asset was $1.549 Billion. So, their net asset value (just using proven reserves) is around $900 million. Swift's market cap as of Friday's close is only $492 million. That makes no sense. Unless there is something seriously wrong with an E&P company, it should not be trading for half NAV.
The Saka joint venture brings in $125 million cash at closing and Saka will carry SFY on an additional $50 million of future field development within Fasken Eagle Ford AMI. This deal plus cash flow from operations should more than cover their capital program this year.
My current valuation of SFY is based on 4X cash flow from operations per share. A 4X multiple of CFPS is very low for a company with positive earnings.
I think the market still considers SFY a "gasser". That is not a popular label in today's market. The best thing they can do is close the deal with Saka and focus on ramping up production at Fasken. It would be nice if they'd find a buyer for the Central Louisiana package, but I sure don't think they will give it away nor should they.
NOTE: SFY is no longer in our Small-Cap Growth Portfolio. I am not recommending it at this time, but I do own a few shares and I will continue to follow it since I know a lot of you do own it.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group