Southwestern Q4 results -- earnings beat, punchy capex outlook

Feb. 24, 2022 5:16 PM ETSWNBy: SA News Team4 Comments

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Southwestern Energy (NYSE:SWN) announced Q4 results after the close, posting an earnings beat, doubling the capex budget and sharing plans to repair the balance sheet in 2022:

  • Earnings - the Company generated 31c/s in adjusted earnings during Q4, versus Street consensus of 28c; free cash flow came in at $341m or ~6.8% of the Company's current market capitalization.
  • Production - Management guided the street to 2022 production of ~4.7bcfe/d, indicating that production will remain broadly flat with current levels, following the closing of an acquisitions at year end.
  • Capital - the capital budget was set to $1.9-$2.0b, nearly double the 2021 spend of $1.1b; management indicated this will be a sustaining level of capex, following two acquisitions in 2021.
  • Allocation - following two acquisitions, Management will allocate free cash flow to the balance sheet, in hopes of reaching target debt levels of $3.0-$3.5b (year end net debt $5.4b).

Southwestern's (SWN) outlook is somewhat challenging to compare to peers, given the high debt levels and recent acquisitions. On the positive side, without the benefit of a recently closed transaction, the Company is generating almost 25% of its market cap in cash (annualized). On the negative side, Southwestern will need to allocate nearly all of this free cash to the balance sheet for two years before hitting the Company's debt target.

Shares remain somewhat unloved by the Street, and there's little here to suggest analysts will change their view on the name.

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