Southwestern Energy

Stock: SWN

Rating: Good

Author: Waleed M. Tariq

Company Overview

  • Two-thirds of SWN’s assets are in Appalachia and Haynesville.
  • In 2021, the business invested $4.5 billion in Haynesville and Bossier Shales, including a $2.7 billion merger and $1.85 billion acquisition.

Bullish

  • Haynesville has produced a 58% YoY increase in MRQ output volume.
  • The company is advertising itself as a gas exporter due to Europe’s energy problems.
  • I’m bullish on the stock’s long-term growth and value.

Bearish

  • The company’s $2.7 billion loss may be a set back to the company’s performance.

Market optimism

  • 40 percent of EU gas originates from Russia. Before the conflict, initiatives to limit coal use, reduce carbon emissions, and deplete domestic gas sources were on course to quadruple this amount in two decades.
  • European nations will turn away from Russia for natural gas, increasing demand for U.S. producers. Higher U.S. natural gas production can fulfill demand.
US Natural Gas Production 2021 and 2022
S&P Global
  • Global supply worries have pushed U.S. spot and futures gas prices to decade-highs.

SWN’s Strategic Growth

  • SWN’s MRQ rose from $1 billion to $3 billion, with a 56% gross profit margin, up 13% YoY. Haynesville production and rising commodity prices boosted revenue.
  • The Haynesville basin’s low emissions and proximity to LNG export terminals make it a potential sweet spot for US natural gas exports.
  • 53% of the basin’s gas output will be certified this year, with 40% of total obligations in 2022, indicating momentum.
Haynesville Gas Production Third Party Certification 2022
S&P Global

Valuation

  • TTM and FWD P/E are 30% below industry median after tripling YTD. Other indicators are below industry medians, except P/B (12.70 vs. 2.19).

Conclusion

  • When the corporation deleverages and uses pricing hedges, its share price will soar. SWN has long-term potential despite volatility.