With Saudi Arabia voluntarily reducing its oil production once more, Southwestern Energy Company (NYSE: SWN) is expected to benefit as gas rises due to the production cut since oil and gas prices move in tandem. It is also expected that gas prices will increase by Q3 due to demand increase according to the Energy Information Administration. Considering that SWN stock surged 75% in May 2022 when oil and gas prices skyrocketed, it could be well-positioned to witness a somewhat similar run if oil and gas prices climb this year.
SWN Stock News
The oil sector is waiting patiently for the results of Saudi Arabia’s decision to extend its oil production cut after OPEC+ cut its production earlier in April. It is expected that oil and gas prices will increase due to the production cut since gas prices increased more than 19% back in April following OPEC+’s production cut. All of that bodes well for SWN stock since its trading price is closely related to gas prices – with the stock climbing 75% in May 2022 when oil reached a whopping $105.
If gas prices increase in a similar fashion this year, SWN’s revenues would increase significantly as more than 58% of its revenues come from gas sales. Through these additional revenues, SWN would be able to achieve its goal of increasing its cash flow to pay off its $3.96 billion debt as the company is keeping production flat to manage its operating costs.
On that note, the Energy Information Administration (EIA) is expecting gas prices to reach $3 by Q3 due to an increase in demand. As this would represent a 33.3% increase in gas prices from the current $2.25 price, this increase could be a major helping hand for SWN as it would improve its outlook. Based on this, SWN stock could be poised to run in Q3 which might make it attractive at current levels.
As for its cost-saving efforts, SWN expects lower capital spend in Q2 since it is going to delay some activities like the release of an additional frac fleet in Haynesville and the release of a frac fleet in Pennsylvania earlier than planned. Through these actions, SWN would be able to navigate through its debt situation which will decrease the pressure on its balance sheet. Given that these actions would add significant value to the company, SWN stock could be a profitable investment ahead of Q3.
SWN Stock Financials
In its Q1 2023 report, SWN’s assets stayed the same QoQ at $12.9 billion, while its cash and cash equivalents decreased 94% QoQ from $50 million to $3 million. SWN’s total liabilities decreased by 22% QoQ from $8.6 billion to $6.7 billion.
Revenue decreased 31% YoY from $1.6 billion to $1.1 billion. Operating costs decreased almost 6% from $1.6 billion to $1.5 billion, which contributed to the operating income decrease of 53% YoY from $1.3 billion to $0.606 billion. As a result, net income increased 173% YoY to $1.9 billion.
Media Sentiment
@CorneliaLake believes the LNG market is in a good spot.
Technical Analysis
SWN stock’s trend is neutral with the stock trading in a sideways channel between $4.63 and $5.82. Looking at the indicators, the stock is testing the 200 MA as support and is trading above the 50 and 21 MAs. Meanwhile, the RSI is neutral at 57 and the MACD is approaching a bearish crossover.
As for the fundamentals. SWN stock just witnessed a catalyst in Saudi Arabia cutting its oil production by an additional 1 million barrels. Given that oil prices are expected to increase due to this production cut and oil and gas prices are intertwined, the expected increase in gas prices might drive the SWN stock price higher.
SWN Stock Forecast
SWN is in a good position to benefit from Saudi Arabia’s production cut since gas and oil prices are expected to increase due to the declining supply coupled with the EIA expectations that gas prices will reach $3 in Q3 which in turn will increase WSN revenues. With WSN stock being so closely related to gas prices, SWN’s PPS might increase soon – making it one to keep an eye on over the coming months.
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