Image source: Southwestern Energy investor presentation.
Continue Reading Below
What: Shares of Southwestern Energy are up 13.5% as of 10:45 a.m. ET today after the company reported earnings that were better than expected.
So what: Before getting too excited to hear that an energy company beat expectations, let's remember that the forecast for energy companies in general is very, very low lately. This past quarter, Southwestern posted an adjusted net loss of ($0.08) per share, which was better than the $0.20-per-share loss that was expected. That adjusted loss also strips out some very large charges such as a major asset write-down and a tax item deduction. On a GAAP basis, Southwestern's loss for the quarter was $3.03 per share.
If there are some positives to take away from this earnings report, it's that the company's production levels ticked up ever so slightly despite huge declines in capital spending. This suggests that it's getting more efficient at capital spending and bringing down operating costs such that it can at least make today's low oil and gas prices somewhat manageable. At the same time, though, it is still struggling and losing money at today's prices, and production is expected to begin to slump as the lack of capital investment starts to bite.
Now what: It's encouraging to see Southwestern beating Wall Street's very modest expectations, but the fact is that the company needs oil and gas prices to rise significantly before it can repair some of the damage done to its balance sheet. Today's earnings result seems more like a "steady as she goes" sort of moment that shouldn't change anyone's investment thesis. If you are bullish on natural gas prices, then Southwestern's low-cost position will eventually pan out, but that is predicated on something that is completely out of its control.
The article Southwestern Energy's Earnings Hop Over a Low Hurdle and Shares Climb 13.5% originally appeared on Fool.com.
Continue Reading Below
Tyler Crowe has no position in any stocks mentioned.You can follow him at Fool.comor on Twitter@TylerCroweFool.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.