So is there some legitimate path towards bankruptcy here that management is not disclosing? Because all material that is put out by company suggests continuously strengthening balance sheet, but equity markets suggest the infamous death spiral.
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Still think that valuation is closer to $2 per share?
Moron. I hope you covered your short.
I wanted to offer a thought to the original post... in reality there are too many assets at swn v debt for a bankruptcy. As is almost always the case the “money” really controls the company. They will force , with many covenants, contracts, and personal influence to make exactly what’s happening — happen.
The “money” want there’s back first — so sell assets pay off what you owe; cut what your spending ( limited drilling, no new ventures, layoffs) and get the rest of your assets to “sell ready”
They don’t care about culture, career development, “ the formula” , the history —- none of it .. and that’s ok, they actually have an obligation to get a return for their investors.
Many refer to Way as an idiot or whatever. Scam artists are idiots; even worse they lack morality .. he and the other Svp are smart they are getting what they can out of Swn for their families. Unfortunately they have to con employees and investors to get there. Therefore the great sounding investor relations pr .
He’s been a manipulator since he took over. Every press release is flowered with all kinds of adjectives. It looks like the product of a shyster — it is. Compare our press releases to Cabot or any other leader out there. Way is desperate and has been manipulating all of us and Wall Street (or trying).
In 2/2017....Bill Way..what happened to Moorefield? Like Brown dense or Brunswick?
"In the company’s fourth quarter conference call on Feb. 26 with Wall Street analysts, Southwestern CEO Bill Way mentioned the Moorefield play as an area with great future potential.
“In the Fayetteville, we are focused on several emerging opportunities within our acreage, and our activity in 2017 will advance our learnings on a number of fronts, including additional benches in the play,” Way said. “Part of this plan will be to further our understanding of the high potential Moorefield and its ability to drive margin expansion in our asset.”"
What’s missing in that analysis is uses of the remaining cash flow. Income taxes from the sale, remaining interest, G&A that gets capitalized, severance and other one time costs leaves some cash for drilling but not enough to grow beyond 12-18 months at current gas prices. The decline then begins and the same death spiral we are on now exists. We haven’t even mentioned capital costs continue to move up with service company inflation and our well level returns not meeting 1.3 PVI (not that today’s we’ll get to 1.3). We are going to lose people one way or the other as who wants to stay in this mess, esp with Way still here.
I still don’t think we get that much for all Fayetteville. In decline, a lot of wells to manage and ultimately plug, no real demand for added gas assets makes likely buyer PE backed firm that will bid at 20%.
Fairly good analysis BUT MUST CONSIDER cost of layoffs, outstanding lawsuit issues, cash flow after Fayettvile sale reduced
Estimated Fayetteville sale proceeds: 1.5 B
(1.2B from proceeds pays down secured loan, 75M pays remaining 2020’s, 225M remaining proceeds adds to cash)
Cash on hand post sale: 1.2B
Total debt remaining: 3.1B
Net Debt: 1.9B
2018 EBITDA post Fayetteville sale =897M
Net Debt/EBITDA: 2.1X
Crazy thing is that many (internal management and external) have been proposing to sell Fayetteville for years and use proceeds to pay down debt. Hindsight is always better, but a classic case of falling in love with a legacy asset and destroying value.
On a separate thread, someone mentioned that if SWN got less than $1.5 Billion they should keep it. I just can't see this happening, and basically SWN is acting in presentations as if Fayetteville doesn't exist.
It will be sold, there will be no special investment vehicle; all Fayetteville employees will be gone from SWN and many, many will be laid off, especially in Houston.
The proceeds will be used t reduce debt, so no new assets, more layoffs
Overhead has to be cut- layoffs.
It will be long, painful and disorganized process that is the SWN "Way"
Estimated Fayetteville sale proceeds: 1.5 B
(1.2B from proceeds pays down secured loan, 75M pays remaining 2020’s, 225M remaining proceeds adds to cash)
Cash on hand post sale: 1.2B
Total debt remaining: 3.1B
Net Debt: 1.9B
2018 EBITDA post Fayetteville sale =897M
Net Debt/EBITDA: 2.1X
Lol. Our Fayetteville acreage is the jewel of Arkansas compared to BHP. I don’t think bottom and 2nd to bottom position in the gas shales makes much difference.
BHP acreage quality is much less attractive than Southwestern. That’s why it hasn’t sold.
Banks/lenders run a base case using actual differentials from NYMEX for property and current strip prices and a sensitivity price case both lower than the PE "preliminary" case in our recent presentation which includes no plugging liability or overhead/g&a, etc. ($50,000 × 4500 Weeks= $225M low end plugging liability). No way of knowing what the true value is. Clearly, no one will buy it at promoted price. BHP Billiton has been trying to sale Fayetteville for about 2 years. Their recent announcements indicated a 2 year plan to sale out of all shale.
Pay very close attention folks. This is exactly how a stock is manipulated by the banks and analysts.
Well. We don’t exactly have to sell. Anything less than 1.5 and it’s probably smarter to keep it.
I’m not saying Fayetteville Shale is a world class asset. But a $2.00 price on the stock is freaking stupid. Even for a stock manipulator.
Decline looks a little low, but I'll give on that. Gas price down from 2018 guidance levels. PE firm will not bid a 10% discount. Try 20%. The Fayetteville cash flow is bankable at the $2.50 gas price level (normal bank haircut). P&A liability is not small.
BHP's Fayetteville has been for sale for what a year now at least. Even if your model worked, who wants all that gas at other than a steal. Buyer has all the leverage here, SWN has none (and buyer knows it).
Fayetteville production ebitda 221M.
Fayetteville gathering ebitda 182M?
Combined 2018 403M.
12% decline, 5 year payout = 1.6 B
What am I missing. Cheapest gas on the planet...
I think you should fix your bank model.
Or if you work for Southwestern Energy you should quit your day job.
All the games/gyrations done with debt DON'T ELIMINATE IT nor is cash flow as said $1billion with declining assets, plugging liabilities(good point) and REAL GAS PRICES. Goldman Sachs price target $4.50. Layoffs aren't a fix either but rather a short term bandaid at the cost of declining moral and continued market disfavor.
The market is clearly closer to Mr. Venker's assessment than Way's assessment. $1 billion or so cash flow in 2018 with $275 going to interest. If you shut down drilling, you don't pay off debt in a few years - there is this thing called decline.
As far as obligations, don't forget about the 1000's of wells in Fayetteville. They have to be P&A'd at some point and that negative value is not in PV10. Over 4500 wells in Fayetteville at maybe $50,000 - $100,000 per well to P&A. With lower gas prices (lower than the PV10 that used for December 2017 reserves), those P&A dates move closer and closer. Any buyer will think about that. Ultimately SWN will sell Fayetteville E&P for LESS than $1 billion or "decide to keep this valuable asset in the portfolio" when no s---er can be found to take it. Fayetteville midstream will be worth a few hundred million - not a big multiple on its cash flows since they are in big decline.
MR. VENKER IS SMOKING CRACK!
HE HAS SUCH A NICE RECORD.
GREAT CALL ON WHITING PETROLEUM!
http://investorwand.com/investor/9442/drew-venker
Southwestern Energy price target lowered to $2 from $4 at Morgan Stanley Morgan Stanley analyst Drew Venker believes reducing overhead is likely Southwestern Energy's best avenue to unlock shareholder value and thinks selling the Fayetteville assets is unlikely to transform its outlook. Venker assumes Southwestern retains Fayetteville in his base case estimates, though he lowered his estimates and net asset value to reflect a reduced value for the NE Marcellus. Given his lowered estimates and NAV view, the analyst cut his price target on Southwestern Energy shares to $2 and he keeps an Underweight rating on the stock.
Wby reduced value for NE Appalachia?
The majority of the remaining employee's are incompetent anyway, which is valid reason to fire them.
Southwestern Energy Co's long-term debt & capital lease obligation for the quarter that ended in Sep. 2017 was $4,396 Million. FACT
WEAKENING GAS PRICES FACT
Why not just fire people for any rediculous reason? Would that not be cheaper than a layoff?
A company that has 1 billion dollars in cash flow, and can shut down every rig and pay down ALL their debt in 3 to 4 years is not going bankrupt anytime soon. Now if gas goes to $1 now and stays for the next 3 years, I might stand corrected.
Better to spend your energy figuring out how to do more with less instead of worrying about bankruptcy.