Shares of independent energy company Southwestern Energy Company SWN slipped about 7.6% on the NYSE to touch a 52-week low of $8.15 on Dec 3, 2015. The stock finally closed a tad higher at $8.19. Volume was also upsized with about 21.3 million shares exchanging hands. The decline followed the bearish mood ahead of the OPEC or the Organization of the Petroleum Exporting Countries – the international cartel of oil producers – meeting in Vienna on Friday.
What Led to the Share Price Decline?
Southwestern Energy is an independent energy company whose wholly owned subsidiaries are engaged in natural gas and oil exploration, development and production, and natural gas gathering and marketing.
The outcome of the gathering of OPEC's 12-member countries from the Middle East, Africa and Latin America is expected to have far-reaching implications for all involved in oil trade – from the retail stations to the budgets of oil-dependent nations.
When OPEC last met in June, it extended its now year-long strategy to maintain the daily crude production level at the preset 30 million barrels, ignoring chances of an output cut in response to the prevailing supply glut.
The broader market is apprehensive that OPEC will maintain the same official output level for some more months to come. This will not come of any help in lessening the oil supply glut. Also, weak numbers from the Chinese economy put a bar on the appreciation of oil futures.
Along with this, from a peak of about $13.50 per million barrels per unit in 2008 to around $2.2 now – sinking in between to the 10-year low of under $2 in 2012 – the plummeting value of natural gas represents a decline of around 80% over 7 years.
In the absence of major production cuts, we do not expect much upside in gas prices in the near term. Things were made worse by apprehensions of soft heating demand following forecasts of higher-than-normal temperatures across certain regions of the U.S. in the short term.
As such, investors’ disapproval is clearly reflected in the company’s recent 52-week low price.
Zacks Rank & Stock Picks
Currently, Southwestern Energy carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector are Energy Transfer Equity, L.P. ETE, Murphy USA Inc. MUSA and Boardwalk Pipeline Partners, LP BWP. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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