Intrinsic value of Southwestern Energy - SWN

Previous Close

$5.12

  Intrinsic Value

$0.99

stock screener

  Rating & Target

str. sell

-81%

Previous close

$5.12

 
Intrinsic value

$0.99

 
Up/down potential

-81%

 
Rating

str. sell

We calculate the intrinsic value of SWN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  31.50
  28.85
  26.47
  24.32
  22.39
  20.65
  19.08
  17.67
  16.41
  15.27
  14.24
  13.32
  12.48
  11.74
  11.06
  10.46
  9.91
  9.42
  8.98
  8.58
  8.22
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
Revenue, $m
  4,212
  5,427
  6,863
  8,532
  10,443
  12,599
  15,003
  17,655
  20,551
  23,689
  27,062
  30,666
  34,494
  38,543
  42,806
  47,282
  51,968
  56,863
  61,968
  67,285
  72,817
  78,569
  84,548
  90,761
  97,217
  103,928
  110,904
  118,158
  125,704
  133,559
Variable operating expenses, $m
  8,007
  10,317
  13,047
  16,220
  19,851
  23,950
  28,521
  33,562
  39,068
  45,033
  51,445
  58,296
  65,574
  73,269
  81,375
  89,883
  98,791
  108,097
  117,801
  127,908
  138,425
  149,359
  160,725
  172,536
  184,810
  197,567
  210,828
  224,618
  238,964
  253,895
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  8,007
  10,317
  13,047
  16,220
  19,851
  23,950
  28,521
  33,562
  39,068
  45,033
  51,445
  58,296
  65,574
  73,269
  81,375
  89,883
  98,791
  108,097
  117,801
  127,908
  138,425
  149,359
  160,725
  172,536
  184,810
  197,567
  210,828
  224,618
  238,964
  253,895
Operating income, $m
  -3,795
  -4,890
  -6,184
  -7,688
  -9,409
  -11,351
  -13,518
  -15,907
  -18,517
  -21,344
  -24,383
  -27,630
  -31,079
  -34,727
  -38,568
  -42,601
  -46,823
  -51,234
  -55,833
  -60,623
  -65,608
  -70,791
  -76,177
  -81,776
  -87,593
  -93,639
  -99,924
  -106,460
  -113,260
  -120,336
EBITDA, $m
  -3,089
  -3,981
  -5,034
  -6,259
  -7,660
  -9,241
  -11,005
  -12,950
  -15,074
  -17,376
  -19,850
  -22,493
  -25,302
  -28,271
  -31,398
  -34,681
  -38,119
  -41,709
  -45,454
  -49,353
  -53,411
  -57,630
  -62,016
  -66,573
  -71,309
  -76,231
  -81,348
  -86,669
  -92,204
  -97,965
Interest expense (income), $m
  75
  242
  338
  454
  591
  750
  932
  1,137
  1,366
  1,619
  1,895
  2,194
  2,515
  2,859
  3,223
  3,609
  4,015
  4,442
  4,888
  5,355
  5,841
  6,348
  6,875
  7,423
  7,993
  8,585
  9,200
  9,839
  10,504
  11,195
  11,914
Earnings before tax, $m
  -4,036
  -5,228
  -6,638
  -8,278
  -10,158
  -12,283
  -14,655
  -17,273
  -20,136
  -23,239
  -26,577
  -30,145
  -33,938
  -37,950
  -42,178
  -46,617
  -51,265
  -56,122
  -61,188
  -66,465
  -71,956
  -77,666
  -83,601
  -89,768
  -96,178
  -102,839
  -109,763
  -116,964
  -124,455
  -132,251
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -4,036
  -5,228
  -6,638
  -8,278
  -10,158
  -12,283
  -14,655
  -17,273
  -20,136
  -23,239
  -26,577
  -30,145
  -33,938
  -37,950
  -42,178
  -46,617
  -51,265
  -56,122
  -61,188
  -66,465
  -71,956
  -77,666
  -83,601
  -89,768
  -96,178
  -102,839
  -109,763
  -116,964
  -124,455
  -132,251

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  9,551
  12,306
  15,563
  19,348
  23,679
  28,569
  34,020
  40,033
  46,602
  53,716
  61,366
  69,537
  78,218
  87,398
  97,066
  107,216
  117,841
  128,941
  140,517
  152,573
  165,117
  178,161
  191,718
  205,807
  220,448
  235,664
  251,482
  267,931
  285,044
  302,854
Adjusted assets (=assets-cash), $m
  9,551
  12,306
  15,563
  19,348
  23,679
  28,569
  34,020
  40,033
  46,602
  53,716
  61,366
  69,537
  78,218
  87,398
  97,066
  107,216
  117,841
  128,941
  140,517
  152,573
  165,117
  178,161
  191,718
  205,807
  220,448
  235,664
  251,482
  267,931
  285,044
  302,854
Revenue / Adjusted assets
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
Average production assets, $m
  7,055
  9,090
  11,496
  14,292
  17,491
  21,103
  25,130
  29,572
  34,424
  39,679
  45,329
  51,365
  57,778
  64,559
  71,700
  79,198
  87,046
  95,246
  103,796
  112,702
  121,968
  131,603
  141,617
  152,024
  162,839
  174,079
  185,764
  197,914
  210,555
  223,711
Working capital, $m
  -699
  -901
  -1,139
  -1,416
  -1,733
  -2,091
  -2,490
  -2,931
  -3,412
  -3,932
  -4,492
  -5,091
  -5,726
  -6,398
  -7,106
  -7,849
  -8,627
  -9,439
  -10,287
  -11,169
  -12,088
  -13,042
  -14,035
  -15,066
  -16,138
  -17,252
  -18,410
  -19,614
  -20,867
  -22,171
Total debt, $m
  6,146
  8,251
  10,739
  13,631
  16,940
  20,675
  24,841
  29,435
  34,453
  39,888
  45,732
  51,975
  58,608
  65,621
  73,008
  80,762
  88,880
  97,360
  106,204
  115,415
  124,999
  134,964
  145,322
  156,086
  167,271
  178,896
  190,981
  203,549
  216,623
  230,229
Total liabilities, $m
  7,297
  9,402
  11,890
  14,782
  18,091
  21,826
  25,992
  30,586
  35,604
  41,039
  46,883
  53,126
  59,759
  66,772
  74,159
  81,913
  90,031
  98,511
  107,355
  116,566
  126,150
  136,115
  146,473
  157,237
  168,422
  180,047
  192,132
  204,700
  217,774
  231,380
Total equity, $m
  2,254
  2,904
  3,673
  4,566
  5,588
  6,742
  8,029
  9,448
  10,998
  12,677
  14,482
  16,411
  18,460
  20,626
  22,908
  25,303
  27,811
  30,430
  33,162
  36,007
  38,968
  42,046
  45,245
  48,570
  52,026
  55,617
  59,350
  63,232
  67,270
  71,474
Total liabilities and equity, $m
  9,551
  12,306
  15,563
  19,348
  23,679
  28,568
  34,021
  40,034
  46,602
  53,716
  61,365
  69,537
  78,219
  87,398
  97,067
  107,216
  117,842
  128,941
  140,517
  152,573
  165,118
  178,161
  191,718
  205,807
  220,448
  235,664
  251,482
  267,932
  285,044
  302,854
Debt-to-equity ratio
  2.730
  2.840
  2.920
  2.990
  3.030
  3.070
  3.090
  3.120
  3.130
  3.150
  3.160
  3.170
  3.170
  3.180
  3.190
  3.190
  3.200
  3.200
  3.200
  3.210
  3.210
  3.210
  3.210
  3.210
  3.220
  3.220
  3.220
  3.220
  3.220
  3.220
Adjusted equity ratio
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236
  0.236

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4,036
  -5,228
  -6,638
  -8,278
  -10,158
  -12,283
  -14,655
  -17,273
  -20,136
  -23,239
  -26,577
  -30,145
  -33,938
  -37,950
  -42,178
  -46,617
  -51,265
  -56,122
  -61,188
  -66,465
  -71,956
  -77,666
  -83,601
  -89,768
  -96,178
  -102,839
  -109,763
  -116,964
  -124,455
  -132,251
Depreciation, amort., depletion, $m
  706
  909
  1,150
  1,429
  1,749
  2,110
  2,513
  2,957
  3,442
  3,968
  4,533
  5,137
  5,778
  6,456
  7,170
  7,920
  8,705
  9,525
  10,380
  11,270
  12,197
  13,160
  14,162
  15,202
  16,284
  17,408
  18,576
  19,791
  21,055
  22,371
Funds from operations, $m
  -3,331
  -4,319
  -5,488
  -6,849
  -8,409
  -10,173
  -12,142
  -14,316
  -16,693
  -19,271
  -22,044
  -25,009
  -28,160
  -31,494
  -35,008
  -38,697
  -42,560
  -46,597
  -50,808
  -55,195
  -59,759
  -64,505
  -69,439
  -74,566
  -79,894
  -85,431
  -91,187
  -97,173
  -103,399
  -109,879
Change in working capital, $m
  -167
  -202
  -238
  -277
  -317
  -358
  -399
  -440
  -481
  -521
  -560
  -598
  -636
  -672
  -708
  -743
  -778
  -813
  -847
  -883
  -918
  -955
  -992
  -1,031
  -1,072
  -1,114
  -1,158
  -1,204
  -1,253
  -1,304
Cash from operations, $m
  -3,163
  -4,117
  -5,250
  -6,572
  -8,092
  -9,815
  -11,743
  -13,876
  -16,213
  -18,750
  -21,484
  -24,410
  -27,525
  -30,822
  -34,300
  -37,954
  -41,783
  -45,785
  -49,961
  -54,312
  -58,841
  -63,550
  -68,446
  -73,534
  -78,822
  -84,317
  -90,029
  -95,969
  -102,147
  -108,576
Maintenance CAPEX, $m
  -536
  -706
  -909
  -1,150
  -1,429
  -1,749
  -2,110
  -2,513
  -2,957
  -3,442
  -3,968
  -4,533
  -5,137
  -5,778
  -6,456
  -7,170
  -7,920
  -8,705
  -9,525
  -10,380
  -11,270
  -12,197
  -13,160
  -14,162
  -15,202
  -16,284
  -17,408
  -18,576
  -19,791
  -21,055
New CAPEX, $m
  -1,692
  -2,035
  -2,406
  -2,796
  -3,199
  -3,612
  -4,027
  -4,442
  -4,852
  -5,255
  -5,650
  -6,036
  -6,413
  -6,781
  -7,142
  -7,497
  -7,849
  -8,199
  -8,551
  -8,905
  -9,266
  -9,635
  -10,015
  -10,407
  -10,815
  -11,240
  -11,685
  -12,151
  -12,641
  -13,156
Cash from investing activities, $m
  -2,228
  -2,741
  -3,315
  -3,946
  -4,628
  -5,361
  -6,137
  -6,955
  -7,809
  -8,697
  -9,618
  -10,569
  -11,550
  -12,559
  -13,598
  -14,667
  -15,769
  -16,904
  -18,076
  -19,285
  -20,536
  -21,832
  -23,175
  -24,569
  -26,017
  -27,524
  -29,093
  -30,727
  -32,432
  -34,211
Free cash flow, $m
  -5,391
  -6,858
  -8,564
  -10,517
  -12,721
  -15,176
  -17,880
  -20,830
  -24,022
  -27,448
  -31,102
  -34,979
  -39,074
  -43,381
  -47,897
  -52,621
  -57,551
  -62,689
  -68,036
  -73,597
  -79,377
  -85,382
  -91,621
  -98,103
  -104,839
  -111,841
  -119,122
  -126,696
  -134,579
  -142,787
Issuance/(repayment) of debt, $m
  1,755
  2,105
  2,488
  2,892
  3,309
  3,735
  4,165
  4,594
  5,018
  5,436
  5,844
  6,243
  6,632
  7,013
  7,387
  7,754
  8,118
  8,480
  8,844
  9,211
  9,584
  9,965
  10,358
  10,764
  11,186
  11,625
  12,085
  12,567
  13,074
  13,607
Issuance/(repurchase) of shares, $m
  4,577
  5,878
  7,406
  9,172
  11,181
  13,437
  15,941
  18,692
  21,686
  24,918
  28,382
  32,074
  35,987
  40,117
  44,459
  49,012
  53,773
  58,742
  63,920
  69,310
  74,916
  80,744
  86,800
  93,093
  99,633
  106,430
  113,497
  120,846
  128,493
  136,454
Cash from financing (excl. dividends), $m  
  6,332
  7,983
  9,894
  12,064
  14,490
  17,172
  20,106
  23,286
  26,704
  30,354
  34,226
  38,317
  42,619
  47,130
  51,846
  56,766
  61,891
  67,222
  72,764
  78,521
  84,500
  90,709
  97,158
  103,857
  110,819
  118,055
  125,582
  133,413
  141,567
  150,061
Total cash flow (excl. dividends), $m
  941
  1,125
  1,330
  1,546
  1,769
  1,997
  2,227
  2,456
  2,683
  2,906
  3,124
  3,337
  3,545
  3,749
  3,949
  4,145
  4,339
  4,533
  4,728
  4,924
  5,123
  5,327
  5,537
  5,754
  5,979
  6,214
  6,460
  6,718
  6,989
  7,274
Retained Cash Flow (-), $m
  -4,577
  -5,878
  -7,406
  -9,172
  -11,181
  -13,437
  -15,941
  -18,692
  -21,686
  -24,918
  -28,382
  -32,074
  -35,987
  -40,117
  -44,459
  -49,012
  -53,773
  -58,742
  -63,920
  -69,310
  -74,916
  -80,744
  -86,800
  -93,093
  -99,633
  -106,430
  -113,497
  -120,846
  -128,493
  -136,454
Prev. year cash balance distribution, $m
  266
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  22
  29
  38
  48
  60
  73
  88
  105
  124
  144
  166
  189
  215
  241
  270
  300
  331
  364
  398
  434
  471
  510
  550
  592
  635
  681
  727
  776
  827
  880
Cash available for distribution, $m
  -3,370
  -4,753
  -6,076
  -7,626
  -9,412
  -11,440
  -13,715
  -16,237
  -19,003
  -22,012
  -25,258
  -28,736
  -32,441
  -36,368
  -40,511
  -44,867
  -49,433
  -54,208
  -59,192
  -64,386
  -69,793
  -75,417
  -81,263
  -87,339
  -93,654
  -100,216
  -107,036
  -114,128
  -121,505
  -129,180
Discount rate, %
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
  -3,156
  -4,140
  -4,892
  -5,632
  -6,327
  -6,943
  -7,448
  -7,817
  -8,029
  -8,074
  -7,954
  -7,674
  -7,254
  -6,717
  -6,092
  -5,409
  -4,701
  -3,998
  -3,324
  -2,701
  -2,143
  -1,659
  -1,252
  -921
  -659
  -458
  -309
  -202
  -128
  -79
Current shareholders' claim on cash, %
  32.5
  10.8
  3.6
  1.2
  0.4
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Southwestern Energy Company is an energy company engaged in natural gas and oil exploration, development and production. The Company operates through two segments: Exploration and Production (E&P) and Midstream Services. Its operations in northeast Pennsylvania are primarily focused on the unconventional natural gas reservoir known as the Marcellus Shale. Through its affiliated midstream subsidiaries, it is engaged in natural gas gathering activities in Arkansas and Louisiana. Its operations are principally focused on the development of unconventional natural gas reservoirs located in Pennsylvania, West Virginia and Arkansas. As of December 31, 2016, its estimated proved natural gas and oil reserves were 5,253 billions of cubic feet equivalent (Bcfe). During the fiscal year ended December 31, 2016, it gathered approximately 600 billion cubic feet (Bcf) of natural gas in the Fayetteville Shale area, including 42 Bcf of natural gas from third-party operated wells.

FINANCIAL RATIOS  of  Southwestern Energy (SWN)

Valuation Ratios
P/E Ratio -1
Price to Sales 1
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 5.1
Price to Free Cash Flow -26.7
Growth Rates
Sales Growth Rate -22.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -67%
Cap. Spend. - 3 Yr. Gr. Rate -23.4%
Financial Strength
Quick Ratio 35
Current Ratio 0
LT Debt to Equity 502.9%
Total Debt to Equity 507.4%
Interest Coverage -35
Management Effectiveness
Return On Assets -33.9%
Ret/ On Assets - 3 Yr. Avg. -21.7%
Return On Total Capital -42.1%
Ret/ On T. Cap. - 3 Yr. Avg. -26.8%
Return On Equity -165.2%
Return On Equity - 3 Yr. Avg. -91.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 64.5%
Gross Margin - 3 Yr. Avg. 71%
EBITDA Margin -88.7%
EBITDA Margin - 3 Yr. Avg. -67.5%
Operating Margin -92.2%
Oper. Margin - 3 Yr. Avg. -88.8%
Pre-Tax Margin -109.7%
Pre-Tax Margin - 3 Yr. Avg. -94.4%
Net Profit Margin -108.5%
Net Profit Margin - 3 Yr. Avg. -77%
Effective Tax Rate 1.1%
Eff/ Tax Rate - 3 Yr. Avg. 22.6%
Payout Ratio -1%

SWN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SWN stock intrinsic value calculation we used $3203 million for the last fiscal year's total revenue generated by Southwestern Energy. The default revenue input number comes from 2017 income statement of Southwestern Energy. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our SWN stock valuation model: a) initial revenue growth rate of 31.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.8%, whose default value for SWN is calculated based on our internal credit rating of Southwestern Energy, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Southwestern Energy.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of SWN stock the variable cost ratio is equal to 190.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for SWN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.5% for Southwestern Energy.

Corporate tax rate of 27% is the nominal tax rate for Southwestern Energy. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the SWN stock is equal to 0.7%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for SWN are equal to 167.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Southwestern Energy operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for SWN is equal to -16.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1979 million for Southwestern Energy - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 498 million for Southwestern Energy is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Southwestern Energy at the current share price and the inputted number of shares is $2.5 billion.

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COMPANY NEWS

▶ Southwestern Energy: 2Q Earnings Snapshot   [04:33PM  Associated Press]
▶ [$$] Side Effect of Rising Oil Drilling: Indigestion for Gas Frackers   [Jun-14-18 08:58PM  The Wall Street Journal]
▶ [$$] Side Effect of Rising Oil Drilling: Indigestion for Gas Frackers   [Jun-13-18 01:18PM  The Wall Street Journal]
▶ Should You Buy Southwestern Energy Company (NYSE:SWN)?   [May-31-18 11:30AM  Simply Wall St.]
▶ Southwestern Energy: 1Q Earnings Snapshot   [Apr-26-18 07:48PM  Associated Press]
▶ If you own nat gas stocks, you should be scared   [Mar-26-18 07:37PM  CNBC Videos]
▶ Four Penny Stocks Billionaires Are Invested In   [Mar-15-18 12:06PM  Insider Monkey]
▶ Southwestern Energy beats Street 4Q forecasts   [Mar-01-18 04:43PM  Associated Press]
▶ Southwestern Energy names new CFO amid other leadership changes   [Feb-28-18 08:55AM  American City Business Journals]
▶ Daniel Loeb's Top 10 Holdings of 4th Quarter   [Feb-19-18 05:49PM  GuruFocus.com]
▶ 3 More Stocks With a Chance of Big Near-Term Gains   [Feb-16-18 02:00PM  TheStreet.com]
▶ Stocks That Fell to 3-Year Lows in the Week of Jan. 26   [Jan-28-18 09:19AM  GuruFocus.com]
▶ Why ConocoPhillips Expects Lower Production in 4Q17   [Jan-26-18 01:25PM  Market Realist]
▶ Who Owns Southwestern Energy Company (NYSE:SWN)?   [Jan-24-18 01:43PM  Simply Wall St.]
▶ Which Energy Stocks Missed Higher Oil Prices Last Week?   [Jan-17-18 10:31AM  Market Realist]
▶ Is Oil Limiting Natural GasWeighted Stocks Fall?   [Jan-11-18 01:35PM  Market Realist]
▶ Has Natural Gas Outperformed Natural GasWeighted Stocks?   [Jan-04-18 11:35AM  Market Realist]
▶ Natural Gas Inventories Could Boost Natural Gas Prices   [Jan-03-18 02:05PM  Market Realist]
▶ Wall Street: Where Southwestern Energy Could Trade in 2018   [Jan-02-18 02:50PM  Market Realist]
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