Wells Fargo Downgrades Swift Energy (SFY) to Market Perform

Wells Fargo downgraded Swift Energy (NYSE: SFY) from Outperform to Market Perform with a valuation range of $11-$13 from $14-$17.

Analyst David Tameron comments, "The company delivered on its Eagle Ford JV earlier this year, but in our view, additional asset sales are needed to de-lever the balance sheet and provide flexibility in 2015. While the company has its CLATEX assets on the market, continued delays and a disjointed package of assets leave us thinking that either the deal won’t get done, or only parts of it will. Either way, the company may be forced to first shrink to grow and the remaining inventory remains mostly gassy, as liquids locations are drilled up."

He added, "We do not model potential proceeds from a sale, and in its absence, the widening planned capex outspend in 2015 may exceed growth in EBITDA and, as a result, the company could get more expensive next year on EV/EBITDA at 5.6x in 2015E vs. 4.9x in 2014E. This is despite a return to production growth in 2015—we project volumes to be up 13% vs. 2014 estimates driven by lower margin dry gas production at Fasken. In the meantime, we do not expect growth in 2014 as Fasken firm transport is maxed out at 75 MMcf/d until additional capacity comes on line in early 2015. With this backdrop in place, we do not see an environment in which the shares can outperform peers."

For an analyst ratings summary and ratings history on Swift Energy click here. For more ratings news on Swift Energy click here.

Shares of Swift Energy closed at $11.14 yesterday.

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