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Swift Energy (SFY) Downgraded To 'Hold' By Brean Capital On Poor Execution

 February 22, 2013 12:41 PM
 


(By Balachander) Swift Energy Co. (NYSE: SFY) shares were downgraded to "Hold" from "Buy" by Brean Capital LLC, given the company provided an outlook for 2013 that is below expectations (3% growth vs Street 8% target) and its lack of execution continues to overshadow its rich asset base.

Once again, capital expenditures were more than guidance suggested during 4Q12, while oil production was less than expected, the brokerage said.

Swift Energy significantly cut its capital budget for this year to narrow the gap between capex and cash flow; however, production growth is now

expected to be 3%, versus prior guidance of 7%-12%, Brean Capital said.

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Oil as a percentage of total production for 2013 is expected to be 33%, an increase of only 1% from 2012 and well below Brean Capital's initial estimate of 40%.

"The company has several new venture initiatives in the works, including a joint venture and downspacing in the Eagle Ford, and three exploration opportunities, but we remain cautious given the company's recent track record of overpromising and underdelivering," the brokerage wrote in a note.

If the company is unable to find a JV partner in the Eagle Ford, a capex increase or production decrease may be likely, Brean Capital wrote.

The Houston-based company is engaged in developing exploring, acquiring and operating oil and gas properties, with a focus on oil and natural gas reserves onshore in Texas and Louisiana and in the inland waters of Louisiana.

The stock, which has been trading in the 52-week range of $12.25 to $34.00, retreated 3.08% to trade at $13.21 on Friday.

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