SWN Southwestern Energy

·

Generated net cash provided by operating activities of $300 million and net cash flow of $280 million, up 13% and 12%, respectively

·

Delivered on previously announced cost initiatives, saving over $110 million annually (beginning in 2019) through G&A and interest reductions.

·

Realized NGL and oil pricing, including hedges, of $15.05 and $59.22 per barrel, up 34% and 46%, respectively

·

Increased margins in Southwest Appalachia by 76% to $1.60 per Mcfe

·

Exceeded production guidance, reporting net production of 234 Bcfe, up 5%

·

Delivered a 19% increase in Appalachia Basin net production of 167 Bcfe or 1.8 Bcfe per day, including 20% liquids production

·

Produced 44% higher natural gas liquids and oil of 61,370 barrels per day

·

Improved well development efficiency driven by leading operational execution, completing 56 wells, 13 ahead of original development plan

·

Added extended lateral inventory in the Tioga development area through a joint development arrangement

·

Reported net income attributable to common stock of $51 million, or $0.09 per diluted share, and adjusted net income attributable to common stock of $105 million, or $0.18 per diluted share

·

Maintaining full-year $1.15 - $1.25 billion capital investment guidance; second quarter capital investment of $403 million, consistent with front end loaded plan

·

Expecting existing portfolio to generate modest cash flow above full year capital investment at current prices, with any excess cash applied to outstanding borrowings on the revolving bank facility

·

Raising net production guidance to 955 - 970 Bcfe, up from 930 - 965 Bcfe (see Production Guidance table below)

·

Increasing Appalachia Basin net production guidance to 695 - 707 Bcfe, up 21%  

(based on midpoints) compared to 2017







1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Total Year

Guidance:

  Natural Gas (Bcf)

197

201

213 – 218

210 – 217

821 – 833

  NGLs (MBbls)

4,230

4,862

4,900 – 5,100

5,250 – 5,400

19,242 – 19,592

  Oil (MBbls)

613

723

900 – 1,000

900 – 1,000

3,136 – 3,336

 Total Production (Bcfe)

226

234

248 – 255

247 – 255

955 – 970

Total Production (MMcfe/d)

2,511

2,571

2,696 – 2,772

2,685 – 2,772

2,616 – 2,658





Full-Year Production by Division

Production



(Bcfe)

Northeast Appalachia

459 – 465

Southwest Appalachia

236 – 242

Fayetteville Shale

260 – 263

Total

955 – 970

(1)

Consistent with original guidance, the updated guidance excludes any impact from Fayetteville strategic alternatives announced in February 2018.



FINANCIAL STATISTICS (Unaudited)

For the three months ended

For the six months ended



June 30,

June 30,



2018

2017

2018

2017

Financial Results (in millions, except per share amounts)

Net income attributable to common stock

$

$

$

$

Adjusted net income attributable to common stock (non-GAAP measure)

$

$

$

$

Adjusted EBITDA (non-GAAP measure)

$

$

$

$

Net cash provided by operating activities

$

$

$

$

Net cash flow (non-GAAP measure)

$

$

$

$

Total capital investments

$

$

$

$



OPERATING STATISTICS

For the three months ended

For the six months ended



June 30,

June 30,



2018

2017

2018

2017

Production

Gas production (Bcf)

Oil production (MBbls)

NGL production (MBbls)

Total production (Bcfe)



Division Production

Northeast Appalachia (Bcf)

Southwest Appalachia (Bcfe)

Fayetteville Shale (Bcf)



Average unit costs per Mcfe

Lease operating expenses

$

$

$

$

General & administrative expenses (1)

$

$

$

$

Taxes, other than income taxes (2,3)

$

$

$

$

Full cost pool amortization

$

$

$

$

(1)

Excludes $15 million of restructuring charges and $7.9 million of legal settlement charges for the three and six months ended June 30, 2018.

(2)

Excludes $1 million of restructuring charges for the three and six months ended June 30, 2018.

(3)

Decrease primarily due to an $8 million severance tax refund related to a favorable assessment on deductible expenses in Southwest Appalachia for the three and six months ended June 30, 2018. 



COMMODITY PRICES

For the three months ended

For the six months ended



June 30,

June 30,



2018

2017

2018

2017

Natural Gas Price:

NYMEX Henry Hub Price ($/MMBtu) (1)

$

$

$

$

Discount to NYMEX (2)

Average realized gas price per Mcf, excluding derivatives

$

$

$

$

Gain (loss) on settled financial basis derivatives ($/Mcf)

Gain (loss) on settled commodity derivatives ($/Mcf)

Average realized gas price per Mcf, including derivatives

$

$

$

$

Oil Price:

WTI oil price ($/Bbl)

$

$

$

$

Discount to WTI

Average oil price per Bbl, excluding derivatives

$

$

$

$

Average oil price per Bbl, including derivatives

$

$

$

$

NGL Price:

Average net realized NGL price per Bbl, excluding derivatives

$

$

$

$

Average net realized NGL price per Bbl, including derivatives

$

$

$

$

Percentage of WTI

Average net realized C3+ price per Bbl, excluding derivatives

$

$

$

$

Average net realized C3+ price per Bbl, including derivatives

$

$

$

$

Percentage of WTI

Total Weighted Average Realized Price:

Excluding derivatives ($/Mcfe)

$

$

$

$

Including derivatives ($/Mcfe)

$

$

$

$

(1)

Based on last day monthly futures settlement prices.

(2)

This discount includes a basis differential, a heating content adjustment, physical basis sales, third-party transportation charges and fuel charges and excludes financial basis derivatives.



Three Months Ended June 30, 2018 E&P Division Results

Appalachia

Fayetteville



Northeast

Southwest

Shale

Production (Bcfe) (1)

Gross operated production as of June 2018 (MMcfe/d)

Net operated production as of June 2018 (MMcfe/d)



Capital investments ($ in millions)

Exploratory and development drilling, including workovers

$

$

$

Acquisition and leasehold

 –  

Seismic and other

Capitalized interest and expense

Total capital investments

$

$

$



Gross operated well activity summary

Drilled

–  

Completed

Wells to sales



Average completed well cost (in millions)

$

(2)

$

$

Average lateral length (in ft)



Realized Natural Gas Price

NYMEX Henry Hub Price ($/MMBtu)

$

$

$

Discount to NYMEX (3)

Average realized gas price per Mcf, excluding derivatives

$

$

$

Total weighted average realized price per Mcfe, excluding derivatives

$

$

$

(1)

Southwest Appalachia production included 22 Bcf of natural gas, 4,850 MBbls of NGLs and 707 MBbls of oil.

(2)

Average well costs includes amounts for delineation and science.

(3)

This discount includes a basis differential, a heating content adjustment, physical basis sales, third-party transportation charges and fuel charges, and excludes financial basis derivatives.



SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



For the three months ended

For the six months ended



June 30,

June 30,



2018

2017

2018

2017

(in millions, except share/per share amounts)

Operating Revenues

Gas sales

$

$

$

$

Oil sales

NGL sales

Marketing

Gas gathering

Other

–  

–  



Operating Costs and Expenses

Marketing purchases

Operating expenses

General and administrative expenses

Restructuring charges

–  

–  

Depreciation, depletion and amortization

Taxes, other than income taxes



Operating Income

Interest Expense

Interest on debt

Other interest charges

Interest capitalized





Gain (Loss) on Derivatives (1)

Loss on Early Extinguishment of Debt

Other Income, Net



Income Before Income Taxes

Provision (Benefit) for Income Taxes

Deferred

–  

–  

–  

–  



–  

–  

–  

–  

Net Income

$

$

$

$

Mandatory convertible preferred stock dividend

–  

–  

Participating securities - mandatory convertible preferred stock

–  

Net Income Attributable to Common Stock

$

$

$

$



Income Per Common Share

Basic

$

$

$

$

Diluted

$

$

$

$

Weighted Average Common Shares Outstanding

Basic

Diluted



SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



June 30,
2018

December 31,
2017

ASSETS

(in millions)

Current assets:

Cash and cash equivalents

$

$

Accounts receivable, net

Derivative assets

Other current assets

Total current assets

Natural gas and oil properties, using the full cost method, including $1,835 million as of June 30, 2018 and $1,817 million as of December 31, 2017 excluded from amortization

Gathering systems

Other

Less: Accumulated depreciation, depletion and amortization

Total property and equipment, net

Other long-term assets

TOTAL ASSETS

$

$



LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

$

Taxes payable

Interest payable

Dividends payable

–  

Derivative liabilities

Other current liabilities

Total current liabilities

Long-term debt

Pension and other postretirement liabilities

Other long-term liabilities

Total long-term liabilities

Equity:

Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 586,430,101 shares as of June 30, 2018 and 512,134,311 as of December 31, 2017

Preferred stock, $0.01 par value, 10,000,000 shares authorized, 6.25% Series B Mandatory Convertible, $1,000 per share liquidation preference, 1,725,000 shares issued and outstanding as of December 31, 2017, converted to common stock on January 12, 2018

–  

–  

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive loss

Common stock in treasury; 31,269 shares as of June 30, 2018 and December 31, 2017, respectively

Total equity

TOTAL LIABILITIES AND EQUITY

$

$



SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



For the six months ended



June 30,



2018

2017



(in millions)

Cash Flows From Operating Activities:

Net income

$

$

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization

Amortization of debt issuance costs

(Gain) loss on derivatives, unsettled

Stock-based compensation

Loss on early extinguishment of debt

Other

Change in assets and liabilities

Net cash provided by operating activities



Cash Flows From Investing Activities:

Capital investments

Proceeds from sale of property and equipment

Other

Net cash used in investing activities



Cash Flows From Financing Activities:

Payments on long-term debt

Payments on revolving credit facility

–  

Borrowings under revolving credit facility

–  

Change in bank drafts outstanding

–  

Debt issuance costs

–  

Preferred stock dividend

–  

Cash paid for tax withholding

–  

Net cash used in financing activities



Decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of period

$

$

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)



Exploration and Production

Midstream Services

Other

Eliminations

Total



(in millions)

Three months ended June 30, 2018

Revenues

$

$

$

–  

$

$

Marketing purchases

–  

–  

Operating expenses

–  

General and administrative expenses

(1)

–  

–  

Restructuring charges

–  

–  

Depreciation, depletion and amortization

–  

–  

Taxes, other than income taxes

–  

–  

Operating income

–  

–  

Capital investments (2)

–  



Three months ended June 30, 2017

Revenues

$

$

$

–  

$

$

Marketing purchases

–  

–  

Operating expenses

–  

General and administrative expenses

–  

–  

Depreciation, depletion and amortization

–  

–  

Taxes, other than income taxes

–  

–  

Operating income

–  

–  

Capital investments (2)

–  



Six months ended June 30, 2018

Revenues

$

$

$

–  

$

$

Marketing purchases

–  

–  

Operating expenses

–  

General and administrative expenses

(1)

–  

–  

Restructuring charges

–  

–  

Depreciation, depletion and amortization

(3)

–  

–  

Taxes, other than income taxes

–  

–  

Operating income

–  

–  

Capital investments (2)

–  



Six months ended June 30, 2017

Revenues

$

$

$

–  

$

$

Marketing purchases

–  

–  

Operating expenses

–  

General and administrative expenses

–  

–  

Depreciation, depletion and amortization

–  

–  

Taxes, other than income taxes

–  

–  

Operating income

–  

–  

Capital investments (2)

–  

(1)

Includes $7.9 million of legal settlement charges.

(2)

Capital investments include increases of $19 million and $41 million for the three months ended June 30, 2018 and 2017, respectively, and an increase of $52 million and a decrease of $11 million for the six months ended June 30, 2018 and 2017, respectively, relating to the change in capital accruals between periods.

(3)

Includes a $10 million impairment related to certain non-core gathering assets.



Financial protection on production

Weighted Average Price per MMBtu



Volume

Sold

Purchased

Sold



(Bcf)

Swaps

Puts

Puts

Calls

Natural Gas

2018

Sold fixed price swaps

$

$

–  

$

–  

$

–  

Two-way costless collars

–  

–  

Three-way costless collars

–  

Total

2019

Sold fixed price swaps

$

$

–  

$

–  

$

–  

Two-way costless collars

–  

–  

Three-way costless collars

–  

Total

2020

Sold fixed price swaps

$

$

–  

$

–  

$

–  

Three-way costless collars

–  

Total