Further strengthened financial resilience
through comprehensive cost reductions and leading operational
achievements; lowered annual cost guidance across all
categories
Southwestern Energy Company (NYSE: SWN) today announced
financial and operating results for the second quarter ended June
30, 2020.
- Broad-based cost elimination with full year expense savings
totaling $90 million, up $30 million since last quarter;
- Achieved record single-well cost of $505 per lateral foot;
expect to average $650 per foot in the second half of the
year;
- Revised annual capital guidance to $860 million – $915 million,
lowering high end of range;
- Shallowed annual base decline to 23%;
- Delivered total production of 201 Bcfe; including 1.7 Bcf per
day of gas and 79 MBbls per day of liquids;
- Realized $120 million in cash settlements from the hedging
program across all commodities, a $0.60 per Mcfe benefit; reported
weighted average realized price (excluding transportation) of $2.05
per Mcfe including derivatives; and
- Repurchased $27 million senior notes at a 24% discount;
year-to-date senior note repurchases total $107 million at a 33%
discount.
“Southwestern Energy again underscored its strength and
resilience during the second quarter. We mitigated many of the
far-reaching impacts of COVID-19 on the industry with operational
agility and commercial flexibility to achieve results at or above
our commitments. These actions support our return to a self-funded
capital program in 2021,” said Bill Way, Southwestern Energy
President and Chief Executive Officer.
“We delivered comprehensive cost reductions, improved our base
decline and lowered well costs, all ahead of expectations. This
progress, along with our dynamic hedge portfolio and
returns-focused capital allocation practice, solidly moves us
forward on our path to deliver sustainable long-term value,”
continued Way.
Financial Results
For the quarter ended June 30, 2020, Southwestern Energy
recorded a net loss of $880 million, or ($1.63) per diluted share,
including $655 million of non-cash impairments and a $229 million
non-cash loss on unsettled mark-to-market derivatives. This
compares to net income of $138 million, or $0.26 per diluted share
in the second quarter of 2019. Adjusted net income (loss)
(non-GAAP), which excludes the non-cash items noted above, was a $1
million loss, or ($0.00) per diluted share in the second quarter of
2020, compared to adjusted net income of $40 million, or $0.08 per
diluted share for the prior year period. The decrease in adjusted
net income (loss) was primarily related to a 47% decrease in
average realized price, partially offset by $120 million in cash
settled derivative gains in 2020 and a $31 million decrease in
depreciation, depletion and amortization expense. Adjusted EBITDA
(non-GAAP) was $106 million, net cash provided by operating
activities was $94 million and net cash flow (non-GAAP) was $87
million.
FINANCIAL STATISTICS
For the three months ended
For the six months ended
June 30,
June 30,
(in millions)
2020
2019
2020
2019
Net income (loss)
$
(880
)
$
138
$
(2,427
)
$
732
Adjusted net income (loss) (non-GAAP)
$
(1
)
$
40
$
55
$
185
Diluted earnings (loss) per share
$
(1.63
)
$
0.26
$
(4.49
)
$
1.35
Adjusted diluted earnings per share
(non-GAAP)
$
(0.00
)
$
0.08
$
0.10
$
0.34
Adjusted EBITDA (non-GAAP)
$
106
$
186
$
312
$
505
Net cash provided by operating
activities
$
94
$
101
$
254
$
543
Net cash flow (non-GAAP)
$
87
$
173
$
278
$
482
Total capital investments (1)
$
245
$
368
$
482
$
693
(1)
Capital investments includes an increase
of $39 million for the three months ended June 30, 2019, and
increases of $8 million and $105 million for the six months ended
June 30, 2020 and 2019, respectively, relating to the change in
capital accruals between periods. There was no change in the
capital accrual for the three months ended June 30, 2020.
As indicated in the table below, second quarter 2020 weighted
average realized price (including transportation) was $1.65 per
Mcfe including derivatives, down 24% from $2.17 per Mcfe in the
prior year period. Settled derivatives provided a $0.60 per Mcfe
uplift to realized price, but were more than offset by lower
commodity prices, including a 35% decrease to NYMEX Henry Hub and
53% decrease in West Texas Intermediate (WTI), compared to prior
year.
During the second quarter, the Company realized $120 million in
cash settled derivative gains, bringing year-to-date cash settled
derivative gains to $213 million. As of June 30, 2020, the fair
value of unsettled derivatives for the remainder of 2020 was a $195
million asset. The Company has 385 Bcfe of its remaining expected
2020 production hedged with swaps and collars for approximately 90%
of natural gas, 95% of oil and 60% of NGLs. In addition, the
Company has 145 Bcf of natural gas financial basis hedges.
As of June 30, 2020, Southwestern Energy had total debt of $2.46
billion and a cash balance of $10 million, with a leverage ratio of
3.1x. During the quarter, the Company reduced senior notes by $27
million through open market repurchases at a 24% discount, bringing
year-to-date senior notes reduction to $107 million, at a 33%
discount. The Company’s senior notes totaled $2.12 billion, with
only $207 million due before 2025.
At the end of the second quarter, the Company had $1.26 billion
undrawn commitment under its $1.8 billion revolving credit facility
with $336 million borrowed and $209 million in outstanding letters
of credit. Since April, the Company was able to convert $113
million in outstanding letters of credit to surety bonds.
Realized Prices
For the three months ended
For the six months ended
(includes transportation costs)
June 30,
June 30,
2020
2019
2020
2019
Natural Gas Price:
NYMEX Henry Hub price ($/MMBtu) (1)
$
1.72
$
2.64
$
1.83
$
2.89
Discount to NYMEX (2)
(0.74
)
(0.84
)
(0.57
)
(0.52
)
Realized gas price per Mcf, excluding
derivatives
$
0.98
$
1.80
$
1.26
$
2.37
Gain (loss) on settled financial basis
derivatives ($/Mcf)
(0.05
)
(0.03
)
0.03
(0.03
)
Gain on settled commodity derivatives
0.57
0.17
0.43
0.04
Realized gas price per Mcf, including
derivatives
$
1.50
$
1.94
$
1.72
$
2.38
Oil Price, per Bbl:
WTI oil price
$
27.85
$
59.81
$
37.01
$
57.36
Discount to WTI
(12.16
)
(10.26
)
(9.46
)
(9.75
)
Realized oil price, excluding
derivatives
$
15.69
$
49.55
$
27.55
$
47.61
Realized oil price, including
derivatives
$
41.64
$
51.60
$
44.08
$
49.80
NGL Price, per Bbl:
Realized NGL price, excluding
derivatives
$
6.43
$
10.51
$
7.29
$
12.50
Realized NGL price, including
derivatives
$
8.22
$
12.62
$
9.50
$
13.84
Percentage of WTI, excluding
derivatives
23
%
18
%
20
%
22
%
Total Weighted Average Realized
Price:
Excluding derivatives ($/Mcfe)
$
1.05
$
1.99
$
1.37
$
2.48
Including derivatives ($/Mcfe)
$
1.65
$
2.17
$
1.90
$
2.54
(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
Operational Results
Total production for the quarter ended June 30, 2020 was 201
Bcfe, comprised of 79% natural gas, 18% NGLs and 3% oil. Capital
investments totaled $245 million for the second quarter, with 30
wells drilled, 31 wells completed and 31 wells placed to sales.
During the quarter, the Company shifted activity to high-rate,
high-volume natural gas wells, with over 80% of wells drilled in
dry gas Northeast Appalachia and rich gas Southwest Appalachia. The
Company has revised its well count guidance ranges to reflect the
shift in activity, with full year capital investment estimated to
be split evenly between Northeast Appalachia and Southwest
Appalachia.
The Company continues to deliver well cost reductions ahead of
expectations. In the second quarter, wells to sales averaged $691
per lateral foot, with an expected full year average of $690 per
foot, compared to original guidance of $730 per foot. This
incremental reduction is due to operational efficiencies,
completion design optimization and deflationary service costs.
Additionally, the Company expects to average $650 per foot for
wells to sales in the second half of 2020.
For the three months ended
For the six months ended
June 30,
June 30,
2020
2019
2020
2019
Production
Gas production (Bcf)
158
148
314
291
Oil production (MBbls)
1,083
937
2,482
1,791
NGL production (MBbls)
6,111
5,497
12,239
11,100
Total production (Bcfe)
201
186
402
368
Average unit costs per Mcfe
Lease operating expenses
$
0.91
$
0.90
$
0.94
$
0.90
General & administrative expenses
(1)
$
0.14
$
0.19
$
0.13
$
0.19
Taxes, other than income taxes
$
0.05
$
0.09
$
0.06
$
0.10
Full cost pool amortization
$
0.38
$
0.55
$
0.46
$
0.56
(1)
Excludes restructuring charges (including
severance) of $2 million for the three months ended June 30, 2020
and 2019, and $12 million and $5 million for the six months ended
June 30, 2020 and 2019, respectively.
Southwest Appalachia – In the second quarter, total
production was 88 Bcfe, half of which was liquids production of 79
MBbls per day. The Company drilled nine wells, completed 17 wells
and placed 20 wells to sales. The average lateral length of wells
to sales was 11,469 feet, and included six wells in the rich area
and 14 wells in the super rich area. All six of the rich wells were
online for at least 30 days and had an average 30-day rate of 17.2
MMcfe per day, while 12 of the super rich wells were online for at
least 30 days and had an average 30-day rate of 7.3 MMcfe per day,
including 67% liquids. The production rates associated with the
super rich wells were temporarily managed lower to mitigate
condensate market constraints that existed early in the second
quarter.
Northeast Appalachia – Second quarter production was 113
Bcf. There were 21 wells drilled, 14 wells completed and 11 wells
put to sales with an average lateral length of 9,693 feet. Of the
eight wells that were online for at least 30 days, six were Lower
Marcellus, with an average 30-day rate of 14.8 MMcf per day. Second
quarter wells to sales represented a different well mix compared to
the first quarter, which was primarily located in the higher rate
Tioga area. The two remaining wells were part of the Upper
Marcellus testing and had an average 30-day rate of 8.3 MMcf per
day.
E&P Division Results
For the three months ended June
30, 2020
For the six months ended June 30,
2020
Northeast
Southwest
Northeast
Southwest
Gas production (Bcf)
113
45
227
87
Liquids production
Oil (MBbls)
—
1,079
—
2,474
NGL (MBbls)
—
6,110
—
12,237
Production (Bcfe)
113
88
227
175
Gross operated production June 2020
(MMcfe/d)
1,475
1,569
Net operated production June 2020
(MMcfe/d)
1,203
973
Capital investments ($ in
millions)
Drilling and completions, including
workovers
$
107
$
87
$
186
$
197
Land acquisition and other
4
7
5
13
Capitalized interest and expense
4
29
10
59
Total capital investments
$
115
$
123
$
201
$
269
Gross operated well activity
summary
Drilled
21
9
36
32
Completed
14
17
24
29
Wells to sales
11
20
16
27
Average well cost on wells to sales (in
millions)
$
6.2
$
8.2
$
6.6
$
8.9
Average lateral length (in ft)
9,693
11,469
9,475
11,981
Total weighted average realized price
per Mcfe, excluding derivatives
$
1.03
$
1.08
$
1.37
$
1.37
Updated Guidance
The Company revised its annual guidance to reflect lower costs
across all categories and higher NGL price realizations as a
percentage of WTI. Production guidance is also revised due to the
shift in activity to high-rate, high-volume gas, resulting in a
rebalance of production mix and well count. Updated guidance noted
in bold:
1st Quarter Actual
2nd Quarter Actual
3rd Quarter
4th Quarter
Total Year
Production
Natural Gas (Bcf)
156
158
170 – 177
177 – 184
661 – 675
Oil/Condensate (MBbls)
1,399
1,083
1,300 – 1,400
1,275 – 1,375
5,057 – 5,257
NGLs (MBbls)
6,128
6,111
6,350 – 6,625
6,750 – 7,025
25,339 – 25,889
Total Production (Bcfe)
201
201
216 – 225
225 – 234
843 – 861
Total Production (MMcfe/d)
2,213
2,203
2,347 – 2,446
2,446 – 2,543
2,303 – 2,352
CAPITAL BY DIVISION (in
millions)
Northeast Appalachia
$330 – $345
Southwest Appalachia
$365 – $380
Other
$25 – $30
Capitalized interest
$85 – $95
Capitalized expense
$55 – $65
Total Capital Investments
$860 – $915
PRODUCTION BY DIVISION (Bcfe)
Northeast Appalachia
471 – 480
Southwest Appalachia
372 – 381
PRICING
Natural gas discount to NYMEX including
transportation
$0.63 – $0.73 per Mcf
Oil discount to West Texas Intermediate
(WTI) including transportation
$9.50 – $11.50 per Bbl
Natural Gas Liquids realization as a %
of WTI including transportation
19% – 24%
EXPENSES
Lease operating expenses
$0.90 – $0.94 per Mcfe
General & administrative
expense
$0.11 – $0.15 per Mcfe
Taxes, other than income taxes
$0.05 – $0.07 per Mcfe
Interest expense - net of
capitalization
$78 – $88 MM
Income tax rate (~100% deferred)
23.5%
WELL COUNTS
Drilled
Completed
Wells To Sales
Ending DUC Inventory
Northeast Appalachia
45 – 50
40 – 45
40 – 45
5 – 10
Southwest Appalachia
45 – 50
50 – 55
50 – 55
15 – 20
Total Well Count
90 – 100
90 – 100
90 – 100
20 – 30
Conference Call
Southwestern Energy will host a conference call on Friday, July
31, 2020 at 9:30 a.m. Central to discuss second quarter 2020
results. To participate, dial US toll-free 877-883-0383, or
international 412-902-6506 and enter access code 6529300. A live
webcast will be available at ir.swn.com and a replay will be
archived following the call.
To listen to a replay of the call, dial 877-344-7529,
International 412-317-0088, or Canada Toll Free 855-669-9658. Enter
replay access code 10145880. The replay will be available until
August 31, 2020.
About Southwestern Energy
Southwestern Energy Company is an independent energy company
engaged in natural gas, natural gas liquids and oil exploration,
development, production and marketing. For additional information,
visit our website www.swn.com.
Forward Looking Statement
This news release contains forward-looking statements.
Forward-looking statements relate to future events and anticipated
results of operations, business strategies, and other aspects of
our operations or operating results. In many cases you can identify
forward-looking statements by terminology such as “anticipate,”
“intend,” “plan,” “project,” “estimate,” “continue,” “potential,”
“should,” “could,” “may,” “will,” “objective,” “guidance,”
“outlook,” “effort,” “expect,” “believe,” “predict,” “budget,”
“projection,” “goal,” “forecast,” “model,” “target” or similar
words. Statements may be forward looking even in the absence of
these particular words. Where, in any forward-looking statement,
the Company expresses an expectation or belief as to future
results, such expectation or belief is expressed in good faith and
believed to have a reasonable basis. However, there can be no
assurance that such expectation or belief will result or be
achieved. The actual results of operations can and will be affected
by a variety of risks and other matters including, but not limited
to, changes in commodity prices (including geographic basis
differentials); changes in expected levels of natural gas, natural
gas liquids and oil reserves or production; impact of reduced
demand for our products and products made from them due to
governmental and societal actions taken in response to the COVID-19
pandemic; operating hazards, drilling risks, unsuccessful
exploratory activities; natural disasters and epidemics; limited
access to capital or significantly higher cost of capital related
to illiquidity or uncertainty in the domestic or international
financial markets; international monetary conditions; the risks
related to the discontinuation of LIBOR and/or other reference
rates that may be introduced following the transition, including
increased expenses and litigation and the effectiveness of interest
rate hedge strategies; unexpected cost increases; potential
liability for remedial actions under existing or future
environmental regulations; failure or delay in obtaining necessary
regulatory approvals; potential liability resulting from pending or
future litigation; general domestic and international economic and
political conditions, including the impact of COVID-19; the impact
of a prolonged federal, state or local government shutdown and
threats not to increase the federal government’s debt limit; as
well as changes in tax, environmental and other laws, including
court rulings, applicable to our business. Other factors that could
cause actual results to differ materially from those described in
the forward-looking statements include other economic, business,
competitive and/or regulatory factors affecting our business
generally as set forth in our filings with the Securities and
Exchange Commission. Unless legally required, Southwestern Energy
Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise.
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
For the three months ended
For the six months ended
June 30,
June 30,
(in millions, except share/per share
amounts)
2020
2019
2020
2019
Operating Revenues:
Gas sales
$
164
$
275
$
412
$
705
Oil sales
19
47
71
86
NGL sales
40
58
90
139
Marketing
187
287
426
725
Other
—
—
3
2
410
667
1,002
1,657
Operating Costs and Expenses:
Marketing purchases
201
293
449
734
Operating expenses
182
169
375
334
General and administrative expenses
32
40
58
77
Loss on sale of operating assets
—
3
—
3
Restructuring charges
2
2
12
5
Depreciation, depletion and
amortization
84
115
197
227
Impairments
655
6
2,134
6
Taxes, other than income taxes
10
17
23
36
1,166
645
3,248
1,422
Operating Income (Loss)
(756
)
22
(2,246
)
235
Interest Expense:
Interest on debt
40
41
80
83
Other interest charges
3
2
5
3
Interest capitalized
(21
)
(28
)
(44
)
(57
)
22
15
41
29
Gain (Loss) on Derivatives
(109
)
152
230
120
Gain on Early Extinguishment of
Debt
7
—
35
—
Other Income (Loss), Net
—
(6
)
1
(5
)
Income (Loss) Before Income
Taxes
(880
)
153
(2,021
)
321
Provision (Benefit) for Income
Taxes
Current
—
—
(2
)
—
Deferred
—
15
408
(411
)
—
15
406
(411
)
Net Income (Loss)
$
(880
)
$
138
$
(2,427
)
$
732
Earnings (Loss) Per Common
Share
Basic
$
(1.63
)
$
0.26
$
(4.49
)
$
1.36
Diluted
$
(1.63
)
$
0.26
$
(4.49
)
$
1.35
Weighted Average Common Shares
Outstanding:
Basic
541,079,192
539,005,941
540,693,841
539,362,984
Diluted
541,079,192
539,947,053
540,693,841
540,624,742
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2020
December 31, 2019
ASSETS
(in millions)
Current assets:
Cash and cash equivalents
$
10
$
5
Accounts receivable, net
250
345
Derivative assets
466
278
Other current assets
44
51
Total current assets
770
679
Natural gas and oil properties, using the
full cost method, including $1,423 million as of June 30, 2020 and
$1,506 million as of December 31, 2019 excluded from
amortization
25,739
25,250
Other
512
520
Less: Accumulated depreciation, depletion
and amortization
(22,825
)
(20,503
)
Total property and equipment, net
3,426
5,267
Operating lease assets
153
159
Deferred tax assets
—
407
Other long-term assets
206
205
Total long-term assets
359
771
TOTAL ASSETS
$
4,555
$
6,717
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
426
$
525
Taxes payable
48
59
Interest payable
48
51
Derivative liabilities
282
125
Current operating lease liabilities
34
34
Other current liabilities
37
54
Total current liabilities
875
848
Long-term debt
2,440
2,242
Long-term operating lease liabilities
113
119
Pension and other postretirement
liabilities
37
43
Other long-term liabilities
267
219
Total long-term liabilities
2,857
2,623
Commitments and contingencies
Equity:
Common stock, $0.01 par value;
1,250,000,000 shares authorized; issued 586,593,540 shares as of
June 30, 2020 and 585,555,923 shares as of December 31, 2019
6
6
Additional paid-in capital
4,730
4,726
Accumulated deficit
(3,678
)
(1,251
)
Accumulated other comprehensive loss
(33
)
(33
)
Common stock in treasury, 44,353,224
shares as of June 30, 2020 and December 31, 2019
(202
)
(202
)
Total equity
823
3,246
TOTAL LIABILITIES AND EQUITY
$
4,555
$
6,717
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
For the six months ended
June 30,
(in millions)
2020
2019
Cash Flows From Operating
Activities:
Net income (loss)
$
(2,427
)
$
732
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion and
amortization
197
227
Amortization of debt issuance costs
4
2
Impairments
2,134
6
Deferred income taxes
408
(411
)
Gain on derivatives, unsettled
(17
)
(96
)
Stock-based compensation
2
4
Gain on early extinguishment of debt
(35
)
—
Loss on sale of assets
—
3
Other
—
10
Change in assets and liabilities:
Accounts receivable
94
221
Accounts payable
(121
)
(129
)
Taxes payable
(11
)
(6
)
Interest payable
(1
)
1
Inventories
6
4
Other assets and liabilities
21
(25
)
Net cash provided by operating
activities
254
543
Cash Flows From Investing
Activities:
Capital investments
(472
)
(586
)
Proceeds from sale of property and
equipment
2
26
Net cash used in investing activities
(470
)
(560
)
Cash Flows From Financing
Activities:
Payments on long-term debt
(72
)
—
Payments on revolving credit facility
(919
)
—
Borrowings under revolving credit
facility
1,221
—
Change in bank drafts outstanding
(8
)
(7
)
Purchase of treasury stock
—
(21
)
Cash paid for tax withholding
(1
)
(1
)
Net cash provided by (used in) financing
activities
221
(29
)
Increase (decrease) in cash and cash
equivalents
5
(46
)
Cash and cash equivalents at beginning of
year
5
201
Cash and cash equivalents at end of
period
$
10
$
155
Hedging Summary
A detailed breakdown of derivative financial instruments and
financial basis positions as of June 30, 2020, including the
remainder of 2020 and excluding those positions that settled in the
first and second quarters, is shown below. Please refer to the
Company’s quarterly report on Form 10-Q to be filed with the
Securities and Exchange Commission for complete information on the
Company’s commodity, basis and interest rate protection.
Weighted Average Price per
MMBtu
Volume (Bcf)
Swaps
Sold Puts
Purchased Puts
Sold Calls
Natural gas
2020
Fixed price swaps
218
$
2.39
$
—
$
—
$
—
Two-way costless collars
44
—
—
2.12
2.34
Three-way costless collars
59
—
2.18
2.57
2.96
Total
321
2021
Fixed price swaps
36
$
2.53
$
—
$
—
$
—
Two-way costless collars
55
—
—
2.34
2.76
Three-way costless collars
306
—
2.16
2.49
2.85
Total
397
2022
Two-way costless collars
29
$
—
$
—
$
2.10
$
2.83
Three-way costless collars
99
—
2.08
2.45
2.85
Total
128
2023
Three-way costless collars
9
$
—
$
2.16
$
2.59
$
3.36
Weighted Average Price per
Bbl
Volume (MBbls)
Swaps
Sold Puts
Purchased Puts
Sold Calls
Oil
2020
Fixed price swaps (1)
1,107
$
72.54
$
—
$
—
$
—
Two-way costless collars
502
—
—
56.83
59.78
Three-way costless collars
895
—
43.54
52.57
57.55
Total
2,504
2021
Fixed price swaps
2,328
$
53.72
$
—
$
—
$
—
Three-way costless collars
1,445
—
43.52
53.25
58.14
Total
3,773
2022
Fixed price swaps
438
$
51.74
$
—
$
—
$
—
Three-way costless collars
666
—
42.50
53.20
58.00
Total
1,104
Ethane
2020
Fixed price swaps
5,230
$
8.61
$
—
$
—
$
—
2021
Fixed price swaps
5,889
$
7.12
$
—
$
—
$
—
2022
Fixed price swaps
136
$
7.35
$
—
$
—
$
—
Propane
2020
Fixed price swaps
2,748
$
23.01
$
—
$
—
$
—
Two-way costless collars
184
—
—
25.20
29.40
Total
2,932
2021
Fixed price swaps
4,298
$
19.99
$
—
$
—
$
—
2022
Fixed price swaps
105
$
19.43
$
—
$
—
$
—
(1)
Includes 790 MBbls of purchased fixed
price oil swaps at $36.64 per barrel and 1,897 MBbls of sold fixed
price oil swaps at $57.60 per barrel.
Natural gas financial basis
positions
Volume
Basis Differential
(Bcf)
($/MMBtu)
Q3 2020
Dominion South
41
$
(0.53
)
TCO
18
$
(0.46
)
TETCO M3
22
$
(0.42
)
Total
81
$
(0.48
)
Q4 2020
Dominion South
35
$
(0.51
)
TCO
11
$
(0.43
)
TETCO M3
18
$
(0.10
)
Total
64
$
(0.38
)
2021
Dominion South
71
$
(0.47
)
TCO
22
$
(0.36
)
TETCO M3
57
$
0.36
Total
150
$
(0.14
)
2022
Dominion South
69
$
(0.51
)
TCO
17
$
(0.37
)
TETCO M3
36
$
(0.41
)
Total
122
$
(0.46
)
Explanation and Reconciliation of Non-GAAP
Financial Measures
The Company reports its financial results in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”). However, management believes certain non-GAAP
performance measures may provide financial statement users with
additional meaningful comparisons between current results, the
results of its peers and of prior periods.
One such non-GAAP financial measure is net cash flow. Management
presents this measure because (i) it is accepted as an indicator of
an oil and gas exploration and production company’s ability to
internally fund exploration and development activities and to
service or incur additional debt, (ii) changes in operating assets
and liabilities relate to the timing of cash receipts and
disbursements which the Company may not control and (iii) changes
in operating assets and liabilities may not relate to the period in
which the operating activities occurred.
Additional non-GAAP financial measures the Company may present
from time to time are net debt, adjusted net income, adjusted
diluted earnings per share and adjusted EBITDA, all which exclude
certain charges or amounts. Management presents these measures
because (i) they are consistent with the manner in which the
Company’s position and performance are measured relative to the
position and performance of its peers, (ii) these measures are more
comparable to earnings estimates provided by securities analysts,
and (iii) charges or amounts excluded cannot be reasonably
estimated and guidance provided by the Company excludes information
regarding these types of items. These adjusted amounts are not a
measure of financial performance under GAAP.
3 Months Ended June
30,
6 Months Ended June
30,
2020
2019
2020
2019
Adjusted net income (loss):
(in millions)
Net income (loss)
$
(880
)
$
138
$
(2,427
)
$
732
Add back (deduct):
Restructuring charges
2
2
12
5
Impairments
655
6
2,134
6
Loss on sale of assets
—
3
—
3
(Gain) loss on derivatives, unsettled
229
(118
)
(17
)
(96
)
Gain on early extinguishment of debt
(7
)
—
(35
)
—
Non-cash pension settlement loss
—
4
—
4
Other (gain) loss
(1
)
3
(1
)
1
Adjustments due to discrete tax items
(1)
207
(23
)
881
(489
)
Tax impact on adjustments
(206
)
25
(492
)
19
Adjusted net income (loss)
$
(1
)
$
40
$
55
$
185
(1)
2020 primarily relates to the recognition
of a valuation allowance. 2019 primarily relates to the release of
the valuation allowance. The Company expects its 2020 income tax
rate to be 23.5% before the impacts of any valuation allowance.
3 Months Ended June
30,
6 Months Ended June
30,
2020
2019
2020
2019
Adjusted diluted earnings (loss) per
share:
Diluted earnings (loss) per share
$
(1.63
)
$
0.26
$
(4.49
)
$
1.35
Add back (deduct):
Restructuring charges
0.01
0.00
0.02
0.01
Impairments
1.21
0.01
3.95
0.01
Loss on sale of assets
—
0.00
—
0.01
(Gain) loss on derivatives, unsettled
0.42
(0.22
)
(0.03
)
(0.18
)
Gain on early extinguishment of debt
(0.01
)
—
(0.07
)
—
Non-cash pension settlement loss
—
0.01
—
0.01
Other (gain) loss
(0.00
)
0.01
(0.00
)
0.00
Adjustments due to discrete tax items
(1)
0.38
(0.04
)
1.63
(0.91
)
Tax impact on adjustments
(0.38
)
0.05
(0.91
)
0.04
Adjusted diluted earnings (loss) per
share
$
(0.00
)
$
0.08
$
0.10
$
0.34
(1)
2020 primarily relates to the recognition
of a valuation allowance. 2019 primarily relates to the release of
the valuation allowance. The Company expects its 2020 income tax
rate to be 23.5% before the impacts of any valuation allowance.
3 Months Ended June
30,
6 Months Ended June
30,
2020
2019
2020
2019
Net cash flow:
(in millions)
Net cash provided by operating
activities
$
94
$
101
$
254
$
543
Add back (deduct):
Changes in operating assets and
liabilities
(9
)
70
12
(66
)
Restructuring charges
2
2
12
5
Net cash flow
$
87
$
173
$
278
$
482
3 Months Ended June
30,
6 Months Ended June
30,
2020
2019
2020
2019
Adjusted EBITDA:
(in millions)
Net income (loss)
$
(880
)
$
138
$
(2,427
)
$
732
Add back (deduct):
Interest expense
22
15
41
29
Provision (benefit) for income taxes
—
15
406
(411
)
Depreciation, depletion and
amortization
84
115
197
227
Restructuring charges
2
2
12
5
Impairments
655
6
2,134
6
Loss on sale of assets
—
3
—
3
(Gain) loss on derivatives, unsettled
229
(118
)
(17
)
(96
)
Gain on early extinguishment of debt
(7
)
—
(35
)
—
Non-cash pension settlement loss
—
4
—
4
Other (gain) loss
—
4
(1
)
2
Stock-based compensation expense
1
2
2
4
Adjusted EBITDA
$
106
$
186
$
312
$
505
June 30, 2020
Net debt:
(in millions)
Total debt (1)
$
2,457
Subtract:
Cash and cash equivalents
(10
)
Net debt
$
2,447
(1)
Does not include $17 million of
unamortized debt discount and issuance expense.
June 30, 2020
Net debt to EBITDA:
(in millions)
Net debt
$
2,447
Adjusted EBITDA (1)
$
780
Net debt to EBITDA
3.1x
(1)
Adjusted EBITDA for the twelve months
ended June 30, 2020.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730006037/en/
Investor Contact Paige Penchas Vice President, Investor
Relations (832) 796-4068 paige_penchas@swn.com
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