Operational and financial achievements with
disciplined acquisition accelerating momentum into a rising price
environment; increasing estimated 2021 free cash flow to $300
million
Southwestern Energy Company (NYSE: SWN) today announced
financial and operating results for the third quarter ended
September 30, 2020.
- Increasing 2021 free cash flow estimate due to improved current
strip and continuing capital and operational efficiencies;
investment to be limited to maintenance capital;
- At-market acquisition of Montage Resources expected to close
following Montage shareholder vote on November 12; on track for $30
million acquisition synergies;
- Borrowing base reaffirmed at $1.8 billion; increases to $2.0
billion following acquisition closing; asset coverage from combined
portfolio exceeds borrowing base;
- Peer leading maturity runway maintained through equity and
senior notes issuance; Montage senior notes called subject to
closing;
- Continuous innovation driving record low single-well cost of
$491 per lateral foot; second half average expected to be below
$650 per lateral foot;
- Total production of 221 Bcfe; includes 1.9 Bcf per day of gas
and 87 MBbls per day of liquids;
- Realized $97 million in cash derivative settlements bringing
year-to-date total to $310 million from rigorous hedging program;
and
- Published 7th Annual Corporate Responsibility report for 2019.
Key environmental highlights include:
Reported lowest GHG intensity among AXPC
peers in annual EHS Survey
Methane intensity 85% better than the
target set by ONE Future
Fresh water neutral for the fourth year in
a row; 100% of fresh water usage offset through recycling and
conservation projects
“We have executed a disciplined repositioning strategy back to
free cash flow in 2021 by decreasing debt, maintaining strong
liquidity and leading maturity runway, reducing structural costs
and improving capital efficiency,” said Bill Way, Southwestern
Energy President and Chief Executive Officer.
“Further building on the Company’s strengths, our attention is
focused on optimizing free cash flow generation and further debt
reduction. These plans are underpinned by a returns-driven
investment strategy at maintenance capital benefiting from
innovation and technology to drive further well performance
improvements and cost efficiencies, all while dynamically hedging,
realizing the full synergies of a value-adding acquisition and
driving enhanced returns for shareholders,” continued Way.
Financial Results For the quarter ended September 30,
2020, Southwestern Energy recorded a net loss of $593 million, or
($1.04) per diluted share, including $361 million of non-cash
impairments and a $289 million non-cash loss on unsettled
mark-to-market derivatives due to rising prices in future periods.
This compares to net income of $49 million, or $0.09 per diluted
share in the third quarter of 2019.
Adjusted net income (non-GAAP), which excludes the non-cash
items noted above, was $47 million, or $0.08 per diluted share in
the third quarter of 2020, compared to adjusted net income of $44
million, or $0.08 per diluted share for the prior year period, as
decreased revenues due to lower prices were offset by decreased
depreciation, depletion and amortization expense. Adjusted EBITDA
(non-GAAP) was $154 million, net cash provided by operating
activities was $153 million and net cash flow (non-GAAP) was $135
million.
FINANCIAL STATISTICS
For the three months ended
For the nine months ended
September 30,
September 30,
(in millions)
2020
2019
2020
2019
Net income (loss)
$
(593
)
$
49
$
(3,020
)
$
781
Adjusted net income (non-GAAP)
$
47
$
44
$
102
$
229
Diluted earnings (loss) per share
$
(1.04
)
$
0.09
$
(5.48
)
$
1.44
Adjusted diluted earnings per share
(non-GAAP)
$
0.08
$
0.08
$
0.18
$
0.42
Adjusted EBITDA (non-GAAP)
$
154
$
202
$
466
$
707
Net cash provided by operating
activities
$
153
$
196
$
407
$
739
Net cash flow (non-GAAP)
$
135
$
185
$
413
$
667
Total capital investments (1)
$
223
$
240
$
705
$
933
(1) Capital investments on the cash flow statement include
decreases of $7 million and $53 million for the three months ended
September 30, 2020 and 2019, respectively, and increases of $1
million and $52 million for the nine months ended September 30,
2020 and 2019, respectively, relating to the change in accrued
expenditures between periods.
As indicated in the table below, third quarter 2020 weighted
average realized price, including $0.35 per Mcfe of transportation
expenses, was $1.34 per Mcfe before the impact of derivatives, down
22% from $1.72 per Mcfe in the prior year period. The decrease was
primarily due to an 11% decrease in NYMEX Henry Hub and a 27%
decrease in West Texas Intermediate (WTI). Third quarter 2020
weighted average realized price before transportation expenses was
$1.69 per Mcfe.
The Company realized $97 million in cash-settled derivative
gains during the third quarter, a $0.44 per Mcfe uplift, bringing
year-to-date gains to $310 million. Included in the third quarter
settled derivative gains is a $20 million gain related to natural
gas basis hedges, which protected the Company from widening basis
differentials in the Appalachia basin.
During the third quarter, the Company completed two capital
market transactions related to the announced acquisition of Montage
Resources. Net proceeds of $152 million from the issuance of 63.25
million shares of common stock and $350 million of 8.375% Senior
Notes due 2028 will be used to fund a redemption of outstanding
Montage Senior Notes due 2023 upon the anticipated close of the
acquisition in the fourth quarter.
As of September 30, 2020, Southwestern Energy had total debt of
$2.47 billion and a cash balance of $95 million, with a leverage
ratio of 3.2x. At the end of the third quarter, the Company had no
borrowings under its revolving credit facility with $203 million in
outstanding letters of credit. In October, the Company announced
its borrowing base had been reaffirmed at $1.8 billion, with
commitments to increase to $2.0 billion upon the closing of the
Montage acquisition.
Realized Prices
For the three months ended
For the nine months ended
(includes transportation costs)
September 30,
September 30,
2020
2019
2020
2019
Natural Gas Price:
NYMEX Henry Hub price ($/MMBtu) (1)
$
1.98
$
2.23
$
1.88
$
2.67
Discount to NYMEX (2)
(0.89
)
(0.78
)
(0.68
)
(0.63
)
Realized gas price per Mcf, excluding
derivatives
$
1.09
$
1.45
$
1.20
$
2.04
Gain (loss) on settled financial basis
derivatives ($/Mcf)
0.12
(0.01
)
0.06
(0.02
)
Gain on settled commodity derivatives
($/Mcf)
0.31
0.43
0.39
0.18
Realized gas price per Mcf, including
derivatives
$
1.52
$
1.87
$
1.65
$
2.20
Oil Price, per Bbl:
WTI oil price
$
40.93
$
56.45
$
38.32
$
57.06
Discount to WTI
(11.47
)
(9.91
)
(10.12
)
(9.92
)
Realized oil price, excluding
derivatives
$
29.46
$
46.54
$
28.20
$
47.14
Realized oil price, including
derivatives
$
46.69
$
49.67
$
44.97
$
49.74
NGL Price, Per Bbl:
Realized NGL price, excluding
derivatives
$
10.34
$
8.89
$
8.37
$
11.24
Realized NGL price, including
derivatives
$
10.50
$
11.93
$
9.85
$
13.18
Percentage of WTI, excluding
derivatives
25
%
16
%
22
%
20
%
Total Weighted Average Realized
Price:
Excluding derivatives ($/Mcfe)
$
1.34
$
1.72
$
1.36
$
2.21
Including derivatives ($/Mcfe)
$
1.78
$
2.16
$
1.86
$
2.41
(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 September 30, 2020 was 221 Bcfe, comprised of 78% natural
gas, 18% NGLs and 4% oil. Capital investments totaled $223 million
for the third quarter, with 16 wells drilled, 25 wells completed
and 30 wells placed to sales. Third quarter wells to sales averaged
$664 per lateral foot. During the quarter, the Company continued to
progress operational efficiencies and drive further cost
reductions, including averaging 15 stages completed per day on a
7-well pad. As a result of these improvements, the Company is on
track to deliver well costs below the targets announced in the
second quarter.
Operating Statistics
For the three months ended
For the nine months ended
September 30,
September 30,
2020
2019
2020
2019
Production
Gas production (Bcf)
173
158
487
449
Oil production (MBbls)
1,294
1,419
3,776
3,210
NGL production (MBbls)
6,687
5,911
18,926
17,011
Total production (Bcfe)
221
202
623
570
Division Production
Northeast Appalachia (Bcf)
121
118
348
343
Southwest Appalachia (Bcfe)
100
84
275
227
Average unit costs per Mcfe
Lease operating expenses
$
0.91
$
0.94
$
0.93
$
0.92
General & administrative expenses
$
0.12
(1)
$
0.15
(2)
$
0.13
(1)
$
0.17
(2)
Taxes, other than income taxes
$
0.07
$
0.08
$
0.06
$
0.09
Full cost pool amortization
$
0.29
$
0.58
$
0.40
$
0.57
(1) Excludes $3 million in Montage acquisition-related expenses
for the three and nine months ended September 30, 2020 and $12
million in restructuring charges for the nine months ended
September 30, 2020.
(2) Excludes $4 million and $9 million of restructuring charges
for the three and nine months ended September 30, 2019,
respectively. Excludes a $6 million residual value guarantee
short-fall payment to the previous lessor of our headquarters
building and $3 million of legal settlement charges for the three
and nine months ended September 30, 2019.
Southwest Appalachia – In the third quarter, total
production was 100 Bcfe, with liquids production of 87 MBbls per
day. The Company drilled seven wells, completed 12 wells and placed
12 wells to sales. The average lateral length of wells to sales was
13,206 feet, and included six wells in the rich area and six wells
in the super rich area. All six of the rich wells were online for
at least 30 days and had an average 30-day rate of 25.0 MMcfe per
day, and all six of the super rich wells were online for at least
30 days and had an average 30-day rate of 14.5 MMcfe per day,
including 63% liquids.
Northeast Appalachia – Third quarter production was 121
Bcf. There were nine wells drilled, 13 wells completed and 18 wells
put to sales with an average lateral length of 9,455 feet. The 17
wells that were online for at least 30 days were all Lower
Marcellus wells, with an average 30-day rate of 15.0 MMcf per
day.
E&P Division Results
For the three months ended
September 30, 2020
For the nine months ended
September 30, 2020
Northeast
Southwest
Northeast
Southwest
Gas production (Bcf)
121
52
348
139
Liquids production
Oil (MBbls)
—
1,290
—
3,764
NGL (MBbls)
—
6,687
—
18,924
Production (Bcfe)
121
100
348
275
Gross operated production September 2020
(MMcfe/d)
1,630
1,850
Net operated production September 2020
(MMcfe/d)
1,334
1,147
Capital investments ($ in
millions)
Drilling and completions, including
workovers
$
82
$
78
$
268
$
275
Land acquisition and other
9
9
14
22
Capitalized interest and expense
7
30
17
89
Total capital investments
$
98
$
117
$
299
$
386
Gross operated well activity
summary
Drilled
9
7
45
39
Completed
13
12
37
41
Wells to sales
18
12
34
39
Average well cost on wells to sales (in
millions)
$
6.6
$
8.3
$
6.6
$
8.7
Average lateral length (in ft)
9,455
13,206
9,464
12,358
Total weighted average realized price
per Mcfe, excluding derivatives
$
1.09
$
1.65
$
1.27
$
1.47
Conference Call Southwestern Energy will host a
conference call on Friday, October 30, 2020 at 9:30 a.m. Central to
discuss third quarter 2020 results. To participate, dial US
toll-free 877-883-0383, or international 412-902-6506 and enter
access code 7104794. 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 10148744. The replay will be available until
November 30, 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 Certain statements and
information herein may constitute “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. The words “believe,” “expect,” “anticipate,” “plan,”
“intend,” “foresee,” “should,” “would,” “could,” “attempt,”
“appears,” “forecast,” “outlook,” “estimate,” “project,”
“potential,” “may,” “will,” “are likely,” “guidance,” “goal,”
“model,” “target,” “budget” and other similar expressions are
intended to identify forward-looking statements, which are
generally not historical in nature. Statements may be forward
looking even in the absence of these particular words. Examples of
forward-looking statements include, but are not limited to,
statements regarding generation of free cash flow and synergies
upon closing of the acquisition (“Proposed Transaction”) of Montage
Resources Corporation (“Montage”). These forward-looking statements
are based on our current expectations and beliefs concerning future
developments and their potential effect on us. The forward-looking
statements contained in this document are largely based on our
expectations for the future, which reflect certain estimates and
assumptions made by our management. These estimates and assumptions
reflect our best judgment based on currently known market
conditions, operating trends, and other factors. Although we
believe such estimates and assumptions to be reasonable, they are
inherently uncertain and involve a number of risks and
uncertainties that are beyond our control. As such, management’s
assumptions about future events may prove to be inaccurate. For a
more detailed description of the risks and uncertainties involved,
see “Risk Factors” in our most recently filed Annual Report on Form
10-K, subsequent Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and other SEC filings. We do not intend to publicly
update or revise any forward-looking statements as a result of new
information, future events, changes in circumstances, or otherwise.
These cautionary statements qualify all forward-looking statements
attributable to us, or persons acting on our behalf. Management
cautions you that the forward looking statements contained herein
are not guarantees of future performance, and we cannot assure you
that such statements will be realized or that the events and
circumstances they describe will occur. Factors that could cause
actual results to differ materially from those anticipated or
implied in the forward-looking statements herein include, but are
not limited to: the timing and extent of changes in market
conditions and prices for natural gas, oil and natural gas liquids
(“NGLs”), including regional basis differentials and the impact of
reduced demand for our production and products in which our
production is a component due to governmental and societal actions
taken in response to the COVID-19 pandemic; our ability to fund our
planned capital investments; a change in our credit rating, an
increase in interest rates and any adverse impacts from the
discontinuation of the London Interbank Offered Rate; the extent to
which lower commodity prices impact our ability to service or
refinance our existing debt; the impact of volatility in the
financial markets or other global economic factors, including the
impact of COVID-19; difficulties in appropriately allocating
capital and resources among our strategic opportunities; the timing
and extent of our success in discovering, developing, producing and
estimating reserves; our ability to maintain leases that may expire
if production is not established or profitably maintained; our
ability to realize the expected benefits from the Proposed
Transaction; the consummation of or failure to consummate the
Proposed Transaction and the timing thereof; costs in connection
with the Proposed Transaction; integration of operations and
results subsequent to the Proposed Transaction; our ability to
transport our production to the most favorable markets or at all;
the impact of government regulation, including changes in law, the
ability to obtain and maintain permits, any increase in severance
or similar taxes, and legislation or regulation relating to
hydraulic fracturing, climate and over-the-counter derivatives; the
impact of the adverse outcome of any material litigation against us
or judicial decisions that affect us or our industry generally; the
effects of weather; increased competition; the financial impact of
accounting regulations and critical accounting policies; the
comparative cost of alternative fuels; credit risk relating to the
risk of loss as a result of non-performance by our counterparties;
and any other factors listed in the reports we have filed and may
file with the SEC that are incorporated by reference herein. All
written and oral forward-looking statements attributable to us are
expressly qualified in their entirety by this cautionary
statement.
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
For the three months ended
For the nine months ended
September 30,
September 30,
(in millions, except share/per share
amounts)
2020
2019
2020
2019
Operating Revenues:
Gas sales
$
199
$
238
$
611
$
943
Oil sales
40
67
111
153
NGL sales
68
52
158
191
Marketing
219
279
645
1,004
Other
1
—
4
2
527
636
1,529
2,293
Operating Costs and Expenses:
Marketing purchases
226
288
675
1,022
Operating expenses
202
189
577
523
General and administrative expenses
31
42
89
119
Montage acquisition-related expenses
3
—
3
—
Restructuring charges
—
4
12
9
Loss on sale of operating assets
—
—
—
3
Depreciation, depletion and
amortization
70
125
267
352
Impairments
361
2
2,495
8
Taxes, other than income taxes
15
15
38
51
908
665
4,156
2,087
Operating Income (Loss)
(381
)
(29
)
(2,627
)
206
Interest Expense:
Interest on debt
43
42
123
125
Other interest charges
2
2
7
5
Interest capitalized
(23
)
(27
)
(67
)
(84
)
22
17
63
46
Gain (Loss) on Derivatives
(192
)
100
38
220
Gain on Early Extinguishment of
Debt
—
7
35
7
Other Income (Loss), Net
2
(2
)
3
(7
)
Income (Loss) Before Income
Taxes
(593
)
59
(2,614
)
380
Provision (Benefit) for Income
Taxes:
Current
—
(1
)
(2
)
(1
)
Deferred
—
11
408
(400
)
—
10
406
(401
)
Net Income (Loss)
$
(593
)
$
49
$
(3,020
)
$
781
Earnings (Loss) Per Common
Share:
Basic
$
(1.04
)
$
0.09
$
(5.48
)
$
1.45
Diluted
$
(1.04
)
$
0.09
$
(5.48
)
$
1.44
Weighted Average Common Shares
Outstanding:
Basic
571,872,413
539,221,101
551,162,559
539,315,170
Diluted
571,872,413
540,038,187
551,162,559
540,442,649
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, 2020
December 31, 2019
ASSETS
(in millions)
Current assets:
Cash and cash equivalents
$
95
$
5
Accounts receivable, net
239
345
Derivative assets
238
278
Other current assets
41
51
Total current assets
613
679
Natural gas and oil properties, using the
full cost method, including $1,379 million as of September 30, 2020
and $1,506 million as of December 31, 2019 excluded from
amortization
25,969
25,250
Other
500
520
Less: Accumulated depreciation, depletion
and amortization
(23,247
)
(20,503
)
Total property and equipment, net
3,222
5,267
Operating lease assets
145
159
Deferred tax assets
—
407
Other long-term assets
177
205
Total long-term assets
322
771
TOTAL ASSETS
$
4,157
$
6,717
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
416
$
525
Taxes payable
47
59
Interest payable
56
51
Derivative liabilities
287
125
Current operating lease liabilities
33
34
Other current liabilities
30
54
Total current liabilities
869
848
Long-term debt
2,450
2,242
Long-term operating lease liabilities
107
119
Long-term derivative liabilities
188
111
Pension and other postretirement
liabilities
35
43
Other long-term liabilities
124
108
Total long-term liabilities
2,904
2,623
Commitments and contingencies
Equity:
Common stock, $0.01 par value;
1,250,000,000 shares authorized; issued 649,899,653 shares as of
September 30, 2020 and 585,555,923 shares as of December 31,
2019
7
6
Additional paid-in capital
4,882
4,726
Accumulated deficit
(4,271
)
(1,251
)
Accumulated other comprehensive loss
(32
)
(33
)
Common stock in treasury, 44,353,224
shares as of September 30, 2020 and December 31, 2019
(202
)
(202
)
Total equity
384
3,246
TOTAL LIABILITIES AND EQUITY
$
4,157
$
6,717
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
For the nine months ended
September 30,
(in millions)
2020
2019
Cash Flows From Operating
Activities:
Net income (loss)
$
(3,020
)
$
781
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion and
amortization
267
352
Amortization of debt issuance costs
6
5
Impairments
2,495
8
Deferred income taxes
408
(400
)
(Gain) loss on derivatives, unsettled
272
(108
)
Stock-based compensation
2
6
Gain on early extinguishment of debt
(35
)
(7
)
Loss on sale of assets
—
3
Other
3
11
Change in assets and liabilities
Accounts receivable
106
257
Accounts payable
(129
)
(124
)
Taxes payable
(12
)
(3
)
Interest payable
3
2
Inventories
3
(2
)
Other assets and liabilities
38
(42
)
Net cash provided by operating
activities
407
739
Cash Flows From Investing
Activities:
Capital investments
(700
)
(877
)
Proceeds from sale of property and
equipment
2
42
Net cash used in investing activities
(698
)
(835
)
Cash Flows From Financing
Activities:
Payments on long-term debt
(72
)
(43
)
Payments on revolving credit facility
(1,449
)
—
Borrowings under revolving credit
facility
1,415
—
Change in bank drafts outstanding
(9
)
(11
)
Proceeds from issuance of long-term
debt
350
—
Debt issuance costs
(5
)
—
Purchase of treasury stock
—
(21
)
Proceeds from issuance of common stock
152
—
Cash paid for tax withholding
(1
)
(1
)
Net cash provided by (used in) financing
activities
381
(76
)
Increase (decrease) in cash and cash
equivalents
90
(172
)
Cash and cash equivalents at beginning of
year
5
201
Cash and cash equivalents at end of
period
$
95
$
29
Hedging Summary A detailed breakdown of derivative
financial instruments and financial basis positions as of September
30, 2020, including the remainder of 2020 and excluding those
positions that settled in the first, second and third 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 and basis
protection.
Weighted Average Price per
MMBtu
Volume (Bcf)
Swaps
Sold Puts
Purchased Puts
Sold Calls
Natural gas
2020
Fixed price swaps
91
$
2.46
$
—
$
—
$
—
Two-way costless collars
57
—
—
2.45
2.75
Three-way costless collars
25
—
2.19
2.58
2.96
Total
173
2021
Fixed price swaps
93
$
2.67
$
—
$
—
$
—
Two-way costless collars
166
—
—
2.51
2.89
Three-way costless collars
291
—
2.16
2.49
2.84
Total
550
2022
Fixed price swaps
37
$
2.75
$
$
$
Two-way costless collars
32
—
—
2.17
2.88
Three-way costless collars
116
—
2.07
2.44
2.87
Total
185
2023
Three-way costless collars
25
$
—
$
2.07
$
2.48
$
3.18
Natural gas financial basis
positions
Volume
Basis Differential
(Bcf)
($/MMBtu)
Q4 2020
Dominion South
35
$
(0.51
)
TCO
11
$
(0.43
)
TETCO M3
20
$
(0.07
)
Total
66
$
(0.37
)
2021
Dominion South
71
$
(0.47
)
TCO
22
$
(0.36
)
TETCO M3
62
$
0.37
Total
155
$
(0.12
)
2022
Dominion South
69
$
(0.51
)
TCO
16
$
(0.37
)
TETCO M3
42
$
(0.19
)
Total
127
$
(0.38
)
Weighted Average Price per
Bbl
Volume (MBbls)
Swaps
Sold Puts
Purchased Puts
Sold Calls
Oil
2020
Fixed price swaps (1)
584
$
75.44
$
—
$
—
$
—
Two-way costless collars
261
—
—
56.76
59.75
Three-way costless collars
404
—
43.71
52.85
57.78
Total
1,249
2021
Fixed price swaps
2,574
$
52.84
$
—
$
—
$
—
Three-way costless collars
1,445
—
43.52
53.25
58.14
Total
4,019
2022
Fixed price swaps
762
$
48.85
$
—
$
—
$
—
Three-way costless collars
666
—
42.50
53.20
58.00
Total
1,428
2023
Three-way costless collars
111
$
—
$
30.00
$
40.00
$
57.85
Ethane
2020
Fixed price swaps
2,629
$
8.62
$
—
$
—
$
—
2021
Fixed price swaps
5,889
$
7.12
$
—
$
—
$
—
Two-way costless collars
584
—
—
7.14
10.40
Total
6,473
2022
Fixed price swaps
190
$
7.41
$
—
$
—
$
—
Two-way costless collars
135
—
—
7.56
9.66
Total
325
Propane
2020
Fixed price swaps
1,435
$
23.11
$
—
$
—
$
—
Two-way costless collars
92
—
—
25.20
29.40
Total
1,527
2021
Fixed price swaps
4,298
$
19.99
$
—
$
—
$
—
2022
Fixed price swaps
156
$
19.25
$
—
$
—
$
—
Normal Butane
2020
Fixed price swaps
195
$
22.44
$
—
$
—
$
—
Natural Gasoline
2020
Fixed price swaps
184
$
34.59
$
—
$
—
$
—
(1) Includes 448 MBbls of purchased fixed price oil swaps at
$33.94 per barrel and 1,032 MBbls of sold fixed price oil swaps at
$57.44 per barrel.
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.
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
Adjusted net income:
(in millions)
Net income (loss)
$
(593
)
$
49
$
(3,020
)
$
781
Add back (deduct):
Montage acquisition-related expenses
3
—
3
—
Restructuring charges
—
4
12
9
Impairments
361
2
2,495
8
Loss on sale of assets
—
—
—
3
(Gain) loss on derivatives, unsettled
289
(12
)
272
(108
)
Gain on early extinguishment of debt
—
(7
)
(35
)
(7
)
Legal settlement charges
1
3
1
3
Non-cash pension settlement loss
—
1
—
5
Other loss (1)
1
7
—
10
Adjustments due to discrete tax items
(2)
139
1
1,020
(494
)
Tax impact on adjustments
(154
)
(4
)
(646
)
19
Adjusted net income
$
47
$
44
$
102
$
229
(1) Includes a $6 million residual value guarantee short-fall
payment to the previous lessor of our headquarters building for the
three and nine months ended September 30, 2019. (2) 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.
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
Adjusted diluted earnings per
share:
Diluted earnings (loss) per share
$
(1.04
)
$
0.09
$
(5.48
)
$
1.44
Add back (deduct):
Montage acquisition-related expenses
0.01
—
0.01
—
Restructuring charges
—
0.01
0.02
0.02
Impairments
0.63
0.00
4.50
0.01
Loss on sale of assets
—
—
—
0.00
(Gain) loss on derivatives, unsettled
0.50
(0.02
)
0.50
(0.20
)
Gain on early extinguishment of debt
—
(0.01
)
(0.06
)
(0.01
)
Legal settlement charges
0.00
0.01
0.00
0.01
Non-cash pension settlement loss
—
0.00
—
0.01
Other loss (1)
0.00
0.01
—
0.01
Adjustments due to discrete tax items
(2)
0.24
0.00
1.84
(0.91
)
Tax impact on adjustments
(0.26
)
(0.01
)
(1.15
)
0.04
Adjusted diluted earnings per share
$
0.08
$
0.08
$
0.18
$
0.42
(1) Includes a $6 million residual value guarantee short-fall
payment to the previous lessor of our headquarters building for the
three and nine months ended September 30, 2019. (2) 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.
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
Net cash flow:
(in millions)
Net cash provided by operating
activities
$
153
$
196
$
407
$
739
Add back (deduct):
Changes in operating assets and
liabilities
(21
)
(22
)
(9
)
(88
)
Montage acquisition-related expenses
3
—
3
—
Restructuring charges
—
4
12
9
Other loss (1)
—
7
—
7
Net cash flow
$
135
$
185
$
413
$
667
(1) Includes a $6 million residual value guarantee short-fall
payment to the previous lessor of our headquarters building for the
three and nine months ended September 30, 2019.
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
Adjusted EBITDA:
(in millions)
Net income (loss)
$
(593
)
$
49
$
(3,020
)
$
781
Add back (deduct):
Interest expense
22
17
63
46
Provision (benefit) for income taxes
—
10
406
(401
)
Depreciation, depletion and
amortization
70
125
267
352
Montage acquisition-related expenses
3
—
3
—
Restructuring charges
—
4
12
9
Impairments
361
2
2,495
8
Loss on sale of assets
—
—
—
3
(Gain) loss on derivatives, unsettled
289
(12
)
272
(108
)
Gain on early extinguishment of debt
—
(7
)
(35
)
(7
)
Legal settlement charges
1
3
1
3
Non-cash pension settlement loss
—
1
—
5
Other loss (1)
1
8
—
10
Stock-based compensation expense
—
2
2
6
Adjusted EBITDA
$
154
$
202
$
466
$
707
(1) Includes a $6 million residual value guarantee short-fall
payment to the previous lessor of our headquarters building for the
three and nine months ended September 30, 2019.
September 30, 2020
Net debt:
(in millions)
Total debt (1)
$
2,471
Subtract:
Cash and cash equivalents
(95
)
Net debt
$
2,376
(1) Does not include $21 million of unamortized debt discount
and issuance expense.
September 30, 2020
Net debt to EBITDA:
(in millions)
Net debt
$
2,376
Adjusted EBITDA (1)
$
732
Net debt to EBITDA
3.2x
(1) Adjusted EBITDA for the twelve months ended September 30,
2020.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201029006263/en/
Investor Contact Brittany Raiford Director, Investor
Relations (832) 796-7906 brittany_raiford@swn.com
Bernadette Butler Investor Relations Advisor (832) 796-6079
bernadette_butler@swn.com
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