Creating sustainable value in responsible
natural gas development from disciplined execution, growing scale
and financial strength
Southwestern Energy Company (NYSE: SWN) today announced
financial and operating results for the third quarter ended
September 30, 2021.
- Established scale positions in the two premier US natural gas
basins by expanding operations into the Haynesville with the
closing and integration of Indigo Natural Resources;
- Generated $213 million net cash provided by operating
activities, $396 million net cash flow (non-GAAP), and $105 million
of free cash flow (non-GAAP); - On track to exceed $475 million in
free cash flow in 2021
- Improved leverage ratio by 0.4x to 2.2x and expect to reduce
leverage to approximately 2x by year-end;
- Issued $1.2 billion of 5.375% senior notes due 2030, extending
maturity runway and lowering cost of debt; received credit rating
upgrade to BB by S&P;
- Reported total production of 310 Bcfe, or 3.4 Bcfe per day,
including one month of Haynesville production; total 2.7 Bcf per
day of gas and 106 MBbls per day of liquids;
- Achieved record SEC proved reserves (unaudited) of
approximately 18.5 Tcfe; and
- Received weighted average realized price (excluding impact of
transportation and hedges) of $4.08 per Mcfe.
“Disciplined execution and financial strength defined the
quarter for Southwestern Energy. Our team delivered financial and
operating results which exceeded expectations, including the
successful establishment of operations in Haynesville. Our team’s
proven capabilities in large scale consolidation and development
are capturing the tangible benefits of scale from core positions in
the two premier US gas basins. Our strategy continues to
differentiate SWN and strengthen our position as a preferred
investment opportunity for institutional investors seeking exposure
to responsible natural gas development,” said Bill Way,
Southwestern Energy President and Chief Executive Officer.
Finance Update
The Company prioritizes protecting its financial strength and
will continue the allocation of free cash flow to debt reduction
and disciplined risk management. Given the current commodity price
outlook and successful recent strategic actions, the Company has
reduced its sustainable leverage target from 2x to a target range
of 1.0x to 1.5x.
Within its disciplined risk management policy, the Company will
target a level of hedges that protects the funding for capital
investments and other financial priorities, including debt
repayment. This approach to hedging safeguards the Company’s
financial strength while also retaining meaningful exposure to
potential commodity price upside.
Financial Results
For the three months ended
For the nine months ended
September 30,
September 30,
(in millions)
2021
2020
2021
2020
Net loss
$
(1,857
)
$
(593
)
$
(2,386
)
$
(3,020
)
Adjusted net income (non-GAAP)
$
188
$
47
$
513
$
102
Diluted loss per share
$
(2.36
)
$
(1.04
)
$
(3.34
)
$
(5.48
)
Adjusted diluted earnings per share
(non-GAAP)
$
0.24
$
0.08
$
0.72
$
0.18
Adjusted EBITDA (non-GAAP)
$
426
$
154
$
1,108
$
466
Net cash provided by operating
activities
$
213
$
153
$
830
$
407
Net cash flow (non-GAAP)
$
396
$
135
$
1,022
$
413
Total capital investments (1)
$
291
$
223
$
816
$
705
(1)
Capital investments include an increase of
$34 million and a decrease of $7 million for the three months ended
September 30, 2021 and 2020, respectively, and increases of $63
million and $1 million for the nine months ended September 30, 2021
and 2020, respectively, relating to the change in accrued
expenditures between periods.
For the quarter ended September 30, 2021, Southwestern Energy
recorded a net loss of $1.86 billion, or ($2.36) per diluted share,
compared to a net loss in 2020 of $593 million, or ($1.04) per
diluted share. The quarter ended September 30, 2021 included a
$2,011 million loss on unsettled derivatives, and the same period
for 2020 included a $361 million non-cash impairment and a $289
million loss on unsettled derivatives.
Adjusted net income was $188 million, or $0.24 per diluted
share, in the third quarter of 2021, compared to $47 million, or
$0.08 per diluted share, for the prior year period. The increase
was primarily related to a 40% increase in the weighted average
realized price, including derivatives, and a 40% increase in
production volumes, largely due to the Indigo and Montage
acquisitions. Adjusted EBITDA (non-GAAP) was $426 million, net cash
provided by operating activities was $213 million, net cash flow
(non-GAAP) was $396 million and free cash flow (non-GAAP) was $105
million.
As indicated in the table below, third quarter 2021 weighted
average realized price, including $0.34 per Mcfe of transportation
expenses, was $3.74 per Mcfe, excluding the impact of derivatives.
Including derivatives, weighted average realized price (including
transportation) for the quarter was up 40% from $1.78 per Mcfe in
2020 to $2.49 per Mcfe in 2021, primarily due to higher commodity
prices, including a 103% increase in NYMEX Henry Hub and a 72%
increase in WTI, partially offset by the impact of settled
derivatives. Third quarter 2021 weighted average realized price
before transportation expense and excluding the impact of
derivatives was $4.08 per Mcfe.
As of September 30, 2021, Southwestern Energy had total debt of
$4.2 billion and a leverage ratio of 2.2x, an improvement of 0.4x
compared to the previous quarter. At quarter end, the Company had
$665 million of borrowings under its revolving credit facility with
$159 million in letters of credit. The letters of credit decreased
$74 million due to the Company’s September 1st S&P upgrade to
BB credit rating.
During the quarter, the Company issued $1.2 billion of 5.375%
senior notes due 2030 and utilized the proceeds to refinance higher
coupon senior notes due 2025 and 2026 and to repay a portion of its
revolver. The issuance extended the weighted average time to
maturity of its senior notes to greater than 6 years and improved
the weighted average cost of debt to approximately 6%.
Realized Prices
For the three months ended
For the nine months ended
(includes transportation costs)
September 30,
September 30,
2021
2020
2021
2020
Natural Gas Price:
NYMEX Henry Hub price ($/MMBtu) (1)
$
4.01
$
1.98
$
3.18
$
1.88
Discount to NYMEX (2)
(0.83
)
(0.89
)
(0.74
)
(0.68
)
Realized gas price per Mcf, excluding
derivatives
$
3.18
$
1.09
$
2.44
$
1.20
Gain on settled financial basis
derivatives ($/Mcf)
0.11
0.12
0.11
0.06
Gain (loss) on settled commodity
derivatives ($/Mcf)
(1.14
)
0.31
(0.43
)
0.39
Realized gas price, including derivatives
($/Mcf)
$
2.15
$
1.52
$
2.12
$
1.65
Oil Price:
WTI oil price ($/Bbl) (3)
$
70.56
$
40.93
$
64.82
$
38.32
Discount to WTI
(8.24
)
(11.47
)
(8.71
)
(10.12
)
Realized oil price, excluding derivatives
($/Bbl)
$
62.32
$
29.46
$
56.11
$
28.20
Realized oil price, including derivatives
($/Bbl)
$
44.83
$
46.69
$
40.06
$
44.97
NGL Price:
Realized NGL price, excluding derivatives
($/Bbl)
$
31.76
$
10.34
$
26.05
$
8.37
Realized NGL price, including derivatives
($/Bbl)
$
19.31
$
10.50
$
17.13
$
9.85
Percentage of WTI, excluding
derivatives
45
%
25
%
40
%
22
%
Total Weighted Average Realized
Price:
Excluding derivatives ($/Mcfe)
$
3.74
$
1.34
$
3.01
$
1.36
Including derivatives ($/Mcfe)
$
2.49
$
1.78
$
2.41
$
1.86
(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.
(3)
Based on the average daily settlement
price of the nearby month futures contract over the period.
Operational Results
Total production for the quarter ended September 30, 2021 was
310 Bcfe, of which 81% was natural gas, 16% NGLs and 3% oil.
Capital investments totaled $291 million for the third quarter,
with 17 wells drilled, 23 wells completed and 24 wells placed to
sales.
For the three months ended
For the nine months ended
September 30,
September 30,
2021
2020
2021
2020
Production
Gas production (Bcf)
251
173
684
487
Oil production (MBbls)
1,729
1,294
5,222
3,776
NGL production (MBbls)
8,011
6,687
23,255
18,926
Total production (Bcfe)
310
221
855
623
Total production (Bcfe/day)
3.4
2.4
3.1
2.3
Average unit costs per Mcfe
Lease operating expenses (1)
$
0.95
$
0.91
$
0.94
$
0.93
General & administrative expenses
(2,3)
$
0.09
$
0.12
$
0.11
$
0.13
Taxes, other than income taxes
$
0.11
$
0.07
$
0.10
$
0.06
Full cost pool amortization
$
0.43
$
0.29
$
0.37
$
0.40
(1)
Includes post-production costs such as
gathering, processing, fractionation and compression.
(2)
Excludes $35 million and $39 million in
merger-related expenses for the three and nine months ended
September 30, 2021, respectively, and $7 million in restructuring
charges for the nine months ended September 30, 2021.
(3)
Excludes $3 million in merger-related
expenses for the three and nine months ended September 30, 2020,
respectively, and $12 million in restructuring charges for the nine
months ended September 30, 2020.
Appalachia – In the third quarter, total production was
280 Bcfe, with NGL production of 87 MBbls per day and oil
production of 19 MBbls per day. The Company drilled 15 wells,
completed 19 wells and placed 19 wells to sales with an average
lateral length of 14,147 feet. During the third quarter, Appalachia
well costs averaged under $630 per lateral foot for wells placed to
sales, including approximately $550 per lateral foot in dry gas
Marcellus. In the fourth quarter, the Company expects to average 2
rigs and 2 completion crews on its Appalachia properties, with
activity in both dry gas and liquids rich areas.
Haynesville – The Company closed on the acquisition of
its Haynesville assets on September 1, 2021, and as such, third
quarter results include 30 days of production and activity.
Production was 30 Bcf, or 1.0 Bcf per day. The Company drilled two
wells, completed four wells and placed five wells to sales. All
five wells placed to sales were in the highly economic Middle
Bossier with an average initial production rate of 24 MMcf per day
and an average lateral length of 6,326 feet. The Company expects to
maintain the current rig and completion crew activity through the
fourth quarter, placing 10 to 13 wells to sales.
E&P Division Results
For the three months ended
September 30, 2021
For the nine months ended
September 30, 2021
Appalachia
Haynesville
Appalachia
Haynesville
Gas production (Bcf)
221
30
654
30
Liquids production
Oil (MBbls)
1,722
2
5,206
2
NGL (MBbls)
8,011
—
23,253
—
Production (Bcfe)
280
30
825
30
Gross operated production September 2021
(MMcfe/d)
4,147
1,325
Net operated production September 2021
(MMcfe/d)
3,038
1,016
Capital investments ($ in
millions)
Drilling and completions, including
workovers
$
176
$
52
$
591
$
52
Land acquisition and other
14
1
41
1
Capitalized interest and expense
34
6
109
6
Total capital investments
$
224
$
59
$
741
$
59
Gross operated well activity
summary(1)
Drilled
15
2
61
2
Completed
19
4
67
4
Wells to sales
19
5
67
5
Total weighted average realized price
per Mcfe, excluding derivatives
$
3.68
$
4.33
(2)
$
2.96
$
4.33
(2)
(1)
For Haynesville, represents wells drilled,
completed and placed to sales by Southwestern Energy after the
close of the acquisition on September 1, 2021.
(2)
Haynesville weighted average realized
price of $4.33 per Mcfe only includes sales beginning on September
1, 2021. The NYMEX Henry Hub price for September 2021 was $4.37 per
MMBtu.
Wells to sales summary
For the three months ended
September 30, 2021
Gross wells to sales
Average lateral length
Appalachia
Super Rich Marcellus
5
14,473
Rich Marcellus
3
11,324
Dry Gas Utica
4
15,574
Dry Gas Marcellus
7
15,829
Haynesville(1)
5
6,326
Total
24
(1)
Wells to sales following the close of the
acquisition on September 1, 2021. Includes wells drilled and
completed by previous operator.
Fourth Quarter 2021 Price Guidance
Based on current market conditions, Southwestern expects fourth
quarter price differentials to be within the following ranges.
Natural gas discount to NYMEX including
transportation (1)
$0.52 – $0.62 per Mcf
Natural gas liquids realization as a % of
WTI including transportation
42% – 50%
(1)
Includes an estimated $0.03 to $0.06 per
Mcfe gain on basis hedges.
Conference Call
Southwestern Energy will host a conference call on Thursday,
November 4, 2021 at 10:00 a.m. Central to discuss third quarter
2021 results. To participate, dial US toll-free 877-883-0383, or
international 412-902-6506 and enter access code 7695937. A live
webcast will be available at ir.swn.com.
About Southwestern Energy
Southwestern Energy Company (NYSE: SWN) is a leading U.S.
producer of natural gas and natural gas liquids focused on
responsibly developing large-scale energy assets in the nation’s
most prolific shale gas basins. SWN’s returns-driven strategy
strives to create sustainable value for its stakeholders by
leveraging its scale, financial strength and operational execution.
For additional information, please visit www.swn.com and
www.swn.com/responsibility.
Forward Looking Statement
Certain statements and information in this news release may
constitute “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Exchange Act, as amended. The words “believe,” “expect,”
“anticipate,” “plan,” "predict," “intend,” "seek," “foresee,”
“should,” “would,” “could,” “attempt,” “appears,” “forecast,”
“outlook,” “estimate,” “project,” “potential,” “may,” “will,”
“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 our financial position, business strategy,
production, reserve growth and other plans and objectives for our
future operations, and generation of free cash flow. 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
COVID-19 or other public health crises and any related company or
governmental policies and actions to protect the health and safety
of individuals or governmental policies or actions to maintain the
functioning of national or global economies and markets; 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;
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 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.
Use of Non-GAAP Information
This news release contains non-GAAP financial measures, such as
net cash flow, free cash flow, net debt and adjusted EBITDA,
including certain key statistics and estimates. We report our
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 users of this financial information additional
meaningful comparisons between current results and the results of
our peers and of prior periods. Please see below for definitions of
the non-GAAP financial measures that are based on reconcilable
historical information.
Use of Projections
The financial, operational, industry and market projections,
estimates and targets in this news release are forward-looking
statements that are based on assumptions that are inherently
subject to significant uncertainties and contingencies, many of
which are beyond SWN's control. The assumptions and estimates
underlying the projected, expected or target results are inherently
uncertain and are subject to a wide variety of significant
business, economic, regulatory and competitive risks and
uncertainties that could cause actual results to differ materially
from those contained in the financial, operational, industry and
market projections, estimates and targets, including assumptions,
risks and uncertainties described in "Forward-looking Statements"
above.
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)
2021
2020
2021
2020
Operating Revenues:
Gas sales
$
811
$
199
$
1,708
$
611
Oil sales
110
40
297
111
NGL sales
255
68
607
158
Marketing
418
219
1,102
645
Other
4
1
6
4
1,598
527
3,720
1,529
Operating Costs and Expenses:
Marketing purchases
420
226
1,109
675
Operating expenses
296
202
805
577
General and administrative expenses
32
31
104
89
Merger-related expenses
35
3
39
3
Restructuring charges
—
—
7
12
Depreciation, depletion and
amortization
138
70
334
267
Impairments
6
361
6
2,495
Taxes, other than income taxes
35
15
86
38
962
908
2,490
4,156
Operating Income (Loss)
636
(381
)
1,230
(2,627
)
Interest Expense:
Interest on debt
56
43
154
123
Other interest charges
3
2
9
7
Interest capitalized
(25
)
(23
)
(68
)
(67
)
34
22
95
63
Gain (Loss) on Derivatives
(2,399
)
(192
)
(3,461
)
38
Gain (Loss) on Early Extinguishment of
Debt
(59
)
—
(59
)
35
Other Income (Loss), Net
(1
)
2
(1
)
3
Loss Before Income Taxes
(1,857
)
(593
)
(2,386
)
(2,614
)
Provision (Benefit) for Income
Taxes:
Current
—
—
—
(2
)
Deferred
—
—
—
408
—
—
—
406
Net Loss
$
(1,857
)
$
(593
)
$
(2,386
)
$
(3,020
)
Loss Per Common Share:
Basic
$
(2.36
)
$
(1.04
)
$
(3.34
)
$
(5.48
)
Diluted
$
(2.36
)
$
(1.04
)
$
(3.34
)
$
(5.48
)
Weighted Average Common Shares
Outstanding:
Basic
787,032,414
571,872,413
713,455,662
551,162,559
Diluted
787,032,414
571,872,413
713,455,662
551,162,559
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, 2021
December 31, 2020
ASSETS
(in millions)
Current assets:
Cash and cash equivalents
$
12
$
13
Accounts receivable, net
708
368
Derivative assets
130
241
Other current assets
52
49
Total current assets
902
671
Natural gas and oil properties, using the
full cost method
31,486
27,261
Other
503
523
Less: Accumulated depreciation, depletion
and amortization
(23,987
)
(23,673
)
Total property and equipment, net
8,002
4,111
Operating lease assets
144
163
Deferred tax assets
—
—
Other long-term assets
193
215
Total long-term assets
337
378
TOTAL ASSETS
$
9,241
$
5,160
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt
$
201
$
—
Accounts payable
955
573
Taxes payable
78
74
Interest payable
42
58
Derivative liabilities
2,769
245
Current operating lease liabilities
41
42
Other current liabilities
76
20
Total current liabilities
4,162
1,012
Long-term debt
4,036
3,150
Long-term operating lease liabilities
101
117
Long-term derivative liabilities
960
183
Pension and other postretirement
liabilities
31
45
Other long-term liabilities
237
156
Total long-term liabilities
5,365
3,651
Commitments and contingencies
Equity:
Common stock, $0.01 par value;
2,500,000,000 shares authorized; issued 1,059,331,421 shares as of
September 30, 2021 and 718,795,700 shares as of December 31,
2020
11
7
Additional paid-in capital
6,688
5,093
Accumulated deficit
(6,749
)
(4,363
)
Accumulated other comprehensive loss
(34
)
(38
)
Common stock in treasury, 44,353,224
shares as of September 30, 2021 and December 31, 2020
(202
)
(202
)
Total equity/(deficit)
(286
)
497
TOTAL LIABILITIES AND EQUITY
$
9,241
$
5,160
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
For the nine months ended
September 30,
(in millions)
2021
2020
Cash Flows From Operating
Activities:
Net loss
$
(2,386
)
$
(3,020
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation, depletion and
amortization
334
267
Amortization of debt issuance costs
6
6
Impairments
6
2,495
Deferred income taxes
—
408
Loss on derivatives, unsettled
2,952
272
Stock-based compensation
2
2
(Gain) loss on early extinguishment of
debt
59
(35
)
Other
3
3
Change in assets and liabilities
Accounts receivable
(147
)
106
Accounts payable
58
(129
)
Taxes payable
(10
)
(12
)
Interest payable
(13
)
3
Inventories
(2
)
3
Other assets and liabilities
(32
)
38
Net cash provided by operating
activities
830
407
Cash Flows From Investing
Activities:
Capital investments
(747
)
(700
)
Proceeds from sale of property and
equipment
4
2
Cash acquired in Indigo Acquisition
55
—
Cash paid in Indigo Acquisition
(373
)
—
Other
(1
)
—
Net cash used in investing activities
(1,062
)
(698
)
Cash Flows From Financing
Activities:
Payments on long-term debt
(844
)
(72
)
Payments on revolving credit facility
(3,401
)
(1,449
)
Borrowings under revolving credit
facility
3,366
1,415
Change in bank drafts outstanding
33
(9
)
Repayment of Indigo revolving credit
facility
(95
)
—
Proceeds from issuance of long-term
debt
1,200
350
Debt issuance/amendment costs
(25
)
(5
)
Proceeds from issuance of common stock,
net
—
152
Cash paid for tax withholding
(3
)
(1
)
Net cash provided by financing
activities
231
381
Increase (decrease) in cash and cash
equivalents
(1
)
90
Cash and cash equivalents at beginning of
year
13
5
Cash and cash equivalents at end of
period
$
12
$
95
Hedging Summary
A detailed breakdown of derivative financial instruments and
financial basis positions as of September 30, 2021 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
2021
Fixed price swaps
102
$
2.83
$
—
$
—
$
—
Two-way costless collars
88
—
—
2.70
3.04
Three-way costless collars
84
—
2.19
2.54
2.91
Total
274
2022
Fixed price swaps
539
$
2.77
$
—
$
—
$
—
Two-way costless collars
141
—
—
2.66
3.06
Three-way costless collars
333
—
2.06
2.51
2.94
Total
1,013
2023
Fixed price swaps
274
$
2.76
$
—
$
—
$
—
Two-way costless collars
83
—
—
2.69
2.92
Three-way costless collars
215
—
2.09
2.54
3.00
Total
572
2024
Fixed price swaps
57
$
2.43
$
—
$
—
$
—
Three-way costless collars
11
—
2.25
2.80
3.54
Total
68
Volume
Weighted Average Strike
Price
(Bcf)
($/MMBtu)
Call Options – Natural Gas
(Net)
2021
19
$
3.19
2022
77
$
3.00
2023
46
$
2.94
2024
9
$
3.00
Total
151
Swaptions – Natural
Gas
2021(1)
18
$
3.00
(1)
The Company has sold swaptions with an
underlying tenor of January 2022 to December 2022, with an exercise
date of December 23, 2021.
Natural gas financial basis
positions
Volume
Basis Differential
(Bcf)
($/MMBtu)
Q4 2021
Dominion South
28
$
(0.63
)
TCO
18
$
(0.49
)
TETCO M3
25
$
0.06
Total
71
$
(0.36
)
Q1 2022
Dominion South
25
$
(0.59
)
TCO
18
$
(0.49
)
TETCO M3
23
$
1.27
Total
66
$
0.07
Q2 2022
Dominion South
33
$
(0.58
)
TCO
20
$
(0.50
)
TETCO M3
24
$
(0.48
)
Total
77
$
(0.53
)
Q3 2022
Dominion South
33
$
(0.58
)
TCO
21
$
(0.51
)
TETCO M3
24
$
(0.49
)
Total
78
$
(0.54
)
Q4 2022
Dominion South
27
$
(0.61
)
TCO
21
$
(0.51
)
TETCO M3
15
$
(0.26
)
Total
63
$
(0.49
)
Weighted Average Price per
Bbl
Volume (MBbls)
Swaps
Sold Puts
Purchased Puts
Sold Calls
Oil
2021
Fixed price swaps
780
$
48.94
$
—
$
—
$
—
Two-way costless collars
46
—
—
37.50
45.50
Three-way costless collars
550
—
39.18
48.95
54.35
Total
1,376
2022
Fixed price swaps
3,203
$
53.54
$
—
$
—
$
—
Three-way costless collars
1,380
—
39.89
50.23
57.05
Total
4,583
2023
Fixed price swaps
846
$
55.98
$
—
$
—
$
—
Three-way costless collars
1,268
—
33.97
45.51
56.12
Total
2,114
2024
Fixed price swaps
54
$
53.15
$
—
$
—
$
—
Ethane
2021
Fixed price swaps
2,483
$
9.74
$
—
$
—
$
—
Two-way costless collars
147
—
—
7.14
10.40
Total
2,630
2022
Fixed price swaps
3,361
$
10.01
$
—
$
—
$
—
Two-way costless collars
135
—
—
7.56
9.66
Total
3,496
Propane
2021
Fixed price swaps
2,107
$
23.98
$
—
$
—
$
—
2022
Fixed price swaps
4,471
$
26.96
$
—
$
—
$
—
Three-way costless collars
305
—
16.80
21.00
31.92
Total
4,776
Normal Butane
2021
Fixed price swaps
617
$
29.08
$
—
$
—
$
—
2022
Fixed price swaps
1,295
$
29.16
$
—
$
—
$
—
Natural Gasoline
2021
Fixed price swaps
635
$
43.62
$
—
$
—
$
—
2022
Fixed price swaps
1,256
$
46.41
$
—
$
—
$
—
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.
Another such non-GAAP financial measure is free cash flow, which
is defined as cash provided by operating activities, adjusting for
changes in operating assets and liabilities, merger-related
expenses and restructuring charges, less total capital investment.
Management presents this measure because it is accepted as an
indicator of excess cash flow available to a company for the
repayment of debt or for other general corporate purposes,
including the possible return of capital to shareholders.
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,
2021
2020
2021
2020
Adjusted net income:
(in millions)
Net income (loss)
$
(1,857
)
$
(593
)
$
(2,386
)
$
(3,020
)
Add back (deduct):
Merger-related expenses
35
3
39
3
Restructuring charges
—
—
7
12
Impairments
6
361
6
2,495
Loss on unsettled derivatives
2,011
289
2,952
272
(Gain) loss on early extinguishment of
debt
59
—
59
(35
)
Legal settlement charges
—
1
—
1
Other loss
—
1
—
—
Adjustments due to discrete tax items
(1)
447
139
570
1,020
Tax impact on adjustments
(513
)
(154
)
(734
)
(646
)
Adjusted net income
$
188
$
47
$
513
$
102
(1)
2020 primarily relates to the recognition
of a valuation allowance. The Company expects its 2021 income tax
rate to be 24.3% before the impacts of any valuation allowance.
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Adjusted diluted earnings per
share:
Diluted earnings (loss) per share
$
(2.36
)
$
(1.04
)
$
(3.34
)
$
(5.48
)
Add back (deduct):
Merger-related expenses
0.05
0.01
0.05
0.01
Restructuring charges
—
—
0.01
0.02
Impairments
0.01
0.63
0.01
4.50
Loss on unsettled derivatives
2.54
0.50
4.12
0.50
(Gain) loss on early extinguishment of
debt
0.08
—
0.08
(0.06
)
Legal settlement charges
—
0.00
—
0.00
Other loss
—
0.00
—
—
Adjustments due to discrete tax items
(1)
0.57
0.24
0.80
1.84
Tax impact on adjustments
(0.65
)
(0.26
)
(1.01
)
(1.15
)
Adjusted diluted earnings per share
$
0.24
$
0.08
$
0.72
$
0.18
(1)
2020 primarily relates to the recognition
of a valuation allowance. The Company expects its 2021 income tax
rate to be 24.3% before the impacts of any valuation allowance.
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Net cash flow:
(in millions)
Net cash provided by operating
activities
$
213
$
153
$
830
$
407
Add back (deduct):
Changes in operating assets and
liabilities
148
(21
)
146
(9
)
Merger-related expenses
35
3
39
3
Restructuring charges
—
—
7
12
Net cash flow
$
396
$
135
$
1,022
$
413
Three Months Ended September
30, 2021
Free cash flow:
(in millions)
Net cash flow (as shown above)
$
396
Subtract:
Total capital investments
(291
)
Free cash flow
$
105
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Adjusted EBITDA:
(in millions)
Net loss
$
(1,857
)
$
(593
)
$
(2,386
)
$
(3,020
)
Add back (deduct):
Interest expense
34
22
95
63
Provision (benefit) for income taxes
—
—
—
406
Depreciation, depletion and
amortization
138
70
334
267
Merger-related expenses
35
3
39
3
Restructuring charges
—
—
7
12
Impairments
6
361
6
2,495
Loss on unsettled derivatives
2,011
289
2,952
272
(Gain) loss on early extinguishment of
debt
59
—
59
(35
)
Legal settlement charges
—
1
—
1
Stock-based compensation expense
—
—
2
2
Other loss
—
1
—
—
Adjusted EBITDA
$
426
$
154
$
1,108
$
466
September 30, 2021
Net debt:
(in millions)
Total debt (1)
$
4,245
Subtract:
Cash and cash equivalents
(12
)
Net debt
$
4,233
(1)
Does not include $8 million of unamortized
debt premium and issuance expense.
September 30, 2021
Net debt to Adjusted EBITDA:
(in millions)
Net debt
$
4,233
Adjusted EBITDA (1)
$
1,897
Net debt to Adjusted EBITDA
2.2x
(1)
Adjusted EBITDA of $1,897 million for the
twelve months ended September 30, 2021 includes $8 million of
adjusted EBITDA generated by Indigo Natural Resources prior to the
September 2021 acquisition and $505 million of adjusted EBITDA
generated by Montage Resources prior to the November 2020
acquisition.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211103006225/en/
Investor Contact Brittany Raiford Director, Investor
Relations (832) 796-7906 brittany_raiford@swn.com
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