Strategic and transformative action repositions
the Company to deliver greater value from higher return Appalachia
assets
Announces debt reduction plan, share repurchase
program and supplemental investment to drive liquids and value
growth
Southwestern Energy Company (NYSE: SWN) (the “Company”) today
announced that it has entered into a definitive agreement with
Flywheel Energy, LLC, a private company backed by Kayne Private
Energy Income Funds, to sell its Fayetteville Shale E&P and
related midstream gathering assets for $1.865 billion in cash,
subject to adjustments and customary closing conditions. In
addition, the buyer will assume approximately $438 million of
future contractual liabilities after taking into account certain
obligations retained by the Company. The transaction, which was
unanimously approved by Southwestern Energy’s directors, has an
effective date of July 1, 2018, and is expected to close in
December 2018.
The Company also announced:
- A conditional tender offer for up to
$900 million of its Senior Notes, as described in a separate press
release also issued today;
- A share repurchase program of up to
$200 million; and
- Allocation of up to $600 million over
the next two years, in aggregate, supplementing cash flow to
further develop the Company’s liquids-rich Appalachia assets and
accelerate the path to self-funding. Until investments are made,
these funds will be used to repay credit facility borrowings.
Bill Way, President and CEO of Southwestern Energy, said, “The
sale of Fayetteville represents a pivotal and deliberate step
towards fulfilling our promise to reposition Southwestern Energy to
capture greater returns from our higher margin Appalachia assets.
We are pleased with the process, the outcome and the resulting
valuation of this significant asset. I’d like to thank the
employees of Fayetteville for their years of extraordinary service
to the Company and its shareholders, particularly during this
process.
“This transaction is a significant milestone in advancing our
strategic plan. Our shareholders will benefit from an optimized
portfolio, stronger balance sheet including improved financial
flexibility and the return of capital to all shareholders through a
share repurchase program. I am grateful for the tireless work of
our entire dedicated and talented SWN team that sets the stage for
a stronger future.”
Financial Impact
Following the closing, the Company will have pro-forma debt of
approximately $2.3 billion. A portion of proceeds will be used to
replace cash flow that would otherwise have been generated by the
Fayetteville assets and reinvested into SWN’s liquids-rich assets
in West Virginia. The resulting increase in activity in West
Virginia is expected to accelerate the Company’s path to
self-funded growth in production and shareholder value. The Company
targets a long-term sustainable debt/EBITDA ratio of 2x by
2020.
The commitments under the Company’s revolving credit facility
are expected to remain at approximately $2.0 billion following the
close of the transaction.
As a result of the transaction, Southwestern Energy expects
additional annualized interest and organizational cost reductions
of $60-75 million. This is incremental to the $110 million in
annualized interest and G&A savings announced in the second
quarter. The Company expects to offset federal taxes using existing
net operating losses.
Company Outlook
Subject to its rigorous capital allocation philosophy, the
Company anticipates deploying up to six rigs in 2019, generating
total production growth of 8-12% and liquids growth of 15-25%. For
2020, the Company anticipates total production growth in the
mid-teens and liquids growth in the mid-twenties. These expected
outcomes are dependent upon market conditions and subject to
completion of the Company’s annual budget processes.
Activity will be weighted toward Southwest Appalachia’s high
margin, liquids-rich inventory. The Company continues to develop
its premium acreage, with total production growing over 60% since
2016.
Southwestern Energy has over 475,000 (net) acres in the
Appalachia Basin prospective for Upper and Lower Marcellus, Upper
Devonian and Utica/Upper Point Pleasant development. Within
Appalachia, Southwestern Energy has identified over 40 Tcfe of
resource, which includes more than 1,800 economic drilling
locations below $2.75/Mcf gas and $50/Bbl oil. The Company’s
year-end 2017 Appalachia reserves were 11.1 Tcfe, 33% of which were
condensate and natural gas liquids.
Transaction Details
Under the terms of the transaction, Southwestern Energy will
exit Fayetteville. These assets include approximately 915,000 net
acres, 4,033 operated producing wells, 3.7 Tcf of proved reserves
as of year-end 2017, anticipated 2019 production of 225-230 Bcf and
associated midstream gathering infrastructure and compression. The
Company will transfer to the buyer at closing certain natural gas
hedge positions that the Company has or will put in place on behalf
of the buyer. The buyer will assume $564 million of contractual
obligations, with the Company responsible for certain of these
potential obligations of up to $126 million related to unused
transportation through 2020.
Advisors
J.P. Morgan Securities LLC is serving as financial advisor to
Southwestern Energy, and Latham & Watkins LLP is serving as
legal advisor. Houlihan Lokey Capital, Inc. provided certain
evaluation services to the Company’s Board of Directors.
About Southwestern Energy Company
Southwestern Energy Company (NYSE: SWN) is an independent energy
company whose wholly-owned subsidiaries are engaged in natural gas,
natural gas liquids and oil exploration, development, production,
gathering and marketing. Additional information about the Company
is available at 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,” “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; changes in expected levels of natural gas and oil
reserves or production; operating hazards, drilling risks,
unsuccessful exploratory activities; 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; unexpected cost increases;
potential liability for remedial actions under existing or future
environmental regulations; potential liability resulting from
pending or future litigation; and general domestic and
international economic and political conditions; as well as changes
in tax, environmental and other laws 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.
Click here to subscribe to Mobile Alerts for Southwestern
Energy.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180904005396/en/
Southwestern Energy CompanyPaige Penchas, 832-796-4068Vice
President, Investor Relationspaige_penchas@swn.com
Southwestern Energy (NYSE:SWN)
Historical Stock Chart
From Mar 2024 to Apr 2024
Southwestern Energy (NYSE:SWN)
Historical Stock Chart
From Apr 2023 to Apr 2024