Strategic transformation delivers material free
cash flow in 2021; Company to further reduce debt
Southwestern Energy Company (NYSE: SWN) today announced
financial and operating results for the fourth quarter and full
year 2020 and issued 2021 guidance.
“In 2020, Southwestern Energy delivered on its commitments,
exceeding expectations on all key metrics while navigating the
uncertainties of a global pandemic and the associated challenging
commodity price and operating environments. We have positioned the
Company to deliver material free cash flow going forward through an
enduring conviction to our returns-driven strategy. We delivered
strong results across all of our strategic pillars, including an
accretive acquisition, a meaningfully lower cost structure and an
increased underlying asset value,” said Bill Way, Southwestern
Energy President and Chief Executive Officer.
“Southwestern Energy has entered 2021 with greater scale and
resilience, prepared to capture increasing value from more than one
trillion cubic feet equivalent of expected annual production
flowing into diverse and key markets. The free cash flow we expect
to deliver this year will be used to reduce debt as we progress
towards our goal of sustainable 2 times leverage. Consistent with
our disciplined approach, any further improvement in cash flow from
higher commodity prices will accelerate the delivery of that
objective,” Way continued.
2020 Highlights
- Completed acquisition of Montage Resources, delivering over $30
million in G&A synergies, while maintaining balance sheet
strength through associated capital market transactions;
- Delivered $55 million of free cash flow in the fourth
quarter;
- Realized $90 million in additional expense reductions including
a 33% decrease in G&A to $0.12 per Mcfe;
- Reported total production of 880 Bcfe; 3.05 Bcfe per day pro
forma fourth quarter net production rate;
- Invested capital of $899 million and delivered 100 wells to
sales;
- Generated $362 million of realized hedge gains, including $76
million from basis;
- Repurchased $107 million of senior notes for $72 million, a 33%
discount;
- Enhanced liquidity with borrowing base increased to $2.0
billion following acquisition;
- Reduced well costs, averaged $637 per lateral foot in the
second half of 2020; annual reduction of 19% to $670 per lateral
foot with an average lateral length of 12,154 feet;
- Lowered Proved Developed F&D costs by 25% to $0.40 per Mcfe
through well cost reductions and increased well productivity;
- Realized 26% of WTI on full year NGL prices, above the high end
of guidance, and 36% of WTI in the fourth quarter, both associated
with strengthening market fundamentals and NGL marketing
optimization;
- Reported proved reserves of 12.0 Tcfe, including 1.4 Tcfe of
positive performance revisions and 741 Bcfe of reserve additions,
partially mitigating the impact of backward-looking SEC
prices;
- Released our 7th annual corporate responsibility report; key
environmental highlights included top quartile GHG and methane
intensity among AXPC peers; and
- Recorded the fifth consecutive year of freshwater neutrality;
have now replaced over 14 billion gallons of freshwater in
communities where we work and live.
2021 Guidance
The Company’s 2021 guidance is underpinned by the four pillars
of its shareholder returns driven strategy: creating sustainable
value, protecting financial strength, increasing scale and
progressing best-in-class execution. The 2021 plan prioritizes free
cash flow generation, disciplined investment at maintenance levels
and debt reduction. Highlights are presented below; full guidance
is available in the attachments to this press release.
- Guidance based on $2.77 per Mcf NYMEX Henry Hub and $50 per
barrel WTI; expect to deliver free cash flow of over $275 million,
which is expected to be utilized for debt reduction;
- Prices of $3.00 per Mcfe NYMEX Henry Hub and $58 per barrel WTI
would increase free cash flow estimate to more than $375 million
and results in achieving targeted leverage ratio of 2.0x;
- Capital investment of $850 to $925 million; expect 3.05 Bcfe
per day average fourth quarter 2021 net production, flat with
fourth quarter 2020;
- Estimate 75 to 90 wells to sales including 12 to 15 in dry gas
Ohio Utica; approximately 50% of total capital investment in dry
gas and 50% in liquids-rich acreage;
- Continued focus on costs, expect G&A per Mcfe to decrease
20%;
- Expected to reduce well costs another 10% to an average of
approximately $600 per lateral foot for all wells to sales
inclusive of Ohio Utica; expect average lateral length of 14,000
feet;
- Hedges in place for approximately 85%, 60% and 95% of expected
natural gas, natural gas liquids and oil production, respectively;
approximately 80% of natural gas hedges allow for participation in
upside from improving prices;
- Protecting 75% of natural gas basis through physical and
financial basis hedges and out of basin transportation portfolio;
expect financial basis hedge gain of $0.07 to $0.09 per Mcf;
and
- Continued commitment to corporate responsibility, investing in
human capital and our communities, and developing energy
responsibly with a focus on reduced air emissions and water
conservation, including maintaining top quartile performance in the
industry for GHG and methane intensity.
2020 Fourth Quarter and Full Year Results
FINANCIAL STATISTICS
For the three months ended
For the years ended
December 31,
December 31,
(in millions)
2020
2019
2020
2019
Net income (loss)
$
(92
)
$
110
$
(3,112
)
$
891
Adjusted net income (non-GAAP)
$
119
$
99
$
221
$
328
Diluted earnings (loss) per share
$
(0.14
)
$
0.20
$
(5.42
)
$
1.65
Adjusted diluted earnings per share
(non-GAAP)
$
0.18
$
0.18
$
0.38
$
0.61
Adjusted EBITDA (non-GAAP)
$
276
$
266
$
742
$
973
Net cash provided by operating
activities
$
121
$
225
$
528
$
964
Net cash flow (non-GAAP)
$
249
$
246
$
662
$
913
Total capital investments (1)
$
194
$
207
$
899
$
1,140
- Capital investments on the cash flow statement include
decreases of $5 million and $18 million for the three months ended
December 31, 2020 and 2019, respectively, and a decrease of $3
million and an increase of $34 million for the year ended December
31, 2020 and 2019, respectively, relating to the change in accrued
expenditures between periods.
Fourth Quarter 2020 Financial Results
For the quarter ended December 31, 2020, Southwestern Energy
recorded a net loss of $92 million, or ($0.14) per diluted share,
including $335 million of non-cash impairments and a $134 million
non-cash gain on unsettled mark to market derivatives. This
compares to net income of $110 million, or $0.20 per diluted share
in the fourth quarter of 2019.
Adjusted net income (non-GAAP), which excludes non-cash items
noted above and other one-time charges, was $119 million or $0.18
per diluted share in 2020 and $99 million or $0.18 per share for
the same period in 2019. The increase was primarily related to
increased production volumes and a decrease in average unit
operating costs, partially offset by wider natural gas basis
differentials. For the fourth quarter of 2020, adjusted EBITDA
(non-GAAP) was $276 million, net cash provided by operating
activities was $121 million and net cash flow (non-GAAP) was $249
million, resulting in $55 million in free cash flow.
As indicated in the table below, fourth quarter 2020 weighted
average realized price, including $0.37 per Mcfe of transportation
expenses, was $1.93 per Mcfe before the impact of derivatives, down
9% compared to $2.12 per Mcfe in 2019. The decrease was primarily
due to widened basis differentials in the Appalachia basin. Fourth
quarter weighted average realized price before transportation
expense was $2.30 per Mcfe.
The Company realized $52 million in cash-settled derivative
gains during the fourth quarter of 2020, a $0.21 per Mcfe uplift.
Included in the fourth quarter settled derivative gains is a $47
million gain related to natural gas basis hedges, which protected
the Company from widening basis differentials.
Full Year 2020 Financial Results
The Company recorded a net loss of $3.1 billion, or ($5.42) per
share, for the year ended December 31, 2020 compared to net income
of $891 million, or $1.65 per share in 2019. In 2020, the Company
recorded non-cash impairments of $2.8 billion and $138 million of
non-cash loss on unsettled derivatives, and had an $818 million
change in its deferred tax provision. Excluding these non-cash and
other one-time items, adjusted net income for 2020 was $221
million, or $0.38 per share, compared to $328 million, or $0.61 per
share, in 2019. The decrease in adjusted net income compared to
prior year was primarily the result of a decrease in commodity
prices, partially offset by a $182 million increase in settled
derivatives impact, increased production volumes and decreased
G&A and depreciation, depletion and amortization expense. In
2020, Adjusted EBITDA (non-GAAP) was $742 million, net cash
provided by operating activities was $528 million and net cash flow
(non-GAAP) was $662 million.
For the full year 2020, weighted average realized price,
including $0.37 per Mcfe of transportation expense, was $1.53 per
Mcfe before the impact of derivatives, a 30% decrease compared to
$2.18 per Mcfe in 2019, due to decreased prices across all
commodities. In 2020, the weighted average realized price before
transportation expenses was $1.90 per Mcfe.
Cash-settled derivative gains totaled $362 million in 2020, a
$0.41 per Mcfe uplift, bringing the weighted average realized price
including the impact of derivatives to $1.94 per Mcfe in 2020,
compared to $2.42 per Mcfe in 2019.
As of December 31, 2020, Southwestern Energy had total debt of
$3.15 billion and a cash balance of $13 million. At the end of
2020, the Company had $700 million of borrowings under its $2.0
billion revolving credit facility with $233 million in outstanding
letters of credit.
Realized Prices
For the three months ended
For the years ended
(includes transportation costs)
December 31,
December 31,
2020
2019
2020
2019
Natural Gas Price:
NYMEX Henry Hub price ($/MMBtu) (1)
$
2.66
$
2.50
$
2.08
$
2.63
Discount to NYMEX (2)
(0.99
)
(0.69
)
(0.74
)
(0.65
)
Realized gas price per Mcf, excluding
derivatives
$
1.67
$
1.81
$
1.34
$
1.98
Gain on settled financial basis
derivatives ($/Mcf)
0.23
0.05
0.11
—
Gain (loss)on settled commodity
derivatives ($/Mcf)
(0.09
)
0.26
0.25
0.20
Realized gas price per Mcf, including
derivatives
$
1.81
$
2.12
$
1.70
$
2.18
Oil Price, per Bbl:
WTI oil price
$
42.66
$
56.96
$
39.40
$
57.03
Discount to WTI
(10.69
)
(10.59
)
(10.20
)
(10.13
)
Realized oil price, excluding
derivatives
$
31.97
$
46.37
$
29.20
$
46.90
Realized oil price, including
derivatives
$
52.27
$
49.16
$
46.91
$
49.56
NGL Price, per Bbl:
Realized NGL price, excluding
derivatives
$
15.28
$
12.46
$
10.24
$
11.59
Realized NGL price, including
derivatives
$
14.65
$
14.83
$
11.15
$
13.64
Percentage of WTI, excluding
derivatives
36
%
22
%
26
%
20
%
Total Weighted Average Realized
Price:
Excluding derivatives ($/Mcfe)
$
1.93
$
2.12
$
1.53
$
2.18
Including derivatives ($/Mcfe)
$
2.14
$
2.44
$
1.94
$
2.42
- Based on last day monthly futures settlement prices.
- 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 Review
Total production for the quarter ended December 31, 2020 was 257
Bcfe, comprised of 81% natural gas, 16% NGLs and 3% oil. Included
in the fourth quarter 2020 results was 49 days of production from
the acquired Montage Resources properties. Production totaled 880
Bcfe for the year ended December 31, 2020.
Capital investments in the fourth quarter of 2020 were $194
million, bringing full year capital investment to $899 million. The
Company brought 100 wells to sales, drilled 98 wells and completed
96 wells during the year.
Operating Statistics
For the three months ended
For the years ended
December 31,
December 31,
2020
2019
2020
2019
Production
Gas production (Bcf)
207
160
694
609
Oil production (MBbls)
1,365
1,486
5,141
4,696
NGL production (MBbls)
7,001
6,609
25,927
23,620
Total production (Bcfe)
257
208
880
778
Average unit costs per Mcfe
Lease operating expenses
$
0.92
$
0.94
$
0.93
$
0.92
General & administrative expenses
$
0.11
(1)
$
0.19
(2)
$
0.12
(1)
$
0.18
(2)
Taxes, other than income taxes
$
0.06
$
0.05
$
0.06
$
0.08
Full cost pool amortization
$
0.33
$
0.54
$
0.38
$
0.56
- Excludes $38 million and $41 million in Montage
acquisition-related expenses and $4 million and $16 million in
restructuring charges for the three months and year ended December
31, 2020, respectively. Excludes $1 million of legal settlement
charges for the year ended December 31, 2020.
- Excludes restructuring charges of $2 million and $11 million
and legal settlement charges of $3 million and $6 million for the
three months and year ended December 31, 2019, respectively.
Excludes a $6 million residual value guarantee short-fall payment
to the previous lessor of our headquarters building for the year
ended December 31, 2019.
Southwest Appalachia – In the fourth quarter, total
production was 132 Bcfe, with liquids production of 91 MBbls per
day, including 49 days of production from properties previously
owned by Montage Resources. The Company drilled 10 wells, completed
11 wells and placed 16 wells to sales, excluding four wells placed
to sales that were drilled and completed by Montage Resources. The
average lateral length of wells to sales was 15,477 feet, and
included five wells in the rich area and 11 wells in the super rich
area. All five of the rich wells were online for at least 30 days
and had an average 30-day rate of 23.2 MMcfe per day, while only
six of the super rich wells were online for at least 30 days and
had an average 30-day rate of 9.8 MMcfe per day, including 72%
liquids.
In 2020, Southwest Appalachia’s total production was 407 Bcfe,
including 85 MBbls per day of liquids. The Company drilled 49
wells, completed 52 wells and placed 55 wells to sales during 2020,
with 14 drilled uncompleted wells as of December 31, 2020.
Northeast Appalachia – In the fourth quarter, total
production was 125 Bcf. There were four wells drilled, seven wells
completed and 11 wells placed to sales in the quarter with an
average lateral length of 14,667 feet. Of the 11 wells to sales,
eight wells were online for at least 30 days and had an average
30-day rate of 15.6 MMcf per day.
Production for the year was 473 Bcf in Northeast Appalachia. The
Company drilled 49 wells, completed 44 wells and brought 45 wells
to sales during 2020, with 10 drilled uncompleted wells at
year-end.
E&P Division Results
For the three months ended
December 31, 2020
For the year ended December 31,
2020
Northeast
Southwest
Northeast
Southwest
Gas production (Bcf)
125
82
473
221
Liquids production
Oil (MBbls)
—
1,360
—
5,124
NGL (MBbls)
—
6,999
—
25,923
Production (Bcfe)
125
132
473
407
Gross operated production December 2020
(MMcfe/d)
1,639
2,745
Net operated production December 2020
(MMcfe/d)
1,340
1,702
Capital investments ($ in
millions)
Drilling and completions, including
workovers
$
53
$
85
$
321
$
360
Land acquisition and other
4
7
18
29
Capitalized interest and expense
6
32
23
121
Total capital investments
$
63
$
124
$
362
$
510
Gross operated well activity
summary
Drilled
4
10
49
49
Completed
7
11
44
52
Wells to sales
11
16
(1)
45
55
(1)
Average well cost on wells to sales (in
millions)
$
7.6
$
10.7
(1)
$
6.8
$
9.3
(1)
Average lateral length (in ft)
14,667
15,477
(1)
10,765
13,265
(1)
Total weighted average realized price
per Mcfe, excluding derivatives
$
1.65
$
2.20
$
1.37
$
1.71
- Excludes 4 wells placed to sales during the fourth quarter of
2020 that were drilled and completed by Montage Resources.
2020 Proved Reserves
The Company reported total proved reserves of 12.0 Tcfe at
year-end 2020, compared to 12.7 Tcfe in 2019. Reserves consisted of
76% natural gas and 24% liquids. During 2020, the Company reported
1.4 Tcfe of positive performance revisions related to increased
well performance and lower operating costs, 741 Bcfe of reserve
additions, and also acquired 2.4 Tcfe of reserves related to the
acquisition of Montage Resources. The Company incurred 4.4 Tcfe of
downward price revisions related to significantly reduced trailing
12-month SEC prices on all commodities.
Lower SEC prices, which were $1.98 per Mcf NYMEX Henry Hub,
$39.57 per Bbl WTI and $10.27 per Bbl NGLs, resulted in a PV-10 of
$1.85 billion. Using 2021 strip prices as of January 4, 2021, which
were $2.70 per Mcf NYMEX Henry Hub, $47.67 per Bbl WTI and $11.82
per Bbl NGLs, the PV-10 of the reported year-end 2020 reserves
would increase to $5.85 billion, without consideration of any PV-10
increase from the expected higher reserve volumes at those
prices.
2020 Proved Reserves by
Commodity
Natural Gas
Oil
NGL
Total
(Bcf)
(MBbls)
(MBbls)
(Bcfe)
Proved reserves, beginning of
year
8,630
72,925
608,761
12,721
Revisions of previous estimates
due to price
(2,143
)
(32,507
)
(338,639
)
(4,370
)
Revisions of previous estimates
other than price
763
3,816
106,444
1,424
Extensions, discoveries and other
additions
714
135
4,371
741
Production
(694
)
(5,141
)
(25,927
)
(880
)
Acquisition of reserves in
place
1,911
18,796
55,141
2,354
Disposition of reserves in
place
—
—
—
—
Proved reserves, end of year
9,181
58,024
410,151
11,990
Proved developed reserves:
Beginning of year
4,906
26,124
226,271
6,421
End of year
6,342
33,563
276,548
8,203
2020 Proved Reserves by Division
(Bcfe)
Appalachia
Northeast
Southwest
Other (1)
Total
Proved reserves, beginning of
year
4,837
7,883
1
12,721
Revisions of previous estimates due to
price
(389
)
(3,981
)
—
(4,370
)
Revisions of previous estimates other than
price
46
1,378
—
1,424
Extensions, discoveries and other
additions
672
69
—
741
Production
(473
)
(407
)
—
(880
)
Acquisition of reserves in place
223
2,131
—
2,354
Disposition of reserves in place
—
—
—
—
Proved reserves, end of year
4,916
7,073
1
11,990
- Other includes properties outside of the Appalachian
Basin.
The Company’s 2020 proved developed finding and development (PD
F&D) costs decreased 25% from the prior year to $0.40 per Mcfe,
when excluding the impact of capitalized interest and portions of
capitalized G&A costs in accordance with the full cost method
of accounting.
Total Company Proved Developed Finding
and Development
Three-Year
12 Months Ended December
31,
Total
Total PD Adds (Bcfe):
2020
2019
2018
2020
New PD adds
267
191
177
635
PUD conversions
1,631
(2)
1,441
1,139
4,211
Total PD Adds
1,898
1,632
1,316
4,846
Costs Incurred (in millions):
Unproved property acquisition costs
$
124
$
162
$
164
$
450
Exploration costs
—
2
5
7
Development costs
812
936
1,014
2,762
Capitalized Costs Incurred
$
936
$
1,100
$
1,183
$
3,219
Subtract (in millions):
Proved property acquisition costs
$
—
$
—
$
—
$
—
Unproved property acquisition costs
(124
)
(162
)
(164
)
(450
)
Capitalized interest and expense
associated with development and exploration (1)
(60
)
(81
)
(93
)
(234
)
PD Costs Incurred
$
752
$
857
$
926
$
2,535
PD F&D
$
0.40
$
0.53
$
0.70
$
0.52
Note: Amounts may not add due to rounding
- Adjusting for the impacts of the full cost accounting method
for comparability.
- Includes increased reserve estimates of 144 Bcfe in the
Appalachian Basin associated with productivity enhancements for
newly developed PUD locations.
Conference Call
Southwestern Energy will host a conference call and webcast on
Friday, February 26, 2021 at 9:30 a.m. Central to discuss fourth
quarter and fiscal year 2020 results. To participate, dial US
toll-free 877-883-0383, or international 412-902-6506 and enter
access code 3652399. The conference call will webcast live at
www.swn.com.
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 10152130. The replay will be available until
March 26, 2021.
Due to the inclement weather last week, the Company plans to
file its Annual Report on Form 10-K on March 1, 2021.
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 the 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 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 acquisition of Montage
Resources Corporation (“Montage Acquisition”); costs in connection
with the Montage Acquisition; integration of operations and results
subsequent to the Montage Acquisition; 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.
2021 Guidance
PRODUCTION
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter (1)
Total Year
Natural Gas (Bcf)
211 – 216
217 – 223
219 – 226
226 – 233
873 – 898
Oil/Condensate (MBbls)
1,575 – 1,675
1,890 – 2,015
1,710 – 1,835
1,500 – 1,625
6,675 – 7,150
NGLs (MBbls)
7,425 – 7,700
7,575 – 7,850
7,445 – 7,720
6,900 – 7,175
29,345 – 30,445
Total Production (Bcfe)
265 – 272
274 – 282
274 – 283
276 – 286
1,089 – 1,123
Total Production (Bcfe/d)
2.94 – 3.02
3.01 – 3.10
2.98 – 3.08
3.00 – 3.11
2.98 – 3.08
CAPITAL BY DIVISION (in
millions)
Northeast Appalachia
$220 – $240
Southwest Appalachia
$475 – $500
Other
$20 – $30
Capitalized interest
$80 – $90
Capitalized expense
$55 – $65
Total Capital Investments
$850 – $925
PRODUCTION BY DIVISION (Bcfe)
Northeast Appalachia
475 – 489
Southwest Appalachia
614 – 634
PRICING
Natural gas discount to NYMEX including
transportation (2)
$0.69 – $0.84 per Mcf
Oil discount to West Texas Intermediate
(WTI) including transportation
$9.00 – $11.00 per Bbl
Natural gas liquids realization as a % of
WTI including transportation (3)
30% – 38%
EXPENSES
Lease operating expenses
$0.92 – $0.96 per Mcfe
General & administrative expense
$0.08 – $0.12 per Mcfe
Taxes, other than income taxes
$0.06 – $0.10 per Mcfe
Interest expense - net of
capitalization
$110 – $120 MM
Income tax rate (~100% deferred)
23.2%
WELL COUNT
Drilled
Completed
Wells To Sales
Ending DUC Inventory
Northeast Appalachia
21 – 26
27 – 32
27 – 32
2 – 7
Southwest Appalachia (4)
49 – 59
48 – 58
48 – 58
13 – 23
Total Well Count
70 – 85
75 – 90
75 – 90
15 – 30
- NGL guidance for the fourth quarter assumes 4 MBbls per day of
incremental ethane rejection based on strip prices at the time of
guidance. NGL volumes may vary based on economic decisions to
maximize value of the ethane barrel as a liquid or in its gas form
(ethane recovery/rejection).
- Based on $2.77 per Mcf NYMEX Henry Hub. Includes impact of
transportation costs and $0.07 — $0.09 per Mcf gain from financial
basis hedges.
- Based on $50 per Bbl WTI.
- Includes Ohio Utica.
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
For the three months ended
For the years ended
December 31,
December 31,
(in millions, except share/per share
amounts)
2020
2019
2020
2019
Operating Revenues:
Gas sales
$
356
$
298
$
967
$
1,241
Oil sales
43
70
154
223
NGL sales
107
83
265
274
Marketing
272
293
917
1,297
Other
1
1
5
3
779
745
2,308
3,038
Operating Costs and Expenses:
Marketing purchases
271
298
946
1,320
Operating expenses
236
197
813
720
General and administrative expenses
32
47
121
166
Montage merger-related expenses
38
—
41
—
Restructuring charges
4
2
16
11
(Gain) loss on sale of operating
assets
—
(1
)
—
2
Depreciation, depletion and
amortization
90
119
357
471
Impairments
335
8
2,830
16
Taxes, other than income taxes
17
11
55
62
1,023
681
5,179
2,768
Operating Income (Loss)
(244
)
64
(2,871
)
270
Interest Expense:
Interest on debt
48
41
171
166
Other interest charges
4
3
11
8
Interest capitalized
(21
)
(25
)
(88
)
(109
)
31
19
94
65
Gain on Derivatives
186
54
224
274
Gain on Early Extinguishment of
Debt
—
1
35
8
Other Income (Loss), Net
(2
)
—
1
(7
)
Income (Loss) Before Income
Taxes
(91
)
100
(2,705
)
480
Provision (Benefit) for Income
Taxes:
Current
—
(1
)
(2
)
(2
)
Deferred
1
(9
)
409
(409
)
1
(10
)
407
(411
)
Net Income (Loss)
$
(92
)
$
110
$
(3,112
)
$
891
Earnings (Loss) Per Common
Share
Basic
$
(0.14
)
$
0.20
$
(5.42
)
$
1.65
Diluted
$
(0.14
)
$
0.20
$
(5.42
)
$
1.65
Weighted Average Common Shares
Outstanding:
Basic
641,576,267
539,434,877
573,889,502
539,345,343
Diluted
641,576,267
540,574,288
573,889,502
540,382,914
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31,
December 31,
2020
2019
ASSETS
(in millions)
Current assets:
Cash and cash equivalents
$
13
$
5
Accounts receivable, net
368
345
Derivative assets
241
278
Other current assets
49
51
Total current assets
671
679
Natural gas and oil properties, using the
full cost method
27,261
25,250
Other
523
520
Less: Accumulated depreciation, depletion
and amortization
(23,673
)
(20,503
)
Total property and equipment, net
4,111
5,267
Operating lease assets
163
159
Deferred tax assets
—
407
Other long-term assets
215
205
Total long-term assets
378
771
TOTAL ASSETS
$
5,160
$
6,717
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
573
$
525
Taxes payable
74
59
Interest payable
58
51
Derivative liabilities
245
125
Current operating lease liabilities
42
34
Other current liabilities
20
54
Total current liabilities
1,012
848
Long-term debt
3,150
2,242
Long-term operating lease liabilities
117
119
Long-term derivative liabilities
183
111
Pension and other postretirement
liabilities
45
43
Other long-term liabilities
156
108
Total long-term liabilities
3,651
2,623
Commitments and contingencies
Equity:
Common stock, $0.01 par value;
1,250,000,000 shares authorized; issued 718,795,700 shares as of
December 31, 2020 and 585,555,923 shares as of December 31,
2019
7
6
Additional paid-in capital
5,093
4,726
Accumulated deficit
(4,363
)
(1,251
)
Accumulated other comprehensive loss
(38
)
(33
)
Common stock in treasury, 44,353,224
shares as of December 31, 2020 and 2019
(202
)
(202
)
Total equity
497
3,246
TOTAL LIABILITIES AND EQUITY
$
5,160
$
6,717
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
For the years ended
December 31,
(in millions)
2020
2019
Cash Flows From Operating
Activities:
Net income (loss)
$
(3,112
)
$
891
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion and
amortization
357
471
Amortization of debt issuance costs
9
8
Impairments
2,830
16
Deferred income taxes
409
(409
)
(Gain) loss on derivatives, unsettled
138
(94
)
Stock-based compensation
3
8
Gain on early extinguishment of debt
(35
)
(8
)
Loss on sale of assets
—
2
Other
6
10
Change in assets and liabilities
Accounts receivable
50
234
Accounts payable
(131
)
(141
)
Taxes payable
(7
)
—
Interest payable
(11
)
—
Inventories
2
(7
)
Other assets and liabilities
20
(17
)
Net cash provided by operating
activities
528
964
Cash Flows From Investing
Activities:
Capital investments
(896
)
(1,099
)
Proceeds from sale of property and
equipment
12
54
Cash acquired in Montage merger
3
—
Net cash used in investing activities
(881
)
(1,045
)
Cash Flows From Financing
Activities:
Payments on current portion of long-term
debt
—
(52
)
Payments on long-term debt
(72
)
(54
)
Payments on revolving credit facility
(1,671
)
(532
)
Borrowings under revolving credit
facility
2,337
566
Change in bank drafts outstanding
1
(19
)
Repayment of Montage revolving credit
facility
(200
)
—
Repayment of Montage senior notes
(522
)
—
Proceeds from issuance of long-term
debt
350
—
Debt issuance costs and other financing
costs
(10
)
(3
)
Proceeds from issuance of common stock
152
—
Purchase of treasury stock
—
(21
)
Cash paid for tax withholding
(4
)
(1
)
Other
—
1
Net cash provided by (used in) financing
activities
361
(115
)
Increase (decrease) in cash and cash
equivalents
8
(196
)
Cash and cash equivalents at beginning of
year
5
201
Cash and cash equivalents at end of
year
$
13
$
5
Hedging Summary
A detailed breakdown of the Company’s derivative financial
instruments and financial basis positions as of February 23, 2021,
including 2021 derivative contracts that have settled, is shown
below. Please refer to our annual report on Form 10-K 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
203
$
2.80
$
—
$
—
$
—
Two-way costless collars
255
—
—
2.57
2.94
Three-way costless collars
303
—
2.16
2.50
2.86
Total
761
2022
Fixed price swaps
112
$
2.68
$
—
$
—
$
—
Two-way costless collars
64
—
—
2.52
3.03
Three-way costless collars
278
—
2.06
2.50
2.97
Total
454
2023
Three-way costless collars
103
$
—
$
2.05
$
2.46
$
3.01
Natural gas financial basis
positions
Volume
Basis Differential
(Bcf)
($/MMBtu)
Q1 2021
Dominion South
16
$
(0.42
)
TCO
5
$
(0.31
)
TETCO M3
21
$
1.95
Total
42
$
0.80
Q2 2021
Dominion South
35
$
(0.58
)
TCO
28
$
(0.51
)
TETCO M3
24
$
(0.44
)
Total
87
$
(0.52
)
Q3 2021
Dominion South
35
$
(0.62
)
TCO
28
$
(0.51
)
TETCO M3
24
$
(0.44
)
Total
87
$
(0.53
)
Q4 2021
Dominion South
23
$
(0.58
)
TCO
13
$
(0.47
)
TETCO M3
17
$
(0.00
)
Total
53
$
(0.37
)
2022
Dominion South
94
$
(0.56
)
TCO
35
$
(0.43
)
TETCO M3
53
$
(0.10
)
Total
182
$
(0.40
)
Weighted Average Price per
Bbl
Volume (MBbls)
Swaps
Sold Puts
Purchased Puts
Sold Calls
Oil
2021
Fixed price swaps
4,887
$
48.59
$
—
$
—
$
—
Two-way costless collars
201
—
—
37.73
45.68
Three-way costless collars
1,543
—
37.42
47.22
52.86
Total
6,631
2022
Fixed price swaps
1,470
$
47.34
$
—
$
—
$
—
Three-way costless collars
1,380
—
39.89
50.23
57.05
Total
2,850
2023
Three-way costless collars
878
$
—
$
33.52
$
43.52
$
53.41
Ethane
2021
Fixed price swaps
5,976
$
7.16
$
—
$
—
$
—
Two-way costless collars
584
—
—
7.14
10.40
Total
6,560
2022
Fixed price swaps
1,758
$
8.68
$
—
$
—
$
—
Two-way costless collars
135
—
—
7.56
9.66
Total
1,893
Propane
2021
Fixed price swaps
7,149
$
20.72
$
—
$
—
$
—
2022
Fixed price swaps
2,422
$
20.98
$
—
$
—
$
—
Three-way costless collars
305
—
16.80
21.00
31.92
Total
2,727
Normal Butane
2021
Fixed price swaps
2,092
$
25.44
$
—
$
—
$
—
2022
Fixed price swaps
667
$
22.77
$
—
$
—
$
—
Natural Gasoline
2021
Fixed price swaps
2,021
$
37.95
$
—
$
—
$
—
2022
Fixed price swaps
765
$
39.48
$
—
$
—
$
—
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 December
31,
12 Months Ended December
31,
2020
2019
2020
2019
(in millions)
Adjusted net income:
Net income (loss)
$
(92
)
$
110
$
(3,112
)
$
891
Add back (deduct):
Montage merger-related expenses
38
—
41
—
Restructuring charges
4
2
16
11
Impairments
335
8
2,830
16
(Gain) loss on sale of assets
—
(1
)
—
2
(Gain) loss on derivatives, unsettled
(134
)
14
138
(94
)
Gain on early extinguishment of debt
—
(1
)
(35
)
(8
)
Legal settlement charges
—
3
1
6
Non-cash pension settlement loss
—
1
—
6
Other loss (1)
2
—
2
10
Adjustments due to discrete tax items
(2)
22
(32
)
1,042
(526
)
Tax impact on adjustments
(56
)
(5
)
(702
)
14
Adjusted net income
$
119
$
99
$
221
$
328
- Includes a $6 million residual value guarantee short-fall
payment to the previous lessor of our headquarters building for the
twelve months ended December 31, 2019.
- 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 23.2%
before the impacts of any valuation allowance.
3 Months Ended December
31,
12 Months Ended December
31,
2020
2019
2020
2019
Adjusted diluted earnings per
share:
Diluted earnings per share
$
(0.14
)
$
0.20
$
(5.42
)
$
1.65
Add back (deduct):
Montage merger-related expenses
0.06
—
0.07
—
Restructuring charges
0.01
0.00
0.03
0.02
Impairments
0.52
0.01
4.91
0.03
(Gain) loss on sale of assets
—
(0.00
)
—
0.00
(Gain) loss on derivatives, unsettled
(0.21
)
0.03
0.25
(0.17
)
Gain on early extinguishment of debt
—
(0.00
)
(0.06
)
(0.01
)
Legal settlement charges
—
0.01
0.00
0.01
Non-cash pension settlement loss
—
0.00
—
0.01
Other loss (1)
0.00
—
0.00
0.02
Adjustments due to discrete tax items
(2)
0.03
(0.06
)
1.81
(0.97
)
Tax impact on adjustments
(0.09
)
(0.01
)
(1.21
)
0.02
Adjusted diluted earnings per share
$
0.18
$
0.18
$
0.38
$
0.61
- Includes a $6 million residual value guarantee short-fall
payment to the previous lessor of our headquarters building for the
twelve months ended December 31, 2019.
- 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 23.2%
before the impacts of any valuation allowance.
3 Months Ended December
31,
12 Months Ended December
31,
2020
2019
2020
2019
(in millions)
Net cash flow:
Net cash provided by operating
activities
$
121
$
225
$
528
$
964
Add back (deduct):
Changes in operating assets and
liabilities
86
19
77
(69
)
Montage merger-related expenses
38
—
41
—
Restructuring charges
4
2
16
11
Other loss (1)
—
—
—
7
Net cash flow
$
249
$
246
$
662
$
913
- Includes a $6 million residual value guarantee short-fall
payment to the previous lessor of our headquarters building for the
twelve months ended December 31, 2019.
3 Months Ended December
31,
12 Months Ended December
31,
2020
2019
2020
2019
(in millions)
Adjusted EBITDA:
Net income (loss)
$
(92
)
$
110
$
(3,112
)
$
891
Add back (deduct):
Interest expense
31
19
94
65
Provision (benefit) for income taxes
1
(10
)
407
(411
)
Depreciation, depletion and
amortization
90
119
357
471
Montage merger-related expenses
38
—
41
—
Restructuring charges
4
2
16
11
Impairments
335
8
2,830
16
(Gain) loss on sale of assets
—
(1
)
—
2
(Gain) loss on derivatives, unsettled
(134
)
14
138
(94
)
Gain on early extinguishment of debt
—
(1
)
(35
)
(8
)
Legal settlement charges
—
3
1
6
Non-cash pension settlement loss
—
1
—
6
Other loss (1)
2
—
2
10
Stock-based compensation expense
1
2
3
8
Adjusted EBITDA
$
276
$
266
$
742
$
973
- Includes a $6 million residual value guarantee short-fall
payment to the previous lessor of our headquarters building for the
twelve months ended December 31, 2019.
December 31, 2020
Net debt:
(in millions)
Total debt (1)
$
3,171
Subtract:
Cash and cash equivalents
(13
)
Net debt
$
3,158
- Does not include $21 million of unamortized debt discount and
issuance expense.
December 31, 2020
Net debt to EBITDA:
(in millions)
Net debt
$
3,158
Adjusted EBITDA (1)
$
900
Net debt to EBITDA
3.5x
- Adjusted EBITDA for the twelve months ended December 31, 2020,
including $158 million of Adjusted EBITDA related to Montage
Resources prior to the close of the acquisition.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210225006217/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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