Southwestern Energy Announces Fourth Quarter and Full Year 2019 Results; Provides 2020 Guidance

Company Release - 2/27/2020 4:19 PM ET

2020 capital investment 20% lower than 2019

Reaffirms capability and commitment to achieving free cash flow neutrality by end of 2020 through operational efficiencies, cost reductions, well outperformance and hedge program benefits

SPRING, Texas--(BUSINESS WIRE)-- Southwestern Energy Company (NYSE: SWN) today announced financial and operating results for the fourth quarter and full year 2019 and issued 2020 guidance.

“Once again, our team achieved results at or above the midpoint of guidance across all metrics highlighting our established culture of outperformance while operating safely and responsibly. Importantly, we further reduced the cost structure of the Company, enhanced well performance while materially lowering well costs, and improved operational efficiencies, all adding to economic inventory,” said Bill Way, Southwestern Energy President and Chief Executive Officer.

“Foundational to the Company’s resilience, especially in the current pricing environment, are a strong balance sheet, capital discipline, unique Tier 1 condensate and liquids rich acreage and a multi-year hedge position. We remain confident in our ability to return the Company to free cash flow by the end of this year and be firmly positioned to deliver an attractive long-term value proposition for shareholders,” Way continued.

Fourth Quarter 2019 Highlights

  • Reported 208 Bcfe total production, total liquids above guidance at 88 MBbls per day;
  • Increased condensate production to 1,486 MBbls, greater than 16.2 MBbls per day;
  • Received weighted average realized price (excluding transportation costs) of $2.85 per Mcfe, including $68 million in settled derivatives, 8% less than prior year despite a 31% decrease in NYMEX Henry Hub;

Full Year 2019 Highlights

  • Achieved a year-end net debt/EBITDA of 2.3x;
  • Reduced well costs 27% to $824 per lateral foot with an average lateral length of 10,014 feet;
  • Invested capital of $1.14 billion, 9% below prior year; delivered wells to sales above the high-end of guidance;
  • Reported total production of 778 Bcfe, including 23% total liquids growth;
  • Grew condensate production 38%;
  • Increased proved reserves to 12.7 Tcfe, including 32% liquids, and replaced 203% of 2019 production volumes;
  • Lowered Proved Developed F&D by 24% to $0.53 per Mcfe;
  • Realized an additional $122 million in gross G&A and interest reductions;
  • Received weighted average realized price (excluding transportation costs) of $2.82 per Mcfe, 3% below prior year, including $180 million in derivative gains; and
  • Continued environmental stewardship with low methane emissions and another year of freshwater neutrality, bringing total gallons returned to the environment to 11 billion.

2020 Guidance
The following table provides a summary of capital and production guidance. For full guidance, please refer to attachments in this press release. The comparisons below are based on the midpoint of 2020 guidance and 2019 actual results.

Guidance Summary ($2.10 per MMBtu NYMEX and $50 per Bbl WTI)

Total capital investment

$860 – $940

MM

Total production

830 – 865

Bcfe

Natural gas

642 – 668

Bcf

Oil

5,625 – 6,025

MBbls

NGL

25,500 – 26,600

MBbls

  • Capital investments of $860 to $940 million, 20% less than 2019; first half weighted similar to prior years;
  • Additional 10% well cost reduction, averaging $730 per lateral foot for all wells to sales, including dry gas and liquids-rich areas; costs include all drilling and completion costs, pad construction, facilities installation and initial flowback;
  • Increasing average lateral length 20% to more than 12,000 feet;
  • Estimating 90 to 110 wells to sales, with approximately two-thirds located in liquids-rich acreage; reduced cost structure and efficiency improvements allowing for activity levels similar to 2019 with less capital;
  • Resulting production growth of 9% driven primarily by investment in Southwest Appalachia, with oil and natural gas liquids (NGLs) increasing approximately 25% and 10%, respectively;
  • Hedge position includes protection on approximately 83%, 100% and 51% of expected natural gas, oil and NGL production;
  • Expected shallowing of base decline to 25%; and
  • Decreasing G&A to $0.13 to $0.17 per Mcfe range, down from $0.18 per Mcfe in 2019, including approximately $40 million in reductions implemented earlier this year.

Natural gas hedges, which include swaps and collars, are in place for approximately 83% of expected natural gas production at a floor price of $2.47 per MMBtu for April through the remainder of the year. Ethane hedges are in place for 8,099 MBbls at an average swap price of $8.67 per barrel ($0.21 per gallon). Propane hedges are in place for 5,112 MBbls at an average price of $24.00 per barrel ($0.57 per gallon). Approximately 100% of estimated oil production is hedged with swaps and collars in place at an average floor price of $56.56 per barrel.

2019 Fourth Quarter and Full Year Results
The table below summarizes select financial statistics. Results for 2019 may not be comparable to 2018 due to the December 2018Fayetteville Shale divestiture.

FINANCIAL STATISTICS

 

For the three months ended

 

For the years ended

 

 

December 31,

 

December 31,

(in millions)

 

2019

 

2018

 

2019

 

2018

Net income attributable to common stock

 

$

110

 

$

307

 

$

891

 

$

535

 

Adjusted net income attributable to common stock (non-GAAP)

 

$

99

 

$

176

 

$

328

 

$

590

 

Diluted earnings per share

 

$

0.20

 

$

0.54

 

$

1.65

 

$

0.93

 

Adjusted diluted earnings per share (non-GAAP)

 

$

0.18

 

$

0.31

 

$

0.61

 

$

1.02

 

Adjusted EBITDA (non-GAAP)

 

$

266

 

$

395

(1)

$

973

 

$

1,484

(1)

Net cash provided by operating activities

 

$

225

 

$

252

 

$

964

 

$

1,223

 

Net cash flow (non-GAAP)

 

$

246

 

$

359

 

$

913

 

$

1,352

 

Total capital investments (2)

 

$

207

 

$

209

 

$

1,140

 

$

1,248

 

(1) Includes $86 million and $375 million of Adjusted EBITDA from the divested Fayetteville Shale assets for the three and twelve months ended December 31, 2018, respectively

(2) Capital investments on the cash flow statement include decreases of $18 million and $74 million for the three months ended December 31, 2019 and 2018, respectively, and an increase of $34 million and a decrease of $53 million for the twelve months ended December 31, 2019 and 2018, respectively, relating to the change in accrued expenditures between periods.

Fourth Quarter 2019 Financial Results
Southwestern Energy recorded net income attributable to common stock of $110 million or $0.20 per diluted share for the quarter ended December 31, 2019. Adjusted net income, which excludes the impact of unsettled derivatives and one-time items, was $99 million or $0.18 per diluted share in 2019 and $176 million or $0.31 per share for the same period in 2018. Excluding the impact of the Fayetteville Shale divestiture, the decrease was primarily related to a decrease in commodity prices, partially offset by a $167 million increase in settled derivatives compared to 2018. Adjusted EBITDA (non-GAAP) was $266 million, net cash provided by operating activities was $225 million and net cash flow (non-GAAP) was $246 million.

Fourth quarter 2019 weighted average realized price (including transportation costs) was $2.12 per Mcfe excluding derivatives compared to $3.15 per Mcfe in 2018. Including derivatives and excluding transportation costs, the weighted average realized price in the fourth quarter of $2.85 per Mcfe was 8% less than prior year despite a 31% decrease in NYMEX Henry Hub.

Full Year 2019 Financial Results
The Company recorded net income attributable to common stock of $891 million, or $1.65 per share, for the year ended December 31, 2019. Adjusted net income for 2019 was $328 million, or $0.61 per share, compared to $590 million, or $1.02 per share, in 2018. The decrease in adjusted net income compared to prior year was primarily the result of a decrease in commodity prices and the divestiture of the Fayetteville Shale, partially offset by a $274 million increase in settled derivatives impact, a 23% increase in liquids production and decreased interest and G&A expense. Adjusted EBITDA (non-GAAP) was $973 million, net cash provided by operating activities was $964 million and net cash flow (non-GAAP) was $913 million.

For the full year 2019, weighted average realized price (including transportation costs) was $2.18 per Mcfe excluding derivatives, an 18% decrease compared to $2.66 per Mcfe in 2018, due to decreased prices across all commodities. The weighted average realized price including derivatives and excluding transportation costs was $2.82 per Mcfe, a decrease of only 3% compared to prior year due to $180 million of derivative gains in 2019.

During the year, the Company reduced senior notes by $114 million, repurchasing $62 million of senior notes at an average discount of 13% and retiring $52 million of notes that were due in 2020. The Company had a leverage ratio of 2.3x at year-end and a weighted average interest rate of 6.7% on its $2.2 billion of senior notes with no significant maturities until 2025. As of December 31, 2019, the Company had $1.8 billion of liquidity available under its $2 billion revolving credit facility, with $34 million borrowed and $172 million letters of credit outstanding.

Realized Prices

 

For the three months ended

 

For the years ended

(includes transportation costs)

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

Natural Gas Price:

 

 

 

 

 

 

 

 

NYMEX Henry Hub price ($/MMBtu)(1)

 

$

2.50

 

 

$

3.64

 

 

$

2.63

 

 

$

3.09

 

Discount to NYMEX (2)

 

 

(0.69

)

 

 

(0.66

)

 

 

(0.65

)

 

 

(0.64

)

Realized gas price per Mcf, excluding derivatives

 

$

1.81

 

 

$

2.98

 

 

$

1.98

 

 

$

2.45

 

Gain (loss) on settled financial basis derivatives ($/Mcf)

 

 

0.05

 

 

 

(0.02

)

 

 

 

 

(0.04

)

Gain (loss) on settled commodity derivatives ($/Mcf)

 

 

0.26

 

 

 

(0.48

)

 

 

0.20

 

 

 

(0.06

)

Realized gas price per Mcf, including derivatives

 

$

2.12

 

 

$

2.48

 

 

$

2.18

 

 

$

2.35

 

Oil Price, per Bbl:

 

 

 

 

 

 

 

 

WTI oil price ($/Bbl)

 

$

56.96

 

 

$

58.81

 

 

$

57.03

 

 

$

64.77

 

Discount to WTI

 

 

(10.59

)

 

 

(7.94

)

 

 

(10.13

)

 

 

(7.98

)

Realized oil price, excluding derivatives

 

$

46.37

 

 

$

50.87

 

 

$

46.90

 

 

$

56.79

 

Realized oil price, including derivatives

 

$

49.16

 

 

$

50.37

 

 

$

49.56

 

 

$

56.07

 

NGL Price, Per Bbl:

 

 

 

 

 

 

 

 

Realized NGL price, excluding derivatives

 

$

12.46

 

 

$

18.59

 

 

$

11.59

 

 

$

17.91

 

Realized NGL price, including derivatives

 

$

14.83

 

 

$

18.49

 

 

$

13.64

 

 

$

17.23

 

Percentage of WTI, excluding derivatives

 

 

22

%

 

 

32

%

 

 

20

%

 

 

28

%

Total Weighted Average Realized Price:

 

 

 

 

 

 

 

 

Excluding derivatives ($/Mcfe)

 

$

2.12

 

 

$

3.15

 

 

$

2.18

 

 

$

2.66

 

Including derivatives ($/Mcfe)

 

$

2.44

 

 

$

2.72

 

 

$

2.42

 

 

$

2.57

 

(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 Review
Total production for the quarter ended December 31, 2019 was 208 Bcfe, 23% of which was liquids. NGL production was 6,609 MBbls, or 71.8 MBbls per day, and condensate production was 1,486 MBbls, or 16.2 MBbls per day, each above the high end of guidance.

For the year, Appalachia production was 778 Bcfe, an 11% increase compared to prior year, with all growth coming from liquids-rich assets in Southwest Appalachia. NGL and oil production increased 20% and 38%, respectively, compared to prior year.

Capital investments in the fourth quarter of 2019 were $207 million, bringing full year capital investment to $1,140 million, 9% below prior year. The Company brought 113 wells to sales during the year, above the high end of guidance, while spending less capital due to operational efficiencies.

Operating Statistics

 

For the three months ended

 

For the years ended

 

 

 

December 31,

 

December 31,

 

 

 

2019

 

2018

 

2019

 

2018

 

Production

 

 

 

 

 

 

 

 

 

Gas production (Bcf)

 

 

160

 

 

194

 

 

609

 

 

807

 

Oil production (MBbls)

 

 

1,486

 

 

1,073

 

 

4,696

 

 

3,407

 

NGL production (MBbls)

 

 

6,609

 

 

5,434

 

 

23,620

 

 

19,706

 

Total production (Bcfe)

 

 

208

 

 

234

 

 

778

 

 

946

 

 

 

 

 

 

 

 

 

 

 

Division Production

 

 

 

 

 

 

 

 

 

Northeast Appalachia (Bcf)

 

 

116

 

 

118

 

 

459

 

 

459

 

Southwest Appalachia (Bcfe)

 

 

92

 

 

71

 

 

319

 

 

243

 

Fayetteville Shale(Bcf)

 

 

 

44

 

 

 

243

 

 

 

 

 

 

 

 

 

 

 

Average unit costs per Mcfe

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

$

0.94

 

$

0.93

 

$

0.92

 

$

0.93

 

General & administrative expenses

 

$

0.19

(1)

$

0.18

(1)

$

0.18

(2)

$

0.19

(2)

Taxes, other than income taxes

 

$

0.05

 

$

0.10

 

$

0.08

 

$

0.09

(3)

Full cost pool amortization

 

$

0.54

 

$

0.53

 

$

0.56

 

$

0.51

 

(1) G&A per Mcfe excludes restructuring charges of $2 million and $18 million and legal settlement charges of $3 million and $1 million for the three months ended December 31, 2019 and 2018, respectively.

(2) G&A per Mcfe excludes $11 million restructuring charges, $6 million charges related to sale of building and $6 million legal settlement charges for the twelve months ended December 31, 2019 and $36 million restructuring charges and $9 million of legal settlement charges for the twelve months ended December 31, 2018.

(3) TOTI per Mcfe excludes $1 million of restructuring charges for the twelve months ended December 31, 2018.

Southwest Appalachia– In the fourth quarter, total net production for Southwest Appalachia was 92 Bcfe, including over 16 MBbls per day of condensate. The Company placed 16 wells to sales in the fourth quarter, all located in the Company’s super rich acreage, with an average lateral length of 11,213 feet. Eleven of the 16 wells were online for at least 30 days and had an average 30-day rate of 10 MMcfe per day, including 67% liquids, of which 444 barrels per day were condensate.

In 2019, Southwest Appalachia’s total net production increased 31% to 319 Bcfe, 53% of which were liquids. The Company placed 69 wells to sales, including 64 located in the super rich acreage, drilled 66 wells and completed 72 wells in 2019.

Northeast Appalachia– In the fourth quarter, total net production for Northeast Appalachia was 116 Bcf. There were no wells drilled, five wells completed and eight wells placed to sales in the quarter with an average lateral length of 9,841 feet. Of the eight wells to sales, three wells were online for at least 30 days and had an average 30-day rate of 18 MMcf per day.

Production for the year was 459 Bcf, flat with prior year. The Company drilled 39 wells, completed 44 wells and brought 44 wells to sales during 2019.

E&P Division Results

For the three months
ended December 31, 2019

 

 

For the year ended
December 31, 2019

 

Northeast

 

Southwest

 

 

Northeast

 

Southwest

Gas production (Bcf)

 

116

 

 

44

 

 

 

459

 

 

150

Liquids production

 

 

 

 

 

 

 

 

 

 

 

 

Oil (MBbls)

 

 

 

1,480

 

 

 

 

 

4,673

NGL (MBbls)

 

 

 

6,608

 

 

 

 

 

23,611

Production (Bcfe)

 

116

 

 

92

 

 

 

459

 

 

319

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross operated production December 2019 (MMcfe/d)

 

1,500

 

 

1,545

 

 

 

 

 

 

 

Net operated production December 2019(MMcfe/d)

 

1,224

 

 

958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital investments ($ in millions)

 

 

 

 

 

 

 

 

 

 

 

 

Drilling and completions, including workovers

$

40

 

$

84

 

 

$

314

 

$

516

Land acquisition and other

 

11

 

 

15

 

 

 

18

 

 

45

Capitalized interest and expense

 

8

 

 

36

 

 

 

33

 

 

149

Total capital investments

$

59

 

$

135

 

 

$

365

 

$

710

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross operated well activity summary

 

 

 

 

 

 

 

 

 

 

 

 

Drilled

 

 

 

10

 

 

 

39

 

 

66

Completed

 

5

 

 

10

 

 

 

44

 

 

72

Wells to sales

 

8

 

 

16

 

 

 

44

 

 

69

 

 

 

 

 

 

 

 

 

 

 

 

 

Average well cost on wells to sales (in millions)

$

7.1

 

$

8.9

 

 

$

7.3

 

$

8.9

Average lateral length (in ft)

 

9,841

 

 

11,213

 

 

 

9,029

 

 

10,642

 

 

 

 

 

 

 

 

 

 

 

 

 

Total weighted average realized price per Mcfe, excluding derivatives

$

1.92

 

$

2.36

 

 

$

2.10

 

$

2.30

2019 Proved Reserves
The Company increased its total proved reserves to 12.7 Tcfe, 7% above year-end 2018 due to additions and positive performance revisions across gas, oil and NGLs. Reserves consisted of 68% natural gas, and 32% liquids, with PV-10 at year-end 2019 of $3.7 billion.

During the year, the Company replaced 203% of production volumes through 1,195 Bcfe of proved reserve additions and net positive revisions of 385 Bcfe. The reserve life index was approximately 16.4 years at year-end 2019.

Proved Reserves Summary

 

For the years ended December 31,

 

 

2019

 

2018

Proved reserves (in Bcfe)

 

 

12,721

 

 

11,921

 

 

 

 

 

 

 

PV-10:

 

 

 

 

 

 

Pre-tax (millions)

 

$

3,735

 

$

6,524

PV of taxes (millions)

 

 

(35)

 

 

(525)

After-Tax (millions)

 

$

3,700

 

$

5,999

 

 

 

 

 

 

 

Percent of estimated proved reserves that are:

 

 

 

 

 

 

Natural gas

 

 

68%

 

 

67%

NGLs and oil

 

 

32%

 

 

33%

Proved developed

 

 

50%

 

 

47%

2019 Proved Reserves by Commodity

Natural Gas

 

Oil

 

NGL

 

Total

 

 

(Bcf)

 

(MBbls)

 

(MBbls)

 

(Bcfe)

 

 

 

 

 

 

 

 

 

 

Proved reserves, beginning of year

8,044

 

69,007

 

577,063

 

11,921

 

Revisions of previous estimates due to price

(480

)

(2,041

)

(37,492

)

(717

)

Revisions of previous estimates other than price

685

 

3,707

 

65,869

 

1,102

 

Extensions, discoveries and other additions

992

 

6,948

 

26,941

 

1,195

 

Production

(609

)

(4,696

)

(23,620

)

(778

)

Acquisition of reserves in place

 

 

 

 

Disposition of reserves in place

(2

)

 

 

(2

)

Proved reserves, end of year

8,630

 

72,925

 

608,761

 

12,721

 

 

 

 

 

 

 

 

 

 

Proved developed reserves:

 

 

 

 

 

 

 

 

Beginning of year

4,395

 

18,037

 

175,480

 

5,557

 

End of year

4,906

 

26,124

 

226,271

 

6,421

 

2019 Proved Reserves by Division (Bcfe)

Appalachia

 

 

 

 

 

 

Northeast

 

Southwest

 

Other (1)

 

Total

 

 

 

 

 

 

 

 

 

 

Proved reserves, beginning of year

4,366

 

7,554

 

1

 

11,921

 

Revisions of previous estimates due to price

(57

)

(660

)

 

(717

)

Revisions of previous estimates other than price

127

 

975

 

 

1,102

 

Extensions, discoveries and other additions

862

 

333

 

 

1,195

 

Production

(459

)

(319

)

 

(778

)

Acquisition of reserves in place

 

 

 

 

Disposition of reserves in place

(2

)

 

 

(2

)

Proved reserves, end of year

4,837

 

7,883

 

1

 

12,721

 

(1) Other includes properties outside of the Appalachian Basin.

The Company’s 2019 proved developed finding and development (PD F&D) costs decreased 24% from the prior year to $0.53 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

 

2019

 

2018

 

2017

 

2019

Total PD Adds (Bcfe):

 

 

 

 

 

 

 

 

 

 

 

New PD adds

 

191

 

 

177

 

 

1,258

 

 

1,626

PUD conversions

 

1,441

(2)

 

1,139

 

 

46

 

 

2,626

Total PD Adds

 

1,632

 

 

1,316

 

 

1,304

 

 

4,252

 

 

 

 

 

 

 

 

 

 

 

 

Costs Incurred (in millions):

 

 

 

 

 

 

 

 

 

 

 

Unproved property acquisition costs

$

162

 

$

164

 

$

194

 

$

520

Exploration costs

 

2

 

 

5

 

 

22

 

 

29

Development costs

 

936

 

 

1,014

 

 

1,024

 

 

2,974

Capitalized Costs Incurred

$

1,100

 

$

1,183

 

$

1,240

 

$

3,523

 

 

 

 

 

 

 

 

 

 

 

 

Subtract (in millions):

 

 

 

 

 

 

 

 

 

 

 

Proved property acquisition costs

$

 

$

 

$

 

$

Unproved property acquisition costs

 

(162)

 

 

(164)

 

 

(194)

 

 

(520)

Capitalized interest and expense associated with development and exploration (1)

 

(81)

 

 

(93)

 

 

(103)

 

 

(277)

PD Costs Incurred

$

857

 

$

926

 

$

943

 

$

2,726

 

 

 

 

 

 

 

 

 

 

 

 

PD F&D

$

0.53

 

$

0.70

 

$

0.72

 

$

0.64

Note: Amounts may not add due to rounding

(1) Adjusting for the impacts of the full cost accounting method for comparability.
(2) Includes increased reserve estimates of 206 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 28, 2020 at 9:00 a.m. Central to discuss fourth quarter and fiscal year 2019 results. To participate, dial US toll-free 877-883-0383, or international 412-902-6506 and enter access code 4822579. 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 10138538. The replay will be available until March 20, 2020.

About Southwestern Energy
Southwestern Energy Company is an independent energy company engaged in natural gas, natural gas liquids and oil exploration, development, production and marketing. For additional information, visit our website www.swn.com.

Forward Looking Statement
This news release contains forward-looking statements. Forward-looking statements relate to future events and anticipated results of operations, business strategies, and other aspects of our operations or operating results. In many cases you can identify forward-looking statements by terminology such as “anticipate,” “intend,” “plan,” “project,” “estimate,” “continue,” “potential,” “should,” “could,” “may,” “will,” “objective,” “guidance,” “outlook,” “effort,” “expect,” “believe,” “predict,” “budget,” “projection,” “goal,” “forecast,” “target” or similar words. Statements may be forward looking even in the absence of these particular words. Where, in any forward-looking statement, the Company expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, there can be no assurance that such expectation or belief will result or be achieved. The actual results of operations can and will be affected by a variety of risks and other matters including, but not limited to, changes in commodity prices (including geographic basis differentials); changes in expected levels of natural gas and oil reserves or production; operating hazards, drilling risks, unsuccessful exploratory activities; natural disasters; limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets; international monetary conditions; the risks related to the discontinuation of LIBOR and/or other reference rates that may be introduced following the transition, including increased expenses and litigation and the effectiveness of interest rate hedge strategies; unexpected cost increases; potential liability for remedial actions under existing or future environmental regulations; failure or delay in obtaining necessary regulatory approvals; potential liability resulting from pending or future litigation; general domestic and international economic and political conditions; the impact of a prolonged federal, state or local government shutdown and threats not to increase the federal government’s debt limit; as well as changes in tax, environmental and other laws, including court rulings, applicable to our business. Other factors that could cause actual results to differ materially from those described in the forward-looking statements include other economic, business, competitive and/or regulatory factors affecting our business generally as set forth in our filings with the Securities and Exchange Commission. Unless legally required, Southwestern Energy Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

2020 Guidance

 

1st Quarter

 

2nd Quarter

 

3rd Quarter

 

4th Quarter

 

Total Year

Production

 

 

 

 

 

 

 

 

 

Natural Gas (Bcf)

150 – 156

 

152 – 158

 

170 – 177

 

170 – 177

 

642 – 668

Oil/Condensate (MBbls)

1,300 – 1,400

 

1,200 – 1,300

 

1,475 – 1,575

 

1,650 – 1,750

 

5,625 – 6,025

NGLs (MBbls)

6,000 – 6,275

 

6,150 – 6,425

 

6,600 – 6,875

 

6,750 – 7,025

 

25,500 – 26,600

Total Production (Bcfe)

194 – 202

 

196 – 205

 

219 – 228

 

221 – 230

 

830 – 865

Total Production (MMcfe/d)

2,132 – 2,220

 

2,154 – 2,253

 

2,380 – 2,478

 

2,402 – 2,500

 

2,268 – 2,363

CAPITAL BY DIVISION (in millions)

 

Northeast Appalachia

$235 – $260

Southwest Appalachia

$460 – $485

Other

$25 – $35

Capitalized interest

$85 – $95

Capitalized expense

$55 – $65

Total Capital Investments

$860 – $940

PRODUCTION BY DIVISION (Bcfe)

 

Northeast Appalachia

455 – 470

Southwest Appalachia

375 – 395

 

 

PRICING

 

Natural gas discount to NYMEX including transportation

$0.63 – $0.73 per Mcf

Oil discount to West Texas Intermediate (WTI) including transportation

$9.50 – $11.50 per Bbl

Natural Gas Liquids realization as a % of WTI including transportation

16% – 21%

 

 

EXPENSES

 

Lease operating expenses

$0.92 – $0.97 per Mcfe

General & administrative expense

$0.13 – $0.17 per Mcfe

Taxes, other than income taxes

$0.07 – $0.09 per Mcfe

 

 

Interest expense - net of capitalization

$80 – $90 MM

Income tax rate (~100% deferred)

23.5%

WELL COUNT

 

 

 

 

Drilled

 

Completed

 

Wells To Sales

 

Ending DUC
Inventory

Northeast Appalachia

 

 

 

25 – 35

 

30 – 40

 

30 – 40

 

0 – 10

Southwest Appalachia

 

 

 

50 – 60

 

60 – 70

 

60 – 70

 

5 – 15

Total Well Count

 

 

 

75 – 95

 

90 – 110

 

90 – 110

 

5 – 25

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)

 

2019

 

2018

 

2019

 

2018

Operating Revenues:

 

 

 

 

 

 

 

 

Gas sales

 

$

298

 

 

$

586

 

 

$

1,241

 

 

$

1,998

 

Oil sales

 

 

70

 

 

 

55

 

 

 

223

 

 

 

196

 

NGL sales

 

 

83

 

 

 

100

 

 

 

274

 

 

 

352

 

Marketing

 

 

293

 

 

 

417

 

 

 

1,297

 

 

 

1,222

 

Gas gathering

 

 

 

 

16

 

 

 

 

 

89

 

Other

 

 

1

 

 

 

1

 

 

 

3

 

 

 

5

 

 

 

 

745

 

 

 

1,175

 

 

 

3,038

 

 

 

3,862

 

Operating Costs and Expenses:

 

 

 

 

 

 

 

 

Marketing purchases

 

 

298

 

 

 

421

 

 

 

1,320

 

 

 

1,229

 

Operating expenses

 

 

197

 

 

 

197

 

 

 

720

 

 

 

785

 

General and administrative expenses

 

 

47

 

 

 

44

 

 

 

166

 

 

 

209

 

(Gain) loss on sale of operating assets, net

 

 

(1

)

 

 

(17

)

 

 

2

 

 

 

(17

)

Restructuring charges

 

 

2

 

 

 

19

 

 

 

11

 

 

 

39

 

Depreciation, depletion and amortization

 

 

119

 

 

 

134

 

 

 

471

 

 

 

560

 

Impairments

 

 

8

 

 

 

 

 

16

 

 

 

171

 

Taxes, other than income taxes

 

 

11

 

 

 

25

 

 

 

62

 

 

 

89

 

 

 

 

681

 

 

 

823

 

 

 

2,768

 

 

 

3,065

 

Operating Income

 

 

64

 

 

 

352

 

 

 

270

 

 

 

797

 

Interest Expense:

 

 

 

 

 

 

 

 

Interest on debt

 

 

41

 

 

 

51

 

 

 

166

 

 

 

231

 

Other interest charges

 

 

3

 

 

 

2

 

 

 

8

 

 

 

8

 

Interest capitalized

 

 

(25

)

 

 

(29

)

 

 

(109

)

 

 

(115

)

 

 

 

19

 

 

 

24

 

 

 

65

 

 

 

124

 

 

 

 

 

 

 

 

 

 

Gain (Loss) on Derivatives

 

 

54

 

 

 

(10

)

 

 

274

 

 

 

(118

)

Gain (Loss) on Early Extinguishment of Debt

 

 

1

 

 

 

(9

)

 

 

8

 

 

 

(17

)

Other Loss, Net

 

 

 

 

(1

)

 

 

(7

)

 

 

 

 

 

 

 

 

 

 

 

Income Before Income Taxes

 

 

100

 

 

 

308

 

 

 

480

 

 

 

538

 

Provision (Benefit) for Income Taxes:

 

 

 

 

 

 

 

 

Current

 

 

(1

)

 

 

1

 

 

 

(2

)

 

 

1

 

Deferred

 

 

(9

)

 

 

 

 

(409

)

 

 

 

 

 

(10

)

 

 

1

 

 

 

(411

)

 

 

1

 

Net Income

 

$

110

 

 

$

307

 

 

$

891

 

 

$

537

 

Participating securities — mandatory convertible preferred stock

 

 

 

 

 

 

 

 

2

 

Net Income Attributable to Common Stock

 

$

110

 

 

$

307

 

 

$

891

 

 

$

535

 

 

 

 

 

 

 

 

 

 

Earnings Per Common Share

 

 

 

 

 

 

 

 

Basic

 

$

0.20

 

 

$

0.54

 

 

$

1.65

 

 

$

0.93

 

Diluted

 

$

0.20

 

 

$

0.54

 

 

$

1.65

 

 

$

0.93

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

539,434,877

 

 

 

564,863,538

 

 

 

539,345,343

 

 

 

574,631,756

 

Diluted

 

 

540,574,288

 

 

 

567,773,371

 

 

 

540,382,914

 

 

 

576,642,808

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

December 31,
2019

 

December 31,
2018

ASSETS

 

(in millions)

Current assets:

 

 

 

Cash and cash equivalents

 

$

5

 

 

$

201

 

Accounts receivable, net

 

 

345

 

 

581

 

Derivative assets

 

 

278

 

 

130

 

Other current assets

 

 

51

 

 

44

 

Total current assets

 

 

679

 

 

956

 

Natural gas and oil properties, using the full cost method, including $1,506 million as of December 31, 2019 and $1,755 million as of December 31, 2018 excluded from amortization

 

 

25,250

 

 

24,180

 

Other

 

 

520

 

 

525

 

Less: Accumulated depreciation, depletion and amortization

 

 

(20,503

)

 

(20,049

)

Total property and equipment, net

 

 

5,267

 

 

4,656

 

Operating lease assets

 

 

159

 

 

 

Deferred tax assets

 

 

407

 

 

 

Other long-term assets

 

 

205

 

 

185

 

Total long-term assets

 

 

771

 

 

185

 

TOTAL ASSETS

 

$

6,717

 

 

$

5,797

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

 

$

525

 

 

$

609

 

Taxes payable

 

 

59

 

 

58

 

Interest payable

 

 

51

 

 

52

 

Derivative liabilities

 

 

125

 

 

79

 

Current operating lease liabilities

 

 

34

 

 

 

Other current liabilities

 

 

54

 

 

48

 

Total current liabilities

 

 

848

 

 

846

 

Long-term debt

 

 

2,242

 

 

2,318

 

Long-term operating lease liabilities

 

 

119

 

 

 

Pension and other postretirement liabilities

 

 

43

 

 

46

 

Other long-term liabilities

 

 

219

 

 

225

 

Total long-term liabilities

 

 

2,623

 

 

2,589

 

Commitments and contingencies

 

 

 

Equity:

 

 

 

Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 585,555,923 shares as of December 31, 2019 and 585,407,107 shares as of December 31, 2018

 

 

6

 

 

6

 

Additional paid-in capital

 

 

4,726

 

 

4,715

 

Accumulated deficit

 

 

(1,251

)

 

(2,142

)

Accumulated other comprehensive loss

 

 

(33

)

 

(36

)

Common stock in treasury, 44,353,224 shares as of December 31, 2019 and 39,092,537 shares as of December 31, 2018

 

 

(202

)

 

(181

)

Total equity

 

 

3,246

 

 

2,362

 

TOTAL LIABILITIES AND EQUITY

 

$

6,717

 

 

$

5,797

 

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the years ended

 

 

December 31,

(in millions)

 

2019

 

2018

Cash Flows From Operating Activities:

 

 

 

 

Net income

 

$

891

 

 

$

537

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation, depletion and amortization

 

 

471

 

 

 

560

 

Amortization of debt issuance costs

 

 

8

 

 

 

8

 

Impairments

 

 

16

 

 

 

171

 

Deferred income taxes

 

 

(409

)

 

 

(Gain) loss on derivatives, unsettled

 

 

(94

)

 

 

24

 

Stock-based compensation

 

 

8

 

 

 

14

 

(Gain) loss on early extinguishment of debt

 

 

(8

)

 

 

17

 

(Gain) loss on sale of assets, net

 

 

2

 

 

 

(17

)

Other

 

 

10

 

 

 

(1

)

Change in assets and liabilities

 

 

 

 

 

 

Accounts receivable

 

 

234

 

 

 

(153

)

Accounts payable

 

 

(141

)

 

 

65

 

Taxes payable

 

 

 

 

2

 

Interest payable

 

 

 

 

(10

)

Inventories

 

 

(7

)

 

 

(13

)

Other assets and liabilities

 

 

(17

)

 

 

19

 

Net cash provided by operating activities

 

 

964

 

 

 

1,223

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

Capital investments

 

 

(1,099

)

 

 

(1,290

)

Proceeds from sale of property and equipment

 

 

54

 

 

 

1,643

 

Other

 

 

 

 

6

 

Net cash provided by (used in) investing activities

 

 

(1,045

)

 

 

359

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

Payments on current portion of long-term debt

 

 

(52

)

 

 

Payments on long-term debt