Southwestern Energy Announces First Quarter 2020 Results

Company Release - 4/30/2020 4:19 PM ET

Pivoting investment to high-rate natural gas producing inventory, enabled by asset flexibility and operational agility

SPRING, Texas--(BUSINESS WIRE)-- Southwestern Energy Company (NYSE: SWN) today announced financial and operating results for the first quarter ended March 31, 2020.

  • Completed semi-annual borrowing base redetermination and revolving credit facility commitment at $1.8 billion with no other changes in terms
  • Repurchased $80 million in senior notes at an average 36% discount
  • Received weighted average realized price (excluding transportation) of $2.56 per Mcfe, including $93 million settled hedging gains, a $0.47 per Mcfe benefit
  • Reported total production of 201 Bcfe, including 1.7 Bcf per day of gas and 83 MBbls per day of liquids
  • Reduced cost structure by a total of $60 million in 2020 across all expense categories, with additional savings measures in progress
  • Responding to current commodity price and COVID-19 demand impact:

- Second quarter total production expected to be largely unaffected, with a higher percentage of production from natural gas due to improved well performance and ethane rejection; minimal condensate curtailments expected

- Full year capital investment currently expected to be $860 million, use of earmarked proceeds will not exceed $300 million

“Again this quarter, the Company delivered operational and financial performance that exceeded expectations. These results, combined with ample liquidity, a long debt maturity runway, rigorous capital discipline and proactive risk management, demonstrate a strong foundation to navigate today’s ever-changing environment. Given the Company’s operational agility and portfolio flexibility, we have shifted capital investment to high-rate, high-value natural gas as fundamentals indicate support for higher prices going forward,” said Bill Way, Southwestern Energy President and Chief Executive Officer.

“Clearly, current market conditions resulting from the COVID-19 pandemic can affect some of our operating and financial metrics. In response we are reducing capital, and we continue to find ways to mitigate the impacts. Throughout, we remain committed to protecting our balance sheet, returning to free cash flow and maximizing shareholder value,” continued Way.

Financial Results

For the quarter ended March 31, 2020, Southwestern Energy recorded a net loss of $1.5 billion, or $2.86 per diluted share, which includes a $1.48 billion non-cash full cost ceiling test impairment, $408 million related to tax valuation allowance, a $246 million gain from unsettled derivatives and other one-time items. This compares to net income of $594 million, or $1.10 per diluted share in the first quarter of 2019. Adjusted net income, which excludes the items noted above, was $56 million, or $0.10 per diluted share, in the first quarter of 2020, compared to $145 million, or $0.27 per diluted share, for the prior year period. The decrease was primarily related to lower commodity prices compared to 2019, partially offset by a $93 million gain in settled derivatives in 2020, compared to a $10 million loss in 2019. Adjusted EBITDA (non-GAAP) was $206 million, net cash provided by operating activities was $160 million and net cash flow (non-GAAP) was $191 million.

 

 

 

 

 

 

FINANCIAL STATISTICS

For the three months ended

 

March 31,

(in millions)

2020

 

2019

Net income (loss)

$

 

(1,547

)

 

$

 

594

Adjusted net income (non-GAAP)

$

 

56

 

 

$

 

145

Diluted earnings (loss) per share

$

 

(2.86

)

 

$

 

1.10

Adjusted diluted earnings per share (non-GAAP)

$

 

0.10

 

 

$

 

0.27

Adjusted EBITDA (non-GAAP)

$

 

206

 

 

$

 

319

Net cash provided by operating activities

$

 

160

 

 

$

 

442

Net cash flow (non-GAAP)

$

 

191

 

 

$

 

309

Total capital investments (1)

$

 

237

 

 

$

 

325

(1)

Capital investments includes increases of $8 million and $66 million for the three months ended March 31, 2020 and 2019, respectively, relating to the change in capital accruals between periods.

As indicated in the table below, first quarter 2020 weighted average realized price (including transportation) was $1.69 per Mcfe excluding the impact of derivatives. Including derivatives, weighted average realized price (including transportation) for the quarter was down 26% from $2.92 per Mcfe in 2019 to $2.16 per Mcfe in 2020, as settled derivative gains did not fully offset the 38% decrease in NYMEX Henry Hub.

During the first quarter, $93 million was realized from cash-settled hedging gains. At quarter end, the Company had hedges for 87% of its remaining natural gas production, 57% of its natural gas liquids (NGLs) production and approximately 100% of its oil production, all at prices well above current strip pricing for the remainder of 2020. As of March 31, 2020, the fair value of the hedge portfolio for the remainder of 2020 was $353 million. The Company’s three-year rolling hedging program spans across a range of commodities including natural gas, oil, ethane, propane and basis.

At quarter-end, the Company had total debt of $2.3 billion and a cash balance of $5 million, with a leverage ratio of 2.7x. During the first quarter of 2020, $80 million of senior notes were repurchased at a discount of 36%, with $2.15 billion of senior notes outstanding, including $210 million due before 2025.

As of March 31, 2020, Southwestern Energy had $149 million in revolver borrowings and $172 million in letters of credit. Subsequent to quarter end, the Company’s borrowing base related to the revolving credit facility was set at $1.8 billion following a scheduled semi-annual redetermination. On a pro-forma basis, the Company has approximately $1.3 billion in liquidity available under its revolving credit facility after adjusting for quarter-end borrowings and an additional $150 million in letters of credit issued subsequent to quarter-end.

Realized Prices

 

For the three months ended

(includes transportation costs)

 

March 31,

 

 

2020

 

 

2019

Natural Gas Price:

 

 

 

 

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

 

$

 

1.95

 

 

$

 

3.15

 

Discount to NYMEX (2)

 

 

(0.42

)

 

 

(0.20

)

Realized gas price per Mcf, excluding derivatives

 

$

 

1.53

 

 

$

 

2.95

 

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

 

 

0.10

 

 

 

(0.03

)

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

 

 

0.31

 

 

 

(0.08

)

Realized gas price per Mcf, including derivatives

 

$

 

1.94

 

 

$

 

2.84

 

Oil Price, per Bbl:

 

 

 

 

WTI oil price ($/Bbl)

 

$

 

46.17

 

 

$

 

54.90

 

Discount to WTI

 

 

(9.45

)

 

 

(9.42

)

Realized oil price, excluding derivatives

 

$

 

36.72

 

 

$

 

45.48

 

Realized oil price, including derivatives

 

$

 

45.97

 

 

$

 

47.82

 

NGL Price, Per Bbl:

 

 

 

 

Realized NGL price, excluding derivatives

 

$

 

8.16

 

 

$

 

14.45

 

Realized NGL price, including derivatives

 

$

 

10.78

 

 

$

 

15.05

 

Percentage of WTI, excluding derivatives

 

 

18

%

 

 

26

%

Total Weighted Average Realized Price:

 

 

 

 

Excluding derivatives ($/Mcfe)

 

$

 

1.69

 

 

$

 

2.98

 

Including derivatives ($/Mcfe)

 

$

 

2.16

 

 

$

 

2.92

 

(1)

Based on last day monthly futures settlement prices.

(2)

This discount includes a basis differential, a heating content adjustment, physical basis sales, third-party transportation charges and fuel charges, and excludes financial basis derivatives.

Operational Results

Total production for the quarter ended March 31, 2020 was 201 Bcfe, of which 78% was natural gas, 18% NGLs and 4% oil. Capital investments totaled $237 million for the first quarter, with 38 wells drilled, 22 wells completed and 12 wells placed to sales.

 

 

For the three months ended

 

 

March 31,

 

 

2020

 

2019

Production

 

 

 

 

Gas production (Bcf)

 

 

156

 

 

 

143

 

Oil production (MBbls)

 

 

1,399

 

 

 

854

 

NGL production (MBbls)

 

 

6,128

 

 

 

5,603

 

Total production (Bcfe)

 

 

201

 

 

 

182

 

 

 

 

 

 

Average unit costs per Mcfe

 

 

 

 

Lease operating expenses

 

$

 

0.96

 

 

$

 

0.90

 

General & administrative expenses (1)

 

$

 

0.11

 

 

$

 

0.19

 

Taxes, other than income taxes

 

$

 

0.07

 

 

$

 

0.10

 

Full cost pool amortization

 

$

 

0.53

 

 

$

 

0.57

 

(1)

Excludes $10 million and $3 million of restructuring charges (including severance) for the 2020 and 2019 periods, respectively.

Southwest Appalachia– In the first quarter, total production was 87 Bcfe, approximately half of which was liquids. The Company drilled 23 wells, completed 12 wells and placed seven wells to sales, four in the rich acreage and three in the super rich, with an average lateral length of 13,444 feet. The 3 super rich wells were online for at least 30 days and had an average 30-day rate of 11 MMcfe per day, including 68% liquids.

Part of the shift to high-rate natural gas producing wells will include increased development in the Company’s rich acreage in West Virginia. A four-well pad placed to sales in the rich acreage mid-March exceeded expectations, with a combined peak production rate of approximately 170 MMcfe per day, a new Company record and a 20% improvement over the previous record. This represents a continuation of the performance improvement the Company has seen in this area utilizing latest generation completion designs. A typical well in the rich acreage produces approximately 60% natural gas and 40% liquids, with a small contribution from condensate.

Northeast Appalachia– First quarter 2020 production was 114 Bcf. There were 15 wells drilled, 10 wells completed and five wells put to sales with an average lateral length of 8,874 feet. Four of the five wells were online for at least 30 days and had an average 30-day rate of 24 MMcf per day, a 60% increase compared to prior year quarter. This outperformance was driven by lateral length, completion design enhancement and well mix.

Division Results

For the three months ended

March 31, 2020

 

Northeast

 

 

Southwest

Gas production (Bcf)

 

114

 

 

 

42

Liquids production

 

 

 

 

 

 

Oil (MBbls)

 

 

 

 

1,395

NGL (MBbls)

 

 

 

 

6,127

Production (Bcfe)

 

114

 

 

 

87

 

 

 

 

 

 

 

Gross operated production March 2020 (MMcfe/d)

 

1,499

 

 

 

1,515

Net operated production March 2020(MMcfe/d)

 

1,220

 

 

 

939

 

 

 

 

 

 

 

Capital investments (in millions)

 

 

 

 

 

 

Drilling and completions, including workovers

$

 

79

 

 

$

 

110

Land acquisition and other

 

1

 

 

 

6

Capitalized interest and expense

 

6

 

 

 

30

Total capital investments

$

 

86

 

 

$

 

146

 

 

 

 

 

 

 

Gross operated well activity summary

 

 

 

 

 

 

Drilled

 

15

 

 

 

23

Completed

 

10

 

 

 

12

Wells to sales

 

5

 

 

 

7

 

 

 

 

 

 

 

Average well cost on wells to sales (in millions)

$

 

8.0

 

 

$

 

11.1

Average lateral length (in ft)

 

8,874

 

 

 

13,444

 

 

 

 

 

 

 

Total weighted average realized price per Mcfe, excluding derivatives

$

 

1.71

 

 

$

 

1.66

Conference Call

Southwestern Energy will host a conference call and webcast on Friday, May 1, 2020 at 9:00 a.m. Central to discuss first quarter 2020 results. To participate, dial US toll-free 877-883-0383, or international 412-902-6506 and enter access code 6715011. The conference call will webcast live at http://ir.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 10140146. The replay will be available until May 22, 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,” “model,” “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, natural gas liquids and oil reserves or production; impact of reduced demand for our products and products made from them due to governmental and societal actions taken in response to the COVID-19 pandemic; operating hazards, drilling risks, unsuccessful exploratory activities; natural disasters and epidemics; 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, including the impact of COVID-19; 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.

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

For the three months ended

 

 

March 31,

(in millions, except share/per share amounts)

 

2020

 

2019

Operating Revenues:

 

 

 

 

Gas sales

 

$

248

 

 

$

430

 

Oil sales

 

52

 

 

39

 

NGL sales

 

50

 

 

81

 

Marketing

 

239

 

 

438

 

Other

 

3

 

 

2

 

 

 

592

 

 

990

 

Operating Costs and Expenses:

 

 

 

 

Marketing purchases

 

248

 

 

441

 

Operating expenses

 

193

 

 

165

 

General and administrative expenses

 

26

 

 

37

 

Restructuring charges

 

10

 

 

3

 

Depreciation, depletion and amortization

 

113

 

 

112

 

Impairments

 

1,479

 

 

 

Taxes, other than income taxes

 

13

 

 

19

 

 

 

2,082

 

 

777

 

Operating Income (Loss)

 

(1,490

)

 

213

 

Interest Expense:

 

 

 

 

Interest on debt

 

40

 

 

42

 

Other interest charges

 

2

 

 

1

 

Interest capitalized

 

(23

)

 

(29

)

 

 

19

 

 

14

 

 

 

 

 

 

Gain (Loss) on Derivatives

 

339

 

 

(32

)

Gain on Early Extinguishment of Debt

 

28

 

 

 

Other Income, Net

 

1

 

 

1

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

(1,141

)

 

168

 

Provision (Benefit) for Income Taxes:

 

 

 

 

Current

 

(2

)

 

 

Deferred

 

408

 

 

(426

)

 

 

406

 

 

(426

)

Net Income (Loss)

 

$

(1,547

)

 

$

594

 

 

 

 

 

 

Earnings (Loss) Per Common Share

 

 

 

 

Basic

 

$

(2.86

)

 

$

1.10

 

Diluted

 

$

(2.86

)

 

$

1.10

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

Basic

 

540,308,491

 

 

539,721,751

 

Diluted

 

540,308,491

 

 

541,320,487

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

March 31,
2020

 

December 31,
2019

ASSETS

 

(in millions)

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

5

 

 

$

5

 

Accounts receivable, net

 

292

 

 

345

 

Derivative assets

 

627

 

 

278

 

Other current assets

 

48

 

 

51

 

Total current assets

 

972

 

 

679

 

Natural gas and oil properties, using the full cost method, including $1,437 million as of March 31, 2020 and $1,506 million as of December 31, 2019 excluded from amortization

 

25,488

 

 

25,250

 

Other

 

523

 

 

520

 

Less: Accumulated depreciation, depletion and amortization

 

(22,095

)

 

(20,503

)

Total property and equipment, net

 

3,916

 

 

5,267

 

Operating lease assets

 

152

 

 

159

 

Deferred tax assets

 

 

 

407

 

Other long-term assets

 

235

 

 

205

 

Total long-term assets

 

387

 

 

771

 

TOTAL ASSETS

 

$

5,275

 

 

$

6,717

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

465

 

 

$

525

 

Taxes payable

 

52

 

 

59

 

Interest payable

 

54

 

 

51

 

Derivative liabilities

 

268

 

 

125

 

Current operating lease liabilities

 

32

 

 

34

 

Other current liabilities

 

43

 

 

54

 

Total current liabilities

 

914

 

 

848

 

Long-term debt

 

2,279

 

 

2,242

 

Long-term operating lease liabilities

 

114

 

 

119

 

Pension and other postretirement liabilities

 

40

 

 

43

 

Other long-term liabilities

 

227

 

 

219

 

Total long-term liabilities

 

2,660

 

 

2,623

 

Commitments and contingencies

 

 

 

 

Equity:

 

 

 

 

Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 586,023,435 shares as of March 31, 2020 and 585,555,923 shares as of December 31, 2019

 

6

 

 

6

 

Additional paid-in capital

 

4,728

 

 

4,726

 

Accumulated deficit

 

(2,798

)

 

(1,251

)

Accumulated other comprehensive loss

 

(33

)

 

(33

)

Common stock in treasury, 44,353,224 shares as of March 31, 2020 and December 31, 2019

 

(202

)

 

(202

)

Total equity

 

1,701

 

 

3,246

 

TOTAL LIABILITIES AND EQUITY

 

$

5,275

 

 

$

6,717

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the three months ended

 

 

March 31,

(in millions)

 

2020

 

2019

Cash Flows From Operating Activities:

 

 

 

 

Net income (loss)

 

$

(1,547

)

 

$

594

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

Depreciation, depletion and amortization

 

113

 

 

112

 

Amortization of debt issuance costs

 

1

 

 

1

 

Impairments

 

1,479

 

 

 

Deferred income taxes

 

408

 

 

(426

)

(Gain) loss on derivatives, unsettled

 

(246

)

 

22

 

Stock-based compensation

 

1

 

 

2

 

Gain on early extinguishment of debt

 

(28

)

 

 

Other

 

 

 

1

 

Change in assets and liabilities

 

 

 

 

 

 

Accounts receivable

 

53

 

 

189

 

Accounts payable

 

(86

)

 

(48

)

Taxes payable

 

(6

)

 

4

 

Interest payable

 

1

 

 

2

 

Inventories

 

8

 

 

5

 

Other assets and liabilities

 

9

 

 

(16

)

Net cash provided by operating activities

 

160

 

 

442

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

Capital investments

 

(228

)

 

(258

)

Net cash used in investing activities

 

(228

)

 

(258

)

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

Payments on long-term debt

 

(52

)

 

 

Payments on revolving credit facility

 

(500

)

 

 

Borrowings under revolving credit facility

 

615

 

 

 

Change in bank drafts outstanding

 

5

 

 

3

 

Purchase of treasury stock

 

 

 

(21

)

Cash paid for tax withholding

 

 

 

(1

)

Net cash provided by (used in) financing activities

 

68

 

 

(19

)

 

 

 

 

 

Increase in cash and cash equivalents

 

 

 

165

 

Cash and cash equivalents at beginning of year

 

5

 

 

201

 

Cash and cash equivalents at end of period

 

$

5

 

 

$

366

 

Hedging Summary

A detailed breakdown of derivative financial instruments and financial basis positions as of March 31, 2020, including the remainder of 2020 and excluding those positions that settled in the first quarter, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

279

 

$

 

2.50

 

$

 

 

$

 

 

$

 

Two-way costless collars

23

 

 

 

 

 

 

2.50

 

 

2.79

Three-way costless collars

136

 

 

 

 

2.08

 

 

2.42

 

 

2.70

Total

438

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

36

 

$

 

2.53

 

$

 

 

$

 

 

$

 

Two-way costless collars

29

 

 

 

 

 

 

2.28

 

 

2.77

Three-way costless collars

265

 

 

 

 

2.18

 

 

2.49

 

 

2.84

Total

330

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

Two-way costless collars

29

 

$

 

 

$

 

 

$

 

2.10

 

$

 

2.83

Three-way costless collars

91

 

 

 

 

2.10

 

 

2.46

 

 

2.86

Total

120

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-way costless collars

2

 

$

 

 

$

 

2.15

 

$

 

2.55

 

$

 

3.35

 

 

 

 

Weighted Average Price per Bbl

 

Volume (MBbls)

 

Swaps

 

Sold Puts

 

Purchased
Puts

 

Sold Calls

Oil

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps (1)

2,442

 

$

 

57.75

 

$

 

 

$

 

 

$

 

Two-way costless collars

731

 

 

 

 

 

 

56.88

 

 

59.81

Three-way costless collars

1,210

 

 

 

 

43.94

 

 

53.17

 

 

58.05

Total

4,383

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

2,328

 

$

 

53.72

 

$

 

 

$

 

 

$

 

Three-way costless collars

1,445

 

 

 

 

43.52

 

 

53.25

 

 

58.14

Total

3,773

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

438

 

$

 

51.74

 

$

 

 

$

 

 

$

 

Three-way costless collars

666

 

 

 

 

42.50

 

 

53.20

 

 

58.00

Total

1,104

 

 

 

 

 

 

 

 

 

 

 

 

Ethane

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

6,952

 

$

 

8.59

 

$

 

 

$

 

 

$

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

3,017

 

$

 

7.40

 

$

 

 

$

 

 

$

 

Propane

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

4,049

 

$

 

23.06

 

$

 

 

$

 

 

$

 

Two-way costless collars

275

 

 

 

 

 

 

25.20

 

 

29.40

Total

4,324

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

2,460

 

$

 

21.77

 

$

 

 

$

 

 

$

 

(1)

Includes 186 MBbls of purchased fixed price oil swaps at $57.46 per barrel and 2 628 MBbls of sold fixed price oil swaps at $57.73 per barrel.

Natural gas financial basis positions

 

Volume

 

Basis Differential

 

 

(Bcf)

 

($/MMBtu)

2020

 

 

 

 

Dominion South

 

105

 

 

$

(0.51

)

TCO

 

37

 

 

$

(0.43

)

TETCO M3

 

57

 

 

$

(0.32

)

Total

 

199

 

 

$

(0.44

)

2021

 

 

 

 

Dominion South

 

68

 

 

$

(0.47

)

TCO

 

4

 

 

$

(0.31

)

TETCO M3

 

31

 

 

$

0.98

 

Total

 

103

 

 

$

(0.03

)

2022

 

 

 

 

 

 

 

Dominion South

 

58

 

 

$

(0.52

)

TETCO M3

 

30

 

 

$

(0.41

)

Total

 

88

 

 

$

(0.48

)

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 March 31,

 

2020

 

2019

Adjusted net income:

(in millions)

Net income (loss)

$

(1,547

)

 

$

594

 

Add back (deduct):

 

 

 

 

 

 

 

Restructuring charges

 

10

 

 

 

3

 

Impairments

 

1,479

 

 

 

 

Gain on sale of assets, net

 

 

 

 

(2

)

(Gain) loss on certain derivatives

 

(246

)

 

 

22

 

Gain on early extinguishment of debt

 

(28

)

 

 

 

Adjustments due to discrete tax items (1)

 

674

 

 

 

(466

)

Tax impact on adjustments

 

(286

)

 

 

(6

)

Adjusted net income

$

56

 

 

$

145

 

(1)

 

2020 primarily relates to the recognition of a valuation allowance. 2019 primarily relates to the release of the valuation allowance. The Company expects its 2020 income tax rate to be 23.5% before the impacts of any valuation allowance.

 

3 Months Ended March 31,

 

2020

 

2019

Adjusted diluted earnings per share:

 

Diluted earnings (loss) per share

$

(2.86

)

 

$

1.10

 

Add back (deduct):

 

 

 

 

 

 

 

Restructuring charges

 

0.02

 

 

 

0.00

 

Impairments

 

2.73

 

 

 

 

Gain on sale of assets, net

 

 

 

 

(0.00

)

(Gain) loss on certain derivatives

 

(0.46

)

 

 

0.04

 

Gain on early extinguishment of debt

 

(0.05

)

 

 

 

Adjustments due to discrete tax items (1)

 

1.25

 

 

 

(0.86

)

Tax impact on adjustments

 

(0.53

)

 

 

(0.01

)

Adjusted diluted earnings per share

$

0.10

 

 

$

0.27

 

(1)

2020 primarily relates to the recognition of a valuation allowance. 2019 primarily relates to the release of the valuation allowance. The Company expects its 2020 income tax rate to be 23.5% before the impacts of any valuation allowance.

 

3 Months Ended March 31,

 

2020

 

2019

Net cash flow:

(in millions)

Net cash provided by operating activities

$

160

 

 

$

442

 

Add back (deduct):

 

 

 

 

 

 

 

Changes in operating assets and liabilities

 

21

 

 

 

(136

)

Restructuring charges

 

10

 

 

 

3

 

Net cash flow

$

191

 

 

$

309

 

 

3 Months Ended March 31,

 

2020

 

2019

Adjusted EBITDA:

(in millions)

Net income (loss)

$

(1,547

)

 

$

594

 

Add back (deduct):

 

 

 

 

 

 

 

Interest expense

 

19

 

 

 

14

 

Income tax expense (benefit)

 

406

 

 

 

(426

)

Depreciation, depletion and amortization

 

113

 

 

 

112

 

Restructuring charges

 

10

 

 

 

3

 

Impairments

 

1,479

 

 

 

 

Gain on sale of assets, net

 

 

 

 

(2

)

(Gain) loss on certain derivatives

 

(246

)

 

 

22

 

Gain on early extinguishment of debt

 

(28

)

 

 

 

Stock-based compensation expense

 

1

 

 

 

2

 

Other

 

(1

)

 

 

 

Adjusted EBITDA

$

206

 

 

$

319

 

 

 

March 31, 2020

Net debt:

 

(in millions)

Total debt (1)

 

$

2,297

 

Subtract:

 

 

Cash and cash equivalents

 

(5

)

Net debt

 

$

2,292

 

(1) Does not include $19 million of unamortized debt discount and issuance expense.

 

 

March 31, 2020

Net debt to Adjusted EBITDA:

 

(in millions)

Net debt

 

$

2,292

 

Adjusted EBITDA (1)

 

$

860

 

Net debt to Adjusted EBITDA

 

2.7x

(1) Includes Adjusted EBITDA of $860 million for the twelve months ended March 31, 2020.

 

 

 

Investor Contact
Paige Penchas
Vice President, Investor Relations
(832) 796-4068
paige_penchas@swn.com

Source: Southwestern Energy Company