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Section 1: 8-K (SWN FORM 8-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
________________________________________________________________
 
FORM 8-K
 
________________________________________________________________

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported): April 25, 2019
 
________________________________________________________________

SOUTHWESTERN ENERGY COMPANY
(Exact name of registrant as specified in its charter)
 
________________________________________________________________

Delaware
(State or other jurisdiction of incorporation)
 
001-08246
 
71-0205415
(Commission File Number)
 
(IRS Employer Identification No.)
 
10000 Energy Drive
Spring, Texas
 
77,389
(Address of principal executive offices)
 
(Zip Code)
 
(832) 796-1000
(Registrant's telephone number, including area code)
 
Not Applicable
(Former name or former address, if changed since last report)
 
________________________________________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
        o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
        o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
        o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
        o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
 
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o





Explanatory Note
The information in this report provided under Item 2.02, including Exhibit 99.1 attached hereto, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
 
SECTION 2 - Financial Information
 
Item 2.02 Results of Operations and Financial Condition.

On April 25, 2019, Southwestern Energy Company (the "Company") issued a press release announcing the Company's financial results for the first quarter ended March 31, 2019 (Exhibit 99.1).  The press release is being furnished as Exhibit 99.1.
  
SECTION 9 - Financial Statements and Exhibits
 
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1

 
 
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
SOUTHWESTERN ENERGY COMPANY
 
 
 
Dated: April 25, 2019
 
By:
 
      /s/    JULIAN M. BOTT                  
 
 
Name:
 
Julian M. Bott
 
 
Title:
 
Executive Vice President and
 
 
 
 
Chief Financial Officer


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1 EARNINGS RELEASE)

Exhibit

397659227_swnheadera01.jpg


NEWS RELEASE

SOUTHWESTERN ENERGY ANNOUNCES FIRST QUARTER 2019 RESULTS
Continuing operational outperformance, with cost savings driving cash flow higher

SPRING, Texas - April 25, 2019...Southwestern Energy Company (NYSE: SWN) today announced financial and operating results for the quarter ended March 31, 2019, the Company’s first quarter as a single-basin Appalachia producer. These results include net income of $594 million, or $1.10 per share, and adjusted net income of $145 million, or $0.27 per share. Unless otherwise noted, results are compared to the first quarter of 2018, which included contribution from Fayetteville Shale assets sold in December 2018.

Appalachia production up 14 percent to 182 Bcfe, liquids up 33 percent to 71,740 barrels per day, Appalachia revenue up 13 percent;
Generated Adjusted EBITDA of $319 million, net cash provided by operating activities of $442 million and net cash flow of $309 million;
Invested capital totaling $325 million in the quarter, consistent with front-loaded capital plan;
Improved E&P margin by 14 percent to $1.79 per Mcfe, as a result of improved differentials and lower expenses;
Realized a $46 million, or 32 percent, reduction in general and administrative and interest savings in the first quarter;
Continued strength of balance sheet with net debt to EBITDA of 1.7 times, excluding 2018 Fayetteville EBITDA, liquidity in excess of $2 billion;
Reduced well cost on wells to sales by 10 percent from 2018 full year average, on track to meet guidance of $875 per lateral foot for the year; and
Drilled five wells in excess of 15,000 feet, including an 18,683 foot state record lateral in Pennsylvania.

“These results demonstrate the exceptional quality of our Appalachia assets and the strength, resilience and operational execution capabilities of our teams, who successfully navigate through changing operating conditions,” said Bill Way, President and Chief Executive Officer, Southwestern Energy.  “Having deleveraged the balance sheet with the monetization of Fayetteville, ongoing operational improvements are driving costs lower and production higher, proof points that we are well down the transitional path back to free cash flow clearly outlined in our strategy.”

Financial Results

Southwestern Energy reported net income of $594 million or $1.10 per share for the first quarter of 2019, including a $426 million non-cash deferred income tax benefit, resulting from the release of a tax valuation allowance previously recorded against a deferred tax asset. The Company reported adjusted net income of $145 million, excluding the deferred tax benefit.



FINANCIAL STATISTICS
 
For the three months ended
 
 
March 31,
(in millions)
 
2019
 
2018
Net income attributable to common stock
 
$
594

 
$
205

Adjusted net income attributable to common stock (non-GAAP)
 
$
145

 
$
162

Adjusted EBITDA (non-GAAP)
 
$
319

 
$
396

Net cash provided by operating activities
 
$
442

 
$
364

Net cash flow (non-GAAP)
 
$
309

 
$
358

Total capital investments (1)
 
$
325

 
$
338

(1)
Capital investments includes increases of $66 million and $33 million for the three months ended March 31, 2019 and 2018, respectively, relating to the change in capital accruals between periods.

Weighted average realized pricing, excluding settled derivatives, was $2.98 per Mcfe, 6 percent above the prior year. Realized pricing for natural gas was $2.95 per Mcf and reflects a discount to NYMEX of $0.20 per Mcf, $0.08 per Mcf better than the first quarter 2018. Natural gas liquids realized pricing was $14.45 per barrel, or 26 percent of West Texas Intermediate (WTI), and realized oil pricing was $45.48 per barrel, reflecting a $9.42 per barrel discount to WTI.

As of March 31, 2019, the Company had $2.3 billion of outstanding, long-term, fixed rate notes and had $2.2 billion of liquidity, including cash of $366 million. There are no material senior note maturities before 2025. The Company has no borrowings under its $2.0 billion secured credit facility, and the borrowing base was recently reaffirmed.

In the first quarter, the Company completed its $200 million authorized share repurchase program, repurchasing a total of approximately 44 million shares at an average price of $4.53 per share, resulting in an 8 percent reduction in shares outstanding.

Operational Results

Total production for the quarter was 182 Bcfe, or 2.0 Bcfe per day including natural gas production of 143 Bcf, oil production of 854 MBbls and natural gas liquids of 5.6 MMBbls. SWN invested $325 million in the first quarter, drilling 30 wells, completing 31 and placing 19 to sales.

Southwest Appalachia’s net gas production averaged 345 MMcf per day, with total liquids production averaging 71,680 barrels per day. The Company placed nine wells to sales in the quarter, with a combined initial production rate of 99 MMcfe per day, including 67% liquids, of which 4,800 barrels per day were oil, all targeting the Marcellus super rich gas window.  Well costs on wells to sales were reduced 22 percent in the quarter compared to fourth quarter 2018 with an average lateral length of 8,644 feet. The Company also drilled and cased an ultra-long lateral of approximately 18,000 feet, a division record in West Virginia.

Northeast Appalachia’s net gas production averaged 1.24 Bcf per day. The Company placed 10 wells to sales in the first quarter in Susquehanna and Tioga Counties. One of the wells in Tioga County achieved a Company record initial production rate of 39 MMcf per day on an 11,130 foot lateral. The Company also drilled a Pennsylvania state record lateral of 18,683 feet.

2



OPERATING STATISTICS
 
For the three months ended
 
 
March 31,
 
 
2019
 
2018
Production
 
 
 
 
Gas production (Bcf)
 
143

 
197

Oil production (MBbls)
 
854

 
613

NGL production (MBbls)
 
5,603

 
4,230

Total production (Bcfe)
 
182

 
226

 
 
 
 
 
Division Production
 
 
 
 
Northeast Appalachia (Bcf)
 
112

 
108

Southwest Appalachia (Bcfe)
 
70

 
51

Fayetteville Shale (Bcf) (1)
 

 
67

 
 
 
 
 
Average unit costs per Mcfe
 
 
 
 
Lease operating expenses
 
$
0.90

 
$
0.94

General & administrative expenses
 
$
0.19

(2) 
$
0.21

Taxes, other than income taxes
 
$
0.10

 
$
0.09

Full cost pool amortization
 
$
0.57

 
$
0.48

(1)
The Fayetteville Shale assets were sold on December 3, 2018.
(2)
Excludes $3 million of restructuring charges (including severance) for the three months ended March 31, 2019.
Realized Prices
 
For the three months ended
 
 
March 31,
 
 
2019
 
2018
Natural Gas Price:
 
 
 
 
NYMEX Henry Hub price ($/MMBtu) (1)
 
$
3.15

 
$
3.00

Discount to NYMEX (2)
 
(0.20
)
 
(0.28
)
Average realized gas price per Mcf, excluding derivatives
 
$
2.95

 
$
2.72

Loss on settled financial basis derivatives ($/Mcf)
 
(0.03
)
 
(0.11
)
Gain (loss) on settled commodity derivatives ($/Mcf)
 
(0.08
)
 
0.06

Average realized gas price per Mcf, including derivatives
 
$
2.84

 
$
2.67

Oil Price:
 
 
 
 
WTI oil price ($/Bbl)
 
$
54.90

 
$
62.87

Discount to WTI
 
(9.42
)
 
(6.86
)
Average oil price per Bbl, excluding derivatives
 
$
45.48

 
$
56.01

Average oil price per Bbl, including derivatives
 
$
47.82

 
$
56.01

NGL Price:
 
 
 
 
Average net realized NGL price per Bbl, excluding derivatives
 
$
14.45

 
$
15.42

Average net realized NGL price per Bbl, including derivatives
 
$
15.05

 
$
15.43

Percentage of WTI
 
26
%
 
25
%
Average net realized C3+ price per Bbl, excluding derivatives
 
$
27.11

 
$
36.01

Average net realized C3+ price per Bbl, including derivatives
 
$
28.01

 
$
36.00

Percentage of WTI
 
49
%
 
57
%
Total Weighted Average Realized Price:
 
 
 
 
Excluding derivatives ($/Mcfe)
 
$
2.98

 
$
2.81

Including derivatives ($/Mcfe)
 
$
2.92

 
$
2.77

(1)
Based on last day monthly futures settlement prices.
(2)
This discount includes a basis differential, a heating content adjustment, physical basis sales, third-party transportation charges and fuel charges, and excludes financial basis derivatives.


3


Three Months Ended March 31, 2019 E&P Division Results
 
Appalachia
 
 
Northeast
 
Southwest
Gas Production (Bcf)
 
112

 
31

Liquids Production
 
 
 
 
  Oil (MBbls)
 

 
849

  NGL (MBbls)
 

 
5,602

Production (Bcfe)
 
112

 
70

Gross operated production (MMcfe/d)
 
1,497

 
1,237

Net operated production (MMcfe/d)
 
1,227

 
767

 
 
 
 
 
Capital investments ($ in millions)
 
 
 
 
Exploratory and development drilling, including workovers
 
$
94

 
$
154

Acquisition and leasehold
 
2

 
5

Seismic and other
 
1

 

Capitalized interest and expense
 
9

 
39

Total capital investments
 
$
106

 
$
198

 
 
 
 
 
Gross operated well activity summary
 
 
 
 
Drilled
 
11

 
19

Completed
 
11

 
20

Wells to sales
 
10

 
9

 
 
 
 
 
Average well cost on wells to sales (in millions)
 
$
7.8

 
$
8.6

Average lateral length (in ft)
 
7,502

 
8,644
 
 
 
 
 
Total weighted average realized price per Mcfe, excluding derivatives
 
$
3.12

 
$
2.76


Conference Call
Southwestern Energy will host a conference call and webcast on Friday, April 26, 2019 at 9:30 a.m. Central to discuss first quarter 2019 results. To participate, dial US toll-free 877-883-0383, or international 412-902-6505 and enter access code 6562032. The conference call will be 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 10130076. The replay will be available until May 17, 2019.

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.

Investor Contact
Paige Penchas
Vice President, Investor Relations
(832) 796-4068
[email protected]

Media Contact
Jim Schwartz
Director, Corporate Communications
(832) 796-2716
[email protected]

4


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.
###



5


SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
For the three months ended
 
 
March 31,
(in millions, except share/per share amounts)
 
2019
 
2018
Operating Revenues:
 
 
 
 
Gas sales
 
$
430

 
$
540

Oil sales
 
39

 
35

NGL sales
 
81

 
65

Marketing
 
438

 
253

Gas gathering
 

 
24

Other
 
2

 
3

 
 
990

 
920

Operating Costs and Expenses:
 
 
 
 
Marketing purchases
 
441

 
255

Operating expenses
 
165

 
189

General and administrative expenses
 
37

 
55

Restructuring charges
 
3

 

Depreciation, depletion and amortization
 
112

 
143

Taxes, other than income taxes
 
19

 
23

 
 
777

 
665

Operating Income
 
213

 
255

Interest Expense:
 
 
 
 
Interest on debt
 
42

 
65

Other interest charges
 
1

 
2

Interest capitalized
 
(29
)
 
(28
)
 
 
14

 
39

 
 
 
 
 
Loss on Derivatives
 
(32
)
 
(7
)
Other Income (Loss), Net
 
1

 
(1
)
 
 
 
 
 
Income Before Income Taxes
 
168

 
208

Benefit from Income Taxes:
 
 
 
 
Current
 

 

Deferred
 
(426
)
 

 
 
(426
)
 

Net Income
 
$
594

 
$
208

Participating securities - mandatory convertible preferred stock
 

 
3

Net Income Attributable to Common Stock
 
$
594

 
$
205

 
 
 
 
 
Earnings Per Common Share
 
 
 
 
Basic
 
$
1.10

 
$
0.36

Diluted
 
$
1.10

 
$
0.36

 
 
 
 
 
Weighted Average Common Shares Outstanding:
 
 
 
 
Basic
 
539,721,751

 
571,297,804

Diluted
 
541,320,487

 
573,844,459




6


SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
March 31, 2019
 
December 31, 2018
ASSETS
 
(in millions)
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
366

 
$
201

Accounts receivable, net
 
390

 
581

Derivative assets
 
87

 
130

Other current assets
 
44

 
44

Total current assets
 
887

 
956

Natural gas and oil properties, using the full cost method, including $1,673 million as of March 31, 2019 and $1,755 million as of December 31, 2018 excluded from amortization
 
24,486

 
24,180

Gathering systems
 
38

 
38

Other
 
509

 
487

Less: Accumulated depreciation, depletion and amortization
 
(20,162
)
 
(20,049
)
Total property and equipment, net
 
4,871

 
4,656

Deferred tax assets
 
426

 

Other long-term assets
 
262

 
185

TOTAL ASSETS
 
$
6,446

 
$
5,797

LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of long-term debt
 
$
52

 
$

Accounts payable
 
626

 
609

Taxes payable
 
62

 
58

Interest payable
 
58

 
52

Derivative liabilities
 
50

 
79

Other current liabilities
 
95

 
48

Total current liabilities
 
943

 
846

Long-term debt
 
2,267

 
2,318

Pension and other postretirement liabilities
 
43

 
46

Other long-term liabilities
 
256

 
225

Total long-term liabilities
 
2,566

 
2,589

Commitments and contingencies
 
 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 585,548,726 shares as of March 31, 2019 and 585,407,107 as of December 31, 2018
 
6

 
6

Additional paid-in capital
 
4,717

 
4,715

Accumulated deficit
 
(1,548
)
 
(2,142
)
Accumulated other comprehensive loss
 
(36
)
 
(36
)
Common stock in treasury, 44,353,224 shares as of March 31, 2019 and 39,092,537 shares as of December 31, 2018
 
(202
)
 
(181
)
Total equity
 
2,937

 
2,362

TOTAL LIABILITIES AND EQUITY
 
$
6,446

 
$
5,797






7


SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
For the three months ended
 
 
March 31,
(in millions)
 
2019
 
2018
Cash Flows From Operating Activities:
 
 
 
 
Net income
 
$
594

 
$
208

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation, depletion and amortization
 
112

 
143

Amortization of debt issuance costs
 
1

 
2

Deferred income taxes
 
(426
)
 

(Gain) loss on derivatives, unsettled
 
22

 
(2
)
Stock-based compensation
 
2

 
4

Other
 
1

 
3

Change in assets and liabilities
 
136

 
6

Net cash provided by operating activities
 
442

 
364

 
 
 
 
 
Cash Flows From Investing Activities:
 
 
 
 
Capital investments
 
(258
)
 
(302
)
Proceeds from sale of property and equipment
 

 
6

Other
 

 
2

Net cash used in investing activities
 
(258
)
 
(294
)
 
 
 
 
 
Cash Flows From Financing Activities:
 
 
 
 
Change in bank drafts outstanding
 
3

 

Purchase of treasury stock
 
(21
)
 

Preferred stock dividend
 

 
(27
)
Cash paid for tax withholding
 
(1
)
 
(1
)
Net cash used in financing activities
 
(19
)
 
(28
)
 
 
 
 
 
Increase in cash and cash equivalents
 
165

 
42

Cash and cash equivalents at beginning of year
 
201

 
916

Cash and cash equivalents at end of period
 
$
366

 
$
958





8


 
 
 
 
 
 
 
 
 
 
 
SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
 
 
Exploration
 
 
 
 
 
 
 
 
 
 
and
 
Midstream
 
 
 
 
 
 
 
 
Production
 
Services
 
Other
 
Eliminations
 
Total
 
 
(in millions)
Three months ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
542

 
$
941

 
$

 
$
(493
)
 
$
990

Marketing purchases
 

 
934

 

 
(493
)
 
441

Operating expenses
 
166

 
(1
)
 

 

 
165

General and administrative expenses
 
34

 
3

 

 

 
37

Restructuring charges
 
3

 

 

 

 
3

Depreciation, depletion and amortization
 
110

 
2

 

 

 
112

Taxes, other than income taxes
 
19

 

 

 

 
19

Operating income
 
210

 
3

 

 

 
213

Capital investments (1)
 
325

 

 

 

 
325

 
 
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
637

 
$
896

 
$

 
$
(613
)
 
$
920

Marketing purchases
 

 
819

 

 
(564
)
 
255

Operating expenses
 
213

 
25

 

 
(49
)
 
189

General and administrative expenses
 
48

 
7

 

 

 
55

Depreciation, depletion and amortization
 
117

 
26

(2) 

 

 
143

Taxes, other than income taxes
 
21

 
2

 

 

 
23

Operating income
 
238

 
17

 

 

 
255

Capital investments (1)
 
334

 
4

 

 

 
338

(1)
Capital investments includes increases of $66 million and $33 million for the three months ended March 31, 2019 and 2018, respectively, relating to the change in capital accruals between periods.
(2)
Includes a $10 million impairment related to certain non-core gathering assets.





9


Hedging Summary
A detailed breakdown of Southwestern Energy’s derivative financial instruments and financial basis positions as of March 31, 2019 is shown below. Please refer to the quarterly report on Form 10-Q 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
 
 
 
Sold
 
Purchased
 
Sold
 
Basis
 
(Bcf)
 
Swaps
 
Puts
 
Puts
 
Calls
 
Differential
Natural Gas
 
 
 
 
 
 
 
 
 
 
 
2019
 
 
 
 
 
 
 
 
 
 
 
Fixed price swaps
195

 
$
2.90

 
$

 
$

 
$

 
$

Two-way costless collars
44

 

 

 
2.78

 
2.92

 

Three-way costless collars
101

 

 
2.46

 
2.88

 
3.22

 

Total
340

 
 
 
 
 
 
 
 
 
 
2020
 
 
 
 
 
 
 
 
 
 
 
Fixed price swaps
24

 
$
2.88

 
$

 
$

 
$

 
$

Three-way costless collars
122

 

 
2.35

 
2.68

 
2.96

 

Total
146

 
 
 
 
 
 
 
 
 
 
2021
 
 
 
 
 
 
 
 
 
 
 
Three-way costless collars
37

 
$

 
$
2.35

 
$
2.60

 
$
2.93

 
$

 
 
 
 
 
 
 
 
 
 
 
 
Basis Swaps
 
 
 
 
 
 
 
 
 
 
 
2019
85

 
$

 
$

 
$

 
$

 
$
(0.50
)
2020
59

 

 

 

 

 
(0.44
)
Total
144

 
 
 
 
 
 
 
 
 
 

 
 
 
Weighted Average Price per Bbl
 
Volume
 
 
 
Sold
 
Purchased
 
Sold
 
(MBbls)
 
Swaps
 
Puts
 
Puts
 
Calls
Oil
 
 
 
 
 
 
 
 
 
2019
 
 
 
 
 
 
 
 
 
Fixed price swaps (1)
921

 
$
62.13

 
$

 
$

 
$

Two-way costless collars
248

 

 

 
65.00

 
72.30

Three-way costless collars
412

 

 
45.00

 
55.00

 
63.67

Total
1,581

 
 
 
 
 
 
 
 
2020
 
 
 
 
 
 
 
 
 
Fixed price swaps
366

 
$
65.68

 
$

 
$

 
$

Two-way costless collars
366

 

 

 
60.00

 
69.80

Total
732

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Propane
 
 
 
 
 
 
 
 
 
2019
 
 
 
 
 
 
 
 
 
Fixed price swaps
2,028

 
$
31.25

 
$

 
$

 
$

2020
 
 
 
 
 
 
 
 
 
Fixed price swaps
824

 
$
27.35

 
$

 
$

 
$

Two-way costless collars
366

 

 

 
25.20

 
29.40

Total
1,190

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ethane
 
 
 
 
 
 
 
 
 
2019
 
 
 
 
 
 
 
 
 
Fixed price swaps
2,778

 
$
13.90

 
$

 
$

 
$

2020
 
 
 
 
 
 
 
 
 
Fixed price swaps
732

 
$
13.49

 
$

 
$

 
$

(1)
Includes 206 MBbls of purchased fixed price oil swaps hedged at $69.10 per barrel and 1,127 MBbls of sold fixed price oil swaps hedged at $63.41 per barrel.

10


 
 
 
 
 
Financial basis positions
 
Volume
 
Basis Differential
(excludes physical positions)
 
(Bcf)
 
($/MMbtu)
 
 
 
 
 
Q2 2019
 
 
 
 
TCO
 
2

 
$
(0.38
)
Dominion South
 
23

 
$
(0.54
)
TETCO M3
 
9

 
$
(0.43
)
Total
 
34

 
$
(0.50
)
 
 
 
 
 
2019
 
 
 
 
TCO
 
4

 
$
(0.38
)
Dominion South
 
60

 
$
(0.54
)
TETCO M3
 
21

 
$
(0.43
)
Total
 
85

 
$
(0.50
)
 
 
 
 
 
2020
 
 
 
 
TCO
 
17

 
$
(0.51
)
Dominion South
 
18

 
$
(0.58
)
TETCO M3
 
24

 
$
(0.27
)
Total
 
59

 
$
(0.44
)































11


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, adjusted EBITDA and its E&P and Midstream segment operating income, 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,
 
 
2019
 
2018
 
 
(in millions)
Net income attributable to common stock:
 
 
 
 
Net income attributable to common stock
 
$
594

 
$
205

Add back:
 
 
 
 
Participating securities – mandatory convertible preferred stock
 

 
1

Restructuring charges
 
3

 

Gain on sale of assets, net
 
(2
)
 
(1
)
(Gain) loss on certain derivatives
 
22

 
(2
)
Impairment of non-core gathering assets
 

 
10

Adjustments due to inventory valuation and other
 

 
3

Adjustments due to discrete tax items (1)
 
(466
)
 
(51
)
Tax impact on adjustments
 
(6
)
 
(3
)
Adjusted net income attributable to common stock
 
$
145

 
$
162

(1)
2018 primarily relates to the exclusion of certain discrete tax adjustments associated with the valuation allowance against deferred tax assets. The Company expects its 2019 income tax rate to be 24.5%.



12


 
 
3 Months Ended March 31,
 
 
2019
 
2018
Diluted earnings per share:
 
 
 
 
Diluted earnings per share
 
$
1.10

 
$
0.36

Add back:
 
 
 
 
Participating securities – mandatory convertible preferred stock
 

 
0.00

Restructuring charges
 
0.00

 

Gain on sale of assets, net
 
(0.00
)
 
(0.00
)
(Gain) loss on certain derivatives
 
0.04

 
0.00

Impairment of non-core gathering assets
 

 
0.02

Adjustments due to inventory valuation and other
 

 
0.00

Adjustments due to discrete tax items (1)
 
(0.86
)
 
(0.09
)
Tax impact on adjustments
 
(0.01
)
 
(0.01
)
Adjusted diluted earnings per share
 
$
0.27

 
$
0.28

(1)
2018 primarily relates to the exclusion of certain discrete tax adjustments associated with the valuation allowance against deferred tax assets. The Company expects its 2019 income tax rate to be 24.5%.

 
 
3 Months Ended March 31,
 
 
2019
 
2018
 
 
(in millions)
Net cash flow provided by operating activities:
 
 
 
 
Net cash provided by operating activities
 
$
442

 
$
364

Add back:
 
 
 
 
Changes in operating assets and liabilities
 
136

 
6

Restructuring charges
 
3

 

Net cash flow
 
$
309

 
$
358


 
 
3 Months Ended March 31,
 
 
2019
 
2018
 
 
(in millions)
EBITDA:
 
 
 
 
Net income
 
$
594

 
$
208

Add back:
 
 
 
 
Interest expense
 
14

 
39

Income tax expense (benefit)
 
(426
)
 

Depreciation, depletion and amortization
 
112

 
143

Restructuring charges
 
3

 

Gain on sale of assets, net
 
(2
)
 
(1
)
Loss on foreign currency adjustment
 

 
3

(Gain) loss on certain derivatives
 
22

 
(2
)
Stock based compensation expense
 
2

 
6

Adjusted EBITDA
 
$
319

 
$
396


 
 
March 31, 2019
 
 
(in millions)
Total debt
 
$
2,319

Subtract:
 
 
Cash and cash equivalents
 
(366
)
Net debt
 
$
1,953



13


 
 
March 31, 2019
 
 
(in millions)
Net debt
 
$
1,953

Adjusted EBITDA (1)
 
$
1,131

Net debt to EBITDA
 
1.7x

(1)
Includes Adjusted EBITDA of $1,408 million for the twelve months ended March 31, 2019 less $277 million of EBITDA generated by Fayetteville E&P and Midstream prior to the December 2018 divestiture.

14
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Section 3: EX-99.1 (EXHIBIT 99.1 EARNINGS RELEASE - PDF)

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