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

SWN Form 8-K

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): February 28, 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

  77389
(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 February 28, 2019, Southwestern Energy Company (the "Company") issued a press release announcing the Company's financial results for the year ended December 31, 2018 (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

Press release announcing earnings dated February 28, 2019.

 

   

 

 


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: February 28, 2019

 

By:

 

      /s/    JULIAN M. BOTT                  

   

Name:

 

Julian M. Bott

   

Title:

 

Executive Vice President and

       

Chief Financial Officer


EXHIBIT INDEX

 

Exhibit Number Description

 

 

 

99.1

Press release announcing earnings dated February 28, 2019.

     
(Back To Top)

Section 2: EX-99 (10-K 2018 EARNINGS RELEASE)

2018 10K Press Release

Picture 2

NEWS RELEASE



SOUTHWESTERN ENERGY ANNOUNCES QUARTERLY AND 2018 RESULTS

Continued outperformance, advantaged balance sheet, foundation set for value growth



SPRING, Texas – February 28, 2019...Southwestern Energy Company (NYSE: SWN) today announced financial and operating results for the fourth quarter and year-end December 31, 2018. Fiscal year 2018 highlights, compared to prior year include:

·

Reported net cash provided by operating activities of $1.22 billion and net cash flow of $1.35 billion, generating $100 million in free cash flow above capital investment of $1.25 billion;

·

Total Company production of 946 Bcfe, above midpoint of guidance, adjusted for Fayetteville sale;

·

Grew Appalachia production 21 percent to 702 Bcfe and liquids production 40 percent to 63,100 barrels per day;

·

23 percent higher weighted average realized price in Appalachia of $2.82 per Mcfe, net of transportation;

·

Generated a $1.66 per Mcfe margin in Appalachia, an increase of 43 percent;

·

Total Company proved reserves of 11.9 Tcfe, including 33 percent liquids, and pre-tax PV-10 value of $6.5 billion;

·

Restructured G&A and reduced interest costs resulting in estimated future annual savings of $155 million;

·

Closed Fayetteville sale on December 3rd receiving net proceeds of $1.65 billion;

·

Reduced senior notes and bank debt by $2.1 billion;

·

Repurchased 44 million shares of common stock for $199 million at an average price of $4.53 per share, as of February 28, 2019.



“The Company’s continued outperformance, the resulting advantaged balance sheet and impressive operational execution have set a solid foundation for further value growth,” said Bill Way, President and Chief Executive Officer, Southwestern Energy.  “We carry strong momentum into 2019, refocused, reengineered and reenergized as a leading Appalachia basin operator, with a flexible, high value natural gas and natural gas liquids portfolio, supported by a net debt/EBITDA ratio of less than 2X.”

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL STATISTICS

For the three months ended

 

For the year ended



December 31,

 

December 31,



2018

 

2017

 

2018

 

2017

Financial Results (in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stock

$

307 

 

$

267 

 

$

535 

  

$

815 

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

$

176 

 

$

63 

 

$

590 

 

$

219 

Adjusted EBITDA (non-GAAP)

$

394 

 

$

345 

 

$

1,484 

 

$

1,247 

Net cash provided by operating activities

$

252 

 

$

308 

 

$

1,223 

 

$

1,097 

Net cash flow (non-GAAP)

$

359 

 

$

322 

 

$

1,352 

 

$

1,138 

Total Capital Investments

$

209 

 

$

347 

 

$

1,248 

 

$

1,293 









 

 


 

 



 

 

 

 

 

 

 

 

 

 

 

 

OPERATING STATISTICS

For the three months ended

 

For the year ended

 



December 31,

 

December 31,

 



2018

 

2017

 

2018

 

2017

 

Production

 

 

 

 

 

 

 

 

 

 

 

 

Gas production (Bcf)

 

194 

 

 

210 

 

 

807 

 

 

797 

 

Oil production (MBbls)

 

1,073 

 

 

580 

 

 

3,407 

 

 

2,327 

 

NGL production (MBbls)

 

5,434 

 

 

4,111 

 

 

19,706 

 

 

14,245 

 

Total production (Bcfe)

 

234 

 

 

239 

 

 

946 

 

 

897 

 



 

 

 

 

 

 

 

 

 

 

 

 

Division Production

 

 

 

 

 

 

 

 

 

 

 

 

Northeast Appalachia (Bcf)

 

118 

 

 

110 

 

 

459 

 

 

395 

 

Southwest Appalachia (Bcfe)

 

71 

 

 

52 

 

 

243 

 

 

183 

 

Fayetteville Shale (Bcf) (1)

 

44 

 

 

75 

 

 

243 

 

 

316 

 



 

 

 

 

 

 

 

 

 

 

 

 

Average unit costs per Mcfe

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

$

0.93 

 

$

0.91 

 

$

0.93 

 

$

0.90 

 

General & administrative expenses

$

0.18 

(2)

$

0.23 

 

$

0.19 

(3)

$

0.22 

(4)

Taxes, other than income taxes

$

0.10 

 

$

0.07 

 

$

0.09 

(5)

$

0.10 

 

Full cost pool amortization

$

0.53 

 

$

0.48 

 

$

0.51 

 

$

0.45 

 

(1)

The Fayetteville Shale assets and associated reserves were sold on December 3, 2018.

(2)

Excludes $18 million restructuring charges (including severance) and $1 million of legal settlement charges.

(3)

Excludes $36 million restructuring charges (including severance) and $9 million of legal settlement charges.

(4)

Excludes $5 million of legal settlement charges.

(5)

Excludes $1 million of restructuring charges.

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

COMMODITY PRICES

For the three months ended

 

For the year ended



December 31,

 

December 31,



2018

 

2017

 

2018

 

2017

Natural Gas Price:

 

 

 

 

 

 

 

 

 

 

 

NYMEX Henry Hub Price ($/MMBtu) (1)

$

3.64 

 

$

2.93 

 

$

3.09 

 

$

3.11 

Discount (Differential) to NYMEX (2)

 

(0.66)

 

 

(0.93)

 

 

(0.64)

 

 

(0.88)

Average realized gas price per Mcf, excluding derivatives

$

2.98 

 

$

2.00 

 

$

2.45 

 

$

2.23 

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

 

(0.02)

 

 

0.07 

 

 

(0.04)

 

 

(0.01)

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

 

(0.48)

 

 

0.05 

 

 

(0.06)

 

 

(0.03)

Average realized gas price per Mcf, including derivatives

$

2.48 

 

$

2.12 

 

$

2.35 

 

$

2.19 

Oil Price:

 

 

 

 

 

 

 

 

 

 

 

WTI oil price ($/Bbl)

$

58.81 

 

$

55.40 

 

$

64.77 

 

$

50.96 

Discount (Differential) to WTI

 

(7.94)

 

 

(7.35)

 

 

(7.98)

 

 

(7.84)

  Average oil price per Bbl, excluding derivatives

$

50.87 

 

$

48.05 

 

$

56.79 

 

$

43.12 

Average oil price per Bbl, including derivatives

$

50.37 

 

$

48.05 

 

$

56.07 

 

$

43.12 

NGL Price:

 

 

 

 

 

 

 

 

 

 

 

Average net realized NGL price per Bbl, excluding derivatives

$

18.59 

 

$

17.97 

 

$

17.91 

 

$

14.46 

Average net realized NGL price per Bbl, including derivatives

$

18.49 

 

$

17.99 

 

$

17.23 

 

$

14.48 

Percentage of WTI

 

32% 

 

 

32% 

 

 

28% 

 

 

28% 

Average net realized C3+ price per Bbl, excluding derivatives

$

32.26 

 

$

39.38 

 

$

34.46 

 

$

30.08 

Average net realized C3+ price per Bbl, including derivatives

$

32.75 

 

$

39.38 

 

$

33.77 

 

$

30.08 

Percentage of WTI

 

55% 

 

 

71% 

 

 

53% 

 

 

59% 

Total Weighted Average Realized Price:

 

 

 

 

 

 

 

 

 

 

 

Appalachian Basin, excluding derivatives ($/Mcfe)

$

3.31 

 

$

2.17 

 

$

2.82 

 

$

2.30 

Total Company

 

 

 

 

 

 

 

 

 

 

 

Excluding derivatives ($/Mcfe)

$

3.15 

 

$

2.19 

 

$

2.66 

 

$

2.32 

Including derivatives ($/Mcfe)

$

2.72 

 

$

2.30 

 

$

2.57 

 

$

2.29 

(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.





2

 


 

 

Financial Results

Southwestern Energy recorded net income attributable to common stock of $307 million or $0.54 per diluted share and $535 million or $0.93 per diluted share for the fourth quarter and year ended December 31, 2018, respectively. For full year 2018, net income reflects stronger operating performance driven by 78 percent higher liquids revenue of $548 million, which was partially offset by impairments associated with the Fayetteville sale, restructuring charges and unsettled derivative losses of $24 million in 2018 compared to an unsettled derivative gain of $451 million in 2017. Excluding the impact of unsettled derivatives, net income attributable to common stock was 54 percent higher for 2018 compared to the prior year. For the fourth quarter of 2018, net income was higher than 2017, due to higher natural gas and liquids revenue, offset by a settled derivative loss of $99 million in the fourth quarter and the impact of restructuring charges. 



For the full year 2018, adjusted net income was $590 million, more than $370 million above the prior year. For the fourth quarter of 2018, adjusted net income attributable to common stock was $176 million, a 179 percent increase compared to the same quarter last year.  Adjusted net income incorporates the impact of an assumed corporate tax rate of 24.5 percent, and excludes unsettled derivatives, as well as other one-time charges.



For the fiscal year 2018, adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) was $1,484 million, 19 percent above 2017 due to improved realized prices, increased production and reduced general and administrative expenses, partially offset by higher operating expenses related to a shift to more liquids-rich production in Southwest Appalachia. The primary components of adjusted EBITDA included $1,168 million from Appalachia operations and $377 million from Fayetteville operations, including Fayetteville Midstream. Adjusted EBITDA was $49 million higher in the fourth quarter of 2018 compared to a year ago, and includes two months of Fayetteville ownership.



For the full year 2018, weighted average realized price excluding derivatives was $2.66 per Mcfe, 15 percent or 34 cents higher than the prior year. Including derivatives, weighted average realized pricing was $2.57 per Mcfe, 12 percent above the prior year. For fiscal year 2018, Appalachia weighted average realized pricing was $2.82 per Mcfe, a $0.52 per Mcfe improvement compared to the prior year due to natural gas basis improvement, higher liquids production and improved liquids pricing.



For the fourth quarter of 2018, weighted average realized pricing, excluding derivatives was $3.15 per Mcfe, which was 44 percent higher than the prior period, driven primarily by the impact of higher NGL and oil production and price realizations. Including the impact of derivative settlement losses of $99 million, weighted average realized pricing was $2.72 per Mcfe, 18 percent higher than the prior year. Appalachia weighted average realized pricing was $3.31 per Mcfe in the fourth quarter, 53 percent above the prior year. 



Total debt reduction for 2018 was $2.1 billion, including credit facility refinancing and the repurchase of senior notes. During the fourth quarter of 2018, the Company closed on the sale of its Fayetteville Shale assets and used the net proceeds received of $1.65

3

 


 

 

billion to repurchase $900 million of senior notes, repurchase shares of common stock and repay all outstanding borrowings under its revolving credit facility, pending additional investments. Cash on hand at year-end was $201 million.

Pursuant to the Company’s $200 million authorized share repurchase program, during the fourth quarter of 2018, the Company invested $156 million to repurchase 34 million shares of common stock at an average price of $4.55 per share. In total, as of February 28, 2019, the Company has repurchased 44 million shares for a cumulative total of $199 million at an average price of $4.53 per share.

Southwestern Energy continues to execute a disciplined hedging program with physical, financial and basis derivatives on its forecasted natural gas, natural gas liquids and oil production. A summary of the Company’s financial derivative position is provided in the attached financial tables. Additional information on physical and financial derivatives can be found in the Company’s 2018 Form 10-K.



Operational Review

In 2018, the Company invested $1.23 billion in E&P operations which includes $1.11 billion in Appalachia and $60 million on the Southwest Appalachia water project. Southwestern Energy drilled 106 wells, completed 119 wells and placed 138 wells to sales.



During the fourth quarter of 2018, Southwestern invested a total of approximately $175 million in its Appalachia operations and $21 million on the water project. The Company drilled 15 wells, completed 11 wells and placed 25 wells to sales.



Southwest Appalachia – In 2018, Southwest Appalachia’s total net production increased 33 percent to 243 Bcfe and included 63,100 barrels per day of liquids. Liquids comprised 57 percent of production volumes. The Company brought 76 wells online, with approximately 80 percent of the wells located in the super rich acreage.  The Company drilled and completed 71 Marcellus wells.

In the fourth quarter, the Company drilled nine wells, completed five and placed 17 to sales. These included two Upper Devonian wells with initial liquids production of 49 percent. Delineation of the Upper Devonian will continue in 2019.

On a full year basis, weighted average realized price on a natural gas equivalent basis was $3.34 per Mcfe, a $0.25 per Mcfe uplift compared to the NYMEX gas price of $3.09 per MMBtu. For the fourth quarter, weighted average realized price was $3.62 per Mcfe. The uplift is directly related to higher liquids production and premium pricing received from the sale of natural gas liquids and oil.

Northeast Appalachia – Northeast Appalachia’s 2018 total net production increased to 459 Bcf, up 16 percent. The increase in production was mainly due to Tioga well outperformance, gathering capacity expansion and cycle time improvements. The Company drilled 41 wells, completed 54 wells and placed 60 wells to sales.



4

 


 

 

Well activity in the fourth quarter of 2018 included six drilled wells, six completions and eight wells to sales. One of the eight wells brought online was a Company record, ultra-long lateral of 16,272 feet that met all timing, cost and initial production forecasts. The Company continues to increase its lateral lengths and plans to drill and complete more ultra-long laterals in 2019.



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Three Months Ended December 31, 2018 E&P Division Results

Appalachia

 

Fayetteville



Northeast

 

Southwest

 

Shale (1)

Gas Production (Bcf)

 

118 

 

 

32 

 

 

44 

Liquids Production

 

 

 

 

 

 

 

 

 NGL (MBbls)

 

–  

 

 

5,431 

 

 

–  

 Oil (MBbls)

 

–  

 

 

1,065 

 

 

–  

Production (Bcfe)

 

118 

 

 

71 

 

 

44 

Gross operated production (MMcfe/d)

 

1,536 

 

 

1,213 

 

 

–  

Net operated production (MMcfe/d)

 

1,256 

 

 

752 

 

 

 –  

 

 

 

 

 

 

 

 

Capital investments ($ in millions)

 

 

 

 

 

 

 

 

Exploratory and development drilling, including workovers

$

51 

 

$

75 

 

$

– 

Acquisition and leasehold

 

 

 

 

 

– 

Seismic and other

 

– 

 

 

– 

 

 

Capitalized interest and expense

 

 

 

37 

 

 

Total capital investments

$

62 

 

$

113 

 

$



 

 

 

 

 

 

 

 

Gross operated well activity summary

 

 

 

 

 

 

 

 

Drilled

 

 

 

 

 

– 

Completed

 

 

 

 

 

– 

Wells to sales

 

 

 

17 

 

 

– 



 

 

 

 

 

 

 

 

Average completed well cost (in millions) 

$

9.7 

(2)

$

9.0 

(2) 

$

– 

Average lateral length (in ft) 

 

9,119 

 

 

6,992 

(3) 

 

– 



 

 

 

 

 

 

 

 

Realized Natural Gas Price

 

 

 

 

 

 

 

 

NYMEX Henry Hub Price ($/MMBtu)

$

3.64 

 

$

3.64 

 

$

3.64 

Discount to NYMEX (4)

 

(0.51)

 

 

(0.48)

 

 

(1.22)

Average realized gas price per Mcf, excluding derivatives

$

3.13 

 

$

3.16 

 

$

2.42 

Total weighted average realized price per Mcfe, excluding derivatives

$

3.13 

 

$

3.62 

 

$

2.42 

(1)

The Fayetteville Shale assets and associated reserves were sold on December 3, 2018.

(2)

Average completed well cost includes Marcellus wells only and amounts for delineation and science.

(3)

Average lateral length includes Marcellus wells only.

(4)

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.

5

 


 

 





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Year Ended December 31, 2018 E&P Division Results

Appalachia

 

Fayetteville



Northeast

 

Southwest

 

Shale (1)

Gas Production (Bcf)

 

459 

 

 

105 

 

 

243 

Liquids Production

 

 

 

 

 

 

 

 

 NGL (MBbls)

 

–  

 

 

19,679 

 

 

–  

 Oil (MBbls)

 

–  

 

 

3,355 

 

 

–  

Production (Bcfe)

 

459 

 

 

243 

 

 

243 

Gross operated production (MMcfe/d)

 

1,536 

 

 

1,213 

 

 

–  

Net operated production (MMcfe/d)

 

1,256 

 

 

752 

 

 

–  



 

 

 

 

 

 

 

 

Capital investments ($ in millions)

 

 

 

 

 

 

 

 

Exploratory and development drilling, including workovers

$

370 

 

$

502 

 

$

15 

Acquisition and leasehold

 

14 

 

 

37 

 

 

– 

Seismic and other

 

 

 

 

 

Capitalized interest and expense

 

35 

 

 

148 

 

 

13 

Total capital investments

$

422 

 

$

691 

 

$

33 



 

 

 

 

 

 

 

 

Gross operated well activity summary

 

 

 

 

 

 

 

 

Drilled

 

41 

 

 

63 

 

 

Completed

 

54 

 

 

63 

 

 

Wells to sales

 

60 

 

 

76 

 

 



 

 

 

 

 

 

 

 

Average completed well cost (in millions) 

$

7.5 

(2)

$

9.2 

(2) 

$

– 

Average lateral length (in ft) 

 

7,584 

 

 

7,267 

(3) 

 

– 



 

 

 

 

 

 

 

 

Realized Natural Gas Price

 

 

 

 

 

 

 

 

NYMEX Henry Hub Price ($/MMBtu)

$

3.09 

 

$

3.09 

 

$

3.09 

Discount to NYMEX (4)

 

(0.55)

 

 

(0.51)

 

 

(0.88)

Average realized gas price per Mcf, excluding derivatives

$

2.54 

 

$

2.58 

 

$

2.21 

Total weighted average realized price per Mcfe, excluding derivatives

$

2.54 

 

$

3.34 

 

$

2.21 

(1)

The Fayetteville Shale assets and associated reserves were sold on December 3, 2018.

(2)

Average completed well cost includes Marcellus wells only and amounts for delineation and science.

(3)

Average lateral length includes Marcellus wells only.

(4)

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.



6

 


 

 

2018 Proved Reserves

The Company’s estimated proved natural gas, natural gas liquids and oil reserves, audited by an independent petroleum engineering firm, were 11.9 Tcfe as of December 31, 2018.  The reserve life index was approximately 17 years at year-end 2018, excluding production associated with Fayetteville. The following tables detail additional information relating to reserve estimates as of and for the year ended December 31, 2018:



 

 

 

 

 

 

 



 

 

 

 

 

Proved Reserves Summary

For the years ended December 31,



2018

 

2017

Proved reserves (in Bcfe)

 

11,921 

 

 

14,775 

Prices used

 

 

 

 

 

Natural gas (per Mcf)

$

3.10 

 

$

2.98 

Oil (per Bbl)

$

65.56 

 

$

47.79 

Natural Gas Liquids (per Bbl)

$

17.64 

 

$

14.41 



 

 

 

 

 

PV-10:

 

 

 

 

 

Pre-Tax (millions)

$

6,524 

 

$

5,784 

PV of Taxes (millions)

 

(525)

 

 

(222)

After-Tax (millions)

$

5,999 

 

$

5,562 



 

 

 

 

 

Percent of estimated proved reserves that are:

 

 

 

 

 

Natural gas

 

67% 

 

 

75% 

Natural gas liquids and oil

 

33% 

 

 

25% 

Proved developed

 

47% 

 

 

54% 



 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

2018 Proved Reserves by Commodity

Natural Gas

 

Oil

 

NGL

 

Total



(Bcf)

 

(MBbls)

 

(MBbls)

 

(Bcfe)

Proved reserves, beginning of year

11,126 

 

65,636 

 

542,455 

 

14,775 

   Revisions of previous estimates due to price

96 

 

788 

 

8,912 

 

154 

   Revisions of previous estimates other than price

316 

 

410 

 

8,855 

 

372 

   Extensions, discoveries and other additions

753 

 

5,830 

 

36,823 

 

1,009 

   Production

(807)

 

(3,407)

 

(19,706)

 

(946)

   Acquisition of reserves in place

–  

 

–  

 

–  

 

–  

   Disposition of reserves in place (1)

(3,440)

 

(250)

 

(276)

 

(3,443)

Proved reserves, end of year

8,044 

 

69,007 

 

577,063 

 

11,921 



 

 

 

 

 

 

 

Proved developed reserves:

 

 

 

 

 

 

 

Beginning of year

6,979 

 

14,513 

 

142,213 

 

7,920 

End of year

4,395 

 

18,037 

 

175,480 

 

5,557 



Note: Amounts may not add due to rounding

(1)

The 2018 disposition is primarily associated with the Fayetteville Shale sale.





 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

2018 Proved Reserves by Division

 

Appalachia

 

Fayetteville

 

 

 

 



 

Northeast

 

Southwest

 

Shale (1)

 

Other (2)

 

Total

Estimated Proved Reserves (Bcfe):

 

 

 

 

 

 

 

 

 

 

Reserves, beginning of year

 

4,126 

 

6,962 

 

3,679 

 

 

14,775 

Revisions of previous estimates due to price

 

41 

 

106 

 

 

 

154 

Revisions of previous estimates other than price

 

107 

 

272 

 

(6)

 

(1)

 

372 

Extensions, discoveries and other additions

 

551 

 

457 

 

 

–  

 

1,009 

Production

 

(459)

 

(243)

 

(243)

 

(1)

 

(946)

Acquisition of reserves in place

 

– 

 

– 

 

– 

 

– 

 

– 

Disposition of reserves in place

 

– 

 

– 

 

(3,437)

 

(6)

 

(3,443)

  Reserves, end of year

 

4,366 

 

7,554 

 

–  

 

 

11,921 

(1)

The Fayetteville Shale E&P assets and associated reserves were divested December 3, 2018.

(2)

Other includes properties outside of the Appalachian Basin and Fayetteville Shale.

7

 


 

 

2018 PROVED RESERVES BY CATEGORY AND SUMMARY OPERATING DATA (1)





 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Appalachia

 

 

 

 



 

Northeast

 

 

Southwest

 

 

Other (2)

 

 

Total

Estimated proved reserves:

 

 

 

 

 

 

 

 

 

 

 

   Natural gas (Bcf):

 

 

 

 

 

 

 

 

 

 

 

   Developed

 

3,327 

 

 

1,068 

 

 

–  

 

 

4,395 

   Undeveloped

 

1,039 

 

 

2,610 

 

 

–  

 

 

3,649 



 

4,366 

 

 

3,678 

 

 

–  

 

 

8,044 

   Crude oil (MMBbls):

 

 

 

 

 

 

 

 

 

 

 

Developed

 

– 

 

 

17.9 

 

 

0.1 

 

 

18.0 

Undeveloped

 

– 

 

 

51.0 

 

 

– 

 

 

51.0 



 

– 

 

 

68.9 

 

 

0.1 

 

 

69.0 

Natural gas liquids (MMBbls):

 

 

 

 

 

 

 

 

 

 

 

Developed

 

– 

 

 

175.5 

 

 

– 

 

 

175.5 

Undeveloped

 

– 

 

 

401.6 

 

 

– 

 

 

401.6 



 

– 

 

 

577.1 

 

 

– 

 

 

577.1 

Total proved reserves (Bcfe)(3):

 

 

 

 

 

 

 

 

 

 

 

Developed

 

3,327 

 

 

2,229 

 

 

 

 

5,557 

Undeveloped

 

1,039 

 

 

5,325 

 

 

– 

 

 

6,364 



 

4,366 

 

 

7,554 

 

 

 

 

11,921 

Percent of total

 

37% 

 

 

63% 

 

 

0% 

 

 

100% 



 

 

 

 

 

 

 

 

 

 

 

Percent proved developed

 

76% 

 

 

30% 

 

 

100% 

 

 

47% 

Percent proved undeveloped

 

24% 

 

 

70% 

 

 

0% 

 

 

53% 



 

 

 

 

 

 

 

 

 

 

 

Production (Bcfe)

 

459 

 

 

243 

 

 

244 

(4)

 

946 

Capital investments (in millions)

$

422 

 

$

691 

 

$

118 

(5)

$

1,231 

Total gross producing wells (6)

 

666 

 

 

466 

 

 

17 

 

 

1,149 

Total net producing wells (6)

 

592 

 

 

333 

 

 

14 

 

 

939 



 

 

 

 

 

 

 

 

 

 

 

Total net acreage

 

184,024 

 

 

297,445 

 

 

166,120 

(7)

 

647,589 

Net undeveloped acreage

 

73,174 

 

 

220,331 

 

 

153,159 

(7)

 

446,664 



 

 

 

 

 

 

 

 

 

 

 

PV-10:

 

 

 

 

 

 

 

 

 

 

 

Pre-tax (in millions) (8)

$

3,054 

 

$

3,470 

 

$

 

 

$

6,524 

PV of taxes (in millions) (8)

 

(245)

 

 

(280)

 

 

– 

 

  

(525)

After-tax (in millions) (8)

$

2,809 

 

$

3,190 

 

$

 

 

$

5,999 

Percent of total

 

47% 

 

 

53% 

 

 

0% 

 

 

100% 

Percent operated (9)

 

99% 

 

 

100% 

 

 

100% 

 

 

99% 

(1)

The Fayetteville Shale E&P assets and associated reserves were divested on December 3, 2018.

(2)

Other reserves and acreage consists primarily of properties in Colorado.  Production and capital investing includes Fayetteville Shale.

(3)

We have no reserves from synthetic gas, synthetic oil or nonrenewable natural resources intended to be upgraded into synthetic gas or oil.  We used standard engineering and geoscience methods, or a combination of methodologies in determining estimates of material properties, including performance and test date analysis offset statistical analogy of performance data, volumetric evaluation, including analysis of petrophysical parameters (including porosity, net pay, fluid saturations (i.e., water, oil and gas) and permeability) in combination with estimated reservoir parameters (including reservoir temperature and pressure, formation depth and formation volume factors), geological analysis, including structure and isopach maps and seismic analysis, including review of 2-D and 3-D data to ascertain faults, closure and other factors.

(4)

Includes 243 Bcf of natural gas production related to our Fayetteville Shale operations which were sold on December 3, 2018.

(5)

Other capital investments includes $33 million related to our Fayetteville Shale operations which were sold on December 3, 2018, $60 million related to our water infrastructure project, $16 million related to our E&P service companies and $9 million related to our exploration activities.

(6)

Represents producing wells, including 394 wells in which we only have an overriding royalty interest in Northeast Appalachia, used in the December 31, 2018 reserves calculation.

(7)

Excludes exploration licenses for 2,518,519 net acres in New Brunswick, Canada, which have been subject to a moratorium since 2015.

(8)

Pre-tax PV-10 (a non-GAAP measure) is one measure of the value of a company’s proved reserves that we believe is used by securities analysts to compare relative values among peer companies without regard to income taxes.  The reconciling difference in pre-tax PV-10 and the after-tax PV-10, or standardized measure, is the discounted value of future income taxes on the estimated cash flows from our proved natural gas, oil and NGL reserves.

(9)

Based upon pre-tax PV-10 of proved developed producing activities.

8

 


 

 

The Company’s 2018 and three-year average proved developed finding and development (PD F&D) costs were $0.70 and $0.72 per Mcfe, respectively, when excluding the impact of capitalizing interest and portions of capitalized G&A costs in accordance with the full cost method of accounting.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Company PD F&D

 

 

Three-Year



12 Months Ended December 31,

 

Total



2018

 

2017

 

2016

 

2018

Total PD Adds (Bcfe):

 

 

 

 

 

 

 

 

 

 

 

New PD adds

 

177 

 

 

1,258 

 

 

257 

 

 

1,692 

PUD conversions

 

1,139 

(2)

 

46 

 

 

220 

 

 

1,405 

Total PD Adds

 

1,316 

 

 

1,304 

 

 

477 

 

 

3,097 



 

 

 

 

 

 

 

 

 

 

 

Costs Incurred (in millions):

 

 

 

 

 

 

 

 

 

 

 

Unproved property acquisition costs

$

164 

 

$

194 

 

$

171 

 

$

529 

Exploration costs

 

 

 

22 

 

 

17 

 

 

44 

Development costs

 

1,014 

 

 

1,024 

 

 

433 

 

 

2,471 

Capitalized Costs Incurred

$

1,183 

 

$

1,240 

 

$

621 

 

$

3,044 



 

 

 

 

 

 

 

 

 

 

 

Subtract (in millions):

 

 

 

 

 

 

 

 

 

 

 

Proved property acquisition costs

$

–  

 

$

–  

 

$

–  

 

$

–  

Unproved property acquisition costs

 

(164)

 

 

(194)

 

 

(171)

 

 

(529)

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

 

(93)

 

 

(103)

 

 

(91)

 

 

(287)

PD Costs Incurred

$

926 

 

$

943 

 

$

359 

 

$

2,228 



 

 

 

 

 

 

 

 

 

 

 

PD F&D

$

0.70 

 

$

0.72 

 

$

0.75 

 

$

0.72 

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 43 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, March 1, 2019 at 9:30 a.m. Central to discuss fourth quarter and year-end 2018 results. To participate, dial US toll-free 877-883-0383, or international 412-902-6505 and enter access code 9372440. 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 10128185. The replay will be available until March 20, 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]







9

 


 

 

Media Contact

Jim Schwartz

Director, Corporate Communications

(832) 796-2716

[email protected]



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.

###













8

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

10

 


 

 

STATEMENTS OF OPERATIONS

 

Southwestern Energy Company and Subsidiaries

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

For the three months ended

 

For the years ended



 

December 31,

 

December 31,



 

2018

 

2017

 

2018

 

2017



 

 

(in millions, except share/per share amounts)

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Gas sales

 

$

586 

 

$

425 

 

$

1,998 

 

$

1,793 

Oil sales

 

 

55 

 

 

29 

 

 

196 

 

 

102 

NGL sales

 

 

100 

 

 

74 

 

 

352 

 

 

206 

Marketing

 

 

417 

 

 

236 

 

 

1,222 

 

 

972 

Gas gathering

 

 

16 

 

 

41 

 

 

89 

 

 

126 

Other

 

 

 

 

 

 

 

 



 

 

1,175 

 

 

809 

 

 

3,862 

 

 

3,203 

Operating Costs and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Marketing purchases

 

 

421 

 

 

236 

 

 

1,229 

 

 

976 

Operating expenses

 

 

197 

 

 

190 

 

 

785 

 

 

671 

General and administrative expenses

 

 

44 

 

 

63 

 

 

209 

 

 

233 

Restructuring charges

 

 

19 

 

 

 –  

 

 

39 

 

 

 –  

Depreciation, depletion and amortization

 

 

134 

 

 

140 

 

 

560 

 

 

504 

Impairments

 

 

–  

 

 

–  

 

 

171 

 

 

 –  

Gain on sale of assets, net

 

 

(17)

 

 

(6)

 

 

(17)

 

 

(6)

Taxes, other than income taxes

 

 

25 

 

 

19 

 

 

89 

 

 

94 



 

 

823 

 

 

642 

 

 

3,065 

 

 

2,472 

Operating Income

 

 

352 

 

 

167 

 

 

797 

 

 

731 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

Interest on debt

 

 

51 

 

 

64 

 

 

231 

 

 

239 

Other interest charges

 

 

 

 

 

 

 

 

Interest capitalized

 

 

(29)

 

 

(28)

 

 

(115)

 

 

(113)



 

 

24 

 

 

38 

 

 

124 

 

 

135 



 

 

 

 

 

 

 

 

 

 

 

 

Gain (Loss) on Derivatives

 

 

(10)

 

 

127 

 

 

(118)

 

 

422 

Loss on Early Extinguishment of Debt

 

 

(9)

 

 

–  

 

 

(17)

 

 

(70)

Other Income (Loss), Net

 

 

(1)

 

 

(1)

 

 

 –  

 

 



 

 

 

 

 

 

 

 

 

 

 

 

Income Before Income Taxes

 

 

308 

 

 

255 

 

 

538 

 

 

953 

Provision (Benefit) for Income Taxes

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

(12)

 

 

 

 

(22)

Deferred

 

 

 –  

 

 

(67)

 

 

 –  

 

 

(71)



 

 

 

 

(79)

 

 

 

 

(93)

Net Income

 

 

307 

 

 

334 

 

 

537 

 

 

1,046 

Mandatory convertible preferred stock dividend

 

 

 –  

 

 

27 

 

 

 –  

 

 

108 

Participating securities - mandatory convertible preferred stock

 

 

 –  

 

 

40 

 

 

 

 

123 

Net Income Attributable to Common Stock

 

$

307 

 

$

267 

 

$

535 

 

$

815 



 

 

 

 

 

 

 

 

 

 

 

 

Income Per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.54 

 

$

0.53 

 

$

0.93 

 

$

1.64 

Diluted

 

$

0.54 

 

$

0.53 

 

$

0.93 

 

$

1.63 

Weighted Average Common Shares Outstanding

Basic

 

564,863,538 

 

503,614,377 

 

574,631,756 

 

498,264,321 

Diluted

 

567,773,371 

 

507,137,867 

 

576,642,808 

 

500,804,297 



11

 


 

 



 

 

 

 

 

 



 

 

 

 

 

 

BALANCE SHEETS

 

Southwestern Energy Company and Subsidiaries

 

 

 

 

 



 

 

 

 

 

 



 

December 31,
2018

 

December 31,
2017



 

(in millions)

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

201 

 

$

916 

Accounts receivable, net

 

 

581 

 

 

428 

Derivative assets

 

 

130 

 

 

130 

Other current assets

 

 

44 

 

 

35 

 Total current assets

 

 

956 

 

 

1,509 

Natural gas and oil properties, using the full cost method, including $1,755 million as of December 31, 2018 and $1,817 million as of December 31, 2017 excluded from amortization

 

 

24,180 

 

 

23,890 

Gathering systems

 

 

38 

 

 

1,315 

Other

 

 

487 

 

 

564 

Less: Accumulated depreciation, depletion and amortization

 

 

(20,049)

 

 

(19,997)

Total property and equipment, net

 

 

4,656 

 

 

5,772 

Other long-term assets

 

 

185 

 

 

240 

TOTAL ASSETS

 

$

5,797 

 

$

7,521 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

609 

 

$

533 

Taxes payable

 

 

58 

 

 

62 

Interest payable

 

 

52 

 

 

70 

Dividends payable

 

 

–  

 

 

27 

Derivative liabilities

 

 

79 

 

 

64 

Other current liabilities

 

 

48 

 

 

24 

Total current liabilities

 

 

846 

 

 

780 

Long-term debt

 

 

2,318 

 

 

4,391 

Pension and other postretirement liabilities

 

 

46 

 

 

58 

Other long-term liabilities

 

 

225 

 

 

313 

Total long-term liabilities

 

 

2,589 

 

 

4,762 

Commitment and contingencies

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 585,407,107 shares as of December 31, 2018 and 512,134,311 as of December 31, 2017

 

 

 

 

Preferred stock, $0.01 par value, 10,000,000 shares authorized, 6.25% Series B Mandatory Convertible, $1,000 per share liquidation preference, 1,725,000 shares issued and outstanding as of December 31, 2017, converted to common stock on January 12, 2018

 

 

–  

 

 

–  

Additional paid-in capital

 

 

4,715 

 

 

4,698 

Accumulated deficit

 

 

(2,142)

 

 

(2,679)

Accumulated other comprehensive loss

 

 

(36)

 

 

(44)

Common stock in treasury; 39,092,537 shares as of December 31, 2018 and 31,269 shares as of December 31, 2017

 

 

(181)

 

 

(1)

Total equity

 

 

2,362 

 

 

1,979 

TOTAL LIABILITIES AND EQUITY

 

$

5,797 

 

$

7,521 



12

 


 

 



 

 

 

 

 

 



 

 

 

 

 

 

STATEMENTS OF CASH FLOWS

 

Southwestern Energy Company and Subsidiaries

 

 

 

 

 



 

For the years ended



 

December 31,



 

2018

 

2017



 

(in millions)

Cash Flows From Operating Activities:

 

 

 

 

 

 

Net income

 

$

537 

 

$

1,046 

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

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

560 

 

 

504 

Amortization of debt issuance costs

 

 

 

 

Impairments

 

 

171 

 

 

–  

Deferred income taxes

 

 

–  

 

 

(71)

(Gain) loss on derivatives, unsettled

 

 

24 

 

 

(451)

Stock-based compensation

 

 

14 

 

 

24 

Gain on sales of assets, net

 

 

(17)

 

 

(6)

Loss on early extinguishment of debt

 

 

17 

 

 

70 

Other

 

 

(1)

 

 

13 

Change in assets and liabilities

 

 

(90)

 

 

(41)

Net cash provided by operating activities

 

 

1,223 

 

 

1,097 



 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

Capital investments

 

 

(1,290)

 

 

(1,268)

Proceeds from sale of property and equipment

 

 

1,643 

 

 

10 

Other

 

 

 

 

Net cash provided by (used in) investing activities

 

 

359 

 

 

(1,252)



 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

Payments on current portion of long-term debt

 

 

–  

 

 

(328)

Payments on long-term debt

 

 

(2,095)

 

 

(1,139)

Payments on revolving credit facility

 

 

(1,983)

 

 

–  

Borrowings under revolving credit facility

 

 

1,983 

 

 

–  

Change in bank drafts outstanding

 

 

17 

 

 

Proceeds from issuance of long-term debt

 

 

–  

 

 

1,150 

Debt issuance costs

 

 

(9)

 

 

(24)

Purchase of treasury stock

 

 

(180)

 

 

–  

Preferred stock dividend

 

 

(27)

 

 

(16)

Cash paid for tax withholding

 

 

(3)

 

 

(2)

Other

 

 

–  

 

 

(2)

Net cash used in financing activities

 

 

(2,297)

 

 

(352)



 

 

 

 

 

 

Decrease in cash and cash equivalents

 

 

(715)

 

 

(507)

Cash and cash equivalents at beginning of year

 

 

916 

 

 

1,423 

Cash and cash equivalents at end of year

 

$

201 

 

$

916 



13

 


 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENT INFORMATION

 

Southwestern Energy Company and Subsidiaries

 

Exploration

 

 

 

 

 

 

 

 

 

 

 



 

and

 

Midstream

 

 

 

 

 

 

 

 

 

(in millions)

 

Production

 

Services

 

Other