Toggle SGML Header (+)


Section 1: 8-K (8-K)

Document
false0000007332 0000007332 2019-08-06 2019-08-06


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): August 6, 2019
 
________________________________________________________________
 
SOUTHWESTERN ENERGY COMPANY
(Exact name of registrant as specified in its charter)
 
________________________________________________________________
 
Delaware
 
001-08246
 
71-0205415
(State or other jurisdiction of incorporation)
 
(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:
 
         Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
         Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
         Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
         Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, Par Value $0.01
 
SWN
 
New York Stock Exchange
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company

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.






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 August 6, 2019, Southwestern Energy Company (the "Company") issued a press release announcing the Company's financial results for the second quarter ended June 30, 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
 
(101.INS)
 
Interactive Data File Instance Document
(101.SCH)
 
Interactive Data File Schema Document
(101.CAL)
 
Interactive Data File Calculation Linkbase Document
(101.LAB)
 
Interactive Data File Label Linkbase Document
(101.PRE)
 
Interactive Data File Presentation Linkbase Document
(101.DEF)
 
Interactive Data File Definition Linkbase Document
 
 
 
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: August 6, 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
399077980_swnheader.jpg


NEWS RELEASE

SOUTHWESTERN ENERGY ANNOUNCES SECOND QUARTER 2019 RESULTS

Ongoing capital efficiencies driving top end of capital guidance lower; planned second half activity reduction underway

SPRING, Texas – August 6, 2019...Southwestern Energy Company (NYSE: SWN) today announced financial and operating results for the quarter ended June 30, 2019.

“SWN’s position as a leading Appalachia producer is underpinned by its operational outperformance, continued cost reduction, disciplined capital allocation and prudent commodity risk management. This, combined with a strong balance sheet and no material near term debt maturities, provides resilience in this volatile commodity price environment,” said Bill Way, President and Chief Executive Officer, Southwestern Energy.

Planned second half activity reduction underway with average rig count reduced from 6 rigs in the first half to 2 rigs by the end of the third quarter;
Invested total capital of $368 million, consistent with front-half loaded capital program;
On track to deliver 25% annual average well cost reduction on wells to sales; $866 per lateral foot in the quarter with average lateral length of over 10,100 feet;
Lowered top end of capital guidance, not to exceed $1.15 billion due to ongoing capital efficiency improvements;
Reported Appalachia production of 186 Bcfe, up 11% compared to prior year quarter; liquids production of 70.7 MBbls per day, 21% of production;
Captured $2.61 per Mcfe weighted average realized price, including derivatives and excluding $0.44 per Mcfe of transportation costs, essentially flat compared to prior year quarter;
Net debt to EBITDA of 2.0 times excluding the benefit of 2018 Fayetteville EBITDA; undrawn revolver of $2 billion; no material debt maturities before 2025;
72% of projected gas production hedged for the remainder of the year with a fair value of gas derivatives of $110 million at June 30, 2019; and
Improved gas differentials and LOE costs expected to more than offset lower NGL realizations by approximately $40 million for the year; updated guidance follows.

 
 
 
Previous Annual Guidance
 
Updated Annual Guidance
   Lease operating expense
 
 
$0.92 - $0.97 per Mcfe
 
$0.90 - $0.94 per Mcfe
   Natural gas differentials
 
 
$0.70 - $0.80 per Mcf
 
$0.60 - $0.70 per Mcf
   NGL price realizations
 
 
24% - 29% of WTI
 
18% - 22% of WTI

“We reiterate our priority of returning to free cash flow by the end of 2020, which remains achievable at recent strip prices. This strategic objective will be enabled by our continuing operational and cost improvements, without compromising our demonstrated operating

1


and financial discipline, including our practice of investing within a fully funded capital program,” continued Way.

Financial Results
The table below summarizes financial statistics. Year over year results are not comparable as prior year’s results include the contribution of Fayetteville assets, which were sold in December 2018.

FINANCIAL STATISTICS
 
For the three months ended
 
For the six months ended
 
 
June 30,
 
June 30,
(in millions)
 
2019
 
2018
 
2019
 
2018
Net income attributable to common stock
 
$
138

 
$
51

 
$
732

 
$
257

Adjusted net income attributable to common stock (non-GAAP)
 
$
40

 
$
105

 
$
185

 
$
267

Adjusted EBITDA (non-GAAP)
 
$
186

 
$
317

 
$
505

 
$
713

Net cash provided by operating activities
 
$
101

 
$
300

 
$
543

 
$
664

Net cash flow (non-GAAP)
 
$
173

 
$
280

 
$
482

 
$
638

Total capital investments (1)
 
$
368

 
$
403

 
$
693

 
$
741

(1)
Capital investments on the cash flow statement include increases of $39 million and $19 million for the three months ended June 30, 2019 and 2018, respectively, and increases of $105 million and $52 million for the six months ended June 30, 2019 and 2018, respectively, relating to the change in accrued expenditures between periods.

Southwestern Energy reported net income attributable to common stock of $138 million, or $0.26 per share, and adjusted net income of $40 million, or $0.08 per share. Compared to the prior year quarter these results include interest expense savings of $17 million and general and administrative expense savings of $19 million. Adjusted EBITDA was $186 million, net cash provided by operating activities was $101 million and net cash flow (non-GAAP) was $173 million.

Weighted average realized price was $2.17 per Mcfe, which includes transportation costs and the benefit of $0.18 per Mcfe from settled derivatives. By commodity, including the benefit of derivatives, realized gas price was $1.94 per Mcf, oil realizations were $51.60 per Bbl and NGL realizations were $12.62 per Bbl.

Excluding derivatives, which is consistent with guidance, natural gas differential was $0.84 per Mcf, NGL realizations were 18% of WTI and oil differential was $10.26 per Bbl.

For the second half of 2019, 72% of the Company’s natural gas production, 34% of NGLs and 77% of oil are hedged, based on the midpoint of guidance.

At June 30, 2019, the Company had cash of $155 million, an undrawn revolver of $2 billion, total debt of $2.3 billion and a trailing 12 month net debt/EBITDA ratio of 2.0 times, excluding the benefit of EBITDA associated with the Fayetteville Shale.

During the quarter, Southwestern Energy invested capital totaling $368 million, including capitalized interest and expense of $46 million, bringing year to date capital investment to $693 million, consistent with the Company’s previously disclosed front-half weighted capital program. Further, as planned, the Company has already begun to manage down capital

2


investment with average rig count reduced from 6 rigs in the first half to 2 rigs by the end of the third quarter. Total capital investment for the year is not expected to exceed $1.15 billion, below the high end of original capital guidance, and the Company reaffirms original annual production guidance.

REALIZED PRICES
 
For the three months ended
 
For the six months ended
(includes transportation costs)
 
June 30,
 
June 30,
 
 
2019
 
2018
 
2019
 
2018
Natural Gas Price:
 
 
 
 
 
 
 
 
NYMEX Henry Hub price ($/MMBtu) (1)
 
$
2.64

 
$
2.80

 
$
2.89

 
$
2.90

Discount to NYMEX (2)
 
(0.84
)
 
(0.81
)
 
(0.52
)
 
(0.55
)
Realized gas price per Mcf, excluding derivatives
 
$
1.80

 
$
1.99

 
$
2.37

 
$
2.35

Loss on settled financial basis derivatives ($/Mcf)
 
(0.03
)
 
(0.01
)
 
(0.03
)
 
(0.06
)
Gain on settled commodity derivatives ($/Mcf)
 
0.17

 
0.13

 
0.04

 
0.10

Realized gas price per Mcf, including derivatives
 
$
1.94

 
$
2.11

 
$
2.38

 
$
2.39

Oil Price:
 
 
 
 
 
 
 
 
WTI oil price ($/Bbl)
 
$
59.81

 
$
67.88

 
$
57.36

 
$
65.37

Discount to WTI
 
(10.26
)
 
(7.73
)
 
(9.75
)
 
(7.12
)
Realized oil price per Bbl, excluding derivatives
 
$
49.55

 
$
60.15

 
$
47.61

 
$
58.25

Realized oil price per Bbl, including derivatives
 
$
51.60

 
$
59.22

 
$
49.80

 
$
57.74

NGL Price:
 
 
 
 
 
 
 
 
Realized NGL price per Bbl, excluding derivatives
 
$
10.51

 
$
15.37

 
$
12.50

 
$
15.39

Realized NGL price per Bbl, including derivatives
 
$
12.62

 
$
15.05

 
$
13.84

 
$
15.22

Percentage of WTI
 
18
%
 
23
%
 
22
%
 
24
%
Realized C3+ price per Bbl, excluding derivatives
 
$
20.91

 
$
33.11

 
$
23.85

 
$
34.49

Realized C3+ price per Bbl, including derivatives
 
$
23.68

 
$
32.32

 
$
25.73

 
$
34.07

Percentage of WTI
 
35
%
 
49
%
 
42
%
 
53
%
Total Weighted Average Realized Price:
 
 
 
 
 
 
 
 
Excluding derivatives ($/Mcfe)
 
$
1.99

 
$
2.21

 
$
2.48

 
$
2.51

Including derivatives ($/Mcfe)
 
$
2.17

 
$
2.30

 
$
2.54

 
$
2.53

(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 was 186 Bcfe, an 11% increase compared to the prior-year second quarter excluding Fayetteville, including 148 Bcf of gas production, 937 MBbls of oil production and 5,497 MBbls of natural gas liquids production. E&P capital invested was $349 million, 8% lower than the second quarter of 2018. During the quarter, SWN drilled 41 wells, completed 40 wells and placed 36 wells to sales.

Well Cost Update
The Company is on track to achieve its commitment of averaging $875 per lateral foot for all wells to sales in 2019. This quarter, the Company achieved an average well cost of $866 per lateral foot with an average completed lateral length of 10,128 feet. Average well costs per lateral foot includes title, regulatory, permitting, pad site, facilities, drilling, completion and initial flowback costs. Longer lateral lengths, piped water, self-sourced sand and operational outperformance are the primary contributors to improving well costs.

Lateral length on wells to sales increased 30% year over year

3


Realizing an average savings of approximately $800,000 per well for all wells utilizing Southwest Appalachia water infrastructure; 100% of wells completed this year will utilize piped water
Sand savings of $230,000 per well have exceeded original estimates
Stages per day expected to improve 35% in 2019 to 7.2 stages per day, compared to full year 2018

Three Months Ended June 30, 2019 E&P Division Results
 
Appalachia
 
 
Northeast
 
Southwest
Gas Production (Bcf)
 
113

 
35

Liquids Production
 
 
 
 
  Oil (MBbls)
 

 
931

  NGL (MBbls)
 

 
5,493

Production (Bcfe)
 
113

 
73

Gross operated production as of June 2019 (MMcfe/d)
 
1,487

 
1,367

Net operated production as of June 2019 (MMcfe/d)
 
1,212

 
847

 
 
 
 
 
Capital investments ($ in millions)
 
 
 
 
Exploratory and development drilling, including workovers
 
$
115

 
$
169

Acquisition and leasehold
 
1

 
15

Seismic and other
 
2

 
1

Capitalized interest and expense
 
8

 
38

Total capital investments
 
$
126

 
$
223

 
 
 
 
 
Gross operated well activity summary
 
 
 
 
Drilled
 
18

 
23

Completed
 
14

 
26

Wells to sales
 
13

 
23

 
 
 
 
 
Average well cost on wells to sales (in millions)
 
$
8.5

 
$
8.9

Average lateral length (in ft)
 
9,981

 
10,211
 
 
 
 
 
Total weighted average realized price per Mcfe, excluding derivatives
 
$
1.91

 
$
2.10


Southwest Appalachia’s total production averaged 802 MMcfe per day, including 10.2 MBbls per day of oil and 60.4 MBbls per day of natural gas liquids. During the quarter, natural gas liquids production was reduced to capture greater value through ethane rejection. The Company drilled 23 wells, completed 26 wells and placed 23 wells to sales in the quarter. In alignment with the Company’s plan to focus on liquids-rich Marcellus wells, all 23 wells brought online this quarter were located in the super rich acreage and had an average lateral length of 10,211 feet.

Twelve of the 23 wells were online for at least 30 days and had an average 30-day rate of 11 MMcfe per day, an over 60% increase compared to second quarter last year. The improvement is attributed to longer lateral lengths and well performance improvements.

Northeast Appalachia’s total production averaged 1.2 Bcf per day, essentially flat to the prior year quarter. In the quarter, the Company drilled 18 wells, completed 14 wells and placed 13 wells to sales with an average lateral length of 9,981 feet.


4


Wells to sales in the quarter had an average initial production rate of 25 MMcf per day, 25% higher than the same quarter last year, driven predominantly by longer lateral lengths. Four of the 13 wells to sales in the quarter were online for at least 30 days and had an average 30-day rate of 17 MMcf per day.

OPERATING STATISTICS
 
For the three months ended
 
For the six months ended
 
 
 
June 30,
 
June 30,
 
 
 
2019
 
2018
 
2019
 
2018
 
Production
 
 
 
 
 
 
 
 
 
Gas production (Bcf)
 
148

 
201

 
291

 
398

 
Oil production (MBbls)
 
937

 
723

 
1,791

 
1,336

 
NGL production (MBbls)
 
5,497

 
4,862

 
11,100

 
9,092

 
Total production (Bcfe)
 
186

 
234

 
368

 
460

 
 
 
 
 
 
 
 
 
 
 
Division Production
 
 
 
 
 
 
 
 
 
Northeast Appalachia (Bcf)
 
113

 
112

 
225

 
220

 
Southwest Appalachia (Bcfe)
 
73

 
55

 
143

 
106

 
Fayetteville Shale (Bcf) (1)
 

 
67

 

 
134

 
 
 
 
 
 
 
 
 
 
 
Average unit costs per Mcfe
 
 
 
 
 
 
 
 
 
Lease operating expenses (2)
 
$
0.90

 
$
0.91

 
$
0.90

 
$
0.93

 
General & administrative expenses
 
$
0.19

(3) 
$
0.19

(4) 
$
0.19

(3) 
$
0.20

(4) 
Taxes, other than income taxes
 
$
0.09

 
$
0.06

(5) 
$
0.10

 
$
0.07

(5) 
Full cost pool amortization
 
$
0.58

 
$
0.50

 
$
0.57

 
$
0.49

 
(1)
The Fayetteville Shale assets were sold on December 3, 2018.
(2)
LOE includes post-production costs such as: gathering, processing, fractionation and compression charges.
(3)
Excludes $2 million and $5 million of restructuring charges for the three and six months ended June 30, 2019, respectively.
(4)
Excludes $15 million of restructuring charges and $7.9 million of legal settlement charges for the three and six months ended June 30, 2018.
(5)
Excludes $1 million of restructuring charges for the three and six months ended June 30, 2018.

Resource to Reserves
The Company continued its testing program in the quarter by successfully drilling and completing three Upper Marcellus wells and completing its first Upper Devonian well in the super rich acreage. All four wells are expected to be online in the third quarter.

Conference Call
Southwestern Energy will host a conference call and webcast on August 7, 2019 at 9:30 a.m. Central Time to discuss second quarter 2019 financial and operating results. To participate, dial US toll-free 877-883-0383, or international 412-902-6506 and enter access code 1226688. The conference call will be webcast live at www.swn.com/investors/.

A replay of the call will be available until August 28, 2019 at 877-344-7529, International 412-317-0088, or Canada Toll Free 855-669-9658, access code 10133404.

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.


5


Investor Contact
 
Media Contact
Paige Penchas
 
Jim Schwartz
Vice President, Investor Relations
 
Director, Corporate Communications
(832) 796-4068
 
(832) 796-2716
 

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.
###




6


SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
For the three months ended
 
For the six months ended
 
 
June 30,
 
June 30,
(in millions, except share/per share amounts)
 
2019
 
2018
 
2019
 
2018
Operating Revenues:
 
 
 
 
 
 
 
 
Gas sales
 
$
275

 
$
407

 
$
705

 
$
947

Oil sales
 
47

 
44

 
86

 
79

NGL sales
 
58

 
75

 
139

 
140

Marketing
 
287

 
265

 
725

 
518

Gas gathering
 

 
24

 

 
48

Other
 

 
1

 
2

 
4

 
 
667

 
816

 
1,657

 
1,736

Operating Costs and Expenses:
 
 
 
 
 
 
 
 
Marketing purchases
 
293

 
265

 
734

 
520

Operating expenses
 
169

 
193

 
334

 
382

General and administrative expenses
 
40

 
59

 
77

 
114

Loss on sale of operating assets
 
3

 

 
3

 

Restructuring charges
 
2

 
18

 
5

 
18

Depreciation, depletion and amortization
 
121

 
142

 
233

 
285

Taxes, other than income taxes
 
17

 
15

 
36

 
38

 
 
645

 
692

 
1,422

 
1,357

Operating Income
 
22

 
124

 
235

 
379

Interest Expense:
 
 
 
 
 
 
 
 
Interest on debt
 
41

 
59

 
83

 
124

Other interest charges
 
2

 
2

 
3

 
4

Interest capitalized
 
(28
)
 
(29
)
 
(57
)
 
(57
)
 
 
15

 
32

 
29

 
71

 
 
 
 
 
 
 
 
 
Gain (Loss) on Derivatives
 
152

 
(36
)
 
120

 
(43
)
Loss on Early Extinguishment of Debt
 

 
(8
)
 

 
(8
)
Other Income (Loss), Net
 
(6
)
 
3

 
(5
)
 
2

 
 
 
 
 
 
 
 
 
Income Before Income Taxes
 
153

 
51

 
321

 
259

Provision (Benefit) for Income Taxes:
 
 
 
 
 
 
 
 
Current
 

 

 

 

Deferred
 
15

 

 
(411
)
 

 
 
15

 

 
(411
)
 

Net Income
 
$
138

 
$
51

 
$
732

 
$
259

Participating securities - mandatory convertible preferred stock
 

 

 

 
2

Net Income Attributable to Common Stock
 
$
138

 
$
51

 
$
732

 
$
257

 
 
 
 
 
 
 
 
 
Earnings Per Common Share
 
 
 
 
 
 
 
 
Basic
 
$
0.26

 
$
0.09

 
$
1.36

 
$
0.45

Diluted
 
$
0.26

 
$
0.09

 
$
1.35

 
$
0.44

 
 
 
 
 
 
 
 
 
Weighted Average Common Shares Outstanding:
 
 
 
 
 
 
 
 
Basic
 
539,005,941

 
581,159,200

 
539,362,984

 
576,255,744

Diluted
 
539,947,053

 
582,878,106

 
540,624,742

 
578,222,740




7


SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
June 30, 2019
 
December 31, 2018
ASSETS
 
(in millions)
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
155

 
$
201

Accounts receivable, net
 
358

 
581

Derivative assets
 
209

 
130

Other current assets
 
42

 
44

Total current assets
 
764

 
956

Natural gas and oil properties, using the full cost method, including $1,678 million as of June 30, 2019 and $1,755 million as of December 31, 2018 excluded from amortization
 
24,823

 
24,180

Other
 
555

 
525

Less: Accumulated depreciation, depletion and amortization
 
(20,279
)
 
(20,049
)
Total property and equipment, net
 
5,099

 
4,656

Deferred tax assets
 
410

 

Other long-term assets
 
272

 
185

TOTAL ASSETS
 
$
6,545

 
$
5,797

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

 
$

Accounts payable
 
585

 
609

Taxes payable
 
52

 
58

Interest payable
 
53

 
52

Derivative liabilities
 
67

 
79

Other current liabilities
 
103

 
48

Total current liabilities
 
912

 
846

Long-term debt
 
2,267

 
2,318

Pension and other postretirement liabilities
 
39

 
46

Other long-term liabilities
 
245

 
225

Total long-term liabilities
 
2,551

 
2,589

Commitments and contingencies
 
 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 585,478,345 shares as of June 30, 2019 and 585,407,107 shares as of December 31, 2018
 
6

 
6

Additional paid-in capital
 
4,720

 
4,715

Accumulated deficit
 
(1,410
)
 
(2,142
)
Accumulated other comprehensive loss
 
(32
)
 
(36
)
Common stock in treasury, 44,353,224 shares as of June 30, 2019 and 39,092,537 shares as of December 31, 2018
 
(202
)
 
(181
)
Total equity
 
3,082

 
2,362

TOTAL LIABILITIES AND EQUITY
 
$
6,545

 
$
5,797






8


SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
For the six months ended
 
 
June 30,
(in millions)
 
2019
 
2018
Cash Flows From Operating Activities:
 
 
 
 
Net income
 
$
732

 
$
259

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation, depletion and amortization
 
233

 
285

Amortization of debt issuance costs
 
2

 
4

Deferred income taxes
 
(411
)
 

(Gain) loss on derivatives, unsettled
 
(96
)
 
54

Stock-based compensation
 
4

 
9

Loss on early extinguishment of debt
 

 
8

Loss on sale of assets, net
 
3

 

Other
 
10

 
1

Change in assets and liabilities:
 
 
 
 
Accounts receivable
 
221

 
12

Accounts payable
 
(129
)
 
53

Taxes payable
 
(6
)
 
(4
)
Interest payable
 
1

 
(1
)
Inventories
 
4

 
(7
)
Other assets and liabilities
 
(25
)
 
(9
)
Net cash provided by operating activities
 
543

 
664

 
 
 
 
 
Cash Flows From Investing Activities:
 
 
 
 
Capital investments
 
(586
)
 
(684
)
Proceeds from sale of property and equipment
 
26

 
6

Other
 

 
3

Net cash used in investing activities
 
(560
)
 
(675
)
 
 
 
 
 
Cash Flows From Financing Activities:
 
 
 
 
Payments on long-term debt
 

 
(1,191
)
Payments on revolving credit facility
 

 
(645
)
Borrowings under revolving credit facility
 

 
1,005

Change in bank drafts outstanding
 
(7
)
 

Debt issuance costs
 

 
(9
)
Purchase of treasury stock
 
(21
)
 

Preferred stock dividend
 

 
(27
)
Cash paid for tax withholding
 
(1
)
 
(1
)
Net cash used in financing activities
 
(29
)
 
(868
)
 
 
 
 
 
Decrease in cash and cash equivalents
 
(46
)
 
(879
)
Cash and cash equivalents at beginning of year
 
201

 
916

Cash and cash equivalents at end of period
 
$
155

 
$
37





9


SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
 
 
Exploration
 
 
 
 
 
 
 
 
 
 
and
 
Midstream
 
 
 
 
 
 
 
 
Production
 
Services
 
Other
 
Eliminations
 
Total
 
 
(in millions)
Three months ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
371

 
$
626

 
$

 
$
(330
)
 
$
667

Marketing purchases
 

 
622

 

 
(329
)
 
293

Operating expenses
 
169

 
1

 

 
(1
)
 
169

General and administrative expenses
 
35

 
5

 

 

 
40

Loss on sale of operating assets
 

 
3

 

 

 
3

Restructuring charges
 
2

 

 

 

 
2

Depreciation, depletion and amortization
 
118

 
3

 

 

 
121

Taxes, other than income taxes
 
17

 

 

 

 
17

Operating income (loss)
 
30

 
(8
)
 

 

 
22

Capital investments (1)
 
367

 

 
1

 

 
368

 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
520

 
$
797

 
$

 
$
(501
)
 
$
816

Marketing purchases
 

 
716

 

 
(451
)
 
265

Operating expenses
 
215

 
28

 

 
(50
)
 
193

General and administrative expenses
 
53

(2) 
6

 

 

 
59

Restructuring charges
 
16

 
2

 

 

 
18

Depreciation, depletion and amortization
 
126

 
16

(3) 

 

 
142

Taxes, other than income taxes
 
13

 
2

 

 

 
15

Operating income
 
97

 
27

 

 

 
124

Capital investments (1)
 
396

 
5

 
2

 

 
403

 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
913

 
$
1,567

 
$

 
$
(823
)
 
$
1,657

Marketing purchases
 

 
1,556

 

 
(822
)
 
734

Operating expenses
 
335

 

 

 
(1
)
 
334

General and administrative expenses
 
69

 
8

 

 

 
77

Loss on sale of operating assets
 

 
3

 

 

 
3

Restructuring charges
 
5

 

 

 

 
5

Depreciation, depletion and amortization
 
228

 
5

 

 

 
233

Taxes, other than income taxes
 
36

 

 

 

 
36

Operating income (loss)
 
240

 
(5
)
 

 

 
235

Capital investments (1)
 
692

 

 
1

 

 
693

 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
1,157

 
$
1,693

 
$

 
$
(1,114
)
 
$
1,736

Marketing purchases
 

 
1,535

 

 
(1,015
)
 
520

Operating expenses
 
428

 
53

 

 
(99
)
 
382

General and administrative expenses
 
101

(2) 
13

 

 

 
114

Restructuring charges
 
16

 
2

 

 

 
18

Depreciation, depletion and amortization
 
243

 
42

(3) 

 

 
285

Taxes, other than income taxes
 
34

 
4

 

 

 
38

Operating income
 
335

 
44

 

 

 
379

Capital investments (1)
 
730

 
9

 
2

 

 
741

(1)
Capital investments include increases of $39 million and $19 million for the three months ended June 30, 2019 and 2018, respectively, and increases of $105 million and $52 million for the six months ended June 30, 2019 and 2018, respectively, relating to the change in accrued expenditures between years.
(2)
Includes $7.9 million of legal settlement charges.
(3)
Includes a $10 million impairment related to certain non-core gathering assets.

10


Hedging Summary
A detailed breakdown of Southwestern Energy’s derivative financial instruments and financial basis positions as of June 30, 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
131

 
$
2.92

 
$

 
$

 
$

 
$

Two-way costless collars
25

 

 

 
2.78

 
2.92

 

Three-way costless collars
67

 

 
2.47

 
2.88

 
3.22

 

Total
223

 
 
 
 
 
 
 
 
 
 
2020
 
 
 
 
 
 
 
 
 
 
 
Fixed price swaps
24

 
$
2.88

 
$

 
$

 
$

 
$

Three-way costless collars
148

 

 
2.36

 
2.67

 
2.97

 

Total
172

 
 
 
 
 
 
 
 
 
 
2021
 
 
 
 
 
 
 
 
 
 
 
Three-way costless collars
37

 
$

 
$
2.35

 
$
2.60

 
$
2.93

 
$

 
 
 
 
 
 
 
 
 
 
 
 
Basis Swaps
 
 
 
 
 
 
 
 
 
 
 
2019
80

 
$

 
$

 
$

 
$

 
$
(0.45
)
2020
132

 

 

 

 

 
(0.34
)
2021
28

 
 
 
 
 
 
 
 
 
(0.51
)
Total
240

 
 
 
 
 
 
 
 
 
 


11


 
 
 
Weighted Average Price per Bbl
 
Volume
 
 
 
Sold
 
Purchased
 
Sold
 
(MBbls)
 
Swaps
 
Puts
 
Puts
 
Calls
Oil
 
 
 
 
 
 
 
 
 
2019
 
 
 
 
 
 
 
 
 
Fixed price swaps (1)
1,003

 
$
60.89

 
$

 
$

 
$

Two-way costless collars
764

 

 

 
61.45

 
67.16

Three-way costless collars
276

 

 
45.00

 
55.00

 
63.67

Total
2,043

 
 
 
 
 
 
 
 
2020
 
 
 
 
 
 
 
 
 
Fixed price swaps
1,556

 
$
60.18

 
$

 
$

 
$

Two-way costless collars
366

 

 

 
60.00

 
69.80

Three-way costless collars
641

 

 
45.00

 
55.00

 
63.36

Total
2,563

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Propane
 
 
 
 
 
 
 
 
 
2019
 
 
 
 
 
 
 
 
 
Fixed price swaps
1,955

 
$
30.18

 
$

 
$

 
$

Two-way costless collars
276

 

 

 
25.62

 
28.77

Total
2,231

 
 
 
 
 
 
 
 
2020
 
 
 
 
 
 
 
 
 
Fixed price swaps
2,196

 
$
26.97

 
$

 
$

 
$

Two-way costless collars
366

 

 

 
25.20

 
29.40

Total
2,562

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ethane
 
 
 
 
 
 
 
 
 
2019
 
 
 
 
 
 
 
 
 
Fixed price swaps
1,858

 
$
13.90

 
$

 
$

 
$

2020
 
 
 
 
 
 
 
 
 
Fixed price swaps
732

 
$
13.49

 
$

 
$

 
$

(1)
Includes 138 MBbls of purchased fixed price oil swaps hedged at $69.10 per barrel and 1,141 MBbls of sold fixed price oil swaps hedged at $61.88 per barrel.

12


Financial basis positions
 
Volume
 
Basis Differential
(excludes physical positions)
 
(Bcf)
 
($/MMbtu)
 
 
 
 
 
Q3 2019
 
 
 
 
TCO
 
2

 
$
(0.38
)
Dominion South
 
30

 
$
(0.53
)
TETCO M3
 
14

 
$
(0.43
)
Total
 
46

 
$
(0.49
)
 
 
 
 
 
2019
 
 
 
 
TCO
 
2

 
$
(0.38
)
Dominion South
 
51

 
$
(0.53
)
TETCO M3
 
27

 
$
(0.30
)
Total
 
80

 
$
(0.45
)
 
 
 
 
 
2020
 
 
 
 
TCO
 
17

 
$
(0.51
)
Dominion South
 
80

 
$
(0.52
)
TETCO M3
 
35

 
$
0.16

Total
 
132

 
$
(0.34
)
 
 
 
 
 
2021
 
 
 
 
Dominion South
 
24

 
$
(0.53
)
TETCO M3
 
4

 
$
(0.40
)
Total
 
28

 
$
(0.51
)





























13




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 June 30,
 
 
2019
 
2018
 
 
(in millions)
Net income attributable to common stock:
 
 
 
 
Net income attributable to common stock
 
$
138

 
$
51

Add back:
 
 
 
 
Restructuring charges
 
2

 
18

Loss on sale of operating assets
 
3

 

(Gain) loss on certain derivatives
 
(118
)
 
56

Loss on early extinguishment of debt
 

 
8

Legal settlement charges
 

 
8

Non-cash pension settlement loss
 
4

 

Other non-cash (gain) loss
 
9

 
(1
)
Adjustments due to discrete tax items (1)
 
(23
)
 
(13
)
Tax impact on adjustments
 
25

 
(22
)
Adjusted net income attributable to common stock
 
$
40

 
$
105

(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%.


14


 
 
6 Months Ended June 30,
 
 
2019
 
2018
 
 
(in millions)
Net income attributable to common stock:
 
 
 
 
Net income attributable to common stock
 
$
732

 
$
257

Add back:
 
 
 
 
Restructuring charges
 
5

 
18

Loss on sale of operating assets
 
3

 

(Gain) loss on certain derivatives
 
(96
)
 
54

Impairment of non-core gathering assets
 

 
10

Loss on early extinguishment of debt
 

 
8

Legal settlement charge
 

 
8

Non-cash pension settlement loss
 
4

 

Other non-cash loss
 
7

 
1

Adjustments due to discrete tax items (1)
 
(489
)
 
(64
)
Tax impact on adjustments
 
19

 
(25
)
Adjusted net income attributable to common stock
 
$
185

 
$
267

(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 June 30,
 
 
2019
 
2018
Diluted earnings per share:
 
 
 
 
Diluted earnings per share
 
$
0.26

 
$
0.09

Add back:
 
 
 
 
Restructuring charges
 
0.00

 
0.03

Loss on sale of operating assets
 
0.00

 

(Gain) loss on certain derivatives
 
(0.22
)
 
0.10

Loss on early extinguishment of debt
 

 
0.01

Legal settlement charges
 

 
0.01

Non-cash pension settlement loss
 
0.01

 

Other non-cash (gain) loss
 
0.02

 
(0.00
)
Adjustments due to discrete tax items (1)
 
(0.04
)
 
(0.02
)
Tax impact on adjustments
 
0.05

 
(0.04
)
Adjusted diluted earnings per share
 
$
0.08

 
$
0.18

(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%.


15


 
 
6 Months Ended June 30,
 
 
2019
 
2018
Diluted earnings per share:
 
 
 
 
Diluted earnings per share
 
$
1.35

 
$
0.44

Add back:
 
 
 
 
Restructuring charges
 
0.01

 
0.03

Loss on sale of operating assets
 
0.01

 

(Gain) loss on certain derivatives
 
(0.18
)
 
0.09

Impairment of non-core gathering assets
 

 
0.02

Loss on early extinguishment of debt
 

 
0.02

Legal settlement charges
 

 
0.01

Non-cash pension settlement loss
 
0.01

 

Other non-cash loss
 
0.01

 
0.00

Adjustments due to discrete tax items (1)
 
(0.91
)
 
(0.11
)
Tax impact on adjustments
 
0.04

 
(0.04
)
Adjusted diluted earnings per share
 
$
0.34

 
$
0.46

(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 June 30,
 
 
2019
 
2018
 
 
(in millions)
Net cash flow provided by operating activities:
 
 
 
 
Net cash provided by operating activities
 
$
101

 
$
300

Add back: