Southwestern Energy Announces First Quarter 2021 Results

Rhea-AI Summary

Southwestern Energy Company (NYSE: SWN) reported strong financial results for Q1 2021, with a net income of $80 million, reversing a significant loss in 2020. The company generated $347 million in net cash from operations and realized $88 million in free cash flow, which was used to reduce debt. Total production reached 269 Bcfe, with improved pricing leading to an 18% increase in the weighted average realized price. The balance sheet remains robust with a leverage ratio decreasing to 3.0x, and the company expects to approach 2.0x by year-end.

Positive

• Net income improved to $80 million in Q1 2021 from a loss of $1.5 billion in 2020.
• Generated $88 million in free cash flow, fully used for debt reduction.
• Total production increased by 34% due to the Montage acquisition.
• Leverage ratio improved to 3.0x, expected to approach 2.0x by year-end.

Negative

• Total debt remains high at $3.0 billion.

Southwestern Energy Company (NYSE: SWN) today announced financial and operating results for the first quarter ended March 31, 2021.

• Achieved $347 million net cash provided by operating activities; invested $266 million consistent with its maintenance capital plan;
• Generated $88 million free cash flow (non-GAAP);
• Free cash flow fully utilized to reduce debt; expect to approach 2.0x leverage by year-end;
• Borrowing base and commitments reaffirmed at elected $2.0 billion;
• Reported total production of 269 Bcfe, or 3.0 Bcfe per day, including 2.4 Bcf per day of gas and 103 MBbls per day of liquids;
• Received weighted average realized price (excluding transportation) of $2.99 per Mcfe; and
• Approximately 80% of annual natural gas production protected from impacts of widening Appalachia differentials through transportation capacity and basis hedges.

“The Company’s returns-driven strategy is underpinned by a lower cost structure, improving operational performance, a strong balance sheet, the generation of free cash flow and capturing the benefits of scale, all while operating safely and responsibly. In the first quarter, we delivered on each of these aspects of our strategy. Our teams continue to innovate and create opportunities to further improve results,” said Bill Way, Southwestern Energy President and Chief Executive Officer.

Financial Results

	For the three months ended
	March 31,
(in millions)	2021			2020
Net income (loss)	$	80		$	(1,547	)
Adjusted net income (non-GAAP)	$	196		$	56
Diluted earnings (loss) per share	$	0.12		$	(2.86	)
Adjusted diluted earnings per share (non-GAAP)	$	0.29		$	0.10
Adjusted EBITDA (non-GAAP)	$	382		$	206
Net cash provided by operating activities	$	347		$	160
Net cash flow (non-GAAP)	$	354		$	191
Total capital investments (1)	$	266		$	237

(1)

Capital investments include increases of $38 million and $8 million for the three months ended March 31, 2021 and 2020, respectively, relating to the change in capital accruals between periods.

For the quarter ended March 31, 2021, Southwestern Energy recorded net income of $80 million, or $0.12 per diluted share, compared to a net loss in 2020 of $1.5 billion, or ($2.86) per diluted share, attributable to a $1.48 billion non-cash full cost ceiling test impairment and $408 million tax valuation allowance included in 2020 results.

Adjusted net income was $196 million, or $0.29 per diluted share, in the first quarter of 2021, compared to $56 million, or $0.10 per diluted share, for the prior year period. The increase was primarily related to an 18% increase in the weighted average realized price including derivatives and a 34% increase in production volumes, largely due to the Montage acquisition. Adjusted EBITDA (non-GAAP) was $382 million, net cash provided by operating activities was $347 million and net cash flow (non-GAAP) was $354 million.

As indicated in the table below, first quarter 2021 weighted average realized price, including $0.37 per Mcfe of transportation expenses, was $2.62 per Mcfe excluding the impact of derivatives. Including derivatives, weighted average realized price (including transportation) for the quarter was up 18% from $2.16 per Mcfe in 2020 to $2.54 per Mcfe in 2021 primarily due to higher commodity prices including a 38% increase in NYMEX Henry Hub and a 25% increase in WTI. First quarter 2021 weighted average realized price before transportation expense and excluding the impact of derivatives was $2.99 per Mcfe.

At quarter end, the Company had hedges in place for 88% of its remaining 2021 expected natural gas production, 60% of its 2021 expected natural gas liquids (NGLs) production and 93% of its 2021 expected oil production. During the quarter, SWN realized a $41 million gain from settled basis hedges which was more than offset by losses associated with settled NGL and oil hedges due to increased liquids prices, for a total $22 million settled hedge loss.

As of March 31, 2021, Southwestern Energy had total debt of $3.0 billion with the leverage ratio improving to 3.0x. The Company’s borrowing base was reaffirmed as part of its regularly scheduled spring redetermination, with revolving credit facility commitments unchanged at the elected $2.0 billion and asset coverage continuing to exceed the borrowing base. At quarter end, the Company had $567 million of borrowings under its revolving credit facility with $233 million in letters of credit. During the quarter, debt was reduced by $133 million, which included $88 million in free cash flow and changes in working capital.

Realized Prices		For the three months ended
(includes transportation costs)		March 31,
		2021				2020
Natural Gas Price:
NYMEX Henry Hub price ($/MMBtu) (1)		$	2.69			$	1.95
Discount to NYMEX (2)		(0.58		)		(0.42		)
Realized gas price per Mcf, excluding derivatives		$	2.11			$	1.53
Gain on settled financial basis derivatives ($/Mcf)		0.19				0.10
Gain on settled commodity derivatives ($/Mcf)		0.03				0.31
Realized gas price, including derivatives ($/Mcf)		$	2.33			$	1.94
Oil Price:

FAQ

What were Southwestern Energy's Q1 2021 financial results?

In Q1 2021, Southwestern Energy reported a net income of $80 million and generated $347 million in net cash from operating activities.

What is Southwestern Energy's net cash flow for Q1 2021?

The net cash flow for Q1 2021 was $354 million, indicating solid cash management.

How much debt does Southwestern Energy have?

As of March 31, 2021, Southwestern Energy had total debt of $3.0 billion.

What was the leverage ratio for Southwestern Energy in Q1 2021?

The leverage ratio improved to 3.0x in Q1 2021.

What was the free cash flow generated by Southwestern Energy in Q1 2021?

Southwestern Energy generated $88 million in free cash flow during Q1 2021.