Southwestern Energy Announces Fourth Quarter and Full Year 2020 Results; Provides 2021 Guidance

Rhea-AI Summary

Southwestern Energy Company (NYSE: SWN) reported its 2020 financial results, highlighting a fourth-quarter net loss of $92 million but achieving $55 million in free cash flow.

The company completed the acquisition of Montage Resources, generating $30 million in synergies, and plans to use anticipated free cash flow of over $275 million in 2021 for debt reduction. 2021 guidance includes a capital investment of $850 to $925 million, with free cash flow potentially exceeding $375 million based on commodity prices. Southwestern reported proved reserves of 12.0 Tcfe at year-end 2020.

Positive

• Generated $55 million in free cash flow in Q4 2020.
• Completed the acquisition of Montage Resources, achieving $30 million in G&A synergies.
• Expected to generate over $275 million in free cash flow in 2021 for debt reduction.
• Achieved a 33% reduction in G&A expenses to $0.12 per Mcfe.
• Reported proved reserves of 12.0 Tcfe, including positive performance revisions.

Negative

• Recorded a net loss of $3.1 billion for 2020.
• Fourth quarter net loss of $92 million, impacted by non-cash impairments.
• Adjusted net income decreased to $221 million from $328 million YoY due to lower commodity prices.
• Weighted average realized price fell by 30% to $1.53 per Mcfe for 2020.

Southwestern Energy Company (NYSE: SWN) today announced financial and operating results for the fourth quarter and full year 2020 and issued 2021 guidance.

“In 2020, Southwestern Energy delivered on its commitments, exceeding expectations on all key metrics while navigating the uncertainties of a global pandemic and the associated challenging commodity price and operating environments. We have positioned the Company to deliver material free cash flow going forward through an enduring conviction to our returns-driven strategy. We delivered strong results across all of our strategic pillars, including an accretive acquisition, a meaningfully lower cost structure and an increased underlying asset value,” said Bill Way, Southwestern Energy President and Chief Executive Officer.

“Southwestern Energy has entered 2021 with greater scale and resilience, prepared to capture increasing value from more than one trillion cubic feet equivalent of expected annual production flowing into diverse and key markets. The free cash flow we expect to deliver this year will be used to reduce debt as we progress towards our goal of sustainable 2 times leverage. Consistent with our disciplined approach, any further improvement in cash flow from higher commodity prices will accelerate the delivery of that objective,” Way continued.

2020 Highlights

• Completed acquisition of Montage Resources, delivering over $30 million in G&A synergies, while maintaining balance sheet strength through associated capital market transactions;
• Delivered $55 million of free cash flow in the fourth quarter;
• Realized $90 million in additional expense reductions including a 33% decrease in G&A to $0.12 per Mcfe;
• Reported total production of 880 Bcfe; 3.05 Bcfe per day pro forma fourth quarter net production rate;
• Invested capital of $899 million and delivered 100 wells to sales;
• Generated $362 million of realized hedge gains, including $76 million from basis;
• Repurchased $107 million of senior notes for $72 million, a 33% discount;
• Enhanced liquidity with borrowing base increased to $2.0 billion following acquisition;
• Reduced well costs, averaged $637 per lateral foot in the second half of 2020; annual reduction of 19% to $670 per lateral foot with an average lateral length of 12,154 feet;
• Lowered Proved Developed F&D costs by 25% to $0.40 per Mcfe through well cost reductions and increased well productivity;
• Realized 26% of WTI on full year NGL prices, above the high end of guidance, and 36% of WTI in the fourth quarter, both associated with strengthening market fundamentals and NGL marketing optimization;
• Reported proved reserves of 12.0 Tcfe, including 1.4 Tcfe of positive performance revisions and 741 Bcfe of reserve additions, partially mitigating the impact of backward-looking SEC prices;
• Released our 7^th annual corporate responsibility report; key environmental highlights included top quartile GHG and methane intensity among AXPC peers; and
• Recorded the fifth consecutive year of freshwater neutrality; have now replaced over 14 billion gallons of freshwater in communities where we work and live.

2021 Guidance

The Company’s 2021 guidance is underpinned by the four pillars of its shareholder returns driven strategy: creating sustainable value, protecting financial strength, increasing scale and progressing best-in-class execution. The 2021 plan prioritizes free cash flow generation, disciplined investment at maintenance levels and debt reduction. Highlights are presented below; full guidance is available in the attachments to this press release.

• Guidance based on $2.77 per Mcf NYMEX Henry Hub and $50 per barrel WTI; expect to deliver free cash flow of over $275 million, which is expected to be utilized for debt reduction;
• Prices of $3.00 per Mcfe NYMEX Henry Hub and $58 per barrel WTI would increase free cash flow estimate to more than $375 million and results in achieving targeted leverage ratio of 2.0x;
• Capital investment of $850 to $925 million; expect 3.05 Bcfe per day average fourth quarter 2021 net production, flat with fourth quarter 2020;
• Estimate 75 to 90 wells to sales including 12 to 15 in dry gas Ohio Utica; approximately 50% of total capital investment in dry gas and 50% in liquids-rich acreage;
• Continued focus on costs, expect G&A per Mcfe to decrease 20%;
• Expected to reduce well costs another 10% to an average of approximately $600 per lateral foot for all wells to sales inclusive of Ohio Utica; expect average lateral length of 14,000 feet;
• Hedges in place for approximately 85%, 60% and 95% of expected natural gas, natural gas liquids and oil production, respectively; approximately 80% of natural gas hedges allow for participation in upside from improving prices;
• Protecting 75% of natural gas basis through physical and financial basis hedges and out of basin transportation portfolio; expect financial basis hedge gain of $0.07 to $0.09 per Mcf; and
• Continued commitment to corporate responsibility, investing in human capital and our communities, and developing energy responsibly with a focus on reduced air emissions and water conservation, including maintaining top quartile performance in the industry for GHG and methane intensity.

2020 Fourth Quarter and Full Year Results

FINANCIAL STATISTICS		For the three months ended								For the years ended
		December 31,								December 31,
(in millions)		2020				2019				2020				2019
Net income (loss)		$	(92	)		$	110			$	(3,112	)		$	891
Adjusted net income (non-GAAP)		$	119			$	99			$	221			$	328
Diluted earnings (loss) per share		$	(0.14	)		$	0.20			$	(5.42	)		$	1.65
Adjusted diluted earnings per share (non-GAAP)		$	0.18			$	0.18			$	0.38			$	0.61
Adjusted EBITDA (non-GAAP)		$	276			$	266			$	742			$	973
Net cash provided by operating activities		$	121			$	225			$	528			$	964
Net cash flow (non-GAAP)		$	249			$	246			$	662			$	913
Total capital investments (1)		$	194			$	207			$	899			$	1,140

1. Capital investments on the cash flow statement include decreases of $5 million and $18 million for the three months ended December 31, 2020 and 2019, respectively, and a decrease of $3 million and an increase of $34 million for the year ended December 31, 2020 and 2019, respectively, relating to the change in accrued expenditures between periods.

Fourth Quarter 2020 Financial Results

For the quarter ended December 31, 2020, Southwestern Energy recorded a net loss of $92 million, or ($0.14) per diluted share, including $335 million of non-cash impairments and a $134 million non-cash gain on unsettled mark to market derivatives. This compares to net income of $110 million, or $0.20 per diluted share in the fourth quarter of 2019.

Adjusted net income (non-GAAP), which excludes non-cash items noted above and other one-time charges, was $119 million or $0.18 per diluted share in 2020 and $99 million or $0.18 per share for the same period in 2019. The increase was primarily related to increased production volumes and a decrease in average unit operating costs, partially offset by wider natural gas basis differentials. For the fourth quarter of 2020, adjusted EBITDA (non-GAAP) was $276 million, net cash provided by operating activities was $121 million and net cash flow (non-GAAP) was $249 million, resulting in $55 million in free cash flow.

As indicated in the table below, fourth quarter 2020 weighted average realized price, including $0.37 per Mcfe of transportation expenses, was $1.93 per Mcfe before the impact of derivatives, down 9% compared to $2.12 per Mcfe in 2019. The decrease was primarily due to widened basis differentials in the Appalachia basin. Fourth quarter weighted average realized price before transportation expense was $2.30 per Mcfe.

The Company realized $52 million in cash-settled derivative gains during the fourth quarter of 2020, a $0.21 per Mcfe uplift. Included in the fourth quarter settled derivative gains is a $47 million gain related to natural gas basis hedges, which protected the Company from widening basis differentials.

Full Year 2020 Financial Results

The Company recorded a net loss of $3.1 billion, or ($5.42) per share, for the year ended December 31, 2020 compared to net income of $891 million, or $1.65 per share in 2019. In 2020, the Company recorded non-cash impairments of $2.8 billion and $138 million of non-cash loss on unsettled derivatives, and had an $818 million change in its deferred tax provision. Excluding these non-cash and other one-time items, adjusted net income for 2020 was $221 million, or $0.38 per share, compared to $328 million, or $0.61 per share, in 2019. The decrease in adjusted net income compared to prior year was primarily the result of a decrease in commodity prices, partially offset by a $182 million increase in settled derivatives impact, increased production volumes and decreased G&A and depreciation, depletion and amortization expense. In 2020, Adjusted EBITDA (non-GAAP) was $742 million, net cash provided by operating activities was $528 million and net cash flow (non-GAAP) was $662 million.

For the full year 2020, weighted average realized price, including $0.37 per Mcfe of transportation expense, was $1.53 per Mcfe before the impact of derivatives, a 30% decrease compared to $2.18 per Mcfe in 2019, due to decreased prices across all commodities. In 2020, the weighted average realized price before transportation expenses was $1.90 per Mcfe.

Cash-settled derivative gains totaled $362 million in 2020, a $0.41 per Mcfe uplift, bringing the weighted average realized price including the impact of derivatives to $1.94 per Mcfe in 2020, compared to $2.42 per Mcfe in 2019.

As of December 31, 2020, Southwestern Energy had total debt of $3.15 billion and a cash balance of $13 million. At the end of 2020, the Company had $700 million of borrowings under its $2.0 billion revolving credit facility with $233 million in outstanding letters of credit.

Realized Prices		For the three months ended								For the years ended
(includes transportation costs)		December 31,								December 31,
		2020				2019				2020				2019
Natural Gas Price:
NYMEX Henry Hub price ($/MMBtu) (1)		$	2.66			$	2.50			$	2.08			$	2.63
Discount to NYMEX (2)			(0.99	)			(0.69	)			(0.74	)			(0.65	)
Realized gas price per Mcf, excluding derivatives		$	1.67			$	1.81			$	1.34			$	1.98
Gain on settled financial basis derivatives ($/Mcf)			0.23				0.05				0.11				—
Gain (loss)on settled commodity derivatives ($/Mcf)			(0.09	)			0.26				0.25				0.20
Realized gas price per Mcf, including derivatives		$	1.81			$	2.12			$	1.70			$	2.18
Oil Price, per Bbl:
WTI oil price		$	42.66			$	56.96			$	39.40			$	57.03
Discount to WTI			(10.69	)			(10.59	)			(10.20	)			(10.13	)
Realized oil price, excluding derivatives		$	31.97			$	46.37			$	29.20			$	46.90
Realized oil price, including derivatives		$	52.27			$	49.16			$	46.91			$	49.56
NGL Price, per Bbl:
Realized NGL price, excluding derivatives		$	15.28			$	12.46			$	10.24			$	11.59
Realized NGL price, including derivatives		$	14.65			$	14.83			$	11.15			$	13.64
Percentage of WTI, excluding derivatives			36	%			22	%			26	%			20	%
Total Weighted Average Realized Price:
Excluding derivatives ($/Mcfe)		$	1.93			$	2.12			$	1.53			$	2.18
Including derivatives ($/Mcfe)		$	2.14			$	2.44			$	1.94			$	2.42

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 Review

Total production for the quarter ended December 31, 2020 was 257 Bcfe, comprised of 81% natural gas, 16% NGLs and 3% oil. Included in the fourth quarter 2020 results was 49 days of production from the acquired Montage Resources properties. Production totaled 880 Bcfe for the year ended December 31, 2020.

Capital investments in the fourth quarter of 2020 were $194 million, bringing full year capital investment to $899 million. The Company brought 100 wells to sales, drilled 98 wells and completed 96 wells during the year.

Operating Statistics		For the three months ended										For the years ended
		December 31,										December 31,
		2020					2019					2020				2019
Production
Gas production (Bcf)			207					160					694				609
Oil production (MBbls)			1,365					1,486					5,141				4,696
NGL production (MBbls)			7,001					6,609					25,927				23,620
Total production (Bcfe)			257					208					880				778
Average unit costs per Mcfe
Lease operating expenses		$	0.92				$	0.94				$	0.93			$	0.92
General & administrative expenses		$	0.11	(1)			$	0.19	(2)			$	0.12	(1)		$	0.18	(2)
Taxes, other than income taxes		$	0.06				$	0.05				$	0.06			$	0.08
Full cost pool amortization		$	0.33				$	0.54				$	0.38			$	0.56

1. Excludes $38 million and $41 million in Montage acquisition-related expenses and $4 million and $16 million in restructuring charges for the three months and year ended December 31, 2020, respectively. Excludes $1 million of legal settlement charges for the year ended December 31, 2020.
2. Excludes restructuring charges of $2 million and $11 million and legal settlement charges of $3 million and $6 million for the three months and year ended December 31, 2019, respectively. Excludes a $6 million residual value guarantee short-fall payment to the previous lessor of our headquarters building for the year ended December 31, 2019.

Southwest Appalachia – In the fourth quarter, total production was 132 Bcfe, with liquids production of 91 MBbls per day, including 49 days of production from properties previously owned by Montage Resources. The Company drilled 10 wells, completed 11 wells and placed 16 wells to sales, excluding four wells placed to sales that were drilled and completed by Montage Resources. The average lateral length of wells to sales was 15,477 feet, and included five wells in the rich area and 11 wells in the super rich area. All five of the rich wells were online for at least 30 days and had an average 30-day rate of 23.2 MMcfe per day, while only six of the super rich wells were online for at least 30 days and had an average 30-day rate of 9.8 MMcfe per day, including 72% liquids.

In 2020, Southwest Appalachia’s total production was 407 Bcfe, including 85 MBbls per day of liquids. The Company drilled 49 wells, completed 52 wells and placed 55 wells to sales during 2020, with 14 drilled uncompleted wells as of December 31, 2020.

Northeast Appalachia – In the fourth quarter, total production was 125 Bcf. There were four wells drilled, seven wells completed and 11 wells placed to sales in the quarter with an average lateral length of 14,667 feet. Of the 11 wells to sales, eight wells were online for at least 30 days and had an average 30-day rate of 15.6 MMcf per day.

Production for the year was 473 Bcf in Northeast Appalachia. The Company drilled 49 wells, completed 44 wells and brought 45 wells to sales during 2020, with 10 drilled uncompleted wells at year-end.

E&P Division Results		For the three months ended December 31, 2020							For the year ended December 31, 2020
		Northeast			Southwest				Northeast			Southwest
Gas production (Bcf)			125			82				473			221
Liquids production
Oil (MBbls)			—			1,360				—			5,124
NGL (MBbls)			—			6,999				—			25,923
Production (Bcfe)			125			132				473			407
Gross operated production December 2020 (MMcfe/d)			1,639			2,745
Net operated production December 2020 (MMcfe/d)			1,340			1,702
Capital investments ($ in millions)
Drilling and completions, including workovers		$	53		$	85			$	321		$	360
Land acquisition and other			4			7				18			29
Capitalized interest and expense			6			32				23			121
Total capital investments		$	63		$	124			$	362		$	510
Gross operated well activity summary
Drilled			4			10				49			49
Completed			7			11				44			52
Wells to sales			11			16	(1)			45			55	(1)
Average well cost on wells to sales (in millions)		$	7.6		$	10.7	(1)		$	6.8		$	9.3	(1)
Average lateral length (in ft)			14,667			15,477	(1)			10,765			13,265	(1)
Total weighted average realized price per Mcfe, excluding derivatives		$	1.65		$	2.20			$	1.37		$	1.71

1. Excludes 4 wells placed to sales during the fourth quarter of 2020 that were drilled and completed by Montage Resources.

2020 Proved Reserves

The Company reported total proved reserves of 12.0 Tcfe at year-end 2020, compared to 12.7 Tcfe in 2019. Reserves consisted of 76% natural gas and 24% liquids. During 2020, the Company reported 1.4 Tcfe of positive performance revisions related to increased well performance and lower operating costs, 741 Bcfe of reserve additions, and also acquired 2.4 Tcfe of reserves related to the acquisition of Montage Resources. The Company incurred 4.4 Tcfe of downward price revisions related to significantly reduced trailing 12-month SEC prices on all commodities.

Lower SEC prices, which were $1.98 per Mcf NYMEX Henry Hub, $39.57 per Bbl WTI and $10.27 per Bbl NGLs, resulted in a PV-10 of $1.85 billion. Using 2021 strip prices as of January 4, 2021, which were $2.70 per Mcf NYMEX Henry Hub, $47.67 per Bbl WTI and $11.82 per Bbl NGLs, the PV-10 of the reported year-end 2020 reserves would increase to $5.85 billion, without consideration of any PV-10 increase from the expected higher reserve volumes at those prices.

2020 Proved Reserves by Commodity		Natural Gas			Oil			NGL			Total
		(Bcf)			(MBbls)			(MBbls)			(Bcfe)
Proved reserves, beginning of year		8,630			72,925			608,761			12,721
Revisions of previous estimates due to price		(2,143	)		(32,507	)		(338,639	)		(4,370	)
Revisions of previous estimates other than price		763			3,816			106,444			1,424
Extensions, discoveries and other additions		714			135			4,371			741
Production		(694	)		(5,141	)		(25,927	)		(880	)
Acquisition of reserves in place		1,911			18,796			55,141			2,354
Disposition of reserves in place		—			—			—			—
Proved reserves, end of year		9,181			58,024			410,151			11,990
Proved developed reserves:
Beginning of year		4,906			26,124			226,271			6,421
End of year		6,342			33,563			276,548			8,203
2020 Proved Reserves by Division (Bcfe)		Appalachia
		Northeast			Southwest			Other (1)			Total
Proved reserves, beginning of year		4,837			7,883			1			12,721
Revisions of previous estimates due to price		(389	)		(3,981	)		—			(4,370	)
Revisions of previous estimates other than price		46			1,378			—			1,424
Extensions, discoveries and other additions		672			69			—			741
Production		(473	)		(407	)		—			(880	)
Acquisition of reserves in place		223			2,131			—			2,354
Disposition of reserves in place		—			—			—			—
Proved reserves, end of year		4,916			7,073			1			11,990

1. Other includes properties outside of the Appalachian Basin.

The Company’s 2020 proved developed finding and development (PD F&D) costs decreased 25% from the prior year to $0.40 per Mcfe, when excluding the impact of capitalized interest and portions of capitalized G&A costs in accordance with the full cost method of accounting.

Total Company Proved Developed Finding and Development															Three-Year
		12 Months Ended December 31,													Total
Total PD Adds (Bcfe):		2020					2019				2018				2020
New PD adds			267					191				177				635
PUD conversions			1,631		(2)			1,441				1,139				4,211
Total PD Adds			1,898					1,632				1,316				4,846
Costs Incurred (in millions):
Unproved property acquisition costs		$	124				$	162			$	164			$	450
Exploration costs			—					2				5				7
Development costs			812					936				1,014				2,762
Capitalized Costs Incurred		$	936				$	1,100			$	1,183			$	3,219
Subtract (in millions):
Proved property acquisition costs		$	—				$	—			$	—			$	—
Unproved property acquisition costs			(124	)				(162	)			(164	)			(450	)
Capitalized interest and expense associated with development and exploration (1)			(60	)				(81	)			(93	)			(234	)
PD Costs Incurred		$	752				$	857			$	926			$	2,535
PD F&D		$	0.40				$	0.53			$	0.70			$	0.52

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 144 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, February 26, 2021 at 9:30 a.m. Central to discuss fourth quarter and fiscal year 2020 results. To participate, dial US toll-free 877-883-0383, or international 412-902-6506 and enter access code 3652399. 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 10152130. The replay will be available until March 26, 2021.

Due to the inclement weather last week, the Company plans to file its Annual Report on Form 10-K on March 1, 2021.

About Southwestern Energy

Southwestern Energy Company is an independent energy company engaged in natural gas, natural gas liquids and oil exploration, development, production and marketing. For additional information, visit our website www.swn.com.

Forward Looking Statement

Certain statements and information herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” “attempt,” “appears,” “forecast,” “outlook,” “estimate,” “project,” “potential,” “may,” “will,” “are likely,” “guidance,” “goal,” “model,” “target,” “budget” and other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. Statements may be forward looking even in the absence of these particular words. Examples of forward-looking statements include, but are not limited to, statements regarding the financial position, business strategy, production, reserve growth and other plans and objectives for our future operations, and generation of free cash flow. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. The forward-looking statements contained in this document are largely based on our expectations for the future, which reflect certain estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions, operating trends, and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. As such, management’s assumptions about future events may prove to be inaccurate. For a more detailed description of the risks and uncertainties involved, see “Risk Factors” in our most recently filed Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other SEC filings. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events, changes in circumstances, or otherwise. These cautionary statements qualify all forward-looking statements attributable to us, or persons acting on our behalf. Management cautions you that the forward looking statements contained herein are not guarantees of future performance, and we cannot assure you that such statements will be realized or that the events and circumstances they describe will occur. Factors that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements herein include, but are not limited to: the timing and extent of changes in market conditions and prices for natural gas, oil and natural gas liquids (“NGLs”), including regional basis differentials and the impact of reduced demand for our production and products in which our production is a component due to governmental and societal actions taken in response to the COVID-19 pandemic; our ability to fund our planned capital investments; a change in our credit rating, an increase in interest rates and any adverse impacts from the discontinuation of the London Interbank Offered Rate; the extent to which lower commodity prices impact our ability to service or refinance our existing debt; the impact of volatility in the financial markets or other global economic factors, including the impact of COVID-19; difficulties in appropriately allocating capital and resources among our strategic opportunities; the timing and extent of our success in discovering, developing, producing and estimating reserves; our ability to maintain leases that may expire if production is not established or profitably maintained; our ability to realize the expected benefits from the acquisition of Montage Resources Corporation (“Montage Acquisition”); costs in connection with the Montage Acquisition; integration of operations and results subsequent to the Montage Acquisition; our ability to transport our production to the most favorable markets or at all; the impact of government regulation, including changes in law, the ability to obtain and maintain permits, any increase in severance or similar taxes, and legislation or regulation relating to hydraulic fracturing, climate and over-the-counter derivatives; the impact of the adverse outcome of any material litigation against us or judicial decisions that affect us or our industry generally; the effects of weather; increased competition; the financial impact of accounting regulations and critical accounting policies; the comparative cost of alternative fuels; credit risk relating to the risk of loss as a result of non-performance by our counterparties; and any other factors listed in the reports we have filed and may file with the SEC that are incorporated by reference herein. All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.

2021 Guidance

PRODUCTION

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter (1)

Total Year

Natural Gas (Bcf)

211 – 216

217 – 223

219 – 226

226 – 233

873 – 898

Oil/Condensate (MBbls)

1,575 – 1,675

1,890 – 2,015

1,710 – 1,835

1,500 – 1,625

6,675 – 7,150

NGLs (MBbls)

7,425 – 7,700

7,575 – 7,850

7,445 – 7,720

6,900 – 7,175

29,345 – 30,445

Total Production (Bcfe)

265 – 272

274 – 282

274 – 283

276 – 286

1,089 – 1,123

Total Production (Bcfe/d)

2.94 – 3.02

3.01 – 3.10

2.98 – 3.08

3.00 – 3.11

2.98 – 3.08

CAPITAL BY DIVISION (in millions)

Northeast Appalachia

$220 – $240

Southwest Appalachia

$475 – $500

Other

$20 – $30

Capitalized interest

$80 – $90

Capitalized expense

$55 – $65

Total Capital Investments

$850 – $925

PRODUCTION BY DIVISION (Bcfe)

Northeast Appalachia

475 – 489

Southwest Appalachia

614 – 634

PRICING

Natural gas discount to NYMEX including transportation (2)

$0.69 – $0.84 per Mcf

Oil discount to West Texas Intermediate (WTI) including transportation

$9.00 – $11.00 per Bbl

Natural gas liquids realization as a % of WTI including transportation (3)

30% – 38%

EXPENSES

Lease operating expenses

$0.92 – $0.96 per Mcfe

General & administrative expense

$0.08 – $0.12 per Mcfe

Taxes, other than income taxes

$0.06 – $0.10 per Mcfe

Interest expense - net of capitalization

$110 – $120 MM

Income tax rate (~100% deferred)

23.2%

WELL COUNT

Drilled

Completed

Wells To Sales

Ending DUC Inventory

Northeast Appalachia

21 – 26

27 – 32

27 – 32

2 – 7

Southwest Appalachia (4)

49 – 59

48 – 58

48 – 58

13 – 23

Total Well Count

70 – 85

75 – 90

75 – 90

15 – 30

1. NGL guidance for the fourth quarter assumes 4 MBbls per day of incremental ethane rejection based on strip prices at the time of guidance. NGL volumes may vary based on economic decisions to maximize value of the ethane barrel as a liquid or in its gas form (ethane recovery/rejection).
2. Based on $2.77 per Mcf NYMEX Henry Hub. Includes impact of transportation costs and $0.07 — $0.09 per Mcf gain from financial basis hedges.
3. Based on $50 per Bbl WTI.
4. Includes Ohio Utica.

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
		For the three months ended								For the years ended
		December 31,								December 31,
(in millions, except share/per share amounts)		2020				2019				2020				2019
Operating Revenues:
Gas sales		$	356			$	298			$	967			$	1,241
Oil sales		43				70				154				223
NGL sales		107				83				265				274
Marketing		272				293				917				1,297
Other		1				1				5				3
		779				745				2,308				3,038
Operating Costs and Expenses:
Marketing purchases		271				298				946				1,320
Operating expenses		236				197				813				720
General and administrative expenses		32				47				121				166
Montage merger-related expenses		38				—				41				—
Restructuring charges		4				2				16				11
(Gain) loss on sale of operating assets		—				(1		)		—				2
Depreciation, depletion and amortization		90				119				357				471
Impairments		335				8				2,830				16
Taxes, other than income taxes		17				11				55				62
		1,023				681				5,179				2,768
Operating Income (Loss)		(244		)		64				(2,871		)		270
Interest Expense:
Interest on debt		48				41				171				166
Other interest charges		4				3				11				8
Interest capitalized		(21		)		(25		)		(88		)		(109		)
		31				19				94				65
Gain on Derivatives		186				54				224				274
Gain on Early Extinguishment of Debt		—				1				35				8
Other Income (Loss), Net		(2		)		—				1				(7		)
Income (Loss) Before Income Taxes		(91		)		100				(2,705		)		480
Provision (Benefit) for Income Taxes:
Current		—				(1		)		(2		)		(2		)
Deferred		1				(9		)		409				(409		)
		1				(10		)		407				(411		)
Net Income (Loss)		$	(92	)		$	110			$	(3,112	)		$	891
Earnings (Loss) Per Common Share
Basic		$	(0.14	)		$	0.20			$	(5.42	)		$	1.65
Diluted		$	(0.14	)		$	0.20			$	(5.42	)		$	1.65
Weighted Average Common Shares Outstanding:
Basic		641,576,267				539,434,877				573,889,502				539,345,343
Diluted		641,576,267				540,574,288				573,889,502				540,382,914

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
		December 31,				December 31,
		2020				2019
ASSETS		(in millions)
Current assets:
Cash and cash equivalents		$	13				$	5
Accounts receivable, net		368					345
Derivative assets		241					278
Other current assets		49					51
Total current assets		671					679
Natural gas and oil properties, using the full cost method		27,261					25,250
Other		523					520
Less: Accumulated depreciation, depletion and amortization		(23,673		)			(20,503		)
Total property and equipment, net		4,111					5,267
Operating lease assets		163					159
Deferred tax assets		—					407
Other long-term assets		215					205
Total long-term assets		378					771
TOTAL ASSETS		$	5,160				$	6,717
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	573				$	525
Taxes payable		74					59
Interest payable		58					51
Derivative liabilities		245					125
Current operating lease liabilities		42					34
Other current liabilities		20					54
Total current liabilities		1,012					848
Long-term debt		3,150					2,242
Long-term operating lease liabilities		117					119
Long-term derivative liabilities		183					111
Pension and other postretirement liabilities		45					43
Other long-term liabilities		156					108
Total long-term liabilities		3,651					2,623
Commitments and contingencies
Equity:
Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 718,795,700 shares as of December 31, 2020 and 585,555,923 shares as of December 31, 2019		7					6
Additional paid-in capital		5,093					4,726
Accumulated deficit		(4,363		)			(1,251		)
Accumulated other comprehensive loss		(38		)			(33		)
Common stock in treasury, 44,353,224 shares as of December 31, 2020 and 2019		(202		)			(202		)
Total equity		497					3,246
TOTAL LIABILITIES AND EQUITY		$	5,160				$	6,717

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		For the years ended
		December 31,
(in millions)		2020				2019
Cash Flows From Operating Activities:
Net income (loss)		$	(3,112	)		$	891
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		357				471
Amortization of debt issuance costs		9				8
Impairments		2,830				16
Deferred income taxes		409				(409		)
(Gain) loss on derivatives, unsettled		138				(94		)
Stock-based compensation		3				8
Gain on early extinguishment of debt		(35		)		(8		)
Loss on sale of assets		—				2
Other		6				10
Change in assets and liabilities
Accounts receivable		50				234
Accounts payable		(131		)		(141		)
Taxes payable		(7		)		—
Interest payable		(11		)		—
Inventories		2				(7		)
Other assets and liabilities		20				(17		)
Net cash provided by operating activities		528				964
Cash Flows From Investing Activities:
Capital investments		(896		)		(1,099		)
Proceeds from sale of property and equipment		12				54
Cash acquired in Montage merger		3				—
Net cash used in investing activities		(881		)		(1,045		)
Cash Flows From Financing Activities:
Payments on current portion of long-term debt		—				(52		)
Payments on long-term debt		(72		)		(54		)
Payments on revolving credit facility		(1,671		)		(532		)
Borrowings under revolving credit facility		2,337				566
Change in bank drafts outstanding		1				(19		)
Repayment of Montage revolving credit facility		(200		)		—
Repayment of Montage senior notes		(522		)		—
Proceeds from issuance of long-term debt		350				—
Debt issuance costs and other financing costs		(10		)		(3		)
Proceeds from issuance of common stock		152				—
Purchase of treasury stock		—				(21		)
Cash paid for tax withholding		(4		)		(1		)
Other		—				1
Net cash provided by (used in) financing activities		361				(115		)
Increase (decrease) in cash and cash equivalents		8				(196		)
Cash and cash equivalents at beginning of year		5				201
Cash and cash equivalents at end of year		$	13			$	5

Hedging Summary

A detailed breakdown of the Company’s derivative financial instruments and financial basis positions as of February 23, 2021, including 2021 derivative contracts that have settled, is shown below. Please refer to our annual report on Form 10-K to be filed with the Securities and Exchange Commission for complete information on the Company’s commodity, basis and interest rate protection.

				Weighted Average Price per MMBtu
		Volume (Bcf)		Swaps			Sold Puts			Purchased Puts			Sold Calls
Natural gas
2021
Fixed price swaps		203		$	2.80		$	—		$	—		$	—
Two-way costless collars		255			—			—			2.57			2.94
Three-way costless collars		303			—			2.16			2.50			2.86
Total		761
2022
Fixed price swaps		112		$	2.68		$	—		$	—		$	—
Two-way costless collars		64			—			—			2.52			3.03
Three-way costless collars		278			—			2.06			2.50			2.97
Total		454
2023
Three-way costless collars		103		$	—		$	2.05		$	2.46		$	3.01

Natural gas financial basis positions		Volume			Basis Differential
		(Bcf)			($/MMBtu)
Q1 2021
Dominion South		16			$	(0.42	)
TCO		5			$	(0.31	)
TETCO M3		21			$	1.95
Total		42			$	0.80
Q2 2021
Dominion South		35			$	(0.58	)
TCO		28			$	(0.51	)
TETCO M3		24			$	(0.44	)
Total		87			$	(0.52	)
Q3 2021
Dominion South		35			$	(0.62	)
TCO		28			$	(0.51	)
TETCO M3		24			$	(0.44	)
Total		87			$	(0.53	)
Q4 2021
Dominion South		23			$	(0.58	)
TCO		13			$	(0.47	)
TETCO M3		17			$	(0.00	)
Total		53			$	(0.37	)
2022
Dominion South		94			$	(0.56	)
TCO		35			$	(0.43	)
TETCO M3		53			$	(0.10	)
Total		182			$	(0.40	)

				Weighted Average Price per Bbl
		Volume (MBbls)		Swaps			Sold Puts			Purchased Puts			Sold Calls
Oil
2021
Fixed price swaps		4,887		$	48.59		$	—		$	—		$	—
Two-way costless collars		201			—			—			37.73			45.68
Three-way costless collars		1,543			—			37.42			47.22			52.86
Total		6,631
2022
Fixed price swaps		1,470		$	47.34		$	—		$	—		$	—
Three-way costless collars		1,380			—			39.89			50.23			57.05
Total		2,850
2023
Three-way costless collars		878		$	—		$	33.52		$	43.52		$	53.41
Ethane
2021
Fixed price swaps		5,976		$	7.16		$	—		$	—		$	—
Two-way costless collars		584			—			—			7.14			10.40
Total		6,560
2022
Fixed price swaps		1,758		$	8.68		$	—		$	—		$	—
Two-way costless collars		135			—			—			7.56			9.66
Total		1,893
Propane
2021
Fixed price swaps		7,149		$	20.72		$	—		$	—		$	—
2022
Fixed price swaps		2,422		$	20.98		$	—		$	—		$	—
Three-way costless collars		305			—			16.80			21.00			31.92
Total		2,727
Normal Butane
2021
Fixed price swaps		2,092		$	25.44		$	—		$	—		$	—
2022
Fixed price swaps		667		$	22.77		$	—		$	—		$	—
Natural Gasoline
2021
Fixed price swaps		2,021		$	37.95		$	—		$	—		$	—
2022
Fixed price swaps		765		$	39.48		$	—		$	—		$	—

Explanation and Reconciliation of Non-GAAP Financial Measures

The Company reports its financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, management believes certain non-GAAP performance measures may provide financial statement users with additional meaningful comparisons between current results, the results of its peers and of prior periods.

One such non-GAAP financial measure is net cash flow. Management presents this measure because (i) it is accepted as an indicator of an oil and gas exploration and production company’s ability to internally fund exploration and development activities and to service or incur additional debt, (ii) changes in operating assets and liabilities relate to the timing of cash receipts and disbursements which the Company may not control and (iii) changes in operating assets and liabilities may not relate to the period in which the operating activities occurred.

Additional non-GAAP financial measures the Company may present from time to time are net debt, adjusted net income, adjusted diluted earnings per share and adjusted EBITDA, all which exclude certain charges or amounts. Management presents these measures because (i) they are consistent with the manner in which the Company’s position and performance are measured relative to the position and performance of its peers, (ii) these measures are more comparable to earnings estimates provided by securities analysts, and (iii) charges or amounts excluded cannot be reasonably estimated and guidance provided by the Company excludes information regarding these types of items. These adjusted amounts are not a measure of financial performance under GAAP.

		3 Months Ended December 31,								12 Months Ended December 31,
		2020				2019				2020				2019
		(in millions)
Adjusted net income:
Net income (loss)		$	(92	)		$	110			$	(3,112	)		$	891
Add back (deduct):
Montage merger-related expenses			38				—				41				—
Restructuring charges			4				2				16				11
Impairments			335				8				2,830				16
(Gain) loss on sale of assets			—				(1	)			—				2
(Gain) loss on derivatives, unsettled			(134	)			14				138				(94	)
Gain on early extinguishment of debt			—				(1	)			(35	)			(8	)
Legal settlement charges			—				3				1				6
Non-cash pension settlement loss			—				1				—				6
Other loss (1)			2				—				2				10
Adjustments due to discrete tax items (2)			22				(32	)			1,042				(526	)
Tax impact on adjustments			(56	)			(5	)			(702	)			14
Adjusted net income		$	119			$	99			$	221			$	328

1. Includes a $6 million residual value guarantee short-fall payment to the previous lessor of our headquarters building for the twelve months ended December 31, 2019.
2. 2020 primarily relates to the recognition of a valuation allowance. 2019 primarily relates to the release of the valuation allowance. The Company expects its 2020 income tax rate to be 23.2% before the impacts of any valuation allowance.

		3 Months Ended December 31,								12 Months Ended December 31,
		2020				2019				2020				2019
Adjusted diluted earnings per share:
Diluted earnings per share		$	(0.14	)		$	0.20			$	(5.42	)		$	1.65
Add back (deduct):
Montage merger-related expenses			0.06				—				0.07				—
Restructuring charges			0.01				0.00				0.03				0.02
Impairments			0.52				0.01				4.91				0.03
(Gain) loss on sale of assets			—				(0.00	)			—				0.00
(Gain) loss on derivatives, unsettled			(0.21	)			0.03				0.25				(0.17	)
Gain on early extinguishment of debt			—				(0.00	)			(0.06	)			(0.01	)
Legal settlement charges			—				0.01				0.00				0.01
Non-cash pension settlement loss			—				0.00				—				0.01
Other loss (1)			0.00				—				0.00				0.02
Adjustments due to discrete tax items (2)			0.03				(0.06	)			1.81				(0.97	)
Tax impact on adjustments			(0.09	)			(0.01	)			(1.21	)			0.02
Adjusted diluted earnings per share		$	0.18			$	0.18			$	0.38			$	0.61

1. Includes a $6 million residual value guarantee short-fall payment to the previous lessor of our headquarters building for the twelve months ended December 31, 2019.
2. 2020 primarily relates to the recognition of a valuation allowance. 2019 primarily relates to the release of the valuation allowance. The Company expects its 2020 income tax rate to be 23.2% before the impacts of any valuation allowance.

		3 Months Ended December 31,						12 Months Ended December 31,
		2020			2019			2020			2019
		(in millions)
Net cash flow:
Net cash provided by operating activities		$	121		$	225		$	528		$	964
Add back (deduct):
Changes in operating assets and liabilities			86			19			77			(69	)
Montage merger-related expenses			38			—			41			—
Restructuring charges			4			2			16			11
Other loss (1)			—			—			—			7
Net cash flow		$	249		$	246		$	662		$	913

1. Includes a $6 million residual value guarantee short-fall payment to the previous lessor of our headquarters building for the twelve months ended December 31, 2019.

		3 Months Ended December 31,								12 Months Ended December 31,
		2020				2019				2020				2019
		(in millions)
Adjusted EBITDA:
Net income (loss)		$	(92	)		$	110			$	(3,112	)		$	891
Add back (deduct):
Interest expense			31				19				94				65
Provision (benefit) for income taxes			1				(10	)			407				(411	)
Depreciation, depletion and amortization			90				119				357				471
Montage merger-related expenses			38				—				41				—
Restructuring charges			4				2				16				11
Impairments			335				8				2,830				16
(Gain) loss on sale of assets			—				(1	)			—				2
(Gain) loss on derivatives, unsettled			(134	)			14				138				(94	)
Gain on early extinguishment of debt			—				(1	)			(35	)			(8	)
Legal settlement charges			—				3				1				6
Non-cash pension settlement loss			—				1				—				6
Other loss (1)			2				—				2				10
Stock-based compensation expense			1				2				3				8
Adjusted EBITDA		$	276			$	266			$	742			$	973

1. Includes a $6 million residual value guarantee short-fall payment to the previous lessor of our headquarters building for the twelve months ended December 31, 2019.

		December 31, 2020
Net debt:		(in millions)
Total debt (1)		$	3,171
Subtract:
Cash and cash equivalents		(13		)
Net debt		$	3,158

1. Does not include $21 million of unamortized debt discount and issuance expense.

		December 31, 2020
Net debt to EBITDA:		(in millions)
Net debt		$	3,158
Adjusted EBITDA (1)		$	900
Net debt to EBITDA		3.5x

1. Adjusted EBITDA for the twelve months ended December 31, 2020, including $158 million of Adjusted EBITDA related to Montage Resources prior to the close of the acquisition.

 

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FAQ

What were Southwestern Energy's financial results for Q4 2020?

Southwestern Energy reported a net loss of $92 million in Q4 2020 but generated $55 million in free cash flow.

What is Southwestern Energy's expected free cash flow for 2021?

The company expects to generate over $275 million in free cash flow for 2021, primarily for debt reduction.

What were the highlights of Southwestern Energy's acquisition of Montage Resources?

The acquisition of Montage Resources generated over $30 million in G&A synergies.

What is the proved reserves figure for Southwestern Energy as of year-end 2020?

As of December 31, 2020, Southwestern Energy reported proved reserves of 12.0 Tcfe.

How did Southwestern Energy's adjusted net income change from 2019 to 2020?

Adjusted net income decreased from $328 million in 2019 to $221 million in 2020.