Southwestern Energy Announces Third Quarter 2021 Results
Southwestern Energy Company (NYSE: SWN) reported financial results for Q3 2021, showcasing significant operational growth with net cash provided by operating activities at $213 million and free cash flow of $105 million. The company achieved a total production of 310 Bcfe and established operations in the Haynesville basin post-acquisition of Indigo Natural Resources. Despite a net loss of $1.86 billion largely due to derivative losses, adjusted net income rose to $188 million, driven by a 40% increase in realized prices. The leverage ratio improved to 2.2x, with expectations to reduce it further by year-end.
- Generated $213 million net cash provided by operating activities.
- Achieved total production of 310 Bcfe, with significant contributions from Haynesville operations.
- Free cash flow reached $105 million, with an expectation to exceed $475 million for the full year.
- Improved leverage ratio to 2.2x, with a target of approximately 2x by year-end.
- Credit rating upgraded to BB by S&P.
- Adjusted net income grew to $188 million, up from $47 million year-over-year.
- Reported a net loss of $1.86 billion, significantly higher than prior year losses.
- Loss on unsettled derivatives amounted to $2.011 billion, offsetting operational gains.
Creating sustainable value in responsible natural gas development from disciplined execution, growing scale and financial strength
- Established scale positions in the two premier US natural gas basins by expanding operations into the Haynesville with the closing and integration of Indigo Natural Resources;
-
Generated
net cash provided by operating activities,$213 million net cash flow (non-GAAP), and$396 million of free cash flow (non-GAAP);$105 million
- On track to exceed in free cash flow in 2021$475 million - Improved leverage ratio by 0.4x to 2.2x and expect to reduce leverage to approximately 2x by year-end;
-
Issued
of$1.2 billion 5.375% senior notes due 2030, extending maturity runway and lowering cost of debt; received credit rating upgrade to BB by S&P; - Reported total production of 310 Bcfe, or 3.4 Bcfe per day, including one month of Haynesville production; total 2.7 Bcf per day of gas and 106 MBbls per day of liquids;
-
Achieved record
SEC proved reserves (unaudited) of approximately 18.5 Tcfe; and -
Received weighted average realized price (excluding impact of transportation and hedges) of
per Mcfe.$4.08
“Disciplined execution and financial strength defined the quarter for
Finance Update
The Company prioritizes protecting its financial strength and will continue the allocation of free cash flow to debt reduction and disciplined risk management. Given the current commodity price outlook and successful recent strategic actions, the Company has reduced its sustainable leverage target from 2x to a target range of 1.0x to 1.5x.
Within its disciplined risk management policy, the Company will target a level of hedges that protects the funding for capital investments and other financial priorities, including debt repayment. This approach to hedging safeguards the Company’s financial strength while also retaining meaningful exposure to potential commodity price upside.
Financial Results
|
|
For the three months ended |
|
For the nine months ended |
||||||||||||
|
|
|
|
|
||||||||||||
(in millions) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Net loss |
|
$ |
(1,857 |
) |
|
$ |
(593 |
) |
|
$ |
(2,386 |
) |
|
$ |
(3,020 |
) |
Adjusted net income (non-GAAP) |
|
$ |
188 |
|
|
$ |
47 |
|
|
$ |
513 |
|
|
$ |
102 |
|
Diluted loss per share |
|
$ |
(2.36 |
) |
|
$ |
(1.04 |
) |
|
$ |
(3.34 |
) |
|
$ |
(5.48 |
) |
Adjusted diluted earnings per share (non-GAAP) |
|
$ |
0.24 |
|
|
$ |
0.08 |
|
|
$ |
0.72 |
|
|
$ |
0.18 |
|
Adjusted EBITDA (non-GAAP) |
|
$ |
426 |
|
|
$ |
154 |
|
|
$ |
1,108 |
|
|
$ |
466 |
|
Net cash provided by operating activities |
|
$ |
213 |
|
|
$ |
153 |
|
|
$ |
830 |
|
|
$ |
407 |
|
Net cash flow (non-GAAP) |
|
$ |
396 |
|
|
$ |
135 |
|
|
$ |
1,022 |
|
|
$ |
413 |
|
Total capital investments (1) |
|
$ |
291 |
|
|
$ |
223 |
|
|
$ |
816 |
|
|
$ |
705 |
|
(1) |
Capital investments include an increase of |
For the quarter ended
Adjusted net income was
As indicated in the table below, third quarter 2021 weighted average realized price, including
As of
During the quarter, the Company issued
Realized Prices |
|
For the three months ended |
|
For the nine months ended |
||||||||||||
(includes transportation costs) |
|
|
|
|
||||||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Natural Gas Price: |
|
|
|
|
|
|
|
|
||||||||
NYMEX Henry Hub price ($/MMBtu) (1) |
|
$ |
4.01 |
|
|
$ |
1.98 |
|
|
$ |
3.18 |
|
|
$ |
1.88 |
|
Discount to NYMEX (2) |
|
(0.83 |
) |
|
(0.89 |
) |
|
(0.74 |
) |
|
(0.68 |
) |
||||
Realized gas price per Mcf, excluding derivatives |
|
$ |
3.18 |
|
|
$ |
1.09 |
|
|
$ |
2.44 |
|
|
$ |
1.20 |
|
Gain on settled financial basis derivatives ($/Mcf) |
|
0.11 |
|
|
0.12 |
|
|
0.11 |
|
|
0.06 |
|
||||
Gain (loss) on settled commodity derivatives ($/Mcf) |
|
(1.14 |
) |
|
0.31 |
|
|
(0.43 |
) |
|
0.39 |
|
||||
Realized gas price, including derivatives ($/Mcf) |
|
$ |
2.15 |
|
|
$ |
1.52 |
|
|
$ |
2.12 |
|
|
$ |
1.65 |
|
Oil Price: |
|
|
|
|
|
|
|
|
||||||||
WTI oil price ($/Bbl) (3) |
|
$ |
70.56 |
|
|
$ |
40.93 |
|
|
$ |
64.82 |
|
|
$ |
38.32 |
|
Discount to WTI |
|
(8.24 |
) |
|
(11.47 |
) |
|
(8.71 |
) |
|
(10.12 |
) |
||||
Realized oil price, excluding derivatives ($/Bbl) |
|
$ |
62.32 |
|
|
$ |
29.46 |
|
|
$ |
56.11 |
|
|
$ |
28.20 |
|
Realized oil price, including derivatives ($/Bbl) |
|
$ |
44.83 |
|
|
$ |
46.69 |
|
|
$ |
40.06 |
|
|
$ |
44.97 |
|
NGL Price: |
|
|
|
|
|
|
|
|
||||||||
Realized NGL price, excluding derivatives ($/Bbl) |
|
$ |
31.76 |
|
|
$ |
10.34 |
|
|
$ |
26.05 |
|
|
$ |
8.37 |
|
Realized NGL price, including derivatives ($/Bbl) |
|
$ |
19.31 |
|
|
$ |
10.50 |
|
|
$ |
17.13 |
|
|
$ |
9.85 |
|
Percentage of WTI, excluding derivatives |
|
45 |
% |
|
25 |
% |
|
40 |
% |
|
22 |
% |
||||
Total Weighted Average Realized Price: |
|
|
|
|
|
|
|
|
||||||||
Excluding derivatives ($/Mcfe) |
|
$ |
3.74 |
|
|
$ |
1.34 |
|
|
$ |
3.01 |
|
|
$ |
1.36 |
|
Including derivatives ($/Mcfe) |
|
$ |
2.49 |
|
|
$ |
1.78 |
|
|
$ |
2.41 |
|
|
$ |
1.86 |
|
(1) |
Based on last day monthly futures settlement prices. |
|
(2) |
This discount includes a basis differential, a heating content adjustment, physical basis sales, third-party transportation charges and fuel charges, and excludes financial basis derivatives. |
|
(3) |
Based on the average daily settlement price of the nearby month futures contract over the period. |
Operational Results
Total production for the quarter ended
|
|
For the three months ended |
|
For the nine months ended |
||||||||||||
|
|
|
|
|
||||||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Production |
|
|
|
|
|
|
|
|
||||||||
Gas production (Bcf) |
|
251 |
|
|
173 |
|
|
684 |
|
|
487 |
|
||||
Oil production (MBbls) |
|
1,729 |
|
|
1,294 |
|
|
5,222 |
|
|
3,776 |
|
||||
NGL production (MBbls) |
|
8,011 |
|
|
6,687 |
|
|
23,255 |
|
|
18,926 |
|
||||
Total production (Bcfe) |
|
310 |
|
|
221 |
|
|
855 |
|
|
623 |
|
||||
Total production (Bcfe/day) |
|
3.4 |
|
|
2.4 |
|
|
3.1 |
|
|
2.3 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Average unit costs per Mcfe |
|
|
|
|
|
|
|
|
||||||||
Lease operating expenses (1) |
|
$ |
0.95 |
|
|
$ |
0.91 |
|
|
$ |
0.94 |
|
|
$ |
0.93 |
|
General & administrative expenses (2,3) |
|
$ |
0.09 |
|
|
$ |
0.12 |
|
|
$ |
0.11 |
|
|
$ |
0.13 |
|
Taxes, other than income taxes |
|
$ |
0.11 |
|
|
$ |
0.07 |
|
|
$ |
0.10 |
|
|
$ |
0.06 |
|
Full cost pool amortization |
|
$ |
0.43 |
|
|
$ |
0.29 |
|
|
$ |
0.37 |
|
|
$ |
0.40 |
|
(1) |
Includes post-production costs such as gathering, processing, fractionation and compression. |
|
(2) |
Excludes |
|
(3) |
Excludes |
Appalachia – In the third quarter, total production was 280 Bcfe, with NGL production of 87 MBbls per day and oil production of 19 MBbls per day. The Company drilled 15 wells, completed 19 wells and placed 19 wells to sales with an average lateral length of 14,147 feet. During the third quarter, Appalachia well costs averaged under
Haynesville – The Company closed on the acquisition of its Haynesville assets on
E&P Division Results |
For the three months ended
|
|
|
For the nine months ended
|
|
||||||||||
|
Appalachia |
|
|
Haynesville |
|
|
Appalachia |
|
|
Haynesville |
|
||||
Gas production (Bcf) |
|
221 |
|
|
|
30 |
|
|
|
654 |
|
|
|
30 |
|
Liquids production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (MBbls) |
|
1,722 |
|
|
|
2 |
|
|
|
5,206 |
|
|
|
2 |
|
NGL (MBbls) |
|
8,011 |
|
|
|
— |
|
|
|
23,253 |
|
|
|
— |
|
Production (Bcfe) |
|
280 |
|
|
|
30 |
|
|
|
825 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross operated production |
|
4,147 |
|
|
|
1,325 |
|
|
|
|
|
|
|
|
|
Net operated production |
|
3,038 |
|
|
|
1,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital investments ($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilling and completions, including workovers |
$ |
176 |
|
|
$ |
52 |
|
|
$ |
591 |
|
|
$ |
52 |
|
Land acquisition and other |
|
14 |
|
|
|
1 |
|
|
|
41 |
|
|
|
1 |
|
Capitalized interest and expense |
|
34 |
|
|
|
6 |
|
|
|
109 |
|
|
|
6 |
|
Total capital investments |
$ |
224 |
|
|
$ |
59 |
|
|
$ |
741 |
|
|
$ |
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross operated well activity summary(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilled |
|
15 |
|
|
|
2 |
|
|
|
61 |
|
|
|
2 |
|
Completed |
|
19 |
|
|
|
4 |
|
|
|
67 |
|
|
|
4 |
|
Wells to sales |
|
19 |
|
|
|
5 |
|
|
|
67 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total weighted average realized price per Mcfe, excluding derivatives |
$ |
3.68 |
|
|
$ |
4.33 |
(2) |
|
$ |
2.96 |
|
|
$ |
4.33 |
(2) |
(1) |
For Haynesville, represents wells drilled, completed and placed to sales by |
|
(2) |
Haynesville weighted average realized price of |
Wells to sales summary |
|
For the three months ended |
|||
|
|
Gross wells to sales |
|
Average lateral length |
|
Appalachia |
|
|
|
|
|
Super |
|
5 |
|
14,473 |
|
|
|
3 |
|
11,324 |
|
Dry Gas Utica |
|
4 |
|
15,574 |
|
Dry Gas Marcellus |
|
7 |
|
15,829 |
|
Haynesville(1) |
|
5 |
|
6,326 |
|
Total |
|
24 |
|
|
|
(1) |
Wells to sales following the close of the acquisition on |
Fourth Quarter 2021 Price Guidance
Based on current market conditions, Southwestern expects fourth quarter price differentials to be within the following ranges.
Natural gas discount to NYMEX including transportation (1) |
|
Natural gas liquids realization as a % of WTI including transportation |
|
(1) |
Includes an estimated |
Conference Call
About
Forward Looking Statement
Certain statements and information in this news release may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, as amended. The words “believe,” “expect,” “anticipate,” “plan,” "predict," “intend,” "seek," “foresee,” “should,” “would,” “could,” “attempt,” “appears,” “forecast,” “outlook,” “estimate,” “project,” “potential,” “may,” “will,” “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 our 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
Use of Non-GAAP Information
This news release contains non-GAAP financial measures, such as net cash flow, free cash flow, net debt and adjusted EBITDA, including certain key statistics and estimates. We report our financial results in accordance with accounting principles generally accepted in
Use of Projections
The financial, operational, industry and market projections, estimates and targets in this news release are forward-looking statements that are based on assumptions that are inherently subject to significant uncertainties and contingencies, many of which are beyond SWN's control. The assumptions and estimates underlying the projected, expected or target results are inherently uncertain and are subject to a wide variety of significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the financial, operational, industry and market projections, estimates and targets, including assumptions, risks and uncertainties described in "Forward-looking Statements" above.
SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES |
||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
|
For the three months ended |
|
For the nine months ended |
||||||||||||
|
|
|
|
|
||||||||||||
(in millions, except share/per share amounts) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Operating Revenues: |
|
|
|
|
|
|
|
|
||||||||
Gas sales |
|
$ |
811 |
|
|
$ |
199 |
|
|
$ |
1,708 |
|
|
$ |
611 |
|
Oil sales |
|
110 |
|
|
40 |
|
|
297 |
|
|
111 |
|
||||
NGL sales |
|
255 |
|
|
68 |
|
|
607 |
|
|
158 |
|
||||
Marketing |
|
418 |
|
|
219 |
|
|
1,102 |
|
|
645 |
|
||||
Other |
|
4 |
|
|
1 |
|
|
6 |
|
|
4 |
|
||||
|
|
1,598 |
|
|
527 |
|
|
3,720 |
|
|
1,529 |
|
||||
Operating Costs and Expenses: |
|
|
|
|
|
|
|
|
||||||||
Marketing purchases |
|
420 |
|
|
226 |
|
|
1,109 |
|
|
675 |
|
||||
Operating expenses |
|
296 |
|
|
202 |
|
|
805 |
|
|
577 |
|
||||
General and administrative expenses |
|
32 |
|
|
31 |
|
|
104 |
|
|
89 |
|
||||
Merger-related expenses |
|
35 |
|
|
3 |
|
|
39 |
|
|
3 |
|
||||
Restructuring charges |
|
— |
|
|
— |
|
|
7 |
|
|
12 |
|
||||
Depreciation, depletion and amortization |
|
138 |
|
|
70 |
|
|
334 |
|
|
267 |
|
||||
Impairments |
|
6 |
|
|
361 |
|
|
6 |
|
|
2,495 |
|
||||
Taxes, other than income taxes |
|
35 |
|
|
15 |
|
|
86 |
|
|
38 |
|
||||
|
|
962 |
|
|
908 |
|
|
2,490 |
|
|
4,156 |
|
||||
Operating Income (Loss) |
|
636 |
|
|
(381 |
) |
|
1,230 |
|
|
(2,627 |
) |
||||
Interest Expense: |
|
|
|
|
|
|
|
|
||||||||
Interest on debt |
|
56 |
|
|
43 |
|
|
154 |
|
|
123 |
|
||||
Other interest charges |
|
3 |
|
|
2 |
|
|
9 |
|
|
7 |
|
||||
Interest capitalized |
|
(25 |
) |
|
(23 |
) |
|
(68 |
) |
|
(67 |
) |
||||
|
|
34 |
|
|
22 |
|
|
95 |
|
|
63 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Gain (Loss) on Derivatives |
|
(2,399 |
) |
|
(192 |
) |
|
(3,461 |
) |
|
38 |
|
||||
Gain (Loss) on Early Extinguishment of Debt |
|
(59 |
) |
|
— |
|
|
(59 |
) |
|
35 |
|
||||
Other Income (Loss), Net |
|
(1 |
) |
|
2 |
|
|
(1 |
) |
|
3 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Loss Before Income Taxes |
|
(1,857 |
) |
|
(593 |
) |
|
(2,386 |
) |
|
(2,614 |
) |
||||
Provision (Benefit) for Income Taxes: |
|
|
|
|
|
|
|
|
||||||||
Current |
|
— |
|
|
— |
|
|
— |
|
|
(2 |
) |
||||
Deferred |
|
— |
|
|
— |
|
|
— |
|
|
408 |
|
||||
|
|
— |
|
|
— |
|
|
— |
|
|
406 |
|
||||
Net Loss |
|
$ |
(1,857 |
) |
|
$ |
(593 |
) |
|
$ |
(2,386 |
) |
|
$ |
(3,020 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Loss Per Common Share: |
|
|
|
|
|
|
|
|
||||||||
Basic |
|
$ |
(2.36 |
) |
|
$ |
(1.04 |
) |
|
$ |
(3.34 |
) |
|
$ |
(5.48 |
) |
Diluted |
|
$ |
(2.36 |
) |
|
$ |
(1.04 |
) |
|
$ |
(3.34 |
) |
|
$ |
(5.48 |
) |
|
|
|
|
|
|
|
|
|
||||||||
Weighted Average Common Shares Outstanding: |
|
|
|
|
|
|
|
|
||||||||
Basic |
|
787,032,414 |
|
|
571,872,413 |
|
|
713,455,662 |
|
|
551,162,559 |
|
||||
Diluted |
|
787,032,414 |
|
|
571,872,413 |
|
|
713,455,662 |
|
|
551,162,559 |
|
SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES |
|||||||||
CONSOLIDATED BALANCE SHEETS |
|||||||||
(Unaudited) |
|||||||||
|
|
|
|
|
|||||
ASSETS |
|
(in millions) |
|||||||
Current assets: |
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
12 |
|
|
$ |
13 |
|
|
Accounts receivable, net |
|
708 |
|
|
368 |
|
|||
Derivative assets |
|
130 |
|
|
241 |
|
|||
Other current assets |
|
52 |
|
|
49 |
|
|||
Total current assets |
|
902 |
|
|
671 |
|
|||
Natural gas and oil properties, using the full cost method |
|
31,486 |
|
|
27,261 |
|
|||
Other |
|
503 |
|
|
523 |
|
|||
Less: Accumulated depreciation, depletion and amortization |
|
(23,987 |
) |
|
(23,673 |
) |
|||
Total property and equipment, net |
|
8,002 |
|
|
4,111 |
|
|||
Operating lease assets |
|
144 |
|
|
163 |
|
|||
Deferred tax assets |
|
— |
|
|
— |
|
|||
Other long-term assets |
|
193 |
|
|
215 |
|
|||
Total long-term assets |
|
337 |
|
|
378 |
|
|||
TOTAL ASSETS |
|
$ |
9,241 |
|
|
$ |
5,160 |
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|||||
Current liabilities: |
|
|
|
|
|||||
Current portion of long-term debt |
|
$ |
201 |
|
|
$ |
— |
|
|
Accounts payable |
|
955 |
|
|
573 |
|
|||
Taxes payable |
|
78 |
|
|
74 |
|
|||
Interest payable |
|
42 |
|
|
58 |
|
|||
Derivative liabilities |
|
2,769 |
|
|
245 |
|
|||
Current operating lease liabilities |
|
41 |
|
|
42 |
|
|||
Other current liabilities |
|
76 |
|
|
20 |
|
|||
Total current liabilities |
|
4,162 |
|
|
1,012 |
|
|||
Long-term debt |
|
4,036 |
|
|
3,150 |
|
|||
Long-term operating lease liabilities |
|
101 |
|
|
117 |
|
|||
Long-term derivative liabilities |
|
960 |
|
|
183 |
|
|||
Pension and other postretirement liabilities |
|
31 |
|
|
45 |
|
|||
Other long-term liabilities |
|
237 |
|
|
156 |
|
|||
Total long-term liabilities |
|
5,365 |
|
|
3,651 |
|
|||
Commitments and contingencies |
|
|
|
|
|||||
Equity: |
|
|
|
|
|||||
Common stock, |
|
11 |
|
|
7 |
|
|||
Additional paid-in capital |
|
6,688 |
|
|
5,093 |
|
|||
Accumulated deficit |
|
(6,749 |
) |
|
(4,363 |
) |
|||
Accumulated other comprehensive loss |
|
(34 |
) |
|
(38 |
) |
|||
Common stock in treasury, 44,353,224 shares as of |
|
(202 |
) |
|
(202 |
) |
|||
Total equity/(deficit) |
|
(286 |
) |
|
497 |
|
|||
TOTAL LIABILITIES AND EQUITY |
|
$ |
9,241 |
|
|
$ |
5,160 |
|
|
|
SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES |
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(Unaudited) |
||||||||
|
|
For the nine months ended |
||||||
|
|
|
||||||
(in millions) |
|
2021 |
|
2020 |
||||
Cash Flows From Operating Activities: |
|
|
|
|
||||
Net loss |
|
$ |
(2,386 |
) |
|
$ |
(3,020 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
||||
Depreciation, depletion and amortization |
|
334 |
|
|
267 |
|
||
Amortization of debt issuance costs |
|
6 |
|
|
6 |
|
||
Impairments |
|
6 |
|
|
2,495 |
|
||
Deferred income taxes |
|
— |
|
|
408 |
|
||
Loss on derivatives, unsettled |
|
2,952 |
|
|
272 |
|
||
Stock-based compensation |
|
2 |
|
|
2 |
|
||
(Gain) loss on early extinguishment of debt |
|
59 |
|
|
(35 |
) |
||
Other |
|
3 |
|
|
3 |
|
||
Change in assets and liabilities |
|
|
|
|
|
|
||
Accounts receivable |
|
(147 |
) |
|
106 |
|
||
Accounts payable |
|
58 |
|
|
(129 |
) |
||
Taxes payable |
|
(10 |
) |
|
(12 |
) |
||
Interest payable |
|
(13 |
) |
|
3 |
|
||
Inventories |
|
(2 |
) |
|
3 |
|
||
Other assets and liabilities |
|
(32 |
) |
|
38 |
|
||
Net cash provided by operating activities |
|
830 |
|
|
407 |
|
||
|
|
|
|
|
||||
Cash Flows From Investing Activities: |
|
|
|
|
||||
Capital investments |
|
(747 |
) |
|
(700 |
) |
||
Proceeds from sale of property and equipment |
|
4 |
|
|
2 |
|
||
Cash acquired in Indigo Acquisition |
|
55 |
|
|
— |
|
||
Cash paid in Indigo Acquisition |
|
(373 |
) |
|
— |
|
||
Other |
|
(1 |
) |
|
— |
|
||
Net cash used in investing activities |
|
(1,062 |
) |
|
(698 |
) |
||
|
|
|
|
|
||||
Cash Flows From Financing Activities: |
|
|
|
|
||||
Payments on long-term debt |
|
(844 |
) |
|
(72 |
) |
||
Payments on revolving credit facility |
|
(3,401 |
) |
|
(1,449 |
) |
||
Borrowings under revolving credit facility |
|
3,366 |
|
|
1,415 |
|
||
Change in bank drafts outstanding |
|
33 |
|
|
(9 |
) |
||
Repayment of Indigo revolving credit facility |
|
(95 |
) |
|
— |
|
||
Proceeds from issuance of long-term debt |
|
1,200 |
|
|
350 |
|
||
Debt issuance/amendment costs |
|
(25 |
) |
|
(5 |
) |
||
Proceeds from issuance of common stock, net |
|
— |
|
|
152 |
|
||
Cash paid for tax withholding |
|
(3 |
) |
|
(1 |
) |
||
Net cash provided by financing activities |
|
231 |
|
|
381 |
|
||
|
|
|
|
|
||||
Increase (decrease) in cash and cash equivalents |
|
(1 |
) |
|
90 |
|
||
Cash and cash equivalents at beginning of year |
|
13 |
|
|
5 |
|
||
Cash and cash equivalents at end of period |
|
$ |
12 |
|
|
$ |
95 |
|
Hedging Summary
A detailed breakdown of derivative financial instruments and financial basis positions as of
|
|
|
Weighted Average Price per MMBtu |
||||||||||
|
Volume (Bcf) |
|
Swaps |
|
Sold Puts |
|
Purchased Puts |
|
Sold Calls |
||||
Natural gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
102 |
|
$ |
2.83 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Two-way costless collars |
88 |
|
|
— |
|
|
— |
|
|
2.70 |
|
|
3.04 |
Three-way costless collars |
84 |
|
|
— |
|
|
2.19 |
|
|
2.54 |
|
|
2.91 |
Total |
274 |
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
539 |
|
$ |
2.77 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Two-way costless collars |
141 |
|
|
— |
|
|
— |
|
|
2.66 |
|
|
3.06 |
Three-way costless collars |
333 |
|
|
— |
|
|
2.06 |
|
|
2.51 |
|
|
2.94 |
Total |
1,013 |
|
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
274 |
|
$ |
2.76 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Two-way costless collars |
83 |
|
|
— |
|
|
— |
|
|
2.69 |
|
|
2.92 |
Three-way costless collars |
215 |
|
|
— |
|
|
2.09 |
|
|
2.54 |
|
|
3.00 |
Total |
572 |
|
|
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
57 |
|
$ |
2.43 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Three-way costless collars |
11 |
|
|
— |
|
|
2.25 |
|
|
2.80 |
|
|
3.54 |
Total |
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume |
|
Weighted Average
|
|||
|
|
(Bcf) |
|
($/MMBtu) |
|||
Call Options – Natural Gas (Net) |
|
|
|
|
|||
2021 |
|
19 |
|
|
$ |
3.19 |
|
2022 |
|
77 |
|
|
$ |
3.00 |
|
2023 |
|
46 |
|
|
$ |
2.94 |
|
2024 |
|
9 |
|
|
$ |
3.00 |
|
Total |
|
151 |
|
|
|
|
|
Swaptions – Natural Gas |
|
|
|
|
|
|
|
2021(1) |
|
18 |
|
|
$ |
3.00 |
|
(1) |
The Company has sold swaptions with an underlying tenor of |
Natural gas financial basis positions |
|
Volume |
|
Basis Differential |
|||
|
|
(Bcf) |
|
($/MMBtu) |
|||
Q4 2021 |
|
|
|
|
|||
Dominion South |
|
28 |
|
|
$ |
(0.63 |
) |
TCO |
|
18 |
|
|
$ |
(0.49 |
) |
TETCO M3 |
|
25 |
|
|
$ |
0.06 |
|
Total |
|
71 |
|
|
$ |
(0.36 |
) |
Q1 2022 |
|
|
|
|
|
|
|
Dominion South |
|
25 |
|
|
$ |
(0.59 |
) |
TCO |
|
18 |
|
|
$ |
(0.49 |
) |
TETCO M3 |
|
23 |
|
|
$ |
1.27 |
|
Total |
|
66 |
|
|
$ |
0.07 |
|
Q2 2022 |
|
|
|
|
|
|
|
Dominion South |
|
33 |
|
|
$ |
(0.58 |
) |
TCO |
|
20 |
|
|
$ |
(0.50 |
) |
TETCO M3 |
|
24 |
|
|
$ |
(0.48 |
) |
Total |
|
77 |
|
|
$ |
(0.53 |
) |
Q3 2022 |
|
|
|
|
|
|
|
Dominion South |
|
33 |
|
|
$ |
(0.58 |
) |
TCO |
|
21 |
|
|
$ |
(0.51 |
) |
TETCO M3 |
|
24 |
|
|
$ |
(0.49 |
) |
Total |
|
78 |
|
|
$ |
(0.54 |
) |
Q4 2022 |
|
|
|
|
|
|
|
Dominion South |
|
27 |
|
|
$ |
(0.61 |
) |
TCO |
|
21 |
|
|
$ |
(0.51 |
) |
TETCO M3 |
|
15 |
|
|
$ |
(0.26 |
) |
Total |
|
63 |
|
|
$ |
(0.49 |
) |
|
|
|
Weighted Average Price per Bbl |
||||||||||
|
Volume (MBbls) |
|
Swaps |
|
Sold Puts |
|
Purchased Puts |
|
Sold Calls |
||||
Oil |
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
780 |
|
$ |
48.94 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Two-way costless collars |
46 |
|
|
— |
|
|
— |
|
|
37.50 |
|
|
45.50 |
Three-way costless collars |
550 |
|
|
— |
|
|
39.18 |
|
|
48.95 |
|
|
54.35 |
Total |
1,376 |
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
3,203 |
|
$ |
53.54 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Three-way costless collars |
1,380 |
|
|
— |
|
|
39.89 |
|
|
50.23 |
|
|
57.05 |
Total |
4,583 |
|
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
846 |
|
$ |
55.98 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Three-way costless collars |
1,268 |
|
|
— |
|
|
33.97 |
|
|
45.51 |
|
|
56.12 |
Total |
2,114 |
|
|
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
54 |
|
$ |
53.15 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Ethane |
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
2,483 |
|
$ |
9.74 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Two-way costless collars |
147 |
|
|
— |
|
|
— |
|
|
7.14 |
|
|
10.40 |
Total |
2,630 |
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
3,361 |
|
$ |
10.01 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Two-way costless collars |
135 |
|
|
— |
|
|
— |
|
|
7.56 |
|
|
9.66 |
Total |
3,496 |
|
|
|
|
|
|
|
|
|
|
|
|
Propane |
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
2,107 |
|
$ |
23.98 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
4,471 |
|
$ |
26.96 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Three-way costless collars |
305 |
|
|
— |
|
|
16.80 |
|
|
21.00 |
|
|
31.92 |
Total |
4,776 |
|
|
|
|
|
|
|
|
|
|
|
|
Normal Butane |
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
617 |
|
$ |
29.08 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
1,295 |
|
$ |
29.16 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Natural Gasoline |
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
635 |
|
$ |
43.62 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed price swaps |
1,256 |
|
$ |
46.41 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
Explanation and Reconciliation of Non-GAAP Financial Measures
The Company reports its financial results in accordance with accounting principles generally accepted in
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.
Another such non-GAAP financial measure is free cash flow, which is defined as cash provided by operating activities, adjusting for changes in operating assets and liabilities, merger-related expenses and restructuring charges, less total capital investment. Management presents this measure because it is accepted as an indicator of excess cash flow available to a company for the repayment of debt or for other general corporate purposes, including the possible return of capital to shareholders.
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.
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Adjusted net income: |
(in millions) |
||||||||||||||
Net income (loss) |
$ |
(1,857 |
) |
|
$ |
(593 |
) |
|
$ |
(2,386 |
) |
|
$ |
(3,020 |
) |
Add back (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger-related expenses |
|
35 |
|
|
|
3 |
|
|
|
39 |
|
|
|
3 |
|
Restructuring charges |
|
— |
|
|
|
— |
|
|
|
7 |
|
|
|
12 |
|
Impairments |
|
6 |
|
|
|
361 |
|
|
|
6 |
|
|
|
2,495 |
|
Loss on unsettled derivatives |
|
2,011 |
|
|
|
289 |
|
|
|
2,952 |
|
|
|
272 |
|
(Gain) loss on early extinguishment of debt |
|
59 |
|
|
|
— |
|
|
|
59 |
|
|
|
(35 |
) |
Legal settlement charges |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
Other loss |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
Adjustments due to discrete tax items (1) |
|
447 |
|
|
|
139 |
|
|
|
570 |
|
|
|
1,020 |
|
Tax impact on adjustments |
|
(513 |
) |
|
|
(154 |
) |
|
|
(734 |
) |
|
|
(646 |
) |
Adjusted net income |
$ |
188 |
|
|
$ |
47 |
|
|
$ |
513 |
|
|
$ |
102 |
|
(1) |
2020 primarily relates to the recognition of a valuation allowance. The Company expects its 2021 income tax rate to be |
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Adjusted diluted earnings per share: |
|
||||||||||||||
Diluted earnings (loss) per share |
$ |
(2.36 |
) |
|
$ |
(1.04 |
) |
|
$ |
(3.34 |
) |
|
$ |
(5.48 |
) |
Add back (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger-related expenses |
|
0.05 |
|
|
|
0.01 |
|
|
|
0.05 |
|
|
|
0.01 |
|
Restructuring charges |
|
— |
|
|
|
— |
|
|
|
0.01 |
|
|
|
0.02 |
|
Impairments |
|
0.01 |
|
|
|
0.63 |
|
|
|
0.01 |
|
|
|
4.50 |
|
Loss on unsettled derivatives |
|
2.54 |
|
|
|
0.50 |
|
|
|
4.12 |
|
|
|
0.50 |
|
(Gain) loss on early extinguishment of debt |
|
0.08 |
|
|
|
— |
|
|
|
0.08 |
|
|
|
(0.06 |
) |
Legal settlement charges |
|
— |
|
|
|
0.00 |
|
|
|
— |
|
|
|
0.00 |
|
Other loss |
|
— |
|
|
|
0.00 |
|
|
|
— |
|
|
|
— |
|
Adjustments due to discrete tax items (1) |
|
0.57 |
|
|
|
0.24 |
|
|
|
0.80 |
|
|
|
1.84 |
|
Tax impact on adjustments |
|
(0.65 |
) |
|
|
(0.26 |
) |
|
|
(1.01 |
) |
|
|
(1.15 |
) |
Adjusted diluted earnings per share |
$ |
0.24 |
|
|
$ |
0.08 |
|
|
$ |
0.72 |
|
|
$ |
0.18 |
|
(1) |
2020 primarily relates to the recognition of a valuation allowance. The Company expects its 2021 income tax rate to be |
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Net cash flow: |
(in millions) |
||||||||||||||
Net cash provided by operating activities |
$ |
213 |
|
|
$ |
153 |
|
|
$ |
830 |
|
|
$ |
407 |
|
Add back (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities |
|
148 |
|
|
|
(21 |
) |
|
|
146 |
|
|
|
(9 |
) |
Merger-related expenses |
|
35 |
|
|
|
3 |
|
|
|
39 |
|
|
|
3 |
|
Restructuring charges |
|
— |
|
|
|
— |
|
|
|
7 |
|
|
|
12 |
|
Net cash flow |
$ |
396 |
|
|
$ |
135 |
|
|
$ |
1,022 |
|
|
$ |
413 |
|
|
|
Three Months Ended
|
||
Free cash flow: |
|
(in millions) |
||
Net cash flow (as shown above) |
|
$ |
396 |
|
Subtract: |
|
|
||
Total capital investments |
|
(291 |
) |
|
Free cash flow |
|
$ |
105 |
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Adjusted EBITDA: |
(in millions) |
||||||||||||||
Net loss |
$ |
(1,857 |
) |
|
$ |
(593 |
) |
|
$ |
(2,386 |
) |
|
$ |
(3,020 |
) |
Add back (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
34 |
|
|
|
22 |
|
|
|
95 |
|
|
|
63 |
|
Provision (benefit) for income taxes |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
406 |
|
Depreciation, depletion and amortization |
|
138 |
|
|
|
70 |
|
|
|
334 |
|
|
|
267 |
|
Merger-related expenses |
|
35 |
|
|
|
3 |
|
|
|
39 |
|
|
|
3 |
|
Restructuring charges |
|
— |
|
|
|
— |
|
|
|
7 |
|
|
|
12 |
|
Impairments |
|
6 |
|
|
|
361 |
|
|
|
6 |
|
|
|
2,495 |
|
Loss on unsettled derivatives |
|
2,011 |
|
|
|
289 |
|
|
|
2,952 |
|
|
|
272 |
|
(Gain) loss on early extinguishment of debt |
|
59 |
|
|
|
— |
|
|
|
59 |
|
|
|
(35 |
) |
Legal settlement charges |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
Stock-based compensation expense |
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
Other loss |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
Adjusted EBITDA |
$ |
426 |
|
|
$ |
154 |
|
|
$ |
1,108 |
|
|
$ |
466 |
|
|
|
|
||
Net debt: |
|
(in millions) |
||
Total debt (1) |
|
$ |
4,245 |
|
Subtract: |
|
|
||
Cash and cash equivalents |
|
(12 |
) |
|
Net debt |
|
$ |
4,233 |
(1) |
Does not include |
|
|
|
||
Net debt to Adjusted EBITDA: |
|
(in millions) |
||
Net debt |
|
$ |
4,233 |
|
Adjusted EBITDA (1) |
|
$ |
1,897 |
|
Net debt to Adjusted EBITDA |
|
2.2x |
(1) |
Adjusted EBITDA of |
View source version on businesswire.com: https://www.businesswire.com/news/home/20211103006225/en/
Investor Contact
Director, Investor Relations
(832) 796-7906
brittany_raiford@swn.com
Source:
FAQ
What are the key financial results for Southwestern Energy Q3 2021?
What drove the increase in Southwestern Energy's production in Q3 2021?
How has Southwestern Energy improved its financial leverage?
What was the free cash flow for Southwestern Energy in Q3 2021?