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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Southwestern Energy | NYSE:SWN | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.02 | 0.27% | 7.36 | 7.49 | 7.31 | 7.31 | 13,565,529 | 23:49:42 |
2020 capital investment 20% lower than 2019
Reaffirms capability and commitment to achieving free cash flow neutrality by end of 2020 through operational efficiencies, cost reductions, well outperformance and hedge program benefits
Southwestern Energy Company (NYSE: SWN) today announced financial and operating results for the fourth quarter and full year 2019 and issued 2020 guidance.
“Once again, our team achieved results at or above the midpoint of guidance across all metrics highlighting our established culture of outperformance while operating safely and responsibly. Importantly, we further reduced the cost structure of the Company, enhanced well performance while materially lowering well costs, and improved operational efficiencies, all adding to economic inventory,” said Bill Way, Southwestern Energy President and Chief Executive Officer.
“Foundational to the Company’s resilience, especially in the current pricing environment, are a strong balance sheet, capital discipline, unique Tier 1 condensate and liquids rich acreage and a multi-year hedge position. We remain confident in our ability to return the Company to free cash flow by the end of this year and be firmly positioned to deliver an attractive long-term value proposition for shareholders,” Way continued.
Fourth Quarter 2019 Highlights
Full Year 2019 Highlights
2020 Guidance The following table provides a summary of capital and production guidance. For full guidance, please refer to attachments in this press release. The comparisons below are based on the midpoint of 2020 guidance and 2019 actual results.
Guidance Summary ($2.10 per MMBtu NYMEX and $50 per Bbl WTI)
Total capital investment
$860 – $940
MM
Total production
830 – 865
Bcfe
Natural gas
642 – 668
Bcf
Oil
5,625 – 6,025
MBbls
NGL
25,500 – 26,600
MBbls
Natural gas hedges, which include swaps and collars, are in place for approximately 83% of expected natural gas production at a floor price of $2.47 per MMBtu for April through the remainder of the year. Ethane hedges are in place for 8,099 MBbls at an average swap price of $8.67 per barrel ($0.21 per gallon). Propane hedges are in place for 5,112 MBbls at an average price of $24.00 per barrel ($0.57 per gallon). Approximately 100% of estimated oil production is hedged with swaps and collars in place at an average floor price of $56.56 per barrel.
2019 Fourth Quarter and Full Year Results The table below summarizes select financial statistics. Results for 2019 may not be comparable to 2018 due to the December 2018 Fayetteville Shale divestiture.
FINANCIAL STATISTICS
For the three months ended
For the years ended
December 31,
December 31,
(in millions)
2019
2018
2019
2018
Net income attributable to common stock
$
110
$
307
$
891
$
535
Adjusted net income attributable to common stock (non-GAAP)
$
99
$
176
$
328
$
590
Diluted earnings per share
$
0.20
$
0.54
$
1.65
$
0.93
Adjusted diluted earnings per share (non-GAAP)
$
0.18
$
0.31
$
0.61
$
1.02
Adjusted EBITDA (non-GAAP)
$
266
$
395
(1)
$
973
$
1,484
(1)
Net cash provided by operating activities
$
225
$
252
$
964
$
1,223
Net cash flow (non-GAAP)
$
246
$
359
$
913
$
1,352
Total capital investments (2)
$
207
$
209
$
1,140
$
1,248
(1) Includes $86 million and $375 million of Adjusted EBITDA from the divested Fayetteville Shale assets for the three and twelve months ended December 31, 2018, respectively
(2) Capital investments on the cash flow statement include decreases of $18 million and $74 million for the three months ended December 31, 2019 and 2018, respectively, and an increase of $34 million and a decrease of $53 million for the twelve months ended December 31, 2019 and 2018, respectively, relating to the change in accrued expenditures between periods.
Fourth Quarter 2019 Financial Results Southwestern Energy recorded net income attributable to common stock of $110 million or $0.20 per diluted share for the quarter ended December 31, 2019. Adjusted net income, which excludes the impact of unsettled derivatives and one-time items, was $99 million or $0.18 per diluted share in 2019 and $176 million or $0.31 per share for the same period in 2018. Excluding the impact of the Fayetteville Shale divestiture, the decrease was primarily related to a decrease in commodity prices, partially offset by a $167 million increase in settled derivatives compared to 2018. Adjusted EBITDA (non-GAAP) was $266 million, net cash provided by operating activities was $225 million and net cash flow (non-GAAP) was $246 million.
Fourth quarter 2019 weighted average realized price (including transportation costs) was $2.12 per Mcfe excluding derivatives compared to $3.15 per Mcfe in 2018. Including derivatives and excluding transportation costs, the weighted average realized price in the fourth quarter of $2.85 per Mcfe was 8% less than prior year despite a 31% decrease in NYMEX Henry Hub.
Full Year 2019 Financial Results The Company recorded net income attributable to common stock of $891 million, or $1.65 per share, for the year ended December 31, 2019. Adjusted net income for 2019 was $328 million, or $0.61 per share, compared to $590 million, or $1.02 per share, in 2018. The decrease in adjusted net income compared to prior year was primarily the result of a decrease in commodity prices and the divestiture of the Fayetteville Shale, partially offset by a $274 million increase in settled derivatives impact, a 23% increase in liquids production and decreased interest and G&A expense. Adjusted EBITDA (non-GAAP) was $973 million, net cash provided by operating activities was $964 million and net cash flow (non-GAAP) was $913 million.
For the full year 2019, weighted average realized price (including transportation costs) was $2.18 per Mcfe excluding derivatives, an 18% decrease compared to $2.66 per Mcfe in 2018, due to decreased prices across all commodities. The weighted average realized price including derivatives and excluding transportation costs was $2.82 per Mcfe, a decrease of only 3% compared to prior year due to $180 million of derivative gains in 2019.
During the year, the Company reduced senior notes by $114 million, repurchasing $62 million of senior notes at an average discount of 13% and retiring $52 million of notes that were due in 2020. The Company had a leverage ratio of 2.3x at year-end and a weighted average interest rate of 6.7% on its $2.2 billion of senior notes with no significant maturities until 2025. As of December 31, 2019, the Company had $1.8 billion of liquidity available under its $2 billion revolving credit facility, with $34 million borrowed and $172 million letters of credit outstanding.
Realized Prices
For the three months ended
For the years ended
(includes transportation costs)
December 31,
December 31,
2019
2018
2019
2018
Natural Gas Price:
NYMEX Henry Hub price ($/MMBtu) (1)
$
2.50
$
3.64
$
2.63
$
3.09
Discount to NYMEX (2)
(0.69
)
(0.66
)
(0.65
)
(0.64
)
Realized gas price per Mcf, excluding derivatives
$
1.81
$
2.98
$
1.98
$
2.45
Gain (loss) on settled financial basis derivatives ($/Mcf)
0.05
(0.02
)
—
(0.04
)
Gain (loss) on settled commodity derivatives ($/Mcf)
0.26
(0.48
)
0.20
(0.06
)
Realized gas price per Mcf, including derivatives
$
2.12
$
2.48
$
2.18
$
2.35
Oil Price, per Bbl:
WTI oil price ($/Bbl)
$
56.96
$
58.81
$
57.03
$
64.77
Discount to WTI
(10.59
)
(7.94
)
(10.13
)
(7.98
)
Realized oil price, excluding derivatives
$
46.37
$
50.87
$
46.90
$
56.79
Realized oil price, including derivatives
$
49.16
$
50.37
$
49.56
$
56.07
NGL Price, Per Bbl:
Realized NGL price, excluding derivatives
$
12.46
$
18.59
$
11.59
$
17.91
Realized NGL price, including derivatives
$
14.83
$
18.49
$
13.64
$
17.23
Percentage of WTI, excluding derivatives
22
%
32
%
20
%
28
%
Total Weighted Average Realized Price:
Excluding derivatives ($/Mcfe)
$
2.12
$
3.15
$
2.18
$
2.66
Including derivatives ($/Mcfe)
$
2.44
$
2.72
$
2.42
$
2.57
(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, 2019 was 208 Bcfe, 23% of which was liquids. NGL production was 6,609 MBbls, or 71.8 MBbls per day, and condensate production was 1,486 MBbls, or 16.2 MBbls per day, each above the high end of guidance.
For the year, Appalachia production was 778 Bcfe, an 11% increase compared to prior year, with all growth coming from liquids-rich assets in Southwest Appalachia. NGL and oil production increased 20% and 38%, respectively, compared to prior year.
Capital investments in the fourth quarter of 2019 were $207 million, bringing full year capital investment to $1,140 million, 9% below prior year. The Company brought 113 wells to sales during the year, above the high end of guidance, while spending less capital due to operational efficiencies.
Operating Statistics
For the three months ended
For the years ended
December 31,
December 31,
2019
2018
2019
2018
Production
Gas production (Bcf)
160
194
609
807
Oil production (MBbls)
1,486
1,073
4,696
3,407
NGL production (MBbls)
6,609
5,434
23,620
19,706
Total production (Bcfe)
208
234
778
946
Division Production
Northeast Appalachia (Bcf)
116
118
459
459
Southwest Appalachia (Bcfe)
92
71
319
243
Fayetteville Shale (Bcf)
—
44
—
243
Average unit costs per Mcfe
Lease operating expenses
$
0.94
$
0.93
$
0.92
$
0.93
General & administrative expenses
$
0.19
(1)
$
0.18
(1)
$
0.18
(2)
$
0.19
(2)
Taxes, other than income taxes
$
0.05
$
0.10
$
0.08
$
0.09
(3)
Full cost pool amortization
$
0.54
$
0.53
$
0.56
$
0.51
(1) G&A per Mcfe excludes restructuring charges of $2 million and $18 million and legal settlement charges of $3 million and $1 million for the three months ended December 31, 2019 and 2018, respectively.
(2) G&A per Mcfe excludes $11 million restructuring charges, $6 million charges related to sale of building and $6 million legal settlement charges for the twelve months ended December 31, 2019 and $36 million restructuring charges and $9 million of legal settlement charges for the twelve months ended December 31, 2018.
(3) TOTI per Mcfe excludes $1 million of restructuring charges for the twelve months ended December 31, 2018.
Southwest Appalachia – In the fourth quarter, total net production for Southwest Appalachia was 92 Bcfe, including over 16 MBbls per day of condensate. The Company placed 16 wells to sales in the fourth quarter, all located in the Company’s super rich acreage, with an average lateral length of 11,213 feet. Eleven of the 16 wells were online for at least 30 days and had an average 30-day rate of 10 MMcfe per day, including 67% liquids, of which 444 barrels per day were condensate.
In 2019, Southwest Appalachia’s total net production increased 31% to 319 Bcfe, 53% of which were liquids. The Company placed 69 wells to sales, including 64 located in the super rich acreage, drilled 66 wells and completed 72 wells in 2019.
Northeast Appalachia – In the fourth quarter, total net production for Northeast Appalachia was 116 Bcf. There were no wells drilled, five wells completed and eight wells placed to sales in the quarter with an average lateral length of 9,841 feet. Of the eight wells to sales, three wells were online for at least 30 days and had an average 30-day rate of 18 MMcf per day.
Production for the year was 459 Bcf, flat with prior year. The Company drilled 39 wells, completed 44 wells and brought 44 wells to sales during 2019.
E&P Division Results
For the three months ended December 31, 2019
For the year ended December 31, 2019
Northeast
Southwest
Northeast
Southwest
Gas production (Bcf)
116
44
459
150
Liquids production
Oil (MBbls)
—
1,480
—
4,673
NGL (MBbls)
—
6,608
—
23,611
Production (Bcfe)
116
92
459
319
Gross operated production December 2019 (MMcfe/d)
1,500
1,545
Net operated production December 2019 (MMcfe/d)
1,224
958
Capital investments ($ in millions)
Drilling and completions, including workovers
$
40
$
84
$
314
$
516
Land acquisition and other
11
15
18
45
Capitalized interest and expense
8
36
33
149
Total capital investments
$
59
$
135
$
365
$
710
Gross operated well activity summary
Drilled
—
10
39
66
Completed
5
10
44
72
Wells to sales
8
16
44
69
Average well cost on wells to sales (in millions)
$
7.1
$
8.9
$
7.3
$
8.9
Average lateral length (in ft)
9,841
11,213
9,029
10,642
Total weighted average realized price per Mcfe, excluding derivatives
$
1.92
$
2.36
$
2.10
$
2.30
2019 Proved Reserves The Company increased its total proved reserves to 12.7 Tcfe, 7% above year-end 2018 due to additions and positive performance revisions across gas, oil and NGLs. Reserves consisted of 68% natural gas, and 32% liquids, with PV-10 at year-end 2019 of $3.7 billion.
During the year, the Company replaced 203% of production volumes through 1,195 Bcfe of proved reserve additions and net positive revisions of 385 Bcfe. The reserve life index was approximately 16.4 years at year-end 2019.
Proved Reserves Summary
For the years ended December 31,
2019
2018
Proved reserves (in Bcfe)
12,721
11,921
PV-10:
Pre-tax (millions)
$
3,735
$
6,524
PV of taxes (millions)
(35)
(525)
After-Tax (millions)
$
3,700
$
5,999
Percent of estimated proved reserves that are:
Natural gas
68%
67%
NGLs and oil
32%
33%
Proved developed
50%
47%
2019 Proved Reserves by Commodity
Natural Gas
Oil
NGL
Total
(Bcf)
(MBbls)
(MBbls)
(Bcfe)
Proved reserves, beginning of year
8,044
69,007
577,063
11,921
Revisions of previous estimates due to price
(480
)
(2,041
)
(37,492
)
(717
)
Revisions of previous estimates other than price
685
3,707
65,869
1,102
Extensions, discoveries and other additions
992
6,948
26,941
1,195
Production
(609
)
(4,696
)
(23,620
)
(778
)
Acquisition of reserves in place
—
—
—
—
Disposition of reserves in place
(2
)
—
—
(2
)
Proved reserves, end of year
8,630
72,925
608,761
12,721
Proved developed reserves:
Beginning of year
4,395
18,037
175,480
5,557
End of year
4,906
26,124
226,271
6,421
2019 Proved Reserves by Division (Bcfe)
Appalachia
Northeast
Southwest
Other (1)
Total
Proved reserves, beginning of year
4,366
7,554
1
11,921
Revisions of previous estimates due to price
(57
)
(660
)
—
(717
)
Revisions of previous estimates other than price
127
975
—
1,102
Extensions, discoveries and other additions
862
333
—
1,195
Production
(459
)
(319
)
—
(778
)
Acquisition of reserves in place
—
—
—
—
Disposition of reserves in place
(2
)
—
—
(2
)
Proved reserves, end of year
4,837
7,883
1
12,721
(1) Other includes properties outside of the Appalachian Basin.
The Company’s 2019 proved developed finding and development (PD F&D) costs decreased 24% from the prior year to $0.53 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
2019
2018
2017
2019
Total PD Adds (Bcfe):
New PD adds
191
177
1,258
1,626
PUD conversions
1,441
(2)
1,139
46
2,626
Total PD Adds
1,632
1,316
1,304
4,252
Costs Incurred (in millions):
Unproved property acquisition costs
$
162
$
164
$
194
$
520
Exploration costs
2
5
22
29
Development costs
936
1,014
1,024
2,974
Capitalized Costs Incurred
$
1,100
$
1,183
$
1,240
$
3,523
Subtract (in millions):
Proved property acquisition costs
$
–
$
–
$
–
$
–
Unproved property acquisition costs
(162)
(164)
(194)
(520)
Capitalized interest and expense associated with development and exploration (1)
(81)
(93)
(103)
(277)
PD Costs Incurred
$
857
$
926
$
943
$
2,726
PD F&D
$
0.53
$
0.70
$
0.72
$
0.64
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 206 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 28, 2020 at 9:00 a.m. Central to discuss fourth quarter and fiscal year 2019 results. To participate, dial US toll-free 877-883-0383, or international 412-902-6506 and enter access code 4822579. 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 10138538. The replay will be available until March 20, 2020.
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 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.
2020 Guidance
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total Year
Production
Natural Gas (Bcf)
150 – 156
152 – 158
170 – 177
170 – 177
642 – 668
Oil/Condensate (MBbls)
1,300 – 1,400
1,200 – 1,300
1,475 – 1,575
1,650 – 1,750
5,625 – 6,025
NGLs (MBbls)
6,000 – 6,275
6,150 – 6,425
6,600 – 6,875
6,750 – 7,025
25,500 – 26,600
Total Production (Bcfe)
194 – 202
196 – 205
219 – 228
221 – 230
830 – 865
Total Production (MMcfe/d)
2,132 – 2,220
2,154 – 2,253
2,380 – 2,478
2,402 – 2,500
2,268 – 2,363
CAPITAL BY DIVISION (in millions)
Northeast Appalachia
$235 – $260
Southwest Appalachia
$460 – $485
Other
$25 – $35
Capitalized interest
$85 – $95
Capitalized expense
$55 – $65
Total Capital Investments
$860 – $940
PRODUCTION BY DIVISION (Bcfe)
Northeast Appalachia
455 – 470
Southwest Appalachia
375 – 395
PRICING
Natural gas discount to NYMEX including transportation
$0.63 – $0.73 per Mcf
Oil discount to West Texas Intermediate (WTI) including transportation
$9.50 – $11.50 per Bbl
Natural Gas Liquids realization as a % of WTI including transportation
16% – 21%
EXPENSES
Lease operating expenses
$0.92 – $0.97 per Mcfe
General & administrative expense
$0.13 – $0.17 per Mcfe
Taxes, other than income taxes
$0.07 – $0.09 per Mcfe
Interest expense - net of capitalization
$80 – $90 MM
Income tax rate (~100% deferred)
23.5%
WELL COUNT
Drilled
Completed
Wells To Sales
Ending DUC Inventory
Northeast Appalachia
25 – 35
30 – 40
30 – 40
0 – 10
Southwest Appalachia
50 – 60
60 – 70
60 – 70
5 – 15
Total Well Count
75 – 95
90 – 110
90 – 110
5 – 25
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)
2019
2018
2019
2018
Operating Revenues:
Gas sales
$
298
$
586
$
1,241
$
1,998
Oil sales
70
55
223
196
NGL sales
83
100
274
352
Marketing
293
417
1,297
1,222
Gas gathering
—
16
—
89
Other
1
1
3
5
745
1,175
3,038
3,862
Operating Costs and Expenses:
Marketing purchases
298
421
1,320
1,229
Operating expenses
197
197
720
785
General and administrative expenses
47
44
166
209
(Gain) loss on sale of operating assets, net
(1
)
(17
)
2
(17
)
Restructuring charges
2
19
11
39
Depreciation, depletion and amortization
119
134
471
560
Impairments
8
—
16
171
Taxes, other than income taxes
11
25
62
89
681
823
2,768
3,065
Operating Income
64
352
270
797
Interest Expense:
Interest on debt
41
51
166
231
Other interest charges
3
2
8
8
Interest capitalized
(25
)
(29
)
(109
)
(115
)
19
24
65
124
Gain (Loss) on Derivatives
54
(10
)
274
(118
)
Gain (Loss) on Early Extinguishment of Debt
1
(9
)
8
(17
)
Other Loss, Net
—
(1
)
(7
)
—
Income Before Income Taxes
100
308
480
538
Provision (Benefit) for Income Taxes:
Current
(1
)
1
(2
)
1
Deferred
(9
)
—
(409
)
—
(10
)
1
(411
)
1
Net Income
$
110
$
307
$
891
$
537
Participating securities — mandatory convertible preferred stock
—
—
—
2
Net Income Attributable to Common Stock
$
110
$
307
$
891
$
535
Earnings Per Common Share
Basic
$
0.20
$
0.54
$
1.65
$
0.93
Diluted
$
0.20
$
0.54
$
1.65
$
0.93
Weighted Average Common Shares Outstanding:
Basic
539,434,877
564,863,538
539,345,343
574,631,756
Diluted
540,574,288
567,773,371
540,382,914
576,642,808
SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, 2019
December 31, 2018
ASSETS
(in millions)
Current assets:
Cash and cash equivalents
$
5
$
201
Accounts receivable, net
345
581
Derivative assets
278
130
Other current assets
51
44
Total current assets
679
956
Natural gas and oil properties, using the full cost method, including $1,506 million as of December 31, 2019 and $1,755 million as of December 31, 2018 excluded from amortization
25,250
24,180
Other
520
525
Less: Accumulated depreciation, depletion and amortization
(20,503
)
(20,049
)
Total property and equipment, net
5,267
4,656
Operating lease assets
159
—
Deferred tax assets
407
—
Other long-term assets
205
185
Total long-term assets
771
185
TOTAL ASSETS
$
6,717
$
5,797
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
525
$
609
Taxes payable
59
58
Interest payable
51
52
Derivative liabilities
125
79
Current operating lease liabilities
34
—
Other current liabilities
54
48
Total current liabilities
848
846
Long-term debt
2,242
2,318
Long-term operating lease liabilities
119
—
Pension and other postretirement liabilities
43
46
Other long-term liabilities
219
225
Total long-term liabilities
2,623
2,589
Commitments and contingencies
Equity:
Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 585,555,923 shares as of December 31, 2019 and 585,407,107 shares as of December 31, 2018
6
6
Additional paid-in capital
4,726
4,715
Accumulated deficit
(1,251
)
(2,142
)
Accumulated other comprehensive loss
(33
)
(36
)
Common stock in treasury, 44,353,224 shares as of December 31, 2019 and 39,092,537 shares as of December 31, 2018
(202
)
(181
)
Total equity
3,246
2,362
TOTAL LIABILITIES AND EQUITY
$
6,717
$
5,797
SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the years ended
December 31,
(in millions)
2019
2018
Cash Flows From Operating Activities:
Net income
$
891
$
537
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization
471
560
Amortization of debt issuance costs
8
8
Impairments
16
171
Deferred income taxes
(409
)
—
(Gain) loss on derivatives, unsettled
(94
)
24
Stock-based compensation
8
14
(Gain) loss on early extinguishment of debt
(8
)
17
(Gain) loss on sale of assets, net
2
(17
)
Other
10
(1
)
Change in assets and liabilities
Accounts receivable
234
(153
)
Accounts payable
(141
)
65
Taxes payable
—
2
Interest payable
—
(10
)
Inventories
(7
)
(13
)
Other assets and liabilities
(17
)
19
Net cash provided by operating activities
964
1,223
Cash Flows From Investing Activities:
Capital investments
(1,099
)
(1,290
)
Proceeds from sale of property and equipment
54
1,643
Other
—
6
Net cash provided by (used in) investing activities
(1,045
)
359
Cash Flows From Financing Activities:
Payments on current portion of long-term debt
(52
)
—
Payments on long-term debt
(54
)
(2,095
)
Payments on revolving credit facility
(532
)
(1,983
)
Borrowings under revolving credit facility
566
1,983
Change in bank drafts outstanding
(19
)
17
Debt issuance costs
(3
)
(9
)
Purchase of treasury stock
(21
)
(180
)
Preferred stock dividend
—
(27
)
Cash paid for tax withholding
(1
)
(3
)
Other
1
—
Net cash used in financing activities
(115
)
(2,297
)
Decrease in cash and cash equivalents
(196
)
(715
)
Cash and cash equivalents at beginning of year
201
916
Cash and cash equivalents at end of year
$
5
$
201
Hedging Summary A detailed breakdown of the Company’s derivative financial instruments and financial basis positions as of February 25, 2020, including 2020 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
2020
Fixed price swaps
285
$
2.51
$
—
$
—
$
—
Two-way costless collars
31
—
—
2.56
2.85
Three-way costless collars
230
—
2.18
2.54
2.85
Total
546
2021
Fixed price swaps
30
$
2.54
$
—
$
—
$
—
Two-way costless collars
17
—
—
2.50
2.83
Three-way costless collars
264
—
2.18
2.49
2.84
Total
311
2022
Three-way costless collars
62
$
—
$
2.15
$
2.54
$
2.90
Weighted Average Price per Bbl
Volume (MBbls)
Swaps
Sold Puts
Purchased Puts
Sold Calls
Oil
2020
Fixed price swaps
3,465
$
57.83
$
—
$
—
$
—
Two-way costless collars
966
—
—
56.89
59.81
Three-way costless collars
1,471
—
44.06
53.38
58.23
Total
5,902
2021
Fixed price swaps
2,328
$
53.72
$
—
$
—
$
—
Three-way costless collars
1,445
—
43.52
53.25
58.14
Total
3,773
2022
Fixed price swaps
438
$
51.74
$
—
$
—
$
—
Three-way costless collars
666
—
42.50
53.20
58.00
Total
1,104
Propane
2020
Fixed price swaps
4,746
$
24.01
$
—
$
—
$
—
Two-way costless collars
366
—
—
25.20
29.40
Total
5,112
2021
Fixed price swaps
2,460
$
21.77
$
—
$
—
$
—
Ethane
2020
Fixed price swaps
8,099
$
8.67
$
—
$
—
$
—
2021
Fixed price swaps
2,725
$
7.48
$
—
$
—
$
—
Natural gas financial basis positions
Volume
Basis Differential
(Bcf)
($/MMBtu)
2020
Dominion South
118
$
(0.50
)
TCO
37
$
(0.43
)
TETCO M3
65
$
(0.01
)
Transco Z6 NonNY
2
$
2.02
Total
222
$
(0.33
)
2021
Dominion South
65
$
(0.48
)
TCO
5
$
(0.31
)
TETCO M3
31
$
0.98
Total
101
$
(0.02
)
2022
Dominion South
58
$
(0.52
)
TETCO M3
30
$
(0.41
)
Total
88
$
(0.48
)
Natural gas physical basis positions
Volume
Basis Differential
(Bcf)
($/MMBtu)
2020
271
$
(0.15
)
2021
89
$
(0.28
)
2022
30
$
(0.36
)
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,
2019
2018
2019
2018
(in millions)
Adjusted net income attributable to common stock:
Net income attributable to common stock
$
110
$
307
$
891
$
535
Add back (deduct):
Restructuring charges
2
19
11
39
Impairments
8
—
16
171
(Gain) loss on sale of assets, net
(1
)
(16
)
2
(17
)
(Gain) loss on certain derivatives
14
(89
)
(94
)
24
(Gain) loss on early extinguishment of debt
(1
)
9
(8
)
17
Legal settlement charges
3
1
6
9
Non-cash pension settlement loss
1
—
6
—
Other one-time loss (1)
—
2
10
3
Adjustments due to discrete tax items (2)
(32
)
(75
)
(526
)
(130
)
Tax impact on adjustments
(5
)
18
14
(61
)
Adjusted net income attributable to common stock
$
99
$
176
$
328
$
590
(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) 2019 primarily relates to the release of the valuation allowance. 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 23.5%.
3 Months Ended December 31,
12 Months Ended December 31,
2019
2018
2019
2018
Adjusted diluted earnings per share:
Diluted earnings per share
$
0.20
$
0.54
$
1.65
$
0.93
Add back (deduct):
Restructuring charges
0.00
0.03
0.02
0.06
Impairments
0.01
—
0.03
0.30
(Gain) loss on sale of assets, net
(0.00
)
(0.03
)
0.00
(0.03
)
(Gain) loss on certain derivatives
0.03
(0.16
)
(0.17
)
0.04
(Gain) loss on early extinguishment of debt
(0.00
)
0.02
(0.01
)
0.03
Legal settlement charges
0.01
0.00
0.01
0.02
Non-cash pension settlement loss
0.00
—
0.01
—
Other one-time loss (1)
—
0.01
0.02
0.01
Adjustments due to discrete tax items (2)
(0.06
)
(0.13
)
(0.97
)
(0.23
)
Tax impact on adjustments
(0.01
)
0.03
0.02
(0.11
)
Adjusted diluted earnings per share
$
0.18
$
0.31
$
0.61
$
1.02
(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) 2019 primarily relates to the release of the valuation allowance. 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 23.5%.
3 Months Ended December 31,
12 Months Ended December 31,
2019
2018
2019
2018
(in millions)
Net cash flow:
Net cash provided by operating activities
$
225
$
252
$
964
$
1,223
Add back (deduct):
Changes in operating assets and liabilities
19
88
(69
)
90
Restructuring charges
2
19
11
39
Other one-time loss (1)
—
—
7
—
Net cash flow
$
246
$
359
$
913
$
1,352
(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,
2019
2018
2019
2018
(in millions)
Adjusted EBITDA:
Net income
$
110
$
307
$
891
$
537
Add back (deduct):
Interest expense
19
24
65
124
Income tax expense (benefit)
(10
)
1
(411
)
1
Depreciation, depletion and amortization
119
134
471
560
Restructuring charges
2
19
11
39
Impairments
8
—
16
171
(Gain) loss on sale of assets, net
(1
)
(16
)
2
(17
)
(Gain) loss on certain derivatives
14
(89
)
(94
)
24
(Gain) loss on early extinguishment of debt
(1
)
9
(8
)
17
Legal settlement charges
3
1
6
9
Non-cash pension settlement loss
1
—
6
—
Other one-time loss (1)
—
2
10
3
Stock-based compensation expense
2
3
8
16
Adjusted EBITDA
$
266
$
395
$
973
$
1,484
(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, 2019
Net debt:
(in millions)
Total debt
$
2,242
Subtract:
Cash and cash equivalents
(5
)
Net debt
$
2,237
December 31, 2019
Net debt to EBITDA:
(in millions)
Net debt
$
2,237
Adjusted EBITDA
$
973
Net debt to EBITDA
2.3x
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Investor Contact Paige Penchas Vice President, Investor Relations (832) 796-4068 paige_penchas@swn.com
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