Returned more than $300 million to shareholders
through debt repayment and share repurchases
Southwestern Energy Company (NYSE: SWN) today announced
financial and operating results for the third quarter ended
September 30, 2022.
- Generated $797 million net cash provided by operating
activities, $450 million net income and $360 million adjusted net
income (non-GAAP) - $824 million adjusted EBITDA (non-GAAP) and
$222 million free cash flow (non-GAAP)
- Reduced total debt by $227 million to achieve target leverage
range with 1.4x net debt to adjusted EBITDA (non-GAAP)
- Repurchased $80 million of common stock, bringing total share
repurchases to date to approximately $100 million, or 10% of
authorized amount
- Total net production of 443 Bcfe, or 4.8 Bcfe per day,
including 4.2 Bcf per day of natural gas and 97 MBbls per day of
liquids
- Invested $543 million of capital and placed 31 wells to sales,
including 14 in Appalachia and 17 in Haynesville
- Reinforced long-term flow assurance and marketing optionality
by adding a total of 500 MMcf per day of new firm transportation
starting in 2024 to LNG corridor on Momentum’s New Generation Gas
Gathering system (NG3) and DT Midstream’s LEAP pipeline
- Upgraded to BB+ by Fitch in August; now rated one notch below
investment grade by all three credit agencies
- Established longer-term GHG emission reduction goal of 50%
decrease by 2035, consistent with a path to net zero by 2050
“During the third quarter, the Company executed on its plan,
progressed debt repayment and achieved our target leverage range.
This was complemented by continued return of capital to our
shareholders, bringing total share repurchases to date to 10% of
the authorized amount. With an increasing and resilient free cash
flow generation profile, a strengthening balance sheet, near
investment grade credit ratings, and advantaged access to the LNG
Corridor and other growing demand centers, Southwestern Energy
offers a differentiated rate of change investment opportunity to
what we believe is a structurally constructive long-term natural
gas outlook,” said Bill Way, Southwestern Energy President and
Chief Executive Officer.
Financial Results
For the three months ended
For the nine months ended
September 30,
September 30,
(in millions)
2022
2021
2022
2021
Net income (loss)
$
450
$
(1,857
)
$
(1,052
)
$
(2,386
)
Adjusted net income (non-GAAP)
$
360
$
188
$
1,175
$
513
Diluted earnings (loss) per share
$
0.40
$
(2.36
)
$
(0.94
)
$
(3.34
)
Adjusted diluted earnings per share
(non-GAAP)
$
0.32
$
0.24
$
1.05
$
0.72
Adjusted EBITDA (non-GAAP)
$
824
$
426
$
2,551
$
1,108
Net cash provided by operating
activities
$
797
$
213
$
2,196
$
830
Net cash flow (non-GAAP)
$
765
$
396
$
2,380
$
1,022
Total capital investments (1)
$
543
$
291
$
1,672
$
816
Free cash flow (non-GAAP)
$
222
$
105
$
708
$
206
(1)
Capital investments include a decrease of
$33 million and an increase of $34 million for the three months
ended September 30, 2022 and 2021, respectively, and increases of
$44 million and $63 million for the nine months ended September 30,
2022 and 2021, respectively, relating to the change in accrued
expenditures between periods.
For the quarter ended September 30, 2022, Southwestern Energy
recorded net income of $450 million, or $0.40 per diluted share.
Adjusting for the impact of the Company’s valuation allowance and
other one-time items, adjusted net income (non-GAAP) was $360
million, or $0.32 per diluted share, and adjusted EBITDA (non-GAAP)
was $824 million. Net cash provided by operating activities was
$797 million, net cash flow (non-GAAP) was $765 million and free
cash flow (non-GAAP) was $222 million.
The Company primarily utilized free cash flow generated in the
third quarter of 2022 to reduce the balance of its revolving credit
facility. As of September 30, 2022, Southwestern Energy had total
debt of $4.9 billion and net debt to adjusted EBITDA (non-GAAP) of
1.4x. At the end of the quarter, the Company had $180 million of
borrowings under its revolving credit facility and $109 million in
outstanding letters of credit. In August 2022, the Company received
an upgrade to its long-term debt issuer rating from Fitch to BB+,
placing the Company one notch below an investment grade credit
rating by all three credit agencies.
During the third quarter, the Company repurchased approximately
10.8 million shares for a total cost of approximately $80 million
at an average price of $7.41 per share.
As indicated in the table below, third quarter 2022 weighted
average realized price, including $0.26 per Mcfe of transportation
expenses, was $7.33 per Mcfe excluding the impact of derivatives.
Including derivatives, weighted average realized price (including
transportation) for the third quarter was up 23% from $2.49 per
Mcfe in 2021 to $3.06 per Mcfe in 2022 primarily due to higher
commodity prices including a 104% increase in NYMEX Henry Hub and a
30% increase in WTI. Third quarter 2022 weighted average realized
price before transportation expense and excluding the impact of
derivatives was $7.59 per Mcfe.
Realized Prices
For the three months ended
For the nine months ended
(includes transportation costs)
September 30,
September 30,
2022
2021
2022
2021
Natural Gas Price:
NYMEX Henry Hub price ($/MMBtu) (1)
$
8.20
$
4.01
$
6.77
$
3.18
Discount to NYMEX (2)
(0.78
)
(0.83
)
(0.62
)
(0.74
)
Average realized gas price, excluding
derivatives ($/Mcf)
$
7.42
$
3.18
$
6.15
$
2.44
Gain on settled financial basis
derivatives ($/Mcf)
0.10
0.11
0.06
0.11
Loss on settled commodity derivatives
($/Mcf)
(4.71
)
(1.14
)
(3.38
)
(0.43
)
Average realized gas price, including
derivatives ($/Mcf)
$
2.81
$
2.15
$
2.83
$
2.12
Oil Price:
WTI oil price ($/Bbl) (3)
$
91.56
$
70.56
$
98.09
$
64.82
Discount to WTI (4)
(7.22
)
(8.24
)
(7.39
)
(8.71
)
Average realized oil price, excluding
derivatives ($/Bbl)
$
84.34
$
62.32
$
90.70
$
56.11
Average realized oil price, including
derivatives ($/Bbl)
$
49.06
$
44.83
$
52.29
$
40.06
NGL Price:
Average realized NGL price, excluding
derivatives ($/Bbl)
$
33.33
$
31.76
$
37.50
$
26.05
Average realized NGL price, including
derivatives ($/Bbl)
$
26.55
$
19.31
$
27.64
$
17.13
Percentage of WTI, excluding
derivatives
36
%
45
%
38
%
40
%
Total Weighted Average Realized
Price:
Excluding derivatives ($/Mcfe)
$
7.33
$
3.74
$
6.32
$
3.01
Including derivatives ($/Mcfe)
$
3.06
$
2.49
$
3.11
$
2.41
(1)
Based on last day settlement prices from
monthly futures contracts.
(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.
(4)
This discount primarily includes location
and quality adjustments.
Operational Results
Total net production for the quarter ended September 30, 2022
was 443 Bcfe, of which 88% was natural gas, 10% NGLs and 2% oil.
Capital investments totaled $543 million for the third quarter of
2022 with 31 wells drilled, 36 wells completed and 31 wells placed
to sales.
For the three months ended
For the nine months ended
September 30,
September 30,
2022
2021
2022
2021
Production
Natural gas production (Bcf)
389
251
1,148
684
Oil production (MBbls)
1,173
1,729
3,806
5,222
NGL production (MBbls)
7,788
8,011
22,445
23,255
Total production (Bcfe)
443
310
1,306
855
Average unit costs per Mcfe
Lease operating expenses (1)
$
1.02
$
0.95
$
0.98
$
0.94
General & administrative expenses
(2,3)
$
0.08
$
0.09
$
0.08
$
0.11
Taxes, other than income taxes
$
0.17
$
0.11
$
0.15
$
0.10
Full cost pool amortization
$
0.66
$
0.43
$
0.65
$
0.37
(1)
Includes post-production costs such as
gathering, processing, fractionation and compression.
(2)
Excludes $27 million in merger-related
expenses for the nine months ended September 30, 2022.
(3)
Excludes $35 million and $39 million in
merger-related expenses for the three and nine months ended
September 30, 2021, respectively, and $7 million in restructuring
charges for the nine months ended September 30, 2021.
Appalachia – In the third quarter, total production was
267 Bcfe, with NGL production of 84 MBbls per day and oil
production of 13 MBbls per day. The Company drilled 16 wells,
completed 21 wells and placed 14 wells to sales with an average
lateral length of 15,629 feet.
Haynesville – In the third quarter, total production was
176 Bcf. There were 15 wells drilled, 15 wells completed and 17
wells placed to sales in the quarter with an average lateral length
of 9,332 feet.
E&P Division Results
For the three months ended
September 30, 2022
For the nine months ended
September 30, 2022
Appalachia
Haynesville
Appalachia
Haynesville
Natural gas production (Bcf)
213
176
637
511
Liquids production
Oil (MBbls)
1,169
4
3,786
15
NGL (MBbls)
7,787
—
22,444
—
Production (Bcfe)
267
176
795
511
Capital investments (in
millions)
Drilling and completions, including
workovers
$
193
$
278
$
577
$
868
Land acquisition and other
12
2
45
14
Capitalized interest and expense
32
21
94
60
Total capital investments
$
237
$
301
$
716
$
942
Gross operated well activity
summary
Drilled
16
15
52
53
Completed
21
15
55
53
Wells to sales
14
17
48
57
Total weighted average realized price
per Mcfe, excluding derivatives
$
7.03
$
7.78
$
6.26
$
6.41
Wells to sales summary
For the three months ended
September 30, 2022
Gross wells to sales
Average lateral length
Appalachia
Super Rich Marcellus
8
15,425
Dry Gas Utica(1)
3
11,989
Dry Gas Marcellus
3
19,814
Haynesville
17
9,332
Total
31
(1) Ohio Utica
Fourth Quarter 2022 Guidance
Based on current market conditions, Southwestern expects fourth
quarter production and price differentials to be within the
following ranges.
PRODUCTION
For the quarter ended December
31, 2022
Gas production (Bcf)
368 – 384
Liquids (% of production)
~12.0%
Total (Bcfe)
417 – 437
Total (Bcfe/day)
~4.6
PRICING
Natural gas discount to NYMEX including
transportation (1)
$0.55 – $0.70 per Mcf
Oil discount to West Texas Intermediate
(WTI) including transportation
$7.00 – $9.00 per Bbl
Natural gas liquids realization as a % of
WTI including transportation
26% – 32%
(1)
Includes impact of transportation costs
and expected $0.15 – $0.17 per Mcf gain in Q4 2022 from financial
basis hedges.
Conference Call
Southwestern Energy will host a conference call and webcast on
Friday, October 28, 2022 at 9:30 a.m. Central to discuss third
quarter 2022 results. To participate, dial US toll-free
877-883-0383, or international 412-902-6506 and enter access code
5197466. The conference call will webcast live at www.swn.com.
A replay will also be available on SWN’s website at www.swn.com
following the call.
About Southwestern Energy
Southwestern Energy Company (NYSE: SWN) is a leading U.S.
producer and marketer of natural gas and natural gas liquids
focused on responsibly developing large-scale energy assets in the
nation’s most prolific shale gas basins. SWN’s returns-driven
strategy strives to create sustainable value for its stakeholders
by leveraging its scale, financial strength and operational
execution. For additional information, please visit www.swn.com and
www.swn.com/responsibility.
Forward Looking Statement
This news release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Exchange Act of 1934, as amended.
These statements are based on current expectations. The words
“anticipate,” “intend,” “plan,” “project,” “estimate,” “continue,”
“potential,” “should,” “could,” “may,” “will,” “objective,”
“guidance,” “outlook,” “effort,” “expect,” “believe,” “predict,”
“budget,” “projection,” “goal,” “forecast,” “model,” “target”,
“seek”, “strive,” “would,” “approximate,” and similar words are
intended to identify forward-looking statements. Statements may be
forward looking even in the absence of these particular words.
Examples of forward-looking statements include, but are not
limited to, the expectations of plans, business strategies,
objectives and growth and anticipated financial and operational
performance, including guidance regarding our strategy to develop
reserves, drilling plans and programs, estimated reserves and
inventory duration, projected production and sales volume and
growth rates, commodity prices, projected average well costs,
generation of free cash flow, our return of capital, leverage
targets and debt repayment, expected benefits from acquisitions,
potential acquisitions and strategic transactions, the timing
thereof and our ability to achieve the intended operational,
financial and strategic benefits of any such transactions or other
initiatives. These forward-looking statements are based on
management’s current beliefs, based on currently available
information, as to the outcome and timing of future events. All
forward-looking statements speak only as of the date of this news
release. The estimates and assumptions upon which forward-looking
statements are based are inherently uncertain and involve a number
of risks that are beyond our control. Although we believe the
expectations expressed in such forward-looking statements are based
on reasonable assumptions, such statements 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. Therefore, you should not place undue reliance on any
of the forward-looking statements contained herein.
Factors that could cause our actual results to differ materially
from those indicated in any forward-looking statement are subject
to all of the risks and uncertainties incident to the exploration
for and the development, production, gathering and sale of natural
gas, NGLs and oil, most of which are difficult to predict and many
of which are beyond our control. These risks include, but are not
limited to, commodity price volatility, inflation, lack of
availability of drilling and production equipment and services,
environmental risks, drilling and other operating risks,
legislative and regulatory changes, the uncertainty inherent in
estimating natural gas and oil reserves and in projecting future
rates of production, cash flow and access to capital, the timing of
development expenditures, a change in our credit rating, an
increase in interest rates, our ability to increase commitments
under our revolving credit facility, our ability to maintain leases
that may expire if production is not established or profitably
maintained, our ability to transport our production to the most
favorable markets or at all, any increase in severance or similar
taxes, 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 or power outages, 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, impacts of world health
events, including the COVID-19 pandemic, cybersecurity risks,
geopolitical and business conditions in key regions of the world,
our ability to realize the expected benefits from acquisitions,
including our mergers with GEP Haynesville, LLC, Montage Resources
Corporation and Indigo Natural Resources LLC, our ability to
achieve our GHG emission reduction goals and the costs associated
therewith, and any other factors described or referenced under Item
7. “Management's Discussion and Analysis of Financial Condition and
Results of Operations” and under Item 1A. “Risk Factors” of our
Annual Report on Form 10-K for the year ended December 31,
2021.
We have no obligation and make no undertaking to publicly update
or revise any forward-looking statements, except as required by
applicable law. All written and oral forward-looking statements
attributable to us are expressly qualified in their entirety by
this cautionary statement.
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
For the three months ended
For the nine months ended
September 30,
September 30,
(in millions, except share/per share
amounts)
2022
2021
2022
2021
Operating Revenues:
Gas sales
$
2,884
$
811
$
7,061
$
1,708
Oil sales
100
110
349
297
NGL sales
260
255
842
607
Marketing
1,298
418
3,371
1,102
Other
(1
)
4
(1
)
6
4,541
1,598
11,622
3,720
Operating Costs and Expenses:
Marketing purchases
1,289
420
3,366
1,109
Operating expenses
423
296
1,206
805
General and administrative expenses
41
32
120
104
Merger-related expenses
—
35
27
39
Restructuring charges
—
—
—
7
Depreciation, depletion and
amortization
298
138
861
334
Impairments
—
6
—
6
Taxes, other than income taxes
76
35
198
86
2,127
962
5,778
2,490
Operating Income
2,414
636
5,844
1,230
Interest Expense:
Interest on debt
77
56
218
154
Other interest charges
3
3
10
9
Interest capitalized
(30
)
(25
)
(89
)
(68
)
50
34
139
95
Loss on Derivatives
(1,903
)
(2,399
)
(6,709
)
(3,461
)
Loss on Early Extinguishment of
Debt
—
(59
)
(6
)
(59
)
Other Loss, Net
—
(1
)
(1
)
(1
)
Income (Loss) Before Income
Taxes
461
(1,857
)
(1,011
)
(2,386
)
Provision (Benefit) for Income
Taxes:
Current
11
—
41
—
Deferred
—
—
—
—
11
—
41
—
Net Income (Loss)
$
450
$
(1,857
)
$
(1,052
)
$
(2,386
)
Earnings (Loss) Per Common
Share:
Basic
$
0.41
$
(2.36
)
$
(0.94
)
$
(3.34
)
Diluted
$
0.40
$
(2.36
)
$
(0.94
)
$
(3.34
)
Weighted Average Common Shares
Outstanding:
Basic
1,110,259,907
787,032,414
1,113,705,502
713,455,662
Diluted
1,112,522,861
787,032,414
1,113,705,502
713,455,662
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, 2022
December 31, 2021
ASSETS
(in millions)
Current assets:
Cash and cash equivalents
$
11
$
28
Accounts receivable, net
1,763
1,160
Derivative assets
176
183
Other current assets
52
42
Total current assets
2,002
1,413
Natural gas and oil properties, using the
full cost method
35,293
33,631
Other
515
509
Less: Accumulated depreciation, depletion
and amortization
(25,068
)
(24,202
)
Total property and equipment, net
10,740
9,938
Operating lease assets
183
187
Long-term derivative assets
77
226
Other long-term assets
102
84
Total long-term assets
362
497
TOTAL ASSETS
$
13,104
$
11,848
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt
$
5
$
206
Accounts payable
1,896
1,282
Taxes payable
121
93
Interest payable
43
75
Derivative liabilities
3,270
1,279
Current operating lease liabilities
43
42
Other current liabilities
73
75
Total current liabilities
5,451
3,052
Long-term debt
4,855
5,201
Long-term operating lease liabilities
138
142
Long-term derivative liabilities
1,009
632
Pension and other postretirement
liabilities
27
23
Other long-term liabilities
210
251
Total long-term liabilities
6,239
6,249
Commitments and contingencies
Equity:
Common stock, $0.01 par value;
2,500,000,000 shares authorized; issued 1,161,475,422 shares as of
September 30, 2022 and 1,158,672,666 shares as of December 31,
2021
12
12
Additional paid-in capital
7,169
7,150
Accumulated deficit
(5,440
)
(4,388
)
Accumulated other comprehensive loss
(25
)
(25
)
Common stock in treasury, 57,966,919
shares as of September 30, 2022 and 44,353,224 shares as of
December 31, 2021
(302
)
(202
)
Total equity
1,414
2,547
TOTAL LIABILITIES AND EQUITY
$
13,104
$
11,848
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
For the nine months ended
September 30,
(in millions)
2022
2021
Cash Flows From Operating
Activities:
Net loss
$
(1,052
)
$
(2,386
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation, depletion and
amortization
861
334
Amortization of debt issuance costs
8
6
Impairments
—
6
Loss on derivatives, unsettled
2,524
2,952
Stock-based compensation
4
2
Loss on early extinguishment of debt
6
59
Other
2
3
Change in assets and liabilities,
excluding impact from acquisitions:
Accounts receivable
(602
)
(147
)
Accounts payable
506
58
Taxes payable
28
(10
)
Interest payable
(22
)
(13
)
Inventories
(8
)
(2
)
Other assets and liabilities
(59
)
(32
)
Net cash provided by operating
activities
2,196
830
Cash Flows From Investing
Activities:
Capital investments
(1,623
)
(747
)
Proceeds from sale of property and
equipment
15
4
Cash acquired through acquisitions
—
55
Cash paid through acquisitions
—
(373
)
Other
—
(1
)
Net cash used in investing activities
(1,608
)
(1,062
)
Cash Flows From Financing
Activities:
Payments on current portion of long-term
debt
(205
)
(844
)
Payments on long-term debt
(71
)
—
Payments on revolving credit facility
(10,341
)
(3,401
)
Borrowings under revolving credit
facility
10,061
3,366
Change in bank drafts outstanding
62
33
Proceeds from exercise of common stock
options
7
—
Purchase of treasury stock
(100
)
—
Debt issuance/amendment costs
(14
)
(25
)
Cash paid for tax withholding
(4
)
(3
)
Repayment of Indigo revolving credit
facility
—
(95
)
Proceeds from issuance of long-term
debt
—
1,200
Net cash provided by (used in) financing
activities
(605
)
231
Decrease in cash and cash equivalents
(17
)
(1
)
Cash and cash equivalents at beginning of
year
28
13
Cash and cash equivalents at end of
period
$
11
$
12
Hedging Summary
A detailed breakdown of derivative financial instruments and
financial basis positions as of September 30, 2022, including the
remainder of 2022 and excluding those positions that settled in the
first, second and third quarters, is shown below. Please refer to
the Company’s quarterly report on Form 10-Q 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
2022
Fixed price swaps
207
$
3.04
$
—
$
—
$
—
Two-way costless collars
18
—
—
2.47
2.89
Three-way costless collars
92
—
2.03
2.48
2.88
Total
317
2023
Fixed price swaps
504
$
3.08
$
—
$
—
$
—
Two-way costless collars
219
—
—
3.03
3.55
Three-way costless collars
215
—
2.09
2.54
3.00
Total
938
2024
Fixed price swaps
224
$
2.96
$
—
$
—
$
—
Two-way costless collars
44
—
—
3.07
3.53
Three-way costless collars
11
—
2.25
2.80
3.54
Total
279
Natural gas financial basis
positions
Volume
Basis Differential
(Bcf)
($/MMBtu)
Q4 2022
Dominion South
30
$
(0.65
)
TCO
26
$
(0.57
)
TETCO M3
20
$
(0.16
)
Columbia Gulf Mainline
6
$
(0.25
)
Total
82
$
(0.48
)
2023
Dominion South
134
$
(0.75
)
TCO
72
$
(0.62
)
TETCO M3
62
$
0.15
Trunkline Zone 1A
13
$
(0.29
)
Total
281
$
(0.50
)
2024
Dominion South
46
$
(0.71
)
2025
Dominion South
9
$
(0.64
)
Call Options – Natural Gas
(Net)
Volume
Weighted Average Strike
Price
(Bcf)
($/MMBtu)
2022
21
$
3.01
2023
46
$
2.94
2024
9
$
3.00
Total
76
Weighted Average Price per
Bbl
Volume (MBbls)
Swaps
Sold Puts
Purchased Puts
Sold Calls
Oil
2022
Fixed price swaps
846
$
52.68
$
—
$
—
$
—
Three-way costless collars
344
—
39.76
50.08
56.97
Total
1,190
2023
Fixed price swaps
1,081
$
60.05
$
—
$
—
$
—
Three-way costless collars
1,268
—
33.97
45.51
56.12
Total
2,349
2024
Fixed price swaps
913
$
70.66
$
—
$
—
$
—
2025
Fixed price swaps
41
$
77.66
$
—
$
—
$
—
Ethane
2022
Fixed price swaps
1,463
$
11.44
$
—
$
—
$
—
2023
Fixed price swaps
1,308
$
11.91
$
—
$
—
$
—
Propane
2022
Fixed price swaps
1,536
$
31.22
$
—
$
—
$
—
Three-way costless collars
77
—
16.80
21.00
31.92
Total
1,613
2023
Fixed price swaps
1,925
$
36.79
$
—
$
—
$
—
2024
Fixed price swaps
73
$
42.32
$
—
$
—
$
—
Normal Butane
2022
Fixed price swaps
464
$
36.22
$
—
$
—
$
—
2023
Fixed price swaps
347
$
41.24
$
—
$
—
$
—
Natural Gasoline
2022
Fixed price swaps
501
$
55.78
$
—
$
—
$
—
2023
Fixed price swaps
359
$
66.00
$
—
$
—
$
—
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 the Company’s 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 free cash flow, 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 September
30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Adjusted net income:
(in millions)
Net income (loss)
$
450
$
(1,857
)
$
(1,052
)
$
(2,386
)
Add back (deduct):
Merger-related expenses
—
35
27
39
Restructuring charges
—
—
—
7
Impairments
—
6
—
6
Loss on unsettled derivatives (1)
14
2,011
2,524
2,952
Loss on early extinguishment of debt
—
59
6
59
Other loss
—
—
1
—
Adjustments due to discrete tax items
(2)
(100
)
447
285
570
Tax impact on adjustments
(4)
(513
)
(616
)
(734
)
Adjusted net income
$
360
$
188
$
1,175
$
513
(1)
Includes ($2) million and $7 million of
non-performance risk adjustment to derivative activities for the
three and nine months ended September 30, 2022, respectively, and
$4 million and $5 million of non-performance risk adjustment to
derivative activities for the three and nine months ended September
30, 2021, respectively.
(2)
The Company’s 2022 income tax rate is
24.1% before the impacts of any valuation allowance.
Three Months Ended September
30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Adjusted diluted earnings per
share:
Diluted earnings (loss) per share
$
0.40
$
(2.36
)
$
(0.94
)
$
(3.34
)
Add back (deduct):
Merger-related expenses
—
0.05
0.02
0.05
Restructuring charges
—
—
—
0.01
Impairments
—
0.01
—
0.01
Loss on unsettled derivatives (1)
0.01
2.54
2.27
4.12
Loss on early extinguishment of debt
—
0.08
0.00
0.08
Other loss
—
—
0.00
—
Adjustments due to discrete tax items
(2)
(0.09
)
0.57
0.25
0.80
Tax impact on adjustments
(0.00
)
(0.65
)
(0.55
)
(1.01
)
Adjusted diluted earnings per share
$
0.32
$
0.24
$
1.05
$
0.72
(1)
Includes ($2) million and $7 million of
non-performance risk adjustment to derivative activities for the
three and nine months ended September 30, 2022, respectively, and
$4 million and $5 million of non-performance risk adjustment to
derivative activities for the three and nine months ended September
30, 2021, respectively.
(2)
The Company’s 2022 income tax rate is
24.1% before the impacts of any valuation allowance.
Three Months Ended September
30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Net cash flow:
(in millions)
Net cash provided by operating
activities
$
797
$
213
$
2,196
$
830
Add back (deduct):
Changes in operating assets and
liabilities
(32
)
148
157
146
Merger-related expenses
—
35
27
39
Restructuring charges
—
—
—
7
Net cash flow
$
765
$
396
$
2,380
$
1,022
Three Months Ended September
30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Free cash flow:
(in millions)
Net cash flow
$
765
$
396
$
2,380
$
1,022
Subtract:
Total capital investments
(543
)
(291
)
(1,672
)
(816
)
Free cash flow
$
222
$
105
$
708
$
206
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Adjusted EBITDA:
(in millions)
Net income (loss)
$
450
$
(1,857
)
$
(1,052
)
$
(2,386
)
Add back (deduct):
Interest expense
50
34
139
95
Income tax expense (benefit)
11
—
41
—
Depreciation, depletion and
amortization
298
138
861
334
Merger-related expenses
—
35
27
39
Restructuring charges
—
—
—
7
Impairments
—
6
—
6
Loss on unsettled derivatives (1)
14
b
2,011
2,524
2,952
Loss on early extinguishment of debt
—
59
6
59
Other loss
—
—
1
—
Stock-based compensation expense
1
—
4
2
Adjusted EBITDA
$
824
$
426
$
2,551
$
1,108
(1)
Includes ($2) million and $7 million of
non-performance risk adjustment to derivative activities for the
three and nine months ended September 30, 2022, respectively, and
$4 million and $5 million of non-performance risk adjustment to
derivative activities for the three and nine months ended September
30, 2021, respectively.
12 Months Ended September 30,
2022
Adjusted EBITDA:
(in millions)
Net income
$
1,309
Add back (deduct):
Interest expense
180
Income tax expense (benefit)
41
Depreciation, depletion and
amortization
1,073
Merger-related expenses
64
Loss on unsettled derivatives (1)
516
Loss on early extinguishment of debt
40
Stock-based compensation expense
4
Other
(5
)
Adjusted EBITDA
$
3,222
(1)
Includes $3 million of non-performance
risk adjustment for the twelve months ended September 30, 2022.
September 30, 2022
Net debt:
(in millions)
Total debt (1)
$
4,890
Subtract:
Cash and cash equivalents
(11
)
Net debt
$
4,879
(1)
Does not include $30 million of
unamortized debt discount and issuance expense.
September 30, 2022
Net debt to Adjusted EBITDA:
(in millions)
Net debt
$
4,879
Adjusted EBITDA (1)
$
3,375
Net debt to Adjusted EBITDA
1.4x
(1)
Adjusted EBITDA for the twelve months ended September 30, 2022
includes $153 million of adjusted EBITDA generated by GEP
Haynesville prior to the December 2021 acquisition.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221027005879/en/
Investor Contact Brittany Raiford Director, Investor
Relations (832) 796-7906 brittany_raiford@swn.com
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