Disciplined capital allocation and commitment to debt reduction

Southwestern Energy Company (NYSE: SWN) today announced financial and operating results for the first quarter ended March 31, 2023.

  • Generated $1.1 billion net cash provided by operating activities, $1.9 billion net income and $346 million adjusted net income (non-GAAP) - Adjusted EBITDA (non-GAAP) of $799 million and free cash flow (non-GAAP) of $99 million
  • Reported total net production of 411 Bcfe, or 4.6 Bcfe per day, including 3.9 Bcf per day of gas and 107 MBbls per day of liquids
  • Invested $665 million of capital and placed 36 wells to sales, including 13 in Appalachia and 23 in Haynesville
  • Fully redeemed outstanding 7.75% Senior Notes due 2027 utilizing cash on hand and borrowings under revolving credit facility, consistent with debt reduction plan

“Southwestern Energy demonstrated during the quarter the quality of our dual-basin scale, portfolio optionality and differentiated access to premium markets, delivering strong operational performance and generating free cash flow for debt reduction,” said Bill Way, Southwestern Energy President and Chief Executive Officer.

“Guided by our disciplined capital allocation strategy, we are moderating planned annual activity, including delaying certain dry gas-focused completions. Our operating flexibility, continued capital efficiency improvements and progress driving lower than expected inflation enable us to align capital investment with expected cash flow while maintaining our productive capacity to capitalize on the constructive longer-term natural gas outlook. Southwestern Energy continues to execute our strategy to deliver shareholder value by meeting growing global demand for lower-carbon, reliable energy,” continued Way.

Financial Results

 

 

 

 

 

 

 

For the three months ended

 

March 31,

(in millions)

2023

 

2022

Net income (loss)

$

1,939

 

$

(2,675

)

Adjusted net income (non-GAAP)

$

346

 

$

447

 

Diluted earnings (loss) per share

$

1.76

 

$

(2.40

)

Adjusted diluted earnings per share (non-GAAP)

$

0.31

 

$

0.40

 

Adjusted EBITDA (non-GAAP)

$

799

 

$

905

 

Net cash provided by operating activities

$

1,137

 

$

972

 

Net cash flow (non-GAAP)

$

764

 

$

861

 

Total capital investments (1)

$

665

 

$

544

 

Free cash flow (non-GAAP)

$

99

 

$

317

 

(1)

Capital investments includes a decrease of $6 million and an increase of $43 million for the three months ended March 31, 2023 and 2022, respectively, relating to the change in accrued expenditures between periods.

For the quarter ended March 31, 2023, Southwestern Energy recorded net income of $1.9 billion, or $1.76 per diluted share, including a gain on mark-to-market of unsettled derivatives. Excluding this and other one-time items, adjusted net income (non-GAAP) was $346 million, or $0.31 per diluted share, and Adjusted EBITDA (non-GAAP) was $799 million. Net cash provided by operating activities was $1.1 billion, net cash flow (non-GAAP) was $764 million and free cash flow (non-GAAP) was $99 million.

During the quarter, the Company fully redeemed its outstanding 7.75% Senior Notes due 2027 utilizing cash on hand and borrowings under its revolving credit facility. As of March 31, 2023, Southwestern Energy had total debt of $3.95 billion and net debt to adjusted EBITDA (non-GAAP) of 1.2x. At the end of the quarter, the Company had $210 million of borrowings under its revolving credit facility and $89 million in outstanding letters of credit.

The Company is currently rated one notch below an investment grade credit rating by all three credit agencies. In January 2023, S&P updated Southwestern Energy to positive outlook, joining Fitch, which updated the Company to positive outlook in August 2022.

As indicated in the table below, first quarter 2023 weighted average realized price was $3.48 per Mcfe, excluding the impact of derivatives and net of $0.27 per Mcfe of transportation expenses. Including derivatives, weighted average realized price for the first quarter was down 2% from $3.24 per Mcfe in 2022 to $3.18 per Mcfe in 2023 primarily due to lower commodity prices including a 31% decrease in NYMEX Henry Hub and a 19% decrease in WTI.

Realized Prices

 

For the three months ended

(includes transportation costs)

 

March 31,

 

 

2023

 

2022

Natural Gas Price:

 

 

 

 

NYMEX Henry Hub price ($/MMBtu) (1)

 

$

3.42

 

 

$

4.95

 

Discount to NYMEX (2)

 

(0.20

)

 

(0.45

)

Average realized gas price, excluding derivatives ($/Mcf)

 

$

3.22

 

 

$

4.50

 

Gain (loss) on settled financial basis derivatives ($/Mcf)

 

(0.08

)

 

0.01

 

Loss on settled commodity derivatives ($/Mcf)

 

(0.24

)

 

(1.51

)

Average realized gas price, including derivatives ($/Mcf)

 

$

2.90

 

 

$

3.00

 

Oil Price:

 

 

 

 

WTI oil price ($/Bbl) (3)

 

$

76.13

 

 

$

94.29

 

Discount to WTI (4)

 

(10.21

)

 

(7.99

)

Average realized oil price, excluding derivatives ($/Bbl)

 

$

65.92

 

 

$

86.30

 

Average realized oil price, including derivatives ($/Bbl)

 

$

58.17

 

 

$

50.29

 

NGL Price:

 

 

 

 

Average realized NGL price, excluding derivatives ($/Bbl)

 

$

24.39

 

 

$

39.33

 

Average realized NGL price, including derivatives ($/Bbl)

 

$

24.58

 

 

$

27.08

 

Percentage of WTI, excluding derivatives

 

32

%

 

42

%

Total Weighted Average Realized Price (5):

 

 

 

 

Excluding derivatives ($/Mcfe)

 

$

3.48

 

 

$

4.88

 

Including derivatives ($/Mcfe)

 

$

3.18

 

 

$

3.24

 

(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.

(5)

Net of $0.27 per Mcfe third-party transportation charges.

Operational Results

Total net production for the quarter ended March 31, 2023 was 411 Bcfe, of which 86% was natural gas, 12% NGLs and 2% oil. Capital investments totaled $665 million for the first quarter of 2023, consistent with the Company’s front-end loaded capital program, with 31 wells drilled, 36 wells completed and 36 wells placed to sales.

 

 

For the three months ended

 

 

March 31,

Production

 

2023

 

2022

Natural gas production (Bcf)

 

353

 

 

376

 

Oil production (MBbls)

 

1,418

 

 

1,270

 

NGL production (MBbls)

 

8,240

 

 

6,919

 

Total production (Bcfe)

 

411

 

 

425

 

 

 

 

 

 

Average unit costs per Mcfe

 

 

 

 

Lease operating expenses (1)

 

$

1.05

 

 

$

0.94

 

General & administrative expenses (2)

 

$

0.10

 

 

$

0.09

 

Taxes, other than income taxes

 

$

0.16

 

 

$

0.13

 

Full cost pool amortization

 

$

0.75

 

 

$

0.63

 

(1)

Includes post-production costs such as gathering, processing, fractionation and compression.

(2)

Excludes $25 million in merger-related expenses related to our 2021 Haynesville acquisitions for the three months ended March 31, 2022.

Appalachia – In the first quarter, total production was 251 Bcfe, with NGL production of 91 MBbls per day and oil production of 16 MBbls per day. The Company drilled 19 wells, completed 15 wells and placed 13 wells to sales with an average lateral length of 14,916 feet.

Haynesville – In the first quarter, total production was 160 Bcfe. There were 12 wells drilled, 21 wells completed and 23 wells placed to sales in the quarter with an average lateral length of 8,207 feet.

 

For the three months ended

E&P Division Results

March 31, 2023

 

Appalachia

 

 

Haynesville

Gas production (Bcf)

 

193

 

 

 

160

Liquids production

 

 

 

 

 

 

Oil (MBbls)

 

1,409

 

 

 

8

NGL (MBbls)

 

8,240

 

 

 

Production (Bcfe)

 

251

 

 

 

160

 

 

 

 

 

 

 

Capital investments (in millions)

 

 

 

 

 

 

Drilling and completions, including workovers

$

219

 

 

$

359

Land acquisition and other

 

26

 

 

 

2

Capitalized interest and expense

 

31

 

 

 

20

Total capital investments

$

276

 

 

$

381

 

 

 

 

 

 

 

Gross operated well activity summary

 

 

 

 

 

 

Drilled

 

19

 

 

 

12

Completed

 

15

 

 

 

21

Wells to sales

 

13

 

 

 

23

 

 

 

 

 

 

 

Total weighted average realized price per Mcfe, excluding derivatives

$

3.68

 

 

$

3.17

Wells to sales summary

 

For the three months ended March 31, 2023

 

 

Gross wells to sales

 

Average lateral length (ft)

Appalachia

 

 

 

 

Super Rich Marcellus

 

11

 

15,701

Dry Gas Marcellus

 

2

 

10,596

Haynesville

 

23

 

8,207

Total

 

36

 

 

 

Second Quarter 2023 Guidance Update

Based on current market conditions, Southwestern expects second quarter production and price differentials to be within the following ranges.

PRODUCTION

For the quarter ended June 30, 2023

Gas production (Bcf)

355 – 365

Liquids (% of production)

~13.0%

Total (Bcfe)

408 – 420

 

 

PRICING

 

Natural gas discount to NYMEX including transportation (1)

$0.60 – $0.72 per Mcf

Oil discount to West Texas Intermediate (WTI) including transportation

$10.00 – $12.00 per Bbl

Natural gas liquids realization as a % of WTI including transportation

24% – 32%

(1)

Includes an estimated $0.05 to $0.06 per Mcf loss on basis hedges.

Conference Call

Southwestern Energy will host a conference call and webcast on Friday, April 28, 2023 at 9:30 a.m. Central to discuss first quarter 2023 financial and operating results. To participate, dial US toll-free 877-883-0383, or international 412-902-6506 and enter access code 6306886. 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.swncrreport.com.

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 (including the number of rigs and frac crews to be used), estimated reserves and inventory duration, projected production and sales volume and growth rates, projected commodity prices, basis and average differential, impact of commodity prices on our business, projected average well costs, generation of free cash flow, our return of capital strategy, including the amount and timing of any redemptions, repayments or repurchases of our common stock, outstanding debt securities or other debt instruments, leverage targets, our ability to maintain or improve our credit ratings, our ability to achieve our debt reduction plan, leverage levels and financial profile, our hedging strategy, our environmental, social and governance (ESG) initiatives and our ability to achieve anticipated results of such initiatives, expected benefits from acquisitions, potential acquisitions, divestitures, potential divestitures 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, the costs and results of drilling and operations, lack of availability of drilling and production equipment and services, the ability to add proved reserves in the future, 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, the quality of technical data, 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 achieve our debt reduction plan, our ability to increase commitments under our revolving credit facility, our hedging and other financial contracts, 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, including as a result of financial or banking failures, 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, divestitures, and strategic transactions, 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, 2022.

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

 

 

 

March 31,

 

(in millions, except share/per share amounts)

 

2023

 

2022

 

Operating Revenues:

 

 

 

 

 

Gas sales

 

$

1,145

 

 

$

1,692

 

 

Oil sales

 

95

 

 

111

 

 

NGL sales

 

201

 

 

272

 

 

Marketing

 

679

 

 

866

 

 

Other

 

(2

)

 

2

 

 

 

 

2,118

 

 

2,943

 

 

Operating Costs and Expenses:

 

 

 

 

 

Marketing purchases

 

667

 

 

862

 

 

Operating expenses

 

418

 

 

381

 

 

General and administrative expenses

 

46

 

 

44

 

 

Merger-related expenses

 

 

 

25

 

 

Depreciation, depletion and amortization

 

313

 

 

275

 

 

Taxes, other than income taxes

 

68

 

 

57

 

 

 

 

1,512

 

 

1,644

 

 

Operating Income

 

606

 

 

1,299

 

 

Interest Expense:

 

 

 

 

 

Interest on debt

 

63

 

 

68

 

 

Other interest charges

 

3

 

 

3

 

 

Interest capitalized

 

(30

)

 

(30

)

 

 

 

36

 

 

41

 

 

 

 

 

 

 

 

Gain (Loss) on Derivatives

 

1,401

 

 

(3,927

)

 

Loss on Early Extinguishment of Debt

 

(19

)

 

(2

)

 

Other Loss, Net

 

(1

)

 

 

 

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

1,951

 

 

(2,671

)

 

Provision for Income Taxes:

 

 

 

 

 

Current

 

 

 

4

 

 

Deferred

 

12

 

 

 

 

 

 

12

 

 

4

 

 

Net Income (Loss)

 

$

1,939

 

 

$

(2,675

)

 

 

 

 

 

 

 

Earnings (Loss) Per Common Share:

 

 

 

 

 

Basic

 

$

1.76

 

 

$

(2.40

)

 

Diluted

 

$

1.76

 

 

$

(2.40

)

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

Basic

 

1,100,278,261

 

 

1,114,610,964

 

 

Diluted

 

1,102,396,636

 

 

1,114,610,964

 

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

March 31, 2023

 

December 31, 2022

ASSETS

 

(in millions)

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

3

 

 

$

50

 

Accounts receivable, net

 

667

 

 

1,401

 

Derivative assets

 

463

 

 

145

 

Other current assets

 

66

 

 

68

 

Total current assets

 

1,199

 

 

1,664

 

Natural gas and oil properties, using the full cost method

 

36,430

 

 

35,763

 

Other

 

532

 

 

527

 

Less: Accumulated depreciation, depletion and amortization

 

(25,704

)

 

(25,387

)

Total property and equipment, net

 

11,258

 

 

10,903

 

Operating lease assets

 

175

 

 

177

 

Long-term derivative assets

 

201

 

 

72

 

Other long-term assets

 

104

 

 

110

 

Total long-term assets

 

480

 

 

359

 

TOTAL ASSETS

 

$

12,937

 

 

$

12,926

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

1,549

 

 

$

1,835

 

Taxes payable

 

109

 

 

136

 

Interest payable

 

27

 

 

86

 

Derivative liabilities

 

409

 

 

1,317

 

Current operating lease liabilities

 

43

 

 

42

 

Other current liabilities

 

29

 

 

65

 

Total current liabilities

 

2,166

 

 

3,481

 

Long-term debt

 

3,935

 

 

4,392

 

Long-term operating lease liabilities

 

128

 

 

133

 

Long-term derivative liabilities

 

208

 

 

378

 

Other long-term liabilities

 

246

 

 

218

 

Total long-term liabilities

 

4,517

 

 

5,121

 

Commitments and contingencies

 

 

 

 

Equity:

 

 

 

 

Common stock, $0.01 par value; 2,500,000,000 shares authorized; issued 1,162,882,464 shares as of March 31, 2023 and 1,161,545,588 shares as of December 31, 2022

 

12

 

 

12

 

Additional paid-in capital

 

7,178

 

 

7,172

 

Accumulated deficit

 

(600

)

 

(2,539

)

Accumulated other comprehensive income (loss)

 

(9

)

 

6

 

Common stock in treasury, 61,614,693 shares as of March 31, 2023 and December 31, 2022

 

(327

)

 

(327

)

Total equity

 

6,254

 

 

4,324

 

TOTAL LIABILITIES AND EQUITY

 

$

12,937

 

 

$

12,926

 

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the three months ended

 

 

March 31,

(in millions)

 

2023

 

2022

Cash Flows From Operating Activities:

 

 

 

 

Net income (loss)

 

$

1,939

 

 

$

(2,675

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

Depreciation, depletion and amortization

 

313

 

 

275

 

Amortization of debt issuance costs

 

2

 

 

2

 

Deferred income taxes

 

12

 

 

 

(Gain) loss on derivatives, unsettled

 

(1,524

)

 

3,232

 

Stock-based compensation

 

1

 

 

1

 

Loss on early extinguishment of debt

 

19

 

 

2

 

Other

 

2

 

 

(1

)

Change in assets and liabilities, excluding impact from acquisitions:

 

 

 

 

 

 

Accounts receivable

 

734

 

 

89

 

Accounts payable

 

(257

)

 

126

 

Taxes payable

 

(27

)

 

(13

)

Interest payable

 

(33

)

 

(16

)

Inventories

 

(14

)

 

4

 

Other assets and liabilities

 

(30

)

 

(54

)

Net cash provided by operating activities

 

1,137

 

 

972

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

Capital investments

 

(670

)

 

(500

)

Net cash used in investing activities

 

(670

)

 

(500

)

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

Payments on current portion of long-term debt

 

 

 

(202

)

Payments on long-term debt

 

(437

)

 

(21

)

Payments on revolving credit facility

 

(1,357

)

 

(2,803

)

Borrowings under revolving credit facility

 

1,317

 

 

2,517

 

Change in bank drafts outstanding

 

(33

)

 

34

 

Cash paid for tax withholding

 

(4

)

 

(4

)

Net cash used in financing activities

 

(514

)

 

(479

)

 

 

 

 

 

Decrease in cash and cash equivalents

 

(47

)

 

(7

)

Cash and cash equivalents at beginning of year

 

50

 

 

28

 

Cash and cash equivalents at end of period

 

$

3

 

 

$

21

Hedging Summary

A detailed breakdown of derivative financial instruments and financial basis positions as of March 31, 2023, including the remainder of 2023 and excluding those positions that settled in the first quarter, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

453

 

$

3.15

 

$

 

$

 

$

Two-way costless collars

116

 

 

 

 

 

 

2.86

 

 

3.21

Three-way costless collars

145

 

 

 

 

2.07

 

 

2.49

 

 

2.91

Total

714

 

 

 

 

 

 

 

 

 

 

 

 

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

528

 

$

3.54

 

$

 

$

 

$

Two-way costless collars

44

 

 

 

 

 

 

3.07

 

 

3.53

Three-way costless collars

11

 

 

 

 

2.25

 

 

2.80

 

 

3.54

Total

583

 

 

 

 

 

 

 

 

 

 

 

 

2025

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-way costless collars

99

 

 

 

 

2.50

 

 

3.75

 

 

5.69

Natural gas financial basis positions

 

Volume

 

Basis Differential

 

 

(Bcf)

 

($/MMBtu)

Q2 2023

 

 

 

 

Dominion South

 

34

 

 

$

(0.75

)

TCO

 

22

 

 

$

(0.60

)

TETCO M3

 

15

 

 

$

(0.55

)

Trunkline Zone 1A

 

3

 

 

$

(0.29

)

Total

 

74

 

 

$

(0.64

)

Q3 2023

 

 

 

 

 

 

 

Dominion South

 

34

 

 

$

(0.75

)

TCO

 

22

 

 

$

(0.62

)

TETCO M3

 

16

 

 

$

(0.66

)

Trunkline Zone 1A

 

3

 

 

$

(0.29

)

Total

 

75

 

 

$

(0.67

)

Q4 2023

 

 

 

 

Dominion South

 

33

 

 

$

(0.75

)

TCO

 

20

 

 

$

(0.61

)

TETCO M3

 

15

 

 

$

(0.18

)

Trunkline Zone 1A

 

3

 

 

$

(0.29

)

Total

 

71

 

 

$

(0.57

)

2024

 

 

 

 

 

 

 

Dominion South

 

46

 

 

$

(0.71

)

2025

 

 

 

 

 

 

 

Dominion South

 

9

 

 

$

(0.64

)

Call Options – Natural Gas (Net)

 

Volume

 

Weighted Average Strike Price

 

 

(Bcf)

 

($/MMBtu)

2023

 

36

 

 

$

2.95

 

2024

 

9

 

 

$

3.00

 

Total

 

45

 

 

 

 

 

 

 

 

Weighted Average Price per Bbl

 

Volume (MBbls)

 

Swaps

 

Sold Puts

 

Purchased Puts

 

Sold Calls

Oil

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

999

 

$

62.61

 

$

 

$

 

$

Two-way costless collars

294

 

 

 

 

 

 

70.00

 

 

80.58

Three-way costless collars

926

 

 

 

 

34.09

 

 

45.68

 

 

56.07

Total

2,219

 

 

 

 

 

 

 

 

 

 

 

 

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

1,571

 

$

71.06

 

$

 

$

 

$

Two-way costless collars

146

 

 

 

 

 

 

70.00

 

 

78.25

Total

1,717

 

 

 

 

 

 

 

 

 

 

 

 

2025

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

41

 

$

77.66

 

$

 

$

 

$

Ethane

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

5,570

 

$

11.51

 

$

 

$

 

$

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

1,305

 

$

10.81

 

$

 

$

 

$

Propane

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

3,592

 

$

36.31

 

$

 

$

 

$

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

1,094

 

$

35.70

 

$

 

$

 

$

Normal Butane

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

591

 

$

40.96

 

$

 

$

 

$

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

329

 

$

40.74

 

$

 

$

 

$

Natural Gasoline

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

512

 

$

63.74

 

$

 

$

 

$

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

329

 

$

64.37

 

$

 

$

 

$

Put Options – Oil (Net)

 

Volume

 

Weighted Average Strike Price

 

 

(MBbls)

 

($/Bbl)

2023

 

127

 

 

$

73.50

 

 

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, adjusted EBITDA and net debt to adjusted EBITDA, all of 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 March 31,

 

 

2023

 

2022

 

Adjusted net income:

(in millions)

 

Net income (loss)

$

1,939

 

 

$

(2,675

)

 

Add back (deduct):

 

 

 

 

 

 

 

 

Merger-related expenses

 

 

 

 

25

 

 

(Gain) loss on unsettled derivatives (1)

 

(1,524

)

 

 

3,232

 

 

Loss on early extinguishment of debt

 

19

 

 

 

2

 

 

Other

 

3

 

 

 

 

 

Adjustments due to discrete tax items (2)

 

(437

)

 

 

648

 

 

Tax impact on adjustments

 

346

 

 

 

(785

)

 

Adjusted net income

$

346

 

 

$

447

 

 

(1)

Includes ($4) million and $5 million of non-performance risk adjustment related to our derivative activities for the three months ended March 31, 2023 and 2022, respectively.

(2)

The Company’s 2023 income tax rate is 23.0% before the impacts of any valuation allowance.

 

3 Months Ended March 31,

 

 

2023

 

2022

 

Adjusted diluted earnings per share:

 

 

Diluted earnings (loss) per share

$

1.76

 

 

$

(2.40

)

 

Add back (deduct):

 

 

 

 

 

 

 

 

Merger-related expenses

 

 

 

 

0.02

 

 

(Gain) loss on unsettled derivatives (1)

 

(1.38

)

 

 

2.89

 

 

Loss on early extinguishment of debt

 

0.02

 

 

 

0.00

 

 

Other

 

0.00

 

 

 

 

 

Adjustments due to discrete tax items (2)

 

(0.40

)

 

 

0.58

 

 

Tax impact on adjustments

 

0.31

 

 

 

(0.69

)

 

Adjusted diluted earnings per share

$

0.31

 

 

$

0.40

 

 

(1)

Includes ($4) million and $5 million of non-performance risk adjustment related to our derivative activities for the three months ended March 31, 2023 and 2022, respectively.

(2)

The Company’s 2023 income tax rate is 23.0% before the impacts of any valuation allowance.

 

3 Months Ended March 31,

 

 

2023

 

2022

 

Net cash flow:

(in millions)

 

Net cash provided by operating activities

$

1,137

 

 

$

972

 

 

Add back (deduct):

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities

 

(373

)

 

 

(136

)

 

Merger-related expenses

 

 

 

 

25

 

 

Net cash flow

$

764

 

 

$

861

 

 

 

3 Months Ended March 31,

 

 

2023

 

2022

 

Free cash flow:

(in millions)

 

Net cash flow

$

764

 

 

$

861

 

 

Subtract:

 

 

 

 

 

 

 

 

Total capital investments

 

(665

)

 

 

(544

)

 

Free cash flow

$

99

 

 

$

317

 

 

 

3 Months Ended March 31,

 

 

2023

 

2022

 

Adjusted EBITDA:

(in millions)

 

Net income (loss)

$

1,939

 

 

$

(2,675

)

 

Add back (deduct):

 

 

 

 

 

 

 

 

Interest expense

 

36

 

 

 

41

 

 

Income tax expense

 

12

 

 

 

4

 

 

Depreciation, depletion and amortization

 

313

 

 

 

275

 

 

Merger-related expenses

 

 

 

 

25

 

 

(Gain) loss on unsettled derivatives (1)

 

(1,524

)

 

 

3,232

 

 

Loss on early extinguishment of debt

 

19

 

 

 

2

 

 

Other

 

3

 

 

 

 

 

Stock-based compensation expense

 

1

 

 

 

1

 

 

Adjusted EBITDA

$

799

 

 

$

905

 

 

(1)

Includes ($4) million and $5 million of non-performance risk adjustment related to our derivative activities for the three months ended March 31, 2023 and 2022, respectively.

 

 

12 Months Ended March 31, 2023

Adjusted EBITDA:

 

(in millions)

Net income (loss)

 

$

6,463

 

Add back (deduct):

 

 

 

 

Interest expense

 

 

179

 

Income tax expense

 

 

59

 

Depreciation, depletion and amortization

 

 

1,212

 

Merger-related expenses

 

 

2

 

Gain on unsettled derivatives (1)

 

 

(4,780

)

Loss on early extinguishment of debt

 

 

31

 

Stock-based compensation expense

 

 

4

 

Other

 

7

 

Adjusted EBITDA

 

$

3,177

 

(1)

Includes ($9) million of non-performance risk adjustment for the twelve months ended March 31, 2023

 

 

March 31, 2023

Net debt:

 

(in millions)

Total debt (1)

 

$

3,953

 

Subtract:

 

 

Cash and cash equivalents

 

(3

)

Net debt

 

$

3,950

 

(1)

Does not include $18 million of unamortized debt premium/discount and issuance expense.

 

 

March 31, 2023

Net debt to Adjusted EBITDA:

 

(in millions)

Net debt

 

$

3,950

 

Adjusted EBITDA

 

$

3,177

 

Net debt to Adjusted EBITDA

 

1.2x

 

Investor Contact Brittany Raiford Director, Investor Relations (832) 796-7906 brittany_raiford@swn.com

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