Reduces full-year capital investment guidance
~10%
Southwestern Energy Company (NYSE: SWN) today announced
financial and operating results for the second quarter ended June
30, 2023.
- Generated $231 million net income, $95 million adjusted net
income (non-GAAP), $484 million adjusted EBITDA (non-GAAP) and $425
million net cash provided by operating activities
- Reported total net production of 423 Bcfe, or 4.6 Bcfe per day,
including 4.0 Bcf per day of gas and 106 MBbls per day of
liquids
- Invested $595 million of capital and placed 50 wells to sales,
including 28 in Appalachia and 22 in Haynesville
- Reduced full-year capital investment guidance $200 million, or
approximately 10%, due to activity reductions, moderating
inflation, and operational efficiencies
- Closed divestiture of non-core Pennsylvania Utica assets,
applying $123 million of net proceeds to debt reduction
“Southwestern Energy continues to improve the resilience and
free cash flow generation capacity of our business. With our
successes mitigating inflationary pressures and driving operational
efficiencies, we expect to deliver our 2023 plan with less activity
and corresponding investment. Debt reduction remains our top
capital allocation priority, which we accelerated with a non-core
asset sale. Our disciplined strategy to manage through the
commodity price cycle maintains the Company’s financial strength
and productive capacity. We are well positioned to increase
shareholder value in the supportive longer-term natural gas
environment,” said Bill Way, Southwestern Energy President and
Chief Executive Officer.
Financial Results
For the three months ended
For the six months ended
June 30,
June 30,
(in millions)
2023
2022
2023
2022
Net income (loss)
$
231
$
1,173
$
2,170
$
(1,502
)
Adjusted net income (non-GAAP)
$
95
$
368
$
441
$
815
Diluted earnings (loss) per share
$
0.21
$
1.05
$
1.97
$
(1.35
)
Adjusted diluted earnings per share
(non-GAAP)
$
0.09
$
0.33
$
0.40
$
0.73
Adjusted EBITDA (non-GAAP)
$
484
$
822
$
1,283
$
1,727
Net cash provided by operating
activities
$
425
$
427
$
1,562
$
1,399
Net cash flow (non-GAAP)
$
453
$
754
$
1,217
$
1,615
Total capital investments (1)
$
595
$
585
$
1,260
$
1,129
Free cash flow (deficit) (non-GAAP)
$
(142
)
$
169
$
(43
)
$
486
(1)
Capital investments include a decrease of
$22 million and an increase of $34 million for the three months
ended June 30, 2023 and 2022, respectively, and a decrease of $28
million and an increase of $77 million for the six months ended
June 30, 2023 and 2022, respectively, relating to the change in
capital accruals between periods.
For the quarter ended June 30, 2023, Southwestern Energy
recorded net income of $231 million, or $0.21 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 $95 million, or $0.09 per diluted share, and
adjusted EBITDA (non-GAAP) was $484 million. Net cash provided by
operating activities was $425 million, net cash flow (non-GAAP) was
$453 million and total capital investments were $595 million.
As of June 30, 2023, Southwestern Energy had total debt of $4.05
billion and net debt to adjusted EBITDA (non-GAAP) of 1.4x. At the
end of the quarter, the Company had $310 million of borrowings
under its revolving credit facility and $25 million in outstanding
letters of credit.
As indicated in the table below, second quarter 2023 weighted
average realized price was $1.84 per Mcfe, excluding the impact of
derivatives and net of $0.25 per Mcfe of transportation expenses.
Including derivatives, weighted average realized price for the
second quarter was down 23% from $3.04 per Mcfe in 2022 to $2.33
per Mcfe in 2023 primarily due to lower commodity prices including
a 71% decrease in NYMEX Henry Hub and a 32% decrease in WTI.
Realized Prices
For the three months ended
For the six months ended
(includes transportation costs)
June 30,
June 30,
2023
2022
2023
2022
Natural Gas Price:
NYMEX Henry Hub price ($/MMBtu) (1)
$
2.10
$
7.17
$
2.76
$
6.06
Discount to NYMEX (2)
(0.63
)
(0.69
)
(0.43
)
(0.56
)
Average realized gas price, excluding
derivatives ($/Mcf)
$
1.47
$
6.48
$
2.33
$
5.50
Gain (loss) on settled financial basis
derivatives ($/Mcf)
(0.02
)
0.06
(0.05
)
0.04
Gain (loss) on settled commodity
derivatives ($/Mcf)
0.57
(3.86
)
0.17
(2.70
)
Average realized gas price, including
derivatives ($/Mcf)
$
2.02
$
2.68
$
2.45
$
2.84
Oil Price:
WTI oil price ($/Bbl) (3)
$
73.78
$
108.41
$
74.96
$
101.35
Discount to WTI (4)
(10.58
)
(8.12
)
(10.41
)
(7.81
)
Average realized oil price, excluding
derivatives ($/Bbl)
$
63.20
$
100.29
$
64.55
$
93.54
Average realized oil price, including
derivatives ($/Bbl)
$
56.82
$
56.94
$
57.49
$
53.73
NGL Price:
Average realized NGL price, excluding
derivatives ($/Bbl)
$
18.63
$
40.07
$
21.51
$
39.72
Average realized NGL price, including
derivatives ($/Bbl)
$
20.85
$
29.23
$
22.71
$
28.22
Percentage of WTI, excluding
derivatives
25
%
37
%
29
%
39
%
Total Weighted Average Realized
Price:
Excluding derivatives ($/Mcfe)
$
1.84
$
6.69
$
2.65
$
5.80
Including derivatives ($/Mcfe)
$
2.33
$
3.04
$
2.75
$
3.14
(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 June 30, 2023 was 423
Bcfe, of which 86% was natural gas, 12% NGLs and 2% oil. Capital
investments totaled $595 million for the second quarter of 2023
with 38 wells drilled, 46 wells completed and 50 wells placed to
sales.
For the three months ended
For the six months ended
June 30,
June 30,
2023
2022
2023
2022
Production
Natural gas production (Bcf)
365
383
718
759
Oil production (MBbls)
1,441
1,363
2,859
2,633
NGL production (MBbls)
8,247
7,738
16,487
14,657
Total production (Bcfe)
423
438
834
863
Average unit costs per Mcfe
Lease operating expenses (1)
$
1.00
$
0.97
$
1.03
$
0.96
General & administrative expenses
(2)
$
0.09
$
0.07
$
0.09
$
0.08
Taxes, other than income taxes
$
0.14
$
0.15
$
0.15
$
0.14
Full cost pool amortization
$
0.77
$
0.65
$
0.76
$
0.64
(1)
Includes post-production costs such as
gathering, processing, fractionation and compression.
(2)
Excludes $2 million and $27 million in
merger-related expenses for the three and six months ended June 30,
2022, respectively.
Appalachia – In the second quarter, total production was
257 Bcfe, with NGL production of 90 MBbls per day and oil
production of 16 MBbls per day. The Company drilled 20 wells,
completed 28 wells and placed 28 wells to sales with an average
lateral length of 17,304 feet.
Haynesville – In the second quarter, total production was
166 Bcf. There were 18 wells drilled, 18 wells completed and 22
wells placed to sales in the quarter with an average lateral length
of 8,527 feet.
E&P Division Results
For the three months ended June
30, 2023
For the six months ended June 30,
2023
Appalachia
Haynesville
Appalachia
Haynesville
Natural gas production (Bcf)
199
166
392
326
Liquids production
Oil (MBbls)
1,434
7
2,843
15
NGL (MBbls)
8,240
5
16,480
5
Production (Bcfe)
257
166
508
326
Capital investments (in
millions)
Drilling and completions, including
workovers
$
219
$
292
$
438
$
651
Land acquisition and other
27
1
53
3
Capitalized interest and expense
29
19
60
39
Total capital investments
$
275
$
312
$
551
$
693
Gross operated well activity
summary
Drilled
20
18
39
30
Completed
28
18
43
39
Wells to sales
28
22
41
45
Total weighted average realized price
per Mcfe, excluding derivatives
$
1.83
$
1.86
$
2.75
$
2.50
Wells to sales summary
For the three months ended June
30, 2023
Gross wells to sales
Average lateral length
Appalachia
Super Rich Marcellus
11
15,445
Rich Marcellus
8
16,822
Dry Gas Utica(1)
3
19,740
Dry Gas Marcellus
6
20,136
Haynesville
22
8,527
Total
50
(1)
Ohio Utica
2023 Guidance
In the table below, the Company provides third quarter and
updated full year 2023 guidance reflecting current market
conditions. Bold indicates updated full year guidance.
3rd Quarter
Total Year
PRODUCTION
Gas production (Bcf)
360 – 380
1,425 – 1,465
Liquids (% of production)
~13.5%
13.5 – 14.0%
Total (Bcfe)
419 – 439
1,650 – 1,705
CAPITAL BY DIVISION (in
millions)
Appalachia
~45%
Haynesville
~55%
Total D&C capital (includes land)
$1,750 – $2,020
Other
$50 – $70
Capitalized interest and expense
$200 – $210
Total capital investments
$2,000 – $2,300
PRICING
Natural gas discount to NYMEX including
transportation (1)
$0.75 – $0.87 per Mcf
$0.55 – $0.70 per Mcf
Oil discount to West Texas Intermediate
(WTI) including transportation
$12.50 – $14.50 per Bbl
$12.00 – $15.00 per Bbl
Natural gas liquids realization as a % of
WTI including transportation (2)
20% – 28%
27% – 35%
EXPENSES
Lease operating expenses
$1.05 – $1.11 per Mcfe
General & administrative expense
$0.08 – $0.12 per Mcfe
Taxes, other than income taxes
$0.16 – $0.20 per Mcfe
Income tax rate (~100% deferred)
23.0%
GROSS OPERATED WELL COUNT (3)
Drilled
Completed
Wells To Sales
Ending DUC Inventory
Appalachia
53 – 57
59 – 63
62 – 66
13 – 17
Haynesville
52 – 56
55 – 59
61 – 65
17 – 21
Total Well Count
105 – 113
114 – 122
123 – 131
30 – 38
(1)
Includes impact of transportation costs
and expected $0.08 — $0.12 per Mcf and $0.02 — $0.04 per Mcf impact
from financial basis hedges for the third quarter and full year of
2023, respectively.
(2)
Annual guidance based on $74 per Bbl
WTI.
(3)
Based on the midpoint of capital
investment guidance.
Conference Call
Southwestern Energy will host a conference call and webcast on
Friday, August 4, 2023 at 9:30 a.m. Central to discuss second
quarter 2023 results. To participate, dial US toll-free
877-883-0383, or international 412-902-6506 and enter access code
6394673. 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
For the six months ended
June 30,
June 30,
(in millions, except share/per share
amounts)
2023
2022
2023
2022
Operating Revenues:
Gas sales
$
551
$
2,485
$
1,696
$
4,177
Oil sales
92
138
187
249
NGL sales
153
310
354
582
Marketing
475
1,207
1,154
2,073
Other
(2
)
(2
)
(4
)
—
1,269
4,138
3,387
7,081
Operating Costs and Expenses:
Marketing purchases
481
1,215
1,148
2,077
Operating expenses
418
402
836
783
General and administrative expenses
41
35
87
79
Merger-related expenses
—
2
—
27
Depreciation, depletion and
amortization
328
288
641
563
Taxes, other than income taxes
58
65
126
122
1,326
2,007
2,838
3,651
Operating Income (Loss)
(57
)
2,131
549
3,430
Interest Expense:
Interest on debt
60
73
123
141
Other interest charges
3
4
6
7
Interest capitalized
(29
)
(29
)
(59
)
(59
)
34
48
70
89
Gain (Loss) on Derivatives
317
(879
)
1,718
(4,806
)
Loss on Early Extinguishment of
Debt
—
(4
)
(19
)
(6
)
Other Loss, Net
—
(1
)
(1
)
(1
)
Income (Loss) Before Income
Taxes
226
1,199
2,177
(1,472
)
Provision (Benefit) for Income
Taxes:
Current
—
26
—
30
Deferred
(5
)
—
7
—
(5
)
26
7
30
Net Income (Loss)
$
231
$
1,173
$
2,170
$
(1,502
)
Earnings (Loss) Per Common
Share:
Basic
$
0.21
$
1.05
$
1.97
$
(1.35
)
Diluted
$
0.21
$
1.05
$
1.97
$
(1.35
)
Weighted Average Common Shares
Outstanding:
Basic
1,101,167,082
1,116,175,758
1,100,725,127
1,115,456,855
Diluted
1,102,724,782
1,118,244,778
1,102,487,313
1,115,456,855
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2023
December 31, 2022
ASSETS
(in millions)
Current assets:
Cash and cash equivalents
$
25
$
50
Accounts receivable, net
598
1,401
Derivative assets
423
145
Other current assets
74
68
Total current assets
1,120
1,664
Natural gas and oil properties, using the
full cost method
36,899
35,763
Other
545
527
Less: Accumulated depreciation, depletion
and amortization
(26,039
)
(25,387
)
Total property and equipment, net
11,405
10,903
Operating lease assets
168
177
Long-term derivative assets
205
72
Other long-term assets
103
110
Total long-term assets
476
359
TOTAL ASSETS
$
13,001
$
12,926
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
1,381
$
1,835
Taxes payable
116
136
Interest payable
77
86
Derivative liabilities
270
1,317
Current operating lease liabilities
44
42
Other current liabilities
22
65
Total current liabilities
1,910
3,481
Long-term debt
4,036
4,392
Long-term operating lease liabilities
121
133
Long-term derivative liabilities
205
378
Other long-term liabilities
240
218
Total long-term liabilities
4,602
5,121
Commitments and contingencies
Equity:
Common stock, $0.01 par value;
2,500,000,000 shares authorized; issued 1,163,077,745 shares as of
June 30, 2023 and 1,161,545,588 shares as of December 31, 2022
12
12
Additional paid-in capital
7,182
7,172
Accumulated deficit
(369
)
(2,539
)
Accumulated other comprehensive income
(loss)
(9
)
6
Common stock in treasury, 61,614,693
shares as of June 30, 2023 and December 31, 2022
(327
)
(327
)
Total equity
6,489
4,324
TOTAL LIABILITIES AND EQUITY
$
13,001
$
12,926
SOUTHWESTERN ENERGY COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
For the six months ended
June 30,
(in millions)
2023
2022
Cash Flows From Operating
Activities:
Net income (loss)
$
2,170
$
(1,502
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion and
amortization
641
563
Amortization of debt issuance costs
4
6
Deferred income taxes
7
—
Gain (loss) on derivatives, unsettled
(1,631
)
2,510
Stock-based compensation
5
3
Loss on early extinguishment of debt
19
6
Other
2
2
Change in assets and liabilities:
Accounts receivable
803
(621
)
Accounts payable
(363
)
433
Taxes payable
(20
)
4
Interest payable
(5
)
7
Inventories
(25
)
(5
)
Other assets and liabilities
(45
)
(7
)
Net cash provided by operating
activities
1,562
1,399
Cash Flows From Investing
Activities:
Capital investments
(1,286
)
(1,050
)
Proceeds from sale of property and
equipment
123
1
Net cash used in investing activities
(1,163
)
(1,049
)
Cash Flows From Financing
Activities:
Payments on current portion of long-term
debt
—
(204
)
Payments on long-term debt
(437
)
(71
)
Payments on revolving credit facility
(1,946
)
(5,564
)
Borrowings under revolving credit
facility
2,006
5,510
Change in bank drafts outstanding
(43
)
29
Proceeds from exercise of common stock
options
—
7
Purchase of treasury stock
—
(20
)
Debt issuance/amendment costs
—
(11
)
Cash paid for tax withholding
(4
)
(4
)
Net cash used in financing activities
(424
)
(328
)
Increase (decrease) in cash and cash
equivalents
(25
)
22
Cash and cash equivalents at beginning of
year
50
28
Cash and cash equivalents at end of
period
$
25
$
50
Hedging Summary
A detailed breakdown of derivative financial instruments and
financial basis positions as of June 30, 2023, including the
remainder of 2023 and excluding those positions that settled in the
first and second 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
2023
Fixed price swaps
348
$
3.25
$
—
$
—
$
—
Two-way costless collars
78
—
—
2.83
3.21
Three-way costless collars
95
—
2.08
2.50
2.91
Total
521
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
Two-way costless collars
73
$
—
$
—
$
3.50
$
5.40
Three-way costless collars
106
—
2.50
3.75
5.69
Total
179
Natural gas financial basis
positions
Volume
Basis Differential
(Bcf)
($/MMBtu)
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
25
$
2.96
2024
82
6.56
2025
73
7.00
2026
73
7.00
Total
253
Weighted Average Price per
Bbl
Volume (MBbls)
Swaps
Sold Puts
Purchased Puts
Sold Calls
Oil
2023
Fixed price swaps
1,466
$
67.34
$
—
$
—
$
—
Two-way costless collars
294
—
—
70.00
80.58
Three-way costless collars
582
—
34.36
46.05
55.96
Total
2,342
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
4,499
$
11.01
$
—
$
—
$
—
2024
Fixed price swaps
1,305
$
10.81
$
—
$
—
$
—
Propane
2023
Fixed price swaps
3,601
$
32.19
$
—
$
—
$
—
2024
Fixed price swaps
1,460
$
33.29
$
—
$
—
$
—
Normal Butane
2023
Fixed price swaps
396
$
40.96
$
—
$
—
$
—
2024
Fixed price swaps
329
$
40.74
$
—
$
—
$
—
Natural Gasoline
2023
Fixed price swaps
342
$
63.74
$
—
$
—
$
—
2024
Fixed price swaps
329
$
64.37
$
—
$
—
$
—
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 (deficit), 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.
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Adjusted net income:
(in millions)
Net income (loss)
$
231
$
1,173
$
2,170
$
(1,502
)
Add back (deduct):
Merger-related expenses
—
2
—
27
(Gain) loss on unsettled derivatives
(1)
(107
)
(722
)
(1,631
)
2,510
Loss on early extinguishment of debt
—
4
19
6
Other (2)
4
1
7
1
Adjustments due to discrete tax items
(3)
(57
)
(263
)
(494
)
385
Tax impact on adjustments
24
173
370
(612
)
Adjusted net income
$
95
$
368
$
441
$
815
(1)
Includes ($4) million of non-performance
risk adjustment to derivative activities for the six months ended
June 30, 2023, and $4 million and $9 million of non-performance
risk adjustment to derivative activities for the three and six
months ended June 30, 2022, respectively.
(2)
Includes $4 million and $5 million for the
three and six months ended June, 30, 2023, respectively, of G&A
related to the development of enterprise resource technology,
expensed in the period incurred per GAAP.
(3)
The Company’s 2023 income tax rate is
23.0% before the impacts of any valuation allowance.
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Adjusted diluted earnings per
share:
Diluted earnings (loss) per share
$
0.21
$
1.05
$
1.97
$
(1.35
)
Add back (deduct):
Merger-related expenses
—
0.00
—
0.03
(Gain) loss on unsettled derivatives
(1)
(0.10
)
(0.64
)
(1.48
)
2.25
Loss on early extinguishment of debt
—
0.00
0.02
0.00
Other (2)
0.00
0.00
0.00
0.00
Adjustments due to discrete tax items
(3)
(0.05
)
(0.23
)
(0.45
)
0.34
Tax impact on adjustments
0.03
0.15
0.34
(0.54
)
Adjusted diluted earnings per share
$
0.09
$
0.33
$
0.40
$
0.73
(1)
Includes ($4) million of non-performance
risk adjustment to derivative activities for the six months ended
June 30, 2023, and $4 million and $9 million of non-performance
risk adjustment to derivative activities for the three and six
months ended June 30, 2022, respectively.
(2)
Includes $4 million and $5 million for the
three and six months ended June, 30, 2023, respectively, of G&A
related to the development of enterprise resource technology,
expensed in the period incurred per GAAP.
(3)
The Company’s 2023 income tax rate is
23.0% before the impacts of any valuation allowance.
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net cash flow:
(in millions)
Net cash provided by operating
activities
$
425
$
427
$
1,562
$
1,399
Add back (deduct):
Changes in operating assets and
liabilities
28
325
(345
)
189
Merger-related expenses
—
2
—
27
Net cash flow
$
453
$
754
$
1,217
$
1,615
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Free cash flow (deficit):
(in millions)
Net cash flow
$
453
$
754
$
1,217
$
1,615
Subtract:
Total capital investments
(595
)
(585
)
(1,260
)
(1,129
)
Free cash flow (deficit)
$
(142
)
$
169
$
(43
)
$
486
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Adjusted EBITDA:
(in millions)
Net income (loss)
$
231
$
1,173
$
2,170
$
(1,502
)
Add back (deduct):
Interest expense
34
48
70
89
Income tax expense (benefit)
(5
)
26
7
30
Depreciation, depletion and
amortization
328
288
641
563
Merger-related expenses
—
2
—
27
(Gain) loss on unsettled derivatives
(1)
(107
)
(722
)
(1,631
)
2,510
Loss on early extinguishment of debt
—
4
19
6
Other
(1
)
1
2
1
Stock-based compensation expense
4
2
5
3
Adjusted EBITDA
$
484
$
822
$
1,283
$
1,727
(1)
Includes ($4) million of non-performance
risk adjustment to derivative activities for the six months ended
June 30, 2023, and $4 million and $9 million of non-performance
risk adjustment to derivative activities for the three and six
months ended June 30, 2022, respectively.
12 Months Ended June 30,
2023
Adjusted EBITDA:
(in millions)
Net income
$
5,521
Add back (deduct):
Interest expense
165
Income tax expense
28
Depreciation, depletion and
amortization
1,252
Gain on unsettled derivatives (1)
(4,165
)
Loss on early extinguishment of debt
27
Stock-based compensation expense
6
Other
5
Adjusted EBITDA
$
2,839
(1)
Includes ($13) million of non-performance
risk adjustment for the twelve months ended June 30, 2023.
June 30, 2023
Net debt:
(in millions)
Total debt (1)
$
4,053
Subtract:
Cash and cash equivalents
(25
)
Net debt
$
4,028
(1)
Does not include $17 million of
unamortized debt discount and issuance expense.
June 30, 2023
Net debt to Adjusted EBITDA:
(in millions)
Net debt
$
4,028
Adjusted EBITDA
$
2,839
Net debt to Adjusted EBITDA
1.4x
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230803628314/en/
Brittany Raiford Director, Investor Relations (832) 796-7906
brittany_raiford@swn.com
Southwestern Energy (NYSE:SWN)
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