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

 

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

Southwestern Energy (NYSE:SWN)
Historical Stock Chart
From Jan 2024 to Feb 2024 Click Here for more Southwestern Energy Charts.
Southwestern Energy (NYSE:SWN)
Historical Stock Chart
From Feb 2023 to Feb 2024 Click Here for more Southwestern Energy Charts.