HOUSTON, July 30 /PRNewswire-FirstCall/ -- Southwestern Energy
Company (NYSE:SWN) today announced its financial and operating
results for the second quarter of 2009. Highlights include: --
Natural gas and crude oil production of 74.3 Bcfe, up 65% over the
same period in 2008 -- Net cash provided by operating activities
before changes in operating assets and liabilities of $325.3
million (a non-GAAP measure reconciled below), up 13% from the same
period in 2008 -- Net earnings of $121.1 million, compared to
$136.6 million in the same period in 2008 For the second quarter of
2009, Southwestern reported net income of $121.1 million, or $0.35
per diluted share, compared to $136.6 million, or $0.39 per diluted
share, for the same period in 2008. Net cash provided by operating
activities before changes in operating assets and liabilities (a
non-GAAP measure reconciled below) was $325.3 million in the second
quarter of 2009, up from $288.2 million for the same period in
2008. "We continue to make significant progress in the development
of our Fayetteville Shale play every quarter, and the second
quarter was no exception," remarked Harold M. Korell, Executive
Chairman of Southwestern Energy. "Our gross operated production
from the Fayetteville Shale reached a significant milestone of 1
Bcf per day in July, compared to approximately 500 MMcf per day
this time a year ago. The productivity of our wells also continues
to improve as we learn more. While current gas prices remain low,
we believe lower industry drilling activity will result in higher
prices over the next 18 months. With our focus on value creation
and a world-class resource to develop in the Fayetteville Shale, we
are well-positioned not only to weather the current low commodity
price environment with our strong balance sheet and financial
flexibility, but also to benefit greatly when prices return to more
normalized levels." For the first six months of 2009, Southwestern
reported a net loss of $311.7 million, or $0.91 per diluted share,
which included a first quarter $907.8 million non-cash ceiling test
impairment ($558.3 million net of taxes) of the company's natural
gas and oil properties resulting from lower natural gas prices.
Excluding the non-cash impairment, Southwestern's net income for
the first six months of 2009 was $246.6 million (a non-GAAP
measure; see reconciliation below), or $0.71 per diluted share,
compared to net income of $245.6 million, or $0.71 per diluted
share, in the same period in 2008. Net cash provided by operating
activities before changes in operating assets and liabilities (a
non-GAAP measure; see reconciliation below), was $697.9 million for
the first six months of 2009, up 22% from $571.9 million for the
same period in 2008. Excluding the non-cash impairment, the
company's financial results have been impacted primarily by the
significant growth in production volumes during the first six
months of 2009, partially offset by lower realized natural gas
prices. Second Quarter 2009 Financial Results E&P Segment -
Operating income from the company's E&P segment was $174.4
million for the second quarter of 2009, compared to $215.1 million
for the same period in 2008. The decrease was primarily due to a
39% decrease in realized natural gas prices and a 22% increase in
operating costs and expenses, which was partially offset by a 65%
increase in production volumes. Gas and oil production totaled 74.3
Bcfe in the second quarter of 2009, up from 45.1 Bcfe in the second
quarter of 2008, and included 60.6 Bcf from the company's
Fayetteville Shale play, up from 29.6 Bcf in the second quarter of
2008. As a result of recent inspections, repairs and maintenance on
the Fayetteville Lateral of the Texas Gas Transmission Pipeline
(Boardwalk Pipeline), the company has experienced curtailments that
have impacted its ability to transport its production from the
Fayetteville Shale. Beginning in April 2009, Texas Gas reduced the
capacity on, or shut down, the Fayetteville Lateral on several
occasions due to various activities, including maintenance and
pipeline inspection. These activities, as well as similar repairs
to the Greenville Lateral, are expected to continue, resulting in
future curtailments. Texas Gas has estimated that it will begin
repairs and maintenance on the pipeline in September and that the
repairs will be completed in one to five months. Currently, the
company's transportation capacity for its Fayetteville Shale
production is sufficient for its wells at a gross operated rate of
approximately 1,050 MMcf per day. Southwestern's net share of its
gross operated capacity, together with its share of production
which is operated by other companies, is approximately 750 MMcf per
day. Southwestern estimates that its total gross operated
production will be curtailed to approximately 650 MMcf per day, or
approximately 450 MMcf per day net, once the repairs to the
Fayetteville Lateral Phase 1 facilities begin. In anticipation of
these continued pipeline curtailments, Southwestern has revised its
previous gas and oil production guidance range for 2009 from 289 to
292 Bcfe to 278 to 288 Bcfe, or approximately 45% over 2008 levels
(using midpoints). Of the total 2009 targeted annual production,
approximately 227 to 236 Bcf is expected to come from the
Fayetteville Shale. This revised production guidance assumes
curtailment of portions of the Fayetteville Lateral Phase 1
facilities for 45 to 60 days starting in September and total
curtailed volumes for the remainder of the year of approximately 15
Bcf net to Southwestern. Southwestern's production guidance for the
remainder of 2009 is shown below: 1st 2nd 3rd 4th Full-Year Quarter
Quarter Quarter Quarter 2009 Actual Actual Estimate Estimate
Estimate ------ ------ -------- -------- -------- Previous Guidance
(Bcfe) 60 - 61 70 - 71 75 - 76 80 - 81 289 - 292 Revised Guidance
(Bcfe) 63.9 74.3 66 - 68 74 - 82 278 - 288 Including the effect of
hedges, Southwestern's average realized gas price in the second
quarter of 2009 was $5.01 per Mcf, down from $8.17 per Mcf in the
second quarter of 2008. The company's commodity hedging activities
increased its average gas price by $2.11 per Mcf during the second
quarter of 2009, compared to a decrease of $1.83 per Mcf during the
same period in 2008. Disregarding the impact of commodity price
hedges, the company's average price received for its gas production
during the second quarter of 2009 was approximately $0.60 per Mcf
lower than average NYMEX spot prices, compared to approximately
$0.92 per Mcf lower during the second quarter of 2008. The company
believes that average basis differentials going forward will
generally approximate those experienced in the second quarter of
2009, but will be volatile due to the Boardwalk Pipeline repairs
discussed above. As of July 30, 2009, the company had protected
approximately 50 Bcf of its third quarter 2009 expected gas
production from the potential of widening basis differentials
through hedging activities and sales arrangements at an average
basis differential to NYMEX gas prices of approximately $0.35 per
Mcf, excluding transportation charges and fuel charges. As of that
same date for the fourth quarter of 2009, the company had protected
approximately 30 Bcf at an average basis differential to NYMEX gas
prices of approximately $0.35 per Mcf, excluding transportation and
fuel charges. The company typically sells its natural gas at a
discount to NYMEX spot prices due to locational basis
differentials, transportation charges and fuel charges. Lease
operating expenses per unit of production for the company's E&P
segment were $0.73 per Mcfe in the second quarter of 2009, down
from $0.95 per Mcfe in the second quarter of 2008. The decrease
primarily resulted from the impact that lower natural gas prices
had on the cost of compressor fuel in the second quarter of 2009.
General and administrative expenses per unit of production were
$0.34 per Mcfe in the second quarter of 2009, down from $0.41 per
Mcfe in the second quarter of 2008. The decrease was primarily due
to the effects of the company's increased production volumes which
more than offset increased compensation and related costs primarily
associated with the expansion of the company's E&P operations
due to the Fayetteville Shale play. Taxes other than income taxes
per unit of production were $0.08 per Mcfe in the second quarter of
2009, compared to $0.16 per Mcfe in the second quarter of 2008,
primarily due to changes in severance and ad valorem taxes that
result from the mix of the company's production volumes combined
with lower commodity prices. The company's full cost pool
amortization rate decreased to $1.46 per Mcfe in the second quarter
of 2009, compared to $2.01 per Mcfe in the second quarter of 2008.
The decline in the average amortization rate was primarily the
result of the $907.8 million non-cash ceiling test impairment
recorded in the first quarter of 2009. The amortization rate is
impacted by timing and amount of reserve additions and the costs
associated with those additions, revisions of previous reserve
estimates due to both price and well performance, impairments that
result from full cost ceiling tests, proceeds from the sale of
properties that reduce the full cost pool and the levels of costs
subject to amortization. The future full cost pool amortization
rate cannot be predicted with accuracy due to the variability of
each of the factors discussed above, as well as other factors.
Midstream Services - Operating income for the company's midstream
services segment, which is comprised of natural gas gathering and
marketing activities, was $27.8 million for the three months ended
June 30, 2009, up from $15.0 million in the same period in 2008.
The increase in operating income was primarily due to the increase
in gathering revenues from the company's Fayetteville Shale play,
partially offset by increased operating costs and expenses. At June
30, 2009, the company's midstream segment was gathering
approximately 1,060 MMcf per day through 960 miles of gathering
lines in the Fayetteville Shale play area, up from approximately
600 MMcf per day a year ago. Gathering volumes, revenues and
expenses for this segment are expected to continue to grow as
reserves related to the company's Fayetteville Shale play are
developed and production increases. First Six Months of 2009
Financial Results E&P Segment - Excluding the non-cash ceiling
test impairment, operating income from the company's E&P
segment was $354.4 million for the six months ended June 30, 2009
(a non-GAAP measure; see reconciliation below), compared to $380.8
million for the same period in 2008. The decrease was primarily due
to lower realized natural gas prices and increased operating costs
and expenses which were partially offset by higher production. Gas
and oil production was 138.2 Bcfe in the first six months of 2009,
compared to 84.1 Bcfe in the first six months of 2008, and included
110.8 Bcf from the company's Fayetteville Shale play, up from 53.2
Bcfe in the first six months of 2008. Southwestern's average
realized gas price was $5.44 per Mcf, including the effect of
hedges, in the first six months of 2009 compared to $7.95 per Mcf
in the first six months of 2008. The company's hedging activities
increased the average gas price realized during the first six
months of 2009 by $2.12 per Mcf, compared to a decrease of $0.87
per Mcf during the first six months of 2008. Disregarding the
impact of hedges, the average price received for the company's gas
production during the first six months of 2009 was approximately
$0.87 per Mcf lower than average NYMEX spot prices, compared to
approximately $0.66 per Mcf lower than NYMEX spot prices during the
first six months of 2008. Lease operating expenses for the
company's E&P segment were $0.76 per Mcfe in the first six
months of 2009, down from $0.87 per Mcfe in the first six months of
2008. The decrease was primarily the result of the impact that
lower natural gas prices had on the cost of compressor fuel in the
first six months of 2009. General and administrative expenses were
$0.32 per Mcfe in the first six months of 2009, compared to $0.42
per Mcfe in the first six months of 2008. The decrease was
primarily due to the effects of the company's increased production
volumes which more than offset increased compensation and related
costs primarily associated with the expansion of the company's
E&P operations due to the Fayetteville Shale play. Taxes other
than income taxes were $0.10 per Mcfe during the first six months
of 2009, compared to $0.16 per Mcfe during the first six months of
2008, primarily due to the change in the mix of the company's
production volumes combined with lower commodity prices. The
company's full cost pool amortization rate decreased to $1.63 per
Mcfe in the first six months of 2009, compared to $2.15 per Mcfe in
the first six months of 2008, primarily due to the $907.8 million
non-cash ceiling test impairment recorded in the first quarter of
2009 and the sale of natural gas and oil properties in 2008, as the
proceeds were credited to the full cost pool. Midstream Services -
Operating income for the company's midstream activities was $55.2
million in the first six months of 2009, compared to $25.2 million
in the first six months of 2008. The increase in operating income
was primarily due to increased gathering revenues and an increase
in the margin from gas marketing activities related to the
Fayetteville Shale play, partially offset by increased operating
costs and expenses. Capital Investments - For the first six months
of 2009, Southwestern invested a total of $959.4 million, compared
to $825.4 million during the first six months of 2008, which
included $852.5 million invested in its E&P business and $102.5
million invested in its Midstream Services activities. Of the
$852.5 million invested in its E&P business, approximately
$700.7 million was invested in its Fayetteville Shale play, $74.0
million in East Texas, $32.4 million in its conventional Arkoma
Basin program and $31.8 million in New Ventures. The company
expects that its total capital investments for the full year of
2009 to be approximately $1.8 billion. E&P Operations Review
Fayetteville Shale Play - For the first six months of 2009,
Southwestern placed a total of 231 operated wells on production in
the Fayetteville Shale play, all of which were horizontal wells
fracture stimulated using slickwater. At June 30, 2009, the
company's gross production rate from the Fayetteville Shale play
was approximately 990 MMcf per day, up from approximately 500 MMcf
per day a year ago. The graph below provides gross production data
from the company's operated wells in the Fayetteville Shale play
area through June 30, 2009. (Photo:
http://www.newscom.com/cgi-bin/prnh/20090730/DA54480-a) During the
second quarter of 2009, the company's horizontal wells had an
average completed well cost of $2.9 million per well, average
horizontal lateral length of 4,123 feet and average time to drill
to total depth of 11 days from re-entry to re-entry. This compares
to an average completed well cost of $3.1 million per well, average
horizontal lateral length of 3,874 feet and average time to drill
to total depth of 12 days from re-entry to re-entry in the first
quarter of 2009. The company currently has 17 drilling rigs running
in its Fayetteville Shale play area, 13 that are capable of
drilling horizontal wells and 4 smaller rigs that are used to drill
the vertical portion of the wells. The company currently expects
its gross well count in the play during 2009 to be approximately
575 wells (75% operated). Since 2007, the continuous improvement of
the company's completion practices have resulted in
quarter-over-quarter improvements in average initial production
rates of operated wells placed on production. Results from the
company's drilling activities from 2007 through 2009, by quarter,
are shown below. Completion Wells Average 30th-Day 60th-Day Average
Method Placed on IP Rate Avg Rate Avg Rate Lateral SW/XL/ Time
Frame Production (Mcf/d) (# of wells) (# of wells) Length Hy-RHy
1st Qtr 2007 58 1,261 1,066(58) 958(58) 2,104 11/37/10 2nd Qtr 2007
46 1,497 1,254(46) 1,034(46) 2,512 24/12/10 3rd Qtr 2007 74 1,769
1,510(72) 1,350(71) 2,622 69/4/1 4th Qtr 2007 77 2,027 1,690(77)
1,499(76) 3,193 68/1/8 1st Qtr 2008 75 2,343 2,147(75) 1,943(74)
3,301 71/1/3 2nd Qtr 2008 83 2,541 2,155(83) 1,886(83) 3,562 83/0/0
3rd Qtr 2008 97 2,882 2,560(97) 2,349(97) 3,736 97/0/0 4th Qtr
2008(1) 74 3,350(1) 2,722(74) 2,401(73) 3,850 74/0/0 1st Qtr
2009(1) 120 2,992(1) 2,537(120) 2,310(119) 3,874 120/0/0 2nd Qtr
2009 111 3,611 2,952(82) 2,694(56) 4,123 111/0/0 Note: Results as
of June 30, 2009. SW - Slickwater fluids XL - Crosslinked gel
fluids Hy-RHy - Hybrid or Reverse Hybrid method (combination
slickwater/crosslinked gel fluid system) (1) The significant
increase in the average initial production rate for the fourth
quarter of 2008 and the subsequent decrease for the first quarter
of 2009 primarily reflected the impact of the delay in the
Boardwalk Pipeline. Wells that were placed on production in January
and February of 2009 had average initial production rates of 2,806
Mcf per day and 2,749 Mcf per day, respectively, while wells placed
on production during March 2009 had average initial production
rates of 3,353 Mcf per day. The graph below provides normalized
average daily production data through June 30, 2009, for the
company's horizontal wells using slickwater and crosslinked gel
fluids. The "dark blue curve" is for horizontal wells fracture
stimulated with either slickwater or crosslinked gel fluid. The
"red curve" indicates results for the company's wells with lateral
lengths greater than 3,000 feet, while the "purple curve" indicates
results for the company's wells with lateral lengths greater than
4,000 feet. The normalized production curves are intended to
provide a qualitative indication of the company's Fayetteville
Shale wells' performance and should not be used to estimate an
individual well's estimated ultimate recovery. The 2.0, 2.5 and 3.0
Bcf typecurves are shown solely for reference purposes and are not
intended to be projections of the performance of the company's
wells. (Photo:
http://www.newscom.com/cgi-bin/prnh/20090730/DA54480-b) At June 30,
2009, Southwestern held approximately 879,000 net acres in the play
area (including 125,372 net acres in the traditional Fairway
portion of the Arkoma Basin). East Texas - In the second quarter of
2008, Southwestern signed a 50/50 joint venture agreement with a
private company targeting the Haynesville/Bossier Shale intervals
in Shelby and San Augustine Counties, Texas. The first horizontal
well, the Red River 877 #1 located in Shelby County, reached total
depth in the fourth quarter of 2008, was production tested at 7.2
MMcf per day in the first quarter of 2009 and is currently
producing approximately 1.8 MMcf per day. The second horizontal
well, the Red River 164 #1, was production tested at 13.4 MMcf per
day in the second quarter of 2009 and is currently producing
approximately 7.8 MMcf per day. The company has completed drilling
a third well, the Red River 619 #1 well located in San Augustine
County, and recently spud its fourth well, the Burrows Gas Unit
#1-H. Pending further results from these wells, the company may
invest more capital in the Haynesville/Bossier Shale play than
previously planned. In total, Southwestern has approximately 32,800
net acres it believes is prospective for the Haynesville/Bossier
Shale. Southwestern participated in drilling 23 wells in East Texas
during the first six months of 2009, 21 of which were James Lime
horizontal wells. The company currently has 28 operated James Lime
horizontal wells on production which had average gross initial
production rates of 10.1 MMcf per day. Southwestern's current net
production from the James Lime is approximately 38.6 MMcf per day.
Production from the company's East Texas properties was 15.6 Bcfe
for the first six months of 2009, compared to 16.0 Bcfe for the
first six months of 2008. Conventional Arkoma Program - (Outside
the Fayetteville Shale play area) Southwestern participated in
drilling 13 wells in its conventional Arkoma Basin drilling program
during the first six months of 2009. Production from the company's
conventional Arkoma Basin was 11.6 Bcf for the first six months of
2009, compared to 11.9 Bcf for the first six months of 2008. New
Ventures - At June 30, 2009, Southwestern held approximately
160,500 net undeveloped acres in the United States outside of its
core operating areas in connection with New Ventures, including
approximately 138,300 net acres in Pennsylvania under which it
believes the Marcellus Shale is prospective. Explanation and
Reconciliation of Non-GAAP Financial Measures We report our
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 users of this financial information additional
meaningful comparisons between current results and the results of
our peers and of prior periods. One such non-GAAP financial measure
is net cash provided by operating activities before changes in
operating assets and liabilities. 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 we may
present from time to time are net income attributable to
Southwestern Energy, diluted earnings per share attributable to
Southwestern Energy stockholders and our E&P segment operating
income, all which exclude certain charges or amounts. Management
presents these measures because (i) they are consistent with the
manner in which the Company's performance is measured relative to
the 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. See the
reconciliations below of GAAP financial measures to non-GAAP
financial measures for the three and six months ended June 30, 2009
and June 30, 2008. Non-GAAP financial measures should not be
considered in isolation or as a substitute for the Company's
reported results prepared in accordance with GAAP. 6 Months Ended
June 30, ----------------------- 2009 2008 ---- ---- (in thousands)
Net income (loss) attributable to Southwestern Energy: Net income
(loss) attributable to Southwestern Energy $(311,730) $245,579 Add
back: Impairment of natural gas and oil properties (net of taxes)
558,305 -- ------- ----- Net income attributable to Southwestern
Energy, excluding impairment of natural gas and oil properties
$246,575 $245,579 ======== ======== 6 Months Ended June 30,
----------------------- 2009 2008 ---- ---- Diluted earnings per
share: Net income (loss) per share attributable to $(0.91) $0.71
Southwestern Energy stockholders Add back: Impairment of natural
gas and oil properties (net of taxes) 1.62 -- ---- ----- Net income
per share attributable to Southwestern Energy stockholders,
excluding impairment of natural gas and oil properties $0.71 $0.71
===== ===== 3 Months Ended June 30, ----------------------- 2009
2008 ---- ---- (in thousands) Cash flow from operating activities:
Net cash provided by operating activities $266,436 $291,165 Add
back (deduct): Change in operating assets and liabilities 58,860
(2,935) ------ ------ Net cash provided by operating activities
before changes in operating assets and liabilities $325,296
$288,230 ======== ======== 6 Months Ended June 30,
----------------------- 2009 2008 ---- ---- (in thousands) Cash
flow from operating activities: Net cash provided by operating
activities $673,731 $588,252 Add back (deduct): Change in operating
assets and liabilities 24,120 (16,305) ------ ------- Net cash
provided by operating activities before changes in operating assets
and liabilities $697,851 $571,947 ======== ======== 6 Months Ended
June 30, ----------------------- 2009 2008 ---- ---- (in thousands)
E&P segment operating income: E&P segment operating income
(loss) $(553,460) $380,796 Add back: Impairment of natural gas and
oil properties 907,812 -- ------- ----- E&P segment operating
income excluding impairment of natural gas and oil properties
$354,352 $380,796 ======== ======== Southwestern will host a
teleconference call on Friday, July 31, 2009, at 10:00 a.m. Eastern
to discuss the company's second quarter 2009 results. The toll-free
number to call is 877-407-8035 and the international toll-free
number is 201-689-8035. The teleconference can also be heard "live"
on the Internet at http://www.swn.com/. Southwestern Energy Company
is an integrated company whose wholly-owned subsidiaries are
engaged in oil and gas exploration and production, natural gas
gathering and marketing. Additional information on the company can
be found on the Internet at http://www.swn.com/. All statements,
other than historical financial information, may be deemed to be
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements that
address activities, outcomes and other matters that should or may
occur in the future, including, without limitation, statements
regarding the financial position, business strategy, production and
reserve growth and other plans and objectives for the company's
future operations, are forward-looking statements. Although the
company believes the expectations expressed in such forward-looking
statements are based on reasonable assumptions, such statements are
not guarantees of future performance and actual results or
developments may differ materially from those in the
forward-looking statements. The company has no obligation and makes
no undertaking to publicly update or revise any forward-looking
statements. You should not place undue reliance on forward-looking
statements. They are subject to known and unknown risks,
uncertainties and other factors that may affect the company's
operations, markets, products, services and prices and cause its
actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements. In addition
to any assumptions and other factors referred to specifically in
connection with forward-looking statements, risks, uncertainties
and factors that could cause the company's actual results to differ
materially from those indicated in any forward-looking statement
include, but are not limited to: the timing and extent of changes
in market conditions and prices for natural gas and oil (including
regional basis differentials); the company's ability to transport
its production to the most favorable markets or at all; the timing
and extent of the company's success in discovering, developing,
producing and estimating reserves; the economic viability of, and
the company's success in drilling, the company's large acreage
position in the Fayetteville Shale play, overall as well as
relative to other productive shale gas plays; the company's ability
to fund the company's planned capital investments; the company's
ability to determine the most effective and economic fracture
stimulation for the Fayetteville Shale formation; the impact of
federal, state and local government regulation, including any
increase in severance taxes; the costs and availability of oil
field personnel services and drilling supplies, raw materials, and
equipment and services; the company's future property acquisition
or divestiture activities; increased competition; the financial
impact of accounting regulations and critical accounting policies;
the comparative cost of alternative fuels; conditions in capital
markets, changes in interest rates and the ability of the company's
lenders to provide it with funds as agreed; credit risk relating to
the risk of loss as a result of non-performance by the company's
counterparties and any other factors listed in the reports the
company has filed and may file with the Securities and Exchange
Commission (SEC). For additional information with respect to
certain of these and other factors, see the reports filed by the
company with the SEC. The company disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Financial Summary Follows OPERATING STATISTICS (Unaudited)
Southwestern Energy Company and Subsidiaries Three Months Six
Months Periods Ended June 30 2009 2008 2009 2008 ---- ---- ----
---- Exploration & Production ------------------------
Production Gas production (MMcf) 74,120 44,312 137,809 82,517 Oil
production (MBbls) 32 127 66 269 Total equivalent production
(MMcfe) 74,315 45,075 138,208 84,132 ------ ------ ------- ------
Commodity Prices Average gas price per Mcf, including hedges $5.01
$8.17 $5.44 $7.95 Average gas price per Mcf, excluding hedges $2.90
$10.00 $3.32 $8.82 Average oil price per Bbl $51.91 $122.26 $43.24
$108.69 ------ ------- ------ ------- Operating Expenses per Mcfe
Lease operating expenses $0.73 $0.95 $0.76 $0.87 General &
administrative expenses $0.34 $0.41 $0.32 $0.42 Taxes, other than
income taxes $0.08 $0.16 $0.10 $0.16 Full cost pool amortization
$1.46 $2.01 $1.63 $2.15 Midstream --------- Gas volumes marketed
(Bcf) 89.1 59.5 175.6 109.6 Gas volumes gathered (Bcf) 94.9 49.9
174.4 88.4 STATEMENTS OF OPERATIONS (Unaudited) Southwestern Energy
Company and Subsidiaries Three Months Six Months Periods Ended June
30 2009 2008 2009 2008 --------------------- ---- ---- ---- ----
(in thousands except share/per share amounts) Operating Revenues
Gas sales $367,430 $371,114 $740,088 $733,705 Gas marketing 91,438
205,836 243,010 341,143 Oil sales 1,693 15,538 2,875 29,251 Gas
gathering 16,865 9,186 33,428 17,472 Other 94 2,696 (1,064) 6,905
--- ----- ------ ----- 477,520 604,370 1,018,337 1,128,476 -------
------- --------- --------- Operating Costs and Expenses Gas
purchases - midstream services 91,187 202,889 240,367 335,341 Gas
purchases - gas distribution - 9,544 - 61,439 Operating expenses
30,506 30,030 57,678 54,026 General and administrative expenses
29,200 25,741 52,909 49,481 Depreciation, depletion and
amortization 117,927 98,151 242,155 195,248 Impairment of natural
gas and oil properties - - 907,812 - Taxes, other than income taxes
6,473 8,729 15,681 16,145 ----- ----- ------ ------ 275,293 375,084
1,516,602 711,680 ------- ------- --------- ------- Operating
Income (Loss) 202,227 229,286 (498,265) 416,796 ------- -------
-------- ------- Interest Expense Interest on debt 13,725 15,659
27,910 32,745 Other interest charges 870 619 1,529 1,267 Interest
capitalized (11,529) (7,281) (22,689) (13,486) -------- ------
-------- -------- 3,066 8,997 6,750 20,526 ----- ----- ----- ------
Other Income 169 169 534 176 --- --- --- --- Income (Loss) Before
Income Taxes 199,330 220,458 (504,481) 396,446 ------- -------
-------- ------- Provision (Benefit) for Income Taxes Current -
46,500 (35,500) 46,500 Deferred 78,272 37,193 (157,187) 104,017
------ ------ -------- ------- 78,272 83,693 (192,687) 150,517
------ ------ -------- ------- Net income (loss) 121,058 136,765
(311,794) 245,929 Less: net income (loss) attributable to
noncontrolling interest (42) 215 (64) 350 --- --- --- --- Net
Income (Loss) Attributable to Southwestern Energy $121,100 $136,550
$(311,730) $245,579 -------- -------- --------- -------- Earnings
Per Share Net income (loss) attributable to Southwestern Energy
stockholders - Basic $0.35 $0.40 $(0.91) $0.72 Net income (loss)
attributable to Southwestern Energy stockholders - Diluted $0.35
$0.39 $(0.91) $0.71 ----- ----- ------ ----- Weighted Average
Common Shares Outstanding Basic 342,960,373 341,402,888 342,766,760
341,233,574 Diluted 348,806,860 346,551,198 342,766,760 346,287,843
BALANCE SHEETS (Unaudited) Southwestern Energy Company and
Subsidiaries June 30 2009 2008 ------- ---- ---- (in thousands)
ASSETS Current Assets $664,776 $759,329 Current Assets Held For
Sale - 42,926 --- ------ Property and Equipment 6,298,500 4,510,372
Less: Accumulated depreciation, depletion and amortization
2,767,225 1,392,380 --------- --------- 3,531,275 3,117,992
--------- --------- Other Assets 142,231 74,242 Assets Held For
Sale - 142,971 --- ------- $4,338,282 $4,137,460 ----------
---------- LIABILITIES AND EQUITY Current Liabilities $644,224
$1,129,771 Current Liabilities Associated With Assets Held For Sale
- 32,633 --- ------ Long-Term Debt 869,600 674,800 ------- -------
Deferred Income Taxes 554,434 450,089 ------- ------- Long-Term
Hedging Liability 4,012 301,668 ----- ------- Other Liabilities
57,668 57,774 Other Liabilities Associated With Assets Held For
Sale - 17,005 --- ------ Commitments and Contingencies Equity
Common stock, $.01 par value; authorized 540,000,000 shares, issued
344,486,505 shares in 2009 and 342,786,381 in 2008 3,445 3,428
Additional paid-in capital 822,428 798,750 Retained earnings
1,138,247 1,127,610 Accumulated other comprehensive income (loss)
238,550 (462,061) Common stock in treasury, 203,059 shares in 2009
and 224,594 in 2008 (4,300) (4,725) ------ ------ Total
Southwestern Energy stockholders' equity 2,198,370 1,463,002
Noncontrolling interest 9,974 10,718 ----- ------ Total equity
2,208,344 1,473,720 --------- --------- $4,338,282 $4,137,460
---------- ---------- STATEMENTS OF CASH FLOWS (Unaudited)
Southwestern Energy Company and Subsidiaries Six Months Periods
Ended June 30 2009 2008 --------------------- ---- ---- (in
thousands) Cash Flows From Operating Activities Net income (loss)
$(311,794) $245,929 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation, depletion and
amortization 242,983 196,411 Impairment of natural gas and oil
properties 907,812 - Deferred income taxes (157,187) 104,017
Impairment of natural gas inventory 4,283 - Unrealized loss on
derivatives 6,039 20,345 Stock-based compensation expense 5,810
5,839 Gain on sale of property and equipment - (392) Distributions
to noncontrolling interest in partnership (95) (202) Change in
assets and liabilities (24,120) 16,305 ------- ------ Net cash
provided by operating activities 673,731 588,252 ------- -------
Cash Flows From Investing Activities Capital investments (963,976)
(812,421) Proceeds from sale of property and equipment - 590,513
Other items (4,144) (296) ------ ---- Net cash used in investing
activities (968,120) (222,204) --------- -------- Cash Flows From
Financing Activities Payments on short-term debt (60,600) (600)
Payments on revolving long-term debt (339,500) (1,843,600)
Borrowings under revolving long-term debt 535,500 1,001,400
Proceeds from issuance of long-term debt - 600,000 Debt issuance
costs and revolving credit facility costs - (8,895) Excess tax
benefit for stock-based compensation - 39,332 Change in bank drafts
outstanding (38,401) 19,643 Proceeds from exercise of common stock
options 3,358 2,067 ----- ----- Net cash provided by (used in)
financing activities 100,357 (190,653) ------- -------- Increase
(decrease) in cash and cash equivalents (194,032) 175,395 Cash and
cash equivalents at beginning of year(1) 196,277 1,832 -------
----- Cash and cash equivalents at end of period(1) $2,245 $177,227
------ -------- (1) Cash and cash equivalents at the beginning of
the year for 2008 and at June 30, 2008 include $1.1 million and
$0.1 million, respectively, classified as "held for sale." SEGMENT
INFORMATION (Unaudited) Southwestern Energy Company and
Subsidiaries Exploration & Midstream Production Services
Other(1) Eliminations Total ----------- --------- -------
------------ ----- Quarter Ending (in thousands) June 30, 2009
-------------- Revenues $372,681 $337,164 $231 $(232,556) $477,520
Gas purchases - 285,208 - (194,021) 91,187 Operating expenses
54,303 14,620 - (38,417) 30,506 General & administrative
expenses 25,000 4,293 25 (118) 29,200 Depreciation, depletion &
amortization 113,357 4,375 195 - 117,927 Taxes, other than income
taxes 5,588 876 9 - 6,473 ----- --- --- --- ----- Operating Income
$174,433 $27,792 $2 $- $202,227 -------- ------- --- --- --------
Capital Investments (2) $402,079 $51,535 $2,622 $- $456,236 Quarter
Ending June 30, 2008 -------------- Revenues $377,725 $639,758
$33,631 $(446,744) $604,370 Gas purchases - 609,366 20,463
(417,396) 212,433 Operating expenses 42,964 8,967 7,299 (29,200)
30,030 General & administrative expenses 18,378 3,333 4,178
(148) 25,741 Depreciation, depletion & amortization 94,031
2,370 1,750 - 98,151 Taxes, other than income taxes 7,266 720 743 -
8,729 ----- --- --- --- ----- Operating Income (Loss) $215,086
$15,002 $(802) $- $229,286 -------- ------- ----- --- --------
Capital Investments (2) $362,821 $47,878 $4,843 $- $415,542 Six
Months Ending June 30, 2009 ----------------- Revenues $750,766
$730,638 $463 $(463,530) $1,018,337 Gas purchases - 629,611 -
(389,244) 240,367 Operating expenses 104,353 27,381 - (74,056)
57,678 General & administrative expenses 44,696 8,409 34 (230)
52,909 Depreciation, depletion & amortization 233,488 8,301 366
- 242,155 Impairment of natural gas and oil properties 907,812 - -
- 907,812 Taxes, other than income taxes 13,877 1,782 22 - 15,681
------ ----- --- --- ------ Operating Income (Loss) $(553,460)
$55,154 $41 $- $(498,265) --------- ------- --- --- ---------
Capital Investments (2) $852,482 $102,456 4,490 $- $959,428 Six
Months Ending June 30, 2008 ----------------- Revenues $689,742
$1,045,083 $117,934 $(724,283) $1,128,476 Gas purchases - 992,426
79,120 (674,766) 396,780 Operating expenses 73,213 15,902 14,139
(49,228) 54,026 General & administrative expenses 34,931 6,126
8,713 (289) 49,481 Depreciation, depletion & amortization
187,337 4,407 3,504 - 195,248 Taxes, other than income taxes 13,465
1,059 1,621 - 16,145 ------ ----- ----- --- ------ Operating Income
$380,796 $25,163 $10,837 $- $416,796 -------- ------- ------- ---
-------- Capital Investments (2) $739,335 $79,323 $6,742 $-
$825,400 (1) The three- and six-month periods ended June 30, 2008
include operating results and capital investments associated with
our natural gas distribution subsidiary, Arkansas Western Gas
("AWG"). On July 1, 2008, we closed the sale of AWG and, as a
result, we no longer have any natural distribution operations. (2)
Capital investments include reductions of $31.8 million and $8.2
million for the three- and six-month periods ended June 30, 2009,
respectively, and a reduction of $6.8 million and an increase of
$10.0 million for the three- and six-month periods ended June 30,
2008, respectively, relating to the change in accrued expenditures
between periods.
http://www.newscom.com/cgi-bin/prnh/20090730/DA54480-b
http://www.newscom.com/cgi-bin/prnh/20090730/DA54480-a
http://photoarchive.ap.org/ DATASOURCE: Southwestern Energy Company
CONTACT: Greg D. Kerley, Executive Vice President and Chief
Financial Officer, +1-281-618-4803, or Brad D. Sylvester, CFA, Vice
President, Investor Relations, +1-281-618-4897, both of
Southwestern Energy Company Web Site: http://www.swn.com/
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