SWN
$5.06
Southwestern Energy
($.19)
(3.62%)
Earnings Details
3rd Quarter September 2022
Thursday, October 27, 2022 4:18:00 PM
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Summary

Southwestern Energy Misses

Southwestern Energy (SWN) reported 3rd Quarter September 2022 earnings of $0.32 per share on revenue of $4.5 billion. The consensus earnings estimate was $0.30 per share on revenue of $1.7 billion. The Earnings Whisper number was $0.34 per share. Revenue grew 184.2% on a year-over-year basis.

Southwestern Energy Co is an energy company. It explores, develops, and produces natural gas and crude oil within the United States.

Results
Reported Earnings
$0.32
Earnings Whisper
$0.34
Consensus Estimate
$0.30
Reported Revenue
$4.54 Bil
Revenue Estimate
$1.72 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Southwestern Energy Announces Third Quarter 2022 Results

Returned more than $300 million to shareholders through debt repayment and share repurchases

SPRING, Texas--(BUSINESS WIRE)--Southwestern Energy Company (NYSE: SWN) today announced financial and operating results for the third quarter ended September 30, 2022.

  • Generated $797 million net cash provided by operating activities, $450 million net income and $360 million adjusted net income (non-GAAP)
    -
    ­ $824 million adjusted EBITDA (non-GAAP) and $222 million free cash flow (non-GAAP)
  • Reduced total debt by $227 million to achieve target leverage range with 1.4x net debt to adjusted EBITDA (non-GAAP)
  • Repurchased $80 million of common stock, bringing total share repurchases to date to approximately $100 million, or 10% of authorized amount
  • Total net production of 443 Bcfe, or 4.8 Bcfe per day, including 4.2 Bcf per day of natural gas and 97 MBbls per day of liquids
  • Invested $543 million of capital and placed 31 wells to sales, including 14 in Appalachia and 17 in Haynesville
  • Reinforced long-term flow assurance and marketing optionality by adding a total of 500 MMcf per day of new firm transportation starting in 2024 to LNG corridor on Momentum’s New Generation Gas Gathering system (NG3) and DT Midstream’s LEAP pipeline
  • Upgraded to BB+ by Fitch in August; now rated one notch below investment grade by all three credit agencies
  • Established longer-term GHG emission reduction goal of 50% decrease by 2035, consistent with a path to net zero by 2050

“During the third quarter, the Company executed on its plan, progressed debt repayment and achieved our target leverage range. This was complemented by continued return of capital to our shareholders, bringing total share repurchases to date to 10% of the authorized amount. With an increasing and resilient free cash flow generation profile, a strengthening balance sheet, near investment grade credit ratings, and advantaged access to the LNG Corridor and other growing demand centers, Southwestern Energy offers a differentiated rate of change investment opportunity to what we believe is a structurally constructive long-term natural gas outlook,” said Bill Way, Southwestern Energy President and Chief Executive Officer.

Financial Results

 

 

For the three months ended

 

For the nine months ended

 

 

September 30,

 

September 30,

(in millions)

 

2022

 

2021

 

2022

 

2021

Net income (loss)

 

$

450

 

 

$

(1,857

)

 

$

(1,052

)

 

$

(2,386

)

Adjusted net income (non-GAAP)

 

$

360

 

 

$

188

 

 

$

1,175

 

 

$

513

 

Diluted earnings (loss) per share

 

$

0.40

 

 

$

(2.36

)

 

$

(0.94

)

 

$

(3.34

)

Adjusted diluted earnings per share (non-GAAP)

 

$

0.32

 

 

$

0.24

 

 

$

1.05

 

 

$

0.72

 

Adjusted EBITDA (non-GAAP)

 

$

824

 

 

$

426

 

 

$

2,551

 

 

$

1,108

 

Net cash provided by operating activities

 

$

797

 

 

$

213

 

 

$

2,196

 

 

$

830

 

Net cash flow (non-GAAP)

 

$

765

 

 

$

396

 

 

$

2,380

 

 

$

1,022

 

Total capital investments (1)

 

$

543

 

 

$

291

 

 

$

1,672

 

 

$

816

 

Free cash flow (non-GAAP)

 

$

222

 

 

$

105

 

 

$

708

 

 

$

206

 

(1)

Capital investments include a decrease of $33 million and an increase of $34 million for the three months ended September 30, 2022 and 2021, respectively, and increases of $44 million and $63 million for the nine months ended September 30, 2022 and 2021, respectively, relating to the change in accrued expenditures between periods.

For the quarter ended September 30, 2022, Southwestern Energy recorded net income of $450 million, or $0.40 per diluted share. Adjusting for the impact of the Company’s valuation allowance and other one-time items, adjusted net income (non-GAAP) was $360 million, or $0.32 per diluted share, and adjusted EBITDA (non-GAAP) was $824 million. Net cash provided by operating activities was $797 million, net cash flow (non-GAAP) was $765 million and free cash flow (non-GAAP) was $222 million.

The Company primarily utilized free cash flow generated in the third quarter of 2022 to reduce the balance of its revolving credit facility. As of September 30, 2022, Southwestern Energy had total debt of $4.9 billion and net debt to adjusted EBITDA (non-GAAP) of 1.4x. At the end of the quarter, the Company had $180 million of borrowings under its revolving credit facility and $109 million in outstanding letters of credit. In August 2022, the Company received an upgrade to its long-term debt issuer rating from Fitch to BB+, placing the Company one notch below an investment grade credit rating by all three credit agencies.

During the third quarter, the Company repurchased approximately 10.8 million shares for a total cost of approximately $80 million at an average price of $7.41 per share.

As indicated in the table below, third quarter 2022 weighted average realized price, including $0.26 per Mcfe of transportation expenses, was $7.33 per Mcfe excluding the impact of derivatives. Including derivatives, weighted average realized price (including transportation) for the third quarter was up 23% from $2.49 per Mcfe in 2021 to $3.06 per Mcfe in 2022 primarily due to higher commodity prices including a 104% increase in NYMEX Henry Hub and a 30% increase in WTI. Third quarter 2022 weighted average realized price before transportation expense and excluding the impact of derivatives was $7.59 per Mcfe.

Realized Prices

 

For the three months ended

 

For the nine months ended

(includes transportation costs)

 

September 30,

 

September 30,

 

 

2022

 

2021

 

2022

 

2021

Natural Gas Price:

 

 

 

 

 

 

 

 

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

 

$

8.20

 

 

$

4.01

 

 

$

6.77

 

 

$

3.18

 

Discount to NYMEX (2)

 

(0.78

)

 

(0.83

)

 

(0.62

)

 

(0.74

)

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

 

$

7.42

 

 

$

3.18

 

 

$

6.15

 

 

$

2.44

 

Gain on settled financial basis derivatives ($/Mcf)

 

0.10

 

 

0.11

 

 

0.06

 

 

0.11

 

Loss on settled commodity derivatives ($/Mcf)

 

(4.71

)

 

(1.14

)

 

(3.38

)

 

(0.43

)

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

 

$

2.81

 

 

$

2.15

 

 

$

2.83

 

 

$

2.12

 

Oil Price:

 

 

 

 

 

 

 

 

WTI oil price ($/Bbl) (3)

 

$

91.56

 

 

$

70.56

 

 

$

98.09

 

 

$

64.82

 

Discount to WTI (4)

 

(7.22

)

 

(8.24

)

 

(7.39

)

 

(8.71

)

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

 

$

84.34

 

 

$

62.32

 

 

$

90.70

 

 

$

56.11

 

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

 

$

49.06

 

 

$

44.83

 

 

$

52.29

 

 

$

40.06

 

NGL Price:

 

 

 

 

 

 

 

 

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

 

$

33.33

 

 

$

31.76

 

 

$

37.50

 

 

$

26.05

 

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

 

$

26.55

 

 

$

19.31

 

 

$

27.64

 

 

$

17.13

 

Percentage of WTI, excluding derivatives

 

36

%

 

45

%

 

38

%

 

40

%

Total Weighted Average Realized Price:

 

 

 

 

 

 

 

 

Excluding derivatives ($/Mcfe)

 

$

7.33

 

 

$

3.74

 

 

$

6.32

 

 

$

3.01

 

Including derivatives ($/Mcfe)

 

$

3.06

 

 

$

2.49

 

 

$

3.11

 

 

$

2.41

 

(1)

Based on last day settlement prices from monthly futures contracts.

(2)

This discount includes a basis differential, a heating content adjustment, physical basis sales, third-party transportation charges and fuel charges, and excludes financial basis derivatives.

(3)

Based on the average daily settlement price of the nearby month futures contract over the period.

(4)

This discount primarily includes location and quality adjustments.

Operational Results

Total net production for the quarter ended September 30, 2022 was 443 Bcfe, of which 88% was natural gas, 10% NGLs and 2% oil. Capital investments totaled $543 million for the third quarter of 2022 with 31 wells drilled, 36 wells completed and 31 wells placed to sales.

 

 

For the three months ended

 

For the nine months ended

 

 

September 30,

 

September 30,

 

 

2022

 

2021

 

2022

 

2021

Production

 

 

 

 

 

 

 

 

Natural gas production (Bcf)

 

389

 

 

251

 

 

1,148

 

 

684

 

Oil production (MBbls)

 

1,173

 

 

1,729

 

 

3,806

 

 

5,222

 

NGL production (MBbls)

 

7,788

 

 

8,011

 

 

22,445

 

 

23,255

 

Total production (Bcfe)

 

443

 

 

310

 

 

1,306

 

 

855

 

 

 

 

 

 

 

 

 

 

Average unit costs per Mcfe

 

 

 

 

 

 

 

 

Lease operating expenses (1)

 

$

1.02

 

 

$

0.95

 

 

$

0.98

 

 

$

0.94

 

General & administrative expenses (2,3)

 

$

0.08

 

 

$

0.09

 

 

$

0.08

 

 

$

0.11

 

Taxes, other than income taxes

 

$

0.17

 

 

$

0.11

 

 

$

0.15

 

 

$

0.10

 

Full cost pool amortization

 

$

0.66

 

 

$

0.43

 

 

$

0.65

 

 

$

0.37

 

(1)

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

(2)

Excludes $27 million in merger-related expenses for the nine months ended September 30, 2022.

(3)

Excludes $35 million and $39 million in merger-related expenses for the three and nine months ended September 30, 2021, respectively, and $7 million in restructuring charges for the nine months ended September 30, 2021.

Appalachia – In the third quarter, total production was 267 Bcfe, with NGL production of 84 MBbls per day and oil production of 13 MBbls per day. The Company drilled 16 wells, completed 21 wells and placed 14 wells to sales with an average lateral length of 15,629 feet.

Haynesville – In the third quarter, total production was 176 Bcf. There were 15 wells drilled, 15 wells completed and 17 wells placed to sales in the quarter with an average lateral length of 9,332 feet.

E&P Division Results

For the three months ended September 30, 2022

 

 

For the nine months ended September 30, 2022

 

 

Appalachia

 

 

Haynesville

 

 

Appalachia

 

 

Haynesville

 

Natural gas production (Bcf)

 

213

 

 

 

176

 

 

 

637

 

 

 

511

 

Liquids production

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil (MBbls)

 

1,169

 

 

 

4

 

 

 

3,786

 

 

 

15

 

NGL (MBbls)

 

7,787

 

 

 

 

 

 

22,444

 

 

 

 

Production (Bcfe)

 

267

 

 

 

176

 

 

 

795

 

 

 

511

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital investments (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Drilling and completions, including workovers

$

193

 

 

$

278

 

 

$

577

 

 

$

868

 

Land acquisition and other

 

12

 

 

 

2

 

 

 

45

 

 

 

14

 

Capitalized interest and expense

 

32

 

 

 

21

 

 

 

94

 

 

 

60

 

Total capital investments

$

237

 

 

$

301

 

 

$

716

 

 

$

942

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross operated well activity summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Drilled

 

16

 

 

 

15

 

 

 

52

 

 

 

53

 

Completed

 

21

 

 

 

15

 

 

 

55

 

 

 

53

 

Wells to sales

 

14

 

 

 

17

 

 

 

48

 

 

 

57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total weighted average realized price per Mcfe, excluding derivatives

$

7.03

 

 

$

7.78

 

 

$

6.26

 

 

$

6.41

 

Wells to sales summary

For the three months ended September 30, 2022

 

 

Gross wells to sales

 

Average lateral length

Appalachia

 

 

 

 

Super Rich Marcellus

 

8

 

15,425

Dry Gas Utica(1)

 

3

 

11,989

Dry Gas Marcellus

 

3

 

19,814

Haynesville

 

17

 

9,332

Total

 

31

 

 

(1) Ohio Utica

Fourth Quarter 2022 Guidance

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

PRODUCTION

For the quarter ended December 31, 2022

Gas production (Bcf)

368 – 384

Liquids (% of production)

~12.0%

Total (Bcfe)

417 – 437

Total (Bcfe/day)

~4.6

 

 

PRICING

 

Natural gas discount to NYMEX including transportation (1)

$0.55$0.70 per Mcf

Oil discount to West Texas Intermediate (WTI) including transportation

$7.00$9.00 per Bbl

Natural gas liquids realization as a % of WTI including transportation

26% – 32%

(1)

Includes impact of transportation costs and expected $0.15$0.17 per Mcf gain in Q4 2022 from financial basis hedges.

Conference Call

Southwestern Energy will host a conference call and webcast on Friday, October 28, 2022 at 9:30 a.m. Central to discuss third quarter 2022 results. To participate, dial US toll-free 877-883-0383, or international 412-902-6506 and enter access code 5197466. The conference call will webcast live at www.swn.com.

A replay will also be available on SWN’s website at www.swn.com following the call.

About Southwestern Energy

Southwestern Energy Company (NYSE: SWN) is a leading U.S. producer and marketer of natural gas and natural gas liquids focused on responsibly developing large-scale energy assets in the nation’s most prolific shale gas basins. SWN’s returns-driven strategy strives to create sustainable value for its stakeholders by leveraging its scale, financial strength and operational execution. For additional information, please visit www.swn.com and www.swn.com/responsibility.

Forward Looking Statement

This news release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. These statements are based on current expectations. The words “anticipate,” “intend,” “plan,” “project,” “estimate,” “continue,” “potential,” “should,” “could,” “may,” “will,” “objective,” “guidance,” “outlook,” “effort,” “expect,” “believe,” “predict,” “budget,” “projection,” “goal,” “forecast,” “model,” “target”, “seek”, “strive,” “would,” “approximate,” and similar words are intended to identify forward-looking statements. Statements may be forward looking even in the absence of these particular words.

Examples of forward-looking statements include, but are not limited to, the expectations of plans, business strategies, objectives and growth and anticipated financial and operational performance, including guidance regarding our strategy to develop reserves, drilling plans and programs, estimated reserves and inventory duration, projected production and sales volume and growth rates, commodity prices, projected average well costs, generation of free cash flow, our return of capital, leverage targets and debt repayment, expected benefits from acquisitions, potential acquisitions and strategic transactions, the timing thereof and our ability to achieve the intended operational, financial and strategic benefits of any such transactions or other initiatives. These forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. All forward-looking statements speak only as of the date of this news release. The estimates and assumptions upon which forward-looking statements are based are inherently uncertain and involve a number of risks that are beyond our control. Although we believe the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance, and we cannot assure you that such statements will be realized or that the events and circumstances they describe will occur. Therefore, you should not place undue reliance on any of the forward-looking statements contained herein.

Factors that could cause our actual results to differ materially from those indicated in any forward-looking statement are subject to all of the risks and uncertainties incident to the exploration for and the development, production, gathering and sale of natural gas, NGLs and oil, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, legislative and regulatory changes, the uncertainty inherent in estimating natural gas and oil reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures, a change in our credit rating, an increase in interest rates, our ability to increase commitments under our revolving credit facility, our ability to maintain leases that may expire if production is not established or profitably maintained, our ability to transport our production to the most favorable markets or at all, any increase in severance or similar taxes, the impact of the adverse outcome of any material litigation against us or judicial decisions that affect us or our industry generally, the effects of weather or power outages, increased competition, the financial impact of accounting regulations and critical accounting policies, the comparative cost of alternative fuels, credit risk relating to the risk of loss as a result of non-performance by our counterparties, impacts of world health events, including the COVID-19 pandemic, cybersecurity risks, geopolitical and business conditions in key regions of the world, our ability to realize the expected benefits from acquisitions, including our mergers with GEP Haynesville, LLC, Montage Resources Corporation and Indigo Natural Resources LLC, our ability to achieve our GHG emission reduction goals and the costs associated therewith, and any other factors described or referenced under Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” and under Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021.

We have no obligation and make no undertaking to publicly update or revise any forward-looking statements, except as required by applicable law. All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.


SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

For the three months ended

 

For the nine months ended

 

 

September 30,

 

September 30,

(in millions, except share/per share amounts)

 

2022

 

2021

 

2022

 

2021

Operating Revenues:

 

 

 

 

 

 

 

 

Gas sales

 

$

2,884

 

 

$

811

 

 

$

7,061

 

 

$

1,708

 

Oil sales

 

100

 

 

110

 

 

349

 

 

297

 

NGL sales

 

260

 

 

255

 

 

842

 

 

607

 

Marketing

 

1,298

 

 

418

 

 

3,371

 

 

1,102

 

Other

 

(1

)

 

4

 

 

(1

)

 

6

 

 

 

4,541

 

 

1,598

 

 

11,622

 

 

3,720

 

Operating Costs and Expenses:

 

 

 

 

 

 

 

 

Marketing purchases

 

1,289

 

 

420

 

 

3,366

 

 

1,109

 

Operating expenses

 

423

 

 

296

 

 

1,206

 

 

805

 

General and administrative expenses

 

41

 

 

32

 

 

120

 

 

104

 

Merger-related expenses

 

 

 

35

 

 

27

 

 

39

 

Restructuring charges

 

 

 

 

 

 

 

7

 

Depreciation, depletion and amortization

 

298

 

 

138

 

 

861

 

 

334

 

Impairments

 

 

 

6

 

 

 

 

6

 

Taxes, other than income taxes

 

76

 

 

35

 

 

198

 

 

86

 

 

 

2,127

 

 

962

 

 

5,778

 

 

2,490

 

Operating Income

 

2,414

 

 

636

 

 

5,844

 

 

1,230

 

Interest Expense:

 

 

 

 

 

 

 

 

Interest on debt

 

77

 

 

56

 

 

218

 

 

154

 

Other interest charges

 

3

 

 

3

 

 

10

 

 

9

 

Interest capitalized

 

(30

)

 

(25

)

 

(89

)

 

(68

)

 

 

50

 

 

34

 

 

139

 

 

95

 

 

 

 

 

 

 

 

 

 

Loss on Derivatives

 

(1,903

)

 

(2,399

)

 

(6,709

)

 

(3,461

)

Loss on Early Extinguishment of Debt

 

 

 

(59

)

 

(6

)

 

(59

)

Other Loss, Net

 

 

 

(1

)

 

(1

)

 

(1

)

 

 

 

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

461

 

 

(1,857

)

 

(1,011

)

 

(2,386

)

Provision (Benefit) for Income Taxes:

 

 

 

 

 

 

 

 

Current

 

11

 

 

 

 

41

 

 

 

Deferred

 

 

 

 

 

 

 

 

 

 

11

 

 

 

 

41

 

 

 

Net Income (Loss)

 

$

450

 

 

$

(1,857

)

 

$

(1,052

)

 

$

(2,386

)

 

 

 

 

 

 

 

 

 

Earnings (Loss) Per Common Share:

 

 

 

 

 

 

 

 

Basic

 

$

0.41

 

 

$

(2.36

)

 

$

(0.94

)

 

$

(3.34

)

Diluted

 

$

0.40

 

 

$

(2.36

)

 

$

(0.94

)

 

$

(3.34

)

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

Basic

 

1,110,259,907

 

 

787,032,414

 

 

1,113,705,502

 

 

713,455,662

 

Diluted

 

1,112,522,861

 

 

787,032,414

 

 

1,113,705,502

 

 

713,455,662

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

September 30, 2022

 

December 31, 2021

ASSETS

 

(in millions)

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

11

 

 

$

28

 

Accounts receivable, net

 

1,763

 

 

1,160

 

Derivative assets

 

176

 

 

183

 

Other current assets

 

52

 

 

42

 

Total current assets

 

2,002

 

 

1,413

 

Natural gas and oil properties, using the full cost method

 

35,293

 

 

33,631

 

Other

 

515

 

 

509

 

Less: Accumulated depreciation, depletion and amortization

 

(25,068

)

 

(24,202

)

Total property and equipment, net

 

10,740

 

 

9,938

 

Operating lease assets

 

183

 

 

187

 

Long-term derivative assets

 

77

 

 

226

 

Other long-term assets

 

102

 

 

84

 

Total long-term assets

 

362

 

 

497

 

TOTAL ASSETS

 

$

13,104

 

 

$

11,848

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt

 

$

5

 

 

$

206

 

Accounts payable

 

1,896

 

 

1,282

 

Taxes payable

 

121

 

 

93

 

Interest payable

 

43

 

 

75

 

Derivative liabilities

 

3,270

 

 

1,279

 

Current operating lease liabilities

 

43

 

 

42

 

Other current liabilities

 

73

 

 

75

 

Total current liabilities

 

5,451

 

 

3,052

 

Long-term debt

 

4,855

 

 

5,201

 

Long-term operating lease liabilities

 

138

 

 

142

 

Long-term derivative liabilities

 

1,009

 

 

632

 

Pension and other postretirement liabilities

 

27

 

 

23

 

Other long-term liabilities

 

210

 

 

251

 

Total long-term liabilities

 

6,239

 

 

6,249

 

Commitments and contingencies

 

 

 

 

Equity:

 

 

 

 

Common stock, $0.01 par value; 2,500,000,000 shares authorized; issued 1,161,475,422 shares as of September 30, 2022 and 1,158,672,666 shares as of December 31, 2021

 

12

 

 

12

 

Additional paid-in capital

 

7,169

 

 

7,150

 

Accumulated deficit

 

(5,440

)

 

(4,388

)

Accumulated other comprehensive loss

 

(25

)

 

(25

)

Common stock in treasury, 57,966,919 shares as of September 30, 2022 and 44,353,224 shares as of December 31, 2021

 

(302

)

 

(202

)

Total equity

 

1,414

 

 

2,547

 

TOTAL LIABILITIES AND EQUITY

 

$

13,104

 

 

$

11,848

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the nine months ended

 

 

September 30,

(in millions)

 

2022

 

2021

Cash Flows From Operating Activities:

 

 

 

 

Net loss

 

$

(1,052

)

 

$

(2,386

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

Depreciation, depletion and amortization

 

861

 

 

334

 

Amortization of debt issuance costs

 

8

 

 

6

 

Impairments

 

 

 

6

 

Loss on derivatives, unsettled

 

2,524

 

 

2,952

 

Stock-based compensation

 

4

 

 

2

 

Loss on early extinguishment of debt

 

6

 

 

59

 

Other

 

2

 

 

3

 

Change in assets and liabilities, excluding impact from acquisitions:

 

 

 

 

 

 

Accounts receivable

 

(602

)

 

(147

)

Accounts payable

 

506

 

 

58

 

Taxes payable

 

28

 

 

(10

)

Interest payable

 

(22

)

 

(13

)

Inventories

 

(8

)

 

(2

)

Other assets and liabilities

 

(59

)

 

(32

)

Net cash provided by operating activities

 

2,196

 

 

830

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

Capital investments

 

(1,623

)

 

(747

)

Proceeds from sale of property and equipment

 

15

 

 

4

 

Cash acquired through acquisitions

 

 

 

55

 

Cash paid through acquisitions

 

 

 

(373

)

Other

 

 

 

(1

)

Net cash used in investing activities

 

(1,608

)

 

(1,062

)

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

Payments on current portion of long-term debt

 

(205

)

 

(844

)

Payments on long-term debt

 

(71

)

 

 

Payments on revolving credit facility

 

(10,341

)

 

(3,401

)

Borrowings under revolving credit facility

 

10,061

 

 

3,366

 

Change in bank drafts outstanding

 

62

 

 

33

 

Proceeds from exercise of common stock options

 

7

 

 

 

Purchase of treasury stock

 

(100

)

 

 

Debt issuance/amendment costs

 

(14

)

 

(25

)

Cash paid for tax withholding

 

(4

)

 

(3

)

Repayment of Indigo revolving credit facility

 

 

 

(95

)

Proceeds from issuance of long-term debt

 

 

 

1,200

 

Net cash provided by (used in) financing activities

 

(605

)

 

231

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

(17

)

 

(1

)

Cash and cash equivalents at beginning of year

 

28

 

 

13

 

Cash and cash equivalents at end of period

 

$

11

 

 

$

12

 

Hedging Summary

A detailed breakdown of derivative financial instruments and financial basis positions as of September 30, 2022, including the remainder of 2022 and excluding those positions that settled in the first, second and third quarters, is shown below. Please refer to the Company’s quarterly report on Form 10-Q to be filed with the Securities and Exchange Commission for complete information on the Company’s commodity, basis and interest rate protection.

 

 

 

Weighted Average Price per MMBtu

 

Volume (Bcf)

 

Swaps

 

Sold Puts

 

Purchased Puts

 

Sold Calls

Natural gas

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

207

 

$

3.04

 

$

 

$

 

$

Two-way costless collars

18

 

 

 

 

 

 

2.47

 

 

2.89

Three-way costless collars

92

 

 

 

 

2.03

 

 

2.48

 

 

2.88

Total

317

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

504

 

$

3.08

 

$

 

$

 

$

Two-way costless collars

219

 

 

 

 

 

 

3.03

 

 

3.55

Three-way costless collars

215

 

 

 

 

2.09

 

 

2.54

 

 

3.00

Total

938

 

 

 

 

 

 

 

 

 

 

 

 

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

224

 

$

2.96

 

$

 

$

 

$

Two-way costless collars

44

 

 

 

 

 

 

3.07

 

 

3.53

Three-way costless collars

11

 

 

 

 

2.25

 

 

2.80

 

 

3.54

Total

279

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas financial basis positions

 

Volume

 

Basis Differential

 

 

 

(Bcf)

 

($/MMBtu)

 

Q4 2022

 

 

 

 

 

 

 

 

Dominion South

 

30

 

 

$

(0.65

)

 

TCO

 

26

 

 

$

(0.57

)

 

TETCO M3

 

20

 

 

$

(0.16

)

 

Columbia Gulf Mainline

 

6

 

 

$

(0.25

)

 

Total

 

82

 

 

$

(0.48

)

 

2023

 

 

 

 

 

Dominion South

 

134

 

 

$

(0.75

)

 

TCO

 

72

 

 

$

(0.62

)

 

TETCO M3

 

62

 

 

$

0.15

 

 

Trunkline Zone 1A

 

13

 

 

$

(0.29

)

 

Total

 

281

 

 

$

(0.50

)

 

2024

 

 

 

 

 

 

 

 

Dominion South

 

46

 

 

$

(0.71

)

 

2025

 

 

 

 

 

 

 

 

Dominion South

 

9

 

 

$

(0.64

)

 

Call Options – Natural Gas (Net)

 

Volume

 

Weighted Average Strike Price

 

 

(Bcf)

 

($/MMBtu)

2022

 

21

 

 

$

3.01

 

2023

 

46

 

 

$

2.94

 

2024

 

9

 

 

$

3.00

 

Total

 

76

 

 

 

 

 

 

 

 

Weighted Average Price per Bbl

 

Volume (MBbls)

 

Swaps

 

Sold Puts

 

Purchased Puts

 

Sold Calls

Oil

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

846

 

$

52.68

 

$

 

$

 

$

Three-way costless collars

344

 

 

 

 

39.76

 

 

50.08

 

 

56.97

Total

1,190

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

1,081

 

$

60.05

 

$

 

$

 

$

Three-way costless collars

1,268

 

 

 

 

33.97

 

 

45.51

 

 

56.12

Total

2,349

 

 

 

 

 

 

 

 

 

 

 

 

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

913

 

$

70.66

 

$

 

$

 

$

2025

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

41

 

$

77.66

 

$

 

$

 

$

Ethane

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

1,463

 

$

11.44

 

$

 

$

 

$

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

1,308

 

$

11.91

 

$

 

$

 

$

Propane

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

1,536

 

$

31.22

 

$

 

$

 

$

Three-way costless collars

77

 

 

 

 

16.80

 

 

21.00

 

 

31.92

Total

1,613

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

1,925

 

$

36.79

 

$

 

$

 

$

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

73

 

$

42.32

 

$

 

$

 

$

Normal Butane

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

464

 

$

36.22

 

$

 

$

 

$

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

347

 

$

41.24

 

$

 

$

 

$

Natural Gasoline

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

501

 

$

55.78

 

$

 

$

 

$

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price swaps

359

 

$

66.00

 

$

 

$

 

$

Explanation and Reconciliation of Non-GAAP Financial Measures

The Company reports its financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, management believes certain non-GAAP performance measures may provide financial statement users with additional meaningful comparisons between current results, the results of the Company’s peers and of prior periods.

One such non-GAAP financial measure is net cash flow. Management presents this measure because (i) it is accepted as an indicator of an oil and gas exploration and production company’s ability to internally fund exploration and development activities and to service or incur additional debt, (ii) changes in operating assets and liabilities relate to the timing of cash receipts and disbursements which the Company may not control and (iii) changes in operating assets and liabilities may not relate to the period in which the operating activities occurred.

Additional non-GAAP financial measures the Company may present from time to time are free cash flow, net debt, adjusted net income, adjusted diluted earnings per share and adjusted EBITDA, all which exclude certain charges or amounts. Management presents these measures because (i) they are consistent with the manner in which the Company’s position and performance are measured relative to the position and performance of its peers, (ii) these measures are more comparable to earnings estimates provided by securities analysts, and (iii) charges or amounts excluded cannot be reasonably estimated and guidance provided by the Company excludes information regarding these types of items. These adjusted amounts are not a measure of financial performance under GAAP.

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2022

 

2021

 

2022

 

2021

Adjusted net income:

(in millions)

Net income (loss)

$

450

 

 

$

(1,857

)

 

$

(1,052

)

 

$

(2,386

)

Add back (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger-related expenses

 

 

 

 

35

 

 

 

27

 

 

 

39

 

Restructuring charges

 

 

 

 

 

 

 

 

 

 

7

 

Impairments

 

 

 

 

6

 

 

 

 

 

 

6

 

Loss on unsettled derivatives (1)

 

14

 

 

 

2,011

 

 

 

2,524

 

 

 

2,952

 

Loss on early extinguishment of debt

 

 

 

 

59

 

 

 

6

 

 

 

59

 

Other loss

 

 

 

 

 

 

 

1

 

 

 

 

Adjustments due to discrete tax items (2)

 

(100

)

 

 

447

 

 

 

285

 

 

 

570

 

Tax impact on adjustments

 

(4)

 

 

 

(513

)

 

 

(616

)

 

 

(734

)

Adjusted net income

$

360

 

 

$

188

 

 

$

1,175

 

 

$

513

 

(1)

Includes ($2) million and $7 million of non-performance risk adjustment to derivative activities for the three and nine months ended September 30, 2022, respectively, and $4 million and $5 million of non-performance risk adjustment to derivative activities for the three and nine months ended September 30, 2021, respectively.

(2)

The Company’s 2022 income tax rate is 24.1% before the impacts of any valuation allowance.

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2022

 

2021

 

2022

 

2021

Adjusted diluted earnings per share:

 

Diluted earnings (loss) per share

$

0.40

 

 

$

(2.36

)

 

$

(0.94

)

 

$

(3.34

)

Add back (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger-related expenses

 

 

 

 

0.05

 

 

 

0.02

 

 

 

0.05

 

Restructuring charges

 

 

 

 

 

 

 

 

 

 

0.01

 

Impairments

 

 

 

 

0.01

 

 

 

 

 

 

0.01

 

Loss on unsettled derivatives (1)

 

0.01

 

 

 

2.54

 

 

 

2.27

 

 

 

4.12

 

Loss on early extinguishment of debt

 

 

 

 

0.08

 

 

 

0.00

 

 

 

0.08

 

Other loss

 

 

 

 

 

 

 

0.00

 

 

 

 

Adjustments due to discrete tax items (2)

 

(0.09

)

 

 

0.57

 

 

 

0.25

 

 

 

0.80

 

Tax impact on adjustments

 

(0.00

)

 

 

(0.65

)

 

 

(0.55

)

 

 

(1.01

)

Adjusted diluted earnings per share

$

0.32

 

 

$

0.24

 

 

$

1.05

 

 

$

0.72

 

(1)

Includes ($2) million and $7 million of non-performance risk adjustment to derivative activities for the three and nine months ended September 30, 2022, respectively, and $4 million and $5 million of non-performance risk adjustment to derivative activities for the three and nine months ended September 30, 2021, respectively.

(2)

The Company’s 2022 income tax rate is 24.1% before the impacts of any valuation allowance.

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2022

 

2021

 

2022

 

2021

Net cash flow:

(in millions)

Net cash provided by operating activities

$

797

 

 

$

213

 

 

$

2,196

 

 

$

830

 

Add back (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities

 

(32

)

 

 

148

 

 

 

157

 

 

 

146

 

Merger-related expenses

 

 

 

 

35

 

 

 

27

 

 

 

39

 

Restructuring charges

 

 

 

 

 

 

 

 

 

 

7

 

Net cash flow

$

765

 

 

$

396

 

 

$

2,380

 

 

$

1,022

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2022

 

2021

 

2022

 

2021

Free cash flow:

(in millions)

Net cash flow

$

765

 

 

$

396

 

 

$

2,380

 

 

$

1,022

 

Subtract:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total capital investments

 

(543

)

 

 

(291

)

 

 

(1,672

)

 

 

(816

)

Free cash flow

$

222

 

 

$

105

 

 

$

708

 

 

$

206

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2022

 

2021

 

2022

 

2021

Adjusted EBITDA:

(in millions)

Net income (loss)

$

450

 

 

$

(1,857

)

 

$

(1,052

)

 

$

(2,386

)

Add back (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

50

 

 

 

34

 

 

 

139

 

 

 

95

 

Income tax expense (benefit)

 

11

 

 

 

 

 

 

41

 

 

 

 

Depreciation, depletion and amortization

 

298

 

 

 

138

 

 

 

861

 

 

 

334

 

Merger-related expenses

 

 

 

 

35

 

 

 

27

 

 

 

39

 

Restructuring charges

 

 

 

 

 

 

 

 

 

 

7

 

Impairments

 

 

 

 

6

 

 

 

 

 

 

6

 

Loss on unsettled derivatives (1)

 

14

b

 

 

2,011

 

 

 

2,524

 

 

 

2,952

 

Loss on early extinguishment of debt

 

 

 

 

59

 

 

 

6

 

 

 

59

 

Other loss

 

 

 

 

 

 

 

1

 

 

 

 

Stock-based compensation expense

 

1

 

 

 

 

 

 

4

 

 

 

2

 

Adjusted EBITDA

$

824

 

 

$

426

 

 

$

2,551

 

 

$

1,108

 

(1)

Includes ($2) million and $7 million of non-performance risk adjustment to derivative activities for the three and nine months ended September 30, 2022, respectively, and $4 million and $5 million of non-performance risk adjustment to derivative activities for the three and nine months ended September 30, 2021, respectively.

 

 

12 Months Ended September 30, 2022

Adjusted EBITDA:

 

(in millions)

Net income

 

$

1,309

 

Add back (deduct):

 

 

 

 

Interest expense

 

 

180

 

Income tax expense (benefit)

 

 

41

 

Depreciation, depletion and amortization

 

 

1,073

 

Merger-related expenses

 

 

64

 

Loss on unsettled derivatives (1)

 

 

516

 

Loss on early extinguishment of debt

 

 

40

 

Stock-based compensation expense

 

 

4

 

Other

 

(5

)

Adjusted EBITDA

 

$

3,222

 

 

 

 

 

 

(1)

Includes $3 million of non-performance risk adjustment for the twelve months ended September 30, 2022.

 

 

 

September 30, 2022

Net debt:

 

(in millions)

Total debt (1)

 

$

4,890

 

Subtract:

 

 

Cash and cash equivalents

 

(11

)

Net debt

 

$

4,879

 

(1)

Does not include $30 million of unamortized debt discount and issuance expense.

 

 

September 30, 2022

Net debt to Adjusted EBITDA:

 

(in millions)

Net debt

 

$

4,879

 

Adjusted EBITDA (1)

 

$

3,375

 

Net debt to Adjusted EBITDA

 

 

1.4x

 

(1)

Adjusted EBITDA for the twelve months ended September 30, 2022 includes $153 million of adjusted EBITDA generated by GEP Haynesville prior to the December 2021 acquisition.

 

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

Source: Southwestern Energy Company