Southwestern Energy Announces Third Quarter 2022 Results

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 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.

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.

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.

Fourth Quarter 2022 Guidance

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

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.

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.

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.