SOUTHWESTERN ENERGY CO [SWN] Filings

10-Q 1 swn-20220930.htm 10-Q 2022 Q3 FORM 10Q swn-20220930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

For the quarterly period ended September 30, 2022

☐ Transition Report pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

For the transition period from ________ to ________

Commission file number: 001-08246

Southwestern Energy Company

(Exact name of registrant as specified in its charter)

Delaware

71-0205415

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

10000 Energy Drive

Spring, Texas 77389

(Address of principal executive offices)(Zip Code)

(832) 796-1000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par Value $0.01

SWN

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


Class						Outstanding as of October 25, 2022
Common Stock, Par Value $0.01						1,103,578,669

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SOUTHWESTERN ENERGY COMPANY

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022


PART I – FINANCIAL INFORMATION			Page

Item 1.	Financial Statements		4
	Consolidated Statements of Operations		4
	Consolidated Statements of Comprehensive Income (Loss)		5
	Consolidated Balance Sheets		6
	Consolidated Statements of Cash Flows		7
	Consolidated Statements of Changes in Equity		8
	Notes to Consolidated Financial Statements		10
		Note 1. Basis of Presentation	10
		Note 2. Acquisition	10
		Note 3. Restructuring Charges	15
		Note 4. Revenue Recognition	15
		Note 5. Cash and Cash Equivalents	17
		Note 6. Natural Gas and Oil Properties	17
		Note 7. Earnings per Share	18
		Note 8. Derivatives and Risk Management	19
		Note 9. Reclassifications From Accumulated Other Comprehensive Income (Loss)	25
		Note 10. Fair Value Measurements	26
		Note 11. Debt	28
		Note 1 2 . Commitments and Contingencies	32
		Note 1 3 . Income Taxes	33
		Note 14. Pension Plan and Other Postretirement Benefits	34
		Note 15. Long-Term Incentive Compensation	35
		Note 1 6 . Segment Information	39
		Note 1 7 . New Accounting Pronouncements	42

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		42
	Results of Operations		44
	Liquidity and Capital Resources		54
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		60
Item 4.	Controls and Procedures		61

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings		62
Item 1A.	Risk Factors		62
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		62
Item 3.	Defaults Upon Senior Securities		62
Item 4.	Mine Safety Disclosures		62
Item 5.	Other Information		62
Item 6.	Exhibits		63

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CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) includes certain statements that 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 (the “Exchange Act”). All statements, other than statements of historical fact or present financial information, 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 our future operations, are forward-looking statements. Although we believe the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance. We have no obligation and make no undertaking to publicly update or revise any forward-looking statements, except as may be required by law.

Forward-looking statements include the items identified in the preceding paragraph, information concerning possible or assumed future results of operations and other statements in this Quarterly Report identified by words such as “anticipate,” “intend,” “plan,” “project,” “estimate,” “continue,” “potential,” “should,” “could,” “may,” “will,” “objective,” “guidance,” “outlook,” “effort,” “expect,” “believe,” “predict,” “budget,” “projection,” “goal,” “forecast,” “model,” “target” or similar words. Statements may be forward-looking even in the absence of these particular words.

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 our operations, markets, products, services and prices and cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. 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. In addition to any assumptions and other factors referred to specifically in connection with forward-looking statements, risks, uncertainties and factors that could cause our 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, oil and natural gas liquids (“NGLs”) (including regional basis differentials) and the impact of reduced demand for our production and products in which our production is a component due to governmental and societal actions taken in response to the COVID-19 pandemic or other world health event;

•our ability to fund our planned capital investments;

•a change in our credit rating and an increase in interest rates;

•the extent to which lower commodity prices impact our ability to service or refinance our existing debt;

•the impact of volatility in the financial markets or other global economic factors, including the impact of COVID-19 or other diseases;

•geopolitical and business conditions in key regions of the world;

•difficulties in appropriately allocating capital and resources among our strategic opportunities;

•the timing and extent of our success in discovering, developing, producing, replacing and estimating reserves;

•our ability to maintain leases that may expire if production is not established or profitably maintained;

•our ability to meet natural gas delivery commitments and to utilize or monetize our firm transportation commitments;

•our ability to realize the expected benefits from acquisitions, including the Mergers (defined below);

•costs in connection with the Mergers and the transactions contemplated thereby;

•integration of operations and results subsequent to the Mergers;

•risks related to the Mergers, including potential litigation relating to the Mergers, and the effect of the consummation of the Mergers on business relationships, operating results, employees, stakeholders and business generally of the parties;

•our ability to transport our production to the most favorable markets or at all;

•availability and costs of personnel and of products and services provided by third parties;

•the impact of government regulation, including changes in law, the ability to obtain and maintain permits, any increase in severance or similar taxes, and legislation or regulation relating to hydraulic fracturing or other drilling and completing techniques, climate and over-the-counter derivatives;

•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;

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•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;

•our hedging strategy and results;

•our ability to execute our share repurchase program;

•our ability to obtain debt or equity financing on satisfactory terms; and

•any other factors listed in the reports we have filed and may file with the Securities and Exchange Commission (“SEC”).

Should one or more of the risks or uncertainties described above or elsewhere in this Quarterly Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. We specifically disclaim all responsibility to update publicly any information contained in a forward-looking statement or any forward-looking statement in its entirety and therefore disclaim any resulting liability for potentially related damages.

Reserve engineering is a process of estimating underground accumulations of natural gas, oil and NGLs that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and our development program. Accordingly, reserve estimates may differ significantly from the quantities of natural gas, oil and NGLs that are ultimately recovered.

All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the three months ended September 30,				For the nine months ended 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 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

The accompanying notes are an integral part of these consolidated financial statements.

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SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	For the three months ended September 30,				For the nine months ended September 30,
(in millions)	2022		2021		2022		2021
Net income (loss)	$	450	$	(1,857)	$	(1,052)	$	(2,386)

Change in value of pension and other postretirement liabilities:
Settlement adjustment (1)	—		1		—		4

Comprehensive income (loss)	$	450	$	(1,856)	$	(1,052)	$	(2,382)

(1)Settlement adjustment was less than $1 million for the three and nine months ended September 30, 2022. Settlement adjustments reflect $1 million in tax benefits for the nine months ended September 30, 2021.

The accompanying notes are an integral part of these consolidated financial statements.

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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, including $2,236 million as of September 30, 2022 and $2,231 million as of December 31, 2021 excluded from amortization	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
Deferred tax assets	—		—
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 (Note 12)
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

The accompanying notes are an integral part of these consolidated financial statements.

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SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

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

The accompanying notes are an integral part of these consolidated financial statements.

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SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Common Stock in Treasury			Total
	Shares Issued	Amount								Shares	Amount

	(in millions, except share amounts)
Balance at December 31, 2021	1,158,672,666	$	12	$	7,150	$	(4,388)	$	(25)	44,353,224	$	(202)	$	2,547
Comprehensive loss:
Net loss	—	—		—		(2,675)		—		—	—		(2,675)
Other comprehensive income	—	—		—		—		—		—	—		—
Total comprehensive loss	—	—		—		—		—		—	—		(2,675)
Stock-based compensation	—	—		1		—		—		—	—		1





Performance units vested	2,499,860	—		12		—		—		—	—		12
Tax withholding – stock compensation	(721,070)	—		(4)		—		—		—	—		(4)
Balance at March 31, 2022	1,160,451,456	$	12	$	7,159	$	(7,063)	$	(25)	44,353,224	$	(202)	$	(119)
Comprehensive income:
Net income	—	—		—		1,173		—		—	—		1,173
Other comprehensive income	—	—		—		—		—		—	—		—
Total comprehensive income	—	—		—		—		—		—	—		1,173
Stock-based compensation	—	—		2		—		—		—	—		2
Exercise of stock options	893,312	—		7		—		—		—	—		7
Issuance of restricted stock	115,608	—		—		—		—		—	—		—

Restricted units vested

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10-Q	[2021-07-29]
10-Q	[2021-04-29]
10-K	[2021-03-01]
10-Q	[2020-10-29]
10-Q	[2020-07-30]
10-Q	[2020-04-30]
10-K	[2020-02-27]
10-Q	[2019-10-24]
10-Q	[2019-08-06]
10-Q	[2019-04-25]
10-K	[2019-02-28]
10-Q	[2018-10-25]
10-Q	[2018-08-02]
10-Q	[2018-05-07]
10-K	[2018-03-01]
10-Q	[2017-10-26]
10-Q	[2017-08-03]
10-Q	[2017-04-27]
10-K	[2017-02-23]
10-Q	[2016-10-20]
10-Q	[2016-07-21]
10-Q	[2016-04-21]
10-K	[2016-02-25]
10-Q	[2015-10-22]
10-Q	[2015-07-27]
10-Q	[2015-04-23]
10-K	[2015-02-26]
10-Q	[2014-10-23]
10-Q	[2014-07-31]
10-Q	[2014-05-01]
10-K	[2014-02-27]
10-Q	[2013-10-31]
10-Q	[2013-08-01]
10-Q	[2013-05-02]
10-K	[2013-02-21]
10-Q	[2012-11-01]
10-Q	[2012-08-02]
10-Q	[2012-05-03]
10-K	[2012-02-28]