Southwestern Energy Earnings 2019-09-30

SWN 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Comparables ($MM TTM)
Ticker	M Cap	Assets	Liab	Rev	G Profit	Net Inc	EBITDA	EV	G Margin	EV/EBITDA	ROA
MGY	1,810	3,531	747	1,073	0	120	572	2,113	0%	3.7	3%
OAS	1,745	7,710	3,844	2,251	0	236	1,208	4,621	0%	3.8	3%
RRC	1,737	9,728	5,546	3,580	3,009	-1,599	-799	5,558	84%	-7.0	-16%
JAG	1,734	1,914	1,013	432	0	107	152	2,349	0%	15.4	6%
SNDE	1,691	802	409	0	0	0	0	1,691			0%
AR	1,663	17,331	8,991	4,759	0	1,009	2,416	5,266	0%	2.2	6%
WLL	1,662	7,776	3,575	1,856	0	251	1,214	4,539	0%	3.7	3%
SWN	1,654	6,545	3,463	3,783	0	1,010	1,189	3,841	0%	3.2	15%
ESV	1,582	20,683	7,416	1,896	0	393	512	5,436	0%	10.6	2%
CPK	1,528	1,681	1,137	700	0	60	146	1,884	0%	12.9	4%

Document

Table of Contents

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, 2019

☐ 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, 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 22, 2019
Common Stock, Par Value $0.01						541,296,926

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SOUTHWESTERN ENERGY COMPANY

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019


PART I – FINANCIAL INFORMATION					Page

Item 1.	Financial Statements			3
	Consolidated Statements of Operations			3
	Consolidated Statements of Comprehensive Income			4
	Consolidated Balance Sheets			5
	Consolidated Statements of Cash Flows			6
	Consolidated Statements of Changes in Equity			7
	Notes to Consolidated Financial Statements			9
		Note 1. Basis of Presentation	9
		Note 2. Divestitures	9
		Note 3. Restructuring Charges	10
		Note 4. Leases	11
		Note 5. Revenue Recognition	13
		Note 6. Cash and Cash Equivalents	15
		Note 7. Natural Gas and Oil Properties	15
		Note 8. Earnings per Share	15
		Note 9. Derivatives and Risk Management	16
		Note 10. Reclassifications From Accumulated Other Comprehensive Income (Loss)	23
		Note 11. Fair Value Measurements	23
		Note 12. Debt	26
		Note 13. Commitments and Contingencies	28
		Note 14. Income Taxes	29
		Note 15. Pension Plan and Other Postretirement Benefits	30
		Note 16. Stock-Based Compensation	30
		Note 17. Segment Information	33
		Note 18. New Accounting Pronouncements	34
		Note 19. Condensed Consolidated Financial Information	35
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			42
	Results of Operations			44
	Liquidity and Capital Resources			53
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			57
Item 4.	Controls and Procedures			57

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings			58
Item 1A.	Risk Factors			59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			59
Item 3.	Defaults Upon Senior Securities			59
Item 4.	Mine Safety Disclosures			59
Item 5.	Other Information			59
Item 6.	Exhibits			59

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

All statements, other than historical fact or present 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 (the “Exchange Act”). 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 our future operations, are forward-looking statements. Although we

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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 on Form 10-Q 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,” “target” or similar 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. 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);

•our ability to fund our planned capital investments;

•a change in our credit rating, an increase in interest rates and any adverse impacts from the discontinuation of the London Interbank Offered Rate (“LIBOR”);

•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;

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

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

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

•our ability to realize the expected benefits from acquisitions;

•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, 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;

•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; 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.

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)	2019		2018		2019		2018
Operating Revenues:
Gas sales	$	238	$	465	$	943	$	1,412
Oil sales	67		62		153		141
NGL sales	52		112		191		252
Marketing	279		287		1,004		805
Gas gathering	—		25		—		73
Other	—		—		2		4
	636		951		2,293		2,687
Operating Costs and Expenses:
Marketing purchases	288		288		1,022		808
Operating expenses	189		206		523		588
General and administrative expenses	42		51		119		165
Loss on sale of operating assets	—		—		3		—
Restructuring charges	4		2		9		20
Depreciation, depletion and amortization	125		151		352		426
Impairments	2		161		8		171
Taxes, other than income taxes	15		26		51		64
	665		885		2,087		2,242
Operating Income (Loss)	(29)		66		206		445
Interest Expense:
Interest on debt	42		56		125		180
Other interest charges	2		2		5		6
Interest capitalized	(27)		(29)		(84)		(86)
	17		29		46		100

Gain (Loss) on Derivatives	100		(65)		220		(108)
Gain (Loss) on Early Extinguishment of Debt	7		—		7		(8)
Other Income (Loss), Net	(2)		(1)		(7)		1

Income (Loss) Before Income Taxes	59		(29)		380		230
Provision (Benefit) for Income Taxes
Current	(1)		—		(1)		—
Deferred	11		—		(400)		—
	10		—		(401)		—
Net Income (Loss)	$	49	$	(29)	$	781	$	230

Participating securities – mandatory convertible preferred stock	—		—		—		1
Net Income (Loss) Attributable to Common Stock	$	49	$	(29)	$	781	$	229

Earnings (Loss) Per Common Share
Basic	$	0.09	$	(0.05)	$	1.45	$	0.40
Diluted	$	0.09	$	(0.05)	$	1.44	$	0.39

Weighted Average Common Shares Outstanding:
Basic	539,221,101		581,171,753		539,315,170		577,912,421
Diluted	540,038,187		581,171,753		540,442,649		579,828,858

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

(Unaudited)


	For the three months ended September 30,						For the nine months ended September 30,
(in millions)	2019		2018 ⁽¹⁾		2019		2018⁽¹⁾
Net income (loss)	$	49	$	(29)	$	781	$	230

Change in value of pension and other postretirement liabilities:
Amortization of prior service cost and net loss included in net periodic pension cost ⁽²⁾	1		4		5		4

Comprehensive income (loss)	$	50	$	(25)	$	786	$	234

(1)In 2018, deferred tax activity incurred in other comprehensive income was offset by a valuation allowance.

(2)Primarily related to settlement of pension assets in 2019 and the curtailment of pension assets in 2018. Net of less than $1 million and $1 million in taxes for the three months ended September 30, 2019 and 2018, respectively, and $2 million and $1 million in taxes for the nine months ended September 30, 2019 and 2018, respectively.

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, 2019		December 31, 2018
ASSETS	(in millions)
Current assets:
Cash and cash equivalents	$	29	$	201
Accounts receivable, net	323		581
Derivative assets	239		130
Other current assets	42		44
Total current assets	633		956
Natural gas and oil properties, using the full cost method, including $1,518 million as of September 30, 2019 and $1,755 million as of December 31, 2018 excluded from amortization	25,060		24,180

Other	522		525
Less: Accumulated depreciation, depletion and amortization	(20,383)		(20,049)
Total property and equipment, net	5,199		4,656
Deferred tax assets	398		—
Other long-term assets	368		185
TOTAL ASSETS	$	6,598	$	5,797
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	52	$	—
Accounts payable	539		609
Taxes payable	55

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$0.00	541	$1,654

10-Q	2019-10-25	Quarter: 2019-09-30
10-Q	2019-08-06	Quarter: 2019-06-30
10-Q	2019-04-25	Quarter: 2019-03-31
10-K	2019-02-28	Annual: 2018-12-31
10-Q	2018-10-25	Quarter: 2018-09-30
10-Q	2018-08-02	Quarter: 2018-06-30
10-Q	2018-05-07	Quarter: 2018-03-31
10-K	2018-03-01	Annual: 2018-03-01
10-Q	2017-10-26	Quarter: 2017-09-30
10-Q	2017-08-03	Quarter: 2017-06-30
10-Q	2017-04-27	Quarter: 2017-04-27
10-K	2017-02-23	Annual: 2016-12-31
10-Q	2016-10-20	Quarter: 2016-09-30
10-Q	2016-07-21	Quarter: 2016-06-30
10-Q	2016-04-21	Quarter: 2016-03-31
10-K	2016-02-25	Annual: 2015-12-31
10-Q	2015-10-22	Quarter: 2015-09-30
10-Q	2015-07-27	Quarter: 2015-06-30
10-Q	2015-04-23	Quarter: 2015-03-31
10-K	2015-02-26	Annual: 2014-12-31
10-Q	2014-10-23	Quarter: 2014-09-30
10-Q	2014-07-31	Quarter: 2014-06-30
10-Q	2014-05-01	Quarter: 2014-03-31
10-K	2014-02-27	Annual: 2013-12-31
10-Q	2013-10-31	Quarter: 2013-09-30
10-Q	2013-08-01	Quarter: 2013-06-30
10-Q	2013-05-02	Quarter: 2013-03-31
10-K	2013-02-21	Annual: 2012-12-31
10-Q	2012-11-01	Quarter: 2012-09-30
10-Q	2012-08-02	Quarter: 2012-06-30
10-Q	2012-05-03	Quarter: 2012-03-31
10-K	2012-02-28	Annual: 2012-02-27
10-Q	2011-10-27	Quarter: 2011-09-30
10-Q	2011-07-28	Quarter: 2011-06-30
10-Q	2011-04-28	Quarter: 2011-03-31
10-K	2011-02-25	Annual: 2010-12-31
10-Q	2010-10-28	Quarter: 2010-09-30
10-Q	2010-08-05	Quarter: 2010-06-30
10-Q	2010-04-29	Quarter: 2010-03-31
10-K	2010-02-25	Annual: 2009-12-31

8-K	2020-01-29	Regulation FD
8-K	2019-10-24	Earnings, Exhibits
8-K	2019-10-08	Enter Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K	2019-08-06	Earnings, Exhibits
8-K	2019-06-20	Officers, Regulation FD
8-K	2019-05-21	Officers, Shareholder Vote, Other Events, Exhibits
8-K	2019-04-25	Earnings, Exhibits
8-K	2019-02-28	Earnings, Exhibits
8-K	2019-02-05	Earnings, Exhibits
8-K	2018-12-03	M&A, Officers, Other Events, Exhibits
8-K	2018-10-25	Earnings, Exhibits
8-K	2018-09-28	Officers, Regulation FD
8-K	2018-09-17	Enter Agreement, Regulation FD, Exhibits
8-K	2018-08-30	Enter Agreement, Exhibits
8-K	2018-08-02	Earnings, Exhibits
8-K	2018-06-27	Exit Costs, Regulation FD
8-K	2018-05-25	Shareholder Vote, Other Events
8-K	2018-04-26	Earnings, Exhibits
8-K	2018-04-26	Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K	2018-03-07	Officers, Exhibits
8-K	2018-03-01	Earnings, Exhibits
8-K	2018-02-26	Officers, Regulation FD, Exhibits
8-K	2018-02-08	Earnings, Regulation FD, Exhibits
8-K	2018-01-12	Regulation FD

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