Southwestern Energy Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

swn-20200630

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 June 30, 2020

☐ 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 July 28, 2020
Common Stock, Par Value $0.01						542,234,903

Table of Contents

SOUTHWESTERN ENERGY COMPANY

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020


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			8
		Note 1. Basis of Presentation	8
		Note 2. Restructuring Charges	8
		Note 3. Revenue Recognition	9
		Note 4. Cash and Cash Equivalents	11
		Note 5. Natural Gas and Oil Properties	11
		Note 6. Earnings per Share	12
		Note 7. Derivatives and Risk Management	13
		Note 8. Reclassifications From Accumulated Other Comprehensive Income (Loss)	20
		Note 9. Fair Value Measurements	20
		Note 10. Debt	22
		Note 1 1 . Commitments and Contingencies	24
		Note 1 2 . Income Taxes	25
		Note 1 3 . Pension Plan and Other Postretirement Benefits	26
		Note 14. Long-Term Incentive Compensation	26
		Note 1 5 . Segment Information	30
		Note 1 6 . New Accounting Pronouncements	31
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
	Results of Operations			34
	Liquidity and Capital Resources			42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			47
Item 4.	Controls and Procedures			48

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings			48
Item 1A.	Risk Factors			48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			48
Item 3.	Defaults Upon Senior Securities			48
Item 4.	Mine Safety Disclosures			48
Item 5.	Other Information			48
Item 6.	Exhibits			49

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 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.

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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 (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.

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 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;

•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, including the impact of COVID-19;

•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.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the three months ended June 30,						For the six months ended June 30,
(in millions, except share/per share amounts)	2020		2019		2020		2019
Operating Revenues:
Gas sales	$	164	$	275	$	412	$	705
Oil sales	19		47		71		86
NGL sales	40		58		90		139
Marketing	187		287		426		725
Other	—		—		3		2
	410		667		1,002		1,657
Operating Costs and Expenses:
Marketing purchases	201		293		449		734
Operating expenses	182		169		375		334
General and administrative expenses	32		40		58		77
Loss on sale of operating assets	—		3		—		3
Restructuring charges	2		2		12		5
Depreciation, depletion and amortization	84		115		197		227
Impairments	655		6		2,134		6
Taxes, other than income taxes	10		17		23		36
	1,166		645		3,248		1,422
Operating Income (Loss)	(756)		22		(2,246)		235
Interest Expense:
Interest on debt	40		41		80		83
Other interest charges	3		2		5		3
Interest capitalized	(21)		(28)		(44)		(57)
	22		15		41		29

Gain (Loss) on Derivatives	(109)		152		230		120
Gain on Early Extinguishment of Debt	7		—		35		—
Other Income (Loss), Net	—		(6)		1		(5)

Income (Loss) Before Income Taxes	(880)		153		(2,021)		321
Provision (Benefit) for Income Taxes:
Current	—		—		(2)		—
Deferred	—		15		408		(411)
	—		15		406		(411)
Net Income (Loss)	$	(880)	$	138	$	(2,427)	$	732


Earnings (Loss) Per Common Share:
Basic	$	(1.63)	$	0.26	$	(4.49)	$	1.36
Diluted	$	(1.63)	$	0.26	$	(4.49)	$	1.35

Weighted Average Common Shares Outstanding:
Basic	541,079,192		539,005,941		540,693,841		539,362,984
Diluted	541,079,192		539,947,053		540,693,841		540,624,742

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 June 30,						For the six months ended June 30,
(in millions)	2020		2019		2020		2019
Net income (loss)	$	(880)	$	138	$	(2,427)	$	732

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

Comprehensive income (loss)	$	(880)	$	142	$	(2,427)	$	736

(1)Tax benefits for the three months ended June 30, 2020 were immaterial. Net of $1 million in tax benefits for the six months ended June 30, 2020 and the three and six months ended June 30, 2019, respectively. In 2019, primarily related to settlement of pension assets.

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

Table of Contents

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2020		December 31, 2019

ASSETS	(in millions)
Current assets:
Cash and cash equivalents	$	10	$	5
Accounts receivable, net	250		345
Derivative assets	466		278
Other current assets	44		51
Total current assets	770		679
Natural gas and oil properties, using the full cost method, including $1,423 million as of June 30, 2020 and $1,506 million as of December 31, 2019 excluded from amortization	25,739		25,250

Other	512		520
Less: Accumulated depreciation, depletion and amortization	(22,825)		(20,503)
Total property and equipment, net	3,426		5,267
Operating lease assets	153		159
Deferred tax assets	—		407
Other long-term assets	206		205
Total long-term assets	359		771
TOTAL ASSETS	$	4,555	$	6,717
LIABILITIES AND EQUITY
Current liabilities:

Accounts payable	$	426	$	525
Taxes payable	48		59
Interest payable	48		51

Derivative liabilities	282		125
Current operating lease liabilities	34		34
Other current liabilities	37		54
Total current liabilities	875		848
Long-term debt	2,440		2,242
Long-term operating lease liabilities	113		119
Pension and other postretirement liabilities	37		43
Other long-term liabilities	267		219
Total long-term liabilities	2,857		2,623
Commitments and contingencies (Note 11)
Equity:
Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 586,593,540 shares as of June 30, 2020 and 585,555,923 shares as of December 31, 2019

Price	2.04	EPS	2
Shares	540	P/E	1
MCap	1,103	P/FCF	1
Net Debt	2,263	EBIT	733
TEV	3,366	TEV/EBIT	5
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-07-31
10-Q	2020-03-31	Filed 2020-04-30
10-K	2019-12-31	Filed 2020-02-27
10-Q	2019-09-30	Filed 2019-10-25
10-Q	2019-06-30	Filed 2019-08-06
10-Q	2019-03-31	Filed 2019-04-25
10-K	2018-12-31	Filed 2019-02-28
10-Q	2018-09-30	Filed 2018-10-25
10-Q	2018-06-30	Filed 2018-08-02
10-Q	2018-03-31	Filed 2018-05-07
10-K	2018-03-01	Filed 2018-03-01
10-Q	2017-09-30	Filed 2017-10-26
10-Q	2017-06-30	Filed 2017-08-03
10-Q	2017-04-27	Filed 2017-04-27
10-K	2016-12-31	Filed 2017-02-23
10-Q	2016-09-30	Filed 2016-10-20
10-Q	2016-06-30	Filed 2016-07-21
10-Q	2016-03-31	Filed 2016-04-21
10-K	2015-12-31	Filed 2016-02-25
10-Q	2015-09-30	Filed 2015-10-22
10-Q	2015-06-30	Filed 2015-07-27
10-Q	2015-03-31	Filed 2015-04-23
10-K	2014-12-31	Filed 2015-02-26
10-Q	2014-09-30	Filed 2014-10-23
10-Q	2014-06-30	Filed 2014-07-31
10-Q	2014-03-31	Filed 2014-05-01
10-K	2013-12-31	Filed 2014-02-27
10-Q	2013-09-30	Filed 2013-10-31
10-Q	2013-06-30	Filed 2013-08-01
10-Q	2013-03-31	Filed 2013-05-02
10-K	2012-12-31	Filed 2013-02-21
10-Q	2012-09-30	Filed 2012-11-01
10-Q	2012-06-30	Filed 2012-08-02
10-Q	2012-03-31	Filed 2012-05-03
10-K	2012-02-27	Filed 2012-02-28
10-Q	2011-09-30	Filed 2011-10-27
10-Q	2011-06-30	Filed 2011-07-28
10-Q	2011-03-31	Filed 2011-04-28
10-K	2010-12-31	Filed 2011-02-25
10-Q	2010-09-30	Filed 2010-10-28
10-Q	2010-06-30	Filed 2010-08-05
10-Q	2010-03-31	Filed 2010-04-29
10-K	2009-12-31	Filed 2010-02-25

8-K	2020-08-27	Enter Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K	2020-08-18	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2020-08-16	Officers, Regulation FD
8-K	2020-08-13	Enter Agreement, Regulation FD, Exhibits
8-K	2020-08-12	Enter Agreement, Regulation FD, Other Events, Exhibits
8-K	2020-07-30	Earnings, Exhibits
8-K	2020-06-08
8-K	2020-06-04
8-K	2020-05-19
8-K	2020-04-30
8-K	2020-02-27
8-K	2020-01-29
8-K	2019-10-24
8-K	2019-10-08
8-K	2019-08-06
8-K	2019-06-20
8-K	2019-05-21
8-K	2019-04-25
8-K	2019-02-28
8-K	2019-02-05
8-K	2018-12-03
8-K	2018-10-25
8-K	2018-09-28
8-K	2018-09-17
8-K	2018-08-30
8-K	2018-08-02
8-K	2018-06-27
8-K	2018-05-25
8-K	2018-04-26
8-K	2018-04-26
8-K	2018-03-07
8-K	2018-03-01
8-K	2018-02-26
8-K	2018-02-08
8-K	2018-01-12

EX-31.1	swn-20200630xex311.htm
EX-31.2	swn-20200630xex312.htm
EX-32.1	swn-20200630xex321.htm
EX-32.2	swn-20200630xex322.htm
EX-95.1	swn-20200630xex951.htm

SWN 10Q Quarterly Report

Southwestern Energy Earnings 2020-06-30