Southwestern Energy Earnings 2020-09-30

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

swn-20200930

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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, 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 October 27, 2020
Common Stock, Par Value $0.01						605,559,524

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SOUTHWESTERN ENERGY COMPANY

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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		9
		Note 1. Basis of Presentation	9
		Note 2. Acquisition	9
		Note 3 . Restructuring Charges	10
		Note 4 . Revenue Recognition	11
		Note 5 . Cash and Cash Equivalents	12
		Note 6 . Natural Gas and Oil Properties	13
		Note 7 . Earnings per Share	13
		Note 8 . Derivatives and Risk Management	14
		Note 9 . Reclassifications From Accumulated Other Comprehensive Income (Loss)	22
		Note 10 . Fair Value Measurements	22
		Note 1 1 . Debt	25
		Note 1 2 . Commitments and Contingencies	27
		Note 1 3 . Income Taxes	28
		Note 1 4 . Pension Plan and Other Postretirement Benefits	29
		Note 1 5 . Long-Term Incentive Compensation	29
		Note 1 6 . Segment Information	33
		Note 1 7 . New Accounting Pronouncements	34
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
	Results of Operations		38
	Liquidity and Capital Resources		45
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		51
Item 4.	Controls and Procedures		52

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings		52
Item 1A.	Risk Factors		52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		54
Item 3.	Defaults Upon Senior Securities		54
Item 4.	Mine Safety Disclosures		54
Item 5.	Other Information		54
Item 6.	Exhibits		55

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

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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 (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, including the Merger (as defined below);

•the consummation of or failure to consummate the Merger and the timing thereof;

•costs in connection with the Merger;

•integration of operations and results subsequent to the Merger;

•our ability to refinance the Montage Notes (as defined below) and the borrowings under Montage’s senior secured revolving credit facility;

•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)	2020		2019		2020		2019
Operating Revenues:
Gas sales	$	199	$	238	$	611	$	943
Oil sales	40		67		111		153
NGL sales	68		52		158		191
Marketing	219		279		645		1,004
Other	1		—		4		2
	527		636		1,529		2,293
Operating Costs and Expenses:
Marketing purchases	226		288		675		1,022
Operating expenses	202		189		577		523
General and administrative expenses	31		42		89		119
Montage acquisition-related expenses	3		—		3		—
Restructuring charges	—		4		12		9
Loss on sale of operating assets	—		—		—		3
Depreciation, depletion and amortization	70		125		267		352
Impairments	361		2		2,495		8
Taxes, other than income taxes	15		15		38		51
	908		665		4,156		2,087
Operating Income (Loss)	(381)		(29)		(2,627)		206
Interest Expense:
Interest on debt	43		42		123		125
Other interest charges	2		2		7		5
Interest capitalized	(23)		(27)		(67)		(84)
	22		17		63		46

Gain (Loss) on Derivatives	(192)		100		38		220
Gain on Early Extinguishment of Debt	—		7		35		7
Other Income (Loss), Net	2		(2)		3		(7)

Income (Loss) Before Income Taxes	(593)		59		(2,614)		380
Provision (Benefit) for Income Taxes:
Current	—		(1)		(2)		(1)
Deferred	—		11		408		(400)
	—		10		406		(401)
Net Income (Loss)	$	(593)	$	49	$	(3,020)	$	781


Earnings (Loss) Per Common Share:
Basic	$	(1.04)	$	0.09	$	(5.48)	$	1.45
Diluted	$	(1.04)	$	0.09	$	(5.48)	$	1.44

Weighted Average Common Shares Outstanding:
Basic	571,872,413		539,221,101		551,162,559		539,315,170
Diluted	571,872,413		540,038,187		551,162,559		540,442,649

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)	2020		2019		2020		2019
Net income (loss)	$	(593)	$	49	$	(3,020)	$	781

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

Comprehensive income (loss)	$	(592)	$	50	$	(3,019)	$	786

(1)Tax benefits for the three months ended September 30, 2020 were immaterial. Net of less than $1 million in tax benefits for the nine months ended September 30, 2020 and the three months ended September 30, 2019 and $2 million in tax benefits for the nine months ended September 30, 2019. In 2019, primarily related to settlement of pension assets.

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, 2020		December 31, 2019

ASSETS	(in millions)
Current assets:
Cash and cash equivalents	$	95	$	5
Accounts receivable, net	239		345
Derivative assets	238		278
Other current assets	41		51
Total current assets	613		679
Natural gas and oil properties, using the full cost method, including $1,379 million as of September 30, 2020 and $1,506 million as of December 31, 2019 excluded from amortization	25,969		25,250

Other	500		520
Less: Accumulated depreciation, depletion and amortization	(23,247)		(20,503)
Total property and equipment, net	3,222		5,267
Operating lease assets	145		159
Deferred tax assets	—		407
Other long-term assets	177		205
Total long-term assets	322		771
TOTAL ASSETS	$	4,157	$	6,717
LIABILITIES AND EQUITY
Current liabilities:

Accounts payable	$	416	$	525
Taxes payable	47		59
Interest payable	56		51

Derivative liabilities	287		125
Current operating lease liabilities	33		34
Other current liabilities	30		54
Total current liabilities	869		848
Long-term debt	2,450		2,242
Long-term operating lease liabilities	107		119
Long-term derivative liabilities	188		111
Pension and other postretirement liabilities	35		43
Other long-term liabilities	124		108
Total long-term liabilities	2,904		2,623
Commitments and contingencies (Note 12)
Equity:
Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 649,899,653 shares as of September 30, 2020 and 585,555,923 shares as of December 31, 2019	7		6

Additional paid-in capital	4,882		4,726
Accumulated deficit	(4,271)		(1,251)
Accumulated other comprehensive loss	(32)		(33)
Common stock in treasury, 44,353,224 shares as of September 30, 2020 and December 31, 2019	(202)		(202)
Total equity	384		3,246
TOTAL LIABILITIES AND EQUITY	$	4,157	$	6,717

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)	2020		2019
Cash Flows From Operating Activities:
Net income (loss)	$	(3,020)	$	781
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	267		352
Amortization of debt issuance costs	6		5
Impairments	2,495		8
Deferred income taxes	408		(400)
(Gain) loss on derivatives, unsettled	272		(108)
Stock-based compensation	2		6
Gain on early extinguishment of debt	(35)		(7)
Loss on sale of assets	—		3
Other	3		11
Change in assets and liabilities:
Accounts receivable	106		257
Accounts payable	(129)		(124)
Taxes payable	(12)		(3)
Interest payable	3		2
Inventories	3		(2)
Other assets and liabilities	38		(

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	2020-09-30	Filed 2020-10-29
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	2020-11-13
8-K	2020-11-05
8-K	2020-10-29
8-K	2020-10-08
8-K	2020-08-27
8-K	2020-08-18
8-K	2020-08-16
8-K	2020-08-13
8-K	2020-08-12
8-K	2020-07-30
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-20200930xex311.htm
EX-31.2	swn-20200930xex312.htm
EX-32.1	swn-20200930xex321.htm
EX-32.2	swn-20200930xex322.htm
EX-95.1	swn-20200930xex951.htm
EX-10.2	swn-20200930xexhibit102.htm

SWN 10Q Quarterly Report

Southwestern Energy Earnings 2020-09-30