Southwestern Energy Earnings 2020-03-31

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

swn-20200331

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 March 31, 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 April 28, 2020
Common Stock, Par Value $0.01						541,688,616

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SOUTHWESTERN ENERGY COMPANY

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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	11
		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	26
		Note 1 3 . Pension Plan and Other Postretirement Benefits	26
		Note 1 4 . Stock-Based Compensation	27
		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			31
	Results of Operations			34
	Liquidity and Capital Resources			40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			45
Item 4.	Controls and Procedures			45

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings			46
Item 1A.	Risk Factors			47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			47
Item 3.	Defaults Upon Senior Securities			47
Item 4.	Mine Safety Disclosures			47
Item 5.	Other Information			47
Item 6.	Exhibits			48

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.

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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 March 31,
(in millions, except share/per share amounts)	2020		2019
Operating Revenues:
Gas sales	$	248	$	430
Oil sales	52		39
NGL sales	50		81
Marketing	239		438
Other	3		2
	592		990
Operating Costs and Expenses:
Marketing purchases	248		441
Operating expenses	193		165
General and administrative expenses	26		37

Restructuring charges	10		3
Depreciation, depletion and amortization	113		112
Impairments	1,479		—
Taxes, other than income taxes	13		19
	2,082		777
Operating Income (Loss)	(1,490)		213
Interest Expense:
Interest on debt	40		42
Other interest charges	2		1
Interest capitalized	(23)		(29)
	19		14

Gain (Loss) on Derivatives	339		(32)
Gain on Early Extinguishment of Debt	28		—
Other Income, Net	1		1

Income (Loss) Before Income Taxes	(1,141)		168
Provision (Benefit) for Income Taxes:
Current	(2)		—
Deferred	408		(426)
	406		(426)
Net Income (Loss)	$	(1,547)	$	594


Earnings (Loss) Per Common Share:
Basic	$	(2.86)	$	1.10
Diluted	$	(2.86)	$	1.10

Weighted Average Common Shares Outstanding:
Basic	540,308,491		539,721,751
Diluted	540,308,491		541,320,487

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 March 31,
(in millions)	2020		2019
Net income (loss)	$	(1,547)	$	594

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

Comprehensive income (loss)	$	(1,547)	$	594

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)


	March 31, 2020		December 31, 2019

ASSETS	(in millions)
Current assets:
Cash and cash equivalents	$	5	$	5
Accounts receivable, net	292		345
Derivative assets	627		278
Other current assets	48		51
Total current assets	972		679
Natural gas and oil properties, using the full cost method, including $1,437 million as of March 31, 2020 and $1,506 million as of December 31, 2019 excluded from amortization	25,488		25,250

Other	523		520
Less: Accumulated depreciation, depletion and amortization	(22,095)		(20,503)
Total property and equipment, net	3,916		5,267
Operating lease assets	152		159
Deferred tax assets	—		407
Other long-term assets	235		205
Total long-term assets	387		771
TOTAL ASSETS	$	5,275	$	6,717
LIABILITIES AND EQUITY
Current liabilities:

Accounts payable	$	465	$	525
Taxes payable	52		59
Interest payable	54		51

Derivative liabilities	268		125
Current operating lease liabilities	32		34
Other current liabilities	43		54
Total current liabilities	914		848
Long-term debt	2,279		2,242
Long-term operating lease liabilities	114		119
Pension and other postretirement liabilities	40		43
Other long-term liabilities	227		219
Total long-term liabilities	2,660		2,623
Commitments and contingencies (Note 11)
Equity:
Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 586,023,435 shares as of March 31, 2020 and 585,555,923 shares as of December 31, 2019	6		6

Additional paid-in capital	4,728		4,726
Accumulated deficit	(2,798)		(1,251)
Accumulated other comprehensive loss	(33)		(33)
Common stock in treasury, 44,353,224 shares as of March 31, 2020 and December 31, 2019	(202)		(202)
Total equity	1,701		3,246
TOTAL LIABILITIES AND EQUITY	$	5,275	$	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 three months ended March 31,
(in millions)	2020		2019
Cash Flows From Operating Activities:
Net income (loss)	$	(1,547)	$	594
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	113		112
Amortization of debt issuance costs	1		1
Impairments	1,479		—
Deferred income taxes	408		(426)
(Gain) loss on derivatives, unsettled	(246)		22
Stock-based compensation	1		2
Gain on early extinguishment of debt	(28)		—

Other	—		1
Change in assets and liabilities:
Accounts receivable	53		189
Accounts payable	(86)		(48)
Taxes payable	(6)		4
Interest payable	1		2
Inventories	8		5
Other assets and liabilities	9		(16)
Net cash provided by operating activities	160		442

Cash Flows From Investing Activities:
Capital investments	(228)		(258)


Net cash used in investing activities	(228)		(258)

Cash Flows From Financing Activities:

Payments on long-term debt	(52)		—
Payments on revolving credit facility	(500)		—
Borrowings under revolving credit facility	615		—
Change in bank drafts outstanding	5		3


Purchase of treasury stock	—		(21)

Cash paid for tax withholding	—		(1)

Net cash provided by (used in) financing activities	68		(19)

Increase in cash and cash equivalents	—		165
Cash and cash equivalents at beginning of year	5		201
Cash and cash equivalents at end of period	$	5	$	366

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, 2019	585,555,923	$	6	$	4,726	$	(1,251)	$	(33)	44,353,224	$	(202)		$	3,246
Comprehensive loss:
Net loss	—	—		—		(1,547)		—		—	—			(1,547)
Other comprehensive income	—	—		—		—		—		—	—			—
Total comprehensive loss	—	—		—		—		—		—	—			(1,547)
Stock-based compensation	—	—		1		—		—		—	—			1

Issuance of restricted stock	12,397	—		—		—		—		—	—			—
Cancellation of restricted stock	(167,130)	—		—		—		—		—	—			—
Restricted units granted	1,005,976	—		1		—		—		—

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	2020-03-31	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	2020-04-30	Earnings, Exhibits
8-K	2020-02-27	Earnings, Exhibits
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

EX-3.2	swn-20200331xex32.htm
EX-31.1	swn-20200331xex311.htm
EX-31.2	swn-20200331xex312.htm
EX-32.1	swn-20200331xex321.htm
EX-32.2	swn-20200331xex322.htm
EX-95.1	swn-20200331xex951.htm

SWN 10Q Quarterly Report

Southwestern Energy Earnings 2020-03-31