Southwestern Energy Announces First Quarter 2021 Results

Source: 4/29/2021, Location: North America

Southwestern Energy Company announced financial and operating results for the first quarter ended March 31, 2021.

- Achieved $347 million net cash provided by operating activities; invested $266 million consistent with its maintenance capital plan;
- Generated $88 million free cash flow (non-GAAP);
- Free cash flow fully utilized to reduce debt; expect to approach 2.0x leverage by year-end;
- Borrowing base and commitments reaffirmed at elected $2.0 billion;
- Reported total production of 269 Bcfe, or 3.0 Bcfe per day, including 2.4 Bcf per day of gas and 103 MBbls per day of liquids;
- Received weighted average realized price (excluding transportation) of $2.99 per Mcfe; and
- Approximately 80% of annual natural gas production protected from impacts of widening Appalachia differentials through transportation capacity and basis hedges.

“The Company’s returns-driven strategy is underpinned by a lower cost structure, improving operational performance, a strong balance sheet, the generation of free cash flow and capturing the benefits of scale, all while operating safely and responsibly. In the first quarter, we delivered on each of these aspects of our strategy. Our teams continue to innovate and create opportunities to further improve results,” said Bill Way, Southwestern Energy President and Chief Executive Officer.

Financial Results
For the quarter ended March 31, 2021, Southwestern Energy recorded net income of $80 million, or $0.12 per diluted share, compared to a net loss in 2020 of $1.5 billion, or ($2.86) per diluted share, attributable to a $1.48 billion non-cash full cost ceiling test impairment and $408 million tax valuation allowance included in 2020 results.

Adjusted net income was $196 million, or $0.29 per diluted share, in the first quarter of 2021, compared to $56 million, or $0.10 per diluted share, for the prior year period. The increase was primarily related to an 18% increase in the weighted average realized price including derivatives and a 34% increase in production volumes, largely due to the Montage acquisition. Adjusted EBITDA (non-GAAP) was $382 million, net cash provided by operating activities was $347 million and net cash flow (non-GAAP) was $354 million.

As indicated in the table below, first quarter 2021 weighted average realized price, including $0.37 per Mcfe of transportation expenses, was $2.62 per Mcfe excluding the impact of derivatives. Including derivatives, weighted average realized price (including transportation) for the quarter was up 18% from $2.16 per Mcfe in 2020 to $2.54 per Mcfe in 2021 primarily due to higher commodity prices including a 38% increase in NYMEX Henry Hub and a 25% increase in WTI. First quarter 2021 weighted average realized price before transportation expense and excluding the impact of derivatives was $2.99 per Mcfe.

At quarter end, the Company had hedges in place for 88% of its remaining 2021 expected natural gas production, 60% of its 2021 expected natural gas liquids (NGLs) production and 93% of its 2021 expected oil production. During the quarter, SWN realized a $41 million gain from settled basis hedges which was more than offset by losses associated with settled NGL and oil hedges due to increased liquids prices, for a total $22 million settled hedge loss.

As of March 31, 2021, Southwestern Energy had total debt of $3.0 billion with the leverage ratio improving to 3.0x. The Company’s borrowing base was reaffirmed as part of its regularly scheduled spring redetermination, with revolving credit facility commitments unchanged at the elected $2.0 billion and asset coverage continuing to exceed the borrowing base. At quarter end, the Company had $567 million of borrowings under its revolving credit facility with $233 million in letters of credit. During the quarter, debt was reduced by $133 million, which included $88 million in free cash flow and changes in working capital.

Operational Results
Total production for the quarter ended March 31, 2021 was 269 Bcfe, of which 79% was natural gas, 17% NGLs and 4% oil. Capital investments totaled $266 million for the first quarter, with 23 wells drilled, 29 wells completed and 17 wells placed to sales.

Southwest Appalachia – In the first quarter, total production was 151 Bcfe, with NGL production of 84 MBbls per day and oil production of 18 MBbls per day. The Company drilled 12 wells, completed 17 wells and placed nine wells to sales, with all the wells to sales located in the super rich acreage with an average lateral length of 12,629 feet. The wells placed to sales during the quarter had an average 30-day rate of 11 MMcfe per day, including 68% liquids.

Northeast Appalachia – First quarter 2021 production was 118 Bcf. The Company drilled 11 wells, completed 12 wells and placed eight wells to sales with an average lateral length of 13,470 feet. The wells placed to sales during the quarter had an average 30-day rate of 18 MMcf per day.

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