Southwestern Energy Announces Second Quarter 2023 Results

Reduces full-year capital investment guidance ~10%

Southwestern Energy Company (NYSE: SWN) today announced financial and operating results for the second quarter ended June 30, 2023.

• Generated $231 million net income, $95 million adjusted net income (non-GAAP), $484 million adjusted EBITDA (non-GAAP) and $425 million net cash provided by operating activities
• Reported total net production of 423 Bcfe, or 4.6 Bcfe per day, including 4.0 Bcf per day of gas and 106 MBbls per day of liquids
• Invested $595 million of capital and placed 50 wells to sales, including 28 in Appalachia and 22 in Haynesville
• Reduced full-year capital investment guidance $200 million, or approximately 10%, due to activity reductions, moderating inflation, and operational efficiencies
• Closed divestiture of non-core Pennsylvania Utica assets, applying $123 million of net proceeds to debt reduction

“Southwestern Energy continues to improve the resilience and free cash flow generation capacity of our business. With our successes mitigating inflationary pressures and driving operational efficiencies, we expect to deliver our 2023 plan with less activity and corresponding investment. Debt reduction remains our top capital allocation priority, which we accelerated with a non-core asset sale. Our disciplined strategy to manage through the commodity price cycle maintains the Company’s financial strength and productive capacity. We are well positioned to increase shareholder value in the supportive longer-term natural gas environment,” said Bill Way, Southwestern Energy President and Chief Executive Officer.

Financial Results

For the quarter ended June 30, 2023, Southwestern Energy recorded net income of $231 million, or $0.21 per diluted share, including a gain on mark-to-market of unsettled derivatives. Excluding this and other one-time items, adjusted net income (non-GAAP) was $95 million, or $0.09 per diluted share, and adjusted EBITDA (non-GAAP) was $484 million. Net cash provided by operating activities was $425 million, net cash flow (non-GAAP) was $453 million and total capital investments were $595 million.

As of June 30, 2023, Southwestern Energy had total debt of $4.05 billion and net debt to adjusted EBITDA (non-GAAP) of 1.4x. At the end of the quarter, the Company had $310 million of borrowings under its revolving credit facility and $25 million in outstanding letters of credit.

As indicated in the table below, second quarter 2023 weighted average realized price was $1.84 per Mcfe, excluding the impact of derivatives and net of $0.25 per Mcfe of transportation expenses. Including derivatives, weighted average realized price for the second quarter was down 23% from $3.04 per Mcfe in 2022 to $2.33 per Mcfe in 2023 primarily due to lower commodity prices including a 71% decrease in NYMEX Henry Hub and a 32% decrease in WTI.

Operational Results

Total net production for the quarter ended June 30, 2023 was 423 Bcfe, of which 86% was natural gas, 12% NGLs and 2% oil. Capital investments totaled $595 million for the second quarter of 2023 with 38 wells drilled, 46 wells completed and 50 wells placed to sales.

Appalachia – In the second quarter, total production was 257 Bcfe, with NGL production of 90 MBbls per day and oil production of 16 MBbls per day. The Company drilled 20 wells, completed 28 wells and placed 28 wells to sales with an average lateral length of 17,304 feet.

Haynesville – In the second quarter, total production was 166 Bcf. There were 18 wells drilled, 18 wells completed and 22 wells placed to sales in the quarter with an average lateral length of 8,527 feet.

2023 Guidance

In the table below, the Company provides third quarter and updated full year 2023 guidance reflecting current market conditions. Bold indicates updated full year guidance.

Conference Call

Southwestern Energy will host a conference call and webcast on Friday, August 4, 2023 at 9:30 a.m. Central to discuss second quarter 2023 results. To participate, dial US toll-free 877-883-0383, or international 412-902-6506 and enter access code 6394673. The conference call will webcast live at www.swn.com.

A replay will also be available on SWN’s website at www.swn.com following the call.

About Southwestern Energy

Southwestern Energy Company (NYSE: SWN) is a leading U.S. producer and marketer of natural gas and natural gas liquids focused on responsibly developing large-scale energy assets in the nation’s most prolific shale gas basins. SWN’s returns-driven strategy strives to create sustainable value for its stakeholders by leveraging its scale, financial strength and operational execution. For additional information, please visit www.swn.com and www.swncrreport.com.

Forward Looking Statement

This news release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. These statements are based on current expectations. The words “anticipate,” “intend,” “plan,” “project,” “estimate,” “continue,” “potential,” “should,” “could,” “may,” “will,” “objective,” “guidance,” “outlook,” “effort,” “expect,” “believe,” “predict,” “budget,” “projection,” “goal,” “forecast,” “model,” “target”, “seek”, “strive,” “would,” “approximate,” and similar words are intended to identify forward-looking statements. Statements may be forward looking even in the absence of these particular words.

Examples of forward-looking statements include, but are not limited to, the expectations of plans, business strategies, objectives and growth and anticipated financial and operational performance, including guidance regarding our strategy to develop reserves, drilling plans and programs (including the number of rigs and frac crews to be used), estimated reserves and inventory duration, projected production and sales volume and growth rates, projected commodity prices, basis and average differential, impact of commodity prices on our business, projected average well costs, generation of free cash flow, our return of capital strategy, including the amount and timing of any redemptions, repayments or repurchases of our common stock, outstanding debt securities or other debt instruments, leverage targets, our ability to maintain or improve our credit ratings, our ability to achieve our debt reduction plan, leverage levels and financial profile, our hedging strategy, our environmental, social and governance (ESG) initiatives and our ability to achieve anticipated results of such initiatives, expected benefits from acquisitions, potential acquisitions, divestitures, potential divestitures and strategic transactions, the timing thereof and our ability to achieve the intended operational, financial and strategic benefits of any such transactions or other initiatives. These forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. All forward-looking statements speak only as of the date of this news release. The estimates and assumptions upon which forward-looking statements are based are inherently uncertain and involve a number of risks that are beyond our control. Although we believe the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance, and we cannot assure you that such statements will be realized or that the events and circumstances they describe will occur. Therefore, you should not place undue reliance on any of the forward-looking statements contained herein.

Factors that could cause our actual results to differ materially from those indicated in any forward-looking statement are subject to all of the risks and uncertainties incident to the exploration for and the development, production, gathering and sale of natural gas, NGLs and oil, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, the costs and results of drilling and operations, lack of availability of drilling and production equipment and services, the ability to add proved reserves in the future, environmental risks, drilling and other operating risks, legislative and regulatory changes, the uncertainty inherent in estimating natural gas and oil reserves and in projecting future rates of production, the quality of technical data, cash flow and access to capital, the timing of development expenditures, a change in our credit rating, an increase in interest rates, our ability to achieve our debt reduction plan, our ability to increase commitments under our revolving credit facility, our hedging and other financial contracts, our ability to maintain leases that may expire if production is not established or profitably maintained, our ability to transport our production to the most favorable markets or at all, any increase in severance or similar taxes, 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 or power outages, 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, including as a result of financial or banking failures, impacts of world health events, including the COVID-19 pandemic, cybersecurity risks, geopolitical and business conditions in key regions of the world, our ability to realize the expected benefits from acquisitions, divestitures, and strategic transactions, our ability to achieve our GHG emission reduction goals and the costs associated therewith, and any other factors described or referenced under Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” and under Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022.

We have no obligation and make no undertaking to publicly update or revise any forward-looking statements, except as required by applicable law. All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.

Hedging Summary

A detailed breakdown of derivative financial instruments and financial basis positions as of June 30, 2023, including the remainder of 2023 and excluding those positions that settled in the first and second quarters, is shown below. Please refer to the Company’s quarterly report on Form 10-Q to be filed with the Securities and Exchange Commission for complete information on the Company’s commodity, basis and interest rate protection.

Explanation and Reconciliation of Non-GAAP Financial Measures

The Company reports its financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, management believes certain non-GAAP performance measures may provide financial statement users with additional meaningful comparisons between current results, the results of the Company’s peers and of prior periods.

One such non-GAAP financial measure is net cash flow. Management presents this measure because (i) it is accepted as an indicator of an oil and gas exploration and production company’s ability to internally fund exploration and development activities and to service or incur additional debt, (ii) changes in operating assets and liabilities relate to the timing of cash receipts and disbursements which the Company may not control and (iii) changes in operating assets and liabilities may not relate to the period in which the operating activities occurred.

Additional non-GAAP financial measures the Company may present from time to time are free cash flow (deficit), net debt, adjusted net income, adjusted diluted earnings per share, adjusted EBITDA and net debt to adjusted EBITDA, all of which exclude certain charges or amounts. Management presents these measures because (i) they are consistent with the manner in which the Company’s position and performance are measured relative to the position and performance of its peers, (ii) these measures are more comparable to earnings estimates provided by securities analysts, and (iii) charges or amounts excluded cannot be reasonably estimated and guidance provided by the Company excludes information regarding these types of items. These adjusted amounts are not a measure of financial performance under GAAP.