SOUTHWESTERN ENERGY COMPANY HOUSTON, Feb. 23, 2017 /PRNewswire/ -- Southwestern Energy Company (NYSE: SWN) today announced its financial and operating results for the fourth quarter and the year ended December 31, 2016. Calendar year 2016 highlights include:
-- Net cash provided by operating activities of $498 million and net cash
flow of $645 million;
-- Net loss attributable to common stock of $2.8 billion, or $6.32 per
diluted share, and adjusted net loss attributable to common stock of $7
million, or $0.01 per diluted share;
-- Total net production of 875 Bcfe, including 498 Bcfe from the Appalachia
Basin and 375 Bcf from the Fayetteville Shale;
-- Encouraging results associated with Northeast Appalachia completion
testing and production flow optimization, including an aggregate initial
production rate of approximately 92 million cubic feet per day from five
wells on the Cramer pad that were placed to sales in the fourth quarter;
-- First sales successfully commenced in Tioga County, Pennsylvania;
-- Positive early results from the Company's first drilled and completed
Utica well in Marshall County, West Virginia;
-- Upward proved reserves performance revisions of 683 Bcfe, reflecting the
continued improvement in ultimate well recoveries and lower costs; and
-- Proved Developed Producing (PDP) Finding and Development costs for the
total company of $0.75 per Mcfe, a 15% improvement from prior year.
"The bold and decisive approach in which we tackled 2016 delivered remarkable results," said Bill Way, President and Chief Executive Officer of Southwestern Energy. "The progress made in improving our financial strength and the operational excellence that facilitated our mid-year resumption of drilling and completion activities has the Company positioned well to create long-term value for our shareholders."
The Company delivered on all of the initiatives promised at the beginning of 2016, which included strengthening the balance sheet and enhancing margins. As a result, the Company extended its liquidity through 2020 and ended the year with total debt of $4.7 billion and net debt of $3.2 billion, reducing its net debt by $1.5 billion compared to the end of 2015. Additionally, the Company was able to reduce cash operating costs, which includes lease operating expense, general and administrative expense and taxes other than income, by $0.04 per Mcfe through a relentless focus on margin enhancements and operational efficiencies. Below is a summary of fourth quarter and full year 2016 results.
Fourth Quarter and Year-end 2016 Financial Results
Southwestern Energy Company and Subsidiaries
For the three months ended For the year ended
December 31, December 31,
2016 2015 2016 2015
---- ---- ---- ----
(in millions, except
per share amounts)
Operating income
(loss) $122 $(2,561) $(2,195) $(6,522)
Adjusted operating
income (non-GAAP
measure) $134 $8 $215 $146
Net loss attributable
to common stock $(237) $(2,134) $(2,751) $(4,662)
Adjusted net income
(loss) attributable
to common stock (non-
GAAP measure) $39 $(6) $(7) $71
Loss per share $(0.48) $(5.58) $(6.32) $(12.25)
Adjusted earnings
(loss) per share
(non-GAAP measure) $0.08 $(0.02) $(0.01) $0.19
Net cash provided by
operating activities $161 $353 $498 $1,580
Net cash flow (non-
GAAP measure) $211 $306 $645 $1,468
Exploration and
Production 2016
Financial Results For the three months ended For the year ended
December 31, December 31,
2016 2015 2016 2015
---- ---- ---- ----
Production
Fayetteville (Bcf) 86 112 375 465
Northeast Appalachia
(Bcf) 82 97 350 360
Southwest Appalachia
(Bcfe) 33 40 148 143
Other (Bcfe) 1 - 2 8
--- --- --- ---
Total production
(Bcfe) 202 249 875 976
% Natural Gas 90% 91% 90% 92%
Average unit costs per
Mcfe
Lease operating
expenses $0.87 $0.91 $0.87 $0.92
General &
administrative
expenses(1) $0.27 $0.20 $0.22 $0.21
Taxes, other than
income taxes(2) $0.11 $0.09 $0.10 $0.10
Full cost pool
amortization $0.30 $0.78 $0.38 $1.00
(1) Excludes restructuring and other
one-time charges for the three
months and year ended December
31, 2016, respectively.
(2) Excludes restructuring charges
for the year ended December 31,
2016.
Realized Prices For the three months ended For the year ended
December 31, December 31,
2016 2015 2016 2015
---- ---- ---- ----
Natural Gas
Price:
NYMEX Henry Hub
Price
($/MMBtu)(1) $2.98 $2.27 $2.46 $2.66
Discount to
NYMEX(2) $(0.98) $(0.79) $(0.87) $(0.75)
------ ------ ------ ------
Average realized
gas price per
Mcf, excluding
hedges $2.00 $1.48 $1.59 $1.91
Gain (loss) on
settled
financial basis
derivatives
($/Mcf) $0.09 $0.02 $0.03 $(0.00)
Gain (loss) on
settled
commodity
derivatives
($/Mcf) $(0.02) $0.57 $0.02 $0.46
------ ----- ----- -----
Average realized
gas price per
Mcf, including
hedges $2.07 $2.07 $1.64 $2.37
Oil Price:
WTI oil price
($/Bbl) $49.29 $42.18 $43.32 $48.80
Discount to WTI $(8.11) $(14.82) $(12.12) $(15.55)
Average oil price
per Bbl $41.18 $27.36 $31.20 $33.25
NGL Price:
Average net
realized NGL
price per Bbl $12.08 $7.62 $7.46 $6.80
Percentage of WTI 25% 18% 17% 14%
(1) Based on last day settlement
prices from monthly futures
contracts.
(2) This discount includes a basis
differential, physical basis
hedges, third-party
transportation charges and fuel
charges and excludes financial
basis hedges.
Fourth Quarter of 2016 Financial Results
E&P Segment - The operating income from the Company's E&P segment was $82 million for the fourth quarter of 2016, improved from an operating loss of $2.6 billion during the fourth quarter of 2015 due to a $2.6 billion impairment of natural gas and oil properties during that quarter. Excluding impairments and other one-time charges, adjusted operating income from the Company's E&P segment was $94 million for the fourth quarter of 2016, compared to an adjusted operating loss of $64 million for the same period in 2015. The increase in adjusted operating income was primarily due to lower operating costs and higher realized liquids prices partially offset by decreased production. The decreased production was a result of limited activity in 2016 due to lower natural gas prices.
Midstream Segment - Operating income for the Company's Midstream segment, comprised of gathering and marketing activities, was $40 million for the fourth quarter of 2016, compared to $72 million for the same period in 2015. The decrease in operating income was largely due to a decrease in volumes gathered, resulting from lower production volumes in the Fayetteville Shale.
Full Year 2016 Financial Results
E&P Segment - The operating loss from the Company's E&P segment was $2.4 billion for 2016, compared to an operating loss of $7.1 billion for 2015. The E&P segment recorded a $2.3 billion impairment of natural gas and oil properties for the year ended December 31, 2016 compared to a $7.0 billion impairment for the same period in 2015. Excluding impairments, the improvement in operating loss was primarily due to lower operating costs and expenses and increasing NGL realizations, partially offset by lower realized natural gas prices and decreased production. Adjusted operating income from the Company's E&P segment was $3 million for 2016, compared to an adjusted operating loss of $159 million in 2015.
Midstream Services - Operating income for the Company's Midstream segment was $209 million for 2016, compared to $583 million for the same period in 2015. The decrease in operating income was primarily due to 2015 including a $277 million net gain on sale of assets divested. Adjusted operating income for the Company's Midstream segment was $212 million for 2016 compared to $306 million for the same period in 2015. The decrease in adjusted operating income was largely due to a decrease in volumes gathered resulting from lower production volumes in the Fayetteville Shale and the sale of the Company's northeast Pennsylvania gathering assets.
Capital Investments - During 2016, Southwestern invested a total of $648 million. This included approximately $623 million invested in its E&P business, $21 million invested in its Midstream segment and $4 million invested for corporate and other purposes. Of the $648 million, approximately $152 million was associated with capitalized interest and $89 million was associated with capitalized expenses.
2016 Natural Gas and Oil Reserves
Southwestern's estimated proved natural gas and oil reserves totaled approximately 5,253 Bcfe at December 31, 2016, compared to 6,215 Bcfe at the end of 2015. The decrease in the Company's reserves in 2016 was primarily due to downward price revisions associated with decreased commodity prices and 2016 production, partially offset by upward performance revisions and the Company's successful development activity in Northeast Appalachia, Southwest Appalachia and the Fayetteville Shale. The average prices from the first day of each month from the previous twelve months utilized to value the Company's estimated proved natural gas and oil reserves at December 31, 2016 were $2.48 per MMBtu for natural gas, $39.25 per barrel for oil and $6.74 per barrel for NGLs, compared to $2.59 per MMBtu for natural gas, $46.79 per barrel for oil and $6.82 per barrel for NGLs at December 31, 2015. Approximately 93% of the Company's estimated proved reserves were natural gas and 99% were classified as proved developed at year-end 2016, compared to 95% and 93%, respectively, at year-end 2015.
The following table details additional information relating to reserve estimates as of and for the year ended December 31, 2016:
Natural Gas Oil NGL Total
(Bcf) (MBbls) (MBbls) (Bcfe)
---- ------ ------ -----
Proved reserves,
beginning of year 5,917 8,753 40,947 6,215
Revisions of
previous
estimates (446) 1,564 13,794 (354)
Extensions,
discoveries and
other additions 198 2,417 11,576 282
Production (788) (2,192) (12,372) (875)
Acquisition of
reserves in place - - - -
Disposition of
reserves in place (15) (19) (14) (15)
--- --- --- ---
Proved reserves,
end of year 4,866 10,523 53,931 5,253
===== ====== ====== =====
Proved developed
reserves:
Beginning of year 5,474 8,753 40,947 5,772
End of year 4,789 10,523 53,931 5,176
Note: Amounts may not
add due to rounding
2016 PROVED RESERVES BY DIVISION
Appalachia Fayetteville
----------
Northeast Southwest Shale Other Total
--------- --------- ----- ----- -----
Estimated Proved
Reserves (Bcfe):
Reserves, beginning of
year 2,319 611 3,281 4 6,215
Production (350) (148) (375) (2) (875)
Extensions, discoveries
and other additions 81 157 44 - 282
Disposition of reserves
in place - (15) - - (15)
Price revisions (794) (127) (116) - (1,037)
Performance & production
revisions 318 199 163 3 683
--- --- --- --- ---
Reserves, end of year 1,574 677 2,997 5 5,253
===== === ===== === =====
The following table provides an overall and by category summary of the Company's natural gas, oil and NGL reserves as of December 31, 2016 and sets forth 2016 annual information related to production and capital investments for each of its operating areas:
2016 PROVED RESERVES BY CATEGORY AND SUMMARY OPERATING DATA
Appalachia Fayetteville
----------
Northeast Southwest Shale Other (1) Total
--------- --------- ----- -------- -----
Estimated Proved
Reserves:
Natural Gas (Bcf):
Developed (Bcf) 1,540 293 2,954 2 4,789
Undeveloped (Bcf) 34 - 43 - 77
--- --- --- --- ---
1,574 293 2,997 2 4,866
Crude Oil (MMBbls):
Developed (MMBbls) - 10.2 - 0.3 10.5
Undeveloped (MMBbls) - - - - -
--- --- --- --- ---
- 10.2 - 0.3 10.5
Natural Gas Liquids
(MMBbls):
Developed (MMBbls) - 53.8 - 0.1 53.9
Undeveloped (MMBbls) - - - - -
--- --- --- --- ---
- 53.8 - 0.1 53.9
Total Proved Reserves
(Bcfe):
Developed (Bcfe) 1,540 677 2,954 5 5,176
Undeveloped (Bcfe) 34 - 43 - 77
--- --- --- --- ---
1,574 677 2,997 5 5,253
----- --- ----- --- -----
Percent of Total 30% 13% 57% 0% 100%
Percent Proved Developed 98% 100% 99% 100% 99%
Percent Proved
Undeveloped 2% 0% 1% 0% 1%
Production (Bcfe) 350 148 375 2 875
Capital Investments
(millions)(2) $204 $288 $86 $19 $597
Total Gross Producing
Wells(3) 820 306 4,217 16 5,359
Total Net Producing
Wells(3) 439 216 2,932 13 3,600
Total Net Acreage 245,805 321,563 918,535 3,023,386 4,509,289
Net Undeveloped Acreage 146,096 161,607 285,692 3,010,908 3,604,303
PV-10:
Pre-Tax (millions)(4) $183 $163 $1,325 $(6) $1,665
PV of Taxes (millions)(4) - - - - -
--- --- --- --- ---
After-Tax (millions)(4) $183 $163 $1,325 $(6) $1,665
---- ---- ------ --- ------
Percent of Total 11% 10% 79% 0% 100%
Percent Operated(5) 95% 100% 99% 100% 98%
(1) Other consists primarily of
properties in Canada (which are
subject to a moratorium),
Colorado and Louisiana.
(2) Total and Other capital
investments excludes $26
million related to our E&P
service companies.
(3) Represents all producing wells,
including wells in which we
only have an overriding royalty
interest, as of December 31,
2016.
(4) Pre-tax PV-10 (a non-GAAP
measure) is one measure of the
value of a company's proved
reserves that we believe is
used by securities analysts to
compare relative values among
peer companies without regard
to income taxes. The
reconciling difference in pre-
tax PV-10 and the after-tax
PV-10, or standardized
measure, is the discounted
value of future income taxes on
the estimated cash flows from
our proved natural gas, oil and
NGL reserves.
(5) Based upon pre-tax PV-10 of
proved developed producing
activities.
The Company's 2016 and three-year average proved developed finding and development costs were $0.75 and $1.00 per Mcfe, respectively, when excluding the impact of capitalizing interest and portions of G&A costs in accordance with the full cost method of accounting.
Proved developed finding and development costs - Proved developed (PDP) finding and development (F&D) costs are computed here by dividing exploration and development capital costs incurred, excluding capitalized interest and expenses, for the indicated period by PDP reserve additions and proved undeveloped (PUD) conversions for that same period. At times, adjustments are made to this calculation in order to improve usefulness for investors. For example, adjustments are made to exclude the differences between accounting methods to improve comparability. The following computes PDP F&D costs for the periods ending December 31, 2016, 2015 and 2014 and the three years ending December 31, 2016. A breakdown is also shown detailing these amounts separately for Northeast Appalachia, Southwest Appalachia and the Fayetteville Shale.
TOTAL COMPANY PDP F&D
---------------------
Three-Year
12 Months Ended December 31, Average
2016 2015 2014 2016
---- ---- ---- ----
Total PDP Adds (Bcfe):
New PDP adds 257 416 531 1,204
PUD conversions 220 1,044 790 2,054
--- ----- --- -----
Total PDP Adds 477 1,460 1,321 3,258
--- ----- ----- -----
Costs Incurred (in
millions):
Proved property
acquisition costs $ - $81 $1,455 $1,536
Unproved property
acquisition costs 171 692 3,934 4,797
Exploration costs 17 50 232 299
Development costs 433 1,417 1,600 3,450
--- ----- ----- -----
Capitalized Costs
Incurred $621 $2,240 $7,221 $10,082
---- ------ ------ -------
Subtract (in millions):
Proved property
acquisition costs $ - $(81) $(1,455) $(1,536)
Unproved property
acquisition costs (171) (692) (3,934) (4,797)
Capitalized interest
and expense(1)
associated with
development and
exploration (91) (187) (206) (484)
--- ---- ---- ----
PDP Costs Incurred $359 $1,280 $1,626 $3,265
---- ------ ------ ------
PDP F&D $0.75 $0.88 $1.23 $1.00
----- ----- ----- -----
Note: Amounts may not add due to rounding
(1) Adjusting for the impacts of the
full cost accounting method for
comparability.
DIVISION PDP F&D
----------------
12 Months Ended December 31, 2016
---------------------------------
Appalachia Fayetteville
----------
Northeast Southwest Shale Other Total
--------- --------- ----- ----- -----
Total PDP Adds (Bcfe):
New PDP adds 81 157 19 - 257
PUD conversions 181 - 39 - 220
--- --- --- --- ---
Total PDP Adds 262 157 58 - 477
--- --- --- --- ---
Costs Incurred (in
millions):
Proved property
acquisition costs $ - $ - $ - $ - $ -
Unproved property
acquisition costs 11 149 3 8 171
Exploration costs 8 8 1 - 17
Development costs 178 133 86 36 433
--- --- --- --- ---
Capitalized Costs
Incurred $197 $290 $90 $44 $621
---- ---- --- --- ----
Subtract (in millions):
Proved property
acquisition costs $ - $ - $ - $ - $ -
Unproved property
acquisition costs (11) (149) (3) (8) (171)
Capitalized interest
and expense(1)
associated with
development and
exploration (31) (28) (21) (11) (91)
--- --- --- --- ---
PDP Costs Incurred $155 $113 $66 $25 $359
---- ---- --- --- ----
PDP F&D $0.59 $0.72 $1.14 $ - $0.75
----- ----- ----- --- --- -----
Note: Amounts may not add due to rounding
(1) Adjusting for the impacts of the
full cost accounting method for
comparability.
The Company believes that providing a measure of PDP F&D costs is useful for investors as a means of evaluating a Company's cost to add proved reserves on a per thousand cubic feet of natural gas equivalent basis. These measures are provided in addition to, and not as an alternative for the financial statements, including the notes thereto, contained in Southwestern's Annual Report on Form 10-K. Due to various factors, including timing differences, PDP F&D costs do not necessarily reflect precisely the costs associated with particular reserves. Changes in commodity prices can affect the magnitude of recorded increases in reserves independent of the related costs of such increases. As a result of the foregoing factors and various factors that could materially affect the timing and amounts of future increases in reserves and the timing and amounts of future costs, including factors disclosed in Southwestern's filings with the SEC, future PDP F&D costs may differ materially from those set forth above. Further, the methods used by Southwestern to calculate its PDP F&D costs may differ significantly from methods used by other companies to compute similar measures and, as a result, Southwestern's PDP F&D costs may not be comparable to similar measures provided by other companies.
2016 Operational Review
During 2016, Southwestern invested a total of approximately $623 million in our E&P business, and participated in drilling 62 wells, completed 86 wells, placed 85 wells to sales and had 135 wells in progress. Of the 135 wells in progress at year-end, 73, 42 and 20 were located in our Northeast Appalachia, Southwest Appalachia and Fayetteville Shale operating areas, respectively, and 35 of these wells are waiting on pipeline or production facilities.
For the years ended
December
31,
---
2016 2015
---- ----
E&P Capital Investments by Type (in millions)
Exploratory and development
drilling, including workovers $358 $1,226
Acquisitions and leasehold 23 607
Seismic expenditures 1 6
Drilling rigs, sand facility and
other 2 40
Capitalized interest and expense 239 379
--- ---
Total E&P capital investments $623 $2,258
E&P Capital Investments by Area
Northeast Appalachia $165 $652
Southwest Appalachia 130 659
Fayetteville Shale 65 496
New Ventures (2) 48
E&P Services & Other 26 24
Capitalized interest and expense 239 379
--- ---
Total E&P capital investments $623 $2,258
Year-end
2016 E&P
Division
Results
Appalachia Fayetteville
----------
Northeast Southwest Shale
--------- --------- -----
Production
(Bcfe) 350 148 375
Gross
operated
production
at year-end
2016 (Mmcfe/
d) 1,138 577 1,377
Reserves:
Reserves
(Bcfe) 1,574 677 2,997
Capital
investments
($ in
millions)
Exploratory
and
development
drilling,
including
workovers $160 $111 $63
Acquisition
and
leasehold 3 18 2
Seismic and
other 2 1 -
Capitalized
interest and
expense 39 158 21
--- --- ---
Total capital
investments $204 $288 $86
Gross
operated
well count
summary
Drilled 37 15 10
Completed 33 17 36
Wells to
sales 24 18 43
Wells in
progress 73 42 20
Year-end
drilled
uncompleted
wells 46 40 13
Realized
price
NYMEX Henry
Hub price
($/MMBtu) $2.46 $2.46 $2.46
Discount to
NYMEX
($/Mcf) $(1.12) $(0.75) $(0.66)
------ ------ ------
Average
realized gas
price,
excluding
hedges
($/Mcf) $1.34 $1.71 $1.80
Northeast Appalachia - In the fourth quarter of 2016, the Company placed 12 wells to sales that had an average lateral length of 6,075 feet and an average cost of $4.7 million per well. The average rate for the first 30 days for wells online was 17,178 Mcf per day in the fourth quarter of 2016 compared to 4,796 Mcf per day in the fourth quarter of 2015. The stronger early rates are a result of increased completion intensity and optimized flow techniques implemented during the second half of the year. During the fourth quarter, Northeast Appalachia placed 11 wells to sales that were completed using increased completion intensity and optimized flow techniques, with all wells exhibiting encouraging early results. One example is the Cramer pad in Susquehanna County, where the Company brought five wells to sales in the fourth quarter with a cumulative rate of approximately 92 million cubic feet per day. Additionally, the Racine pad that was placed online in the third quarter of 2016 has continued to outperform offset wells, producing 75% more volumes in the first 125 days. While the Company continues to assess what portion of these increased volumes relate to incremental expected recovery and what portion relates to acceleration, these results clearly indicate additional value is being created with these new methods.
Additionally, the Company continued its delineation efforts in Tioga County, where initial infrastructure was installed, and it placed its first two well to sales in January 2017. The well results observed to date confirm the productivity of the acreage and the Company intends to further develop this area throughout 2017.
In 2016, Southwestern's operated horizontal wells had an average completed well cost of $5.3 million per well and an average horizontal lateral length of 6,142 feet. This compares to an average completed operated well cost of $5.4 million per well and an average horizontal lateral length of 5,403 feet in 2015.
As of December 31, 2016, Southwestern had spud or acquired 568 operated wells, of which 447 were horizontal and on production and 73 were in progress. Of the 447 operated horizontal wells on production, 281 were located in Susquehanna County, 140 were located in Bradford County, 25 were located in Lycoming County, and one was located in Wyoming County. Of the 73 wells in progress, 46 were either waiting on completion or waiting to be placed to sales, including 36 in Susquehanna County, six in Bradford County and four wells in Sullivan, Tioga and Wyoming Counties, combined.
Southwest Appalachia - In the fourth quarter of 2016, Southwestern brought online seven wells in Southwest Appalachia, including the Company's first drilled and completed Utica well, the O.E. Burge 501H. It was completed with a lateral length of 8,061 feet and is exhibiting the vast potential of this reservoir in the Company's Southwest Appalachia acreage. With the encouraging results, the Company accelerated the timeline for drilling its next Utica test well, which began drilling earlier this month.
Additionally, completion intensity testing continued during the quarter with increased amounts of proppant being used in some wells. In one group of wells, the Company tested one well using approximately 5,000 pounds per lateral foot of proppant and four wells using approximately 3,500 pounds per lateral foot, compared to the recent standard of 2,000 pounds per lateral foot. These wells, along with other test wells, have recently been placed online and early results are expected to be available at the end of the first quarter.
In 2016, of the 18 wells brought to sales, 15 were drilled and completed by Southwestern, of which 14 targeted the Marcellus Shale. The Marcellus wells had an average completed well cost of $5.4 million per well and an average horizontal lateral length of 5,316 feet. This compares to an average completed operated well cost of $6.9 million per well and an average horizontal lateral length of 6,985 feet in 2015.
The Company had a total of 299 horizontal and four vertical wells that the Company operated and that were on production as of December 31, 2016. Additionally, there were 42 horizontal wells in progress at the end of 2016, of which 20 were waiting on pipeline or production facilities.
Fayetteville Shale - During the fourth quarter of 2016, the Company placed 22 wells to sales with an average completed well cost of $2.8 million per well, and average horizontal lateral length of 5,547 feet. Of the 22 wells placed to sales, four were completed using increased proppant and tighter stage spacing. These new completion methods indicate improved initial well productivity and the Company will continue to evaluate additional results to optimize economic value.
During the fourth quarter of 2016, we continued delineation activity in the Moorefield, located just beneath the Fayetteville Shale. Eight Moorefield wells were drilled during the quarter, with seven of these being completed in the first quarter of 2017. These wells are expected to be placed to sales in March.
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 its 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 net debt, adjusted net income, adjusted diluted earnings per share, adjusted EBITDA and its E&P and Midstream segment operating income, all 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.
See the reconciliations throughout this release of GAAP financial measures to non-GAAP financial measures for the three and twelve months ended December 31, 2016 and December 31, 2015, as applicable. Non-GAAP financial measures should not be considered in isolation or as a substitute for the Company's reported results prepared in accordance with GAAP.
3 Months Ended December 31,
---------------------------
2016 2015
---- ----
(in millions)
Net income (loss)
attributable to
common stock:
Net loss
attributable to
common stock $(237) $(2,134)
Add back:
Participating
securities -
mandatory
convertible
preferred stock (6) -
Impairment of
natural gas and
oil properties - 2,576
Restructuring and
other one-time
charges 12 -
Gain on sale of
assets, net - (7)
Transaction costs - 1
Loss on certain
derivatives 324 50
Adjustments due to
inventory
valuation - 32
Adjustments due to
discrete tax
items(1) 74 483
Tax impact on
adjustments (128) (1,007)
---- ------
Adjusted net
income (loss)
attributable to
common stock $39 $(6)
=== ===
(1) Primarily relates to the
exclusion of certain discrete
tax adjustments in the fourth
quarter of 2016 due to an
increase to the valuation
allowance against the
Company's deferred tax
assets. The Company expects
its 2017 income tax rate to
be 38.0% before the impacts
of any valuation allowance.
3 Months Ended December 31,
---------------------------
2016 2015
---- ----
Diluted earnings
(loss) per share:
Diluted loss per
share $(0.48) $(5.58)
Add back:
Participating
securities -
mandatory
convertible
preferred stock (0.01) -
Impairment of
natural gas and oil
properties - 6.74
Restructuring and
other one-time
charges 0.02 -
Gain on sale of
assets, net - (0.02)
Transaction costs - 0.00
Loss on certain
derivatives 0.66 0.13
Adjustments due to
inventory valuation - 0.08
Adjustments due to
discrete tax
items(1) 0.15 1.26
Tax impact on
adjustments (0.26) (2.63)
----- -----
Adjusted diluted
earnings (loss) per
share $0.08 $(0.02)
===== ======
(1) Primarily relates to the
exclusion of certain discrete
tax adjustments in the fourth
quarter of 2016 due to an
increase to the valuation
allowance against the
Company's deferred tax
assets. The Company expects
its 2017 income tax rate to
be 38.0% before the impacts
of any valuation allowance.
12 Months Ended December 31,
----------------------------
2016 2015
---- ----
(in millions)
Net income
(loss)
attributable to
common stock:
Net loss
attributable to
common stock $(2,751) $(4,662)
Add back:
Participating
securities -
mandatory
convertible
preferred stock - (13)
Impairment of
natural gas and
oil properties 2,321 6,950
Restructuring
and other one-
time charges 89 2
Gain on sale of
assets, net (3) (283)
Loss on early
extinguishment
of debt and
other(1) 57 -
Transaction
costs - 54
Loss on certain
derivatives 373 155
Adjustments due
to inventory
valuation 3 32
Adjustments due
to discrete tax
items(2) 978 483
Tax impact on
adjustments (1,074) (2,647)
------ ------
Adjusted net
income (loss)
attributable to
common stock $(7) $71
=== ===
(1) Includes a $51 million loss for
the redemption of certain
senior notes and a $6 million
loss related to the unamortized
debt issuance costs and debt
discounts associated with the
extinguished debt which were
included in other interest
charges.
(2) Primarily relates to the
exclusion of certain discrete
tax adjustments due to an
increase to the valuation
allowance against the Company's
deferred tax assets. The
Company expects its 2017 income
tax rate to be 38.0% before the
impacts of any valuation
allowance.
12 Months Ended December 31,
----------------------------
2016 2015
---- ----
Diluted earnings
(loss) per
share:
Diluted loss per
share $(6.32) $(12.25)
Add back:
Participating
securities -
mandatory
convertible
preferred stock - (0.03)
Impairment of
natural gas and
oil properties 5.33 18.26
Restructuring
and other one-
time charges 0.20 0.01
Gain on sale of
assets, net (0.00) (0.74)
Loss on early
extinguishment
of debt and
other(1) 0.13 -
Transaction
costs - 0.14
Loss on certain
derivatives 0.86 0.41
Adjustments due
to inventory
valuation 0.01 0.08
Adjustments due
to discrete tax
items(2) 2.25 1.27
Tax impact on
adjustments (2.47) (6.96)
----- -----
Adjusted diluted
earnings (loss)
per share $(0.01) $0.19
====== =====
(1) Includes a $51 million loss for
the redemption of certain
senior notes and a $6 million
loss related to the unamortized
debt issuance costs and debt
discounts associated with the
extinguished debt which were
included in other interest
charges.
(2) Primarily relates to the
exclusion of certain discrete
tax adjustments due to an
increase to the valuation
allowance against the Company's
deferred tax assets. The
Company expects its 2017 income
tax rate to be 38.0% before the
impacts of any valuation
allowance.
3 Months Ended December 31,
---------------------------
2016 2015
---- ----
(in millions)
Cash flow from
operating
activities:
Net cash
provided by
operating
activities $161 $353
Add back:
Changes in
operating
assets and
liabilities 49 (47)
Restructuring
charges 1 -
--- ---
Net cash flow $211 $306
==== ====
12 Months Ended December 31,
----------------------------
2016 2015
---- ----
(in millions)
Cash flow from
operating
activities:
Net cash
provided by
operating
activities $498 $1,580
Add back:
Changes in
operating
assets and
liabilities 99 (112)
Restructuring
charges 48 -
--- ---
Net cash flow $645 $1,468
==== ======
3 Months Ended December 31,
---------------------------
2016 2015
---- ----
(in millions)
Operating income
(loss):
Operating income
(loss) $122 $(2,561)
Add back:
Impairment of
natural gas and
oil properties - 2,576
Gain on sale of
assets, net - (7)
Restructuring
and other one-
time charges 12 -
--- ---
Adjusted
operating
income $134 $8
==== ===
12 Months Ended December 31,
----------------------------
2016 2015
---- ----
(in millions)
Operating income
(loss):
Operating loss $(2,195) $(6,522)
Add back:
Impairment of
natural gas and
oil properties 2,321 6,950
Gain on sale of
assets, net - (283)
Restructuring
and other one-
time charges 89 1
--- ---
Adjusted
operating
income $215 $146
==== ====
3 Months Ended December 31,
---------------------------
2016 2015
---- ----
(in millions)
E&P segment
operating
income (loss):
E&P segment
operating
income (loss) $82 $(2,633)
Add back:
Impairment of
natural gas and
oil properties - 2,576
Gain on sale of
assets, net - (7)
Restructuring
and other one-
time charges 12 -
--- ---
Adjusted E&P
segment
operating
income (loss) $94 $(64)
=== ====
12 Months Ended December 31,
----------------------------
2016 2015
---- ----
(in millions)
E&P segment
operating
income (loss):
E&P segment
operating loss $(2,404) $(7,104)
Add back:
Impairment of
natural gas and
oil properties 2,321 6,950
Gain on sale of
assets, net - (6)
Restructuring
and other one-
time charges 86 1
--- ---
Adjusted E&P
segment
operating
income (loss) $3 $(159)
=== =====
12 Months Ended December 31,
----------------------------
2016 2015
---- ----
(in millions)
Midstream
segment
operating
income:
Midstream
segment
operating
income $209 $583
Add back:
Restructuring
charges 3 -
Gain on sale of
assets, net - (277)
--- ----
Adjusted
Midstream
segment
operating
income $212 $306
==== ====
December 31,
2016 2015
---- ----
(in millions)
Net debt:
Total debt $4,653 $4,705
Subtract:
Cash and cash
equivalents (1,423) (15)
------ ---
Net debt $3,230 $4,690
====== ======
Southwestern management will host a teleconference call on Friday, February 24, 2016 at 10:00 a.m. Eastern to discuss its fourth quarter and year-end 2016 results. The toll-free number to call is 877-407-8035 and the international dial-in number is 201-689-8035. The teleconference can also be heard "live" on the Internet at http://www.swn.com.
Southwestern Energy Company is an independent energy company whose wholly-owned subsidiaries are engaged in natural gas and oil exploration, development and production, natural gas gathering and marketing. Additional information on the Company can be found on the Internet at http://www.swn.com.
This news release contains forward-looking statements. Forward-looking statements relate to future events and anticipated results of operations, business strategies, and other aspects of our operations or operating results. In many cases you can identify forward-looking statements by terminology such as "anticipate," "intend," "plan," "project," "estimate," "continue," "potential," "should," "could," "may," "will," "objective," "guidance," "outlook," "effort," "expect," "believe," "predict," "budget," "projection," "goal," "forecast," "target" or similar words. Statements may be forward looking even in the absence of these particular words. Where, in any forward-looking statement, the Company expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, there can be no assurance that such expectation or belief will result or be achieved. The actual results of operations can and will be affected by a variety of risks and other matters including, but not limited to, changes in commodity prices; changes in expected levels of natural gas and oil reserves or production; operating hazards, drilling risks, unsuccessful exploratory activities; limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets; international monetary conditions; unexpected cost increases; potential liability for remedial actions under existing or future environmental regulations; potential liability resulting from pending or future litigation; and general domestic and international economic and political conditions; as well as changes in tax, environmental and other laws applicable to our business. Other factors that could cause actual results to differ materially from those described in the forward-looking statements include other economic, business, competitive and/or regulatory factors affecting our business generally as set forth in our filings with the Securities and Exchange Commission. Unless legally required, Southwestern Energy Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
OPERATING STATISTICS (Unaudited)
Southwestern Energy Company and Subsidiaries
For the three months For the years ended
ended
December 31, December 31,
2016 2015 2016 2015
---- ---- ---- ----
Exploration & Production
------------------------
Production
Gas production (Bcf) 183 226 788 899
Oil production (MBbls) 463 569 2,192 2,265
NGL production (MBbls) 2,792 3,328 12,372 10,702
Total production (Bcfe) 202 249 875 976
Commodity Prices
Average realized gas price per
Mcf, including derivatives $2.07 $2.07 $1.64 $2.37
Average realized gas price per
Mcf, excluding derivatives $2.00 $1.48 $1.59 $1.91
Average realized oil price per
Bbl $41.18 $27.36 $31.20 $33.25
Average realized NGL price per
Bbl $12.08 $7.62 $7.46 $6.80
Summary of Derivative Activity
in the Statement of
Operations
Settled commodity amounts
included in "Operating
Revenues" (in millions) $ - $64 $ - $209
Settled commodity amounts
included in "Gain (Loss) on
Derivatives" (in millions) $14 $69 $36 $206
Unsettled commodity amounts
included in "Gain (Loss) on
Derivatives" (in millions) $(330) $(50) $(375) $(153)
Average unit costs per Mcfe
Lease operating expenses $0.87 $0.91 $0.87 $0.92
General & administrative
expenses (1) $0.27 $0.20 $0.22 $0.21
Taxes, other than income taxes
(2) $0.11 $0.09 $0.10 $0.10
Full cost pool amortization $0.30 $0.78 $0.38 $1.00
Midstream
---------
Volumes marketed (Bcfe) 248 290 1,062 1,127
Volumes gathered (Bcf) 138 179 601 799
(1) Excludes $12 million and $83
million of restructuring and
other one-time charges for the
three months and year ended
December 31, 2016,
respectively.
(2) Excludes $3 million of
restructuring charges for the
year ended December 31, 2016.
STATEMENTS OF OPERATIONS (Unaudited)
Southwestern Energy Company and Subsidiaries
For the three months ended For the years ended
December 31, December 31,
2016 2015 2016 2015
---- ---- ---- ----
(in millions, except share/per share amounts)
Operating Revenues
Gas sales $367 $406 $1,273 $1,946
Oil sales 19 16 69 76
NGL sales 33 26 92 73
Marketing 233 200 864 863
Gas gathering 32 39 138 175
--- --- --- ---
684 687 2,436 3,133
--- --- ----- -----
Operating Costs and Expenses
Marketing purchases 237 198 864 852
Operating expenses 137 182 592 689
General and administrative expenses 76 58 247 246
Restructuring charges 1 - 78 -
Depreciation, depletion and
amortization 87 215 436 1,091
Impairment of natural gas and oil
properties - 2,576 2,321 6,950
Gain on sale of assets, net - (7) - (283)
Taxes, other than income taxes 24 26 93 110
--- --- --- ---
562 3,248 4,631 9,655
--- ----- ----- -----
Operating Income (Loss) 122 (2,561) (2,195) (6,522)
--- ------ ------ ------
Interest Expense
Interest on debt 58 47 226 200
Other interest charges 2 6 14 60
Interest capitalized (29) (49) (152) (204)
--- --- ---- ----
31 4 88 56
Gain (Loss) on Derivatives (311) 17 (339) 47
Loss on Early Extinguishment of
Debt - - (51) -
Other Income (Loss), Net 1 (32) 1 (30)
--- --- --- ---
Loss Before Income Taxes (219) (2,580) (2,672) (6,561)
Income Tax benefit
Current (7) (9) (7) (2)
Deferred (2) (464) (22) (2,003)
--- ---- --- ------
(9) (473) (29) (2,005)
--- ---- --- ------
Net Loss (210) (2,107) (2,643) (4,556)
Mandatory convertible preferred
stock dividend 27 27 108 106
Net Loss Attributable to Common
Stock $(237) $(2,134) $(2,751) $(4,662)
===== ======= ======= =======
Loss Per Common Share
Basic $(0.48) $(5.58) $(6.32) $(12.25)
====== ====== ====== =======
Diluted $(0.48) $(5.58) $(6.32) $(12.25)
====== ====== ====== =======
Weighted Average Common Shares Outstanding
Basic 489,287,827 382,334,978 435,337,402 380,521,039
=========== =========== =========== ===========
Diluted 489,287,827 382,334,978 435,337,402 380,521,039
=========== =========== =========== ===========
BALANCE SHEETS
(Unaudited)
Southwestern Energy
Company and
Subsidiaries
December 31, December 31,
2016 2015
---- ----
(in millions)
ASSETS
Current assets $1,872 $393
Property and equipment 24,489 24,364
Less: Accumulated
depreciation,
depletion and
amortization (19,534) (16,821)
------- -------
Total property and
equipment, net 4,955 7,543
Other long-term assets 249 150
--- ---
Total assets 7,076 8,086
===== =====
LIABILITIES AND EQUITY
Current liabilities 1,064 707
Long-term debt 4,612 4,704
Pension and other
postretirement
liabilities 49 50
Other long-term
liabilities 434 343
--- ---
Total liabilities 6,159 5,804
----- -----
Equity:
Common stock, $0.01
par value; December 12, 2016)
1,250,000,000 shares and 390,138,549 as of
authorized; issued December 31, 2015
495,248,369 shares as
of December 31, 2016
(does not include
2,751,410 shares
issued on January 17,
2017 on account of a
dividend declared on 5 4
Preferred stock, $0.01
par value, 10,000,000 2015, conversion in
shares authorized, January 2018
6.25% Series B
Mandatory
Convertible, $1,000
per share liquidation
preference, 1,725,000
shares issued and
outstanding as of
December 31, 2016 and - -
Additional paid-in
capital 4,677 3,409
Accumulated deficit (3,725) (1,082)
Accumulated other
comprehensive loss (39) (48)
Common stock in
treasury; 31,269
shares as of December
31, 2016 and 47,149
as of December 31,
2015, respectively (1) (1)
--- ---
Total equity 917 2,282
--- -----
Total liabilities and
equity $7,076 $8,086
====== ======
STATEMENTS OF CASH FLOWS
(Unaudited)
Southwestern Energy Company
and Subsidiaries
For the years ended
December 31,
2016 2015
---- ----
(in millions)
Cash Flows From Operating
Activities:
Net loss $(2,643) $(4,556)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Depreciation, depletion and
amortization 436 1,092
Impairment of natural gas
and oil properties 2,321 6,950
Amortization of debt
issuance costs 14 53
Deferred income taxes (22) (2,003)
Loss on derivatives, net of
settlement 373 155
Stock-based compensation 29 26
Gain on sales of assets, net - (283)
Restructuring charges 30 -
Loss on early extinguishment
of debt 51 -
Other 8 34
Change in assets and
liabilities (99) 112
--- ---
Net cash provided by
operating activities 498 1,580
--- -----
Cash Flows From Investing
Activities:
Capital investments (593) (1,798)
Acquisitions - (579)
Proceeds from sale of
property and equipment 430 729
Other 1 10
--- ---
Net cash used in investing
activities (162) (1,638)
---- ------
Cash Flows From Financing
Activities:
Payments on current portion
of long-term debt (1) (1)
Payments on long-term debt (1,175) (500)
Payments on short-term debt - (4,500)
Payments on revolving credit
facility (3,268) (3,024)
Borrowings under revolving
credit facility 3,152 2,840
Payments on commercial paper (242) (7,988)
Borrowings under commercial
paper 242 7,988
Change in bank drafts
outstanding (20) 12
Proceeds from issuance of
long-term debt 1,191 2,950
Debt issuance costs (17) (20)
Proceeds from issuance of
common stock 1,247 669
Proceeds from issuance of
mandatory convertible
preferred stock - 1,673
Preferred stock dividend (27) (79)
Cash paid for tax
withholding (9) -
Other (1) -
--- ---
Net cash provided by
financing activities 1,072 20
----- ---
Increase (decrease) in cash
and cash equivalents 1,408 (38)
Cash and cash equivalents at
beginning of year 15 53
--- ---
Cash and cash equivalents at
end of year $1,423 $15
====== ===
SEGMENT INFORMATION (Unaudited)
Southwestern Energy
Company and
Subsidiaries Exploration
and Midstream
Production Services Other Eliminations Total
---------- -------- ----- ------------ -----
(in millions)
Three months ended
December 31, 2016
------------------
Revenues $415 $707 $ - $(438) $684
Marketing purchases - 612 - (375) 237
Operating expenses 175 25 - (63) 137
General and
administrative expenses 63 13 - - 76
Restructuring charges 1 - - - 1
Depreciation, depletion
and amortization 71 16 - - 87
Taxes, other than income
taxes 23 1 - - 24
Operating income 82 40 - - 122
Capital investments (1) 251 18 3 - 272
Three months ended
December 31, 2015
------------------
Revenues $441 $668 $(1) $(421) $687
Marketing purchases - 541 - (343) 198
Operating expenses 229 33 (2) (78) 182
General and
administrative expenses 49 9 - - 58
Depreciation, depletion
and amortization 204 10 1 - 215
Impairment of natural
gas and oil properties 2,576 - - - 2,576
Gain on sale of assets,
net (7) - - - (7)
Taxes, other than income
taxes 23 3 - - 26
Operating income (loss) (2,633) 72 - - (2,561)
Capital investments (1) 378 3 2 - 383
Year ended December 31,
2016
-----------------------
Revenues $1,413 $2,569 $ - $(1,546) $2,436
Marketing purchases - 2,145 - (1,281) 864
Operating expenses 761 96 - (265) 592
General and
administrative expenses 204 43 - - 247
Restructuring charges 75 3 - - 78
Depreciation, depletion
and amortization 371 65 - - 436
Impairment of natural
gas and oil properties 2,321 - - - 2,321
Taxes, other than income
taxes 85 8 - - 93
Operating income (loss) (2,404) 209 - - (2,195)
Capital investments (1) 623 21 4 - 648
Year ended December 31,
2015
-----------------------
Revenues $2,074 $3,119 $ - $(2,060) $3,133
Marketing purchases - 2,566 - (1,714) 852
Operating expenses 899 136 - (346) 689
General and
administrative expenses 207 39 - - 246
Depreciation, depletion
and amortization 1,028 62 1 - 1,091
Impairment of natural
gas and oil properties 6,950 - - - 6,950
Gain on sale of assets,
net (6) (277) - - (283)
Taxes, other than income
taxes 100 10 - - 110
Operating income (loss) (7,104) 583 (1) - (6,522)
Capital investments (1) 2,258 167 12 - 2,437
(1) Capital investments includes an
increase of $67 million and a
decrease of $28 million for the
three months ended December 31,
2016 and 2015, respectively,
and an increase of $43 million
and a decrease of $33 million
for the years ended December
31, 2016 and 2015,
respectively, relating to the
change in accrued expenditures
between periods.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/southwestern-energy-announces-operational-update-and-2016-financial-results-300412899.html
SOURCE Southwestern Energy Company
