SOUTHWESTERN ENERGY COMPANY HOUSTON, July 21, 2016 /PRNewswire/ -- Southwestern Energy Company (NYSE: SWN) today announced its financial and operating results for the quarter ended June 30, 2016.
"The second quarter was a defining time at Southwestern Energy, where we delivered on our strategic commitments of strengthening our balance sheet, enhancing margins and optimizing our portfolio," remarked Bill Way, President and Chief Executive Officer of Southwestern Energy. "As promised, we took significant and deliberate steps this quarter to strengthen our balance sheet that, when combined with the continued outperformance by our assets, positions us to reinitiate drilling and completion activities and accelerate our path to value-adding growth. We are excited as we drive into the second half of the year and build momentum toward the future." Highlights include:
-- Strengthened the balance sheet and liquidity profile through a
combination of extending bank agreements, successfully issuing equity,
launching and concluding tender offers for debt and negotiating
long-dated inventory monetization (to be closed in third quarter); these
actions, most of which are completed, will reduce or extend debt due
prior to 2020 by approximately $1.8 billion (approximately $1.2 billion
repaid and approximately $600 million extended) and extend access to
approximately $1.9 billion of liquidity until December 2020;
-- Activated a plan to accelerate investment of an incremental $500 million
(earmarked from the July equity offering) into high return projects
within each of the Company's core assets, approximately $375 million of
which is expected to be invested by the end of 2016;
-- Exceeded previously issued production guidance for the quarter by 5%
with natural gas, NGL and oil production of 225 Bcfe, including 128 Bcfe
from the Appalachia Basin and 96 Bcf from the Fayetteville Shale;
-- Raising total year production guidance range by 45 Bcfe or 5% (using
midpoints) to 865 Bcfe to 875 Bcfe primarily resulting from improved
production efficiencies and strong well performance, coupled with an
expected 11 to 14 Bcfe from the $375 million investment increase during
the second half of 2016;
-- Continued capital discipline, with net cash provided by operating
activities of $73 million and net cash flow (a non-GAAP measure
reconciled below) of $114 million, aligning with capital investments of
$74 million; and
-- Net loss attributable to common stock of $620 million, or $1.61 per
diluted share, and an adjusted net loss attributable to common stock (a
non-GAAP measure reconciled below) of $34 million, or $0.09 per diluted
share.
Second Quarter of 2016 Financial Results
For the second quarter of 2016, Southwestern reported a net loss attributable to common stock of $620 million, or $1.61 per diluted share, and an adjusted net loss attributable to common stock (reconciled below) of $34 million, or $0.09 per diluted share. This compares to a net loss attributable to common stock of $815 million, or $2.13 per diluted share, and an adjusted net loss attributable to common stock of $9 million, or $0.02 per diluted share, in the second quarter of 2015.
Net cash provided by operating activities was $73 million for the second quarter of 2016, compared to $399 million in the second quarter of 2015. Net cash flow (reconciled below) was $114 million for the second quarter of 2016, compared to $339 million for the same period in 2015.
E&P Segment - The operating loss from the Company's E&P segment was $549 million for the second quarter of 2016, compared to an operating loss of $1.6 billion during the second quarter of 2015. The decreased operating loss was primarily due to a smaller non-cash impairment. The adjusted operating loss from the Company's E&P segment was $68 million for the second quarter of 2016 (reconciled below), when excluding the non-cash impairment and restructuring charges, compared to an adjusted operating loss of $104 million for the same period in 2015. The decreased adjusted operating loss was primarily due to lower operating costs and higher realized NGL prices partially offset by lower realized natural gas prices and decreased production.
Net production totaled 225 Bcfe in the second quarter of 2016, down less than anticipated from the 245 Bcfe in the second quarter of 2015. The quarter included 96 Bcf from the Fayetteville Shale, 90 Bcf from Northeast Appalachia and 38 Bcfe from Southwest Appalachia. This compares to 121 Bcf from the Fayetteville Shale, 87 Bcf from Northeast Appalachia and 35 Bcfe from Southwest Appalachia in the second quarter of 2015.
Due to the continued challenging commodity price environment, including the effect of derivatives, Southwestern's average realized gas price in the second quarter of 2016 was $1.32 per Mcf, down from $2.23 per Mcf in the second quarter of 2015. The Company's commodity derivative activities increased its average realized gas price by $0.11 per Mcf during the second quarter of 2016, compared to an increase of $0.47 per Mcf during the same period in 2015. As of July 19, 2016, the Company had approximately 93 Bcf of its remaining 2016 forecasted gas production protected at an average floor price of $2.57 per Mcf with upside exposure on approximately 34% of those protected volumes. Additionally, the Company had approximately 228 Bcf of its 2017 forecasted gas production protected at an average floor price of $3.01 per Mcf with upside exposure on approximately 29%, or 66 Bcf, of those protected volumes to $3.39 per Mcf.
A detailed breakdown of the Company's derivative financial instruments as of July 19, 2016 is shown below:
Weighted Average Price per MMBtu
--------------------------------
Volume (Bcf) Swaps Sold Puts Purchased
Puts Sold Calls
----------- ----- --------- ---------- ----------
Financial protection
on production
2016
----
Fixed price swaps 61 $2.57 $ - $ - $ -
Purchased put options 17 $ - $ - $2.34 $ -
Two-way costless-
collars 15 $ - $ - $2.81 $3.38
---
Total 93
2017
----
Fixed price swaps 163 $3.07 $ - $ - $ -
Two-way costless-
collars 47 $ - $ - $2.90 $3.33
Three-way costless-
collars 18 $ - $2.25 $2.75 $3.56
---
Total 228
Sold call options
2016 60 $ - $ - $ - $5.00
2017 86 $ - $ - $ - $3.25
2018 63 $ - $ - $ - $3.50
2019 52 $ - $ - $ - $3.50
2020 32 $ - $ - $ - $3.75
---
Total 293
Like most producers, the Company typically sells its natural gas at a discount to NYMEX settlement prices. This discount includes a basis differential, third-party transportation charges and fuel charges. Disregarding the impact of derivatives, the Company's average price received for its gas production during the second quarter of 2016 was approximately $0.74 per Mcf lower than average NYMEX settlement prices, compared to approximately $0.88 per Mcf lower than average NYMEX settlement prices during the second quarter of 2015. As of June 30, 2016, the Company attempted to mitigate the volatility of basis differentials by protecting basis on approximately 118 Bcf of the remaining 2016 expected natural gas production through financial derivative instruments and physical sales arrangements at a basis differential to NYMEX natural gas prices of approximately ($0.13) per Mcf. Additionally, the Company has protected basis on approximately 105 Bcf of its 2017 forecasted natural gas production at a basis differential to NYMEX natural gas prices of approximately ($0.10) per Mcf.
Lease operating expenses per unit of production for the Company's E&P segment were down to $0.87 per Mcfe in the second quarter of 2016, compared to $0.93 per Mcfe in the second quarter of 2015. The decrease was primarily due to reduced workover activity and contract services as well as the successful renegotiation of the existing gathering and processing rates in Southwest Appalachia.
General and administrative expenses per unit of production were flat at $0.21 per Mcfe in the second quarter of 2016 as compared to the second quarter of 2015. General and administrative cost reductions were offset by decreased production volumes. This excludes the restructuring charges associated with the workforce reduction, which were $11 million for the E&P segment in the second quarter of 2016.
Taxes other than income taxes were down to $0.09 per Mcfe in the second quarter of 2016, compared to $0.10 per Mcfe in the second quarter of 2015. Taxes other than income taxes per Mcfe vary from period to period due to changes in severance and ad valorem taxes that result from the mix of the Company's production volumes and fluctuations in commodity prices.
The Company's full cost pool amortization rate declined significantly to $0.35 per Mcfe in the second quarter of 2016, compared to $1.13 per Mcfe in the second quarter of 2015. The amortization rate is impacted by the timing and amount of reserve additions, the costs associated with those additions, revisions of previous reserve estimates due to both price and well performance, write-downs that result from full cost ceiling tests, proceeds from the sale of properties that reduce the full cost pool and the levels of costs subject to amortization. The Company cannot predict its future full cost pool amortization rate with accuracy due to the variability of each of the factors discussed above, as well as other factors.
Midstream - Operating income for the Company's Midstream segment, comprised of gathering and marketing activities, was $57 million for the second quarter of 2016, compared to $355 million for the same period in 2015. The decrease in operating income was primarily due to 2015 including a $278 million gain on sale of assets divested. Adjusted operating income (reconciled below) for the Company's Midstream segment was $57 million for the second quarter of 2016. This is down from adjusted operating income of $77 million, which excluded a $278 million gain on sale of assets divested, 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.
First Six Months of 2016 Financial Results
For the first six months of 2016, Southwestern reported a net loss attributable to common stock of $1.8 billion, or $4.63 per diluted share, and an adjusted net loss attributable to common stock (reconciled below) of $66 million, or $0.17 per diluted share. This compares to a net loss attributable to common stock of $762 million, or $2.01 per diluted share, and an adjusted net income attributable to common stock of $74 million, or $0.20 per diluted share, in the first six months of 2015.
Net cash provided by operating activities was $165 million for the first six months of 2016, compared to $940 million in the first six months of 2015. Net cash flow (reconciled below) was $261 million for the first six months of 2016, compared to $832 million for the same period in 2015.
The first six months of 2015 included the operating results from the gathering system in northeast Pennsylvania and conventional E&P assets in East Texas and the Arkoma basin that were divested during the second quarter of 2015.
E&P Segment - The operating loss from the Company's E&P segment was $1.7 billion for the first six months of 2016, compared to an operating loss of $1.6 billion during the first six months of 2015. The larger operating loss was primarily due to lower realized commodity prices. The adjusted operating loss from the Company's E&P segment was $133 million for the first six months of 2016 (reconciled below), when excluding the non-cash impairment and restructuring charges, compared to an adjusted operating loss of $26 million for the same period in 2015. The larger loss was primarily due to lower realized natural gas prices along with decreases in realized oil and NGL prices partially offset by lower operating costs.
Net production totaled 462 Bcfe in the first six months of 2016, down less than anticipated from the 478 Bcfe in the first six months of 2015. The first six months of 2016 included 199 Bcf from the Fayetteville Shale, 184 Bcf from Northeast Appalachia and 78 Bcfe from Southwest Appalachia. This compares to 236 Bcf from the Fayetteville Shale, 170 Bcf from Northeast Appalachia and 65 Bcfe from Southwest Appalachia in the first six months of 2015.
Due to the continued challenging commodity price environment, including the effect of derivatives, Southwestern's average realized gas price in the first six months of 2016 was $1.40 per Mcf, down from $2.60 per Mcf in the six months of 2015. The Company's commodity derivative activities increased its average realized gas price by $0.07 per Mcf during the first six months of 2016, compared to an increase of $0.41 per Mcf during the same period in 2015. Disregarding the impact of derivatives, the Company's average price received for its gas production during the first six months of 2016 was approximately $0.69 per Mcf lower than average NYMEX settlement prices, compared to approximately $0.62 per Mcf lower than average NYMEX settlement prices during the first six months of 2015.
Lease operating expenses per unit of production for the Company's E&P segment declined to $0.88 per Mcfe in the first six months of 2016, compared to $0.93 per Mcfe in the first six months of 2015. The decrease was primarily due to reduced workover activity and contract services as well as the successful renegotiation of the existing gathering and processing rates in Southwest Appalachia.
General and administrative expenses per unit of production decreased to $0.20 per Mcfe in the first six months of 2016, compared to $0.22 per Mcfe in the first six months quarter of 2015, down primarily due to a decrease in employee costs. This excludes the restructuring charges associated with the workforce reduction, which were $69 million for the E&P segment in the first six months of 2016.
Taxes other than income taxes were down to $0.09 per Mcfe in the first six months of 2016, compared to $0.11 per Mcfe in the first six months of 2015. This excludes the restructuring charges associated with the workforce reduction, which were $3 million for the E&P segment in the first six months of 2016.
The Company's full cost pool amortization rate declined significantly to $0.42 per Mcfe in the first six months of 2016, compared to $1.14 per Mcfe in the first six months of 2015.
Midstream - Operating income for the Company's Midstream segment was $117 million for the first six months of 2016, compared to $443 million for the same period in 2015. The decrease in operating income was primarily due to 2015 including a $278 million gain on sale of assets divested. Adjusted operating income (reconciled below) for the Company's Midstream segment was $120 million for the first six months of 2016, excluding the impacts from restructuring charges. This is down from $165 million for the same period in 2015, which excluded a $278 million gain on sale of assets divested. 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 Structure and Investments - At June 30, 2016, the Company had total debt of approximately $5.8 billion and $4.8 billion in net debt (a non-GAAP measure reconciled below). These amounts do not reflect the effect of the $1.25 billion equity offering and retirement of approximately $700 million of 2018 bonds through tender offers, all completed in July, or the anticipated closing of the previously announced asset sale in the third quarter.
In June 2016, the Company entered into a new credit agreement for $1,934 million, consisting of a $1,191 million secured term loan that is fully drawn and a new $743 million unsecured revolving credit facility, which matures in December 2020, and reduced its existing $2.0 billion unsecured revolving credit facility due in December 2018 to $66 million. As of June 30, 2016, there were no borrowings under either revolving credit facility; however, there was $169 million in letters of credit outstanding against the new revolving credit facility.
During the first six months of 2016, Southwestern invested a total of $196 million. This is down from $1.6 billion in the first six months of 2015. The $196 million includes approximately $193 million invested in its E&P business, $2 million invested in its Midstream segment and $1 million invested for corporate and other purposes. Of the $196 million, approximately $82 million was associated with capitalized interest and $41 million was associated with capitalized expenses.
Revised 2016 Guidance
The Company has increased its production guidance by 45 Bcfe (using midpoints) for 2016 based on the strong performance of the portfolio for the first six months and, to a lesser extent, improved commodity prices and the availability of capital from the Company's July equity offering. The revised total natural gas, NGL and oil production guidance for 2016 is raised to 865 to 875 Bcfe, an increase of approximately 5% over the Company's previous 2016 production guidance.
Of the 45 Bcfe increase (using midpoints), approximately 33 Bcfe is a result of the strong portfolio performance and only 12 Bcfe is associated with the increased capital being invested during the second half of the year. While having only an estimated 12 Bcfe impact on 2016 production, the increased capital investments for the year will have a significant impact on 2017 production. Of the Company's total expected production in 2016, approximately 371 to 374 Bcf is expected to come from the Fayetteville Shale, approximately 345 to 348 Bcf is expected to come from Northeast Appalachia and 147 to 151 Bcfe is expected to come from Southwest Appalachia.
The Company is currently in the process of reinitiating drilling and completion activity in each of its operating areas and plans to make incremental capital investments of up to $500 million from its July equity offering, with approximately $375 million of this incremental capital expected to be invested before the end of 2016. As part of this plan, the Company reinitiated drilling with its first rig this week in Northeast Appalachia and intends to increase its company-wide rig count to five by the end of the third quarter. These five rigs are expected to be comprised of two in Northeast Appalachia, two in Southwest Appalachia and one in Fayetteville. Additionally, the Company expects to complete approximately 90 to 100 wells in the second half of 2016, which includes new wells drilled and a portion of the inventory of previously drilled but uncompleted wells. The Company's updated guidance for 2016 is shown below.
2016 Guidance
Original Revised
-------- -------
$ millions (except production and well count) $2.35 / $35.00 $2.45 / $45.00
-------------- --------------
Capital:
Discretionary
Capital $100 - $125 $485 - $525
Capitalized
Interest and
Expenses $250 - $275 $240 - $250
----------- -----------
Total Capital $350 - $400 $725 - $775
Net Cash Flow (1)
(2) $450 - $500 $655 - $680
Adjusted net
income (loss)
attributable to
common stock (1)
(2) ($180) - ($160) ($10) - $10
Adjusted EBITDA
(1) (2) $450 - $500 $675 - $700
Production (Bcfe) 815 - 835 865 - 875
Wells Drilled - 55 - 65
Wells Completed 20 - 30 100 - 110
Wells Placed on
Production 20 - 30 120 - 130
Ending DUC
Inventory 100 - 110 55 - 65
(1) Excludes the impact of one-time
severance charges associated with
the 2016 workforce reduction.
(2) This represents a Non-GAAP
measure; see "Explanation and
Reconciliation of Non-GAAP
Financial Measures" below.
Estimated Capital Investments in 2016
-------------------------------------
Capital
Investments
-----------
YTD Total Year
$ millions June 2016 2016 (1)
--------- -------
Northeast Appalachia $24 $220
Southwest Appalachia 20 175
Fayetteville Shale 13 80
Midstream Services 1 5
Capitalized Interest 82 160
Capitalized G&A 41 85
E&P Services & Corporate 15 25
--- ---
Total Capital Investments $196 $750
(1) Assumes midpoint of
total company guidance
provided in table above.
Estimated Production by Quarter in 2016
---------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Year 2016
----------- ----------- ----------- ----------- ---------------
Previous Guidance
(Bcfe) 230 - 235 210 - 215 195 - 200 180 - 185 815 - 835
New Guidance:
Natural Gas (Bcf) 213 203 186 - 190 179 - 184 781 - 790
Oil (MBbls) 607 586 510 - 560 470 - 510 2,173 - 2,263
NGLs (MBbls) 3,376 3,136 2,750 - 2,850 2,550 - 2,650 11,812 - 12,012
----- ----- ------------- ------------- ---------------
Total Production
(Bcfe) 237 225 206 - 211 197 - 202 865 - 875
Estimated E&P Pricing Deductions in
2016
-----------------------------------
Avg Gas Basis Differential and
Transportation Charge $0.73 - $0.83 per Mcf
Avg Oil Basis Differential and
Transportation Charge $13.00 - $15.00 per Bbl
Avg NGL Price Realization 15% - 20% of WTI
Estimated E&P Operating Expenses in
2016 (per Mcfe)
-----------------------------------
Lease Operating Expenses $0.88 - $0.92
General & Administrative Expense $0.22 - $0.25
Taxes, Other Than Income Taxes $0.09 - $0.11
Other Items in 2016
-------------------
Midstream EBITDA ($ in millions) $255 - $270
Net Interest Expense ($ in millions) $60 - $65
E&P Operations Review
During the first six months of 2016, Southwestern invested approximately $193 million in its E&P business, including $71 million in investment capital and $122 in capitalized interest and expenses.
In Northeast Appalachia, the Company placed 6 wells on production in the second quarter of 2016. This activity resulted in net gas production of 90 Bcf, up 4% from 87 Bcf in the second quarter of 2015. Gross operated production in Northeast Appalachia was approximately 1.2 Bcf per day at June 30, 2016. The Company expects to drill 37 to 40 wells, complete 35 to 38 wells and place an additional 29 to 33 wells on production in the second half of 2016 in this operating area.
In Southwest Appalachia, net production of 38 Bcfe in the second quarter of 2016 was 8% higher than the 35 Bcfe of net production in the same period of 2015. The gross operated production rate in Southwest Appalachia was approximately 644 MMcfe per day at June 30, 2016. The Company placed 11 new wells on production in the second quarter of 2016 and expects to drill 11 to 15 wells, complete 20 to 24 wells and place an additional 19 to 22 wells on production in the second half of 2016 in this operating area.
In the second quarter of 2016, Southwestern's net gas production from the Fayetteville Shale was 96 Bcf, compared to 121 Bcf in the second quarter of 2015. Gross operated gas production in the Fayetteville Shale was approximately 1.5 Bcf per day at June 30, 2016. The Company placed 6 wells on production in the second quarter of 2016 and expects to drill 7 to 10 wells, complete 36 to 39 wells and place an additional 37 to 40 wells on production in the second half of 2016 in this operating area.
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 as of and for the three and six months ended June 30, 2016 and June 30, 2015 and the 2016 Guidance, 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 June 30,
-----------------------
2016 2015
---- ----
(in millions)
Net loss attributable to
common stock:
Net loss attributable to
common stock $(620) $(815)
Add back:
Impairment of natural gas
and oil properties 470 1,535
Restructuring charges 11 -
Gain on sale of assets,
net (2) (277)
Transaction costs - 1
Loss on certain
derivatives 108 50
Adjustments due to
inventory valuation 1 -
Adjustments due to
discrete tax items(1) 216 -
Tax impact on adjustments (218) (503)
---- ----
Adjusted net loss
attributable to common
stock $(34) $(9)
---- ---
3 Months Ended June 30,
-----------------------
2016 2015
---- ----
Diluted earnings per
share:
Diluted earnings per
share(2) $(1.61) $(2.13)
Add back:
Impairment of natural gas
and oil properties 1.22 4.02
Restructuring charges 0.03 -
Gain on sale of assets,
net (0.01) (0.72)
Transaction costs - 0.00
Loss on certain
derivatives 0.28 0.13
Adjustments due to
inventory valuation 0.00 -
Adjustments due to
discrete tax items(1) 0.56 -
Tax impact on adjustments (0.56) (1.32)
----- -----
Adjusted diluted earnings
per share $(0.09) $(0.02)
====== ======
(1) 2016 primarily relates to the
exclusion of certain discrete
tax adjustments in the second
quarter of 2016 due to an
increase to the valuation
allowance against the Company's
deferred tax assets. The
Company expects its 2016 income
tax rate to be 38.0% before the
impacts of any valuation
allowance.
(2) Does not include the effect of
98.9 million shares of common
stock issued in July 2016.
6 Months Ended June 30,
-----------------------
2016 2015
---- ----
(in millions)
Net income (loss)
attributable to common
stock:
Net loss attributable
to common stock $(1,779) $(762)
Add back:
Participating
securities - mandatory
convertible preferred
stock - (13)
Impairment of natural
gas and oil properties 1,504 1,535
Restructuring charges 75 -
Gain on sale of assets,
net (2) (277)
Transaction costs - 52
Loss on certain
derivatives 129 71
Adjustments due to
inventory valuation 4 -
Adjustments due to
discrete tax items(1) 647 -
Tax impact on
adjustments (644) (532)
---- ----
Adjusted net income
(loss) attributable to
common stock $(66) $74
---- ---
6 Months Ended June 30,
-----------------------
2016 2015
---- ----
Diluted earnings per
share:
Diluted earnings per
share(2) $(4.63) $(2.01)
Add back:
Participating securities
- mandatory convertible
preferred stock - (0.03)
Impairment of natural
gas and oil properties 3.91 4.05
Restructuring charges 0.19 -
Gain on sale of assets,
net (0.00) (0.73)
Transaction costs - 0.14
Loss on certain
derivatives 0.34 0.19
Adjustments due to
inventory valuation 0.01 -
Adjustments due to
discrete tax items(1) 1.68 -
Tax impact on
adjustments (1.67) (1.41)
----- -----
Adjusted diluted
earnings per share $(0.17) $0.20
====== =====
(1) 2016 primarily relates to the
exclusion of certain discrete
tax adjustments in the first
six months of 2016 due to an
increase to the valuation
allowance against the Company's
deferred tax assets. The
Company expects its 2016 income
tax rate to be 38.0% before the
impacts of any valuation
allowance.
(2) Does not include the effect of
98.9 million shares of common
stock issued in July 2016.
3 Months Ended June 30,
-----------------------
2016 2015
---- ----
(in millions)
Cash flow from operating
activities:
Net cash provided by operating
activities $73 $399
Add back:
Changes in operating assets and
liabilities 17 (60)
Restructuring charges 24 -
--- ---
Net Cash Flow $114 $339
==== ====
6 Months Ended June 30,
-----------------------
2016 2015
---- ----
(in millions)
Cash flow from operating
activities:
Net cash provided by operating
activities $165 $940
Add back:
Changes in operating assets
and liabilities 50 (108)
Restructuring charges 46 -
--- ---
Net Cash Flow $261 $832
==== ====
3 Months Ended June 30,
-----------------------
2016 2015
---- ----
(in millions)
E&P segment operating
loss:
E&P segment operating
loss $(549) $(1,639)
Add back:
Impairment of natural gas
and oil properties 470 1,535
Restructuring charges 11 -
--- ---
Adjusted E&P segment
operating loss $(68) $(104)
==== =====
6 Months Ended June 30,
-----------------------
2016 2015
---- ----
(in millions)
E&P segment operating
loss:
E&P segment operating
loss $(1,709) $(1,561)
Add back:
Impairment of natural
gas and oil properties 1,504 1,535
Restructuring charges 72 -
--- ---
Adjusted E&P segment
operating loss $(133) $(26)
===== ====
3 Months Ended June 30,
-----------------------
2016 2015
---- ----
(in millions)
Midstream segment operating
income:
Midstream segment operating
income $57 $355
Add back:
Gain on sale of assets, net - (278)
--- ----
Adjusted Midstream segment
operating income $57 $77
=== ===
6 Months Ended June 30,
-----------------------
2016 2015
---- ----
(in millions)
Midstream segment operating
income:
Midstream segment operating
income $117 $443
Add back:
Restructuring charges 3 -
Gain on sale of assets, net - (278)
--- ----
Adjusted Midstream segment
operating income $120 $165
==== ====
June 30, December 31,
2016 2015
---- ----
(in millions)
Net debt:
Total debt $5,768 $4,705
Subtract:
Cash and cash equivalents (998) (15)
---- ---
Net debt $4,770 $4,690
====== ======
2016 Guidance
-------------
Original Revised
$2.35 Gas / $35 Oil $2.45 Gas / $45 Oil
------------------- -------------------
($ millions)
Cash flow from operating
activities:
Net cash provided by
operating activities $405 - $450 $609 - $634
Add back (deduct):
One-time cash severance
payments 45 - 50 46
Change in operating assets
and liabilities - -
--- ---
Net cash flow $450 - $500 $655 - $680
2016 Guidance
-------------
Original Revised
$2.35 Gas / $35 Oil $2.45 Gas / $45 Oil
------------------- -------------------
($ millions)
Net loss attributable to
common stock ($223) - ($197) ($1,655) - ($1,625)
Add back (deduct):
Impairment of natural gas
and oil properties - 1,504
Restructuring charges 60 - 70 75
Gain on sale of assets, net - (2)
Loss on certain derivatives - 129
Adjustments due to
inventory valuation - 4
Adjustments due to discrete
tax items - 568 - 579
Tax impact on adjustments (23) - (27) (644)
---------- ----
Adjusted net income (loss)
attributable to common
stock ($180) - ($160) ($10) - $10
(1) Does not include any forecasted
impairments.
2016 Guidance
-------------
Original Revised
$2.35 Gas / $35 Oil $2.45 Gas / $45 Oil
------------------- -------------------
($ in millions)
Net loss attributable to
common stock ($223) - ($197) ($1,655) - ($1,625)
Add back:
Mandatory convertible
preferred stock dividend 108 - 108 108 - 108
--------- ---------
Net loss attributable to
SWN ($115) - ($89) ($1,547) - ($1,517)
Add back:
Provision for income
taxes (70) - (54) -
Impairment of natural gas
and oil properties - 1,504
Depreciation, depletion
and amortization 520 - 530 440 - 450
Gain on sale of assets - (2)
Loss on certain
derivatives - 129
Interest expense 53 - 58 60 - 65
Write-down on inventory - 4
Restructuring costs 60 - 70 75
------- ---
Adjusted EBITDA $450 - $500 $675 - 700
=========== ==========
(1) Does not include any forecasted
impairments.
Southwestern management will host a teleconference call on Friday, July 22, 2016 at 10:00 a.m. Eastern to discuss its second quarter 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 ended For the six months ended
June 30, June 30,
2016 2015 2016 2015
---- ---- ---- ----
Exploration &
Production
-------------
Production
Gas production (Bcf) 203 226 416 445
Oil production (MBbls) 586 589 1,193 1,134
NGL production (MBbls) 3,136 2,574 6,512 4,340
Total production
(Bcfe) 225 245 462 478
Commodity Prices
Average realized gas
price per Mcf,
including derivatives $1.32 $2.23 $1.40 $2.60
Average realized gas
price per Mcf,
excluding derivatives $1.21 $1.76 $1.33 $2.19
Average realized oil
price per Bbl $32.46 $40.88 $25.43 $36.08
Average realized NGL
price per Bbl $6.41 $5.77 $5.67 $7.63
Summary of Derivative
Activity in the
Statement of
Operations
Settled commodity
amounts included in
"Operating Revenues"
(in millions) $ - $53 $ - $95
Settled commodity
amounts included in
"Gain (Loss) on
Derivatives" (in
millions) $23 $52 $31 $88
Unsettled commodity
amounts included in
"Gain (Loss) on
Derivatives" (in
millions) $(108) $(52) $(126) $(70)
Average unit costs per
Mcfe
Lease operating
expenses $0.87 $0.93 $0.88 $0.93
General &
administrative
expenses (1) $0.21 $0.21 $0.20 $0.22
Taxes, other than
income taxes (2) $0.09 $0.10 $0.09 $0.11
Full cost pool
amortization $0.35 $1.13 $0.42 $1.14
Midstream
---------
Volumes marketed
(Bcfe) 271 289 550 549
Volumes gathered (Bcf) 154 201 318 434
(1) Excludes $11 million and $69
million of restructuring
charges for the three and six
months ended June 30, 2016,
respectively.
(2) Excludes $3 million of
restructuring charges for the
six months ended June 30, 2016,
respectively.
STATEMENTS OF OPERATIONS (Unaudited)
Southwestern Energy Company and Subsidiaries
For the three months ended For the six months ended
June 30, June 30,
2016 2015 2016 2015
---- ---- ---- ----
(in millions, except share/per share amounts)
Operating Revenues
Gas sales $251 $457 $566 $1,082
Oil sales 20 24 31 41
NGL sales 20 15 37 33
Marketing 196 222 394 447
Gas gathering 35 46 73 94
--- --- --- ---
522 764 1,101 1,697
--- --- ----- -----
Operating Costs and Expenses
Marketing purchases 197 219 393 441
Operating expenses 151 176 316 331
General and administrative
expenses 56 60 110 128
Restructuring charges 11 - 75 -
Depreciation, depletion and
amortization 107 308 250 601
Impairment of natural gas and
oil properties 470 1,535 1,504 1,535
Gain on sale of assets, net - (277) - (277)
Taxes, other than income
taxes 22 27 45 57
--- --- --- ---
1,014 2,048 2,693 2,816
----- ----- ----- -----
Operating Loss (492) (1,284) (1,592) (1,119)
---- ------ ------ ------
Interest Expense
Interest on debt 56 52 109 102
Other interest charges 2 3 4 52
Interest capitalized (41) (54) (82) (102)
--- --- --- ----
17 1 31 52
Other Income (Loss), Net - 3 (3) 2
Gain (Loss) on Derivatives (85) 1 (99) 15
--- --- --- ---
Loss Before Income Taxes (594) (1,281) (1,725) (1,154)
Provision (Benefit) for
Income Taxes
Current - 7 - 7
Deferred (1) (500) - (451)
--- ---- --- ----
(1) (493) - (444)
--- ---- --- ----
Net Loss (593) (788) (1,725) (710)
Mandatory convertible
preferred stock dividend 27 27 54 52
Net Loss Attributable to
Common Stock $(620) $(815) $(1,779) $(762)
===== ===== ======= =====
Loss Per Common Share
Basic $(1.61) $(2.13) $(4.63) $(2.01)
====== ====== ====== ======
Diluted $(1.61) $(2.13) $(4.63) $(2.01)
====== ====== ====== ======
Weighted Average Common Shares Outstanding
Basic 385,594,815 382,114,011 384,232,831 378,797,446
=========== =========== =========== ===========
Diluted 385,594,815 382,114,011 384,232,831 378,797,446
=========== =========== =========== ===========
BALANCE SHEETS
(Unaudited)
Southwestern Energy
Company and
Subsidiaries
June 30, December 31,
2016 2015
---- ----
(in millions)
ASSETS
Current assets $1,278 $393
Property and equipment 24,529 24,364
Less: Accumulated
depreciation,
depletion and
amortization (18,582) (16,821)
------- -------
Total property and
equipment, net 5,947 7,543
Other long-term assets 152 150
--- ---
Total assets 7,377 8,086
===== =====
LIABILITIES AND EQUITY
Current liabilities 591 707
Long-term debt 5,767 4,704
Pension and other
postretirement
liabilities 51 50
Other long-term
liabilities 395 343
--- ---
Total liabilities 6,804 5,804
----- -----
Equity:
Common stock, $0.01
par value; issued on July 15,
1,250,000,000 shares 2016) and 390,138,549
authorized; issued as of December 31,
392,496,825 (1) 2015
shares as of June 30,
2016 (does not
include 2,100,119
shares declared as a
stock dividend on
June 14, 2016 and 4 4
Preferred stock, $0.01
par value,10,000,000 December 31, 2015,
shares authorized, conversion in January
6.25% Series B 2018
Mandatory
Convertible, $1,000
per share liquidation
preference, 1,725,000
shares issued and
outstanding as of
June 30, 2016 and - -
Additional paid-in
capital 3,418 3,409
Accumulated deficit (2,807) (1,082)
Accumulated other
comprehensive loss (41) (48)
Common stock in
treasury; 31,269
shares as of June 30,
2016 and 47,149 as of
December 31, 2015,
respectively (1) (1)
--- ---
Total equity 573 2,282
--- -----
Total liabilities and
equity $7,377 $8,086
====== ======
(1) Does not include 98,900,000
shares of common stock issued
in July 2016.
STATEMENTS OF CASH
FLOWS (Unaudited)
Southwestern Energy
Company and
Subsidiaries
For the six months ended
June 30,
2016 2015
---- ----
(in millions)
Cash Flows From
Operating Activities
Net loss $(1,725) $(710)
Adjustments to
reconcile net loss to
net cash provided by
operating
activities:
Depreciation,
depletion and
amortization 250 603
Impairment of natural
gas and oil
properties 1,504 1,535
Amortization of debt
issuance costs 4 49
Deferred income taxes - (451)
Loss on derivatives,
net of settlement 129 71
Stock-based
compensation 17 12
Gain on sales of
assets, net - (277)
Restructuring charges 29 -
Other 7 -
Change in assets and
liabilities (50) 108
--- ---
Net cash provided by
operating activities 165 940
--- ---
Cash Flows From
Investing Activities
Capital investments (241) (974)
Acquisitions - (569)
Proceeds from sale of
property and
equipment 54 703
Other 1 10
--- ---
Net cash used in
investing activities (186) (830)
---- ----
Cash Flows From
Financing Activities
Payments on current
portion of long-term
debt (1) (1)
Payments on long-term
debt - (500)
Payments on short-
term debt - (4,500)
Payments on revolving
credit facility (3,268) (1,534)
Borrowings under
revolving credit
facility 3,152 1,804
Payments on commercial
paper (242) (1,182)
Borrowings under
commercial paper 242 1,288
Change in bank drafts
outstanding (21) (1)
Proceeds from issuance
of long-term debt 1,191 2,200
Debt issuance costs (16) (17)
Proceeds from issuance
of common stock - 669
Proceeds from issuance
of mandatory
convertible preferred
stock - 1,673
Preferred stock
dividend (27) (25)
Other (6) -
--- ---
Net cash provided by
(used in) financing
activities 1,004 (126)
----- ----
Increase (decrease) in
cash and cash
equivalents 983 (16)
Cash and cash
equivalents at
beginning of year 15 53
--- ---
Cash and cash
equivalents at end of
period $998 $37
==== ===
SEGMENT INFORMATION (Unaudited)
Southwestern Energy
Company and
Subsidiaries Exploration
and
Production Midstream Other Eliminations Total
---------- --------- ----- ------------ -----
(in millions)
Three months ended
June 30, 2016
------------------
Revenues $284 $559 $ - $(321) $522
Marketing purchases - 452 - (255) 197
Operating expenses 196 21 - (66) 151
General and
administrative
expenses 46 10 - - 56
Restructuring charges 11 - - - 11
Depreciation,
depletion and
amortization 90 17 - - 107
Impairment of natural
gas and oil
properties 470 - - - 470
Taxes, other than
income taxes 20 2 - - 22
Operating income
(loss) (549) 57 - - (492)
Capital investments(1) 73 - 1 - 74
Three months ended
June 30, 2015
------------------
Revenues $490 $766 $ - $(492) $764
Marketing purchases - 624 - (405) 219
Operating expenses 226 35 2 (87) 176
General and
administrative
expenses 52 9 (1) - 60
Depreciation,
depletion and
amortization 291 17 - - 308
Impairment of natural
gas and oil
properties 1,535 - - - 1,535
(Gain) loss on sale of
assets, net 1 (278) - - (277)
Taxes, other than
income taxes 24 4 (1) - 27
Operating income
(loss) (1,639) 355 - - (1,284)
Capital investments(1) 389 19 7 - 415
Six months ended June
30, 2016
---------------------
Revenues $620 $1,180 $ - $(699) $1,101
Marketing purchases - 955 - (562) 393
Operating expenses 405 48 - (137) 316
General and
administrative
expenses 91 19 - - 110
Restructuring charges 72 3 - - 75
Depreciation,
depletion and
amortization 217 33 - - 250
Impairment of natural
gas and oil
properties 1,504 - - - 1,504
Taxes, other than
income taxes 40 5 - - 45
Operating income
(loss) (1,709) 117 - - (1,592)
Capital investments(1) 193 2 1 - 196
Six months ended June
30, 2015
---------------------
Revenues $1,145 $1,704 $1 $(1,153) $1,697
Marketing purchases - 1,410 - (969) 441
Operating expenses 442 71 2 (184) 331
General and
administrative
expenses 108 20 - - 128
Depreciation,
depletion and
amortization 569 32 - - 601
Impairment of natural
gas and oil
properties 1,535 - - - 1,535
(Gain) loss on sale of
assets, net 1 (278) - - (277)
Taxes, other than
income taxes 51 6 - - 57
Operating income
(loss) (1,561) 443 (1) - (1,119)
Capital investments(1) 1,419 157 10 - 1,586
(1) Capital investments includes a $27
million increase and an $11
million decrease for the three
months ended June 30, 2016 and
2015, respectively, and a $51
million decrease and an $11
million decrease for the six
months ended June 30, 2016 and
2015, respectively, relating to
the change in accrued expenditures
between periods. E&P capital for
the three months ended June 30,
2015 includes approximately $516
million related to the WPX
Property and Statoil Property
Acquisitions. Midstream capital
for the six months ended June 30,
2015 includes approximately $119
million of firm transport
associated with the WPX Property
Acquisition.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/southwestern-energy-announces-second-quarter-2016-results-improved-guidance-outcomes-of-financial-strengthening-efforts-and-resumption-of-drilling-and-completion-activity-300302479.html
SOURCE Southwestern Energy Company
