Quarterly / Earnings Reports | Fourth Quarter (4Q) Update | Financial Results | Forecast - Production | Capital Markets | Drilling Program - Wells | Capital Expenditure - 2023

Southwestern Energy 4Q, Full Year 2022 Results; Talks 2023 Plans

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   |    Thursday,February 23,2023

Southwestern Energy Co. announced financial and operating results for the fourth quarter and full-year 2022 and provided 2023 guidance.

CEO Bill Way said: "In 2022, the Company delivered results that both strengthened its financial position and demonstrated the tangible benefits of its expanded and improved asset base. Financially, we repaid over $1 billion of debt, lowering leverage into our target range, and secured upgrades to one-notch below investment grade from all three agencies while also initiating a share repurchase program. Operationally, we delivered results above plan including successful integration of our Haynesville assets and performance improvements in our first year of operations.

"Given near-term market conditions, we have proactively moderated activity, resulting in slightly lower expected production for 2023, and have the flexibility and optionality in our business to adjust as needed. In addition, we expect to drive improved capital efficiency and cost reductions across our operations. We believe the Company's deep, high-quality inventory, advantaged access to growing demand centers including LNG, and financial strength position it to capitalize on structurally supportive longer-term natural gas fundamentals and generate sustainable free cash flow through the cycle," continued Way.

2022 Highlights:

• Generated $3.2 billion net cash provided by operating activities, $1.8 billion net income and $1.5 billion adjusted net income (non-GAAP)
  - Adjusted EBITDA (non-GAAP) of $3.3 billion and free cash flow (non-GAAP) of $848 million
• Reduced total debt by over $1.0 billion, including the repayment of Term Loan B in December 2022, lowering leverage to 1.3x net debt to adjusted EBITDA (non-GAAP)
• Repurchased $125 million of common stock
• Received ratings upgrades to one-notch below investment grade from all three credit agencies; positive outlook by Fitch in August 2022 and S&P in January 2023
• Reported proved reserves of 21.6 Tcfe; post-tax PV-10 of $37.6 billion and pre-tax PV-10 (non-GAAP) of $46.4 billion using SEC prices
• Produced 1.7 Tcfe, or 4.7 Bcfe per day, including 4.2 Bcf per day of natural gas and 97 MBbls per day of liquids
• Successfully integrated Haynesville acquisitions and delivered performance improvements in first year of operations
• Announced a longer-term GHG reduction target and achieved responsibly sourced gas certification for all production

2023 Guidance

The Company's 2023 plan continues to optimize economic returns and cash flow and maintain financial strength through the cycle. The Company expects to deliver further operational efficiencies and cost reductions to partially offset the anticipated inflationary environment. Highlights are presented below; full guidance is available in the attachments to this press release and on the Company's website.

• Production of approximately 4.6 Bcfe per day, including approximately 4.0 Bcf per day of natural gas and 100 MBbls per day of liquids
• Capital investment of $2.2 to $2.5 billion inclusive of $200 to $220 million in capitalized interest and expense
• Expect to average 10 - 11 rigs and 4 - 5 frac fleets, down from 13 rigs and 5 fleets in 2022
• Estimate 138 to 148 gross operated wells to sales including 70 to 75 in the Haynesville with an average lateral length of approximately 8,500 feet and 68 to 73 in Appalachia with an average lateral length of greater than 15,000 feet
• Basis protected for approximately 90% of expected natural gas production
  - Haynesville protected through firm sales and transportation to Gulf Coast and LNG corridor
  - Appalachia natural gas basis protected from in-basin basis exposure through transportation portfolio, firm sales agreements, and financial basis hedges

2022 Fourth Quarter and Full Year Results

Results include the impacts of the Indigo and GEP acquisitions, which closed on September 1, 2021 and December 31, 2021, respectively.

For the quarter ended December 31, 2022, Southwestern Energy recorded net income of $2.9 billion, or $2.63 per diluted share. Adjusting for the impact of the Company's unsettled derivatives, tax valuation allowance and other one-time items, adjusted net income (non-GAAP) was $287 million, or $0.26 per diluted share, and adjusted EBITDA (non-GAAP) was $732 million. Net cash provided by operating activities was $958 million, net cash flow (non-GAAP) was $677 million, and free cash flow (non-GAAP) was $140 million.

As indicated in the table below, fourth quarter 2022 weighted average realized price, including $0.26 per Mcfe of transportation expenses, was $5.45 per Mcfe, excluding the impact of derivatives. Including derivatives, the weighted average realized price for the quarter was up 2% from $2.81 per Mcfe in 2021 to $2.88 per Mcfe in 2022 primarily due to higher commodity prices, including a 7% increase in NYMEX and a 7% increase in WTI, partially offset by the impact of settled derivatives. Fourth quarter 2022 weighted average realized price before transportation expense and excluding derivatives was $5.71 per Mcfe.

For the year ended December 31, 2022, the Company recorded net income of $1,849 million, or $1.66 per diluted share. Adjusting for the impact of the Company's tax valuation allowance and other one-time items, adjusted net income (non-GAAP) was $1,479 million, or $1.33 per diluted share, and adjusted EBITDA (non-GAAP) was $3,283 million. Net cash provided by operating activities was $3,154 million, net cash flow (non-GAAP) was $3,057 million, and free cash flow (non-GAAP) was $848 million.

In 2022, the Company primarily utilized free cash flow generated to reduce its debt balance. As of December 31, 2022, Southwestern Energy had total debt of $4.4 billion and net debt to adjusted EBITDA (non-GAAP) of 1.3x. This compares to total debt of $5.4 billion as of December 31, 2021. At the end of 2022, the Company had $250 million of borrowings under its revolving credit facility and $110 million in outstanding letters of credit.

On December 30, 2022, the Company repaid its Term Loan B using cash on hand and borrowings on its revolving credit facility. On January 27, 2023 the Company delivered notice to the holders of its 7.75% Senior Notes due 2027 that it intends to redeem such notes on February 26, 2023, utilizing cash on hand and borrowings under its revolving credit facility.

The Company is currently one-notch below an investment grade credit rating by all three credit agencies. In January 2023, S&P updated Southwestern Energy to positive outlook, joining Fitch, which updated the Company to positive outlook in August 2022.

In 2022, the Company repurchased 17.3 million shares of its common stock for a total cost of approximately $125 million. In the fourth quarter of 2022, the Company repurchased 3.6 million shares of its common stock for a total cost of approximately $25 million.

As indicated in the table below, for the full year 2022, weighted average realized price, including $0.25 per Mcfe of transportation expenses, was $6.10 per Mcfe, excluding the impact of derivatives. Including derivatives, the weighted average realized price for the quarter was up 21% from $2.53 per Mcfe in 2021 to $3.06 per Mcfe in 2022 primarily due to higher commodity prices, including a 73% increase in NYMEX and a 39% increase in WTI, partially offset by the impact of settled derivatives. In 2022, the weighted average realized price before transportation expense and excluding derivatives was $6.35 per Mcfe.

Operational Results

Appalachia - In the fourth quarter, total production was 259 Bcfe, with NGL production of 87 MBbls per day and oil production of 13 MBbls per day. The Company drilled 15 wells, completed 12 wells, and placed 15 wells to sales with an average lateral length of 16,081 feet and average well cost of $857 per lateral foot.

In 2022, Appalachia's total production was 1.1 Tcfe, including 97 MBbls per day of liquids. During 2022, the Company drilled 67 wells, completed 67 wells, and placed 63 wells to sales, with an average lateral length of 14,587 feet. At year-end, the Company had 24 drilled but uncompleted wells in Appalachia. During 2022, Appalachia well costs averaged $821 per lateral foot for wells placed to sales.

Haynesville - In the fourth quarter, total production was 168 Bcf. There were 18 wells drilled, 19 wells completed, and 13 wells placed to sales in the quarter with an average lateral length of 9,065 feet and average well cost of $1,927 per lateral foot.

Production for the year was 679 Bcf in Haynesville. The Company drilled 71 wells, completed 72 wells, and brought 70 wells to sales, with an average lateral length of 8,984 feet. The Company had 29 drilled but uncompleted wells at year-end. During 2022, Haynesville well costs averaged $1,758 per lateral foot for wells placed to sales.

2024 Development Plan

Category	2023	2024 Est. Initial	Updated 2024 Guidance	%Difference (2023 vs 2024)
Total Capital Expenditure($mm)

 Click here for More Planned 2024 Activity