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Southwestern Energy Fourth Quarter, Full Year 2021 Results

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   |    Tuesday,March 01,2022

Southwestern Energy Co. announced financial and operating results for the fourth quarter and full-year 2021.

CEO Bill Way said: "In 2021, Southwestern Energy delivered results above expectations. We materially increased our scale and enhanced our free cash flow generation capability. Our new Haynesville assets complement our premium Appalachia position by deepening the Company's inventory, expanding market optionality and reach, including globally through the LNG Corridor, while lowering the risk profile of the enterprise.

"We are also reporting Company-record reserves and value that reflect the quality and depth of our inventory. Notably, the reported PV-10 value of these reserves using SEC prices is more than double our current enterprise value, further emphasizing the compelling economic opportunity that SWN offers its shareholders. Our 2022 plan is designed to deliver that value," continued Way.

2021 Highlights:

• Generated $1.4 billion net cash provided by operating activities, $1.7 billion net cash flow (non-GAAP) and $547 million in free cash flow (non-GAAP);
• Delivered Company-record reserves of 21.1 Tcfe, PV-10 of $18.7 billion, and pre-tax PV-10 (non-GAAP) of $22.4 billion using SEC prices;
• Closed acquisitions of Indigo Natural Resources on September 1^st and GEP Haynesville on December 31^st; becomes largest Haynesville and second-largest natural gas-focused producer in United States;
• Strengthened financial position and lowered leverage ratio to 2.0 times, expanded liquidity, reduced cost of debt and extended weighted-average debt maturity profile; upgraded to BB+ by S&P in January 2022; and
• Announced and implementing Company-wide responsibly sourced gas certification and continuous monitoring.

2021 Fourth Quarter and Full Year Results

For the quarter ended December 31, 2021, Southwestern Energy recorded net income of $2.4 billion, or $2.31 per diluted share, including a positive $2.0 billion non-cash change in unsettled mark to market derivatives. This compares to a net loss of $92 million, or ($0.14) per diluted share in the fourth quarter of 2020.

Adjusted net income (non-GAAP), which excludes non-cash items noted above and other one-time charges, was $318 million or $0.31 per diluted share in 2021 and $119 million or $0.18 per share for the same period in 2020. The increase was primarily related to increased production volumes and increased commodity prices. For the fourth quarter of 2021, adjusted EBITDA (non-GAAP) was $671 million, net cash provided by operating activities was $533 million and net cash flow (non-GAAP) was $633 million, and free cash flow (non-GAAP) was $341 million.

As indicated in the table below, fourth quarter 2021 weighted average realized price, including $0.28 per Mcfe of transportation expenses, was $5.36 per Mcfe, excluding the impact of derivatives. Including derivatives, the weighted average realized price for the quarter was up 31% to $2.81 per Mcfe, as compared to prior year, primarily due to higher commodity prices, including a 119% increase in NYMEX and an 81% increase in WTI, partially offset by the impact of settled derivatives. Fourth quarter 2021 weighted average realized price before transportation expense and excluding derivatives was $5.64 per Mcfe.

Full Year 2021 Financial Results

The Company recorded a net loss of $25 million, or ($0.03) per share, for the year ended December 31, 2021 compared to a net loss of $3.1 billion, or ($5.42) per share in 2020. In 2021, the Company recorded a $944 million non-cash loss on unsettled derivatives. Excluding these non-cash and other one-time items, adjusted net income (non-GAAP) for 2021 was $831 million, or $1.05 per share, compared to $221 million, or $0.38 per share, in 2020. The increase in adjusted net income (non-GAAP) compared to prior year was primarily the result of increased commodity prices and increased production volumes associated with the Company's acquisitions. In 2021, Adjusted EBITDA (non-GAAP) was $1.8 billion, net cash provided by operating activities was $1.4 billion, net cash flow (non-GAAP) was $1.7 billion, and free cash flow (non-GAAP) was $547 million.

As indicated in the table below, for the full year 2021, weighted average realized price, including $0.34 per Mcfe of transportation expense, was $3.74 per Mcfe excluding the impact of derivatives. Including derivatives, weighted average realized price was up 30% from $1.94 per Mcfe in 2020 to $2.53 per Mcfe in 2021. The increase was primarily related to higher commodity prices, including an 85% increase in NYMEX Henry Hub and a 72% increase in WTI, partially offset by the impact of derivatives. In 2021, the weighted average realized price before transportation expenses and excluding the impact of derivatives was $4.08 per Mcfe.

As of December 31, 2021, Southwestern Energy had total debt of $5.4 billion and net debt to adjusted EBITDA (non-GAAP) of 2.0x. At the end of 2021, the Company had access to $1.4 billion of liquidity, with $460 million of borrowings under its revolving credit facility and $160 million in outstanding letters of credit. During the fourth quarter of 2021, the Company further extended its maturity profile and improved its weighted average cost of debt when securing financing for the consideration of its GEP Haynesville acquisition by issuing $1.15 billion of 4.75% senior notes due 2032 and a $550 million institutional term loan subject to variable rate interest at 3.0% at year-end.

In January 2022, the Company received an upgrade to its long-term debt issuer rating from S&P to BB+, placing the Company one notch below investment grade credit rating. The Company also retired during January the remaining $201 million of senior notes due March 2022.

Operational Results

Total production for the quarter ended December 31, 2021 was 385 Bcfe, comprised of 86% natural gas, 12% NGLs and 2% oil. Production totaled 1.24 Tcfe for the year ended December 31, 2021.

Capital investments in the fourth quarter of 2021 were $292 million, bringing full year capital investment to $1,108 million. The Company brought 93 wells to sales, drilled 87 wells and completed 93 wells during the year.

Appalachia - In the fourth quarter, total production was 283 Bcfe, with NGL production of 84 MBbls per day and oil production of 15 MBbls per day. The Company drilled 13 wells, completed 11 wells and placed 11 wells to sales with an average lateral length of 17,129 feet. During the fourth quarter, Appalachia well costs averaged $650 per lateral foot for wells placed to sales, including approximately $518 per lateral foot in dry gas Marcellus.

In 2021, Appalachia's total production was 1.1 Tcfe, including 103 MBbls per day of liquids. During 2021, the Company drilled 74 wells, completed 78 wells and placed 78 wells to sales, with an average lateral length of 14,332 feet. At year-end, the Company had 20 drilled but uncompleted wells in Appalachia.

Haynesville - In the fourth quarter, total production was 102 Bcf. There were 11 wells drilled, 11 wells completed and 10 wells placed to sales in the quarter with an average lateral length of 6,875 feet.

Production for the year was 132 Bcf in Haynesville. The Company drilled 13 wells, completed 15 wells and brought 15 wells to sales following the close of the Indigo acquisition, with 29 drilled but uncompleted wells at year-end, including those acquired from GEP Haynesville.

The Haynesville results in 2021 include activity from the properties acquired from Indigo Natural Resources starting on September 1, 2021. The Company closed its acquisition of GEP Haynesville on December 31, 2021, and, as such, there was no impact to reported 2021 production or capital investments.

2021 Proved Reserves

The Company increased its total proved reserves to 21.1 Tcfe at year-end 2021, up 76% from 12.0 Tcfe at year-end 2020. The increase was primarily related to reserves acquired from Indigo Natural Resources and GEP Haynesville, reserve additions in Appalachia, as well as an increase in commodity prices.

The after-tax PV-10 (standardized measure) of the Company's reserves was $18.7 billion. The PV-10 value before the impact of taxes (non-GAAP) was $22.4 billion, including $15.5 billion from Appalachia and $6.9 billion from Haynesville. SEC prices used for the Company's reported 2021 reserves were $3.60 per Mcf NYMEX Henry Hub, $66.56 per Bbl WTI, and $28.65 per Bbl NGLs.

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