Southwestern Energy First Quarter 2022 Results

Southwestern Energy Co. announced financial and operating results for the first quarter ended March 31, 2022.

Highlights:

• Generated $972 million net cash provided by operating activities, $861 million net cash flow (non-GAAP) and $317 million free cash flow (non-GAAP)
• Reduced debt by $508 million, consistent with disciplined capital allocation framework, utilizing free cash flow and seasonal working capital changes
• Reported total production of 425 Bcfe, or 4.7 Bcfe per day, including 4.2 Bcf per day of gas and 91 MBbls per day of liquids
• Operational performance on track; invested $544 million of capital consistent with front-end loaded plan to bring 32 wells to sales during the quarter
• Completed responsibly sourced gas well certifications of all Appalachia production; Haynesville certifications expected to be complete by year-end; progressing continuous monitoring project across the portfolio
• In April, announced Amended and Restated Credit Agreement; becomes unsecured upon receipt of an investment grade rating, maturity extended to 2027 and borrowing base increased to $3.5 billion while retaining elected commitments of $2.0 billion

CEO Bill Way said: "Southwestern Energy delivered another strong quarter following the timely and successful integration of our Haynesville assets, highlighting the strength of the Company's strategically positioned business. Our amended and restated credit agreement is evidence of our progress to achieving investment grade. We believe our increasing and more resilient free cash flow generation capability coupled with our improved business and financial risk profile has created real value for our shareholders.

"Recent global events underscore the importance of energy security and highlight the vital role of US natural gas, both domestically and globally. Today, SWN is differentially positioned to help meet the growing global demand for US natural gas as the second largest natural gas-focused producer in the US, already delivering 1.5 Bcf per day directly to LNG. Our strategically advantaged transportation portfolio enables the Company to reach diversified premium markets, including the capability of delivering approximately 65% of natural gas production to the LNG corridor and Gulf Coast. This marketing advantage is complemented by our deep Tier 1 inventory, strong and improving financial and credit profile, and an enterprise-wide commitment to RSG," continued Way.

Financial Results

For the quarter ended March 31, 2022, Southwestern Energy recorded a net loss of $2.7 billion, or ($2.40) per diluted share, primarily due to the mark-to-market of unsettled derivatives. Excluding this and other one-time items, adjusted net income (non-GAAP) was $447 million, or $0.40 per diluted share, and Adjusted EBITDA (non-GAAP) was $905 million. Net cash provided by operating activities was $972 million, net cash flow (non-GAAP) was $861 million and free cash flow (non-GAAP) was $317 million.

The Company utilized free cash flow generated in the first quarter of 2022 for debt reduction. In January, the Company retired the remaining $201 million of senior notes due March 2022. As of March 31, 2022, Southwestern Energy had total debt of $4.9 billion and net debt to adjusted EBITDA (non-GAAP) of 1.7x. At the end of the quarter, the Company had access to $1.7 billion of liquidity, with $174 million of borrowings under its revolving credit facility and $147 million in outstanding letters of credit. 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.

In April 2022, the Company announced an Amended and Restated Credit Agreement that extended the maturity date of its existing credit facility by three years to April 2027 with an aggregate maximum revolving credit amount and borrowing base of $3.5 billion, and no change to elected commitments of $2.0 billion. The Agreement provides for the release of subsidiary guarantors and collateral, as well as other terms consistent with standard "fall away" provisions, upon receipt of an investment grade rating from either S&P or Moody's and the satisfaction of certain other conditions. Furthermore, upon receipt of two investment grade ratings from S&P, Moody's or Fitch, the Agreement provides for terms consistent with investment grade peers, including the replacement of all financial covenants with a debt to capitalization financial covenant. Returning to investment grade remains a key financial objective for the Company, aligned with its strategic priorities.

As indicated in the table below, first quarter 2022 weighted average realized price, including $0.25 per Mcfe of transportation expenses, was $4.88 per Mcfe excluding the impact of derivatives. Including derivatives, weighted average realized price (including transportation) for the first quarter was up 28% from $2.54 per Mcfe in 2021 to $3.24 per Mcfe in 2022 primarily due to higher commodity prices including an 84% increase in NYMEX Henry Hub and a 63% increase in WTI. First quarter 2022 weighted average realized price before transportation expense and excluding the impact of derivatives was $5.13 per Mcfe.

Operational Results

Total net production for the quarter ended March 31, 2022 was 425 Bcfe, of which 88% was natural gas, 10% NGLs and 2% oil. Capital investments totaled $544 million for the first quarter of 2022, consistent with the Company's front-end loaded capital program, with 33 wells drilled, 37 wells completed and 32 wells placed to sales.

Appalachia - In the first quarter, total production was 259 Bcfe, with NGL production of 77 MBbls per day and oil production of 14 MBbls per day. The Company drilled 18 wells, completed 17 wells and placed 11 wells to sales with an average lateral length of 12,667 feet.

Haynesville - In the first quarter, total production was 166 Bcf. There were 15 wells drilled, 20 wells completed and 21 wells placed to sales in the quarter with an average lateral length of 8,215 feet.

Second Quarter 2022 Guidance Update

Based on current market conditions, Southwestern expects second quarter production and price differentials to be within the following ranges.