Balancing dual priorities of debt reduction and managing productive capacity

Southwestern Energy Company (NYSE: SWN) today announced financial and operating results for the third quarter ended September 30, 2023.

• Generated $45 million net income, $106 million adjusted net income (non-GAAP), $513 million adjusted EBITDA (non-GAAP), $477 million net cash provided by operating activities and $23 million free cash flow (non-GAAP)
• Quarter-end total debt $4.1 billion, down from $4.4 billion at year-end 2022
• Reported total net production of 425 Bcfe, or 4.6 Bcfe per day, including 4.0 Bcf per day of gas and 104 MBbls per day of liquids
• Invested $454 million of capital and placed 23 wells to sales, including 15 in Appalachia and 8 in Haynesville
• Released its 10^th annual Corporate Responsibility report, highlighting sustainability initiatives and progress, including a 17% reduction in Scope 1 GHG emissions intensity and a 20% reduction in methane intensity in 2022 compared to 2021

“During the third quarter, the Company continued its disciplined approach of optimizing free cash flow generation and activity. This approach balances our dual priorities of debt reduction and managing the productive capacity of the Company in the structurally improving natural gas environment. As we look ahead to next year, Southwestern Energy is well positioned with its deep inventory, firm transportation portfolio and market access to benefit from the expected growing demand from LNG facilities along the Gulf Coast,” said Bill Way, Southwestern Energy President and Chief Executive Officer.

Financial Results

For the quarter ended September 30, 2023, Southwestern Energy recorded net income of $45 million, or $0.04 per diluted share, including a loss on mark-to-market of unsettled derivatives. Excluding this and other one-time items, adjusted net income (non-GAAP) was $106 million, or $0.10 per diluted share, and adjusted EBITDA (non-GAAP) was $513 million. Net cash provided by operating activities was $477 million, net cash flow (non-GAAP) was $477 million and free cash flow (non-GAAP) was $23 million.

As of September 30, 2023, Southwestern Energy had total debt of $4.1 billion and net debt to adjusted EBITDA (non-GAAP) of 1.6x. At the end of the quarter, the Company had $388 million of borrowings under its revolving credit facility and no outstanding letters of credit. Subsequent to quarter end, the Company’s elected commitments and borrowing base were reaffirmed as part of its regularly scheduled fall redetermination at the elected $2.0 billion and $3.5 billion, respectively.

As indicated in the table below, third quarter 2023 weighted average realized price was $2.05 per Mcfe, excluding the impact of derivatives and net of $0.24 per Mcfe of transportation expenses. Including derivatives, weighted average realized price for the third quarter was down 21% from $3.06 per Mcfe in 2022 to $2.43 per Mcfe in 2023 primarily due to lower commodity prices including a 69% decrease in NYMEX Henry Hub and a 10% decrease in WTI.

Operational Results

Total net production for the quarter ended September 30, 2023 was 425 Bcfe, of which 86% was natural gas, 12% NGLs and 2% oil. Capital investments totaled $454 million for the third quarter of 2023 with 24 wells drilled, 25 wells completed and 23 wells placed to sales.

Appalachia – In the third quarter, total production was 262 Bcfe, with NGL production of 90 MBbls per day and oil production of 14 MBbls per day. The Company drilled 12 wells, completed 15 wells and placed 15 wells to sales with an average lateral length of 16,231 feet.

Haynesville – In the third quarter, total production was 163 Bcfe. There were 12 wells drilled, 10 wells completed and 8 wells placed to sales in the quarter with an average lateral length of 9,082 feet.

Fourth Quarter 2023 Guidance

Based on current market conditions, Southwestern expects fourth quarter production and price differentials to be within the following ranges. Additionally, the Company updates full year oil differential guidance to $10 to $13 per barrel discount to WTI.

Conference Call

Southwestern Energy will host a conference call and webcast on Friday, November 3, 2023 at 10:00 a.m. Central to discuss third quarter 2023 results. To participate, dial US toll-free 877-883-0383, or international 412-902-6506 and enter access code 4941446. The conference call will webcast live at www.swn.com.

A replay will also be available on SWN’s website at www.swn.com following the call.

About Southwestern Energy

Southwestern Energy Company (NYSE: SWN) is a leading U.S. producer and marketer of natural gas and natural gas liquids focused on responsibly developing large-scale energy assets in the nation’s most prolific shale gas basins. SWN’s returns-driven strategy strives to create sustainable value for its stakeholders by leveraging its scale, financial strength and operational execution. For additional information, please visit www.swn.com and www.swncrreport.com.

Forward Looking Statement

This news release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. These statements are based on current expectations. The words “anticipate,” “intend,” “plan,” “project,” “estimate,” “continue,” “potential,” “should,” “could,” “may,” “will,” “objective,” “guidance,” “outlook,” “effort,” “expect,” “believe,” “predict,” “budget,” “projection,” “goal,” “forecast,” “model,” “target”, “seek”, “strive,” “would,” “approximate,” and similar words are intended to identify forward-looking statements. Statements may be forward looking even in the absence of these particular words.

Examples of forward-looking statements include, but are not limited to, the expectations of plans, business strategies, objectives and growth and anticipated financial and operational performance, including guidance regarding our strategy to develop reserves, drilling plans and programs (including the number of rigs and frac crews to be used), estimated reserves and inventory duration, projected production and sales volume and growth rates, projected commodity prices, basis and average differential, impact of commodity prices on our business, projected average well costs, generation of free cash flow, our return of capital strategy, including the amount and timing of any redemptions, repayments or repurchases of our common stock, outstanding debt securities or other debt instruments, leverage targets, our ability to maintain or improve our credit ratings, our ability to achieve our debt reduction plan, leverage levels and financial profile, our hedging strategy, our environmental, social and governance (ESG) initiatives and our ability to achieve anticipated results of such initiatives, expected benefits from acquisitions, potential acquisitions, divestitures, potential divestitures and strategic transactions, the timing thereof and our ability to achieve the intended operational, financial and strategic benefits of any such transactions or other initiatives. These forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. All forward-looking statements speak only as of the date of this news release. The estimates and assumptions upon which forward-looking statements are based are inherently uncertain and involve a number of risks that are beyond our control. Although we believe the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance, and we cannot assure you that such statements will be realized or that the events and circumstances they describe will occur. Therefore, you should not place undue reliance on any of the forward-looking statements contained herein.

Factors that could cause our actual results to differ materially from those indicated in any forward-looking statement are subject to all of the risks and uncertainties incident to the exploration for and the development, production, gathering and sale of natural gas, NGLs and oil, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, the costs and results of drilling and operations, lack of availability of drilling and production equipment and services, the ability to add proved reserves in the future, environmental risks, drilling and other operating risks, legislative and regulatory changes, the uncertainty inherent in estimating natural gas and oil reserves and in projecting future rates of production, the quality of technical data, cash flow and access to capital, the timing of development expenditures, a change in our credit rating, an increase in interest rates, our ability to achieve our debt reduction plan, our ability to increase commitments under our revolving credit facility, our hedging and other financial contracts, our ability to maintain leases that may expire if production is not established or profitably maintained, our ability to transport our production to the most favorable markets or at all, any increase in severance or similar taxes, the impact of the adverse outcome of any material litigation against us or judicial decisions that affect us or our industry generally, the effects of weather or power outages, increased competition, the financial impact of accounting regulations and critical accounting policies, the comparative cost of alternative fuels, credit risk relating to the risk of loss as a result of non-performance by our counterparties, including as a result of financial or banking failures, impacts of world health events, including the COVID-19 pandemic, cybersecurity risks, geopolitical and business conditions in key regions of the world, our ability to realize the expected benefits from acquisitions, divestitures, and strategic transactions, our ability to achieve our GHG emission reduction goals and the costs associated therewith, and any other factors described or referenced under Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” and under Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022.

We have no obligation and make no undertaking to publicly update or revise any forward-looking statements, except as required by applicable law. All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.

Hedging Summary

A detailed breakdown of derivative financial instruments and financial basis positions as of September 30, 2023, including the remainder of 2023 and excluding those positions that settled in the first, second and third quarters, is shown below. Please refer to the Company’s quarterly report on Form 10-Q to be filed with the Securities and Exchange Commission for more information on the Company’s commodity and basis protection.

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 the Company’s 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 free cash flow (deficit), net debt, adjusted net income, adjusted diluted earnings per share, adjusted EBITDA and net debt to adjusted EBITDA, all of 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.