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Southwestern Energy Announces Fourth Quarter and Full Year 2021 Results; Provides 2022 Guidance

Record reserves value underscores resilient and growing free cash flow from responsible natural gas development

SPRING, Texas, Feb. 24 /BusinessWire/ -- Southwestern Energy Company (NYSE:SWN) (the "Company" or "Southwestern") today announced financial and operating results for the fourth quarter and full-year 2021 and provided first quarter and full-year 2022 guidance.

"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," said Bill Way, Southwestern Energy President and Chief Executive Officer.

"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

2022 Guidance

The 2022 plan is designed to optimize free cash flow through the execution of our strategy of disciplined investment at maintenance capital levels. Highlights are presented below; full guidance is available in the attachments to this press release and on the Company's website.

2021 Fourth Quarter and Full Year Results

FINANCIAL STATISTICS

For the three months ended

For the years ended

December 31,

December 31,

(in millions)

2021

2020

2021

2020

Net income (loss)

$

2,361

$

(92

)

$

(25

)

$

(3,112

)

Adjusted net income (non-GAAP)

$

318

$

119

$

831

$

221

Diluted earnings (loss) per share

$

2.31

$

(0.14

)

$

(0.03

)

$

(5.42

)

Adjusted diluted earnings per share (non-GAAP)

$

0.31

$

0.18

$

1.05

$

0.38

Adjusted EBITDA (non-GAAP)

$

671

$

276

$

1,779

$

742

Net cash provided by operating activities

$

533

$

121

$

1,363

$

528

Net cash flow (non-GAAP)

$

633

$

249

$

1,655

$

662

Total capital investments (1)

$

292

$

194

$

1,108

$

899

(1)

Capital investments on the cash flow statement include an increase of $7 million and a decrease of $5 million for the three months ended December 31, 2021 and 2020, respectively, and an increase of $70 million and a decrease of $3 million for the years ended December 31, 2021 and 2020, respectively, relating to the change in accrued expenditures between periods.

Fourth Quarter 2021 Financial 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.

Realized Prices

For the three months ended

For the years ended

(includes transportation costs)

December 31,

December 31,

2021

2020

2021

2020

Natural Gas Price:

NYMEX Henry Hub price ($/MMBtu) (1)

$

5.83

$

2.66

$

3.84

$

2.08

Discount to NYMEX (2)

(0.73

)

(0.99

)

(0.53

)

(0.74

)

Realized gas price per Mcf, excluding derivatives

$

5.10

$

1.67

$

3.31

$

1.34

Gain on settled financial basis derivatives ($/Mcf)

0.05

0.23

0.09

0.11

Gain (loss) on settled commodity derivatives ($/Mcf)

(2.55

)

(0.09

)

(1.12

)

0.25

Realized gas price per Mcf, including derivatives

$

2.60

$

1.81

$

2.28

$

1.70

Oil Price:

WTI oil price ($/Bbl) (3)

$

77.19

$

42.66

$

67.92

$

39.40

Discount to WTI

(8.27

)

(10.69

)

(9.12

)

(10.20

)

Realized oil price, excluding derivatives ($/Bbl)

$

68.92

$

31.97

$

58.80

$

29.20

Realized oil price, including derivatives ($/Bbl)

$

42.03

$

52.27

$

40.48

$

46.91

NGL Price, per Bbl:

Realized NGL price, excluding derivatives ($/Bbl)

$

36.79

$

15.28

$

28.72

$

10.24

Realized NGL price, including derivatives ($/Bbl)

$

21.44

$

14.65

$

18.20

$

11.15

Percentage of WTI, excluding derivatives

48

%

36

%

42

%

26

%

Total Weighted Average Realized Price:

Excluding derivatives ($/Mcfe)

$

5.36

$

1.93

$

3.74

$

1.53

Including derivatives ($/Mcfe)

$

2.81

$

2.14

$

2.53

$

1.94

(1)

Based on last day monthly futures settlement prices.

(2)

This discount includes a basis differential, a heating content adjustment, physical basis sales, third-party transportation charges and fuel charges, and excludes financial basis derivatives.

(3)

Based on the average daily settlement price of the nearby month futures contract over the period.

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.

For the three months ended

For the years ended

December 31,

December 31,

2021

2020

2021

2020

Production

Gas production (Bcf)

331

207

1,015

694

Oil production (MBbls)

1,388

1,365

6,610

5,141

NGL production (MBbls)

7,685

7,001

30,940

25,927

Total production (Bcfe)

385

257

1,240

880

Total production (Bcfe/day)

4.2

2.8

3.4

2.4

Average unit costs per Mcfe

Lease operating expenses (1)

$

0.96

$

0.92

$

0.95

$

0.93

General & administrative expenses (2)(3)

$

0.08

$

0.11

$

0.10

$

0.12

Taxes, other than income taxes

$

0.12

$

0.06

$

0.11

$

0.06

Full cost pool amortization

$

0.53

$

0.33

$

0.42

$

0.38

(1)

Includes post-production costs such as gathering, processing, fractionation and compression.

(2)

Excludes $37 million and $76 million in merger-related expenses for the three months and year ended December 31, 2021, respectively. Excludes $7 million in restructuring charges for the year ended December 31, 2021.

(3)

Excludes $38 million and $41 million in merger-related expenses for the three months and year ended December 31, 2020, respectively. Excludes $4 million and $16 million in restructuring charges for the three months and year ended December 31, 2020, respectively.

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.

E&P Division Results

For the three months
ended December 31, 2021

For the year ended
December 31, 2021

Appalachia

Haynesville

Appalachia

Haynesville

Gas production (Bcf)

229

102

883

132

Liquids production

Oil (MBbls)

1,361

6

6,567

8

NGL (MBbls)

7,683

-

30,936

-

Production (Bcfe)

283

102

1,108

132

Capital investments ($ in millions)

Drilling and completions, including workovers

$

104

$

126

$

694

$

178

Land acquisition and other

6

-

48

1

Capitalized interest and expense

31

15

140

21

Total capital investments

$

141

$

141

$

882

$

200

Gross operated well activity summary(1)

Drilled

13

11

74

13

Completed

11

11

78

15

Wells to sales

11

10

78

15

Total weighted average realized price per Mcfe, excluding derivatives

$

5.34

$

5.43

$

3.57

$

5.18

(1)

For Haynesville, represents wells drilled, completed and placed to sales by Southwestern Energy after the close of the Indigo Natural Resources acquisition on September 1, 2021.

Wells to sales summary

For the three months ended December 31, 2021

Gross wells to sales

Average lateral length

Appalachia

Super Rich Marcellus

5

16,867

Dry Gas Utica

3

14,063

Dry Gas Marcellus

3

20,631

Haynesville(1)

10

6,875

Total

21

(1)

Includes wells drilled and completed by Indigo.

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.

Proved Reserves Summary

For the years ended December 31,

2021

2020

Proved reserves (in Bcfe)

21,148

11,990

PV-10: (in millions)

Pre-tax

$

22,420

$

1,847

PV of taxes

(3,689

)

-

After-Tax (in millions)

$

18,731

$

1,847

Percent of estimated proved reserves that are:

Natural gas

82

%

76

%

NGLs and oil

18

%

24

%

Proved developed

54

%

68

%

2021 Proved Reserves by Commodity

Natural Gas

Oil

NGL

Total

(Bcf)

(MBbls)

(MBbls)

(Bcfe)

Proved reserves, beginning of year

9,181

58,024

410,151

11,990

Revisions of previous estimates due to price

501

1,414

(15,525

)

415

Revisions of previous estimates other than price

248

1,900

1,500

269

Extensions, discoveries and other additions

2,543

24,865

211,598

3,962

Production

(1,015

)

(6,610

)

(30,940

)

(1,240

)

Acquisition of reserves in place(1)

5,750

247

180

5,753

Disposition of reserves in place

(1

)

(61

)

-

(1

)

Proved reserves, end of year

17,207

79,779

576,964

21,148

Proved developed reserves:

Beginning of year

6,342

33,563

276,548

8,203

End of year

9,308

40,930

296,832

11,335

(1)

Reflects the acquisition of our Haynesville properties.

2021 Proved Reserves by Division (Bcfe)

Appalachia

Haynesville

Other (1)

Total

Proved reserves, beginning of year

11,989

-

1

11,990

Price revisions

415

-

-

415

Performance and production revisions

270

-

(1

)

269

Extensions, discoveries and other additions

3,962

-

-

3,962

Production

(1,108

)

(132

)

-

(1,240

)

Acquisition of reserves in place(2)

-

5,753

-

5,753

Disposition of reserves in place

(1

)

-

-

(1

)

Proved reserves, end of year

15,527

5,621

-

21,148

(1)

Other includes properties outside of Appalachia and Haynesville.

(2)

Reflects the acquisition of our Haynesville properties.

The Company reported 2021 proved developed finding and development ("PD F&D") costs of $0.42 per Mcfe for its Appalachia properties when excluding the impact of capitalized interest and portions of capitalized G&A costs in accordance with the full cost method of accounting.

Proved Developed Finding and Development (1)

Three-Year

12 Months Ended December 31,

Total

Total PD Adds (Bcfe):

2021

2020

2019

2021

New PD adds

451

267

191

909

PUD conversions

1,298

(3

)

1,631

1,441

4,370

Total PD Adds

1,749

1,898

1,632

5,279

Costs Incurred (in millions):

Unproved property acquisition costs

$

123

$

124

$

162

$

409

Exploration costs

-

-

2

2

Development costs

799

812

936

2,547

Capitalized Costs Incurred

$

922

$

936

$

1,100

$

2,958

Subtract (in millions):

Proved property acquisition costs

$

-

$

-

$

-

$

-

Unproved property acquisition costs

(123

)

(124

)

(162

)

(409

)

Capitalized interest and expense associated with development and exploration (2)

(56

)

(60

)

(81

)

(197

)

PD Costs Incurred

$

743

$

752

$

857

$

2,352

PD F&D (PD Cost Incurred / Total PD Adds)

$

0.42

$

0.40

$

0.53

$

0.45

Note: Amounts may not add due to rounding

(1)

Includes Appalachia only.

(2)

Adjusting for the impacts of the full cost accounting method for comparability.

(3)

Includes increased reserve estimates of 145 Bcfe in the Appalachian Basin associated with productivity enhancements for newly developed PUD locations and compression.

Conference Call

Southwestern Energy will host a conference call and webcast on Friday, February 25, 2022 at 9:30 a.m. Central to discuss fourth quarter and fiscal year 2021 results. To participate, dial US toll-free 877-883-0383, or international 412-902-6506 and enter access code 2596339. The conference call will webcast live at www.swn.com.

To listen to a replay of the call, dial 877-344-7529, International 412-317-0088, or Canada Toll Free 855-669-9658. Enter replay access code 3985981. The replay will be available until March 4, 2022.

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.swn.com/responsibility.

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, estimated reserves and inventory duration, projected production and sales volume and growth rates, commodity prices, projected average well costs, generation of free cash flow, expected benefits from acquisitions, potential acquisitions 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, lack of availability of drilling and production equipment and services, 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, cash flow and access to capital, the timing of development expenditures, a change in our credit rating, an increase in interest rates and any adverse impacts from the discontinuation of the London Interbank Offered Rate, 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, 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, impacts of world health events, including the COVID-19 pandemic, cybersecurity risks, our ability to realize the expected benefits from acquisitions, including our mergers with GEP Haynesville, LLC, Montage Resources Corporation and Indigo Natural Resources LLC, and any other factors discussed 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, 2021.

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.

2022 Guidance

1st Quarter

Total Year

PRODUCTION

Gas production (Bcf)

365 - 377

1,487 - 1,517

Liquids (% of production)

11.0% - 11.5%

11.5% - 12.0%

Total (Bcfe)

411 - 426

1,683 - 1,723

Total (Bcfe/day)

~4.6

~4.7

CAPITAL BY DIVISION (in millions)

Appalachia

~45%

Haynesville

~55%

Total D&C capital (includes land)

$1,665 - $1,740

Other

$20 - $30

Capitalized interest and expense

$215 - $230

Total capital investments

$1,900 - $2,000

PRICING

Natural gas discount to NYMEX including transportation (1)

$0.40 - $0.50 per Mcf

$0.55 - $0.70 per Mcf

Oil discount to West Texas Intermediate (WTI) including transportation

$8.00 - $10.00 per Bbl

$8.00 - $10.00 per Bbl

Natural gas liquids realization as a % of WTI including transportation (2)

38% - 43%

32% - 40%

EXPENSES

Lease operating expenses

$0.92 - $0.96 per Mcfe

General & administrative expense

$0.08 - $0.12 per Mcfe

Taxes, other than income taxes

$0.11 - $0.15 per Mcfe

Income tax rate (~100% deferred)

24.1%

GROSS OPERATED WELL COUNT

Drilled

Completed

Wells To Sales

Ending DUC Inventory

Appalachia

70 - 75

70 - 75

60 - 65

25 - 30

Haynesville

60 - 65

65 - 70

70 - 75

18 - 23

Total Well Count

130 - 140

135 - 145

130 - 140

43 - 53

(1)

Annual guidance based on $4.15 per Mcf NYMEX Henry Hub. Includes impact of transportation costs and expected $0.05 - $0.08 per Mcf gain from financial basis hedges for the full year of 2022. Do not expect a material impact from basis hedges in the first quarter of 2022.

(2)

Annual guidance based on $75 per Bbl WTI.


SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the three months ended

For the years ended

December 31,

December 31,

(in millions, except share/per share amounts)

2021

2020

2021

2020

Operating Revenues:

Gas sales

$

1,704

$

356

$

3,412

$

967

Oil sales

97

43

394

154

NGL sales

283

107

890

265

Marketing

861

272

1,963

917

Other

2

1

8

5

2,947

779

6,667

2,308

Operating Costs and Expenses:

Marketing purchases

848

271

1,957

946

Operating expenses

365

236

1,170

813

General and administrative expenses

34

32

138

121

Merger-related expenses

37

38

76

41

Restructuring charges

-

4

7

16

Depreciation, depletion and amortization

212

90

546

357

Impairments

-

335

6

2,830

Taxes, other than income taxes

46

17

132

55

1,542

1,023

4,032

5,179

Operating Income (Loss)

1,405

(244

)

2,635

(2,871

)

Interest Expense:

Interest on debt

66

48

220

171

Other interest charges

4

4

13

11

Interest capitalized

(29

)

(21

)

(97

)

(88

)

41

31

136

94

Gain (Loss) on Derivatives

1,025

186

(2,436

)

224

Gain (Loss) on Early Extinguishment of Debt

(34

)

-

(93

)

35

Other Income (Loss), Net

6

(2

)

5

1

Income (Loss) Before Income Taxes

2,361

(91

)

(25

)

(2,705

)

Provision (Benefit) for Income Taxes:

Current

-

-

-

(2

)

Deferred

-

1

-

409

-

1

-

407

Net Income (Loss)

$

2,361

$

(92

)

$

(25

)

$

(3,112

)

Earnings (Loss) Per Common Share

Basic

$

2.32

$

(0.14

)

$

(0.03

)

$

(5.42

)

Diluted

$

2.31

$

(0.14

)

$

(0.03

)

$

(5.42

)

Weighted Average Common Shares Outstanding:

Basic

1,015,779,264

641,576,267

789,657,776

573,889,502

Diluted

1,020,130,445

641,576,267

789,657,776

573,889,502

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the years ended

December 31,

(in millions)

2021

2020

Cash Flows From Operating Activities:

Net income (loss)

$

(25

)

$

(3,112

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation, depletion and amortization

546

357

Amortization of debt issuance costs

9

9

Impairments

6

2,830

Deferred income taxes

-

409

Loss on derivatives, unsettled

944

138

Stock-based compensation

2

3

(Gain) loss on early extinguishment of debt

93

(35

)

Other

(3

)

6

Change in assets and liabilities

Accounts receivable

(425

)

50

Accounts payable

261

(131

)

Taxes payable

(4

)

(7

)

Interest payable

6

(11

)

Inventories

(3

)

2

Other assets and liabilities

(44

)

20

Net cash provided by operating activities

1,363

528

Cash Flows From Investing Activities:

Capital investments

(1,032

)

(896

)

Proceeds from sale of property and equipment

4

12

Cash acquired in mergers

66

3

Cash paid in mergers

(1,642

)

-

Net cash used in investing activities

(2,604

)

(881

)

Cash Flows From Financing Activities:

Payments on long-term debt

(1,177

)

(72

)

Payments on revolving credit facility

(6,628

)

(1,671

)

Borrowings under revolving credit facility

6,388

2,337

Change in bank drafts outstanding

5

1

Repayment of revolving credit facilities associated with mergers

(176

)

(200

)

Repayment of Montage senior notes

-

(522

)

Proceeds from issuance of long-term debt

2,900

350

Debt issuance and other financing costs

(53

)

(10

)

Proceeds from issuance of common stock, net

-

152

Cash paid for tax withholding

(3

)

(4

)

Net cash provided by financing activities

1,256

361

Increase in cash and cash equivalents

15

8

Cash and cash equivalents at beginning of year

13

5

Cash and cash equivalents at end of year

$

28

$

13

Hedging Summary

A detailed breakdown of the Company's derivative financial instruments and financial basis positions as of February 22, 2022, including 2022 derivative contracts that have settled, is shown below. Please refer to our annual report on Form 10-K to be filed with the Securities and Exchange Commission for complete information on the Company's commodity, basis and interest rate protection.

Weighted Average Price per MMBtu

Volume (Bcf)

Swaps

Sold Puts

Purchased Puts

Sold Calls

Natural gas

2022

Fixed price swaps

806

$

3.08

$

-

$

-

$

-

Two-way costless collars

144

-

-

2.71

3.14

Three-way costless collars

347

-

2.06

2.52

2.94

Total

1,297

2023

Fixed price swaps

503

$

3.04

$

-

$

-

$

-

Two-way costless collars

219

-

-

3.03

3.55

Three-way costless collars

215

-

2.09

2.54

3.00

Total

937

2024

Fixed price swaps

224

$

2.96

$

-

$

-

$

-

Two-way costless collars

44

-

-

3.07

3.53

Three-way costless collars

11

-

2.25

2.80

3.54

Total

279

Call Options - Natural Gas (Net)

Volume

Weighted Average
Strike Price

(Bcf)

($/MMBtu)

2022

84

$

3.01

2023

46

$

2.94

2024

9

$

3.00

Total

139

$

Natural gas financial basis positions

Volume

Basis Differential

(Bcf)

($/MMBtu)

Q1 2022

Dominion South

25

$

(0.59

)

TCO

18

$

(0.49

)

TETCO M3

23

$

1.27

Columbia Gulf Mainline

6

$

(0.24

)

Total

72

$

0.04

Q2 2022

Dominion South

39

$

(0.65

)

TCO

26

$

(0.55

)

TETCO M3

24

$

(0.48

)

Columbia Gulf Mainline

7

$

(0.24

)

Total

96

$

(0.55

)

Q3 2022

Dominion South

40

$

(0.65

)

TCO

26

$

(0.56

)

TETCO M3

24

$

(0.49

)

Columbia Gulf Mainline

7

$

(0.24

)

Total

97

$

(0.56

)

Q4 2022

Dominion South

30

$

(0.65

)

TCO

25

$

(0.56

)

TETCO M3

19

$

(0.14

)

Columbia Gulf Mainline

6

$

(0.24

)

Total

80

$

(0.47

)

2023

Dominion South

124

$

(0.72

)

TCO

55

$

(0.54

)

TETCO M3

62

$

0.15

Total

241

$

(0.45

)

Weighted Average Price per Bbl

Volume (MBbls)

Swaps

Sold Puts

Purchased Puts

Sold Calls

Oil

2022

Fixed price swaps

3,203

$

53.54

$

-

$

-

$

-

Three-way costless collars

1,380

-

39.89

50.23

57.05

Total

4,583

2023

Fixed price swaps

846

$

55.98

$

-

$

-

$

-

Three-way costless collars

1,268

-

33.97

45.51

56.12

Total

2,114

2024

Fixed price swaps

603

$

68.68

$

-

$

-

$

-

Ethane

2022

Fixed price swaps

5,797

$

11.37

$

-

$

-

$

-

Two-way costless collars

135

-

-

7.56

9.66

Total

5,932

2023

Fixed price swaps

998

$

11.61

$

-

$

-

$

-

Propane

2022

Fixed price swaps

6,369

$

31.14

$

-

$

-

$

-

Three-way costless collars

305

-

16.80

21.00

31.92

Total

6,674

2023

Fixed price swaps

883

$

35.95

$

-

$

-

$

-

Normal Butane

2022

Fixed price swaps

1,806

$

35.64

$

-

$

-

$

-

2023

Fixed price swaps

329

$

40.64

$

-

$

-

$

-

Natural Gasoline

2022

Fixed price swaps

1,840

$

52.85

$

-

$

-

$

-

2023

Fixed price swaps

314

$

63.01

$

-

$

-

$

-

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.

Another such non-GAAP financial measure is free cash flow, which is defined as cash provided by operating activities, adjusting for changes in operating assets and liabilities, merger-related expenses and restructuring charges, less total capital investments. Management presents this measure because it is accepted as an indicator of excess cash flow available to a company for the repayment of debt or for other general corporate purposes.

Another such non-GAAP financial measure is pre-tax PV-10. Management believes that the presentation of PV-10 is relevant and useful to our investors as supplemental disclosure to the standardized measure of discounted future cash flows ("standardized measure"), or after-tax PV-10 amount, because it presents the discounted future net cash flows attributable to our proved reserves prior to taking into account future corporate income taxes and our current tax structure. While the standardized measure is dependent on the unique tax situation of each company, PV-10 is based on a pricing methodology and discount factors that are consistent for all companies. Because of this, PV-10 can be used within the industry and by creditors and securities analysts to evaluate estimated net cash flows from proved reserves on a more comparable basis. The difference between the standardized measure and the PV-10 amount is the discounted amount of estimated future income taxes.

Additional non-GAAP financial measures the Company may present from time to time are net debt, adjusted net income, adjusted diluted earnings per share and adjusted EBITDA, 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.

3 Months Ended
December 31,

12 Months Ended
December 31,

2021

2020

2021

2020

Adjusted net income:

(in millions)

Net income (loss)

$

2,361

$

(92

)

$

(25

)

$

(3,112

)

Add back (deduct):

Merger-related expenses

37

38

76

41

Restructuring charges

-

4

7

16

Impairments

-

335

6

2,830

(Gain) loss on unsettled derivatives (1)

(2,008

)

(134

)

944

138

(Gain) loss on early extinguishment of debt

34

-

93

(35

)

Legal settlement charges

-

-

-

1

Other (gain) loss

(6

)

2

(6

)

2

Adjustments due to discrete tax items (2)

(568

)

22

2

1,042

Tax impact on adjustments

468

(56

)

(266

)

(702

)

Adjusted net income

$

318

$

119

$

831

$

221

(1)

Includes $1 million of non-performance risk adjustment for the three and twelve months ended December 31, 2021 and 2020.

(2)

2020 primarily relates to the recognition of a valuation allowance. The Company's 2021 income tax rate is 24.1% before the impacts of any valuation allowance.

3 Months Ended
December 31,

12 Months Ended
December 31,

2021

2020

2021

2020

Adjusted diluted earnings per share:

Diluted earnings (loss) per share

$

2.31

$

(0.14

)

$

(0.03

)

$

(5.42

)

Add back (deduct):

Merger-related expenses

0.04

0.06

0.10

0.07

Restructuring charges

-

0.01

0.01

0.03

Impairments

-

0.52

0.01

4.91

(Gain) loss on unsettled derivatives (1)

(1.97

)

(0.21

)

1.19

0.25

(Gain) loss on early extinguishment of debt

0.03

-

0.12

(0.06

)

Legal settlement charges

-

-

-

0.00

Other (gain) loss

(0.01

)

0.00

(0.01

)

0.00

Adjustments due to discrete tax items (2)

(0.55

)

0.03

0.00

1.81

Tax impact on adjustments

0.46

(0.09

)

(0.34

)

(1.21

)

Adjusted diluted earnings per share

$

0.31

$

0.18

$

1.05

$

0.38

(1)

Includes $1 million of non-performance risk adjustment for the three and twelve months ended December 31, 2021 and 2020.

(2)

2020 primarily relates to the recognition of a valuation allowance. The Company's 2021 income tax rate is 24.1% before the impacts of any valuation allowance.

3 Months Ended
December 31,

12 Months Ended
December 31,

2021

2020

2021

2020

Net cash flow:

(in millions)

Net cash provided by operating activities

$

533

$

121

$

1,363

$

528

Add back (deduct):

Changes in operating assets and liabilities

63

86

209

77

Merger-related expenses

37

38

76

41

Restructuring charges

-

4

7

16

Net cash flow

$

633

$

249

$

1,655

$

662

3 Months Ended
December 31, 2021

12 Months Ended
December 31, 2021

Free cash flow:

(in millions)

Net cash flow

$

633

$

1,655

Subtract:

Total capital investments

(292

)

(1,108

)

Free cash flow

$

341

$

547

3 Months Ended
December 31,

12 Months Ended
December 31,

2021

2020

2021

2020

Adjusted EBITDA:

(in millions)

Net income (loss)

$

2,361

$

(92

)

$

(25

)

$

(3,112

)

Add back (deduct):

Interest expense

41

31

136

94

Provision (benefit) for income taxes

-

1

-

407

Depreciation, depletion and amortization

212

90

546

357

Merger-related expenses

37

38

76

41

Restructuring charges

-

4

7

16

Impairments

-

335

6

2,830

(Gain) loss on unsettled derivatives (1)

(2,008

)

(134

)

944

138

(Gain) loss on early extinguishment of debt

34

-

93

(35

)

Legal settlement charges

-

-

-

1

Other (gain) loss

(6

)

2

(6

)

2

Stock-based compensation expense

-

1

2

3

Adjusted EBITDA

$

671

$

276

$

1,779

$

742

(1)

Includes $1 million of non-performance risk adjustment for the three and twelve months ended December 31, 2021 and 2020.

December 31, 2021

Net debt:

(in millions)

Total debt (1)

$

5,440

Subtract:

Cash and cash equivalents

(28

)

Net debt

$

5,412

(1)

Does not include $33 million of unamortized debt premium/discount and issuance expense.

December 31, 2021

Net debt to adjusted EBITDA:

(in millions)

Net debt

$

5,412

Adjusted EBITDA (1)

$

2,644

Net debt to adjusted EBITDA

2.0x

(1)

Adjusted EBITDA for the twelve months ended December 31, 2021 includes $369 million of Adjusted EBITDA generated by Indigo Natural Resources prior to the September 2021 acquisition and $496 million of Adjusted EBITDA generated by GEP Haynesville prior to the December 2021 acquisition.

December 31, 2021

Pre-tax PV-10:

(in millions)

PV-10 (standardized measure)

$

18,731

Add back:

Present value of taxes

3,689

Pre-tax PV-10

$

22,420

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