Southwestern Energy (SWN) 4 Nov 212021 Q3 Earnings call transcript

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Southwestern Energy call discussing its third quarter results and the acquisition of GEP Haynesville. Management will open up the call for a question-and-answer session following prepared remarks. [Operator Instructions]. I will now turn the call over to Brittany Raiford, Southwestern Energy's Director of Investor Relations.

Tom. you, Thank thank and joining call. today's Good you morning, for

President Way, Chief Officer; Executive Joining Kurtz, Giesler, me Clay and Bill are Vice Jason and Operating today Officer; Transportation. President Carrell, Financial Officer; Marketing of and Chief Carl Chief

this As website. also posted to announcement, a a morning's we investor new part presentation of our

outcomes. we are involve I'd discussed call are this our started, get out risks we during uncertainties to point these that statements make that Many many control and Before like of beyond and affecting the of comments the forward-looking in of sections with and our and more factors are Commission detail in statement filings forward-looking annual the risk the respective quarterly the and Exchange forward-looking of Securities announcements. and statement sections the report

expectations are financial some are assumptions, update obligation and across periods expressed reasonable them. materially, and may performance, future no may the not to help of results we also on they peers. non-GAAP and actual developments to measures, with comparisons We and which differ based we facilitate Although under guarantees are believe refer

the For to use, to I release now on website. measures corresponding GAAP found we our a available our reconciliation can Bill earnings call the Way. any over turn will in measure non-GAAP be nearest

financially good both Thank and today us on operationally. for really you, the Brittany, morning, quarter, appreciate and call another delivered our We everyone. you strong joining discussion. We

us that financed, In in basins. positions opportunity we closed X addition, well transformative premier Indigo and the natural a the integrated gas U.S. acquisition,

to By of deliver just trillion natural great over to strategy, in the of of to cubic our gas we has Appalachia, continues team many call. surpassed Pennsylvania the incredibly in worked way listening last are feet which dedicated asset closely the to year example, our value X responsible hard company. Northeast Our and production one whom execute this

you. the all a that well done, and congratulate you on thank my company, call and job across to So on do team I this you on

comprised financial delivered is allow X our benefits capturing creating value, including these protecting execution. strategy Results the to our us Our pillar, first pillars by fourth sustainable in progressing scale. and operational of of the tangible strength teams pillars execute interdependent leading X

meets the any intent strategic reserves to acquisition institutional equivalent GEP to cubic vehicle deal to day. cubic a XXXX today GEP to Haynesville, to GEP directly brings announced our responsible SWN's Haynesville. making inventory. all proved investors the billion day increases effective acquisition adjacent expected largest with as production core per also SWN's Haynesville. development. exposure inventory. newest pay operations to net in gain Bcf increase preferred are XXX,XXX the per feet SWN's gas day feet of It from operator year-end transaction will X.X high-quality The us Including the The for X.X XXX large-scale be Bossier Haynesville addition approximately of adds SEC our criteria investment and natural XX equivalent. Haynesville acres trillion is the of in framework economic total locations It disciplined intent. supports stacked Middle assets Our to The The must. earlier also that

well across locations the and the the enhancement enterprise. approximately cost With adding acquisitions, company X,XXX now scale, price reductions, has economic commodity improvement, performance

maintenance in expect to Given activity of XXXX complementary capital portfolio, areas nature the of strength our all part our program. as and we operating across have our investment of

The our along corridor global Appalachia this demand differentials company's the the the Gulf and outlets. markets the will access improve our centers will increase the acquisition margins. growing overall and LNG supplement high-value to to With premium exposure expanded basis Coast, further

Haynesville. responsibly-sourced gas plan we in program our of part to As practices, a the leading ESG implement

access to we enhanced the economics Beyond margins and improved will from markets. ESG benefits, that lead ultimately to believe clear greater sustainability gas responsibly-sourced global

$X.XX The portion November total and deal. billion XX-day share Turning billion be equity SWN will to The per cash of the is debt approximately of comprised X. stock as will SWN calculated shares per consideration of stock. agreed million VWAP in the portion cash $X.XX $XXX $X.XXX of of million terms XX of financed, and the the consist of

a We derisked to in discuss debt targets have meaningful an will reach implies recent lower gas release, in to and our a minute. revised other clear leverage X.Xx, of more to projected appropriately trades a and enterprise The and to price SWN discount transactions. 'XX fully natural announced EBITDA consolidation at purchase Carl press our discount this currently path and where a value compared

accretive expect in the valuation, earnings attractive XXXX. share per estimates these per already of and flow immediately share flow per share XX%. per Cash $XX margins, million Given returns by increased transaction be cash SWN's in share, Included accretion synergies to we to approximately all this identified the are metrics and key free

will synergy expect to negotiated We integration Indigo as with our integrating as X-month services experience GEP million transition year, capture our starting be The by agreement enhanced the seller. $XX a increase of per in recent 'XX. with well to

deal subject to including closing regulatory expect conditions, to approvals. We year-end, customary the by close

Now Carrell, will let and GEP on me quarter the who operational perspectives turn an the update the acquisition. call over provide on to Clay

good and Bill, Thanks, morning.

of the per per oil, exited top Bcfe Bcfe the production guidance XXX,XXX producing our X the I Bcf our flat NGLs want deliver where in continued which get in running quarter on touch quarter of hit with third related previous at XQ, quarters. I production per some range. XX to X of end reported which ground and the to In operational to Total including We Before to X day Haynesville. Appalachia. details is day team total Haynesville, barrels XXX we day the included and days of the in Haynesville results acquisition, included

were Haynesville rigs with During Appalachia, in XQ, in area. X we each the rigs averaged X drilling and there completion in running crews X

operating now the months. have for X We been Haynesville

smoothly. employees new running into been integrated Our Houston have and in operations and business, been have Louisiana the

production table. brought our online, average to Haynesville Bossier operational wells combined bring X been in initial has In focus to our we leverage that all in of expertise Our Middle the September, the with first which were initial the an an million of per XX And announcement, scale average of quality day These GEP high-quality the and X,XXX feet. feet of are with we approximately position. increased the Haynesville cubic that today's of rate existing position. of acquisition indicative our results teams C-Lab

is year X As of and acreage rigs economies, benefit Haynesville rigs. Bill contract mentioned running earlier, the and enhanced optimization, for proximity synergies allow realizing X scale. the to existing completion operating our and running expect exit the X of GEP will the position to GEP crew currently our marketing

maintenance maintain who approximately $X.X of issue holding with of gains, to our XXXX by We investment technical early production through capital improved guidance formal program continued year will next driving I'll performance innovation and the close teams knowledge are billion efficiency performance flat. and transfer. our operating high-end and commitment acknowledging

expect in in discuss We operational and the have to move turn it Carl established financial we highlights. as of to a now do XXXX same execution Appalachia, the forward I'll to over leading we with our Haynesville track record development plan.

you, Clay. Thank

we flow. million During quarter, the generated cash $XXX of free

We total ended $X.X by third materially to expect leverage the flow reducing in in debt, We fourth the quarter. increase X.Xx. X.Xx our our billion quarter with to free cash

near as have lower share clear path From essentially leverage for perspective, to appropriately across referenced our strength immediate year-end to plan protects dilution. debt total finance X.Xx. with I'll today's key announcement. a leverage should minimizing equity A, drive B, to and the deal further, leverage-neutral while, manner We the our And perspective, From in a an we financial expected metrics. Turning debt discuss and ratios. Bill equity derisked and is that, accretion transaction a materially acquisition the double-digit

Given should disciplined our repayment the hedging debt Using over apply increased cash X way commodity approach current expected scale in a our expect to safeguarding price We next go intend years. approximately to billion cash to which X.Xx. flow and the billion cash total this our leverage approximately outlook, would ratio production, we $X near with debt would $X.X reduce to long with to this free acquired flow. our the

our range then leverage the ratio newly of would $X.X and to end low end at market clarity at provide our range billion target of be right-hand to sheet. thinking the about range. the to lower side added balance updated range the our announced we're debt better $X.X the billion Our absolute how the target to X.Xx debt of We X.Xx to about announced leverage our target

like and strategy total we to targets, of We management would execution risk enterprise our to a debt initiate approach process. approach. return a remains of leverage would hedging our hedging the as aspects of of clarify we part company's Importantly, look program. The our core some capital

changes construct, dynamic investment. strength approach with and with appropriate price questions. production. our inversely We directly lower hedging pricing capital commodity company's improved we exposure company's financial a our while strength protects the the or the to In program, prepared company's the at concludes retaining sufficient cover conservative Given hedging financial upside. cost and remarks. level will commodity unhedged structure target to believe potential open Please will levels on This forward, with line higher hedging for expected general, prices costs this and to our assuming shift going our capital

Instructions]. [Operator

question comes Howard Scotia first from Stewart The with Weil. Holly

you think $X.X of CapEx consolidated I billion. mentioned Clay, one, first Maybe

is guess, this GEP spend what right? could us that expected out for I was then First, And to allocate year? you

definitely, number. billion correct the $X.X is the So

know full into XXXX. capital rigs X that year all we are they'll what right to and spend We move capital expect have We now, in have that's areas year. was. the as their exit don't how XXXX running number I

is in we out capital do. What we'll $X.X -- billion for And enterprise. like the this our enterprise we just even be as plan put the Holly, directional at a the 'XX maintenance usually point. quarter program will Yes. first

Bill, develop we and to just maybe and on plans big Williams plans associated GEP have on out GEP's some acreage? a pretty point. reconcile that that have that with with JV of should that. portion How put I your maybe, And to Okay. follow growth Haynesville believe a its to

Yes.

you -- that the than separate It's we acquired. acreage they It's clarity, with you with. if think that and can It's just a check in later -- Williams. part is separate want about are X. for you're them a But to. with we a been GEP it dealing call company talking what never GEP acreage I of deal

carved So out. we that's and that's from always privy not a that It's something new a acquisition of we're arrangement. looked whole been this at, it's any that of part relatively any not not because change to

The next Jeoffrey Tudor, comes Pickering, question Lambujon from Holt. with

takes those forma I headline since business flow But share do cash EPS. about of last time, comparison give XX and at was the in some one, like us $X could appreciate $X.XX gas. free change on we're metrics XXXX year the were flow sense the for pro just Slide gas. wanted just pre-deal. thinking about something I leverage, you're think at how again, the on just the run per cash for cash XXXX to CapEx, next to flow, for commentary you puts pre-deal ask the pre-deal of a First I the and metrics on estimates in tracking, hoping how free I for

And as the per you question. slide, on pointed metrics cash metrics share you that leverage cash neutral. are referenced, great free definitely and or Jeff, I XX, and Yes, flow the so on that accretion on Slide free flow gas, out, of think side the $X all

we deal fits financial that there. with progresses and So really line feel in framework comfortable right the our strength strategic our

after circle Okay. call. the that on I'll just back

sustainable top The second wanted kind the year-end getting cash of that to priorities end of closer that I closer of XXXX. understand free kind flow to updated. the level get as just X.Xx you there the use. you at all Obviously, question is range on to

balances move allocation should you balance sheet? the might that think dedicated we we and start enter to be as XXX% shareholder on where about as Just flow that cash or you base. the returns asset that curious how the to discussion frame, As time integrate when might towards on free

the options. think we when bringing our there, I committed So started the out, Until debt and that new -- down. you to we get press achieve we've out we debt and question put have we levels correctly I that of leverage other in are that release, interpreted

talk can be is it bit how debt of X billion -- cleared. return purchases, ways appropriately we up that to and have number obviously, to a Carl attention do return or different dividends, $X.X Once derisked shareholders. -- to said a intent. and $X our shifts then open billion As X.Xx leverage, of share about and risked past, And the to in we appropriately aperture capital then talk to do you you would you that, that we about the wider we our and

America. The next from with question Leggate Bank comes Doug of

John is Leggate. Unfortunately, This morning. on this is for Doug busy a Abbott pretty

here. questions a Just of couple

X done you'll provide XXXX. you've your deals, early So budget in

up how do high we your Haynesville ability think margin to how potential have agreements potentially think Appalachia, expansion? those Just in Gulf you how for speaking given with when we shift what opportunities to proximity the FT think you to Coast agreements activity about but assets, level, -- You from a -- your some the about do is the about should Gulf the Coast?

Yes. again, headline our force-rank as when first year and strip, well of from of every end and a all portfolio an take there, our you over little drilling an must The for flexible on our we with do we run economics can perspective. enterprise upon fly. over is us, a budgeting, do transportation. we that across lever have and example, opportunities constraints maintenance capital-type on insufficient for we program then them, planning And improve on we, a -- of know, game being shift no where more because with any on But economics of we lot integration vertical more deal a margin to opportunity or staying little one the transportation extra moving extra by here, -- the other those,

MVCs. no have We

we actually have protected. well in quite banks those front of So -- large so MVCs, and quite

and So in faster. of expense midstream lot a another. and at the area of want we lot the will other And a changes grow want create gathering these ideas, of the we of flexibility. to how to thoughts into certain don't commodities you a bins -- we the sharp through have of Or take rate winter, overcapitalize investment the

So a that. look of all take we at

when One in the level done we activity maintaining last know deals of that, capital of in focused while flow free and production result quality maintenance add things generation it's that of the it optimizing the value of each inventory such all on And the we've that you X up, we'll cash have the complementary is a profile. level the are area. of some maximizing

Right.

theme here. sticking of sort marketing with Just the

So with about you think Indigo have marketing you basically they opportunities GeoSouthern, talk about could Coast? then sales when any together, then to firm along Do I have agreements? improve of the mean FT? Gulf And the do and they sort GeoSouthern

Yes.

you at That's the group. a Jason. is X the When they GeoSouthern, asset, that roll have of manage pipes. this with probably when over Indigo XXX,XXX So roughly question. then I marketing in we day FT look on great basis. a different among -- we And they're just the over Clay X a on and between meaning really, mentioned the it perspective. Bcf the synergies that a marketing day But X those assets, very gathering pipelines companies of forma pro there's downstream FT system. earlier, complementary from a have

the same from there's we system. multiple pipelines have where into lever ability the to gathering transport So

future to and So build to there's continue and sales flexibility portfolio. that optionality transportation out

volume market, to And greater have we've access the there. so strategically, access, important Coast already levels Gulf of gained where XX% our of to we reach able

to continue those the to optimize transportation. rightpriced opportunities we'll February of as bring market of rightsized kinds And well. in the and plans then about table, part talk and as have those Coast Gulf We LNG market all and the we'll

Charles Rice. The comes from Johnson next Meade question with

Carl, mentioned I you this way think deal In first want maybe for I you your comments, question dilution. -- say heard that equity want Carl. believe you a you I that to to limits that in this finance prepared

guidance with that negotiate so this on how give recognize want want longer-term on that tranches is financing take? you interpret no $X.XXX billion? I should -- what interpret as or -- there's being we will table the saying to to punt yourself we to what want may that should not you free feel equity us add. and then on that public kind color and that So secondly, there But any as for in And form bridge of of there's to many you no this if

Sure.

we I support our clear think billion the financing that press release consideration. to committed made had $X.XXX

public we anticipate of issuing So price. fund don't to the equity portion that purchase

meaningful negotiating our years to debt I commentary next this against prepayable. billion financing would And then of I it's expect flow Sure, permanently. deductible. no, our need $X.XXX So think that generate a cash to And From as to over against permit that of a the with it's don't I the anticipate post portion clear. I'm company, to X be asset make not easily happy ourselves. we

of come the Right, people was if the I learn north give west, but is deal, made there, as the can was I'm bit out you right. a the first about south here. particular to then play play. And a And how relative sense and biased I'm and a can attenuate Bossier or or varies at and Well, with of wondering Indigo where you Carl. this And us you look clarification, me more sometime to leaning, to move wondering and you I across and kind deals the the this that's ask 'XX, terminates how you mention eyes where little you've thank little maybe of strength or map I deal of if you other kind prospectivity, a question with assets, if laid attractiveness and a And of position that bit as the X and over help about course to kind that for east. guys north. could relative the of this 'XX fresh that the more start it the

Yes, I'll take that.

and is next across continuity acreage then more mixture also us of we're the And DeSoto Bossier. of Parish, gives River Middle That's that that Haynesville part quality new and in to of picked a of of around Indigo. Parish, corner is really Bossier a north picked the is from Indigo pretty similar than well picked the southeast you in of in the that look of the which greater the acreage really the we Haynesville picking look high acreage acquisition, XXX closer comment, go in Parish XX-XX which Middle the Haynesville northern central Middle has hits it's Bossier. DeSoto little of Indigo little at when area whole Parish. And map, essentially, on acreage performance, here, your in we position up results, that bit, where and area been kind had a There's to So are Red all lot then it's fills inventory talking we've a the When here, part at and western a acreage, seeing Bossier Louisiana, industry to a the up. GeoSouthern in in When that per basin, Bcf Indigo is either towards that all core more better the that you part When area. on. up both than locations Louisiana position. the map, split. look a the best close to X we you down that's you public that XX-XX this that Natchitoches and in the EURs. Haynesville, grouping close starting at Haynesville a prolific position, It's of that, X very a and good position connect, very of but big the data high-quality you And which the the side color part go about And nicely across of and WIM we with a depths even deals also reported performance X,XXX the up split Bcf to Southeastern combination X,XXX when of then similar the fits that but per EUR. GEP more piece

GeoSouthern position. of Indigo we after the nature already complementary really like the So the owning acreage

The question Kashy comes with Harrison from Sandler. next Piper

Indigo GEP, between busy Montage. been and deal has extraordinarily over X.X team your the on the I'm past sure years. Congratulations

that. Appreciate

questions a of and strategy my are maybe So mainly sprinkle as well. financial-related

an was to wondering risk But this hedging worth debt, of provide deal quite get about turns bit. if sure I goes do you have to billion if pricing on you position you So if don't so Carl, just something or make I'm else evolving cycle the we a particular philosophy about and unfavorable know intend aggressively $X.X on could think don't I actually as the wondering specifically, deal there's maybe mitigation this we just this you as some if weather clarification and in is deal. talked caught unexpected. hedge

It's fair a question.

pretty a pro we've what overall disciplined debt committed range, think at our I to part really our say, range. higher debt already that. and I'll it than just hedging a puts getting of target said strategy target we that's quantum quite our debt. mitigation that large a prepared we're debt to We're framework. risk it's It we forma of is leave bit have recognize

at at then company's is robust. now the And I think the scale estimated be to is quite flow generation we're cash

Exactly.

And management basis our risk managing fact and is other and we to discipline a really and about the we've for, price if that capital all are known get then our do earmarked all of debt go want flow the firm have free to we And commodity that think that risk that clear, we managing and of is or you until outlays -- will down we've what continue cash reach pay and to that you costs. the the enterprise target. earmarked, to that close tenets No we if associated really of of one. risk with one is

bubbles. will and practice X-year do continue, will on that that be and the So basis, us there across and to there hedge hedges commodity yes, we at a portfolio, then out different is our price enables that rolling

either And or maybe you. then Got Bill Carl. for

Just the sustainable leverage. a definition on quick clarification of

make cycle? billion sure in gas turns maybe and would strategically advantaged looking $X.XX consideration? any to to leverage, $X So X at $X.X really, beyond at cycle the about make price going make that, the getting move strip the it be I'm just time? the down sense And sustainable to that in point using when cycle is, position does if hey, with this Or beneath to an pricing Southwestern does whatever you a contemplate go we're take in where does to that X.Xx within given for eventually billion talk trough reason, a to specific

when a ways. I'll cycle don't to of appropriate It's about term capital. to balance in a of cost X.X, like We of to range want directly it question. and be ratio have couple an maintain sustainable that's safety great long be appropriate sort where leverage financial answer to talk Most we an of X over-equitized. still the we'd through

And so we manage got above business then would X. range, get below back trying X try well if that we our i.e., into above we X.X look to leverage to range. We and and and got that in get down back

-- second an your target think commodity as that Now down. ongoing up, about so I would despite prices,

much Now is we scenario. what comfortable we to billion approach quite us or $X.X the but what billion other than as with with level the that commodity that Xx, with a what of -- a that And on of that. that of quantum is We guide something our not are use, element for which on doesn't strip run comfortable in And leverage from depending $X low that price perspective. to down debt was prices new that, price debt are cycle really leverage to level is get that's is we the debt. predicated more you target low weathering

how of in pro total with zeroed range business. on for debt basically So this that we that's new quantum forma

back now for the over session. question-and-answer I turn conference to remarks. any our Way closing will concludes Bill This

about our is look costs shows activity and balance about excited you our and, company our in clearly, scale that hope the done The sure of materials. the here through the front protecting company, having around and other on I mind however, We're on time. strongly by that our being supported our at and X transforming making for call. growth the thank the we've joining I sheet of made scale, talked today progress Well, -- and strength, after we're and the in looking those all financial as shareholder very pillars us we've you our

that, you continue as on take next call. conversations our thank we'll posted, look we having next step, for you forward joining So With us. and keep to we to this

The for attending conference has presentation. now concluded. you today's Thank

You disconnect. may now