Southwestern Energy (SWN) 4 Aug 232023 Q2 Earnings call transcript

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Southwestern Energy's Second Quarter 2023 Earnings Call. Management will open the call for a question-and-answer session following prepared remarks. [Operator Instructions] This call is being recorded. I will now turn the call over to Brittany Raiford, Southwestern Energy's Director of Investor Relations.

You may begin.

Sarah. you, Thank welcome Call. and Energy's Quarter Second Good to Earnings XXXX morning, Southwestern

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

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

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

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

good to Brittany, operating morning, appreciate you, us We today and Thank financial results. joining discuss you quarter second our everyone. and

Southwestern of Energy's execution responsibly disciplined Tier strong strategy dual-basin quarterly inventory. performance of and our our reflects the X efficiently developing

economic strategy value equity strong premium and the execution long-term business our by SWN's value translates our markets shareholders economic our across including generating for to and natural greater choice E&P shareholders. LNG believe access Gulf assured for expertise We deliver our the into gas assets, of are scale, of returns capitalizing on Coast. We our advantaged to

the to priorities, between current to continue company's our the and market of value we we gap expect our valuation. corporate business progress As the intrinsic narrow actionable

business making efficiency at remain on the the capital levels. sheet capacity, capital and cycle. investing we're generally Our Progress and through maintenance continues strategic the the to debt improved improve top priorities of commodity while balance maintaining resilience through these price the productive objectives reduction, strengthening company's positioning

This our of trajectory quarter efficiency. clearly demonstrates the positive capital

was the detail completion efficiencies cycle during see as to Our that quarter. Clay strong days times due our resulted we reduced And encouraging additional and also producing continue inflation will production performance efforts. in from shortly, results mitigation to improved primarily

Additionally, the by program inherent business in in relative adjusting to and company to continues overall demonstrate the our development our price response commodity flexibility levels.

to both capital ongoing debt, generated to balance reflects free guidance savings updated applied our us and and efforts sheet. capital optimization inflation strengthening further invest Our less year-to-date generate activity capital reduction allowed production. Consistent our outperformance cash that will towards with be the that from have flow our strategy, the production allocation

sale ultimately return We range a billion of proceeds asset we as We expect to to range, billion debt from and capital noncore and flow the annual reduce quarter. $X.X from to to to approach debt plan second cash reduce free this year-over-year shareholders. in our target $X

demand supply gas Our for is supported outlook natural and both constructive by fundamentals.

reductions activity capital moderating we into we've sector heading result will seen if production industry-wide supply, year. through believe the declining that the not Regarding discipline in next

demand. materially Coast. to nearly become per under demand, construction next facility production as day the year per next liquefaction pricing in-service would wave growth Regarding expected necessary another month, to believe meet operational with of need of the reaching With These FID increased burn Bcf price strengthen XXXX. We early X to the incentivize natural gas by this additional LNG as end have LNG XX support. nearly dates to are LNG now strong imports projects projects should both provide power Bcf last of and along day Gulf incremental

we the demand. growth the associated needed facilities increased to that believe the LNG Haynesville, to of of the critical to majority will advantaged be Texas particularly supply supply, Coast, proximity some gas provide its this given South is expected Permian on While the

to already to LNG we leverage from natural a supply the our Haynesville. our producer company through in depth next to supplier Haynesville access The both And have to the wave Southwestern LNG portfolio. positioned Energy the Gulf LNG direct supplier additionally, Coast come. the from and is largest further And business inventory required years to we gas scale to to of for well remain firm have U.S. optionality the our sector Appalachia key transportation is and existing facilities. gas

transition us balance believe improving strengthening capital ill to a our value. will natural macro, increased into returns we and we what drive As shareholder position well sheet gas and efficiency be more economic constructive

the Let some over operational to me now for updates. turn call Clay

The good of quarter Bill, morning. you, and with delivered team operating another XXX strong Bcfe. Thank production

turn-in and Our downtime day production performance, liquids, consisted driven well and natural recovery. oil. Bcf X and day nearly of barrels barrels per of per of less lines, saw day increased XX,XXX improved accelerated of XXX,XXX gas including outperformance portfolio across per by debt our We

sourcing move expected year. the had we year. X were reduction chain opportunity the mitigate reverse second provided year-to-date, beginning with and the team as wells with sector feet, placed to XX the of perspective, some more Lower sales lateral During an X Appalachia, than in nearly XX placed XX improved those liquids-rich of a in XX in we in an we were million of X,XXX of the Bossier. From XX the to sales. Haynesville XX% in with acreage has cases, interval and the we we sales invested were length supply of to lateral and, continued wells for global capital Virginia our the activity industry the seen average average quarter, gas-directed placed cost In dry of XX,XXX to and in Pennsylvania. feet, an the were gas In $XXX West drilling Haynesville, of and areas our combined at our inflationary through across have wells Ohio pressures wells activity, wells Middle an length strategic half with expected moderation in we

have We frac horsepower the particularly board, in savings and captured across casing, chemicals.

with are service with current We align price work further the commodity costs to to environment. continuing our providers

assumed already guidance XXXX. efficiency lower achieve XX% able and expect year. inflation savings outlook particularly be to in the we XX% year. next for to costs Those have this inflation our decreased cost gains successes year. original year, than in flow metrics the to single-digit for to But Haynesville. And free capital we've been company's to in the XXXX, capital are to the with efficiency improve generation date XX% well by deflationary helping this the Our impacts low encouraged our We're and XX% potential to reductions deflationary cash

production. From into team's we half Consistent updating XXXX and formally our or full year-to-date, year, $X are wells back lowering the shift approximately billion impact by $XXX a communicated to we XX% of XX reflect originally the the with our than less previously completed $X.X to XX of expect a sales we capital adjustments only guidance we and to billion with drilled activity million modest to outperformance to less turned planned. As the an activity are perspective, range guidance. and year wells approximately

plan first activity, momentum second done the strong on the will from the team million capital heading into moderating quarter the an we quarter. has investment $XXX half our this second and operational The of half. year in decrease third the roughly job we Given expect excellent in delivering have

to over call the turn Carl. I'll Now

Thank program investment cash the during prices, cash by gas of in ended you, outpaced with million. and proceeds outspend Nonetheless, approximately $XXX working million operating debt last capital to front-loaded and $X.X the capital quarter our our in from seasonality Clay. flow largely line with Pennsylvania Approximately natural noncore billion. Consistent net quarter quarter outflow. with a sale, $XXX Utica our quarterly the asset offset a seasonal

to within be our XXXX. range track flow year-end target debt X.Xx. Our leverage deliver We lower than anticipate of X.X at on annual to leverage to program that XXXX increased and to within remain still modestly our year-end cash X.Xx,

lowering enterprise to risk that direct $X.X stock, return sustainably transfers capital capital. volatility towards expect believe lenders sales free financial $X.X market to value, shareholder growing to flow debt range shareholders, debt the of from the noncore debt range capitalization. Progressing will to future asset and to and to We believe to our as remains flows Bill our our We billion cost well both Reducing further proceeds billion. of to increased from our debt lower target we as return able value lessens our which reduction. of translates our both our be directly also target position reduction shareholders cash grade. to noted, SWN debt to investment cash

XX% the On XX% position during hedge layer and base 'XX. quarter approximately added stand our to XXXX hedged currently natural we respectively, for 'XX at the gas and and hedging front,

protecting balances upside approach XX% hedge our price moderate continue appropriate We realizations XX%. of this with a natural more improve financial to We exposure. to believe range outlook. production gas target constructive risk-adjusted strength This should given range our

across across the for facets the of please shareholders. translate executing Operator, value questions. company open the for greater actively multiple the significant are line We business, into value

[Operator Instructions] with Rice. Our comes question Charles first Meade Johnson from

I part is, a the that of of of pulled right thing. I towards wells maybe detail or turned completion long wells it case, the guys the, schedule But release. deltas updated are because meaning. forward high question. through it's at out Clay, appreciate you of looks in guys pulled the gone sales on curve and XQ, completions you've in of maybe And offer Bill, question that a into to than with the that I I guess, some XQ I asking, stab at it have or sales that wonder the the time to of of Carl. just end you in rather individual and that's XX XQ that's appreciate could have if the press take into turned you a sort guide? reload XQ like are Clay drilled your pulling if looks you way the going I guide, wells to and completions best some the Are now. the already sales in through XQ. you each And out of piece, And efficiencies. And some I XQ look our biased your cutting like guess,

us so you continuing now, to prices won't way the turned that a we've seeing with than we quarter, to them all our operational caused back wells consistent are but optionality allows focus in at completions add show exists our see that completion in if where given we improvements quarter that, the of year. efficiency budget and right, us guidance start to the have are the up. XQ first we're gains been with and more to in fourth original surge sales call. the reflecting And guided right with price on, All that that the is consistent forward commodity go incremental go Sure, the guide still we that that

And Okay. me and you've is there's on also you've most more then Slide this to wanted was your as question, slide that in thing some it wells, surprised area, ask on DeSoto specifically, productive I productive just think which Bossier given -- I -- detail gotten us this you've area. And you new because on presentation, XX. a that actually wells and Haynesville than the are the your East your which identified one

could address if as a defaulting So And some all kind downstream surprise artifact that of you perhaps well? I an the to area? this you of in perhaps was a or whether result is wonder

Sure.

IT Bossier outperform look DeSoto the were X, Haynesville. East, focused When certain average, East, the But there some both that area they blocks Bossier EUR Haynesville in that on on there feel the some is broader identical, had fact assets are of It we performed was big So of the across that Haynesville look targeted does for different Zone and There the a we fault area. fault East of Bossier where in field. why that best we good and the part area beginning. you area. they're and you Haynesville stacked a that almost why Middle another DeSoto area. Fault that as and mentioned, was acquired the part and at highest block And Haynesville in Middle from of Tier included parts the DeSoto Natchitoches essentially we the Middle in

Our Bank comes next from Doug of question Leggate, America.

messaging. for the Thanks having and me on, love

volatility. equity improving the On

So is me your even to that's improve understanding down the efficiency which the I capital our different to -- testing Haynesville in talking loadings, message. I'm to want particular, two, thank seems fluid ones, you It is yet. hit spending. if specifically, completions reinforcing that I further. not done in may. And you're a potential seems to which and low-hanging have quick for want step to I that you're big fruit [indiscernible], that in different drop me I

question seems address could in please? for to on if it's elaborate that's Clay. Can So area another it. it a still I that, us that. got money that's But you you some Maybe wonder just

of across has We've time across benefited both the efforts Haynesville, area both that loading Certainly. fluid Appalachia some now. been active around optimization the an areas. and all performance has production completion for been

We combination optimize parts to to well across our best come to the completions best of up performance. with continue different deliver the field

will continue. that so And

some other I about think in making that of talked place. have our some peers movements

I think do. we'll been we've are and those things to over time, doing continue

do capital under back Clay, you billion? you the $X think get can

us asking keep that. You

think continued success. dependent deflation the reduction price, depending depending that upon I upon commodity upon levels, activity

billion $X.XX the $X what $X.X but I guided of think a there's to a similar billion. to range to range a we XXXX that has of that of maybe for midpoint billion, is outcomes

and just peers a day, real the quick perception macro My we reality put look massive disclosure follow-up But one Haynesville a the asked is wells. of guys the a you but your uncompleted think at other of is gap and that one. has when what backlog. big services, a out of be to some last of overhang third-party I question the the there's your relative DUC between to there the a to seems night perception you this

into of come higher you big -- looks that? just could the could wonder gas that can stream a if relative on that the you count a price? So DUC ] What there I to [ do you perception think like situation load it's supply address

now. little we of Yes, we at actually half data upon Haynesville ones by different for comment overstated, have more the with we than than now has weigh right maybe half, DUC count the our the that agree a public one the that XX, it and of look says depending have your right services, public we more on

it's on So with your Agree overstated. we thoughts think that.

next question Umang comes The from Goldman Choudhary Sachs. with

love macro. would question, first thoughts your gas on the my For

Your thoughts noticed management I you how in back back then and on half of the some the risk are in about then of 'XX? And the half year? some hedging. setup you thinking 'XX in added the through hedges

of addressed storage. couple narrow increased view gas over of balance we've I you and in natural next little on But around very seen outlook well think a gas of the emerge the summer is our the this in fundamental years. of our into lot Bill XXXX, when LNG a a by a constructive that very rebound picture bit burns with exports offset perhaps overhang derived

where the And does winter. so question October. of balance the into levels it's inventory how when XXXX, of position we going a up And think us about end in really that

some see curve So to a winter. the that the start part we warmer-than-normal you're correct add we in downside of protection that event that to did

to very the our that increase But And case add so we protection guided to in how materialize. we wanted view hedges speaking, was generally we're downside to of a market. our about opportunistic by book,

risk protection, our exactly still Opportunistic our portfolio that. but strategy, to downside adding upside to us broader increase you it's when participation. think some about our And management on allow so focused

a little update bit about and how you're obviously from then it. was very thinking operation Efficiency guys And XQ. the in gains strong you on

your increased have for DUC the end inventory year. of the You

that you the the gives does to the optionality So increasing some towards for macro improve, activity especially winter. extent

strong sheet of maintaining terms our mentioned, also understand you to capacity, in I'm back of act productive balancing trying sheet, balance but and the production obviously, half in year. keeping of, balance the is strength the like here So the declining the maintain our

Yes.

year at move the completions have. we and to get end is prices to we and into but right, as it's see to where adjustments will commodity we and made it expected. drilling And going be are deflation. moved we us where by XXXX the the together we're you're put want to XXXX. the does fully optionality we And all have be the optionality like count, able DUC closer as plan, would we provide what driven clearer of inventory the it Again, up the With to

question Stifel. Annis next comes Our from with John

you my high-level still 'XX? on cadence revised understanding For some means XXXX XXXX capital for the plan production that in what could first comments with ongoing, and offer is planning one, the

Sure.

production slightly little that about some out the in with front-end and pulling could -- As back see with And you'll up XQ we for XXXX, where we XXXX, the reduction That program, that the showing loaded the I in the XXXX. front-end as greater a we're will think be volumes similar front-loaded of accentuated we think, half. profiles past continue normal and activity the into in that we to plan in where always ways, will guided again activities have a XQ not for because XXXX. in our a just look year front loading, profile

talked positioned we price in from or keep to in that. the going As we to environment. If all with reading tealeaves what then think commodity for 'XX, we're constructive line benefit that more [ about fundamentals lay in capital 'XX up ] be to we about, and those shows want XXXX to our the 'XX, of out early late plan

So going more current to as cost with get up And costs into I've be Hopefully, we're we're showing there. line environment. the commodity we and in come more to said, service as able price deflation to move XXXX, seeing

company record quarter. this And I'm my in average lateral mistaken, in achieved not for if follow-up, terms you a length Appalachia of

closer commentary to regarding that provide there foot would technical depth this laterals or drilling the notable your season in level? limitations laterals any E&Ps uptick with you XX,XXX inventory extended Could With that with support range. are that results to wells positive XX,XXX achieving industry concerns And earnings in laterals? on XX,XXX-foot on color

have was completed Ohio XX well the feet. I -- got in that we've with quarter, XX,XXX feet. almost In close a start exceeded wells XX,XXX I'll that to think now So we

I think integration, are able teams vertical leading have being our competitive to in advantage place. that to all completion of drilling the our us really and experience a

in had we're of temperatures. That Haynesville in XX,XXX is in to the one progress blocks the with foot We going majority hole and XQ, in length a and bottom moving average late also we the different the in have XX,XXX Haynesville. The think Appalachia early TD some into XQ we're benefits But experience, of make lateral and over and those that the fault little that Haynesville done knowledge that that. XX,XXX is with of wells an higher we foot to XQ, example the capture pressure to feet. of length lateral longer was laterals close and Haynesville the bit

is being made progress So there.

Our continue to have can up improved of we by be the contiguous go so to doing longer. inventory land the picking to acreage the leases position continues our groups so to add optionality we that that trades, nature lease

Our Truist. from question Donnes Bertrand with next comes

you category even question more a that of are just first maybe in you your have The towards on But I you. the commentary, and getting recent marketing locking conservative that is more would quarter, your you're available maybe the front, maybe maybe LNG last the put in on to personnel little maybe you a interested attractive suggested trips coming deals the brought with or recent have contract.

the out kind deal? the you guess the I fair? of standing And there part just to the of of kind contracts LNG new second are that part premium is of is, any Hub above first Henry dynamics So then

Sure. fair. think I that's No,

currently Bcf opening well. U.S. natural like currently of exporters the very in gas supplier a sold this going Bcf continue feel we'll there supplier corridor, think X over internationally with to production we're for opportunities understand are of supply variety the we us. we be a since market to believe We his now to largest we LNG to remain will and day sector plenty buyers. priced day, the And major reaches the X.X that forward. to As wide a alluded of Bill a LNG that remarks, And have we right of

differentially the we an from leverage your connectivity of question, agreement. risk-adjusted corridor our of scale But us from position these how the allow we growing to supply will global benefit to all opportunities So transactions, price price to pointedly believe to attractive regardless into the demand more and we're direct evaluating wave our I of our next LNG. think potentially

right, risk shifting approach sell. And a we very You're to is disciplined we're tranche that of the the a structure The contracts aware contract we taking is bit. next maturing. market how

the but great. then differential sound XQ That's pretty to full And remain challenged a your strong. one, guidance year quarter, of bit realities outlook second gas, the for more your shows seems it

intra-quarter the or So just the you Marcellus. the Haynesville about wondering just Maybe or I other, and already your DUCs one the differential is outperforming maybe maybe maybe if -- could you considering difference you are impacts. was between relative seeing talk in coming on MVP something

Yes.

a basis region second winter buildup has the market obviously, well in quarter. pipeline from mild in the the moved maintenance throw that. bit as weakened think and as Northeast primarily we early a East in plus levels, into the I third of storage little quarter Driven the resulting by of top on

we I affects think a plus the have basin we us company-wide, Gulf in about to of how our when our transportation via hedged, production that access large have firm arrangements. Coast think portion the we

very we're So despite volatility on in our the differentials. near-term range in comfortable guidance full Northeast, year basis this comfortable with

quick XX over are real a comment on got lateral my XX,XXX correction We've Just feet. lengths. to that

it sorry. misstated I earlier, So

with Citi. question next Diamond Paul comes from Our

inventory of to DUCs rate, normalized I want wanted a DUCs kind get you on little for just the idea just a bit about in you see your kind touch proper guys. I you as for with to market level guys little on base of a what talked bit. run -- of

Yes.

and having build them amount a not can we core and about up. drilling we completion us gain line don't waiting the straight continue efficient areas the right on on that and -- both in success front lot progress Our the and have to efficiency those be make for of is of then in we so drilling DUCs the completion philosophy can DUCs. of make on that We're

XX%, we've in inventory XXXX, DUC talked we're the that that some amount had a us XX% program and I between And that optimizing price now, to efficiencies. way given right we with earlier, in gas right guided so somewhere around the we're areas, line give in the the DUCs range originally. But few keep more driving we about like mean, DUCs the the about X will that's with more got of we optionality. to But

Understood. what you one of really your forward activity, look guys want are in viewing would looking towards online? of cadence? mind, And start just kind as rigs bellwethers to kind quick bringing guys and Talking does for that what 'XX? the see rig you to to back And follow-up. What like into HX

think future. I our going our are, mean flow liquids. we to in Yes. continue see commodity portfolio to lot sustained the within I prices at we're that minimum, exposure of going a a capital balance us our gives view living a of with And higher And cash to remember, spend. more

staying a NGL And productive and capital the move be in are maintenance the we're the of be while, year drivers we a into that the into gas in we discussion, will and move of company now as natural prices been natural maintaining gas that that guide prices oil the mainly we've will that So as part XXXX. capacity or but environment drive those that. the for and and will

Okay. Understood.

flow think kind as it of than? driven we balance about So cash just

Yes.

Our from JP comes Arun Morgan. next question with Jayaram

Bcfe kind XQ and ]. about Tim, sustaining JPMorgan. [ Jayaram, next business X.XX guided the at you should requirements question the year. we of I CapEx think of to Arun XXX of quick had how third quarter a production on

sustain we you'd fourth think guys And for as or to quarter trying the should so saw about about we half getting think run thinking to of about XXXX we we but thoughts production, second the being on hold. like average, that just production as what how you should start rate

range where bit X.X could Bcf upon year, are I of prices a a equivalent a Well, we day mean think than we've going that commodity production. little dependent were quarter as all We're little the XXXX, be to lower be net fourth This about. at. X.X. talked will that I apply above

maintaining potentially of going where within company, given to. come our the the of move So and range I prices capacity and within lives we're down view where think then productive commodity that that costs to range

asked half correct. times, did Got know our second of it. the couple I Clay, follow-up. And my a year, $XXX in we million it's of just you're around the math spending been if but

sustaining you've you're you're OFS below So basically that is, on the maybe at Haynesville. particularly spending quick level? your on that in follow-up changed vendors, maybe this some we saying, And a know teams

was where maybe snapshot leading-edge wondering at costs could Day, Analyst are on you I if what you trending foot give So us a well to per quoted relative maybe.

capital So the you're spend capital. right second being sustaining below the the about half

in that the I a happened operational think have of in reductions that cost for efficiencies Haynesville And to is turn-in $X,XXX the of we're have we've are lines of the in cost through benefit drilling we've of this what now range. foot had our guided more XXXX XX% year kind full that that seen. about on all particular XQ, what more line with I'm we're wells well in seeing guiding the the

made the past. mean, Those point, of now. were So on performance completion your wells the us then And are and very ahead They're we've seeing that drill that the worked change-outs we've providers. in reduction pumping to where the we on providers good. have got vetted that are I efficiencies and game the right has with been

Our Noel back like remarks. conference concludes This session. comes Bill turn to closing Touhy any our would for the Brothers. to over next from I Parks question-and-answer with question Way

call and you just quarter you. employees That's Thank for the updating look to all appreciation of to with team Southwestern third -- I you up. express joining in all coming today, the want the of it. quarter we forward our the and leadership the from in

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

disconnect. You now may