2014

Southwestern Energy Announces Capital Program And Guidance For 2014

HOUSTON, Dec. 10, 2013 /PRNewswire/ -- Southwestern Energy Company (NYSE: SWN) today announced its total capital investment program in 2014 is planned to be approximately $2.3 billion, compared to a projected $2.25 billion capital program in 2013.

Southwestern is targeting total net gas and oil production of 740 to 752 Bcfe in 2014, up approximately 14% over the company's current production projection of 653 to 655 Bcfe for 2013 (using midpoints). Total net production from the Fayetteville Shale in 2014 is expected to be 479 to 484 Bcf, essentially flat compared to 483 to 484 Bcf projected to be produced in 2013. In the Marcellus Shale, the company expects total net production to grow by over 60% in 2014 to 244 to 249 Bcf, compared to 148 to 149 Bcf that is projected to be produced in 2013.

"2014 is going to be a good year for Southwestern Energy," stated Steve Mueller, President and Chief Executive Officer of Southwestern Energy. "In the Marcellus Shale, our production growth will exceed 60% from 2013 levels even though we will invest less capital. This reflects the continued improvement in well performance in our Bradford, Lycoming and Susquehanna acreage. Our Susquehanna County properties continue to encourage us, as we recently placed a well on line that achieved a peak 24-hour production rate of over 32 MMcf per day. We also plan to begin delineation of the acreage we acquired in 2013 in Wyoming, Sullivan, and Tioga counties. In the Fayetteville Shale, our well performance continues to improve, evidenced by a well we recently placed on production at over 12 MMcf per day, and our efficiencies created by our vertical integration are also expected to continue to improve keeping our well costs low. Finally, our Brown Dense program gives us meaningful upside as we initiate a 10-well development program, in addition to the continued delineation of the play. Our positions in two world-class natural gas basins, our operational strengths and the potential from our exploration opportunities are setting Southwestern Energy up to have another great year in 2014."

The following tables provide annual forecast information for 2014, as compared to projected 2013 results, for capital investments and the gross and net well counts for each of the company's operating areas.








Capital Investments








Projected
2013


Forecast
2014








(in millions)

Fayetteville Shale






$    900


$     900

Marcellus Shale






870


760

Brown Dense






90


178

New Ventures






130


190

Ark-La-Tex






10


7

Midstream Services






160


140

Drilling Rigs






65


95

E&P Services & Corporate





25


55

Total Capital Investments





$  2,250


$  2,325

 


Gross Op. Well Count


Net Op. Well Count


Projected
2013


Forecast
2014


Projected
2013


Forecast
2014

Fayetteville Shale

441


460-470


326


320-330

Marcellus Shale

109


80-85


108


75-80

Brown Dense

6


14


6


14

New Ventures

2


8


2


7

Ark-La-Tex

0


1


0


1

Total Well Count

558


563-578


442


417-432









In the Fayetteville Shale, Southwestern expects that the average re-entry to re-entry time to drill its operated horizontal wells to total depth will continue to decrease in 2014 to approximately 6.2 days from approximately 6.5 days projected for 2013. The company's average 2014 completed well cost is estimated to be $2.6 million per well with a 5,400 average horizontal lateral, compared to an estimated $2.5 million well cost with an average horizontal lateral length of 5,300 feet in 2013.

In the Marcellus Shale, Southwestern plans to drill approximately 41 wells in Bradford County, 27 wells in Susquehanna County, 7 wells in Lycoming County and 8 horizontal delineation wells on the company's acreage it acquired in 2013 in Wyoming, Sullivan and Tioga Counties. The company expects that the average re-entry to re-entry time to drill its operated horizontal wells to total depth will be approximately 11.3 days in 2014, compared to approximately 11.9 days projected for 2013. Southwestern's average 2014 completed well cost is estimated to be $6.8 million per well with a 4,950 average horizontal lateral with 18.0 completed stages, compared to an estimated $7.0 million well cost with an average horizontal lateral length of 4,900 feet and 17.5 completed stages in 2013.

In the company's Lower Smackover Brown Dense exploration program, Southwestern plans to drill up to 14 wells, all of which are planned to be vertical wells.

In the company's New Ventures, Southwestern plans to drill up to 8 gross wells including further testing in the Denver-Julesburg Basin in Colorado and the Paradox Basin in Utah, as well as new projects that will be discussed more as the year progresses.

Southwestern Issues Guidance for 2014
The company's projected results for 2014 are as follows:

Estimated Production by Quarter in 2014


1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Full-Year 2014

Total Production (Bcfe)

177 - 179

183 - 185

187 - 191

193 - 197

740 - 752

Estimated E&P Pricing Deductions in 2014 ($ per Mcfe, except for fuel charges)

      Average Basis Differential and Transportation Charge

$0.55 - $0.60

      Average Fuel Charge

0.50% - 1.00%



Estimated E&P Operating Expenses in 2014 (assumes $3.75 per Mcf gas price)

      Lease Operating Expenses

$0.88 - $0.93

      General & Administrative Expense

$0.24 - $0.28

      Taxes, Other Than Income Taxes

$0.09 - $0.11



Other Operating Income and Expenses in 2014 (assumes $3.75 per Mcf gas price)

      Midstream EBITDA ($ in millions)

$355 - $360

      Net Interest Expense ($ in millions)

$32 - $34

      Income Tax Rate (90% Deferred)

40.0%

      Weighted Average Diluted Shares Outstanding (in millions)

352

 

As of December 9, 2013, the company had NYMEX hedges in place on notional volumes of 233 Bcf of its 2014 projected natural gas production hedged through fixed price swaps at a weighted average price of $4.41 per Mcf.

Assuming a NYMEX commodity price of $3.75 per Mcf of gas for 2014, the company is targeting net income of $635 to $645 million and net cash provided by operating activities before changes in operating assets and liabilities (a non-GAAP measure; see "Explanation and Reconciliation of Non-GAAP Financial Measures" below) of $1,920 to $1,930 million in 2014. The company expects net income plus interest, income tax expense, depreciation, depletion and amortization (also known as EBITDA, a non-GAAP measure; see "Explanation and Reconciliation of Non-GAAP Financial Measures" below) to be approximately $1,985 to $1,995 million in 2014. The company has also provided additional price scenarios and their corresponding estimated financial results for 2014 in the table below:

NYMEX

Commodity Prices

 

Net Income

Net

Cash Flow (1)

 

EBITDA (1)

$3.50 Gas

$560 - $570

Million

$1,810 - $1,820

Million

$1,860 - $1,870
Million

$3.75 Gas

$635 - $645

Million

$1,920 - $1,930

Million

$1,985 - $1,995
Million

$4.00 Gas

$710 - $720

Million

$2,035 - $2,045

Million

$2,105 - $2,115
Million

(1)   Net cash provided by operating activities before changes in operating assets and liabilities (net cash flow) and EBITDA are non-GAAP measures; see Explanation and Reconciliation of Non-GAAP Financial Measures below.

Explanation and Reconciliation of Non-GAAP Financial Measures
Net cash provided by operating activities before changes in operating assets and liabilities (net cash flow) is presented because of its acceptance 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. The company has also included this information because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements which the company may not control and may not relate to the period in which the operating activities occurred. Net cash provided by operating activities before changes in operating assets and liabilities should not be considered in isolation or as a substitute for net cash provided by operating activities prepared in accordance with generally accepted accounting principles. The table below reconciles 2014 forecasted net cash provided by operating activities before changes in operating assets and liabilities with 2014 forecasted net cash provided by operating activities.



 2014 Guidance 



 NYMEX Commodity Price Assumption 



$3.50 Gas


$3.75 Gas


$4.00 Gas



$90.00 Oil


$90.00 Oil


$90.00 Oil


($ in millions)

Net cash provided by operating activities


 $1,810-$1,820 


 $1,920-$1,930 


 $2,035-$2,045 

Add back (deduct):







   Assumed change in operating assets and liabilities

--


--


--

Net cash flow


 $1,810-$1,820 


 $1,920-$1,930 


 $2,035-$2,045 

EBITDA is defined as net income plus interest expense, income tax expense, depreciation, depletion and amortization. Southwestern has included information concerning EBITDA because it is used by certain investors as a measure of the ability of a company to service or incur indebtedness and because it is a financial measure commonly used in the energy industry. EBITDA should not be considered in isolation or as a substitute for net income, net cash provided by operating activities or other income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. EBITDA as defined above may not be comparable to similarly titled measures of other companies. Net income is a financial measure calculated and presented in accordance with generally accepted accounting principles. The table below reconciles 2014 forecasted EBITDA with 2014 forecasted net income.



 2014 Guidance 






 NYMEX Commodity Price Assumption 


Midstream




$3.50 Gas


$3.75 Gas


$4.00 Gas


Services




$90.00 Oil


$90.00 Oil


$90.00 Oil


Segment

(1)


($ in millions)




Net income attributable to SWN


 $560-$570 


 $635-$645 


 $710-$720 


 $175-$180 


Add back:










   Provision for income taxes


 373-380 


 423-430 


 473-480 


 117-120 


   Interest expense


 33-35 


 32-34 


 31-33 


 9-11 


   Depreciation, depletion and amortization


 885-895 


 885-895 


 885-895 


 52-54 


EBITDA


 $1,860-$1,870 


 $1,985-$1,995 


 $2,105-$2,115 


 $355-$360 












(1) Midstream Services segment results assume NYMEX commodity prices of $3.75 per Mcf for natural gas and $90.00 per barrel for crude oil for 2014.

 

Southwestern Energy Company is an independent energy company whose wholly-owned subsidiaries are engaged in natural gas and oil exploration, development and production, natural gas gathering and marketing. Additional information on the company can be found on the Internet at http://www.swn.com.

All statements, other than historical facts and financial information, may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements that address activities, outcomes and other matters that should or may occur in the future, including, without limitation, statements regarding the financial position, business strategy, production and reserve growth and other plans and objectives for the company's future operations, are forward-looking statements. Although the company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. The company has no obligation and makes no undertaking to publicly update or revise any forward-looking statements, other than to the extent set forth below. You should not place undue reliance on forward-looking statements. They are subject to known and unknown risks, uncertainties and other factors that may affect the company's operations, markets, products, services and prices and cause its actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with forward-looking statements, risks, uncertainties and factors that could cause the company's actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to: the timing and extent of changes in market conditions and prices for natural gas and oil (including regional basis differentials); the company's ability to transport its production to the most favorable markets or at all; the timing and extent of the company's success in discovering, developing, producing and estimating reserves; the economic viability of, and the company's success in drilling, the company's large acreage position in the Fayetteville Shale play, overall as well as relative to other productive shale gas areas; the company's ability to fund the company's planned capital investments; the impact of federal, state and local government regulation, including any legislation relating to hydraulic fracturing, the climate or over the counter derivatives; the company's ability to determine the most effective and economic fracture stimulation for the Fayetteville Shale play and the Marcellus Shale play; the costs and availability of oil field personnel services and drilling supplies, raw materials, and equipment and services; the company's future property acquisition or divestiture activities; increased competition; the financial impact of accounting regulations and critical accounting policies; the comparative cost of alternative fuels; conditions in capital markets, changes in interest rates and the ability of the company's lenders to provide it with funds as agreed; credit risk relating to the risk of loss as a result of non-performance by the company's counterparties and any other factors listed in the reports the company has filed and may file with the Securities and Exchange Commission (SEC). For additional information with respect to certain of these and other factors, see the reports filed by the company with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE Southwestern Energy Company



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