(17) CONDENSED CONSOLIDATING FINANCIAL INFORMATION

On April 26, 2018, the Company entered into the 2018 credit facility. Pursuant to requirements under the indentures governing its senior notes, each subsidiary that became a guarantor of the 2018 credit facility also became a guarantor of each of the Company’s senior notes. The 2018 credit facility and senior notes are guaranteed on a senior unsecured basis by the Company, along with its material subsidiaries (the “Guarantor Subsidiaries”), which are 100% owned by the Company. These guarantees are full and unconditional and joint and several among the Guarantor Subsidiaries. Certain of the Company’s operating units which are accounted for on a consolidated basis do not guarantee the 2018 credit facility and senior notes (“Non-Guarantor Subsidiaries”). See Note 10 – Debt for additional information on the Company’s 2018 revolving credit facility and senior notes.

The following financial information reflects consolidating financial information of Southwestern Energy Company (the parent and issuer company), its Guarantor Subsidiaries on a combined basis and the Non-Guarantor Subsidiaries on a combined basis, prepared on the equity basis of accounting. The information is presented in accordance with the requirements of Rule 3-10 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the Guarantor Subsidiaries operated as independent entities.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
Three months ended June 30, 2018:
Operating Revenues:
Gas sales	$	–	$	407	$	–	$	–	$	407
Oil sales		–		44		–		–		44
NGL sales		–		75		–		–		75
Marketing		–		265		–		–		265
Gas gathering		–		24		–		–		24
Other		–		1		–		–		1
		–		816		–		–		816
Operating Costs and Expenses:
Marketing purchases		–		265		–		–		265
Operating expenses		–		193		–		–		193
General and administrative expenses		–		59		–		–		59
Restructuring charges		–		18		–		–		18
Depreciation, depletion and amortization		–		142		–		–		142
Taxes, other than income taxes		–		15		–		–		15
		–		692		–		–		692
Operating Income		–		124		–		–		124
Interest Expense, Net		32		–		–		–		32
Loss on Derivatives		–		(36)		–		–		(36)
Loss on Early Extinguishment of Debt		(8)		–		–		–		(8)
Other Income, Net		–		3		–		–		3
Equity in Earnings of Subsidiaries		91		–		–		(91)		–

Income (Loss) Before Income Taxes		51		91		–		(91)		51
Provision (Benefit) for Income Taxes		–		–		–		–		–
Net Income (Loss)	$	51	$	91	$	–	$	(91)	$	51
Mandatory convertible preferred stock dividend		–		–		–		–		–
Participating securities - mandatory convertible preferred stock		–		–		–		–		–
Net Income (Loss) Attributable to Common Stock	$	51	$	91	$	–	$	(91)	$	51

Net Income (Loss)	$	51	$	91	$	–	$	(91)	$	51
Other comprehensive income		–		–		–		–		–
Comprehensive Income (Loss)	$	51	$	91	$	–	$	(91)	$	51


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
Three months ended June 30, 2017:
Operating Revenues:
Gas sales	$	–	$	471	$	–	$	–	$	471
Oil sales		–		23		–		–		23
NGL sales		–		37		–		–		37
Marketing		–		250		–		–		250
Gas gathering		–		30		–		–		30
Other		–		–		–		–		–
		–		811		–		–		811
Operating Costs and Expenses:
Marketing purchases		–		253		–		–		253
Operating expenses		–		164		–		–		164
General and administrative expenses		–		58		–		–		58
Depreciation, depletion and amortization		–		123		–		–		123
Taxes, other than income taxes		–		25		–		–		25
		–		623		–		–		623
Operating Income		–		188		–		–		188
Interest Expense, Net		34		–		–		–		34
Gain on Derivatives		–		134		–		–		134
Loss on Early Extinguishment of Debt		(10)		–		–		–		(10)
Other Income, Net		–		6		–		–		6
Equity in Earnings of Subsidiaries		328		–		–		(328)		–

Income (Loss) Before Income Taxes		284		328		–		(328)		284
Provision (Benefit) for Income Taxes		–		–		–		–		–
Net Income (Loss)	$	284	$	328	$	–	$	(328)	$	284
Mandatory convertible preferred stock dividend		27		–		–		–		27
Participating securities - mandatory convertible preferred stock		33		–		–		–		33
Net Income (Loss) Attributable to Common Stock	$	224	$	328	$	–	$	(328)	$	224

Net Income (Loss)	$	284	$	328	$	–	$	(328)	$	284
Other comprehensive income		1		–		–		–		1
Comprehensive Income (Loss)	$	285	$	328	$	–	$	(328)	$	285


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
Six months ended June 30, 2018:
Operating Revenues:
Gas sales	$	–	$	947	$	–	$	–	$	947
Oil sales		–		79		–		–		79
NGL sales		–		140		–		–		140
Marketing		–		518		–		–		518
Gas gathering		–		48		–		–		48
Other		–		4		–		–		4
		–		1,736		–		–		1,736
Operating Costs and Expenses:
Marketing purchases		–		520		–		–		520
Operating expenses		–		382		–		–		382
General and administrative expenses		–		114		–		–		114
Restructuring charges		–		18		–		–		18
Depreciation, depletion and amortization		–		285		–		–		285
Taxes, other than income taxes		–		38		–		–		38
		–		1,357		–		–		1,357
Operating Income		–		379		–		–		379
Interest Expense, Net		71		–		–		–		71
Loss on Derivatives		–		(43)		–		–		(43)
Loss on Early Extinguishment of Debt		(8)		–		–		–		(8)
Other Income, Net		–		2		–		–		2
Equity in Earnings of Subsidiaries		338		–		–		(338)		–

Income (Loss) Before Income Taxes		259		338		–		(338)		259
Provision (Benefit) for Income Taxes		–		–		–		–		–
Net Income (Loss)	$	259	$	338	$	–	$	(338)	$	259
Mandatory convertible preferred stock dividend		–		–		–		–		–
Participating securities - mandatory convertible preferred stock		2		–		–		–		2
Net Income (Loss) Attributable to Common Stock	$	257	$	338	$	–	$	(338)	$	257

Net Income (Loss)	$	259	$	338	$	–	$	(338)	$	259
Other comprehensive income		–		–		–		–		–
Comprehensive Income (Loss)	$	259	$	338	$	–	$	(338)	$	259


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
Six months ended June 30, 2017:
Operating Revenues:
Gas sales	$	–	$	974	$	–	$	–	$	974
Oil sales		–		46		–		–		46
NGL sales		–		77		–		–		77
Marketing		–		503		–		–		503
Gas gathering		–		57		–		–		57
		–		1,657		–		–		1,657
Operating Costs and Expenses:
Marketing purchases		–		504		–		–		504
Operating expenses		–		311		–		–		311
General and administrative expenses		–		108		–		–		108
Depreciation, depletion and amortization		–		229		–		–		229
Taxes, other than income taxes		–		51		–		–		51
		–		1,203		–		–		1,203
Operating Income		–		454		–		–		454
Interest Expense, Net		66		–		–		–		66
Gain on Derivatives		–		250		–		–		250
Loss on Early Extinguishment of Debt		(11)		–		–		–		(11)
Other Income, Net		–		8		–		–		8
Equity in Earnings of Subsidiaries		712		–		–		(712)		–

Income (Loss) Before Income Taxes		635		712		–		(712)		635
Provision (Benefit) for Income Taxes		–		–		–		–		–
Net Income (Loss)	$	635	$	712	$	–	$	(712)	$	635
Mandatory convertible preferred stock dividend		54		–		–		–		54
Participating securities - mandatory convertible preferred stock		76		–		–		–		76
Net Income (Loss) Attributable to Common Stock	$	505	$	712	$	–	$	(712)	$	505

Net Income (Loss)	$	635	$	712	$	–	$	(712)	$	635
Other comprehensive income		1		–		–		–		1
Comprehensive Income (Loss)	$	636	$	712	$	–	$	(712)	$	636


CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
June 30, 2018:
ASSETS
Cash and cash equivalents	$	29		8		–		–	$	37
Accounts receivable, net		–		416		–		–		416
Other current assets		8		106		–		–		114
Total current assets		37		530		–		–		567

Intercompany receivables		7,954		–		–		(7,954)		–

Natural gas and oil properties, using the full cost method		–		24,557		54		–		24,611
Gathering systems		–		1,295		27		–		1,322
Other		209		367		–		–		576
Less: Accumulated depreciation, depletion and amortization		(149)		(20,070)		(57)		–		(20,276)
Total property and equipment, net		60		6,149		24		–		6,233

Investments in subsidiaries (equity method)		–		24		–		(24)		–
Other long-term assets		22		220		–		–		242
TOTAL ASSETS	$	8,073		6,923		24		(7,978)	$	7,042

LIABILITIES AND EQUITY
Accounts payable	$	82		560		–		–	$	642
Other current liabilities		75		141		–		–		216
Total current liabilities		157		701		–		–		858

Intercompany payables		–		7,954		–		(7,954)		–

Long-term debt		3,570		–		–		–		3,570
Pension and other postretirement liabilities		55		–		–		–		55
Other long-term liabilities		11		298		–		–		309
Negative carrying amount of subsidiaries, net		2,030		–		–		(2,030)		–
Total long-term liabilities		5,666		298		–		(2,030)		3,934
Commitments and contingencies
Total equity (accumulated deficit)		2,250		(2,030)		24		2,006		2,250
TOTAL LIABILITIES AND EQUITY	$	8,073		6,923		24		(7,978)	$	7,042


CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
December 31, 2017:
ASSETS
Cash and cash equivalents	$	914	$	2	$	–	$	–	$	916
Accounts receivable, net		–		428		–		–		428
Other current assets		10		155		–		–		165
Total current assets		924		585		–		–		1,509

Intercompany receivables		7,978		–		–		(7,978)		–

Natural gas and oil properties, using the full cost method		–		23,834		56		–		23,890
Gathering systems		–		1,288		27		–		1,315
Other		207		357		–		–		564
Less: Accumulated depreciation, depletion and amortization		(134)		(19,804)		(59)		–		(19,997)
Total property and equipment, net		73		5,675		24		–		5,772

Investments in subsidiaries (equity method)		–		24		–		(24)		–
Other long-term assets		16		224		–		–		240
TOTAL ASSETS	$	8,991	$	6,508	$	24	$	(8,002)	$	7,521

LIABILITIES AND EQUITY
Accounts payable	$	73	$	460	$	–	$	–	$	533
Other current liabilities		110		137		–		–		247
Total current liabilities		183		597		–		–		780

Intercompany payables		–		7,978		–		(7,978)		–

Long-term debt		4,391		–		–		–		4,391
Pension and other postretirement liabilities		58		–		–		–		58
Other long-term liabilities		13		300		–		–		313
Negative carrying amount of subsidiaries, net		2,367		–		–		(2,367)		–
Total long-term liabilities		6,829		300		–		(2,367)		4,762
Commitments and contingencies
Total equity (accumulated deficit)		1,979		(2,367)		24		2,343		1,979
TOTAL LIABILITIES AND EQUITY	$	8,991	$	6,508	$	24	$	(8,002)	$	7,521


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
Six months ended June 30, 2018:
Net cash provided by (used in) operating activities	$	276	$	725	$	–	$	(337)	$	664
Investing activities:
Capital investments		(6)		(678)		–		–		(684)
Other		–		9		–		–		9
Net cash used in investing activities		(6)		(669)		–		–		(675)
Financing activities
Intercompany activities		(287)		(50)		–		337		–
Payments on long-term debt		(1,191)		–		–		–		(1,191)
Payments on revolving credit facility		(645)		–		–		–		(645)
Borrowings under revolving credit facility		1,005		–		–		–		1,005
Preferred stock dividend		(27)		–		–		–		(27)
Other		(10)		–		–		–		(10)
Net cash provided by (used in) financing activities		(1,155)		(50)		–		337		(868)
Increase (decrease) in cash and cash equivalents		(885)		6		–		–		(879)
Cash and cash equivalents at beginning of year		914		2		–		–		916
Cash and cash equivalents at end of period	$	29	$	8	$	–	$	–	$	37

Six months ended June 30, 2017:
Net cash provided by (used in) operating activities	$	613	$	677	$	–	$	(712)	$	578
Investing activities:
Capital investments		(7)		(609)		(3)		–		(619)
Other		1		12		–		–		13
Net cash used in investing activities		(6)		(597)		(3)		–		(606)
Financing activities
Intercompany activities		(634)		(81)		3		712		–
Payments on long-term debt		(287)		–		–		–		(287)
Other		3		–		–		–		3
Net cash provided by (used in) financing activities		(918)		(81)		3		712		(284)
Increase (decrease) in cash and cash equivalents		(311)		(1)		–		–		(312)
Cash and cash equivalents at beginning of year		1,416		7		–		–		1,423
Cash and cash equivalents at end of period	$	1,105	$	6	$	–	$	–	$	1,111