(15) CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In April 2018, the Company entered into the 2018 credit facility. Pursuant to requirements under the indentures governing the Company’s senior notes, each 100% owned subsidiary that became a guarantor of the 2018 credit facility also became a guarantor of each of the Company’s senior notes (the “Guarantor Subsidiaries”). The Guarantor Subsidiaries also granted liens and security interests to support their guarantees under the 2018 credit facility but not of the senior notes. These guarantees are full and unconditional and joint and several among the Guarantor Subsidiaries. Certain of the Company’s subsidiaries which are accounted for on a consolidated basis do not guarantee the 2018 credit facility and senior notes (“Non-Guarantor Subsidiaries”). See Note 8 for additional information on the Company’s 2018 revolving credit facility and senior notes. At the closing of the Fayetteville Shale sale in December 2018, the Company’s subsidiaries being sold were released from these guarantees. See Note 3 for additional information on the divestiture of the Company’s Fayetteville Shale-related subsidiaries.

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


(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
Year ended December 31, 2018:
Operating Revenues:
Gas sales	$	–	$	1,998	$	–	$	–	$	1,998
Oil sales		–		196		–		–		196
NGL sales		–		352		–		–		352
Marketing		–		1,222		–		–		1,222
Gas gathering		–		89		–		–		89
Other		–		5		–		–		5
		–		3,862		–		–		3,862
Operating Costs and Expenses:
Marketing purchases		–		1,229		–		–		1,229
Operating expenses		–		785		–		–		785
General and administrative expenses		–		209		–		–		209
Restructuring charges		–		39		–		–		39
Depreciation, depletion and amortization		–		560		–		–		560
Impairments		–		171		–		–		171
Gain on sale of assets, net		–		(17)		–		–		(17)
Taxes, other than income taxes		–		89		–		–		89
		–		3,065		–		–		3,065
Operating Income		–		797		–		–		797
Interest Expense, Net		124		–		–		–		124
Loss on Derivatives		–		(118)		–		–		(118)
Loss on Early Extinguishment of Debt		(17)		–		–		–		(17)
Equity in Earnings of Subsidiaries		678		–		–		(678)		–

Income (Loss) Before Income Taxes		537		679		–		(678)		538
Provision for Income Taxes		–		1		–		–		1
Net Income (Loss)	$	537	$	678	$	–	$	(678)	$	537
Mandatory convertible preferred stock dividend		–		–		–		–		–
Participating securities – mandatory convertible preferred stock		2		–		–		–		2
Net Income (Loss) Attributable to Common Stock	$	535	$	678	$	–	$	(678)	$	535

Net Income (Loss)	$	537	$	678	$	–	$	(678)	$	537
Other comprehensive income		8		–		–		–		8
Comprehensive Income (Loss)	$	545	$	678	$	–	$	(678)	$	545



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
Year ended December 31, 2017:
Operating Revenues:
Gas sales	$	–	$	1,793	$	–	$	–	$	1,793
Oil sales		–		102		–		–		102
NGL sales		–		206		–		–		206
Marketing		–		972		–		–		972
Gas gathering		–		126		–		–		126
Other		–		4		–		–		4
		–		3,203		–		–		3,203
Operating Costs and Expenses:
Marketing purchases		–		976		–		–		976
Operating expenses		–		671		–		–		671
General and administrative expenses		–		233		–		–		233
Depreciation, depletion and amortization		–		504		–		–		504
Gain on sale of assets, net		–		(6)		–		–		(6)
Taxes, other than income taxes		–		94		–		–		94
		–		2,472		–		–		2,472
Operating Income		–		731		–		–		731
Interest Expense, Net		135		–		–		–		135
Gain on Derivatives		–		422		–		–		422
Loss on Early Extinguishment of Debt		(70)		–		–		–		(70)
Other Income, Net		–		5		–		–		5
Equity in Earnings of Subsidiaries		1,251		–		–		(1,251)		–

Income (Loss) Before Income Taxes		1,046		1,158		–		(1,251)		953
Benefit from Income Taxes		–		(93)		–		–		(93)
Net Income (Loss)	$	1,046	$	1,251	$	–	$	(1,251)	$	1,046
Mandatory convertible preferred stock dividend		108		–		–		–		108
Participating securities – mandatory convertible preferred stock		123		–		–		–		123
Net Income (Loss) Attributable to Common Stock	$	815	$	1,251	$	–	$	(1,251)	$	815

Net Income (Loss)	$	1,046	$	1,251	$	–	$	(1,251)	$	1,046
Other comprehensive income		(5)		6		6		(12)		(5)
Comprehensive Income (Loss)	$	1,041	$	1,257	$	6	$	(1,263)	$	1,041



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
Year ended December 31, 2016:
Operating Revenues:
Gas sales	$	–	$	1,273	$	–	$	–	$	1,273
Oil sales		–		69		–		–		69
NGL sales		–		92		–		–		92
Marketing		–		864		–		–		864
Gas gathering		–		138		–		–		138
		–		2,436		–		–		2,436
Operating Costs and Expenses:
Marketing purchases		–		864		–		–		864
Operating expenses		–		592		–		–		592
General and administrative expenses		–		247		–		–		247
Restructuring charges		–		73		–		–		73
Depreciation, depletion and amortization		–		436		–		–		436
Impairments		–		2,266		55		–		2,321
Taxes, other than income taxes		–		93		–		–		93
		–		4,571		55		–		4,626
Operating Income		–		(2,135)		(55)		–		(2,190)
Interest Expense, Net		88		–		–		–		88
Loss on Derivatives		–		(339)		–		–		(339)
Loss on Early Extinguishment of Debt		(51)		–		–		–		(51)
Other Loss, Net		–		(4)		–		–		(4)
Equity in Earnings of Subsidiaries		(2,504)		(55)		–		2,559		–

Income (Loss) Before Income Taxes		(2,643)		(2,533)		(55)		2,559		(2,672)
Benefit from Income Taxes		–		(29)		–		–		(29)
Net Income (Loss)	$	(2,643)	$	(2,504)	$	(55)	$	2,559	$	(2,643)
Mandatory convertible preferred stock dividend		108		–		–		–		108
Participating securities – mandatory convertible preferred stock		–		–		–		–		–
Net Income (Loss) Attributable to Common Stock	$	(2,751)	$	(2,504)	$	(55)	$	2,559	$	(2,751)

Net Income (Loss)	$	(2,643)	$	(2,504)	$	(55)	$	2,559	$	(2,643)
Other comprehensive income		9		3		3		(6)		9
Comprehensive Income (Loss)	$	(2,634)	$	(2,501)	$	(52)	$	2,553	$	(2,634)


CONDENSED CONSOLIDATED BALANCE SHEETS


(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
December 31, 2018:
ASSETS
Cash and cash equivalents	$	201	$	–	$	–	$	–	$	201
Accounts receivable, net		4		577		–		–		581
Other current assets		8		166		–		–		174
Total current assets		213		743		–		–		956

Intercompany receivables		7,932		–		–		(7,932)		–

Natural gas and oil properties, using the full cost method		–		24,128		52		–		24,180
Gathering systems		–		11		27		–		38
Other		197		290		–		–		487
Less: Accumulated depreciation, depletion and amortization		(154)		(19,840)		(55)		–		(20,049)
Total property and equipment, net		43		4,589		24		–		4,656

Investments in subsidiaries (equity method)		–		24		–		(24)		–
Other long-term assets		19		166		–		–		185
TOTAL ASSETS	$	8,207	$	5,522	$	24	$	(7,956)	$	5,797

LIABILITIES AND EQUITY
Accounts payable	$	113	$	496	$	–	$	–	$	609
Other current liabilities		115		122		–		–		237
Total current liabilities		228		618		–		–		846

Intercompany payables		–		7,932		–		(7,932)		–

Long-term debt		2,318		–		–		–		2,318
Pension and other postretirement liabilities		46		–		–		–		46
Other long-term liabilities		54		171		–		–		225
Negative carrying amount of subsidiaries, net		3,199		–		–		(3,199)		–
Total long-term liabilities		5,617		171		–		(3,199)		2,589
Commitments and contingencies
Total equity (accumulated deficit)		2,362		(3,199)		24		3,175		2,362
TOTAL LIABILITIES AND EQUITY	$	8,207	$	5,522	$	24	$	(7,956)	$	5,797


CONDENSED CONSOLIDATED BALANCE SHEETS


(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


(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
Year ended December 31, 2018:
Net cash provided by (used in) operating activities	$	304	$	1,595	$	–	$	(676)	$	1,223
Investing activities:
Capital investments		(20)		(1,270)		–		–		(1,290)
Proceeds from the sale of property and equipment		–		1,643		–		–		1,643
Other		–		6		–		–		6
Net cash used in investing activities		(20)		379		–		–		359
Financing activities
Intercompany activities		1,300		(1,976)		–		676		–
Payments on long-term debt		(2,095)		–		–		–		(2,095)
Payments on revolving credit facility		(1,983)		–		–		–		(1,983)
Borrowings under revolving credit facility		1,983		–		–		–		1,983
Purchase of treasury stock		(180)		–		–		–		(180)
Preferred stock dividend		(27)		–		–		–		(27)
Other		5		–		–		–		5
Net cash provided by (used in) financing activities		(997)		(1,976)		–		676		(2,297)
Increase (decrease) in cash and cash equivalents		(713)		(2)		–		–		(715)
Cash and cash equivalents at beginning of year		914		2		–		–		916
Cash and cash equivalents at end of year	$	201	$	–	$	–	$	–	$	201

Year ended December 31, 2017:
Net cash provided by (used in) operating activities	$	1,019	$	1,327	$	–	$	(1,249)	$	1,097
Investing activities:
Capital investments		(13)		(1,250)		(5)		–		(1,268)
Proceeds from the sale of property and equipment		1		9		–		–		10
Other		1		5		–		–		6
Net cash used in investing activities		(11)		(1,236)		(5)		–		(1,252)
Financing activities
Intercompany activities		(1,158)		(96)		5		1,249		–
Payments on short-term debt		(328)		–		–		–		(328)
Payments on long-term debt		(1,139)		–		–		–		(1,139)
Proceeds from issuance of long-term debt		1,150		–		–		–		1,150
Preferred stock dividend		(16)		–		–		–		(16)
Other		(19)		–		–		–		(19)
Net cash provided by (used in) financing activities		(1,510)		(96)		5		1,249		(352)
Increase (decrease) in cash and cash equivalents		(502)		(5)		–		–		(507)
Cash and cash equivalents at beginning of year		1,416		7		–		–		1,423
Cash and cash equivalents at end of year	$	914	$	2	$	–	$	–	$	916

Year ended December 31, 2016:
Net cash provided by (used in) operating activities	$	(2,610)	$	550	$	–	$	2,558	$	498
Investing activities:
Capital investments		(3)		(590)		–		–		(593)
Proceeds from the sale of property and equipment		2		428		–		–		430
Other		1		–		–		–		1
Net cash used in investing activities		–		(162)		–		–		(162)
Financing activities
Intercompany activities		2,950		(392)		–		(2,558)		–
Payments on long-term debt		(1,175)		–		–		–		(1,175)
Payments on revolving credit facility		(3,268)		–		–		–		(3,268)
Borrowings on revolving credit facility		3,152		–		–		–		3,152
Payments on commercial paper		(242)		–		–		–		(242)
Borrowings under commercial paper		242		–		–		–		242
Proceeds from issuance of long-term debt		1,191		–		–		–		1,191
Proceeds from issuance of common stock		1,247		–		–		–		1,247
Preferred stock dividend		(27)		–		–		–		(27)
Other		(48)		–		–		–		(48)
Net cash provided by (used in) financing activities		4,022		(392)		–		(2,558)		1,072
Increase (decrease) in cash and cash equivalents		1,412		(4)		–		–		1,408
Cash and cash equivalents at beginning of year		4		11		–		–		15
Cash and cash equivalents at end of year	$	1,416	$	7	$	–	$	–	$	1,423