Condensed Consolidating Financial Information

6 Months Ended

Jun. 30, 2019

Condensed Financial Information Disclosure [Abstract]

Condensed Consolidating Financial Information

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 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 12 – Debt 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, its subsidiaries being sold were released from these guarantees. See Note 2 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

(Unaudited)

(in millions)	Parent		Guarantors			Non-Guarantors		Eliminations			Consolidated
Three months ended June 30, 2019
Operating Revenues:
Gas sales	$	—	$	275		$	—	$	—		$	275
Oil sales	—		47			—		—			47
NGL sales	—		58			—		—			58
Marketing	—		287			—		—			287
	—		667			—		—			667
Operating Costs and Expenses:
Marketing purchases	—		293			—		—			293
Operating expenses	—		169			—		—			169
General and administrative expenses	—		40			—		—			40
Loss on sale of operating assets	—		3			—		—			3
Restructuring charges	—		2			—		—			2
Depreciation, depletion and amortization	—		121			—		—			121
Taxes, other than income taxes	—		17			—		—			17
	—		645			—		—			645
Operating Income	—		22			—		—			22
Interest Expense, Net	15		—			—		—			15
Gain on Derivatives	—		152			—		—			152
Other Loss, Net	—		(6		)	—		—			(6		)
Equity in Earnings of Subsidiaries	153		—			—		(153		)	—
Income (Loss) Before Income Taxes	138		168			—		(153		)	153
Provision for Income Taxes	—		15			—		—			15
Net Income (Loss)	$	138	$	153		$	—	$	(153	)	$	138
Net Income (Loss)	$	138	$	153		$	—	$	(153	)	$	138
Other Comprehensive Income	4		—			—		—			4
Comprehensive Income (Loss)	$	142	$	153		$	—	$	(153	)	$	142

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 for Income Taxes	—			—			—		—			—
Net Income (Loss)	$	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
Six months ended June 30, 2019
Operating Revenues:
Gas sales	$	—	$	705		$	—	$	—		$	705
Oil sales	—		86			—		—			86
NGL sales	—		139			—		—			139
Marketing	—		725			—		—			725
Other	—		2			—		—			2
	—		1,657			—		—			1,657
Operating Costs and Expenses:
Marketing purchases	—		734			—		—			734
Operating expenses	—		334			—		—			334
General and administrative expenses	—		77			—		—			77
Loss on sale of operating assets	—		3			—		—			3
Restructuring charges	—		5			—		—			5
Depreciation, depletion and amortization	—		233			—		—			233
Taxes, other than income taxes	—		36			—		—			36
	—		1,422			—		—			1,422
Operating Income	—		235			—		—			235
Interest Expense, Net	29		—			—		—			29
Gain on Derivatives	—		120			—		—			120
Other Loss, Net	—		(5		)	—		—			(5		)
Equity in Earnings of Subsidiaries	761		—			—		(761		)	—
Income (Loss) Before Income Taxes	732		350			—		(761		)	321
Benefit from Income Taxes	—		(411		)	—		—			(411		)
Net Income (Loss)	$	732	$	761		$	—	$	(761	)	$	732
Net Income (Loss)	$	732	$	761		$	—	$	(761	)	$	732
Other Comprehensive Income	4		—			—		—			4
Comprehensive Income (Loss)	$	736	$	761		$	—	$	(761	)	$	736

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 for Income Taxes	—			—			—		—			—
Net Income (Loss)	$	259		$	338		$	—	$	(338	)	$	259
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 BALANCE SHEETS

(Unaudited)

(in millions)	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
June 30, 2019
ASSETS
Cash and cash equivalents	$	155		$	—		$	—		$	—		$	155
Accounts receivable, net	—			358			—			—			358
Other current assets	5			246			—			—			251
Total current assets	160			604			—			—			764
Intercompany receivables	7,894			—			—			(7,894		)	—
Natural gas and oil properties, using the full cost method	—			24,769			54			—			24,823
Other	196			330			29			—			555
Less: Accumulated depreciation, depletion and amortization	(162		)	(20,059		)	(58		)	—			(20,279		)
Total property and equipment, net	34			5,040			25			—			5,099
Investments in subsidiaries (equity method)	—			23			—			(23		)	—
Other long-term assets	45			637			—			—			682
TOTAL ASSETS	$	8,133		$	6,304		$	25		$	(7,917	)	$	6,545
LIABILITIES AND EQUITY
Accounts payable	$	72		$	513		$	—		$	—		$	585
Other current liabilities	193			134			—			—			327
Total current liabilities	265			647			—			—			912
Intercompany payables	—			7,892			2			(7,894		)	—
Long-term debt	2,267			—			—			—			2,267
Pension and other postretirement liabilities	39			—			—			—			39
Other long-term liabilities	39			206			—			—			245
Negative carrying amount of subsidiaries, net	2,441			—			—			(2,441		)	—
Total long-term liabilities	4,786			206			—			(2,441		)	2,551
Commitments and contingencies
Total equity (accumulated deficit)	3,082			(2,441		)	23			2,418			3,082
TOTAL LIABILITIES AND EQUITY	$	8,133		$	6,304		$	25		$	(7,917	)	$	6,545

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(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
Other	197			301			27			—			525
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 STATEMENT OF CASH FLOWS

(Unaudited)

(in millions)	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Six months ended June 30, 2019
Net cash provided by (used in) operating activities	$	1,124		$	179		$	—		$	(760	)	$	543
Investing activities:
Capital investments	(1		)	(584		)	(1		)	—			(586		)
Proceeds from sale	—			26			—			—			26
Net cash used in investing activities	(1		)	(558		)	(1		)	—			(560		)
Financing activities:
Intercompany activities	(1,140		)	379			1			760			—
Change in bank drafts outstanding	(7		)	—			—			—			(7		)
Purchase of treasury stock	(21		)	—			—			—			(21		)
Cash paid for tax withholding	(1		)	—			—			—			(1		)
Net cash provided by (used in) financing activities	(1,169		)	379			1			760			(29		)
Decrease in cash and cash equivalents	(46		)	—			—			—			(46		)
Cash and cash equivalents at beginning of year	201			—			—			—			201
Cash and cash equivalents at end of period	$	155		$	—		$	—		$	—		$	155
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