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Long-Term Incentive Compensation
 12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Long-Term Incentive Compensation LONG-TERM INCENTIVE COMPENSATION
The Southwestern Energy Company 2013 Incentive Plan was adopted in February 2013, approved by stockholders in May 2013 and amended and restated per stockholders’ approval in May 2016 and further amended in May 2017 and May 2019 (the “2013 Plan”).  The 2013 Plan provides for the compensation of officers, key employees and eligible non-employee directors of the Company and its subsidiaries.
The 2013 Plan provides for grants of options, stock appreciation rights, and shares of restricted stock and restricted stock units to employees, officers and directors that, in the aggregate, do not exceed 88,700,000 shares.  The types of incentives that may be awarded are comprehensive and are intended to enable the Company’s Board of Directors to structure the most appropriate incentives and to address changes in income tax laws which may be enacted over the term of the 2013 Plan.
The Company’s stock-based compensation is classified as either equity or liability awards in accordance with GAAP.  The fair value of an equity-classified award is determined at the grant date and is amortized to general and administrative expense and capitalized expense on a straight-line basis over the vesting period of the award.  The fair value of a liability-classified award is determined on a quarterly basis beginning at the grant date until final vesting.  Changes in the fair value of liability-classified awards are recorded to general and administrative expense over the vesting period of the award.  A portion of this general and administrative expense is capitalized into natural gas and oil properties, included in property and equipment.  Generally, stock options granted to employees and directors vest ratably over three years from the grant date and expire seven years from the date of grant.  The Company issues shares of restricted stock or restricted stock units to employees and directors which generally vest over four years.  Restricted stock, restricted stock units and stock options granted to participants under the 2013 Plan, as amended and restated, immediately vest upon death, disability or retirement (subject to a minimum of three years of service). The Company issues performance units which have historically vested over three years to employees. The performance units granted in 2018, 2019 and 2020 cliff-vest at the end of three years.
In June 2018, the Company announced a workforce reduction.  Unvested stock-based awards of the affected employees were subsequently cancelled and the approximate fair value of a portion of those cancelled awards was included in a cash severance payment that was paid in the third quarter of 2018.  Stock-based compensation costs recognized prior to the cancellation as either general and administrative expense or capitalized expense were reversed and the severance payments were subsequently recognized as restructuring charges for the year ended December 31, 2018 on the consolidated statements of operations.
In December 2018, the Company closed the Fayetteville Shale sale.  As part of this transaction, most employees associated with those assets became employees of the buyer although the employment of some was terminated.  All affected employees were offered a severance package, which included a one-time cash payment depending on length of service and, if applicable, the current value of a portion of equity awards that were forfeited. Stock-based compensation costs recognized prior to the cancellation as either general and administrative expense or capitalized expense were reversed and the severance payments were subsequently recognized as restructuring charges for the years ended December 31, 2019 and 2018 on the consolidated statements of operations.
In February 2020, the Company announced a strategic realignment of the Company’s organizational structure. Affected employees were offered a severance package, which included a one-time payment depending on length of service and, if applicable, the current value of unvested long-term incentive awards that were forfeited. The Company also recognized additional severance costs in the fourth quarter of 2020 related to continued organizational restructuring. Stock-based compensation costs recognized prior to the cancellation as either general and administrative expense or capitalized expense were reversed and the severance payments were subsequently recognized as restructuring charges for the year ended December 31, 2020 on the consolidated statements of operations.
Equity-Classified Awards
Equity-Classified Stock Options
The Company recorded the following compensation costs related to stock options for the years ended December 31, 2020, 2019 and 2018:
(in millions)202020192018
Stock options – general and administrative expense$— $1 $2 
Stock options – general and administrative expense capitalized$— $— $— 
The Company recorded no deferred tax assets related to stock options for the year ended December 31, 2020, compared to deferred tax assets of less than $1 million for the years ended December 31, 2019 and 2018.  Additionally, the Company had no unrecognized compensation cost related to unvested stock options at December 31, 2020.
The fair value of stock options is estimated on the date of the grant using a Black-Scholes valuation model that uses the weighted average assumptions noted in the following table.  Expected volatility is based on historical volatility of the Company’s common stock and other factors.  The Company uses historical data on the exercise of stock options, post-vesting forfeitures and other factors to estimate the expected term of the stock-based payments granted.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company did not issue equity-classified stock options in 2020, 2019 or 2018.
The following tables summarize stock option activity for the years 2020, 2019 and 2018, and provide information for options outstanding at December 31 of each year:
202020192018
Number
of Shares		Weighted Average Exercise Price
Number
of Shares
Weighted Average Exercise Price
Number
of Shares
Weighted Average Exercise Price
(in thousands) (in thousands) (in thousands) 
Options outstanding at January 14,635 $15.26 5,178 $17.06 6,020 $19.43 
Granted— $— — $— — $— 
Exercised— $— — $— — $— 
Forfeited or expired(785)$24.46 (543)$32.38 (842)$33.99 
Options outstanding at December 313,850 $13.39 4,635 $15.26 5,178 $17.06 

Options OutstandingOptions Exercisable
Range of
Exercise Prices
Options Outstanding at December 31, 2020Weighted Average Exercise PriceWeighted Average Remaining Contractual LifeOptions Exercisable at December 31, 2020Weighted Average Exercise PriceWeighted Average Remaining Contractual Life
(in thousands) (years)(in thousands) (years)
$7.74-$29.42
3,126 $8.95 2.33,126 $8.95 2.3
$30.59-$35.64
634 $30.59 0.9634 $30.59 0.9
$46.55-$46.55
90 $46.55 0.390 $46.55 0.3
3,850 $13.39 2.03,850 $13.39 2.0
No options were granted or exercised in 2020, 2019 or 2018.  
Equity-Classified Restricted Stock
The Company recorded the following compensation costs related to restricted stock grants for the years ended December 31, 2020, 2019 and 2018:
(in millions)202020192018
Restricted stock grants – general and administrative expense$3 $6 $9 
Restricted stock grants – general and administrative expense capitalized$1 $4 $5 
The Company also recorded deferred tax asset of $2 million related to restricted stock for the year ended December 31, 2020, compared to a reduction in the deferred tax assets of less than $1 million and deferred tax asset of $2 million for the years end
2019 and 2018, respectively.  As of December 31, 2020, there was $1 million of total unrecognized compensation cost related to unvested shares of restricted stock that is expected to be recognized over a weighted-average period of less than one year.
The following table summarizes the restricted stock activity for the years 2020, 2019 and 2018, and provides information for restricted stock outstanding at December 31 of each year:
202020192018
Number of
Shares		Weighted Average Fair Value
Number of
Shares
Weighted Average Fair Value
Number of
Shares
Weighted Average Fair Value
(in thousands) (in thousands) (in thousands) 
Unvested shares at January 11,480 $7.00 2,717 $7.91 6,254 $8.85 
Granted584 $2.86 493 $3.06 350 $4.72 
Vested(1,098)$5.26 (1,516)$7.16 (2,058)$9.24 
Forfeited(269)
(1)
$7.79 (214)
(2)
$8.38 (1,829)
(3)
$9.01 
Unvested shares at December 31697 $5.97 1,480 $7.00 2,717 $7.91 
(1)Includes 171,813 shares forfeited as a result of the reduction in workforce for the year end December 31, 2020.
(2)Includes 65,196 shares forfeited as a result of the reduction in workforce for the year ended December 31, 2019.
(3)Includes 1,287,636 shares forfeited as a result of the reduction in workforce for the year ended December 31, 2018.
The fair values of the grants were $2 million for 2020, $2 million for 2019 and $2 million for 2018.  The total fair value of shares vested were $6 million for 2020, $11 million for 2019 and $19 million for 2018.
Equity-Classified Restricted Stock Units
As a result of the Merger with Montage, certain Montage employees became employees of Southwestern and retained their original equity awards. The amount of compensation costs related these equity-classified restricted stock units recorded by the Company was immaterial for the year ended December 31, 2020. As of December 31, 2020, there was less than $1 million of total unrecognized compensation cost related to unvested equity-classified restricted stock units that is expected to be recognized over a weighted-average period of approximately one year.
The following table summarizes equity-classified restricted stock unit activity to be paid out in Company stock for the year ended December 31, 2020.
Number
of Units		Weighted Average
Fair Value
(in thousands)
Unvested Units at January 1, 2020— $— 
Granted186 $3.05 
Vested(42)$3.05 
Forfeited(10)$3.05 
Unvested Units at December 31, 2020134 $3.05 
Equity-Classified Performance Units
The Company recorded compensation costs related to equity-classified performance units for the years ended December 31, 2020, 2019 and 2018.  The performance units awarded in 2017 included a market condition based on relative Total Shareholder Return (“TSR”).  The grant date fair value is calculated using the closing price of the Company’s common stock at the grant date and a Monte Carlo model to estimate the TSR market condition.  The estimated fair value is amortized to compensation expense on a straight-line basis over the vesting period of the award.  There were no equity-classified performance units awarded in 2020, 2019 or 2018.
(in millions)202020192018
Performance units – general and administrative expense$— $1 $3 
Performance units – general and administrative expense capitalized$— $— $1 
The Company also recorded a deferred tax asset of less than $1 million related to equity-classified performance units for the year ended December 31, 2020, compared to deferred tax assets of less than $1 million and $1 million in 2019 and 2018, respectively. As of December 31, 2020, there are no more equity-classified performance units outstanding.
The following table summarizes equity-classified performance unit activity to be paid out in Company stock for the years ended December 31, 2020, 2019 and 2018, and provides information for unvested units as of December 31, 2020, 2019 and 2018: 
202020192018
Number of
Units (1)
Weighted
Average Fair Value
Number of
Units (1)
Weighted
Average Fair Value
Number of
Units (1)
Weighted
Average Fair Value
(in thousands)(in thousands)(in thousands)
Unvested units at January 1178 $10.47 598 $10.01 1,084 $10.12 
Granted— $— — $— — $— 
Vested(178)$10.47 (378)$9.59 (290)$10.47 
Forfeited— $— (42)
(2)
$10.47 (196)
(3)
$9.94 
Unvested shares at December 31— $— 178 $10.47 598 $10.01 
(1)These amounts reflect the number of performance units granted in thousands.  The actual payout of shares may range from a minimum of zero shares to a maximum of two shares per unit contingent upon TSR.  The performance units have a three-year vesting term and the actual disbursement of shares, if any, is determined during the first quarter following the end of the three-year vesting period.
(2)Includes 41,761 units related to the reduction in workforce for the year ended December 31, 2019.
(3)Includes 144,927 units related to the reduction in workforce for the year ended December 31, 2018.
Liability-Classified Awards
Liability-Classified Restricted Stock Units
In the first quarter of 2019 and 2018, the Company granted restricted stock units that vest over a period of four years and are payable in either cash or shares at the option of the Compensation Committee of the Company’s Board of Directors.  The Company has accounted for these as liability-classified awards, and accordingly changes in the market value of the instruments will be recorded to general and administrative expense and capitalized expense over the vesting period of the award. 
(in millions)202020192018
Restricted stock units – general and administrative expense$5 $7 $4 
Restricted stock units – general and administrative expense capitalized$2 $5 $3 
The Company also recorded deferred tax assets of $1 million for the year ended December 31, 2020, compared to less than $1 million and $2 million related to liability-classified restricted stock units for the years ended 2019 and 2018, respectively.  As of December 31, 2020, there was $22 million of total unrecognized compensation cost related to liability-classified restricted stock units that is expected to be recognized over a weighted-average period of two years.  The amount of unrecognized compensation cost for liability-classified awards will fluctuate over time as they are marked to market.
The following table summarizes restricted stock unit activity to be paid out in cash for the years ended December 31, 2020 and 2019 and provides information for unvested units as of December 31, 2020 and 2019:
202020192018
Number
of Units		Weighted Average Fair ValueNumber
of Units		Weighted Average Fair ValueNumber
of Units		Weighted Average Fair Value
(in thousands) (in thousands)(in thousands)
Unvested units at January 112,992 $2.42 8,202 $3.41 — $— 
Granted6,172 $1.41 8,659 $4.34 12,216 $3.69 
Vested(3,960)$1.43 (2,624)$4.09 (232)$5.14 
Forfeited(3,591)
(1)
$2.67 (1,245)
(2)
$3.48 (3,782)
(3)
$4.86 
Unvested units at December 3111,613 $2.67 12,992 $2.42 8,202 $3.41 
(1)Includes 2,010,196 units related to the reduction in workforce for the year ended December 31, 2020.
(2)Includes 400,056 units related to the reduction in workforce for the year ended December 31, 2019.
(3)Includes 2,766,610 units related to the reduction in workforce for the year ended December 31, 2018.
Liability-Classified Performance Units
In 2020, 2019 and 2018 the Company granted performance units that vest at the end of, or over, a three-year period and are payable in either cash or shares at the option of the Compensation Committee of the Company’s Board of Directors.  The
Company has accounted for these as liability-classified awards, and accordingly changes in the fair market value of the instruments will be recorded to general and administrative expense and capitalized expense over the vesting period of the awards.  The performance unit awards granted in 2018 include a performance condition based on cash flow per debt-adjusted share and two market conditions, one based on absolute TSR and the other on relative TSR as compared to a group of the Company’s peers.  The performance unit awards granted in 2019 include a performance condition based on return on average capital employed and two market conditions, one based on absolute TSR and the other on relative TSR. The performance unit awards granted in 2020 include a performance condition based on return on average capital employed and a market condition based on relative TSR. The fair values of all market conditions discussed above are calculated by Monte Carlo models on a quarterly basis.
(in millions)202020192018
Liability-classified performance units – general and administrative expense$7 $2 $2 
Liability-classified performance units – general and administrative expense capitalized$2 $1 $— 
The Company also recorded deferred tax assets of $2 million related to liability-classified performance units for the year ended December 31, 2020, compared to a reduction of deferred tax asset of less than $1 million and a deferred tax asset of $1 million for the years ended 2019 and 2018, respectively.  As of December 31, 2020, there was $14 million of total unrecognized compensation cost related to liability-classified performance units.  This cost is expected to be recognized over a weighted-average period of two years.  The amount of unrecognized compensation cost for liability-classified awards will fluctuate over time as they are marked to market. The final value of the performance unit awards is contingent upon the Company’s actual performance against the Performance Measures.
The following table summarizes liability-classified performance unit activity to be paid out in cash or stock for the years ended December 31, 2020, 2019 and 2018 and provides information for unvested units as of December 31, 2020, 2019 and 2018:
202020192018
Number
of Units		Weighted Average
Fair Value		Number
of Units		Weighted Average
Fair Value		Number
of Units		Weighted Average
Fair Value
(in thousands) (in thousands)(in thousands)
Unvested units at January 15,142 $2.42 2,803 $3.41 — $— 
Granted6,172 $1.41 2,757 $4.34 3,200 $3.70 
Vested— $— (43)$2.42 — $— 
Forfeited(2,615)
(1)
$3.05 (375)
(2)
$3.12 (397)
(3)
$4.55 
Unvested units at December 318,699 $2.57 5,142 $2.42 2,803 $3.41 
(1)Includes 518,450 units related to the reduction in workforce for the year ended December 31, 2020.
(2)Includes 375,086 units related to the reduction in workforce for the year ended December 31, 2019.
(3)Includes 295,160 units related to the reduction in workforce for the year ended December 31, 2018.
Cash-Based Compensation
Performance Cash Awards
In 2020, the Company granted performance cash awards that vest over a four-year period and are payable in cash on an annual basis. The value of each unit of the award equal one dollar. The Company recognizes the cost of these awards as general and administrative expense, operating expense and capitalized expense over the vesting period of the awards. The performance cash awards granted in 2020 include a performance condition determined annually by the Company. In 2020, the performance measure is a targeted discretionary cash flow amount. If the Company, in its sole discretion, determines that the threshold was not met, the amount for that vesting period will not vest and will be cancelled.
Number
of Units		Weighted Average
Fair Value
(in thousands)
Unvested units at January 1, 2020— $— 
Granted20,044 $1.00 
Vested(100)$1.00 
Forfeited(1,591)
(1)
$1.00 
Unvested Units at December 31, 202018,353 $1.00 
(1) Includes 945,500 units related to the reduction in workforce for the year ended December 31, 2020.
The Company also recorded a deferred tax asset of $1 million related to performance cash awards for the year ended December 31, 2020. As of December 31, 2020 there was $14 million of total unrecognized compensation cost related to performance cash awards. This cost is expected to be recognized over a weighted average 3.2 years. The final value of the performance cash awards is contingent upon the Company's actual performance against these performance measures.