Southwestern Energy Offers Strategic Initiatives, Plans for '16

Southwestern Energy Company

today provided an update on its strategic plans for 2016 and the initiatives it is taking to position the Company for long-term value creation. "We will capitalize on our premier quality assets, significant hydrocarbon resource and strong liquidity position to proactively address the challenges presented by the current commodity price environment. Our strategic plan will enable us to optimize the business in today's constrained environment while positioning us to outperform when commodity prices improve," stated Bill Way, President and Chief Executive Officer of Southwestern Energy. "Looking ahead, we are dedicated to operational excellence and remaining flexible as we continue to pursue our objective of keeping our investing levels within cash flow. We have taken clear and decisive actions to create long-term value for our shareholders, including reducing activity to align with current commodity prices. We have a clear focus on identifying opportunities to further strengthen our balance sheet, enhancing operating margins through both revenue and cost improvements and optimizing cash flow throughout the Company. We will maintain our capital discipline by only investing in projects that exceed our 1.3 PVI threshold at strip prices. We are confident that this plan will strengthen the Company, putting us on a path to return to value-adding growth for our shareholders." 2016 Strategy Throughout 2016, the Company will focus on further strengthening its balance sheet, enhancing margins and optimizing its portfolio of premier quality assets. Details on these initiatives are described below. Build on strong liquidity to further strengthen the balance sheet. Demonstrating its prioritization of generating solid returns instead of low-value growth, the Company announced in January 2016 the decision to temporarily halt its drilling activities, continuing its commitment to disciplined operations. This year, the Company will pursue an operating plan that aligns its capital investment program with cash flows generated from operations. As part of that plan, the Company has deferred investment on its 3.7 million net acres of exploration opportunities. Due to its low cost structure, significant production base and diverse transportation portfolio, the Company continues to generate positive cash flow from its operations in this price environment. Southwestern has a strong liquidity position, with approximately $1.9 billion of available capacity on its unsecured revolving credit facility at December 31, 2015, and no significant debt maturities until 2018. The Company plans to continue to evaluate opportunities to strengthen the balance sheet further and to create additional flexibility to return to differentiating value-adding growth when commodity prices and cash flow support an increase in activity. Southwestern is currently in the process of identifying potential asset monetization candidates in its portfolio and will announce additional details as these decisions are made. Operate efficiently and enhance margins. As a result of decreased activity, a workforce reduction was implemented that will create annual savings of $150 million to $175 million. The Company continues to thoroughly analyze its cost structure, along with its current agreements, to identify additional savings opportunities. In February 2016, the Company and the Williams Companies negotiated a reduction in certain existing gathering, transportation, and processing rates for its natural gas, oil and NGL activities in West Virginia effective January 1, 2016. This is estimated to reduce the Company's costs by over $35 million in 2016, with future savings realized with increased production levels. Concurrent with the negotiated reduction, the Company dedicated to the Williams Companies additional gathering rights for its wet gas Marcellus acreage in the center of its West Virginia acreage position, as well as additional dry gas Utica gathering rights in the northern West Virginia portion of its Southwest Appalachia asset. The Company is subject to minimum volume commitments only as it directs the Williams Companies to construct new wet gas or dry gas infrastructure in West Virginia. The Company retains undedicated dry gas Utica acreage in the southern portion of its West Virginia acreage position. Despite the challenging NYMEX prices anticipated in 2016, Appalachian Basin revenues are expected to be positively impacted as a result of additional pipelines being placed into service. Compared to 2015 discounts to NYMEX (inclusive of regional basis differential, pipe transportation costs and fuel charges) of $1.04 per Mcf and $0.74 per Mcf in Northeast and Southwest Appalachia, respectively, 2016 discounts to NYMEX are estimated to be $0.95 per Mcf and $0.70 per Mcf, respectively. This expected improvement increases revenues by approximately $35 million using forecasted 2016 volumes. Discounts to NYMEX are expected to improve even further as additional pipelines are placed in service in 2017 and beyond. Optimize the portfolio. With the Company's differentiating focus on project returns, the Northeast and Southwest Appalachia areas are positioned to be the growth drivers for years to come with the Fayetteville Shale E&P and Midstream businesses providing a base of cash flows that will fund this growth activity. The Company's capital efficiency is expected to improve as well performance in Northeast and Southwest Appalachia has resulted in drilling and completion returns that are among the best in the industry. The midstream infrastructure agreements with the Williams Companies, referred to above, provide the Company with a gathering rate structure that enhances the Company's optionality to allocate capital in the future to either wet gas Marcellus development or dry gas Utica development, as desired based on project economics. In addition to the gathering agreement changes described above, the Company and the Williams Companies also concurrently negotiated incremental gas processing capacity and access to additional NGL infrastructure that is expected to result in more favorable NGL pricing for Southwestern. Commenting on the initiatives, Bill Way stated, "As we navigate this challenging time for our industry, the combination of our premier assets and the prudent strategic plan being implemented in 2016 provides the setting for a future that holds significant value for our shareholders."