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SOUTHWESTERN ENERGY CO (SWN)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 was characterized by severe GAAP headwinds from a $2.1B full cost ceiling test impairment, driving a net loss of $1.5B (-$1.39 diluted EPS) despite positive operating cash flow; non-GAAP adjusted EPS was $0.12 and adjusted EBITDA was $472M .
  • Realized prices fell sharply YoY with Henry Hub down 35%; weighted average realized price including derivatives declined to $2.61/Mcfe vs $3.18 in Q1 2023, while total production decreased 9% YoY to 376 Bcfe .
  • Southwestern signaled a 2024 plan to align activity and capital investment with expected annual cash flow to maintain a consistent production profile at strip prices; formal guidance remains discontinued due to the pending Chesapeake merger, and the company did not host an earnings call .
  • Operational positives included Haynesville well cost reductions to $1,816 per lateral foot (down 13% vs 2023 average) and maintained hedging coverage into 2025; near-term stock narrative likely centers on impairment-driven GAAP loss, visibility reduction (no guidance/call), and merger progress .

What Went Well and What Went Wrong

What Went Well

  • Cost efficiency: Haynesville well cost averaged $1,816 per lateral foot, a 13% decrease from 2023 average, supporting capital efficiency in a low-price environment .
  • Cash generation and liquidity management: Net cash provided by operating activities was $496M; net debt/adjusted EBITDA stood at 1.9x with total debt of $4.0B, indicating manageable leverage through the cycle .
  • Disciplined 2024 posture: “For full-year 2024, the Company plans to align activity and capital investment with expected annual cash flow, resulting in an expected consistent production profile throughout the year at current strip prices.” (management statement in press release) .

What Went Wrong

  • Pricing and GAAP impairment: Weighted average realized price including derivatives fell to $2.61/Mcfe (from $3.18 YoY) amid a 35% decline in Henry Hub, triggering a $2.1B impairment and -$1.39 GAAP diluted EPS .
  • Production and unit costs: Total production declined to 376 Bcfe (from 411 Bcfe YoY); LOE/unit increased to $1.12/Mcfe vs $1.05 YoY, reflecting cost pressure even as well costs improved in Haynesville .
  • Investor visibility: Guidance was withdrawn and no conference call was held due to the pending Chesapeake merger, limiting direct management color on near-term trajectory and integration plans .

Financial Results

MetricQ1 2023Q3 2023Q4 2023Q1 2024
Revenues ($USD Millions)$2,118 $1,443 $1,692 $1,417
Net Income - (IS) ($USD Millions)$1,939 $45 $(658) $(1,535)
Diluted EPS ($USD)$1.76 $0.04 $(0.60) $(1.39)
Adjusted Diluted EPS (non-GAAP) ($USD)$0.31 $0.10 $0.17 $0.12
Adjusted EBITDA (non-GAAP) ($USD Millions)$799 $513 $611 $472
Operating Income (EBIT) ($USD Millions)$606 $7 $(1,530) $(2,057)
EBIT Margin %28.6% (606/2,118) 0.5% (7/1,443) -90.4% (-1,530/1,692) -145.2% (-2,057/1,417)
EBITDA Margin % (Adj)37.7% (799/2,118) 35.5% (513/1,443) 36.1% (611/1,692) 33.3% (472/1,417)
Cash from Operations ($USD Millions)$1,137 $477 $477 $496
Capital Investments ($USD Millions)$665 $454 $417 $538

KPIs

KPIQ1 2023Q3 2023Q4 2023Q1 2024
Total Production (Bcfe)411 425 410 376
Natural Gas Production (Bcf)353 368 352 325
Oil Production (MBbls)1,418 1,310 1,433 1,231
NGL Production (MBbls)8,240 8,228 8,144 7,261
Weighted Avg Realized Price incl. derivatives ($/Mcfe)$3.18 $2.43 $2.75 $2.61
LOE per Mcfe ($)$1.05 $1.06 $1.09 $1.12
G&A per Mcfe ($)$0.10 $0.10 $0.10 $0.13
DD&A per Mcfe ($)$0.75 $0.78 $0.79 $0.68

Segment Breakdown

MetricAppalachia Q4 2023Appalachia Q1 2024Haynesville Q4 2023Haynesville Q1 2024
Production (Bcfe)264 238 146 138
Gas Production (Bcf)206 187 146 138
Oil (MBbls)1,422 1,226 9 5
NGL (MBbls)8,141 7,260 2 1
Total weighted avg realized price excl. derivatives ($/Mcfe)$2.47 $2.34 $2.58 $1.95
Drilled / Completed / Wells to Sales9 / 5 / 11 15 / 15 / 6 8 / 12 / 12 14 / 12 / 12
Avg lateral length (ft)13,514 16,378 8,739 10,458
Well cost per lateral foot ($/ft)n/a$824 n/a$1,816
Capex: D&C ($MM)$107 $198 $215 $233
Capex: Land/Other ($MM)$15 $46 $3 $0
Capex: Capitalized interest/expense ($MM)$32 $35 $19 $20
Total Capex ($MM)$154 $279 $237 $253

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Production (Bcfe)Q4 2023400–420 Bcfe Guidance discontinued (no formal ranges) Withdrawn
Gas discount to NYMEX incl. transportation ($/Mcf)Q4 2023$0.58–$0.70/Mcf Guidance discontinued Withdrawn
Oil differential to WTI ($/Bbl)Q4 2023$11.50–$13.50/Bbl Guidance discontinued Withdrawn
NGL realization (% of WTI)Q4 202322%–30% Guidance discontinued Withdrawn
2024 activity/capex postureFY 2024n/a“Align activity and capital investment with expected annual cash flow… consistent production profile” (directional, not formal guidance) New directional statement

Earnings Call Themes & Trends

Note: No Q1 2024 conference call due to the pending Chesapeake merger; Q4 2023 also had no call .

TopicPrevious Mentions (Q3 2023 and Q4 2023)Current Period (Q1 2024)Trend
Capital discipline & free cash flowQ3: “Optimizing free cash flow generation and activity; debt reduction” (CEO remarks) . Q4: Free cash flow $162M; leverage 1.6x .Align capex with expected cash flow; consistent production profile .Consistent discipline; capex front-end loaded, tied to cash flow .
Cost structure & well costsQ3 LOE $1.06/Mcfe; DD&A $0.78/Mcfe . Q4 LOE $1.09; DD&A $0.79 .Haynesville $1,816/ft (-13% vs 2023); LOE $1.12/Mcfe .Efficiency gains in Haynesville despite modest LOE uptick .
Hedging strategyQ3: substantial swaps/collars; 2024–2025 positions . Q4: updated 2024–2025 coverage .2024: 502 Bcf hedged; 2025: 267 Bcf hedged; liquids hedges maintained .Sustained hedge coverage; collars/swaps calibrated to price environment .
Commodity pricing/macroQ3: Henry Hub down 69% YoY; realized price incl. derivatives $2.43/Mcfe . Q4: realized price $2.75/Mcfe .Henry Hub down 35% YoY; realized price $2.61/Mcfe .Price pressure persists; hedge offsets partially cushion .
M&A/merger processQ4: Guidance discontinued; no call; merger communications (S-4 upcoming) .Guidance discontinued; no call; S-4 registration process referenced .Integration planning; regulatory/proxy steps ongoing .

Management Commentary

  • “For full-year 2024, the Company plans to align activity and capital investment with expected annual cash flow, resulting in an expected consistent production profile throughout the year at current strip prices.”
  • “Haynesville well cost averaged $1,816 per lateral foot, a 13% decrease from 2023 average.”
  • Prior narrative framing: “Southwestern Energy is well positioned with its deep inventory, firm transportation portfolio and market access to benefit from the expected growing demand from LNG facilities along the Gulf Coast,” said Bill Way, President & CEO (Q3 2023) .
  • Guidance stance: “Due to the pending merger with Chesapeake, Southwestern Energy has discontinued providing guidance” and did not host a call for Q1 2024 .

Q&A Highlights

  • No Q1 2024 conference call or webcast due to the pending merger; consequently, there was no public Q&A session or new guidance clarifications .
  • Q4 2023 similarly had no call, reinforcing reduced near-term direct management commentary during merger process .

Estimates Context

  • Wall Street consensus estimates from S&P Global were unavailable for SWN due to a missing mapping in our SPGI Capital IQ integration. As a result, we cannot quantify beats/misses versus consensus for Q1 2024 at this time.
  • Given the sharp GAAP loss driven by impairment and a realized price decline, we would expect Street models to emphasize non-GAAP metrics (adjusted EBITDA, cash from operations) and to reflect lower commodity price assumptions and production cadence consistent with a cash flow-aligned program .

Key Takeaways for Investors

  • GAAP loss driven by $2.1B impairment masks underlying cash generation: adjusted EBITDA of $472M and CFO of $496M suggest resilient non-GAAP performance despite pricing pressure .
  • Pricing pressure remains the dominant headwind; realized price fell to $2.61/Mcfe with Henry Hub down 35% YoY, indicating hedging only partially mitigates the macro backdrop .
  • Operational execution improves cost efficiency: Haynesville well costs down 13%; longer laterals in Appalachia reflect ongoing technical focus on capital productivity .
  • 2024 strategy centers on cash flow alignment over growth; expect production consistency rather than volume expansion, with front-end loaded capex pacing .
  • Investor visibility is limited near-term: guidance withdrawn and no call due to the Chesapeake merger; the stock narrative will hinge on merger milestones and commodity trajectory .
  • Balance sheet remains manageable: total debt ~$4.0B; net debt/adjusted EBITDA at 1.9x, providing flexibility through the cycle .
  • Watch hedging and basis differentials: substantial 2024–2025 hedge coverage and noted basis discounts underscore price realization risks and the importance of transportation/assets mix .