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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 Date of report (Date of earliest event
reported): December 16, 2010 SOUTHWESTERN ENERGY COMPANY (Exact name of registrant as specified in its
charter) Delaware (State or other jurisdiction of incorporation)
2350 N. Sam Houston Pkwy. E., Suite
125, Houston, Texas (281) 618-4700 (Registrant's telephone number, including area
code) Not Applicable (Former name or former address, if changed
since last report) Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions: o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Section 8 - Other Events Item 8.01 Other Events. On December 16, 2010, Southwestern Energy Company
(the "Company") issued a news release announcing the Company's capital program
and guidance for 2011. The news release is furnished with this filing as Exhibit
99.1. Section 9 -
Financial Statements and Exhibits Item 9.01 Financial
Statements and Exhibits. (d) Exhibits. Exhibits. The following
exhibit is being furnished as part of this Report. Exhibit Description
SIGNATURES Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: December 16,
2010 By: /s/ GREG D.
KERLEY Name: Greg D. Kerley Title: Executive Vice President
and Chief Financial
Officer EXHIBIT
INDEX Exhibit Description NEWS RELEASE
SOUTHWESTERN ENERGY ANNOUNCES CAPITAL
PROGRAM AND GUIDANCE FOR 2011 Focused on Maximizing Returns from Low-Cost Operations and
Enhancing the Value of Midstream Assets in 2011 Company Provides Update on Marcellus Shale
Operations Houston,
Texas December 16, 2010...Southwestern Energy Company (NYSE: SWN) today
announced its planned capital investment program and guidance for 2011. The
companys total capital investment program in 2011 is planned to be
approximately $1.9 billion, down from approximately $2.1 billion in 2010. The
companys 2011 capital program includes approximately $1.6 billion for its
exploration and production segment, $225 million for its midstream segment and
$60 million for corporate and other purposes. Our
large inventory of high-return wells in the Fayetteville Shale gives us the
ability to have profitable growth in todays price environment and our economies
of scale in the play enable us to enjoy one of the lowest cost structures in the
industry. The continued focus on keeping our costs low and adding the
maximum value for each dollar we invest are the keys to success in 2011, stated
Steve Mueller, President and Chief Executive Officer of Southwestern Energy.
Our 2011 capital investment program continues to be dominated by
our position in the Fayetteville Shale. Our plan for the Fayetteville Shale
during the year is to transition from earning our acreage position by drilling
first wells in new sections and optimizing well spacing to more drilling on
multi-well pads which will result in faster drilling times. We currently plan to
start the year with 13 operated horizontal rigs in the Fayetteville Shale
and exit the year drilling with 11 rigs. We are currently operating one rig in
the Marcellus Shale and will increase to two rigs by year-end 2011. As a
result, our 2011 production is expected to be in a range of 465 to 475 Bcfe,
which is an increase of approximately 18% compared to our expected 2010 levels.
While we continue to believe that the long-term
fundamentals for natural gas are very good, we are entering the new year with
gas prices at lower levels than what we saw at the beginning of 2010. Our
2011 capital program is flexible, and we have the ability to adjust as
market conditions change throughout the year. All of our 2011 investments
are expected to be funded through our cash flow and borrowings
on our revolving credit facility, and our debt-to-total capitalization
ratio is expected to remain approximately 30% through 2011. In
addition, our Board of Directors has recently approved the first steps for
evaluating the possible future monetization of our Midstream gathering assets.
Our low-cost operations, our position in a world-class play and our ability to
be flexible -MORE-
in todays price environment give us the
opportunity to create significant value for our stockholders in 2011, stated
Mueller. The following tables provide annual forecast information for 2011,
as compared to projected 2010 results, for capital investments and the
gross and net well counts (including wells operated by others) for each of the
companys operating areas. Capital
Investments Projected 2010 Forecast 2011 (in
millions) Fayetteville
Shale Play $
1,300 $
1,150 East Texas 150 20 Appalachia 140 265 New
Ventures 140 170 Arkoma
Basin 15 10 Midstream
Services 270 225 Corporate
& Other 85 60 Total
Capital Investments $
2,100 $
1,900 Gross Well
Count Net Well
Count Projected 2010 Forecast 2011 Projected 2010 Forecast 2011 Fayetteville Shale Play 653 530-540 412 340-350 East Texas 27 8-10 17 2-3 Appalachia 12 40-45 10 35-40 Arkoma Basin 8 -- 1 -- New Ventures -- 2 -- 2 Total Well Count 700 580-600 440 380-400 Southwestern
expects to participate in approximately 580 to 600 total gross wells (480 to 500
operated) in 2011, compared to an estimated 700 total gross wells in 2010
(approximately 575 operated). The companys 2011 net well count will be
approximately 380 to 400 wells compared to approximately 440 net wells in 2010.
In
2011, Southwestern plans to participate in approximately 530 to 540 gross wells
in the Fayetteville Shale play, 440 to 450 of which will be operated. Average
drilled lateral length per operated horizontal well in the Fayetteville Shale
play is expected to increase to approximately 4,800 feet, up from an average of
approximately 4,400 feet projected for 2010. The company also expects that the
average time to drill to total depth from re-entry to re-entry will decrease in
2011 to approximately 9.5 days from approximately 11.0 days projected for
2010. The company is projecting average completed well
costs of $2.8 million per well for 2011. Approximately 60 of the operated wells
in 2011 are planned to be the first well drilled in a section compared to
approximately 220 operated wells projected for 2010. Approximately 2.3 wells per
drilling pad are planned in 2011, compared to approximately 1.8 wells per
drilling pad projected for 2010. In
the Marcellus Shale play in Pennsylvania, the company plans to begin the year
drilling with one operated rig and end the year with two operated rigs.
Southwestern plans to participate in a total of 40 to 45 gross wells, all of
which will be operated. In -MORE-
East
Texas, the company expects to participate in approximately 8 to 10 gross wells,
two of which will be operated and targeting the James Lime formation.
Southwestern also plans to invest approximately $170 million in various other
unconventional, exploration and New Ventures projects in 2011, which includes
drilling two operated wells. Of
the approximate $1.6 billion E&P capital budget for 2011, $1.2 billion (or
72%) will be invested in development and exploratory drilling, $50 million in
seismic and other geological and geophysical (G&G) expenditures, $145
million in leasehold and $255 million in capitalized interest and expenses and
other equipment, facilities and technology-related expenditures. Southwestern
Issues Guidance for 2011 Southwestern
is targeting total gas and oil production of 465 to 475 Bcfe, up approximately
18% over the companys expected 2010 levels. Approximately 410 to 420 Bcf of the
2011 targeted gas production is projected to come from the companys activities
in the Fayetteville Shale play, up from the 2010 projected production of
approximately 346 to 349 Bcf. As
of December 16, 2010, the company had NYMEX hedges in place on notional
volumes of 128.6 Bcf of its 2011 projected natural gas production hedged through
fixed price swaps and collars at a weighted average floor price of $5.43 per
Mcf. The companys projected results for 2011 are as follows: Estimated
Production by Quarter in 2011 1st
Quarter 2nd
Quarter 3rd
Quarter 4th
Quarter Full-Year
2011 Total Production (Bcfe) 109 - 111 115 - 117 119 - 121 122 - 126 465 - 475 Estimated E&P Pricing Deductions in 2011 ($ per Mcfe,
except for fuel charges) Average
Basis Differential $0.10 - $0.20 Average
Transportation Charge $0.25 - $0.30 Average
Fuel Charge 0.50% - 1.00% Estimated
E&P Operating Expenses in 2011 (assumes $4.50 per Mcf gas
price) Lease
Operating Expenses $0.88 - $0.92 General
& Administrative Expense $0.32 - $0.36 Taxes,
Other Than Income Taxes $0.14 - $0.18 Other
Operating Income and Expenses in 2011 (assumes $4.50 per Mcf gas
price) Midstream
Operating Income ($ in millions) $225 - $230 Net
Interest Expense ($ in millions) $37 - $38 Income
Tax Rate (90% - 95% Deferred) 39.0% Weighted
Average Diluted Shares Outstanding (in millions) 350 Assuming a NYMEX commodity price of $4.50 per Mcf of gas for 2011,
the company is targeting net income of $555 to $565 million and net cash
provided by operating activities before changes in operating assets and
liabilities (a non-GAAP measure; see -MORE-
Explanation and Reconciliation of Non-GAAP Financial Measures
below) of $1,615 to $1,625 million in 2011. The company expects its operating
income to approximate $960 to $970 million and its net income plus interest,
income tax expense, depreciation, depletion and amortization (also known as
EBITDA, a non-GAAP measure; see Explanation and Reconciliation of Non-GAAP
Financial Measures below) to be approximately $1,660 to $1,670 million in 2011.
The company has also provided additional price scenarios and their corresponding
estimated financial results for 2011 in the table below: NYMEX Commodity Prices Net Income Operating Income Net Cash Flow (1) EBITDA (1) $4.00 Gas $460 - $470 Million $800 - $810 Million $1,460 - $1,470 Million $1,500 - $1,510 Million $4.50 Gas $555 - $565 Million $960 - $970 Million $1,615 - $1,625 Million $1,660 - $1,670 Million $5.00 Gas $660 - $670 Million $1,125 - $1,135 Million $1,770 - $1,780 Million $1,825 - $1,835 Million (1) Net cash provided by operating
activities before changes in operating assets and liabilities and EBITDA are
non-GAAP measures; see Explanation and Reconciliation of Non-GAAP Financial
Measures below. Current
Update on Marcellus Shale Operations In 2010, the company has drilled 12 horizontal wells in Northeast
Pennsylvania targeting the Marcellus Shale. Three of the horizontal
wells located in the Greenzweig area were placed on production on November
19th and each are currently producing at daily gross rates of 5.9 to 6.8 MMcf
per day with flowing tubing pressures ranging from 1,722 to 1,848 psi.
Currently, there are four horizontal wells and one vertical well on production
with two additional horizontal wells in the initial flowback stage after
fracture stimulation and gross daily production from all wells in the Greenzweig
area is approximately 30 MMcf per day. Southwestern expects that a total of
seven horizontal wells and one vertical well will be producing from the area by
year-end. Explanation
and Reconciliation of Non-GAAP Financial Measures Net
cash provided by operating activities before changes in operating assets and
liabilities is presented because of its acceptance as an indicator of an oil and
gas exploration and production companys ability to internally fund exploration
and development activities and to service or incur additional debt. The company
has also included this information because changes in operating assets and
liabilities relate to the timing of cash receipts and disbursements which the
company may not control and may not relate to the period in which the operating
activities occurred. Net cash provided by operating activities before changes in
operating assets and liabilities should not be considered in isolation or
as a substitute for net cash provided by operating activities prepared in
accordance with generally accepted accounting principles. The table below
reconciles 2011 forecasted net cash provided by operating activities before -MORE-
changes
in operating assets and liabilities with 2011 forecasted net cash provided by
operating activities.
2011 Guidance NYMEX Commodity Price Assumption $4.00 Gas $4.50 Gas $5.00 Gas $70.00 Oil $70.00 Oil $70.00 Oil ($ in millions) Net cash provided by operating activities $1,460-$1,470 $1,615-$1,625 $1,770-$1,780 Add back (deduct): Assumed change in operating assets and liabilities -- -- -- Net
cash flow $1,460-$1,470 $1,615-$1,625 $1,770-$1,780
1-08246
71-0205415
(Commission File Number)
(IRS
Employer Identification No.)
77032
(Address of principal executive offices)
(Zip
Code)
Number
SOUTHWESTERN ENERGY COMPANY
Number
EBITDA is defined as net income plus interest expense, income tax expense, depreciation, depletion and amortization. Southwestern has included information concerning EBITDA because it is used by certain investors as a measure of the ability of a company to service or incur indebtedness and because it is a financial measure commonly used in the energy industry. EBITDA should not be considered in isolation or as a substitute for net income, net cash provided by operating activities or other income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. EBITDA as defined above may not be comparable to similarly titled measures of other companies. Net income is a financial measure calculated and presented in accordance with generally accepted accounting principles. The table below reconciles 2011 forecasted EBITDA with 2011 forecasted net income.
|
2011 Guidance | ||||
|
NYMEX Commodity Price Assumption | ||||
|
$4.00 Gas |
|
$4.50 Gas |
|
$5.00 Gas |
|
$70.00 Oil |
|
$70.00 Oil |
|
$70.00 Oil |
|
|
|
($ in millions) |
|
|
Net income attributable to SWN |
$460-$470 |
|
$555-$565 |
|
$660-$670 |
Add back: |
|
|
|
|
|
Provision for income taxes |
294-300 |
|
355-361 |
|
422-428 |
Interest expense |
38-39 |
|
37-38 |
|
35-36 |
Depreciation, depletion and amortization |
705-710 |
|
705-710 |
|
705-710 |
EBITDA |
$1,500-$1,510 |
|
$1,660-$1,670 |
|
$1,825-$1,835 |
Southwestern Energy Company is an integrated company whose wholly-owned subsidiaries are engaged in oil and gas exploration and production, natural gas gathering and marketing. Additional information on the company can be found on the Internet at http://www.swn.com.
Contacts:
Greg D. Kerley
Brad D. Sylvester, CFA
Executive Vice President
Vice President, Investor Relations
and Chief Financial Officer
(281) 618-4897
(281) 618-4803
All statements, other than historical financial information, may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
-MORE-
statements that address activities, outcomes and other matters that should or may occur in the future, including, without limitation, statements regarding the financial position, business strategy, production and reserve growth and other plans and objectives for the companys future operations, are forward-looking statements. Although the company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. The company has no obligation and makes no undertaking to publicly update or revise any forward-looking statements. You should not place undue reliance on forward-looking statements. They are subject to known and unknown risks, uncertainties and other factors that may affect the companys operations, markets, products, services and prices and cause its actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with forward-looking statements, risks, uncertainties and factors that could cause the companys actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to: the timing and extent of changes in market conditions and prices for natural gas and oil (including regional basis differentials); the companys ability to fund the companys planned capital investments; the companys ability to transport its production to the most favorable markets or at all; the timing and extent of the companys success in discovering, developing, producing and estimating reserves; the economic viability of, and the companys success in drilling, the companys large acreage position in the Fayetteville Shale play, overall as well as relative to other productive shale gas plays; the impact of federal, state and local government regulation, including any legislation relating to hydraulic fracturing, the climate or over the counter derivatives; the companys ability to determine the most effective and economic fracture stimulation for the Fayetteville Shale formation; the companys future property acquisition or divestiture activities; the impact of the adverse outcome of any material litigation; the costs and availability of oil field personnel, services, drilling supplies, raw materials, and equipment; increased competition; the financial impact of accounting regulations and critical accounting policies; the comparative cost of alternative fuels; conditions in capital markets, changes in interest rates and the ability of the companys lenders to provide it with funds as agreed; credit risk relating to the risk of loss as a result of non-performance by the companys counterparties and any other factors listed in the reports the company has filed and may file with the Securities and Exchange Commission (SEC). For additional information with respect to certain of these and other factors, see the reports filed by the company with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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