On this page of StockholderLetter.com we present the latest annual shareholder letter from SOUTHWESTERN ENERGY CO — ticker symbol SWN. Reading current and past SWN letters to shareholders can bring important insights into the investment thesis.
SWN Shareholder/Stockholder Letter Transcript:
2022 Annual Report Southwestern Energy is strategically positioned to play a vital role in providing lower-carbon, reliable, and affordable fuel for the world. As the largest dual-basin natural gas producer and top supplier to LNG exporters, we are delivering operational results ahead of expectations, expanding our free cash flow generation capacity, and are primed to deliver sustainable value creation for shareholders over the long-term. 2022 ANNUAL REPORT | 01 Dear Fellow Shareholders 2022 was an important year for Southwestern Energy and our industry. The outstanding Southwestern Energy team advanced our strategy by delivering strong performance, both financially and operationally, giving the company significant momentum in 2023. Energy security and global decarbonization have emerged as important global themes, underscoring the importance of U.S. natural gas and shining a bright light on Southwestern Energy s market-advantaged, responsibly sourced natural gas production. We are proud that Southwestern Energy is providing cleaner-burning, reliable, and affordable energy for the developed and developing world. The Company is well positioned to continue unlocking value through market cycles. Southwestern Energy s 2022 performance further strengthened our financial position and demonstrated the tangible benefits of scale from our dual-basin portfolio and enhanced asset base. Many internal and external factors supported our strategic execution in 2022, but none was more important than the contributions of our talented people. Our collective commitment to safe and responsible energy production, while fostering a diverse and inclusive environment, is fundamental to the Company s continued success. We extend our sincere gratitude to all those who work in service of Southwestern Energy s success. I am proud of our progress and excited about our plans for continued performance improvement. Southwestern Energy is primed to deliver sustainable value creation for shareholders. Free Cash Flow ($MM) * $848 55% $547 INCREASE FY21 FY22 Net Debt ($B) * $5.4 $4.4 F INA N CIAL RES ILIENCY Utilizing free cash flow generated during the year, we significantly reduced the Company s outstanding debt and repurchased $125 million of Southwestern Energy common stock in 2022. The Company also secured credit rating upgrades to one notch below investment grade at all three credit agencies, reflecting our significant progress strengthening the balance sheet over the past two years. Our capital allocation objective is to reduce debt and leverage to within or below our target ranges, while sustainably returning capital to shareholders. While in the near-term we plan to direct free cash flow generated to debt reduction, returning capital to shareholders remains core to our value proposition. OPE RATION AL EXCELL ENCE In 2022, we delivered operational results ahead of expectations, while navigating a challenging service cost and supply chain environment. We demonstrated our large-scale asset development andt integration expertise by successfully integrating our Haynesville assets, and fostered a culture of safety, learning, and continuous improvement, all while continuing to deliver success in Appalachia. At year-end, the Company reported record reserves of 21.6 Tcfe and a pre-tax PV-10 value of $46.4 billion. We believe these reserves, which represent only a fraction of our total inventory, support the Company s ability to sustainably operate and create value today and into the future. 02 | 2022 ANNUAL REPORT $1B DECREASE YE21 YE22 As the largest dual-basin natural gas producer and top supplier to LNG exporters, we demonstrated the benefits of a development strategy that prioritizes flow assurance and market optionality. Importantly, with our differentiated market access, Southwestern Energy is strategically positioned to supply increasing energy demands and capitalize on strong, long-term natural gas fundamentals. Net Debt to Adjusted EBITDA * 2.0x 0.7x 1.3x CORPORATE S U STA I NA B I L I T Y DECREASE We believe that natural gas, especially independently certified responsibly sourced gas (RSG), is foundational to a lower-carbon future. Southwestern Energy has a long and successful track record of leading ESG practices, including meaningfully improving our emissions profile. In 2022, we announced a longer-term greenhouse gas (GHG) emissions reduction target consistent with a pathway to net zero and completed the certification of all our production as responsibly sourced gas. Emissions management and GHG reduction progress are critical to the Company s sustainable value creation goals. We also believe other resources, especially water, must be responsibly managed. Through water conservation, recycling, and reuse, Southwestern Energy achieved its seventh year of fresh water neutral operations, having returned more fresh water to the environment than we consumed. These practices provide tangible benefits to the communities where we live and operate, while improving the sustainability of our business. THE FUTURE IN FOCU S YE21 Pre-Tax PV-10 ($B) * $46.4 On behalf of Southwestern Energy and its people, thank you for your continued investment and support. 2x $22.4 INCREASE YE21 Going forward, we intend to build on our momentum. Southwestern Energy is strategically positioned to meet the growing global demand for natural gas, including through LNG, while improving operational efficiency, enhancing our financial strength, managing enterprise-wide risk, and leveraging the optionality of the business to deliver superior and sustainable returns. YE22 YE22 * Free cash flow, net debt, net debt to adjusted EBITDA, and pre-tax PV-10 are non-GAAP financial measures. Please see explanations and reconciliations on the inside back cover. Sincerely, Bill Way President and Chief Executive Officer Southwestern Energy 2022 ANNUAL REPORT | 034/5/2023 Letter Continued (Full PDF)