Southwestern Energy Company

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Southwestern Energy Fourth Quarter 2021 Earnings Call. Management will open up the call for a question and answer session following the prepared remarks. In the interest of time, please limit yourself to two questions and re-queue for additional questions. This call is being recorded. I will now turn the call over to Brittany Rayford, Southwestern Energy's Director of Investor Relations. You may begin.

Thank you, Andrea. Good morning, and welcome to Southwestern Energy's fourth quarter of 2021 earnings and 2022 guidance call. Joining me today are Bill Way, President and Chief Executive Officer, Clay Carroll, Chief Operating Officer, Carl Giesler, Chief Financial Officer, and Jason Kurtz, Head of Marketing and Transportation. Before we get started, I'd like to point out that many of the comments we make during this call are forward-looking statements that involve risk and uncertainties affecting outcomes. Many of these are beyond our control and are discussed in more detail in the risk factors and forward-looking statement sections of our annual report and quarterly reports as filed with the Securities and Exchange Commission. Although we believe the expectations expressed are based on reasonable assumptions, they are not guarantees of future performance and actual results and developments may differ materially and we are under no obligation to update them. We may also refer to some non-GAAP financial measures which help facilitate comparisons across periods and with peers. For any non-GAAP measures we use, a reconciliation to the nearest corresponding GAAP measure can be found in our earnings release available on our website. And I'll turn over the call to Bill Way.

Thank you, Brittany, and good morning, everyone. We really appreciate you joining us on our call today. Our strategic intent is to generate resilient and growing free cash flow from responsible natural gas development. 2021 was clearly transformative for Southwestern Energy, and we did just that and more. We further improved our financial strength and generated material free cash flow that we expect to grow meaningfully in 22 and beyond. We delivered results above expectations for both the fourth quarter and the full year 2021. We achieved record reserves and reserve value, generated almost $550 million of free cash flow during the year, and improved nearly every operating and financial metric, all while differentially progressing our RSG and other ESG initiatives. These results and more generally our deliberate actions taken over the past few years to strengthen our operations, upgrade our inventory, improve our cost structure, and bolster our financial position laid the foundation for our strategic entry into the Haynesville. The move into the Haynesville strengthened the company's position as a leading independent natural gas producer, now with core positions in both premier U.S. natural gas basins. More important than just that, we are capturing the tangible benefits of our increased scale, which makes Southwestern Energy a more compelling shareholder value proposition. Specifically, we deepened our high-quality inventory and opportunity set, realized greater operating economies, expanded our optionality and market reach through direct access to LNG and global sales points, and lowered the overall risk profile of SWIN. All of this speaks to sustainable value for the shareholder through the commodity cycle. Our strategic entry into Haynesville was well-timed. Since announcing our first Haynesville transaction back in June, gas fundamentals have strengthened materially, improving the economic value of the transactions. As mentioned previously, the most immediate example of Haynesville adding economic value for our shareholders is our year-end 2021 company reserves that are at a record 21 trillion cubic feet equivalent. These reserves have an SEC pre-tax PV10 value of more than $22 billion, greater than two times our current enterprise value. These reserves and PV10 value reflect the quality and depth of our dual basin inventory and the company's ability to generate resilient free cash flow for years to come. They also reflect a balance of high margin, low basis dry gas production in Haynesville and high-margin, low-decline basis-protected dry gas and liquids-rich production in Appalachia, providing market and hydrocarbon diversification and optionality that clearly differentiates Swinn from its peers. Our increased level of free cash flow generation capacity from our expanded scale has further solidified the company's financial position. As Carl will detail shortly, we ended the year at two times leverage and expect to achieve a leverage ratio within our target range of 1.5 to 1.0 during 2022 as we apply our increasing free cash flow to debt retirement towards our target debt range. We have a disciplined capital allocation framework that currently prioritizes debt repayment to ensure that we protect our financial strength through the cycle. As we begin to approach our leverage ratio this year, and have a clear line of sight and deliberate path to our target total debt range, based on commodity prices and our projected free cash flow, we expect to be in a position where we could initiate a capital return program. We believe the return of capital is a fundamental part of the company's overall economic return for shareholders. We used the Haynesville acquisition to lower our cost of debt, increase our liquidity, and extend our maturity runway. Recognizing the company's increased scale and improved business and financial profile, S&P has upgraded the company twice in the past six months. Most recently, in January, to BB+. We believe that we are on the path to returning to investment grade. I'd like to comment further on SWIN's ongoing commitment to responsibly sourced gas. We made further progress implementing our comprehensive RSG program throughout our Appalachia operations, launching a similar program throughout our Haynesville operations. Our more rigorous, company-wide, well-leveled certification and pad-level monitoring differentiates our RSG efforts from those of our peers. By the end of 2022, we will have certified over 5 BCF per day of gross RSG production across both of our basins. Additionally, in 21, we progressed methane reduction projects and other ESG projects, including replacing all of the fresh water that we used in our operations, and we detailed other ESG initiatives in our eighth annual corporate responsibility report. Our strategy, our execution of that strategy, and our people have transformed Southwestern Energy, significantly advancing our strategic intent to generate resilient free cash flow from responsible natural gas development and increasing the value realization opportunities for our shareholders. 2022 will be focused on delivery of that value and more. It will be a year of catalysts as we execute operationally and financially to drive expanded free cash flow, margins, and economic returns supported by strong commodity fundamentals. The market fundamentals for natural gas should provide support for our expected free cash growth. Consolidation investor-driven producer discipline should continue to support the commodity market as well. At the same time, persistent power demand and stronger LNG and Mexico export demand are also expected to continue. We believe that natural gas is foundational in a low-carbon future, and the company should differentially benefit from both U.S. and export natural gas demand, given that more than 75% of natural gas demand growth through 2025 is expected to occur in the Gulf Coast region where approximately 65% of our natural gas is sold. On the liquid side, we see solid structural support for NGLs and oil through increasing post-pandemic demand, historically low storage levels, and moderated supply growth. While the positive macro outlook is accelerating our free cash flow generation, we are delivering growing value from the execution of our strategy to capture the tangible benefits of scale. I'll now turn the call over to Clay to provide more operational detail on our 2021 results and our 2022 outlook.