Southwestern Energy Company

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Southwestern Energy's second quarter 2023 earnings call. Management will open the call for a question and answer session following prepared remarks. In the interest of time, please limit yourself to two questions and recue 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, Sarah. Good morning, and welcome to Southwestern Energy's second quarter 2023 earnings call. Joining me today are Bill Way, Chief Executive Officer, Clay Carroll, Chief Operating Officer, Carl Giesler, Chief Financial Officer, and Dennis Price, Senior Vice President 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 the 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. Actual results or 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. I will now turn the call over to Bill Way.

Thank you, Brittany, and good morning, everyone. We appreciate you joining us today to discuss our second quarter operating and financial results. Southwestern Energy's strong quarterly performance reflects the disciplined execution of our strategy of responsibly and efficiently developing our Tier 1 dual-basin inventory. We are generating long-term economic value for our shareholders by capitalizing on SWIN's advantaged assets, scale, expertise, and assured access to deliver our natural gas to premium markets of choice, including LNG across the Gulf Coast. We believe the execution of our strategy translates our strong E&P business into greater economic returns and equity value for our shareholders. As we continue to progress our actionable corporate priorities, we expect to narrow the gap between the intrinsic value of our business and the company's current market valuation. Our top priorities remain strengthening the balance sheet through debt reduction, improved capital efficiency, and maintaining the company's productive capacity while generally investing at maintenance capital levels. Progress we're making on these objectives continues to improve the resilience and strategic positioning of the business through the commodity price cycle. This quarter clearly demonstrates the positive trajectory of our capital efficiency. Our strong production performance was primarily due to improved completion efficiencies that resulted in reduced cycle times and additional producing days during the quarter. And as Clay will detail shortly, we also continue to see encouraging results from our inflation mitigation efforts. Additionally, the company continues to demonstrate the inherent flexibility in our business by adjusting our development program in response to overall and relative commodity price levels. Our updated guidance reflects both our production outperformance year-to-date and the ongoing activity optimization and inflation reduction efforts that have allowed us to invest less capital to generate that production. Consistent with our capital allocation strategy, free cash flow generated from our capital savings will be applied towards debt, further strengthening the balance sheet. We expect to reduce debt year over year from annual free cash flow and proceeds from a non-core asset sale in the second quarter. We ultimately plan to reduce debt to our target range of $3.5 to $3 billion, and as we approach this range, return capital to shareholders. Our constructive outlook for natural gas is supported by both supply and demand fundamentals. Regarding supply, we believe the capital discipline that we've seen through the industry-wide activity reductions will result in moderating if not declining sector production heading into next year. Regarding demand, both strong power burn and increased LNG imports should provide additional price support. With another facility reaching FID last month, nearly 12 BCF per day of incremental LNG liquefaction projects are now under construction along the Gulf Coast. These projects have been service dates as early as next year, with nearly 8 BCF per day expected to become operational by the end of 2025. We believe natural gas pricing would need to strengthen materially to incentivize the production growth necessary to meet this next wave of LNG demand. While Permian-associated gas growth is expected to provide some of the needed supply, particularly to the facilities on the south Texas coast, we believe that the Haynesville, given its advantage proximity, will be critical to supply the majority of this increased LNG demand. Southwestern Energy is already both the largest Haynesville producer and gas supplier to existing U.S. LNG facilities. The company is well positioned to supply the next wave of LNG from Haynesville. And additionally, we have further optionality in our business to leverage our direct access from Appalachia to the Gulf Coast through our firm transportation portfolio. And we have the required scale and inventory depth to remain a key natural gas supplier to the LNG sector for years to come. As we transition into what we believe will be a more constructive natural gas macro, our improving capital efficiency and strengthening balance sheet will position us well to drive increased economic returns and shareholder value. Let me turn the call over to Clay now for some operational updates.