Southwestern Energy Company

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Southwestern Energy's third 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 re-queue for any additional questions. This call is being recorded. I will now turn the call over to Brittany Rayford, Southwestern Energy's Vice President of Investor Relations. You may begin.

Thank you. Good morning, and welcome to Southwestern Energy's third quarter of 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 made 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 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 third quarter operating and financial results. Before I begin, I'd like to express my thanks to our dedicated team of consistently delivering on our priorities and driving improvements to our business and value for shareholders quarter after quarter. During the third quarter, we continued our disciplined optimization of free cash flow generation and capital investment. This approach underscores our strategic priorities of both reducing debt and maintaining the company's productive capacity. We believe we have materially improved our capital efficiency and positioned the company for enhanced through-the-cycle price realizations with a more moderate go-forward hedging practice. Our progress on these priorities this year has further strengthened the business and positions us for differentiated value capture as we shift towards an improving macro environment driven primarily by growing LNG demand. We've been encouraged by the industry-wide discipline and activity reductions in response to this year's natural gas prices. Rig counts remain well off their highs from the beginning of the year, particularly in the Haynesville, where rig counts are down approximately 40% year-to-date. Given the production profile of wells in the Hainesville, we expect overall Hainesville basin production to decline at least into early next year, giving us further confidence in the strengthening macro view. Beyond reduced activity and the slowdown in supply growth, it suggests LNG exports are up over 2 BCF per day year over year, recently exceeding 14 BCF per day while weather-adjusted power demand is up 2 BCF a day and exports to Mexico are up almost 1 BCF a day. These factors have helped to significantly dampen the end-of-season storage surplus, with new LNG in-service dates beginning next year. By the end of 2024, we expect LNG exports to grow to 16 BCF per day, over 90% of which is located along the Texas and Louisiana Gulf Coast. When we acquired our Haynesville assets, one of our guiding tenants was firm access to markets of choice. Both of our Haynesville acquisitions included strategic connectivity to advantaged markets along the Gulf Coast, including to LNG, which we increased shortly after closing. With a portion of that expanded capacity already in service and additional capacity expected to go into service by next year, we are well positioned to supply the next wave of LNG facilities as the largest current supplier of natural gas to LNG exporters. As we look ahead to 2024, we expect new LNG facilities to increase demand throughout the year. However, we believe strip prices are not yet high enough to incentivize production growth. Given this dynamic, we intend to continue optimizing free cash flow and capital investment to meet our dual priorities of progressing towards the $3.5 billion top end of our target debt range while maintaining the flexibility and optionality in the business. Our unique asset base provides capital allocation flexibility between basins, commodity windows, as well as assured firm market access. We will continue to optimize investment with the optionality to add back in the back half of 24 should market fundamentals support. We believe this approach to managing the business in a volatile commodity environment is prudent and will best position Swin to sustainably return capital to shareholders. Our hedging strategy helps ensure debt reduction while also providing upside commodity risk exposure as we move through 2024 and 2025. We continue to target a range of 40 to 60 percent of natural gas price protection when entering a new year. Basis protection is also key to commodity risk management. With the physical sales agreements and financial basis hedges, we expect to continue our practice of proactively protecting basis. During the third quarter, our basis hedging program helped offset wider Appalachian basis differentials, and we expect to continue layering on additional protection for future periods as we look to next year. While commodity prices in 23 are well off the highs we experienced last year, we have successfully progressed our key enterprise priorities. Strategic adjustments to our development plan are resulting in free cash flow while maintaining our productive capacity. With this free cash flow, along with the proceeds from non-core asset sales, we have already reduced debt by approximately $300 million in a year when natural gas prices are expected to average less than $3. Additionally, our team is driving further operational and capital efficiency improvements, especially in Haynesville, which is helping to continue lowering our enterprise cost structure. We're also proud to have progressed our leading sustainability programs and initiatives, including reducing our emissions, as outlined in our recently released 10th Annual Corporate Responsibility Report. As we look forward to 2024, we are well positioned to build on the successes of 23 and continue to drive sustainable shareholder value. I'll now turn the call over to Clay for some operational updates.