Southwestern Energy Company 1083 Sain Street
P.O. Box 1408
Fayetteville, AR 72702-1408
(501) 521-1141 FAX: (501) 521-0328
NEWS RELEASE For Further Information Contact:
Greg D. Kerley
Executive Vice President
and Chief Financial Officer
(501) 521-1141
SOUTHWESTERN ENERGY COMPANY ANNOUNCES
STRATEGY AND OUTLOOK FOR 2001
Priorities Include Increased Investment in E&P and Improving Balance Sheet;
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Sale of Utility Delayed
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Fayetteville, Arkansas - December 18, 2000...Southwestern Energy
Company (NYSE: SWN) today announced its business strategy and outlook for 2001.
The Company said it is planning a capital investment of $75 million in its core
exploration and production (E&P) business in 2001, compared to $68 million for
2000, representing an increase of 10%. Approximately $21 million of the
Company's 2001 capital investment program will be allocated to the Arkoma Basin,
$30 million to the Permian Basin and East Texas, and $24 million to the Gulf
Coast.
The Company has also taken advantage of the opportunity afforded by
high commodity prices to hedge a large percentage of 2001 production volumes.
"Our current hedge program ensures that the Company will have the cash flow
available to fund our expanded 2001 capital investment program," commented
Harold M. Korell, President and Chief Executive Officer of Southwestern. "We
also anticipate having significant free cash flow available to improve our
balance sheet." The Company's current hedge position is detailed in its December
7th press release.
The Company also commented on its effort to sell Arkansas Western Gas
Company (AWG). "In June 2000, we announced an effort to pursue the sale of our
utility business. That effort has not resulted in an offer that the Company
considers acceptable," stated Korell. "Fortunately, during this process, oil and
gas prices have moved in our favor, allowing us to hedge volumes for next year
to both fund our growing
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E&P program and improve our balance sheet. Additionally, we will now have the
time and flexibility to achieve a fair price for the utility." The Company
stated that it received several serious expressions of interest from bona fide
parties for the Company's utility assets. However, it is the Company's opinion
that the offers received do not reflect the fair value of AWG. For the time
being, Southwestern plans to operate AWG as a continuing part of its business.
Outlook for 2001
The following statements regarding estimates for the year 2001 are
considered to be forward-looking statements and the Company's actual financial
and operating results could differ materially from those projected as a result
of certain factors listed at the end of this press release. Financial impacts
that may result from Statement of Financial Accounting Standards No. 133 have
not been included in these projections.
"With a production goal of 38 Bcfe and assuming a $3.50 per Mcf NYMEX
gas price and $25.00 per barrel WTI price, we are targeting full-year 2001 cash
flow of $103 million, or $4.13 per share, EBITDA of $128 million and net income
of $32 million, or $1.28 per share," stated Korell.
The Company's historical differential for the average price received
for its gas production is approximately $.05 per Mcf below the NYMEX Henry Hub
index price, excluding the impact of hedges. Additionally, the Company's
historical differential for the average price received for its oil production is
approximately $1.00 per barrel below the West Texas Intermediate (WTI) crude oil
price, excluding the impact of hedges. The Company commented that 2001 cost
estimates for its E&P segment will increase to the following levels:
<TABLE>
<CAPTION>
FY 2000 FY 2001
Operating Expenses per Mcfe Forecast Target
--------------------------- -------- -------
<S> <C> <C>
Production expenses $.37 - $.39 $.42 - $.44
Production taxes $.14 - $.16 $.16 - $.18
General & administrative expense $.29 - $.31 $.27 - $.29
Full cost pool amortization rate* $1.06 - $1.08 $1.07 - $1.09
</TABLE>
* The Company's full cost pool amortization rate can vary from this
estimate due to changes in the level of oil and gas reserves and
changes in the level of unevaluated costs.
The Company also expects operating income and cash flow from its
utility segment to be approximately $13 and $15 million, respectively, assuming
normal weather. Operating income from its gas marketing segment is expected to
approximate $2 million in 2001. The Company expects a loss from its
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investment in the NOARK Pipeline of approximately $2 million. Interest expense
is estimated at approximately 8.0% of its outstanding short- and long-term debt
obligations. The Company also expects all taxes in 2001 to be deferred due to
the Company's tax loss carryforward position. The Company's common shares
outstanding for the year 2001 are expected to average 25 million.
The Company's forecast for 2001 assumes a $3.50 per Mcf NYMEX gas price
and $25.00 per barrel WTI price, and includes current commodity price hedges in
place. The following table demonstrates different price scenarios and their
corresponding estimated results:
<TABLE>
<CAPTION>
----------------- ----------------- ------------------ -----------------
Gas Prices EBITDA Cash Flow Earnings
---------- ------ --------- --------
----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C>
$3.50 per Mcf $128 Million $103 Million $32 Million
----------------- ----------------- ------------------ -----------------
$4.50 per Mcf $136 Million $112 Million $37 Million
----------------- ----------------- ------------------ -----------------
$5.50 per Mcf $150 Million $126 Million $46 Million
----------------- ----------------- ------------------ -----------------
</TABLE>
The Company is hosting a teleconference call related to this press
release on Monday, December 18, at 11:00 a.m. EST. The dial-in number for the
teleconference is 800-530-9601 and the reservation number is 17214726. The
teleconference will also be webcast on the Company's website:
http://www.swn.com. RealPlayer 8 Basic is required to listen to the
teleconference and can be downloaded from the website.
Southwestern Energy Company is engaged in oil and gas exploration and
production in the Arkoma Basin, the Permian Basin, and the onshore Gulf Coast.
Arkansas Western Gas Company serves customers in northern Arkansas, including
the communities of Fayetteville, Springdale, Rogers and Bentonville, one of the
fastest growing areas in the United States. Additional information on the
Company can be found on the Internet at http://www.swn.com.
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. 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. Important factors that could cause actual results to differ
materially from those in the forward-looking statements herein include, but are
not limited to, the timing and extent of
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changes in commodity prices for gas and oil, the timing and extent of the
Company's success in discovering, developing, producing, and estimating
reserves, property acquisition or divestiture activities that may occur, the
effects of weather and regulation on the Company's gas distribution segment, the
value that the Company's gas distribution segment may bring in exploring sales
opportunities for this segment, increased competition, legal and economic
factors, governmental regulation, the financial impact of accounting regulations
for derivative instruments, changing market conditions, the comparative cost of
alternative fuels, conditions in capital markets and changes in interest rates,
availability of oil field services, drilling rigs, and other equipment, as well
as various other factors beyond the Company's control. A discussion of these and
other factors affecting the Company's performance is included in the Company's
periodic reports filed with the Securities and Exchange Commission including its
Annual Report on Form 10-K for the year ended December 31, 1999.
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