Thread regarding Southwestern Energy Co. layoffs

Haven’t seen anything on security lawsuit. But I do seem to recall some royalty lawsuits that were still hanging out there. What’s their status?

Anybody know about status of security fraud lawsuit?

I'll say it again, SWN cannot go forward too long without a credit facility. Even though we advertise as investing within cash flow - the normal swings in payments between payments for our gas are significant. We use some of it now for letters of credit as well. The bank restrictions exist and will exist with maybe a carve out for some minor dividend or buyback. I doubt the bonds have such restrictions, but have not looked. We won't have cash sitting around to use to meet our stated goal of paying off real debt - we net the cash we have against this secured loan when reporting our debt level or credit metrics to wall street.

After Fayetteville closes, 1.2B bank loan goes away. What remains is 1.0-1.5B cash, 1B 2022’s, 1B 2025’s, 600M 2026’s, 500M 2027’s. So there are covenants in these remaining bonds that restrict buybacks?

The current credit facility will likely go away, but it will be replaced with another. I don't know of any independent E&P company without a credit facility. It will be tied to reserves - just like this one, but probably won't require that it is drawn and sitting in cash. However, it will have restrictions on dividends and stock repurchases. They all do. If wildly successful, maybe SWN can negotiate something small or they can pay off the existing and then not enter into another one for a few months and in the meantime create a dividend or buyback - that would be careless though.

So by bank credit facility are you referring to the 1.2B secured loan, secured by Fayetteville? Surely that is going to paid down in entirety upon closing of sale or shortly after.

The bank credit facility restricts dividends and buybacks. The specific reference is in one of the other posts. It makes sense - poor credit and banks do not let you spend money for the benefit of anyone but them.

Does anyone know which of the bonds or secured loan contain covenants that restrict stock buyback? Or is this just a guess?

Probably going to be bought with private equity money? Deal has probably already been in the works you think?

Probably on lower end of that at best ... there aren’t many potential buyers ; BHP is in the market as well with Fayetteville assets ; prices are low and while people will understand this - going into shoulder months has to hurt sentiment

This should have been flipped 8 year or 5 years or 3 years ago .

...so how much do we guess Fayetteville will fetch? 1.5-2.0 B?

Plus PV@10% DOES NOT include anything for overhead, G&A, interest expense, etc.

Not too far from investment grade? That is crazy. SWN will not see investment grade for many years, if ever.

Press release states PV10 of $5.8B. This is based off the trailing 12-month gas price of about $3.11. The forward gas price is about $2.70, so need to haircut that $5.8B PV10 to get a real value.

Debt equals about $4.5B.

Credit investors may not be thinking about a liquidation, hence the prices of the bonds (also driven by high interest rate on each). However, based on the analysis of PV10 value above to debt, equity investors see very little remaining value in the company after debt holders are paid. THAT IS THE PROBLEM! Forget the fact that in remaining portfolio (after Fayetteville sale), there are fewer and fewer locations remaining.

I also find it troubling/amusing that the 2018 guidance is propped up by starting the year with 6 rigs and 5 frac crews. 2019 will be a tough year to keep up any kind of growth at current prices. Smoke and mirrors Way!

Investors see assets less than debt? 2026 and 2027 bonds trading at 101 cents on the dollar, 2022 98 cents/dollar. Corporate family rating BA3? Maybe not too far away from investment grade, as retained CF/debt stays above 20%?

Poor assets? You referring to Fayetteville? It’s a low decline gas field, that produces a large quantity of gas. 0.7 BCF/d? No, not as economic to drill new wells as Marcellus, but no other gas field in U.S. is either.

Mr. Strategy took years to come up with sell Fayetteville and reduce costs?? He should be part of the layoffs that have now effectively been announced.

Story is debt load and poor assets.

Equity investors see all that debt and value of assets being less than debt.

Cash on balance sheet is an anomaly. Credit so bad that we have to have our bank deal structured that way. I would be very surprised if our bank deal would allow us to buy back stock. Most bank deals prohibit that, so probably not possible.

Not to mention that Way is a complete idiot and equity investors cannot have any trust in him.

Bye bye miss American pie....

There’s always a chance that the market sees incompetence at the executive level, dying assets with fewer and fewer inventory opportunities, valueless sound bites during earnings calls, lack of results in the Utica and a bloated G&A burden (that’s not factored in to well economics). The writing is on the wall no matter the financial maneuvering to prolong the inevitable.

Maybe they should just earmark 300 million for stock buy back, initiate at ~$3.00. Buy back the 100 million shares they sold in 2016, Keep production flat for 2018 instead. Keep a healthy billion in cash to take out the 2020 secured term loan.