Southwestern Energy Company (NYSE:SWN) Q1 2018 Earnings Conference Call Transcript

Apr 27, 2018 • 10:00 am ET

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Southwestern Energy Company (NYSE:SWN) Q1 2018 Earnings Conference Call Transcript

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Executive
Julian Bott

revolving credit facility. It replaces prior bank facility, pays off the $1.2 billion term loan and reduces the negative carrying cost of holding more than $900 million in cash, which clearly is not efficient.

Interest expense is expected to reduce by $30 million per year as a result of the decreased debt level and lower borrowing costs. The new reserve base bank loan facility, or RBL, is a secured revolving credit facility, maturing in April 2023 and supported by a borrowing base. It was oversubscribed with commitments from 29 banks and replaces three bank credit facilities that included a revolver and term loans. Pledged assets support an initial borrowing base of $3.2 billion, but we elected a $2 billion initial commitment, which provides ample liquidity without incurring unnecessary commitment fees. We paid off the $1.2 billion term debt with the cash on hand and drawings under the new revolver. Financial covenants are usual and customary with an initial debt-to-EBITDAX maximum of 4.5 times and a minimum current ratio of 1:1.

Lastly, a brief update on hedging. Southwestern Energy maintains a dynamic hedging program to protect cash flow and the ability to fund planned capital investments. Recent hedging activity reflected in the hedging schedule in the press release indicates that additional hedges have been added for 2019 and 2020, primarily using three-way collars. For 2018, approximately 70% of the forecast production is hedged, at an average floor price of $2.97, while retaining price upside exposure on half of the hedge volumes. That concludes my comments.

And I'll turn it back to Brenda to begin the Q&A session.