SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

As of September 30, 2018





Pro Forma

Pro Forma



Fayetteville

Senior Note



Shale Sale

Repurchase

Pro Forma

(in millions)

Historical

Adjustments

Adjustments

Combined

ASSETS

Current assets:

Cash and cash equivalents

$

$

(a)

$

(c)

$

Accounts receivable, net

–  

–  

Derivative assets

(b)

–  

Other current assets

–  

–  

Current assets held for sale

(b)

–  

–  

Total current assets



Natural gas and oil properties, using the full cost method, including $1,767 million as of September 30, 2018 excluded from amortization

(b)

–  

Gathering systems

–  

–  

Other

–  

–  

Less: Accumulated depreciation, depletion and amortization

–  

–  

Total property and equipment, net

–  



Other long-term assets

–  

–  

Long-term assets held for sale

(b)

–  

–  

TOTAL ASSETS

$

$

$

$



LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

$

–  

$

–  

$

Taxes payable

(b)

–  

Interest payable

–  

(c)

Derivative liabilities

–  

–  

Other current liabilities

–  

–  

Current liabilities held for sale

(b)

–  

–  

Total current liabilities



Long-term debt

–  

(c)

Pension and other postretirement liabilities

–  

–  

Other long-term liabilities

(b)

–  

Long-term liabilities held for sale

(b)

–  

–  

Total long-term liabilities



Commitments and contingencies



Equity:

Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 586,195,162 shares as of September 30, 2018

–  

–  

Additional paid-in capital

–  

–  

Accumulated deficit

(b)

(c)

Accumulated other comprehensive loss

–  

–  

Common stock in treasury, 4,860,280 shares as of September 30, 2018 

–  

–  

Total equity

TOTAL LIABILITIES AND EQUITY

$

$

$

$



PRO FORMA CONDENSED

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

For the Nine Months Ended September 30, 2018





Pro Forma

Pro Forma



Fayetteville

Senior Note



Shale Sale

Repurchase

Pro Forma

(in millions, except share and per share amounts)

Historical

Adjustments

Adjustments

Combined

Operating Revenues:

Gas sales

$

$

(d)

$

–  

$

Oil sales

–  

–  

NGL sales

–  

–  

Marketing

(d)

–  

Gas gathering

(d)

–  

–  

Other

–  

–  



–  

Operating Costs and Expenses:

Marketing purchases

(d)

–  

Operating expenses

(d)

–  

General and administrative expenses

(d)

–  

Restructuring charges

–  

–  

Depreciation, depletion and amortization

(d)

–  

Impairments

–  

–  

Taxes, other than income taxes

(d)

–  



–  

Operating Income

–  



Interest expense, net

–  

(e)



Loss on derivatives

(d)

–  

Loss on early extinguishment of debt

–  

–  

Other income, net

–  

–  

Income before income taxes

Income tax expense

 –  

–  

–  

 –  

Net Income

$

$

$

$

Mandatory convertible preferred stock dividend

 –  

–  

–  

 –  

Participating securities – mandatory convertible preferred stock

–  

–  

Net Income Attributable to Common Stock

$

$

$

$



Earnings per Common Share

Basic

$

$

Diluted

$

$



Weighted Average Common Shares Outstanding

Basic

Diluted



PRO FORMA CONDENSED

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

For the Year Ended December 31, 2017





Pro Forma

Pro Forma



Fayetteville

Senior Note



Shale Sale

Repurchase

Pro Forma

(in millions, except share and per share amounts)

Historical

Adjustments

Adjustments

Combined

Operating Revenues:

Gas sales

$

$

(d)

$

–  

$

Oil sales

–  

–  

NGL sales

–  

–  

Marketing

(d)

–  

Gas gathering

(d)

–  

–  

Other

–  

–  



–  

Operating Costs and Expenses:

Marketing purchases

(d)

–  

Operating expenses

(d)

–  

General and administrative expenses

(d)

–  

Depreciation, depletion and amortization

(d)

–  

Gain on sale of assets, net

–  

–  

Taxes, other than income taxes

(d)

–  



–  

Operating Income

–  



Interest expense, net

–  

(e)



Gain on derivatives

(d)

–  

Loss on early extinguishment of debt

–  

–  

Other income, net

(d)

–  

Income before income taxes

Income tax benefit

–  

–  

Net Income

$

$

$

$

Mandatory convertible preferred stock dividend

–  

–  

Participating securities – mandatory convertible preferred stock

(d)

(e)

Net Income Attributable to Common Stock

$

$

$

$



Earnings per Common Share

Basic

$

$

Diluted

$

$



Weighted Average Common Shares Outstanding

Basic

Diluted



(a)

To adjust for the proceeds and other estimated closing adjustments associated with the divestiture.  The following table reflects the estimated cash proceeds:

PRO FORMA CONDENSED

(in millions)

Gross proceeds

$

Less: Estimated closing and post-closing adjustments

Estimated net cash proceeds

$



(b)

To remove the Company’s E&P and related midstream gathering assets associated with the Fayetteville Shale sale pursuant to the Membership Interest Purchase Agreement dated August 30, 2018, as amended.  The following is a summarization of the application of net proceeds and estimated gain on the divestiture:

PRO FORMA CONDENSED

(in millions)

Estimated net cash proceeds

$

Current assets held for sale

Natural gas and oil properties, using the full cost method

Long-term assets held for sale

Current liabilities held for sale

Long-term liabilities held for sale

Other long-term liabilities (1)

Derivative assets (2)

Estimated gain on disposition of assets

Income tax expense  (3)

Estimated net gain on disposition of assets

$



(1)

The Company is obligated to pay a portion of certain future contractual commitments related to unused firm transportation through 2020 per the amended Membership Interest Purchase Agreement.

(2)

Represents premiums on certain fixed price swaps which were novated to the buyer per the amended Membership Interest Purchase Agreement.

(3)

Current income tax expense of approximately $6 million relates to the Fayetteville Shale sale.  Deferred income tax expense was offset by the Company’s recognition of a valuation allowance.

(c)

To adjust for the repurchase of $900 million principal amount of certain of the Company’s outstanding senior notes.

PRO FORMA CONDENSED

(in millions)

Cash used in debt repurchase

$

Less: Interest payable

Less: Tender premiums and estimated bank and legal fees

Principal amount of senior notes repurchased

Less: Unamortized debt costs

Reduction in long-term debt

$



Tender premiums and estimated bank and legal fees

$

Unamortized debt costs

Loss on early extinguishment of debt

$



(d)

Adjustments are to eliminate revenues and costs of the Company’s E&P and related midstream gathering operations associated with the Fayetteville Shale sale from the Company’s consolidated operations.  This includes the impact of marketing the production from the Fayetteville Shale by the Company’s marketing subsidiary as well as the impact of certain derivative positions included in the Fayetteville Shale sale agreement.  Any deferred income tax effects for the nine months ended September 30, 2018 and year ended December 31, 2017, were offset by a change in our valuation allowance.

(e)

Interest expense is adjusted to show the impact of the planned repurchase of $900 million of certain of the Company’s outstanding senior notes on January 1, 2017.  Any deferred income tax effects for the nine months ended September 30, 2018 and year ended December 31, 2017, were offset by a change in our valuation allowance.