SOUTHWESTERN ENERGY CO (Form: 10-Q, Received: 04/27/2017 16:35:16)

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SOUTHWESTERN ENERGY COMPANY

INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2017

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Changes in Equity	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Results of Operations	29
	Liquidity and Capital Resources	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

All statements, other than historical fact or present 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 (the “Exchange Act”) . All statements that address activities, outcomes and other matters that should or may occur in the future, including, without limitation, statements regarding the financial position, business strategy, production and reserve growth and other plans and objectives for our future operations, are forward-looking statements. Although we believe the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance. We have no obligation and make no undertaking to publicly update or revise any forward-looking statements, except as may be required by law.

Forward-looking statements include the items identified in the preceding paragraph, information concerning possible or assumed future results of operations and other statements in this Quarterly Report on Form 10- Q identified by words such as “anticipate,” “intend,” “plan,” “project,” “estimate,” “continue,” “potential,” “should,” “could,” “may,” “will,” “objective,” “guidance,” “outlook,” “effort,” “expect,” “believe,” “predict,” “budget,” “projection,” “goal,” “forecast,” “target” or similar words.

You should not place undue reliance on forward-looking statements. They are subject to known and unknown risks, uncertainties and other factors that may affect our operations, markets, products, services and prices and cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with forward-looking statements, risks, uncertainties and factors that could cause our actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to:

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the timing and extent of changes in market conditions and prices for natural gas , oil and natural gas liquids (“NGLs”) (including regional basis differentials);

our ability to fund our planned capital investments;

a change in our credit rating;

the extent to which lower commodity prices impact our ability to service or refinance our existing debt;

the impact of volatility in the financial markets or other global economic factors;

difficulties in appropriately allocating capital and resources among our strategic opportunities;

the timing and extent of our success in discovering, developing, producing and estimating reserves;

our ability to maintain leases that may expire if production is not established or profitably maintained;

our ability to realize the expected benefits from recent acquisitions ;

our ability to transport our production to the most favorable markets or at all;

availability and costs of personnel and of products and services provided by third parties;

the impact of government regulation, including the ability to obtain and maintain permits, any increase in severance or similar taxes, and legislation relating to hydraulic fracturing, climate and over-the- counter derivatives;

the impact of the adverse outcome of any material litigation against us;

the effects of weather;

increased competition and regulation;

the financial impact of accounting regulations and critical accounting policies;

the comparative cost of alternative fuels;

credit risk relating to the risk of loss as a result of non-performance by our counterparties; and

any other factors listed in the reports we have filed and may file with the Securities and Exchange Commission (“ SEC ”) .

Should one or more of the risks or uncertainties described above or elsewhere in this Quarterly Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. We specifically disclaim all responsibility to publicly update any information contained in a forward-looking statement or any forward-looking statement in its entirety and therefore disclaim any resulting liability for potentially related damages.

All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.


SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	For the three months ended
	March 31,
	2017		2016

Operating Revenues:
Gas sales	$	503	$	315
Oil sales		23		11
NGL sales		40		17
Marketing		253		198
Gas gathering		27		38
		846		579
Operating Costs and Expenses:
Marketing purchases		251		196
Operating expenses		147		165
General and administrative expenses		50		54
Restructuring charges		–		64
Depreciation, depletion and amortization		106		143
Impairment of natural gas and oil properties		–		1,034
Taxes, other than income taxes		26		23
		580		1,679
Operating Income (Loss)		266		(1,100)
Interest Expense:
Interest on debt		58		53
Other interest charges		2		2
Interest capitalized		(28)		(41)
		32		14

Gain (Loss) on Derivatives		116		(14)
Loss on Early Extinguishment of Debt		(1)		–
Other Income (Loss), Net		2		(3)

Income (Loss) Before Income Taxes		351		(1,131)
Provision (Benefit) for Income Taxes:
Deferred		–		1
		–		1
Net Income (Loss)	$	351	$	(1,132)
Mandatory convertible preferred stock dividend		27		27
Participating securities - mandatory convertible preferred stock		43		–
Net Income (Loss) Attributable to Common Stock	$	281	$	(1,159)

Earnings (Loss) Per Common Share:
Basic	$	0.57	$	(3.03)
Diluted	$	0.57	$	(3.03)

Weighted Average Common Shares Outstanding:
Basic		493,068,000		382,870,847
Diluted		494,494,995		382,870,847

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

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SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED ST ATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

	For the three months ended
	March 31,
	2017		2016

Net income (loss)	$	351	$	(1,132)

Change in value of pension and other postretirement liabilities:
Amortization of prior service cost and net loss included in net periodic pension cost (1)		–		1

Change in currency translation adjustment		–		3

Comprehensive income (loss)	$	351	$	(1,128)

(1) Net of $1 million in taxes for the three months ended March 31, 2017 and 2016 .

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

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SOUTHWESTERN ENERGY C OMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

	March 31,		December 31,
	2017		2016
ASSETS	(in millions)
Current assets:
Cash and cash equivalents	$	1,382	$	1,423
Accounts receivable, net		310		363
Derivative assets		58		51
Other current assets		39		35
Total current assets		1,789		1,872
Natural gas and oil properties, using the full cost method, including $2,078 million as of March 31, 2017 and $2,105 million as of December 31, 2016 excluded from amortization		22,942		22,653
Gathering systems		1,306		1,299
Other		536		537
Less: Accumulated depreciation, depletion and amortization		(19,641)		(19,534)
Total property and equipment, net		5,143		4,955
Other long-term assets		264		249
TOTAL ASSETS	$	7,196	$	7,076
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	266	$	41
Accounts payable		436		473
Taxes payable		50		59
Interest payable		29		74
Dividends payable		27		27
Derivative liabilities		280		355
Other current liabilities		33		35
Total current liabilities		1,121		1,064
Long-term debt		4,364		4,612
Pension and other postretirement liabilities		47		49
Other long-term liabilities		386		434
Total long-term liabilities		4,797		5,095
Commitments and contingencies ( Note 1 0 )
Equity:
Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 502,497,469 shares as of March 31, 2017 (does not include 3,34 6,865 shares issued on April 17, 2017 on account of a divi dend declared on March 21, 2017 ) and 495,248,369 as of December 31, 2016		5		5
Preferred stock, $0.01 par value, 10,000,000 shares authorized, 6.25% Series B Mandatory Convertible, $1,000 per share liquidation preference, 1,725,000 shares issued and outstanding as of March 31, 2017 and December 31, 2016, conversion in January 2018		–		–
Additional paid-in capital		4,687		4,677
Accumulated deficit		(3,374)		(3,725)
Accumulated other comprehensive loss		(39)		(39)
Common stock in treasury , 31,269 shares as of March 31, 2017 and December 31, 2016		(1)		(1)
Total equity		1,278		917
TOTAL LIABILITIES AND EQUITY	$	7,196	$	7,076

The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.

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SOUTHWESTERN E NERGY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	For the three months ended
	March 31,
	2017		2016
	(in millions)
Cash Flows From Operating Activities:
Net income (loss)	$	351	$	(1,132)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		106		143
Impairment of natural gas and oil properties		–		1,034
Amortization of debt issuance costs		2		2
Deferred income taxes		–		1
(Gain) loss on derivatives, un settle d		(146)		21
Stock-based compensation		6		9
Restructuring charges		–		42
Loss on early extinguishment of debt		1		–
Other		(2)		5
Change in assets and liabilities:
Accounts receivable		53		103
Accounts payable		(13)		(124)
Taxes payable		(8)		(12)
Interest payable		(24)		(11)
Other assets and liabilities		(14)		11
Net cash provided by operating activities		312		92

Cash Flows From Investing Activities:
Capital investments		(340)		(196)
Proceeds from sale of property and equipment		2		–
Other		4		–
Net cash used in investing activities		(334)		(196)

Cash Flows From Financing Activities:
Payments on short-term debt		(25)		–
Payments on revolving credit facility		–		(864)
Borrowings under revolving credit facility		–		2,600
Payments on commercial paper		–		(242)
Borrowings under commercial paper		–		242
Change in bank drafts outstanding		6		(19)
Preferred stock dividend		–		(27)
Other		–		(4)
Net cash provided by (used in) financing activities		(19)		1,686

Increase (decrease) in cash and cash equivalents		(41)		1,582
Cash and cash equivalents at beginning of year		1,423		15
Cash and cash equivalents at end of period	$	1,382	$	1,597

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

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SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

Common Stock

Preferred Stock

Additional

Accumulated Other

Common

Paid-In

Accumulated

Comprehensive

Stock in

Issued

Amount

Issued

Capital

Deficit (1)

Income (Loss)

Treasury

Total

(in millions, except share amounts)

Balance at December 31, 2016

495,248,369

1,725,000

4,677

(3,725)

(39)

(1)

917

Comprehensive income:

Net income

–

351

–

351

Other comprehensive income

–

Total comprehensive income

–

351

Stock-based compensation

–

Preferred stock dividend ( 2 )

2,751,410

–

Exercise of stock options

–

Issuance of restricted stock

4,549,122

–

Cancellation of restricted stock

(113,185)

–

Performance units vested

121,208

–

Tax withholding – stock compensation

(59,455)

–

Balance at March 31, 2017

502,497,469

1,725,000

4,687

(3,374)

(39)

(1)

1,278

(1)

Includes a net cumulative-effect adjustment of $59 million related to the recognition of previously unrecognized windfall tax benefits resulting from the adoption of ASU 2016-09 as of the beginning of 2017. This adjustment was offset by an increase in net deferred tax assets and the related income tax valuation allowance of the same amount.

(2)

Does not include 3,34 6,865 shares issued on April 17, 2017 and distributed to holders of the Company's mandatory convertible preferred stock.

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

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SOUTHWESTERN ENERG Y COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESEN TATION

Southwestern Energy Company (including its subsidiaries, collectively “Southwestern” or the “Company”) is an independent energy company engaged in natural gas , oil and NGL exploration, development and production (“E&P”). The Company is also focused on creating and capturing additional value through its natural gas gathering and marketing businesses (“Midstream Services ”). Southwestern conducts most of its businesses through subsidiaries and operates principally in two segments: E&P and Midstream Services .

Exploration and Production. Southwestern’s primary business is the exploration for an d production of natural gas, oil and NGLs, with current operations principally focused on the development of unconventional natural gas reservoirs located in Pennsylvania, West Virginia and Arkansas. The Company’s operations in northeast Pennsylvania, herein refer red to as “Northeast Appalachia,” are primarily focused on the unconventional natural gas reservoir known as the Marcellus Shale. O perations in West Virginia and southwest Pennsylvania, herein refer red to as “Southwest Appalachia,” are focused on the Marcellus Shale, the Utica and the Upper Devonian unconventional natural gas and oil reservoirs. Collectively, Southwestern refer s to its properties located in Pennsylvania and West Virginia as the “Appalachian Basin.” The Company’s operations in Arkansas are primarily focused on an unconventional natural gas reservoir known as the Fayetteville Shale. Southwestern ha s activities ongoing in Colorado and Louisiana, along with other areas in which it is currently assessing new development opportunities. The Company also ha s drilling rigs located in Pennsylvania, West Virginia and Arkansas , as well as in other operating areas, and provide s oilfield products and services, principally serving its E&P operations.

Midstream Services . Through the Company’s affiliated midstream subsidiaries, Southwestern engage s in natural gas gathering activities in Arkansas and Louisiana. These activities primarily support the Company’s E&P operations and generate revenue from fees associated with the gathering of natural gas. Southwestern’s marketing activities capture opportunities that arise through the marketing and transportation of the natural gas, oil and NGLs produced in its E&P operations.

The accompanying unaudited condensed consolidated financial statements were prepared using accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information relating to the Company’s organization and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been appropriately condensed or omitted in this Quarterly Report. The Company believes the disclosures made are adequate to make the information presented not misleading.

The unaudited condensed consolidated financial statements contained in this report include all normal and recurring material adjustments that, in the opinion of management, are necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented herein. It is recommended that these unaudited condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report for the year ended December 31, 201 6 (“201 6 Annual Report”).

The Company’s significant accounting policies, which have been reviewed and approved by the Audit Committee of the Company’s Board of Directors, are summarized in Note 1 in the Notes to the Consolidated Financial Statement s included in the Company’s 201 6 Annual Report.

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(2) CASH AND CASH EQUIVALENTS

The following table presents a summary of c ash and cash equivalents as of March 31, 2017 and December 31, 2016 :



	March 31 ,		December 31,
	201 7		201 6
	(in millions)

Cash	$	265	$	254
Marketable securities (1)		1,117		1,169
Total cash and cash equivalents	$	1,382	$	1,423

(1)

Consists of government stable value money market funds .

(3) REDUC TION IN WORKFORCE

In January 2016, the Company announced a 40% workforce reduction as a result of lower anticipated drilling activity. This reduction was substantially complete d in the first quarter of 2016 . In April 2016, the Company also partially restructured executive management, which was substantially completed in the second quarter of 2016.

The following table presents a summary of the restructuring charges for the three months ended March 31, 2016 :


	For the three months ended
	March 31, 2016
	(in millions)
Severance (including payroll taxes)	$	42
Stock-based compensation		18
Pension and other postretirement benefits		3
Outplacement services, other		1
Total restructuring charges (1)	$	64

(1)

Total restructuring charges were $61 million and $3 million for the Company’s E&P and Midstream Services segments, respectively.

Severance payments and other separation costs related to restructuring were substantially completed by the end of 2016.

( 4 ) NATURAL GA S AND OIL PROPERTIES

The Company utilizes the full cost method of accounting for costs related to the exploration, development an d acquisition of natural gas and oil properties. Under this method, all such costs (productive and nonproductive), including salaries, benefits and other internal costs directly attributable to these activities a re capitalized on a country-by- country basis and amortized over the estimated lives of the properties using the units-of-production method. These capitalized costs are subject to a ceiling test that limits such pooled costs , net of applicable deferred taxes, to the aggregate of the present value of future net revenues attributable to proved natural gas , oil and NGL reserves discounted at 10 % (standardized measure) . Any costs in excess of the ceiling are written off as a non-cash expense. The expense may not be reversed in future periods, even though higher natural gas, oil and NGL prices may subsequently increase the ceiling. Companies using the full cost method are required to use the average quoted price from the first day of each month from the previous 12 months, incl uding the impact of derivatives designated for hedge accounting , to calculate the ceiling value of their reserves.

Using the average quoted price from the first day of each month from the previous 12 months for Henry Hub natural gas of $ 2.73 per MMBtu, West Texas Intermediate oil of $ 44.10 per barrel and NGLs of $ 10.17 per barrel , adjusted for differentials, the Company’s net book value of its United States natural gas and oil properties did not exceed the ceiling amount and did not result in a ceiling test impairment at March 31 , 201 7 . The Company had no hedge positions that were designated for hedge account ing as of March 31 , 201 7 . Decreases in market prices as well as changes in production rates, levels of reserves, evaluation of costs excluded from amortization, future development costs and production costs could result in future ceiling test impairments.

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Using the average quoted price from the first day of each month from the previous 12 months for Henry Hub natural gas of $ 2.40 per MMBtu, West Texas Intermediate oil of $ 42.77 per barrel and NGLs of $5.76 per barrel , adjusted for differentials, the net book value of the Company’s United States natura l gas and oil properties exceeded the ceiling by $641 million (net of tax) at March 31, 2016 and result ed in a non-cash ceiling test impairment . The Company had no hedge positions that were designated for hedge accounting as of Marc h 31, 2016.

( 5 ) EARN INGS PER SHARE

Basic earnings per common share is computed by dividing net income (loss) attributable to common stock by the weighted average number of common shares outstanding during the reportable period. The diluted earnings per share calculation adds to the weighted average number of common shares outstanding: the incremental shares that would have been outstanding assuming the exercise of dilutive stock options, the vesting of unvested restricted shares of common stock , performance units and the assumed conversion of mandatory convertible preferred stock . An antidilutive impact is an increase in earnings per share or a reduction in net loss per share resulting from the conversion, exercise, or contingent issuance of certain securities.

In July 2016, the Company completed an underwritten public offering of 98,900,000 shares of its common stock, with an offering price to the public of $13.00 per share. Net proceeds from the common stock offering were approximately $1,247 million, after underwriting discount and offering expenses. The proceeds from the offering were used to repay $375 million of the $750 million term loan entered into in November 2015 and to settle certain tender offers by purchasing an aggregate principal amount of approximately $700 million of the Company’s outstanding senior notes due in the first quarter of 2018. The remaining proceeds of the offering have been used for general corporate purposes.

The mandatory convertible pref erred stock issued in January 2015 entitles the holder to a proportional fractional interest in the rights and preferences of the convertible preferred stock, including conversion, dividend, liquidation and voting rights. Unless converted earlier at the option of the holders, on or around January 15, 2018 each share of convertible preferred stock will automatically convert into between 37.0028 and 43.4782 shares of the Company’s common stock ( correspondingly, each depositary share will convert into between 1.85014 and 2.17391 shares of the Company’s common stock), subject to customary anti-dilution adjustments, depending on the volume-weighted average price of the Company’s common stock over a 20 trading day averaging period immediately prior to that date. The total potential shares of common stock resulting from the conversion will range from 63,829,830 to 74,999,895 shares.

The mandatory convertible preferred stock has the non-forfeitable right to participate on an as - converted basis at the conversion rate then in effect in any common stock dividends declared and as such, is considered a participating security. A ccordingly , it is included in the computation of basic and diluted earnings per share, pursuant to the two-class method. In the calculation of basic earnings per share attributable to common shareholders, participating securities are allocated earnings based on actual dividend distributions received plus a proportionate share of undistributed net income attributable to common shareholders, if any, after recognizing distributed earnings. The Company’s participating securities do not participate in undistributed net losses because they are not contractually obligated to do so.

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The following table presents the computation of earnings per share for the three months ended March 31 , 201 7 and 201 6 :


	For the three months ended March 31,
	2017		2016
	(in millions, except share/per share amounts)
Net income (loss)	$	351	$	(1,132)
Mandatory convertible preferred stock dividend		27		27
Participating securities - mandatory convertible preferred stock		43		–
Net income (loss) attributable to common stock	$	281	$	(1,159)

Number of common shares:
Weighted average outstanding		493,068,000		382,870,847
Issued upon assumed exercise of outstanding stock options		82,845		–
Effect of issuance of non-vested restricted common stock		770,429		–
Effect of issuance of non-vested performance units		573,721		–
Effect of issuance of mandatory convertible preferred stock		–		–
Weighted average and potential dilutive outstanding		494,494,995		382,870,847

Earnings (Loss) per common share:
Basic	$	0.57	$	(3.03)
Diluted	$	0.57	$	(3.03)

The following table presents the common stock shares equivalent excluded from the calculation of diluted earnings per share for the three months ended March 31, 2017 and 2016, as they would have had an antidilutive effect:


	For the three months ended March 31,
	2017	2016
Unvested stock options	1,854,004	5,732,521
Unvested share-based payment	1,212,396	5,779,820
Performance units	–	297,297
Mandatory convertible preferred stock	74,999,895	74,999,895
Total	78,066,295	86,809,533

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(6 ) DERIVATIVES A ND RISK MANAGEMENT

The Company is exposed to volatility in market prices and basis di fferentials for natural gas, oil and NGLs which impacts the predictability of its cash flows related to the sale of those commodities. These risks are managed by the Company’s use of certain derivative financial instruments. As of March 3 1, 2017 and December 31, 2016 , the Company’s derivative financial instruments consisted of fixed price swaps, two-way costless collars, three-way costless collars, basis swaps, put and call options, and interest rate swaps. A description of the Company’s derivative financial instruments is provided below:


Fixed price swaps	The Company receives a fixed price for the contract and pays a floating market price to the counterparty.

Purchased put options	The Company purchases put options based on an index price from the counterparty by payment of a cash premium. If the index price is lower than the put’s strike price at the time of settlement, the Company receives from the counterparty such difference between the index price and the purchased put strike price. If the market price settles above the put’s strike price, no payment is due from either party.

Two-way costless collars	Arrangements that contain a fixed floor price (purchased put option) and a fixed ceiling price (sold call option) based on an index price which, in aggregate, have no net cost. At the contract settlement date, (1) if the index price is higher than the ceiling price, the Company pays the counterparty the difference between the index price and ceiling price, (2) if the index price is between the floor and ceiling prices, no payments are due from either party, and (3) if the index price is below the floor price, the Company will receive the difference between the floor price and the index price.

Three-way costless collars	Arrangements that contain a purchased put option, a sold call option and a sold put option based on an index price which, in aggregate, have no net cost. At the contract settlement date, (1) if the index price is higher than the sold call strike price, the Company pays the counterparty the difference between the index price and sold call strike price, (2) if the index price is between the purchased put strike price and the sold call strike price, no payments are due from either party, (3) if the index price is between the sold put strike price and the purchased put strike price, the Company will receive the difference between the purchased put strike price and the index price, and (4) if the index price is below the sold put strike price, the Company will receive the difference between the purchased put strike price and the sold put strike price.

Basis swaps	Arrangements that guarantee a price differential for natural gas from a specified delivery point. The Company receives a payment from the counterparty if the price differential is greater than the stated terms of the contract and pays the counterparty if the price differential is less than the stated terms of the contract.

Sold call options	The Company sells call options in exchange for a premium. I f the market price exceeds the strike price of the call option a t the time of settlement, the Company pays the counterparty such excess on sold call options. If the market price settles below the call’s strike price , no payment is due from either party.

Interest rate swaps	Interest rate swaps are used to fix or float interest rates on existing or anticipated indebtedness. The purpose of these instruments is to manage the Company’s existing or anticipated exposure to un favorable interest rate changes.

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The Company utilizes counterparties for its derivative instruments that it believes are creditworthy at the time the transactions are entered into , and the Company closely monitors the credit ratings of these counterparties. Additionally, the Company performs both quantitative and qualitative assessments of these counterparties based on their credit ratings and credit default swap rates where applicable. However, the events in the financial markets in recent years demonstrate there can be no assurance that a counterparty will be able to meet its obligations to the Company.

The following table provides information about the Company’s financial instruments that are sensitive to changes in commodity prices and that are used to protect the Company’s exposure. None of the financial instruments below are designated for hedge accounting treatment. The table presents the notional amount in Bcf, the weighted average contract prices and the fair value by expected maturity dates as of March 31, 2017:


		Weighted Average Price per MMBtu
	Volume (Bcf)	Swaps		Sold Puts		Purchased Puts		Sold Calls		Basis Differential		Fair value at March 31, 2017 (in millions)
Financial protection on production
2017
Fixed price swaps	262	$	3.07	$	–	$	–	$	–	$	–	$	(58)
Two-way costless-collars	65		–		–		2.92		3.34		–		(11)
Three-way costless-collars	102		–		2.29		2.97		3.30		–		(16)
Basis swaps	138		–		–		–		–		(1.04)		(73)
Total	567											$	(158)
2018
Fixed price swaps	68	$	3.02	$	–	$	–	$	–	$	–	$	(1)
Two-way costless-collars	23		–		–		2.97		3.56		–		(6)
Three-way costless-collars	245		–		2.39		2.97		3.37		–		(6)
Basis swaps	20		–		–		–		–		(0.95)		(15)
Total	356											$	(28)
2019
Three-way costless-collars	99	$	–	$	2.50	$	2.95	$	3.31	$	–	$	(2)
Total	99											$	(2)


		Weighted Average Price per MMBtu
	Volume (Bcf)	Sold Calls		Fair value at March 31, 2017 (in millions)
Call options
2017	64	$	3.54	$	(10)	(1)
2018	63		3.50		(14)
2019	52		3.50		(10)
2020	32		3.75		(5)
Total	211			$	(39)

(1)

Ex clude s $5 million in premiums paid related to certain call options recognized as a component of derivative assets within current assets on the unaudited condensed consolidated balance sheet. As certain call options settle, the premium will be amortized and recognized as a component of gain (loss) on derivatives on the unaudited condensed consolidated statement of operations.

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The balance sheet classification of the assets and liabilities related to derivative financial instruments (none of which are designated for hedge accounting treatment) are summarized below as of March 31, 2017 a nd December 31, 2016 :


	Derivative Assets
	Balance Sheet Classification		Fair Value
			March 31, 2017			December 31, 2016
		(in millions)
Derivatives not designated as hedging instruments:
Fixed price swaps	Derivative assets		$	2		$	–
Two-way costless collars	Derivative assets			11			8
Three-way costless collars	Derivative assets			23			11
Basis swaps	Derivative assets			2			32
Call options	Derivative assets			15			–
Fixed price swaps	Other long-term assets			7			1
Two-way costless collars	Other long-term assets			–			2
Three-way costless collars	Other long-term assets			120			100
Basis swaps	Other long-term assets			–			1
Total derivative assets			$	180	(1)	$	155

	Derivative Liabilities
	Balance Sheet Classification		Fair Value
			March 31, 2017			December 31, 2016
			(in millions)
Derivatives not designated as hedging instruments:
Fixed price swaps	Derivative liabilities		$	68		$	175
Two-way costless collars	Derivative liabilities			28			49
Three-way costless collars	Derivative liabilities			62			70
Basis swaps	Derivative liabilities			89			13
Call options	Derivative liabilities			32			46
Interest rate swaps	Derivative liabilities			1			2
Fixed price swaps	Other long-term liabilities			–			3
Two-way costless collars	Other long-term liabilities			–			9
Three-way costless collars	Other long-term liabilities			105			122
Basis swaps	Other long-term liabilities			1			5
Call options	Other long-term liabilities			22			35
Interest rate swaps	Other long-term liabilities			1			1
Total derivative liabilities			$	409		$	530

(1)

Does not include $5 million in premiums paid related to certain call options currently recognized as a component of derivative assets within current assets on the unaudited condensed consolidated balance sheet. As certain call options settle, the premium will be amortized and recognized as a component of gain (loss) on derivatives on the unaudited condensed consolidated statement of operations.

At March 31, 2017, the net fair value of the Company’s financial instruments related to natural gas was a $227 million liability. The net fair value of the Company’s interest rate swaps was a $2 million liability as of March 31, 2017.

Derivative Contracts Not Designated for Hedge Accounting

As of March 31 , 201 7 , the Company had no positions designated for hedge accounting treatment . G ains and losses on derivatives that are not designated for hedge accounting treatment , or that do not meet hedge accounting requirements , are recorded as a component of gain (loss) on derivatives on the unaudited condensed consolidated statements of operations. Accordingly, the gain (loss) on derivatives component of the statement s of operations reflects the gains and losses on both settled and unsettled derivatives. The Company calculates gains and losses on settled derivatives as the summation of gains and losses on positions which have settled within the reporting period. Only the settled gains and losses are included in the Company’s realized commodity price calculations.

The Company is a party to interest rate swaps that were entered into to mitigate the Company’s exposure to volatility in interest rates. The interest rate swaps have a notional amount of $170 million and expire in June 2020 . The Company did not designate the interest rate swaps for hedge accounting treatment . Changes in the fair value of the interest rate swaps are included in gain (loss) on derivatives o n the unaudited condensed consolidated statements of operations.

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The following tables summarize the before tax effect of fixed price swaps, purchased put options, two-way costless collars, three-way costless collars, basis swaps, call options and interest rate swaps not designated for hedge accounting on the unaudited condensed consolidated statements of operations for the three months ended March 31 , 201 7 and 201 6 :


		Gain (Loss) on Derivatives, Unsettled
		Recognized in Earnings
	Consolidated Statement of Operations	For the three months ended
	Classification of Gain (Loss)	March 31,
Derivative Instrument	on Derivatives, Unsettled	2017		2016
		(in millions)
Fixed price swaps	Gain (Loss) on Derivatives	$	118	$	20
Purchased put options	Gain (Loss) on Derivatives		–		15
Two-way costless-collars	Gain (Loss) on Derivatives		31		–
Three-way costless- collars	Gain (Loss) on Derivatives		57		–
Basis swaps	Gain (Loss) on Derivatives		(103)		(3)
Call options	Gain (Loss) on Derivatives		42		(50)
Interest rate swaps	Gain (Loss) on Derivatives		1		(3)
Total gain (loss) on unsettled derivatives		$	146	$	(21)

		Gain (Loss) on Derivatives, Settled (1)
		Recognized in Earnings
	Consolidated Statement of Operations	For the three months ended
	Classification of Gain (Loss)	March 31,
Derivative Instrument	on Derivatives, Settled	2017		2016
		(in millions)
Fixed price swaps	Gain (Loss) on Derivatives	$	(16)	$	4
Two-way costless-collars	Gain (Loss) on Derivatives		(3)		–
Three-way costless-collars	Gain (Loss) on Derivatives		(4)		–
Basis swaps	Gain (Loss) on Derivatives		(1)		4
Call options	Gain (Loss) on Derivatives		(6)		–
Interest rate swaps	Gain (Loss) on Derivatives		–		(1)
Total gain (loss) on settled derivatives (2)		$	(30)	$	7

Total gain (loss) on derivatives		$	116	$	(14)

(1)

The Company calculates gain (loss) on derivatives, settled, as the summation of gains and losses on positions that have settled within the period.

(2)

Excluding interest rate swaps, these amounts are included, along with gas sales revenues, in the calculation of the Company’s realized natural gas price.

Derivative Contracts Designated for Hedge Accounting

A ll derivatives are recognized in the balance sheet as either an asset or liability and are measured at fair value , other than transactions for which normal purchase/normal sale is applied. Certain criteria must be satisfied in order for derivative financial instruments to be designated for hedge accounting . Unrealized gains and losses related to unsettled derivatives that have been designated for hedge accounting treatment are recorded in either earnings or as a component of other comprehensive income until settled. In the period of settlement, the Company recognizes the gains and losses from these qualifying hedges in gas sales revenues. As of March 31, 2017 and 2016 , the Company had no positions designated for hedge accounting treatment .

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( 7 ) RECL ASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables detail the components of accumulated other comprehensive income (loss) and the related tax effects for the three months ended March 31 , 201 7 :



	March 31, 2017
	Pension and Other Postretirement		Foreign Currency		Total
	(in millions)
Beginning balance, December 31, 2016	$	(19)	$	(20)	$	(39)
Other comprehensive income (loss) before reclassifications		–		–		–
Amounts reclassified from other comprehensive income (loss) (1)		–		–		–
Net current-period other comprehensive income (loss)		–		–		–
Ending balance, March 31, 2017	$	(19)	$	(20)	$	(39)

(1 ) See separate table below for details about these reclassifications .


Details about Accumulated Other Comprehensive Income	Affected Line Item in the Consolidated Statement of Operations	Amount Reclassified from Accumulated Other Comprehensive Income
		For the three months ended March 31, 2017
		(in millions)
Pension and other postretirement:
Amortization of prior service cost and net loss (1)	General and administrative expenses	$	1
	Provision for income taxes		1
	Net income (loss)	$	–

Total reclassifications for the period	Net income (loss)	$	–

(1 ) See Note 1 1 for additional details regarding the Company’s retirement and employee benefit plans.

( 8 ) FAIR VALU E MEASUREMENTS

The carrying amounts and estimated fair values of the Company’s financial instruments as of March 31 , 201 7 and December 31, 201 6 were as follows:


	March 31, 2017				December 31, 2016
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(in millions)
Cash and cash equivalents	$	1,382	$	1,382	$	1,423	$	1,423
Credit facility		–		–		–		–
Term loan facility due December 2020 (1)		327		327		327		327
Term loan facility due December 2020 (1)		1,191		1,191		1,191		1,191
Senior notes		3,141		3,088		3,166		3,182
Derivative instruments, net (2)		(229)		(229)		(375)		(375)

(1)

The maturity date will accelerate to October 2019 if, by that date, the Company has not amended, redeemed or refinanced at least $765 million of its senior notes due in January 2020 .

(2)

The carrying values of cash and cash equivalents, accounts receivable, other current assets , accounts payable and other current liabilities on the unaudited condensed consolidated balance sheets approxim ate fair value because of their short-term nature. For debt and derivative instruments, the following methods and assumptions were used to estimate fair value:

Debt: The fair values of the Company’s senior notes were based on the market value of the Company’s publicly traded debt as determined based on the yield of the Company’s senior notes.

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The carrying values of the borrowings under the Company’s term loan facilities and unsecured revolving credit facility approximate fair value because the interest rate is variable and reflective of market rates. The Company considers the fair value of its debt to be a Level 2 measurement on the fair value hierarchy.

Derivative Instruments: The fair value of all derivative instruments is the amount at which the instrument could be exchanged currently between willing parties. The amounts are based on quoted market prices, best estimates obtained from counterparties and an option pricing model, when necessary, for price option contracts.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. As presented in the tables below, this hierarchy consists of three broad levels:

Level 1 valuations - Consist of unadjusted quoted prices in active markets for identical assets and liabilities and have the highest priority .

Level 2 valuations - Consist of quoted market information for the ca lculation of fair market value.

Level 3 valuations - Consist of internal estimates and have the lowest priority.

The Company has classified its derivatives into these levels depending upon the data utilized to determine their fair values. The Company’s fixed price swaps (Level 2) are estimated using third-party discounted cash flow calculations using the NYMEX futures index. The Company utilized discounted cash flow models for valuing its interest rate derivatives (Level 2). The net derivative val ues attributable to the Company’ s interest rate derivative contracts as of March 31, 2017 are based on (i) the contracted notional amounts, (ii) active market-quoted London Interbank Offered Rate (“LIBOR”) yield curves and (iii) the applicable credit-adjusted risk-free rate yield curve. The Company’s call options, purchased put options, two-way costless collars and three-way costless collars (Level 3) are valued using the Black-Scholes model, an industry standard option valuation model that takes into account inputs such as contract terms, including maturity, and market parameters, including assumptions of the NYMEX futures index, interest rates, volatility and credit worthiness. The Company’s basis swaps (Level 3) are estimated using third-party calculations based upon forward commodity price curves.

Inputs to the Black-Scholes model, including the volatility input, which is the significant unobservable input for Level 3 fair value measurements, are obtained from a third-party pricing source, with independent verification of the most significant inputs on a monthly basis. An increase (decrease) in volatility would result in an increase (decrease) in fair value measurement, respectively.

Assets and liabilities measured at fair value on a recurring basis are summarized below (in millions):



	March 31, 2017
	Fair Value Measurements Using:
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Assets (Liabilities) at Fair Value
Fixed price swap assets	$	–	$	9	$	–	$	9
Two-way costless collars assets		–		–		11		11
Three-way costless collars assets		–		–		143		143
Basis swap assets		–		–		2		2
Call option assets (1)		–		–		15		15
Fixed price swap liabilities		–		(68)		–		(68)
Two-way costless collars liabilities		–		–		(28)		(28)
Three-way costless collars liabilities		–		–		(167)		(167)
Basis swap liabilities		–		–		(90)		(90)
Call option liabilities		–		–		(54)		(54)
Interest rate swap liabilities		–		(2)		–		(2)
Total	$	–	$	(61)	$	(168)	$	(229)

(1)

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	December 31, 2016
	Fair Value Measurements Using:
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Assets (Liabilities) at Fair Value
Fixed price swap assets	$	–	$	1	$	–	$	1
Two-way costless collars assets		–		–		10		10
Three-way costless collars assets		–		–		111		111
Basis swap assets		–		–		33		33
Fixed price swap liabilities		–		(178)		–		(178)
Two-way costless collars liabilities		–		–		(58)		(58)
Three-way costless collars liabilities		–		–		(192)		(192)
Basis swap liabilities		–		–		(18)		(18)
Call option liabilities		–		–		(81)		(81)
Interest rate swap liabilities		–		(3)		–		(3)
Total	$	–	$	(180)	$	(195)	$	(375)

The table below presents reconciliations for the change in net fair value of derivative assets and liabilities measured at fair value on a recurring basis using significant unobse rvable inputs (Level 3) for the three months ended March 31 , 201 7 and 201 6 . The fair values of Level 3 derivative instruments are estimated using proprietary valuation models that utilize both market observable and unobservable parameters. Level 3 instruments presented in the table consist of net derivatives valued using pricing models incorporating assumptions that, in the Company’s judgment, reflect reasonable assumptions a marketplace partic ipant would have used as of March 31 , 201 7 and 201 6 .


	For the three months ended
	March 31,
	2017		2016
	(in millions)
Balance at beginning of period	$	(195)	$	3
Total gains (losses):
Included in earnings		13		(34)
Settlements		14		(4)
Transfers into/out of Level 3		–		–
Balance at end of period	$	(168)	$	(35)
Change in gains (losses) included in earnings relating to derivatives still held as of March 31	$	27	$	(38)

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( 9 ) D EBT

The c omponents of debt as of March 31 , 201 7 and December 31, 201 6 consisted of the following:


	March 31, 2017
	Debt Instrument		Unamortized Issuance Expense		Unamortized Debt Discount		Total
		(in millions)
Short-term debt:
7.35% Senior Notes due October 2017	$	15	$	–	$	–	$	15
7.125% Senior Notes due October 2017		25		–		–		25
3.30% Senior Notes due January 2018 (1)		38		–		–		38
7.50% Senior Notes due February 2018 (2)		187		–		–		187
7.15% Senior Notes due June 2018		1		–		–		1
Total short-term debt	$	266	$	–	$	–	$	266

Long-term debt:
Variable rate ( 3.450% at March 31, 2017) term loan facility, due December 2020 (3)		327		(2)		–		325
Variable rate ( 3.450% at March 31, 2017) term loan facility, due December 2020 (3)		1,191		(10)		–		1,181
7.15% Senior Notes due June 2018		25		–		–		25
4.05% Senior Notes due January 2020 (1)		850		(4)		–		846
4.10% Senior Notes due March 2022		1,000		(4)		(1)		995
4.95% Senior Notes due January 2025 (1)		1,000		(6)		(2)		992
Total long-term debt	$	4,393	$	(26)	$	(3)	$	4,364

Total debt	$	4,659	$	(26)	$	(3)	$	4,630


	December 31, 2016
	Debt Instrument		Unamortized Issuance Expense		Unamortized Debt Discount		Total
		(in millions)
Short-term debt:
7.35% Senior Notes due October 2017	$	15	$	–	$	–	$	15
7.125% Senior Notes due October 2017		25		–		–		25
7.15% Senior Notes due June 2018		1		–		–		1
Total short-term debt	$	41	$	–	$	–	$	41

Long-term debt:
Variable rate ( 3.220% at December 31, 2016) term loan facility, due December 2020 (3)		327		(2)		–		325
Variable rate ( 3.220% at December 31, 2016) term loan facility, due December 2020 (3)		1,191		(10)		–		1,181
3.30% Senior Notes due January 2018 (1)		38		–		–		38
7.50% Senior Notes due February 2018		212		–		–		212
7.15% Senior Notes due June 2018		25		–		–		25
4.05% Senior Notes due January 2020 (1)		850		(5)		–		845
4.10% Senior Notes due March 2022		1,000		(4)		(1)		995
4.95% Senior Notes due January 2025 (1)		1,000		(7)		(2)		991
Total long-term debt	$	4,643	$	(28)	$	(3)	$	4,612

Total debt	$	4,684	$	(28)	$	(3)	$	4,653

(1)

In February and June 2016, Moody’s and S&P downgraded certain senior notes, increasing the interest rates by 175 basis points effective July 2016. As a result of the downgrades, interest rates increased to 5.05% for the 2018 Notes, 5.80% for the 2020 Notes and 6.70% for the 2025 Notes.

(2)

In March 2017, the Company repurchased $25 million of its 7.50% Senior Notes due February 2018 and recognized a $1 million loss on the extinguishment of debt.

(3)

The maturity date will accelerate to October 2019 if, by that date, the Company has not amended, redeemed or refinanced at least $765 million of its senior notes due in January 2020 .

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2016 Credit Facility

In June 2016, the Company reduced its existing $2.0 billion unsecured revolving credit facility to $66 million and entered into a new credit agreement for $1,934 million, consisting of a $1,191 million secured term loan and a new $743 million unsecured revolving credit facility, which matures in December 2020 . The maturity date will accelerate to October 2019 if, by that date, the Company has not amended, redeemed or refinanced at least $765 million of its senior notes due January 2020. The $1,191 million secured term loan is fully drawn, with approximately $285 million of this balance used to pay down the previous revolving credit facility bala nce in its entirety. As of March 31 , 201 7 , there were no borrowings under either revolving credit facilit y; however, $327 million in letters of credit was outstanding against the 2016 revolving credit facility.

Loans under the 2016 credit agreement are subject to varying rates of interest based on whether the loan is a Eurodollar loan or an alternate base rate loan. Eurodollar loans bear interest at the Eurodollar rate, which is adjusted LIBOR plus applicable margins ranging from 1.750% to 2.500% . Alternate base rate loans bear interest at the alternate base rate plus the applicable margin ranging from 0.750% to 1.500% . The interest rate on the term loan facility is determined based upon the Company’s public debt ratings and was 250 basis points over LIBOR as of March 31, 2017.

The new term loan and revolving credit facility contain financial covenants that impose certain restrictions on the Company. Under the new credit agreement, the Company must maintain a minimum interest coverage of 1.00x in 2017, increasing by 0.25x increments per year to 1.50x in 2019 and 2020 . The Company is also subject to a minimum liquidity requirement of $300 million, which could be increased up to $500 million upon certain conditions, as well as an anti-hoarding provision, requiring unrestricted cash in excess of $100 million to pay down any amounts borrowed under the new revolving credit facility. The financial covenant with respect to minimum interest coverage consists of EBITDAX divided by consolidated interest expense. EBITDAX, as defined in our 2016 credit agreement, excludes the effects of interest expense, income taxes, depreciation, depletion and amortization, any non-cash impacts from impairments, certain non-cash hedging activities, stock-based compensation expense, non-cash gains or losses on asset sales, unamortized issuance cost, unamortized debt discount and certain restructuring costs. Colla teral for the new secured term loan is principally the Company’s E&P properties in the Fayetteville Shale area, the equity of its subsidiaries and cash and marketable securities on hand, and the new credit agreement requires a minimum collateral coverage ratio of 1.50x for the 2016 secured term loan. This collateral also may support all or a part of revolving credit extensions depending on restrictions in the Company’s senior notes indentures.

A s of March 31, 2017 , the Company was in compliance with all of the covenants of this credit agreement. Although the Company does not anticipate any violations of the financial covenants, its ability to comply with these covenants is dependent upon the success of its exploration and development program and upon factors beyond the Company’s control, such as the market prices for natural gas, oil and NGLs.

2013 Credit Facility

In December 2013, the Company entered into a credit agreement that exchanged its previous revolving credit facility. Under the revolving credit facility, the Company had a borrowing capacity of $2.0 billion. The revolving credit facility was unsecured and was not guaranteed by any subsidiaries. On March 30, 2016, the Company borrowed $1.55 billion on the revolving credit facility with the proceeds invested in marketable securities. The $1.55 billion borrowing was repaid on April 1, 2016. In June 2016, this credit facility was substantially exchanged for a new credit facility comprised of a $1,191 m illion secured term loan and a new $743 m illion revolving credit facility. The borrowing capacity of the original 2013 credit agreement was reduced from $2.0 billion to $66 million , remains unsecured and the maturity remain s December 2018 . As of March 31 , 201 7 , there were no borrowings under this facility.

The existing unsecured 2013 revolving credit facility includes a financial covenant under which the Company may not have total debt in excess of 60% of its total adjusted book capital. This financial covenant with respect to capitalization perc entages excludes the effects of any full cost ceiling impairments, certain hedging activities and the Company’s pension and other postretirement liabilities. At March 31, 2017, debt constituted 34% of the Company’s adjusted book capital .

2015 Term Facility

In November 2015, the Company entered into a $750 million unsecured three -year term loan credit agreement with various lenders that was utilized to repay borrowings under the revolving credit facility. The interest rate on the term loan

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facility is determined based upon the Company’s public debt ratings from Moody’s and S&P and was 250 basis points over LIBOR as of March 31, 2017. The term loan facility requires prepayment unde r certain circumstances from the net cash proceeds of sales of equity or certain assets and borrowings outside the ordinary course of business. In June 2016, this term loan agreement was amended to extend the maturity date upon a repayment threshold. From the net proceeds of the July 2016 equity offering, the Company repaid $375 million of the $750 million unsecured term loan, which had the effect of extending the term loan maturity from November 2018 to December 2020 , which will accelerate to October 2019 if, by that date, the Company has not amended, redeemed or refinanced at least $765 million of its senior notes due in January 2020 . In September 2016, the Company repaid a n additional $48 million from the proceeds received from the closing of the sale of approximately 55,000 net acres in West Virginia .

Senior Notes

In January 2015, the Company completed a public offering of $350 million aggregate principal amount of its 3.30% senior notes due 2018 (the “2018 Notes”), $850 million aggregate principal amount of its 4.05% senior notes due 2020 (the “2020 Notes”) and $1.0 billion aggregate principal amount of its 4.95% senior notes due 2025 (the “2025 Notes” together with the 2018 and 2020 Notes, the “Notes”), with net proceeds from the offering totaling approximately $2.2 billion after underwriting discounts and offering expenses. The Notes were sold to the public at a price of 99.949% of their face value for the 2018 Notes, 99.897% of their face value for the 2020 Notes and 99.782% of their face value for the 2025 Notes. The interest rates on the Notes are determined based upon the public bond ratings from Moody’s and S&P. Downgrades on the Notes from either rating agency increase interest costs by 25 basis points per downgrade level and upgrades decrease interest costs by 25 basis points per upgrade level , up to the stated coupon rate, on the following semi-annual bond interest payment. In February and June 2016, Moody’s and S&P downgraded the Notes, increasing the interest rates by 175 basis points effective July 2016. As a result of these downgrades, interest rates increased to 5.05% for the 2018 Notes, 5.80% for the 2020 Notes and 6.70% for the 2025 Notes. In the event of future downgrades, the coupons for this series of notes are capped at 5.30% , 6.05% and 6.95% , respectively. T he first coupon payment at the higher interest rate s was paid in J anuary 201 7.

In July 2016 , the Company used a portion of the proceeds from the July 2016 equity offering to settle certain tender offer s by purchasing an aggregate principal amount of approximately $700 million of its outstanding senior notes due in the first quarter of 2018.

(1 0 ) COMMIT MENTS AND CONTINGENCIES

Operating Commitments and Contingencies

As of March 31, 2017, the Company’s contractual obligations for demand and similar charges under firm transportation and gathering agreements to guarantee access capacity on natural gas and liquids pipelines and gathering systems totaled approximately $8.7 billion , $ 3.7 billion of which related to access capacity on future pipeline and gathering infrastructure projects that still require the granting of regulatory approvals and additional construction efforts. The Company also had guarantee obligations of up to $ 821 million of that amount. As of March 31 , 201 7 , future payments under non-cancelable firm transportation and gathering agreements are as follows:


	Payments Due by Period
	Total		Less than 1 Year		1 to 3 Years		3 to 5 Years		5 to 8 Years		More than 8 Years
		(in millions)
Infrastructure currently in service	$	5,011	$	592	$	1,139	$	791	$	832	$	1,657
Pending regulatory approval and/or construction (1)		3,661		35		371		474		730		2,051
Total transportation charges	$	8,672	$	627	$	1,510	$	1,265	$	1,562	$	3,708

(1)

Based on the estim ated in-service dates as of March 3 1 , 201 7 .

Environ mental Risk

The Company is subject to laws and regulations relating to the protection of the environment. Environmental and cleanup related costs of a non-capital nature are accrued when it is both probable that a liability has been incurred and when the amount can be reasonably estimated. Management believes any future remediation or other compliance related costs will not have a material effect on the financial position or results of operations of the Company.

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Litiga tion

The Company is subject to various litigation, claims and proceedings that have arisen in the ordinary course of business, such as for alleged breaches of contract, miscalculation of royalties and pollution, contamination or nuisance. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. Management believes that current litigation, claims and proceedings, individually or in aggregate and after taking into account insurance, are not likely to have a material adverse impact on the Company’s financial position, results of operations or cash flows , although it is possible that adverse outcomes could have a material adverse effect on the Company’s results of operations or cash flows for the period in which the effect of that outcome becomes reasonably estimable. Many of these matters are in early stages, so the allegations and the damage theories have not been fully developed, and are all subject to inhe rent uncertainties; therefore, m anagement’s vie w may change in the future.

Arkansas Royalty Litigation

Certain of the Company’s subsidiaries are defendants in three cases, two filed in Arkansas state court in 2010 and 2013 and one in federal court in 2014, on behalf of putative classes of royalty owners on some of the Company’s leases located in Arkansas. The chief complaint in all three cases is that one of the Company’s subsidiaries underpaid the royalty owners by, among other things, deducting from royalty payments costs for gathering, transportation, and compression of natural gas in excess of what is permitted by the relevant leases. In September and October 2014, the judges in the two Arkansas state actions entered orders certifying classes of royalty owners who are citizens of Arkansas.

In November 2015, the court in the federal case denied the plaintiff’s motion to certify a class of royalty owners not included in either of the two state cases. In April 2016, the court certified a broader class that includes Arkansas residents and citizens . Class members were notified of the pending action in late 2016, and the period to “opt out” of the class has expired. The plaintiff in the federal case presented two alternative damages theories. Under one theory, plaintiffs have asserted that obligations to affiliates are not “incurred” and therefore the exploration and production subsidiary was not entitled to deduct any post-production costs; the federal court has granted partial summary judgment for the Company’s subsidiaries on this theory. Under another theory, plaintiffs assert that the gathering and treating rates the Company deducted from royalty payments exceeded the affiliates’ actual costs or otherwise were not reasonable. The class representative’s expert’s report alleges class-wide damages in this case of approximately $98 million , before interest and statutory amounts . The class is also seeking punitive damages. The Company moved for summary judg ment on all claims . T he court granted the motion in part and denied it in part and has set a trial date in the second quarter of 2017.

The Company’s subsidiaries appealed the class certification order in the state cases. In December 2016 , the Arkansas Supreme Court affirmed the certifications. These cases are now before the Arkansas trial judges. The precise configuration of the classes has not been determined, particularly in light of the overlapping composition of the class in the federal case. One of the state cases has been set for trial in the third quarter of 2017. No date for trial has been set in the other state case .

In addition, in September 2015 three cases were filed in Arkansas state court on behalf of a total of 248 individually named plaintiffs. Each case asserts complaints that are in substance virtually identical to the above-described case. The Company and its subsidiaries have removed two of the cases to federal court, and those cases have been assigned to the court in which the above-described federal case is pending. All three cases have been stayed.

Management believes that, in all of the above cases, the deductions from royalty payments as calculated are permitted and is vigorously defend ing the cases. The Company’s assessment may change in the future due to the occurrence of certain events, such as adverse judgments, and such a re-assessment could lead to the determination that the potential liability is probable and could be material to the Company’s results of operations, financial position or cash flows.

Indemnifications

The Company provides certain indemnifications in relation to dispositions of assets. These indemnifications typically relate to disputes, litigation or tax matters existing at the date of disposition. No liability has been recognized in connection with these indemnifications.

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(1 1 ) PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS

The Company has defined pension and postretirement benefit plans which cover substantially all of the Company’s employees. Net periodic pension costs include the following components for the three months ended March 31, 2017 and 2016 :


	Pension Benefits
	For the three months ended
	March 31,
	2017		2016
	(in millions)
Service cost	$	2	$	4
Interest cost		1		2
Expected return on plan assets		(1)		(2)
Amortization of prior service cost		–		–
Amortization of net loss		1		–
Net periodic benefit cost	$	3	$	4

The Company’s other postretirement benefit plan had a net periodic benefit cost of $1 million for the three months ended March 31 , 201 7 and 2016 .

As of March 31 , 201 7 , the Company has contributed $5 million to the pension and other postretirement benefit plan s in 2017. The Company expects to contribute an additional $9 million to its pension plan during the remainder of 2017. The Company recognized a liability of $34 million and $13 million related to its pension and other postretirement be nefits, respectively, as of March 31 , 201 7, compared to a liability of $36 million and $13 million as of December 31, 2016. The Company used an assumption of 4.60% during the first quarter of 2016 for both the pension and other postretirement benefit plans. In January 2016, the Company initiated a reduction in workforce that was substantially completed by the end of the first quarter of 2016. The impact of the workforce reduction on the Company’s pension and other postretirement benefit costs was not recognized until subsequent quarters in 2016 due to the delayed timing of actuarial data available. The Company updated the discount rate currently used in the measurement of the benefit obligation of the pension plan and other postretirement benefits plan to 4.20% in the second quarter of 2016.

The Company maintains a non-qualified deferred compensation supplemental retirement savings plan (“Non-Qualified Plan”) for certain key employees who may elect to defer and contribute a portion of their compensation, as permitted by the plan. Shares of the Company’s common stock purchased under the terms of the Non-Qualified Plan are presented as treasury stock and totaled 11,686 shares at March 31 , 201 7, compared to 31,269 s hares at December 31, 2016 .

(1 2 ) STOCK-BASE D COMPENSATION

The Company recognized the following amounts in employee stock-based compensation costs for the three months ended March 31, 2017 and 201 6 :


	For the three months ended
	March 31,
	2017		2016
	(in millions)
Stock-based compensation cost – expensed (1)	$	6	$	23
Stock-based compensation cost – capitalized	$	4	$	3

(1)

Includes $18 million related to the reduction in workforce for the three months ended March 31 , 2016.

In January 2016, the Company announced a 40% workforce reduction that was substantially completed by the end of March 2016. In April 2016, the Company also partially restructured executive management, which was substantially completed in the second quarter of 2016. Affected employees were offered a severance package that included, if applicable, amendments to certain outstanding equity awards that modified forfeiture provisions on separation from the Company. As a result, certain unvested stock-based equity awards became fully vested at the time of separation. These shares were revalued and recognized immediately as a component of restructuring charges on the Company’s unaudited condensed consolidated statements of operations. The unvested portion of equity-based performance units was forfeited upon separation from the Company.

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As of March 31, 2017, there was $ 96 million of total unrecognized compensation cost related to the Company’s unvested stock option grants, restricted stock grants and performance units. This cost is expected to be recognized over a weighted-average period of 3 y ears .

Stock Options

The following table summarizes s tock option activity for the three months ended March 31, 2017 and provides information for options outstanding an d options exercisable as of March 31, 2017 :


	Number		Weighted Average
	of Options		Exercise Price
	(in thousands)		(per share)
Outstanding at December 31, 2016		5,416	$	23.46
Granted		1,322		8.59
Exercised		–		–
Forfeited or expired		(17)		45.57
Outstanding at March 31, 2017		6,721		20.48
Exercisable at March 31, 2017		3,537	$	29.34

Restricted Stock

The following table summarizes restr icted stock activity for the three months ended March 31, 2017 and provides information for unvested shares as of March 31, 2017 :


	Number		Weighted Average
	of Shares		Fair Value
	(in thousands)		(per share)
Unvested shares at December 31, 2016		3,321	$	11.85
Granted		4,549		8.59
Vested		(70)		13.45
Forfeited		(113)		10.05
Unvested shares at March 31, 2017		7,687	$	9.93

Equity-Classified Performance Units

The following table summarizes performance unit activity for the three months ended March 31, 2017 to be paid out in Company stock and provides information for unvested units as o f March 31, 2017. The performance units awarded in 2013 and 2014 inclu ded a market condition based on r elative Total Shareholder Return (“TSR”) and a performance condition based on the Company's Present Value Index (“PVI”), collectively the “Performance Measures .” The fair value of the TSR market condition is based on a Monte Carlo model and is amortized to compensation expense on a straight-line basis over the vesting period of the award. The fair value of the PVI performance condition is based on economic analysis for each investment opportunity based upon the expected present value added for each dollar to be invested and amortized to com pensation expense on a straight line basis over the vesting period of the award. T he performance unit award s granted in 2015 , 2016 and during the first quarter of 2017 are based exclusively on TSR. The grant date fair value is calculated using the applicable Performance Measures and the closing price of the Company’s common stock at the grant date.


	Number		Weighted Average
	of Units (1)		Fair Value
	(in thousands)		(per share)
Unvested units at December 31, 2016		719	$	11.46
Granted		1,197		10.47
Vested		–		–
Forfeited		–		–
Unvested units at March 31, 2017		1,916	$	10.84

(1)

These amounts reflect the number of performance units granted in thousands. The actual payout of shares may range from a minimum of zero shares to a maximum of two shares contingent upon the actual performance against the Performance Measures. The performance units have a three -year vesting term and the actual disbursement of shares, if any, is determined during the first quarter following the end of the three-year vesting period.

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Liability-Classified Performance Units

Prior to 2013, c ertain employees were provided performance units vesting equally over three yea rs, payable in cash. The payout of these units wa s based on certain metrics, such as total shareholder return and reserve replacement efficiency, compared to a predetermined group of peer companies and Company goal s . At the end of each performance period, the value of the vest ed performance units, if any, would be paid in cash. In the first quarter of 2016, the Company completed the final payout under these performance unit agreements .

(1 3 ) SEGM ENT INFORMATION

The Company’s reportable business segments have been identified based on the differences in products or services provided. Revenues for the E&P segment are derived from the production and sale of natural gas and liquids. The Midstream Services segment generates revenue through the marketing of both Company and third-party produced natural gas and liquids volumes and through gathering fees associated with the transportation of natural gas to market.

Summarized financial information for the Company’s reportable segments is shown in the following table. The accounting policies of the segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of the 201 6 Annual Report. Management evaluates the performance of its segments based on operating income, defined as operating revenues less operating costs. Income before income taxes, for the purpose of reconciling the operating income amount shown below to consolidated income before income taxes, is the sum of oper ating income, interest expense, gain (loss) on derivatives and other income (loss ). The “Other” column includes items not related to the Company’s reportable segments , including real estate and corporate items.


	Exploration and Production			Midstream Services			Other			Total
	(in millions)
Three months ended March 31, 2017:
Revenues from external customers	$	566		$	280		$	–		$	846
Intersegment revenues		(3)			578			–			575
Depreciation, depletion and amortization expense		90			16			–			106
Operating income		225			41			–			266
Interest expense (1)		32			–			–			32
Gain on derivatives		116			–			–			116
Loss on early extinguishment of debt		–			–			(1)			(1)
Other income, net		2			–			–			2
Assets		4,413			1,268			1,515	(2)		7,196
Capital investments (3)		283			6			1			290

Three months ended March 31, 2016:
Revenues from external customers	$	343		$	236		$	–		$	579
Intersegment revenues		(7)			385			–			378
Depreciation, depletion and amortization expense		127			16			–			143
Impairment of natural gas and oil properties		1,034			–			–			1,034
Operating income (loss)		(1,160)	(4)		60	(5)		–			(1,100)
Interest e xpense (1)		14			–			–			14
Loss on derivatives		(13)			(1)			–			(14)
Other loss, net		(2)			(1)			–			(3)
Provision for income taxes (1)		1			–			–			1
Assets		5,538			1,220			1,760	(2)		8,518
Capital investments (3)		120			2			–			122

(1)

Interest expense and the provision for income taxes by segment are an allocation of corporate amounts as they are incurred at the corporate level.

(2)

Other assets represent corporate assets not allocated to segments and assets for non-reportable segments. At March 31, 2017 and 2016, other assets includes approximately $1.4 billion and $1.6 billion in cash and cash equivalents, respectively.

(3)

Capital investments includes decreases of $52 million and $78 million for the three months ended March 31, 2017 and 2016, respectively, relating to the change in accrued expenditures between periods.

(4)

Operating income (loss) for the E&P segment includes $61 million related to restructuring charges for the three months ended March 31, 2016.

(5)

Operating income (loss) for the Midstream segment includes $3 million related to restructuring charges for the three months ended March 31, 2016.

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Included in intersegment revenues of the Midstream Services segment are $ 52 4 million and $ 319 million for the three months ended March 31 , 201 7 and 201 6 , respectively , for marketing of the Company’s E&P sales. Corporate assets include cash and cash equivalents, furniture and fixtures and other costs. Corporate general and administrative costs, depreciation expense and taxes other than income are allocated to the segments.

(1 4 ) INCOME TAXES

The Company’s effective tax rate was approximately 0% for the three months ended March 31 , 201 7 and 2016 , primarily as a result of the recognition of a valuation allowance. A valuation allowance for deferred tax assets, including net operating losses, is recognized when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. To assess that likelihood, the Company uses estimates and judgment regarding future taxable income, and considers the tax consequences in the jurisdiction where such taxable income is generated, to determine whether a valuation allowance is required. Such evidence can include current financial position, results of operations, both actual and forecasted, the reversal of deferred tax liabilities, and tax planning strategies as well as the current and forecasted business economic s of the oil and gas industry.

T he Company maintained its net deferred tax asset po sition at March 31, 2017 primarily d ue to the write-downs of the carrying value of natural gas and oil properties in 2015 and 2016 . The Company recorded a $75 m illion decrease in our valuation allowance for the three months ended March 31, 2017 and a $431 million increase in our valuation allowance for the three months ended March 31, 2016 . Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of deferred tax assets. In management’s view, the cumulative loss incurred over recent years outweighs any positive factors, such as the possibility of future growth. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income are increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as future expected growth.

(1 5 ) NEW ACCOUNTI NG PRONOUNCEMENTS

New Accounting Standards Implemented

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation – Stock Compensation (Topic 718) (“Update 2016-09”), to simplify accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. For public entities, Update 2016-09 became effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. The Company adopted Update 2016-09 during the first quarter with an effective date of January 1, 2017. The recognition of previously unrecognized windfall tax benefits resulted in a net cumulative-effect adjustment of $59 million, which increased net deferred tax assets and the related income tax valuation allowance by the same amount as of the beginning of 2017. The amendments within Update 2016-09 related to the recognition of excess tax benefits and tax shortfalls in the income statement and presentation within the operating section of the statement of cash flows were adopted prospectively, with no adjustments made to prior periods. The Company has elected to account for forfeitures as they occur. The remaining provisions of this amendment did not have a material effect on its unaudited condensed consolidated results of operations, financial position or cash flows.

New Accounting Standards Not Yet Implemented

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230) (“Update 2016-15”), which seeks to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. For public entities, Update 2016-15 becomes effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the provisions of Update 2016-15 and assessing the impact, if any, it may have on its consolidated results of operations, financial position or cash flows.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“Update 2016-02”), which seeks to increase transparency and comparability among organizations by, among other things, recognizing lease assets and lease liabilities on the balance sheet for leases classified as operating leases under previous GAAP and disclosing key information about leasing arrangements. Through March 201 7 , the Company made progress on contract reviews, drafting its accounting policies and evaluating the new disclosure requirements. The Company will continue assessing the effect that the updated standard may have on its consolidated financial statements and related disclosures,

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and anticipates that its assessment will be complete in 2018. For public entities, Update 2016-02 becomes effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“Update 2014-09”), which seeks to provide clarity for recognizing revenue. The new standard removes inconsistencies in existing standards, changes the way companies recognize revenue from contracts with customers and increases disclosure requirements. The codification was amended through additional ASUs and, as amended, requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The standard is required to be adopted using either the full retrospective approach, with all prior periods presented adjusted, or the modified retrospective approach, with a cumulative adjustment to retained earnings on the opening balance sheet. The Company has not yet selected a transition method. The Company has a team in place to analyze the impact of Update 2014-09, and the related ASU's, across all revenue streams to evaluate the impact of the new standard on revenue contracts. This includes reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements under the new standard. Through March 201 7 , the Company made progress on contract reviews, drafting its accounting policies and evaluating the new disclosure requirements. The Company expects to complete its evaluations of the impacts of the accounting and disclosure requirements on its business processes, controls and systems in the second half of 2017. For public entities, the new standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERA TIONS.

The following updates information as to Southwestern Energy Company’s financial condition provided in our 2016 Annual Report and analyzes the changes in the results of operations between the three months ended March 31, 2017 and 2016. For definitions of commonly used natural gas and oil terms used in this Quarterly Report, please refer to the “Glossary of Certain Industry Terms” provided in our 2016 Annual Report.

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the risks described in the “Cautionary Statement About Forward-Looking Statements” in the forepart of this Quarterly Report, in Item 1A, “Risk Factors” in Part I and elsewhere in our 2016 Annual Report, and Item 1A, “Risk Factors” in Part II in this Quarterly Report and any other quarterly report on Form 10-Q filed during the fiscal year. You should read the following discussion with our unaudited condensed consolidated financial statements and the related notes included in this Quarterly Report.

OVERVIEW

Background

Southwestern Energy Company (including its subsidiaries, collectively, “we”, “our”, “us” or “Southwestern”) is an independent energy company engaged in natural gas, oil and NGL exploration, development and production, which we refer to as “E&P.” We are also focused on creating and capturing additional value through our natural gas gathering and marketing businesses, which we refer to as “Midstream Services.” We conduct most of our businesses through subsidiaries and we operate principally in two segments: E&P and Midstream Services. Currently we operate only in the United States.

Exploration and Production. Our primary business is the exploration for and production of natural gas, oil and NGL, with our current operations principally focused on the development of unconventional natural gas reservoirs located in Pennsylvania, West Virginia and Arkansas. Our operations in northeast Pennsylvania, which we refer to as “Northeast Appalachia,” are primarily focused on the unconventional natural gas reservoir known as the Marcellus Shale. Our operations in West Virginia and southwest Pennsylvania, which we refer to as “Southwest Appalachia,” are focused on the Marcellus Shale, the Utica and the Upper Devonian unconventional natural gas and oil reservoirs. Collectively, we refer to our properties located in Pennsylvania and West Virginia as the “Appalachian Basin.” Our operations in Arkansas are primarily focused on an unconventional natural gas reservoir known as the Fayetteville Shale. We have smaller holdings in Colorado and Louisiana, along with other areas in which we are testing potential new resources. We also have drilling rigs located in Pennsylvania, West Virginia and Arkansas, as well as in other operating areas, and provide oilfield products and services, principally serving our E&P operations.

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Midstream Services . Through our affiliated midstream subsidiaries, we engage in natural gas gathering activities in Arkansas and Louisiana. These activities primarily support our E&P operations and generate revenue from fees associated with the gathering of natural gas. Our marketing activities capture opportunities that arise through the mark eting and transportation of natural gas, oil and NGLs produced in our E&P operations.

We are focused on providing long-term growth in the net asset value per share of our business. Historically, the vast majority of our operating income and cash flow has been derived from the production associated with our E&P business. However, beginning in 2015 and continuing into 2017, depressed commodity prices significantly decreased our pace of activity and cash flow from our E&P operations . The price we expect to receive for our production is a critical factor in the capital investments we make to develop our properties . The current commodity price environment has resulted in the impairment of a significant portion of our natural gas and oil properties over recent reporting periods. Commodity prices fluctuate due to a variety of factors we cannot control or predict. These factors, which include increased supplies of natural gas , oil or NGLs due to greater exploration and development activities, weather conditions, political and economic events, and competition from other energy sources, impact supply and demand, which in turn determines the sales prices for our production. In addition to the factors identified above, the prices we realize for our production are affected by our hedging activities as well as locational differences in market prices, including basis differentials . Our 2016 results also reflect reduced costs of third-party services we were able to negotiate during the downturn in the industry. As industry activity increases, demand for these services also increases, and these service providers are likely to seek higher prices than we were able to obtain in 2016.

With the successful implementation of our debt reduction strategy in 2016, along with improving forward pricing, we began increasing our activity in the third quarter of 2016, continuing into the first quarter of 2017.

Three Months Ended March 31, 2017 Compared with Three Months Ended March 31, 2016

We reported net income attributable to common stock of $ 281 million for the three months ended March 31, 2017 , or $0.57 per diluted share, compared to a net loss attributable to common stock of $ 1.2 b illion, or ( $ 3.03) per diluted share, for the same period in 2016 .

Our natural gas and liquids production decreased to 204 Bcfe for the three months ended March 31, 2017, a decrease of 14% from 237 Bcfe for the same period in 2016. The 33 Bcfe decrease was due to a 22 Bcfe decrease in net production from our Fayetteville Shale and other properties, a 7 Bcf decrease in net production from our Northeast Appalachia properties and a 4 Bcfe decrease in net production from our Southwest Appalachia properties, compared to the same period in 2016. The average price realized for our gas production, including the effects of derivatives, increased 7 4 % to $2.57 per Mcf for the three months ended March 31, 2017, compared to $1.48 per Mcf for the same period in 2016. The average price realized for our oil production increased 135% to $43.74 per barrel for the three months ended March 31, 2017, compared to $18.65 per barrel for the same period in 2016. The average price realized for our NGL production, including the effects of derivatives, increased 16 7 % to $13.2 8 per barrel for the three months ended March 31, 2017 , compared to $4. 98 per barrel for the same period in 201 6 . We did not use derivatives to financially protect our 2017 or 2016 oil production.

Our E&P segment operating income was $225 million for the three months ended March 31, 2017, an increase from an operating loss of $1.2 billion for the same period in 2016. This increase was primarily due to the impairment of natural gas and oil properties of $1,034 million for the three months ended March 31, 2016. Excluding the 2016 impairment, our E&P segment operating income increased $351 million for the three months ended March 31, 2017, compared to the same period in 2016, primarily due to a $274 million increase in revenue related to increased realized natural gas, oil and NGL prices (excluding derivatives) and a $12 4 million decrease in operating costs and expenses, partially offset by a $4 7 million decrease in revenue resulting from a 33 Bcfe decrease in production.

Operating income for our Midstream Services segment was $41 million for the three months ended March 31, 2017, a decrease from $60 million for the same period in 2016, primarily due to a $22 million decrease in gas gathering revenues and a $3 million decrease in our marketing margin, partially offset by a $6 million decrease in operating costs and expenses.

Capital investments were $290 million for the three months ended March 31, 2017 (including $28 million in capitalized interest and $25 million in capitalized expenses), of which $283 million was invested in our E&P segment, compared to $122 million for the same period of 2016, of which $120 million was invested in our E&P segment .

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RESUL TS OF OPERATIONS

The following discussion of our results of operations for our segments is presented before intersegment eliminations. We evaluate our segments as if they were stand-alone operations and accordingly discuss their results prior to any intersegment eliminations. Interest expense and income tax expense are discussed on a consolidated basis.


Exploration and Production
	For the three months
	ended March 31,
	2017		2016
Revenues (in millions)	$	563	$	336
Impairment of natural gas and oil properties (in millions)	$	–	$	1,034
Operating costs and expenses (in millions) (1)	$	338	$	462
Operating income (loss) (in millions)	$	225	$	(1,160)
Gain (loss) on derivatives, settled (in millions) (2)	$	(30)	$	8

Gas production (Bcf)		183		213
Oil production (MBbls)		519		607
NGL production (MBbls)		3,008		3,376
Total production (Bcfe)		204		237

Average realized gas price per Mcf, including derivatives (3)	$	2.57	$	1.48
Average realized gas price per Mcf, excluding derivatives	$	2.73	$	1.44
Average realized oil price per Bbl	$	43.74	$	18.65
Average realized NGL price per Bbl	$	13.28	$	4.98

Average unit costs per Mcfe:
Lease operating expenses	$	0.89	$	0.88
General & administrative expenses (4)	$	0.21	$	0.19
Taxes, other than income taxes (5)	$	0.12	$	0.08
Full cost pool amortization	$	0.40	$	0.49

(1) Includes $61 million of restructuring charges for the three months ended March 31, 2016.

(2) Represents the gain (loss) on settled commodity derivatives.

(3) Includes the gain (loss) on settled commodity derivatives.

(4) Excludes $58 million of restructuring charges for the three months ended March 31, 2016.

(5) Excludes $3 million of restructuring charges for the three months ended March 31, 2016.

Revenues

Revenues for our E&P segment were $56 3 million, an increase of 68%, for the three months ended March 31, 2017, compared to $336 million for the same period in 2016. Revenues increased by $274 million as a result of increased natural gas, oil and NGL pricing, excluding the effects of derivatives, partially offset by a decrease of $4 7 million as a result of decreased production volumes . Natural gas, oil and NGL prices are difficult to predict and are subject to wide price fluctuations. Excluding basis swaps , as of March 31, 2017 we had protected 429 Bcf of our remaining 201 7 natural gas production to limit our exposure to price fluctuations. We refer you to Note 6 to the unaudited condensed consolidated financial statements included in this Quarterly Report and to the discussion of “Commodity Prices” provided below for additional information .

Production

For the three months ended March 31, 2017, our natural gas and liquids production decreased 14% to 204 Bcfe, from 237 Bcfe for the same period in 2016, and was produced entirely by our properties in the United States. The 33 Bcfe decrease was due to a 22 Bcfe decrease in net production from our Fayetteville Shale and other properties, a 7 Bcf decrease in net production from our Northeast Appalachia properties and a 4 Bcfe decrease in net production from our Southwest Appalachia properties, compared to the same period in 2016. Net production from our Northeast Appalachia, Southwest Appalachia and Fayetteville Shale properties was 87 Bcf, 36 Bcfe and 81 Bcf, respectively , for the three months ended March 31, 2017, compared to 94 Bcf, 40 Bcf e , and 103 Bcf , respectively, for the same period in 2016 .

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Commod ity Prices

The average price realized for our natural gas production, including the effects of derivatives, increased to $2.57 per Mcf for the three months ended March 31, 2017, compared to $1.48 per Mcf for the same period in 2016. The increase was primarily due to the $1.29 per Mcf increase in the average realized natural gas price, excluding the effects of derivatives, partially offset by a loss from our derivative program during the three months ended March 31, 2017, compared to a gain for the same period in 2016. The average price realized for our natural gas production, excluding the effe cts of derivatives, increased 90 % to $2.73 per Mcf for the three months ended March 31, 2017, compared to the same period in 2016. Our derivatives decreased the average realized natural gas price by $0.16 per Mcf for the three months ended March 31, 2017, compared to an increase of $0.04 per Mcf for the same period in 2016.

Our E&P segment receives a sales price for our natural gas at a discount to average monthly NYMEX settlement prices due to heating content of the gas, locational basis differentials, transportation charges and fuel charges. Additionally, we receive a sales price for our oil and NGLs at a difference to average monthly West Texas Intermediate settlement and Mont Belvieu NGL composite prices, respectively, due to a number of factors including product quality, composition and types of NGLs sold, locational basis differentials, transportation and fuel charges.

We regularly enter into various hedging and other financial arrangements with respect to a portion of our projected natural gas production in order to ensure certain desired levels of cash flow and to minimize the impact of price fluctuations, including fluctuations in locational market differentials. We refer you to Item 3, "Quantitative and Qualitative Disclosures About Market Risks" and Note 6 to the unaudited condensed consolidated financial statements included in this Quarterly Report for additional discussion about our derivatives and risk management activities .

Excluding the impact of derivatives , the average price received for our natural gas production for the three months ended March 31, 2017 of $2.73 per Mcf was approximately $0.59 per Mcf lower than the average monthly NYMEX settlement price, primarily due to locational basis differentials and transportation charges . We protected approximately 57 % of our natural gas production for the three months ended March 31, 2017 from the impact of widening basis differentials through our sales arrangements and financial derivatives. As of March 31, 2017, w e have protected basis on approximately 296 Bcf and 101 Bcf of our 201 7 and 201 8 expected natural gas production , respectively, through physical sales arrangements and financial derivatives at a basis differential to NYMEX natural gas prices of approximately ($0.73) per Mcf and ($0. 50 ) per Mcf for the remainder of 2017 and 2018, respectively. We refer you to Note 6 to the unaudited condensed consolidated financial statements included in this Quarterly Report for additio nal details about our derivative instruments.

We realized an average sales price of $43.74 per barrel for our oil production for the three months ended March 31, 2017, an increase of approximately 135% from $18.65 per barrel for the same period in 2016. Oil accounted for 2% of our total production for the three month s ended March 31, 2017 and 2016 . We did not use derivatives to financially protect our 2017 or 2016 oil production.

We realized an average sales price of $13.2 8 per barrel for our NGL production for the three months ended March 31, 2017, an increase of approximately 167 % from $4.98 per barrel for the same period in 2016. NGLs accounted for 9% of our total production for the three months ended March 31, 2017 and 2016. A small portion of our 2017 NGL production was financially protected through the use of derivatives. The impact was immaterial .

Operating Income

Our E&P segment operating income was $2 2 5 million for the three months ended March 31, 2017, an increase from an operating loss of $1.2 billion for the same period in 2016. The E&P segment recorded a $1.0 billion impairment of natural gas and oil properties for the three months ended March 31, 2016. Excluding the 2016 impairment, our E&P segment operating income increased $351 million for the three months ended March 31, 2017, compared to the same period in 2016, primarily due to a $274 million increase in revenue related to increased realized natural gas, oil and NGL prices (excluding derivatives) and a $12 4 million decrease in operating costs and expenses, partially offset by a $4 7 million decrease in revenue resulting from a 33 Bcfe decrease in production. For the three months ended March 31, 2016, general and administrative expenses and taxes other than income taxes included $58 million and $3 million, respectively, related to restructuring charges .

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Operating Costs and Expenses

Lease opera ting expenses per Mcfe for the E&P segment were $0.89 for the three months ended March 31, 2017, compared to $0.88 for the same period in 2016. Lease operating expenses per Mcfe increased for the three months ended March 31, 2017, compared to the same period of 2016, primarily due to the impact of increased prices for natural gas used as compressor fuel . In total, lease operating expenses for the E&P segment were $182 million and $209 million for the three months ended March 31, 2017 and 2016, respectively .

General and administrative expenses for the E&P segment increased to $0.21 per Mcfe for the three months ended March 31, 2017, compared to $0.19 per Mcf for the same period in 2016, excluding the restructuring charges associated primarily with our workforce reduction in the first quarter of 2016, as a result of decreased production volumes. In total, general and administrative expenses for the E&P segment were $43 million and $45 million for the three months ended March 31, 2017 and 2016, respectively, excluding the 2016 restructuring charges . Including restructuring charges, general and administrative costs for three months ended March 31, 2016 were $ 103 million for our E&P segment.

Taxes other than income taxes per Mcfe were $0.12 for the three months ended March 31, 2017, compared to $0.08 per Mcfe for the same period in 201 6, excluding $3 million relating to restructuring charges in the first quarter of 2016. Taxes other than income taxes per Mcfe vary from period to period due to changes in ad valorem and severance taxes that result from the mix of our production volumes and fluctuations in commodity prices.

Our full cost pool amortization rate averaged $0.40 per Mcfe and $0. 49 per Mcfe for the three months ended March 31, 2017 and 2016, respectively . The decrease in the average amortization rate resulted primarily from our full cost ceiling impairments between the respective periods. The amortization rate is impacted by the timing and amount of reserve additions and the costs associated with those additions, revisions of previous reserve estimates due to both price and well performance, write-downs that result from full cost ceiling impairments , proceeds from the sale of properties that reduce the full cost pool and the level s of costs subject to amortization. We cannot predict our future full cost pool amortization rate with accuracy due to the variability of each of the factors discussed above, as well as other factors, including but not limited to the uncertainty of the am ount of future reserve changes. In total, depreciation, depletion and amortization expense for the E&P segment was $90 million and $127 million for the three months ended March 31, 2017 and 2016, respectively .

Unevaluated costs excluded from amortization were $2.1 billion at March 31, 2017 and December 31, 201 6 . The unevaluated costs excluded from amortization remained flat as the evaluation of previously unevaluated properties totaling $127 million in the first quarter of 2017 was partially offset by the impact of $96 million of unevaluated capital invest ed during the same period .


Midstream Services
	For the three months ended
	March 31,
	2017		2016
	($ in millions, except volumes)
Marketing revenues	$	777	$	518
Gas gathering revenues	$	81	$	103
Marketing purchases	$	765	$	503
Operating costs and expenses (1)	$	52	$	58
Operating income	$	41	$	60
Volumes marketed (Bcfe)		245		279
Volumes gathered (Bcf)		129		165

(1)

Includes $3 million of restructuring charges for the three months ended March 31, 2016.

Revenues

Revenues from our marketing activities increased 50% to $777 million for the three months ended March 31, 2017, compared to the same period in 2016. For the three months ended March 31, 2017, the volumes marketed decreased 12% and the price received for volumes marketed increased 71%, compared to the same period in 2016. Increases and decreases in marketing revenues due to changes in commodity prices are largely offset by corresponding changes in marketing purchase expenses. Of the total natural gas volumes marketed, production from our affiliated E&P operated wells accounted for 9 5 % and 96% of the natural gas marketed volumes for the three months ended March 31, 2017 and 2016, respectively. Our Midstream Services segment marketed approximately 67% of our combined oil and NGL production for the three months ended March 31, 2017 and 2016.

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Revenues from our gathering activities decreased 21% to $81 million for the three months ended March 31, 2017 , compared to the same period in 201 6 . The decrease in the gathering revenues for the three months ended March 31, 2017 was primarily due to the decreased volumes in the Fayetteville Shale .

Operating Income

Operating income from our Midstream segment decreased to $41 million for the three months ended March 31, 2017, compared to $60 million for the same period in 2016, primarily due to a $22 million decrease in gas gathering revenues and a $3 million decrease in marketing margin, partially offset by a $6 million decrease in operating costs and expenses.

The margin generated from marketing activities was $12 million and $15 million for the three months ended March 31, 2017 and 2016, respectively. Margins are driven primarily by volumes marketed and may fluctuate depending on the prices paid for commodities and the ultimate disposition of those commodities. We enter into derivative contracts from time to time with respect to our natural gas marketing activities to provide margin protection. For more information about our derivatives and risk management activities, we refer you to Item 3, "Quantitative and Qualitative Disclosures About Market Risks" included in this Quarterly Report for additional information.

Restructuring Charges

In January 2016, we announced a 40% workforce reduction , which was substantially concluded by the end of March 2016. In April 2016, we also partially restructured executive management. Affected employees were offered a severance package that included a one-time cash payment depending on length of service and, if applicable, accelerated vesting of outstanding stock-based equity awards. As a result of the workforce reduction and executive management restructuring, we recognized restructuring charges of $ 64 million for the three months ended March 31, 2016 .

Interest Expense

Interest expense, net of capitalization, was $32 million for the three months ended March 31, 2017, compared to $14 million interest expense, net of capitalization, for the same period in 2016. Gross interest expense increased to $60 million for the three months ended March 31, 2017, compared to $55 million for the same period in 2016, primarily due to an increase in our cost of debt. We capitalized interest of $28 million and $41 million for the three months ended March 31, 2017 and 2016, respectively. The decrease in capitalized interest for the three months ended March 31, 2017, compared to the same period in 201 6, was primarily due to the evaluation of a portion of our Southwest Appalachia assets acquired in December 2014.

Gain (Loss) on Derivatives

O ur current derivatives are not designated for hedge accounting treatment. Changes in the fair value of derivatives that are not designated for hedge accounting are recorded in gain (loss) on derivatives. We recorded a $ 116 million net gain on our derivatives for the three months ended March 31, 2017, consisting of a $ 146 million gain on unsettled derivatives , partially offset by a $ 30 million loss on settled derivatives. For the three months ended March 31, 2016 , we recorded a $ 14 million net loss on our derivatives, consisting of a $ 21 million loss on un settled derivatives, partially offset by a $ 7 million gain on settled derivativ es. We refer you to Note 6 to the unaudited condensed consolidated financial statements included in this Quarterly Report for additional detail s about our gain (loss) on derivatives. In general and without consideration of volatility or duration, as natur al gas prices increase from March 31, 2017 levels, we will recognize losses in future periods and, likewise, as natu ral gas prices decline from March 31, 2017 levels, we will recognize gains in future periods on our derivative contracts not designated for hedge accounting treatment prior to settlement.

Income Taxes

Our effective tax rate was approximately 0% for the three months ended March 31, 2017 and 2016. We recorded an immaterial income tax benefit for the three months ended March 31, 2017, and a $ 1 m illion income tax expense for the three months ended March 31, 2016 . Our low e ffective tax rate is the result of our recognition of a valuation allowance that reduced the deferred tax asset primarily related to our current net operating loss carryforward. A valuation allowance for deferred tax assets, including net operating losses, is recognized when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized.

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New Accounting Standards Implemented in this Report

Refer to Note 1 5 to the unaudited condensed consolidated financial statements of this Quarterly Report for a discussion of new accounting standards which have been implemented.

New Accounting Standards Not Yet Implemented in this Report

Refer to Note 1 5 to the unaudited condensed consolidated financial statements of this Quarterly Report for a discussion of new accounting standards which have not yet been implemented.

LIQUID ITY AND CAPI TAL RESOURCES

We depend primarily on funds generated from our operations, our cash and cash equivalents balance, our $809 million revolving credit facilities and capital markets as our primary sources of liquidity.

During 2016, we took significant steps in managing our maturities and liquidity. In June 2016, we refinanced approximately 97% of our principal credit facility, which was due in December 2018, including extending the maturity by two years until December 2020, granting liens on certain assets and modifying borrowing rates and covenants. We simultaneously modified borrowing rates and covenants under our $750 million unsecured term loan facility and extended its maturity by two years also until December 2020 should its principal balance be reduced by 50% by June 2018. The maturity date s of our principle credit facility and our unsecured term loan facility will accelerate to October 2019 if, by that date, we have not amended, redeemed or refinanced at least $765 million of our senior notes due in January 2020. In July 2016, we completed a public offering of 98,900,000 shares of our common stock, with net proceeds totaling approximately $1,247 million after underwriting discounts and offering expenses. Of the funds received from the common stock offering, $375 million was used to pay down a portion of our $750 million unsecured term loan and $750 million was used to settle certain tender offers by purchasing an aggregate principal amount of approximately $700 million of our outstanding senior notes due in the first quarter of 2018. The repayment of $375 million on the $750 million unsecured term loan had the effect of extending its maturity date to December 2020 subject to the conditions described above. In September 2016, we completed the sale of 55,000 net acres in West Virginia for $422 million, subject to customary post-closing adjustments, and used $48 million of the proceeds to further decrease the balance of this term loan. We earmarked the remaining funds from the equity issuance and the sale of the West Virginia acreage for capital activity. In March 2017, we repurchased $25 million of our 7.50% Senior Notes due February 2018.

During the first half of 2016, we suspended drilling and completion activity in the Appalachian Basin and Fayetteville Shale as a result of the commodity price environment. After the successful implementation of our debt reduction strategy along with our equity offering, we began increasing our activity in the third quarter of 2016, which has continued throughout the first quarter of 2017. Although we have the financial flexibility to draw on the funds available under our cash balance and revolving credit facility as necessary, we continue to be committed to our capital discipline strategy of investing within our cash flow from operations, supplemented by the remaining funds from the July 2016 equity issuance and asset sale in West Virginia. We refer you to Note 9 of the unaudited condensed consolidated financial statements included in this Quarterly Report and the section below under “Financing Requirements” for additional discussion of our credit facilities.

The credit status of the financial institutions participating in our revolving credit facilities could adversely impact our ability to borrow funds under the revolving credit facilities. Although we believe all of the lenders under the facilities have the ability to provide funds, we cannot predict whether each will be able to meet their obligation to us. We refer you to the section below under “Financing Requirements” for additional discussion of our compliance with the covenants of our term loans and revolving credit facilities.

Net cash provided by operating activities increased 2 39 % to $31 2 million for the three months ended March 31, 2017, from $92 million for the same period in 2016, primarily due to an increase in net income adjusted for non-cash expenses and changes in working capital accounts. During the three months ended March 31, 2017, requirements for our capital investments were funded primarily from our cash generated by operating activities and cash and cash equivalents. Net cash generated from operating activities exceeded our cash requirements for cap ital investments for the three months ended March 31, 2017 , compared to net cash from operating activities being 75% of our cash requirements for capital investments for the same period in 2016, reflecting our commitment to our capital discipline strategy of investing within our cash flow from operations , supplemented by the 2016 equity issuance and asset sales, during the current commodity price environment.

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Our cash flow from operating activities is highly dependent upon the sales prices that we receive for our natural gas and liquids production. Natural gas, oil and NGL prices are subject to wide fluctuations and are driven by market supply and demand, which is impacted by many factors. The sales price we receive for our production is also influenced by our commodity hedging activities. See “Quantitative and Qualitative Disclosures about Market Risks” in Item 3 and Note 6 to the unaudited condensed consolidated financial statements included in this Quarterly Report for further details. Our commodity hedging activities are subject to the credit risk of our counterparties being financially unable to complete the transaction. We actively monitor the credit status of our counterparties, performing both quantitative and qualitative assessments based on their credit ratings and credit default swap rates where applicable, and to date have not had any credit defaults associated with our transactions. However, any future failures by one or more counterparties could negatively impact our cash flow from operating activities.

Additionally, our short-term cash flows are dependent on the timely collection of receivables from our customers and joint interest partners. We actively manage this risk through credit management activities and, through the date of this filing, have not experienced any significant write-offs for non-collectable amounts. However, any sustained inaccessibility of credit by our customers and joint interest partners could adversely impact our cash flows.

Due to these above factors, we are unable to forecast with certainty our future level of cash flow from operations. Accordingly, we expect to adjust our discretionary uses of cash depend ing upon available cash flow. Further, we may from time to time seek to retire or rearrange some or all of our outstanding debt or preferred stock through cash purchases, and/or exchanges, open market purchases, privately negotiated transactions, tender offers or otherwise. Such transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Capital Investments

Our capital investments were $290 million and $122 million for the three months ended March 31, 2017 and 2016, respectively. Our E&P segment investments were $283 million and $120 million for the three months ended March 31, 2017 and 201 6 , respectively. Our E&P segment capitalized internal costs of $32 million for the three months ended March 31, 2017 compared to $ 27 million for the same period in 201 6 . These internal costs were directly related to acquisition, exploration and development activities and are included as part of the cost of natural gas and oil properties.

Although our 2017 capital investment program is expected to be funded through cash flow from operations along with our cash and cash equivalents, we have the financial flexibility to utilize borrowings under our revolving credit facilities.

Finan cing Requirements

Our total debt outstanding was $4.6 billion as of March 31, 2017 and December 31, 201 6 . Our total debt, net of cash and cash equivalents of $1.4 b illion, was $3.2 billion at March 31, 2017 and December 31, 2016. Our actions to reduce and extend our total debt outstanding are further discussed below.

At April 25, 2017, we had a long-term issuer credit rating of Ba3 by Moody’s, a long-term debt rating of BB- by S&P and a long-term issuer default rating of BB by Fitch Ratings . Any downgrades in our public debt ratings by Moody’s or S&P could increase our cost of funds and decrease our liquidity under our revolving credit facilities.

At March 31, 2017, our capital structure consisted of 78% debt (excluding $1.4 billion in cash and cash equivalents) and 22% equity, compared to 84 % debt ( ex cluding $ 1.4 b illion in cash and cash equivalents) and 16 % equity at December 31, 201 6 .

In July 2016, we consummated an underwritten offering of 98,900,000 shares of our common stock pursuant to an effective registration statement filed with the Securities and Exchange Commission, with net proceeds of the offering totaling approximately $1,247 million after underwriting discounts and offering expenses. A portion of the proceeds from the offering were used to repay $375 million of the $750 million term loan entered into in November 2015 and to settle certain tender offers by purchasing an aggregate principal amount of approximately $700 million of our outstanding senior notes due in the first quarter of 2018. The remaining net proceeds of the offering will be used for general corporate purposes, including the completion of wells already drilled or the funding of other capital projects.

In June 2016, we reduced our existing $2.0 billion unsecured revolving credit facility to $66 million and entered into a new credit agreement for $1,934 million, consisting of a $1,191 million secured term loan and a new unsecured $743

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million revolving credit facility, which matures i n December 2020. The maturity date will accelerate to October 2019 if, by that date, we have not amended, redeemed or refinanced at least $765 million of our senior notes due in January 2020. The $1,191 million secured term loan is fully drawn, with approximately $285 million of this balance used to pay down the existing revolving credit facility bala nce in its entirety. As of March 31, 2017 , there were no borrowings under either revolving credit facility ; however, there was $327 million in letters of credit outstanding against the 2016 revolving credit facility.

Loans under the 2016 credit agreement are subject to varying rates of interest based on whether the loan is a Eurodollar loan or an alternate base rate loan. Eurodollar loans bear interest at the Eurodollar rate, which is adjusted London Interbank Offer Rate (“LIBOR”) plus applicable margins ranging from 1.750% to 2.500%. Alternate base rate loans bear interest at the alternate base rate plus the applicable margin ranging from 0.750% to 1.500%. The interest rate on the term loan facility is determined based upon our public debt ratings and was 250 basis points over LIBOR as of March 31, 2017.

Our 2016 credit agreement contains financial covenants that impose certain restrictions on us. Under our revolving credit and term loan facilities, we must keep a minimum interest coverage of 1.00x in 2017, increasing by 0.25x increments per year to 1.50x in 2019 and 2020. We are also subject to a minimum liquidity requirement of $300 million, which could be increased up to $500 million upon certain conditions, as well as an anti-hoarding provision, requiring unrestricted cash in excess of $100 million to pay down any amounts borrowed under the new revolving credit facility. The financial covenant with respect to minimum interest coverage consists of EBITDAX divided by consolidated interest expense. EBITDAX, as defined in our 2016 credit agreement, excludes the effects of interest expense, income taxes, depreciation, depletion and amortization, any non-cash impacts from impairments, certain non-cash hedging activities, stock-based compensation expense, non-cash gains or losses on asset sales, unamortized issuance cost, unamortized debt discount and certain restructuring costs. Collateral for the new secured term loan is principally our E&P properties in the Fayetteville Shale area, the equity of its subsidiaries and cash and marketable securities on hand. This collateral also may support all or a part of revolving credit extensions depending on restrictions in our senior notes indentures, and requires a minimum collateral coverage ratio of 1.50x.

The existing unsecured 2013 revolving credit facility includes a financial covenant under which we may not issue total debt in excess of 60% of our total adjusted book capital, as defined in that agreement. This financial covenant with respect to capitalization percentages excludes the effects of any full cost ceiling impairments, certain hedging activities and our pension and other postretirement liabilities. We are in compliance with this covenant. As of March 31, 2017, the maximum amount available under this credit facility was $66 million , with no amounts outstanding.

In November 2015, we entered into a $750 million unsecured three-year term loan credit agreement with various lenders that was used to repay borrowings under the existing revolving credit facility. The interest rate on the term loan facility is determined based upon our public debt ratings from Moody’s and S&P and was 250 basis points over LIBOR as of March 31, 2017 . The term loan facility requires prepayment under certain circumstances from the net cash proceeds of sales of equity or certain assets and borrowings outside the ordinary course of business. In June 2016, the 2015 term loan agreement was amended to extend the maturity date, provided at least 50% would be paid down by June 2017. After our July 2016 equity offering, we repaid $375 million of the $750 million term loan, which had the effect of extending its maturity from November 2018 to December 2020 . The maturity date will accelerate to October 2019 if, by that date, we have not amended, redeemed or refinanced at least $765 million of our senior notes due January 2020. In September 2016, we repaid an additional $48 million of the term loan with proceeds from the sale of our West Virginia acreage.

A s of March 31, 2017 , we were in compliance with all of the covenants of the term loans and revolving credit facilities. Although we do not anticipate any violations of the financial covenants, our ability to comply with these covenants is dependent upon the success of our exploration and development program and upon factors beyond our control, such as the market prices for natural gas and liquids.

Our mandatory convertible preferred stock, issued in January 2015, entitles the holders to a proportional fractional interest in the rights and preferences of the convertible preferred stock, including conversion, dividend, liquidation and voting rights. Dividends are to be paid at a rate of 6.25% per annum on the liquidation preference of $1,000 per share and can be paid in cash, common stock or a combination of both. Since inception, and as of April 25, 2017, we have made four of the quarterly dividend payments in cash and five of the quarterly dividend payments in stock. Unless converted earlier at the option of the holders, on or around January 15, 2018 each share of convertible preferred stock will automatically convert into between 37.0028 and 43.4782 shares of our common stock (correspondingly, each depositary share will convert into between 1.85014 and 2.17391 shares of our common stock), subject to customary anti-dilution

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adjustments, depending on the volume-weighted average price of our common stock over a 20 trading-day period immediately prior to that date.

Our mandatory convertible preferred stock has the non-forfeitable right to participate on an as-converted basis at the conversion rate then in effect in any common stock dividends declared and as such, is considered a participating security. As such, it is included in the computation of basic and diluted earnings per share, pursuant to the two-class method. In the calculation of basic earnings per share attributable to common shareholders, participating securities are allocated earnings based on actual dividend distributions received plus a proportionate share of undistributed net income attributable to common shareholders, if any, after recognizing distributed earnings.

In January 2015, we completed a public offering of $350 million aggregate principal amount of our 3.30% senior notes due 2018 (the “2018 Notes”), $850 million aggregate principal amount of our 4.05% senior notes due 2020 (the “2020 Notes”) and $1.0 billion aggregate principal amount of our 4.95% senior notes due 2025 (the “2025 Notes” and together with the 2018 and 2020 Notes, the “Notes”), with net proceeds from the offering totaling approximately $2.2 billion after underwriting discounts and offering expenses. The Notes were sold to the public at a price of 99.949% of their face value for the 2018 Notes, 99.897% of their face value for the 2020 Notes and 99.782% of their face value for the 2025 Notes. The interest rates on the Notes are determined based on our public bond ratings from Moody’s and S&P. Downgrades on the Notes from either rating agency increase our interest costs by 25 basis points per downgrade level on the following semi-annual bond interest payment. Based on the February and June 2016 downgrades from Moody’s and S&P, our interest rates on these Notes increased by 175 basis points in July 2016. In July 2016 , we used a portion of the proceeds from the July 2016 equity offering to settle certain tender offer s by purchasing an aggregate principal amount of approximately $700 million of our outstanding senior notes due in the first quarter of 2018.

Our derivative contracts allow us to ensure a certain level of cash flow to fund our operations. Excluding basis swaps, at April 25, 2017, we had commodity price derivatives in place on 42 9 Bcf of our remaining targeted 2017 natural gas production, and 336 Bcf and 99 Bcf o n our targeted 201 8 and 201 9 natural gas production, respectively. We also had commodity derivatives in place on 138 M Bbls of our remaining targeted 2017 ethane production and 183 MBbls of our targeted ethane production for our 2018.

Off-Balance Sheet Arrangements

We may enter into off-balance sheet arrangements and transactions that can give rise to material off-balance sheet obligations. As of March 31, 2017 , our material off-balance sheet arrangements and transactions include operating lease arrangements and $327 million in letters of credit outstanding against our 2016 revolving credit facility . There are no other transactions, arrangements or other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect our liquidity or availability of our capital resources. For more information regarding off-balance sheet arrangements, we refer you to “Contractual Obligations and Contingent Liabilities and Commitments” in our 2016 Annual Report.

Contractual Obligations and Contingent Liabilities and Commitments

We have various contractual obligations in the normal course of our operations and financing activities. Other than the firm transportation and gathering agreements discussed below, there have been no material changes to our contractual obligations from those disclosed in our 2016 Annual Report on Form 10-K.

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Contingent Liabilities and Commitments

As of March 31, 2017, our contractual obligations for demand and similar charges under firm transport and gathering agreements to guarantee access capacity on natural gas and liquids pipelines and gathering systems totaled approximately $8.7 billion, $3.7 billion of which related to access capacity on future pipeline and gathering infrastructure projects that still require the granting of regulatory approvals and/or additional construction efforts. This amount also included guarantee obligations of up to $821 million. As of March 31, 2017 , future payments under non-cancelable firm transportation and gathering agreements are as follows:



	Payments Due by Period
	Total		Less than 1 Year		1 to 3 Years		3 to 5 Years		5 to 8 Years		More than 8 Years
		(in millions)
Infrastructure Currently in Service	$	5,011	$	592	$	1,139	$	791	$	832	$	1,657
Pending Regulatory Approval and/or Construction (1)		3,661		35		371		474		730		2,051
Total Transportation Charges	$	8,672	$	627	$	1,510	$	1,265	$	1,562	$	3,708

(1) Based on the estimated in-service dates as of March 31, 2017 .

Substantially all of our employees are covered by defined benefit and postretirement benefit plans. For the three months ended March 31, 2017 , we have contributed $5 million to the pension and postretirement benefit plan s. We expect to contribute an additional $9 million to our pension and postretirement benefit plans during the remainder of 2017. As of March 31, 2017 and December 31, 2016, we recognized liabilit ies of $47 million and $ 49 million, respectively, as a result of the underfunded status of our pension and other postretirement benefit plans . See Note 1 1 to the unaudited condensed consolidated financial statements included in this Quarterly Report for additional discussion about our pension and other postretirement benefits.

We are subject to various litigation, claims and proceedings that arise in the ordinary course of business , such as for alleged breaches of contract, miscalculation of royalties and pollution, contamination or nuisance. We accrue for such items when a liability is both probable and the amou nt can be reasonably estimated. Management believes that current lit igation, claims and proceedings, individually or in aggregate and after taking into account insurance, are not likely to have a material adverse impact on our financial position, results of operations or cash flows , although it is possible that adverse outcomes could have a material adverse effect on our results of operations or cash flows for the period in which the effect of that outcome becomes reasonably estimable. Many of these matters are in early stages, so the allegations and the damage theories have not been fully developed, and are all subjec t to inherent uncertainties; therefore, management’s view may change in the future. For further information, we refer you to “Litigation” and “Environmental Risk” in Note 1 0 to the unaudited condensed consolidated financial statements included in Item 1 of Part I of this Quarterly Report .

We are also subject to laws and regulations relating to the protection of the environment. Environmental and cleanup related costs of a non-capital nature are accrued when it is both probable that a liability has been incurred and when the amount can be reasonably estimated. Management believes any future remediation or other compliance related costs will not have a material effect on our financial position or results of operations.

Working Capital

We maintain access to funds that may be needed to meet capital requirements through our cash and cash equivalents and our revolving credit facilities, described in “Financing Requirements” above. We had positive working capital of $668 million at March 31, 2017 and positive working capital of $808 million at December 31, 2016. The positive working capital as of March 31, 2017 and December 31, 2016 was primarily due to $1.4 billion of cash and cash equivalents .

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ITEM 3. Q UANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risks relating to our operations result primarily from the volatility in commodity prices, basis differentials and interest rates, as well as service costs and credit risk concentrations. We use fixed price swap agreements, fixed price options, basis swaps and interest rate swaps to reduce the volatility of earnings and cash flow due to fluctuations in the prices of natural gas and interest rates. Our Board of Directors has approved risk management policies and procedures to utilize financial products for the reduction of defined commodity price risk. Utilization of financial products for the reduction of interest rate risks is also overseen by our Board of Directors. These policies prohibit speculation with derivatives and limit swap agreements to counterparties with appropriate credit standings.

Credit Risk

Our financial instruments that are exposed to concentrations of credit risk consist primarily of trade receivables and derivative contracts associated with commodities trading. Concentrations of credit risk with respect to receivables are limited due to the large number of our physical commodity purchasers and their dispersion across geographic areas . No single purchaser accounted for greater than 10% of revenues for the three months ended March 31, 2017 . See “Commodities Risk” below for discussion of credit risk associated with commodities trading.

Interest Rate Risk

As of March 31, 2017, we had approximately $3.1 billion of outstanding senior notes with a weighted average interest rate of 5.67% and $1.5 billion of term loan facility debt with a variable interest rate of 3.45%. We currently have an interest rate swap in effect to mitigate a portion of our exposure to volatility in interest rates.


	Expected Maturity Date
		2017			2018			2019			2020			2021			Thereafter			Total
Fixed Rate Payments (1)	$	41		$	250		$	–		$	850		$	–		$	2,000		$	3,141
Weighted Average Interest Rate		7.21	%		7.09	%		–	%		5.80	%		–	%		5.40	%		5.67	%

Variable Rate Payments (1)		–			–			–			1,518	(2)		–			–			1,518
Weighted Average Interest Rate		–	%		–	%		–	%		3.45	%		–	%		–	%		3.45	%

(1) Excludes unamortized debt issuance costs and debt discounts .

(2) The maturity date will accelerate to October 2019 if, by that date, we have not amended, redeemed or refinanced at least $765 million of our 2020 Senior Notes.

Commod ities Risk

We use over-the-counter fixed price swap agreements and options to protect sales of our production against the inherent risks of adverse price fluctuations or locational pricing differences between a published index and the NYMEX futures market. These swaps and options include transactions in which one party will pay a fixed price (or variable price) for a notional quantity in exchange for receiving a variable price (or fixed price) based on a published index (referred to as price swaps) and transactions in which parties agree to pay a price based on two different indices (referred to as basis swaps). For additional information on our derivatives and risk management, see Note 6 in the unaudited condensed consolidated financial statements included in this Quarterly Report.

The primary market risks relating to our derivative contracts are the volatility in market prices and basis differentials for natural gas. However, the market price risk is offset by the gain or loss recognized upon the related sale or purchase of the natural gas that is financially protected. Credit risk relates to the risk of loss as a result of non-performance by our counterparties. The counterparties are primarily major banks and integrated energy companies that management believes present minimal credit risks. The credit quality of each counterparty and the level of financial exposure we have to each counterparty are closely monitored to limit our credit risk exposure. Additionally, we perform both quantitative and qualitative assessments of these counterparties based on their credit ratings and credit default swap rates where applicable. We have not incurred any counterparty losses related to non-performance and do not anticipate any losses given the information we have currently. However, we cannot be certain that we will not experience such losses in the future.

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Ite m 4. Controls and Procedures.

Disclosure Controls and Procedures

We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act. Our disclosure controls and procedures are the controls and other procedures that we have designed to ensure that we record, process, accumulate and communicate information to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and submission within the time periods specified in the SEC’s rules and forms. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those determined to be effective can provide only a level of reasonable assurance with respect to financial statement preparation and presentation. Based on the evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of March 31, 2017 at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Refer to “Litigation” and “Environmental Risk” in Note 1 0 to the unaudited condensed consolidated financial statements included in Item 1 of Part I of this Quarterly Report for a discussion of the Company’s legal proceedings.

ITEM 1A. RISK FACTORS .

There were no additions or material changes to our risk factors as disclosed in Item 1A of Part I in the Company’s 201 6 Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES.

Our sand mining operations in support of our E&P business are subject to regulation by the Federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by S ection 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.106) is included in Exhibit 95.1 to this Quarterly Report .

ITEM 5. OTHER INFORMATION.

Amended and Restated Bylaws

On April 25, 2017, the Company’s Board of Directors amended the Company’s amended and restated Bylaws, effective as of such date.

The amendments to the Bylaws:

eliminate the current requirement that the number of directors be six to ten and that any change in size of more than 30% receive stockholder approval;

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eliminate the concept of director emeritus going forward;

revise the provision on compensation for directors to reflect current procedures, including elimination of director emeritus going forward;

add a provision stating that amendments to the Bylaws for director and officer indemnity may not reduce protections in effect at the time of the underlying alleged act or omission, reflecting a change in the Delaware general Corporation Law;

eliminate the requirement that proposed amendments to the Bylaws be specified in the notice of meetings of the Board of Directors, while retaining that requirement for meetings of stockholders; and

make other technical and conforming changes.

The foregoing description is a summary and does not purport to be a complete description of the amendments to the Company’s Bylaws and is qualified in its entirety by reference to the text of the Company’s Bylaws, as amended through April 25, 2017, a conformed copy of which are attached to this Quarterly Report as Exhibit 3. 1 and are incorporated herein by reference.

ITEM 6. EXH IBITS.


(3.1)*	Amended and Restated Bylaws of Southwestern Energy Company, as amended on April 25, 2017
(31.1) *	Certification of CEO filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
( 31.2 ) *	Certification of CFO filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
( 32.1 ) *	Certification of CEO furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(32.2)*	Certification of CFO furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
( 95.1 ) *	Mine Safety Disclosure
(101.INS)	Interactive Data File Instance Document
(101.SCH)	Interactive Data File Schema Document
(101.CAL)	Interactive Data File Calculation Linkbase Document
(101.LAB)	Interactive Data File Label Linkbase Document
(101.PRE)	Interactive Data File Presentation Linkbase Document
(101.DEF)	Interactive Data Fi le Definition Linkbase Document

* Filed herewith

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			SOUTHWESTERN ENERGY COMPANY
			Registrant


Dated:	April 27, 2017	/s/ R. CRAIG OWEN
		R. Craig Owen
		Senior Vice President
		and Chief Financial Officer

BYLAWS

SOUTHWESTERN ENERGY COMPANY

(hereinafter called the “Corporation”)

ARTICLE I

OFFICES

1.1 Registered Office . The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware.

1.2 Other Offices . The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine.

ARTICLE II

MEETINGS OF STOCKHOLDERS

2.1 Place of Meetings . Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors.

2.2 Annual Meetings . The Annual Meeting of Stockholders of the Corporation (the “Annual Meeting”) for the election of directors shall be held on such date and at such time as shall be designated from time to time by the Board of Directors. Any other proper business may be transacted at the Annual Meeting.

2.3 Nature of Business at Meetings of Stockholders . No business may be transacted at an Annual Meeting, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the Annual Meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the Annual Meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.3 and on the record date for the determination of stockholders entitled to notice of and to vote at such Annual Meeting and (ii) who complies with the notice procedures set forth in this Section 2.3. Clause (c) of the immediately preceding sentence shall be the exclusive means for a stockholder to make business proposals (other than director nominations made in accordance with Section 2.4 or Section 2.18 and other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and included in the Corporation’s notice of meeting) before an Annual Meeting.

In addition to any other applicable requirements, for business to be properly brought before an Annual Meeting by a stockholder, the stockholder must have given timely notice thereof (and timely updates and supplements thereto) in proper written form to the Secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, such notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than ninety (90) nor more than one hundred and twenty (120) days prior to the anniversary date of the immediately preceding Annual Meeting of Stockholders; provided , however , that in the event that the Annual Meeting is called for a date that is not within twenty-five (25) days before or after such anniversary date, notice by

the stockholder in order to be timely must be so received no later than the close of business on the tenth (10 th ) day following the day on which notice of the date of the Annual Meeting was mailed or such public disclosure of the date of the Annual Meeting was made, whichever first occurs. In no event shall any adjournment or postponement of an Annual Meeting, or the public announcement thereof, commence a new time period for the giving of a stockholder’s notice as described above.

To be in proper form, a stockholder’s notice given pursuant to this Section 2.3 shall set forth, as to the stockholder giving the notice and each beneficial owner, if any, on whose behalf the proposal is made: (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting and the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the Bylaws, the language of the proposed amendment), (ii) the name and address of the stockholder proposing such business, as they appear on the Corporation’s books, and of such beneficial owner, (iii) (A) the class and number of shares of capital stock of the Corporation that are, directly or indirectly, owned beneficially or of record by such stockholder, such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith, (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, or any derivative or synthetic arrangement having the characteristics of a long position in any class or series of shares of the Corporation, or any contract, derivative, swap or other transaction or series of transactions designed to produce economic benefits and risks that correspond substantially to the ownership of any class or series of shares of the Corporation, including due to the fact that the value of such contract, derivative, swap or other transaction or series of transactions is determined by reference to the price, value or volatility of any class or series of shares of the Corporation, whether or not such instrument, contract or right shall be subject to settlement in the underlying class or series of shares of the Corporation, through the delivery of cash or other property, or otherwise, and without regard of whether the stockholder of record, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith, may have entered into transactions that hedge or mitigate the economic effect of such instrument, contract or right or any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation (any of the foregoing, a “Derivative Instrument”) directly or indirectly owned beneficially by such stockholder or beneficial owner, or any of their respective affiliates or associates or others acting in concert therewith, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder or beneficial owner, or any of their respective affiliates or associates or others acting in concert therewith has a right to vote any class or series of shares of the Corporation, (D) any agreement, arrangement, understanding, relationship or otherwise, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by such stockholder or beneficial owner, or any of their respective affiliates or associates or persons acting in concert therewith, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any class or series of the shares of the Corporation by, manage the risk of share price changes for, or increase or

decrease the voting power of, such stockholder with respect to any class or series of the shares of the Corporation, or which provides, directly or indirectly, the opportunity to profit or share in any profit derived from any decrease in the price or value of any class or series of the shares of the Corporation (any of the foregoing, “Short Interests”), (E) any rights to dividends on the shares of the Corporation owned beneficially by such stockholder or beneficial owner that are separated or separable from the underlying shares of the Corporation, (F) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder or beneficial owner, or any of their respective affiliates or associates or others acting in concert therewith, is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership, and (G) any performance-related fees (other than an asset-based fee) that such stockholder or beneficial owner, or any of their respective affiliates or associates or others acting in concert therewith is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, including any such interests held by members of such person’s immediate family sharing the same household, (iv) a description of all arrangements or understandings between such stockholder or beneficial owner, or any of their respective affiliates or associates or others acting in concert therewith, and any other person or persons (including their names) in connection with the proposal of such business and any material interest of such stockholder or beneficial owner, or any of their respective affiliates or associates or others acting in concert therewith, in such business, (v) to the extent not required by clauses (ii) through (iv), any disclosures that would be required pursuant to Item 5 or Item 6 of Schedule 13D under the Exchange Act if the requirements therein were applicable to such stockholder and such beneficial owner and any other information relating to such stockholder and beneficial owner that would be required to be disclosed in a proxy statement and form of proxy or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder and (vi) a representation that such stockholder intends to appear in person or by proxy at the meeting to bring such business before the meeting. The presiding officer of the meeting shall, if the facts warrant, determine that business was not properly brought before the meeting in accordance with the foregoing procedure and, if he should so determine, he may so declare to the meeting and any such business not properly brought shall not be transacted. Notwithstanding the provisions of this paragraph or of Section 2.14, so long as the Corporation is subject to Rule 14a-8 under the Exchange Act, business consisting of a proposal properly included in the Corporation’s proxy statement with respect to a meeting pursuant to such Rule may be transacted at a meeting, provided that the stockholder making such proposal complies with the requirements of such rule, including paragraph (h) thereof.

2.4 Nomination of Directors . Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances and except as provided in Section 2.18 and Section 3.2 of these Bylaws. Nominations of persons for election to the Board of Directors at any Annual Meeting, or at any Special Meeting of Stockholders called for the purpose of electing directors, may be made (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.4 and on the record date for the determination of stockholders entitled to notice of and to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 2.4. Clause (b) of the immediately preceding sentence and Section 2.18 of these Bylaws shall be the exclusive means for a stockholder to make director nominations for an Annual Meeting of Stockholders and clause (b) of the immediately preceding sentence shall be the exclusive means for a stockholder to make director nominations for a Special Meeting of Stockholders.

In addition to any other applicable requirements, for a nomination to be properly brought before a meeting of stockholders by a stockholder pursuant to clause (b) of the immediately preceding paragraph,

such stockholder must have given timely notice thereof (and timely updates and supplements thereto) in proper written form to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an Annual Meeting, not less than ninety (90) nor more than one hundred and twenty (120) days prior to the anniversary date of the immediately preceding Annual Meeting of Stockholders; provided , however , that in the event that the Annual Meeting is called for a date that is not within twenty-five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than no later than the close of business on the tenth (10 th ) day following the day on which notice of the date of the Annual Meeting date was mailed or such public disclosure of the date of the annual Meeting was first made, whichever first occurs; and (b) in the case of a Special Meeting of Stockholders called for the purpose of electing directors, no later than the close of business on the tenth (10 th ) day following the day on which notice of the date of the Special Meeting was mailed or public disclosure of the date of the Special Meeting was made, whichever first occurs. In no event shall any adjournment or postponement of an Annual Meeting or a Special Meeting called for the purpose of electing directors, or the public announcement thereof, commence a new time period for the giving of a stockholder’s notice as described above.

In addition, to be timely, a stockholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than 5 business days after the later of the record date for the meeting or the date notice of the record date is first publicly disclosed, in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting, or any adjournment or postponement thereof, in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof. For the avoidance of doubt, the obligation to update and supplement as set forth in this paragraph or any other provision of these Bylaws shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or under any other provision of these Bylaws or enable or be deemed to permit a stockholder who has previously submitted notice hereunder or under any other provision of these Bylaws to amend or update any proposal or to submit any new proposal, including by changing or adding nominees, matters, business and/or resolutions proposed to be brought before a meeting of the stockholders.

To be in proper form, a stockholder’s notice given pursuant to this Section 2.4 shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the nominee, (ii) the principal occupation or employment of the nominee, (iii) the class and number of shares of capital stock of the Corporation that are owned beneficially or of record by the nominee, (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder and (v) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder, or any beneficial owner on whose behalf the nomination is made, or any of their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand; and (b) as to the stockholder giving the notice and each beneficial owner, if any, on whose behalf the nomination is made, (i) the name and address of the stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the information required by clauses (iii)(A) through (iii)(G) of the fourth paragraph of Section 2.3, (iii) a description of all arrangements or understandings between such stockholder or beneficial owner, or any of their respective affiliates or associates or others acting in concert therewith, and

each proposed nominee or any other person or persons (including their names) pursuant to which the nomination(s) are to be made and any material interest of such stockholder or beneficial owner, or any of their respective affiliates or associates or others acting in concert therewith, in such nomination, (iv) to the extent not required by clauses (b)(ii) and (b)(iii), any disclosures that would be required pursuant to Item 5 or Item 6 of Schedule 13D under the Exchange Act if the requirements therein were applicable to such stockholder and such beneficial owner and any other information relating to such stockholder and beneficial owner that would be required to be disclosed in a proxy statement and form of proxy or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder and (v) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice. Such notice must be accompanied by (x) a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected and (y) a completed and signed questionnaire, representation and agreement required by the next succeeding paragraph of this Section 2.4. At the request of the Corporation, any proposed nominee shall furnish to the Secretary any other information (A) that may reasonably be required by the Corporation to determine whether such proposed nominee is independent under the rules and listing standards of the principal United States securities exchanges upon which the common stock of the Corporation is listed or traded, any applicable rules of the Securities and Exchange Commission or any publicly disclosed standards used by the Board of Directors in determining and disclosing the independence of the Corporation’s directors (collectively, the “Independence Standards”), (B) that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee or (C) that may reasonably be required by the Corporation to determine the eligibility of such nominee to serve as a director of the Corporation. The presiding officer of the meeting shall, if the facts warrant, determine that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he may so declare to the meeting and the defective nomination shall be disregarded.

To be eligible to be a nominee for election or re-election by the stockholders as a director of the Corporation, a person must deliver (not later than the deadline prescribed for delivery of notice under the second paragraph of this Section 2.4) to the Secretary of the Corporation a written questionnaire with respect to the background and qualification of such person and, if applicable, the background of any other person on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person: (i) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person as to how such person, if elected as a director, will act or vote (in his or her capacity as a director of the Corporation) on any issue or question (a “Voting Commitment”) that has not been disclosed in such questionnaire; or (B) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director, with such person’s duties under applicable law, as a director of the Corporation; (ii) is not and will not become a party to any agreement, arrangement or understanding with any person other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed in such questionnaire; and (iii) in such person’s individual capacity and on behalf of any person on whose behalf the nomination is being made, would be in compliance, if elected as a director, as of the date of such representation and will comply with, applicable law and all conflict of interest, confidentiality and other policies and guidelines of the Corporation (including the Corporate Governance Guidelines adopted by the Board of Directors ) applicable to directors generally and publicly available (whether on the Corporation’s website or otherwise), as may be amended from time to time.

2.5 Special Meetings . Unless otherwise required by law or by the Certificate of Incorporation, Special Meetings of Stockholders, for any purpose or purposes, may be called by either (i) the Chairman, (ii) the President, (iii) the Secretary or (iv) the Board of Directors, and shall be called by the Secretary,

subject to compliance with the terms of this Section 2.5, upon the written request of holders having an aggregate “net long position” of not less than twenty percent (20%) of the outstanding shares of the Corporation ’s common stock as of the date of such request (“Special Meeting Request”). “Net long position” shall be determined with respect to each requesting holder in accordance with the definition thereof set forth in Rule 14e-4 under the Securities Exchange Act of 1934, provided that (x) for purposes of such definition, in determining such holder’s “short position,” the reference in such Rule to “the date the tender offer is first publicly announced or otherwise made known by the bidder to the holders of the security to be acquired” shall be the date of the relevant Special Meeting Request and the reference to the “highest tender offer price or stated amount of the consideration offered for the subject security” shall refer to the closing sales price of the Corporation’s common stock on the New York Stock Exchange on such date (or, if such date is not a trading day, the next succeeding trading day) and (y) the net long position of such holder shall be reduced by the number of shares as to which such holder does not, or will not, have the right to vote or direct the vote at the Special Meeting or as to which such holder has entered into any derivative or other agreement, arrangement or understanding that hedges or transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of such shares. Whether the requesting holders have complied with the requirements of this Article and related provisions of the By-laws shall be determined in good faith by the Board, which determination shall be conclusive and binding on the Corporation and the stockholders. At a Special Meeting of Stockholders, only such business shall be conducted as shall be specified in the notice of meeting (or any supplement thereto); provided , that nothing herein shall prohibit the Board of Directors from submitting matters to the stockholders at any Special Meeting.

Notwithstanding the foregoing, a Special Meeting shall not be held if (i) the Special Meeting request relates to an item of business that is not a proper subject for stockholder action under applicable law, (ii) the Special Meeting request is delivered during the period commencing ninety (90) days prior to the first anniversary of the date of the notice of annual meeting for the immediately preceding annual meeting and ending on the earlier of (x) the date of the next annual meeting and (y) thirty (30) calendar days after the first anniversary of the date of the immediately preceding annual meeting, (iii) an identical or substantially similar item (as determined in good faith by the Board of Directors, a “ Similar Item ”), other than the election of directors, was presented at a meeting of the stockholders held not more than twelve (12) months before the Special Meeting request is delivered, (iv) a Similar Item was presented at a meeting of the stockholders held not more than ninety (90) days before the Special Meeting request is delivered (and, for purposes of this clause (iv), the election of directors shall be deemed a “Similar Item” with respect to all items of business involving the election or removal of directors) or (v) a Similar Item is included in the Corporation’s notice as an item of business to be brought before a Stockholder meeting that has been called by the time the Special Meeting request is delivered but not yet held.

Upon the written request of any stockholders who have called a Special Meeting, it shall be the duty of the Secretary of the Corporation to fix the date of the Special Meeting, which shall be held at such date and time as the Secretary may fix, not less than fifteen (15) nor more than sixty (60) days after the receipt of the request (provided that such request complies with all applicable provisions of these Bylaws), and to give due notice thereof in accordance with the applicable provisions of these Bylaws.

2.6 Notice . Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a Special Meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by law, written notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to notice of and to vote at such meeting. Whenever any notice is required by these Bylaws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by (i) depositing the same in a post office box in a sealed postage paid wrapper, addressed to the person entitled thereto at

his last known post office address, and such notice shall be deemed to have been given on the date of such mailing or (ii) by electronic transmission to the extent permitted by the General Corporation Laws of the State of Delaware (the “DGCL”). Any notice required to be given under these Bylaws may be waived by the person entitled thereto. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by statute.

2.7 Adjournments . Any meeting of the stockholders may be adjourned from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting in accordance with the requirements of Article VI hereof shall be given to each stockholder of record entitled to notice of and to vote at the meeting.

2.8 Quorum . Unless otherwise required by applicable law or the Certificate of Incorporation, the holders of a majority of the Corporation’s capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the presiding officer of the meeting or the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, in the manner provided in Section 2.7 hereof, until a quorum shall be present or represented.

2.9 Voting . (a) Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, any question, with the exception of the election of directors, brought before any meeting of the stockholders shall be decided by the vote of the holders of a majority of the total number of votes of the Corporation’s capital stock represented and entitled to vote thereat, voting as a single class. Unless otherwise provided in the Certificate of Incorporation, and subject to Section 2.12 of this Article II, each stockholder represented at a meeting of the stockholders shall be entitled to cast one (1) vote for each share of the capital stock entitled to vote thereat held by such stockholder. Such votes may be cast in person or by proxy as provided in Section 2.11 of this Article II. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of the stockholders, in such officer’s discretion, may require that any votes cast at such meeting shall be cast by written ballot.

(b) Except as otherwise provided in the Certificate of Incorporation, a nominee for director shall be elected to the Board of Directors by stockholders if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election; provided , however , that directors shall be elected by a plurality of the votes cast in any “contested election.” A “contested election” means any election of directors by the stockholders for which (i) the Corporation receives a notice that a stockholder has nominated a person for election to the Board of Directors that was timely made in accordance with the applicable nomination periods provided in these Bylaws, and (ii) such nomination has not been withdrawn on or before the 10th day before the Corporation first mails its initial proxy statement in connection with such election of directors; provided , however , that the determination that an election is a contested election shall be determinative only as to the timeliness of a notice of nomination and not otherwise as to its validity. If directors are to be elected by a plurality of the votes cast, stockholders shall not be permitted to vote against a nominee but instead will be permitted to withhold a vote from a nominee.

2.10 Proxies . Each stockholder entitled to vote at a meeting of the stockholders may authorize another person or persons to act for such stockholder as proxy, but no such proxy shall be voted upon after three years from its date, unless such proxy provides for a longer period. Without limiting the manner in

which a stockholder may authorize another person or persons to act for such stockholder as proxy, the following shall constitute a valid means by which a stockholder may grant such authority:

(i) A stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy. Execution may be accomplished by the stockholder or such stockholder’s authorized officer, director, employee or agent signing such writing or causing such person’s signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature.

(ii) A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such telegram, cablegram or transmission, provided that any such telegram or cablegram must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information on which they relied.

Any copy, facsimile telecommunication or other reliable reproduction of the writing, telegram, cablegram or transmission authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing, telegram, cablegram or transmission for any and all purposes for which the original writing, telegram, cablegram or transmission could be used; provided , however , that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing, telegram, cablegram or transmission.

2.11 List of Stockholders Entitled to Vote . The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting (i) either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held or (ii) during ordinary business hours, at the principal place of business of the Corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

2.12 Record Date . (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of the stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of the stockholders shall apply to any adjournment of the meeting; provided , however , that the Board of Directors may fix a new record date for the adjourned meeting.

(b) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting shall be established pursuant to this Section 2.12(b). In order that the

Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice delivered to the Secretary at the principal executive offices of the Corporation, request that the Board of Directors fix a record date. To be valid and effective, the written notice must set forth the action or actions proposed to be taken by written consent and must be received by the Secretary at the principal executive offices of the Corporation. The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such written notice is received, adopt a resolution fixing the record date (unless a record date has previously been fixed by the Board of Directors pursuant to the first sentence of this Section 2.12(b)). If no record date has been fixed by the Board of Directors within ten (10) days after the date on which such written notice is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date after the expiration of such ten day time period on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in the manner prescribed by the DGCL. If no record date has been fixed by the Board of Directors, and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action.

2.13 Stock Ledger . The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 2.11 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of the stockholders.

2.14 Conduct of Meetings . The Board of Directors of the Corporation may adopt by resolution such rules and regulations for the conduct of any meeting of the stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the Chairman of the Board or the presiding officer of any meeting of the stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such presiding officer, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the Chairman of the Board or the presiding officer of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) the determination of when the polls shall open and close for any given matter to be voted on at the meeting; (iii) rules and procedures for maintaining order at the meeting and the safety of those present; (iv) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the presiding officer of the meeting shall determine; (v) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (vi) limitations on the time allotted to questions or comments by participants.

2.15 Inspectors of Election . In advance of any meeting of the stockholders, the Board of Directors, by resolution, the Chairman of the Board of Directors or the President shall appoint one or more inspectors to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of the stockholders, the presiding officer of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by applicable law, inspectors may be officers, employees or agents of the Corporation. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspector shall have the duties prescribed by law

and shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by applicable law.

2.16 Certain Matters Relating to Stockholder Proposals . Without limiting the applicability of Sections 2.3, 2.4 and 2.18, a stockholder who seeks to have any proposal included in the Corporation’s proxy materials must provide notice as required by and otherwise comply with the applicable requirements of the rules and regulations under the Exchange Act. Except for the immediately preceding sentence, nothing in Section 2.3, 2.4 or 2.18 shall be deemed to affect any rights of (i) stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act; or (ii) the holders of any class or series of preferred stock of the Corporation, voting as a class separately from the holders of common stock, to elect directors pursuant to any applicable provisions of such class or series preferred stock or the Certificate of Incorporation.

2.17 Inspectors of Written Consent . In the event of the delivery, in the manner provided by Section 2.12(b) of these Bylaws and applicable law, to the Corporation of the requisite written consent or consents to take corporate action and/or any related revocation or revocations, the Corporation shall engage nationally recognized independent inspectors of elections for the purpose of promptly performing a ministerial review of the validity of the consents and revocations. For the purpose of permitting the inspectors to perform such review, no action by written consent and without a meeting shall be effective until such inspectors have completed their review, determined that the requisite number of valid and unrevoked consents delivered to the Corporation in accordance with Section 2.12(b) and applicable law have been obtained to authorize or take the action specified in the consents, and certified such determination for entry in the records of the Corporation kept for the purpose of recording the proceedings of meetings of stockholders. Nothing contained in this Section 2.17 shall in any way be construed to suggest or imply that the Board of Directors or any stockholder shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after such certification by the independent inspectors, or to take any other action (including the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

2.18 Proxy Access

(a) Whenever the Board of Directors solicits proxies with respect to the election of directors at an Annual Meeting (beginning with the 2016 Annual Meeting), subject to the provisions of this Section 2.18, the Corporation shall include in its proxy statement for such Annual Meeting, in addition to any persons nominated for election by or at the direction of the Board of Directors (or any duly authorized committee thereof), the name, together with the Required Information (as defined below), of any person nominated for election (the “Stockholder Nominee”) to the Board of Directors by a stockholder or group of no more than twenty (20) stockholders (counting as one stockholder, for this purpose, any two (2) or more funds that are part of the same Related Fund Group (as defined below)) that satisfies the requirements of this Section 2.18 (such stockholder or stockholders, the “Eligible Stockholder”) and that expressly elects at the time of providing the notice required by this Section 2.18 to have such nominee included in the Corporation’s proxy materials pursuant to this Section 2.18. For purposes of this Section 2.18, the “Required Information” that the Corporation will include in its proxy statement is (i) the information provided to the Secretary of the Corporation concerning the Stockholder Nominee and the Eligible Stockholder that is required to be disclosed in the Corporation’s proxy statement pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder and (ii) if the Eligible Stockholder so elects, a Supporting Statement (as defined in Section 2.18(g) hereof). Subject to the provisions of this Section 2.18, the name of any Stockholder Nominee included in the Corporation’s proxy statement for an Annual Meeting shall also be set forth on the form of proxy distributed by the Corporation in connection with such Annual Meeting.

(b) In addition to any other applicable requirements, for a Stockholder Nominee to be eligible for inclusion in the Corporation’s proxy materials pursuant to this Section 2.18, the Eligible Stockholder must give timely notice of such nomination (the “Notice of Proxy Access Nomination”) in proper written form to the Secretary of the Corporation. To be timely, the Notice of Proxy Access Nomination must be delivered to or mailed and received by the Secretary at the principal executive offices of the Corporation not less than one hundred and twenty (120) days nor more than one hundred and fifty (150) days prior to the first anniversary of the date that the Corporation first distributed its proxy statement to stockholders for the previous year’s Annual Meeting. In no event shall any adjournment or postponement of an Annual Meeting or the public announcement thereof commence a new time period for the giving of a Notice of Proxy Access Nomination pursuant to this Section 2.18.

(c) The maximum number of Stockholder Nominees nominated by all Eligible Stockholders that will be included in the Corporation’s proxy materials with respect to an Annual Meeting shall not exceed the greater of (i) two (2) or (ii) twenty percent (20%) of the number of directors in office as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with this Section 2.18 (the “Final Proxy Access Nomination Date”) or, if such amount is not a whole number, the closest whole number below twenty percent (20%) (such number, as it may be adjusted pursuant to this Section 2.18(c), the “Permitted Number”). In the event that one or more vacancies for any reason occurs on the Board of Directors after the Final Proxy Access Nomination Date but before the date of the Annual Meeting and the Board of Directors resolves to reduce the size of the Board of Directors in connection therewith, the Permitted Number shall be calculated based on the number of directors in office as so reduced. In addition, the Permitted Number shall be reduced by (x) the number of individuals who will be included in the Corporation’s proxy materials as nominees recommended by the Board of Directors pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of stock from the Corporation by such stockholder or group of stockholders) and (y) the number of directors in office as of the Final Proxy Access Nomination Date who were included in the Corporation’s proxy materials as Stockholder Nominees for any of the three (3) preceding Annual Meetings (including any persons counted as Stockholder Nominees pursuant to clause (B) of the next sentence) and whom the Board of Directors decides to nominate for re-election to the Board of Directors. For purposes of determining when the Permitted Number has been reached, each of the following persons shall be counted as one of the Stockholder Nominees: (A) any individual nominated by an Eligible Stockholder for inclusion in the Corporation’s proxy materials pursuant to this Section 2.18 whose nomination is subsequently withdrawn and (B) any individual nominated by an Eligible Stockholder for inclusion in the Corporation’s proxy materials pursuant to this Section 2.18 whom the Board of Directors decides to nominate for election to the Board of Directors. Any Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the Corporation’s proxy materials pursuant to this Section 2.18 shall rank such Stockholder Nominees based on the order in which the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the Corporation’s proxy materials in the event that the total number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 2.18 exceeds the Permitted Number. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 2.18 exceeds the Permitted Number, the highest ranking Stockholder Nominee who meets the requirements of this Section 2.18 from each Eligible Stockholder will be selected for inclusion in the Corporation’s proxy materials until the Permitted Number is reached, going in order of the amount (largest to smallest) of shares of common stock of the Corporation each Eligible Stockholder properly disclosed as owned in its Notice of Proxy Access Nomination (as determined by the Corporation). If the Permitted Number is not reached after the highest ranking Stockholder Nominee who meets the requirements of this Section 2.18 from each Eligible Stockholder has been selected, then the next highest ranking Stockholder Nominee who meets the requirements of this Section 2.18 from each Eligible Stockholder will be selected for inclusion in the Corporation’s proxy materials, and this process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached.

(d) To make a nomination pursuant to this Section 2.18, an Eligible Stockholder must have owned (as defined below) at least three percent (3%) of the Corporation’s outstanding common stock (the “Required Shares”) continuously for at least three (3) years (the “Minimum Holding Period”) as of both the date the Notice of Proxy Access Nomination is delivered to or mailed and received by the Secretary of the Corporation in accordance with this Section 2.18 and the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting, and must continue to own the Required Shares through the date of the Annual Meeting. For purposes of this Section 2.18, an Eligible Stockholder shall be deemed to “own” only those outstanding shares of common stock of the Corporation as to which the stockholder possesses both (i) the full voting and investment rights pertaining to the shares and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares (x) sold by such stockholder or any of its affiliates in any transaction that has not been settled or closed, (y) borrowed by such stockholder or any of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuant to an agreement to resell or (z) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar instrument or agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of outstanding common stock of the Corporation, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (1) reducing in any manner, to any extent or at any time in the future, such stockholder’s or its affiliates’ full right to vote or direct the voting of any such shares and/or (2) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or affiliate, but not including any hedging across a broad multi-industry investment portfolio solely with respect to currency risk, interest-rate risk or, using a broad multi-industry index-based hedge, equity risk. A stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder’s ownership of shares shall be deemed to continue during any period in which (i) the stockholder has loaned such shares, provided that the stockholder has the power to recall such loaned shares on five (5) business days’ notice and includes in the Notice of Proxy Access Nomination an agreement that it (A) will promptly recall such loaned shares upon being notified that any of its Shareholder Nominees will be included in the Corporation’s proxy materials and (B) will continue to hold such recalled shares through the date of the Annual Meeting or (ii) the stockholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. For purposes of this Section 2.18, the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the General Rules and Regulations under the Exchange Act. For purposes of this Section 2.18, the term “Related Fund Group” means two or more collective investment funds that hold themselves out to investors as related funds for purposes of investment and investor services or are sponsored by the same employer. For the avoidance of doubt, no shares may be attributed as owned by more than one person constituting an Eligible Stockholder under this Section 2.18, and no person may be a member of more than one group of persons constituting an Eligible Stockholder under this Section 2.18.

(e) To be in proper written form for purposes of this Section 2.18, the Notice of Proxy Access Nomination must include or be accompanied by the following:

(i) a written statement signed by the Eligible Stockholder certifying as to the number of shares it owns and has owned continuously during the Minimum Holding Period and the Eligible Stockholder’s agreement to provide, within five (5) business days following the later of the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting or the date notice of the record date is first publicly disclosed, a written statement by the Eligible Stockholder certifying as to the number of shares it owns and has continuously owned through the record date;

(ii) one or more written statements from the record holder of the Required Shares (and from each intermediary through which the Required Shares are or have been held during the Minimum Holding Period) verifying that, as of a date within seven (7) calendar days prior to the date the Notice of Proxy Access Nomination is delivered to or mailed and received by the Secretary of the Corporation, the Eligible Stockholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Stockholder’s agreement to provide, within five (5) business days following the later of the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting or the date notice of the record date is first publicly disclosed, one or more written statements from the record holder and such intermediaries verifying the Eligible Stockholder’s continuous ownership of the Required Shares through the record date;

(iii) a copy of the Schedule 14N that has been or is concurrently being filed with the United States Securities and Exchange Commission as required by Rule 14a-18 under the Exchange Act;

(iv) the information, representations and agreements that would be required to be set forth in a stockholder’s notice of a nomination pursuant to Section 2.4 of these Bylaws (including the written consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected and the completed and signed questionnaire, representation and agreement identified in Section 2.4 of these Bylaws);

(v) a representation and agreement that the Eligible Stockholder (A) will continue to hold the Required Shares through the date of the Annual Meeting, (B) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control at the Corporation, and does not presently have such intent, (C) has not nominated and will not nominate for election to the Board of Directors at the Annual Meeting any person other than the Stockholder Nominee(s) it is nominating pursuant to this Section 2.18, (D) has not engaged and will not engage in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the Annual Meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors, (E) has not distributed and will not distribute to any stockholder of the Corporation any form of proxy for the Annual Meeting other than the form distributed by the Corporation, (F) has complied and will comply with all laws and regulations applicable to solicitations and the use, if any, of soliciting material in connection with the Annual Meeting, and (G) has provided and will provide facts, statements and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;

(vi) a representation as to the Eligible Stockholder’s intentions with respect to continuing to own the Required Shares for at least one year following the Annual Meeting;

(vii) an agreement that the Eligible Stockholder (A) assumes all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder’s communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder provided to the Corporation, (B) will indemnify and hold harmless the Corporation and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 2.18 and (C) will file with the Securities and Exchange Commission any solicitation or other communication with the stockholders of the Corporation relating to the Annual Meeting at which its Stockholder Nominee(s) will be nominated, regardless of whether any such filing is

required under Regulation 14A of the Exchange Act or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A of the Exchange Act;

(viii) in the case of a nomination by a group of stockholders together constituting an Eligible Stockholder, the designation by all group members of one member of the group that is authorized to receive communications, notices and inquiries from the Corporation and to act on behalf of all members of the group with respect to all matters relating to the nomination under this Section 2.18 (including withdrawal of the nomination); and

(ix) in the case of a nomination by a group of stockholders together constituting an Eligible Stockholder in which two or more funds that are part of the same Related Fund Group are counted as one stockholder for purposes of qualifying as an Eligible Stockholder, documentation reasonably satisfactory to the Corporation that demonstrates that the funds are part of the same Related Fund Group.

(f) In addition to the information required pursuant to Section 2.18(e) or any other provision of these Bylaws, the Corporation may require (i) any proposed Stockholder Nominee to furnish any other information (x) that may reasonably be required by the Corporation to determine whether the Stockholder Nominee would be independent under the Independence Standards, (y) that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such Stockholder Nominee or (z) that may reasonably be required by the Corporation to determine the eligibility of such Stockholder Nominee to serve as a director of the Corporation and (ii) the Eligible Stockholder to furnish any other information that may reasonably be required by the Corporation to verify the Eligible Stockholder’s continuous ownership of the Required Shares for the Minimum Holding Period.

(g) The Eligible Stockholder may, at its option, provide to the Secretary of the Corporation, at the time the Notice of Proxy Access Nomination is provided, a written statement, not to exceed five hundred (500) words, in support of the Stockholder Nominee(s)’ candidacy (a “Supporting Statement”). Only one Supporting Statement may be submitted by an Eligible Stockholder (including any group of stockholders together constituting an Eligible Stockholder) in support of its Stockholder Nominee(s), regardless of the number of its Stockholder Nominees. Notwithstanding anything to the contrary contained in this Section 2.18, the Corporation may omit from its proxy materials any information or Supporting Statement (or portion thereof) that it, in good faith, believes would violate any applicable law or regulation.

(h) In the event that any information or communications provided by an Eligible Stockholder or a Stockholder Nominee to the Corporation or its stockholders ceases to be true and correct in all material respects or omits to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, such Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the Secretary of the Corporation of any defect in such previously provided information and of the information that is required to correct any such defect. In addition, any person providing any information to the Corporation pursuant to this Section 2.18 shall further update and supplement such information, if necessary, so that all such information shall be true and correct as of the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting and as of the date that is ten (10) business days prior to the Annual Meeting, and such update and supplement shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not later than the later of five (5) business days after the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting or the date notice of the record date is first publicly disclosed, in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date of the Annual Meeting, in the case of the update and supplement required to be made as of ten (10) business days prior to the Annual Meeting. For

the avoidance of doubt, the requirement to update and supplement such information does not permit any Eligible Stockholder or other person to change or add any proposed Stockholder Nominee or be deemed to cure any defects or limit the remedies (including, without limitation, under these Bylaws) available to the Corporation relating to any defect.

(i) Notwithstanding anything to the contrary contained in this Section 2.18, the Corporation shall not be required to include, pursuant to this Section 2.18, a Stockholder Nominee in its proxy materials (i) for any meeting of stockholders for which the Secretary of the Corporation receives notice (whether or not subsequently withdrawn) that the Eligible Stockholder or any other stockholder intends to nominate one or more persons for election to the Board of Directors pursuant to the advance notice requirements for director nominations set forth in Section 2.4 of these Bylaws, (ii) if the Eligible Stockholder who has nominated such Stockholder Nominee has engaged in or is currently engaged in, or has been or is a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the Annual Meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors, (iii) who would not be an independent director under the Independence Standards, (iv) whose election as a member of the Board of Directors would cause the Corporation to be in violation of these Bylaws, the Certificate of Incorporation, the rules and listing standards of the principal United States securities exchanges upon which the common stock of the Corporation is listed or traded, or any applicable state or federal law, rule or regulation, (v) who is or has been, within the past three (3) years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, (vi) who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past ten (10) years, (vii) who is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended, (viii) if such Stockholder Nominee or the applicable Eligible Stockholder shall have provided any information to the Corporation or its stockholders in respect of the nomination that was untrue in any material respect or that omitted to state a material fact necessary to make the statements made, in light of the circumstances in which they were made, not misleading, or (ix) if such Stockholder Nominee or the applicable Eligible Stockholder otherwise contravenes any of the agreements or representations made by such Stockholder Nominee or Eligible Stockholder or fails to comply with its obligations pursuant to this Section 2.18.

(j) Notwithstanding anything to the contrary set forth herein, if (i) a Stockholder Nominee and/or the applicable Eligible Stockholder breaches any of its or their obligations, agreements or representations under this Section 2.18 or (ii) a Stockholder Nominee otherwise becomes ineligible for inclusion in the Corporation’s proxy materials pursuant to this Section 2.18 or dies, becomes disabled or otherwise becomes ineligible or unavailable for election at the Annual Meeting, in each case as determined by the Board of Directors, any duly authorized committee thereof or the chairman of the Annual Meeting, (x) the Corporation may omit or, to the extent feasible, remove the information concerning such Stockholder Nominee and the related Supporting Statement from its proxy materials and/or otherwise communicate to its stockholders that such Stockholder Nominee will not be eligible for election at the Annual Meeting, (y) the Corporation shall not be required to include in its proxy materials any successor or replacement nominee proposed by the applicable Eligible Stockholder or any other Eligible Stockholder and (z) the Board of Directors or the chairman of the Annual Meeting shall declare such nomination to be invalid and such nomination shall be disregarded notwithstanding that proxies in respect of such vote may have been received by the Corporation. In addition, if the Eligible Stockholder (or a representative thereof, any such representative to be designated in writing by the Eligible Stockholder and provided to the Corporation in advance of the Annual Meeting) does not appear at the Annual Meeting to present any nomination pursuant to this Section 2.18, such nomination shall be declared invalid and disregarded as provided in clause (z) above.

(k) Whenever the Eligible Stockholder consists of a group of stockholders (including funds in a Related Fund Group counting as a single stockholder), (i) each provision in this Section 2.18 that requires the Eligible Stockholder to provide any written statements, representations, undertakings, agreements or other instruments or to meet any other conditions shall be deemed to require each stockholder (including each individual fund) that is a member of such group to provide each of such statements, representations, undertakings, agreements or other instruments and to meet such other conditions (except that the members of such group may aggregate their shareholdings in order to meet the three percent (3%) ownership requirement of the “Required Shares” definition) and (ii) a breach of any obligation, agreement or representation under this Section 2.18 by any member of such group shall be deemed a breach by the Eligible Stockholder. No person may be a member of more than one group of stockholders constituting an Eligible Stockholder with respect to any Annual Meeting.

(l) Any Stockholder Nominee who is included in the Corporation’s proxy materials for a particular Annual Meeting but either (i) withdraws from or becomes ineligible or unavailable for election at the Annual Meeting or (ii) does not receive at least twenty-five percent (25%) of the votes cast in favor of such Stockholder Nominee’s election, will be ineligible to be a Stockholder Nominee pursuant to this Section 2.18 for the next two (2) Annual Meetings of stockholders. For the avoidance of doubt, the immediately preceding sentence shall not prevent any stockholder from nominating any person to the Board of Directors pursuant to and in accordance with Section 2.4 of these Bylaws.

(m) For purposes of this Section 2.18 “public announcement” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

(n) This Section 2.18 provides the exclusive method for a stockholder to include nominees for election to the Board of Directors in the Corporation’s proxy materials.

ARTICLE III

DIRECTORS

3.1 Number, Quorum, Qualifications and Retirement . (a) The Board of Directors shall consist of a number of directors , no fewer than five (5), as the Board of Directors may determine. A majority of the directors shall constitute a quorum for the transaction of business. A director need not be a stockholder at the time of his or her initial election or appointment to the Board; provided, however, that all directors must thereafter comply with any applicable stock ownership guidelines set forth in the Corporate Governance Guidelines adopted by the Board of Directors .

(b) The directors shall be elected in the manner provided in the Delaware General Corporation Law and the provisions of these Bylaws (including Section 2.9 hereof). Any nominee for director in an uncontested election (as defined in Section 2.9 hereof) who receives a greater number of votes “against” his or her election than votes “for” such election shall, to the extent not previously provided, promptly (and in any event no later than the first regularly scheduled meeting of the Board of Directors following certification of the stockholders’ vote) submit his or her resignation conditioned upon the acceptance of such resignation by the Nominating and Governance Committee. The Nominating and Governance Committee of the Board of Directors shall consider all of the relevant facts and circumstances and recommend to the Board of Directors the action to be taken with respect to such conditional resignation. The Board of Directors will consider the Nominating and Governance Committee’s recommendation and decide whether to accept or reject any tendered resignation no later than ninety (90) days following

certification of the stockholders’ vote. Following the Board’s decision on such recommendation, the Corporation will promptly publicly disclose the Board’s decision and process (including, if applicable, the reason or reasons for rejecting the tendered resignation(s)) in a periodic or current report filed with the Commission.

To the extent that one or more directors’ resignations are accepted by the Board of Directors, the Nominating and Governance Committee will recommend to the Board of Directors whether to fill such vacancy or vacancies or, to the extent permitted by the Certificate of Incorporation or these Bylaws, to reduce the size of the Board.

Any director whose resignation is being considered pursuant to this provision will not participate in the Nominating and Governance Committee recommendation or Board consideration regarding whether or not to accept such director’s resignation. If the resignation of a member of the Nominating and Governance Committee is under consideration with respect to the same election, then the independent directors who were elected at such election will appoint a Board of Directors committee amongst themselves solely for the purpose of considering the tendered resignations and will recommend to the Board of Directors whether to accept or reject them. Such committee may, but need not, consist of all of the independent directors who were elected. If less than three (3) independent directors were re-elected, then the entire Board of Directors shall consider the tendered resignations, provided , however , that a director may not participate in the consideration of his or her own resignation.

3.2 Vacancies . Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring on the Board of Directors may be filled by a majority of the Board of Directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy resulting from an increase in the number of directors shall hold office for a term that shall coincide with the remaining term of other directors. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor.

3.3 Duties and Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws required to be exercised or done by the stockholders.

3.4 Meetings . The Board of Directors may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman, if there be one, the President, or by any two directors. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone or telegram on twenty-four (24) hours’ notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances.

3.5 Organization . At each meeting of the Board of Directors, the Chairman of the Board of Directors, or, in his or her absence, a director chosen by a majority of the directors present, shall act as chairman. The Secretary of the Corporation shall act as secretary at each meeting of the Board of Directors. In case the Secretary shall be absent from any meeting of the Board of Directors, an Assistant Secretary shall perform the duties of secretary at such meeting; and in the absence from any such meeting of the Secretary and all the Assistant Secretaries, the presiding officer of the meeting may appoint any person to act as secretary of the meeting.

3.6 Resignations and Removals of Directors. Any director of the Corporation may resign at any time, by giving notice in writing to the Chairman of the Board of Directors, the President or the Secretary of the Corporation. Such resignation shall take effect at the time therein specified or, if no time is specified, immediately; and, unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Except as otherwise required by applicable law and subject to the rights, if any, of the holders of shares of preferred stock then outstanding, any director or the entire Board of Directors may be removed from office at any time, with or without cause, by the affirmative vote of the holders of at least a majority in voting power of the issued and outstanding capital stock of the Corporation entitled to vote in the election of directors.

3.7 Quorum . Except as otherwise required by law or the Certificate of Incorporation, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place of the adjourned meeting, until a quorum shall be present.

3.8 Actions of the Board by Written Consent . Unless otherwise provided in the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.

3.9 Meetings by Means of Conference Telephone . Unless otherwise provided in the Certificate of Incorporation or these Bylaws, members of the Board of Directors of the Corporation, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.9 shall constitute presence in person at such meeting.

3.10 Committees . The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent permitted by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each committee shall keep regular minutes and report to the Board of Directors when required.

3.11 Compensation . The Board of Directors may adopt policies and practices for the payment or reimbursement of directors’ expenses and compensation and benefits, if any, for directors and former directors (including former directors appointed directors emeriti under these bylaws as previously in effect), which compensation and benefits may, but need not, include cash payments, awards of stock and other incentives to the extent permitted under applicable plans, and access to benefits made available to

employees of the Corporation or its subsidiaries and which may include additional amounts or awards for service as Chairman of the Board of Directors, presiding or lead director, chairmanship of a committee or other function s . Any such policies or practices may be modified or rescinded at any time, and a current or former director has vested rights in the continuation of any such policy or practice only if and to the extent expressly provided.

3.12 Executive Committee . The directors may appoint from their number an executive committee which may make its own rules of procedure and shall meet where and as provided by such rules, or by a resolution of the directors. A majority shall constitute a quorum, and in every case the affirmative vote of a majority of all the members of the committee shall be necessary to the adoption of any resolution. During the intervals between the meetings of the directors the executive committee shall have and may exercise all the powers of the directors in the management of the business and affairs of the Corporation, including power to authorize the seal of the Corporation to be affixed to all papers which may require it, in such manner as such committee shall deem best for the interests of the Corporation, in all cases in which specific directions shall not have been given by the directors.

3.13 Chairman of the Board of Directors . The directors shall appoint from their number a Chairman of the Board of Directors, who shall preside at all meetings of the stockholders and of the Board of Directors and shall be a member of the executive committee, if any. The Chairman of the Board of Directors shall have supervision of such matters as may be designated to him by the Board of Directors or the executive committee.

3.14 Vice Chairman of the Board of Directors . The directors may appoint from their number a Vice Chairman, who shall be vested with all the powers and perform all of the duties of the Chairman of the Board of Directors in the absence or disability of the latter unless or until the Board of Directors shall otherwise determine.

ARTICLE IV

OFFICERS

4.1 General . The officers of the Corporation shall be a President, one or more Vice Presidents, one or more of whom may be designated as Executive Vice President or Senior Vice President and shall have senior authority, a Secretary, a Treasurer, a Controller and such assistants and other officers, including a Chief Executive Officer and a Chief Operating Officer, as may from time to time be elected or appointed by the Board of Directors. The Board of Directors, by resolution, may also designate the Chairman and any Vice Chairman of the Board of Directors as officers. Two or more offices may be held by the same person.

4.2 Chairman and Vice Chairman of the Board of Directors . If designated as an officer of the Corporation, the Chairman and any Vice Chairman of the Board of Directors, in addition to his responsibilities as a director, shall have supervision of such matters as may be designated to him by the Board of Directors or the executive committee, and any such Vice Chairman of the Board of Directors shall be vested with all the powers and shall perform all the duties of the Chairman in the absence or disability of the latter (and if more than one such Vice Chairman, in order of seniority) unless or until the Board of Directors shall otherwise determine.

4.3 President . The President shall, in the absence of the Chairman or any Vice Chairman of the Board, preside at all meetings of the Board of Directors, and act as Chairman at, and call to order all

meetings of the stockholders. He shall have such other powers and perform such other duties as shall be prescribed by the Board of Directors. If there is no Chief Executive Officer, the President shall have all the powers and duties specified for the Chief Executive Officer.

4.4 Chief Executive Officer . The Board of Directors may elect a Chief Executive Officer. The Chief Executive Officer shall have power to call special meetings of the stockholders and directors for any purpose or purposes, appoint and discharge, subject to the approval of the Board of Directors, employees and agents of the Corporation, make and sign contracts and agreements in the name and behalf of the Corporation, except that he be not authorized to dispose or encumber material assets of the Corporation without the authority of the Board of Directors, and while the Board of Directors and/or committees are not in session he shall have general management and control of the business and affairs of the Corporation; he shall see that the books, reports, statements and certificates required by the statute under which this Corporation is organized or any other laws applicable thereto are properly kept, made and filed according to law; and he shall generally do and perform all acts incident to the office of President or Chief Executive Officer, or which are authorized or required by law. He shall have such other powers and perform such other duties as shall be prescribed by the Board of Directors.

4.5 Chief Operating Officer . The Board may elect a Chief Operating Officer. The Chief Operating Officer shall have such powers and perform such duties as shall be prescribed by the Board of Directors.

4.6 Vice President . The Vice Presidents in the order of their seniority shall be vested with all the powers and shall perform all the duties of the President in the absence or disability of the latter, unless or until the Board of Directors shall otherwise determine. They shall have such other powers and perform such other duties as shall be prescribed by the Board of Directors.

4.7 Secretary . The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and directors, and all other notices required by law or by these Bylaws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chairman of the Board of Directors, the President, or by the Board of Directors or stockholders upon whose requisition the meeting is called as provided in these Bylaws. He shall record all proceedings of the meetings of the Corporation and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the Board of Directors or the President. He shall have custody of the seal of the Corporation and shall affix the same to all instruments requiring it, when authorized by the Board of Directors or the President, and attest the same. He shall be sworn to the faithful discharge of his duties.

4.8 Assistant Secretary . Any Assistant Secretary shall be vested with the powers and shall perform all the duties of Secretary in the absence or disability of the latter, unless or until the Board of Directors shall otherwise determine. He shall have such other powers and perform such other duties as shall be prescribed by the Board of Directors.

4.9 Treasurer . The Treasurer shall have the custody of all funds, securities, evidences of indebtedness and other valuable documents of the Corporation; he shall receive and give or cause to be given receipts and acquittances for moneys paid in on account of the Corporation and shall pay out of the funds on hand all just debts of the Corporation of whatever nature upon maturity of the same; he shall enter or cause to be entered in books of the Corporation to be kept for that purpose full and accurate accounts of all monies received and paid out on account of the Corporation, and, whenever required by the President or the Board of Directors, he shall render a statement of his cash accounts. He shall, unless otherwise determined by the Board of Directors, have charge of the original stock books, transfer books and stock ledgers and act as transfer agent in respect of the stock and securities of the Corporation; he shall prepare

and submit from time to time to the Board of Directors financial, cash and operating budgets or estimates; he shall prepare and submit such other financial data and information as he shall be directed to by the Board of Directors; and he shall perform all of the other duties incident to the office of Treasurer. He shall give the Corporation a bond for the faithful discharge of his duties in such amount and with such surety as the Board of Directors shall prescribe.

4.10 Assistant Treasurer . Any Assistant Treasurer shall be vested with all the powers and shall perform all the duties of Treasurer in the absence or disability of the latter, unless or until the Board of Directors shall otherwise determine. He shall have such other powers and perform such other duties as shall be prescribed by the Board of Directors.

4.11 Controller . The Controller shall be responsible for directing the Corporation’s accounting functions. Specific areas include the development and maintenance of planning and budgeting systems, analysis and interpretation of trends requiring management’s attention, the preparation of financial and management reports and procedures, and senior management. Ancillary responsibilities include the supervision of external auditors, and participation in the planning and execution of the utility rate cases.

4.12 Other Officers . Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

4.13 Voting Securities Owned by the Corporation . Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President or any Vice President or any other officer authorized to do so by the Board of Directors and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons.

ARTICLE V

STOCK

5.1 Form of Certificates . The shares of the Corporation may be represented by certificates or may be uncertificated. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation (i) by the Chairman of the Board of Directors, or the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by such stockholder in the Corporation. Absent a specific request for such a certificate by the registered owner or transferee thereof, all shares may be uncertificated upon the original issuance thereof by the Corporation or upon surrender or any certificate representing such shares to the Corporation or its transfer agent.

5.2 Signatures . Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued,

it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

5.3 Lost Certificates . The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or such owner’s legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate.

5.4 Transfers . Stock of the Corporation shall be transferable in the manner prescribed by applicable law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation by the Corporation or the Corporation’s transfer agent and upon the surrender of a certificate therefor, properly endorsed for transfer and payment of all necessary transfer taxes; provided, however, that such surrender and endorsement or payment of taxes shall not be required in any case in which the officers of the Corporation shall determine to waive such requirement. Every certificate exchanged, returned or surrendered to the Corporation shall be marked “Cancelled,” with the date of cancellation, by the Secretary or Assistant Secretary of the Corporation or the transfer agent thereof. Within a reasonable time after the transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General Corporation Law of the State of Delaware. Subject to the provisions of the Certificate of Incorporation and these By-Laws, the Board of Directors may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, transfer and registration of shares of the Corporation. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.

5.5 Dividend Record Date . In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

5.6 Record Owners . The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by law.

5.7 Transfer and Registry Agents. The Corporation may from time to time maintain one or more transfer offices or agencies and registry offices or agencies at such place or places as may be determined from time to time by the Board of Directors.

ARTICLE VI

NOTICES

6.1 Notices . Whenever written notice is required by law, the Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at such person’s address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by telegram, telex, cable or otherwise electronically as permitted by law.

6.2 Waivers of Notice . Whenever any notice is required by applicable law, the Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of a person at a meeting, present in person or represented by proxy, shall constitute a waiver of notice of such meeting, except where the person attends the meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any Annual or Special Meeting or any regular or special meeting of the directors or members of a committee of directors need be specified in any written waiver of notice unless so required by law, the Certificate of Incorporation or these Bylaws.

ARTICLE VII

GENERAL PROVISIONS

7.1 Dividends . Dividends upon the capital stock of the Corporation, subject to the requirements of the DGCL and the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting of the Board of Directors (or any action by written consent in lieu thereof in accordance with Section 3.8 hereof), and may be paid in cash, in property, or in shares of the Corporation’s capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for purchasing any of the shares of capital stock, warrants, rights, options, bonds, debentures, notes, scrip or other securities or evidences of indebtedness of the Corporation, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve.

7.2 Disbursements . All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

7.3 Fiscal Year . The fiscal year of the Corporation shall end on December 31 of each year unless changed by resolution of the Board of Directors.

7.4 Corporate Seal . The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

7.5 Forum for Adjudication of Disputes . (a) Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be a state or federal court located within the state of Delaware, in all cases subject to the court’s having personal jurisdiction over the indispensa ble parties named as defendants. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 7.5.

(b) If any action the subject matter of which is within the scope of paragraph (a) above is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce paragraph (a) above (an “FSC Enforcement Action”) and (ii) having service of process made upon such stockholder in any such FSC Enforcement Action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.

7.6 Determinations, Etc . To the fullest extent permitted by law and except as expressly provided otherwise in these Bylaws, any interpretation or application of, or determination under, these Bylaws made by the Board of Directors or authorized committee thereof shall be conclusive and binding on the Corporation, its stockholders and other affected persons.

ARTICLE VIII

INDEMNIFICATION

8.1 Power to Indemnify in Actions, Suits or Proceedings other than Those by or in the Right of the Corporation . Subject to Section 8.3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

8.2 Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation . Subject to Section 8.3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving

at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

8.3 Authorization of Indemnification . Any indemnification under this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Sections 8.1 and 8.2, as the case may be. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders. Such determination shall be made, with respect to former directors and officers, by any person or persons having the authority to act on the matter on behalf of the Corporation. To the extent, however, that a present or former director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case.

8.4 Good Faith Defined . For purposes of any determination under Section 8.3, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person’s conduct was unlawful, if such person’s action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The provisions of this Section 8.4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Sections 8.1 and 8.2, as the case may be.

8.5 Indemnification by a Court . Notwithstanding any contrary determination in the specific case under Section 8.3, and notwithstanding the absence of any determination thereunder, any director or officer may apply to the Court of Chancery of the State of Delaware or any other court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Sections 8.1 and 8.2. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Sections 8.1 and 8.2, as the case may be. Neither a contrary determination in the specific case under Section 8.3 nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 8.5 shall be given to the Corporation promptly upon the filing of such application. If successful,

in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.

8.6 Expenses Payable in Advance . Expenses (including attorneys’ fees) incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article VIII. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate.

8.7 Nonexclusivity of Indemnification and Advancement of Expenses . The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation, these Bylaws, any agreement, a vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Sections 8.1 and 8.2 shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Sections 8.1 and 8.2 but whom the Corporation has the power or obligation to indemnify under the provisions of the DGCL, or otherwise.

8.8 Insurance . The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Article VIII.

8.9 Certain Definitions . For purposes of this Article VIII, references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. The term “other enterprise” as used in this Article VIII shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. For purposes of this Article VIII, references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article VIII.

8.10 Survival of Indemnification and Advancement of Expenses . The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Any repeal or modification of the provisions of this Article VIII shall not adversely affect any right to indemnification or advancement of expenses under this Article VIII with respect to acts or omissions occurring before the repeal or modification.

8.11 Indemnification of Employees and Agents . The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation.

ARTICLE IX

AMENDMENTS

9.1 Amendments . These Bylaws may be altered, amended or repealed, in whole or in part, or new Bylaws may be adopted by the stockholders or by the Board of Directors; provided , however , that in case of action by the stockholders, notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such meeting of the stockholders . All such amendments must be approved by either the holders of at least a majority of the outstanding capital stock entitled to vote thereon or by a majority of the entire Board of Directors then in office.

9.2 Entire Board of Directors . As used in this Article IX and in these Bylaws generally, the term “entire Board of Directors” means the total number of directors which the Corporation would have if there were no vacancies.

* * *




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Form 10-Q

(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2017

Or

[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________

Commission file number: 00 1-08246

Southwestern Energy Company
(Exact name of registrant as specified in its charter)


Delaware			71-0205415
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

10000 Energy Drive Spring , Texas			77 389
(Address of principal executive offices)			(Zip Code)

(832) 796 - 1000
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company , or an emerging growth company . See the definitions of “large accelerated filer”, “accelerated filer” , “smaller reporting company” and “ emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐		Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Class			Outstanding as o f April 25, 2017
Common Stock, Par Value $0.01			505 , 869 , 805


I, William J. Way, certify that:
	1. I have reviewed this Quarterly Report on Form 10-Q of Southwestern Energy Company;

	2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

		(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

	5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

		(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
		(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	April 27, 2017		/s/ WILLIAM J. WAY
				William J. Way
				Director, President and Chief Executive Officer


I, R. Craig Owen, certify that:
	1. I have reviewed this Quarterly Report on Form 10-Q of Southwestern Energy Company;

	2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

		(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

	5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

		(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
		(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	April 27, 2017		/s/ R. CRAIG OWEN
				R. Craig Owen
				Senior Vice President and Chief Financial Officer


Dated: April 27, 2017		/s/ WILLIAM J. WAY
		William J. Way
		Director, President and Chief Executive Officer



(1)		The definition of mine under section 3 of the Mine Act includes the mine, as well as other items used in, or to be used in, or resulting from, the work of extracting minerals, such as land, structures, facilities, equipment, machines, tools, and preparation facilities. Unless otherwise indicated, any of these other items associated with a single mine have been aggregated in the totals for that mine.

(2)		The whole-dollar amounts included are the total dollar value of proposed or outstanding assessments received from MSHA on or before March 31, 2017 regardless of whether the assessment has been challenged or appealed, for alleged violations occurring during the three month period ended March 31, 2017. Citations and orders can be contested and appealed, and as part of that process, are sometimes reduced in severity and amount, and are sometimes dismissed. The number of citations, orders, and proposed assessments vary by inspector and also vary depending on the size and type of the operation.