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Table of Contents 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2020
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: 001-08246
SWN-20200331_G1.JPG
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 77389
(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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, Par Value $0.01 SWN New York Stock Exchange
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 every Interactive Data File required to be submitted 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 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 of April 28, 2020
Common Stock, Par Value $0.01 541,688,616


Table of Contents 
SOUTHWESTERN ENERGY COMPANY
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

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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.
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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 (this “Quarterly Report”) 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,” “model,” “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:
•the timing and extent of changes in market conditions and prices for natural gas, oil and natural gas liquids (“NGLs”), including regional basis differentials and the impact of reduced demand for our production and products in which our production is a component due to governmental and societal actions taken in response to the COVID-19 pandemic;
•our ability to fund our planned capital investments;
•a change in our credit rating, an increase in interest rates and any adverse impacts from the discontinuation of the London Interbank Offered Rate (“LIBOR”);
•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, including the impact of COVID-19;
•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 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 changes in law, the ability to obtain and maintain permits, any increase in severance or similar taxes, and legislation or regulation relating to hydraulic fracturing, climate and over-the-counter derivatives;
•the impact of the adverse outcome of any material litigation against us or judicial decisions that affect us or our industry generally;
•the effects of weather;
•increased competition;
•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 update publicly 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 For the three months ended March 31,
(in millions, except share/per share amounts) 2020 2019
Operating Revenues:    
Gas sales $ 248    $ 430   
Oil sales 52    39   
NGL sales 50    81   
Marketing 239    438   
Other 3    2   
 592    990   
Operating Costs and Expenses:
Marketing purchases 248    441   
Operating expenses 193    165   
General and administrative expenses 26    37   
Restructuring charges 10    3   
Depreciation, depletion and amortization 113    112   
Impairments 1,479    —   
Taxes, other than income taxes 13    19   
 2,082    777   
Operating Income (Loss) (1,490)   213   
Interest Expense:
Interest on debt 40    42   
Other interest charges 2    1   
Interest capitalized (23)   (29)  
 19    14   

Gain (Loss) on Derivatives 339    (32)  
Gain on Early Extinguishment of Debt 28    —   
Other Income, Net 1    1   

Income (Loss) Before Income Taxes (1,141)   168   
Provision (Benefit) for Income Taxes:
Current (2)   —   
Deferred 408    (426)  
 406    (426)  
Net Income (Loss) $ (1,547)   $ 594   

Earnings (Loss) Per Common Share:
Basic $ (2.86)   $ 1.10   
Diluted $ (2.86)   $ 1.10   

Weighted Average Common Shares Outstanding:
Basic 540,308,491    539,721,751   
Diluted 540,308,491    541,320,487   

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

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SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 For the three months ended March 31,
(in millions) 2020 2019
Net income (loss) $ (1,547)   $ 594   

Change in value of pension and other postretirement liabilities:
Amortization of prior service cost and net loss included in net periodic pension cost
—    —   

Comprehensive income (loss) $ (1,547)   $ 594   

The accompanying notes are an integral part of these consolidated financial statements.
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SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 March 31, 2020 December 31, 2019
ASSETS (in millions)
Current assets:    
Cash and cash equivalents $ 5    $ 5   
Accounts receivable, net 292    345   
Derivative assets 627    278   
Other current assets 48    51   
Total current assets 972    679   
Natural gas and oil properties, using the full cost method, including $1,437 million as of March 31, 2020 and $1,506 million as of December 31, 2019 excluded from amortization
25,488    25,250   
Other 523    520   
Less: Accumulated depreciation, depletion and amortization (22,095)   (20,503)  
Total property and equipment, net 3,916    5,267   
Operating lease assets 152    159   
Deferred tax assets —    407   
Other long-term assets 235    205   
Total long-term assets 387    771   
TOTAL ASSETS $ 5,275    $ 6,717   
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 465    $ 525   
Taxes payable 52    59   
Interest payable 54    51   
Derivative liabilities 268    125   
Current operating lease liabilities 32    34   
Other current liabilities 43    54   
Total current liabilities 914    848   
Long-term debt 2,279    2,242   
Long-term operating lease liabilities 114    119   
Pension and other postretirement liabilities 40    43   
Other long-term liabilities 227    219   
Total long-term liabilities 2,660    2,623   
Commitments and contingencies (Note 11)
Equity:
Common stock, $0.01 par value; 1,250,000,000 shares authorized; issued 586,023,435 shares as of March 31, 2020 and 585,555,923 shares as of December 31, 2019
6    6   
Additional paid-in capital 4,728    4,726   
Accumulated deficit (2,798)   (1,251)  
Accumulated other comprehensive loss (33)   (33)  
Common stock in treasury, 44,353,224 shares as of March 31, 2020 and December 31, 2019
(202)   (202)  
Total equity 1,701    3,246   
TOTAL LIABILITIES AND EQUITY $ 5,275    $ 6,717   

The accompanying notes are an integral part of these consolidated financial statements.
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SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 For the three months ended March 31,
(in millions) 2020 2019
Cash Flows From Operating Activities:    
Net income (loss) $ (1,547)   $ 594   
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization 113    112   
Amortization of debt issuance costs 1    1   
Impairments 1,479    —   
Deferred income taxes 408    (426)  
(Gain) loss on derivatives, unsettled (246)   22   
Stock-based compensation 1    2   
Gain on early extinguishment of debt (28)   —   
Other —    1   
Change in assets and liabilities:
Accounts receivable 53    189   
Accounts payable (86)   (48)  
Taxes payable (6)   4   
Interest payable 1    2   
Inventories 8    5   
Other assets and liabilities 9    (16)  
Net cash provided by operating activities 160    442   

Cash Flows From Investing Activities:
Capital investments (228)   (258)  
Net cash used in investing activities (228)   (258)  

Cash Flows From Financing Activities:
Payments on long-term debt (52)   —   
Payments on revolving credit facility (500)   —   
Borrowings under revolving credit facility 615    —   
Change in bank drafts outstanding 5    3   
Purchase of treasury stock —    (21)  
Cash paid for tax withholding —    (1)  
Net cash provided by (used in) financing activities 68    (19)  

Increase in cash and cash equivalents —    165   
Cash and cash equivalents at beginning of year 5    201   
Cash and cash equivalents at end of period $ 5    $ 366   

The accompanying notes are an integral part of these consolidated financial statements.໿
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SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
Common Stock Additional
Paid-In
Capital 		Accumulated
Deficit 		Accumulated Other
Comprehensive
Income (Loss) 		Common Stock in Treasury Total
Shares
Issued 		Amount Shares Amount
(in millions, except share amounts)
Balance at December 31, 2019 585,555,923    $ 6    $ 4,726    $ (1,251)   $ (33)   44,353,224    $ (202)   $ 3,246   
Comprehensive loss:
Net loss —    —    —    (1,547)   —    —    —    (1,547)  
Other comprehensive income —    —    —    —    —    —    —    —   
Total comprehensive loss —    —    —    —    —    —    —    (1,547)  
Stock-based compensation —    —    1    —    —    —    —    1   
Issuance of restricted stock 12,397    —    —    —    —    —    —    —   
Cancellation of restricted stock (167,130)   —    —    —    —    —    —    —   
Restricted units granted 1,005,976    —    1    —    —    —    —    1   
Treasury stock —    —    —    —    —    —    —    —   
Performance units vested —    —    —    —    —    —    —    —   
Tax withholding – stock compensation (383,731)   —    —    —    —    —    —    —   
Balance at March 31, 2020 586,023,435    $ 6    $ 4,728    $ (2,798)   $ (33)   44,353,224    $ (202)   $ 1,701   


Common Stock Additional
Paid-In
Capital 		Accumulated
Deficit 		Accumulated Other
Comprehensive
Income (Loss) 		Common Stock in Treasury Total
Shares
Issued 		Amount Shares Amount
(in millions, except share amounts)
Balance at December 31, 2018 585,407,107    $ 6    $ 4,715    $ (2,142)   $ (36)   39,092,537    $ (181)   $ 2,362   
Comprehensive income:
Net income —    —    —    594    —    —    —    594   
Other comprehensive income —    —    —    —    —    —    —    —   
Total comprehensive income —    —    —    —    —    —    —    594   
Stock-based compensation —    —    3    —    —    —    —    3   
Issuance of restricted stock 8,798    —    —    —    —    —    —    —   
Cancellation of restricted stock (128,324)   —    —    —    —    —    —    —   
Treasury stock —    —    —    —    —    5,260,687    (21)   (21)  
Performance units vested 535,802    —    —    —    —    —    —    —   
Tax withholding – stock compensation (274,657)   —    (1)   —    —    —    —    (1)  
Balance at March 31, 2019 585,548,726    $ 6    $ 4,717    $ (1,548)   $ (36)   44,353,224    $ (202)   $ 2,937   

The accompanying notes are an integral part of these consolidated financial statements.
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SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
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 marketing business (“Marketing”), which was previously referred to as “Midstream” when it included the operation of gathering systems. Southwestern conducts most of its business through subsidiaries and operates principally in two segments: E&P and Marketing.
E&P. Southwestern’s primary business is the exploration for and production of natural gas, oil and NGLs, with ongoing operations focused on the development of unconventional natural gas and oil reservoirs located in Pennsylvania and West Virginia. The Company’s operations in northeast Pennsylvania, herein referred to as “Northeast Appalachia,” are primarily focused on the unconventional natural gas reservoir known as the Marcellus Shale. Operations in West Virginia and southwest Pennsylvania, herein referred to as “Southwest Appalachia,” are focused on the Marcellus Shale, the Utica and the Upper Devonian unconventional natural gas and oil reservoirs. Collectively, Southwestern refers to its properties located in Pennsylvania and West Virginia as “Appalachia.” The Company also operates drilling rigs located in Pennsylvania and West Virginia, and provides certain oilfield products and services, principally serving the Company’s E&P operations through vertical integration.
Marketing. Southwestern’s marketing activities capture opportunities that arise through the marketing and transportation of natural gas, oil and NGLs primarily produced in its E&P operations.
The accompanying 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 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 consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 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 Statements included in the Company’s 2019 Annual Report.
(2) RESTRUCTURING CHARGES

On February 4, 2020, the Company notified employees of a workforce reduction plan as a result of a strategic realignment of the Company’s organizational structure. This reduction was substantially complete by the end of the first quarter of 2020. Affected employees were offered a severance package, which included a one-time payment depending on length of service and, if applicable, the current value of unvested long-term incentive awards that were forfeited. These costs were recognized as restructuring charges for the three months ended March 31, 2020, and a liability of approximately $0.3 million has been accrued as of March 31, 2020 related to future payments associated with the February 2020 restructuring.
In December 2018, the Company closed the sale of the equity in certain of its subsidiaries that owned and operated its Fayetteville Shale E&P and related midstream gathering assets in Arkansas (the “Fayetteville Shale sale”). As part of the transaction, most employees associated with those assets became employees of the buyer although the employment of some was terminated. Due to the scale of the assets that were sold, the temporary employment of certain employees was extended through a transition period into 2019. All affected employees were offered a severance package, which included a one-time cash payment depending on length of service and, if applicable, the current value of equity awards that were forfeited. The Company also incurred charges related to office consolidation. A portion of these costs along with the aforementioned severance costs were recognized as restructuring charges in the first quarter of 2019.
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The following table presents a summary of the restructuring charges included in Operating Income (Loss) for the three months ended March 31, 2020 and 2019:
For the three months ended March 31,
(in millions) 2020 2019
Severance (including payroll taxes) $ 10    $ 2   
Office consolidation —    1   
Total restructuring charges (1)
$ 10    $ 3   
(1)Total restructuring charges were $10 million and $3 million for the Company’s E&P segment for the three months ended March 31, 2020 and 2019, respectively.
The following table presents a reconciliation of the liability associated with the Company’s restructuring activities at March 31, 2020, which is reflected in accounts payable on the consolidated balance sheet:
(in millions)
Liability at December 31, 2019 $ 2   
Additions 10   
Distributions (12)  
Liability at March 31, 2020 $ —   

(3) REVENUE RECOGNITION
Revenues from Contracts with Customers
Natural gas and liquids.  Natural gas, oil and NGL sales are recognized when control of the product is transferred to the customer at a designated delivery point.  The pricing provisions of the Company’s contracts are primarily tied to a market index with certain adjustments based on factors such as delivery, quality of the product and prevailing supply and demand conditions in the geographic areas in which the Company operates.  Under the Company’s sales contracts, the delivery of each unit of natural gas, oil and NGLs represents a separate performance obligation, and revenue is recognized at the point in time when the performance obligations are fulfilled.  There is no significant financing component to the Company’s revenues as payment terms are typically within 30 to 60 days of control transfer.  Furthermore, consideration from a customer corresponds directly with the value to the customer of the Company’s performance completed to date.  As a result, the Company recognizes revenue in the amount for which the Company has a right to invoice and has not disclosed information regarding its remaining performance obligations.
The Company records revenue from its natural gas and liquids production in the amount of its net revenue interest in sales from its properties. Accordingly, natural gas and liquid sales are not recognized for deliveries in excess of the Company’s net revenue interest, while natural gas and liquid sales are recognized for any under-delivered volumes.  Production imbalances are generally recorded as receivables and payables and not contract assets or contract liabilities as the imbalances are between the Company and other working interest owners, not the end customer.
Marketing.  The Company, through its marketing affiliate, markets natural gas, oil and NGLs for its affiliated E&P company as well as other joint interest owners that choose to market with the Company.  In addition, the Company markets some products purchased from third parties.  Marketing revenues for natural gas, oil and NGL sales are recognized when control of the product is transferred to the customer at a designated delivery point.  The pricing provisions of the Company’s contracts are primarily tied to a market index with certain adjustments based on factors such as delivery, quality of the product and prevailing supply and demand conditions.  Under the Company’s marketing contracts, the delivery of each unit of natural gas, oil and NGLs represents a separate performance obligation, and revenue is recognized at the point in time when the performance obligations are fulfilled.  Customers are invoiced and revenues are recorded each month as natural gas, oil and NGLs are delivered, and payment terms are typically within 30 to 60 days of control transfer.  Furthermore, consideration from a customer corresponds directly with the value to the customer of the Company’s performance completed to date.  As a result, the Company recognizes revenue in the amount for which the Company has a right to invoice and has not disclosed information regarding its remaining performance obligations.
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Disaggregation of Revenues
The Company presents a disaggregation of E&P revenues by product on the consolidated statements of operations net of intersegment revenues.  The following table reconciles operating revenues as presented on the consolidated statements of operations to the operating revenues by segment:
(in millions) E&P Marketing Intersegment
Revenues 		Total
Three months ended March 31, 2020
Gas sales $ 239    $ —    $ 9    $ 248   
Oil sales 52    —    —    52   
NGL sales 50    —    —    50   
Marketing —    548    (309)   239   
Other (1)
3    —    —    3   
Total $ 344    $ 548    $ (300)   $ 592   
Three months ended March 31, 2019
Gas sales $ 421    $ —    $ 9    $ 430   
Oil sales 39    —    —    39   
NGL sales 81    —    —    81   
Marketing —    940    (502)   438   
Other (2)
1    1    —    2   
Total $ 542    $ 941    $ (493)   $ 990   
(1)For the three months ended March 31, 2020, other E&P revenues consists primarily of gains on purchaser imbalances associated with certain NGLs.
(2)For the three months ended March 31, 2019, other E&P revenues consists primarily of water sales to third-party operators, and other Marketing revenues consists primarily of sales of gas from storage.
Associated E&P revenues are also disaggregated for analysis on a geographic basis by the core areas in which the Company operates, which are in Pennsylvania and West Virginia.

For the three months ended March 31,
(in millions) 2020 2019
Northeast Appalachia $ 195    $ 348   
Southwest Appalachia 149    193   
Other —    1   
Total $ 344    $ 542   
Receivables from Contracts with Customers
The following table reconciles the Company’s receivables from contracts with customers to consolidated accounts receivable as presented on the consolidated balance sheet:

(in millions) March 31, 2020 December 31, 2019
Receivables from contracts with customers $ 195    $ 284   
Other accounts receivable 97    61   
Total accounts receivable $ 292    $ 345   
Amounts recognized against the Company’s allowance for doubtful accounts related to receivables arising from contracts with customers were immaterial for the three months ended March 31, 2020 and 2019.  The Company has no contract assets or contract liabilities associated with its revenues from contracts with customers.
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(4) CASH AND CASH EQUIVALENTS
The following table presents a summary of cash and cash equivalents as of March 31, 2020 and December 31, 2019:
(in millions) March 31, 2020 December 31, 2019
Cash $ 5    $ 5   
Marketable securities (1)
—    —   
Total $ 5    $ 5   
(1)At March 31, 2020, marketable securities were immaterial and consisted of government stable value money market funds.
(5) NATURAL GAS AND OIL PROPERTIES
The Company utilizes the full cost method of accounting for costs related to the exploration, development and 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, are 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, including the impact of derivatives designated for hedge accounting, to calculate the ceiling value of their reserves. The Company had no hedge positions that were designated for hedge accounting as of March 31, 2020. Prices used to calculate the ceiling value of reserves were as follows:
(in millions) March 31, 2020 March 31, 2019
Natural gas (per MMBtu)
$ 2.30    $ 3.07   
Oil (per Bbl)
$ 55.77    $ 63.00   
NGLs (per Bbl)
$ 9.96    $ 17.65   
Using the average quoted prices above, adjusted for market differentials, the Company’s net book value of its United States natural gas and oil properties exceeded the ceiling by $1.5 billion at March 31, 2020, resulting in a non-cash ceiling test impairment. 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. Given the decline in commodity prices in 2019 and early 2020, the Company expects that an additional non-cash impairment of its assets will likely occur in the second quarter of 2020 and perhaps later.
The Company’s net book value of its United States natural gas and oil properties did not exceed the ceiling amount at March 31, 2019, and the Company had no derivative positions that were designated for hedge accounting as of March 31, 2019. 
(6) EARNINGS PER SHARE
Basic earnings per common share is computed by dividing net income 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 the first quarter of 2019, the Company repurchased 5,260,687 shares of its outstanding common stock as part of a share repurchase program for approximately $21 million at an average price of $3.84 per share.
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The following table presents the computation of earnings per share for the three months ended March 31, 2020 and 2019:
 For the three months ended March 31,
(in millions, except share/per share amounts) 2020 2019
Net income (loss) $ (1,547)   $ 594   

Number of common shares:
Weighted average outstanding 540,308,491    539,721,751   
Issued upon assumed exercise of outstanding stock options —    —   
Effect of issuance of non-vested restricted common stock —    665,435   
Effect of issuance of non-vested restricted units —    —   
Effect of issuance of non-vested performance units —    933,301   
Weighted average and potential dilutive outstanding 540,308,491    541,320,487   

Earnings per common share
Basic $ (2.86)   $ 1.10   
Diluted $ (2.86)   $ 1.10   
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, 2020 and 2019, as they would have had an antidilutive effect:

 For the three months ended March 31,
 2020 2019
Unexercised stock options 4,584,563    5,128,640   
Unvested share-based payment 1,006,860    1,881,355   
Restricted stock units 1,312,293    —   
Performance units 2,275,498    260,201   
Total 9,179,214    7,270,196   

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(7) DERIVATIVES AND RISK MANAGEMENT
The Company is exposed to volatility in market prices and basis differentials 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 31, 2020, the Company’s derivative financial instruments consisted of fixed price swaps, two-way costless collars, three-way costless collars, basis swaps, call options and interest rate swaps.  A description of the Company’s derivative financial instruments is provided below:
Fixed price swaps If the Company sells a fixed price swap, the Company receives a fixed price for the contract and pays a floating market price to the counterparty.  If the Company purchases a fixed price swap, the Company receives a floating market price for the contract and pays a fixed price to the counterparty.
  
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 that, 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.  If the Company sells a basis swap, 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.  If the Company purchases a basis swap, the Company pays the counterparty if the price differential is greater than the stated terms of the contract and receives a payment from the counterparty if the price differential is less than the stated terms of the contract.
  
Call options The Company purchases and sells call options in exchange for a premium.  If the Company purchases a call option, the Company receives from the counterparty the excess (if any) of the market price over the strike price of the call option at the time of settlement, but if the market price is below the call’s strike price, no payment is due from either party.  If the Company sells a call option, the Company pays the counterparty the excess (if any) of the market price over the strike price of the call option at the time of settlement, but if the market price is 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 unfavorable interest rate changes.
The Company contracts with counterparties for its derivative instruments that it believes are creditworthy at the time the transactions are entered into, and the Company actively monitors the credit ratings and credit default swap rates of these counterparties where applicable.  However, there can be no assurance that a counterparty will be able to meet its obligations to the Company.  The fair value of the Company’s derivative assets and liabilities includes a non-performance risk factor. See Note 9 for additional details regarding the Company’s fair value measurements of its derivative positions. The Company presents its derivative positions on a gross basis and does not net the asset and liability positions.
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The following tables provide 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 tables present the notional amount, the weighted average contract prices and the fair value by expected maturity dates as of March 31, 2020:
Financial Protection on Production
   Weighted Average Price per MMBtu  

Volume (Bcf)
Swaps Sold Puts Purchased Puts Sold Calls Basis Differential
Fair Value at
March 31, 2020
(in millions)
Natural Gas              
2020              
Fixed price swaps 279    $ 2.50    $ —    $ —    $ —    $ —    $ 181   
(1)
Two-way costless collars 23    —    —    2.50    2.79    —    3   
Three-way costless collars 136    —    2.08    2.42    2.70    —    15   
Total 438    $ 199   
2021
Fixed price swaps 36    $ 2.53    $ —    $ —    $ —    $ —    $ 5   
Two-way costless collars 29    —    —    2.28    2.77    —    (1)  
Three-way costless collars 265    —    2.18    2.49    2.84    —    (20)  
Total 330    $ (16)  
2022
Two-way costless collars 29    $ —    $ —    $ 2.10    $ 2.83    $ —    $ —   
Three-way costless collars 91    —    2.10    2.46    2.86    —    (2)  
Total 120    $ (2)  
2023
Three-way costless collars 2    $ —    $ 2.15    $ 2.55    $ 3.35    $ —    $ —   
Basis Swaps
2020 199    $ —    $ —    $ —    $ —    $ (0.44)   $ (3)  
2021 103    —    —    —    —    (0.03)   12   
2022 88    —    —    —    —    (0.48)   (4)  
Total 390    $ 5   
(1)Includes $9 million in premiums paid related to certain natural gas fixed price swaps recognized as a component of derivative assets within current assets on the consolidated balance sheet at March 31, 2020. As certain natural gas fixed price swaps settle, the premium will be amortized and recognized as a component of gain (loss) on derivatives on the consolidated statements of operations.
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Volume
(MBbls)
Weighted Average Strike Price per Bbl
Fair Value at
March 31, 2020
(in millions)
Swaps Sold Puts Purchased Puts Sold Calls
Oil
2020
Fixed price swaps (1)
2,442    $ 57.75    $ —    $ —    $ —    $ 66   
Two-way costless collars 731    —    —    56.88    59.81    19   
Three-way costless collars 1,210    —    43.94    53.17    58.05    9   
Total 4,383    $ 94   
2021   
Fixed price swaps 2,328    $ 53.72    $ —    $ —    $ —    $ 39   
Three-way costless collars 1,445    —    43.52    53.25    58.14    10   
Total 3,773    $ 49   
2022
Fixed price swaps 438    $ 51.74    $ —    $ —    $ —    $ 5   
Three-way costless collars 666    —    42.50    53.20    58.00    4   
Total 1,104    $ 9   
Ethane
2020
Fixed price swaps 6,952    $ 8.59    $ —    $ —    $ —    $ 21   
2021
Fixed price swaps 3,017    $ 7.40    $ —    $ —    $ —    $ 2   
Propane      
2020      
Fixed price swaps 4,049    $ 23.06    $ —    $ —    $ —    $ 43   
Two-way costless collars 275    —    —    25.20    29.40    4   
Total 4,324    $ 47   
2021
Fixed price swaps 2,460    $ 21.77    $ —    $ —    $ —    $ 17   
(1)Includes 186 MBbls of purchased fixed price oil swaps at $57.46 per barrel with a fair value of ($5) million and 2,628 MBbls of sold fixed price oil swaps at $57.73 per barrel with a fair value of $71 million.

Other Derivative Contracts

Volume
(Bcf)
Weighted Average Strike Price per MMBtu
Fair Value at
March 31, 2020
(in millions)
Sold Call Options – Natural Gas (Net)
2020 51    $ 2.83    $ (2)  
2021 57    3.15    (7)  
2022 58    3.00    (6)  
2023 17    2.84    (3)  
2024 9    3.00    (2)  
Total 192    $ (20)  
໿

Volume
(MBbls)
Weighted Average Strike Price per Bbl
Fair Value at
March 31, 2020
(in millions)
Sold Call Options – Oil
2021 226    $ 60.00    $ —   
15
Volume
(Bcf)
Weighted Average Strike Price per MMBtu
Fair Value at
March 31, 2020
(in millions)
 Swaps Basis Differential
Storage (1)
       
2020
Purchased fixed price swaps 3    $ 2.00    $ —    $ (1)  
Purchased basis swaps 1    —    (0.49)   —   
Sold fixed price swaps 2    1.99    —    —   
Sold basis swaps 1    —    (0.51)   —   
Total 7    $ (1)  
2021
Purchased fixed price swaps 1    $ 2.04    $ —    $ —   
Sold fixed price swaps 2    2.49    —    —   
Sold basis swaps 1    —    (0.38)   —   
Total 4    $ —   
(1)The Company has entered into certain derivatives to protect the value of volumes of natural gas injected into a storage facility that will be withdrawn at a later date.

Purchased Fixed Price Swaps – Marketing (Natural Gas) (1)
Volume
(Bcf)
Weighted Average Strike Price per MMBtu
Fair Value at
March 31, 2020
(in millions)
2020 6    $ 2.44    $ (2)  
2021 6    2.44    —   
Total 12    $ (2)  
(1)The Company has entered into a limited number of derivatives to protect the value of certain long-term sales contracts.
At March 31, 2020, the net fair value of the Company’s financial instruments related to commodities was a $402 million asset and included a net reduction of less than $1 million related to non-performance risk. See Note 9 for additional details regarding the Company’s fair value measurements of its derivative positions.
As of March 31, 2020, the Company had no positions designated for hedge accounting treatment. Gains and losses on derivatives that are not designated for hedge accounting treatment, or do not meet hedge accounting requirements, are recorded as a component of gain (loss) on derivatives on the consolidated statements of operations. Accordingly, the gain (loss) on derivatives component of the statement of operations reflects the gain 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.  Changes in the fair value of the interest rate swaps are included in gain (loss) on derivatives on the consolidated statements of operations. At March 31, 2020, the net fair value of the Company’s interest rate swaps was a $1 million liability.
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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) is summarized below as of March 31, 2020 and December 31, 2019:

Derivative Assets        
 Fair Value
(in millions) Balance Sheet Classification March 31, 2020   December 31, 2019
Derivatives not designated as hedging instruments:  
Purchased fixed price swaps – natural gas Derivative assets $ 1    $ —   
Fixed price swaps – natural gas Derivative assets 181   
(1)
77   
(1)
Fixed price swaps – oil Derivative assets 80    4   
Fixed price swaps – ethane Derivative assets 22    11   
Fixed price swaps – propane Derivative assets 48    21   
Two-way costless collars – natural gas Derivative assets 13    10   
Two-way costless collars – oil Derivative assets 28    5   
Two-way costless collars – propane Derivative assets 4    2   
Three-way costless collars – natural gas Derivative assets 189    126   
Three-way costless collars – oil Derivative assets 36    3   
Basis swaps – natural gas Derivative assets 22    17   
Purchased call options – natural gas Derivative assets 3    1   
Fixed price swaps – natural gas storage Derivative assets —    1   
Fixed price swaps – natural gas Other long-term assets 5    7   
Fixed price swaps – oil Other long-term assets 35    1   
Fixed price swaps – ethane Other long-term assets 1    —   
Fixed price swaps – propane Other long-term assets 12    3   
Two-way costless collars – natural gas Other long-term assets 5    4   
Three-way costless collars – natural gas Other long-term assets 71    74   
Three-way costless collars – oil Other long-term assets 29    7   
Basis swaps – natural gas Other long-term assets 5    15   
Purchased call options – natural gas Other long-term assets 1    2   
Total derivative assets   $ 791    $ 391   

(1) Includes $9 million in premiums paid related to certain natural gas fixed price swaps recognized as a component of derivative assets within current assets on the consolidated balance sheet at both March 31, 2020 and December 31, 2019. As certain natural gas fixed price swaps settle, the premium will be amortized and recognized as a component of gain (loss) on derivatives on the consolidated statements of operations.
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Derivative Liabilities      
 Fair Value
(in millions) Balance Sheet Classification March 31, 2020 December 31, 2019
Derivatives not designated as hedging instruments:  
Purchased fixed price swaps – natural gas Derivative liabilities $ 3    $ 1   
Purchased fixed price swaps – oil Derivative liabilities 5    —   
Fixed price swaps – natural gas Derivative liabilities —    1   
Fixed price swaps – oil Derivative liabilities —    6   
Two-way costless collars – natural gas Derivative liabilities 10    4   
Two-way costless collars – oil Derivative liabilities 9    5   
Three-way costless collars – natural gas Derivative liabilities 194    84   
Three-way costless collars – oil Derivative liabilities 24    4   
Basis swaps – natural gas Derivative liabilities 12    17   
Sold call options – natural gas Derivative liabilities 9    3   
Interest rate swaps Derivative liabilities 1    —   
Purchased fixed price swaps – natural gas storage Derivative liabilities 1    —   
Fixed price swaps – oil Other long-term liabilities —    2   
Two-way costless collars – natural gas Other long-term liabilities 6    4   
Three-way costless collars – natural gas Other long-term liabilities 73    72   
Three-way costless collars – oil Other long-term liabilities 18    8   
Basis swap – natural gas Other long-term liabilities 10    9   
Sold call options – natural gas Other long-term liabilities 15    15   
Sold call options – oil Other long-term liabilities —    1   
Total derivative liabilities   $ 390    $ 236   

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The following tables summarize the before-tax effect of the Company’s derivative instruments on the consolidated statements of operations for the three months ended March 31, 2020 and 2019:
Unsettled Gain (Loss) on Derivatives Recognized in Earnings
Derivative Instrument Consolidated Statement of Operations
Classification of Gain (Loss)
on Derivatives, Unsettled 		For the three months ended
March 31,
2020 2019
   (in millions)
Purchased fixed price swaps – natural gas Gain (Loss) on Derivatives $ (1)   $ —   
Purchased fixed price swaps – oil Gain (Loss) on Derivatives (5)   4   
Fixed price swaps – natural gas Gain (Loss) on Derivatives 103    (2)  
Fixed price swaps – oil Gain (Loss) on Derivatives 118    (13)  
Fixed price swaps – ethane Gain (Loss) on Derivatives 12    7   
Fixed price swaps – propane Gain (Loss) on Derivatives 36    (4)  
Two-way costless collars – natural gas Gain (Loss) on Derivatives (4)   (1)  
Two-way costless collars – oil Gain (Loss) on Derivatives 19    (7)  
Two-way costless collars – propane Gain (Loss) on Derivatives 2    —   
Three-way costless collars – natural gas Gain (Loss) on Derivatives (51)   2   
Three-way costless collars – oil Gain (Loss) on Derivatives 25    —   
Basis swaps – natural gas Gain (Loss) on Derivatives (1)   (10)  
Purchased call options – natural gas Gain (Loss) on Derivatives 1    —   
Sold call options – natural gas Gain (Loss) on Derivatives (6)   2   
Sold call options – oil Gain (Loss) on Derivatives 1    —   
Purchased fixed price swap – natural gas storage Gain (Loss) on Derivatives (1)   —   
Fixed price swap – natural gas storage Gain (Loss) on Derivatives (1)   —   
Interest rate swaps Gain (Loss) on Derivatives (1)   —   
Total gain (loss) on unsettled derivatives $ 246    $ (22)  
Settled Gain (Loss) on Derivatives Recognized in Earnings (1)
Derivative Instrument Consolidated Statement of Operations
Classification of Gain (Loss)
on Derivatives, Settled 		For the three months ended
March 31,
2020 2019
(in millions)
Purchased fixed price swaps – natural gas Gain (Loss) on Derivatives $ (1)   $ —   
Purchased fixed price swaps – oil Gain (Loss) on Derivatives —    (1)  
Fixed price swaps – natural gas Gain (Loss) on Derivatives 5    (6)  
Fixed price swaps – oil Gain (Loss) on Derivatives 9    2   
Fixed price swaps – ethane Gain (Loss) on Derivatives 6    1   
Fixed price swaps – propane Gain (Loss) on Derivatives 10    2   
Two-way costless collars – natural gas Gain (Loss) on Derivatives 6    (1)  
Two-way costless collars – oil Gain (Loss) on Derivatives 3    1   
Two-way costless collars – propane Gain (Loss) on Derivatives 1    —   
Three-way costless collars – natural gas Gain (Loss) on Derivatives 36    (4)  
Three-way costless collars – oil Gain (Loss) on Derivatives 1    —   
Basis swaps – natural gas Gain (Loss) on Derivatives 16    (4)  
Fixed price swaps – natural gas storage Gain (Loss) on Derivatives 1    —   
Total gain (loss) on settled derivatives $ 93    $ (10)  
  
Total gain (loss) on derivatives $ 339    $ (32)  
(1)The Company calculates gain (loss) on derivatives, settled, as the summation of gains and losses on positions that settled within the period.
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(8) RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
In the first quarter of 2020, changes in accumulated other comprehensive income related to the Company’s pension and other postretirement benefits. The following tables detail the components of accumulated other comprehensive income and the related tax effects for the three months ended March 31, 2020:
(in millions) Pension and Other Postretirement Foreign Currency Total
Beginning balance December 31, 2019 $ (19)   $ (14)   $ (33)  
Other comprehensive income before reclassifications —    —    —   
Amounts reclassified from other comprehensive income (1)
—    —    —   
Net current-period other comprehensive income —    —    —   
Ending balance March 31, 2020 $ (19)   $ (14)   $ (33)  

(1)Amounts reclassified from other comprehensive income to earnings were immaterial for the three months ended March 31, 2020. See Note 13 for additional details regarding the Company’s pension and other postretirement benefit plans.
(9) FAIR VALUE MEASUREMENTS
Assets and liabilities measured at fair value on a recurring basis
The carrying amounts and estimated fair values of the Company’s financial instruments as of March 31, 2020 and December 31, 2019 were as follows:
 March 31, 2020   December 31, 2019
(in millions) Carrying
Amount 		Fair
Value 		Carrying
Amount 		Fair
Value
Cash and cash equivalents $ 5    $ 5    $ 5    $ 5   
2018 revolving credit facility due April 2024 149    149    34    34   
Senior notes (1)
2,148    1,460    2,228    2,085   
Derivative instruments, net 401   
(2)
401   
(2)
155   
(2)
155   
(2)
(1)Excludes unamortized debt issuance costs and debt discounts.
(2)Includes $9 million in premiums paid related to certain natural gas fixed price swaps recognized as a component of derivative assets within current assets on the consolidated balance sheet.
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 calculation of fair market value.
Level 3 valuations - Consist of internal estimates and have the lowest priority.
The carrying values of cash and cash equivalents, including marketable securities, accounts receivable, other current assets, accounts payable and other current liabilities on the consolidated balance sheets approximate 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 are based on the market value of the Company’s publicly traded debt as determined based on the market prices of the Company’s senior notes. The fair value of the Company's 4.10% Senior Notes due March 2022 is considered to be a Level 2 measurement on the fair value hierarchy.  The fair values of the Company's remaining senior notes are considered the be a Level 1 measurement. The carrying values of the borrowings under the Company’s revolving credit facility (to the extent utilized) approximates fair value because the interest rate is variable and reflective of market rates.  The Company considers the fair value of its revolving credit facility to be a Level 1 measurement on the fair value hierarchy.
Derivative Instruments: The Company measures the fair value of its derivative instruments based upon a pricing model that utilizes market-based inputs, including, but not limited to, the contractual price of the underlying position, current market prices, natural gas and liquids forward curves, discount rates such as the LIBOR curve for a similar duration of each outstanding position, volatility factors and non-performance risk. Non-performance risk considers the effect of the Company’s credit standing on the fair value of derivative liabilities and the effect of counterparty credit standing on the fair value of derivative assets. Both inputs to the model are based on published credit default swap rates and the duration of each
20
outstanding derivative position. As of March 31, 2020, the impact of non-performance risk on the fair value of the Company’s net derivative asset position was a net reduction of less than $1 million.
The Company has classified its derivative instruments into 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 New York Mercantile Exchange (“NYMEX”) futures index for natural gas and oil derivatives and Oil Price Information Service (“OPIS”) for ethane and propane derivatives.  The Company utilizes discounted cash flow models for valuing its interest rate derivatives (Level 2).  The net derivative values attributable to the Company’s interest rate derivative contracts as of March 31, 2020 are based on (i) the contracted notional amounts, (ii) active market-quoted LIBOR yield curves and (iii) the applicable credit-adjusted risk-free rate yield curve.
The Company’s call options, two-way costless collars and three-way costless collars (Level 2) 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 and OPIS futures index, interest rates, volatility and credit worthiness.  Inputs to the Black-Scholes model, including the volatility input, 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.
The Company’s basis swaps (Level 2) are estimated using third-party calculations based upon forward commodity price curves.
Assets and liabilities measured at fair value on a recurring basis are summarized below:
 March 31, 2020
 Fair Value Measurements Using:  
(in millions) Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets (Liabilities) at Fair Value
Assets    
Purchased fixed price swaps $ —    $ 1    $ —    $ 1   
Fixed price swaps (1)
—    384    —    384   
Two-way costless collars —    50    —    50   
Three-way costless collars —    325    —    325   
Basis swaps —    27    —    27   
Purchased call options —    4    —    4   
Liabilities
Purchased fixed price swaps —    (8)   —    (8)  
Two-way costless collars —    (25)   —    (25)  
Three-way costless collars —    (309)   —    (309)  
Basis swaps —    (22)   —    (22)  
Sold call options —    (24)   —    (24)  
Purchased fixed price swaps – storage —    (1)   —    (1)  
Interest rate swaps —    (1)   —    (1)  
Total (2)
$ —    $ 401    $ —    $ 401   
(1)Includes $9 million in premiums paid related to certain natural gas fixed price swaps recognized as a component of derivative assets within current assets on the consolidated balance sheet at March 31, 2020. As certain natural gas fixed price swaps settle, the premium will be amortized and recognized as a component of gain (loss) on derivatives on the consolidated statements of operations.
(2)Includes a net fair value reduction of less than $1 million related to estimated nonperformance risk.
21
 December 31, 2019
 Fair Value Measurements Using:  
(in millions) Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets (Liabilities) at Fair Value
Assets      
Fixed price swaps (1)
$ —    $ 124    $ —    $ 124   
Two-way costless collars —    21    —    21   
Three-way costless collars —    210    —    210   
Basis Swaps —    32    —    32   
Purchased call options —    3    —    3   
Fixed price swaps - storage —    1    —    1   
Liabilities
Purchased fixed price swaps —    (1)   —    (1)  
Fixed price swaps —    (9)   —    (9)  
Two-way costless collars —    (13)   —    (13)  
Three-way costless collars —    (168)   —    (168)  
Basis Swaps —    (26)   —    (26)  
Sold call options —    (19)   —    (19)  
Total $ —    $ 155    $ —    $ 155   
(1)Includes $9 million in premiums paid related to certain natural gas fixed price swaps recognized as a component of derivative assets within current assets on the consolidated balance sheet at December 31, 2019. As certain natural gas fixed price swaps settle, the premium will be amortized and recognized as a component of gain (loss) on derivatives on the consolidated statements of operations.
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 consist of net derivatives valued using pricing models incorporating assumptions that, in the Company’s judgment, reflect reasonable assumptions a marketplace participant would use. There were no Level 3 derivatives in the first quarters of 2020 and 2019.
(10) DEBT
The components of debt as of March 31, 2020 and December 31, 2019 consisted of the following:
March 31, 2020
(in millions) Debt Instrument Unamortized Issuance Expense Unamortized Debt Discount Total
Long-term debt:
Variable rate (2.120% at March 31, 2020) 2018 revolving credit facility due April 2024
$ 149    $ —   
(1)
$ —    $ 149   
4.10% Senior Notes due March 2022
210    (1)   —    209   
4.95% Senior Notes due January 2025 (2)
864    (5)   (1)   858   
7.50% Senior Notes due April 2026
621    (6)   —    615   
7.75% Senior Notes due October 2027
453    (5)   —    448   
Total long-term debt $ 2,297    $ (17)   $ (1)   $ 2,279   
December 31, 2019
(in millions) Debt Instrument Unamortized Issuance Expense Unamortized Debt Discount Total
Long-term debt:
Variable rate (4.310% at December 31, 2019) 2018 term loan facility due April 2024
$ 34    $ —   
(1)
$ —    $ 34   
4.10% Senior Notes due March 2022
213    (1)   —    212   
4.95% Senior Notes due January 2025 (2)
892    (5)   (1)   886   
7.50% Senior Notes due April 2026
639    (7)   —    632   
7.75% Senior Notes due October 2027
484    (6)   —    478   
Total long-term debt $ 2,262    $ (19)   $ (1)   $ 2,242   
(1)At March 31, 2020 and December 31, 2019, unamortized issuance expense of $10 million and $11 million, respectively, associated with the 2018 credit facility (as defined below) was classified as other long-term assets on the consolidated balance sheets.
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(2)At March 31, 2020 and December 31, 2019, respectively, the interest rate was 6.20% for the 2025 Notes, reflecting a net downgrade in the Company’s bond ratings since the initial offering. This rate has been in effect since January 2019. On April 7, 2020, S&P downgraded the Company’s bond rating to BB-, which has the effect of increasing the interest rate on the 2025 Notes to 6.45%. The first coupon payment to the bondholders at the higher interest rate will be paid in January 2021.
Credit Facilities
2018 Revolving Credit Facility
In April 2018, the Company replaced its credit facility that was entered into in 2016 with a new revolving credit facility (the “2018 credit facility”) with a group of banks that, as amended, has a maturity date of April 2024.  The 2018 credit facility has an aggregate maximum revolving credit amount of $3.5 billion and, at March 31, 2020, had a borrowing base of $2.1 billion with aggregate bank commitments of $2.0 billion. The Company may utilize the credit facility in the form of loans and letters of credit. The borrowing base is subject to redetermination at least twice a year, in April and October. On April 13, 2020, the banks participating in the 2018 credit facility redetermined the borrowing base to be $1.8 billion, which also changed the aggregate commitments to that amount. The 2018 credit facility is secured by substantially all of the assets owned by the Company and its subsidiaries. The permitted lien provisions in the senior note indentures currently limit liens securing indebtedness to the greater of $2.0 billion or 25% of adjusted consolidated net tangible assets.
Loans under the 2018 credit facility 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 for such interest period plus the applicable margin (as those terms are defined in the 2018 credit facility documentation).  The applicable margin for Eurodollar loans under the 2018 credit facility ranges from 1.50% to 2.50% based on the Company’s utilization of the 2018 credit facility.  Alternate base rate loans bear interest at the alternate base rate plus the applicable margin.  The applicable margin for alternate base rate loans under the 2018 credit facility ranges from 0.50% to 1.50% based on the Company’s utilization of the 2018 credit facility.
The 2018 credit facility contains customary representations and warranties and contains covenants including, among others, the following:
•a prohibition against incurring debt, subject to permitted exceptions;
•a restriction on creating liens on assets, subject to permitted exceptions; 
•restrictions on mergers and asset dispositions;
•restrictions on use of proceeds, investments, transactions with affiliates, or change of principal business; and
•maintenance of the following financial covenants, commencing with the fiscal quarter ending June 30, 2018:
1.Minimum current ratio of no less than 1.00 to 1.00, whereby current ratio is defined as the Company’s consolidated current assets (including unused commitments under the credit agreement, but excluding non-cash derivative assets) to consolidated current liabilities (excluding non-cash derivative obligations and current maturities of long-term debt).
2.Maximum total net leverage ratio of no greater than (i) with respect to each fiscal quarter ending during the period from June 30, 2018 through March 31, 2019, 4.50 to 1.00, (ii) with respect to each fiscal quarter ending during the period from June 30, 2019 through March 31, 2020, 4.25 to 1.00, and (iii) with respect to each fiscal quarter ending on or after June 30, 2020, 4.00 to 1.00.  Total net leverage ratio is defined as total debt less cash on hand (up to the lesser of 10% of credit limit or $150 million) divided by consolidated EBITDAX for the last four consecutive quarters.  EBITDAX, as defined in the credit agreement governing the Company’s 2018 credit facility, excludes the effects of interest expense, depreciation, depletion and amortization, income tax, 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. 
The 2018 credit facility contains customary events of default that include, among other things, the failure to comply with the financial covenants described above, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments and cross-defaults to material indebtedness.  If an event of default occurs and is continuing, all amounts outstanding under the 2018 credit facility may become immediately due and payable.
As of March 31, 2020, the Company was in compliance with all of the covenants contained in the credit agreement governing the 2018 credit facility. Beginning late in the first quarter of 2020, decreased transportation, manufacturing and general economic activity levels prompted by COVID-19 and related governmental and societal actions reduced the demand for
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oil-based products such as gasoline, jet fuel and other refined products, as well as NGLs. Reduced demand, along with geopolitical events such as the disagreements between the Organization of Petroleum Exporting Countries (“OPEC”) and Russia on production levels, have caused a significant decline in commodity pricing since the beginning of 2020. Additionally, space to store oil and condensate production is reaching or may reach capacity in some areas, which has prompted purchasers of oil and condensate to reduce future purchase levels and, in some cases, to claim force majeure for purchases already contracted. Consequently, during the second half of April 2020, the Company received notices from two companies asserting force majeure and curtailing approximately 3,200 gross barrels per day of condensate. To the extent that this decreased demand for the Company’s commodities continues or storage for its production is not available, Southwestern expects to reduce production from or completely shut in portions of its currently producing wells. If the current market conditions persist or deteriorate further, the Company would proactively continue to adjust its activities and plans. Absent any actions taken by Southwestern, and under these conditions or if they worsen, current modeling indicates that the Company would not be in compliance with its Net Leverage Ratio covenant under the 2018 credit facility in late 2020. Under such circumstances, Southwestern would seek waivers or a modification of the covenant package from the lenders in advance of any covenant non-compliance. Additionally, the Company has other mitigating options including but not limited to the monetization of derivative asset positions, the reduction or elimination of non-essential expenditures or the sale of non-core assets.
Each United States domestic subsidiary of the Company for which the Company owns 100% guarantees the 2018 credit facility.  Pursuant to requirements under the indentures governing its senior notes, each subsidiary that became a guarantor of the 2018 credit facility also became a guarantor of each of the Company’s senior notes.
As of March 31, 2020, the Company had $172 million in letters of credit and $149 million borrowings outstanding under the 2018 credit facility. As of April 28, 2020, the Company had been requested to post an additional $150 million in letters of credit related to firm transportation. The Company currently does not anticipate being required to supply a materially greater amount of letters of credit under its existing contracts.
Senior Notes
In January 2015, the Company completed a public offering of $1.0 billion aggregate principal amount of its 4.95% senior notes due 2025 (the “2025 Notes”).  The interest rate on the 2025 Notes is determined based upon the public bond ratings from Moody’s and S&P.  Downgrades on the 2025 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.  At March 31, 2020, the interest rate for the 2025 Notes was 6.20%, reflecting a net downgrade in the Company’s bond ratings since the initial offering. This rate has been in effect since January 2019. On April 7, 2020, S&P downgraded the Company’s bond rating to BB- which had the effect of increasing the interest rate on the 2025 Notes to 6.45%. The first coupon payment to the bondholders at the higher interest rate will be paid in January 2021. In the event of future downgrades, the coupons for this series of notes have been capped at 6.95%.
In the first quarter of 2020, the Company repurchased $3 million of its 4.10% Senior Notes due 2022, $28 million of its 4.95% Senior Notes due 2025, $18 million of its 7.50% Senior Notes due 2026 and $31 million of its 7.75% Senior Notes due 2027 for $52 million, and recognized a $28 million gain on the extinguishment of debt.
(11) COMMITMENTS AND CONTINGENCIES
Operating Commitments and Contingencies
As of March 31, 2020, 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 $7.6 billion, $411 million 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 $1.1 billion of that amount.  As of March 31, 2020, future payments under non-cancelable firm transportation and gathering agreements were as follows:
 Payments Due by Period
(in millions) Total Less than 1
Year 		1 to 3 Years 3 to 5 Years 5 to 8 Years More than 8
Years
Infrastructure currently in service $ 7,199    $ 753    $ 1,339    $ 1,098    $ 1,524    $ 2,485   
Pending regulatory approval and/or construction (1) 
411    1    17    23    74    296   
Total transportation charges $ 7,610    $ 754    $ 1,356    $ 1,121    $ 1,598    $ 2,781   
(1)Based on estimated in-service dates as of March 31, 2020.
In December 2018, the Company closed the Fayetteville Shale sale and retained certain contractual commitments related to firm transportation, with the buyer obligated to pay the transportation provider directly for these charges. As of March 31,
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2020, approximately $81 million of these contractual commitments remain of which the Company will reimburse the buyer for certain of these potential obligations up to approximately $45 million through December 2020 depending on the buyer’s actual use, and has recorded a $36 million liability for the estimated future payments, down from $46 million recorded at December 31, 2019.
In the first quarter of 2019, the Company agreed to purchase firm transportation with pipelines in the Appalachian Basin starting in 2021 and running through 2032 totaling $357 million in total contractual commitments, which is presented in the table above; the seller has agreed to reimburse $133 million of these commitments.
In February 2020, the Company was notified that the proposed Constitution pipeline project was cancelled and that the Company was released from a firm transportation agreement with its sponsor. Prior to its cancellation, the Company had contractual commitments totaling $512 million over the next 17 years related to the Constitution pipeline project.
Environmental 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, results of operations or cash flows of the Company.
Litigation
The Company is subject to various litigation, claims and proceedings, most of which have arisen in the ordinary course of business, such as for alleged breaches of contract, miscalculation of royalties, employment matters, traffic accidents, pollution, contamination, encroachment on others’ property or nuisance. The Company accrues for litigation, claims and proceedings when a liability is both probable and the amount can be reasonably estimated. As of March 31, 2020, the Company does not currently have any material amounts accrued related to litigation matters. For any matters not accrued for, it is not possible at this time to estimate the amount of any additional loss, or range of loss, that is reasonably possible, but, based on the nature of the claims, 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, 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 inherent uncertainties; therefore, management’s view may change in the future.
St. Lucie County Fire District Firefighters’ Pension Trust

On October 17, 2016, the St. Lucie County Fire District Firefighters’ Pension Trust filed a putative class action in the 61st District Court in Harris County, Texas, against the Company, certain of its former officers and current and former directors and the underwriters on behalf of itself and others that purchased certain depositary shares from the Company’s January 2015 equity offering, alleging material misstatements and omissions in the registration statement for that offering. The Company removed the case to federal court, but after a decision by the United States Supreme Court in an unrelated case that these types of cases are not subject to removal, the federal court remanded the case to the Texas state court. The Texas trial court denied the Company’s motion to dismiss, and in February 2020, the court of appeals declined to exercise discretion to reverse the trial court’s decision. The Company filed a petition to review the trial court’s decision with the Texas Supreme Court, which remains pending. The Company carries insurance for the claims asserted against it and the officer and director defendants, and the carrier has accepted coverage. The Company denies all allegations and intends to continue to defend this case vigorously. The Company does not expect this case to have a material adverse effect on the results of operations, financial position or cash flows of the Company after taking insurance into account. Additionally, it is not possible at this time to estimate the amount of any additional loss, or range of loss, that is reasonably possible.
Indemnifications
The Company has provided certain indemnifications to various third parties, including in relation to asset and entity dispositions, securities offerings and other financings, and litigation, such as the St. Lucie County Fire District Firefighters’ Pension Trust case described above.  In the case of asset dispositions, these indemnifications typically relate to disputes, litigation or tax matters existing at the date of disposition. The Company likewise obtains indemnification for future matters when it sells assets, although there is no assurance the buyer will be capable of performing those obligations.  In the case of equity offerings, these indemnifications typically relate to claims asserted against underwriters in connection with an offering. No material liabilities have been recognized in connection with these indemnifications.
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(12) INCOME TAXES
The Company’s effective tax rate was approximately (36)% for the three months ended March 31, 2020. The change in the effective tax rate for the three months ended March 31, 2020 related to the effects of recording a valuation allowance against the Company’s U.S. deferred tax assets. 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 assets 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 current and forecasted business economics of the oil and gas industry.
Due to significant pricing declines and the material write-down of the carrying value of the Company’s natural gas and oil properties in the three months ended March 31, 2020, the Company concluded that it was more likely than not that these deferred tax assets will not be realized and recorded a discrete tax expense in the period of $408 million for the increase in its valuation allowance. The net change in valuation allowance is reflected as a component of income tax expense. The Company also has retained a valuation allowance of $87 million related to net operating losses in jurisdictions in which it no longer operates. Management will continue to assess available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of deferred tax assets. The amount of the deferred tax asset considered realizable, however, could be adjusted based on changes in subjective estimates of future taxable income or if objective negative evidence is no longer present.
The Company’s effective tax rate was approximately (254)% for the three months ended March 31, 2019. The effective tax rate for the three months ended March 31, 2019 was primarily the effect of releasing the valuation allowances previously recorded against the Company’s deferred tax assets.  As of the first quarter of 2019, the Company had sustained and projected to sustain a three-year cumulative level of profitability. Based on this factor and other positive evidence available at the time, the Company concluded that it was more likely than not that the deferred tax assets would be realized and determined $522 million of the valuation allowance would be released during 2019, of which $426 million was released on a discrete basis in the first quarter of 2019.
(13) PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS

The Company maintains defined pension and other 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, 2020 and 2019:
 Consolidated Statements of
Operations Classification of
Net Periodic Benefit Cost 		For the three months ended March 31,
(in millions) 2020 2019
Service cost General and administrative expenses $ 2    $ 2   
Interest cost Other Income (Loss), Net 1    1   
Expected return on plan assets Other Income (Loss), Net (1)   (2)  
Amortization of prior service cost Other Income (Loss), Net —    —   
Amortization of net loss Other Income (Loss), Net —    1   
Net periodic benefit cost   $ 2    $ 2   
The Company’s other postretirement benefit plan had a net periodic benefit cost of $1 million and less than $1 million for the three months ended March 31, 2020 and 2019, respectively.
As of March 31, 2020, the Company has contributed $5 million to the pension and other postretirement benefit plans and expects to contribute an additional $7 million to its pension plan during the remainder of 2020.  The Company recognized liabilities of $27 million and $13 million related to its pension and other postretirement benefits, respectively, as of March 31, 2020, compared to liabilities of $30 million and $13 million as of December 31, 2019, respectively.
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 Non-Qualified Plan.  Shares of the Company’s common stock purchased under the terms of the Non-Qualified Plan are included in treasury stock and totaled 3,632 shares and 5,115 shares at March 31, 2020 and December 31, 2019, respectively.
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(14) LONG-TERM INCENTIVE COMPENSATION
The Company’s long-term incentive compensation plans consist of a combination of stock-based awards that derive their value directly or indirectly from the Company’s common stock price, and cash-based awards that are fixed in amount but subject to meeting annual performance thresholds. In March 2020, the Company issued its first long-term fixed cash-based awards. The resulting impact to general and administrative expenses as well as capitalized expenses was immaterial for the first quarter of 2020.
Stock-Based Compensation
The Company’s stock-based compensation is classified as either equity awards or liability awards in accordance with GAAP.  The fair value of an equity-classified award is determined at the grant date and is amortized to general and administrative expense on a straight-line basis over the vesting period of the award.  A portion of this general and administrative expense is capitalized into natural gas and oil properties, included in property and equipment. The fair value of a liability-classified award is determined on a quarterly basis beginning at the grant date until final vesting.  Changes in the fair value of liability-classified awards are recorded to general and administrative expense and capitalized expense over the vesting period of the award. Generally, stock options granted to employees and directors vest ratably over three years from the grant date and expire seven years from the date of grant. The Company issues shares of restricted stock, restricted stock units, or performance cash awards to employees and directors which generally vest over four years. Restricted stock, restricted stock units, performance cash awards and stock options granted to participants under the 2013 Incentive Plan, as amended and restated, immediately vest upon death, disability or retirement (subject to a minimum of three years of service). The Company issues performance unit awards to employees which historically have vested at or over three years.
In February 2020, the Company notified employees of a workforce reduction plan as a result of a strategic realignment of the Company’s organizational structure. This reduction was substantially complete by the end of the first quarter of 2020. Affected employees were offered a severance package which, if applicable, included the current value of unvested long-term incentive awards that were forfeited.
The Company recognized the following amounts in total employee stock-based compensation costs for the three months ended March 31, 2020 and 2019:
 For the three months ended March 31,
(in millions) 2020 2019
Stock-based compensation cost – expensed $ —   
(1)
$ 7   
Stock-based compensation cost – capitalized —   
(1)
4   
(1)For the three months ended March 31, 2020, a decrease in the value of liability-based awards approximately offset the amounts expensed and capitalized for equity-based awards.
Equity-Classified Awards
The Company recognized the following amounts in employee equity-classified stock-based compensation costs for the three months ended March 31, 2020 and 2019:
 For the three months ended March 31,
(in millions) 2020 2019
Equity-classified awards – expensed $ 1    $ 2   
Equity-classified awards – capitalized —    1   
As of March 31, 2020, there was $4 million of total unrecognized compensation cost related to the Company’s unvested equity-classified stock option grants, equity-classified restricted stock grants and equity-classified performance units.  This cost is expected to be recognized over a weighted-average period of 0.9 years.
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Equity-Classified Stock Options
The following table summarizes equity-classified stock option activity for the three months ended March 31, 2020 and provides information for options outstanding and options exercisable as of March 31, 2020:
 Number
of Options 		Weighted Average
Exercise Price
 (in thousands)  
Outstanding at December 31, 2019 4,635    $ 15.26   
Granted —    $ —   
Exercised —    $ —   
Forfeited or expired (62)   $ 15.11   
Outstanding at March 31, 2020 4,573    $ 15.27   
Exercisable at March 31, 2020 4,478    $ 15.48   
Equity-Classified Restricted Stock
The following table summarizes equity-classified restricted stock activity for the three months ended March 31, 2020 and provides information for unvested shares as of March 31, 2020:
 Number
of Shares 		Weighted Average
Fair Value
 (in thousands)  
Unvested shares at December 31, 2019 1,480    $ 7.00   
Granted 12    $ 2.42   
Vested (522)   $ 7.75   
Forfeited (167)   $ 8.59   
Unvested shares at March 31, 2020 803    $ 6.11   
Equity-Classified Performance Units
The following table summarizes equity-classified performance unit activity for the three months ended March 31, 2020 and provides information for unvested units as of March 31, 2020.  The performance unit awards granted in 2018 include a market condition based exclusively on the Total Shareholder Return (“TSR”), with their fair value calculated by a Monte Carlo model.  The total fair value of the performance units is amortized to compensation expense on a straight line basis over the vesting period of the award.  The grant date fair value is calculated using the closing price of the Company’s common stock at the grant date.

Number
of Units (1)
Weighted Average
Fair Value
 (in thousands)  
Unvested units at December 31, 2019 178    $ 10.47   
Granted —    $ —   
Vested (178)   $ 10.47   
Forfeited —    $ —   
Unvested units at March 31, 2020 —    $ —   
(1)The actual payout of shares may range from a minimum of zero shares to a maximum of two shares per unit contingent upon TSR.  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.
Liability-Classified Awards
The Company recognized the following amounts in employee liability-classified stock-based compensation costs for the three months ended March 31, 2020:
 For the three months ended March 31,
(in millions) 2020 2019
Liability-classified stock-based compensation cost – expensed $ (1)   $ 5   
Liability-classified stock-based compensation cost – capitalized —    3   
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Liability-Classified Restricted Stock Units
In the first quarter of each year beginning with 2018, the Company granted restricted stock units that vest over a period of four years and are payable in either cash or shares at the option of the Compensation Committee of the Company’s Board of Directors.  The Company has accounted for these as liability-classified awards, and accordingly changes in the market value of the instruments will be recorded to general and administrative expense and capitalized expense over the vesting period of the award.  As of March 31, 2020, there was $26 million of total unrecognized compensation cost related to liability-classified restricted stock units that is expected to be recognized over a weighted-average period of 3.0 years. The amount of unrecognized compensation cost for liability-classified awards will fluctuate over time as they are marked to market.
 Number
of Units 		Weighted Average
Fair Value
 (in thousands)  
Unvested units at December 31, 2019 12,992    $ 2.42   
Granted 6,172    $ 1.41   
Vested (3,852)   $ 1.38   
Forfeited (1,464)   $ 1.67   
Unvested units at March 31, 2020 13,848    $ 1.69   
Liability-Classified Performance Units
In each year beginning with 2018, the Company granted performance units that vest at the end of, or over, a three-year period and are payable in either cash or shares at the option of the Compensation Committee of the Company’s Board of Directors.  The Company has accounted for these as liability-classified awards, and accordingly changes in the fair market value of the instruments will be recorded to general and administrative expense and capitalized expense over the vesting period of the awards.  The performance unit awards granted in 2018 include a performance condition based on cash flow per debt-adjusted share and two market conditions, one based on absolute TSR and the other on relative TSR as compared to a group of the Company’s peers. The performance unit awards granted in 2019 include performance conditions based on return on average capital employed and two market conditions, one based on absolute TSR and the other on relative TSR.  The performance units granted in 2020 include a performance condition based on return on average capital employed and a market condition based on relative TSR. The fair values of the market conditions are calculated by Monte Carlo models on a quarterly basis.  As of March 31, 2020, there was $15 million of total unrecognized compensation cost related to liability-classified performance units.  This cost is expected to be recognized over a weighted-average period of 2.6 years.  The amount of unrecognized compensation cost for liability-classified awards will fluctuate over time as they are marked to market. The final value of the performance unit awards is contingent upon the Company’s actual performance against these performance measures.
 Number
of Units 		Weighted Average
Fair Value
 (in thousands)  
Unvested units at December 31, 2019 5,142    $ 2.42   
Granted 6,172    $ 1.41   
Vested —    $ —   
Forfeited —    $ —   
Unvested units at March 31, 2020 11,314    $ 1.69   
Cash-Based Compensation
Performance Cash Awards
In 2020, the Company granted performance cash awards that vest over a four-year period and are payable in cash on an annual basis. The value of each unit of the award equals one dollar. The Company recognizes the cost of these awards as general and administrative expense and capitalized expense over the vesting period of the awards. The performance cash awards granted in 2020 include a performance condition determined annually by the Company. In 2020, the performance measure is a targeted discretionary cash flow amount. If the Company, in its sole discretion, determines that the threshold was not met, the amount for that vesting period will not vest and will be cancelled. As of March 31, 2020, there was $19 million of total unrecognized compensation cost related to performance cash awards. This cost is expected to be recognized over a weighted average 3.9 years. The final value of the performance cash awards is contingent upon the Company’s actual performance against these performance measures.
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Number
of Units 		Weighted Average Fair Value
(in thousands)
Unvested units at 12/31/2019 —    $ —   
Granted 20,044    $ 1.00   
Vested —    $ —   
Forfeited (135)   $ 1.00   
Unvested units at March 31, 2020 19,909    $ 1.00   

(15) SEGMENT 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 Marketing segment generates revenue through the marketing of both Company and third-party produced natural gas and liquids volumes.
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 2019 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 operating income, interest expense, gain (loss) on derivatives, gain on early extinguishment of debt and other income.  The “Other” column includes items not related to the Company’s reportable segments, including real estate and corporate items. Corporate general and administrative costs, depreciation expense and taxes, other than income taxes, are allocated to the segments.
E&P Marketing Other Total
Three months ended March 31, 2020 (in millions)
Revenues from external customers $ 353    $ 239    $ —    $ 592   
Intersegment revenues (9)   309    —    300   
Depreciation, depletion and amortization expense 111    2    —    113   
Impairments 1,479    —    —    1,479   
Operating income (loss) (1,486)  
(1)
(4)   —    (1,490)  
Interest expense (2)
19    —    —    19   
Gain on derivatives 339    —    —    339   
Gain on early extinguishment of debt —    —    28    28   
Other income, net 1    —    —    1   
Provision for income taxes (2)
406    —    —    406   
Assets 4,900   
(3)
214    161   
(4)
5,275   
Capital investments (5)
237    —    —    237   
Three months ended March 31, 2019
Revenues from external customers $ 551    $ 439    $ —    $ 990   
Intersegment revenues (9)   502    —    493   
Depreciation, depletion and amortization expense 110    2    —    112   
Operating income 210   
(1)
3    —    213   
Interest expense (2)
14    —    —    14   
Loss on derivatives (32)   —    —    (32)  
Other income, net 1    —    —    1   
Benefit from income taxes (2)
(426)   —    —    (426)  
Assets 5,562   
(3)
342    542   
(4)
6,446   
Capital investments (5)
325    —    —    325   

(1)Operating income for the E&P segment includes $10 million and $3 million of restructuring charges for the three months ended March 31, 2020 and 2019, respectively.
(2)Interest expense and provision (benefit) for income taxes by segment is an allocation of corporate amounts as they are incurred at the corporate level.
(3)E&P assets includes office, technology, water infrastructure, drilling rigs and other ancillary equipment not directly related to natural gas and oil properties. For the three months ended March 31, 2019, this also includes deferred tax assets which are an allocation of corporate amounts as they are incurred at the corporate level.
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(4)Other assets represent corporate assets not allocated to segments and assets for non-reportable segments.  At March 31, 2020 and 2019, other assets included approximately $5 million and $366 million, respectively, in cash and cash equivalents, $32 million and $68 million, respectively, in income taxes receivable, $23 million and $56 million, respectively, in property, plant and equipment, $10 million and $10 million, respectively, in unamortized debt expense, $9 million and $10 million, respectively, in prepayments, $5 million and $7 million, respectively, in a non-qualified retirement plan and $77 million and $25 million in right-of-use lease assets, respectively.
(5)Capital investments include increases of $8 million and $66 million for the three months ended March 31, 2020 and 2019, respectively, relating to the change in accrued expenditures between years.
(17) NEW ACCOUNTING PRONOUNCEMENTS
Recently Adopted
In August 2018, the FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement (ASC 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements. ASU 2018-13 became effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2019. As a result of adoption, this standard did not have a material impact on the Company’s consolidated financial statements.
In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“Update 2016-13”). Update 2016-13 replaced the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including but not limited to trade receivables. For public business entities, the new standard became effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period.
From an evaluation of the Company’s existing credit portfolio, which includes trade receivables from commodity sales, joint interest billings due from partners and other receivables and cash equivalents, historical credit losses have been de minimis and are expected to remain so in the future assuming no substantial changes to the business or creditworthiness of our business partners. Update 2016-13 did not have a significant impact on the Company’s consolidated financial statements or related control environment upon adoption on January 1, 2020.
Issued but Not Yet Adopted
In August 2018, the FASB issued ASU 2018-14, Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”). This ASU amends, adds and removes certain disclosure requirements under FASB ASC Topic 715 – Compensation-Retirement Benefits. The guidance in ASU 2018-14 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. This ASU will result in expanded disclosures within the Company’s interim and annual footnote disclosures, however, the adoption of ASU 2018-14 is not expected to have a material impact on the Company’s consolidated financial statements.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following updates information as to Southwestern Energy Company’s financial condition provided in our 2019 Annual Report and analyzes the changes in the results of operations between the three month periods ended March 31, 2020 and 2019.  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 2019 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 “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 2019 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 consolidated financial statements and the related notes included in this Quarterly Report.
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OVERVIEW
Background
Southwestern Energy Company (including its subsidiaries, collectively, “we,” “our,” “us,” “the Company” 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 marketing business, which we call “Marketing” but previously referred to as “Midstream” when it included the operations of gathering systems.  We conduct most of our businesses through subsidiaries, and we currently operate exclusively in the lower 48 United States.
E&P.  Our primary business is the exploration for and production of natural gas, oil and NGLs, with our ongoing operations focused on the development of unconventional natural gas reservoirs located in Pennsylvania and West Virginia.  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, our properties in Pennsylvania and West Virginia are herein referred to as “Appalachia.” We also operate drilling rigs located in Pennsylvania and West Virginia, and we provide certain oilfield products and services, principally serving our E&P operations through vertical integration.
Marketing. Our marketing activities capture opportunities that arise through the marketing and transportation of natural gas, oil and NGLs primarily produced in our E&P operations.
Recent Financial and Operating Results
Significant first quarter 2020 operating and financial results include:
Total Company
•Net loss of $1,547 million, or ($2.86) per diluted share, decreased compared to net income of $594 million, or $1.10 per diluted share, for the same period in 2019. The decrease was primarily due to a $1,479 million non-cash full cost ceiling test impairment and a $408 million tax valuation allowance, which were only partially offset by a $371 million positive impact of derivatives, including a $103 million improvement in settled derivatives as compared to the same period in 2019.
•Operating loss of $1,490 million decreased compared to operating income of $213 million for the same period in 2019 on a consolidated basis primarily due to a $1,479 million non-cash full cost ceiling test impairment in the first quarter of 2020. Excluding the non-cash impairment, operating loss of $11 million decreased 105% compared to the same period in 2019 primarily due to lower margins associated with reduced commodity prices.
•Net cash provided by operating activities of $160 million decreased 64% from $442 million for the same period in 2019 primarily due to the decrease in operating income net of depreciation, depletion and amortization and impairments, and a reduction in net cash flow associated with working capital, partially offset by the improvement in settled derivatives discussed above.
•Total capital investing of $237 million decreased 27% from $325 million for the same period in 2019.
•We repurchased $80 million in aggregate principal amount of our outstanding senior notes at a discount and recognized a gain on the extinguishment of debt of $28 million.
E&P
•E&P segment operating loss of $1,486 million decreased from operating income of $210 million for the same period in 2019, primarily related to the non-cash impairment of $1,479 million in the first quarter of 2020.
•Total net production of 201 Bcfe, which was comprised of 78% natural gas and 22% oil and NGLs, increased 10% from 182 Bcfe in the same period in 2019, and our liquids production increased 17% over the same period primarily associated with our oil production.
•Excluding the effect of derivatives, our realized natural gas price of $1.53 per Mcf decreased 48%, our realized oil price of $36.72 per barrel decreased 19% and our realized NGL price of $8.16 per barrel decreased 44% as compared to the same period in 2019. Our total weighted average realized price excluding the effect of derivatives of $1.69 per Mcfe decreased 43% from the same period in 2019.
•E&P segment invested $237 million in capital; drilling 38 wells, completing 22 wells and placing 12 wells to sales.
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Outlook
We expect to continue to exercise capital discipline in our 2020 capital investment program, and we remain committed to our focus on optimizing our portfolio by concentrating our efforts on our highest return investment opportunities, looking for ways to optimize our cost structure and maximize margins in each core area of our business and further developing our knowledge of our asset base.
Lower natural gas, oil and NGL prices present challenges to our industry and our Company, as do changes in laws, regulations and investor sentiment and other key factors described in “Risk Factors” in our 2019 Annual Report. During the first quarter of 2020, the economic impact of the COVID-19 pandemic and related governmental and societal measures (discussed below), along with the disagreements between OPEC and Russia on production levels, have caused oil prices to decrease 66% since the beginning of 2020. In the first quarter of 2020, gains on settled derivatives offset a large portion of the impact of the recent decline in prices, and as of April 28, 2020, we currently have derivative positions in place for 81% of our expected remaining 2020 production. There can be no assurance that we will be able to add derivative positions to cover the remainder of our expected production at favorable prices. See “Quantitative and Qualitative Disclosures About Market Risk” in Item 3 and Note 7 - Derivatives and Risk Management, in the consolidated financial statements included in this Quarterly Report for further details.
The Impact of COVID-19 on Our Business

During the first quarter of 2020, we did not experience any material impact to our ability to operate or market our production due to the direct or indirect impacts of the COVID-19 pandemic. In early March 2020, we instituted additional health measures at our facilities and banned nonessential travel. In mid-March, in advance of state and local governments restricting business operations and imposing “stay at home” directives in Pennsylvania, West Virginia and Texas (where our operations and offices are located) we notified employees that those whose work does not require a physical presence should work from home. Almost all employees working at our sites today are engaged in the physical drilling, completion and operation of wells, and we have instituted additional measures designed to prevent the possible spread of the virus, including social distancing and appropriate personal protective equipment (PPE). The Cybersecurity and Infrastructure Security Agency in the U.S. Department of Homeland Security classifies individuals engaged in and supporting exploration for and production of natural gas, oil and NGLs as “essential critical infrastructure workforce,” and to date, state and local governments have followed this guidance and exempted these activities from business closures. Should this situation change, our access to supplies or workers to drill, complete and operate wells could be materially and adversely affected.
Although prices for oil dropped substantially during March 2020, by early in the first quarter we had protected the price of 99% of our expected 2020 oil production through derivatives. During the first quarter, natural gas prices were not impacted as severely as oil prices, and as of March 31, 2020, we have protected the price of approximately 87% of expected remaining 2020 gas production through derivatives. However, as decreased transportation, manufacturing and general economic activity levels prompted by COVID-19 and related governmental and societal actions have reduced the demand for oil-based products such as gasoline, jet fuel and other refined products, as well as NGLs, space to store oil and condensate production is reaching or may reach capacity in some areas, which is prompting purchasers of oil and condensate to reduce future purchase levels and, in some cases, to claim force majeure for purchases already contracted. Further, although the reduced production of natural gas associated with oil wells has dampened the effect of lower natural gas demand, the demand for natural gas and liquefied natural gas to be exported has fallen. These situations may lead to production greater than storage capacity later in the year, depending on weather and other seasonal factors. In addition, commodity pricing challenges may cause our production costs to exceed the revenues associated with such production. To the extent that this decreased demand for our commodities continues and our margins are not at acceptable levels or storage for our production is not available, we may have to reduce production from or completely shut in portions of our currently producing wells. The inability to sell our production or the decision to potentially reduce or shut in our production could materially and adversely affect our operating results and our ability to comply with the financial covenants under our 2018 credit facility.
There is uncertainty around the extent and duration of the disruption. The degree to which the COVID-19 pandemic or any other public health crisis adversely impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, its impact on the economy and market conditions, and how quickly and to what extent normal economic and operating conditions can resume. Therefore, while we expect this matter will likely disrupt our operations, the degree of the adverse financial impact cannot be reasonably estimated at this time.
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RESULTS 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.  Restructuring charges, interest expense, gain (loss) on derivatives, gain on early extinguishment of debt and income taxes are discussed on a consolidated basis.
E&P
 For the three months ended March 31,
(in millions) 2020 2019
Revenues $ 344    $ 542   
Operating costs and expenses (1)
1,830    332   
Operating income (loss) $ (1,486)   $ 210   
Gain on derivatives, settled (2)
$ 93    $ (10)  
(1)Includes $1,479 million related to non-cash full cost ceiling test impairment for the three months ended March 31, 2020.
(2)Represents the gain on settled commodity derivatives and is not included in operating income (loss).
Operating Income (Loss)
•Operating income (loss) for the E&P segment decreased $1,696 million for the three months ended March 31, 2020, compared to the same period in 2019, primarily due to a $1,479 million non-cash full cost ceiling test impairment. Excluding the impact of the impairment, operating income (loss) decreased $217 million compared to the same period in 2019 primarily due to lower margins associated with decreased commodity pricing.
Revenues
The following illustrates the effects on sales revenues associated with changes in commodity prices and production volumes:
 Three months ended March 31,
(in millions except percentages) Natural
Gas 		Oil NGLs Total
2019 sales revenues (1)
$ 421    $ 39    $ 81    $ 541   
Changes associated with prices (221)   (12)   (39)   (272)  
Changes associated with production volumes 39    25    8    72   
2020 sales revenues (2)
$ 239    $ 52    $ 50    $ 341   
Increase (decrease) from 2019 (43) % 33  % (38) % (37) %
(1)Excludes $1 million in other operating revenues for the three months ended March 31, 2019 primarily related to third-party water sales.
(2)Excludes $3 million in other operating revenues for the three months ended March 31, 2020 primarily related to gains on purchaser imbalances associated with certain NGLs.
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Production Volumes
 For the three months ended March 31, Increase/(Decrease)
Production volumes: 2020 2019
Natural Gas (Bcf)
Northeast Appalachia 114    112    2%
Southwest Appalachia 42    31    35%
Total 156    143    9%

Oil (MBbls)
Southwest Appalachia 1,395    849    64%
Other 4    5    (20)%
Total 1,399    854    64%

NGL (MBbls)
Southwest Appalachia 6,127    5,602    9%
Other 1    1    —%
Total 6,128    5,603    9%

Production volumes by area: (Bcfe)
Northeast Appalachia 114    112    2%
Southwest Appalachia (1)
87    70    24%
Total 201    182    10%

Production percentage: (Bcfe)
Natural gas 78  % 79  %
Oil 4  % 3  %
NGL 18  % 18  %
(1)Approximately 87 Bcfe and 69 Bcfe for the three months ended March 31, 2020 and March 31, 2019, respectively, were produced from the Marcellus Shale formation.
•Production volumes for our E&P segment increased by 19 Bcfe for the three months ended March 31, 2020 compared to the same period in 2019, primarily due to a 24% increase in production volumes in Southwest Appalachia.
•Oil and NGL production increased 64% and 9%, respectively, for the three months ended March 31, 2020, compared to the same period in 2019.
Commodity Prices
The price we expect to receive for our production is a critical factor in determining the capital investments we make to develop our properties.  Commodity prices fluctuate due to a variety of factors we cannot control or predict, including increased supplies of natural gas, oil or NGLs due to greater exploration and development activities, weather conditions, political and economic events such as the response to the COVID-19 pandemic, and competition from other energy sources.  These factors impact supply and demand, which in turn determine the sales prices for our production.  In addition to these factors, the prices we realize for our production are affected by our hedging activities as well as locational differences in market prices, including basis differentials.  We will continue to evaluate the commodity price environments and adjust the pace of our activity in order to maintain appropriate liquidity and financial flexibility.
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 For the three months ended March 31, Increase/(Decrease)
 2020 2019
Natural Gas Price:
NYMEX Henry Hub Price ($/MMBtu) (1)
$ 1.95    $ 3.15    (38)%
Discount to NYMEX (2)
(0.42)   (0.20)   (110)%
Average realized gas price, excluding derivatives ($/Mcf)
$ 1.53    $ 2.95    (48)%
Gain (loss) on settled financial basis derivatives ($/Mcf)
0.10    (0.03)  
Gain (loss) on settled commodity derivatives ($/Mcf)
0.31    (0.08)  
Average realized gas price, including derivatives ($/Mcf)
$ 1.94    $ 2.84    (32)%

Oil Price:
WTI oil price ($/Bbl)
$ 46.17    $ 54.90    (16)%
Discount to WTI (9.45)   (9.42)   —%
Average oil price, excluding derivatives ($/Bbl)
$ 36.72    $ 45.48    (19)%
Gain on settled derivatives ($/Bbl)
9.25    2.34   
Average oil price, including derivatives ($/Bbl)
$ 45.97    $ 47.82    (4)%

NGL Price:
Average realized NGL price, excluding derivatives ($/Bbl)
$ 8.16    $ 14.45    (44)%
Gain on settled derivatives ($/Bbl)
2.62    0.60   
Average realized NGL price, including derivatives ($/Bbl)
$ 10.78    $ 15.05    (28)%
Percentage of WTI, excluding derivatives
18  % 26  %

Total Weighted Average Realized Price:
Excluding derivatives ($/Mcfe)
$ 1.69    $ 2.98    (43)%
Including derivatives ($/Mcfe)
$ 2.16    $ 2.92    (26)%
(1)Based on last day settlement prices from monthly futures contracts.
(2)This discount includes a basis differential, a heating content adjustment, physical basis sales, third-party transportation charges and fuel charges, and excludes financial basis hedges.
We receive a sales price for our natural gas at a discount to average monthly NYMEX settlement prices based on heating content of the gas, locational basis differentials and transportation 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 derivatives and other financial arrangements with respect to a portion of our projected natural gas, oil and NGL 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 Risk” and Note 7 to the consolidated financial statements, included in this Quarterly Report.
The table below presents the amount of our future production in which the basis is protected as of March 31, 2020:
Volume (Bcf) Basis Differential
Basis Swaps – Natural Gas
2020 199    $ (0.44)  
2021 103    (0.03)  
2022 88    (0.48)  
Total 390   
Physical NYMEX Sales Arrangements – Natural Gas
2020 178    $ (0.28)  
2021 94    (0.29)  
Total 272   
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In addition to protecting basis, the table below presents the amount of our future production in which price is financially protected as of March 31, 2020:
 Remaining
2020 		Full Year
2021 		Full Year
2022
Natural gas (Bcf)
438    330    120   
Oil (MBbls)
4,383    3,773    1,104   
Ethane (MBbls)
6,952    3,017    —   
Propane (MBbls)
4,324    2,460    —   
Total financial protection on future production (Bcfe)
532    386    127   
We refer you to Note 7 of the consolidated financial statements included in this Quarterly Report for additional details about our derivative instruments.
Operating Costs and Expenses
 For the three months ended March 31, Increase/(Decrease)
(in millions except percentages) 2020 2019
Lease operating expenses $ 194    $ 166    17%
General & administrative expenses 23    34    (32)%
Restructuring charges 10    3    233%
Taxes, other than income taxes 13    19    (32)%
Full cost pool amortization 106    103    3%
Non-full cost pool DD&A 5    7    (29)%
Impairments 1,479    —    100%
Total operating costs $ 1,830    $ 332    451%

For the three months ended March 31, Increase/
Average unit costs per Mcfe: 2020 2019 (Decrease)
Lease operating expenses (1)
$ 0.96    $ 0.90    7%
General & administrative expenses $ 0.11   
(2)
$ 0.19   
(3)
(42)%
Taxes, other than income taxes $ 0.07    $ 0.10    (30)%
Full cost pool amortization $ 0.53    $ 0.57    (7)%
(1)Includes post-production costs such as gathering, processing, fractionation and compression.
(2)Excludes a $10 million in restructuring charges for the three months ended March 31, 2020.
(3)Excludes $3 million of restructuring charges for the three months ended March 31, 2019.

Lease Operating Expenses
•Lease operating expenses per Mcfe increased $0.06 for the three months ended March 31, 2020, compared to the same period of 2019, due to a $0.04 per Mcfe increase related to a shift towards liquids production, which includes processing fees, and a $0.02 per Mcfe increase related to increased compression costs.
General and Administrative Expenses
•General and administrative expenses decreased $11 million for the three months ended March 31, 2020, compared to the same period of 2019, primarily due to decreased personnel costs and the implementation of cost reduction initiatives.
Taxes, Other than Income Taxes
•On a per Mcfe basis, taxes, other than income taxes, may 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.  Taxes, other than income taxes, per Mcfe decreased $0.03 for the three months ended March 31, 2020, compared to the same period of 2019, primarily due to lower effective severance tax rates in Southwest Appalachia.
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Full Cost Pool Amortization
•Our full cost pool amortization rate decreased $0.04 per Mcfe for the three months ended March 31, 2020 as compared to the same period in 2019.  The average amortization rate decreased primarily as a result of the impact of capital investment and the further evaluation of our unproved properties during the past twelve months.
•The amortization rate is impacted by the timing and amount of reserve additions and the future development costs associated with those additions, revisions of previous reserve estimates due to both price and well performance, write-downs that result from non-cash full cost ceiling impairments, proceeds from the sale of properties that reduce the full cost pool, and the levels 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 amount of future reserve changes.
•Unevaluated costs excluded from amortization were $1.4 billion at March 31, 2020, compared to $1.5 billion at December 31, 2019.  The unevaluated costs excluded from amortization decreased as the impact of $15 million of unevaluated capital invested during the period was more than offset by the evaluation of previously unevaluated properties totaling $84 million.
Marketing
 For the three months ended March 31, Increase/
(Decrease)
(in millions except percentages) 2020 2019
Marketing revenues $ 548    $ 940    (42)%
Other operating revenues —    1    (100)%
Marketing purchases 547    934    (41)%
Operating costs and expenses 5    5    —%
Gain on sale of operating assets —    (1)   (100)%
Operating income (loss) $ (4)   $ 3    (233)%

Volumes marketed (Bcfe)
263    289    (9)%

Percent natural gas production marketed from affiliated E&P operations 87  % 69  %
Percent oil and NGL production marketed from affiliated E&P operations 77  % 75  %
Operating Income (Loss)
•Marketing operating income (loss) decreased $7 million for the three months ended March 31, 2020, compared to the same period in 2019, primarily due to a $5 million decrease in the marketing margin. In addition, marketing operating income for the first quarter of 2019 included a $1 million gain on the sale of operating assets and a $1 million gain on the sale of gas in storage.
•The margin generated from marketing activities was $1 million and $6 million for the three months ended March 31, 2020 and 2019, respectively. The decrease in marketing margin for the three months ended March 31, 2020, compared to the same period in 2019, reflects our efforts to optimize the cost of our transportation through the purchase and sale of third-party natural gas.
Marketing margins are driven primarily by volumes marketed and may fluctuate depending on the prices paid for commodities, related cost of transportation and the ultimate disposition of those commodities.  Increases and decreases in marketing revenues due to changes in commodity prices and volumes marketed are largely offset by corresponding changes in marketing purchase expenses. Efforts to optimize the cost of our transportation can result in greater expenses and therefore lower marketing margins.
Revenues
•For the three months ended March 31, 2020, revenues from our marketing activities decreased $392 million compared to the same period in 2019, primarily due to a 26 Bcfe decrease in the volumes marketed and a 36% decrease in the price received for volumes marketed.
Operating Costs and Expenses
•Marketing operating costs and expenses remained flat for the three months ended March 31, 2020, compared to the same period in 2019.
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Consolidated
Restructuring Charges
In February 2020, employees were notified of a workforce reduction plan as a result of a strategic realignment of our organizational structure.  Affected employees were offered a severance package, which included a one-time cash payment depending on length of service and, if applicable, the current value of unvested long-term incentive awards that were forfeited.  We recognized restructuring expense of $10 million for the three months ended March 31, 2020 related to cash severance, including payroll taxes.
In the first quarter of 2019, we recognized $3 million in restructuring charges consisting of cash severance payments and office consolidation expenses related to the Fayetteville Shale sale, which closed in December 2018. We refer you to Note 2 to the consolidated financial statements included in this Quarterly Report for additional details about our restructuring charges.
Interest Expense
 For the three months ended March 31, Increase/(Decrease)
(in millions except percentages) 2020 2019
Gross interest expense:
Senior notes $ 37    $ 39    (5)%
Credit arrangements 3    3    —%
Amortization of debt costs 2    1    100%
Total gross interest expense 42    43    (2)%
Less: capitalization (23)   (29)   (21)%
Net interest expense $ 19    $ 14    36%
•Interest expense related to our senior notes decreased for the three months ended March 31, 2020, compared to the same period of 2019, as we repurchased $80 million and $114 million of our outstanding senior notes during 2020 and 2019, respectively.
•Capitalized interest decreased for the three months ended March 31, 2020, compared to the same period in 2019, due to the evaluation of natural gas and oil properties over the past twelve months.
•Capitalized interest decreased as a percentage of gross interest expense for the three months ended March 31, 2020, compared to the same period in 2019, primarily related to a larger percentage decrease in our unevaluated natural gas and oil properties balance as compared to the smaller percentage decrease in our gross interest expense over the same period.
Gain (Loss) on Derivatives
 For the three months ended March 31,
(in millions) 2020 2019
Gain (loss) on unsettled derivatives $ 246    $ (22)  
Gain (loss) on settled derivatives 93    (10)  
Gain (loss) on derivatives $ 339    $ (32)  
We refer you to Note 7 to the consolidated financial statements included in this Quarterly Report for additional details about our gain (loss) on derivatives.
Gain/Loss on Early Extinguishment of Debt

For the three months ended March 31, 2020, we recorded a gain on early extinguishment of debt of $28 million as a result of our repurchase of $80 million in aggregate principal amount of our outstanding senior notes for $52 million. See Note 10 to the consolidated financial statements of this Quarterly Report for more information on our long-term debt.
Income Taxes
 For the three months ended March 31,
(in millions except percentages) 2020 2019
Income tax (benefit) expense $ 406    $ (426)  
Effective tax rate (36) % (254) %
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•As of the first quarter of 2019, we had sustained a three-year cumulative level of profitability. Based on this factor and other positive evidence including forecasted income as of March 31, 2019, we concluded that it was more likely than not that the deferred tax asset would be realized and determined that $426 million of the valuation allowance would be released as of March 31, 2019. However, due to commodity price declines during the first quarter of 2020 and the write-down of the carrying value of our natural gas and oil properties for the three months ended March 31, 2020, in addition to other negative evidence, we concluded that it was more likely than not that these deferred tax assets will not be realized and recorded a discrete tax expense in the period of $408 million for the increase in our valuation allowance. The net change in valuation allowance is reflected as a component of income tax expense. We also continue to retain a valuation allowance of $87 million related to net operating losses in jurisdictions in which we no longer operate.
New Accounting Standards Implemented in this Report
Refer to Note 16 to the 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 16 to the consolidated financial statements of this Quarterly Report for a discussion of new accounting standards which have not yet been implemented.
LIQUIDITY AND CAPITAL RESOURCES
We depend primarily on funds generated from our operations, our 2018 credit facility, our cash and cash equivalents balance and capital markets as our primary sources of liquidity. On April 13, 2020, the banks participating in our 2018 credit facility redetermined our borrowing base to be $1.8 billion, which also changed our aggregate commitments to that amount. As of April 28, 2020, we had $1.3 billion of total available liquidity, which exceeds our currently modeled needs, and we remain committed to our strategy of capital discipline. We refer you to Note 10 to the consolidated financial statements included in this Quarterly Report and the section below under “Credit Arrangements and Financing Activities” for additional discussion of our 2018 credit facility and related covenant requirements.
Our cash flow from operating activities is highly dependent upon our ability to sell, and 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. See “The Impact of COVID-19 on Our Business” in the Overview section of Item 2 in Part I for additional discussion about current and potential future market conditions. The sales price we receive for our production is also influenced by our commodity hedging activities.  Our derivative contracts allow us to ensure a certain level of cash flow to fund our operations. In the first quarter of 2020, gains on derivatives have offset a large portion of the impact of the recent decline in prices, and as of April 28, 2020, we currently have derivative positions in place for 81% of our expected remaining 2020 production, including 87% of our originally expected condensate production. There can be no assurance that we will be able to add derivative positions to cover the remainder of our expected production at favorable prices. See “Quantitative and Qualitative Disclosures about Market Risk” in Item 3 in Part I and Note 7 in the 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 settle 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.
Our short-term cash flows are also dependent on the timely collection of receivables from our customers and joint interest owners.  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 depending upon available cash flow.  Further, we may from time to time seek to retire, rearrange or amend some or all of our outstanding debt or debt agreements 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.
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Credit Arrangements and Financing Activities
In April 2018, we replaced our credit facility entered into in 2016 with a new revolving credit facility (the “2018 credit facility”) with a group of banks that, as amended, has a maturity date of April 2024.  The 2018 credit facility has an aggregate maximum revolving credit amount of $3.5 billion and, at March 31, 2020, had a borrowing base of $2.1 billion with aggregate bank commitments of $2.0 billion. The borrowing base is subject to redetermination at least twice a year, in April and October, and is subject to change based primarily on drilling results, commodity prices, our future derivative position, the level of capital investing and operating costs. On April 13, 2020, the banks participating in our 2018 credit facility redetermined the borrowing base to be $1.8 billion, which also changed our aggregate commitments to that amount. The 2018 credit facility is secured by substantially all of our assets, including most of our subsidiaries. The permitted lien provisions in the senior note indentures currently limit liens securing indebtedness to the greater of $2.0 billion or 25% of adjusted consolidated net tangible assets. We may utilize the 2018 credit facility in the form of loans and letters of credit. As of March 31, 2020, we had $149 borrowings outstanding on our 2018 credit facility and $172 million in outstanding letters of credit. As of April 28, 2020, we have been requested to post an additional $150 million in letters of credit related to firm transportation. We currently do not anticipate being required to supply a materially greater amount of letters of credit under our existing contracts.
As of March 31, 2020, we were in compliance with all of the covenants of our revolving credit facility in all material respects. Our ability to comply with financial covenants in future periods depends, among other things, on the success of our development program and upon factors beyond our control, such as the market demand and prices for natural gas and liquids. Beginning late in the first quarter of 2020, decreased transportation, manufacturing and general economic activity levels prompted by COVID-19 and related governmental and societal actions reduced the demand for oil-based products such as gasoline, jet fuel and other refined products, as well as NGLs. Reduced demand, along with geopolitical events such as the disagreements between OPEC and Russia on production levels, have caused a significant decline in commodity pricing since the beginning of 2020. Additionally, space to store oil and condensate production is reaching or may reach capacity in some areas, which has prompted purchasers of oil and condensate to reduce future purchase levels and, in some cases, to claim force majeure for purchases already contracted. Consequently, during the second half of April 2020, we received notices from two companies asserting force majeure and curtailing approximately 3,200 gross barrels per day of our condensate. We are adjusting our 2020 capital investing program to take into account these changed conditions. To the extent that this decreased demand for our commodities continues or storage for our production is not available, we expect to reduce production from or completely shut in portions of our currently producing wells. If the current market conditions persist or deteriorate further, we would proactively continue to adjust our activities and plans. Absent any actions taken by the Company, and under these conditions or if they worsen, current modeling indicates that we would not be in compliance with our Net Leverage Ratio covenant under our 2018 credit facility in late 2020. Under such circumstances, we would seek waivers or a modification of the covenant package from the lenders in advance of any covenant non-compliance. Additionally, we have other mitigating options including but not limited to the monetization of derivative asset positions, the reduction or elimination of non-essential expenditures or the sale of non-core assets. We refer you to Note 10 of the consolidated financial statements included in this Quarterly Report for additional discussion of the covenant requirements of our 2018 credit facility.
The credit status of the financial institutions participating in our revolving credit facility could adversely impact our ability to borrow funds under the revolving credit facility.  Although we believe all of the lenders under the facility have the ability to provide funds, we cannot predict whether each will be able to meet their obligation to us. We refer you to Note 10 to the consolidated financial statements included in this Quarterly Report for additional discussion of our revolving credit facility.
In the first quarter of 2020, we repurchased $3 million of our 4.10% Senior Notes due 2022, $28 million of our 4.95% Senior Notes due 2025, $18 million of our 7.50% Senior Notes due 2026 and $31 million of our 7.75% Senior Notes due 2027 for $52 million, and recognized a $28 million gain on the extinguishment of debt.
In the second half of 2019, we purchased $35 million of our 4.95% Senior Notes due 2025, $11 million of our 7.50% Senior Notes due 2026 and $16 million of our 7.75% Senior Notes due 2027, and recognized an $8 million gain on extinguishment of debt. Additionally, in December 2019, we retired the remaining $52 million outstanding principal amount of our 4.05% Senior Notes due 2020.
Because of the focused work on refinancing and repayment of our debt during the last three years, only $210 million of our senior notes outstanding as of March 31, 2020 is scheduled to become due prior to 2025.
At April 28, 2020, we had a long-term issuer credit rating of Ba2 by Moody’s (affirmed on April 2, 2020), a long-term debt rating of BB- by S&P and a long-term issuer default rating of BB by Fitch Ratings.  On April 7, 2020, S&P downgraded our bond rating to BB-, which has the effect of increasing the interest rate on the 2025 Notes to 6.45%. The first coupon payment to the bondholders at the higher interest rate will be January 2021. Any further upgrades or downgrades in our public debt ratings by Moody’s or S&P could decrease or increase our cost of funds, respectively.
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Cash Flows
 For the three months ended March 31,
(in millions) 2020 2019
Net cash provided by operating activities $ 160    $ 442   
Net cash used in investing activities (228)   (258)  
Net cash provided by (used in) financing activities 68    (19)  
Cash Flow from Operating Activities
 For the three months ended March 31,
(in millions) 2020 2019
Net cash provided by operating activities $ 160    $ 442   
Add back (subtract) changes in working capital 21    (136)  
Net cash provided by operating activities, net of changes in working capital $ 181    $ 306   
•Net cash provided by operating activities decreased 64%, or $282 million, for the three months ended March 31, 2020, compared to the same period in 2019, due to a $272 million decrease resulting from lower commodity prices, a $157 million decrease in working capital, a $19 million increase in operating costs and a $5 million increase in net interest costs. These decreases were partially offset by a $103 million increase in our settled derivatives and a $72 million increase associated with increased production.
•Net cash generated from operating activities, net of changes in working capital, provided 76% of our cash requirements for capital investments for the three months ended March 31, 2020, compared to providing 94% of our cash requirements for capital investments for the same period in 2019. While we front-load our capital programs into the earlier quarters in the year, we remain committed to our capital discipline strategy.
Cash Flow from Investing Activities
•Total capital investing decreased $88 million for the three months ended March 31, 2020, compared to the same period in 2019, due to a $75 million decrease in direct E&P capital investing and a $13 million decrease in capitalized interest and internal costs, as compared to the same period in 2019.  
 For the three months ended March 31,
(in millions) 2020 2019
Additions to properties and equipment $ 228    $ 258   
Adjustments for capital investments
Changes in capital accruals 8    66   
Other (1)
1    1   
Total capital investing $ 237    $ 325   
(1)Includes capitalized non-cash stock-based compensation and costs to retire assets, which are classified as cash used in operating activities.
Capital Investing
 For the three months ended March 31, Increase/(Decrease)
(in millions except percentages) 2020 2019
E&P capital investing $ 237    $ 325    (27)%
Other capital investing (1)
—    —    —%
Total capital investing $ 237    $ 325    (27)%
(1)Other capital investing was immaterial for the three months ended March 31, 2020 and 2019.
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 For the three months ended March 31,
(in millions) 2020 2019
E&P Capital Investments by Type:
Exploratory and development drilling, including workovers $ 190    $ 251   
Acquisitions of properties 6    7   
Seismic expenditures —    1   
Water infrastructure project 1    15   
Other 4    2   
Capitalized interest and expenses 36    49   
Total E&P capital investments $ 237    $ 325   

E&P Capital Investments by Area:
Northeast Appalachia $ 86    $ 106   
Southwest Appalachia 146    198   
Other E&P (1)
5    21   
Total E&P capital investments $ 237    $ 325   
(1)Includes $1 million and $15 million for the three months ended March 31, 2020 and 2019, respectively, related to our water infrastructure project.
 For the three months ended March 31,
 2020 2019
Gross Operated Well Count Summary:
Drilled 38    30   
Completed 22    31   
Wells to sales 12    19   
Actual capital expenditure levels may vary significantly from period to period due to many factors, including drilling results, natural gas, oil and NGL prices, industry conditions, the prices and availability of goods and services, and the extent to which properties are acquired or non-strategic assets are sold.
Cash Flow from Financing Activities
(in millions except percentages) March 31, 2020 December 31, 2019 Increase/(Decrease)
Debt (1)
$ 2,279    $ 2,242    $ 37   
Equity 1,701    3,246    (1,545)  
Total debt to capitalization ratio 57  % 41  %
(1)The increase in total debt as of March 31, 2020, as compared to December 31, 2019, primarily relates to the use of the 2018 credit facility to supplement our capital investing, which is front-loaded to the first half of the year, partially offset by the repurchase of certain of our outstanding senior notes at a discount during the first quarter of 2020.
In the first quarter of 2020, we repurchased $80 million in aggregate principal amount of our outstanding senior notes at a discount for $52 million, and recognized a $28 million gain on the extinguishment of debt.
We refer you to Note 10 of the consolidated financial statements included in this Quarterly Report for additional discussion of our outstanding debt and credit facilities.
Working Capital
•We had positive working capital of $58 million at March 31, 2020, a $227 million increase from December 31, 2019, as a $206 million positive change in the current mark-to-market value of our derivative position, a $60 million decrease in accounts payable and a $7 million decrease in taxes payable, as compared to December 31, 2019, were only partially offset by a $53 million decrease in accounts receivable, as compared to December 2019, related to lower commodity prices.
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, 2020, our material off-balance sheet arrangements and transactions include operating service arrangements, $172 million in letters of credit outstanding against our 2018 credit facility and $115 million in outstanding surety bonds.  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
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regarding off-balance sheet arrangements, we refer you to “Contractual Obligations and Contingent Liabilities and Commitments” in our 2019 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 2019 Annual Report.
Contingent Liabilities and Commitments
As of March 31, 2020, we had commitments 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 $7.6 billion, $411 million 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 $1.1 billion.  As of March 31, 2020, future payments under non-cancelable firm transportation and gathering agreements are as follows:
 Payments Due by Period
(in millions) Total Less than 1 Year 1 to 3 Years 3 to 5 Years 5 to 8 years More than 8 Years
Infrastructure currently in service $ 7,199    $ 753    $ 1,339    $ 1,098    $ 1,524    $ 2,485   
Pending regulatory approval and/or construction (1)
411    1    17    23    74    296   
Total transportation charges $ 7,610    $ 754    $ 1,356    $ 1,121    $ 1,598    $ 2,781   
(1)Based on the estimated in-service dates as of March 31, 2020.
Included in the transportation charges above are $81 million (due in less than one year) related to certain agreements that remain in the name of our marketing affiliate but are expected to be paid in full by Flywheel Energy Operating, LLC, the purchaser of the Fayetteville Shale assets. Of these amounts, we may be obligated to reimburse Flywheel Energy Operating, LLC for a portion of volumetric shortfalls during 2020 (up to $45 million) under these transportation agreements and have currently recorded a $36 million liability as of March 31, 2020, down from $46 million recorded at December 31, 2019.
In the first quarter of 2019, we agreed to purchase firm transportation with pipelines in the Appalachian Basin starting in 2021 and running through 2032 totaling $357 million in total contractual commitments of which the seller has agreed to reimburse $133 million of these commitments.
In February 2020, we were notified that the proposed Constitution pipeline project was cancelled and that we were released from a firm transportation agreement with its sponsor. Prior to its cancellation, we had contractual commitments totaling $512 million over the next 17 years related to the Constitution pipeline project.
Substantially all of our employees are covered by defined benefit and postretirement benefit plans.  For the three months ended March 31, 2020, we have contributed $5 million to the pension and postretirement benefit plans, and we expect to further contribute an additional $7 million to our pension plan during the remainder of 2020.  We recognized liabilities of $40 million and $43 million as of March 31, 2020 and December 31, 2019, respectively, as a result of the underfunded status of our pension and other postretirement benefit plans.  See Note 13 to the 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, employment matters, traffic incidents, pollution, contamination, encroachment on others’ property or nuisance.  We accrue 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 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 subject to inherent uncertainties; therefore, management’s view may change in the future.
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, results of operations or cash flows.
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For further information, we refer you to “Litigation” and “Environmental Risk” in Note 11 to the consolidated financial statements included in Item 1 of Part I of this Quarterly Report.
Supplemental Guarantor Financial Information
As discussed in Note 10, in April, 2018, the Company entered into the 2018 credit facility.  Pursuant to requirements under the indentures governing our senior notes, each 100% owned subsidiary that became a guarantor of the 2018 credit facility also became a guarantor of each of our senior notes (the “Guarantor Subsidiaries”). The Guarantor Subsidiaries also granted liens and security interests to support their guarantees under the 2018 credit facility but not of the senior notes.   These guarantees are full and unconditional and joint and several among the Guarantor Subsidiaries.  Certain of our operating units which are accounted for on a consolidated basis do not guarantee the 2018 credit facility and senior notes.
The Company and the Guarantor Subsidiaries jointly and severally, and fully and unconditionally, guarantee the payment of the principal and premium, if any, and interest on the senior notes when due, whether at stated maturity of the senior notes, by acceleration, by call for redemption or otherwise, together with interest on the overdue principal, if any, and interest on any overdue interest, to the extent lawful, and all other obligations of the Company to the holders of the senior notes.

SEC Regulation S-X Rule 13-01 requires the presentation of “Summarized Financial Information” to replace the “Condensed Consolidating Financial Information” required under Rule 3-10. Rule 13-01 allows the omission of Summarized Financial Information if assets, liabilities and results of operations of the Guarantors are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company. The Parent and Guarantor Subsidiaries comprise the material operations of the Company. Therefore, the Company concluded that the presentation of the Summarized Financial Information is not required as the Summarized Financial Information of the Company’s Guarantors is not materially different from our consolidated financial statements.
ITEM 3. QUANTITATIVE 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, 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, oil and certain NGLs along with 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 exposure to concentrations of credit risk consists 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 purchasers and their dispersion across geographic areas.  However, at March 31, 2020, one purchaser accounted for 12% of our revenues. A default on this account could have a material impact on the Company, but we do not believe that there is a material risk of a default. As of December 31, 2019, no single purchaser accounted for greater than 10% of revenues. We believe that the loss of any one customer would not have an adverse effect on our ability to sell our natural gas, oil and NGL production. See “Commodities Risk” below for discussion of credit risk associated with commodities trading.
Interest Rate Risk
As of March 31, 2020, we had approximately $2.1 billion of outstanding senior notes with a weighted average interest rate of 6.70%, and we had $149 million in borrowings under our revolving credit facility.  We currently have an interest rate swap in effect to mitigate a portion of our exposure to volatility in interest rates.  At March 31, 2020, we had a long-term issuer credit rating of Ba2 by Moody’s, a long-term debt rating of BB by S&P and a long-term issuer default rating of BB by Fitch Ratings.  On April 7, 2020, S&P downgraded our bond rating to BB-, which has the effect of increasing the interest rate on our 2025 Notes to 6.45%. The first coupon payment to the bondholders at the higher interest rate will be paid in January 2021. Any further upgrades or downgrades in our public debt ratings by Moody’s or S&P could decrease or increase our cost of funds, respectively.
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 Expected Maturity Date
($ in millions) 2021 2022 2023 2024 2025 Thereafter Total
Fixed rate payments (1)
$ —    $ 210    $ —    $ —    $ 864    $ 1,074    $ 2,148   
Weighted average interest rate —  % 4.10  % —  % —  % 6.20  % 7.61  % 6.70  %

Variable rate payments (1)
$ —    $ —    $ —    $ 149    $ —    $ —    $ 149   
Weighted average interest rate —  % —  % —  % 2.12  % —  % —  % 2.12  %
(1)Excludes unamortized debt issuance costs and debt discounts.
Commodities 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).
The primary market risks relating to our derivative contracts are the volatility in market prices and basis differentials for our production.  However, the market price risk is offset by the gain or loss recognized upon the related sale or purchase of the production 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.  The fair value of our derivative assets and liabilities includes a non-performance risk factor. We refer you to Note 7 and Note 9 of the consolidated financial statements included in this Quarterly Report for additional details about our derivative instruments and their fair value.
ITEM 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, 2020 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, 2020 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 11 to the consolidated financial statements included in Item 1 of Part I of this Quarterly Report for a discussion of the Company’s legal proceedings.
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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 2019 Annual Report, except as set forth below.
The widespread outbreak of an illness, pandemic (such as COVID-19) or any other public health crisis may have material adverse effects on our financial position, results of operations or cash flows.

In December 2019, COVID-19 was reported to have surfaced in China. The spread of this virus has caused business disruptions beginning in January 2020, including disruptions in the oil and natural gas industry. In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic, and the U.S. economy began to experience pronounced effects. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, reduced global demand for oil and gas, and created significant volatility and disruption of financial and commodity markets. The extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, is uncertain and depends on various factors, including the demand for natural gas, oil, NGLs and other products derived from these commodities, the availability of personnel, equipment and services critical to our ability to operate our properties and the impact of potential governmental restrictions on travel, transports and operations. There is uncertainty around the extent and duration of the disruption. The degree to which the COVID-19 pandemic or any other public health crisis adversely impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, its impact on the economy and market conditions, and how quickly and to what extent normal economic and operating conditions can resume. Therefore, while the Company expects this matter will likely disrupt its operations, the degree of the adverse financial impact cannot be reasonably estimated at this time.
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 mine location, which supported our former Fayetteville Shale business, is 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 Section 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
On April 28, 2020, the Board of Directors of the Company amended the Company’s bylaws (as so amended, the “Amended and Restated Bylaws”) to provide that litigation against the Company or its officers, directors, employees or agents under the federal Securities Act of 1933, as amended, must be brought in federal courts and modified existing provisions requiring various actions arising under Delaware law to be brought in Delaware courts. This description is qualified in its entirely by Section 7.5 of the Company’s Amended and Restated Bylaws, which are filed with this Quarterly Report as Exhibit 3.2.
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ITEM 6. EXHIBITS
(3.1)
(3.2)*
(31.1)*
(31.2)*
(32.1)*
(32.2)*
(95.1)*
(101.INS) Inline Interactive Data File Instance Document
(101.SCH) Inline Interactive Data File Schema Document
(101.CAL) Inline Interactive Data File Calculation Linkbase Document
(101.LAB) Inline Interactive Data File Label Linkbase Document
(101.PRE) Inline Interactive Data File Presentation Linkbase Document
(101.DEF) Inline Interactive Data File Definition Linkbase Document
(104.1) Cover Page Interactive Data File – the cover page from this Quarterly Report on Form 10-Q, formatted in inline XBRL (included within the Exhibit 101 attachments)
*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 30, 2020 /s/ JULIAN M. BOTT
   Julian M. Bott
Executive Vice President and
Chief Financial Officer
໿
48








BYLAWS

OF

SOUTHWESTERN ENERGY COMPANY

(A Delaware Corporation)



As Amended through April 28, 2020





























BYLAWS

OF

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 (10th) 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.

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 such 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.

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
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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
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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 (10th) 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 (10th) 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
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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
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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.
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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.


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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
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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.

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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
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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
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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
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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
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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
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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;

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(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
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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
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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
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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
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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.

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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
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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 functions. 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.
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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
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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.
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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.

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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.


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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
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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 Certain Disputes. (a) Unless the Corporation consents in writing to the selection of an alternative forum (an “Alternative Forum Consent”), the Court of Chancery of the State of Delaware shall be 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 duty (including any fiduciary duty) owed by any current or former director, officer, stockholder, employee or agent of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim against the Corporation or any current or former director, officer, stockholder, employee or agent of the Corporation arising out of or relating to any provision of the General Corporation Law of Delaware or the Corporation’s Certificate of Incorporation or Bylaws (each, as in effect from time to time), or (iv) any action asserting a claim against the Corporation or any current or former director, officer, stockholder, employee or agent of the Corporation governed by the internal affairs doctrine of the State of Delaware; provided, however, that, in the event that the Court of Chancery of the State of Delaware lacks subject matter jurisdiction over any such action or proceeding, the sole and exclusive forum for such action or proceeding shall be another state or federal court located within the State of Delaware, in each such case, unless the Court of Chancery (or such other state or federal court located within the State of Delaware, as applicable) has dismissed a prior action by the same plaintiff asserting the same claims because such court lacked personal jurisdiction over an indispensable party named as a defendant therein.

(b) Unless the Corporation gives an Alternative Forum Consent, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.


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(c) Any person or entity purchasing, otherwise acquiring or holding 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.

(d) Failure to enforce the foregoing provisions would cause the Corporation irreparable harm and the Corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions. If any action the subject matter of which is within the scope of paragraph (a) or (b) 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) or (b) 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.

(e) The existence of any prior Alternative Forum Consent shall not act as a waiver of the Corporation’s ongoing consent right as set forth above in this Section 7.5 with respect to any current or future actions or claims.

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.
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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
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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
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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
32

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.


* * *
33

Exhibit 31.1
CERTIFICATION
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 30, 2020                           /s/ WILLIAM J. WAY                        
William J. Way
Director, President and Chief Executive Officer



Exhibit 31.2
CERTIFICATION
I, Julian M. Bott, 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 30, 2020                    /s/ JULIAN M. BOTT                                
Julian M. Bott
Executive Vice President and Chief Financial Officer
 


Exhibit 32.1
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
In connection with the Quarterly Report of Southwestern Energy Company, a Delaware corporation (the “Corporation”) on Form 10-Q for the quarter ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William J. Way, Director, President and Chief Executive Officer of the Corporation, certify to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
Dated:      April 30, 2020     
          /s/ WILLIAM J. WAY                        
William J. Way
Director, President and Chief Executive Officer



Exhibit 32.2
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
In connection with the Quarterly Report of Southwestern Energy Company, a Delaware corporation (the “Corporation”) on Form 10-Q for the quarter ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Julian M. Bott, Executive Vice President and Chief Financial Officer of the Corporation, certify to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
Dated:     April 30, 2020      
          /s/ JULIAN M. BOTT                   
Julian M. Bott
Executive Vice President and Chief Financial Officer



EXHIBIT 95.1
Mine Safety Disclosure


The following disclosure is provided pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires certain disclosures by companies required to file periodic reports under the Securities Exchange Act of 1934, as amended, that operate mines regulated under the Federal Mine Safety and Health Act of 1977.
 
The table that follows reflects citations, orders, violations and proposed assessments issued by the Mine Safety and Health Administration (the “MSHA”) to A. W. Realty, LLC, an indirect wholly owned subsidiary of Southwestern Energy Company.  The disclosure is with respect to the three months ended March 31, 2020.  Due to timing and other factors, the data may not agree with the mine data retrieval system maintained by the MSHA at www.MSHA.gov.

Southwestern Energy Company
Mine Safety Disclosure
Three Months Ended March 31, 2020
(Unaudited)
Operation (1)
Section
104
S&S
Citations 		Section
104(b)
Orders 		Section
104(d)
Citations
and
Orders 		Section
110(b)(2)
Violations 		Section
107(a)
Orders 		Section
107(a)
Orders
Total Dollar
Value of
Proposed
MSHA
Assessments (2)
 
Total Number of Mining Related 
Fatalities
Received Notice of Pattern of Violations Under Section 104(e) Received Notice of Potential to Have Pattern Under Section 104(e) Legal
Actions
Pending
as of the
Last Day of 
Period 		Legal
Actions
Initiated
During 
Period 		Legal Actions
Resolved
During
Period
A. W. Realty Company, LLC — — — — — — $— —   — — —
       
Total             $—   No No      
(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 all proposed or outstanding assessments, regardless of classification, received from MSHA on or before March 31, 2020 regardless of whether the assessment has been challenged or appealed, for alleged violations occurring during the three month period ended March 31, 2020. 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.