EX-99 2 exhibit991.htm EARNINGS PRESS RELEASE NEWS RELEASE

 

 

 

2350 N. Sam Houston Parkway East

Suite 300

Houston, Texas 77032

(281) 618-4700 Fax: (281) 618-4820

 

NEWS RELEASE

SOUTHWESTERN ENERGY ANNOUNCES RECORD

SECOND QUARTER 2004 RESULTS

Houston, Texas - July 29, 2004...Southwestern Energy Company (NYSE: SWN) today announced financial results for the second quarter of 2004. Highlights include:

  • Record earnings of $20.8 million, or $0.56 per diluted share

  • Production totaling 12.6 Bcfe, up 25% from the second quarter of 2003

  • Development drilling programs in East Texas and Arkoma Basin continue to deliver excellent results

    For the second quarter of 2004, net income more than doubled to $20.8 million, or $0.56 per diluted share, from $9.5 million, or $0.26 per diluted share, for the same period in 2003. Included in the company's results for the second quarter of 2004 was a pre-tax gain of $1.5 million, or approximately $0.02 per diluted share, on the sale of commercial real estate.  Net cash provided by operating activities before changes in operating assets and liabilities (a non-GAAP measure which has been reconciled below) was $50.3 million in the second quarter of 2004, up 76% from $28.5 million for the same period in 2003. Strong commodity prices and a 25% increase in production from the company's exploration and production (E&P) segment led to the improved financial results.

    Net income for the six months ended June 30, 2004 was $45.3 million, or $1.23 per diluted share, up 95% from $23.2 million, or $0.71 per diluted share, for the same period in 2003. Net cash provided by operating activities before changes in operating assets and liabilities was $106.8 million for the first six months of 2004, up 64% from $65.2 million for the same period in 2003.

    "2004 is shaping up to be another record year for our company," stated Harold M. Korell, President and Chief Executive Officer of Southwestern Energy. "The combination of growing production volumes and high realized commodity prices are delivering record earnings and cash flows from our E&P segment. Our development drilling programs in East Texas and the Arkoma Basin continue to create significant value, and our exploration success in New Mexico is contributing nicely to our production volumes."

    Second Quarter 2004 Financial Results

    E&P Segment - Operating income from the company's E&P segment was $37.5 million for the three months ended June 30, 2004, up from $21.5 million for the same period in 2003. The comparative increase was primarily due to a 25% increase in production volumes combined with higher realized oil and gas prices.

    - MORE -

    Gas and oil production totaled 12.6 Bcfe for the three months ended June 30, 2004, up from 10.1 Bcfe in the same period of 2003, and 11.4 Bcfe in the first quarter of 2004. The increase in production over the prior year resulted primarily from higher production volumes from the company's Overton Field in East Texas and increased production from the company's River Ridge discovery in New Mexico.

    Southwestern's average realized gas price was $5.25 per Mcf in the second quarter of 2004, up 23% from $4.28 per Mcf in the second quarter of 2003. Southwestern's average realized oil price was $28.68 per barrel during the second quarter of 2004, compared to $27.40 per barrel in the second quarter of 2003.

    Lease operating expenses per Mcfe for the company's E&P segment were $0.39 per Mcfe in the second quarter of 2004, compared to $0.36 per Mcfe in the second quarter of 2003. General and administrative expenses per Mcfe were $0.35 in the second quarter of 2004, compared to $0.40 per Mcfe in the same period in 2003. The decrease in general and administrative expenses per Mcfe was primarily due to higher production volumes.

    Natural Gas Distribution Segment - The company's natural gas distribution segment realized a seasonal operating loss of $1.4 million in the second quarter of 2004, compared to a loss of $2.1 million for the same period in 2003. The comparative improvement in the operating loss in 2004 was primarily due to the effects of a $4.1 million annual rate increase implemented in October 2003. The positive impact of the utility's rate increase more than offset the effects of warmer weather in the utility's service territory during the second quarter of 2004, which was 16% warmer than normal and 6% warmer than the prior year.

    Marketing and Transportation and Other Segments - Operating income from the company's natural gas marketing activities was $0.8 million for the three months ended June 30, 2004, compared to $0.5 million in the second quarter of 2003. The company recorded a pre-tax loss from operations of $0.7 million relating to the company's 25% interest in the NOARK pipeline partnership during the second quarter of 2004, compared to a pre-tax loss of $0.1 million for the same period in 2003. The loss in 2004 included adjustments to previous allocations of income and expense by the pipeline's operator.  The company's results for the second quarter of 2004 also include a pre-tax gain of $1.5 million relating to the sale of 14 acres of undeveloped commercial real estate located in Fayetteville, Arkansas.

    First Six Months 2004 Financial Results

    E&P Segment - Operating income for the E&P segment was $70.9 million during the first six months of 2004, compared to $40.4 million during the first six months of 2003. The increase was primarily due to a 27% increase in production volumes combined with higher realized oil and gas prices.

    Gas and oil production totaled 24.0 Bcfe for the six months ended June 30, 2004, up from 18.9 Bcfe for the first six months of 2003. The increase in production resulted primarily from higher production volumes from the company's Overton Field in East Texas, increased production in the Arkoma Basin and the company's River Ridge discovery in New Mexico.

    - MORE -

    Southwestern's average realized gas price was $5.09 per Mcf for the first six months of 2004, up from $4.22 per Mcf during the first six months of 2003. Southwestern's average realized oil price was $28.55 per barrel for the first six months of 2004, compared to $27.54 per barrel during the first six months of 2003.

    Lease operating expenses per Mcfe for the company's E&P segment were $0.39 per Mcfe during both the first six months of 2004 and 2003. General and administrative expenses per Mcfe were $0.37 per Mcfe during the first six months of 2004, compared to $0.42 per Mcfe in the same period in 2003. The decrease was primarily due to higher production volumes.

    Natural Gas Distribution Segment - Operating income for Southwestern's utility was $7.4 million during the first six months of 2004, up from $5.9 million during the first six months of 2003. The comparative increase in operating income in 2004 was primarily due to the effects of a $4.1 million annual rate increase implemented in late 2003. The positive impact of the utility's rate increase combined with an increase in the number of customers offset the effects of warmer weather for the first half of the year, which was 5% warmer than normal and 9% warmer than the same period in 2003.

    Marketing and Transportation and Other Segments - Operating income for the company's natural gas marketing activities was $1.7 million during the first six months of 2004, compared to $1.2 million in the same period in 2003. The company recorded a pre-tax loss from operations related to its investment in NOARK of $0.5 million during the first six months of 2004, compared to pre-tax income of $1.4 million in the same period in 2003. Results for 2003 include a pre-tax gain of $1.3 million related to the sale of a non-strategic portion of NOARK's pipeline. The company's results in the first half of 2004 and 2003 included a pre-tax gain of $3.0 million and $2.7 million, respectively, related to the sale of gas in storage inventory.

    E&P Update

    In the first half of 2004, the company participated in drilling 93 wells. Of these, 67 were successful, 7 were dry and 19 were in progress at the end of the second quarter, for an overall success rate of 91%.

    In the Arkoma Basin, the company spudded a total of 10 wells at its Ranger Anticline Area in Yell County, Arkansas, of which 7 were successful, 2 were dry, and 1 was in progress. In 2004, Southwestern plans to drill a total of approximately 20 wells at Ranger. Since inception, the company has completed 33 out of 40 wells drilled at Ranger, adding 42.0 net Bcfe at a finding and development cost of $0.81 per Mcfe. Based on recent results, the company estimates that there are at least 30 additional low-risk locations at Ranger to be drilled after 2004, and an additional 90 locations that are contingent on the drilling success of the current low-risk inventory.

    At the company's Overton Field located in Smith County, Texas, 45 wells were spudded in the first half of 2004, of which 38 were producers and 7 were in progress. Southwestern continues to maintain the 100% drilling success rate at Overton that began in 2001. Gross production at the Overton Field at the end of the second quarter was approximately 80 MMcfe per day, up from 60 MMcfe per day at the end of 2003.

    - MORE -

    Southwestern currently has 5 rigs running at Overton and expects to drill a total of 74 wells in 2004. The wells drilled in 2004 have taken an average of 22 days to drill, with an average initial production rate of 2.9 MMcfe per day and an estimated ultimate recovery of 1.8 Bcfe per well. Based on current well performance projections and reasonable gas price assumptions, the company anticipates that its drilling program at Overton could extend beyond 2006. With a NYMEX price of $5.00 per Mcf, the company estimates that approximately 130 wells (with reserve potential of approximately 130 Bcfe) could be drilled beyond 2004. Alternatively, with a NYMEX price of $6.00 per Mcf, the company estimates that 187 wells (with reserve potential of approximately 175 Bcfe) could be drilled beyond its 2004 drilling program.

    In the Permian Basin, the company announced last week it had acquired additional working interest in its River Ridge discovery in Lea County, New Mexico for $14.4 million.

    In South Louisiana, Southwestern spudded its L'Orange prospect in the second quarter. Southwestern operates this exploration prospect, targeting the Marg A sands at 15,600 feet, with a 50% working interest. The well is currently drilling at 10,800 feet and is expected to be at total depth in approximately 10 weeks.

    Southwestern Updates Guidance for 2004

    The following statements regarding estimates for the year 2004 are considered to be forward-looking statements and the company's actual financial and operating results could differ materially from those projected as a result of certain factors listed at the end of this press release.

    Southwestern is targeting 2004 oil and gas production at 50.0 - 52.0 Bcfe, an increase of 21 - 26% over the company's 2003 production of 41.2 Bcfe. The increase from the company's June estimate of 48.5 - 50.5 Bcfe for 2004 is primarily due to increased net production from the company's recent acquisition of additional working interests in its River Ridge discovery in New Mexico and from continued success of the company's drilling program. Below is a table showing the company's actual production through June 30, 2004, along with its estimated production guidance for the third and fourth quarters of 2004:
      1st Quarter

    2nd Quarter

    3rd Quarter

    4th Quarter

    Full-Year 2004
      Actual

    Actual

    Estimate

    Estimate

    Estimate

    Production:

     

     

     

     

     

         Gas (Bcf)

    10.5

    11.8

    12.1 - 13.0

    12.4 - 13.4

    46.8 - 48.7

         Oil (MBbls)

    152

    140

    130 - 140

    120 - 130

    542 - 562

         Total Production (Bcfe)

    11.4

    12.6

    12.9 - 13.8

    13.1 - 14.2

    50.0 - 52.0

    Assuming NYMEX commodity prices of $6.00 per Mcf of gas and $34.00 per barrel of oil for 2004, the company is targeting net income of $94 - $97 million and net cash provided by operating activities before changes in operating assets and liabilities (a non-GAAP measure; see explanation below) of $225 - $228 million in 2004. The company expects its operating income to approximate $172 - $175 million and its net income plus interest, income tax expense, depreciation, depletion and amortization (also referred to as EBITDA and a non-GAAP measure which has been reconciled below) to be approximately $242 - $245 million in 2004.

    - MORE -

    The following table demonstrates different NYMEX price scenarios and their corresponding estimated impact on the company's results for 2004, including current hedges in place:

    NYMEX

    Commodity

     Prices

    Net Income

    Operating Income

    Net

    Cash Flow

    Before Changes

    in Operating

    Assets and Liabilities*

    EBITDA*

    $5.00 Gas

    $30.00 Oil

    $72 - $75

    Million

    $135 - $138

    Million

    $190 - $193

    Million

    $207 - $210

    Million

    $6.00 Gas

    $34.00 Oil

    $94 - $97

    Million

    $172 - $175

    Million

    $225 - $228

    Million

    $242 - $245

    Million

    * Non-GAAP measure; see Explanation and Reconciliation of Non-GAAP Financial Measures below.

    Explanation and Reconciliation of Non-GAAP Financial Measures

    Net cash provided by operating activities before changes in operating assets and liabilities is presented because of its acceptance as an indicator of an oil and gas exploration and production company's ability to internally fund exploration and development activities and to service or incur additional debt. The company has also included this information because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements which the company may not control and may not relate to the period in which the operating activities occurred. Net cash provided by operating activities before changes in operating assets and liabilities should not be considered in isolation or as a substitute for net cash provided by operating activities prepared in accordance with generally accepted accounting principles. Forecasting changes in operating assets and liabilities would require unreasonable effort, would not be reliable and could be misleading. Therefore, the reconciliation of the company's forecasted net cash provided by operating activities before changes in operating assets and liabilities has assumed no changes in assets and liabilities. The first table below reconciles actual net cash provided by operating activities before changes in operating assets and liabilities with net cash provided by operating activities as derived from the company's financial information.

     

    3 Months Ended June 30,

     

    6 Months Ended June 30,

     

    2004

    		   2003

     

    2004

     

    2003

    Net cash provided by operating activities

    $

    43,733 

    		  

    $

    31,736 

     

    		 $

    120,473 

     

    		 $

    70,308 

    Add back (deduct):

     

     

    		  

     

     

     

    		  

     

     

    		  

     

    Change in operating assets and liabilities

     

    6,570 

    		  

     

    (3,208)

     

    		  

    (13,651)

     

    		  

    (5,094)

    Net cash provided by operating activities before changes in operating assets and liabilities

    		 $

    50,303 

    		   $ 28,528    $ 106,822    $ 65,214 

    - MORE -

     

    2004 Guidance
      NYMEX Commodity Price Assumptions
     

    $5.00 Gas

    		  

    $6.00 Gas
     

    $30.00 Oil

    		  

    $34.00 Oil
      (in millions)

    Net cash provided by operating activities

    $190-$193

    		  

    $225-$228

    Add back (deduct):

    		      

    Change in operating assets and liabilities

    --

    		  

    --

    Net cash provided by operating activities before changes in operating assets and liabilities

    $190-$193

     

    $225-$228

    EBITDA is defined as net income plus interest, income tax expense, depreciation, depletion and amortization. Southwestern has included information concerning EBITDA because it is used by certain investors as a measure of the ability of a company to service or incur indebtedness and because it is a financial measure commonly used in the energy industry. EBITDA should not be considered in isolation or as a substitute for net income, net cash provided by operating activities or other income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. EBITDA as defined above may not be comparable to similarly titled measures of other companies. Net income is a financial measure calculated and presented in accordance with generally accepted accounting principles. The table below reconciles 2004 forecasted EBITDA with 2004 forecasted net income.

     

    2004 Guidance

     

    NYMEX Commodity Price Assumptions

     

    $5.00 Gas

     

    $6.00 Gas

     

    $30.00 Oil

     

    $34.00 Oil

     

    (in millions)

    Net income

    $72-$75

     

    $94-$97

    Add back:

     

     

     

    Provision for income taxes - deferred

    44-45

     

    58-59

    Interest expense

    17-19

     

    17-19

    Depreciation, depletion and amortization

    73-75

     

    73-75

    EBITDA

    $207-$210

     

    $242-$245

    Southwestern will host a teleconference call on Friday, July 30, 2004, at 10:00 a.m. Eastern to discuss the company's second quarter 2004 results. The toll-free number to call is 800-500-0311 and the reservation number is 458189. The teleconference can also be heard "live" over the Internet at the company's website: http://www.swn.com.

    Southwestern Energy Company is an integrated natural gas company whose wholly-owned subsidiaries are engaged in oil and gas exploration and production, natural gas gathering, transmission, and marketing, and natural gas distribution. Additional information on the company can be found on the Internet at http://www.swn.com.

    Contacts: Greg D. Kerley   Brad D. Sylvester, CFA
      Executive Vice President   Manager, Investor Relations
      and Chief Financial Officer   (281) 618-4897
      (281) 618-4803    

    - MORE -

    All statements, other than historical 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. Although the company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include, but are not limited to, the timing and extent of changes in commodity prices for gas and oil, the timing and extent of the company's success in discovering, developing, producing and estimating reserves, property acquisition or divestiture activities that may occur, the effects of weather and regulation on the company's gas distribution segment, increased competition, the impact of federal, state and local government regulation, the financial impact of accounting regulations and critical accounting policies, changing market conditions and prices, the comparative cost of alternative fuels, conditions in capital markets and changes in interest rates, availability of oil field personnel, services, drilling rigs and other equipment, as well as various other factors beyond the company's control, and any other factors listed in the reports the company has filed with the Securities and Exchange Commission. A discussion of these and other factors affecting the company's performance is included in the company's periodic reports filed with the Securities and Exchange Commission including its Annual Report on Form 10-K for the year ended December 31, 2003.

    Financial Summary Follows

    # # #

     

    OPERATING STATISTICS (Unaudited)     Page 1 of 5
    Southwestern Energy Company and Subsidiaries    
               
       

             Three Months

            Six Months
      Periods Ended June 30   2004   2003  

    2004

    		  

    2003
    Exploration & Production        
    Production        

    Affiliated gas sales (MMcf)

    		   1,657   1,790 3,349 3,456
     

    Unaffiliated gas sales (MMcf)

    		   10,124   7,469   18,947     13,904
     

    Total gas production (MMcf)

    		   11,781   9,259   22,296   17,360
             
    Oil production (MBbls)   140   139 292 264
             
     

    Total equivalent production (MMcfe)

    		   12,621   10,093   24,048   18,944
    Commodity Prices        

    Average realized gas price per Mcf

    		   $5.25   $4.28 $5.09  $4.22 
     

    Average realized oil price per Bbl

    		   $28.68   $27.40   $28.55    $27.54 
    Operating Expenses per Mcfe        

    Lease operating expenses

    		   $0.39   $0.36 $0.39  $0.39 

    Taxes, other than income taxes

    		  $0.28   $0.23 $0.27  $0.25 

    General & administrative expenses

    		   $0.35   $0.40 $0.37  $0.42 
     

    Full cost pool amortization

    		   $1.18   $1.17   $1.18    $1.17 
           
    Marketing        
      Gas volumes marketed (MMcf)   13,143   10,207   25,424    18,723 
           
    Gas Distribution        
    Deliveries (Bcf)        

    Sales and end-use transportation

    		   3.9   3.8 13.7  14.5 

    Off-system transportation

    		   -   0.1 1.0  0.1 

    Number of customers - period end

    		   140,227   137,690 140,227  137,690 

    Average sales rate per Mcf

    		   $11.06   $9.74 $8.73  $7.34 

    Heating weather - degree days

    		   261   279 2,322  2,554 
                                - percent of normal   84%   90%   95%    104% 

     

    STATEMENTS OF OPERATIONS (Unaudited) Page 2 of 5
    Southwestern Energy Company and Subsidiaries
           
     

               Three Months

              Six Months
      Periods Ended June 30  

    2004

    		  

    2003

    		  

    2004

    		  

    2003
                        (in thousands, except share/per share amounts)  
    Operating Revenues        
    Gas sales   $     73,838    $  49,286  $   174,857  $   126,993 
    Gas marketing   15,674    11,667  24,860  24,273 
    Oil sales   4,008    3,821  8,342  7,280 
      Gas transportation and other   2,907    1,713    8,158    6,596 
          96,427    66,487    216,217    165,142 
    Operating Costs and Expenses        
    Gas purchases - utility   3,518    2,199  35,050  29,247 
    Gas purchases - marketing   14,572    10,850  22,635  22,408 
    Operating expenses   10,498    9,248  20,210  18,294 
    General and administrative expenses   8,264    7,663  16,274  15,546 
    Depreciation, depletion and amortization   17,091    13,686  32,617  26,069 
      Taxes, other than income taxes   4,238    2,895    7,878    5,958 
          58,181    46,541    134,664    117,522 
      Operating Income   38,246    19,946    81,553    47,620 
    Interest Expense        
    Interest on long-term debt   4,376    4,075  8,797  9,002 
    Other interest charges   316    337  828  722 
      Interest capitalized   (745)   (501)   (1,293)   (866)
          3,947    3,911    8,332    8,858 
      Other Income (Expense)   (868)   (63)   (547)   1,359 
     

    Income Before Income Taxes, Minority Interest & Accounting Change

    		   33,431    15,972  72,674  40,121 
      Minority Interest in Partnership   (431)   (609)   (830)   (1,374)
      Income Before Income Taxes & Accounting Change   33,000    15,363  71,844  38,747 
      Provision for Income Taxes - Deferred   12,210    5,837    26,582    14,724 
      Income Before Accounting Change   20,790    9,526  45,262  24,023 
     

    Cumulative Effect of Adoption of Accounting Principle

    		   -    -    -    (855)
      Net Income   $     20,790    $    9,526    $     45,262    $     23,168 
      Basic Earnings Per Share:        
     

    Income before accounting change

    		   $0.58    $0.27  $1.27  $0.76 
     

    Cumulative effect of adoption of accounting principle

    		   -    -    -    (0.03)
      Net income   $0.58    $0.27    $1.27    $0.73 
      Diluted Earnings Per Share:            
     

    Income before accounting change

    		   $0.56    $0.26  $1.23  $0.74 
     

    Cumulative effect of adoption of accounting principle

    		   -    -    -    (0.03)
      Net income   $0.56    $0.26    $1.23    $0.71 
     

    Weighted Average Common Shares Outstanding:
     

    Basic

    		   35,671,456    35,053,171  35,610,454  31,614,921 
     

    Diluted

    		   36,825,281    36,087,726    36,719,929    32,558,360 

     

    BALANCE SHEETS (Unaudited)

    Page 3 of 5
    Southwestern Energy Company and Subsidiaries
     
    June 30  

    2004

    		  

    2003

                           (in thousands)
    ASSETS
     
    Current Assets   $     91,370    $    65,414 

      
    Investments   13,295    14,231 

    Property, Plant and Equipment, at cost

    		 1,596,303  1,373,737 

    Less: Accumulated depreciation, depletion and amortization

    		   738,020    680,391 
        858,283    693,346 
    Other Assets   15,490    15,788 

      
        $   978,438    $  788,779 
     
    LIABILITIES AND SHAREHOLDERS' EQUITY
     
    Current Liabilities   $   107,591 

      

    		 $   77,452 

    Long-Term Debt   278,000    247,800 
    Deferred Income Tax Liabilities   173,397    125,486 
    Other Liabilities   27,007 

        

    		 27,654 

    Commitments and Contingencies         
    Minority Interest in Partnership   12,483  13,298 
    Shareholders' Equity

    Common stock, $.10 par value; authorized 75,000,000 shares, issued 37,225,584 shares

    		 3,723  3,723 
    Additional paid-in capital 124,680  121,149 
    Retained earnings 292,147  221,156 

    Accumulated other comprehensive income (loss)

    		   (24,201)

       

    		 (26,299)

    Less: Common stock in treasury, at cost, 1,058,245 shares in 2004 and 1,650,492 shares in 2003

    		 (11,789) (18,388)

             Unamortized cost of restricted shares issued under stock incentive plan, 418,125, shares in 2004 and 496,429 shares in 2003

    		   (4,600)   (4,252)
        379,960    297,089 
        $    978,438    $  788,779 

     

    STATEMENTS OF CASH FLOWS (Unaudited)

    Page 4 of 5
    Southwestern Energy Company and Subsidiaries

                  Six Months
      Periods Ended June 30  

    2004

    		  

    2003
     

                        (in thousands)
    Cash Flows From Operating Activities
    Net Income $    45,262  $  23,168 

    Adjustments to reconcile net income to net cash provided by operating activities:

    Depreciation, depletion and amortization

    		 34,372  27,668 

    Deferred income taxes

    		 26,582  14,724 

    Ineffectiveness of cash flow hedges

    		 1,239  (556)
     

    Gain on sale of other property, plant & equipment

    		   (1,534)   -   

    Equity in (income) loss of NOARK partnership

    		 545    (1,444)

    Minority interest in partnership

    		 356  799 

    Cumulative effect of adoption of accounting principle

    		   -     855 
     

    Change in operating assets and liabilities

    		   13,651    5,094 
      Net cash provided by operating activities   120,473    70,308 
     
    Cash Flows From Investing Activities

    Capital expenditures

    		 (124,234) (80,468)

    Distribution from NOARK partnership

    		 -  2,500 
     

    Proceeds from sale of other property, plant & equipment

    		   1,906    -   

    Increase in gas stored underground

    		 -  (1,705)
     

    Other items

    		   (74)   (479)
     

    Net cash used in investing activities

    		   (122,402)   (80,152)
     

    Cash Flow From Financing Activities

    Issuance of common stock

    		   -    103,213 

    Payments on revolving long-term debt

    		 (210,300) (184,900)

    Borrowings under revolving long-term debt

    		 209,500  90,300 
     

    Debt issuance costs

    		   (1,514)   -   

    Change in bank drafts outstanding

    		 898  218 
     

    Proceeds from exercise of common stock options

    		   3,154    1,292 
     

    Minority interest contributions

    		   -    44   
     

    Net cash used in financing activities

    		   1,738    10,167 
     
    Increase (decrease) in cash (191) 323 
      Cash at beginning of year   1,277    1,690 
      Cash at end of period   $      1,086    $    2,013 

     

    SEGMENT INFORMATION (Unaudited)

    Page 5 of 5
    Southwestern Energy Company and Subsidiaries
     
     

    Exploration

    Marketing,
     

    and

    		 Gas

    Transportation
     

    Production

    		  

    Production

    		  

    and Other

    		  

     Eliminations

    		  

    Total
     

    (in thousands)
    Quarter Ending June 30, 2004
     
    Revenues $ 65,872  $ 23,012  $ 73,925  $ (66,382) $ 96,427 

    Gas purchases

    		 -  12,994  71,332  (66,236) 18,090 

    Operating expenses

    		 4,954  5,569  -  (25) 10,498 

    General & administrative expenses

    		 4,434  3,645  306  (121) 8,264 

    Depreciation, depletion & amortization

    		 15,444  1,616  31  -  17,091 

    Taxes, other than income taxes

    		   3,588    616    34    -    4,238 
    Operating Income (Loss) $  37,452  $ (1,428) $ 2,222  $ -  $ 38,246 
     
    Capital Investments $  66,428     $ 1,241      $ 533     $ -     $ 68,202 
     
    Quarter Ending June 30, 2003
     
    Revenues $ 43,489  $ 20,637  $ 50,009  $ (47,648) $ 66,487 

    Gas purchases

    		 -  11,467  49,079  (47,497) 13,049 

    Operating expenses

    		 3,615  5,662  -  (29) 9,248 

    General & administrative expenses

    		 4,000  3,490  295  (122) 7,663 

    Depreciation, depletion & amortization

    		 12,117  1,534  35  -  13,686 

    Taxes, other than income taxes

    		   2,281    592    22    -    2,895 
    Operating Income (Loss) $ 21,476  $ (2,108) $ 578  $ -  $ 19,946 
     
    Capital Investments $ 46,784    $ 3,099    $ 216    $ -    $ 50,099 
                               
    Six Months Ending June 30, 2004
     
    Revenues $ 124,943  $ 84,271  $ 135,453  $ (128,450) $ 216,217 

    Gas purchases

    		 -  54,342  131,470  (128,127) 57,685 

    Operating expenses

    		 9,328  10,962  -  (80) 20,210 

    General & administrative expenses

    		 8,870  7,084  563  (243) 16,274 

    Depreciation, depletion & amortization

    		 29,336  3,217  64  -  32,617 

    Taxes, other than income taxes

    		   6,528    1,284    66    -    7,878 
    Operating Income $  70,881  $ 7,382  $ 3,290  $ -  $ 81,553 
     
    Capital Investments $ 123,011     $ 3,180      $ 648     $ -     $ 126,839 
     
    Six Months Ending June 30, 2003
     
    Revenues $ 83,225  $ 78,144  $ 98,041  $ (94,268) $ 165,142 

    Gas purchases

    		 -  49,634  95,952  (93,931) 51,655 

    Operating expenses

    		 7,342  11,047  -  (95) 18,294 

    General & administrative expenses

    		 7,865  7,262  661  (242) 15,546 

    Depreciation, depletion & amortization

    		 22,931  3,068  70  -  26,069 

    Taxes, other than income taxes

    		   4,674    1,236    48    -    5,958 
    Operating Income $ 40,413  $ 5,897  $ 1,310  $ -  $ 47,620 
     
    Capital Investments $ 75,232    $ 4,940    $ 296    $ -    $ 80,468